As filed with the Securities and Exchange Commission on March 25, 1996
Registration File Nos. 33-79124 and 811-8520
U.S. SECURITIES AND EXCHANGE COMMISSION
=======================================
Washington, D.C. 20549
FORM N-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 2 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 5 |X|
(Check appropriate box or boxes.)
TIAA SEPARATE ACCOUNT VA-1
--------------------------
(Exact Name of Registrant)
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
------------------------------------------------------
(Name of Insurance Company)
730 Third Avenue
New York, New York 10017-3206
-----------------------------
(Address of Insurance Company's Principal Executive Offices)
Insurance Company's Telephone Number, including Area Code: (212) 490-9000
Name and Address of Agent for Service: Copy to:
Peter C. Clapman, Esquire Paul J. Mason, Esquire
Teachers Insurance and Annuity Sutherland, Asbill & Brennan
Association of America 1275 Pennsylvania Avenue, N.W.
730 Third Avenue Washington, D.C. 20004-2404
New York, New York 10017-3206
Approximate Date of Proposed Public Offering: As soon as practicable after
effectiveness of this filing
It is proposed that this filing will become effective (check appropriate box)
|_| immediately upon filing pursuant to paragraph (b)
|X| on April 1, 1996, pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph(a)(1)
|_| on(date) pursuant to paragraph(a)(1)
|_| 75 days after filing pursuant to paragraph(a)(2)
|_| on(date)pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
|_| This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
<PAGE>
The Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940. The Rule 24f-2 Notice for the Registrant's fiscal year ended December
31, 1995, was filed on February 16, 1996.
<PAGE>
CROSS REFERENCE SHEET
---------------------
Showing Location of Information Required by Form N-3
in Part A (Prospectus) and Part B (Statement of Additional Information)
of the Registration Statement
PART A (PROSPECTUS)
<TABLE>
<CAPTION>
Item of Form N-3 Part A (Prospectus) Caption
- ---------------- ---------------------------
<S> <C>
1. Cover Page.................................. Cover Page
2. Definitions................................. Definitions
3. Synopsis ................................... Summary
4. Condensed Financial Information............. Condensed Financial Information; Performance
Information
5. General Description of Registrant
and Insurance Company....................... Teachers Insurance and Annuity Association of
America; The Separate Account; Investment Practices
6. Management.................................. Management and Investment Advisory Arrangements
7. Deductions and Expenses..................... The Contract (Charges)
8. General Description of Variable
Annuity Contracts........................... Adding, Closing, or Substituting Portfolios; The
Contract; Voting Rights; General Matters
9. Annuity Period.............................. The Contract (The Annuity Period; Income Options)
10. Death Benefit............................... The Contract (Death Benefits)
11. Purchases and Contract Value................ Valuation of Assets; The Contract (Remitting
Premiums; Accumulation Units); Distribution of the
Contracts
12. Redemptions................................. The Contract (Remitting Premiums; Cash Withdrawals;
General Considerations for All Transfers and Cash
Withdrawals)
13. Taxes....................................... The Contract (Tax Issues); Federal Income Taxes
14. Legal Proceedings........................... Legal Proceedings
15. Table of Contents of the Statement of
Additional Information...................... Table of Contents for the Statement of Additional
Information
</TABLE>
<PAGE>
PART B (STATEMENT OF ADDITIONAL INFORMATION)
<TABLE>
<CAPTION>
Item of Form N-3 Part B (Statement of Additional Information) Caption
- ---------------- ----------------------------------------------------
<S> <C>
16. Cover Page.................................. Cover Page
17. Table of Contents........................... Table of Contents
18. General Information and History............. (Prospectus) Teachers Insurance and Annuity
Association of America
19. Investment Objectives and Policies........... Investment Restrictions; Investment Policies and Risk
Considerations; Portfolio Turnover
20. Management................................... Management
21. Investment Advisory and Other Services....... Investment Advisory and Related Services
22. Brokerage Allocation......................... Brokerage Allocation
23. Purchase and Pricing of Securities Being
Offered...................................... Valuation of Assets; (Prospectus) The Contract
(Transfers Between the Separate Account and the Fixed
Account; General Considerations for All Transfers and
Cash Withdrawals)
24. Underwriters................................. (Prospectus) Distribution of the Contracts
25. Calculation of Performance Data.............. Performance Information
26. Annuity Payments............................. (Prospectus) The Contract (The Annuity Period;
Income Options)
27. Financial Statements......................... Financial Statements; (Prospectus) Condensed Financial
Information
</TABLE>
<PAGE>
[graphic of part of $1 bill]
Prospectus
Teachers Insurance and
Annuity Association
Individual Deferred
Variable Annuities
Funded Through TIAA
Separate Account VA-1
April 1, 1996
[TIAA logo]
<PAGE>
PROSPECTUS
Dated April 1, 1996
Individual Deferred Variable Annuities
Funded Through
TIAA Separate Account VA-1 of
Teachers Insurance and Annuity Association
of America
This prospectus tells you about an individual deferred variable annuity funded
through TIAA Separate Account VA-1 of Teachers Insurance and Annuity Association
of America (TIAA). Read it carefully before investing, and keep it for future
reference.
TIAA Separate Account VA-1 (the separate account) is a segregated investment
account of TIAA. The separate account provides individual variable annuities for
employees of tax-exempt or publicly supported colleges, universities, and other
educational and research organizations and for other eligible persons, including
retired employees of eligible institutions. Its main purpose is to accumulate,
invest, and then disburse funds for lifetime income or through other payment
options.
TIAA offers this variable annuity as part of the contract, which also has a
fixed account. Whether the variable annuity is available to you is subject to
approval by regulatory authorities in your state.
As with all variable annuities, your accumulation can increase or decrease,
depending on how well the underlying investments in the separate account do over
time. TIAA doesn't guarantee the investment performance of the separate account,
and you bear the entire investment risk.
More information about the separate account and the variable component of the
contract is on file with the Securities and Exchange Commission (SEC) in a
"Statement of Additional Information" (SAI) dated April 1, 1996. You can get it
by writing us at TIAA, 730 Third Avenue, New York, New York 10017-3206
(attention: Central Services), or by calling 1 800 842-2733, extension 5509. The
SAI, as supplemented from time to time, is "incorporated by reference" into the
prospectus; that means it's legally part of the prospectus. The SAI's table of
contents is on the last page of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is April 1, 1996.
<PAGE>
Table of Contents
Item Page
- ---------------------------------- -----
Definitions 2
Summary 3
Condensed Financial
Information 6
Teachers Insurance and
Annuity Association
of America 6
The Separate Account 7
Adding, Closing, or
Substituting Portfolios 7
Investment Practices 8
Performance Information 11
Valuation of Assets 12
Management and Investment Advisory
Arrangements 12
The Contract 12
Eligible Purchasers of
the Contract 13
Remitting Premiums 13
Accumulation Units 14
The Fixed Account 15
Transfers Between the Separate
Account and
the Fixed Account 15
Cash Withdrawals 15
General Considerations for All
Transfers and Cash Withdrawals 16
Tax Issues 16
Charges 16
The Annuity Period 18
Income Options 19
Death Benefits 20
Timing of Payments 22
Federal Income Taxes 23
Voting Rights 26
General Matters 27
Distribution of the Contracts 28
Legal Proceedings 28
Table of Contents for Statement of
Additional Information 29
This prospectus outlines the terms under which the variable annuity issued by
TIAA is available. It doesn't constitute an offering in any jurisdiction where
such an offering can't lawfully be made. No dealer, salesman, or anyone else is
authorized to give any information or to make any representation in connection
with this offering other than those contained in this prospectus. If anyone does
offer you such information or representations, you shouldn't rely on them.
<PAGE>
Definitions
Throughout the prospectus, "TIAA," "we," and "our" refer to Teachers Insurance
and Annuity Association of America. "You" and "your" mean any contractowner or
any prospective contractowner.
The terms and phrases below are defined so you'll know precisely how we're using
them. To understand some definitions, you may have to refer to other defined
terms.
Accumulation. The total value of your accumulation units.
Accumulation Period. The period that begins with your first premium and
continues as long as you still have an amount accumulated in either the separate
account or the fixed account.
Accumulation Unit. A share of participation in the separate account.
Annuitant. The natural person whose life is used in determining the annuity
payments to be received. The annuitant may be the contractowner or another
person.
Annuity Partner. The natural person whose life is used in determining the
annuity payments to be received under a survivor income option if the annuitant
dies. The annuity partner is also known as the second annuitant.
Beneficiary. Any person or institution named to receive benefits if you die
during the accumulation period or if you die while any annuity income or death
benefit payments remain due. You don't have to name the same beneficiary for
each of these two situations.
Business Day. Any day the New York Stock Exchange (NYSE) is open for trading. A
business day ends at 4 p.m. Eastern Time, or when trading closes on the NYSE, if
earlier.
Calendar Day. Any day of the year. Calendar days end at the same time as
business days.
Contract. The fixed and variable components of the individual, flexible premium,
deferred annuity described in this prospectus.
Contractowner. The person (or persons) who controls all the rights and benefits
under a contract.
CREF. The College Retirement Equities Fund, TIAA's companion organization.
Eligible Institution. A public or private institution in the United States that
is nonproprietary and nonprofit. Private institutions have to be ruled
tax-exempt under IRC section 501(c)(3) or earlier versions of the section. The
main purpose
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of any eligible institution must be to offer instruction; conduct research;
serve and support education or research; or perform ancillary functions for such
institutions.
Fixed Account. The component of the contract guaranteeing principal plus a
specified rate of interest supported by assets in the general account.
General Account. All of TIAA's assets other than those allocated to TIAA
Separate Account VA-1 or to any other TIAA separate account.
Income Option. Any of the ways you can receive annuity income, which must be
from the fixed account.
Internal Revenue Code (IRC). The Internal Revenue Code of 1986, as amended.
Premium. Any amount you invest in the contract.
Separate Account. TIAA Separate Account VA-1, which was established by TIAA
under New York State law to fund your variable annuity. The account holds its
assets apart from TIAA's other assets.
Survivor Income Option. An option that continues lifetime annuity payments as
long as either the annuitant or the annuity partner is alive.
TIAA. Teachers Insurance and Annuity Association of America.
Valuation Day. Any day the NYSE is open for trading, as well as the last
calendar day of each month. Valuation days end as of the close of all U.S.
national exchanges where securities or other investments of the separate account
are principally traded. Valuation days that aren't business days end at 4 p.m.
Eastern Time.
Summary
Read this summary together with the detailed information you'll find in the rest
of the prospectus.
This prospectus describes the variable component of the contract, which also
provides fixed annuity benefits (see "The Fixed Account," page 15). The contract
is an individual deferred annuity that is available to any employee or retired
employee of an eligible institution, or his or her spouse or domestic partner
(see "Eligible Purchasers of the Contract," page 13). The availability of the
variable component of the contract is subject to applicable regulatory approval.
The Separate Account
TIAA Separate Account VA-1 is an open-end management investment company.
Currently the separate account has only one investment portfolio, the Stock
Index Account. Like any other portfolio that we might add in the future, the
Stock Index Account is subject to the risks involved in professional investment
management,
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including those resulting from general economic conditions. The value of your
accumulation in any portfolio can fluctuate, and you bear the entire risk.
Expenses
Here's a summary of the direct and indirect expenses under the contract.
Contractowner Transaction Expenses
Deductions from premiums (as a percentage of premiums) None
Charges for Transfers and Cash Withdrawals
(as a percentage of transaction amount)
Transfers to the fixed account None
Cash withdrawals None
Annual Expenses (as a percentage of average net assets)
Investment Advisory Charge (after fee waiver) (1) .07%
Mortality and Expense Risk Charge (current) (2) .10%
Administrative Expense Charge .20%
Total Annual Expenses (3) .37%
(1) Although Teachers Advisors, Inc., the separate account's investment adviser,
is entitled to an annual fee of 0.30% of the separate account's average
daily net assets, it has voluntarily agreed to waive a portion of its fee.
(2) TIAA reserves the right to increase the mortality and expense risk charge to
a maximum of 1.00% per year.
(3) If we imposed the full amount of the administrative expense, investment
advisory and mortality and expense risk charges, total annual expenses would
be 1.50%. TIAA guarantees that total annual expenses will never exceed this
level.
You will receive at least three months' notice before we raise any of these
charges.
Premium taxes apply to certain contracts (see "Other Charges," page 17).
The next table gives an example of the expenses you'd incur on a hypothetical
investment of $1,000 over several periods. The table assumes a 5 percent annual
return on assets.
<TABLE>
<CAPTION>
Annual Expense Deductions from Net Assets 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------- ------- ------- ------- ---------
<S> <C> <C> <C> <C>
If you withdraw your entire accumulation at the end of
the applicable time period: $ 4 $ 12 $21 $47
If you annuitize at the end of the applicable time
period: $ 4 $ 12 $21 $47
If you do not withdraw your entire accumulation: $ 4 $ 12 $21 $47
</TABLE>
These tables are to help you understand the various expenses you would bear
directly or indirectly as an owner of a contract. Remember that they don't
represent actual past or future expenses or investment performance. Actual
expenses may be higher or lower. For more information, see "Charges," page 16.
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<PAGE>
"Free Look" Right
Until the end of the period of time specified in the contract (the "free look"
period), you can examine the contract and return it to TIAA for a refund. The
time period will depend on the state in which you live. In states that permit
it, we'll refund the accumulation value calculated on the date that you mailed
or delivered the contract and the refund request to us. In states that don't
allow us to refund accumulation value only, we'll refund the premiums you paid
to the contract. If you live in a state that requires refund of premiums (see
page 13) and we issued you a contract on or after November 1, 1994, your
premiums and transfers allocated to the separate account during the "free look"
period can't exceed $10,000. We will consider the contract returned on the date
it's postmarked and properly addressed with postage pre-paid or, if it's not
postmarked, on the day we receive it. We will send you the refund within seven
(7) days after we get written notice of cancellation and the return contract. We
will cancel the contract as of the date of issue.
Restrictions on Transfers and Cash Withdrawals
Currently, you can transfer funds from the separate (variable) account to the
fixed account as often as you like, but you can transfer from the fixed account
to the separate account no more than once every 180 days. After you have been
given three months' notice, we may limit the number of transfers from the
separate account to one in any 90-day period. All transfers or cash withdrawals
must be for at least $1,000 or your entire account balance, if less.
You may have to pay a tax penalty if you want to make a cash withdrawal before
age 59-1/2. For more, see "Income Options," page 19, and "Federal Income Taxes,"
page 23.
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Condensed Financial Information
Below you'll find condensed audited financial information for the separate
account for the periods from November 1, 1994 (date of initial registration) to
December 31, 1994 and for the year ended December 31, 1995. The audited
financial statements for the separate account and TIAA are in the SAI, which is
available free upon request. The table should be read in conjunction with the
audited financial statements and related notes appearing in the SAI.
<TABLE>
<CAPTION>
November 1, 1994
(date of initial registration) Year Ended
to December 31, 1994 December 31, 1995
----------------------------- ------------------
<S> <C> <C>
Per Accumulation Unit Data:
Investment income $ 0.138 $ 0.745
Expense charges 0.023 0.170
----------------------------- ------------------
Investment income--net 0.115 0.575
Net realized and unrealized
gain(loss) on investments (0.676) 8.565
----------------------------- ------------------
Net increase(decrease) in
Accumulation Unit Value (0.561) 9.140
Accumulation Unit Value:
Beginning of period 25.832 25.271
----------------------------- ------------------
End of period $25.271 $34.411
============================= ==================
Ratios to Average Net Assets:
Expenses 0.09% 0.55%
Investment income--net 0.45% 1.87%
Portfolio turnover rate 0.04% 0.98%
Thousands of Accumulation Units
outstanding at end of period 1,171 2,605
</TABLE>
Teachers Insurance and Annuity Association of America
TIAA is a nonprofit stock life insurance company, organized under the laws of
New York State. It was founded on March 4, 1918, by the Carnegie Foundation for
the Advancement of Teaching. All of the stock of TIAA is held by the TIAA Board
of Overseers, a nonprofit New York membership corporation whose main purpose is
to hold TIAA's stock. TIAA's headquarters are at 730 Third Avenue, New York, New
York 10017-3206; there are also regional offices in Atlanta, Boston, Chicago,
Dallas, Denver, Detroit, New York, Philadelphia, San Francisco, and Washington,
D.C., and a telephone service center in Denver. TIAA's general account offers
traditional annuities, which guarantee principal and a specified interest rate
while providing the opportunity for additional dividends. TIAA also offers life,
long-term disability, and long-term care insurance. TIAA has received the
highest ratings from the leading independent insurance industry rating agencies:
A + + (Superior) from A.M. Best Company, AAA from Duff & Phelps Credit Rating
Company, Aaa from Moody's Investor's Service and AAA from Standard and Poor's.
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TIAA is the companion organization of the College Retirement Equities Fund
(CREF), the first company in the United States to issue a variable annuity. CREF
is a nonprofit membership corporation established in New York State in 1952.
Together, TIAA and CREF form the principal retirement system for the nation's
education and research communities and the largest retirement system in the
U.S., based on assets under management. TIAA-CREF serves approximately 1.8
million people at about 5,800 institutions. As of December 31, 1995, TIAA's
assets were approximately $80 billion; the combined assets for TIAA and CREF
totalled approximately $160.6 billion (although CREF doesn't stand behind TIAA's
guarantees).
The Separate Account
Separate Account VA-1 was established on February 16, 1994, as a separate
investment account of TIAA under New York law, by resolution of TIAA's Board of
Trustees. The separate account is governed by a management committee. As an
"open-end" diversified management investment company, the separate account has
no limit on how many units of participation it can issue. The separate account
is registered with the SEC under the Investment Company Act of 1940, as amended
(the 1940 Act), though registration doesn't entail SEC supervision of its
management and investment practices. As part of TIAA, the separate account is
also subject to regulation by the State of New York Insurance Department (NYID)
and the insurance departments of some other jurisdictions in which the contracts
are offered (see the SAI).
Although TIAA owns the assets of the separate account, the contract states that
the separate account's income, investment gains, and investment losses are
credited to or charged against the assets of the separate account without regard
to TIAA's other income, gains, or losses. Under New York law, we cannot charge
the separate account with liabilities incurred by any other TIAA separate
account or other business activity TIAA may undertake.
The contract accepts only after-tax dollars. In contrast, TIAA-CREF's other
fixed and variable annuity products are part of employer retirement plans and
accept premiums consisting primarily of before-tax dollars. Like earnings from
other TIAA-CREF annuity products, earnings on accumulations in the separate
account aren't taxed until withdrawn or paid as annuity income (see "Federal
Income Taxes," page 23).
Adding, Closing, or Substituting Portfolios
The separate account currently consists of a single investment portfolio, but we
can add new investment portfolios in the future. We don't guarantee that the
separate account, or any investment portfolio added in the future, will always
be avail-
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able. We reserve the right, subject to any applicable law, to change the
separate account and its investments. We can add or close portfolios, substitute
one portfolio for another, or combine portfolios, subject to the requirements of
applicable law. We can also make any changes to the separate account or to the
contract required by applicable insurance law, the Internal Revenue Code, or the
1940 Act. TIAA can make some changes at its discretion, subject to NYID and SEC
approval as required. The separate account can (i) operate under the 1940 Act as
a unit investment trust that invests in another investment company, or in any
other form permitted by law, (ii) deregister under the 1940 Act if registration
is no longer required, or (iii) combine with other separate accounts. As
permitted by law, TIAA can transfer the separate account assets to another
separate account or accounts of TIAA or another insurance company or transfer
the contract to another insurance company.
Investment Practices
The separate account is subject to several types of risks. One is market risk
price volatility due to changing conditions in the financial markets. Another is
financial risk. For stocks or other equity securities, financial risk comes from
the possibility that current earnings will fall or that overall financial
soundness will decline, reducing the security's value.
The separate account currently consists solely of the Stock Index Account.
Changing the investment objective of the separate account won't require a vote
by contractowners. The separate account can also change some of its investment
policies (that is, the methods used to pursue the objective) without such
approval. Of course, there's no guarantee that the separate account will meet
its investment objective.
The separate account's general perspective is long-term, and we avoid both
extreme conservatism and high risk in investing. Teachers Advisors, Inc.
(Advisors) manages the separate account's assets (see "Management and Investment
Advisory Arrangements," page 12). Personnel of Advisors, a subsidiary of TIAA,
may also manage assets of one or more CREF accounts on behalf of TIAA-CREF
Investment Management, Inc., an investment adviser which is also a TIAA
subsidiary. Ordinarily, investment decisions for the separate account will be
made independently, but managers for the separate account may at times decide to
buy or to sell a particular security at the same time as for a CREF account they
may also be managing. If so, investment opportunities are allocated equitably,
which can have an adverse effect on the size of the position the separate
account buys or sells, as well as the price paid or received for it.
Investment Objective
The investment objective of the separate account is favorable long-term return
from a diversified portfolio selected to track the overall market for common
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stocks publicly traded in the U.S., as represented by a broad stock market
index.
Investment Mix
The separate account attempts to track the U.S. stock market as a whole by
investing substantially all of its assets in stocks included in the Russell 3000
Index (See "The Russell 3000 Index," below). The separate account doesn't try to
match the Russell 3000 precisely by holding all 3,000 stocks. Rather, we use
sampling to try to emulate the index's overall investment characteristics. The
portfolio won't be managed in the traditional sense of picking individual
securities based on economic, financial, and market analysis. This means that a
company can remain in the portfolio even if it performs poorly.
Using the Russell 3000 as the measure of the U.S. equity market isn't
fundamental to the separate account's objective or investment policies, and the
management committee can substitute other indices without contractowner
approval. We'll notify you, however, before making any change in the target
index.
We expect that in periods when the overall U.S. stock market is rising, the
separate account's unit value will also rise, while in market declines, the
separate account's unit value will likewise decline. We don't expect to match
the index precisely. However, we expect the separate account to closely track
the index. To ensure this, a correlation coefficient will be calculated daily
using the separate account's returns from the most recent 30 trading days and
the index's returns for the same period. We expect the correlation coefficient
usually to be above 0.99 and in any case never to fall below 0.98. If it
approaches 0.98, we'll rebalance the portfolio--a process which involves
realigning portfolio weights and/or adding more stocks to the separate account.
Since the index's returns aren't reduced by operating or investment expenses,
the separate account's ability to match the index will be adversely affected by
the costs of buying and selling stocks and other expenses. However, we expect
expenses to be low compared to an actively managed stock portfolio.
The Russell 3000 Index
The Russell 3000 is an index of the 3,000 largest publicly traded U.S.
corporations, based on the value of their outstanding stock. According to Frank
Russell Company, Russell 3000 companies account for about 98 percent of the
total market capitalization of the publicly-traded U.S. equity market. The
market capitalization of individual companies in the Russell 3000 ranged from
$22.6 million to $120.3 billion, with an average of $2.1 billion as of December
31, 1995.
Frank Russell Company chooses the stocks in the index solely on a statistical
basis, using market capitalization. The stocks are weighted in the index by
relative market value. Frank Russell Company can change stocks in the index and
their weightings from time to time. We'll adjust the separate account's
portfolio to
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reflect the changes as appropriate. We can also adjust the separate account's
portfolio because of mergers and similar events.
The separate account hasn't been endorsed or sponsored by and isn't affiliated
with Frank Russell Company. A stock's presence in the Russell 3000 doesn't mean
that Frank Russell Company believes that it's an attractive investment. Frank
Russell Company isn't responsible for any literature about the separate account
and makes no representations or warranties about its content. The Russell 3000
is a trademark and service mark of Frank Russell Company.
Other Investments
The separate account can also hold other investments whose return depends on
stock market prices. These include stock index futures contracts, options (puts
and calls) on futures contracts, and debt securities whose prices or interest
rates are linked to the return of a recognized stock market index. The separate
account can also make swap arrangements where the return is linked to a
recognized stock market index. The separate account would make such investments
in order to seek to match the total return of Russell 3000. However, they might
not track the return of the Russell 3000 in all cases and can involve additional
credit risks. Investing in options or futures contracts and entering into equity
swaps involve special risks; see the SAI. Such investing by the separate account
is subject to any necessary regulatory approvals.
The separate account can hold other types of securities with equity
characteristics, such as bonds convertible into common stock, warrants,
preferred stock, and depository receipts for such securities. In addition, the
separate account can hold fixed-income securities that it acquires because of
mergers, recapitalizations, or otherwise. For liquidity, the separate account
can also invest in short-term debt securities and other money market
instruments, including those denominated in foreign currencies.
Other Investment Issues and Risks
Options, Futures, and Other Investments
The separate account can buy and sell options (puts and calls) and futures to
the extent permitted by the New York State Insurance Department, the SEC, and
the Commodity Futures Trading Commission. We intend to use options and futures
primarily as hedging techniques or for cash management, not for speculation, but
they involve special considerations and risks nonetheless.
For more information, see the SAI.
The separate account can also invest in newly developed financial instruments,
such as equity swaps and equity-linked fixed-income securities, so long as these
are consistent with its investment objective and regulatory requirements. For
more information, see the SAI.
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Illiquid Securities
The separate account can invest up to 10 percent of its assets in investments
that may not be readily marketable. It may be difficult to sell these
investments for their fair market value.
Repurchase Agreements
Repurchase agreements are one of several short-term vehicles the separate
account can use to manage cash balances effectively. In a repurchase agreement,
we buy an underlying debt instrument on condition that the seller agrees to buy
it back at a fixed time (usually a relatively short period) and price. The
period from purchase to repurchase is usually no more than a week and never more
than a year. Repurchase agreements may involve special risks; for more details,
see the SAI.
Firm Commitment Agreements
The separate account can enter "firm commitment" agreements to buy securities at
a fixed price or yield on a specified future date. We expect that these
transactions will be relatively infrequent. For more, see the SAI.
Investment Companies
The separate account can invest up to 10 percent of its assets in other
investment companies.
Securities Lending
Subject to certain restrictions, the separate account can seek additional income
by lending securities to brokers, dealers, and other financial institutions.
Brokers and dealers must be registered with the SEC and be members of the
National Association of Securities Dealers, Inc. (NASD); any recipient must be
unaffiliated with TIAA. All loans will be fully collateralized. If we lend a
security, we can call in the loan at any time. See the SAI.
Borrowing
The separate account can borrow money from banks (no more than 33-1/3 percent of
the market value of its assets at the time of borrowing). It can also borrow
money from other sources temporarily (no more than 5 percent of the total market
value of its assets at the time of borrowing). See the SAI.
Performance Information
From time to time, we advertise the total return and average annual total return
of the separate account. "Total return" means the cumulative percentage increase
or decrease in the value of an investment over standard one-, five-, and
ten-year periods (and occasionally other periods as well).
"Average annual total return"
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means the annually compounded rate that would result in the same cumulative
total return over the stated period.
All performance figures are based on past investment results. They aren't a
guarantee that the separate account will perform equally or similarly in the
future. Write or call us for current performance figures for the separate
account (see "Contacting TIAA," page 28).
Valuation of Assets
We calculate the value of the assets as of the close of every valuation day.
Except as noted below, we use market quotations or independent pricing services
to value securities and other instruments. If market quotations or independent
pricing services aren't readily available, we'll use fair value, as decided in
good faith under the direction of the management committee. For more
information, see the SAI.
Management and Investment Advisory Arrangements
The principal responsibility for directing the separate account's investments
and administration rests with its management committee. Advisors manages the
assets in the separate account. A wholly owned subsidiary of TIAA, Advisors is
registered under the Investment Advisers Act of 1940. Its duties include
conducting research, recommending investments, and placing orders to buy and
sell securities. It also provides for all portfolio accounting, custodial, and
related services for the separate account. Advisors and its personnel act
consistently with the investment objectives, policies, and restrictions of the
separate account.
TIAA restricts the ability of those personnel of Advisors who have direct
responsibility and authority for making investment decisions for the separate
account to trade in securities for their own accounts. The restrictions also
apply to members of their households, i.e., spouses, domestic partners and
relatives sharing the same home. Transactions in securities by those individuals
are subject to preclearance procedures and reporting requirements, including a
requirement that they send duplicate confirmation statements and other account
reports to a special compliance unit.
The Contract
The contract is an individual flexible-premium (you can contribute varying
amounts) deferred annuity that accepts only after-tax dollars from eligible
purchasers. The rights and benefits under the variable component of the contract
are summarized below; however, the descriptions you read here are qualified
entirely by the contract itself. Subject to regulatory approval, we offer the
contracts to residents of all fifty states and the District of Columbia.
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Eligible Purchasers of the Contract
An employee or a retiree of an eligible institution can purchase a contract. For
this purpose, an individual who retired after attainment of age 55 and completed
at least five years of service at an eligible institution is considered to be a
"retiree." A spouse or domestic partner of an employee or retiree can also
purchase a contract. Two adults will be considered to be "domestic partners" if
they have lived together continuously for at least six months and intend to
reside together permanently, are mutually responsible for their common welfare,
have no other domestic partnership or marriage, and are not blood relatives.
Remitting Premiums
We'll issue you a contract as soon as we receive your completed application and
your initial premium of at least $2,000 at our home office, even if you don't
initially allocate any premiums to the separate account. (The $2,000 minimum
doesn't apply if premiums are collected by payroll deduction and forwarded by
your employer.) We will credit your initial premium within two business days
after we receive all necessary information or the premium itself, whichever is
later. If we don't have the necessary information within five business days,
we'll contact you to explain the delay. We'll return the initial premium at that
time unless you consent to our keeping it and crediting it as soon as we receive
the missing information from you.
Subsequent premiums must be for at least $100. (However, the $100 minimum
doesn't apply to premiums that your employer pays for you by payroll deduction.)
We will also accept premiums of at least $25 through electronic funds transfer.
Additional premiums will be credited as of the business day we receive them.
Except as described below, the contract doesn't restrict how large your premiums
are or how often you send them, although we reserve the right to impose
restrictions in the future. Unless your contract was issued before November 1,
1994, your total premiums and transfers to the separate account during the "free
look" period can't exceed $10,000 if you live in any of the following states:
Jurisdiction "Free Look" Period (days)
- ----------------- --------------------------
Georgia 10
Idaho 20
Massachusetts 10
Nebraska 10
Nevada 10
North Carolina 30
South Carolina 31
Texas 30
Utah 10
Washington 10
West Virginia 10
Total premiums and transfers to the fixed account in any 12-month period could
be limited to $300,000, so you should contact us if you want more than $300,000
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to be credited to the fixed account during any such period (see "Contacting
TIAA," page 28).
Currently, TIAA will accept premiums at any time both the contractowner and the
annuitant are living and your contract is in the accumulation period. However we
reserve the right not to accept premiums under this contract after you have been
given three months' notice. If TIAA stops accepting premiums under this
contract, we will accept premiums under a new contract issued to you with the
same annuitant, annuity starting date, beneficiary, and methods of benefit
payment as those under this contract at the time of replacement.
Accumulation Units
Premiums paid to the separate account purchase accumulation units. When you
remit premiums or transfer amounts into the separate account, the number of your
units will increase; when you transfer amounts from the account (including
applying funds to the fixed account to begin annuity income) or take a cash
withdrawal, the number of your units will decrease. We calculate how many
accumulation units to credit by dividing the amount allocated to the separate
account by its unit value for the business day when we received your premium. We
may use a later business day for your initial premium. To determine how many
accumulation units to subtract for transfers and cash withdrawals, we use the
unit value for the business day when we receive your completed transaction
request and all required information and documents. (You can choose to have your
transaction completed at a later date; if you do, we will use that later date as
the valuation day.) For amounts to be applied to begin annuity income, the unit
value will be the one for the last valuation day of the month when we receive
all required information and documentation (see "The Annuity Period," page 18).
For amounts to be applied to begin death benefits, the unit value will be the
one for the valuation day when we receive proof of death (see "Death Benefits,"
page 20).
The value of the accumulation units will depend mainly on investment experience,
though the unit value also reflects expense deductions from assets (see
"Charges," page 16). The unit value is calculated at the close of each valuation
day. We multiply the previous day's unit value by the net investment factor for
the separate account. The net investment factor is calculated as A divided by B,
where A and B are defined as: A equals the value of the separate account's net
assets at the end of the day, excluding the net effect of transactions (i.e.,
premiums received, benefits paid, and transfers to and from the account) made
during that day. This amount is equal to the net assets at the end of the prior
day (including the net effect of transactions made during the prior day)
increased/decreased by realized and unrealized capital gains/losses, dividends,
and investment income and decreased by expense and risk charges. B is the value
of the separate account's net assets at the end of the prior day (including the
net effect of transactions made during the prior day).
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The Fixed Account
Premiums allocated and amounts transferred to the fixed account become part of
the general account assets of TIAA, which support insurance and annuity
obligations. The general account includes all the assets of TIAA, except those
in the separate account or in any other TIAA separate investment account.
Interests in the fixed account have not been registered under the Securities Act
of 1933 (the 1933 Act), nor is the fixed account registered as an investment
company under the 1940 Act. Neither the fixed account nor any interests therein
are generally subject to the 1933 Act or 1940 Act. The SEC staff has told us
that they haven't reviewed the information in this prospectus about the fixed
account.
You can allocate premiums to the fixed account or transfer from the separate
account to the fixed account at any time. In contrast, you can transfer or take
a cash withdrawal from the fixed account only once every 180 days. TIAA may
defer payment of a transfer or cash withdrawal from the fixed account for up to
six months.
When you invest in the separate account, you bear the investment risk. However,
TIAA bears the full investment risk for all accumulations in the fixed account.
Currently TIAA guarantees that amounts in the fixed account will earn interest
of at least 3 percent per year. At its discretion, TIAA can credit amounts in
the fixed account with interest at a higher rate than 3 percent per year. TIAA
has sole investment discretion for the fixed account, subject to applicable law.
