As filed with the Securities and Exchange Commission on April 1, 1999
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. 5 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 8 [X]
(Check appropriate box or boxes.)
TIAA SEPARATE ACCOUNT VA-1
---------------------------
(Exact Name of Registrant)
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
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(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 Steven B. Boehm, Esquire
Teachers Insurance and Annuity Sutherland, Asbill & Brennan LLP
Association of America 1275 Pennsylvania Avenue, N.W.
730 Third Ave Washington, D.C. 20004-2415
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)
|X| immediately upon filing pursuant to paragraph (b)
|_| on (date) 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.
Title & Securities Being Registered: Interests in a separate account funding
variable annuity contracts.
<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> <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> <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 Transfer 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>
Prospectus
Teachers Insurance and
Annuity Association
Individual Deferred
Variable Annuities
Funded Through TIAA
Separate Account VA-1
April 1, 1999
<PAGE>
Prospectus Dated April 1, 1999
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 non-profit or publicly supported colleges, universities, and
other educational and research organizations and for other eligible persons.
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, 1999. 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. The SEC maintains a Website
(http://www.sec.gov) that contains the SAI, material incorporated by reference
and other information regarding the separate account.
These securities have not been approved or disapproved by the Securities and
Exchange Commission nor has the commission passed upon the accuracy or adequacy
of this prospectus. Any representation to the contrary is a criminal offense.
An investment in the contract is not a deposit of the TIAA-CREF Trust Company,
FSB, and is not insured or guaranteed by the Federal Deposit Insurance
Corporation (FDIC) or any other government agency.
The date of this prospectus is April 1, 1999.
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Table of contents
3 Definitions
5 Summary
8 Condensed financial information
9 Teachers Insurance and
Annuity Association of America
10 The Separate Account
10 Adding, closing, or substituting portfolios
11 Investment practices
15 Performance information
15 Valuation of assets
15 Management and Investment Advisory Arrangements
16 The Contract
16 Eligible Purchasers of the Contract
16 Remitting Premiums
18 Accumulation Units
19 The Fixed Account
19 Transfers Between the Separate Account
and the Fixed Account
20 Cash Withdrawals
20 General Considerations for All Transfers
and Cash Withdrawals
20 Tax Issues
21 Charges
22 The Annuity Period
23 Income Options
24 Death Benefits
27 Timing of payments
27 Federal income taxes
31 Voting rights
31 General matters
33 Distribution of the contracts
33 Legal proceedings
34 Table of contents for Statement of Additional Information
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.
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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.
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Eligible Institution
A public or private institution in the United States that is nonproprietary and
nonprofit, and the main purpose of which is 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.
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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 19). The
contract is an individual deferred annuity that is available to any employee,
trustee, or retired employee of an eligible institution, or his or her spouse
(or surviving spouse) as well as certain other eligible persons (see "Eligible
Purchasers of the Contract," page 16). 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, 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. (Advisors), 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.
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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 22).
The table at the bottom of this page 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.
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 21.
"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 17) 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 returned 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
<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>
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transfers from the separate account to one in any 90-day period. All transfers
must be for at least $250 or your entire account balance. All cash withdrawals
must be for at least $1,000 or your entire account balance.
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 23, and "Federal Income Taxes,"
page 27.
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Condensed financial information
Below you'll find condensed audited financial information for the separate
account for the periods presented. 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
Year Ended December 31, registration)
------------------------------------------------------- to December 31,
1998 1997 1996 1995 1994(1)
------------- ------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Per accumulation unit data:
Investment income $ 0.908 $ 0.847 $ 0.807 $ 0.745 $ 0.138
Expense charges 0.223 0.182 0.150 0.170 0.023
-------- -------- -------- -------- --------
Investment income-net 0.685 0.665 0.657 0.575 0.115
Net realized and unrealized
gain (loss) on investments 12.407 12.429 6.755 8.565 (0.676)
-------- -------- -------- -------- --------
Net increase (decrease) in
accumulation unit value 13.092 13.094 7.412 9.140 (0.561)
Accumulation unit value:
Beginning of period 54.917 41.823 34.411 25.271 25.832
-------- -------- -------- -------- --------
End of period $ 68.009 $ 54.917 $ 41.823 $ 34.411 $ 25.271
======== ======== ======== ======== ========
Ratios to average net assets:
Expenses(2) 0.37% 0.37% 0.40% 0.55% 0.09%
Investment income-net 1.14% 1.36% 1.74% 1.87% 0.45%
Portfolio turnover rate 45.93% 2.39% 4.55% 0.98% 0.04%
Thousands of accumulation
units outstanding at end
of period 11,145 9,901 6,768 2,605 1,171
</TABLE>
(1) The percentages shown for this period are not annualized.
(2) Advisors has agreed to waive a portion of its investment advisory fee.
Without this waiver the Stock Index Account's expense ratio for the periods
listed would have been higher (see Note 3 of the notes to financial
statements).
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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.
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 world, based on assets under management. TIAA-CREF serves approximately
2.1 million people at about 8,800 institutions. As of December 31, 1998, TIAA's
assets were approximately $102 billion; the combined assets for TIAA and CREF
totalled approximately $248 billion (although CREF doesn't stand behind TIAA's
guarantees).
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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, most of 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 annuity products, earnings on accumulations in the separate account
aren't taxed until withdrawn or paid as annuity income (see "Federal Income
Taxes," page 27).
================================================================================
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 available. 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
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(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. Advisors manages the separate
account's assets (see "Management and Investment Advisory Arrangements" page
15). Personnel of Advisors, a subsidiary of TIAA, also manage assets of one or
more CREF accounts on behalf of TIAA-CREF Investment Management, LLC, an
investment adviser which is also a TIAA subsidiary. Personnel of Advisors also
manage assets of other investment companies, including TIAA-CREF Life Funds and
TIAA-CREF Mutual Funds. Ordinarily, investment decisions for the separate
account will be made independently, but managers for the separate account may at
times decide to buy or sell a particular security at the same time as for a CREF
account or another investment company whose assets 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
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overall market for common 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.
We will, however, use proprietary quantitative scoring and trading techniques
to attempt to slightly outperform the Russell 3000 Index.
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 the
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
$2 million to $345.8 billion, with an average of $4.2 billion as of December
31, 1998.
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The Frank Russell Company includes stocks in the Index solely on their market
capitalization and weights them by relative market value. The Frank Russell
Company can change stocks and their weightings in the Index. We'll adjust the
separate account's portfolio to reflect the changes as appropriate. We can also
adjust the separate account's portfolio because of mergers and similar events.
The separate account isn't promoted, endorsed, sponsored, or sold by, and isn't
affiliated with, the Frank Russell Company. A stock's presence in the Russell
3000 doesn't mean that the Frank Russell Company believes that it's an
attractive investment. The Frank Russell Company isn't responsible for any
literature about the separate account and makes no representations or
warranties about its content. The Russell 3000 is a trademark and service mark
of the 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 the 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. For more information, 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.
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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.
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
The separate account can use repurchase agreements to manage cash balances. 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 information, 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 information, 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. For
more information, 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). For more information, see
the SAI.
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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" 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 32).
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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
determined in good faith under the direction of the management committee. We
may also use "fair value" in certain other circumstances. For more information,
see the SAI.
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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
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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. Transactions in securities by those individuals must be
reported and approved and they must also send duplicate confirmation statements
and other account reports to a special compliance unit.
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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, the District of Columbia
and the United States Virgin Islands.
Eligible Purchasers of the Contract
An employee, trustee, or a retiree of an eligible institution can purchase a
contract. For this purpose, an individual who is at least 55 years old and
completed at least five years of service at an eligible institution is
considered to be a "retiree." A spouse (or surviving spouse) of an employee,
trustee, or retiree of an eligible institution can also purchase a contract.
Any individual who owns a TIAA or CREF annuity contract or certificate or
individual insurance policy, as well as the spouse or surviving spouse of such
a person can also purchase a contract.
Remitting Premiums
Initial Premiums We'll issue you a contract as soon as we receive your
completed application and your initial premium of at least $250 at our home
office, even if you don't initially allocate any premiums to the separate
account. Please send your check, payable to TIAA, along with your application
to:
TIAA-CREF
P.O. Box 71727
Chicago, IL 60694-1727
(The $250 minimum doesn't apply if application and payment of at least $25 is
accompanied by an agreement for electronic funds transfer (EFT) or if you are
using payroll deduction. We also reserve the right to temporarily waive the
$250 minimum initial premium amount.) 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
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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.
Additional Premiums. Subsequent premiums must be for at least $25. Send a check
payable to TIAA, along with a personalized payment coupon (supplied upon
purchasing a contract) to:
TIAA-CREF
P.O. Box 95919
Chicago, IL 60694-5919
If you don't have a coupon, use a separate piece of paper to give us your name,
address and contract number. These premiums will be credited as of the business
day we receive them. 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.
Electronic Payment You may make initial or subsequent investments by
electronic payment. A federal wire is usually received the same day and an ACH
is usually received by the second day after transmission. Be aware that your
bank may charge you a fee to wire funds, although ACH is usually less expensive
than a federal wire. Here's what you need to do:
1. If you are sending in an initial premium, send us your application;
2. Instruct your bank to wire money to:
Citibank, N.A.
ABA Number 021000089
New York, NY
Account of: TIAA
Account Number: 4068-4865
3. Specify on the wire:
- Your name, address and Social Security Number(s) or Taxpayer
Identification Number
- Indicate if this is for a new application or existing contract (provide
contract number if existing)
Certain Restrictions 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:
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"Free Look"
Jurisdiction 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
to be credited to the fixed account during any such period (see "Contacting
TIAA," page 32).
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 22). 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 24).
The value of the accumulation units will depend mainly on investment
experience, though the unit value reflects expense deductions from assets (see
"Charges," page 21). 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)
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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).
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 $250 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).
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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 total amount in the separate account and the fixed account
falls below $250. 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. Transfers
and cash withdrawals made at any time other than during a business day will be
effective at the close of the next business day. 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, call our Automated
Telephone Service at 1 800 842-2252 (there is an option to speak with a live
person, if you wish) or use our Inter/ACT Service over the Internet at
www.tiaa-cref.org. If you make a telephone or Internet transfer at any time
other than during a business day, it will be effective at the close of the next
business day. We can suspend or terminate your ability to transfer by telephone
or over the Internet at any time.
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 or penalties as well. For details,
see "Federal Income Taxes," page 27.
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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.
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. 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.
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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).
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.
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. We transfer your separate account accumulation to the fixed account on
that day. 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 annuity
option chosen, 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 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.
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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 of the annuitant's ninetieth
birthday). You can change the annuity starting date at any time before annuity
payments begin (see "Choices and Changes," page 31). 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 32.) If we haven't received all
the necessary information, we'll defer the annuity starting date until the
first day 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. 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 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. You have a number of different annuity
options to choose among.
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
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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 Pays income at least as long as the annuitant and the
annuity partner are alive, then continues upon the death of one at either the
same or a reduced level at least until the second person dies. Once annuity
payments 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.
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.
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.
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 accu-
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mulation period (see "Choices and Changes," page 31). 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 become 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 19). 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 32.) 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 have the
option of paying 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.
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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 28.) 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 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 31). 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.
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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; (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.
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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
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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 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 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. If a contractowner's spouse is the designated beneficiary, he or she
can continue the contract when the 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
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<PAGE>
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 remaining portion of the withdrawal
is not taxable. The investment in the contract usually equals all premiums paid
by the contractowner or on the contractowner's behalf.
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. Generally, under the
Interest Payments method the death benefit will be taxed as though it were
distributed as a single-sum payment at the beginning of the payment period,
with interest taxed 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 591/2;
(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. Legislation is proposed from time to time that would
change the taxation of annuity contracts. It is possible that such legislation
could be enacted and that it could be retroactive (that is, effec-
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<PAGE>
tive prior to the date of the change). You should consult a tax adviser with
respect to legislative developments and their effect on the Contract.
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.
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 and its affiliates 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). It is possible, for instance, that if you take annuity
payments from only one of the contracts, they could be taxed like individual
withdrawals (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 22), 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.
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<PAGE>
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 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 16).
Telephone and Internet Transactions
You can use our Automated Telephone Service (ATS) or our Inter/ACT System over
the Internet to check your accumulation balances and/or your current allocation
percentages, transfer between the separate account and the fixed account,
and/or allocate future
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<PAGE>
premiums to the separate account or the fixed account. You will be asked to
enter your Personal Identification Number (PIN) and Social Security Number for
both systems. Both will lead you through the transaction process and will use
reasonable procedures to confirm that instructions given are genuine. All
transactions made over the ATS and Inter/ACT are electronically recorded.
To use the ATS, you need to call 1 800 842-2252 on a touch-tone phone. To use
Inter/ACT, access the TIAA-CREF Internet home page at www.tiaa-cref.org.
We can suspend or terminate your ability to transact by telephone or over the
Internet at any time.
Year 2000 Issues
Like all financial and business organizations, the separate account and its
service providers depend on the smooth functioning of computer systems to
operate. The separate account's operations, including securities pricing,
trading, and the servicing of contractowners, could be affected if these
computer systems fail or incorrectly process or calculate date-related
information on or after January 1, 2000.
The separate account is dedicated to providing uninterrupted, high-quality
service before, during, and after the Year 2000. To achieve this goal, the
separate account, along with TIAA and Advisors, have developed and have been
actively carrying out an extensive Year 2000 plan to remediate, test and
certify all internal computer systems, and to verify, to the extent possible,
that external service providers will be ready for the Year 2000. While we have
taken steps we believe reasonably address the Year 2000 problem, we can't
guarantee complete success or eliminate the possibility that interaction with
outside computer systems could affect the separate account's operations. If the
systems the separate account relies upon do fail or produce faulty data, there
could be delays in properly processing transactions, or we may be unable
temporarily to engage in normal business activities. Also, the separate
account's performance could be affected if a systems failure at a company or
governmental entity affects the price of securities the separate account owns.
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, or the
post office box specifically designated for the purpose. You can ask questions
by calling toll-free 1 800 223-1200.
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<PAGE>
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.
Householding
To cut costs and eliminate duplicate documents sent to your home, we may, if
the SEC allows, begin mailing only one copy of the separate account prospectus,
prospectus supplements, annual and semi-annual reports, or any other required
documents, to your household, even if more than one contractowner lives there.
If you would prefer to continue receiving your own copy of any of these
documents, you may call us toll-free at 1 800 842-2733, extension 5509, or
write us.
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.
Errors or Omissions
We reserve the right to correct any errors or omissions on any form, report or
statement that we send you.
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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, are members of the NASD and are direct or indirect subsidiaries
of TIAA. 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.
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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.
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33
<PAGE>
Table of contents for
Statement of Additional Information
<TABLE>
<CAPTION>
Page in the
Statement of
Additional
Item Information
- --------------------------------------------------------------------------------
<S> <C>
Investment Restrictions B-3
Investment Policies and Risk Considerations B-3
Options and Futures B-3
Firm Commitment Agreements and Purchase of "When-Issued" B-6
Securities
Lending of Securities B-6
Repurchase Agreements B-6
Swap Transactions B-7
Segregated Accounts B-7
Other Investment Techniques and Opportunities B-7
Portfolio Turnover B-7
Valuation of Assets B-8
Equity Securities B-8
Money Market Instruments B-8
Options B-8
Investments for Which Market Quotations Are Not Readily Available B-8
Management B-9
Separate Account Management Committee and Officers B-9
Compensation of Managers B-9
Investment Advisory and Related Services B-10
Investment Advisory Services B-10
Administrative Services B-10
Advisors and TIAA B-10
Custody of Portfolio B-10
Auditors B-10
Brokerage Allocation B-11
Performance Information B-11
Total Return Information for the Separate Account B-11
Performance Comparisons B-12
Illustrating Compounding, Tax Deferral, and Expense Deductions B-12
Periodic Reports B-13
General Matters B-13
Assignment of Contracts B-13
Payment to an Estate, Guardian, Trustee, etc. B-13
Benefits Based on Incorrect Information B-13
Proof of Survival B-13
State Regulation B-13
Legal Matters B-13
Experts B-13
Additional Considerations B-13
Additional Information B-14
Financial Statements B-14
</TABLE>
34
<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, 1999
This Statement of Additional Information is not a prospectus and should be read
in connection with the current prospectus dated April 1, 1999 (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.
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Location of
Additional
Information
in Prospectus,
Item Page if applicable
---- ---- -------------
<S> <C> <C>
Investment Restrictions ............................. B-3 13
Investment Policies and Risk
Considerations .................................... B-3 11-14
Options and Futures ............................... B-3 13-14
Firm Commitment Agreements
and Purchase of
"When-Issued" Securities ........................ B-6 14
Lending of Securities ............................. B-6 14
Repurchase Agreements ............................. B-6 14
Swap Transactions ................................. B-7 13-14
Segregated Accounts ............................... B-7
Other Investment Techniques and
Opportunities ................................... B-7
Portfolio Turnover .................................. B-7
Valuation of Assets ................................. B-8 15
Equity Securities ................................. B-8
Money Market Instruments .......................... B-8
Options ........................................... B-8
Investments for Which Market
Quotations are Not Readily
Available ....................................... B-8
Management .......................................... B-9 15-16
Separate Account Management
Committee and Officers .......................... B-9 15-16
Compensation of Managers .......................... B-9
Investment Advisory and Related
Services .......................................... B-10
Investment Advisory Services ...................... B-10 15-16
</TABLE>
<TABLE>
<CAPTION>
Location of
Additional
Information
in Prospectus,
Item Page if applicable
---- ---- -------------
<S> <C> <C>
Administrative Services ............................ B-10
Advisors and TIAA .................................. B-10
Custody of Portfolio ............................... B-10
Auditors ........................................... B-10
Brokerage Allocation ................................. B-11
Performance Information .............................. B-11 15
Total Return Information for the
Separate Account ................................. B-11
Performance Comparisons ............................ B-12
Illustrating Compounding, Tax
Deferral, and Expense
Deductions ....................................... B-12
Periodic Reports ..................................... B-13
General Matters ...................................... B-13
Assignment of Contracts ............................ B-13
Payment to an Estate, Guardian,
Trustee, etc ..................................... B-13
Benefits Based on Incorrect
Information ...................................... B-13
Proof of Survival .................................. B-13
State Regulation ..................................... B-13 10
Legal Matters ........................................ B-13 33
Experts .............................................. B-13
Additional Considerations ............................ B-13
Additional Information ............................... B-14
Financial Statements ................................. B-14 8
</TABLE>
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 331/3% 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 may be
made; (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.
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
B-3
<PAGE>
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.
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.
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.
B-4
<PAGE>
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.
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.
B-5
<PAGE>
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, 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-7). 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.
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.
B-6
<PAGE>
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 separate account'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 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 or other securities 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. In 1998, the
separate account adopted an enhanced index approach to investing which utilizes
proprietary quantitative scoring and trading techniques to attempt to slightly
outperform the Russell 300 Index (see page 12 of the Prospectus). This approach
inherently involves trading volumes beyond the level necessary to maintain a
typical stock index portfolio. As a result of the adoption of this approach,
the portfolio turnover rate in 1998 for the separate account was 45.93% as
compared to 2.39% in 1997 when such an approach was not in effect.
B-7
<PAGE>
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 asked
prices if no sale is reported. Equity securities which are listed or traded on
any other exchange are valued in a comparable manner on the principal exchange
where traded.
Equity securities traded in the United States over-the-counter market are
valued based on the last sale price on the date of valuation for NASDAQ
National Market System securities, or at the mean of the closing bid and asked
prices if no sale is reported. Other U.S. over-the-counter equity securities
are valued at the mean of the closing bid and asked prices.
Equity securities traded in the United States may be valued at fair value as
determined in good faith under the direction of the Management Committee (see
"Management," below) if events materially effecting the value of a domestic
investment (as determined in our sole discretion) occur between the time when
its price is determined and the time the separate account's net asset value is
calculated.
Money Market Instruments
Money market instruments for which market quotations are readily available are
valued based on the most recent bid price or the equivalent quoted yield for
such securities (or those of comparable maturity, quality, and type). Values
for money market instruments will be obtained either from one or more of the
major market makers or from one or more of the financial information services
for the securities to be valued.
Options
Portfolio investments underlying options are valued as described above. Stock
options written by the 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-8
<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 with
Name and Address* Age Registrant
- ---------------------------------- ----- --------------------------
<S> <C> <C>
Laurence W. Franz 59 Manager
Canisius College
2001 Main Street
Buffalo, New York 14208
Jeanmarie C. Grisi 40 Manager
Carnegie Corporation of New York
437 Madison Avenue
New York, New York 10022
Richard M. Norman 54 Manager
Rutgers University
Old Queens Building, Room 101
Somerset-George Street
New Brunswick, New Jersey 08903
Thomas G. Walsh** 57 Chairman of the
Management Committee
and President
Richard L. Gibbs 52 Executive Vice President
Peter C. Clapman 63 Senior Vice President,
Secretary and Chief
Counsel, Investments
Richard J. Adamski 57 Vice President and
Treasurer
<CAPTION>
Principal Occupation(s)
Name and Address* During Past 5 Years
- ----------------- -------------------
<S> <C>
Laurence W. Franz Vice President, Business and Finance, and
Treasurer, Canisius
Canisius College College
2001 Main Street
Buffalo, New York 14208
Jeanmarie C. Grisi Treasurer, Carnegie Corporation of New York
Carnegie Corporation of New York (a philanthropic grantmaking foundation)
437 Madison Avenue
New York, New York 10022
Richard M. Norman Vice President for Administration and
Rutgers University Associate Treasurer, Rutgers, The State
Old Queens Building, Room 101 University of New Jersey
Somerset-George Street
New Brunswick, New Jersey 08903
Thomas G. Walsh** President, Teachers Personal Investors
Services, Inc. ("TPIS"), since February 1994,
and Executive Vice President, TIAA and CREF
Richard L. Gibbs Executive Vice President, TIAA, CREF,
TIAA-CREF Investment Management, LLC
("Investment Management") and TIAA-CREF
Individual & Institutional Services, Inc.
("Services"), since 1993
Peter C. Clapman Senior Vice President and Chief Counsel,
Investments, TIAA and CREF
Richard J. Adamski Vice President and Treasurer, Investment
Management and Services, since January 1992
and TPIS, since 1994, and Vice President and
Treasurer, TIAA and CREF
</TABLE>
* The address for all officers of the separate account is 730 Third Avenue,
New York, New York 10017-3206.
** This Manager is or may be an "interested person" within the meaning of the
Investment Company Act of 1940.