This prospectus provides information mainly about the contract's variable
component, which is funded by the separate account. For more about the fixed
account, see the contract itself.
Transfers Between the Separate Account and the Fixed Account
Subject to the conditions below, you can transfer some (at least $1,000 at a
time) or all of the amount accumulated under your contract between the separate
account and the fixed account. Currently, we don't charge you for transfers from
the separate account to the fixed account. We don't currently limit the number
of transfers from the separate account, but we reserve the right to do so in the
future to one every 90 days. Transfers to the fixed account begin participating
on the day following effectiveness of the transfer (see below).
Cash Withdrawals
You can withdraw some or all of your accumulation in the separate account as
cash. Cash withdrawals must be for at least $1,000 (or your entire accumulation,
if less). We reserve the right to cancel any contract where no premiums have
been paid to either the separate account or the fixed account for three years
and your
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total amount in the separate account and the fixed account falls below $2,000.
Currently, there's no charge for cash withdrawals.
If you withdraw your entire accumulation in the separate account and the fixed
account, we'll cancel your contract and all of our obligations to you under the
contract will end.
General Considerations for All Transfers and Cash Withdrawals
You can tell us how much you want to transfer or withdraw in dollars,
accumulation units, or as a percentage of your accumulation.
Transfers and cash withdrawals are effective at the end of the business day we
receive your request and any required information and documentation. You can
also defer the effective date of a transfer or cash withdrawal to a future
business day acceptable to us.
To request a transfer, write to TIAA's home office or call us at 1 800 223-1200.
If you make a telephone transfer at any time other than during a business day,
it will be effective at the close of the next business day. We reserve the right
to suspend or terminate transfers by telephone.
Tax Issues
Make sure you understand the possible federal and other income tax consequences
of transfers and cash withdrawals. Cash withdrawals are usually taxed at the
rates for ordinary income--i.e., they are not treated as capital gains. They may
subject you to early-distribution taxes as well. For details, see "Federal
Income Taxes," page 23.
Charges
Separate Account Charges
Charges are deducted each valuation day from the assets of the separate account
for various services required to manage investments, administer the separate
account and the contracts, and to cover certain insurance risks borne by TIAA.
We expect that expense deductions will be relatively low.
Advisors, a wholly-owned subsidiary of TIAA, provides the investment
management services. TIAA itself provides the administrative services for the
separate account and the contracts.
Investment Advisory Charge. This charge is for investment advice, portfolio
accounting, custodial, and similar services provided for by Advisors. The
investment management agreement between Advisors and the separate account sets
the investment advisory fee at 0.30 percent annually. Currently, Advisors has
agreed to waive a portion of that fee, so that the daily deduction is equivalent
to 0.07 percent of net assets annually.
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Administrative Expense Charge. This charge is for administration and operations,
such as allocating premiums and administering accumulations. The current daily
deduction is equivalent to 0.20 percent of net assets annually.
Mortality and Expense Risk Charge. TIAA imposes a daily charge as compensation
for bearing certain mortality and expense risks in connection with the contract.
The current daily deduction is equal to 0.10 percent of net assets annually;
approximately 0.03 percent is for mortality risks, and approximately 0.07
percent is for expense risks. Accumulations and annuity payments aren't affected
by changes in actual mortality experience or by TIAA's actual expenses.
TIAA's mortality risks come from its contractual obligations to make annuity
payments and to pay death benefits before the annuity starting date. This
assures that neither your own longevity nor any collective increase in life
expectancy will lower the amount of your annuity payments. TIAA also bears a
risk in connection with its death benefit guarantee, since a death benefit may
exceed the actual amount of an accumulation at the time when it's payable.
TIAA's expense risk is the possibility that TIAA's actual expenses for
administering the contract and the separate account will exceed the amount
recovered through the administrative expense deduction.
If the mortality and expense risk charge isn't enough to cover TIAA's actual
costs, TIAA will absorb the deficit. On the other hand, if the charge more than
covers costs, the excess will belong to TIAA. TIAA will pay a fee from its
general account assets, which may include amounts derived from the mortality and
expense risk charge, to Teachers Personal Investors Services, Inc. (TPIS), the
principal underwriter of the variable component of the contract for distribution
of the variable component of the contract.
Other Charges
No Deductions from Premiums. The contract provides for no front-end charges.
Premium Taxes. Currently, contracts issued to residents of several states and
the District of Columbia are subject to a premium tax. Charges for premium taxes
on a particular contract ordinarily will be deducted from the accumulation when
it's applied to provide annuity payments. However, if a jurisdiction requires
payment of premium taxes at other times, such as when premiums are paid or when
cash withdrawals are taken, we'll deduct premium taxes at those times. Current
state premium taxes, where charged, range from 1.00 percent to 3.50 percent of
annuity payments.
Brokerage Fees and Related Transaction Expenses
Brokers' commissions, transfer taxes, and other portfolio fees are charged to
the separate account (see the SAI).
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The Annuity Period
All annuity payments are paid to the contractowner from the fixed account.
(Annuity payments may be available from the separate account in the future.)
TIAA fixed annuity payments are usually monthly. You can choose quarterly,
semi-annual, and annual payments as well. TIAA reserves the right not to make
payments at any interval that would cause the initial payment to be less than
$100.
You can take payments from all or just a part (but not less than $10,000) of the
amount you've accumulated in the separate account and the fixed account, so it's
possible for you to be both accumulating and receiving annuity payments at the
same time. You can also pick a different income option for different parts of
the amount you've accumulated, but once you've started payments you can't change
your income option or annuity partner (if you named one) for that payment
stream. If you choose to receive annuity payments from part of the amount you've
already accumulated (i.e., partial annuitization) while continuing to accumulate
at the same time, the annuity payments may be treated as cash withdrawals
(rather than as annuity payments) for federal income tax purposes (see "Federal
Income Taxes," page 23).
The value of the amount accumulated upon which payments are based will be set at
the end of the last calendar day of the month before the annuity starting date.
The total value of annuity payments may be more or less than total premiums paid
by the contractowner.
Technically all benefits are payable at TIAA's home office, but we'll send your
annuity payments by mail to your home address or (on your request) by mail or
electronic fund transfer to your bank. If the address or bank where you want
your payments sent changes, it's your responsibility to let us know. We can send
payments to your residence or bank abroad, although there are some countries
where the U.S. Treasury Department imposes restrictions.
Annuity Starting Date
Generally you pick an annuity starting date (it has to be the first day of a
month) when you first apply for a contract. If you don't, we'll tentatively
assume the annuity starting date will be the latest permissible annuity starting
date (i.e., the first day of the month after the annuitant's eighty-fifth
birthday). You can change the annuity starting date at any time before annuity
payments begin (see "Choices and Changes," page 27). In any case, the annuity
starting date must be at least fourteen months after the date your contract is
issued.
For payments to begin on the annuity starting date, we must have received all
information and documentation necessary for the income option you've picked.
(For more information, contact TIAA--see page 28.) If we haven't received all
the necessary information, we'll defer the annuity starting date until the first
day
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of the month after the information has reached us, but not beyond the latest
permissible annuity starting date. If, by the latest permissible annuity
starting date, you haven't picked an income option or if we have not otherwise
received all the necessary information, we will begin payments under a Single
Life Annuity with a 10-Year Guaranteed Period (or a shorter period if required
to meet federal tax law). Your first annuity check may be delayed while we
process your choice of income options and calculate the amount of your initial
payment.
Income Options
You have a number of different annuity options to choose among. You may select
from the several income options set forth in your contract (all from the fixed
account) or any other annuity option available from TIAA at the time of
selection. However, federal tax law might limit the options available to you.
You may change your choice any time before payments begin, but once they have
begun no change can be made. At the annuity starting date, the dollar amount of
each periodic annuity payment is fixed, based upon the number and value of the
separate account accumulation units being converted to annuity income, the ages
of the annuitant and (under a survivor income option) the annuity partner, and
the annuity purchase rates at that time. (These will not be lower than the rates
provided in your contract.) Payments won't change while the annuitant and the
annuity partner (under a survivor income option) are alive. After the end of the
accumulation period, your contract will no longer participate in the separate
account.
The current options are:
Single Life Annuity. Pays income (usually monthly) as long as the annuitant
lives. Remember: All payments end at the annuitant's death so that it would
be possible, for example, for the contractowner to receive only one payment
if the annuitant died less than a month after annuity payments started. If
you die before the annuitant, your beneficiary becomes the contractowner.
Single Life Annuity with a 10-, 15-, or 20-Year Guaranteed Period. Pays
income (usually monthly) as long as the annuitant lives or until the end of
the guaranteed period, whichever is longer. If the annuitant dies before the
period is up, payments continue for the remaining time. If you die while any
payments remain due, your beneficiary becomes the contractowner.
Payments for a Fixed Period. Pays income (usually monthly) for a stipulated
period of not less than two nor more than thirty years. At the end of the
period you've chosen, payments stop. If you die before the period is up, your
beneficiary becomes the contractowner.
Survivor Income Options. Pay income at least as long as the annuitant and the
annuity partner are alive, then continue upon the death of one at either the
same or a reduced level at least until the second person dies. Once annuity
payments
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begin under a survivor annuity, you can't change the annuity partner. If you
die while any payments remain due, your beneficiary becomes the
contractowner.
(bullet) Full Benefit, with or without Guaranteed Period. If the annuitant or
the annuity partner dies, payments continue for the life of the
survivor. If you haven't chosen a guaranteed period, all payments
stop when the second person dies. If you've chosen a guaranteed
period of 10, 15, or 20 years and both the annuitant and the annuity
partner die before it elapses, payments continue for the rest of the
period.
(bullet) Two-Thirds Benefit, with or without Guaranteed Period. If the
annuitant or the annuity partner dies, payments of two-thirds of the
amount that would have been paid if both had lived continue for the
life of the survivor. If you haven't chosen a guaranteed period, all
payments stop when the second person dies. If you've chosen a
guaranteed period of 10, 15, or 20 years and both the annuitant and
the annuity partner die before it elapses, payments of two-thirds
of the amount that would have been paid if both had lived continue
for the rest of the period.
(bullet) Half-Benefit after the Death of the Annuitant, with or without
Guaranteed Period. If the annuity partner outlives the annuitant,
payments of half the amount that would have been paid if the
annuitant had lived will continue for the life of the annuity
partner. If you haven't chosen a guaranteed period, all payments
stop when the second person dies. If you've chosen a guaranteed
period of 10, 15, or 20 years and both the annuitant and the annuity
partner die before it elapses, payments of half the amount that
would have been paid if the annuitant had lived continue for the
rest of the period.
We may make variable income options available in the future, subject to
applicable law.
Death Benefits
Death benefits become payable when we receive proof that you or the annuitant
has died during the accumulation period. When you fill out an application for a
contract, you name one or more beneficiaries to receive the death benefit if you
die. You can change your beneficiary at any time during the accumulation period
(see "Choices and Changes," page 27). For more information on designating
beneficiaries, contact TIAA or your legal advisor. If the annuitant dies during
the accumulation period, you become the death benefit payee.
Your accumulation will continue participating in the investment experience of
the separate account up to and including the day when we receive proof of death.
Ordinarily, we will transfer your separate account accumulation to the fixed
account as of the day we receive proof of death. However, if the contractowner's
spouse is the sole beneficiary, when the contractowner dies the spouse can
choose to be
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come the contractowner and continue the contract, or receive the death benefit.
If the spouse does not make a choice within 60 days after we receive proof of
death, the spouse will automatically become the contractowner. The spouse will
also become the annuitant if the contractowner was the annuitant.
The amount of the death benefit will equal the greater of (1) the amount you
have accumulated in the separate and fixed accounts on the day we receive proof
of death or, if that isn't a business day, on the next business day, or (2) the
total premiums paid under your contract minus any cash withdrawals (or surrender
charges on cash withdrawals or transfers from the fixed account). If (2) is
greater than (1), we'll deposit the difference in the fixed account as of the
day we receive proof of death.
You can choose in advance the method by which death benefits should be paid, or
you can leave it up to the death benefit payee. Except with the Single-Sum
Payment and Interest Payments methods, the amount of each periodic payment is
fixed (see "The Fixed Account," page 15). While you and the annuitant are both
alive, you can change the method of payment you've chosen. You can also
stipulate that your beneficiary not change the method you've specified in
advance. (To choose, change, or restrict the method by which death benefits are
to be paid, you or your beneficiary has to notify us in writing.) Once death
benefits start, the method of payment can't be changed.
To pay a death benefit, TIAA must have received all necessary forms and
documentation. (For more information, contact TIAA--see page 28.) Even if we
have not received all of the required information, death benefits must begin by
the first day of the month following the 60th day after we receive proof of
death. If no method of payment has been chosen by that time, we'll pay the
entire death benefit to the death benefit payee within five years of death,
using the Payments for a Fixed Period method. If the contractowner isn't a
natural person (e.g., it's an estate or a corporation), we'll apply these
distribution requirements if the annuitant dies.
Methods of Payment
TIAA limits the methods of payment for death benefits to those suitable under
federal income tax law for annuity contracts. (For more information, see
"Taxation of Annuities," page 24.) With methods offering periodic payments,
benefits are usually monthly, but the death benefit payee can request to receive
them quarterly, semiannually, or annually instead. Federal law may restrict the
availability of certain methods to the death benefit payee; conversely, TIAA may
offer additional methods in the future. At present, the methods of payment for
TIAA death benefits are:
Single-Sum Payment. The entire death benefit is paid at once (within seven
days after we receive all necessary forms and documentation). When the
beneficiary is an estate, the single-sum method is automatic, and TIAA
reserves the
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right to pay death benefits only as a single sum to corporations, trustees,
partnerships, guardians, or any beneficiary not a natural person.
Single Life Annuity. Payable monthly for the life of the death benefit payee,
with payments ending when he or she dies.
Single Life Annuity with a 10-, 15-, or 20-Year Guaranteed Period. Payable
monthly for the death benefit payee's lifetime or until the end of the period
chosen, whichever is later. If he or she dies before the period is up, the
remaining payments continue to the person named to receive them (see "Choices
and Changes," page 27). Federal tax law says the guaranteed period selected
can't exceed the death benefit payee's life expectancy.
Payments for a Fixed Period. Payable over two to thirty years, as determined
by you or your beneficiary. At the end of the selected period, payments stop.
If the death benefit payee dies before the period is up, the remaining
payments continue to the person named to receive them. Federal tax law says
the fixed period selected can't exceed the death benefit payee's life
expectancy.
Interest Payments. We'll pay interest on the amount of the death benefit each
month for two to thirty years. You (or your beneficiary, unless you specify
otherwise) choose the period. The death benefit is payable at the end of the
period chosen. If the death benefit payee dies before the interest payment
period is up, the death benefit becomes payable immediately. For this
interest-only method, the death benefit must be at least $5,000.
The Single Life Annuity and the Single Life Annuity with a 10-, 15-, or 20-Year
Guaranteed Period methods are available only if the death benefit payee is a
natural person. Under any method (except the Interest Payments method) that
would result in payments of less than $100 a month, we reserve the right to
require a change in choice that will result in payments of $100 or more. You or
your beneficiary can use more than one method of payment, but each has to meet
the same $100 minimum-payment requirement.
Timing of Payments
Usually we'll make the following kinds of payments from the separate account
within seven calendar days after we've received the information we need to
process a request:
1. Cash withdrawals;
2. Transfers to the fixed account; and
3. Death benefits.
We can extend the seven-day period only if (1) the New York Stock Exchange is
closed (or trading restricted by the SEC) on a day that isn't a weekend or
holiday;
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(2) an SEC-recognized emergency makes it impractical for us to sell securities
or determine the value of assets in the separate account; or (3) the SEC says by
order that we can or must postpone payments to protect you and other separate
account contractowners.
Federal Income Taxes
The following discussion is based on our understanding of current federal income
tax law as the IRS now interprets it. We can't guarantee that the law or the
IRS's interpretation won't change. We haven't considered any applicable state or
other tax laws. Of course, your own tax status or that of your beneficiary can
affect your final outcome.
Tax Status of the Contract
Diversification Requirements. Section 817(h) of the Internal Revenue Code (IRC)
and the regulations under it provide that separate account investments
underlying a contract must be "adequately diversified" for it to qualify as an
annuity contract under IRC section 72. The separate account intends to comply
with the diversification requirements of the regulations under section 817(h).
This will affect how we make investments.
Under the IRC, you could be considered the owner of the assets of the separate
account used to support your contract. If this happens, you'd have to include
income and gains from the separate account assets in your gross income. The IRS
has published rulings stating that a variable contractowner will be considered
the owner of separate account assets if the contractowner has any powers that
the actual owner of the assets might have, such as the ability to exercise
investment control. The Treasury Department says that the regulations on
investment diversification don't provide guidance about when and how investor
control of a segregated asset account's investment could cause the investor
rather than the insurance company to be treated as the owner of the assets for
tax purposes. The Treasury Department has also stated that the IRS would issue
regulations or rulings clarifying the "extent to which policyholders may direct
their investments to particular subaccounts without being treated as owners of
the underlying assets."
Your ownership rights under the contract are similar but not identical to those
described by the IRS in rulings that held that contractowners were not owners of
separate account assets, so the IRS therefore might not rule the same way in
your case. TIAA reserves the right to change the contract if necessary to help
prevent your being considered the owner of the separate account's assets.
Required Distributions. To qualify as an annuity contract under section 72(s) of
the IRC, a contract must provide that: (a) if any owner dies on or after the
annuity starting date but before all amounts under the contract have been
distributed, the remaining amounts will be distributed at least as quickly as
under the method
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being used when the owner died; and (b) if any owner dies before the annuity
starting date, all amounts under the contract will be distributed within five
years of the date of death. So long as the distributions begin within a year of
the owner's death, the IRS will consider these requirements satisfied for any
part of the owner's interest payable to or for the benefit of a "designated
beneficiary" and distributed over the beneficiary's life or over a period that
cannot exceed the beneficiary's life expectancy. A designated beneficiary is the
person the owner names to assume ownership when the owner dies. A designated
beneficiary must be a natural person, but if a contractowner's spouse is the
designated beneficiary, such spouse can continue the contract when such
contractowner dies.
The contract is designed to comply with section 72(s). TIAA will review the
contract and amend it if necessary to make sure that it continues to comply with
the section's requirements.
Taxation of Annuities
Assuming the contracts qualify as annuity contracts for federal income tax
purposes:
In General. IRC section 72 governs annuity taxation generally. We believe an
owner who is a natural person usually won't be taxed on increases in the value
of a contract until there is a distribution (i.e., the owner withdraws all or
part of the accumulation or takes annuity payments). Assigning, pledging, or
agreeing to assign or pledge any part of the accumulation usually will be
considered a distribution. Withdrawals of accumulated investment earnings are
taxable as ordinary income. Generally under the IRC, withdrawals are first
allocated to investment earnings.
The owner of any annuity contract who is not a natural person generally must
include in income any increase in the excess of the accumulation over the
"investment in the contract" during the taxable year. There are some exceptions
to this, and agents of prospective owners that are not natural persons may wish
to discuss them with a competent tax advisor.
The following discussion applies generally to contracts owned by a natural
person:
Withdrawals. If you withdraw funds from your contract before the annuity
starting date, IRC section 72(e) usually deems taxable any amounts received to
the extent that the accumulation value immediately before the withdrawal exceeds
the investment in the contract. Any additional withdrawal is not taxable. The
investment in the contract usually equals all premiums paid by the contractowner
or on the contractowner's behalf. A partial annuitization may be treated as a
cash withdrawal from the contract prior to the annuity starting date; if so, it
would be taxable to the extent the amounts held under the contract exceeded the
investment in the contract. Accordingly, an owner should contact a competent tax
advisor before requesting a partial annuitization.
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If you withdraw your entire accumulation under a contract, you will be taxed
only on the part that exceeds your investment in the contract.
Annuity Payments. Although tax consequences can vary with the income option you
pick, IRC section 72(b) provides generally that, before you recover the
investment in the contract, gross income does not include that fraction of any
annuity income payments that equals the ratio of investment in the contract to
the expected return at the annuity starting date. After you recover your
investment in the contract, all additional annuity payments are fully taxable.
Taxation of Death Benefit Proceeds. Amounts may be paid from a contract because
an owner has died. If the payments are made in a single sum, they're taxed the
same way a full withdrawal from the contract is taxed. If they are distributed
as annuity payments, they're taxed as annuity payments. Death benefits paid
under the Interest Payments method are usually taxed like a full withdrawal from
the contract, and the interest payable thereon is taxable as it is paid.
Penalty Tax on Some Withdrawals. You may have to pay a penalty tax (10 percent
of the amount treated as taxable income) on some withdrawals. However, there is
usually no penalty on distributions:
(1) on or after you reach 59-1/2;
(2) after you die (or after the annuitant dies, if the owner isn't an
individual);
(3) after you become disabled; or
(4) that are part of a series of substantially equal periodic (at least
annual) payments for your life (or life expectancy) or the joint life (or
life expectancy) of you and your beneficiary.
Possible Tax Changes. In recent years, legislation has been proposed that would
adversely change the federal taxation of certain annuities. For example, one
proposal would have taxed income on non-qualified annuities that did not have
"substantial life contingencies" when it was credited to the annuity. As of the
date of the current prospectus, Congress is not considering any legislation on
annuity taxation. However, there is always the possibility that the tax
treatment of annuities could change, and it's also possible that some changes
could be retroactive (that is, effective prior to the actual date of the
change).
Transfers, Assignments or Exchanges of a Contract
Transferring contract ownership, designating an annuitant, payee or other
beneficiary who is not also the owner, or exchanging a contract can have other
tax consequences that we don't discuss here. If you're thinking about any of
those transactions, contact a tax advisor.
25
<PAGE>
Withholding
Annuity distributions usually are subject to withholding for the recipient's
federal income tax liability at rates that vary according to the type of
distribution and the recipient's tax status. However, recipients can usually
choose not to have tax withheld from distributions.
Multiple Contracts
In determining gross income, section 72(e) generally treats as one contract all
TIAA non-qualified deferred annuity contracts issued after October 21, 1988 to
the same owner during any calendar year. This could affect when income is
taxable and how much might be subject to the 10 percent penalty tax (see above).
There might be other situations where Treasury concludes that it would be
appropriate to treat two or more annuity contracts purchased by the same owner
as if they were one contract. Consult a tax advisor before buying more than one
annuity contract for the purpose of gaining a tax advantage.
Possible Charge for TIAA's Taxes
Currently we don't charge the separate account for any federal, state, or local
taxes on it or its contracts (other than premium taxes--see page 17), but we
reserve the right to charge the separate account or the contracts for any tax or
other cost resulting from the tax laws that we believe should be attributed to
them.
Tax Advice
What we tell you here about federal and other taxes isn't comprehensive and is
for general information only. It doesn't cover every situation. Taxation varies
depending on the circumstances, and state and local taxes may also be involved.
For complete information on your personal tax situation, check with a qualified
tax advisor.
Voting Rights
The separate account doesn't plan to hold annual meetings of contractowners.
When contractowner meetings are held, contractowners generally can vote (1) to
elect the management committee; (2) to ratify the selection of an independent
auditor for the separate account; and (3) on any other matter that requires a
vote by contractowners.
On the record date, you'll have one vote per dollar of your accumulation.
When we use the phrase "majority of outstanding voting securities" in this
prospectus and the SAI, we mean the lesser of (a) 67 percent of the voting
securities present, as long as the holders of at least half the voting
securities are present or represented by proxy; or (b) 50 percent of the
outstanding voting securities. If a majority of outstanding voting securities
isn't required to decide a question, we'll
26
<PAGE>
generally require a quorum of 10 percent of the securities, with a simple
majority required to decide the issue. If laws, regulations, or legal
interpretations make it unnecessary to submit any issue to a vote, or otherwise
restrict your voting rights, we reserve the right to act as permitted.
General Matters
Choices and Changes
As long as the contract permits, the contractowner (or the annuitant, the
annuity partner, beneficiary, or any other payee) can choose or change any of
the following: (1) an annuity starting date; (2) an income option; (3) a
transfer; (4) a method of payment for death benefits; (5) an annuity partner,
beneficiary, or other person named to receive payments; and (6) a cash
withdrawal or other distribution.
You have to make your choices or changes via a written notice satisfactory to us
and received at our home office (see below). You can change the terms of a
transfer, cash withdrawal, or other cash distribution only before they're
scheduled to take place. When we receive a notice of a change in beneficiary or
other person named to receive payments, we'll execute the change as of the date
it was signed, even if the signer dies in the meantime. We execute all other
changes as of the date received. As already mentioned, we'll delay the effective
date of some transactions until we receive additional documentation (see
"Remitting Premiums," page 13).
Telephone Transactions
You can use our Automated Service Center to check your accumulation balances
and/or your current allocation percentages, transfer between the separate
account and the fixed account, and/or allocate future premiums to the separate
account or the fixed account by telephone. To use the Automated Service Center,
you need to call 1 800 223-1200 on a touch-tone phone. You will be prompted
through whatever transactions you select. We'll use reasonable care to confirm
that instructions given by telephone are genuine. You will be asked for your
contract number and Personal Access Code (PAC) as part of these procedures. The
first time you call, you will have to change your PAC. Your PAC can be any 4- to
7-digit number you select, and can also be the same number you use to get
information about your Retirement Annuity or Supplemental Retirement Annuity
through the TIAA-CREF Automated Telephone Service. The Automated Service Center
is available 24 hours a day. If you are calling from a rotary phone, you may
call weekdays between 8 a.m. and 8 p.m., Eastern Time--stay on the line after
the initial greeting, and a service representative will assist you. Calls may be
recorded for verification.
27
<PAGE>
Contacting TIAA
We won't consider any notice, form, request, or payment to have been received by
TIAA until it reaches our home office: Teachers Insurance and Annuity
Association of America, 730 Third Avenue, New York, New York 10017-3206. You can
ask questions by calling toll-free 1 800 223-1200.
Electronic Prospectuses
If you received this prospectus electronically and would like a paper copy,
please call 1 800 842-2733, extension 5509, and we will send it to you.
Signature Requirements
For some transactions, we may require your signature to be notarized or
guaranteed by a commercial bank or a member of a national securities exchange.
Distribution of the Contracts
The contracts are offered continuously by Teachers Personal Investors Services,
Inc. (TPIS) and, in some instances, TIAA-CREF Individual & Institutional
Services, Inc. (Services), which are both registered with the SEC as
broker-dealers and are members of the NASD. TPIS may be considered the
"principal underwriter" for interests in the contract. Anyone distributing the
contract must be a registered representative of either TPIS or Services, whose
main offices are both at 730 Third Avenue, New York, New York 10017-3206. No
commissions are paid in connection with the distribution of the contracts.
Legal Proceedings
The assets of the separate account are not subject to any legal actions. Neither
TIAA nor TPIS nor Advisors is involved in any legal action that we consider
material to its obligations to the separate account.
28
<PAGE>
Table of Contents for
Statement of Additional Information
Page in the Statement of
Item Additional Information
-------------------------------------------- -------------------------
Investment Restrictions B-3
Investment Policies and Risk Considerations B-4
Options and Futures B-4
Firm Commitment Agreements and Purchase of
"When-Issued" Securities B-7
Lending of Securities B-8
Repurchase Agreements B-8
Swap Transactions B-9
Segregated Accounts B-10
Other Investment Techniques and
Opportunities B-10
Portfolio Turnover B-10
Valuation of Assets B-10
Equity Securities B-10
Money Market Instruments B-11
Options B-11
Investments for Which Market Quotations Are
Not Readily Available B-11
Management B-12
Separate Account Management Committee and
Officers B-12
Compensation of Managers B-13
Investment Advisory and Related Services B-13
Custody of Portfolio B-13
Auditors B-13
Brokerage Allocation B-14
Performance Information B-15
Total Return Information for the Separate
Account B-15
Performance Comparisons B-16
Illustrating Compounding, Tax Deferral, and
Expense Deductions B-16
Periodic Reports B-17
General Matters B-17
Assignment of Contracts B-17
Payment to an Estate, Guardian, Trustee,
etc. B-17
Benefits Based on Incorrect Information B-17
Proof of Survival B-17
State Regulation B-18
Legal Matters B-18
Experts B-18
Additional Considerations B-18
Additional Information B-19
Financial Statements B-19
29
<PAGE>
[TIAA logo]
Teachers Insurance and
Annuity Association
730 Third Avenue
New York, NY 10017-3206
[indicia]
Bulk Rate
U.S. Postage Paid
Permit 20
Holliston, MA 01746
<PAGE>
Individual Deferred Variable Annuities
Funded Through
TIAA SEPARATE ACCOUNT VA-1
of
TEACHERS INSURANCE AND ANNUITY ASSOCIATION
OF AMERICA
STATEMENT OF ADDITIONAL INFORMATION
April 1, 1996
This Statement of Additional Information is not a prospectus and should be read
in connection with the current prospectus dated April 1, 1996 (the
("Prospectus"), for the variable annuity that is the variable component of the
contract. The Prospectus is available without charge upon written or oral
request to: Teachers Insurance and Annuity Association of America, 730 Third
Avenue, New York, New York 10017-3206, Attention: Central Services; telephone 1
800 842-2733, extension 5509. Terms used in the Prospectus are incorporated in
this Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACTS.
[TIAA LOGO]
<PAGE>
TABLE OF CONTENTS
Page in the Location of
Statement Additional
of Information in
Additional Prospectus, if
Item Information applicable
- ---------------------------------------------------------------
Investment
Restrictions B-3 10-11
Investment Policies and
Risk Considerations B-4 8-11
Options and Futures B-4 10
Firm Commitment
Agreements and
Purchase of
"When-Issued"
Securities B-7 11
Lending of Securities B-8 11
Repurchase Agreements B-8 11
Swap Transactions B-9 10
Segregated Accounts B-10
Other Investment
Techniques and
Opportunities B-10
Portfolio Turnover B-10
Valuation of Assets B-10 12
Equity Securities B-10
Money Market Instruments B-11
Options B-11
Investments for Which
Market Quotations Are
Not Readily Available B-11
Management B-12 12
Separate Account
Management Committee and
Officers B-12
Compensation of
Managers B-13
Investment Advisory and
Related Services B-13 8,12
Custody of Portfolio B-13
Auditors B-13
Brokerage Allocation B-14
Performance
Information B-15 11-12
Total Return
Information for the
Separate Account B-15
Performance
Comparisons B-16
Illustrating
Compounding, Tax
Deferral, and Expense
Deductions B-16
Periodic Reports B-17
General Matters B-17
Assignment of
Contracts B-17
Payment to an Estate,
Guardian, Trustee,
etc. B-17
Benefits Based on
Incorrect Information B-17
Proof of Survival B-17
State Regulation B-18 7
Legal Matters B-18 28
Experts B-18
Additional
Considerations B-18
Additional Information B-19
Financial Statements B-19 6
B-2
<PAGE>
INVESTMENT RESTRICTIONS
The following restrictions are fundamental policies with respect to the separate
account and may not be changed without the approval of a majority of the
outstanding voting securities, as that term is defined under the 1940 Act, in
the separate account:
1. The separate account will not issue senior securities except as SEC
regulations permit;
2. The separate account will not borrow money, except: (a) the separate
account may purchase securities on margin, as described in restriction 9
below; and (b) from banks (only in amounts not in excess of 33-1/3% of the
market value of the separate account's assets at the time of borrowing), and,
from other sources, for temporary purposes (only in amounts not exceeding 5%
of the separate account's total assets taken at market value at the time of
borrowing). Money may be temporarily obtained through bank borrowing, rather
than through the sale of portfolio securities, when such borrowing appears
more attractive for the separate account;
3. The separate account 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 separate account will not, with respect to at least 75% of the value
of its total assets, invest more than 5% of its total assets in the
securities of any one issuer other than securities issued or guaranteed by
the United States Government, its agencies or instrumentalities;
5. The separate account will not make an investment in an industry if after
giving effect to that investment the separate account's holding in that
industry would exceed 25% of the separate account's total assets--this
restriction, however, does not apply to investments in obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities;
6. The separate account will not purchase real estate or mortgages directly;
7. The separate account will not purchase commodities or commodities
contracts, except to the extent futures are purchased as described herein;
8. The separate account will not make loans, except: (a) that it may make
loans of portfolio securities not exceeding 33-1/3% of the value of its total
assets, which are collateralized by either cash, United States Government
securities, or other means permitted by applicable law, equal to at least
102% of the market value of the loaned securities, or such lesser percentage
as may be permitted by the New York State Insurance Department (not to fall
below 100% of the market value of the loaned securities), as reviewed daily;
(b) loans through entry into repurchase agreements; (c) privately-placed debt
securities may be purchased; or (d) participation interests in loans, and
similar investments, may be purchased; and
9. The separate account will not purchase any security on margin (except that
the separate account may obtain such short-term credit as may be necessary
for the clearance of purchases and sales of portfolio securities).
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change of values in portfolio securities will not be considered a violation.
B-3
<PAGE>
INVESTMENT POLICIES AND RISK CONSIDERATIONS
Options and Futures
The separate account may engage in options and futures strategies to the extent
permitted by the New York State Insurance Department and subject to SEC and
Commodity Futures Trading Commission ("CFTC") requirements. It is not the
intention of the separate account to use options and futures strategies in a
speculative manner but rather to use them primarily as hedging techniques or for
cash management purposes.