Compensation of Managers
Currently, Managers who are not active officers of TIAA each receive $5,000 per
year, plus $1,000 for each meeting of the Management Committee attended for
their services to both TIAA Separate Account VA-1 and TIAA-CREF Life Funds (the
"Fund Complex"). Compensation is allocated between the companies in the Fund
Complex based on assets. 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 to the separate account's
Managers for the year ended December 31, 1998. The compensation information
reflected in the table for the year ended December 31, 1998 differs from the
current compensation arrangements.
B-9
<PAGE>
<TABLE>
<CAPTION>
(3)
(2) Pension or Retirement (4)
(1) Aggregate Compensa- Benefits Accrued As Estimated (5)
Name of Person, tion From Separate Part of Separate Benefits Upon Total Compensation
Position Account Account Expenses Retirement From Fund Complex**
- --------------------- --------------------- ----------------------- --------------- ---------------------
<S> <C> <C> <C> <C>
Laurence W. Franz, $ 6,728.50 $-0- $-0- $6,750
Manager
Jeanmarie C. Grisi, $ -0-* $-0- $-0- $ -0-
Manager
Richard M. Norman, $ 6,728.50 $-0- $-0- $6,750
Manager
</TABLE>
* Ms. Grisi declined to accept compensation for her services.
** For purposes of this information, the Fund Complex consists of TIAA Separate
Account VA-1 and TIAA-CREF Life Funds.
Investment Advisory and Related
Services
Investment Advisory Services
Investment advisory services and related services for the separate account are
provided by personnel of Teachers Advisors, Inc. ("Advisors"). Advisors 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.
For the years ended December 31, 1998, 1997 and 1996, the separate account paid
investment advisory fees of $454,592, $293,938 and $141,057, respectively.
These fees reflect the waiver by Advisors of a portion of its investment
advisory fee for the years ended December 31, 1998, 1997 and 1996 of
$1,493,423, $965,646 and $426,181, respectively.
Administrative Services
TIAA provides the administrative services for the separate account and the
contracts. The current daily deduction for such services equates to 0.20% of
net assets annually. For the years ended December 31, 1998, 1997 and 1996,
administrative expenses incurred were $1,298,597, $839,672 and $378,136,
respectively.
Advisors and TIAA
Advisors is a wholly-owned indirect subsidiary of TIAA. The main offices of
both TIAA and Advisors are at 730 Third Avenue, New York, New York 10017-3206.
TIAA is a stock life insurance company, organized under the laws of New York
State. It was founded on March 4, 1918, by the Carnegie Foundation for the
Advancement of Teaching. TIAA is the companion organization of the College
Retirement Equities Fund ("CREF"), the first company in the United States to
issue a variable annuity. Together, TIAA and CREF form the principal retirement
system for the nation's education and research communities and the largest
retirement system in the world, based on assets under management. TIAA-CREF
serves approximately 2.1 million people. As of December 31, 1998, TIAA's assets
were approximately $102 billion; the combined assets for TIAA and CREF totalled
approximately $248 billion.
TIAA holds all of the shares of TIAA-CREF Enterprises, Inc., which in turn
holds all the shares of Advisors, and Teachers Personal Investors Services,
Inc., the principal underwriter for the interests in the variable annuity
contracts funded through the separate account. TIAA also holds all the shares
of TIAA-CREF Investment Management, LLC ("Investment Management"). Investment
Management provides investment advisory services to CREF, TIAA's companion
organization. All of the foregoing are affiliates of the separate account and
Advisors.
Custody of Portfolio
The custodian for the assets of the separate account is Bankers Trust Company,
130 Liberty Street, New York, New York 10006.
Auditors
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, serves as the
separate account's independent auditors and, in that regard, provides general
auditing services for the separate account.
B-10
<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 (i) a CREF account or any other
account that they may also be managing on behalf of TIAA-CREF Investment
Management, LLC ("Investment Management"), another investment adviser also
affiliated with TIAA, or (ii) TIAA-CREF Life Funds, TIAA-CREF Mutual Funds or
any other investment account whose assets Advisors may be managing. 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 1998, 1997 and 1996 was
$257,121, $42,630 and $60,134, 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 1998, 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 other investment company accounts and other accounts,
or the CREF accounts for Investment Management. In such circumstances, the
expenses incurred will be allocated in an equitable manner consistent with the
fiduciary obligations of personnel of Advisors to the separate account.
During 1998, 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, 1998, are set forth below:
A. Regular broker or dealer based on brokerage commission paid
<TABLE>
<S> <C> <C>
Jefferies & Co., Inc. (Parent-Jefferies Group, Inc.) $ 109,175
B. Regular broker or dealer based on entities acting as principal
Chase Securities, Inc. (Parent-Chase Manhattan Corp.) $4,236,210
Dean Witter Reynolds, Inc. (Parent-Morgan Stanley, Dean Witter, & Co.) $2,843,905
Lehman Brothers Inc. (Parent-Lehman Brothers Holdings, Inc.) $ 665,344
Morgan (J.P.) Securities Inc. (Parent-Morgan (J.P.) & Co., Inc.) $ 872,019
Morgan Stanley & Co., Inc. (Parent-Morgan Stanley, Dean Witter, & Co.) $2,843,905
Nations Banc Capital Markets, Inc. (Parent-BankAmerica Corp) $6,667,562
</TABLE>
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's 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
B-11
<PAGE>
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:
<TABLE>
<CAPTION>
Average Annual
Compound Rate of Cumulative Rate of
Period Total Return Total Return
- --------------------------------------------- ------------------ -------------------
<S> <C> <C>
1 year
(from January 1, 1998 to December 31, 1998) 23.84% 23.84%
4 years and 2 months
(from November 1, 1994 date of SEC
registration to December 31, 1998) 26.15% 163.27%
</TABLE>
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.
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
B-12
<PAGE>
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.
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 LLP, Washington, D.C.
Experts
The financial statements of TIAA and the separate account included in this
Statement of Additional Information have been audited by Ernst & Young LLP,
independent auditors, as stated in their reports appearing herein (which report
on the financial statements of TIAA expresses an opinion that such financial
statements are presented in conformity with statutory accounting practices, a
comprehensive basis of accounting as described in Note 2, and not in conformity
with generally accepted accounting principles), 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 investment
vehicles to their line of products. The growing family of TIAA and CREF
products is designed to provide additional 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 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.
B-13
<PAGE>
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 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 what types of investments are best suited for you and
your current needs. In particular, you should consider the tax treatment of a
variable annuity as compared with a standard mutual fund product. With
annuities, earnings generally grow tax-deferred and investors are provided the
option of lifetime income upon retirement. However, annuities may have
restrictions on withdrawals before age 591/2, and thus may not be suitable for
goals other than retirement. We may compare annuities to mutual funds in sales
literature and advertisements.
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-14
<PAGE>
INDEX TO AUDITED FINANCIAL STATEMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
TIAA SEPARATE ACCOUNT VA-1--STOCK INDEX ACCOUNT
Report of Management Responsibility................................. B-16
Report of Independent Auditors...................................... B-17
AUDITED FINANCIAL STATEMENTS
Statements of Assets and Liabilities........................... B-18
Statement of Operations........................................ B-19
Statement of Changes in Net Assets............................. B-20
Notes to Financial Statements....................................... B-21
Statement of Investments............................................ B-23
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
Chairman's Letter................................................... B-41
Report of Management Responsibility................................. B-42
Report of Independent Auditors...................................... B-43
STATUTORY-BASIS FINANCIAL STATEMENTS
Balance Sheets................................................. B-44
Statements of Operations....................................... B-45
Statements of Changes in Contingency Reserves.................. B-46
Statements of Cash Flows....................................... B-47
Notes to Statutory-Basis Financial Statements....................... B-48
</TABLE>
B-15
<PAGE>
REPORT OF MANAGEMENT RESPONSIBILITY
To the Contractowners of
TIAA Separate Account VA-1:
The accompanying financial statements of the Stock Index 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 accompanying financial statements have been audited by the independent
auditing firm of Ernst & Young 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 Ernst & Young LLP and internal audit personnel to review matters relating to
financial reporting, internal controls and auditing.
/s/ Thomas G. Walsh
-------------------------------
President
and Chief Executive Officer
/s/ Richard L. Gibbs
-------------------------------
Chief Financial Officer
and Executive Vice President
B-16
<PAGE>
[Letterhead of ERNST & YOUNG LLP]
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, 1998, and the related statements of
operations for the year then ended and of changes in net assets for each of the
two years in the period then ended. 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. The condensed
financial information for the year ended December 31, 1996 and the periods
prior thereto were audited by other auditors, whose report dated February 6,
1997 expressed an unqualified opinion on such condensed financial information.
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, 1998, by
correspondence with the custodians and brokers. 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, the financial statements referred to above present fairly, in
all material respects, the financial position of the Stock Index Account of
VA-1 at December 31, 1998, the results of its operations for the year then
ended and the changes in its net assets for each of the two years in the period
then ended, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
February 5, 1999
B-17
<PAGE>
TIAA SEPARATE ACCOUNT VA-1
STOCK INDEX ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
(amounts in thousands, except per accumulation unit amount)
<TABLE>
<S> <C>
ASSETS
Investments, at cost ........................................... $ 514,100
Net unrealized appreciation of investments ..................... 242,057
---------
Investments, at value .......................................... 756,157
Cash ........................................................... 789
Dividends and interest receivable .............................. 871
Amounts due from General Account ............................... 593
Receivable from securities transactions ........................ 7,882
---------
TOTAL ASSETS 766,292
---------
LIABILITIES
Payable for securities transactions ............................ 8,310
---------
TOTAL LIABILITIES 8,310
---------
NET ASSETS--Accumulation Fund ................................... $ 757,982
=========
NUMBER OF ACCUMULATION UNITS OUTSTANDING--Notes 5 and 6 ......... 11,145
=========
NET ASSET VALUE, PER ACCUMULATION UNIT--Note 5 .................. $ 68.01
=========
</TABLE>
See notes to financial statements.
B-18
<PAGE>
TIAA SEPARATE ACCOUNT VA-1
STOCK INDEX ACCOUNT
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(amounts in thousands)
<TABLE>
<S> <C>
INVESTMENT INCOME
Income:
Interest ..................................................... $ 130
Dividends .................................................... 9,662
--------
TOTAL INCOME 9,792
--------
Expenses--Note 3:
Investment advisory charges .................................. 1,948
Administrative expenses ...................................... 1,299
Mortality and expense risk charges ........................... 649
--------
EXPENSES BEFORE WAIVER 3,896
Investment advisory charges waived--Note 3 ................... (1,494)
--------
NET EXPENSES 2,402
--------
INVESTMENT INCOME--NET 7,390
--------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS--Note 4
Net realized gain on investments ............................. 31,091
Net change in unrealized appreciation on investments ......... 97,186
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 128,277
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $135,667
========
</TABLE>
See notes to financial statements.
B-19
<PAGE>
TIAA SEPARATE ACCOUNT VA-1
STOCK INDEX ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
(amounts in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Investment income--net ....................................... $ 7,390 $ 5,695
Net realized gain on investments ............................. 31,091 7,108
Net change in unrealized appreciation on investments ......... 97,186 96,189
--------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 135,667 108,992
--------- ---------
FROM CONTRACTOWNER TRANSACTIONS
Premiums ..................................................... 135,735 154,463
Net contractowner transfers (to) from fixed account .......... (36,831) 9,216
Withdrawals .................................................. (16,442) (10,917)
Death benefits ............................................... (3,878) (1,068)
--------- ---------
NET INCREASE IN NET ASSETS RESULTING
FROM CONTRACTOWNER TRANSACTIONS 78,584 151,694
--------- ---------
NET INCREASE IN NET ASSETS 214,251 260,686
NET ASSETS
Beginning of year ............................................ 543,731 283,045
--------- ---------
End of year .................................................. $ 757,982 $ 543,731
========= =========
</TABLE>
See notes to financial statements.
B-20
<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 (the "Account"), which
invests in a diversified portfolio of equity securities selected to track the
overall United States stock market.
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 preparation of financial statements may require management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, income, expenses and related disclosures. Actual results may
differ from those estimates. The following is a summary of the significant
accounting policies 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 income taxes are attributable to the net investment experience of the
Account.
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 0.07% 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 for bearing
certain mortality and expense risks in connection with the contracts equivalent
to an annual rate of 0.10% of the net assets of the Account.
B-21
<PAGE>
TIAA SEPARATE ACCOUNT VA-1
STOCK INDEX ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 4--INVESTMENTS
At December 31, 1998, the net unrealized appreciation on investments was
$242,057,448, consisting of gross unrealized appreciation of $256,727,054 and
gross unrealized depreciation of $14,669,606.
Purchases and sales of securities, other than short-term money market
instruments, for the year ended December 31, 1998, were $378,601,401 and
$295,621,045, respectively.
NOTE 5--CONDENSED FINANCIAL INFORMATION
Selected condensed financial information for an Accumulation Unit of the
Account is presented below.
<TABLE>
<CAPTION>
Years Ended December 31, October 3, 1994
------------------------------------------------------------- (date established) to
1998 1997 1996 1995 December 31, 1994 (1)
------------- ------------- ------------- ------------- ----------------------
<S> <C> <C> <C> <C> <C>
Per Accumulation Unit Data:
Investment income .................... $ .908 $ .847 $ .807 $ .745 $ .206
Expenses ............................. .223 .182 .150 .170 .034
-------- -------- -------- -------- --------
Investment income--net ............... .685 .665 .657 .575 .172
Net realized and unrealized gain
on investments ..................... 12.407 12.429 6.755 8.565 .099
-------- -------- -------- -------- --------
Net increase in
Accumulation Unit Value ............. 13.092 13.094 7.412 9.140 .271
Accumulation Unit Value:
Beginning of period ................. 54.917 41.823 34.411 25.271 25.000
-------- -------- -------- -------- --------
End of period ....................... $ 68.009 $ 54.917 $ 41.823 $ 34.411 $ 25.271
======== ======== ======== ======== ========
Total return .......................... 23.84% 31.31% 21.54% 36.17% 1.08%
Ratios to Average Net Assets:
Expenses (2) ......................... 0.37% 0.37% 0.40% 0.55% 0.13%
Investment income--net ............... 1.14% 1.36% 1.74% 1.87% 0.68%
Portfolio turnover rate ............... 45.93% 2.39% 4.55% 0.98% 0.04%
Thousands of Accumulation Units
outstanding at end of period ......... 11,145 9,901 6,768 2,605 1,171
</TABLE>
(1) The percentages shown for this period are not annualized.
(2) Advisors has agreed to waive a portion of its investment advisory fee.
Without this waiver, the Account's expense ratio for the periods listed
would have been higher (see Note 3).
NOTE 6--ACCUMULATION UNITS
Changes in the number of Accumulation Units outstanding were as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1998 1997
-------------- -----------
<S> <C> <C>
Accumulation Units:
Credited for premiums .......................... 2,250,490 3,195,114
Cancelled for transfers and disbursements ...... (1,006,137) (61,762)
Outstanding:
Beginning of year ............................. 9,901,048 6,767,696
---------- ---------
End of year ................................... 11,145,401 9,901,048
========== =========
</TABLE>
B-22
<PAGE>
TIAA SEPARATE ACCOUNT VA-1
STATEMENT OF INVESTMENTS--STOCK INDEX ACCOUNT
DECEMBER 31, 1998
SUMMARY BY INDUSTRY
(000)
<TABLE>
<CAPTION>
VALUE %
---------------- ----------
<S> <C> <C>
BONDS
CORPORATE BONDS
AUTOMOTIVE DEALERS AND SERVICE STATIONS $ 2 0.00%
-------- ------
TOTAL CORPORATE BONDS
(Cost $3) .................................. 2 0.00
-------- ------
TOTAL BONDS
(Cost $3) .................................. 2 0.00
-------- ------
PREFERRED STOCK
HOLDING AND OTHER INVESTMENT OFFICES ....... 16 0.00
INSTRUMENTS AND RELATED PRODUCTS ........... 0 0.00
INSURANCE CARRIERS ......................... 30 0.00
RUBBER AND MISCELLANEOUS PLASTIC
PRODUCTS .................................. 118 0.02
-------- ------
TOTAL PREFERRED STOCK
(Cost $150) ................................ 164 0.02
-------- ------
COMMON STOCK
AGRICULTURAL PRODUCTION--CROPS ............. 167 0.02
AGRICULTURAL SERVICES ...................... 27 0.00
AMUSEMENT AND RECREATION SERVICES .......... 604 0.08
APPAREL AND ACCESSORY STORES ............... 4,237 0.56
APPAREL AND OTHER TEXTILE PRODUCTS ......... 967 0.13
AUTO REPAIR, SERVICES AND PARKING .......... 487 0.06
AUTOMOTIVE DEALERS AND SERVICE STATIONS 547 0.07
BUILDING MATERIALS AND GARDEN SUPPLIES ..... 8,005 1.06
BUSINESS SERVICES .......................... 54,605 7.20
CHEMICALS AND ALLIED PRODUCTS .............. 98,730 13.02
COAL MINING ................................ 14 0.00
COMMUNICATIONS ............................. 81,710 10.78
DEPOSITORY INSTITUTIONS .................... 63,472 8.37
EATING AND DRINKING PLACES ................. 6,565 0.87
EDUCATIONAL SERVICES ....................... 351 0.05
ELECTRIC, GAS, AND SANITARY SERVICES ....... 32,377 4.27
ELECTRONIC AND OTHER ELECTRIC EQUIPMENT 58,357 7.70
ENGINEERING AND MANAGEMENT SERVICES ........ 1,776 0.23
FABRICATED METAL PRODUCTS .................. 6,763 0.89
FOOD AND KINDRED PRODUCTS .................. 30,807 4.06
FOOD STORES ................................ 5,375 0.71
FORESTRY ................................... 5 0.00
FURNITURE AND FIXTURES ..................... 1,065 0.14
FURNITURE AND HOMEFURNISHINGS STORES ....... 2,004 0.26
GENERAL BUILDING CONTRACTORS ............... 707 0.09
GENERAL MERCHANDISE STORES ................. 16,782 2.21
HEALTH SERVICES ............................ 4,384 0.58
HEAVY CONSTRUCTION, EXCEPT BUILDING ........ 183 0.02
HOLDING AND OTHER INVESTMENT OFFICES ....... 8,130 1.07
HOTELS AND OTHER LODGING PLACES ............ 1,203 0.16
INDUSTRIAL MACHINERY AND EQUIPMENT ......... 56,355 7.43
</TABLE>
<TABLE>
<CAPTION>
VALUE %
---------------- ----------
<S> <C> <C>
INSTRUMENTS AND RELATED PRODUCTS ........... $ 16,029 2.11%
INSURANCE AGENTS, BROKERS AND SERVICE ...... 741 0.10
INSURANCE CARRIERS ......................... 37,125 4.90
LEATHER AND LEATHER PRODUCTS ............... 46 0.01
LEGAL SERVICES ............................. 7 0.00
LOCAL AND INTERURBAN PASSENGER TRANSIT 63 0.01
LUMBER AND WOOD PRODUCTS ................... 1,283 0.17
METAL MINING ............................... 937 0.12
MISCELLANEOUS MANUFACTURING
INDUSTRIES ................................ 533 0.07
MISCELLANEOUS RETAIL ....................... 7,867 1.04
MOTION PICTURES ............................ 4,704 0.62
NONDEPOSITORY INSTITUTIONS ................. 17,266 2.28
NONMETALLIC MINERALS, EXCEPT FUELS ......... 357 0.05
OIL AND GAS EXTRACTION ..................... 3,968 0.53
PAPER AND ALLIED PRODUCTS .................. 6,819 0.90
PERSONAL SERVICES .......................... 1,713 0.23
PETROLEUM AND COAL PRODUCTS ................ 31,599 4.17
PRIMARY METAL INDUSTRIES ................... 2,655 0.35
PRINTING AND PUBLISHING .................... 11,052 1.46
RAILROAD TRANSPORTATION .................... 3,344 0.44
REAL ESTATE ................................ 231 0.03