Options. Option-related activities could include (1) the sale of covered call
option contracts, and the purchase of call option contracts for the purpose of a
closing purchase transaction; (2) the buying of covered put option contracts,
and the selling of put option contracts to close out a position acquired through
the purchase of such options; and (3) the selling of call option contracts or
the buying of put option contracts on groups of securities and on futures on
groups of securities and the buying of similar call option contracts or the
selling of put option contracts to close out a position acquired through a sale
of such options. This list of options-related activities is not intended to be
exclusive, and the separate account 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 having a duration of nine
months or less) which gives the purchaser of the option the right to purchase
the underlying security at a fixed exercise price at any time prior to the
expiration of the option regardless of the market price of the security during
the option period. As consideration for the call option, the purchaser pays the
seller a premium, which the seller retains whether or not the option is
exercised. As the seller of a call option, the separate account 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.
The selling of a call option benefits the separate account 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 separate
account risks an "opportunity loss" of profits if the underlying security
appreciates above the aggregate value of the exercise price and the premium.
The separate account 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 which it had previously sold on that
security. Depending on the premium for the call option purchased by the separate
account, the separate account will realize a profit or loss on the transaction.
A put option is a similar short-term contract that gives the purchaser of the
option the right to sell the underlying security at a fixed exercise price at
any time prior to the expiration of the option regardless of the market price of
the security during the option period. As consideration for the put option the
separate account, as purchaser, pays the seller a premium, which the seller
retains whether or not the option is exercised. The seller of a put option has
the obligation, upon the exercise of the option by the separate account, to
purchase the underlying security at the exercise price at any time during the
option period. The buying of a covered put contract limits the downside exposure
for 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.
B-4
<PAGE>
The separate account 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 separate
account, the separate account would realize a profit or loss on the transaction.
In addition to options (both calls and puts) on individual securities, there are
also options on groups of securities, such as the Standard & Poor's 100 Index
traded on the Chicago Board Options Exchange. There are also options on the
futures of groups of securities such as the Standard & Poor's 500 Stock Index
and the New York Stock Exchange Composite Index. The selling of such calls can
be used in anticipation of, or in, a general market or market sector decline
that may adversely affect the market value of the separate account's portfolio
of securities. To the extent that the separate account's portfolio of securities
changes in value in correlation with a given stock index, the sale of call
options on the futures of that index would substantially reduce the risk to the
portfolio of a market decline, and, by so doing, provides an alternative to the
liquidation of securities positions in the portfolio with resultant transaction
costs. A risk in all options, particularly the relatively new options on groups
of securities and on the futures on groups of securities, is a possible lack of
liquidity. This will be a major consideration before the separate account deals
in any option.
There is another risk in connection with selling a call option on a group of
securities or on the futures of groups of securities. This arises because of the
imperfect correlation between movements in the price of the call option on a
particular group of securities and the price of the underlying securities held
in the portfolio. Unlike a covered call on an individual security, where a large
movement on the upside for the call option will be offset by a similar move on
the underlying stock, a move in the price of a call option on a group of
securities may not be offset by a similar move in the price of securities held
due to the difference in the composition of the particular group and the
portfolio itself.
Futures. To the extent permitted by applicable regulatory authorities, the
separate account may purchase and sell futures contracts on securities or other
instruments, or on groups or indexes of securities or other instruments. The
purpose of hedging techniques using financial futures is to protect the
principal value of a fund against adverse changes in the market value of
securities or instruments in its portfolio, and to obtain better returns on
future investments than actually may be available at the future time. Since
these are hedging techniques, the gains or losses on the futures contract
normally will be offset by losses or gains respectively on the hedged
investment. Futures contracts also may be offset prior to the future date by
executing an opposite futures contract transaction.
A futures contract on an investment is a binding contractual commitment which,
if held to maturity, will result in an obligation to make or accept delivery,
during a particular future month, of the securities or instrument underlying the
contract. By purchasing a futures contract--assuming a "long" position--the
separate account legally will obligate itself to accept the future delivery of
the underlying security or instrument and pay the agreed price. By selling a
futures contract--assuming a "short" position--it legally will obligate itself
to make the future delivery of the security or instrument against payment of the
agreed price.
Positions taken in the futures markets are not normally held to maturity, but
are instead liquidated through offsetting transactions which may result in a
profit or a loss. While futures positions taken by the separate account usually
will be liquidated in this manner, the separate account may instead make or take
delivery of the underlying securities or instruments whenever it appears
economically advantageous to the separate account 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.
B-5
<PAGE>
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 simply are closed out.
Changes in the market value of a particular stock index futures contract reflect
changes in the specified index of equity securities on which the future is
based.
Stock index futures may be used to hedge the equity investments of the separate
account with regard to market (systematic) risk (involving the market's
assessment of overall economic prospects), as distinguished from stock- specific
risk (involving the market's evaluation of the merits of the issuer of a
particular security). By establishing an appropriate "short" position in stock
index futures, the separate account may seek to protect the value of its
securities portfolio against an overall decline in the market for equity
securities. Alternatively, in anticipation of a generally rising market, the
separate account can seek to avoid losing the benefit of apparently low current
prices by establishing a "long" position in stock index futures and later
liquidating that position as particular equity securities are in fact acquired.
To the extent that these hedging strategies are successful, the separate account
will be affected to a lesser degree by adverse overall market price movements,
unrelated to the merits of specific portfolio equity securities, than would
otherwise be the case.
Unlike the purchase or sale of a security, no price is paid or received by the
separate account upon the purchase or sale of a futures contract. Initially, the
separate account will be required to deposit in a custodial account an amount of
cash, United States Treasury securities, or other permissible assets equal to
approximately 5% of the contract amount. This amount is known as "initial
margin." The nature of initial margin in futures transactions is different from
that of margin in security transactions in that futures contract margin does not
involve the borrowing of funds by the customer to finance the transactions.
Rather, the initial margin is in the nature of a performance bond or good faith
deposit on the contract which is returned to the separate account upon
termination of the futures contract assuming all contractual obligations have
been satisfied. Subsequent payments to and from the broker, called "variation
margin," will be made on a daily basis as the price of the underlying stock
index fluctuates making the long and short positions in the futures contract
more or less valuable, a process known as "marking to the market." For example,
when the separate account 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 separate account will receive from the broker a variation
margin payment equal to that increase in value. Conversely, where the separate
account 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
separate account would be required to make a variation margin payment to the
broker. At any time prior to expiration of the futures contract, the separate
account may elect to close the position by taking an opposite position which
will operate to terminate the separate account'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 separate account, and the
separate account realizes a loss or a gain. All margin payments will be made to
a custodian in the broker's name.
There are several risks in connection with the use by the separate account of a
futures contract as a hedging device. One risk arises because of the imperfect
correlation between movements in the prices of the futures contracts and
movements in the securities or instruments which are the subject of the hedge.
The separate account will attempt to reduce this risk by engaging in futures
transactions, to the extent possible, where, in our judgment, there is a
significant correlation between changes in the prices of the futures contracts
and the prices of the separate account's portfolio securities or instruments
sought to be hedged.
B-6
<PAGE>
Successful use of futures contracts by the separate account for hedging purposes
also is subject to the user's ability to predict correctly movements in the
direction of the market. For example, it is possible that, where the separate
account 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 separate account's portfolio may decline.
If this occurred, the separate account would lose money on the futures and also
experience a decline in value in its portfolio investments. However, we believe
that over time the value of the separate account's portfolio will tend to move
in the same direction as the market indices which are intended to correlate to
the price movements of the portfolio securities or instruments sought to be
hedged. It also is possible that, for example, if the separate account has
hedged against the possibility of the decline in the market adversely affecting
stocks held in its portfolio and stock prices increased instead, the separate
account 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 separate account 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 separate account may
have to sell securities or instruments at a time when it may be disadvantageous
to do so.
In addition to the possibility that there may be an imperfect correlation, or no
correlation at all, between movements in the futures contracts and the portion
of the portfolio being hedged, the prices of futures contracts may not correlate
perfectly with movements in the underlying security or instrument due to certain
market distortions. First, all transactions in the futures market are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions which could distort the normal relationship between the
index and futures markets. Second, the margin requirements in the futures market
are less onerous than margin requirements in the securities market, and as a
result the futures market may attract more speculators than the securities
market does. Increased participation by speculators in the futures market also
may cause temporary price distortions. Due to the possibility of price
distortion in the futures market and also because of the imperfect correlation
between movements in the futures contracts and the portion of the portfolio
being hedged, even a correct forecast of general market trends by Advisors still
may not result in a successful hedging transaction over a very short time
period.
The separate account may also use futures contracts and options on futures
contracts to manage its cash flow more effectively. To the extent that the
separate account enters into non-hedging positions, it will do so only in
accordance with certain CFTC exemptive provisions. Thus, pursuant to CFTC Rule
4.5, the aggregate initial margin and premiums required to establish non-hedging
positions in commodity futures or commodity options contracts may not exceed 5%
of the liquidation value of the separate account'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%).
Options and futures transactions may increase the separate account's transaction
costs and portfolio turnover rate and will be initiated only when consistent
with its investment objectives.
Firm Commitment Agreements and Purchase of "When-Issued" Securities
The separate account can enter into firm commitment agreements for the purchase
of securities on a specified future date. When the separate account enters into
firm commitment agreements, liability for the purchase price--and the rights and
risks of ownership of the securities--accrues to the separate account at the
time it becomes obligated to purchase such securities, although delivery and
payment occur at a later date. Accordingly,
B-7
<PAGE>
if the market price of the security should decline, the effect of the agreement
would be to obligate the separate account to purchase the security at a price
above the current market price on the date of delivery and payment. During the
time the separate account is obligated to purchase such securities, it will be
required to segregate assets (see "Segregated Accounts," page B-10). The
separate account will not purchase securities on a "when issued" basis if, as a
result, more than 15% of its net assets would be so invested.
Lending of Securities
Subject to investment restriction 8(a) on page B-3 (relating to loans of
portfolio securities), the separate account may lend its securities to brokers
and dealers that are not affiliated with TIAA, are registered with the SEC and
are members of the NASD, and also to certain other financial institutions. All
loans will be fully collateralized. In connection with the lending of its
securities, the separate account will receive as collateral cash, securities
issued or guaranteed by the United States Government (i.e., Treasury
securities), or other collateral permitted by applicable law, which at all times
while the loan is outstanding will be maintained in amounts equal to at least
102% of the current market value of the loaned securities, or such lesser
percentage as may be permitted by the New York State Insurance Department (not
to fall below 100% of the market value of the loaned securities), as reviewed
daily. By lending its securities, the separate account 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
separate account by the borrower of the securities. Such loans will be
terminable by the separate account at any time and will not be made to
affiliates of TIAA. The separate account 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 separate account may pay reasonable fees to persons
unaffiliated with the separate account 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 by the separate account,
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 separate account 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 separate account's seller to deposit
with the separate account additional collateral equal to any amount by which the
market value of the security subject to the repurchase agreement falls below the
resale amount provided under the repurchase agreement. The separate account will
enter into repurchase agreements only with member banks of the Federal Reserve
System, and with primary dealers in United States Government securities or their
wholly-owned subsidiaries whose creditworthiness has been reviewed and found
satisfactory by Advisors and who have, therefore, been determined to present
minimal credit risk.
Securities underlying repurchase agreements will be limited to certificates of
deposit, commercial paper, bankers' acceptances, or obligations issued or
guaranteed by the United States Government or its agencies or instrumentalities,
in which the separate account may otherwise invest.
B-8
<PAGE>
If a seller of a repurchase agreement defaults and does not repurchase the
security subject to the agreement, the separate account 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 separate account; in such event the separate account might
incur disposition costs in liquidating the collateral and might suffer a loss if
the value of the collateral declines. In addition, if bankruptcy proceedings are
instituted against a seller of a repurchase agreement, realization upon the
collateral may be delayed or limited.
Swap Transactions
The separate account may, to the extent permitted by the New York State
Insurance Department and 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 swap transactions, the separate account may be able to protect
the value of a portion of its portfolio against declines in market value. The
separate account may also enter into swap transactions to facilitate
implementation of allocation strategies between different market segments or
countries or to take advantage of market opportunities which may arise from time
to time. The separate account 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 separate account. However, there can be no assurance that the
return the separate account receives from the counterparty to the swap
transaction will exceed the return it swaps to that party.
While the separate account 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 separate account would be limited to
contractual remedies under the swap agreement. There can be no assurance that
the separate account will succeed when pursuing its contractual remedies. To
minimize the separate account's exposure in the event of default, the separate
account will usually enter into swap transactions on a net basis (i.e., the
parties to the transaction will net the payments payable to each other before
such payments are made). When the separate account enters into swap transactions
on a net basis, the net amount of the excess, if any, of the separate account'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
separate account's custodian. To the extent the separate account enters into
swap transactions other than on a net basis, the amount segregated will be the
full amount of the fund's obligations, if any, with respect to each such swap
agreement, accrued on a daily basis (see "Segregated Accounts," below).
Swap agreements may be considered illiquid by the SEC staff and subject to the
limitations on illiquid investments.
To the extent that there is an imperfect correlation between the return the
separate account is obligated to swap and the securities or instruments
representing such return, the value of the swap transaction may be adversely
affected. The separate account therefore will not 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 the separate account to engage
in swap transactions in a speculative
B-9
<PAGE>
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 separate account.
Segregated Accounts
In connection with when-issued securities, firm commitment agreements, and
certain other transactions in which the separate account incurs an obligation to
make payments in the future, the separate account may be required to segregate
assets with its custodian bank in amounts sufficient to settle the transaction.
To the extent required, such segregated assets will consist of liquid assets
such as cash, United States Government securities or other appropriate high
grade debt obligations as may be permitted by law.
Other Investment Techniques and Opportunities
The separate account 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,
irrespective of how these actions may affect the weight of the particular
securities in the separate account's portfolio.
PORTFOLIO TURNOVER
The transactions engaged in by the separate account are reflected in the
separate account's portfolio turnover rate. The rate of portfolio turnover is
calculated by dividing the lesser of the amount of purchases or sales of
portfolio securities during the fiscal year by the monthly average of the value
of the separate account's portfolio securities (excluding from the computation
all securities, including options, with maturities at the time of acquisition of
one year or less). A high rate of portfolio turnover generally involves
correspondingly greater brokerage commission expenses, which must be borne
directly by the separate account and ultimately by the separate account's
contractowners. However, because portfolio turnover is not a limiting factor in
determining whether or not to sell portfolio securities, a particular investment
may be sold at any time, if investment judgment or account operations make a
sale advisable.
The separate account has no fixed policy on portfolio turnover. The portfolio
turnover rate for the separate account for the period from November 1, 1994 to
December 31, 1994 was 0.04%. The portfolio turnover rate for the separate
account in 1995 was 0.98%.
Because a higher portfolio turnover rate will increase brokerage costs to the
separate account, Advisors will carefully weigh the added costs of short-term
investment against the gains anticipated from such transactions.
VALUATION OF ASSETS
The assets of the separate account are valued as of the close of each valuation
day.
Equity Securities
Investments for which market quotations are readily available are valued at the
market value of such investments, determined as follows:
Equity securities listed or traded on the New York Stock Exchange or the
American Stock Exchange are valued based on their last sale price on such
exchange on the date of valuation, or at the mean of the closing bid and
B-10
<PAGE>
asked prices if no sale is reported. Equity securities which are listed or
traded on any other exchange are valued in a comparable manner on the principal
exchange where traded.
Equity securities traded in the United States over-the-counter market are valued
based on the last sale price on the date of valuation for NASDAQ National Market
System securities, or at the mean of the closing bid and asked prices if no sale
is reported. Other U.S. over-the-counter equity securities are valued at the
mean of the closing bid and asked prices.
Money Market Instruments
Money market instruments for which market quotations are readily available are
valued based on the most recent bid price or the equivalent quoted yield for
such securities (or those of comparable maturity, quality, and type). Values for
money market instruments will be obtained either from one or more of the major
market makers or from one or more of the financial information services for the
securities to be valued.
Options
Portfolio investments underlying options are valued as described above. Stock
options written by the separate account are valued at the last quoted sale
price, or at the closing bid price if no sale is reported for the day of
valuation as determined on the principal exchange on which the option is traded.
The value of the separate account net assets will be increased or decreased by
the difference between the premiums received on writing options and the costs of
liquidating such positions measured by the closing price of the options on the
date of valuation.
For example, when the separate account writes a call option, the amount of the
premium is included in the separate account'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 separate account 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 separate account realizes a gain or loss from the sale of the
underlying securities and the proceeds of the sale increased by the premium
originally received.
A premium paid on the purchase of a put will be deducted from the separate
account's assets and an equal amount will be included as an investment and
subsequently adjusted to the current market value of the put. For example, if
the current market value of the put exceeds the premium paid, the excess would
be unrealized appreciation; conversely, if the premium exceeds the current
market value, such excess would be unrealized depreciation.
Stock and bond index futures, and options thereon, which are traded on
commodities exchanges, are valued at their last sale prices as of the close of
such commodities exchanges.
Investments for Which Market Quotations Are Not Readily Available
Portfolio securities or other assets for which market quotations are not readily
available will be valued at fair value as determined in good faith under the
direction of the Management Committee (see "Management," below).
B-11
<PAGE>
MANAGEMENT
Separate Account Management Committee and Officers
The names of the members of the separate account Management Committee
("Managers") and certain officers of the separate account and information about
their principal occupations during the past five years are shown below:
<TABLE>
<CAPTION>
Position(s) Held
Name and Address* with Registrant Principal Occupation(s) During Past 5 Years
- ---------------------------------- --------------- --------------------------------------------------
<S> <C> <C>
Laurence W. Franz Manager Vice President, Business and Finance, and Treasurer,
Canisius College Canisius College
2001 Main Street
Buffalo, New York 14208
Jeanmarie C. Grisi Manager Treasurer, Carnegie Corporation of New York, since October
Carnegie Corporation of New York 1991. Formerly, Associate Treasurer, Carnegie
437 Madison Avenue Corporation of New York
New York, New York 10022
Richard M. Norman Manager Vice President for Administration and Associate
Rutgers University Treasurer, Rutgers University, since July 1991. Formerly,
Old Queens Building, Room 101 Associate Senior Vice President and Treasurer, Rutgers
Somerset-George Street University
New Brunswick, New Jersey 08903
Thomas W. Jones** Chairman of the Vice Chairman, TIAA and CREF, since November 1995.
Management President and Chief Operating Officer, TIAA and CREF,
Committee and since January 1993. Formerly, Executive Vice President,
President Finance and Planning, TIAA and CREF
Thomas G. Walsh** Manager and President, Teachers Personal Investors Services, Inc.,
Executive Vice since February 1994, and Executive Vice President, TIAA
President and CREF
Richard L. Gibbs Executive Vice Executive Vice President, TIAA and CREF, since March 1993,
President and Vice President, TIAA-CREF Investment Management, Inc.
("Investment Management") and TIAA-CREF Individual &
Institutional Services, Inc. ("Services"), since January
1992. Formerly, Vice President, Finance, TIAA and CREF
Peter C. Clapman Senior Vice Senior Vice President, Secretary and Chief Counsel,
President, Investments, TIAA and CREF
Secretary and
Chief Counsel,
Investments
Richard J. Adamski Vice President Vice President and Treasurer, Investment Management and
and Treasurer Services, since January 1992, and Vice President and
Treasurer, TIAA and CREF, since March 1991. Formerly,
Treasurer, TIAA and CREF
</TABLE>
* The address for all officers of the separate account is 730 Third Avenue, New
York, New York 10017-3206.
** These Managers are or may be "interested persons" within the meaning of the
Investment Company Act of 1940.
B-12
<PAGE>
Compensation of Managers
Managers who are not active officers of TIAA each receive $2,500 per year, plus
$1,000 for each meeting of the Management Committee attended. Managers who are
active officers of TIAA do not receive any additional compensation for their
services as Managers. The following table sets forth the compensation paid by
the separate account to Managers for the year ended December 31, 1995:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Aggregate Pension or
Compensation Retirement Benefits Estimated
From Accrued As Part of Benefits Total Compensation
Name of Person, Separate Separate Account Upon Paid to Managers
Position Account Expenses Retirement by Fund Complex
- --------------------- ------------ -------------------- ------------ ------------------
<S> <C> <C> <C> <C>
Laurence W. Franz, $5,500 $-0- $-0- $5,500
Manager
Jeanmarie C. Grisi, $ -0-* $-0- $-0- $ -0-
Manager
Richard M. Norman, $5,500 $-0- $-0- $5,500
Manager
</TABLE>
* Ms. Grisi declined to accept compensation for her services.
INVESTMENT ADVISORY AND RELATED SERVICES
Investment advisory services and related services for the separate account are
provided by personnel of Teachers Advisors, Inc. ("Advisors"). Advisors is a
subsidiary of TIAA and is registered as an investment adviser under the
Investment Advisers Act of 1940. Advisors manages the investment and
reinvestment of the assets of the separate account, subject to the direction and
control of the Management Committee of the separate account. The advisory
personnel of Advisors perform all research, make recommendations, and place
orders for the purchase and sale of securities. Advisors also provides for all
portfolio accounting, custodial, and related services for the assets of the
separate account.
As described in the Prospectus, the investment management agreement between
Advisors and the separate account provides for payment by the separate account
of an investment advisory fee of 0.30% of assets annually. Currently, with
Advisors waiving a portion of that fee, a daily deduction from the net assets of
the separate account is made at an annual rate of 0.07% for expenses related to
the management of the assets of the separate account.
Custody of Portfolio
The custodian for the assets of the separate account is Bankers Trust Company,
16 Wall Street, New York, New York 10015.
Auditors
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281,
serves as the separate account's independent auditors and, in that regard,
provides general auditing services for the separate account.
B-13
<PAGE>
BROKERAGE ALLOCATION
Advisors is responsible for decisions to buy and sell securities for the
separate account 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
price, execution and available data. When purchasing or selling securities
traded on the over-the-counter market, Advisors generally will execute the
transaction with a broker engaged in making a market for such securities. When
Advisors deems the purchase or sale of a security to be in the best interests of
the separate account, its personnel may, consistent with their fiduciary
obligations, decide either to buy or to sell a particular security for the
separate account at the same time as for a CREF account that they may also be
managing on behalf of TIAA-CREF Investment Management, Inc. ("Investment
Management"), another investment adviser also affiliated with TIAA. In that
event, allocation of the securities purchased or sold, as well as the expenses
incurred in the transaction, will be made in an equitable manner.
Domestic brokerage commissions are negotiated, as there are no standard rates.
All brokerage firms provide the service of execution of the order made; some
brokerage firms also provide research and statistical data, and research reports
on particular companies and industries are customarily provided by brokerage
firms to large investors. In negotiating commissions, consideration is given by
Advisors to the quality of execution provided and to the use and value of the
data. The valuation of such data may be judged with reference to a particular
order or, alternatively, may be judged in terms of its value to the overall
management of the separate account. The aggregate amount of brokerage
commissions paid by the separate account during 1995 and 1994 was $22,442 and
$16,886, respectively.
Advisors will place orders with brokers providing useful research and
statistical data services if reasonable commissions can be negotiated for the
total services furnished even though lower commissions may be available from
brokers not providing such services. Advisors follows guidelines established by
the Management Committee of the separate account for the placing of orders with
brokers providing such services. In 1995, no brokerage commissions were paid by
the separate account to such brokers as a result of such allocation.
Research or services obtained for the separate account may be used by personnel
of Advisors in managing CREF accounts for Investment Management. In such
circumstances, the expenses incurred will be allocated in an equitable manner
consistent with the fiduciary obligations of personnel of Advisors to the
separate account.
During 1995, the separate account acquired securities of certain of its regular
brokers or dealers or their parents, where the parent derives more than 15% of
its total income from securities related activities. These entities and the
value of the securities of these entities held by the separate account as of
December 31, 1995, are set forth below:
A. Regular broker or dealer based on
brokerage commission paid
Bear Stearns & Co., Inc.
(Parent--Bear Stearns Companies, Inc.) $31,303
Merrill Lynch, Pierce, Fenner & Smith, Inc.
(Parent--Merrill Lynch & Co., Inc.) $142,800
B-14
<PAGE>
B. Regular broker or dealer based on entities
acting as principal
Lehman Government Securities, Inc.
(Parent--Lehman Brothers Holdings, Inc.) $42,500
J.P. Morgan Securities Inc. (Parent--Morgan
(J.P.) & Co., Inc.) $208,650
Morgan Stanley & Co., Inc. (Parent--Morgan
Stanley Group, Inc.) $64,500
PERFORMANCE INFORMATION
Total Return Information for the Separate Account
Total return quotations for the separate account may be advertised. Total return
quotations will reflect all aspects of the separate account return. Average
annual total returns are determined by finding the average annual compounded
rate of return over a period that reflects the growth (or decline) in value of a
hypothetical $1,000 investment made at the beginning of the period through the
end of that period, according to the following formula:
P(1 + T)(n) = EV
where: P = hypothetical initial payment of $1,000
T = average annual total return
n = number of years in the period
EV = ending value of the hypothetical investment at the
end of the 1, 5, or 10 year period.
To derive the total return quotations from this formula, the percentage net
change in the value of the $1,000 investment from the beginning of the period to
the end of such period ("cumulative total return") is determined. Cumulative
total returns simply reflect the change in value of an investment over a stated
period. Since the accumulation unit value is a "total return" unit value that
reflects the investment experience of the separate account and all expense
deductions made against the assets of the separate account, the ending value, or
EV, of the $1,000 hypothetical investment is determined by applying the
percentage change in the accumulation unit value over the period to the
hypothetical initial payment of $1,000 less the current deductions from premiums
(0%). We then solve the equation for T to derive the average annual compounded
rate of return for the separate account over the span of the period, and the
resulting "total return" quotation is carried out to the nearest hundredth of
one percent.
Set forth below is the total return information for the separate account, which
reflects all deductions made from the assets in the account, applied to a
hypothetical investment of $1,000:
Average Annual
Compound Rate
of Total Cumulative Rate
Period Return of Total Return
- ----------------------------------- -------------- ----------------
1 year
(from January 1, 1995 to
December 31, 1995) 36.17% 36.17%
1 year and 2 months
(from November 1, 1994 date of
SEC registration to December 31,
1995) 27.87% 33.21%
B-15
<PAGE>
Performance Comparisons
Performance information for the separate account may be compared, in
advertisements, sales literature, and reports to contractowners and annuitants,
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
5000 Equity Index, (10) Russell 1000, 2000, and 3000 indices, (11) the Consumer
Price Index, published by the U.S. Bureau of Labor Statistics (measurement of
inflation), (12) VARDS, and (13) Morningstar, Inc. We may also discuss ratings
or rankings received from these entities, accompanied in some cases by an
explanation of those ratings or rankings, when applicable. In addition,
advertisements may discuss the performance of the indices listed above.
The performance of the separate account also may be compared to other indices or
averages that measure performance of a pertinent group of securities.
Contractowners should keep in mind that the composition of the investments in
the reported averages will not be identical to that of the separate account and
that certain formula calculations (i.e., yield) may differ from index to index.
In addition, there can be no assurance that the separate account will continue
its performance as compared to such indices.
The separate account is not promoted, sponsored, endorsed, or sold by, nor
affiliated with, Frank Russell Company. Frank Russell Company is not responsible
for and has not reviewed the separate account literature or publications and
makes no representation or warranty, express or implied, as to their accuracy,
completeness, or otherwise. Frank Russell Company reserves the right, at any
time and without notice, to change or terminate the Russell 3000 Index. Frank
Russell Company has no obligation to take the needs of the separate account or
its contractowners into consideration in determining the Index. Frank Russell
Company's publication of the Russell 3000 Index in no way suggests or implies an
opinion by Frank Russell Company as to the attractiveness or appropriateness of
investment in any or all of the securities upon which the Index is based. Frank
Russell Company makes no representation, warranty, or guarantee as to the
accuracy, completeness or reliability of the Index or any data included in the
Index. Frank Russell Company makes no representation or warranty regarding the
use, or the results of use, of the Index or any securities comprising the Index.
FRANK RUSSELL MAKES NO EXPRESS OR IMPLIED WARRANTIES OF ANY KIND OR NATURE,
INCLUDING WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY OR OF FITNESS FOR A
PARTICULAR PURPOSE WITH RESPECT TO THE INDEX OR ANY DATA OR SECURITIES INCLUDED
THEREIN.
Illustrating Compounding, Tax Deferral, and Expense Deductions
TIAA may illustrate in advertisements, sales literature and reports to
contractowners or annuitants the effects of tax deferral and/or compounding of
earnings on an investment in the separate account. We may do this using a
hypothetical investment earning a specified rate of return. To illustrate the
effects of compounding, we would show how the total return from an investment of
the same dollar amount, earning the same or different interest rate, varies
depending on when the investment was made. To illustrate the effects of tax
deferral, we will show how the total return from an investment of the same
dollar amount, earning the same or different interest rates, for individuals in
the same tax bracket, would vary between tax-deferred and taxable investments.
B-16
<PAGE>
TIAA may also illustrate in advertisements, sales literature and reports to
contractowners or annuitants the effect of an investment fund's expenses on
total return over time. We may do this using a hypothetical investment earning a
specified rate of return. We would show how the total return, net of expenses,
from an investment of the same dollar amount in funds with the same investment
results but different expense deductions varies increasingly over time. In the
alternative, we would show the difference in the dollar amount of total expense
charges paid over time by an investor in two or more different funds that have
the same annual total return but different asset-based expense charges. We may
also compare the separate account's expense charges to those of other variable
annuities and other investment products.
PERIODIC REPORTS
Prior to the time an entire accumulation has been withdrawn in cash or
transferred to the fixed account a contractowner will be sent a statement each
quarter which sets forth the following:
(1) Premiums paid during the quarter; (2) the number and dollar value of
accumulation units in the separate account credited to the contractowner during
the quarter and in total; (3) cash withdrawals from the separate account during
the quarter; and (4) any transfers between the separate account and the fixed
account during the quarter.
The separate account also will transmit to contractowners, at least
semi-annually, reports showing the financial condition of the separate account
and a schedule of investments held in the separate account in which they have
accumulations.
GENERAL MATTERS
Assignment of Contracts
You can assign the contract at any time.
Payment to an Estate, Guardian, Trustee, etc.
We reserve the right to pay in one sum the commuted value of any benefits due an
estate, corporation, partnership, trustee or other entity not a natural person.
Neither TIAA nor the separate account will be responsible for the conduct of any
executor, trustee, guardian, or other third party to whom payment is made.
Benefits Based on Incorrect Information
If the amounts of benefits provided under a contract were based on information
that is incorrect, benefits will be recalculated on the basis of the correct
data. If any overpayments or underpayments have been made by the separate
account, appropriate adjustments will be made.
Proof of Survival
We reserve the right to require satisfactory proof that anyone named to receive
benefits under a contract is living on the date payment is due. If this proof is
not received after a request in writing, the separate account will have the
right to make reduced payments or to withhold payments entirely until such proof
is received.
B-17
<PAGE>
STATE REGULATION
TIAA and the separate account are subject to regulation by the New York State
Superintendent of Insurance ("Superintendent") as well as by the insurance
regulatory authorities of certain other states and jurisdictions.
TIAA and the separate account must file with the Superintendent both quarterly
and annual statements on forms promulgated by the New York State Insurance
Department. The separate account books and assets are subject to review and
examination by the Superintendent and the Superintendent's agents at all times,
and a full examination into the affairs of the separate account is made at least
every five years. In addition, a full examination of the separate account's
operations is usually conducted periodically by some other states.
LEGAL MATTERS
All matters of applicable state law pertaining to the contracts, including
TIAA's right to issue the contracts, have been passed upon by Charles H. Stamm,
Executive Vice President and General Counsel of TIAA. Legal matters relating to
the federal securities laws have been passed upon by Sutherland, Asbill &
Brennan, Washington, D.C.
EXPERTS
The financial statements of TIAA and the separate account included in this
Statement of Additional Information have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein, and have been
so included in reliance upon the reports of such firm given upon their authority
as experts in accounting and auditing.
ADDITIONAL CONSIDERATIONS
Over the past several years, TIAA and CREF have added many new savings and
investment vehicles to their line of products. The growing family of TIAA and
CREF products is designed to provide additional savings and investment options
for those who want to diversify their holdings. Most experts recommend
diversification as a good strategy for retirement and other long-term investing,
both because a diversified portfolio offers a degree of safety from the
volatility of specific markets, and because it allows the investor to benefit
from the potential for growth in several different types of investments.
The contract became available in 1994. The separate account's Stock Index
Account is ideal for people who are seeking growth and are able to make
long-term investments. Although past performance is no guarantee of future
results, in the past stocks have outperformed many other types of investments.
Investors who seek to counter the effects of inflation on their long-term
investments should therefore consider investing in stocks. The Stock Index
Account could be an appropriate investment for someone who is seeking to
supplement his or her retirement income, to purchase a retirement home, finance
an extended trip, or build a fund for philanthropic purposes. Of course, there
is no guarantee that the investment objective of that or any other fund will be
met.
Before investing, you should consider whether your pension plan and social
security payments will meet your retirement needs. You should look at your
assets and liabilities to help determine whether you need to invest
B-18
<PAGE>
more money to help provide retirement income. You should consider how much time
you have until retirement and the effect of inflation and taxes on your savings
and investments. You should also keep in mind that experts say that people need
70% to 80% of their pre-retirement income to maintain the same standard of
living after retirement. Before contributing to a contract, you should consider
whether you have already reached your contribution limit on your TIAA-CREF basic
Retirement Annuities, Supplemental Retirement Annuities, and other 403(b)
savings plans. Consult your tax advisor to learn more about these limits.
You should also consider the risks of any investment relative to its potential
rewards. In particular, you should be aware of the risk that arises from market
timing. Market timing is an investment technique whereby amounts are transferred
from one category of investment to another (for example, from stocks to bonds)
based upon a perception of how each of those categories of investments will
perform relative to the others at a particular time. Investors who engage in
market timing run the risk that they may transfer out of a type of investment
with a rising market value or transfer into a type of investment with a falling
market value. We do not endorse the practice of market timing.
The variety of issues to consider highlights the importance of the support and
services that TIAA provides. These services include: (1) retirement and life
insurance planning expertise from professional counselors rather than
commissioned salespeople; (2) detailed information through quarterly transaction
reports, newsletters and other publications about retirement planning; and (3)
seminars, individual counseling, a Participant Information Center, and 24-hour
toll-free numbers for transactions and inquiries. If you request it, we will
send you periodic reminders to remit premiums to the contract.
ADDITIONAL INFORMATION
A Registration Statement has been filed with the Securities and Exchange
Commission, under the 1933 Act, with respect to the contracts discussed in the
Prospectus and in this Statement of Additional Information. Not all of the
information set forth in the Registration Statement, amendments and exhibits
thereto has been included in the Prospectus or this Statement of Additional
Information. Statements contained herein concerning the contents of the
contracts and other legal instruments are intended to be summaries. For a
complete statement of the terms of these documents, reference should be made to
the instruments filed with the Commission.
FINANCIAL STATEMENTS
The audited financial statements of the separate account and TIAA follow.
The financial statements of TIAA should be distinguished from the financial
statements of the separate account and should be considered only as bearing upon
the ability of TIAA to meet its obligations under the contracts. They should not
be considered as bearing on the investment performance of the assets held in the
separate account.
B-19
<PAGE>
INDEX TO AUDITED FINANCIAL STATEMENTS
DECEMBER 31, 1995
Page
TIAA Separate Account VA-1--Stock Index Account
Report of Management Responsibility B-21
Report of Independent Auditors B-22
Audited Financial Statements
Statement of Assets and Liabilities B-23
Statement of Operations B-24
Statements of Changes in Net Assets B-25
Notes to Financial Statements B-26
Statement of Investments B-29
Teachers Insurance and Annuity Association of America
Report of Management Responsibility B-44
Report of Independent Auditors B-45
Audited Financial Statements
Balance Sheets B-46
Statements of Operations B-47
Statements of Changes in Contingency Reserves B-48
Statements of Cash Flows B-49
Notes to Financial Statements B-50
B-20
<PAGE>
[TIAA Logo]
REPORT OF MANAGEMENT RESPONSIBILITY
To the Contractowners of
TIAA Separate Account VA-1:
The accompanying financial statements of the Stock Index Account ("Account") of
TIAA Separate Account VA-1 ("VA-1") are the responsibility of management. They
have been prepared in accordance with generally accepted accounting principles
and have been presented fairly and objectively in accordance with such
principles.
Teachers Insurance and Annuity Association of America ("TIAA") has established
and maintains a strong system of internal controls designed to provide
reasonable assurance that assets are properly safeguarded and transactions are
properly executed in accordance with management's authorization, and to carry
out the ongoing responsibilities of management for reliable financial
statements. In addition, TIAA's internal audit personnel provide a continuing
review of the internal controls and operations of TIAA, including its separate
account operations. The internal Auditor regularly reports to the Audit
Committee of the TIAA Board of Trustees and to the Management Committee of VA-1.
The accompanying financial statements have been audited by the independent
auditing firm of Deloitte & Touche LLP. The independent auditors' report, which
appears on the following page, expresses an independent opinion on the fairness
of presentation of these financial statements.
The Audit Committee of the TIAA Board of Trustees, consisting of trustees who
are not officers of TIAA, and the Management Committee of VA-1, the majority of
which are not officers of TIAA, meet regularly with management, representatives
of Deloitte & Touche LLP and internal auditing personnel to review matters
relating to financial reporting, internal controls and auditing.
[signature of Thomas W. Jones]
Chairman of
Management Committee and President
[signature of Thomas G. Walsh]
Manager and
Executive Vice President
[signature of Richard L. Gibb]
Principal Accounting Officer
and Executive Vice President
B-21
<PAGE>
[letterhead]
[LOGO] Deloitte &
Touche LLP Two World Financial Center Telephone: (212) 436-2000
New York, New York 10281-1414 Facsimile: (212) 436-5000
REPORT OF INDEPENDENT AUDITORS
To the Contractowners and Management Committee of
TIAA Separate Account VA-1:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of the Stock Index Account of TIAA Separate
Account VA-1 ("VA-1") as of December 31, 1995, and the related statements of
operations and of changes in net assets for the year then ended and of changes
in net assets for the period October 3, 1994 (date established) to December 31,
1994. These financial statements are the responsibility of VA-1's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1995, by correspondence with
the custodians and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Stock Index Account of VA-1 at December
31, 1995, the results of its operations and the changes in its net assets for
the above-stated periods, in conformity with generally accepted accounting
principles.
[signature of Deloitte Touche LLP]
February 6, 1996
[logo]
- ---------------
Deloitte Touche
Tohmatsu
International
- ---------------
B-22
<PAGE>
TIAA SEPARATE ACCOUNT VA-1
STOCK INDEX ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
ASSETS
Investments, at cost $72,207,438
Net unrealized appreciation of investments 16,387,886
----------
Investments, at value 88,595,324
Cash 32,280
Dividends and interest receivable 168,815
Amounts due from General Account 831,907
----------
TOTAL ASSETS 89,628,326
----------
LIABILITIES
Payable for investment advisory services 733
----------
TOTAL LIABILITIES 733
----------
NET ASSETS--Accumulation Fund $89,627,593
==========
NUMBER OF ACCUMULATION UNITS OUTSTANDING--Notes 5 and 6 2,604,605
==========
NET ASSET VALUE, PER ACCUMULATION UNIT--Note 5 $34.41
==========
See notes to financial statements.
B-23
<PAGE>
TIAA SEPARATE ACCOUNT VA-1
STOCK INDEX ACCOUNT
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
INVESTMENT INCOME
Income:
Dividends $ 1,436,608
Interest 46,587
---------
TOTAL INCOME 1,483,195
---------
Expenses--Note 3:
Investment advisory 186,937
Administrative 122,454
Mortality and expense risk charges 153,073
---------
TOTAL EXPENSES BEFORE WAIVER 462,464
Fees paid indirectly (3,245)
---------
NET EXPENSES BEFORE WAIVER 459,219
Investment advisory charges waived--Note 3 (122,454)
---------
NET EXPENSES 336,765
---------
INVESTMENT INCOME--NET 1,146,430
---------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS--Note 4
Net realized gain on investments 481,973
Net change in unrealized appreciation on investments 16,241,820
---------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 16,723,793
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $17,870,223
=========
See notes to financial statements.
B-24
<PAGE>
TIAA SEPARATE ACCOUNT VA-1
STOCK INDEX ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended October 3, 1994
December 31, (date established) to
1995 December 31, 1994
------------- ----------------------
<S> <C> <C>
FROM OPERATIONS
Investment income--net $ 1,146,430 $ 177,834
Net realized gain on investments 481,973 1,811
Net change in unrealized appreciation on investments 16,241,820 146,066
----------- --------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 17,870,223 325,711
----------- --------------------
FROM CONTRACTOWNER TRANSACTIONS
TIAA seed money contributed (withdrawn)--Note 1 (33,252,105) 25,000,000
Premiums 61,534,705 2,654,030
Contractowner transfers from fixed account 14,563,961 1,616,615
Withdrawals (683,251)
Death benefits (2,296)
----------- --------------------
INCREASE IN NET ASSETS RESULTING
FROM CONTRACTOWNER TRANSACTIONS 42,161,014 29,270,645
----------- --------------------
NET INCREASE IN NET ASSETS 60,031,237 29,596,356
NET ASSETS
Beginning of period 29,596,356 --
----------- --------------------
End of period $ 89,627,593 $29,596,356
=========== ====================
</TABLE>
See notes to financial statements.
B-25
<PAGE>
TIAA SEPARATE ACCOUNT VA-1
STOCK INDEX ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION
TIAA Separate Account VA-1 ("VA-1") is a segregated investment account of
Teachers Insurance and Annuity Association of America ("TIAA") and was organized
on February 16, 1994 under the insurance laws of the State of New York for the
purpose of issuing and funding variable annuity contracts. VA-1 was registered
with the Securities and Exchange Commission ("Commission") effective November 1,
1994 as an open-end, diversified management investment company under the
Investment Company Act of 1940. Currently, VA-1 consists of a single investment
portfolio, the Stock Index Account ("Account"), which invests in a diversified
portfolio of equity securities selected to track the overall United States stock
market.
The Account was established on October 3, 1994 with a $25,000,000 seed money
investment by TIAA. TIAA purchased 1,000,000 Accumulation Units of the Account
and such Units share in the pro rata investment experience of the Account and
are subject to the same valuation procedures and expense deductions as all other
Accumulation Units in the Account. On November 14, 1994, VA-1 began to offer
Accumulation Units of the Account to participants other than TIAA. On October 2,
1995, TIAA began to withdraw its Accumulation Units from the Account at
prevailing daily net asset values and these withdrawals are reflected in the
accompanying financial statements. At December 31, 1995, TIAA retained 2,685
Accumulation Units, with a total value of $92,402.
Teachers Advisors, Inc. ("Advisors"), an indirect subsidiary of TIAA which is
registered with the Commission as an investment adviser, provides investment
advisory services for VA-1 pursuant to an Investment Management Agreement
between TIAA, Advisors and VA-1. TIAA provides all administrative services for
VA-1 pursuant to an Administrative Services Agreement with VA-1. The contracts
are distributed primarily by Teachers Personal Investors Services, Inc.
("TPIS"), also an indirect subsidiary of TIAA, which is registered with the
Commission as a broker-dealer and is a member of the National Association of
Securities Dealers, Inc.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies consistently
followed by the Account, which are in conformity with generally accepted
accounting principles.
Valuation of Investments: Securities listed or traded on any United States
national securities exchange are valued at the last sales price as of the close
of the principal securities exchange on which such securities are traded or, if
there is no sale, at the mean of the last bid and asked prices on such exchange.
Securities traded only in the over-the-counter market and quoted in the NASDAQ
National Market System are valued at the last sales price, or at the mean of the
last bid and asked prices if no sale is reported. All other over-the-counter
securities are valued at the mean of the last bid and asked prices. Short-term
money market instruments are stated at market value. Portfolio securities for
which market quotations are not readily available are valued at fair value as
determined in good faith under the direction of and in accordance with the
responsibilities of the Management Committee of VA-1.
Accounting for Investments: Securities transactions are accounted for as of the
date the securities are purchased or sold (trade date). Interest income is
recorded as earned and, for short-term money market instruments, includes
accrual of discount and amortization of premium. Dividend income is recorded on
the ex-dividend date. Realized gains and losses on security transactions are
accounted for on the average cost basis.
Federal Income Taxes: Based on provisions of the Internal Revenue Code, no
federal taxes are attributable to the net investment experience of the Account.
B-26
<PAGE>
TIAA SEPARATE ACCOUNT VA-1
STOCK INDEX ACCOUNT
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 3--MANAGEMENT AGREEMENTS
Daily charges are deducted from the net assets of the Account for services
required to manage investments, administer the separate account and the
contracts, and to cover certain insurance risks borne by TIAA. The Investment
Management Agreement sets the investment advisory charge at an annual rate of
0.30% of the net assets of the Account. Currently, Advisors has agreed to waive
a portion of such fee, so that the daily deduction is equivalent to an annual
charge of 0.10% of the net assets of the Account. The Administrative Services
Agreement sets the administrative expense charge at an annual rate of 0.20% of
the net assets of the Account. TIAA also imposes a daily charge equivalent to an
annual rate of 0.25% of the net assets of the Account for bearing certain
mortality and expense risks in connection with the contracts.
Advisors and TPIS generally pay directly for all third-party services provided
for the benefit of the Account. "Soft-dollar" arrangements for brokerage and
other services are generally not utilized by the Account. However, certain
custodial fees are reduced based on the level of average cash balances on
deposit with a custodian bank during the period. The amount by which custodial
fees were reduced under these expense offset agreements is reflected in the
accompanying Statement of Operations as "Fees paid indirectly".
NOTE 4--INVESTMENTS
At December 31, 1995, the net unrealized appreciation on investments was
$16,387,886, consisting of gross unrealized appreciation of $17,765,654 and
gross unrealized depreciation of $1,377,768.
Purchases and sales of securities, other than short-term money market
instruments, for the year ended December 31, 1995, were $43,023,069 and
$598,181, respectively.
NOTE 5--CONDENSED FINANCIAL INFORMATION
Selected condensed financial information for an Accumulation Unit of the Account
is presented below.
<TABLE>
<CAPTION>
Year Ended October 3, 1994
December 31, (date established) to
1995 December 31, 1994
------------- ----------------------
<S> <C> <C>
Per Accumulation Unit Data:
Investment income $ .745 $ .206
Expense charges .170 .034
----------- --------------------
Investment income--net .575 .172
Net realized and unrealized gain on investments 8.565 .099
----------- --------------------
Net increase in Accumulation Unit Value 9.140 .271
Accumulation Unit Value:
Beginning of period 25.271 25.000
----------- --------------------
End of period $34.411 $25.271
=========== ====================
Ratios to Average Net Assets:
Expenses 0.55% 0.13%
Investment income--net 1.87% 0.68%
Portfolio turnover rate 0.98% 0.04%
Thousands of Accumulation Units outstanding at end of
period 2,605 1,171
</TABLE>
B-27
<PAGE>
TIAA SEPARATE ACCOUNT VA-1
STOCK INDEX ACCOUNT
NOTES TO FINANCIAL STATEMENTS--(Concluded)
NOTE 6--ACCUMULATION UNITS
Changes in the number of Accumulation Units outstanding were as follows:
<TABLE>
<CAPTION>
Year Ended October 3, 1994
December 31, (date established) to
1995 December 31, 1994
------------- ---------------------
<S> <C> <C>
Accumulation Units:
Credited for premiums 1,999,245 1,106,440
Credited (cancelled) for transfers and
disbursements (565,817) 64,737
Outstanding:
Beginning of period 1,171,177 --
----------- -------------------
End of period 2,604,605 1,171,177
=========== ===================
</TABLE>
B-28
<PAGE>
TIAA SEPARATE ACCOUNT VA-1
STATEMENT OF INVESTMENTS--STOCK INDEX ACCOUNT
DECEMBER 31, 1995
SUMMARY
VALUE %
-------- -----
PREFERRED STOCK
CONGLOMERATES $ 589 0.00%
FINANCIAL--MISCELLANEOUS 294 0.00
-------- -----
TOTAL PREFERRED STOCK
(Cost $754) 883 0.00
-------- -----
COMMON STOCK
AEROSPACE 1,192,523 1.33
AIR TRANSPORTATION 466,805 0.52
AUTOMOTIVE & RELATED 2,297,946 2.56
BANKS 6,579,588 7.34
BEVERAGES 2,527,849 2.82
BROADCASTERS 1,048,972 1.17
BUSINESS SERVICES 1,220,797 1.36
CHEMICALS--MAJOR 1,855,585 2.07
CHEMICALS--SPECIALTY 1,061,389 1.18
COMMUNICATION EQUIPMENT &
SERVICES 1,706,832 1.91
COMPUTER SERVICE 2,721,643 3.04
CONGLOMERATES 1,783,749 1.99
CONSTRUCTION--MATERIALS &
BUILDERS 648,136 0.72
CONTAINERS 97,122 0.11
COSMETICS 502,500 0.56
ELECTRICAL EQUIPMENT 2,771,871 3.09
ELECTRICAL EQUIPMENT--
COMPONENTS DIVERSIFIED 2,697,489 3.01
ELECTRICAL
EQUIPMENT--INSTRUMENTS 472,161 0.53
ENVIRONMENTAL CONTROL 375,274 0.42
FINANCIAL--MISCELLANEOUS 3,170,569 3.54
FOODS 2,220,930 2.48
FOREST PRODUCTS 511,549 0.57
HEALTHCARE--DRUGS 4,793,837 5.35
HEALTHCARE--HOSPITAL SUPPLY 2,024,002 2.26
HEALTHCARE--OTHER 1,217,397 1.36
HEALTHCARE--SERVICE 1,799,860 2.01
HOUSEHOLD--CONSUMER
ELECTRONICS 29,491 0.03
HOUSEHOLD--DURABLE GOODS 423,062 0.47
HOUSEHOLD--PRODUCTS $ 1,416,235 1.58%
INSURANCE--BROKERS & OTHER 425,075 0.48
INSURANCE--LIFE 541,862 0.61
INSURANCE--MULTI-LINE,
PROPERTY & CASUALTY 2,796,924 3.12
LEISURE TIME 1,200,366 1.34
MACHINERY 1,405,459 1.57
METALS--ALUMINIUM 207,649 0.23
METALS--GOLD 189,683 0.21
METALS--NON-FERROUS 299,611 0.33
METALS--STEEL 286,650 0.32
OFFICE EQUIPMENT 2,925,186 3.26
PAPER 1,030,734 1.15
PETROLEUM--EXPLORATION &
PRODUCTION 719,723 0.80
PETROLEUM--INTEGRATED 4,457,290 4.97
PETROLEUM--SERVICE 721,998 0.81
PHOTOGRAPHY 406,400 0.45
PROPERTY--REAL ESTATE 258,000 0.29
PUBLISHING--NEWSPAPER 411,084 0.46
PUBLISHING--OTHER 767,948 0.86
RAILROAD 870,957 0.97
RESTAURANTS & HOTELS 1,131,654 1.26
RETAIL--FOOD 655,652 0.73
RETAIL--GENERAL MERCHANDISE 3,229,926 3.60
TEXTILE & APPAREL 421,299 0.47
TOBACCO 1,635,817 1.83
TRUCKERS & SHIPPING 186,037 0.21
UTILITIES--ELECTRIC 4,080,113 4.55
UTILITIES--GAS & PIPELINE 1,142,818 1.28
UTILITIES--TELEPHONE 6,553,239 7.31
-------- -----
TOTAL COMMON STOCK
(Cost $72,206,684) 88,594,317 98.85
-------- -----
ROUNDING 124 0.00
-------- -----
TOTAL PORTFOLIO
(Cost $72,207,438) 88,595,324 98.85
OTHER ASSETS & LIABILITIES,
NET 1,032,269 1.15
-------- -----
NET ASSETS $89,627,593 100.00%
======== =====
See notes to financial statements.
B-29
<PAGE>
TIAA SEPARATE ACCOUNT VA-1
STATEMENT OF INVESTMENTS--STOCK INDEX ACCOUNT
DECEMBER 31, 1995
SHARES VALUE
- ------- -----------
PREFERRED STOCK--0.00%
CONGLOMERATES--0.00%
41 TELEDYNE, INC SERIES E $ 589
----------
FINANCIAL--
MISCELLANEOUS--0.00%
12 EVEREN CAPITAL CORP SERIES A 294
----------
TOTAL PREFERRED STOCK
(Cost $754) 883
----------
COMMON STOCK--98.85%
AEROSPACE--1.33%
5,300 BOEING CO 415,387
1,500 EG & G, INC 36,375
800 GENERAL DYNAMICS CORP 47,300
1,900 GENERAL MOTORS CORP (CLASS H) 93,337
2,678 LOCKHEED MARTIN CORP 211,562
1,600 MCDONNELL DOUGLAS CORP 147,200
600 NORTHROP GRUMMAN CORP 38,400
1,100 OEA, INC 32,862
3,600 RAYTHEON CO 170,100
----------
1,192,523
----------
AIR TRANSPORTATION--0.52%
950 AIR EXPRESS INTERNATIONAL CORP 21,850
1,100 *AMR CORP 81,675
2,250 COMAIR HOLDINGS, INC 60,468
1,000 DELTA AIRLINES, INC 73,875
900 *FEDERAL EXPRESS CORP 66,487
1,300 *NORTHWEST AIRLINES CORP
(CLASS A) 66,300
2,600 SOUTHWEST AIRLINES CO 60,450
200 *UAL CORP NEW 35,700
----------
466,805
----------
AUTOMOTIVE & RELATED--2.56%
1,200 ALLEN GROUP, INC 26,850
700 BANDAG, INC 37,887
1,000 BORG-WARNER AUTOMOTIVE, INC 32,000
5,700 CHRYSLER CORP 315,637
1,600 COOPER TIRE & RUBBER CO 39,400
800 CUMMINS ENGINE CO, INC 29,600
1,600 DANA CORP 46,800
1,000 DANAHER CORP 31,750
1,200 EATON CORP 64,350
1,200 *ECHLIN, INC 43,800
17,300 FORD MOTOR CO 501,700
11,726 GENERAL MOTORS CORP $ 620,012
1,700 GENUINE PARTS CO 69,700
2,400 GOODYEAR TIRE & RUBBER CO 108,900
1,300 HARLEY DAVIDSON, INC 37,375
700 HAYES WHEELS
INTERNATIONAL, INC 17,937
1,900 *LEAR SEATING CORP 55,100
900 MODINE MANUFACTURING CO 21,600
2,000 *NAVISTAR INTERNATIONAL CORP 21,000
700 PACCAR, INC 29,487
1,200 POLARIS INDUSTRIES, INC 35,250
2,500 SAFETY-KLEEN CORP 39,062
900 SNAP-ON, INC 40,725
500 STANDARD PRODUCTS CO 8,812
300 TRANSPRO, INC 3,187
900 WABASH NATIONAL CORP 20,025
----------
2,297,946
----------
BANKS--7.34%
1,800 AMSOUTH BANCORP 72,675
5,600 BANC ONE CORP 211,400
1,200 BANCORP HAWAII, INC 43,050
2,053 BANK OF BOSTON CORP 94,951
3,000 BANK OF NEW YORK CO, INC 146,250
1,400 BANK SOUTH CORP 42,525
5,700 BANKAMERICA CORP 369,075
1,200 BANKERS TRUST NEW YORK CORP 79,800
1,300 BARNETT BANKS, INC 76,700
500 BAYBANKS, INC 49,125
1,800 BOATMENS BANCSHARES, INC 73,575
1,100 CAPITAL ONE FINANCIAL CORP 26,262
1,000 CCB FINANCIAL CORP 55,500
3,800 CHARTER ONE FINANCIAL, INC 116,375
2,758 CHASE MANHATTAN CORP 167,203
3,800 CHEMICAL BANKING CORP 223,250
6,246 CITICORP 420,043
105 *CNB BANCSHARES INC 2,992
1,800 COMERICA, INC 72,225
2,100 CORESTATES FINANCIAL CORP 79,537
802 CRESTAR FINANCIAL CORP 47,418
1,200 DEPOSIT GUARANTY CORP 53,400
600 FIFTH THIRD BANCORP 43,950
1,212 FIRST AMERICAN BANK CORP 53,782
2,020 FIRST BANK SYSTEM, INC 100,242
4,453 FIRST CHICAGO NBD CORP 175,893
See notes to financial statements.
B-30
<PAGE>
SHARES VALUE
- ------- -----------
BANKS--(continued)
807 FIRST COMMERCE CORP $ 25,824
1,819 FIRST COMML CORP 60,027
1,333 FIRST FIDELITY BANCORP NEW 100,474
500 FIRST FINANCIAL BANCORP 17,625
1,200 FIRST INTERSTATE BANCORP 163,800
1,000 FIRST MICHIGAN BANK CORP 27,750
1,200 FIRST SECURITY CORP 46,200
500 FIRST TENNESSEE NATIONAL CORP 30,250
2,500 FIRST UNION CORP 139,062
1,000 FIRSTAR CORP NEW 39,625
800 FIRSTIER FINANCIAL, INC 35,200
1,600 FIRSTMERIT CORP 48,000
4,006 FLEET FINANCIAL GROUP, INC NEW 163,244
1,947 HUNTINGTON BANCSHARES, INC 46,728
2,900 KEYCORP NEW 105,125
1,900 MAGNA GROUP, INC 45,125
2,200 MARSHALL & ILSLEY CORP 57,200
1,850 MELLON BANK CORP 99,437
1,000 MERCANTILE BANCORP, INC 46,000
2,000 MERCANTILE BANKSHARES CORP 55,750
1,114 MERIDIANBANCORP, INC 51,801
1,000 MIDLANTIC CORP 65,625
2,600 MORGAN (J.P.) & CO, INC 208,650
2,067 NATIONAL CITY CORP 68,469
1,100 NATIONAL COMMERCE BANCORP 28,875
4,124 NATIONSBANK CORP 287,133
1,000 NORTHERN TRUST CORP 56,000
4,500 NORWEST CORP 148,500
1,155 OLD KENT FINANCIAL CORP 47,499
1,900 OLD NATIONAL BANCORP 66,025
300 ONE VALLEY BANCORP OF WEST
VIRGINIA 9,375
3,400 PNC BANK CORP 109,650
1,700 PREMIER BANCORP, INC 39,737
600 REGIONS FINANCIAL CORP 25,800
500 REPUBLIC NEW YORK CORP 31,062
1,116 SIGNET BANKING CORP 26,505
1,850 SOUTHERN NATIONAL CORP 48,562
1,800 SOUTHTRUST CORP 46,125
2,200 ST. PAUL BANCORP, INC 56,100
600 STAR BANC CORP 35,700
1,300 STATE STREET BOSTON CORP 58,500
2,420 SUMMIT BANCORP 76,230
1,500 SUNTRUST BANKS, INC 102,750
1,200 SYNOVUS FINANCIAL CORP 34,200
2,529 U.S. BANCORP 85,037
1,100 UJB FINANCIAL CORP 39,325
1,600 UNION PLANTERS CORP 51,000
1,600 VALLEY NATIONAL BANCORP 40,000
2,500 WACHOVIA CORP NEW 114,375
2,700 WASHINGTON FEDERAL, INC 69,187
510 WELLS FARGO & CO 110,160
900 WILMINGTON TRUST CORP 27,787
800 ZIONS BANCORP 64,200
----------
6,579,588
----------
BEVERAGES--2.82%
3,400 ANHEUSER BUSCH COS, INC 227,375
900 BROWN FORMAN, INC (CLASS B) 32,850
20,200 COCA COLA CO 1,499,850
2,100 COCA COLA ENTERPRISES, INC 56,175
1,100 COORS ADOLPH CO (CLASS B) 24,337
12,300 PEPSICO, INC 687,262
----------
2,527,849
----------
BROADCASTERS--1.17%
500 *BHC COMMUNICATIONS, INC (CLASS
A) 47,250
1,600 CAPITAL CITIES/ABC, INC 197,400
600 *CLEAR CHANNEL COMMUNICATIONS,
INC 26,475
4,300 COMCAST CORP (CLASS A) SPL 78,206
1,260 GAYLORD ENTERTAINMENT CO 34,965
800 *HERITAGE MEDIA CORP
(CLASS A) NEW 20,500
1,000 *INFINITY BROADCASTING CORP
(CLASS A) 37,250
500 *KING WORLD PRODUCTIONS, INC 19,437
2,275 *LIBERTY MEDIA GROUP CLASS A 61,140
500 *LIN TELEVISION CORP 14,875
10,400 *TELE-COMMUNICATIONS, INC (CLASS
A) NEW 206,700
2,200 TURNER BROADCASTING SYSTEMS, INC
(CLASS B) 57,200
400 UNITED TELEVISION, INC 36,100
4,300 *VIACOM, INC (CLASS A) 197,262
300 *VIACOM, INC (CLASS B) 14,212
----------
1,048,972
----------
BUSINESS SERVICES--1.36%
1,200 *AMERICA ONLINE, INC 45,000
900 AUTODESK, INC 30,825
1,800 BLOCK (H&R), INC 72,900
700 *CATALINA MARKETING CORP 43,925
800 CINTAS CORP 35,600
500 *CORPORATE EXPRESS, INC 15,062
1,300 DELUXE CORP 37,700
See notes to financial statements.
B-31
<PAGE>
SHARES VALUE
- ------- -----------
BUSINESS SERVICES--(continued)
900 DIEBOLD, INC $ 49,837
1,200 *FRANKLIN QUEST CO 23,400
1,800 HARLAND (JOHN H.) CO 37,575
1,200 IDEON GROUP, INC 12,150
1,500 INTERPUBLIC GROUP OF COS, INC 65,062
1,200 KELLY SERVICES, INC (CLASS A) 33,300
1,600 MANPOWER, INC 45,000
600 *MICRO WAREHOUSE, INC 25,950
1,500 NATIONAL SERVICE
INDUSTRIES, INC 48,562
2,400 *OFFICE DEPOT, INC 47,400
900 OLSTEN CORP 35,550
1,000 OMNICOM GROUP, INC 37,250
1,200 PAYCHEX, INC 59,850
1,100 PHH CORP 51,425
1,000 *ROBERT HALF
INTERNATIONAL, INC 41,875
1,300 SENSORMATIC ELECTRONICS CORP 22,587
1,700 SERVICE CORP INTERNATIONAL 74,800
900 *STRATACOM, INC 66,150
1,600 *SUNGARD DATA SYSTEMS, INC 45,600
1,900 TRUE NORTH
COMMUNICATIONS, INC 35,150
1,600 *U.S. CELLULAR CORP 54,000
500 WALLACE COMPUTER
SERVICES, INC 27,312
----------
1,220,797
----------
CHEMICALS--MAJOR--2.07%
1,800 AIR PRODUCTS & CHEMICALS, INC 94,950
4,100 DOW CHEMICAL CO 288,537
8,900 DU PONT (E.I.) DE NEMOURS & CO 621,887
1,500 EASTMAN CHEMICAL CO 93,937
800 GOODRICH (B.F.) CO 54,500
1,900 HERCULES, INC 107,112
1,600 MONSANTO CO 196,000
500 OLIN CORP 37,125
3,300 PPG INDUSTRIES, INC 150,975
2,500 PRAXAIR, INC 84,062
800 ROHM & HAAS CO 51,500
2,000 UNION CARBIDE CORP 75,000
----------
1,855,585
----------
CHEMICALS--SPECIALTY--1.18%
1,200 *AIRGAS, INC 39,900
1,500 ALBEMARLE CORP 29,062
700 BETZ LABORATORIES, INC 28,700
1,500 COMMERCIAL METALS CO 37,125
1,300 CROMPTON & KNOWLES CORP 17,225
700 *CYTEC INDUSTRIES, INC 43,662
1,200 ECOLAB, INC 36,000
1,350 ENGELHARD CORP 29,362
800 FOSTER WHEELER CORP 34,000
1,200 GEON CO 29,250
700 GEORGIA GULF CORP 21,525
1,000 GREAT LAKES CHEMICAL CORP 72,000
1,434 ICN PHARMACEUTICALS, INC NEW 27,604
1,200 IMC GLOBAL, INC 49,050
500 LOCTITE CORP 23,750
1,200 LUBRIZOL CORP 33,450
800 LYONDELL PETROCHEMICAL CO 18,300
1,000 MILLIPORE CORP 41,125
2,300 MORTON INTERNATIONAL, INC 82,512
1,200 NALCO CHEMICAL CORP 36,150
800 RAYCHEM CORP 45,500
2,125 RPM, INC 35,062
700 SCHULMAN A, INC 15,750
1,400 *SEALED AIR CORP 39,375
1,100 SIGMA ALDRICH CORP 54,450
1,600 *STERLING CHEMICALS, INC 13,000
800 THIOKOL CORP 27,100
800 VIGORO CORP 49,400
1,000 WELLMAN, INC 22,750
1,000 WITCO CORP 29,250
----------
1,061,389
----------
COMMUNICATION EQUIPMENT &
SERVICES--1.91%
3,342 *3COM CORP 155,820
8,500 *AIRTOUCH COMMUNICATIONS, INC 240,125
800 *ANDREW CORP 30,600
500 *ANTEC CORP 9,000
1,200 *ASCEND COMMUNICATIONS INC 97,350
1,800 *BRINKER INTERNATIONAL, INC 27,225
900 *CABLETRON SYSTEMS, INC 72,900
900 *CASCADE COMMUNICATIONS CORP 76,725
1,100 CENTURY TELEPHONE ENTERPRISES,
INC 34,925
4,600 *CISCO SYSTEMS, INC 343,275
1,200 COMSAT CORP SERIES 1 22,350
3,600 CORNING, INC 115,200
2,000 *DSC COMMUNICATIONS CORP 73,750
600 *GENERAL DATACOMM
INDUSTRIES, INC 10,275
700 HARRIS CORP 38,237
2,400 *LCI INTERNATIONAL, INC 49,200
600 *MFS COMMUNICATIONS CO, INC 31,950
See notes to financial statements.