RUBBER AND MISCELLANEOUS PLASTIC
PRODUCTS .................................. 4,068 0.54
SECURITY AND COMMODITY BROKERS ............. 7,919 1.05
SOCIAL SERVICES ............................ 24 0.00
SPECIAL TRADE CONTRACTORS .................. 88 0.01
STONE, CLAY, AND GLASS PRODUCTS ............ 993 0.13
TEXTILE MILL PRODUCTS ...................... 541 0.07
TOBACCO PRODUCTS ........................... 9,357 1.23
TRANSPORTATION BY AIR ...................... 3,991 0.53
TRANSPORTATION EQUIPMENT ................... 23,046 3.04
TRANSPORTATION SERVICES .................... 948 0.13
TRUCKING AND WAREHOUSING ................... 661 0.09
WATER TRANSPORTATION ....................... 417 0.06
WHOLESALE TRADE-DURABLE GOODS .............. 1,557 0.21
WHOLESALE TRADE-NONDURABLE GOODS ........... 4,882 0.65
-------- ------
TOTAL COMMON STOCK
(Cost $511,548) ............................ 753,592 99.42
-------- ------
SHORT TERM INVESTMENT
U.S. GOVERNMENT AGENCY ..................... 2,399 0.32
-------- ------
TOTAL SHORT TERM INVESTMENT
(Cost $2,399) .............................. 2,399 0.32
-------- ------
TOTAL PORTFOLIO
(Cost $514,100) ............................ 756,157 99.76
OTHER ASSETS & LIABILITIES, NET ............. 1,825 0.24
-------- ------
NET ASSETS .................................. $757,982 100.00%
======== ======
</TABLE>
B-23
<PAGE>
TIAA SEPARATE ACCOUNT VA-1
STATEMENT OF INVESTMENTS--STOCK INDEX ACCOUNT
DECEMBER 31, 1998
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (000)
- --------- --------
<S> <C> <C>
BONDS--0.00%
CORPORATE BONDS--0.00%
AUTOMOTIVE DEALERS AND SERVICE STATIONS--0.00%
$ 1,950 o SD UGLY DUCKLING CORP (SUB DEB)
12.000%, 10/23/03 ................................ $ 2
--------
TOTAL CORPORATE BONDS
(Cost $3) ....................................... 2
--------
TOTAL BONDS
(Cost $3) ....................................... 2
--------
SHARES
- ------
PREFERRED STOCK--0.02%
HOLDING AND OTHER INVESTMENT OFFICES--0.00%
445 APARTMENT INVESTMENT & MANAGEMENT CO
SERIES E ......................................... 16
--------
INSTRUMENTS AND RELATED PRODUCTS--0.00%
3,500 o SD FRESENIUS MEDICAL CARE (CLASS D) .............. 0
--------
INSURANCE CARRIERS--0.00%
389 AETNA, INC SERIES C .............................. 30
--------
RUBBER AND MISCELLANEOUS PLASTIC PRODUCTS--0.02%
2,280 SEALED AIR CORP (CLASS A) ........................ 118
--------
TOTAL PREFERRED STOCK
(Cost $150) ...................................... 164
--------
COMMON STOCK--99.42%
AGRICULTURAL PRODUCTION--CROPS--0.02%
6,200 PIONEER-HI-BRED INTERNATIONAL, INC ............... 167
--------
AGRICULTURAL SERVICES--0.00%
3,600 o SD CADIZ, INC .................................... 27
--------
AMUSEMENT AND RECREATION SERVICES--0.08%
1,200 o SD AMERICAN SKIING CO ............................ 9
7,200 o SD AMF BOWLING, INC .............................. 37
1,200 o SD ANCHOR GAMING CO .............................. 68
700 o SD BALLY TOTAL FITNESS HOLDINGS CORP ............. 17
3,000 o SD BOYD GAMING CORP .............................. 10
1,100 CHURCHILL DOWNS, INC ............................. 36
900 o SD FAMILY GOLF CENTERS, INC ...................... 18
2,800 o SD FLORIDA PANTHERS HOLDINGS, INC ................ 26
6,500 o SD GRAND CASINOS, INC ............................ 52
16,100 o SD HARRAH'S ENTERTAINMENT, INC ................... 253
1,300 o SD HOLLYWOOD PARK, INC ........................... 11
100 o SD INTERNATIONAL SPEEDWAY CORP (CLASS A ) ........ 4
50 o SD PLAYERS INTERNATIONAL, INC .................... 0
600 o SD RIO HOTEL & CASINO, INC ....................... 10
900 o SD SPEEDWAY MOTORSPORTS, INC ..................... 26
900 o SD WESTWOOD ONE, INC ............................. 27
--------
604
--------
APPAREL AND ACCESSORY STORES--0.56%
8,482 o SD ABERCROMBIE & FITCH CO (CLASS A) .............. 600
2,100 o SD AMERICAN EAGLE OUTFITTERS, INC ................ 140
3,000 o SD ANN TAYLOR STORES CORP ........................ 118
600 o SD BUCKLE, INC ................................... 14
20 BURLINGTON COAT FACTORY WAREHOUSE CORP ........... 0
2,800 CATO CORP (CLASS A) .............................. 28
2,100 o SD CHILDRENS PLACE RETAIL STORES ................. 53
1,000 o SD FINISH LINE, INC (CLASS A) .................... 8
36,475 GAP, INC ......................................... 2,052
2,000 o SD GYMBOREE CORP ................................. 13
250 o SD JUST FOR FEET, INC ............................ 4
50 o SD MENS WAREHOUSE, INC ........................... 2
7,900 ROSS STORES, INC ................................. 311
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
1,600 o SD STEIN MART, INC ................................... $ 11
29,100 TJX COS, INC ......................................... 844
1,300 o SD WET SEAL, INC (CLASS A) ........................... 39
--------
4,237
--------
APPAREL AND OTHER TEXTILE PRODUCTS--0.13%
600 AUTHENTIC FITNESS CORP ............................... 11
2,200 o SD DONNA KARAN INTERNATIONAL, INC .................... 17
10,000 o SD FRUIT OF THE LOOM, INC (CLASS A) .................. 138
4,400 o SD HARTMARX CORP ..................................... 25
14,400 o SD JONES APPAREL GROUP, INC .......................... 318
3,500 KELLWOOD CO .......................................... 88
4,800 o SD NAUTICA ENTERPRISES, INC .......................... 72
1,700 PHILLIPS VAN HEUSEN CORP ............................. 12
400 PILLOWTEX CORP ....................................... 11
1,700 o SD QUIKSILVER, INC ................................... 51
300 VF CORP .............................................. 14
8,300 WARNACO GROUP, INC (CLASS A) ......................... 210
--------
967
--------
AUTO REPAIR, SERVICES AND PARKING--0.06%
4,600 o SD AVIS RENT A CAR, INC .............................. 111
50 CENTRAL PARKING CORP ................................. 2
1,400 o SD DOLLAR THRIFTY AUTOMOTIVE GROUP, INC .............. 18
200 HERTZ CORP (CLASS A) ................................. 9
2,633 MIDAS, INC ........................................... 82
8,250 ROLLINS TRUCK LEASING CORP ........................... 122
5,500 RYDER SYSTEM, INC .................................... 143
--------
487
--------
AUTOMOTIVE DEALERS AND SERVICE STATIONS--0.07%
12,000 o SD AUTOZONE, INC ..................................... 395
900 o SD COPART, INC ....................................... 29
3,100 o SD CSK AUTO CORP ..................................... 83
800 o SD DISCOUNT AUTO PARTS, INC .......................... 18
500 o SD GROUP 1 AUTOMOTIVE, INC ........................... 13
900 o SD WEST MARINE, INC .................................. 9
--------
547
--------
BUILDING MATERIALS AND GARDEN SUPPLIES--1.06%
3,800 o SD EAGLE HARDWARE & GARDEN, INC ...................... 124
105,300 HOME DEPOT, INC ...................................... 6,443
28,100 LOWES COS, INC ....................................... 1,438
--------
8,005
--------
BUSINESS SERVICES--7.20%
1,100 AARON RENTS, INC ..................................... 17
1,000 o SD ABACUS DIRECT CORP ................................ 46
600 o SD ABR INFORMATION SERVICES, INC ..................... 12
6,900 o SD ACCLAIM ENTERTAINMENT, INC ........................ 85
600 o SD ACKERLEY GROUP, INC ............................... 11
9,633 o SD ACNEILSEN CORP .................................... 272
5,060 o SD ACXIOM CORP ....................................... 157
10,700 ADOBE SYSTEMS, INC ................................... 500
3,600 o SD ADVO, INC ......................................... 95
4,400 o SD AFFILIATED COMPUTER SERVICES, INC (CLASS A) ....... 198
2,400 o SD ALTERNATIVE RESOURCES CORP ........................ 26
33,400 AMERICA ONLINE, INC .................................. 5,344
7,150 o SD AMERICAN MANAGEMENT SYSTEMS, INC .................. 286
400 ANALYSTS INTERNATIONAL CORP .......................... 8
600 o SD ANSWERTHINK CONSULTING GROUP ...................... 16
1,000 o SD APAC TELESERVICES, INC ............................ 4
8,880 o SD ASCEND COMMUNICATIONS, INC ........................ 584
1,700 o SD ASPECT DEVELOPMENT, INC ........................... 75
6,800 AUTODESK, INC ........................................ 290
</TABLE>
B-24
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
BUSINESS SERVICES--(Continued)
15,800 AUTOMATIC DATA PROCESSING, INC ......................... $ 1,267
4,700 o SD AVANT CORP ........................................ 75
600 o SD AXENT TECHNOLOGIES, INC ........................... 18
1,220 o SD AZTEC TECHNOLOGY PARTNERS, INC .................... 4
100 o SD BARRA, INC ........................................ 2
6,900 o SD BMC SOFTWARE, INC ................................. 307
800 o SD BORG-WARNER SECURITY CORP ......................... 15
40 o SD BRC HOLDINGS, INC ................................. 1
6,300 o SD BUILDING ONE SERVICE .............................. 132
1,300 o SD CADENCE DESIGN SYSTEMS, INC ....................... 39
500 o SD CAMBRIDGE TECHNOLOGY PARTNERS, INC ................ 11
1,700 o SD CARIBINER INTERNATIONAL, INC ...................... 16
300 o SD CATALINA MARKETING CORP ........................... 21
200 o SD CENTURY BUSINESS SERVICES, INC .................... 3
3,000 o SD CERIDIAN CORP ..................................... 209
4,300 o SD CERNER CORP ....................................... 115
2,900 o SD CHECKFREE HOLDINGS CORP ........................... 68
1,300 CHEMED CORP .......................................... 44
2,400 o SD CHOICEPOINT, INC .................................. 155
500 o SD CIBER, INC ........................................ 14
100 o SD CITRIX SYSTEMS, INC ............................... 10
1,800 o SD CMGI, INC ......................................... 192
1,000 o SD COMDISCO, INC ..................................... 17
36,800 COMPUTER ASSOCIATES INTERNATIONAL, INC ............... 1,569
4,850 o SD COMPUTER HORIZONS CORP ............................ 129
6,096 o SD COMPUTER SCIENCES CORP ............................ 393
2,200 COMPUTER TASK GROUP, INC ............................. 60
15,800 o SD COMPUWARE CORP .................................... 1,234
1,800 o SD CONCORD COMMUNICATIONS, INC ....................... 102
1,800 o SD COTELLIGENT, INC .................................. 38
4,300 o SD CSG SYSTEMS INTERNATIONAL, INC .................... 340
5,860 o SD CYBERGUARD CORP ................................... 12
800 o SD DATA DIMENSIONS, INC .............................. 7
400 o SD DATA PROCESSING RESOURCES CORP .................... 12
1,000 o SD DATASTREAM SYSTEMS, INC ........................... 12
500 o SD DBT ONLINE, INC ................................... 12
2,000 o SD DOCUMENTUM, INC ................................... 107
2,200 o SD DOUBLECLICK, INC .................................. 100
186 o SD DST SYSTEMS, INC .................................. 11
26,600 ELECTRONIC DATA SYSTEMS CORP ......................... 1,337
8,500 o SD ELECTRONICS FOR IMAGING, INC ...................... 342
5,500 o SD EMPLOYEE SOLUTIONS, INC ........................... 14
1,200 o SD ENGINEERING ANIMATION, INC ........................ 65
300 o SD ENVOY CORP ........................................ 17
9,300 EQUIFAX, INC ......................................... 318
300 o SD EXCITE, INC ....................................... 13
700 o SD FACTSET RESEARCH SYSTEMS, INC ..................... 43
1,500 FAIR ISSAC & CO, INC ................................. 69
1,100 o SD FILENET CORP ...................................... 13
42,506 FIRST DATA CORP ...................................... 1,347
50 o SD FISERV, INC ....................................... 3
500 o SD FORE SYSTEMS, INC ................................. 9
3,460 o SD FORTE SOFTWARE, INC ............................... 20
1,000 o SD GENESYS TELECOMMUNICATIONS LABORATORIES, INC. ... 22
1,400 o SD GEOTEL COMMUNICATIONS CORP ........................ 52
800 GERBER SCIENTIFIC, INC ............................... 19
1,100 o SD GETTY IMAGES, INC ................................. 19
2,200 o SD GT INTERACTIVE SOFTWARE CORP ...................... 11
43,225 HBO & CO ............................................. 1,240
2,000 o SD HEALTH MANAGEMENT SYSTEMS, INC .................... 16
2,200 o SD HNC SOFTWARE ...................................... 89
30 o SD HYPERION SOLUTIONS CORP ........................... 1
5,930 o SD IMATION CORP ...................................... 104
1,900 o SD IMRGLOBAL CORP .................................... 56
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
8,000 IMS HEALTH, INC ...................................... $ 604
2,700 o SD INDUS INTERNATIONAL, INC .......................... 19
2,000 o SD INDUSTRI-MATEMATIK INTERNATIONAL CORP ............. 10
25,200 o SD INFORMIX CORP ..................................... 249
1,100 o SD INFOUSA, INC (CLASS A) ............................ 5
1,500 o SD INFOUSA, INC (CLASS B) ............................ 8
1,500 o SD INPRISE CORP ...................................... 8
450 o SD INSPIRE INSURANCE SOLUTIONS, INC .................. 8
3,000 o SD INTERGRAPH CORP ................................... 17
3,100 o SD INTERNATIONAL NETWORK SERVICES .................... 206
1,900 o SD INTERNATIONAL TELECOMMUNICATIONS .................. 28
2,100 INTERPOOL, INC ....................................... 35
4,502 INTERPUBLIC GROUP OF COS, INC ........................ 359
6,200 o SD J.D. EDWARDS & CO ................................. 176
200 JACK HENRY & ASSOCIATES, INC ......................... 10
1,200 o SD JDA SOFTWARE GROUP, INC ........................... 12
7,300 o SD KEANE, INC ........................................ 292
2,300 KELLY SERVICES, INC (CLASS A) ........................ 73
1,600 o SD LABOR READY, INC .................................. 32
150 o SD LAMAR ADVERTISING CO (CLASS A) .................... 6
10,180 o SD LEARNING CO, INC .................................. 264
900 o SD LEASING SOLUTIONS, INC ............................ 4
3,400 o SD MACROMEDIA, INC ................................... 115
13,300 MANPOWER, INC ........................................ 335
1,000 o SD MANUGISTICS GROUP, INC ............................ 13
2,200 o SD MAPICS, INC ....................................... 36
1,800 o SD MASTECH CORP ...................................... 52
700 MCGRATH RENTCORP ..................................... 15
3,800 o SD MEDQUIST, INC ..................................... 150
9,300 o SD MENTOR GRAPHICS CORP .............................. 79
1,900 o SD MERCURY INTERACTIVE CORP .......................... 120
4,750 o SD METAMOR WORLDWIDE, INC ............................ 119
800 o SD METRO INFORMATION SERVICES, INC ................... 24
660 o SD MICRO FOCUS GROUP PLC ADR ......................... 6
1,100 o SD MICROMUSE, INC .................................... 21
120,529 o SD MICROSOFT CORP .................................... 16,716
300 o SD MINDSPRING ENTERPRISES, INC ....................... 18
883 o SD MODIS PROFESSIONAL SERVICES ....................... 13
1,300 NATIONAL DATA CORP ................................... 63
700 o SD NCO GROUP, INC .................................... 32
7,300 o SD NETMANAGE, INC .................................... 13
13 o SD NETSCAPE COMMUNICATIONS CORP ...................... 1
2,200 o SD NETWORK APPLIANCE, INC ............................ 99
500 o SD NETWORK SOLUTIONS, INC (CLASS A) .................. 65
3,199 o SD NETWORKS ASSOCIATES, INC .......................... 212
9,200 NIELSEN MEDIA RESEARCH ............................... 166
600 NORRELL CORP ......................................... 9
100 o SD NOVA CORP (GEORGIA) ............................... 3
4,200 o SD NOVACARE EMPLOYEE SERVICES, INC ................... 23
37,900 o SD NOVELL, INC ....................................... 687
1,600 o SD OBJECTIVE SYSTEMS INTEGRATORS, INC ................ 7
9,814 OLSTEN CORP .......................................... 72
11,000 OMNICOM GROUP, INC ................................... 638
500 o SD ON ASSIGNMENT, INC ................................ 17
59,275 o SD ORACLE CORP ....................................... 2,556
32,210 o SD PARAMETRIC TECHNOLOGY CORP ........................ 523
17,300 PAYCHEX, INC ......................................... 890
2,600 o SD PAYMENTECH, INC ................................... 48
1,700 o SD PEGASUS SYSTEMS, INC .............................. 61
700 o SD PEGASYSTEMS, INC .................................. 3
200 o SD PEOPLESOFT, INC ................................... 4
400 o SD PEREGRINE SYSTEMS, INC ............................ 19
2,600 o SD PERSONNEL GROUP OF AMERICA, INC ................... 46
4,200 #o SD PHYSICIAN COMPUTER NETWORK, INC ................... 0
13,000 o SD PLATINUM TECHNOLOGY, INC .......................... 249
6,000 o SD POLICY MANAGEMENT SYSTEMS CORP .................... 303
</TABLE>
B-25
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
BUSINESS SERVICES--(Continued)
2,750 o SD PROGRESS SOFTWARE CORP ............................ $ 93
900 o SD PROJECT SOFTWARE & DEVELOPMENT, INC ............... 30
800 o SD QRS CORP .......................................... 38
2,200 o SD QUADRAMED CORP .................................... 45
8,383 o SD RATIONAL SOFTWARE CORP ............................ 222
100 o SD REALNETWORKS, INC ................................. 4
1,300 o SD REMEDY CORP ....................................... 18
2,700 o SD RENT WAY, INC ..................................... 66
1,900 o SD RENTERS CHOICE, INC ............................... 60
14,700 o SD ROBERT HALF INTERNATIONAL, INC .................... 657
2,000 ROLLINS, INC ......................................... 35
5,100 o SD ROMAC INTERNATIONAL, INC .......................... 113
4,400 o SD SABRE GROUP HOLDINGS, INC ......................... 196
2,000 o SD SAFETY-KLEEN CORP ................................. 28
200 o SD SAPIENT CORP ...................................... 11
2,100 SEI INVESTMENT CO .................................... 209
1,100 SHARED MEDICAL SYSTEMS CORP .......................... 55
9,292 o SD SIEBEL SYSTEMS, INC ............................... 315
4,700 o SD SITEL CORP ........................................ 11
7,700 o SD SNYDER COMMUNICATIONS, INC ........................ 260
700 o SD SOFTWARE AG. SYSTEMS, INC ......................... 13
2,300 o SD STAFFMARK, INC .................................... 51
10,800 o SD STERLING SOFTWARE, INC ............................ 292
5,100 o SD STRUCTURAL DYNAMICS RESEARCH CORP ................. 101
21,200 o SD SUN MICROSYSTEMS, INC ............................. 1,815
7,500 o SD SYBASE, INC ....................................... 56
2,600 o SD SYKES ENTERPRISES, INC ............................ 79
800 o SD SYNTEL, INC ....................................... 9
4,500 o SD SYSTEMSOFT CORP ................................... 1
3,000 o SD TCSI CORP ......................................... 6
75 o SD TECHNOLOGY SOLUTIONS CO ........................... 1
2,000 o SD TELETECH HOLDINGS, INC ............................ 21
2,000 o SD TMP WORLDWIDE, INC ................................ 84
6,000 TRUE NORTH COMMUNICATIONS, INC ....................... 161
4,570 o SD UNITED RENTALS, INC ............................... 151
10,000 o SD USWEB CORP ........................................ 264
6,000 o SD VALASSIS COMMUNICATIONS, INC ...................... 310
800 o SD VANSTAR CORP ...................................... 7
4,300 o SD VANTIVE CORP ...................................... 34
500 o SD VERISIGN, INC ..................................... 30
75 o SD VERITAS SOFTWARE CORP ............................. 4
1,200 o SD VIASOFT, INC ...................................... 8
1,300 o SD VINCAM GROUP, INC ................................. 23
300 o SD VOLT INFORMATION SCIENCES, INC .................... 7
3,800 o SD WANG LABORATORIES, INC ............................ 105
2,500 o SD WEST TELESERVICES CORP ............................ 24
1,150 o SD WIND RIVER SYSTEMS, INC ........................... 54
4,800 o SD YAHOO, INC ........................................ 1,137
2,700 o SD YOUNG & RUBICAM, INC .............................. 87
--------
54,605
--------
CHEMICALS AND ALLIED PRODUCTS--13.02%
108,900 ABBOTT LABORATORIES CO ............................... 5,336
3,400 o SD ADVANCED TISSUE SCIENCE CO ........................ 9
25,100 AIR PRODUCTS & CHEMICALS, INC ........................ 1,004
2,500 ALBEMARLE CORP ....................................... 59
5,700 ALBERTO CULVER CO (CLASS B) .......................... 152
995 o SD ALLERGAN SPECIALTY THERAPEUTICS, INC (CLASS A) .... 9
6,900 ALLERGAN, INC ........................................ 447
2,300 o SD ALLIANCE PHARMACEUTICAL CORP ...................... 8
2,400 ALPHARMA, INC (CLASS A) .............................. 85
81,700 AMERICAN HOME PRODUCTS CORP .......................... 4,601
20,720 o SD AMGEN, INC ........................................ 2,167
10,200 o SD AMYLIN PHARMACEUTICALS, INC ....................... 5
1,200 o SD APHTON CORP ....................................... 15
100 o SD AVIRON, INC ....................................... 3
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
8,300 AVON PRODUCTS, INC ................................... $ 367
2,100 o SD AXYS PHARMACEUTICALS, INC ......................... 12
1,400 o SD BARR LABORATORIES, INC ............................ 67
2,000 o SD BIO-TECHNOLOGY GENERAL CORP ....................... 14
9,400 o SD BIOGEN, INC ....................................... 780
1,300 BLOCK DRUG, INC (CLASS A) ............................ 56
65,700 BRISTOL MYERS SQUIBB CO .............................. 8,791
400 CAMBREX CORP ......................................... 10
1,300 o SD CARBIDE/GRAPHITE GROUP, INC ....................... 19
3,700 CARTER WALLACE, INC .................................. 73
1,000 o SD CELL GENESYS, INC ................................. 6
300 o SD CENTOCOR, INC ..................................... 14
2,600 o SD CEPHALON, INC ..................................... 23
1,500 o SD CHATTEM, INC ...................................... 72
340 o SD CHIRON CORP ....................................... 9
6,200 CLOROX CO ............................................ 724
16,000 COLGATE PALMOLIVE CO ................................. 1,486
4,600 o SD COLUMBIA LABORATORIES, INC ........................ 14
200 o SD COR THERAPEUTICS, INC ............................. 3