B-32
<PAGE>
SHARES VALUE
- ------- -----------
COMMUNICATIONS EQUIPMENT &
SERVICES--(continued)
2,000 *NEW WORLD COMMUNICATIONS GROUP,
INC $ 35,000
5,400 *NOVELL, INC 76,950
1,000 *PAGING NETWORK, INC 24,375
800 *QUALCOMM, INC 34,400
1,600 SCIENTIFIC-ATLANTA, INC 24,000
1,600 *TECH DATA CORP 24,000
1,600 *TELLABS, INC 59,200
----------
1,706,832
----------
COMPUTER SERVICE--3.04%
100 *ACXIOM CORP 2,737
1,200 *ADAPTEC, INC 49,200
1,200 *ADC TELECOMMUNICATIONS, INC 43,800
1,200 ADOBE SYSTEMS, INC 74,400
1,300 *AMERICAN MANAGEMENT SYSTEMS, INC 39,000
2,100 AUTOMATIC DATA
PROCESSING, INC 155,925
3,202 *BAY NETWORKS, INC 131,682
1,200 *BISYS GROUP, INC 36,900
1,000 *BMC SOFTWARE, INC 42,750
1,350 *CADENCE DESIGN SYSTEMS, INC 56,700
1,000 *CERIDIAN CORP 41,250
3,300 COMPUTER ASSOCIATES
INTERNATIONAL, INC 187,687
1,000 *COMPUTER SCIENCES CORP 70,250
1,000 *ELECTRONIC ARTS 26,125
3,200 *EMC CORP 49,200
3,403 FIRST DATA CORP 227,575
1,100 *FISERV, INC 33,000
4,700 GENERAL MOTORS CORP (CLASS E) 244,400
700 HBO & CO 53,637
1,900 *INTERGRAPH CORP 29,925
800 *INTUIT, INC 62,400
950 *MICROCHIP TECHNOLOGY, INC 34,675
5,600 *MICROSOFT CORP 491,400
1,200 NATIONAL DATA CORP 29,700
5,600 *ORACLE CORP 237,300
1,100 *PARAMETRIC TECHNOLOGY CORP 73,150
1,100 *READ-RITE CORP 25,575
1,000 REYNOLDS & REYNOLDS CO (CLASS A) 38,875
1,000 *STERLING SOFTWARE, INC 62,375
1,300 *SYBASE, INC 46,800
1,000 *SYMANTEC CORP 23,250
----------
2,721,643
----------
CONGLOMERATES--1.99%
2,000 ALCO STANDARD CORP $ 91,250
1,800 ALEXANDER & BALDWIN, INC 41,400
4,600 ALLIED SIGNAL, INC 218,500
900 AMERICAN FINANCIAL GROUP, INC 27,562
1,100 *CONCORD EFS, INC 46,475
1,600 ITT INDUSTRIES, INC 38,400
700 JOHNSON CONTROLS, INC 48,125
1,500 KEYSTONE FINANCIAL, INC 45,000
500 *LITTON INDUSTRIES, INC 22,250
1,200 LOEWS CORP 94,050
1,245 MARK IV INDUSTRIES, INC 24,588
6,300 MINNESOTA MINING & MANUFACTURING
CO 417,375
2,500 ROCKWELL INTERNATIONAL CORP 132,187
900 STANDEX INTERNATIONAL CORP 29,475
1,100 TELEDYNE, INC 28,187
1,000 TEXTRON, INC 67,500
1,100 TRW, INC 85,250
2,600 TYCO INTERNATIONAL LTD 92,625
1,800 UNITED TECHNOLOGIES CORP 170,775
2,700 WHITMAN CORP 62,775
----------
1,783,749
----------
CONSTRUCTION--MATERIALS &
BUILDERS--0.72%
700 ARMSTRONG WORLD
INDUSTRIES, INC 43,400
266 *CASTLE & COOKE, INC 4,455
900 CENTEX CORP 31,275
2,625 CLAYTON HOMES, INC 56,109
1,400 FASTENAL CO 59,150
1,000 FLEETWOOD ENTERPRISES, INC 25,750
2,700 KAUFMAN & BROAD HOME CORP 40,162
1,624 LAFARGE CORP 30,450
2,900 MASCO CORP 90,987
900 OAKWOOD HOMES CORP 34,537
1,200 *OWENS CORNING
FIBERGLAS CORP NEW 53,850
400 PLY-GEM INDUSTRIES, INC 6,500
1,100 PULTE CORP 36,987
1,200 SHERWIN-WILLIAMS CO 48,900
1,100 *SIMON PROPERTY GROUP, INC 26,812
1,000 *USG CORP 30,000
500 VULCAN MATERIALS CO 28,812
----------
648,136
----------
CONTAINERS--0.11%
609 BALL CORP 16,747
1,300 *CROWN CORK & SEAL CO, INC 54,275
See notes to financial statements.
B-33
<PAGE>
SHARES VALUE
- ------- -----------
CONTAINERS--(continued)
1,800 *OWENS ILLINOIS, INC $ 26,100
----------
97,122
----------
COSMETICS--0.56%
1,200 AVON PRODUCTS, INC 90,450
6,800 GILLETTE CO 354,450
1,200 INTERNATIONAL FLAVORS &
FRAGRANCES, INC 57,600
----------
502,500
----------
ELECTRICAL EQUIPMENT--3.09%
1,900 *AMERICAN POWER
CONVERSION CORP 18,050
1,500 BALDOR ELECTRIC CO 30,187
1,300 BELDEN, INC 33,475
1,900 DURACELL INTERNATIONAL, INC 98,325
3,400 EMERSON ELECTRIC CO 277,950
800 EXIDE CORP 36,700
26,500 GENERAL ELECTRIC CO 1,908,000
700 GRAINGER (W.W.), INC 46,375
2,100 HONEYWELL, INC 102,112
1,130 HUBBELL, INC (CLASS B) 74,297
1,200 *MAGNETEK, INC 9,750
600 THOMAS & BETTS CORP 44,250
5,600 WESTINGHOUSE ELECTRIC CORP 92,400
----------
2,771,871
----------
ELECTRICAL EQUIPMENT--
COMPONENTS DIVERSIFIED--3.01%
1,700 *ADVANCED MICRO DEVICES, INC 28,050
900 *ALTERA CORP 44,775
3,400 AMP, INC 130,475
1,100 *AMPHENOL CORP (CLASS A) 26,675
1,350 *ANALOG DEVICES, INC 47,756
900 *ARROW ELECTRONICS, INC 38,812
1,500 *ATMEL CORP 33,562
800 AVNET, INC 35,800
1,200 *CIRRUS LOGIC, INC 23,700
2,200 *CYPRESS SEMICONDUCTOR CORP 28,050
1,200 DALLAS SEMICONDUCTOR CORP 24,900
900 FISHER SCIENTIFIC INTERNATIONAL,
INC 30,037
2,300 *GENERAL INSTRUMENT CORP NEW 53,762
20 *HARRIS COMPUTER SYSTEMS CORP 270
1,400 *INTEGRATED DEVICE TECHNOLOGY,
INC 18,025
13,500 INTEL CORP 766,125
1,600 *INTERNATIONAL RECTIFIER CORP 40,000
1,200 *KEMET CORP 28,650
700 *LAM RESEARCH CORP 32,025
1,400 LINEAR TECHNOLOGY CO 54,950
2,200 *LSI LOGIC CORP 72,050
1,400 *MAXIM INTEGRATED PRODUCTS 53,900
2,800 MICRON TECHNOLOGY, INC 110,950
1,656 MOLEX, INC 52,578
9,400 MOTOROLA, INC 535,800
2,100 *NATIONAL SEMICONDUCTOR CORP 46,725
3,100 TEXAS INSTRUMENTS, INC 160,425
600 *U.S. ROBOTICS CORP 52,650
1,100 *VISHAY INTERTECHNOLOGY, INC 34,650
900 *VLSI TECHNOLOGY, INC 16,312
1,500 *XILINX, INC 45,750
800 *ZILOG, INC 29,300
----------
2,697,489
----------
ELECTRICAL EQUIPMENT--
INSTRUMENTS--0.53%
3,000 *APPLIED MATERIALS, INC 118,125
700 *INPUT/OUTPUT, INC 40,425
1,000 *KLA INSTRUMENT CORP 26,062
3,000 LORAL CORP 106,125
800 PERKIN-ELMER CORP 30,200
800 *SILICON VALLEY GROUP, INC 20,200
700 TEKTRONIX, INC 34,387
600 *TENCOR INSTRUMENTS 14,625
1,400 *TERADYNE, INC 35,000
600 VARIAN ASSOCIATES, INC 28,650
1,300 X RITE, INC 18,362
----------
472,161
----------
ENVIRONMENTAL CONTROL--0.42%
3,300 BROWNING FERRIS
INDUSTRIES, INC 97,350
1,100 *SANIFILL, INC 36,712
1,700 *U.S.A. WASTE SERVICES, INC 32,087
7,000 WMX TECHNOLOGIES, INC 209,125
----------
375,274
----------
FINANCIAL--
MISCELLANEOUS--3.54%
1,100 ADVANTA CORP (CLASS A) 42,075
3,100 AHMANSON (H.F.) & CO 82,150
1,200 AMBAC, INC 56,250
7,700 AMERICAN EXPRESS CO 318,587
3,200 AMERICAN GENERAL CORP 111,600
1,575 BEAR STEARNS COS, INC 31,303
800 BENEFICIAL CORP 37,300
See notes to financial statements.
B-34
<PAGE>
SHARES VALUE
- ------- -----------
FINANCIAL--
MISCELLANEOUS--(continued)
2,214 COUNTRYWIDE CREDIT INDUSTRIES,
INC $ 48,154
2,200 DEAN WITTER DISCOVER & CO 103,400
800 DUKE REALTY INVESTMENTS, INC 25,100
1,000 EDWARDS (A.G.), INC 23,875
2,800 FEDERAL HOME LOAN
MORTGAGE CORP 233,800
4,100 FEDERAL NATIONAL
MORTGAGE ASSOCIATION 508,912
1,600 FINANCIAL SECURITY
ASSURANCE HOLDINGS LTD 39,800
900 FINOVA GROUP, INC 43,425
2,200 FIRST FINANCIAL CORP (WISCONSIN) 50,600
1,000 FIRST USA, INC 44,375
2,000 FRANCHISE FINANCE CORP OF
AMERICA 45,250
1,000 FRANKLIN RESOURCES, INC 50,375
1,700 FULTON FINANCIAL CORP 35,275
1,100 GOLDEN WEST FINANCIAL CORP 60,775
2,785 GREAT WESTERN FINANCIAL CORP 71,017
2,600 GREEN TREE FINANCIAL CORP 68,575
1,400 HEALTH AND RETIREMENT PROPERTY
TRUST 22,750
1,700 HOUSEHOLD INTERNATIONAL, INC 100,512
2,000 LEHMAN BROTHERS HOLDINGS, INC 42,500
2,100 MBNA CORP 77,437
1,200 *MEDAPHIS CORP 44,400
1,300 MEDITRUST CORP 45,337
2,550 MERCURY FINANCE CO 33,787
2,800 MERRILL LYNCH & CO, INC 142,800
800 MORGAN STANLEY GROUP, INC 64,500
700 NEW PLAN REALTY TRUST 15,312
1,800 PAINE WEBBER GROUP INC 36,000
1,500 PIONEER GROUP, INC 40,875
500 PMI GROUP, INC 22,625
600 PRICE (T. ROWE) ASSOCIATES, INC 29,550
1,700 SALOMON, INC 60,350
2,100 SCHWAB (CHARLES) CORP 42,262
100 SECURITY CAPITAL PACIFIC TRUST 1,975
1,300 STORAGE USA, INC 42,412
1,200 STUDENT LOAN
MARKETING ASSOCIATION 79,050
1,800 TCF FINANCIAL CORP 59,625
900 UNITED ASSET
MANAGEMENT CORP 34,537
----------
3,170,569
----------
FOODS--2.48%
8,917 *ARCHER DANIELS MIDLAND CO $ 160,506
2,200 CAMPBELL SOUP CO 132,000
900 CARDINAL HEALTH, INC 49,275
3,900 CONAGRA, INC 160,875
2,200 CPC INTERNATIONAL, INC 150,975
1,000 DEAN FOODS CO 27,500
800 DOLE FOOD, INC 28,000
800 DREYERS GRAND ICE CREAM, INC 26,600
1,800 FLOWERS INDUSTRIES, INC 21,825
2,600 GENERAL MILLS, INC 150,150
2,000 *GENERAL NUTRITION COS, INC 46,000
5,400 HEINZ (H.J.) CO 178,875
900 HERSHEY FOODS CORP 58,500
900 IBP, INC 45,450
1,900 KELLOGG CO 146,775
2,000 MCCORMICK & CO, INC 48,250
1,400 NABISCO HOLDINGS CORP
(CLASS A) 45,675
1,300 PIONEER-HI-BRED
INTERNATIONAL, INC 72,312
2,300 QUAKER OATS CO 79,350
1,500 *RALCORP HOLDINGS, INC 36,375
1,500 RALSTON PURINA GROUP 93,562
1,400 RICHFOOD HOLDINGS, INC 37,450
7,800 SARA LEE CORP 248,625
700 *SMITHFIELD FOODS, INC 22,225
900 SMITH'S FOOD & DRUG
CENTERS, INC (CLASS B) 22,725
1,400 TYSON FOODS, INC 36,575
1,800 WRIGLEY (WM) JR CO 94,500
----------
2,220,930
----------
FOREST PRODUCTS--0.57%
1,100 BOISE CASCADE CORP 38,087
1,400 CHAMPION INTERNATIONAL CORP 58,800
1,500 GEORGIA-PACIFIC CORP 102,937
2,200 LOUISIANA PACIFIC CORP 53,350
700 POTLATCH CORP 28,000
1,200 RAYONIER, INC 40,050
3,100 WEYERHAEUSER CO 134,075
1,000 WILLAMETTE INDUSTRIES, INC 56,250
----------
511,549
----------
HEALTHCARE--DRUGS--5.35%
1,900 *ALZA CORP 47,025
4,900 AMERICAN HOME PRODUCTS CORP 475,300
4,500 *AMGEN, INC 267,187
1,700 ARBOR DRUGS, INC 35,700
600 *BIOGEN, INC 36,900
See notes to financial statements.
B-35
<PAGE>
SHARES VALUE
- ------- -----------
HEALTHCARE--DRUGS--(continued)
7,700 BRISTOL MYERS SQUIBB CO $ 661,237
385 *CHIRON CORP 42,542
1,000 *FOREST LABORATORIES, INC 45,250
800 *GENZYME CORP 49,900
40 *GENZYME CORP
(TISSUE REPAIR DIVISION) 635
1,900 IVAX CORP 54,150
5,046 LILLY (ELI) & CO 283,837
700 MCKESSON CORP NEW 35,437
19,400 MERCK & CO, INC 1,275,550
2,600 MYLAN LABORATORIES, INC 61,100
10,100 PFIZER, INC 636,300
3,480 *PHARMACIA & UPJOHN, INC 134,850
700 RHONE-POULENC RORER, INC 37,275
700 *ROBERTS PHARMACEUTICAL CORP 12,425
700 *SCHERER (R.P.) CORP 34,387
6,000 SCHERING-PLOUGH CORP 328,500
2,000 WARNER-LAMBERT CO 194,250
900 *WATSON PHARMACEUTICALS, INC 44,100
----------
4,793,837
----------
HEALTHCARE--HOSPITAL
SUPPLY--2.26%
12,200 ABBOTT LABORATORIES 509,350
1,000 BARD (C.R.), INC 32,250
4,300 BAXTER INTERNATIONAL, INC 180,062
900 BECTON DICKINSON & CO 67,500
1,600 *C-CUBE MICROSYSTEMS, INC 100,000
4,456 GUIDANT CORP 188,266
10,200 JOHNSON & JOHNSON 873,375
2,300 OWENS & MINOR, INC NEW 29,325
1,100 *PYXIS CORP 16,087
1,300 U.S. SURGICAL CORP 27,787
----------
2,024,002
----------
HEALTHCARE--OTHER--1.36%
2,000 ALLERGAN, INC 65,000
1,800 *AMERICAN MEDICAL
RESPONSE, INC 58,500
900 BAUSCH & LOMB, INC 35,662
2,400 *BIOMET, INC 42,900
1,600 *BOSTON SCIENTIFIC CORP 78,400
1,500 CAREMARK INTERNATIONAL, INC 27,187
400 *CORDIS CORP 40,200
1,000 *GENESIS HEALTH VENTURES, INC 36,500
1,600 *IDEXX LABORATORIES, INC 75,200
2,400 *INFORMIX CORP 72,000
3,800 MEDTRONIC, INC 212,325
800 *NELLCOR PURITAN BENNETT, INC 46,400
700 *OXFORD HEALTH PLANS, INC 51,712
2,100 PALL CORP 56,437
600 *QUANTUM HEALTH
RESOURCES, INC 5,887
1,200 *ST. JUDE MEDICAL, INC 51,600
1,300 STEWART ENTERPRISES, INC
(CLASS A) 48,100
900 STRYKER CORP 47,250
1,050 *SUMMIT TECHNOLOGY, INC 35,437
900 *SUNRISE MEDICAL, INC 16,650
2,200 *SYBRON INTERNATIONAL CORP 52,250
800 *THERMO CARDIOSYSTEMS, INC 61,800
----------
1,217,397
----------
HEALTHCARE--SERVICE--2.01%
800 *APRIA HEALTHCARE GROUP, INC 22,600
2,200 *BEVERLY ENTERPRISES 23,375
1,200 *CERNER CORP 24,600
7,092 COLUMBIA/HCA
HEALTHCARE CORP 359,919
800 *COMMUNITY HEALTH
SYSTEMS, INC 28,500
1,100 *FHP INTERNATIONAL CORP 31,350
800 *FOUNDATION HEALTH CORP 34,400
800 *HEALTH CARE &
RETIREMENT CORP 28,000
1,000 HEALTH CARE PROPERTY INVESTORS,
INC 35,125
1,500 *HEALTH MANAGEMENT ASSOCIATES,
INC (CLASS A) NEW 39,187
1,300 *HEALTH SYSTEMS
INTERNATIONAL, INC 41,762
700 *HEALTHCARE COMPARE CO 30,450
1,400 *HEALTHSOURCE, INC 50,400
1,500 *HEALTHSOUTH CORP 43,687
1,100 *HORIZON/CMS HEALTHCARE CORP 27,775
3,000 *HUMANA, INC 82,125
1,000 INTEGRATED HEALTH
SERVICES, INC 25,000
1,200 INVACARE CORP 30,300
1,852 *LABORATORY CORP OF AMERICA
HOLDINGS 17,362
260 *LABORATORY CORP OF AMERICA
HOLDINGS WTS 4/28/00 178
900 *LINCARE HOLDINGS, INC 22,500
800 MANOR CARE, INC 28,000
1,200 *MID ATLANTIC MEDICAL
SERVICES, INC 29,100
See notes to financial statements.
B-36
<PAGE>
SHARES VALUE
- ------- -----------
HEALTHCARE--SERVICE--(continued)
2,800 OMEGA HEALTHCARE
INVESTORS, INC $ 74,550
600 *ORNDA HEALTHCORP 13,950
400 *PACIFICARE HEALTH SYSTEMS, INC
(CLASS A) 34,800
500 *PACIFICARE HEALTH SYSTEMS, INC
(CLASS B) 43,500
1,200 *PHYCOR, INC 60,675
800 *PHYSICIAN CORP OF AMERICA 13,600
3,120 *TENET HEALTHCARE CORP 64,740
25 *TRANSPORT HOLDINGS, INC
(CLASS A) 1,018
2,700 U.S. HEALTHCARE, INC 125,550
2,700 UNITED HEALTHCARE CORP 176,850
1,100 *VALUE HEALTH, INC 30,250
841 *VENCOR, INC 27,332
1,800 *VIVRA, INC 45,225
1,000 *WELLPOINT HEALTH
NETWORKS, INC (CLASS A) 32,125
----------
1,799,860
----------
HOUSEHOLD--CONSUMER
ELECTRONICS--0.03%
735 HARMAN INTERNATIONAL INDUSTRIES,
INC 29,491
----------
HOUSEHOLD--DURABLE GOODS--0.47%
800 BASSETT FURNITURE
INDUSTRIES, INC 18,600
1,500 BLACK & DECKER CORP 52,875
1,600 *BOYD GAMING CORP 18,600
1,600 LEGGETT & PLATT, INC 38,800
2,200 MAYTAG CO 44,550
3,100 NEWELL COS, INC 80,212
2,500 SHAW INDUSTRIES, INC 36,875
800 STANLEY WORKS 41,200
1,800 SUNBEAM CORP 27,450
1,200 WHIRLPOOL CORP 63,900
----------
423,062
----------
HOUSEHOLD--PRODUCTS--1.58%
1,200 APTARGROUP, INC 44,850
700 CLOROX CO 50,137
2,100 COLGATE PALMOLIVE CO 147,525
1,400 DIAL CORP 41,475
700 FIRST BRANDS CORP 33,337
1,900 *PERRIGO CO 22,562
1,100 PREMARK INTERNATIONAL, INC 55,687
10,700 PROCTER & GAMBLE CO 888,100
2,900 RUBBERMAID, INC $ 73,950
1,300 *SCOTTS CO (CLASS A) 25,187
700 TAMBRANDS, INC 33,425
----------
1,416,235
----------
INSURANCE--BROKERS &
OTHER--0.48%
1,300 ALEXANDER & ALEXANDER SERVICES,
INC 24,700
3,200 EQUIFAX, INC 68,400
800 GALLAGHER (ARTHUR J.) & CO 29,800
1,600 *ITT HARTFORD GROUP, INC 77,400
1,000 JOHN ALDEN FINANCIAL CORP 20,875
1,200 MARSH & MCLENNAN COS, INC 106,500
800 MBIA, INC 60,000
1,700 *QUORUM HEALTH GROUP, INC 37,400
----------
425,075
----------
INSURANCE--LIFE--0.61%
1,600 AON CORP 79,800
1,600 *EQUITABLE COS, INC 38,400
1,500 FIRST COLONY CORP 38,062
1,500 JEFFERSON-PILOT CORP 69,750
1,800 PROVIDIAN CORP 73,350
800 RELIASTAR FINANCIAL CORP 35,500
1,050 *SUNAMERICA, INC 49,875
1,100 TORCHMARK CORP 49,775
1,300 UNUM CORP 71,500
1,200 USLIFE CORP 35,850
----------
541,862
----------
INSURANCE--MULTI-LINE,
PROPERTY & CASUALTY--3.12%
1,800 AETNA LIFE & CASUALTY CO 124,650
1,800 AFLAC, INC 78,075
1,200 ALLMERICA PROPERTY & CASUALTY
COS, INC 32,400
6,678 ALLSTATE CORP 274,632
1,000 AMERICAN BANKERS INSURANCE
GROUP, INC 39,000
5,900 AMERICAN INTERNATIONAL GROUP,
INC 545,750
600 AMERICAN RE CORP 24,525
1,300 CHUBB CORP 125,775
1,000 CIGNA CORP 103,250
835 CINCINNATI FINANCIAL CORP 54,483
1,100 FREMONT GENERAL CORP 40,425
600 GEICO CORP 41,925
1,200 GENERAL REINSURANCE CORP 186,000
See notes to financial statements.
B-37
<PAGE>
SHARES VALUE
- ------- -----------
INSURANCE--MULTI-LINE
PROPERTY & CASUALTY--(continued)
800 *INSURANCE AUTO AUCTIONS, INC $ 8,600
402 KEMPER CORP 19,949
1,700 LINCOLN NATIONAL CORP 91,375
700 MERCURY GENERAL CORP NEW 33,425
1,200 MGIC INVESTMENT CORP 65,100
900 NAC RE CORP 32,400
1,200 OHIO CASUALTY CORP 46,500
1,400 OLD REPUBLIC
INTERNATIONAL CORP 49,700
1,300 PROGRESSIVE CORP 63,537
1,800 SAFECO CORP 62,100
1,000 SELECTIVE INSURANCE GROUP, INC 35,500
1,100 ST. PAUL COS, INC NOTES 61,187
1,100 TRANSAMERICA CORP 80,162
5,100 TRAVELERS GROUP, INC 320,662
1,400 *UNITED INSURANCE COS, INC 26,425
1,100 UNITRIN, INC 52,800
2,200 *USF&G CORP 37,125
1,300 ZURICH REINSURANCE
CENTRE HLDNGS, INC 39,487
----------
2,796,924
----------
LEISURE TIME--1.34%
1,400 ARCTCO, INC 18,200
2,300 BRUNSWICK CORP 55,200
1,900 CALLAWAY GOLF CO 42,987
1,500 CARNIVAL CORP (CLASS A) 36,562
1,030 *CHRIS CRAFT INDUSTRIES, INC 44,547
1,900 *CIRCUS CIRCUS ENTERPRISES, INC 52,962
600 *COBRA GOLF, INC 21,375
8,200 DISNEY (WALT) CO 483,800
1,800 *HARRAHS ENTERTAINMENT, INC 43,650
1,500 HASBRO, INC 46,500
2,900 INTERNATIONAL GAME TECHNOLOGY 31,537
1,600 *ITT CORP (NEW) 84,800
1,200 JOSTENS, INC 29,100
3,575 MATTEL, INC 109,931
1,800 *MIRAGE RESORT, INC 62,100
40 *NATIONAL GAMING CORP 475
1,300 OUTBOARD MARINE CORP 26,487
950 *PLAYERS INTERNATIONAL, INC 10,153
----------
1,200,366
----------
MACHINERY--1.57%
500 AGCO CORP 25,500
1,200 *BJ SERVICES CO 34,800
3,200 CATERPILLAR, INC 188,000
800 CINCINNATI MILACRON, INC 21,000
1,400 *COGNEX CORP 48,650
821 *COOPER CAMERON CORP 29,145
935 COOPER INDUSTRIES, INC 34,361
4,200 DEERE & CO 148,050
1,800 DOVER CORP 66,375
1,000 DURIRON, INC 23,375
1,200 FEDERAL SIGNAL CORP 31,050
900 GREENFIELD INDUSTRIES, INC 28,125
1,100 HARNISCHFEGER INDUSTRIES, INC 36,575
600 HARSCO CORP 34,875
900 IDEX CORP 36,675
1,600 ILLINOIS TOOL WORKS, INC 94,400
1,600 INGERSOLL-RAND CO 56,200
900 KAYDON CORP 27,337
600 KENNAMETAL, INC 19,050
1,500 PARKER-HANNIFIN CORP 51,375
800 STEWART & STEVENSON
SERVICES, INC 20,200
700 SUNDSTRAND CORP 49,262
900 TECUMSEH PRODUCTS CO
(CLASS A) 46,575
1,550 *THERMO ELECTRON CORP 80,600
806 TIMKIN CO 30,829
900 TRINITY INDUSTRIES, INC 28,350
1,000 TRINOVA CORP 28,625
800 *VARITY CORP NEW 29,700
1,200 YORK INTERNATIONAL CORP 56,400
----------
1,405,459
----------
METALS--ALUMINIUM--0.23%
800 *ALUMAX, INC 24,500
2,500 ALUMINUM CO OF AMERICA 132,187
900 REYNOLDS METALS CO 50,962
----------
207,649
----------
METALS--GOLD--0.21%
2,200 *AMAX GOLD, INC 15,950
1,400 BATTLE MOUNTAIN GOLD CO 11,900
1,400 FREEPORT MCMORAN COPPER & GOLD,
INC (CLASS A) 39,200
1,263 FREEPORT-MCMORAN COPPER & GOLD,
INC (CLASS B) 35,521
2,100 HOMESTAKE MINING CO 32,812
1,200 NEWMONT MINING CORP 54,300
----------
189,683
----------
See notes to financial statements.
B-38
<PAGE>
SHARES VALUE
- ------- -----------
METALS--NON-FERROUS--0.33%
1,200 ASARCO, INC $ 38,400
1,900 CYPRUS AMAX MINERALS CO 49,637
300 FREEPORT MCMORAN, INC 11,100
1,700 *HECLA MINING CO 11,687
1,700 *MAGMA COPPER CO 47,387
600 MAPCO, INC 32,775
1,100 MINERALS TECHNOLOGIES INC 40,150
1,100 PHELPS DODGE CORP 68,475
----------
299,611
----------
METALS--STEEL--0.32%
2,600 *BETHLEHEM STEEL CORP 36,400
1,200 BIRMINGHAM STEEL CORP 17,850
1,200 INLAND STEEL INDUSTRIES, INC 30,150
2,200 *LTV CORP NEW 30,250
1,400 NUCOR CORP 79,975
900 OREGON STEEL MILLS 12,600
1,500 USX-U.S. STEEL GROUP 46,125
1,600 WORTHINGTON INDUSTRIES, INC 33,300
----------
286,650
----------
OFFICE EQUIPMENT--3.26%
2,800 *AMDAHL CORP 23,800
2,200 APPLE COMPUTER, INC 70,125
800 AVERY DENNISON CORP 40,100
4,200 *COMPAQ COMPUTER CORP 201,600
1,000 *CRAY RESEARCH, INC 24,750
1,600 *DATA GENERAL CORP 22,000
1,400 *DELL COMPUTER CORP 48,475
2,800 *DIGITAL EQUIPMENT CORP 179,550
6,300 HEWLETT-PACKARD CO 527,625
9,200 INTERNATIONAL BUSINESS MACHINES
CORP 844,100
500 *KOMAG, INC 23,062
1,100 MILLER (HERMAN), INC 33,000
2,500 PITNEY BOWES, INC 117,500
1,200 *QUANTUM CORP 19,350
900 *SCI SYSTEMS, INC 27,900
1,300 *SEAGATE TECHNOLOGY, INC 61,750
1,200 *SEQUENT COMPUTER
SYSTEMS, INC 17,400
3,000 *SILICON GRAPHICS, INC 82,500
800 *SOLECTRON CORP 35,300
1,100 *STORAGE TECHNOLOGY CORP 26,262
3,400 *SUN MICROSYSTEMS, INC 155,125
2,800 *TANDEM COMPUTERS, INC 29,750
3,400 *UNISYS CORP 19,125
800 *VIKING OFFICE PRODUCTS, INC 37,200
1,500 *WANG LABORATORIES, INC 24,937
1,700 XEROX CORP 232,900
----------
2,925,186
----------
PAPER--1.15%
700 ALBANY INTERNATIONAL CORP
(CLASS A) NEW 12,687
2,000 BEMIS, INC 51,250
1,000 BOWATER, INC 35,500
600 CONSOLIDATED PAPERS, INC 33,675
160 *CROWN VANTAGE, INC 2,280
800 FEDERAL PAPER BOARD CO, INC 41,500
3,800 INTERNATIONAL PAPER CO 143,925
1,600 JAMES RIVER CORP OF VIRGINIA 38,600
4,350 KIMBERLY-CLARK CORP 359,962
1,500 LONGVIEW FIBRE CO 24,375
900 MEAD CORP 47,025
900 PENTAIR, INC 44,775
1,365 SONOCO PRODUCTS CO 35,831
1,800 STONE CONTAINER CORP 25,875
800 TEMPLE-INLAND, INC 35,300
1,100 UNION CAMP CORP 52,387
1,650 WESTVACO CORP 45,787
----------
1,030,734
----------
PETROLEUM--EXPLORATION &
PRODUCTION--0.80%
1,500 AMERADA HESS CORP 79,500
1,200 ANADARKO PETROLEUM CORP 64,950
500 APACHE CORP 14,750
800 ASHLAND, INC 28,100
2,300 BURLINGTON RESOURCES, INC 90,275
600 KERR-MCGEE CORP 38,100
1,000 LOUISIANA LAND &
EXPLORATION CO 42,875
2,000 MITCHELL ENERGY & DEVELOPMENT
CORP (CLASS A) 37,000
800 MURPHY OIL CORP 33,200
1,200 *NEWFIELD EXPLORATION CO 32,400
1,100 NOBLE AFFILIATES, INC 32,862
1,100 *ORYX ENERGY CO 14,712
700 PARKER & PARSLEY
PETROLEUM CO 15,400
1,300 PENNZOIL CO 54,925
1,000 POGO PRODUCING CO 28,250
3,100 *SANTA FE ENERGY
RESOURCES, INC 29,837
1,200 *SEAGULL ENERGY CORP 26,700
400 *TRITON ENERGY CORP 22,950
See notes to financial statements.
B-39
<PAGE>
SHARES VALUE
- ------- -----------
PETROLEUM--EXPLORATION &
PRODUCTION--(continued)
1,700 UNION TEXAS PETROLEUM HOLDINGS,
INC $ 32,937
----------
719,723
----------
PETROLEUM--INTEGRATED--4.97%
7,400 AMOCO CORP 531,875
2,300 ATLANTIC RICHFIELD CO 254,725
10,500 CHEVRON CORP 551,250
900 DIAMOND SHAMROCK, INC 23,287
19,700 EXXON CORP 1,578,462
6,300 MOBIL CORP 705,600
5,100 OCCIDENTAL PETROLEUM CORP 109,012
2,900 PHILLIPS PETROLEUM CO 98,962
1,800 SUN CO, INC 49,275
4,300 TEXACO, INC 337,550
4,180 UNOCAL CORP 121,742
4,900 USX-MARATHON GROUP, INC NEW 95,550
----------
4,457,290
----------
PETROLEUM--SERVICE--0.81%
2,600 BAKER HUGHES, INC 63,375
800 CABOT CORP 43,100
1,300 CAMCO INTERNATIONAL, INC 36,400
2,900 DRESSER INDUSTRIES, INC 70,687
1,400 FLUOR CORP 92,400
1,900 HALLIBURTON CO 96,187
3,400 *NABORS INDUSTRIES, INC 37,825
2,700 *NOBLE DRILLING CORP 24,300
3,500 *ROWAN COS, INC 34,562
1,000 SONAT OFFSHORE DRILLING, INC 44,750
1,300 TIDEWATER, INC 40,950
700 TOSCO CORP 26,687
1,500 ULTRAMAR CORP 38,625
1,000 VASTAR RESOURCES, INC 31,750
800 *WESTERN ATLAS, INC 40,400
----------
721,998
----------
PHOTOGRAPHY--0.45%
5,500 EASTMAN KODAK CO 368,500
800 POLAROID CORP 37,900
----------
406,400
----------
PROPERTY--REAL ESTATE--0.29%
3,300 TAUBMAN CENTERS, INC 33,000
1,200 *TOLL BROTHERS, INC 27,600
3,500 WEINGARTEN REALTY
INVESTORS, INC 133,000
2,800 WELLSFORD RESIDENTIAL PROPERTY
TRUST 64,400
----------
258,000
----------
PUBLISHING--NEWSPAPER--0.46%
900 BELO (A.H.) CORP SERIES A 31,275
900 CENTRAL NEWSPAPERS, INC
(CLASS A) 28,237
991 *COX COMMUNICATIONS, INC (CLASS
A) NEW 19,324
900 DOW JONES & CO, INC 35,887
1,800 GANNETT CO, INC 110,475
500 KNIGHT-RIDDER, INC 31,250
1,300 NEW YORK TIMES CO (CLASS A) 38,512
1,700 TIMES MIRROR CO (SERIES A) NEW 57,587
700 TRIBUNE CO NEW 42,787
900 *VALASSIS COMMUNICATIONS, INC 15,750
----------
411,084
----------
PUBLISHING--OTHER--0.86%
1,500 AMERICAN GREETINGS CORP (CLASS
A) 41,437
2,100 DONNELLEY (R.R.) & SONS CO 82,687
2,300 DUN & BRADSTREET CORP 148,925
1,000 HARCOURT GENERAL, INC 41,875
600 HOUGHTON MIFFLIN CO 25,800
600 McGRAW HILL COS, INC 52,275
1,400 MEREDITH CORP 58,625
1,400 READER'S DIGEST ASSOCIATION, INC
(CLASS A) (NON-VTG) 71,750
500 *SCHOLASTIC CORP 38,875
5,431 TIME WARNER, INC 205,699
----------
767,948
----------
RAILROAD--0.97%
2,040 BURLINGTON NORTHERN SANTA FE
CORP 159,120
1,300 CONRAIL, INC 91,000
2,800 CSX CORP 127,750
600 ILLINOIS CENTRAL CORP SERIES A 23,025
700 KANSAS CITY SOUTHERN INDUSTRIES,
INC 32,025
1,900 NORFOLK SOUTHERN CORP 150,812
1,800 *SOUTHERN PACIFIC RAIL CORP 43,200
3,000 UNION PACIFIC CORP 198,000
700 *WISCONSIN CENTRAL
TRANSIT CORP 46,025
----------
870,957
----------
See notes to financial statements.