1,500 o SD COULTER PHARMACEUTICAL, INC ....................... 45
800 o SD CREATIVE BIOMOLECULES, INC ........................ 3
60 o SD CRESCENDO PHARMACEUTICALS CORP .................... 1
12,300 o SD CROMPTON & KNOWLES CORP ........................... 254
3,100 DEXTER CORP .......................................... 97
1,700 DIAGNOSTIC PRODUCTS CORP ............................. 53
600 DIAL CORP ............................................ 17
10,900 DOW CHEMICAL CO ...................................... 991
69,669 DU PONT (E.I.) DE NEMOURS & CO ....................... 3,697
2,500 ECOLAB, INC .......................................... 90
500 o SD EMISPHERE TECHNOLOGIES, INC ....................... 8
6,150 FERRO CORP ........................................... 160
4,600 o SD FMC CORP .......................................... 258
1,500 o SD FUISZ TECHNOLOGIES LTD ............................ 19
11 FULLER (H.B.) CO ..................................... 1
11,900 o SD GENSIA SICOR, INC ................................. 54
160 o SD GENZYME CORP (TISSUE REPAIR DIVISION) ............. 0
86 o SD GENZYME-MOLECULAR ONCOLOGY ........................ 0
3,300 GEON CO .............................................. 76
4,300 GEORGIA GULF CORP .................................... 69
200 o SD GILEAD SCIENCES, INC .............................. 8
12,400 o SD GRACE W.R. & CO ................................... 195
2,400 o SD GUILFORD PHARMACEUTICALS, INC ..................... 34
7,550 HANNA (M.A.) CO ...................................... 93
16,300 HERCULES, INC ........................................ 446
3,700 o SD HUMAN GENOME SCIENCES, INC ........................ 132
51 ICN PHARMACEUTICALS, INC ............................. 1
5,900 o SD ICOS CORP ......................................... 176
2,900 o SD IDEC PHARMACEUTICALS CORP ......................... 136
1,680 IMC GLOBAL, INC ...................................... 36
666 o SD IMC GLOBAL, INC WTS 12/22/00 ...................... 0
700 o SD IMCLONE SYSTEMS, INC .............................. 6
3,800 o SD IMMUNE RESPONSE CORP .............................. 41
2,900 o SD IMMUNEX CORP ...................................... 365
2,100 o SD INTERNATIONAL SPECIALTY PRODUCTS, INC ............. 28
3,000 o SD INTERNEURON PHARMACEUTICALS, INC .................. 10
4,000 o SD ISIS PHARMACEUTICALS, INC ......................... 52
16,000 o SD IVAX CORP ......................................... 199
88,302 JOHNSON & JOHNSON CO ................................. 7,406
100 JONES PHARMACEUTICAL, INC ............................ 4
2,200 o SD KV PHARMACEUTICAL CO (CLASS B) .................... 46
5,900 LAUDER (ESTEE) CO (CLASS A) .......................... 504
3,400 LAWTER INTERNATIONAL, INC ............................ 40
1,500 LEARONAL, INC ........................................ 51
63,292 LILLY (ELI) & CO ..................................... 5,625
3,700 LILLY INDUSTRIES, INC (CLASS A) ...................... 74
6,400 o SD LIPOSOME CO, INC .................................. 99
</TABLE>
B-26
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
CHEMICALS AND ALLIED PRODUCTS--(Continued)
9,200 LUBRIZOL CORP ........................................ $ 236
800 o SD MACROCHEM CORP (DELAWARE) ......................... 7
12,000 MALLINCKRODT, INC .................................... 370
5,300 o SD MATRIX PHARMACEUTICALS, INC ....................... 14
700 o SD MCWHORTER TECHNOLOGIES, INC ....................... 16
3,100 o SD MEDICIS PHARMACEUTICAL CORP (CLASS A) ............. 185
3,900 o SD MEDIMMUNE, INC .................................... 388
77,700 MERCK & CO, INC ...................................... 11,475
13,100 MILLENNIUM CHEMICAL, INC ............................. 260
2,500 o SD MILLENNIUM PHARMACEUTICALS, INC ................... 65
500 MINERALS TECHNOLOGIES, INC ........................... 20
1,400 o SD MIRAVANT MEDICAL TECHNOLOGY ....................... 18
3,100 MISSISSIPPI CHEMICAL CORP ............................ 43
33,800 MONSANTO CO .......................................... 1,606
20,100 MORTON INTERNATIONAL, INC ............................ 492
21,300 MYLAN LABORATORIES, INC .............................. 671
1,800 o SD NABI, INC ......................................... 5
6,700 NALCO CHEMICAL CORP .................................. 208
2,800 NATURES SUNSHINE PRODUCTS, INC ....................... 43
1,000 o SD NEOPROBE CORP ..................................... 1
1,700 o SD NEUROGEN CORP ..................................... 30
3,400 o SD NEXSTAR PHARMACEUTICALS, INC ...................... 31
875 o SD OCTEL CORP ........................................ 12
7,600 OLIN CORP ............................................ 215
25 o SD ORGANOGENESIS, INC ................................ 0
9,100 o SD PERRIGO CO ........................................ 80
84,500 PFIZER, INC .......................................... 10,599
27,680 PHARMACIA & UPJOHN, INC .............................. 1,567
1,100 o SD PHARMACYCLICS, INC ................................ 28
11,800 PPG INDUSTRIES, INC .................................. 687
22,000 PRAXAIR, INC ......................................... 776
93,400 PROCTER & GAMBLE CO .................................. 8,529
3,100 o SD PROTEIN DESIGN LABORATORIES, INC .................. 72
2,200 o SD REGENERON PHARMACEUTICALS, INC .................... 16
1,100 o SD REVLON, INC (CLASS A) ............................. 18
4,400 o SD ROBERTS PHARMACEUTICAL CORP ....................... 96
18,700 ROHM & HAAS CO ....................................... 563
31 RPM, INC ............................................. 0
100,000 SCHERING-PLOUGH CORP ................................. 5,525
5,800 SCHULMAN (A.), INC ................................... 132
700 o SD SEQUUS PHARMACEUTICALS, INC ....................... 14
8,500 SHERWIN-WILLIAMS CO .................................. 250
7,400 SIGMA ALDRICH CORP ................................... 217
1,100 STEPAN CO ............................................ 29
400 o SD SUGEN, INC ........................................ 6
500 o SD TECHNE CORP ....................................... 11
4,200 o SD THERAGENICS CORP .................................. 71
1,200 o SD THERMOLASE CORP ................................... 5
2,800 o SD TRIANGLE PHARMACEUTICALS, INC ..................... 38
600 o SD TWINLAB CORP ...................................... 8
1,500 o SD U.S. BIOSCIENCE, INC .............................. 11
600 o SD U.S.A. DETERGENTS, INC ............................ 4
400 UNION CARBIDE CORP ................................... 17
2,000 o SD VICAL, INC ........................................ 28
58,800 WARNER-LAMBERT CO .................................... 4,421
4,700 o SD WATSON PHARMACEUTICALS, INC ....................... 296
600 WELLMAN, INC ......................................... 6
6,000 o SD ZILA, INC ......................................... 59
--------
98,730
--------
COAL MINING--0.00%
800 ARCH COAL, INC ....................................... 14
--------
COMMUNICATIONS--10.78%
700 o SD @ ENTERTAINMENT, INC .............................. 5
3,100 o SD ADELPHIA COMMUNICATIONS CORP (CLASS A) ............ 142
38,000 o SD AIRTOUCH COMMUNICATIONS, INC ...................... 2,741
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
100 o SD ALCATEL S.A. ADR .................................. $ 2
5,400 ALIANT COMMUNICATIONS, INC ........................... 221
17,546 ALLTEL CORP .......................................... 1,049
71,000 AMERITECH CORP ....................................... 4,500
4,600 o SD ARCH COMMUNICATIONS GROUP, INC .................... 7
4,922 o SD ASCENT ENTERTAINMENT GROUP, INC ................... 36
1,200 o SD ASSOCIATED GROUP, INC (CLASS A) ................... 52
123,071 AT & T CORP .......................................... 9,261
111,210 BELL ATLANTIC CORP ................................... 5,894
140,000 BELLSOUTH CORP ....................................... 6,983
14,700 o SD CABLEVISION SYSTEMS CORP (CLASS A) ................ 738
5,200 o SD CAPSTAR BROADCASTING CORP (CLASS A) ............... 119
45,106 CBS CORP ............................................. 1,477
2,300 o SD CD RADIO, INC ..................................... 79
150 o SD CELLULAR COMMUNICATIONS INTERNATIONAL, INC ........ 10
1,100 o SD CELLULAR COMMUNICATIONS OF PUERTO RICO ............ 20
2,500 o SD CENTENNIAL CELLULAR CORP (CLASS A) ................ 103
300 o SD CENTURY COMMUNICATIONS CORP (CLASS A) ............. 10
4,050 CENTURY TELEPHONE ENTERPRISES, INC ................... 273
48 o SD CHRIS CRAFT INDUSTRIES, INC ....................... 2
17,900 CINCINNATI BELL, INC ................................. 677
5,240 o SD CLEAR CHANNEL COMMUNICATIONS, INC ................. 286
25,389 COMCAST CORP (CLASS A) SPECIAL ....................... 1,490
200 COMSAT CORP SERIES 1 ................................. 7
1,400 o SD COX RADIO, INC (CLASS A) .......................... 59
1,200 o SD EMMIS COMMUNICATIONS (CLASS A) .................... 52
2,100 o SD EXODUS COMMUNICATIONS, INC ........................ 135
600 FRONTIER CORP ........................................ 20
154 GAYLORD ENTERTAINMENT CO ............................. 5
5,900 o SD GENERAL COMMUNICATION (CLASS A) ................... 24
200 o SD GLOBAL TELESYSTEMS GROUP, INC ..................... 11
70,600 GTE CORP ............................................. 4,589
9,100 o SD HEARST-ARGYLE TELEVISION, INC ..................... 300
6,400 o SD HEFTEL BROADCASTING CORP (CLASS A) ................ 315
3,300 o SD HIGHWAYMASTER COMMUNICATIONS, INC ................. 4
7,400 o SD ICG COMMUNICATIONS, INC ........................... 159
1,800 o SD IDT CORP .......................................... 28
200 o SD IXC COMMUNICATIONS, INC ........................... 7
1,400 o SD JACOR COMMUNICATIONS, INC WTS 09/18/01 ............ 11
2,000 o SD JONES INTERCABLE, INC (CLASS A) ................... 71
2,550 o SD LEAP WIRELESS INTERNATIONAL, INC .................. 18
28,000 o SD LEVEL 3 COMMUNICATIONS, INC ....................... 1,208
14,100 o SD LIBERTY MEDIA GROUP (CLASS A) ..................... 649
85,482 LUCENT TECHNOLOGIES, INC ............................. 9,403
118,983 o SD MCI WORLDCOM, INC ................................. 8,537
2,300 o SD MCLEODUSA, INC (CLASS A) .......................... 72
32,700 o SD MEDIA ONE GROUP, INC .............................. 1,537
1,500 o SD METROCALL, INC .................................... 7
8,700 o SD NEXTLINK COMMUNICATIONS, INC ...................... 247
1,000 NORTH PITTSBURGH SYSTEMS, INC ........................ 13
6,800 o SD NTL, INC .......................................... 384
5,000 o SD PAGEMART WIRELESS, INC (CLASS A) .................. 28
13,900 o SD PAGING NETWORK, INC ............................... 65
69 o SD PANAMSAT CORP ..................................... 3
700 o SD PEGASUS COMMUNICATIONS CORP ....................... 18
1,000 o SD POWERTEL, INC ..................................... 14
5,600 o SD PREMIERE TECHNOLOGIES, INC ........................ 41
323 o SD QWEST COMMUNICATIONS INTERNATIONAL , INC .......... 16
1,000 o SD RCN CORP .......................................... 18
130,196 SBC COMMUNICATIONS, INC .............................. 6,982
9,400 o SD SKYTEL COMMUNICATIONS, INC ........................ 208
2,400 o SD SMARTALK TELESERVICES, INC ........................ 6
18,600 SPRINT CORP (FON GROUP) .............................. 1,565
28,950 o SD SPRINT CORP (PCS GROUP) ........................... 669
3,000 TCA CABLE TV, INC .................................... 107
12,380 o SD TCI SATELLITE ENTERTAINMENT (CLASS A) ............. 18
</TABLE>
B-27
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
COMMUNICATIONS--(Continued)
28,766 o SD TELE-COMMUNICATIONS, INC (CLASS A) ................ $ 1,591
42,468 o SD TELECOM-TCI VENTURES GROUP (CLASS A) .............. 1,001
4,602 o SD TELEGLOBE, INC (U.S.A.) ........................... 166
78 TELEPHONE & DATA SYSTEMS, INC ........................ 4
5,800 o SD U.S. SATELLITE BROADCASTING, INC (CLASS A) ........ 80
39,711 U.S. WEST, INC ....................................... 2,566
8,150 o SD U.S.A. NETWORKS, INC .............................. 270
6,800 o SD UNITED INTERNATIONAL HOLDINGS, INC ................ 131
500 UNITED TELEVISION, INC ............................... 58
3,500 o SD UNIVISION COMMUNICATIONS, INC ..................... 127
600 o SD USN COMMUNICATIONS, INC ........................... 0
3,700 o SD VIACOM, INC (CLASS A) ............................. 272
18,300 o SD VIACOM, INC (CLASS B) ............................. 1,354
12,700 o SD WESTERN WIRELESS CORP (CLASS A) ................... 279
100 o SD YOUNG BROADCASTING, INC (CLASS A) ................. 4
--------
81,710
--------
DEPOSITORY INSTITUTIONS--8.37%
500 ALABAMA NATIONAL BANCORP ............................. 13
6,675 AMSOUTH BANCORP ...................................... 305
2,800 ANCHOR BANCORP WISCONSIN, INC ........................ 67
10,540 ASSOCIATED BANC-CORP ................................. 360
8,845 ASTORIA FINANCIAL CORP ............................... 405
1,000 BANCFIRST OHIO CORP .................................. 30
7,500 BANCORPSOUTH, INC .................................... 135
3,600 BANCWEST CORP ........................................ 173
41,900 BANK OF NEW YORK CO, INC ............................. 1,686
86,533 BANK ONE CORP ........................................ 4,419
4,700 BANK UNITED CORP (CLASS A) ........................... 184
110,895 BANKAMERICA CORP ..................................... 6,668
800 BANKATLANTIC BANCORP, INC (CLASS B) .................. 6
19,670 BANKBOSTON CORP ...................................... 766
5,445 BANKERS TRUST CORP ................................... 465
2,500 BANKNORTH GROUP, INC ................................. 94
15,448 BB&T CORP ............................................ 623
300 o SD BOK FINANCIAL CORP ................................ 14
1,900 BRENTON BANKS, INC ................................... 32
700 BROOKLINE BANCORP, INC ............................... 8
600 BSB BANCORP, INC ..................................... 20
1,500 BT FINANCIAL CORP .................................... 41
800 CATHAY BANCORP, INC .................................. 33
3,200 CCB FINANCIAL CORP ................................... 182
1,500 o SD CENTENNIAL BANCORP ................................ 28
100 CENTURA BANKS, INC ................................... 7
8,422 CHARTER ONE FINANCIAL, INC ........................... 234
62,240 CHASE MANHATTAN CORP ................................. 4,236
500 CHEMICAL FINANCIAL CORP .............................. 17
2,400 CHITTENDEN CORP ...................................... 77
500 CITY HOLDINGS CO ..................................... 16
4,900 CITY NATIONAL CORP ................................... 204
15,500 COMERICA, INC ........................................ 1,057
3,238 COMMERCE BANCSHARES, INC ............................. 138
50 COMMERCIAL FEDERAL CORP .............................. 1
700 COMMUNITY BANK SYSTEM, INC ........................... 21
1,500 COMMUNITY FIRST BANKSHARES, INC ...................... 32
1,400 COMMUNITY TRUST BANCORP, INC ......................... 33
11,600 COMPASS BANCSHARES, INC .............................. 442
362 o SD CONCORD EFS, INC .................................. 15
1,100 CORUS BANKSHARES, INC ................................ 35
2,461 CRESTAR FINANCIAL CORP ............................... 177
4,400 CULLEN FROST BANKERS, INC ............................ 241
700 D & N FINANCIAL CORP ................................. 17
18,900 DIME BANCORP, INC .................................... 500
2,000 DIME COMMUNITY BANCORP, INC .......................... 41
3,130 DOWNEY FINANCIAL CORP ................................ 80
1,500 F & M BANCORP, INC (WISCONSIN) ....................... 45
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
1,000 F & M NATIONAL CORP .................................. $ 30
2,000 F.N.B. CORP .......................................... 57
600 FARMERS CAPITAL BANK CORP ............................ 23
12,250 FIFTH THIRD BANCORP .................................. 874
15,532 FIRST AMERICAN CORP .................................. 689
4,100 FIRST BANCORP (PUERTO RICO) .......................... 124
1,700 FIRST CHARTER CORP ................................... 29
500 FIRST COMMERCE BANCSHARES, INC ....................... 14
101 o SD FIRST FINANCIAL BANCORP ........................... 3
1,500 FIRST INDIANA CORP ................................... 30
200 FIRST LIBERTY FINANCIAL CORP ......................... 4
300 o SD FIRST REPUBLIC BANK ............................... 8
3,200 FIRST SECURITY CORP .................................. 75
400 FIRST SENTINEL BANCORP, INC .......................... 3
16,000 FIRST TENNESSEE NATIONAL CORP ........................ 609
67,313 FIRST UNION CORP ..................................... 4,093
200 FIRST VIRGINIA BANKS, INC ............................ 9
1,900 FIRST WASHINGTON BANCORP, INC ........................ 46
300 FIRST WESTERN BANCORP, INC ........................... 10
9,440 FIRSTAR CORP ......................................... 880
2,200 FIRSTMERIT CORP ...................................... 59
900 FLAGSTAR BANCORP, INC ................................ 24
46,834 FLEET FINANCIAL GROUP, INC ........................... 2,093
300 o SD FRONTIER FINANCIAL CORP ........................... 14
10,527 FULTON FINANCIAL CORP ................................ 237
1,600 GBC BANCORP .......................................... 41
3,400 o SD GOLDEN STATE BANCORP, INC WTS 01/01/01 ............ 16
3,800 GOLDEN WEST FINANCIAL CORP ........................... 348
1,500 GRAND PREMIER FINANCIAL, INC ......................... 18
13,100 GREENPOINT FINANCIAL CORP ............................ 460
1,200 o SD HAMILTON BANCORP, INC ............................. 32
1,500 HANCOCK HOLDINGS CO .................................. 68
1,200 HARRIS FINANCIAL, INC ................................ 16
25,822 HIBERNIA CORP (CLASS A) .............................. 449
800 HORIZON BANCORP, INC ................................. 27
6,402 HUBCO, INC ........................................... 193
16,430 HUNTINGTON BANCSHARES, INC ........................... 494
600 INDEPENDENCE COMMUNITY BANK CORP ..................... 10
450 INTERWEST BANCORP, INC ............................... 10
1,900 IRWIN FINANCIAL CORP ................................. 52
1,100 JSB FINANCIAL, INC ................................... 60
42,160 KEYCORP .............................................. 1,349
6,150 KEYSTONE FINANCIAL, INC .............................. 228
98 M & T BANK CORP ...................................... 51
75 MAF BANCORP, INC ..................................... 2
5,759 MARSHALL & ILSLEY CORP ............................... 337
59,155 MBNA CORP ............................................ 1,475
12,100 MELLON BANK CORP ..................................... 832
12,791 MERCANTILE BANCORP, INC .............................. 590
11,955 MERCANTILE BANKSHARES CORP ........................... 460
300 MERCHANTS NEW YORK BANCORP, INC ...................... 11
600 MID-AMERICA BANCORP .................................. 16
8,300 MORGAN (J.P.) & CO, INC .............................. 872
2,500 NATIONAL BANCORP OF ALASKA, INC ...................... 84
26,624 NATIONAL CITY CORP ................................... 1,930
19,048 NORTH FORK BANCORP, INC .............................. 456
2,200 NORTHERN TRUST CORP .................................. 192
1,000 OCEAN FINANCIAL CORP ................................. 17
5,991 OLD KENT FINANCIAL CORP .............................. 279
4,067 OLD NATIONAL BANCORP ................................. 227
5,293 ONE VALLEY BANCORP, INC .............................. 174
2,300 PACIFIC CAPITAL BANCORP .............................. 59
13,100 PACIFIC CENTURY FINANCIAL CORP ....................... 319
6,000 PEOPLES BANCORP, INC ................................. 65
68 PEOPLES HERITAGE FINANCIAL GROUP, INC ................ 1
1,700 o SD PFF BANCORP, INC .................................. 27
</TABLE>
B-28
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
DEPOSITORY INSTITUTIONS--(Continued)
27,050 PNC BANK CORP ........................................ $ 1,464
1,190 POPULAR, INC ......................................... 40
1,000 PROVIDENT BANKSHARES CORP ............................ 25
13,900 PROVIDIAN FINANCIAL CORP ............................. 1,043
950 QUEENS COUNTY BANCORP, INC ........................... 28
10,758 REGIONS FINANCIAL CORP ............................... 434
600 RELIANCE BANCORP, INC ................................ 17
3,200 REPUBLIC BANCORP, INC ................................ 44
4,500 REPUBLIC NEW YORK CORP ............................... 205
1,300 REPUBLIC SECURITY FINANCIAL CORP ..................... 16
3,300 RICHMOND COUNTY FINANCIAL CORP ....................... 53
3,200 RIGGS NATIONAL CORP .................................. 65
7,100 ROSLYN BANCORP, INC .................................. 153
800 SANDY SPRING BANCORP, INC ............................ 24
3,100 o SD SILICON VALLEY BANCSHARES ......................... 53
13,150 SOUTHTRUST CORP ...................................... 486
300 o SD SOUTHWEST BANCORP OF TEXAS, INC ................... 5
1,340 SOVEREIGN BANCORP, INC ............................... 19
75 ST. PAUL BANCORP, INC ................................ 2
5,600 STATE STREET CORP .................................... 390
100 STATEN ISLAND BANCORP, INC ........................... 2
2,800 STERLING BANCSHARES, INC ............................. 42
500 STERLING FINANCIAL CORP .............................. 21
19,567 SUMMIT BANCORP ....................................... 855
17,300 SUNTRUST BANKS, INC .................................. 1,323
50 SUSQUEHANNA BANCSHARES, INC .......................... 1
200 SYNOVUS FINANCIAL CORP ............................... 5
9,400 TCF FINANCIAL CORP ................................... 227
800 TEXAS REGIONAL BANCSHARES, INC (CLASS A) ............. 20
700 TR FINANCIAL CORP .................................... 28
2,100 TRUST CO OF NEW JERSEY ............................... 51
7,600 TRUSTMARK CORP ....................................... 172
43,336 U.S. BANCORP ......................................... 1,538
3,100 U.S. TRUST CORP ...................................... 236
10,959 UNION PLANTERS CORP .................................. 497
5,400 UNIONBANCAL CORP ..................................... 184
6,500 UST CORP ............................................. 153
8,198 VALLEY NATIONAL BANCORP .............................. 231
9,836 WACHOVIA CORP ........................................ 860
6,993 WASHINGTON FEDERAL, INC .............................. 187
29,708 WASHINGTON MUTUAL, INC ............................... 1,134
700 WASHINGTON TRUST BANCORP, INC ........................ 15
101,440 WELLS FARGO CO ....................................... 4,051
300 WESBANCO, INC ........................................ 9
1,500 WEST COAST BANCORP (OREGON) .......................... 32
300 WESTAMERICA BANCORP .................................. 11
2,900 WESTERN BANCORP ...................................... 85
1,000 WESTERNBANK PUERTO RICO .............................. 16
3,000 WHITNEY HOLDINGS CORP ................................ 113
--------
63,472
--------
EATING AND DRINKING PLACES--0.87%
2,700 APPLEBEES INTERNATIONAL, INC ......................... 56
2,100 AVADO BRANDS, INC .................................... 17
6,200 BOB EVANS FARMS, INC ................................. 162
8,300 Xo SD BOSTON CHICKEN, INC ............................... 3
11,000 o SD BRINKER INTERNATIONAL, INC ........................ 318
6,800 o SD BUFFETS, INC ...................................... 81
2,900 o SD CEC ENTERTAINMENT, INC ............................ 80
3,403 CKE RESTAURANTS, INC ................................. 100
100 CRACKER BARREL OLD COUNTRY STORE, INC ................ 2
22,700 DARDEN RESTAURANTS, INC .............................. 409
2,100 o SD DAVE & BUSTERS, INC ............................... 48
5,600 o SD FOODMAKER, INC .................................... 124
27,000 HOST MARRIOTT CORP (NEW) ............................. 373
3,060 o SD HOST MARRIOTT SERVICES CORP ....................... 32
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
1,200 o SD IHOP CORP NEW ..................................... $ 48
1,400 o SD LANDRYS SEAFOOD RESTAURANTS, INC .................. 11
1,800 o SD LONE STAR STEAKHOUSE & SALOON, INC ................ 17
3,000 LUBYS CAFETERIA, INC ................................. 46
4,200 MARRIOTT INTERNATIONAL (CLASS A) ..................... 122
45,300 MCDONALD'S CORP ...................................... 3,471
666 MORRISON HEALTH CARE, INC ............................ 13
3,400 o SD PAPA JOHNS INTERNATIONAL, INC ..................... 150
1,900 o SD PLANET HOLLYWOOD, INC (CLASS A) ................... 4
50 o SD RAINFOREST CAFE, INC .............................. 0
700 o SD RARE HOSPITALITY INTERNATIONAL, INC ............... 10
5,200 RUBY TUESDAY, INC .................................... 111
6,300 o SD RYANS FAMILY STEAK HOUSES, INC .................... 78
2,100 o SD SODEXHO MARRIOTT SERVICES, INC .................... 58
3,200 o SD SONIC CORP ........................................ 80
10,740 o SD TRICON GLOBAL RESTAURANTS, INC .................... 538
60 o SD U.S. FOODSERVICE, INC ............................. 3
--------
6,565
--------
EDUCATIONAL SERVICES--0.05%
5,100 o SD DEVRY, INC ........................................ 156
800 o SD LEARNING TREE INTERNATIONAL, INC .................. 7
6,150 o SD SYLVAN LEARNING SYSTEMS, INC ...................... 188
--------
351
--------
ELECTRIC, GAS, AND SANITARY SERVICES--4.27%
9,500 AGL RESOURCES, INC ................................... 219
19,000 ALLEGHENY ENERGY, INC ................................ 656
15,900 o SD ALLIED WASTE INDUSTRIES, INC ...................... 376
17,760 AMEREN CORP .......................................... 758
20,900 AMERICAN ELECTRIC POWER CO, INC ...................... 984
500 AMERICAN STATES WATER CO ............................. 14
300 AMERICAN WATER WORKS CO, INC ......................... 10
8,000 o SD AQUA ALLIANCE, INC ................................ 17
4,900 ATMOS ENERGY CORP .................................... 158
22,100 BALTIMORE GAS & ELECTRIC CO .......................... 682
7,900 BEC ENERGY ........................................... 325
16,300 BROWNING FERRIS INDUSTRIES, INC ...................... 464
6,600 o SD CALENERGY, INC .................................... 229
600 o SD CALPINE CORP ...................................... 15
3,100 CAROLINA POWER & LIGHT CO ............................ 146
700 o SD CASELLA WASTE SYSTEMS, INC (CLASS A) .............. 26
27,300 CENTRAL & SOUTH WEST CORP ............................ 749
2,800 CENTRAL HUDSON GAS & ELECTRIC CORP ................... 125
100 CILCORP, INC ......................................... 6
21,100 CINERGY CORP ......................................... 725
80 o SD CITIZENS UTILITIES CO (CLASS B) ................... 1
26 CMP GROUP, INC ....................................... 0
17,800 COASTAL CORP ......................................... 622
12,200 COLUMBIA ENERGY GROUP ................................ 705
300 COMMONWEALTH ENERGY SYSTEM CO ........................ 12
16,225 CONECTIV, INC ........................................ 398
537 CONECTIV, INC (CLASS A) .............................. 21
600 CONNECTICUT ENERGY CORP .............................. 18
13,500 CONSOLIDATED EDISON CO OF N.Y., INC .................. 714
13,300 CONSOLIDATED NATURAL GAS CO .......................... 718
600 CTG RESOURCES, INC ................................... 16
5,900 DOMINION RESOURCES, INC .............................. 276
200 DQE, INC ............................................. 9
18,400 DTE ENERGY CO ........................................ 789
19,033 DUKE ENERGY CORP ..................................... 1,219
5,600 DYNEGY, INC .......................................... 61
3,700 EASTERN ENTERPRISES CO ............................... 162
300 o SD EASTERN ENVIRONMENTAL SERVICES, INC ............... 9
27,500 EDISON INTERNATIONAL CO .............................. 767
5,402 EL PASO ENERGY CORP .................................. 188
3,300 ENERGEN CORP ......................................... 64
15,661 ENRON CORP ........................................... 894
</TABLE>
B-29
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
ELECTRIC, GAS, AND SANITARY SERVICES--(Continued)
5,300 ENTERGY CORP ......................................... $ 165
200 ETOWN CORP ........................................... 9
27,402 FIRSTENERGY CORP ..................................... 892
5,200 FLORIDA PROGRESS CORP ................................ 233
8,400 FPL GROUP, INC ....................................... 518
17,100 GPU, INC ............................................. 756
5,200 HAWAIIAN ELECTRIC INDUSTRIES, INC .................... 209
17,903 HOUSTON INDUSTRIES, INC .............................. 575
6,100 IDACORP, INC ......................................... 221
4,933 INDIANA ENERGY, INC .................................. 121
12,250 INTERSTATE ENERGY CORP ............................... 395
10,000 KANSAS CITY POWER & LIGHT CO ......................... 296
2,300 LACLEDE GAS CO ....................................... 62
12,600 MCN ENERGY GROUP, INC ................................ 240
6,100 Xo SD MOLTEN METAL TECHNOLOGY, INC ...................... 0
200 MONTANA POWER CO ..................................... 11
6,400 NATIONAL FUEL GAS CO ................................. 289
8,500 NEVADA POWER CO ...................................... 221
385 NEW CENTURY ENERGIES, INC ............................ 19
100 o SD NEWPARK RESOURCES, INC ............................ 1
7,800 NICOR, INC ........................................... 330
5,100 o SD NORTHEAST UTILITIES CO ............................ 82
23,300 NORTHERN STATES POWER CO ............................. 647
150 NORTHWEST NATURAL GAS CO ............................. 4
2,400 NORTHWESTERN CORP .................................... 63
300 NUI CORP ............................................. 8
8,100 OGDEN CORP ........................................... 203
12,300 OGE ENERGY CORP ...................................... 357
2,233 ONEOK, INC ........................................... 81
2,800 ORANGE & ROCKLAND UTILITY, INC ....................... 160
200 OTTER TAIL POWER CO .................................. 8
2,900 PACIFICORP ........................................... 61
11,500 PECO ENERGY CO ....................................... 479
5,700 PEOPLES ENERGY CORP .................................. 227
27,429 PG&E CORP ............................................ 864
97 PIEDMONT NATURAL GAS CO, INC ......................... 4
1,300 PINNACLE WEST CAPITAL CORP ........................... 55
18,800 POTOMAC ELECTRIC POWER CO ............................ 495
23,394 PP&L RESOURCES, INC .................................. 652
15,900 PUBLIC SERVICE ENTERPRISE GROUP, INC ................. 636
7,778 PUGET SOUND ENERGY, INC .............................. 217
13,800 QUESTAR CORP ......................................... 267
3,586 o SD REPUBLIC INDUSTRIES, INC .......................... 53
6,300 ROCHESTER GAS & ELECTRIC CORP ........................ 197
4,200 SCANA CORP ........................................... 135
29,918 SEMPRA ENERGY ........................................ 759
2,200 SIERRA PACIFIC RESOURCES ............................. 84
700 SONAT, INC ........................................... 19
700 SOUTH JERSEY INDUSTRIES, INC ......................... 18
34,700 SOUTHERN CO .......................................... 1,008
17,367 TEXAS UTILITIES CO ................................... 811
1,700 TNP ENTERPRISES, INC ................................. 64
5,437 UGI CORP ............................................. 129
13,200 UNICOM CORP .......................................... 509
900 o SD UNISOURCE ENERGY CORP HOLDINGS CO ................. 12
400 UNITED ILLUMINATING CO ............................... 21
8,956 UTILICORP UNITED, INC ................................ 329
4,400 WASHINGTON GAS LIGHT CO .............................. 119
9,300 WASHINGTON WATER POWER CO ............................ 179
36,342 WASTE MANAGEMENT, INC ................................ 1,694
1,700 WESTERN GAS RESOURCES, INC ........................... 10
17,129 WILLIAMS COS, INC .................................... 534
5,700 WISCONSIN ENERGY CORP ................................ 179
400 WPS RESOURCES CORP ................................... 14
700 YANKEE ENERGY SYSTEMS, INC ........................... 20
--------
32,377
--------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
ELECTRONIC AND OTHER ELECTRIC EQUIPMENT--7.70%
300 o SD AAVID THERMAL TECHNOLOGIES, INC ................... $ 5
3,000 o SD ACTEL CORP ........................................ 60
500 o SD ADTRAN, INC ....................................... 9
1,000 o SD ADVANCED FIBRE COMMUNICATIONS ..................... 11
800 o SD ADVANCED LIGHTING TECHNOLOGIES, INC ............... 8
14,900 o SD ADVANCED MICRO DEVICES, INC ....................... 431
1,200 AEROQUIP-VICKERS, INC ................................ 36
8 ALLEGHENY TELEDYNE, INC .............................. 0
1,600 o SD ALLEN TELECOM, INC ................................ 11
5,500 o SD ALTERA CORP ....................................... 335
13,300 o SD AMERICAN POWER CONVERSION CORP .................... 644
12,560 AMP, INC ............................................. 654
900 o SD ANADIGICS, INC .................................... 10
11,075 o SD ANDREW CORP ....................................... 183
600 o SD ANTEC CORP ........................................ 12
800 o SD APPLIED MAGNETICS CORP ............................ 5
200 o SD APPLIED MICRO CIRCUITS CORP ....................... 7
200 o SD ARTESYN TECHNOLOGIES, INC ......................... 3
400 o SD ASPECT TELECOMMUNICATIONS CORP .................... 7
16,300 o SD ATMEL CORP ........................................ 250
466 BALDOR ELECTRIC CO ................................... 9
1,000 o SD BENCHMARK ELECTRONICS, INC ........................ 37
2,300 BMC INDUSTRIES, INC .................................. 14
500 o SD BROADCOM CORP (CLASS A) ........................... 60
150 o SD BURR BROWN CORP ................................... 4
2,000 C&D TECHNOLOGIES, INC ................................ 55
4,600 o SD CELLNET DATA SYSTEMS, INC ......................... 23
1,000 o SD COMMSCOPE, INC .................................... 17
7,275 o SD COMVERSE TECHNOLOGY, INC .......................... 517
1,235 COOPER INDUSTRIES, INC ............................... 59
1,800 CTS CORP ............................................. 78
14,000 o SD CYPRESS SEMICONDUCTOR CORP ........................ 116
2,800 o SD DIGITAL MICROWAVE CORP ............................ 19
700 o SD DII GROUP, INC .................................... 16
23,600 EMERSON ELECTRIC CO .................................. 1,428
1,900 o SD ESS TECHNOLOGY .................................... 10
700 o SD EXCEL SWITCHING CORP .............................. 27
400 EXIDE CORP ........................................... 7
3,900 o SD GENERAL DATACOMM INDUSTRIES, INC .................. 9
224,000 GENERAL ELECTRIC CO .................................. 22,862
200 o SD GENERAL INSTRUMENT CORP ........................... 7
3,425 o SD GENERAL SEMICONDUCTOR, INC ........................ 28
17,200 Xo SD GEOTEK COMMUNICATIONS, INC ........................ 0
25 o SD GLENAYRE TECHNOLOGIES, INC ........................ 0
2,200 o SD HADCO CORP ........................................ 77
35 HARMAN INTERNATIONAL INDUSTRIES, INC ................. 1
200 HARRIS CORP .......................................... 7
1,060 HUBBELL, INC (CLASS B) ............................... 40
400 o SD INTEGRATED DEVICE TECHNOLOGY, INC ................. 2
115,500 INTEL CORP ........................................... 13,694
500 INTER-TEL, INC ....................................... 12
6,700 o SD INTERDIGITAL COMMUNICATIONS CORP .................. 31
1,400 o SD ITI TECHNOLOGIES, INC ............................. 43
2,400 o SD ITRON, INC ........................................ 17
3,400 o SD JABIL CIRCUIT, INC ................................ 254
100 o SD KEMET CORP ........................................ 1
7,400 o SD KOMAG, INC ........................................ 77
500 KUHLMAN CORP ......................................... 19
900 o SD L-3 COMMUNICATIONS HOLDINGS, INC .................. 42
3,700 o SD LATTICE SEMICONDUCTOR CORP ........................ 170
175 o SD LEVEL ONE COMMUNICATIONS, INC ..................... 6
4,300 LINEAR TECHNOLOGY CO ................................. 385
1,300 o SD MAGNETEK, INC ..................................... 15
7,700 MAYTAG CO ............................................ 479
1,900 o SD MEMC ELECTRONIC MATERIALS, INC .................... 16
</TABLE>
B-30
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
ELECTRONIC & OTHER ELECTRIC EQUIPMENT--(Continued)
5,625 o SD MICROCHIP TECHNOLOGY, INC ......................... $ 208
6,800 o SD MICRON TECHNOLOGY, INC ............................ 344
5,000 o SD MMC NETWORKS, INC ................................. 66
11,237 MOLEX, INC ........................................... 428
900 o SD MOOG, INC (CLASS A) ............................... 35
46,500 MOTOROLA, INC ........................................ 2,839
2,400 o SD MRV COMMUNICATIONS, INC ........................... 15
1,100 NATIONAL PRESTO INDUSTRIES, INC ...................... 47
26,102 o SD NATIONAL SEMICONDUCTOR CORP ....................... 352
6,800 NATIONAL SERVICE INDUSTRIES, INC ..................... 258
2,500 o SD NEOMAGIC CORP ..................................... 55
100 o SD OAK INDUSTRIES, INC ............................... 4
2,700 o SD OAK TECHNOLOGY, INC ............................... 9
2,800 o SD P-COM, INC ........................................ 11
900 PARK ELECTROCHEMICAL CORP ............................ 26
2,700 PITTWAY CORP (CLASS A) ............................... 89
2,700 o SD PLANTRONICS, INC .................................. 232
2,400 o SD PLEXUS CORP ....................................... 81
1,300 o SD PMC-SIERRA, INC ................................... 82
2,500 o SD POLYCOM, INC ...................................... 56
900 o SD PREMISYS COMMUNICATIONS, INC ...................... 8
10,400 o SD QUALCOMM, INC ..................................... 539
13,000 RAYCHEM CORP ......................................... 420
4,100 o SD RAYOVAC CORP ...................................... 109
7,000 o SD READ RITE CORP .................................... 103
700 o SD RECOTON CORP ...................................... 13
9,500 o SD RELTEC CORP ....................................... 211
3,300 o SD REMEC, INC ........................................ 59
2,200 o SD S3, INC ........................................... 16
6,800 o SD SANMINA CORP ...................................... 425
2,000 o SD SAWTEK, INC ....................................... 35
8,500 o SD SCI SYSTEMS, INC .................................. 491
1,800 o SD SCM MICROSYSTEMS, INC ............................. 128
2,000 o SD SEMTECH CORP ...................................... 72
7,900 o SD SENSORMATIC ELECTRONICS CORP ...................... 55
4,200 o SD SMART MODULAR TECHNOLOGIES, INC ................... 117
11,400 o SD SOLECTRON CORP .................................... 1,059
13,600 SUNBEAM CORP ......................................... 95
2,000 TECHNITROL, INC ...................................... 64
5,700 o SD TEKELEC ........................................... 94
1,100 TELEFLEX, INC ........................................ 50
17,200 o SD TELLABS, INC ...................................... 1,179
30,700 TEXAS INSTRUMENTS, INC ............................... 2,627
9,499 THOMAS & BETTS CORP .................................. 411
1,900 THOMAS INDUSTRIES, INC ............................... 37
6,300 o SD UCAR INTERNATIONAL, INC ........................... 112
100 o SD UNIPHASE CORP ..................................... 7
1,800 o SD VICOR CORP ........................................ 16
1,300 o SD VISHAY INTERTECHNOLOGY, INC ....................... 19
12,000 o SD VITESSE SEMICONDUCTOR CORP ........................ 548
2,000 o SD VLSI TECHNOLOGY, INC .............................. 22
3,500 o SD WESTELL TECHNOLOGIES, INC (CLASS A) ............... 17
5,900 o SD XILINX, INC ....................................... 384
5,600 o SD XYLAN CORP ........................................ 98
1,300 Xo SD ZENITH ELECTRONICS CORP ........................... 0
1,000 o SD ZOLTEK COS, INC ................................... 9
--------
58,357
--------
ENGINEERING AND MANAGEMENT SERVICES--0.23%
900 o SD AHL SERVICES, INC ................................. 28
200 BLOUNT INTERNATIONAL, INC ............................ 5
7,900 o SD CATALYTICA, INC ................................... 142
600 o SD DATA TRANSMISSION NETWORK CORP .................... 17
1,100 o SD DIAMOND TECH PARTNERS, INC (CLASS A) .............. 21
11,200 DUN & BRADSTREET CORP ................................ 354
1,800 o SD F.Y.I., INC ....................................... 58
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
400 o SD INCYTE PHARMACEUTICALS, INC ....................... $ 15
3,600 o SD JACOBS ENGINEERING GROUP, INC ..................... 147
1,000 o SD MAXIMUS, INC ...................................... 37
4,800 o SD MEDAPHIS CORP ..................................... 16
1,300 o SD META GROUP, INC ................................... 39
1,800 o SD METZLER GROUP, INC ................................ 88
17,000 o SD NEUROMEDICAL SYSTEMS, INC ......................... 4
600 o SD NFO WORLDWIDE, INC ................................ 7
700 o SD PHARMACEUTICAL PRODUCT DEVELOPMENT ................ 21
400 o SD PROFIT RECOVERY GROUP INTERNATIONAL ............... 15
9,600 o SD QUINTILES TRANSNATIONAL CORP ...................... 512
200 SERVICEMASTER CO ..................................... 4
2,700 o SD STAFF LEASING, INC ................................ 31
400 STONE & WEBSTER, INC ................................. 13
600 TEJON RANCH CO ....................................... 12
75 o SD TETRA TECH, INC ................................... 2
2,000 o SD URS CORP .......................................... 47
400 o SD WACKENHUT CORRECTIONS CORP ........................ 11
4,700 o SD WHITTMAN HART, INC ................................ 130
--------
1,776
--------
FABRICATED METAL PRODUCTS--0.89%
1,300 o SD AMERICAN SAFETY RAZOR CO .......................... 16
610 BALL CORP ............................................ 28
2,000 BARNES GROUP, INC .................................... 58
500 CHART INDUSTRIES, INC ................................ 4
1,600 o SD COLEMAN CO, INC ................................... 15
3,700 CRANE CO ............................................. 112
1,000 CROWN CORK & SEAL CO, INC ............................ 31
82,578 GILLETTE CO .......................................... 3,990
35,700 MASCO CORP ........................................... 1,026
2,500 o SD MILLER INDUSTRIES, INC ............................ 11
200 o SD NCI BUILDING SYSTEMS, INC ......................... 6
300 o SD NORTEK, INC ....................................... 8
18,050 PARKER-HANNIFIN CORP ................................. 591
300 PRIMEX TECHNOLOGIES, INC ............................. 13
9,000 ROCKWELL INTERNATIONAL CORP .......................... 437
3,900 o SD ROHN INDUSTRIES, INC .............................. 13
600 o SD SIMPSON MANUFACTURING CO, INC ..................... 22
2,500 SNAP-ON, INC ......................................... 87
200 o SD SPS TECHNOLOGIES, INC ............................. 11
2,700 STRUM, RUGER & CO, INC ............................... 32
7,500 o SD TOWER AUTOMOTIVE, INC ............................. 187
1,600 VALMONT INDUSTRIES ................................... 22
2,600 WATTS INDUSTRIES, INC (CLASS A) ...................... 43
--------
6,763
--------
FOOD AND KINDRED PRODUCTS--4.06%
1,400 o SD AGRIBRANDS INTERNATIONAL, INC ..................... 42
2,500 o SD AMERICAN ITALIAN PASTA CO (CLASS A) ............... 66
34,800 ANHEUSER BUSCH COS, INC .............................. 2,284
59,564 ARCHER DANIELS MIDLAND CO ............................ 1,024
1,000 o SD BERINGER WINE ESTATES HOLDINGS, INC (CLASS B) ..... 45