B-40
<PAGE>
SHARES VALUE
- ------- -----------
RESTAURANTS & HOTELS--1.26%
1,100 APPLE SOUTH, INC $ 23,650
1,200 APPLEBEES INTERNATIONAL, INC 27,300
1,600 *BOSTON CHICKEN, INC 51,400
1,700 *BUFFETS, INC 23,375
1,300 CRACKER BARREL OLD COUNTRY
STORE, INC 22,425
2,700 DARDEN RESTAURANTS, INC 32,062
900 *HFS INC 73,575
700 HILTON HOTELS CORP 43,050
2,800 *HOST MARRIOTT CORP 37,100
1,050 LA QUINTA INNS, INC 28,743
2,200 MARRIOTT INTERNATIONAL, INC 84,150
10,900 McDONALDS CORP 491,862
1,400 MORRISON RESTAURANTS, INC 19,600
1,550 *PROMUS HOTEL CORP 34,487
2,900 SYSCO CORP 94,250
2,100 WENDYS INTERNATIONAL, INC 44,625
----------
1,131,654
----------
RETAIL--FOOD--0.73%
3,700 ALBERTSONS, INC 121,637
1,800 AMERICAN STORES CO, NEW 48,150
39 *BRUNOS, INC 409
5,900 FOOD LION, INC (CLASS B) 33,556
1,800 GIANT FOOD, INC (CLASS A) 56,700
1,300 GREAT ATLANTIC &
PACIFIC TEA CO, INC 29,900
1,400 *KROGER CO 52,500
2,400 RUDDICK CORP 27,600
1,700 *SAFEWAY, INC NEW 87,550
2,200 *STARBUCKS CORP 46,200
1,000 *STOP & SHOP COS, INC NEW 23,125
1,000 SUPERVALU, INC 31,500
1,600 *VONS COS, INC 45,200
1,400 WINN DIXIE STORES, INC 51,625
----------
655,652
----------
RETAIL--GENERAL
MERCHANDISE--3.60%
2,600 *AUTOZONE, INC 75,075
600 *BARNES & NOBLE, INC 17,400
700 *BEST BUY, INC 11,375
1,300 *BORDERS GROUP, INC 24,050
800 x*CALDOR CORP 2,600
3,200 CHARMING SHOPPES, INC 9,200
1,500 CIRCUIT CITY STORES, INC 41,437
1,300 *CONSOLIDATED STORES CORP 28,275
3,000 *CUC INTERNATIONAL, INC 102,375
900 DAYTON HUDSON CORP 67,500
900 *DEPARTMENT 56, INC 34,537
1,700 DILLARD DEPARTMENT STORES (CLASS
A) 48,450
1,575 DOLLAR GENERAL CORP 32,681
1,000 *ECKERD CORP 44,625
3,570 *FEDERATED DEPARTMENT
STORES, INC 98,175
1,900 GAP, INC 79,800
1,100 *GYMBOREE CORP 22,687
1,500 HECHINGER CO (CLASS A) 6,562
1,300 HEILIG MEYERS CO 23,887
7,500 HOME DEPOT, INC 359,062
7,100 K MART CORP 51,475
600 *KOHLS CORP 31,500
4,200 LIMITED, INC 72,975
2,300 LOWES COS, INC 77,050
3,600 MAY DEPARTMENT STORES CO 152,100
1,900 MELVILLE CORP 58,425
1,300 *MUSICLAND STORES CORP 5,525
900 NORDSTROM, INC 36,450
1,800 *OFFICEMAX, INC 40,275
2,900 PENNEY, (J.C.) CO, INC 138,112
1,200 PEP BOYS-MANNY, MOE & JACK 30,750
1,250 *PETSMART, INC 38,750
3,400 *PRICE/COSTCO, INC 51,850
1,400 *REVCO (D.S.), INC NEW 39,550
2,200 RITE AID CORP 75,350
2,100 ROUSE CO 42,787
5,900 SEARS ROEBUCK & CO 230,100
1,800 *STAPLES, INC 43,875
1,800 STRIDE RITE CORP 13,500
1,800 *SUNGLASS HUT
INTERNATIONAL, INC 42,750
1,200 TANDY CORP 49,800
1,900 TJX COS, INC NEW 35,862
4,000 *TOYS R US, INC 87,000
21,400 WAL-MART STORES, INC 478,825
4,100 WALGREEN CO 122,487
900 *WILLIAMS-SONOMA, INC 16,650
2,800 WOOLWORTH CORP 36,400
----------
3,229,926
----------
TEXTILE & APPAREL--0.47%
1,300 *ANN TAYLOR STORES CORP 13,325
1,600 *FRUIT OF THE LOOM, INC
(CLASS A) 39,000
See notes to financial statements.
B-41
<PAGE>
SHARES VALUE
- ------- -----------
TEXTILE & APPAREL--(continued)
1,600 KELLWOOD CO $ 32,600
1,400 LIZ CLAIBORNE, INC 38,850
900 *NAUTICA ENTERPRISES, INC 39,375
1,000 NIKE, INC (CLASS B) 69,625
1,000 *NINE WEST GROUP, INC 37,500
1,200 REEBOK INTERNATIONAL LTD 33,900
900 RUSSELL CORP 24,975
500 *TOMMY HILFIGER CORP 21,187
1,300 UNIFI, INC 28,762
800 VF CORP 42,200
----------
421,299
----------
TOBACCO--1.83%
2,900 AMERICAN BRANDS, INC 129,412
13,000 PHILIP MORRIS COS, INC 1,176,500
5,301 RJR NABISCO HOLDINGS CORP 163,668
240 *SCHWEITZER-MAUDUIT INTL, INC 5,550
1,800 UNIVERSAL CORP 43,875
3,500 UST, INC 116,812
----------
1,635,817
----------
TRUCKERS & SHIPPING--0.21%
1,100 *AMERICAN FREIGHTWAYS CORP 11,412
900 AMERICAN PRESIDENT COS LTD 20,700
600 ROADWAY SERVICES, INC 29,325
2,800 ROLLINS TRUCK LEASING CORP 31,150
1,600 RYDER SYSTEMS, INC 39,600
300 SHURGARD STORAGE
CENTERS, INC 8,100
1,000 WERNER ENTERPRISES, INC 20,250
600 XTRA CORP 25,500
----------
186,037
----------
UTILITIES--ELECTRIC--4.55%
1,800 *AES CORP 42,975
2,300 ALLEGHENY POWER SYSTEMS, INC 65,837
2,800 AMERICAN ELECTRIC
POWER CO, INC 113,400
2,900 ATLANTIC ENERGY, INC 55,825
2,000 BALTIMORE GAS & ELECTRIC CO 57,000
2,300 CAROLINA POWER & LIGHT CO 79,350
5,100 CENTERIOR ENERGY CORP 45,262
2,300 CENTRAL & SOUTH WEST CORP 64,112
3,100 CINERGY CORP 94,937
3,562 *CITIZENS UTILITIES CO (CLASS B) 44,970
1,700 CMS ENERGY CORP 50,787
3,500 CONSOLIDATED EDISON CO
OF NEW YORK, INC 112,000
2,200 DETROIT EDISON CO 75,900
2,800 DOMINION RESOURCES, INC 115,500
1,500 DPL, INC 37,125
1,200 DQE, INC 36,900
2,700 DUKE POWER CO 127,912
2,700 EASTERN UTILITIES ASSOCIATES 63,787
3,100 ENTERGY CORP NEW 90,675
1,800 FLORIDA PROGRESS CORP 63,675
2,400 FPL GROUP, INC 111,300
1,500 GENERAL PUBLIC UTILITIES CORP 51,000
2,800 HOUSTON INDUSTRIES, INC 67,900
2,600 IDAHO POWER CO 78,000
400 IES INDUSTRIES, INC 10,600
2,100 ILLINOVA CORP 63,000
1,500 KANSAS CITY POWER & LIGHT CO 39,187
2,600 LONG ISLAND LIGHTING CO 42,575
2,300 MIDAMERICAN ENERGY CO 38,525
3,300 NEVADA POWER CO 73,425
1,100 NEW ENGLAND ELECTRIC
SYSTEMS CO 43,587
1,500 NEW YORK STATE ELECTRIC &
GAS CORP 38,812
4,000 NIAGARA MOHAWK POWER CORP 38,500
1,600 NORTHEAST UTILITIES CO 39,000
1,000 NORTHERN STATES POWER CO 49,125
2,400 OHIO EDISON CO 56,400
6,700 PACIFIC GAS & ELECTRIC CO 190,112
4,200 PACIFICORP 89,250
2,700 PECO ENERGY CO 81,337
1,700 PINNACLE WEST CAPITAL CORP 48,875
1,700 POTOMAC ELECTRIC POWER CO 44,625
2,700 PP&L RESOURCES, INC 67,500
1,400 PUBLIC SERVICE CO OF COLORADO 49,525
3,000 *PUBLIC SERVICE CO OF
NEW MEXICO 52,875
3,200 PUBLIC SERVICE ENTERPRISE GROUP,
INC 98,000
3,100 PUGET SOUND POWER & LIGHT CO 72,075
1,500 SAN DIEGO GAS & ELECTRIC CO 35,625
1,200 SCANA CORP 34,350
6,300 SCE CORP 111,825
10,000 SOUTHERN CO 246,250
2,100 TECO ENERGY, INC 53,812
3,600 TEXAS UTILITIES CO 148,050
2,800 UNICOM CORP 91,700
1,300 UNION ELECTRIC CO 54,275
1,800 UNITED ILLUMINATING CO 67,275
1,400 UTILICORP UNITED, INC 41,125
1,800 WASHINGTON WATER POWER CO 31,500
See notes to financial statements.
B-42
<PAGE>
SHARES VALUE
- ------- -----------
UTILITIES--ELECTRIC--(continued)
900 WESTERN RESOURCES, INC $ 30,037
2,000 WISCONSIN ENERGY CORP 61,250
----------
4,080,113
----------
UTILITIES--GAS & PIPELINE--1.28%
1,300 *AMERICAN STANDARD COS, INC 36,400
2,400 ATLANTA GAS LIGHT CO 47,400
800 CABOT OIL & GAS CORP (CLASS A) 11,700
1,500 *COASTAL CORP 55,875
700 *COLUMBIA GAS SYSTEMS, INC 30,712
2,000 CONSOLIDATED NATURAL GAS CO 90,750
1,400 EL PASO NATURAL GAS CO NEW 39,725
3,100 ENRON CORP 118,187
1,600 ENSERCH CORP 26,000
1,600 INDIANA ENERGY INC 38,200
300 *IONICS, INC 13,050
1,100 MCN CORP 25,575
1,800 NICOR, INC 49,500
900 NORTHWEST NATURAL GAS CO 29,700
1,500 PACIFIC ENTERPRISES, INC 42,375
2,500 PANHANDLE EASTERN CORP 69,687
1,300 PIEDMONT NATURAL GAS CO, INC 30,225
1,000 QUESTAR CORP 33,500
1,300 SONAT, INC 46,312
2,700 TENNECO, INC 133,987
1,119 UGI CORP NEW 23,219
1,500 VALERO ENERGY CORP 36,750
1,400 WICOR, INC 45,150
1,569 WILLIAMS COS, INC 68,839
----------
1,142,818
----------
UTILITIES--TELEPHONE--7.31%
3,300 ALLTEL CORP $ 97,350
8,900 AMERITECH CORP NEW 525,100
24,400 AT & T CORP 1,579,900
6,800 *BELL ATLANTIC CORP 454,750
15,200 BELLSOUTH CORP 661,200
1,800 CINCINNATI BELL, INC 62,550
4,700 FRONTIER CORP 141,000
750 *GLENAYRE TECHNOLOGIES, INC 46,687
15,000 GTE CORP 660,000
11,100 MCI COMMUNICATIONS CORP 289,987
1,300 *MOBILE TELECOMMUNICATIONS
TECHNOLOGIES CORP 27,787
2,800 *NEXTEL COMMUNICATIONS, INC
(CLASS A) 41,300
6,700 NYNEX CORP 361,800
6,800 PACIFIC TELESIS GROUP 228,650
9,200 SBC COMMUNICATIONS, INC 529,000
2,200 SOUTHERN NEW ENGLAND
TELECOMMUNICATIONS CORP 87,450
5,500 SPRINT CORP 219,312
1,208 TELEPHONE & DATA SYSTEMS, INC 47,716
7,500 U.S. WEST COMMUNICATIONS GROUP 268,125
7,500 *U.S. WEST MEDIA GROUP 142,500
2,300 *WORLDCOM, INC 81,075
----------
6,553,239
----------
TOTAL COMMON STOCK
(Cost 72,206,684) 88,594,317
----------
ROUNDING 124
----------
TOTAL PORTFOLIO
(Cost 72,207,438) $88,595,324
----------
- -----------------
* NON-INCOME PRODUCING
x IN BANKRUPTCY
See notes to financial statements.
B-43
<PAGE>
[TIAA Logo]
REPORT OF MANAGEMENT RESPONSIBILITY
To the Policyholders of
Teachers Insurance and Annuity
Association of America:
The accompanying financial statements of Teachers Insurance and Annuity
Association of America ("TIAA") are the responsibility of management. They have
been prepared on the basis of statutory accounting policies prescribed or
permitted by the New York State Insurance Department. The financial statements
of TIAA have been presented fairly and objectively in accordance with such
policies.
TIAA has established and maintains a strong system of internal controls designed
to provide reasonable assurance that assets are properly safeguarded and
transactions are properly executed in accordance with management's
authorization, and to carry out the ongoing responsibilities of management for
reliable financial statements. In addition, TIAA's internal audit personnel
provide a continuing review of the internal controls and operations of TIAA, and
the internal Auditor regularly reports to the Audit Committee of the TIAA Board
of Trustees.
The accompanying financial statements of TIAA have been audited by the
independent auditing firm of Deloitte & Touche LLP. The independent auditors'
report, which appears on the following page, expresses an independent opinion on
the fairness of presentation of these financial statements.
The Audit Committee of the TIAA Board of Trustees, consisting of trustees who
are not officers of TIAA, meets regularly with management, representatives of
Deloitte & Touche LLP and internal auditing personnel to review matters relating
to financial reporting, internal controls and auditing. In addition to the
annual audit of the TIAA financial statements, the New York State Insurance
Department and other state insurance departments regularly examine the financial
statements of TIAA as part of their periodic corporate examinations.
[signature of John H. Biggs]
Chairman and
Chief Executive Officer
[signature of Thomas W. Jones]
Vice Chairman, President and
Chief Operating Officer
[signature of Richard L. Gibbs]
Executive Vice President and
Principal Accounting Officer
B-44
<PAGE>
[letterhead]
[LOGO] Deloitte &
Touche LLP Two World Financial Center Telephone: (212) 436-2000
New York, New York 10281-1414 Facsimile: (212) 436-5000
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees of
Teachers Insurance and Annuity
Association of America:
We have audited the accompanying balance sheets of Teachers Insurance and
Annuity Association of America ("TIAA") as of December 31, 1995 and 1994 and the
related statements of operations, changes in contingency reserves, and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of TIAA's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of TIAA at December 31, 1995 and 1994 and the
results of its operations, changes in its contingency reserves, and its cash
flows for each of the three years in the period ended December 31, 1995 in
conformity with accounting policies prescribed or permitted by the New York
State Insurance Department, which practices, as to TIAA, also represent
generally accepted accounting principles.
[signature of Deloitte Touche LLP]
March 12, 1996
[logo]
- ---------------
Deloitte Touche
Tohmatsu
International
- ---------------
B-45
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------------------------
1995 1994
------------ --------------
<S> <C> <C>
ASSETS
Bonds $48,835,831,058 $43,778,517,616
Mortgages 21,000,279,330 20,216,879,404
Real Estate 7,013,052,678 7,075,384,687
Stocks 223,028,483 163,284,129
Other long-term investments 476,803,951 383,815,668
Cash and short-term investments 713,051,046 431,445,982
Investment income due and accrued 1,118,707,821 1,073,386,018
Separate Account assets 209,170,183 30,563,247
Other assets 204,688,878 194,557,100
--------------- ---------------
TOTAL ASSETS $79,794,613,428 $73,347,833,851
=============== ===============
LIABILITIES, CAPITAL AND CONTINGENCY RESERVES
Policy and contract reserves $70,983,830,958 $65,656,734,942
Dividends declared for the following year 1,493,744,768 1,382,680,655
Asset Valuation Reserve 1,860,867,891 1,664,695,698
Interest Maintenance Reserve 621,365,961 544,660,224
Separate Account liabilities 106,511,880 5,292,647
Other liabilities 672,112,096 655,945,669
--------------- ---------------
Total Liabilities 75,738,433,554 69,910,009,835
--------------- ---------------
Capital: 2,500 shares of $1,000 par value common stock
issued and outstanding 2,500,000 2,500,000
--------------- ---------------
Contingency reserves:
For group life insurance 7,761,722 6,821,939
For investment losses, annuity and insurance mortality,
and other risks 4,045,918,152 3,428,502,077
--------------- ---------------
Total Contingency Reserves 4,053,679,874 3,435,324,016
--------------- ---------------
Total Capital and Contingency Reserves 4,056,179,874 3,437,824,016
--------------- ---------------
TOTAL LIABILITIES, CAPITAL AND CONTINGENCY RESERVES $79,794,613,428 $73,347,833,851
=============== ===============
</TABLE>
See notes to financial statements.
B-46
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------
1995 1994 1993
------------ ------------ --------------
<S> <C> <C> <C>
INCOME
Insurance and annuity premiums
and deposits $ 2,854,599,816 $ 2,785,546,486 $ 2,677,251,204
Transfers from CREF, net 351,869,029 191,582,916 247,849,674
Annuity dividend additions 1,943,614,354 1,844,416,805 1,961,603,015
Net investment income 6,108,496,984 5,486,071,238 5,164,006,195
Supplementary contract considerations 150,975,982 104,999,526 94,618,702
--------------- --------------- ---------------
TOTAL INCOME $11,409,556,165 $10,412,616,971 $10,145,328,790
=============== =============== ===============
DISTRIBUTION OF INCOME
Policy and contract benefits $ 1,718,596,923 $ 1,538,301,850 $ 1,334,612,551
Dividends 3,098,930,945 2,874,077,216 2,928,108,945
Increase in policy and contract
reserves 5,329,040,178 5,043,786,384 5,167,901,788
Operating expenses 241,795,245 216,465,411 192,124,351
Transfers to Separate Accounts, net 92,995,463 4,270,646
Federal income taxes 9,487,967 9,843,630 10,482,862
Other, net (4,380,395) (2,972,008) 525,332
Increase in contingency reserves
from operations 923,089,839 728,843,842 511,572,961
--------------- --------------- ---------------
TOTAL DISTRIBUTION OF INCOME $11,409,556,165 $10,412,616,971 $10,145,328,790
=============== =============== ===============
</TABLE>
See notes to financial statements.
B-47
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
STATEMENTS OF CHANGES IN CONTINGENCY RESERVES
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------------
1995 1994 1993
----------- ----------- -------------
<S> <C> <C> <C>
CHANGES IN CONTINGENCY RESERVES:
From operations $ 923,089,839 $ 728,843,842 $ 511,572,961
Net realized capital loss on investments (56,264,893) (95,070,954) (36,426,429)
Net unrealized capital gain (loss) on investments 52,706,109 38,906,936 (40,018,527)
Transfer to the Interest Maintenance Reserve (114,840,183) (170,430,156) (181,606,193)
Transfers from (to) the Asset Valuation Reserve:
Required formula contribution (302,387,557) (249,405,235) (344,323,583)
Net capital losses absorbed 106,215,365 226,638,932 255,224,945
Voluntary contribution (193,508,281) (207,828,000)
Increase in non-admitted assets other than
investments (802,629) (22,194,906) (18,153,629)
Change in valuation basis of policy reserves 2,314,689 (1,224,324)
Other, net 10,639,807 1,522,064
--------- --------- -----------
NET CHANGE IN CONTINGENCY RESERVES 618,355,858 267,616,931 (62,782,779)
CONTINGENCY RESERVES AT BEGINNING OF YEAR 3,435,324,016 3,167,707,085 3,230,489,864
--------- --------- -----------
CONTINGENCY RESERVES AT END OF YEAR $4,053,679,874 $3,435,324,016 $3,167,707,085
========= ========= ===========
</TABLE>
See notes to financial statements.
B-48
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------------------------
1995 1994 1993
---------------- ---------------- -----------------
<S> <C> <C> <C>
CASH PROVIDED By operating activities:
Insurance and annuity premiums, deposits
and considerations $ 2,999,426,179 $ 2,886,724,538 $ 2,766,077,897
Transfers from CREF, net 351,869,029 191,582,916 247,849,674
Annuity dividend additions 1,943,614,354 1,844,416,805 1,961,603,015
Investment income, net 5,998,015,040 5,372,299,141 5,219,656,004
-------------- -------------- ----------------
Total Receipts 11,292,924,602 10,295,023,400 10,195,186,590
-------------- -------------- ----------------
Policy and contract benefits 1,715,727,236 1,500,323,250 1,312,182,472
Dividends 2,987,866,832 2,819,852,489 2,879,831,053
Operating expenses 240,323,235 214,008,001 192,147,540
Federal income taxes 8,510,881 10,114,286 8,014,769
Transfers to Separate Accounts, net 159,017,898 29,164,199
Other, net 6,823,917 6,798,405 (45,847,231)
-------------- -------------- ----------------
Total Disbursements 5,118,269,999 4,580,260,630 4,346,328,603
-------------- -------------- ----------------
Cash Provided by Operating Activities 6,174,654,603 5,714,762,770 5,848,857,987
-------------- -------------- ----------------
By investing activities:
Sales and redemptions of bonds and stocks 3,863,412,778 3,810,787,301 6,413,280,415
Repayment of mortgage principal 1,166,625,456 1,684,113,871 1,639,165,691
Sales of real estate 1,084,222,765 1,610,589,922 1,078,327,249
Other, net 135,661,132 243,837,007 87,362,080
-------------- -------------- ----------------
Cash Provided By Investing Activities 6,249,922,131 7,349,328,101 9,218,135,435
-------------- -------------- ----------------
TOTAL CASH PROVIDED 12,424,576,734 13,064,090,871 15,066,993,422
-------------- -------------- ----------------
DISBURSEMENTS FOR NEW INVESTMENTS
Investments acquired:
Bonds and stocks 8,696,169,089 10,084,139,605 11,826,791,371
Mortgages 2,352,232,441 2,217,021,154 1,043,674,867
Real Estate 866,388,613 1,495,492,478 1,319,927,724
Other, net 228,181,527 352,457,763 60,550,529
-------------- -------------- ----------------
TOTAL DISBURSEMENTS FOR
NEW INVESTMENTS 12,142,971,670 14,149,111,000 14,250,944,491
-------------- -------------- ----------------
INCREASE (DECREASE) IN CASH AND
SHORT-TERM INVESTMENTS 281,605,064 (1,085,020,129) 816,048,931
CASH AND SHORT-TERM INVESTMENTS
AT BEGINNING OF YEAR 431,445,982 1,516,466,111 700,417,180
-------------- -------------- ----------------
CASH AND SHORT-TERM INVESTMENTS
AT END OF YEAR $ 713,051,046 $ 431,445,982 $ 1,516,466,111
============== ============== ================
</TABLE>
See notes to financial statements.
B-49
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS
Note 1--Organization
Teachers Insurance and Annuity Association of America ("TIAA") was established
as a legal reserve life insurance company under the insurance laws of the State
of New York in 1918. TIAA was formed by the Carnegie Foundation for the
Advancement of Teaching for the express purpose of aiding and strengthening
nonprofit educational and research organizations by providing retirement and
insurance benefits for their faculties and other staff members, and by
counseling these organizations and their employees on benefit plans and other
measures of economic security. All of the outstanding common stock of TIAA is
collectively held by the TIAA Board of Overseers, a nonprofit corporation
created solely for the purpose of holding the stock of TIAA.
Note 2--Significant Accounting Policies
TIAA's financial statements have been prepared on the basis of accounting
policies prescribed or permitted by the New York State Insurance Department
("Department"), which policies, hereinafter referred to as statutory accounting
policies, as to TIAA, also represent generally accepted accounting principles.
(Refer to the separate sections, entitled "Permitted Statutory Accounting
Policies" and "Generally Accepted Accounting Principles", within this note.) The
preparation of TIAA's financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities, revenue
and expenses. Actual results could differ from those estimates. The following is
a summary of the significant accounting policies consistently followed by TIAA.
Valuation of Investments: Bonds and short-term investments (debt securities with
maturities of one year or less at the time of acquisition) not in default are
generally stated at amortized cost; medium to highest quality preferred stocks
at cost; common stocks at market value; and all other bond, short-term and
preferred stock investments at the lower of amortized cost or market value.
Mortgages are stated at amortized cost, and directly-owned real estate at
depreciated cost (net of encumbrances). Investments in wholly-owned real estate
subsidiaries, real estate limited partnerships and securities limited
partnerships are stated at TIAA's equity in the net assets of the underlying
entities. Policy loans are stated at outstanding principal amounts. All
investments are stated net of any permanent impairments, which are determined on
an individual asset basis. Depreciation is generally computed over a 40 year
period on the constant yield method for properties acquired prior to 1991, and
on the straight-line method for properties acquired thereafter.
Accounting for Investments: Investment transactions are accounted for as of the
date the investments are purchased or sold (trade date) for publicly traded
common stocks and as of the date the investment transactions are settled
(settlement date) for all other investments. Realized capital gains and losses
on investment transactions are accounted for under the specific identification
method.
Foreign Currency Transactions and Translation: Investments denominated in
foreign currencies and asset swap contracts are valued in U.S. dollars, based on
the exchange rate at the end of the period. Investment transactions in foreign
currencies are recorded at the exchange rates prevailing on the respective
transaction dates. All other asset and liability accounts that are denominated
in a foreign currency are adjusted to reflect the exchange
B-50
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 2--Significant Accounting Policies--(Continued)
rate at the end of the period. Realized and unrealized gains and losses due to
foreign exchange transactions, and those due to translation adjustments, are not
separately reported and are reflected in realized and unrealized capital gains
and losses, respectively.
Securities Lending: TIAA has a securities lending program whereby it loans
securities to qualified brokers in exchange for cash collateral, generally at
least equal to 102% of the market value of the securities loaned. When
securities are loaned, TIAA receives additional income on the collateral and
continues to receive income on the securities loaned. The collateral liability
is netted against the short-term investments in which the cash collateral is
invested and such short-term investments and the equivalent liability are not
reflected in the balance sheet caption, "Cash and short-term investments". TIAA
may bear the risk of delay in recovery of, or loss of rights in, the securities
loaned should a borrower of securities fail to meet contractual obligations.
Asset Swap Contracts: TIAA enters into asset swap contracts to exchange fixed
and variable amounts of foreign currency at specified future dates and at
specified rates to hedge against currency risks on investments denominated in
foreign currencies. Changes in the value of the contracts related to foreign
currency exchange rates are recognized at the end of the period as unrealized
gains or losses. Asset swap contracts incorporate a series of swap transactions
which result in the exchange of TIAA's fixed and variable foreign currency cash
flows into fixed amounts of U.S. dollar cash flows. Asset swap contracts are
entered into directly with a counterparty and TIAA is exposed to the risk of
default of such counterparty, although TIAA does not anticipate non-performance
by any of the counterparties. The maximum potential loss from such risk is equal
to the change in the value of the asset swap during the term of the contract. In
order to minimize the risk associated with potential counterparty default, TIAA
monitors the credit quality of its counterparties.
Interest Rate Swap Contracts: TIAA enters into interest rate swap contracts with
qualified commercial banks to hedge against the effect of interest rate
fluctuations on certain variable interest rate bonds. These contracts allow TIAA
to lock in a fixed interest rate and to transfer the risk of higher or lower
interest rates. TIAA also enters into interest rate swap contracts to swap the
cash flows on certain fixed interest rate bonds into variable interest rate cash
flows in connection with certain adjustable rate products. These contracts
subject TIAA to credit risk should the counterparties not perform according to
the terms of the contracts. However, the maximum potential loss from such credit
risk is much smaller than the par value of the related notes and TIAA does not
anticipate non-performance by any of the counterparties. In order to minimize
the risk associated with potential counterparty default, TIAA monitors the
credit quality of its counterparties. Payments received and payments made under
interest rate swap contracts are reflected in net investment income.
Covered Call Options Written: TIAA writes covered call options on selected bonds
as part of TIAA's asset and liability management program for certain adjustable
rate products. When an option is written, an amount equal to the premium
received is recorded as a liability. Premiums received on options which expire
are recorded as realized capital gains. Premiums received from writing options
which are exercised are added to the proceeds from the sale of the underlying
bond in recognizing the net realized capital gain or loss on the disposition. In
writing
B-51
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 2--Significant Accounting Policies--(Continued)
options, it is assumed that the option may be exercised at any time prior to the
expiration of TIAA's obligation as a writer, and that in such circumstances the
net proceeds of the sale of the underlying bond pursuant to the call option may
be below the prevailing market value.
Investment Income Due and Accrued: Investment income due and accrued excludes
non-admitted amounts of approximately $311,279,000 and $341,199,000 at December
31, 1995 and 1994, respectively.
Non-Admitted Assets Other than Investments: Certain non-investment assets, such
as furniture and fixtures and various receivables, are designated as
non-admitted assets by the Department and, as such, cannot be included in life
insurance company balance sheets filed with the Department. Such non-admitted
assets approximated $174,603,000 at December 31, 1995 and $173,867,000 at
December 31, 1994.
Policy and Contract Reserves: TIAA offers a range of group and individual
retirement annuities and group and individual life and other insurance products.
Policy and contract reserves for such products are determined in accordance with
standard valuation methods approved by the Department. Reserves are stated at
account balances for annuities in the accumulation phase, at the present value
of all future guaranteed benefits for annuities in the payout phase and, for
insurance policies, are computed in accordance with standard actuarial formulas.
The reserves established utilize assumptions for interest (at an average rate of
approximately 3%), mortality and other risks insured. Such reserves establish a
sufficient provision for all contractual benefits guaranteed under policy and
contract provisions.
Dividends Declared for the Following Year: Dividends on insurance policies and
pension annuity contracts in the payout phase are generally declared by the TIAA
Board of Trustees ("Board") in November of each year, and such dividends are
credited to policyholders in the following calendar year. Dividends on pension
annuity contracts in the accumulation phase are generally declared by the Board
in February of each year and such dividends on the various existing vintages of
pension annuity contracts in the accumulation phase are credited to
policyholders during the ensuing twelve month period beginning March 1.
Asset Valuation Reserve: The Asset Valuation Reserve ("AVR"), which covers all
invested asset classes, is an explicit liability reserve required by the
National Association of Insurance Commissioners ("NAIC") and is intended to
provide for potential future credit and equity losses. Reserve components of the
AVR are maintained for bonds, stocks, mortgages, real estate and other invested
assets. Realized and unrealized credit and equity capital gains and losses, net
of capital gains taxes, are credited to or charged against the related
components of the AVR. Formula calculations determine the required contribution
amounts for each component. Insurance companies may also make voluntary
contributions to any component as long as the resulting ending balance does not
exceed the computed maximum reserve for that component. TIAA makes voluntary
contributions to the mortgage and real estate reserves of the AVR as necessary
to keep the reserve balances at least equal to the aggregate differences between
carrying value and the most recent valuation for mortgage and real estate
investments under valuation review. Contributions to the AVR are reported as
transfers from Contingency Reserves.
B-52
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 2--Significant Accounting Policies--(Continued)
Interest Maintenance Reserve: The Interest Maintenance Reserve ("IMR") is a
liability reserve required by the NAIC which accumulates realized capital gains
and losses resulting from interest rate fluctuations. Such capital gains and
losses are amortized out of the IMR as an adjustment to net investment income
over the remaining lives of the assets sold.
Contingency Reserves: By Charter, TIAA operates without profit to the
corporation or its sole shareholder, the TIAA Board of Overseers. As a result,
all contingency reserves are held solely for the benefit of TIAA's
policyholders.
Income and Expenses: Premiums, investment income and expenses are reported as
incurred.
Federal Income Taxes: TIAA is a nonprofit educational organization exempt from
federal income taxation under Section 501(c)(3) of the Internal Revenue Code.
However, any nonpension related income is subject to federal income taxation as
unrelated business income. The federal income tax provision in the accompanying
statements of operations is based on taxes actually paid or anticipated to be
paid with the tax return filing.
Separate Accounts: The balance sheet captions for Separate Account assets and
liabilities (which include participant account values) are stated at market
value. The Separate Accounts' operating results are reflected in the changes to
these assets and liabilities.
TIAA Separate Account VA-1 ("VA-1") is a segregated investment account and was
organized on February 16, 1994 under the insurance laws of the State of New York
for the purpose of issuing and funding variable annuity contracts. VA-1 was
registered with the Securities and Exchange Commission ("Commission") effective
November 1, 1994 as an open-end, diversified management investment company under
the Investment Company Act of 1940. Currently, VA-1 consists of a single
investment portfolio, the Stock Index Account ("SIA"), which invests in a
diversified portfolio of equity securities selected to track the overall United
States stock market.
SIA was established on October 3, 1994 with a $25,000,000 seed money investment
by TIAA. TIAA purchased 1,000,000 Accumulation Units of SIA and such units share
in the pro rata investment experience of SIA and are subject to the same
valuation procedures and expense deductions as all other Accumulation Units in
SIA. On November 14, 1994, TIAA began to offer Accumulation Units of SIA to
participants other than TIAA. At December 31, 1995 and 1994, the number of units
retained by TIAA in SIA were 2,685 and 1,000,000 with a total value of
approximately $92,000 and $25,271,000, respectively.
The TIAA Real Estate Account ("REA") is a segregated investment account and was
organized on February 22, 1995 under the insurance laws of the State of New York
for the purpose of funding variable annuity contracts. REA was registered with
the Commission under the Securities Act of 1933 effective October 2, 1995. REA
will ultimately invest primarily in real estate and real estate-related
investments (70% to 80% of total REA assets) as well as publicly-traded
securities to maintain adequate liquidity.
REA was established on July 3, 1995 with a $100,000,000 seed money investment by
TIAA. TIAA purchased 1,000,000 Accumulation Units of REA and such units share in
the pro rata investment experience of REA and
B-53
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 2--Significant Accounting Policies--(Continued)
are subject to the same valuation procedures and expense deductions as all other
Accumulation Units in REA. On October 2, 1995, TIAA began to offer Accumulation
Units of REA to participants other than TIAA. At December 31, 1995 the number of
units retained by TIAA in REA remained at 1,000,000 with a total value of
approximately $102,566,000.
Permitted Statutory Accounting Policies: Statutory accounting policies
prescribed by the Department include accounting practices reflected in New York
State Insurance Laws and Regulations as well as in NAIC publications. Permitted
statutory accounting policies encompass all accounting practices which are
allowed by the Department but have not been prescribed. TIAA does not utilize
any statutory accounting practices which depart from prescribed statutory
accounting practices; however, TIAA does follow certain permitted statutory
accounting practices. The following permitted statutory accounting policies have
been approved by the Department: inclusion of real estate subsidiaries and real
estate limited partnerships in the Real Estate caption in the accompanying
balance sheets; determination of permanent impairments; and netting of
securities lending collateral against short-term investments.
The NAIC issued prescribed accounting requirements for loan-backed securities,
including collateralized mortgage obligations ("CMO's"), in 1993. The new
accounting requirements stipulated that loan-backed securities should be
accounted for using the interest method. Under the interest method, actual and
anticipated cash flows of a security are utilized to determine the carrying
value of that security. TIAA elected the prospective method for determining
yields and carrying values for interest-only CMO's and the retrospective method
for all other CMO's.
Certain provisions of these statutory accounting policies were required to be
implemented in 1994; the remaining provisions were required for 1995. TIAA
implemented the required provisions of the new accounting policies in 1994 and
also adopted the provisions in 1994 for TIAA's public market CMO portfolio. This
early adoption for public market CMO's represented a permitted accounting
practice which was also approved by the Department. The required provisions of
the new accounting policies for TIAA's private market CMO portfolio were
implemented in 1995. The effect of this change in accounting in 1995 and 1994
was to increase contingency reserves by approximately $11 million and $50
million, respectively.
Generally Accepted Accounting Principles: The Financial Accounting Standards
Board ("FASB") issued FASB Interpretation No. 40, entitled "Applicability of
Generally Accepted Accounting Principles to Mutual Life Insurance and Other
Enterprises" ("Interpretation"), in April 1993. The Interpretation clarifies
that financial statements that are intended to be in conformity with generally
accepted accounting principles should follow all authoritative accounting
pronouncements except to the extent that a pronouncement explicitly exempts a
particular type of enterprise or that enterprise does not have the transaction,
event, or circumstance addressed in the pronouncement. The Interpretation, as
amended, is effective for financial statements issued for fiscal years beginning
after December 15, 1995.
The effect of the Interpretation will be that TIAA (and mutual life insurance
and other enterprises) will not be permitted to refer to financial statements
prepared in accordance with statutory accounting practices as having
B-54
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 2--Significant Accounting Policies--(Concluded)
been prepared in accordance with generally accepted accounting principles
("GAAP") beginning in 1996. If TIAA elects to prepare GAAP financial statements,
the effect of initially applying the Interpretation will be reported
retroactively through restatement of all financial statements presented for
comparative purposes, with the cumulative effect of adopting the Interpretation
included in the earliest year restated. TIAA has analyzed those requirements of
GAAP which differ from statutory accounting practices and is in the process of
quantifying the effects of the potential application of the Interpretation on
its financial statements.
Reclassifications: Certain amounts in the 1994 financial statements have been
reclassified to conform with the 1995 presentation.
B-55
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 3--Investments
Securities Investments: At December 31, 1995 and 1994, the carrying values
(balance sheet amounts) and estimated market values of long-term bond
investments, and gross unrealized gains and losses with respect to such market
values, are shown below:
<TABLE>
<CAPTION>
Gross Gross
Carrying Unrealized Unrealized Estimated
December 31, 1995 Value Gains Losses Market Value
- -------------------------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
agencies and corporations $ 805,105,863 $ 195,202,463 $ 1,000,308,326
Debt securities issued by
foreign governments 1,456,997,622 226,995,685 $ 1,494,536 1,682,498,771
Corporate securities 28,094,698,003 2,942,081,089 78,607,386 30,958,171,706
Mortgage-backed securities 15,163,886,154 1,547,907,663 45,110,081 16,666,683,736
Asset-backed securities 3,315,143,416 317,275,533 4,448,112 3,627,970,837
--------------- -------------- ------------ ---------------
Total $48,835,831,058 $5,229,462,433 $129,660,115 $53,935,633,376
=============== ============== ============ ===============
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Carrying Unrealized Unrealized Estimated
December 31, 1994 Value Gains Losses Market Value
- -------------------------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
agencies and corporations $ 867,096,984 $ 4,361,537 $ 170,252,620 $ 701,205,901
Debt securities issued by
foreign governments 1,468,763,896 25,553,121 92,875,437 1,401,441,580
Corporate securities 27,531,583,866 590,403,140 1,340,430,128 26,781,556,878
Mortgage-backed securities 11,307,671,148 302,144,903 1,064,037,897 10,545,778,154
Asset-backed securities 2,603,401,722 31,766,572 179,575,622 2,455,592,672
--------------- ------------ -------------- ---------------
Total $43,778,517,616 $954,229,273 $2,847,171,704 $41,885,575,185
=============== ============ ============== ===============
</TABLE>
At December 31, 1995 and 1994, approximately 94.9% and 94.3%, respectively, of
the long-term bond portfolio was comprised of investment grade securities. At
December 31, 1995, outstanding forward commitments for future long-term bond
investments approximated $1,281,939,000. It is estimated that $1,275,173,000
will be disbursed in 1996 and $6,766,000 in later years. The funding of bond
commitments is contingent upon the continued favorable financial performance of
the potential borrowers. Debt securities amounting to approximately $237,943,000
and $210,889,000 at December 31, 1995 and 1994, respectively, were on deposit
with governmental authorities or trustees as required by law.
The carrying values and estimated market values of long-term bond investments at
December 31, 1995, by contractual maturity, are shown below:
B-56
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 3--Investments--(Continued)
Carrying Estimated
Value Market Value
------------ -------------
Due in one year or less $ 429,714,344 $ 433,016,648
Due after one year through five years 3,546,510,594 3,816,740,001
Due after five years through ten
years 11,965,866,370 12,939,511,409
Due after ten years 14,414,710,180 16,451,710,745
--------------- ---------------
Subtotal 30,356,801,488 33,640,978,803
Mortgage-backed securities 15,163,886,154 16,666,683,736
Asset-backed securities 3,315,143,416 3,627,970,837
--------------- ---------------
Total $48,835,831,058 $53,935,633,376
=============== ===============
Bonds not due at a single maturity date have been included in the preceding
table based on the year of final maturity. Actual maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations, although prepayment premiums may be applicable.
At December 31, 1995 and 1994, the carrying values of long-term bond investments
were diversified by industry classification as follows:
1995 1994
----- ------
Mortgage-backed securities 31.1% 25.8%
Public utilities 15.5 18.3
Manufacturing 14.0 15.0
Finance and financial
services 8.8 9.7
Asset-backed securities 6.8 6.0
Government 5.7 5.5
Retail and wholesale trade 5.1 5.1
Communications 4.3 5.6
Oil and gas 3.9 4.2
Other 4.8 4.8
----- ------
Total 100.0% 100.0%
===== ======
B-57
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 3--Investments--(Continued)
The approximate carrying values and market values of debt securities loaned and
the cash collateral received in connection therewith were as follows:
Carrying Market Cash
Value Value Collateral
----------- ----------- -------------
December 31,
1995 $1,345,534,000 $1,410,965,000 $1,482,603,000
December 31,
1994 $1,036,779,000 $ 957,529,000 $ 993,763,000
At December 31, 1995 and 1994, TIAA had interest rate swap contracts with
commercial banks related to $110,000,000 and $105,000,000, respectively, par
value of bonds. At December 31, 1995 and 1994, TIAA had asset swap contracts
outstanding related to $245,462,000 and $115,211,000, respectively, of
investments denominated in foreign currencies. The net change in unrealized
losses on such asset swap contracts were approximately $(1,099,000) and
$(7,635,000) for the years ended December 31, 1995 and 1994, respectively.
During 1995, TIAA wrote two covered call options related to $13,500,000 par
value of bonds and received premiums of approximately $142,000. The options were
exercised and the premiums were recorded as additional proceeds on the
dispositions. There were no outstanding covered call options at December 31,
1995.
Mortgage Loan and Real Estate Investments: TIAA makes mortgage loans,
principally collateralized by commercial real estate, and direct investments in
real estate. TIAA's mortgage underwriting standards generally limit mortgage
investments to first mortgage liens on completed income-producing properties for
which the loan-to-value ratio at the time of closing generally ranges between
65% and 75%. Current real estate market conditions in certain regions of the
country are characterized by above-normal but improving vacancy rates and
reduced but stabilizing real estate values. TIAA employs a system to monitor the
effects of current and expected market conditions and other factors on the
collectability of mortgage loans and the realizability of real estate
investments. This system is utilized to identify and quantify any permanent
impairments in value and to determine the appropriate level of mortgage and real
estate reserves in the AVR.
B-58
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 3--Investments--(Continued)
At December 31, 1995 and 1994, the carrying values of mortgage loan investments
were diversified by property type and geographic region as follows:
Property Type 1995 1994
- ----------------------------------- ----- -------
Office buildings 41.1% 41.6%
Shopping centers 30.6 31.1
Mixed-use projects 9.9 10.4
Apartments 8.1 6.2
Hotels 4.6 4.7
Industrial buildings 3.9 4.1
Other 1.8 1.9
----- ------
Total 100.0% 100.0%
===== ======
Geographic Region
- -----------------------------------
West 29.2% 30.1%
Northeast 23.1 22.7
Midwest 20.4 20.3
Southeast 17.1 17.5
Southwest/Plains 10.2 9.4
----- ------
Total 100.0% 100.0%
===== ======
At December 31, 1995 and 1994, approximately 24% and 26%, respectively, of the
mortgage portfolio was invested in California and is included in the West region
shown above.
At December 31, 1995, the contractual maturity schedule of mortgage loans is
shown below:
Carrying
Value
-------------
Due in one year or less $ 1,628,678,100
Due after one year through five years 4,111,058,868
Due after five years through ten years 7,996,176,192
Due after ten years 7,264,366,170
---------------
Total $21,000,279,330
===============
Actual maturities may differ from contractual maturities because borrowers may
have the right to prepay mortgage loans, although prepayment premiums may be
applicable.
At December 31, 1995, outstanding forward commitments for future mortgage loan
investments approximated $1,546,060,000, including commitments under litigation.
Of this, $840,814,000 is scheduled for disbursement in 1996, $92,003,000 in
1997, $84,200,000 in 1998 and $529,043,000 in later years. The funding of
mortgage loan commitments is contingent upon the underlying properties meeting
specified construction, leasing, occupancy and other requirements. Of the total
commitments scheduled for disbursement in 1996, $250,000,000 is related to a
mortgage loan refinancing which occurred in 1993. In connection with the
refinancing, a third party made a five year, interest-only loan to a TIAA
borrower and the borrower made a partial repayment to TIAA. TIAA made
B-59
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 3--Investments--(Continued)
a one year forward commitment to loan $250,000,000 to the borrower. The loan
commitment may be extended, at TIAA's option, for additional one year periods,
up to a total of five years, provided that the borrower's first mortgage to the
third party is not in default at the time the loan commitment is extended. The
loan commitment has been extended to 1996.
At December 31, 1995, 1994 and 1993, the aggregate carrying values of mortgages
with restructured or modified terms, as defined by generally accepted accounting
principles, were approximately $872,377,000, $913,551,000 and $771,038,000,
respectively. For the years ended December 31, 1995, 1994 and 1993, the
investment income earned on such mortgages was approximately $57,142,000,
$41,643,000 and $47,003,000, respectively, which would have been approximately
$96,625,000, $101,394,000 and $86,406,000, respectively, if they had performed
in accordance with their original terms. When restructuring mortgage loans, TIAA
generally requires participation features, yield maintenance stipulations,
and/or the establishment of property specific escrow accounts funded by the
borrowers.
At December 31, 1995 and 1994, the carrying values or real estate investments
were diversified by property type and geographic region as follows:
Property Type 1995 1994
- ---------------------------------------------------- ----- -------
Office buildings 61.7% 60.4%
Shopping centers 15.2 15.9
Mixed-use projects 7.3 6.2
Industrial buildings 3.4 4.0
Income-producing land underlying improved real
estate 3.3 3.4
Land held for future development 2.0 2.0
Apartments 0.7 2.0
Other 6.4 6.1
----- ------
Total 100.0% 100.0%
===== ======
Geographic Region
- ----------------------------------------------------
Midwest 34.8% 39.1%
Southeast 24.7 21.8
West 16.2 16.3
Northeast 14.2 13.9
Southwest/Plains 10.1 8.9
----- -----
Total 100.0% 100.0%
===== =====
At December 31, 1995 and 1994, approximately 12% and 13%, respectively, of the
real estate portfolio was invested in Minnesota and is included in the Midwest
region shown above; for both years, approximately 12% was invested in California
and is included in the West region shown above.
At December 31, 1995, outstanding forward commitments for future real estate
investments approximated $291,444,000. Under these commitments, it is estimated
that $261,022,000 will be disbursed in 1996 and $30,422,000 in later years. The
funding of real estate investment commitments is contingent upon the properties
meeting specified construction, leasing, occupancy and other requirements.
B-60
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 3--Investments--(Concluded)
Depreciation expense on real estate investments for the years ended December 31,
1995, 1994 and 1993, was approximately $98,198,000, $84,872,000 and $70,881,000,
respectively; the amount of accumulated depreciation at December 31, 1995 was
approximately $529,939,000.
Asset Valuation Reserves: The AVR balances at December 31, 1995 and 1994 were
comprised of the following asset-specific reserves:
1995 1994
----------- -------------
Bonds and preferred
stock $ 673,859,636 $ 650,783,617
Mortgages 564,444,067 578,989,017
Real Estate 495,577,164 389,347,850
Common stock 62,372,040 22,592,888
Other invested assets 64,614,984 22,982,326
-------------- --------------
Total $1,860,867,891 $1,664,695,698
============== ==============
Note 4--Investment Income and Capital Gains and Losses
Net Investment Income: For the years ended December 31, 1995, 1994 and 1993, the
components of net investment income were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -------------
<S> <C> <C> <C>
Gross Investment Income:
Bonds $4,113,077,743 $3,591,625,656 $3,146,653,149
Mortgages 1,688,836,730 1,613,072,996 1,813,370,120
Real Estate (net of property
expenses,
taxes and depreciation) 279,016,562 298,290,866 222,457,480
Stocks 24,460,434 12,296,076 9,928,302
Other long-term investments 16,706,459 10,794,114 8,530,439
Cash and short-term investments 52,050,980 37,997,294 42,629,115
Other 8,500,640 9,894,077 6,082,027
-------------- -------------- --------------
Total 6,182,649,548 5,573,971,079 5,249,650,632
Less investment expenses (112,287,010) (102,523,873) (103,129,901)
-------------- -------------- --------------
Net investment income before
amortization of net IMR gains 6,070,362,538 5,471,447,206 5,146,520,731
Plus amortization of net IMR gains 38,134,446 14,624,032 17,485,464
-------------- -------------- --------------
Net investment income $6,108,496,984 $5,486,071,238 $5,164,006,195
============== ============== ==============
</TABLE>
Participation income received on securities, mortgages and real estate included
in the above table was approximately $28,088,000, $27,488,000 and $24,015,000 in
1995, 1994 and 1993, respectively.
B-61
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 4--Investment Income and Capital Gains and Losses--(Concluded)
The net earned rates of investment income on total invested assets (computed as
net investment income before amortization of net IMR gains divided by mean
invested assets) were 8.29%, 8.11% and 8.32% in 1995, 1994 and 1993,
respectively.
Future rental income expected to be received during the next five years under
existing real estate leases in effect as of December 31, 1995 is approximately
$491,476,000 in 1996, $430,958,000 in 1997, $368,419,000 in 1998, $311,099,000
in 1999 and $246,027,000 in 2000.
Realized Capital Gains and Losses: For the years ended December 31, 1995, 1994
and 1993, the net realized capital gains (losses) on sales, redemptions and
writedowns of investments computed under the specific identification method were
as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- --------------
<S> <C> <C> <C>
Bonds $ 32,698,203 $ 23,169,838 $ 84,338,721
Mortgages (204,033,034) (103,763,171) (137,342,068)
Real Estate 99,207,556 (24,555,825) 5,859,835
Stocks 9,808,562 5,435,716 (8,149,796)
Other long-term investments 7,885,199 1,550,624 19,014,949
Cash and short-term investments (758,274) 2,377,735 (148,608)
Other 1,360,695 714,129 538
------------- ------------- --------------
Total realized gains (losses)
before
capital gains tax (53,831,093) (95,070,954) (36,426,429)
Less capital gains tax (2,433,800) 0 0
------------- ------------- --------------
Total $ (56,264,893) $ (95,070,954) $ (36,426,429)
============= ============= ==============
</TABLE>
Proceeds from sales and redemptions of long-term bond investments during 1995,
1994 and 1993 were approximately $3,822,394,000, $3,685,078,000 and
$6,391,828,000, respectively. Gross gains of approximately $122,093,000,
$96,579,000 and $358,273,000 and gross losses of approximately $49,736,000,
$75,097,000 and $75,475,000 were realized on these sales and redemptions during
1995, 1994 and 1993, respectively.
Unrealized Capital Gains and Losses: For the years ended December 31, 1995, 1994
and 1993, the net changes in unrealized capital gains (losses) on investments,
resulting in a net increase (decrease) in the valuation of investments, were as
follows:
1995 1994 1993
----------- ----------- -------------
Bonds $ $ $
51,534,565 64,026,744 18,250,130
Mortgages (1,807,561) (3,125,696) (6,673,961)
Real Estate (42,391,326) (37,141,679) (67,998,555)
Stocks 26,290,762 19,432,861 27,435,407
Other long-term investments 23,553,601 8,458,998 (7,607,109)
Cash and short-term
investments 0 1,285,511 (762,703)
Other (4,473,932) (14,029,803) (2,661,736)
------------ ------------ -------------
Total $ 52,706,109 $ 38,906,936 $(40,018,527)
============ ============ =============
B-62
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 5--Disclosures About Fair Value of Financial Instruments
The estimated fair value amounts of financial instruments presented in the
following tables have been determined by TIAA using market information available
as of December 31, 1995 and 1994, and appropriate valuation methodologies.
However, considerable judgment is necessarily required to interpret market data
in developing the estimates of fair value for financial instruments for which
there are no available market value quotations. The estimates presented are not
necessarily indicative of the amounts TIAA could have realized in a market
exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
<TABLE>
<CAPTION>
Notional Carrying Estimated
December 31, 1995 Amount Value Fair Value
- -------------------------------------- ----------- ------------ --------------
<S> <C> <C> <C>
Assets
Bonds $48,835,831,058 $53,935,633,376
Mortgages 21,000,279,330 22,600,402,237
Stocks 223,028,483 223,028,483
Cash and short-term investments 713,051,046 713,051,046
Policy loans 134,538,623 134,538,623
Liabilities
Teachers Personal Annuity--Fixed
Account 580,720,683 580,720,683
Other financial instruments
Asset swap contracts $238,063,450 (7,398,975) (27,116,738)
Interest rate swap contracts 110,000,000 15,152,000
Stock warrants 6,532,500
December 31, 1994
- --------------------------------------
Assets
Bonds $43,778,517,616 $41,885,575,185
Mortgages 20,216,879,404 19,627,287,444
Stocks 163,284,129 163,284,129
Cash and short-term investments 431,445,982 431,445,982
Policy loans 97,262,920 97,262,920
Liabilities
Teachers Personal Annuit--Fixed
Account 358,987,888 358,987,888
Other financial instruments
Asset swap contracts $108,911,004 (6,300,443) (12,348,000)
Interest rate swap contracts 105,000,000 2,813,000
Stock warrants 1,722,000
</TABLE>
B-63
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 5--Disclosures About Fair Value of Financial Instruments--(Concluded)
Bonds: Fair values for publicly traded long-term bond investments were
determined using quoted market prices. For privately placed long-term bond
investments without a readily ascertainable market value, such values were
determined with the assistance of an independent pricing service utilizing a
discounted cash flow methodology based on coupon rates, maturity provisions and
assigned credit ratings. The aggregate carrying values and estimated fair values
of publicly traded and privately placed bonds at December 31, 1995 and 1994 were
as follows:
<TABLE>
<CAPTION>
1995 1994
---------------------------- ------------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Publicly traded bonds $28,152,735,556 $31,029,476,823 $25,330,827,112 $24,008,853,534
Privately placed bonds 20,683,095,502 22,906,156,553 18,447,690,504 17,876,721,651
--------------- --------------- --------------- ----------------
Total $48,835,831,058 $53,935,633,376 $43,778,517,616 $41,885,575,185
=============== =============== =============== ================
</TABLE>
Mortgages: The fair value of mortgages was determined with the assistance of an
independent pricing service utilizing a discounted cash flow methodology based
on coupon rates, maturity provisions and assigned credit ratings.
Stocks, Cash and Short-Term Investments, and Policy Loans: The carrying values
are reasonable estimates of fair values.
Teachers Personal Annuity-Fixed Account: The carrying values of the liabilities
are reasonable estimates of fair values.
Asset Swap Contracts: The fair value of asset swap contracts (used for hedging
purposes) is the estimated net gain or (loss) that TIAA would record if the
asset swaps were liquidated at year-end. The fair value of asset swap contracts
was estimated by external institutions, including our counterparties, based on
future cash flows and anticipated exchange relationships, and such values were
reviewed internally for reasonableness.
Interest Rate Swap Contracts: The fair value of interest rate swap contracts
(used for hedging purposes) is the estimated net gain or (loss) that TIAA would
record if the interest rate swaps were liquidated at year-end. The swap
agreements have no carrying value. The fair value of interest rate swap
contracts was estimated internally using modeling software developed by
independent third parties.
Stock Warrants: The fair value of stock warrants represents the excess of the
market value of the related stock over the exercise price associated with the
stock warrant. The stock warrants have no carrying value.
Commitments to Extend Credit or Purchase Investments: TIAA does not charge
commitment fees on these agreements, and the related interest rates reflect
market levels at the time of the commitments.
Insurance and Annuity Contracts: TIAA's insurance and annuity contracts, other
than the Teachers Personal Annuity - Fixed Account disclosed above, entail
mortality risks and are, therefore, exempt from the fair value disclosure
requirements related to financial instruments.
B-64
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 6--Management Agreements
All services necessary for the operation of College Retirement Equities Fund
(CREF), a companion organization, are provided, at cost, by two subsidiaries of
TIAA, TIAA-CREF Investment Management, Inc. ("Investment Management") and
TIAA-CREF Individual & Institutional Services, Inc. ("Services"), which provide
investment advisory, administrative and distribution services for CREF. Such
services are provided in accordance with an Investment Management Services
Agreement between CREF and Investment Management, and in accordance with a
Principal Underwriting and Administrative Services Agreement between CREF and
Services. Investment Management is registered with the Commission as an
investment adviser; Services is registered with the Commission as a
broker-dealer and is a member of the National Association of Securities Dealers,
Inc. Investment Management and Services receive management fee payments from
each CREF account on a daily basis according to formulas established each year
with the objective of keeping the management fees as close as possible to each
account's actual expenses. Any differences between actual expenses and the
management fees are adjusted quarterly. Such fees and the equivalent allocated
expenses, which amounted to approximately $226,645,000, $199,396,000 and
$171,411,000 in 1995, 1994 and 1993, respectively, are not included in the
statements of operations and had no effect on TIAA's operations.
All services necessary for the operation of REA are provided, at cost, by TIAA
and Services. TIAA provides investment management services for REA, while
distribution and administrative services are provided by Services in accordance
with a Distribution and Administrative Services Agreement between REA and
Services. TIAA also provides a liquidity guarantee to REA, for a fee, to ensure
that funds are available to meet participant transfer and cash withdrawal
requests in the event that REA's cash flows and liquid investments are
insufficient to fund such requests. TIAA also receives a fee for assuming
certain mortality and expense risks. Fee payments are made from REA on a daily
basis to TIAA and Services according to formulas established annually. Any
differences between actual expenses and daily charges are adjusted quarterly.
Teachers Advisors, Inc. ("Advisors"), a subsidiary of TIAA VA Holdings, Inc.
("Holdings"), which is itself a wholly-owned subsidiary of TIAA, provides
investment advisory services for VA-1 in accordance with an Investment
Management Agreement between TIAA, Advisors and VA-1. TIAA provides all
administrative services for VA-1 in accordance with an Administrative Services
Agreement with VA-1 and also receives a fee for assuming certain mortality and
expense risks. Teachers Personal Investors Services, Inc. ("TPIS"), a subsidiary
of Holdings, distributes contracts for VA-1. Expense deductions are made from
VA-1 on a daily basis. Advisors is registered with the Commission as an
investment adviser; TPIS is registered with the Commission as a broker-dealer
and is a member of the National Association of Securities Dealers, Inc.
B-65
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 7--Pension Plan and Postretirement Benefits
TIAA maintains a qualified, noncontributory defined contribution pension plan
covering substantially all employees. All pension plan liabilities are fully
funded through individually owned retirement annuity contracts. Contributions
are made semi-monthly to each participant's contract based on a percentage of
salary, with the applicable percentage varying by attained age. All
contributions are fully vested for employees hired before 1988. For employees
hired after 1987, contributions are vested after five years of service.
Forfeitures arising from terminations prior to vesting are used to reduce future
employer contributions. The accompanying statements of operations include
contributions to the pension plan of approximately $19,467,000, $17,828,000 and
$16,167,000 in 1995, 1994 and 1993, respectively.
In addition to the pension plan, TIAA provides certain other postretirement life
and health insurance benefits to eligible retired employees who meet prescribed
age and service requirements. The cost of such benefits reflected in the
accompanying statements of operations were approximately $2,273,000, $2,307,000
and $1,641,000 for 1995, 1994 and 1993, respectively. TIAA also maintains a
deferred compensation plan for non-officer trustees and members of the TIAA
Board of Overseers. Under this plan, an eligible board member who has served at
least five years is eligible for a single-sum payment upon leaving the board
equal to 50% of the annual stipend in effect during the last term multiplied by
the number of years of credited service, up to a maximum of 20 years.
Note 8--Unconsolidated Subsidiaries and Other Affiliates
TIAA's wholly-owned subsidiaries primarily involve real estate investment
activities and are primarily included in real estate assets on the accompanying
balance sheets. At December 31, 1995 and 1994, the carrying values of TIAA's
investments in real estate subsidiaries were approximately $4,599,673,000 and
$4,963,164,000, respectively. Subsidiary assets, liabilities and gross rental
income, of real estate subsidiaries, as of and for the years ended December 31,
1995 and 1994, were approximately as follows:
1995 1994
----------- -------------
Assets $5,523,739,000 $5,893,047,000
Liabilities 981,438,000 926,695,000
Gross rental
income 841,970,000 804,576,000
Earnings from primarily real estate subsidiaries in 1995, 1994 and 1993, of
approximately $164,676,000, $210,302,000 and $166,144,000, respectively, are
included in net investment income in the accompanying statements of operations.
Some of the real estate subsidiaries referred to above are partners in joint
ventures. At December 31, 1995 and 1994, the carrying values of TIAA real estate
subsidiaries that are partners in joint ventures were approximately
$2,371,931,000 and $2,945,089,000. Joint venture total assets, liabilities and
gross rental income, as of and for the years ended December 31, 1995 and 1994,
were approximately as follows:
B-66
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Concluded)
Note 8--Unconsolidated Subsidiaries and Other Affiliates--(Concluded)
1995 1994
----------- -------------
Assets $3,437,761,000 $3,770,043,000
Liabilities 1,233,262,000 746,584,000
Gross rental income 608,507,000 550,225,000
The subsidiaries' equity share in these assets, liabilities and gross rental
income were approximately as follows:
1995 1994
----------- -------------
Assets $3,307,523,000 $3,549,882,000
Liabilities 937,673,000 621,281,000
Gross rental income 551,259,000 486,563,000
Net income earned by the subsidiaries from joint venture investments was
approximately $60,689,000, $92,342,000 and $48,299,000 in 1995, 1994 and 1993,
respectively. Some of the real estate joint ventures have mortgage loans from
TIAA. At December 31, 1995 and 1994, the unpaid principal of such mortgage loans
was approximately $826,216,000 and $539,769,000, respectively.
Note 9--Contingencies
It is the opinion of management that any liabilities which might arise from
litigation, state guaranty fund assessments, and other matters, over and above
amounts already provided for in the financial statements, are not considered
material in relation to TIAA's financial position or the results of its
operations.
Note 10--Subsequent Event
Effective January 1, 1996, TIAA ceased conducting insurance and annuity
operations in Canada and reinsured all existing business with an independent
third party insurer under an assumption reinsurance agreement. Under this
agreement, TIAA transferred approximately $129 million (US) of assets to the
independent third party insurer, and, under the reinsurance agreement, this
transfer released all of TIAA's Canadian policy reserves and other liabilities.
TIAA will have no continuing material obligation associated with its withdrawal
from the Canadian insurance market.
B-67
<PAGE>
Part C - OTHER INFORMATION
Item 28. Financial Statements and Exhibits
(a) Financial Statements
The following Financial Statements for TIAA Separate Account
VA-1 (the "Registrant") and Teachers Insurance and Annuity Association of
America ("TIAA") are included with Part B (the Statement of Additional
Information) of this Registration Statement:
<TABLE>
<CAPTION>
Page
(1) The Registrant--Stock Index Account
<S> <C>
Report of Management Responsibility......................................................................... B-21
Report of Independent Auditors.............................................................................. B-22
Audited Financial Statements:
Statement of Assets and Liabilities....................................................................... B-23
Statement of Operations................................................................................... B-24
Statements of Changes in Net Assets....................................................................... B-25
Notes to Financial Statements............................................................................... B-26
Statement of Investments.................................................................................... B-29
(2) TIAA
Report of Management Responsibility......................................................................... B-44
Report of Independent Auditors.............................................................................. B-45
Audited Financial Statements:
Balance Sheets ........................................................................................... B-46
Statements of Operations.................................................................................. B-47
Statements of Changes in Contingency Reserves............................................................. B-48
Statements of Cash Flows.................................................................................. B-49
Notes to Financial Statements............................................................................... B-50
</TABLE>
<PAGE>
(b) Exhibits
(1) Resolution of the Board of Trustees of TIAA establishing
the Registrant (1)
(2) Rules and Regulations of the Registrant (2)
(3) Custodial Services Agreement by and between TIAA and
Bankers Trust Company (3)
(4) Investment Management Agreement by and among TIAA, the
Registrant, and Teachers Advisors, Inc. (2)
(5) Distribution Agreement by and among TIAA, the Registrant,
and Teachers Personal Investors Services,Inc.,as amended*
(6) (A) Form of Teachers Personal Annuity Contract (effective
November 1, 1994) (2)
(B) Form of Endorsement to Teachers Personal Annuity
Contract (in-force prior to November 1, 1994) (2)
(7) Form of Application for Teachers Personal Annuity
Contract (2)
(8) (A) Charter of TIAA (1)
(B) Bylaws of TIAA (1)
(9) None
(10) Not Applicable
(11) Administrative Services Agreement by and between TIAA
and the Registrant, as amended*
(12) (A) Consent of Charles H. Stamm, Esquire*
(B) Consent of Sutherland, Asbill & Brennan*
(13) Consent of Deloitte & Touche LLP*
(14) None
(15) Seed Money Agreement by and between TIAA and the
Registrant (2)
(16) Schedule of Computation of Performance Information*
(17) Financial Data Schedule*
- ------------------------
* Filed herewith.