22,400 BESTFOODS, INC ....................................... 1,193
2,400 o SD BOSTON BEER CO, INC (CLASS A) ..................... 20
8,300 CAMPBELL SOUP CO ..................................... 457
2,300 o SD CANANDAIGUA BRANDS, INC (CLASS A) ................. 133
1,000 CHIQUITA BRANDS INTERNATIONAL, INC ................... 10
153,300 COCA COLA CO ......................................... 10,252
25,100 COCA COLA ENTERPRISES, INC ........................... 897
35,200 CONAGRA, INC ......................................... 1,109
400 COORS (ADOLPH) CO (CLASS B) .......................... 23
5,975 CORN PRODUCTS INTERNATIONAL, INC ..................... 181
6,500 DEAN FOODS CO ........................................ 265
7,700 DOLE FOOD, INC ....................................... 231
400 DREYERS GRAND ICE CREAM, INC ......................... 6
7,016 EARTHGRAINS CO ....................................... 217
100 FARMER BROTHERS CO ................................... 21
</TABLE>
B-31
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
FOOD AND KINDRED PRODUCTS--(Continued)
750 FLOWERS INDUSTRIES, INC .............................. $ 18
14,607 GENERAL MILLS, INC ................................... 1,136
24,500 HEINZ (H.J.) CO ...................................... 1,387
317 HERSHEY FOODS CORP ................................... 20
7,200 HORMEL FOODS CORP .................................... 236
13,500 IBP, INC ............................................. 393
200 IMPERIAL HOLLY CORP .................................. 2
4,000 o SD INTERNATIONAL HOME FOODS, INC ..................... 68
6,900 INTERSTATE BAKERIES CORP ............................. 182
3,100 o SD KEEBLER FOODS CO .................................. 117
3,800 KELLOGG CO ........................................... 130
5,950 LANCASTER COLONY CORP ................................ 191
300 LANCE, INC ........................................... 6
200 MCCORMICK & CO, INC (NON-VOTE) ....................... 7
2,200 MICHAEL FOODS, INC ................................... 66
1,700 NABISCO HOLDINGS CORP (CLASS A) ...................... 71
89,500 PEPSICO, INC ......................................... 3,664
8,900 QUAKER OATS CO ....................................... 530
400 o SD RALCORP HOLDINGS, INC ............................. 7
28,300 RALSTON PURINA CO .................................... 916
800 RIVIANA FOODS, INC ................................... 20
15,601 RJR NABISCO HOLDINGS CORP ............................ 463
1,200 o SD ROBERT MONDAVI CORP (CLASS A) ..................... 49
56,000 SARA LEE CORP ........................................ 1,579
5,400 o SD SMITHFIELD FOODS, INC ............................. 183
4,400 SMUCKER (J.M.) CO (CLASS A) .......................... 109
2,700 o SD SUIZA FOODS CORP .................................. 138
3,866 TOOTSIE ROLL INDUSTRIES, INC ......................... 151
1,200 o SD TRIARC COS, INC ................................... 19
8,600 UNIVERSAL FOODS CORP ................................. 236
4,180 o SD VLASIC FOODS INTERNATIONAL, INC ................... 100
300 WHITMAN CORP ......................................... 8
200 WORTHINGTON FOODS, INC ............................... 4
1,401 WRIGLEY (WM) JR CO ................................... 125
--------
30,807
--------
FOOD STORES--0.71%
17,500 ALBERTSONS, INC ...................................... 1,115
8,700 AMERICAN STORES CO ................................... 321
39 Xo SD BRUNOS, INC ....................................... 0
54,500 FOOD LION, INC (CLASS B) ............................. 548
2,800 GREAT ATLANTIC & PACIFIC TEA CO, INC ................. 83
16,800 o SD KROGER CO ......................................... 1,016
37,404 o SD SAFEWAY, INC ...................................... 2,279
7,000 o SD SOUTHLAND CORP .................................... 13
--------
5,375
--------
FORESTRY--0.00%
200 GEORGIA-PACIFIC CORP (TIMBER GROUP) .................. 5
--------
FURNITURE AND FIXTURES--0.14%
900 BASSETT FURNITURE INDUSTRIES, INC .................... 22
8,300 HON INDUSTRIES, INC .................................. 199
5,800 KIMBALL INTERNATIONAL, INC (CLASS B) ................. 110
2,400 o SD KNOLL, INC ........................................ 71
12,100 MILLER (HERMAN), INC ................................. 325
2,000 STEELCASE, INC ....................................... 33
16,350 U.S. INDUSTRIES, INC ................................. 305
--------
1,065
--------
FURNITURE AND HOMEFURNISHINGS STORES--0.26%
16,000 o SD BED BATH & BEYOND, INC ............................ 546
3,500 o SD BEST BUY, INC ..................................... 215
1,200 o SD CDNOW, INC ........................................ 22
300 CIRCUIT CITY STORES-CIRCUIT CITY GROUP ............... 15
15,700 o SD COMPUSA, INC ...................................... 205
1,100 HAVERTY FURNITURE COS, INC ........................... 23
1,100 o SD LINENS N THINGS, INC .............................. 44
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
5,700 o SD MUSICLAND STORES CORP ............................. $ 85
300 o SD N2K, INC .......................................... 4
15,400 PIER 1 IMPORTS, INC .................................. 149
15,700 TANDY CORP ........................................... 647
2,550 o SD TRANS WORLD ENTERTAINMENT CORP .................... 49
--------
2,004
--------
GENERAL BUILDING CONTRACTORS--0.09%
9,900 CENTEX CORP .......................................... 446
600 o SD CROSSMAN COMMUNITIES, INC ......................... 17
200 HILLENBRAND INDUSTRIES, INC .......................... 11
800 KAUFMAN & BROAD HOME CORP ............................ 23
5,000 LENNAR CORP .......................................... 126
1,500 o SD NVR, INC .......................................... 72
200 PULTE CORP ........................................... 6
200 RYLAND GROUP, INC .................................... 6
--------
707
--------
GENERAL MERCHANDISE STORES--2.21%
3,700 o SD AMES DEPARTMENT STORES, INC ....................... 100
800 o SD BJS WHOLESALE CLUB, INC ........................... 37
2,400 Xo SD CALDOR CORP ....................................... 1
8,800 CASEYS GENERAL STORES, INC ........................... 115
800 o SD COST PLUS, INC .................................... 25
9,100 o SD COSTCO COS, INC ................................... 657
22,300 DAYTON HUDSON CORP ................................... 1,210
1,200 DILLARDS, INC (CLASS A) .............................. 34
8,550 o SD DOLLAR TREE STORES, INC ........................... 374
1,700 FAMILY DOLLAR STORES, INC ............................ 37
22,370 o SD FEDERATED DEPARTMENT STORES, INC .................. 974
5,204 o SD FRED MEYER, INC ................................... 314
59,600 o SD K MART CORP ....................................... 913
3,500 o SD KOHLS CORP ........................................ 215
9,400 MAY DEPARTMENT STORES CO ............................. 568
4,600 o SD NEIMAN-MARCUS GROUP, INC .......................... 115
18,045 PENNEY (J.C.) CO, INC ................................ 846
22,800 o SD SAKS, INC ......................................... 720
32,900 SEARS ROEBUCK & CO ................................... 1,398
900 o SD SERVICE MERCHANDISE, INC .......................... 0
4,200 o SD SHOPKO STORES, INC ................................ 140
98,100 WAL-MART STORES, INC ................................. 7,989
--------
16,782
--------
HEALTH SERVICES--0.58%
1,100 o SD ADVANCE PARADIGM, INC ............................. 39
1,800 o SD AMERICAN HOMEPATIENT, INC ......................... 3
4,600 o SD AMERICAN ONCOLOGY RESOURCES, INC .................. 67
6,900 o SD APRIA HEALTHCARE GROUP, INC ....................... 62
1,800 o SD BEVERLY ENTERPRISES, INC .......................... 12
1,600 o SD CAREMATRIX CORP ................................... 49
1,700 o SD CENTENNIAL HEALTHCARE CORP ........................ 26
3,850 o SD CLINTRIALS, INC ................................... 15
27,138 COLUMBIA/HCA HEALTHCARE CORP ......................... 672
600 o SD CONCENTRA MANAGED CARE, INC ....................... 6
2,000 o SD CURATIVE HEALTH SERVICES, INC ..................... 67
1,800 o SD ENZO BIOCHEMICAL, INC ............................. 19
400 o SD EXPRESS SCRIPTS, INC .............................. 27
1,400 Xo SD FPA MEDICAL MANAGEMENT, INC ....................... 0
31,717 o SD HEALTH MANAGEMENT ASSOCIATES, INC
(CLASS A) NEW ....................................... 686
31,660 o SD HEALTHSOUTH CORP .................................. 489
77 o SD INTEGRATED HEALTH SERVICES, INC ................... 1
13,752 o SD LABORATORY CORP OF AMERICA HOLDINGS ............... 19
260 o SD LABORATORY CORP OF AMERICA HOLDINGS
WTS 04/28/00 ........................................ 0
2,463 o SD LCA-VISION, INC ................................... 3
6,900 o SD LINCARE HOLDINGS, INC ............................. 280
100 o SD LTC HEALTHCARE, INC ............................... 0
</TABLE>
B-32
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
HEALTH SERVICES--(Continued)
2,400 o SD MAGELLAN HEALTH SERVICES, INC ..................... $ 20
10,130 o SD MARINER POST-ACUTE NETWORK, INC ................... 46
32,374 o SD MEDPARTNERS, INC .................................. 170
3,500 o SD NOVACARE, INC ..................................... 9
2,500 o SD PEDIATRIX MEDICAL GROUP, INC ...................... 150
12,800 o SD PHYCOR, INC ....................................... 87
4,600 o SD PHYSICIAN RELIANCE NETWORK, INC ................... 60
6,600 o SD PHYSICIANS RESOURCE GROUP, INC .................... 0
1,400 o SD PROVINCE HEALTHCARE CO ............................ 50
62 o SD QUEST DIAGNOSTICS, INC ............................ 1
50 o SD QUORUM HEALTH GROUP, INC .......................... 1
6,650 o SD RENAL CARE GROUP, INC ............................. 192
1,700 o SD SUN HEALTHCARE GROUP, INC ......................... 11
35,425 o SD TENET HEALTHCARE CORP ............................. 930
69 o SD TOTAL RENAL CARE HOLDINGS, INC .................... 2
2,200 o SD UNITED PAYORS & UNITED PROVIDERS, INC ............. 63
200 o SD UNIVERSAL HEALTH SERVICES, INC .................... 10
8,941 o SD VENCOR, INC ....................................... 40
--------
4,384
--------
HEAVY CONSTRUCTION, EXCEPT BUILDING--0.02%
300 FLUOR CORP ........................................... 13
6,600 FOSTER WHEELER CORP .................................. 87
450 GRANITE CONSTRUCTION, INC ............................ 15
3,500 o SD INSITUFORM TECHNOLOGIES, INC (CLASS A) ............ 51
1,700 o SD MORRSION KNUDSEN CORP ............................. 17
--------
183
--------
HOLDING AND OTHER INVESTMENT OFFICES--1.07%
1,600 ALEXANDRIA REAL ESTATE EQUITIES, INC ................. 50
12,100 AMB PROPERTY CORP .................................... 266
800 AMERICAN HEALTH PROPERTIES, INC ...................... 17
2,000 AMLI RESIDENTIAL PROPERTIES TRUST .................... 45
15,472 ARCHSTONE COMMUNITIES TRUST .......................... 313
2,100 BEDFORD PROPERTY INVESTORS, INC ...................... 35
300 BERKSHIRE REALTY CO, INC ............................. 3
70 BRADLEY REAL ESTATE, INC ............................. 1
3,000 CAPITAL AUTOMOTIVE REIT .............................. 45
8,539 CAPSTEAD MORTGAGE CORP ............................... 35
3,700 CBL & ASSOCIATES PROPERTIES, INC ..................... 96
300 CCA PRISON REALTY TRUST .............................. 6
2,900 CENTERPOINT PROPERTIES CORP .......................... 98
3,700 CHATEAU PROPERTIES, INC .............................. 108
300 CHELSEA GCA REALTY, INC .............................. 11
1,300 o SD COAST FEDERAL LITIGATION CONTINGENT RTS ........... 9
1,000 COMMERCIAL NET LEASE REALTY, INC ..................... 13
10,200 CORNERSTONE PROPERTIES, INC .......................... 159
3,044 COUSINS PROPERTIES, INC .............................. 98
400 o SD CRESECENT OPERATING, INC .......................... 2
3,000 CROWN AMERICAN REALTY TRUST .......................... 23
9,600 DEVELOPERS DIVERSIFIED REALTY CORP ................... 170
13,283 DUKE REALTY INVESTMENTS, INC ......................... 309
1,979 DYNEX CAPITAL, INC ................................... 9
900 EASTGROUP PROPERTIES, INC ............................ 17
2,300 ENTERTAINMENT PROPERTIES TRUST ....................... 39
33,050 EQUITY OFFICE PROPERTIES TRUST ....................... 793
8,178 EQUITY RESIDENTIAL PROPERTIES TRUST CO ............... 331
1,500 ESSEX PROPERTY TRUST, INC ............................ 45
6,000 FEDERAL REALTY INVESTMENT TRUST ...................... 142
4,166 FRANCHISE FINANCE CORP OF AMERICA .................... 100
6,000 GENERAL GROWTH PROPERTIES, INC ....................... 227
500 HEALTH CARE PROPERTY INVESTORS, INC .................. 15
600 HIGHWOODS PROPERTIES, INC ............................ 15
2,600 o SD HOME PROPERTIES OF NEW YORK, INC .................. 67
100 o SD IMPAC MORTGAGE HOLDINGS, INC ...................... 0
5,700 IMPERIAL CREDIT COMMERCIAL MORTGAGE
INVESTMENT CORP ...................................... 53
445 INDYMAC MORTGAGE HOLDINGS, INC ....................... 5
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
4,200 IRT PROPERTY CO ...................................... $ 42
5,000 JDN REALTY CORP ...................................... 108
2,100 JP REALTY, INC ....................................... 41
6,800 KIMCO REALTY CORP .................................... 270
7,800 LIBERTY PROPERTY TRUST CO ............................ 192
1,000 LTC PROPERTIES, INC .................................. 17
4,200 MACERICH CO (THE) .................................... 108
400 MACK-CALI REALTY CORP ................................ 12
99 MEDITRUST CORP PAIRED ................................ 1
5,200 MERIDIAN INDUSTRIAL TRUST, INC ....................... 122
7,500 MERISTAR HOSPITALITY CORP ............................ 139
285 o SD MERRY LAND PROPERTIES, INC ........................ 1
2,200 MGI PROPERTIES, INC .................................. 61
3,100 MID-AMERICA APARTMENT COMMUNITIES, INC ............... 70
1,200 NATIONAL GOLF PROPERTIES, INC ........................ 35
3,200 NATIONAL HEALTH INVESTORS, INC ....................... 79
10,421 NEW PLAN EXCEL REALTY TRUST .......................... 231
2,100 PACIFIC GULF PROPERTIES, INC ......................... 42
1,837 PATRIOT AMERICAN HOSPITALITY, INC .................... 11
800 o SD PEC ISRAEL ECONOMIC CORP .......................... 23
3,600 POST PROPERTIES, INC ................................. 138
6,800 PRIME RETAIL, INC .................................... 67
11,590 PROLOGIS TRUST ....................................... 240
12,300 PUBLIC STORAGE, INC .................................. 333
4,300 REALTY INCOME CORP ................................... 107
6,600 RECKSON ASSOCIATES REALTY CORP ....................... 146
1,000 REDWOOD TRUST, INC ................................... 14
2,200 REGENCY REALTY CORP .................................. 49
500 RFS HOTEL INVESTORS, INC ............................. 6
1,000 SAUL CENTERS, INC .................................... 16
4,500 SHURGARD STORAGE CENTERS, INC ........................ 116
500 SL GREEN REALTY CORP ................................. 11
2,000 o SD SOVRAN SELF STORAGE, INC .......................... 50
600 SPIEKER PROPERTIES, INC .............................. 21
3,300 STARWOOD FINANCIAL TRUST ............................. 198
2,800 STORAGE U.S.A., INC .................................. 90
600 o SD SUMMIT PROPERTIES, INC ............................ 10
2,400 SUN COMMUNITIES, INC ................................. 84
6,500 TAUBMAN CENTERS, INC ................................. 89
1,500 o SD THORNBURG MORTGAGE ASSET CORP ..................... 11
2,500 TOWN & COUNTRY TRUST ................................. 40
796 UNITED DOMINION REALTY TRUST, INC .................... 8
1,500 URBAN SHOPPING CENTERS, INC .......................... 49
8,941 o SD VENTAS, INC ....................................... 109
9,800 VORNADO REALTY TRUST ................................. 331
2,100 o SD WALDEN RESIDENTIAL PROPERTIES, INC ................ 43
6,000 WASHINGTON REAL ESTATE INVESTMENT TRUST .............. 112
4,100 WEINGARTEN REALTY INVESTORS, INC ..................... 183
1,000 WESTERN INVESTMENT REAL ESTATE TRUST ................. 12
4,200 WESTFIELD AMERICA, INC ............................... 72
--------
8,130
--------
HOTELS AND OTHER LODGING PLACES--0.16%
6,600 o SD AZTAR CORP ........................................ 33
1,350 o SD BRISTOL HOTELS & RESORTS, INC ..................... 8
37,338 o SD CENDANT CORP ...................................... 712
6,100 o SD CHOICE HOTELS INTERNATIONAL, INC .................. 83
1,300 o SD CIRCUS CIRCUS ENTERPRISES, INC .................... 15
2,700 o SD CRESTLINE CAPITAL CORP ............................ 39
11,700 o SD EXTENDED STAY AMERICA, INC ........................ 123
3,800 o SD MARCUS CORP ....................................... 62
1,900 o SD MERISTAR HOTELS & RESORTS, INC .................... 5
1,200 o SD PRIMADONNA RESORTS, INC ........................... 11
768 o SD PROMUS HOTEL CORP ................................. 25
3,500 o SD RED ROOF INNS, INC ................................ 59
4,000 o SD SUNBURST HOSPITALITY CORP ......................... 17
2,800 o SD TRUMP HOTEL & CASINO RESORT, INC .................. 11
--------
1,203
--------
</TABLE>
B-33
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
INDUSTRIAL MACHINERY AND EQUIPMENT--7.43%
32,242 o SD 3COM CORP ......................................... $ 1,445
16,400 o SD ADAPTEC, INC ...................................... 288
9,800 AGCO CORP ............................................ 77
400 o SD AMERICAN STANDARD COS, INC ........................ 14
18,300 o SD APPLE COMPUTER, INC ............................... 749
33,100 o SD APPLIED MATERIALS, INC ............................ 1,413
500 APPLIED POWER, INC (CLASS A) ......................... 19
1,200 o SD ASTEC INDUSTRIES, INC ............................. 67
1,600 o SD AUSPEX SYSTEMS, INC ............................... 7
12,715 BAKER HUGHES, INC .................................... 225
100 o SD BANCTEC, INC ...................................... 1
2,300 o SD BELL & HOWELL CO .................................. 87
11,000 BLACK & DECKER CORP .................................. 617
16,100 BRUNSWICK CORP ....................................... 398
5,600 o SD C-CUBE MICROSYSTEMS, INC .......................... 152
2,200 o SD CABLETRON SYSTEMS, INC ............................ 18
4,800 CASE CORP ............................................ 105
15,600 CATERPILLAR, INC ..................................... 718
11,000 o SD CIRRUS LOGIC, INC ................................. 108
108,725 o SD CISCO SYSTEMS, INC ................................ 10,091
8,000 o SD COLTEC INDUSTRIES, INC ............................ 156
1,500 COLUMBUS MCKINNON CORP ............................... 27
110,484 COMPAQ COMPUTER CORP ................................. 4,633
9,000 o SD COPYTELE, INC ..................................... 12
5,600 CUMMINS ENGINE CO, INC ............................... 199
4,500 DEERE & CO ........................................... 149
77,293 o SD DELL COMPUTER CORP ................................ 5,657
1,400 o SD DETROIT DIESEL CORP ............................... 29
700 o SD DIALOGIC CORP ..................................... 14
5,900 o SD DIAMOND MULTIMEDIA SYSTEMS, INC ................... 38
11,450 DIEBOLD, INC ......................................... 409
300 o SD DIGI INTERNATIONAL, INC ........................... 3
200 DONALDSON CO, INC .................................... 4
4,400 DOVER CORP ........................................... 161
38,000 o SD EMC CORP .......................................... 3,230
2,900 o SD ESTERLINE CORP .................................... 63
2,100 o SD FEDDERS CORP ...................................... 12
6,400 FLOWSERVE CORP ....................................... 106
900 GRACO, INC ........................................... 27
400 HARDINGE, INC ........................................ 7
200 HARNISCHFEGER INDUSTRIES, INC ........................ 2
53,800 HEWLETT-PACKARD CO ................................... 3,675
8,300 HUSSMANN INTERNATIONAL, INC .......................... 161
1,200 o SD HYPERCOM CORP ..................................... 12
50 IDEX CORP ............................................ 1
400 o SD IN FOCUS SYSTEMS, INC ............................. 4
12,050 INGERSOLL-RAND CO .................................... 566
60,200 INTERNATIONAL BUSINESS MACHINES CORP ................. 11,122
600 o SD IONICS, INC ....................................... 18
900 JLG INDUSTRIES, INC .................................. 14
268 KENNAMETAL, INC ...................................... 6
600 o SD KULICHE & SOFFA INDUSTRIES, INC ................... 11
1,000 o SD LAM RESEARCH CORP ................................. 18
5,300 o SD LEXMARK INTERNATIONAL GROUP (CLASS A) ............. 533
600 LINCOLN ELECTRIC HOLDINGS CO ......................... 13
300 LINDSAY MANUFACTURING CO ............................. 4
50 MANITOWOC, INC ....................................... 2
500 o SD MICROS SYSTEMS, INC ............................... 16
6,400 MILACRON, INC ........................................ 123
27,700 MINNESOTA MINING & MANUFACTURING CO .................. 1,970
1,000 NACCO INDUSTRIES, INC (CLASS A) ...................... 92
50 o SD NATIONAL INSTRUMENTS CORP ......................... 2
100 NORDSON CORP ......................................... 5
5,600 o SD NOVELLUS SYSTEMS, INC ............................. 277
20,400 PALL CORP ............................................ 516
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
5,875 o SD PAXAR CORP ........................................ $ 53
1,500 PENTAIR, INC ......................................... 60
12,500 PITNEY BOWES, INC .................................... 826
2,000 o SD PRESSTEK, INC ..................................... 14
2,700 ROPER INDUSTRIES, INC ................................ 55
29,348 o SD SEAGATE TECHNOLOGY, INC ........................... 888
7,100 o SD SEQUENT COMPUTER SYSTEMS, INC ..................... 86
3,800 o SD SHIVA CORP ........................................ 21
10,900 o SD SILICON GRAPHICS, INC ............................. 140
1,400 o SD SILICON VALLEY GROUP, INC ......................... 18
50 o SD SLI, INC .......................................... 1
1,800 o SD SPECIALTY EQUIPMENT COS, INC ...................... 49
800 o SD SPEEDFAM INTERNATIONAL, INC ....................... 14
1,500 o SD SPLASH TECHNOLOGY HOLDINGS, INC ................... 11
200 STANDEX INTERNATIONAL CORP ........................... 5
500 STARRETT (L.S.) CO (CLASS A) ......................... 17
16,800 o SD STORAGE TECHNOLOGY CORP ........................... 597
6,600 SYMBOL TECHNOLOGIES, INC ............................. 422
2,800 TECUMSEH PRODUCTS CO (CLASS A) ....................... 131
1,600 TENNANT CO ........................................... 64
22,500 TENNECO, INC ......................................... 766
2,500 o SD TEREX CORP ........................................ 71
8,329 TIMKEN CO ............................................ 157
232 TYCO INTERNATIONAL LTD ............................... 18
17,510 o SD U.S. FILTER CORP .................................. 401
9,208 o SD UNISYS CORP ....................................... 317
500 o SD UNOVA, INC ........................................ 9
1,300 o SD VARCO INTERNATIONAL, INC .......................... 10
3,300 o SD VISUAL NETWORKS, INC .............................. 124
600 o SD XIRCOM, INC ....................................... 20
6,800 YORK INTERNATIONAL CORP .............................. 278
500 o SD ZEBRA TECHNOLOGY CORP ............................. 14
--------
56,355
--------
INSTRUMENTS AND RELATED PRODUCTS--2.11%
3,400 o SD ADAC LABORATORIES, INC ............................ 68
300 o SD AFFYMETRIX, INC ................................... 7
2,600 o SD ALARIS MEDICAL, INC ............................... 15
400 o SD ANALOGIC CORP ..................................... 15
1,900 ARROW INTERNATIONAL, INC ............................. 60
6,500 o SD ARTERIAL VASCULAR ENGINEERING, INC ................ 341
3,800 o SD AVID TECHNOLOGIES, INC ............................ 89
700 o SD BACOU U.S.A., INC ................................. 15
3,100 BAUSCH & LOMB, INC ................................... 186
13,500 BAXTER INTERNATIONAL, INC ............................ 868
4,300 BECKMAN COULTER, INC ................................. 233
8,100 BECTON DICKINSON & CO ................................ 346
3,700 o SD BOSTON SCIENTIFIC CORP ............................ 99
9,300 o SD CHYRON CORP ....................................... 17
700 o SD CLOSURE MEDICAL CORP .............................. 21
1,600 o SD COHERENT, INC ..................................... 20
1,100 o SD COLE NATIONAL CORP (CLASS A) ...................... 19
1,200 o SD CONMED CORP ....................................... 40
800 o SD CREDENCE SYSTEMS CORP ............................. 15
900 o SD CYMER, INC ........................................ 13
2,400 o SD CYTYC CORP ........................................ 62
7,100 DENTSPLY INTERNATIONAL, INC .......................... 183
1,100 o SD DIONEX CORP ....................................... 40
850 o SD DYNATECH CORP ..................................... 2
27,000 EASTMAN KODAK CO ..................................... 1,944
300 o SD FOSSIL, INC ....................................... 9
3,800 o SD GENRAD, INC ....................................... 60
13,612 GUIDANT CORP ......................................... 1,501
800 o SD HAEMONETICS CORP .................................. 18
3,000 o SD HANGER ORTHOPEDIC GROUP, INC ...................... 68
13,500 HONEYWELL, INC ....................................... 1,017
7,900 o SD IMATRON, INC ...................................... 11
</TABLE>
B-34
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
INSTRUMENTS AND RELATED PRODUCTS--(Continued)
3,000 INVACARE CORP ........................................ $ 72
6,900 JOHNSON CONTROLS, INC ................................ 407
2,200 o SD MAXXIM MEDICAL, INC ............................... 65
36,240 MEDTRONIC, INC ....................................... 2,691
1,200 MENTOR CORP .......................................... 28
6,300 o SD METTLER-TOLEDO INTERNATIONAL, INC ................. 177
200 o SD MINE SAFETY APPLIANCE CO .......................... 14
700 MOVADO GROUP, INC .................................... 19
1,300 o SD NOVOSTE CORP ...................................... 37
1,000 o SD OCULAR SCIENCES, INC .............................. 27
2,300 o SD OEC MEDICAL SYSTEMS, INC .......................... 72
300 o SD PERCLOSE, INC ..................................... 10
300 o SD PINNACLE SYSTEMS, INC ............................. 11
5,300 POLAROID CORP ........................................ 99
4,018 RAYTHEON CO (CLASS A) ................................ 208
11,400 RAYTHEON CO (CLASS B) ................................ 607
2,400 o SD RESMED, INC ....................................... 109
1,100 o SD SABRATEK CORP ..................................... 18
1,000 o SD SCOTT TECHNOLOGIES, INC ........................... 17
200 o SD SEPRACOR, INC ..................................... 18
2,700 o SD SOFAMOR DANEK GROUP, INC .......................... 329
1,033 o SD SONOSITE, INC ..................................... 11
14,088 o SD ST. JUDE MEDICAL, INC ............................. 390
11,400 o SD STERIS CORP ....................................... 324
350 o SD SUMMIT TECHNOLOGY, INC ............................ 2
2,800 o SD SUNRISE MEDICAL, INC .............................. 35
200 o SD SYBRON INTERNATIONAL CORP ......................... 5
7,750 TEKTRONIX, INC ....................................... 233
700 o SD THERMEDICS, INC ................................... 8
300 o SD THERMO CARDIOSYSTEMS, INC ......................... 3
75 o SD THERMO ELECTRON CORP .............................. 1
1,125 o SD THERMO INSTRUMENT SYSTEMS, INC .................... 17
1,100 o SD THERMOQUEST CORP .................................. 14
1,200 o SD THERMOTREX CORP ................................... 10
2,000 o SD TRIMBLE NAVIGATION LTD ............................ 15
300 o SD VEECO INSTRUMENTS, INC ............................ 16
600 o SD VENTANA MEDICAL SYSTEMS, INC ...................... 13
2,200 o SD VISX, INC ......................................... 192
2,200 o SD VIVUS, INC ........................................ 6
1,800 o SD WESLEY JESSEN VISIONCARE, INC ..................... 50
2,200 X RITE, INC .......................................... 17
18,900 XEROX CORP ........................................... 2,230
--------
16,029
--------
INSURANCE AGENTS, BROKERS AND SERVICE--0.10%
1,900 BALDWIN & LYONS, INC (CLASS B) ....................... 47
200 BLANCH (E.W.) HOLDINGS, INC .......................... 9
100 o SD FIRST HEALTH GROUP CORP ........................... 2
2,000 HILB, ROGAL & HAMILTON CO ............................ 40
11,000 MARSH & MCLENNAN COS, INC ............................ 643
--------
741
--------
INSURANCE CARRIERS--4.90%
600 20TH CENTURY INDUSTRIES .............................. 14
7,267 AETNA, INC ........................................... 571
26,600 AFLAC, INC ........................................... 1,170
700 o SD ALLEGHANY CORP (DELAWARE) ......................... 132
61,556 ALLSTATE CORP ........................................ 2,378
6,500 AMBAC FINANCIAL GROUP, INC ........................... 391
400 AMERICAN BANKERS INSURANCE GROUP, INC ................ 19
2,300 AMERICAN FINANCIAL GROUP, INC ........................ 101
12,140 AMERICAN GENERAL CORP ................................ 947
74,475 AMERICAN INTERNATIONAL GROUP, INC .................... 7,196
1,100 AMERICAN MEDICAL SECURITY GROUP ...................... 16
200 AMERICAN NATIONAL INSURANCE CO ....................... 17
3,800 o SD AMERIN CORP ....................................... 90
6,050 AON CORP ............................................. 335
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
3,200 ARM FINANCIAL GROUP, INC (CLASS A) ................... $ 71
350 BERKLEY (W.R.) CORP .................................. 12
15 o SD BERKSHIRE HATHAWAY, INC (CLASS A) ................. 1,050
22 o SD BERKSHIRE HATHAWAY, INC (CLASS B) ................. 52
1,100 CHARTWELL RE CORP .................................... 26
200 CHICAGO TITLE CORP ................................... 9
5,200 CHUBB CORP ........................................... 337
18,300 CIGNA CORP ........................................... 1,415
15,188 CINCINNATI FINANCIAL CORP ............................ 556
146,763 CITIGROUP, INC ....................................... 7,265
3,700 CMAC INVESTMENT CORP ................................. 170
17,813 CONSECO, INC ......................................... 544
3,400 ENHANCE FINANCIAL SERVICES GROUP, INC ................ 102
9,500 EQUITABLE COS, INC ................................... 550
7,600 EVEREST REINSURANCE HOLDINGS, INC .................... 296
300 EXECUTIVE RISK, INC .................................. 16
4,900 FBL FINANCIAL GROUP, INC (CLASS A) ................... 119
3,300 FIDELITY NATIONAL FINANCIAL, INC ..................... 101
3,200 FINANCIAL SECURITY ASSURANCE HOLDINGS LTD ............ 174
8,650 FIRST AMERICAN FINANCIAL CORP ........................ 278
2,900 FOREMOST CORP OF AMERICA ............................. 61
9,200 FREMONT GENERAL CORP ................................. 228
1,100 HARLEYSVILLE GROUP, INC .............................. 28
8,300 HARTFORD FINANCIAL SERVICES GROUP, INC ............... 455
4,200 HARTFORD LIFE, INC (CLASS A) ......................... 245
520 o SD HIGHLANDS INSURANCE GROUP, INC .................... 7
1,600 o SD HUMANA, INC ....................................... 29
12,150 JEFFERSON-PILOT CORP ................................. 911
500 o SD KANSAS CITY LIFE INSURANCE CO ................... 41
2,500 LANDAMERICA FINANCIAL GROUP, INC ..................... 140
1,700 LIBERTY CORP ......................................... 84
400 LIBERTY FINANCIAL COS, INC ........................... 11
2,300 LIFE U.S.A. HOLDINGS, INC ............................ 30
3,100 LINCOLN NATIONAL CORP ................................ 254
8,600 LOEWS CORP ........................................... 845
1,600 o SD MAXICARE HEALTH PLANS, INC ........................ 9
1,141 MBIA, INC ............................................ 75
400 MERCURY GENERAL CORP ................................. 18
16,500 MGIC INVESTMENT CORP ................................. 657
700 o SD MID ATLANTIC MEDICAL SERVICES, INC ................ 7
100 NATIONWIDE FINANCIAL SERVICES, INC (CLASS A) ......... 5
13,500 o SD OXFORD HEALTH PLANS, INC .......................... 201
512 o SD PACIFICARE HEALTH SYSTEMS, INC (CLASS A) .......... 37
6,052 o SD PACIFICARE HEALTH SYSTEMS, INC (CLASS B) .......... 481
500 o SD PENN TREATY AMERICAN CORP ......................... 13
4,100 PENNCORP FINANCIAL GROUP, INC ........................ 4
3,500 PMI GROUP, INC ....................................... 173
3,700 PRESIDENTIAL LIFE CORP ............................... 74
5,000 PROGRESSIVE CORP ..................................... 847
2,500 PROTECTIVE LIFE CORP ................................. 100
3,950 REINSURANCE GROUP OF AMERICA, INC .................... 277
8,200 RELIANCE GROUP HOLDINGS, INC ......................... 106
13,611 RELIASTAR FINANCIAL CORP ............................. 628
1,300 o SD RISK CAPITAL HOLDINGS, INC ........................ 28
1,300 RLI CORP ............................................. 43
1,900 SAFECO CORP .......................................... 82
500 SCPIE HOLDINGS, INC .................................. 15
4,700 SELECTIVE INSURANCE GROUP, INC ....................... 95
450 o SD SIERRA HEALTH SERVICES, INC ....................... 9
4,822 ST. PAUL COS, INC .................................... 168
1,000 STEWART INFORMATION SERVICES CORP .................... 58
9,883 SUNAMERICA, INC ...................................... 802
6,300 TIG HOLDINGS, INC .................................... 98
8,200 TORCHMARK CORP ....................................... 290
900 TRANSAMERICA CORP .................................... 104
6,700 TRAVELERS PROPERTY CASUALTY CORP ..................... 208
</TABLE>
B-35
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
INSURANCE CARRIERS--(Continued)
1,600 TRENWICK GROUP, INC .................................. $ 52
1,600 o SD TRIAD GUARANTY, INC ............................... 35
500 o SD TRIGON HEALTHCARE, INC ............................ 19
100 UNITED FIRE & CASULTY CO ............................. 3
18,300 UNITED HEALTHCARE CORP ............................... 788
1,800 UNITED WISCONSIN SERVICES, INC ....................... 16
10,200 UNUM CORP ............................................ 595
1,100 VESTA INSURANCE GROUP, INC ........................... 7
100 o SD WELLPOINT HEALTH NETWORKS, INC .................... 9
--------
37,125
--------
LEATHER AND LEATHER PRODUCTS--0.01%
800 o SD NINE WEST GROUP, INC .............................. 12
679 o SD SAMSONITE CORP .................................... 4
1,800 STRIDE RITE CORP ..................................... 16
300 o SD TIMBERLAND CO ..................................... 14
25 WOLVERINE WORLD WIDE, INC ............................ 0
--------
46
--------
LEGAL SERVICES--0.00%
200 o SD PREPAID LEGAL SERVICES, INC ....................... 7
--------
LOCAL AND INTERURBAN PASSENGER TRANSIT--0.01%
7,100 o SD GREYHOUND LINES, INC .............................. 42
1,900 o SD RURAL/METRO CORP .................................. 21
--------
63
--------
LUMBER AND WOOD PRODUCTS--0.17%
800 o SD AMERICAN HOMESTAR CORP ............................ 12
1,200 CAVALIER HOMES, INC .................................. 14
16,507 CLAYTON HOMES, INC ................................... 228
542 DELTIC TIMBER CORP ................................... 11
11,000 GEORGIA-PACIFIC CORP (PACKAGING GROUP) ............... 644
450 o SD PALM HARBOR HOMES, INC ............................ 11
1,000 SKYLINE CORP ......................................... 33
1,500 UNIVERSAL FOREST PRODUCTS, INC ....................... 30
5,900 WEYERHAEUSER CO ...................................... 300
--------
1,283
--------
METAL MINING--0.12%
1,800 CLEVELAND CLIFFS, INC ................................ 73
3,000 o SD COEUR DALENE MINES CORP ........................... 14
15,700 CYPRUS AMAX MINERALS CO .............................. 157
25,963 FREEPORT-MCMORAN COPPER & GOLD, INC (CLASS B) ........ 271
400 o SD GETCHELL GOLD CORP ................................ 11
6,700 o SD HECLA MINING CO ................................... 24
8,804 o SD KINROSS GOLD CORP ................................. 20
10,900 NEWMONT MINING CORP .................................. 197
4,100 SOUTHERN PERU COPPER CORP ............................ 39
3,200 o SD STILLWATER MINING CO .............................. 131
--------
937
--------
MISCELLANEOUS MANUFACTURING INDUSTRIES--0.07%
5,250 o SD BLYTH INDUSTRIES, INC ............................. 164
2,600 BRADY CORP (CLASS A) ................................. 70
600 o SD HEXCEL CORP ....................................... 5
100 INTERNATIONAL GAME TECHNOLOGY CO ..................... 2
6,300 JOSTENS, INC ......................................... 165
1,300 K2, INC .............................................. 13
900 o SD LYDALL, INC ....................................... 11
3,093 MATTEL, INC .......................................... 71
400 RUSS BERRIE & CO, INC ................................ 9
200 o SD STEINWAY MUSICAL INSTRUMENTS, INC ................. 5
2,400 o SD WMS INDUSTRIES, INC ............................... 18
--------
533
--------
MISCELLANEOUS RETAIL--1.04%
1,000 o SD AMAZON.COM, INC ................................... 321
700 o SD BARNETT, INC ...................................... 10
700 BLAIR CORP ........................................... 16
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
10,200 o SD BORDERS GROUP, INC ................................ $ 254
500 CASH AMERICA INTERNATIONAL, INC ...................... 8
1,100 o SD CDW COMPUTER CENTERS, INC ......................... 106
1,000 o SD COLDWATER CREEK, INC .............................. 14
25,642 CVS CORP ............................................. 1,410
1,000 o SD GARDEN RIDGE CORP ................................. 9
2,200 o SD GLOBAL DIRECTMAIL CORP ............................ 51
2,200 o SD INSIGHT ENTERPRISES, INC .......................... 112
500 o SD LANDS END, INC .................................... 13
4,200 o SD MICHAELS STORES, INC .............................. 76
200 o SD MICRO WAREHOUSE, INC .............................. 7
17,300 o SD OFFICE DEPOT, INC ................................. 639
50 o SD OFFICEMAX, INC .................................... 1
14,600 OMNICARE, INC ........................................ 507
600 o SD PARTY CITY CORP ................................... 9
3,500 o SD PETCO ANIMAL SUPPLIES, INC ........................ 35
9,820 RITE AID CORP ........................................ 487
27,675 o SD STAPLES, INC ...................................... 1,209
2,250 o SD THE SPORTS AUTHORITY, INC ......................... 12
1,087 o SD TOYS R US, INC .................................... 18
4,625 o SD U.S. OFFICE PRODUCTS CO ........................... 18
39,800 WALGREEN CO .......................................... 2,331
6,000 o SD ZALE CORP ......................................... 194
--------
7,867
--------
MOTION PICTURES--0.62%
1,000 o SD AMC ENTERTAINMENT, INC ............................ 21
150,234 DISNEY (WALT) CO ..................................... 4,507
4,800 o SD HOLLYWOOD ENTERTAINMENT CORP ...................... 131
700 o SD KING WORLD PRODUCTIONS, INC ....................... 21
100 o SD PIXAR, INC ........................................ 4
2,700 o SD SPELLING ENTERTAINMENT GROUP, INC ................. 20
--------
4,704
--------
NONDEPOSITORY INSTITUTIONS--2.28%
1,500 AAMES FINANCIAL CORP ................................. 5
1,125 ADVANTA CORP (CLASS A) ............................... 15
34,000 AMERICAN EXPRESS CO .................................. 3,477
9,900 o SD AMERICREDIT CORP .................................. 137
1,600 o SD AMRESCO, INC ...................................... 14
2,300 o SD ARCADIA FINANCIAL LTD ............................. 8
44,116 ASSOCIATES FIRST CAPITAL CORP ........................ 1,869
6,200 CAPITAL ONE FINANCIAL CORP ........................... 713
400 CHARTER MUNICIPAL MORTGAGE ACCEPTANCE ................ 5
2,100 Xo SD CITYSCAPE FINANCIAL CORP .......................... 0
1,300 CONNING CORP ......................................... 27
1,100 o SD CONTIFINANCIAL CORP ............................... 8
3,200 COUNTRYWIDE CREDIT INDUSTRIES, INC ................... 161
100 o SD CREDIT ACCEPTANCE CORP ............................ 1
5,100 DORAL FINANCIAL CORP ................................. 113
74,800 FEDERAL NATIONAL MORTGAGE ASSOCIATION ................ 5,535
1,500 o SD FINANCIAL FEDERAL CORP ............................ 37
3,400 FINOVA GROUP, INC .................................... 183
4,500 o SD FIRSTPLUS FINANCIAL GROUP, INC .................... 12
1,700 o SD FRANCHISE MORTGAGE ACCEPTANCE CO .................. 13
51,400 FREDDIE MAC .......................................... 3,312
800 FUND AMERICAN ENTERPRISES HOLDINGS, INC .............. 112
400 o SD HEALTHCARE FINANCIAL PARTNERS, INC ................ 16
22,736 HOUSEHOLD INTERNATIONAL, INC ......................... 901
1,000 o SD IMC MORTGAGE CO ................................... 0
6,700 o SD LEUCADIA NATIONAL CORP ............................ 211
2,000 o SD LONG BEACH FINANCIAL CORP ......................... 15
6,450 Xo SD MERCURY FINANCE CO ................................ 0
3,219 METRIS COS, INC ...................................... 162
3,325 o SD OMEGA WORLDWIDE, INC .............................. 15
300 RESOURCE AMERICA, INC (CLASS A) ...................... 3
100 SIRROM CAPITAL CORP .................................. 0
</TABLE>
B-36
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
NONDEPOSITORY INSTITUTIONS--(Continued)
3,350 SLM HOLDINGS CORP .................................... $ 161
2,500 o SD UNICAPITAL CORP ................................... 18
2,200 UNITED COS FINANCIAL CORP ............................ 7
--------
17,266
--------
NONMETALLIC MINERALS, EXCEPT FUELS--0.05%
2,400 AMCOL INTERNATIONAL CORP ............................. 24
300 CALMAT CO ............................................ 9
4,779 MARTIN MARIETTA MATERIALS, INC ....................... 297
425 POTASH CORP OF SASKATCHEWAN, INC ..................... 27
--------
357
--------
OIL AND GAS EXTRACTION--0.53%
10,300 APACHE CORP .......................................... 261
800 o SD ATWOOD OCEANICS, INC .............................. 14
900 o SD BELCO OIL & GAS CORP .............................. 5
2,800 o SD BENTON OIL & GAS CO ............................... 8
600 o SD BROWN (TOM), INC .................................. 6
2,849 BURLINGTON RESOURCES, INC ............................ 102
1,200 CABOT OIL & GAS CORP (CLASS A) ....................... 18
2,900 CHESAPEAKE ENERGY CORP ............................... 3
6,425 CROSS TIMBERS OIL CO ................................. 48
7,700 DIAMOND OFFSHORE DRILLING, INC ....................... 182
2,849 o SD EEX CORP .......................................... 20
24,100 ENSCO INTERNATIONAL, INC ............................. 258
1,400 o SD FORCENERGY GAS EXPLORATION, INC ................... 4
5,700 o SD FOREST OIL CORP ................................... 48
700 o SD FRIEDE GOLDMAN INTERNATIONAL, INC ................. 8
900 o SD GLOBAL MARINE, INC ................................ 8
11,800 o SD GREY WOLF, INC .................................... 10
33,632 HALLIBURTON CO ....................................... 996
3,500 o SD HANOVER COMPRESSOR CO ............................. 90
100 o SD HARKEN ENERGY CORP ................................ 0
500 o SD HOUSTON EXPLORATION CO ............................ 10
2,000 KCS ENERGY, INC ...................................... 6
7,700 KERR-MCGEE CORP ...................................... 295
263 o SD MCMORAN EXPLORATION CO ............................ 4
1,200 o SD NABORS INDUSTRIES, INC ............................ 16
400 o SD NEWFIELD EXPLORATION CO ........................... 8
2,600 o SD NUEVO ENERGY CO ................................... 30
1,200 OCCIDENTAL PETROLEUM CORP ............................ 20