(1) Previously filed in the initial Registration Statement on Form N-3
dated May 18, 1994 (File No. 33-79124) and incorporated herein by
reference.
(2) Previously filed in Pre-Effective Amendment No. 1 to Form N-3 dated
October 7, 1994 (File No. 33-79124) and incorporated herein by
reference.
(3) Previously filed in Pre-Effective Amendment No. 2 to Form N-3 dated
October 18, 1994 (File No. 33-79124) and incorporated herein by
reference.
<PAGE>
Item 29. Directors and Officers of the Insurance Company
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name and Principal Business Address Insurance Company Registrant
- ----------------------------------- ----------------- -------------
<S> <C> <C>
David Alexander Trustee
American Secretary
The Rhodes Scholarship Trust
and Trustees' Professor
Pomona College
Rhodes Scholarship Trust Office
Claremont, California 91711
Marcus Alexis Trustee
Professor of Economics and Professor
of Management and Strategy
J. L. Kellogg Graduate School of
Management
Northwestern University
Leverone Hall
2001 Sheridan Road
Evanston, Illinois 60208-2001
A. Howard Amon, Jr. Trustee
9125 Shady Hollow Way
Fair Oaks, California 95628
John H. Biggs Trustee,
TIAA-CREF Chairman and
730 Third Avenue Chief Executive
New York, New York 10017-3206 Officer
Jenne K. Britell Trustee
Executive Vice President,
Chief Lending Officer
and General Manager
The Dime Savings Bank
of New York, FSB
One EAB Plaza
Uniondale, New York 11556-0124
Willard T. Carleton Trustee
Karl L. Eller Professor of Finance
College of Business and Public
Administration
University of Arizona
McClelland Hall
Tucson, Arizona 85721
Robert C. Clark Trustee
Dean and Royall Professor of Law
Harvard Law School
Harvard University
Griswold 200
Cambridge, Massachusetts 02138
Flora Mancuso Edwards Trustee
Professor of English As
A Second Language and
Former President
Middlesex County College
155 Mill Road
Edison, New Jersey 08818
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name and Principal Business Address Insurance Company Registrant
- ----------------------------------- ----------------- -------------
<S> <C> <C>
Estelle A. Fishbein Trustee
Vice President and General Counsel
The Johns Hopkins University
113 Garland Hall
Baltimore, Maryland 21218
Frederick R. Ford Trustee
Executive Vice President and Treasurer
Purdue University
1032 Hovde Hall of Administration
West Lafayette, Indiana 47907-1032
Ruth Simms Hamilton Trustee
Professor of Sociology
Michigan State University
W142 Owen Graduate Hall
East Lansing, Michigan 48824
Thomas W. Jones Trustee, Chairman of
TIAA-CREF Vice Chairman, the Management
730 Third Avenue President and Committee and
New York, New York 10017-3206 Chief Operating President
Officer
Dorothy Ann Kelly, O.S.U. Trustee
President
College of New Rochelle
New Rochelle, New York 10805
Martin L. Leibowitz Trustee, Vice
TIAA-CREF Chairman and Chief
730 Third Avenue Investment Officer
New York, New York 10017-3206
Robert M. O'Neil Trustee
Director
The Thomas Jefferson Center for the
Protection of Free Expression
400 Peter Jefferson Place
Charlottesville, Virginia 22901
Leonard S. Simon Trustee
Chairman, President and
Chief Executive Officer
RCSB Financial, Inc.
235 East Main Street
Rochester, New York 14604
Ronald L. Thompson Trustee
Chairman and Chief Executive Officer
Midwest Stamping Co.
513 Napoleon Road
Bowling Green, Ohio 43402
Paul R. Tregurtha Trustee
Chairman
Mormac Marine Group, Inc.
Three Landmark Square
Stamford, Connecticut 06901
Charles J. Urstadt Trustee
Chairman and President
HRE Properties
321 Railroad Avenue
Greenwich, Connecticut 06830
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name and Principal Business Address Insurance Company Registrant
- ----------------------------------- ----------------- -------------
<S> <C> <C>
William H. Waltrip Trustee
Chairman and Chief Executive Officer
Bausch and Lomb, Inc.
One Bausch and Lomb Place
Rochester, New York 14604
Richard J. Adamski Vice President Vice President
TIAA-CREF and Treasurer and Treasurer
730 Third Avenue
New York, New York 10017-3206
Jonah J. Applebaum Senior Counsel
TIAA-CREF
730 Third Avenue
New York, New York 10017-3206
Diane M. Axelrod Vice President Vice President
TIAA-CREF
730 Third Avenue
New York, New York 10017-3206
Anthony V. Betro Director, Director,
TIAA-CREF Investment Investment
730 Third Avenue Accounting Accounting
New York, New York 10017-3206
Laura M. Bramson Counsel Assistant
TIAA-CREF Secretary
730 Third Avenue and Counsel
New York, New York 10017-3206
Jeffrey A. Casale Assistant
TIAA-CREF Insurance
730 Third Avenue Premium Officer
New York, New York 10017-3206
Gary Chinery Associate Associate
TIAA-CREF Treasurer Treasurer
730 Third Avenue
New York, New York 10017-3206
Peter C. Clapman Senior Vice Senior Vice
TIAA-CREF President, Secretary President,
730 Third Avenue and Chief Counsel, Secretary and
New York, New York 10017-3206 Investments Chief Counsel,
Investments
Jose R. Cruz Accounting Accounting
TIAA-CREF Officer Officer
730 Third Avenue
New York, New York 10017-3206
Virgil H. Cumming Senior Vice Senior Vice
TIAA-CREF President President
730 Third Avenue
New York, New York 10017-3206
Madeleine D'Ambrosio Vice President
TIAA-CREF
730 Third Avenue
New York, New York 10017-3206
Douglas Dial Vice President Vice President
TIAA-CREF and Assistant
730 Third Avenue Secretary
New York, New York 10017-3206
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name and Principal Business Address Insurance Company Registrant
- ----------------------------------- ----------------- -------------
<S> <C> <C>
Eric E. Fisher Vice President Vice President
TIAA-CREF
730 Third Avenue
New York, New York 10017-3206
Dennis D. Foley Research and Research and
TIAA-CREF Development Development
730 Third Avenue Officer Officer
New York, New York 10017-3206
Richard L. Gibbs Executive Executive
TIAA-CREF Vice President Vice President
730 Third Avenue
New York, New York 10017-3206
David Grunbaum Vice President, Vice President,
TIAA-CREF General General
730 Third Avenue Accounting and Accounting and
New York, New York 10017-3206 Payment Payment
Services Services
Harvey Halpert Vice President, Vice President,
TIAA-CREF Actuarial Actuarial
730 Third Avenue
New York, New York 10017-3206
Don Harrell Executive
TIAA-CREF Vice President
730 Third Avenue
New York, New York 10017-3206
Matina Horner Executive
TIAA-CREF Vice President
730 Third Avenue
New York, New York 10017-3206
Roseanne Lipman Klein Chief Counsel
TIAA-CREF
730 Third Avenue
New York, New York 10017-3206
Gary Korbel Manager,
TIAA-CREF Individual
730 Third Avenue Counseling
New York, New York 10017-3206
J. Daniel Lee, Jr. Executive
TIAA-CREF Vice President
730 Third Avenue
New York, New York 10017-3206
Henry Liedtka Manager,
TIAA-CREF Individual
730 Third Avenue Insurance
New York, New York 10017-3206 Systems
James S. Martin Executive Executive
TIAA-CREF Vice President Vice President
730 Third Avenue
New York, New York 10017-3206
Mary Ann E. Masters Vice President, Vice President,
TIAA-CREF Corporate Tax Corporate Tax
730 Third Avenue and Payroll and Payroll
New York, New York 10017-3206
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name and Principal Business Address Insurance Company Registrant
- ----------------------------------- ----------------- -------------
<S> <C> <C>
John J. McCormack, Jr. Executive Executive
TIAA-CREF Vice President Vice President
730 Third Avenue
New York, New York 10017-3206
Gerald K. McCullough Vice President, Vice President,
TIAA-CREF Investment Investment
730 Third Avenue Accounting Accounting
New York, New York 10017-3206 and Reporting and Reporting
John J. McGovern Second Vice
TIAA-CREF President
730 Third Avenue
New York, New York 10017-3206
Ronald P. McPhee Senior Vice Senior Vice
TIAA-CREF President President
730 Third Avenue
New York, New York 10017-3206
Maureen Milet Assistant Vice Assistant Vice
TIAA-CREF President President
730 Third Avenue
New York, New York 10017-3206
Carolyn C. Mitchell Second Vice
TIAA-CREF President
730 Third Avenue
New York, New York 10017-3206
Frances Nolan Vice President
TIAA-CREF
730 Third Avenue
New York, New York 10017-3206
Walter Nolan Vice President
TIAA-CREF
730 Third Avenue
New York, New York 10017-3206
John A. Putney, Jr. Executive
TIAA-CREF Vice President
730 Third Avenue
New York, New York 10017-3206
Jeanne Ray Chief Counsel
TIAA-CREF
730 Third Avenue
New York, New York 10017-3206
David Rubel Actuary Actuary
TIAA-CREF
730 Third Avenue
New York, New York 10017-3206
Larry H. Rubin Second Vice Second Vice
TIAA-CREF President President
730 Third Avenue
New York, New York 10017-3206
Richard Schlefer Assistant Assistant
TIAA-CREF Vice President Vice President
730 Third Avenue
New York, New York 10017-3206
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name and Principal Business Address Insurance Company Registrant
- ----------------------------------- ----------------- -------------
<S> <C> <C>
Mark L. Serlen Senior Counsel Assistant
TIAA-CREF Secretary and
730 Third Avenue Senior Counsel
New York, New York 10017-3206
David Shunk Vice President
TIAA-CREF
730 Third Avenue
New York, New York 10017-3206
Barbara Solan Cash Management Cash Management
TIAA-CREF Officer Officer
730 Third Avenue
New York, New York 10017-3206
Lisa Snow Chief Counsel, Assistant
TIAA-CREF Corporate Law Secretary and
730 Third Avenue Chief Counsel,
New York, New York 10017-3206 Corporate Law
Charles H. Stamm Executive Executive
TIAA-CREF Vice President Vice President
730 Third Avenue and General
New York, New York 10017-3206 Counsel
Elizabeth Sutherland Vice President Vice President
TIAA-CREF and Actuary and Actuary
730 Third Avenue
New York, New York 10017-3206
Steven I. Traum Director--
TIAA-CREF Portfolio
730 Third Avenue Management
New York, New York 10017-3206
Leonard Tribuch Vice President Vice President
TIAA-CREF and Actuary and Actuary
730 Third Avenue
New York, New York 10017-3206
Bruce Wallach Vice President, Vice President,
TIAA-CREF Corporate Corporate
730 Third Avenue Financial Financial
New York, New York 10017-3206 Planning and Planning and
Reporting Reporting
Thomas G. Walsh Executive Member of the
TIAA-CREF Vice President Management
730 Third Avenue Committee and
New York, New York 10017-3206 Executive Vice
President
Steven Weisbart Vice President, Vice President,
TIAA-CREF Policyholder Policyholder
730 Third Avenue Reports Reports
New York, New York 10017-3206
Albert Wilson Chief Counsel
TIAA-CREF and Corporate
730 Third Avenue Secretary
New York, New York 10017-3206
Leonard B. Zimmerman Vice President Vice President
TIAA-CREF and Insurance and Insurance
730 Third Avenue Actuary Actuary
New York, New York 10017-3206
</TABLE>
<PAGE>
Item 30. Persons Controlled by or under Common Control with the Insurance
Company or Registrant
The following companies are subsidiaries of TIAA and are included
in the consolidated financial statements of TIAA:
AIC Properties, Inc.
Chesapeake Investors, Inc.
College Credit Trust
Country Commons Doylestown Trust
Country Commons Joint Venture Trust
DAN Properties, Inc.
Florida Teachers Properties, Inc.
GRC Properties, Inc.
HSD Properties, Inc.
Hunt Valley Title Holding Corp.
Illinois Teachers Properties, Inc.
JHF Properties, Inc.
JV California Two, Inc.
JV California Three, Inc.
JV District of Columbia One, Inc.
JV Florida One, Inc.
JV Florida Three, Inc.
JV Florida Three Sabal, Inc.
JV Florida Four, Inc.
JV Georgia One, Inc.
JV Georgia Two, Inc.
JV Georgia Two Asbury, Inc.
JV Illinois Two, Inc.
JV Indiana One, Inc.
JV Indiana Two, Inc.
JV Indiana Three, Inc.
JV Indiana Four, Inc.
JV Maryland One, Inc.
JV Maryland Two, Inc.
JV Maryland Two Ashton Woods, Inc.
JV Michigan One, Inc.
JV Michigan Two, Inc.
JV Michigan Three, Inc.
JV Minnesota One, Inc.
JV Missouri One, Inc.
JV North Carolina One, Inc.
JV Ohio One, Inc.
JV Ohio One Britton, Inc.
JV Ohio One Butternut, Inc.
JV Ohio One Sterling, Inc.
JV Ohio One Union Station, Inc.
JV Virginia One, Inc.
JV Virginia Two, Inc.
JV Virginia Three, Inc.
JV Virginia Four, Inc.
JV Virginia Four Shirlington, Inc.
JV Washington One, Inc.
JV Washington Two, Inc.
JV Wisconsin One, Inc.
JWL Properties, Inc.
KFJ Ashton Park, Inc.
KFJ Buckingham, Inc.
KFJ Cobblestone, Inc.
KFJ McAlpine, Inc.
KFJ Properties, Inc.
Liberty Place Retail, Inc.
Macallister Holdings, Inc.
Mass. Norwood Properties, Inc.
MAV Properties, Inc.
MBH Properties, Inc.
McCandless Joint Venture, Inc.
McCormick Realty Services, Inc.
Minnesota CC Properties, Inc.
Minnesota Teachers Realty Corp.
MKH Properties, Inc.
MN Properties, Inc.
M.O.A. Enterprises, Inc.
MRC Properties, Inc.
ND Properties, Inc.
New Jersey Teachers Properties, Inc.
NMA II Properties, Inc.
NMA Properties, Inc.
One Liberty Place Land, Inc.
One Liberty Place Tower, Inc.
PBB Properties, Inc.
Reserve Management, Inc.
Rouse-Teachers Properties, Inc.
Savannah Teachers Properties, Inc.
T-Investment Properties, Corp.
<PAGE>
T-Land Corp.
T-L Advance, Inc.
T-Las Colinas Towers Corp.
Teachers Advisors, Inc.
Teachers Boca Properties, Inc.
Teachers Pennsylvania Realty, Inc.
Teachers Personal Investors Services,
Inc.
Teachers Properties, Inc.
Teachers Realty Corporation
TIAA-CREF Individual & Institutional
Services, Inc.
TIAA-CREF Investment Management, Inc.
TIAA VA Holdings, Inc.
TPI Housing, Inc.
Windermere Place Joint Venture Trust
Windermere Goshen Trust
WRC Properties, Inc.
730 Properties, Inc.
730 Cal Hotel Properties I, Inc.
730 Cal Hotel Properties II, Inc.
730 Georgia Hotel Properties I, Inc.
730 Mass. Holding I, Inc.
730 Mass. Hotel Properties I, Inc.
730 Minn. Holding I, Inc.
730 Minn. Hotel Properties I, Inc.
730 MO Hotel Properties I, Inc.
730 Penn. Hotel Properties I, Inc.
(1) All subsidiaries are Delaware corporations except as follows:
A) Teachers Realty Corporation is an Ohio corporation.
B) Minnesota Teachers Realty Corporation is a Minnesota corporation.
C) All Trusts are Pennsylvania business trusts.
(2) All subsidiaries are 100%-owned directly by TIAA, except as follows:
A) M.O.A. Enterprises, Inc., Teachers Properties, Inc., 730 Properties, Inc.,
T-Investment Properties Corp. and T-Land Corp. are 100% owned by
Macallister Holdings, Inc.
B) Chesapeake Investors, Inc. is 95%-owned by Teachers Properties, Inc. and
5%-owned by The Rouse Company. Rouse-Teachers Properties, Inc. is
100%-owned by Chesapeake Investors, Inc.
C) TPI Housing, Inc. is 100%-owned by Teachers Properties, Inc.
D) Teachers Personal Investors Services, Inc. and Teachers Advisors, Inc. are
100%-owned by TIAA VA Holdings, Inc.
E) 730 Cal Hotel Properties I, Inc., 730 Cal Hotel Properties II, Inc., 730
Georgia Hotel Properties I, Inc., 730 Mass. Holding I, Inc., 730 Minn.
Holding I, Inc., 730 MO Hotel Properties I, Inc., 730 Penn Hotel Properties
I, Inc. are 100%-owned by 730 Properties, Inc.
(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:
<PAGE>
A) Teachers Advisors, Inc., which provides investment advice for the
Registrant.
B) Teachers Personal Investors Services, Inc., which provides broker-dealer
services for the Registrant.
C) TIAA-CREF Investment Management, Inc., which provides investment advice for
College Retirement Equities Fund.
D) TIAA-CREF Individual & Institutional Services, Inc., which provides
broker-dealer and administrative services for College Retirement Equities
Fund.
E) Reserve Management, Inc., which is intended to be used by TIAA as a vehicle
for short-term borrowing.
Item 31. Number of Contractowners
As of December 31, 1995, 5,095 contractowners have allocated premiums to
the Separate Account (Stock Index Account).
<PAGE>
Item 32. Indemnification
The Registrant shall indemnify each of the members of the Management
Committee ("Managers") and officers of the Registrant against all liabilities
and expenses, including but not limited to counsel fees, amounts paid in
satisfaction of judgments, as fines or penalties, or in compromise or
settlement, reasonably incurred in connection with the defense or disposition of
any threatened, pending, or completed claim, action, suit, or other proceeding,
whether civil, criminal, administrative, or investigative, whether before any
court or administrative or legislative body, to which such person may be or may
have been subject, while holding office or thereafter, by reason of being or
having been such a Manager or officer; provided that such person acted, or
failed to act, in good faith and in the reasonable belief that such action was
in the best interests of the Separate Account, and, with respect to any criminal
action or proceeding, such person had no reasonable cause to believe the conduct
was unlawful; and except that no such person shall be indemnified for any
liabilities or expenses arising by reason of disabling conduct, whether or not
there is an adjudication of liability.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to Managers and officers of the Registrant, pursuant to
the foregoing provision or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in that Act and is therefore unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment of expenses incurred or paid by a Manager or officer in the
successful defense of any action, suit or proceeding) is asserted by a Manager
or officer in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in that Act and will be governed by the final adjudication of such
issue.
Item 33. Business and Other Connections of Investment Adviser
Investment advisory services for the Registrant are provided by Teachers
Advisors, Inc. ("Advisors"). In this connection, Advisors is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended.
The business and other connections of Advisors' officers are listed in
Schedules A and D of Form ADV as currently on file with the Commission (File No.
801-46887), the text of which is hereby incorporated by reference.
<PAGE>
Item 34. Principal Underwriters
(a) Not Applicable.
(b) Teachers Personal Investors Services, Inc. ("TPIS") may be considered
the principal underwriter for the Registrant. The officers of TPIS and their
positions and offices with TPIS and the Registrant are listed in Schedule A of
Form BD as currently on file with the Commission (File No. 8-47051), the text of
which is hereby incorporated by reference.
(c) Not Applicable.
Item 35. 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, New York
10017, and at other offices of the Registrant located at 750 Third Avenue and
485 Lexington Avenue, both in New York, New York 10017. In addition, certain
duplicated records are maintained at Pierce Leahy Archives, 64 Leone Lane,
Chester, New York 10918.
Item 36. Management Services
Not Applicable.
Item 37. Undertakings
(a) Not Applicable.
(b) The Registrant undertakes to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16 months
old for so long as payments under the variable annuity contracts may be
accepted.
(c) The Registrant undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information,or (2)a
post card or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
(d) The Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
Form N-3 promptly upon written or oral request.
<PAGE>
SIGNATURES
----------
As required by the Securities Act of 1933 and the Investment
Company Act of 1940, TIAA Separate Account VA-1 certifies that it meets the
requirements of Securities Act Rule 485(b) for effectiveness of this
Registration Statement and has caused this Registration Statement to be signed
on its behalf, in the City of New York and State of New York on the 20th day of
March, 1996.
TIAA SEPARATE ACCOUNT VA-1
By: /s/ Thomas W. Jones
-------------------
Thomas W. Jones
President
As required by the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Thomas W. Jones Chairman of the Management 3/20/96
- ------------------- Committee and President
Thomas W. Jones (Principal Executive Officer)
/s/ Thomas G. Walsh Executive Vice President 3/20/96
- ------------------- (Principal Financial Officer)
Thomas G. Walsh and Manager
/s/ Richard L. Gibbs Executive Vice President 3/20/96
- --------------------- (Principal Accounting Officer)
Richard L. Gibbs
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ Laurence W. Franz Manager 3/20/96
- ---------------------
Laurence W. Franz
/s/ Jeanmarie C. Grisi Manager 3/20/96
- ----------------------
Jeanmarie C. Grisi
/s/ Richard M. Norman Manager 3/20/96
- ---------------------
Richard M. Norman
<PAGE>
SIGNATURES
----------
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, Teachers Insurance and Annuity Association of America certifies
that it meets the requirements of Securities Act Rule 485(b) for effectiveness
of this Registration Statement and has caused this Registration Statement to be
signed on its behalf, in the City of New York and State of New York on the 20th
day of March, 1996.
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By:/s/ Peter C. Clapman
--------------------
Peter C. Clapman
Senior Vice President and
Chief Counsel, Investments
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
Signature Title Date
- --------- ----- -----
/s/ John H. Biggs
- -------------------- Chairman of the Board and 3/20/96
John H. Biggs Chief Executive Officer
(Principal Executive Officer)
/s/ Thomas W. Jones
- -------------------- Vice Chairman, President and 3/20/96
Thomas W. Jones Chief Operating Officer
(Principal Financial Officer)
/s/ Richard L. Gibbs
- -------------------- Executive Vice President 3/20/96
Richard L. Gibbs (Principal Accounting Officer)
<PAGE>
<TABLE>
<CAPTION>
Signature of Trustee Date Signature of Trustee Date
- -------------------- ---- -------------------- ----
<S> <C> <C> <C>
/s/ David Alexander
- ----------------------- 3/20/96 -------------------------
David Alexander Ruth Simms Hamilton
/s/ Marcus Alexis
- ------------------------ 3/20/96 /s/ Dorthy Ann Kelly 3/20/96
Marcus Alexis -------------------------
Dorothy Ann Kelly, O.S.U.
/s/ A. Howard Amon, Jr. 3/20/96 /s/ Martin L. Leibowitz 3/20/96
- ------------------------ -------------------------
A. Howard Amon, Jr. Martin L. Leibowitz
/s/ Jenne K. Britell 3/20/96 /s/ Robert M. O'Neil 3/20/96
- ------------------------ -------------------------
Jenne K. Britell Robert M. O'Neil
/s/ Willard T. Carleton 3/20/96 /s/ Leonard S. Simon 3/20/96
- ------------------------ -------------------------
Willard T. Carleton Leonard S. Simon
/s/ Robert C. Clark 3/20/96 /s/ Ronald L. Thompson 3/20/96
- ------------------------ -------------------------
Robert C. Clark Ronald L. Thompson
/s/ Flora Mancuso Edwards 3/20/96 /s/ Paul R. Tregurtha 3/20/96
- ------------------------ -------------------------
Flora Mancuso Edwards Paul R. Tregurtha
/s/ Charles J. Urstadt 3/20/96
- ------------------------ -------------------------
Estelle A. Fishbein Charles J. Urstadt
/s/ Frederick R. Ford 3/20/96 /s/ William H. Waltrip 3/20/96
- ------------------------ -------------------------
Frederick R. Ford William H. Waltrip
</TABLE>
<PAGE>
Exhibit Index
-------------
Exhibit Page
Number Description of Exhibit No.
- ------- ---------------------- ----
5 Distribution Agreement by and among TIAA, the Registrant, and
Teachers Personal Investors Services, Inc. (as amended)
11 Administrative Services Agreement by and between TIAA and the
Registrant (as amended)
12(a) Opinion and Consent of Charles H. Stamm, Esquire
12(b) Consent of Sutherland, Asbill & Brennan
13 Consent of Deloitte & Touche LLP
16 Schedules for Computation of Performance Quotations
17 Financial Data Schedule
EXHIBIT 5
<PAGE>
AMENDMENT TO THE DISTRIBUTION AGREEMENT
FOR THE CONTRACTS FUNDED BY
TIAA SEPARATE ACCOUNT VA-1
Amendment, dated August 1, 1995, to the Distribution Agreement for TIAA
Separate Account VA-1 by and among Teachers Insurance and Annuity Association
("TIAA"), TIAA Separate Account VA-1 (the "Separate Account") and Teachers
Personal Investors Services, Inc. ("TPIS") dated September 15, 1994 (the
"Agreement"). The parties to the Agreement mutually agree that:
1. Item 2 of the Agreement is amended to add the following sentence to the
end of paragraph (a):
TIAA shall retain control and responsibility for any functions that it
may delegate to other parties in connection with services rendered pursuant to
this Agreement.
2. Item 7 of the Agreement is amended to read as follows:
7. Liability. TPIS will not be liable for any error of judgment or
mistake of law or for any loss suffered by the Separate Account 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 bad faith
or 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.
IN WITNESS WHEREOF, TIAA, the Separate Account and TPIS have caused
this amendment to be executed in their names and on their behalf and under their
trust and corporate seals by and through their duly authorized officers on the
day and year first above written.
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
By: /s/ Peter Clapman Attest: /s/ Laura Bramson
- ----------------------- --------------------------
Title: Senior Vice President Title: Senior Counsel
TIAA SEPARATE ACCOUNT VA-1
By: /s/ Lisa Snow Attest: /s/ Laura Bramson
- ------------------------ ---------------------------
Title:Assistant Secretary Title: Assistant Secretary
TEACHERS PERSONAL INVESTORS SERVICES, INC.
By: /s/ Dennis D. Foley Attest: /s/ Laura Bramson
- ------------------------- ---------------------------
Title: Vice President Title: Ass't Secretary
EXHIBIT 11
<PAGE>
AMENDMENT TO THE ADMINISTRATIVE SERVICES
AGREEMENT FOR TIAA SEPARATE ACCOUNT VA-1
Amendment, dated August 1, 1995, to the Administrative
Services Agreement for TIAA Separate Account VA-1 by and between Teachers
Insurance and Annuity Association ("TIAA") and TIAA Separate Account VA-1 (the
"Separate Account"), dated September 15, 1994 (the "Agreement"). The parties to
the Agreement mutually agree that:
1. Item 4 of the Agreement is amended to add the following sentence to the
end of the first paragraph:
TIAA shall retain control and responsibility for any functions that it
may delegate to other parties in connection with services rendered pursuant to
this Agreement.
2. Item 7 of the Agreement is amended to read as follows:
7. Liability of TIAA. TIAA will not be liable for any error of judgment
or mistake of law or for any loss suffered by the Separate Account in connection
with the matters to which this Agreement relates. Nothing herein contained shall
be construed to protect TIAA against any liability resulting from the bad faith
or negligence of TIAA 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.
IN WITNESS WHEREOF, TIAA and the Separate Account have caused
this amendment to be executed in their names and on their behalf and under their
trust and corporate seals by and through their duly authorized officers on the
day and year first above written.
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
By: /s/ Peter C. Clapman Attest: /s/ Laura Bramson
- ------------------------- --------------------------
Title: Senior Vice President Title: Senior Counsel
TIAA SEPARATE ACCOUNT VA-1
By: /s/ Lisa Snow Attest: /s/ Laura Bramson
- -------------------------- --------------------------
Title: Assistant Secretary Title: Senior Counsel &
Ass't Secretary
EXHIBIT 12(A)
<PAGE>
[Letterhead of Teachers Insurance and Annuity Association]
March 20, 1996
The Management Committee
TIAA Separate Account VA-1
730 Third Avenue
New York, New York 10017-3206
Ladies and Gentlemen:
This opinion is furnished in connection with the filing by
TIAA Separate Account VA-1 (the "Separate Account") of Post- Effective Amendment
No. 2 to the Registration Statement (File Nos. 33-79124 and 811-8520) of Form
N-3 under the Securities Act of 1933 for certain individual variable annuity
contracts (the "Contracts") offered and funded by the Separate Account. The
Registration Statement covers an indefinite amount of securities in the form of
interests in the Contracts.
I have examined the Charter, Bylaws and other corporate
records of Teachers Insurance and Annuity Association of America ("TIAA"), the
Rules and Regulations and other organizational records of the Separate Account,
and the relevant statutes and regulations of the State of New York. On the basis
of such examination, it is my opinion that:
1. TIAA is a nonprofit life insurance company duly
organized and validly existing under the laws of
the State of New York.
2. The Separate Account is a "separate account" of TIAA
within the meaning of Section 4240 of the New York
Insurance Law, duly established by a resolution of
TIAA's Board of Trustees and validly existing under
the laws of the State of New York.
3. To the extent New York State law governs, the
Contracts have been duly authorized by TIAA and, when
issued as contemplated by the Registration Statement,
will constitute legal, validly issued and binding
obligations of TIAA enforceable in accordance with
their terms.
<PAGE>
I hereby consent to the use of this opinion as an exhibit to
the Registration Statement, and to the reference to my name under the heading
"Legal Matters" in the Statement of Additional Information.
Sincerely,
/s/ Charles H. Stamm
Executive Vice President
and General Counsel
EXHIBIT 12(B)
<PAGE>
March 20, 1996
The Management Committee
TIAA Separate Account VA-1
730 Third Avenue
New York, New York 10017-3206
Re: Registration of Individual Deferred
Variable Annuity Contracts (Registration
Nos. 33-79124 and 811-8520)
Ladies and Gentlemen:
We hereby consent to the reference to our name under the
caption "Legal Matters" in the Statement of Additional Information filed as a
part of Post-Effective Amendment No. 2 to the above-captioned registration
statement on Form N-3. In giving this consent, we do not admit that we are in
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933.
Sincerely,
SUTHERLAND, ASBILL & BRENNAN
By:/s/ Steven B. Boehm
-------------------
EXHIBIT 13
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 2 to Registration
Statement No. 33-79124 and Amendment No. 5 to Registration Statement No.
811-8520 of TIAA Separate Account VA-1 ("VA-1") on Form N-3 of our reports dated
February 6, 1996 relating to the financial statements of the Stock Index Account
of VA-1 and March 8, 1996 relating to the financial statements of Teachers
Insurance and Annuity Association of America included in the Statement of
Additional Information, which is a part of such Registration Statement, and to
the references to us under the headings "Auditors" and "Experts" in such
Statement of Additional Information.
DELOITTE & TOUCHE LLP
New York, New York
March 22, 1996
EXHIBIT 16
Schedule of Computation
Total Return Information for the TIAA Separate Account VA-1
Stock Index Account
<TABLE>
<CAPTION>
January 1, 1995 14 months (From November 1, 1994
to Commencement of operations to
December 31, 1995 December 31, 1995)
----------------- ------------------
<S> <C> <C>
Hypothetical initial
payment of $1,000 (P) $ 1,000 $ 1,000
Accumulation unit value:
At start of period (A) $ 25.2706 $ 25.8318
At end of period (B) $ 34.4112 $ 34.4112
Ending value of
hypothetical investment
(Ev) = P x (B/A) $1,361.71 $1,332.13
Cumulative rate of total
return = {(EV/P) - 1} x 100 36.17% 33.21%
Number of years
in period (n) 1 1.17
Net change factor (1 + T)
= EV/P 1.3617 1.3321
Average annual compound
rate of total return (T) 36.17% 27.87%
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000923524
<NAME> TIAA SEPARATE ACCOUNT VA-1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 72,207,438
<INVESTMENTS-AT-VALUE> 88,595,324
<RECEIVABLES> 1,000,722
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 32,280
<TOTAL-ASSETS> 89,628,326
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 733
<TOTAL-LIABILITIES> 733
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 2,604,605
<SHARES-COMMON-PRIOR> 1,171,177
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 89,627,593
<DIVIDEND-INCOME> 1,436,608
<INTEREST-INCOME> 46,587
<OTHER-INCOME> 0
<EXPENSES-NET> 336,765
<NET-INVESTMENT-INCOME> 1,146,430
<REALIZED-GAINS-CURRENT> 481,973
<APPREC-INCREASE-CURRENT> 16,241,820
<NET-CHANGE-FROM-OPS> 17,870,223
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,999,245
<NUMBER-OF-SHARES-REDEEMED> 565,817
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 60,031,237
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 186,937
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 462,464
<AVERAGE-NET-ASSETS> 61,314,170
<PER-SHARE-NAV-BEGIN> 25.271
<PER-SHARE-NII> .575
<PER-SHARE-GAIN-APPREC> 8.565
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 34.411
<EXPENSE-RATIO> .005
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