1,500 o SD OCEAN ENERGY, INC ................................. 9
3,400 o SD OCEANEERING INTERNATIONAL, INC .................... 51
400 o SD ORYX ENERGY CO .................................... 5
9,000 o SD PARKER DRILLING CO ................................ 29
1,900 o SD PATTERSON ENERGY, INC ............................. 8
16,200 PIONEER NATURAL RESOURCES CO ......................... 142
300 o SD POOL ENERGY SERVICES CO ........................... 3
100 o SD PRIDE INTERNATIONAL, INC .......................... 1
1,500 o SD RANGE RESOURCES CORP .............................. 5
10,400 o SD ROWAN COS, INC .................................... 104
800 o SD SANTA FE ENERGY RESOURCES, INC .................... 6
16 SCHLUMBERGER LTD ..................................... 1
3,600 o SD SEITEL, INC ....................................... 45
1,700 ST. MARY LAND & EXPLORATION CO ....................... 31
2,100 o SD STONE ENERGY CORP ................................. 60
1,330 o SD SWIFT ENERGY CO ................................... 10
2,000 o SD SYNTROLEUM CORP ................................... 12
4,300 o SD TITAN EXPLORATION, INC ............................ 28
3,700 o SD TRANSMONTAIGNE, INC ............................... 56
11,800 TRANSOCEAN OFFSHORE, INC ............................. 316
2,600 o SD TRANSTEXAS GAS CORP ............................... 7
7,200 o SD TUBOSCOPE, INC .................................... 59
41,414 UNION PACIFIC RESOURCES GROUP, INC ................... 375
2,800 VASTAR RESOURCES, INC ................................ 121
330 o SD WEATHERFORD INTERNATIONAL ......................... 6
--------
3,968
--------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
PAPER AND ALLIED PRODUCTS--0.90%
1,500 o SD ACX TECHNOLOGIES, INC ............................. $ 20
5,000 o SD AMERICAN PAD & PAPER CO ........................... 8
200 AVERY DENNISON CORP .................................. 9
8,700 BOISE CASCADE CORP ................................... 270
16,100 CHAMPION INTERNATIONAL CORP .......................... 652
500 CHESAPEAKE CORP ...................................... 18
3,960 o SD CROWN VANTAGE, INC ................................ 9
4,300 o SD EARTHSHELL CORP ................................... 51
24,725 FORT JAMES CORP ...................................... 989
7,700 o SD GAYLORD CONTAINER CO .............................. 47
4,100 GLATFELTER (P.H.) CO ................................. 51
300 GREIF BROTHERS CORP (CLASS A) ........................ 9
16,547 INTERNATIONAL PAPER CO ............................... 742
3,000 o SD IVEX PACKAGING CORP ............................... 70
41,000 KIMBERLY CLARK CORP .................................. 2,235
600 LONGVIEW FIBRE CO .................................... 7
700 o SD PLAYTEX PRODUCTS, INC ............................. 11
400 REPUBLIC GROUP, INC .................................. 8
1,800 ROCK-TENN CO (CLASS A) ............................... 30
340 SCHWEITZER-MAUDUIT INTERNATIONAL, INC ................ 5
53 o SD SMURFIT-STONE CONTAINER CORP ...................... 1
11,131 SONOCO PRODUCTS CO ................................... 330
3,700 ST. JOE CORP ......................................... 87
1,800 TEMPLE-INLAND, INC ................................... 107
9,900 UNION CAMP CORP ...................................... 668
9,100 WAUSAU-MOSINEE PAPER CORP ............................ 161
6,700 WILLAMETTE INDUSTRIES, INC ........................... 224
--------
6,819
--------
PERSONAL SERVICES--0.23%
13,600 BLOCK (H&R), INC ..................................... 612
10,700 CINTAS CORP .......................................... 754
2,000 o SD COINMACH LAUNDRY CORP ............................. 26
600 CPI CORP ............................................. 16
100 o SD EQUITY CORP INTERNATIONAL ......................... 3
7,800 SERVICE CORP INTERNATIONAL ........................... 297
200 UNIFIRST CORP ........................................ 5
--------
1,713
--------
PETROLEUM AND COAL PRODUCTS--4.17%
58,024 AMOCO CORP ........................................... 3,423
11,400 ASHLAND, INC ......................................... 551
16,200 ATLANTIC RICHFIELD CO ................................ 1,057
46,600 CHEVRON CORP ......................................... 3,865
400 ELCOR CORP ........................................... 13
167,600 EXXON CORP ........................................... 12,256
55,000 MOBIL CORP ........................................... 4,792
2,400 MURPHY OIL CORP ...................................... 99
8,000 PENNZENERGY CO ....................................... 131
12,840 o SD PENNZOIL-QUAKER STATE CO .......................... 190
600 o SD PETROFINA S.A. WTS 08/02/03 ....................... 5
23,000 PHILLIPS PETROLEUM CO ................................ 980
13,800 SUNOCO, INC .......................................... 498
43,116 TEXACO, INC .......................................... 2,280
25,348 TOSCO CORP ........................................... 656
14,926 ULTRAMAR DIAMOND SHAMROCK CORP ....................... 362
4,245 UNOCAL CORP .......................................... 124
8,200 USX-MARATHON GROUP, INC .............................. 247
2,500 VALERO ENERGY CORP ................................... 53
600 WD-40 CO ............................................. 17
--------
31,599
--------
PRIMARY METAL INDUSTRIES--0.35%
700 o SD AFC CABLE SYSTEMS, INC ............................ 24
7,240 ALUMINUM CO OF AMERICA ............................... 540
5,100 ASARCO, INC .......................................... 77
4,150 o SD CABLE DESIGN TECHNOLOGIES CO ...................... 77
2,700 CARPENTER TECHNOLOGY CORP ............................ 92
</TABLE>
B-37
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
PRIMARY METAL INDUSTRIES--(Continued)
100 o SD CITATION CORP ..................................... $ 1
500 o SD CURTISS WRIGHT CORP ............................... 19
1,300 o SD ENCORE WIRE CORP .................................. 12
12,250 ENGELHARD CORP ....................................... 239
87 o SD ESSEX INTERNATIONAL, INC .......................... 3
900 GENERAL CABLE CORP ................................... 18
2,200 IMCO RECYCLING, INC .................................. 34
261 INLAND STEEL INDUSTRIES, INC ......................... 4
1,900 o SD KAISER ALUMINUN CORP .............................. 9
1,800 o SD LONE STAR TECHNOLOGIES, INC ....................... 18
9,800 LTV CORP ............................................. 57
200 MATTHEWS INTERNATIONAL CORP (CLASS A) ................ 6
300 o SD MAXXAM, INC ....................................... 17
5,900 o SD MUELLER INDUSTRIES, INC ........................... 120
1,500 NATIONAL STEEL CORP (CLASS B) ........................ 11
11,200 NUCOR CORP ........................................... 484
100 PRECISION CAST PARTS CORP ............................ 4
2,300 QUANEX CORP .......................................... 52
3,000 REYNOLDS METALS CO ................................... 158
1,100 o SD RTI INTERNATIONAL METALS .......................... 15
5,000 o SD STEEL DYNAMICS, INC ............................... 59
2,000 TITANIUM METALS CORP ................................. 17
14,800 USX-US STEEL GROUP, INC .............................. 340
1,700 o SD WHX CORP .......................................... 17
10,500 WORTHINGTON INDUSTRIES, INC .......................... 131
--------
2,655
--------
PRINTING AND PUBLISHING--1.46%
1,800 AMERICAN BUSINESS PRODUCTS, INC ...................... 42
10,800 AMERICAN GREETINGS CORP (CLASS A) .................... 443
700 o SD APPLIED GRAPHICS TECHNOLOGIES, INC ................ 12
9,900 BELO (A.H.) CORP SERIES A ............................ 197
400 o SD BIG FLOWER HOLDINGS, INC .......................... 9
3,400 CENTRAL NEWSPAPERS, INC (CLASS A) .................... 243
500 o SD CONSOLIDATED GRAPHICS, INC ........................ 34
1,000 o SD CSS INDUSTRIES, INC ............................... 30
600 o SD DAY RUNNER, INC ................................... 9
13,100 DELUXE CORP .......................................... 479
8,300 DOW JONES & CO, INC .................................. 399
2,900 o SD FRANKLIN COVEY CO ................................. 49
24,500 GANNETT CO, INC ...................................... 1,580
300 o SD GIBSON GREETINGS, INC ............................. 4
5,200 HARLAND (JOHN H.) CO ................................. 82
100 HOLLINGER INTERNATIONAL, INC ......................... 1
5,600 KNIGHT-RIDDER, INC ................................... 286
7,500 LEE ENTERPRISES, INC ................................. 236
2,900 Xo SD MARVEL ENTERTAINMENT GROUP, INC ................... 0
2,900 MCGRAW HILL COS, INC ................................. 295
425 MEDIA GENERAL, INC (CLASS A) ......................... 23
800 MEREDITH CORP ........................................ 30
7,800 NEW YORK TIMES CO (CLASS A) .......................... 271
82 NEWS CORP LTD ........................................ 2
600 PENTON MEDIA, INC .................................... 12
2,900 o SD PETERSEN COS, INC (CLASS A) ....................... 98
24,300 o SD PRIMEDIA, INC ..................................... 286
560 R.H. DONNELLEY CORP .................................. 8
700 READER'S DIGEST ASSOCIATION, INC (CLASS A)
(NON-VOTE) ........................................... 18
12,700 REYNOLDS & REYNOLDS CO (CLASS A) ..................... 291
200 o SD SCHOLASTIC CORP ................................... 11
1,300 SCRIPPS (E.W.) CO (CLASS A) .......................... 65
60,718 TIME WARNER, INC ..................................... 3,768
12,200 TRIBUNE CO ........................................... 805
6,500 WALLACE COMPUTER SERVICES, INC ....................... 171
900 WASHINGTON POST CO (CLASS B) ......................... 520
900 WILEY (JOHN) & SONS, INC (CLASS A) ................... 43
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
813 o SD WORKFLOW MANAGEMENT, INC .......................... $ 5
6,400 o SD WORLD COLOR PRESS, INC ............................ 195
--------
11,052
--------
RAILROAD TRANSPORTATION--0.44%
42,720 BURLINGTON NORTHERN SANTA FE CORP .................... 1,442
50 CANADIAN NATIONAL RAILWAY CO ......................... 3
6,300 CSX CORP ............................................. 261
1,800 FLORIDA EAST COAST INDUSTRIES, INC ................... 63
1,500 KANSAS CITY SOUTHERN INDUSTRIES, INC ................. 74
14,300 NORFOLK SOUTHERN CORP ................................ 453
22,882 UNION PACIFIC CORP ................................... 1,031
1,000 o SD WISCONSIN CENTRAL TRANSIT CORP .................... 17
--------
3,344
--------
REAL ESTATE--0.03%
2,666 o SD CASTLE & COOKE, INC ............................... 39
1,000 o SD CATELLUS DEVELOPMENT CORP ......................... 14
300 o SD CB RICHARD ELLIS SERVICES GROUP, INC .............. 5
40 o SD ECHELON INTERNATIONAL CORP ........................ 1
300 o SD FAIRFIELD COMMUNITIES, INC ........................ 3
2,000 o SD GRUBB & ELLIS CO .................................. 16
1,933 o SD INSIGNIA FINANCIAL GROUP, INC ..................... 23
100 o SD LASALLE PARTNERS, INC ............................. 3
4,800 LNR PROPERTY CORP .................................... 96
2,064 o SD RECKSON SERVICES INDUSTRIES, INC .................. 9
1,000 STEWART ENTERPRISES, INC (CLASS A) ................... 22
--------
231
--------
RUBBER AND MISCELLANEOUS PLASTIC PRODUCTS--0.54%
5,100 APTARGROUP, INC ...................................... 143
1,600 ARMSTRONG WORLD INDUSTRIES, INC ...................... 97
5,400 FIRST BRANDS CORP .................................... 213
3,000 FURON CO ............................................. 51
12,250 GOODRICH (B.F.) CO ................................... 439
7,600 GOODYEAR TIRE & RUBBER CO ............................ 383
15,900 ILLINOIS TOOL WORKS, INC ............................. 922
200 MYERS INDUSTRIES, INC ................................ 6
14,800 NIKE, INC (CLASS B) .................................. 600
8,500 PREMARK INTERNATIONAL, INC ........................... 294
7,300 o SD SAFESKIN CORP ..................................... 176
772 o SD SEALED AIR CORP ................................... 39
19,160 SOLUTIA, INC ......................................... 429
1,400 SPARTECH CORP ........................................ 31
100 o SD SYNETIC, INC ...................................... 4
3,000 TREDEGAR INDUSTRIES, INC ............................. 68
8,100 TUPPERWARE CORP ...................................... 133
1,800 WYNNS INTERNATIONAL, INC ............................. 40
--------
4,068
--------
SECURITY AND COMMODITY BROKERS--1.05%
2,900 o SD AFFILIATED MANAGERS GROUP, INC .................... 87
400 o SD AMERITRADE HOLDINGS CORP (CLASS A) ................ 13
5,500 BEAR STEARNS COS, INC ................................ 206
100 DUFF & PHELPS CREDIT RATING CO ....................... 5
1,100 o SD E TRADE GROUP, INC ................................ 51
4,800 EATON VANCE CORP ..................................... 100
15,450 EDWARDS (A.G.), INC .................................. 576
2,100 EVEREN CAPITAL CORP .................................. 48
1,800 FEDERATED INVESTMENTS, INC ........................... 33
3,200 FRANKLIN RESOURCES, INC .............................. 102
2,100 FREEDOM SECURITIES CORP .............................. 32
3,900 o SD FRIEDMAN, BILLINGS, RAMSEY GROUP, INC ............. 25
600 o SD HAMBRECHT & QUIST GROUP ........................... 14
2,200 JEFFERIES GROUP, INC ................................. 109
1,000 JOHN NUVEEN CO (CLASS A) ............................. 37
1,600 LEGG MASON, INC ...................................... 51
15,100 LEHMAN BROTHERS HOLDINGS, INC ........................ 665
16,100 MERRILL LYNCH & CO, INC .............................. 1,075
</TABLE>
B-38
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
SECURITY AND COMMODITY BROKERS--(Continued)
40,055 MORGAN STANLEY, DEAN WITTER, & CO .................... $ 2,844
200 PAINE WEBBER GROUP, INC .............................. 8
6,000 PHOENIX INVESTMENT PARTNERS LTD ...................... 51
5,850 RAYMOND JAMES FINANCIAL CORP ......................... 124
28,600 SCHWAB (CHARLES) CORP ................................ 1,607
1,700 SOUTHWEST SECURITIES GROUP, INC ...................... 34
700 UNITED ASSET MANAGEMENT CORP ......................... 18
157 WADDELL & REED FINANCIAL, INC (CLASS B) .............. 4
--------
7,919
--------
SOCIAL SERVICES--0.00%
1,700 o SD CAPITAL SENIOR LIVING CORP ........................ 24
--------
SPECIAL TRADE CONTRACTORS--0.01%
3,500 APOGEE ENTERPRISES, INC .............................. 39
4,000 o SD GROUP MAINTENANCE AMERICA CORP .................... 49
--------
88
--------
STONE, CLAY, AND GLASS PRODUCTS--0.13%
7,400 CORNING, INC ......................................... 333
4,800 o SD DAL-TILE INTERNATIONAL, INC ....................... 50
2,700 o SD DEPARTMENT 56, INC ................................ 101
2 LAFARGE CORP ......................................... 0
300 LIBBEY, INC .......................................... 9
1,700 NEWELL COS, INC ...................................... 70
9,000 OWENS CORNING CO ..................................... 319
800 o SD OWENS ILLINOIS, INC ............................... 25
500 PUERTO RICAN CEMENT CO, INC .......................... 17
220 SOUTHDOWN, INC ....................................... 13
1,100 USG CORP ............................................. 56
--------
993
--------
TEXTILE MILL PRODUCTS--0.07%
2,981 ALBANY INTERNATIONAL CORP (CLASS A) NEW .............. 56
800 o SD COLLINS & AIKMAN CORP ............................. 4
200 o SD DAN RIVER, INC (CLASS A) .......................... 2
800 o SD GUILFORD MILLS, INC ............................... 13
5,100 o SD MOHAWK INDUSTRIES, INC ............................ 215
2,700 o SD POLYMER GROUP, INC ................................ 27
500 ST. JOHN KNITS, INC .................................. 13
6,700 o SD WESTPOINT STEVENS, INC ............................ 211
--------
541
--------
TOBACCO PRODUCTS--1.23%
7,200 FORTUNE BRANDS, INC .................................. 228
1,600 o SD GENERAL CIGAR HOLDINGS, INC (CLASS A) ............. 14
169,000 PHILIP MORRIS COS, INC ............................... 9,042
2,100 UST, INC ............................................. 73
--------
9,357
--------
TRANSPORTATION BY AIR--0.53%
7,000 AIRBORNE FREIGHT CORP ................................ 252
2,500 o SD AIRTRAN HOLDINGS, INC ............................. 7
500 o SD ALASKA AIR GROUP, INC ............................. 22
17,300 o SD AMR CORP .......................................... 1,027
1,500 o SD ATLAS AIR, INC .................................... 73
300 o SD AVIALL, INC ....................................... 4
87 COMAIR HOLDINGS, INC ................................. 3
400 o SD CONTINENTAL AIRLINES, INC (CLASS B) ............... 13
15,700 DELTA AIRLINES, INC .................................. 816
8,920 o SD FDX CORP .......................................... 794
1,000 o SD MESA AIR GROUP, INC ............................... 8
400 o SD MIDWEST EXPRESS HOLDINGS, INC ..................... 11
3,500 o SD OFFSHORE LOGISTICS, INC ........................... 42
1,800 PITTSTON BAX GROUP ................................... 20
12,901 SOUTHWEST AIRLINES CO ................................ 289
9,500 o SD TRANS WORLD AIRLINES, INC ......................... 46
10,500 o SD U.S. AIRWAYS GROUP, INC ........................... 546
300 o SD UAL CORP .......................................... 18
--------
3,991
--------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
TRANSPORTATION EQUIPMENT--3.04%
300 o SD AFTERMARKET TECHNOLOGY CORP ....................... $ 2
29,300 ALLIED SIGNAL, INC ................................... 1,298
4,200 ARCTIC CAT, INC ...................................... 43
16,684 AUTOLIV, INC ......................................... 620
1,500 o SD AVONDALE INDUSTRIES, INC .......................... 44
4,500 o SD BE AEROSPACE, INC ................................. 95
71,554 BOEING CO ............................................ 2,334
3,600 BORG-WARNER AUTOMOTIVE, INC .......................... 201
900 o SD BREED TECHNOLOGIES, INC ........................... 7
2,200 COACHMEN INDUSTRIES, INC ............................. 58
6,000 CORDANT TECHNOLOGIES, INC ............................ 225
20,024 DANA CORP ............................................ 818
8,300 DANAHER CORP ......................................... 451
2,200 o SD DELCO REMY INTERNATIONAL , INC (CLASS A) .......... 22
9,800 EATON CORP ........................................... 693
70,400 FORD MOTOR CO ........................................ 4,132
5,700 GENCORP, INC ......................................... 142
5,800 GENERAL DYNAMICS CORP ................................ 340
49,226 GENERAL MOTORS CORP .................................. 3,523
500 o SD GENTEX CORP ....................................... 10
11,400 o SD GULFSTREAM AEROSPACE CORP ......................... 607
17,300 HARLEY DAVIDSON, INC ................................. 820
200 o SD HAYES LEMMERZ INTERNATIONAL, INC .................. 6
1,900 o SD KELLSTROM INDUSTRIES, INC ......................... 55
7,296 LOCKHEED MARTIN CORP ................................. 618
6,200 MASCOTECH, INC ....................................... 106
11,166 MERITOR AUTOMOTIVE, INC .............................. 237
1,300 o SD MONACO COACH CORP ................................. 34
100 o SD MOTIVEPOWER INDUSTRIES, INC ....................... 3
300 o SD NATIONAL R.V. HOLDINGS, INC ....................... 8
11,000 o SD NAVISTAR INTERNATIONAL CORP ....................... 314
5,877 NORTHROP GRUMMAN CORP ................................ 430
1,100 OEA, INC ............................................. 13
11,400 PACCAR, INC .......................................... 469
3,400 POLARIS INDUSTRIES, INC .............................. 133
3,100 REGAL-BELOIT CORP .................................... 71
2,100 SMITH (A.O.) CORP .................................... 52
103 o SD SPX CORP .......................................... 7
1,000 STANDARD MOTOR PRODUCTS, INC (CLASS A) ............... 24
700 STANDARD PRODUCTS CO ................................. 14
1,900 o SD STONERIDGE, INC ................................... 43
9,100 SUNDSTRAND CORP ...................................... 472
3,400 SUPERIOR INDUSTRIES INTERNATIONAL, INC ............... 95
8,700 TEXTRON, INC ......................................... 661
300 THOR INDUSTRIES, INC ................................. 8
7,200 TRINITY INDUSTRIES, INC .............................. 277
2,000 o SD TRIUMPH GROUP, INC ................................ 64
3,100 TRW, INC ............................................. 174
18,700 UNITED TECHNOLOGIES CORP ............................. 2,034
2,750 VARLEN CORP .......................................... 63
700 o SD WALBRO CORP ....................................... 4
2,700 WESTINGHOUSE AIR BRAKE CO ............................ 66
400 WINNEBAGO INDUSTRIES, INC ............................ 6
--------
23,046
--------
TRANSPORTATION SERVICES--0.13%
25 AIR EXPRESS INTERNATIONAL CORP ....................... 1
6,800 C.H. ROBINSON WORLDWIDE, INC ......................... 176
900 o SD FRITZ COS, INC .................................... 10
10,500 GALILEO INTERNATIONAL, INC ........................... 457
7,900 GATX CORP ............................................ 299
610 o SD NAVIGANT INTERNATIONAL, INC ....................... 5
--------
948
--------
</TABLE>
B-39
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
TRUCKING AND WAREHOUSING--0.09%
2,500 o SD AMERICAN FREIGHTWAYS CORP ......................... $ 29
2,200 ARNOLD INDUSTRIES, INC ............................... 35
800 CNF TRANSPORTATION, INC .............................. 30
4,350 o SD CONSOLIDATED FREIGHTWAYS CORP ..................... 69
1,000 o SD COVENANT TRANSPORT, INC (CLASS A) ................. 18
800 o SD DISPATCH MANAGEMENT SERVICES CORP ................. 3
1,100 o SD HEARTLAND EXPRESS, INC ............................ 19
300 HUNT (J.B.) TRANSPORT SERVICES, INC .................. 7
100 o SD IRON MOUNTAIN, INC ................................ 4
1,500 o SD LANDSTAR SYSTEM, INC .............................. 61
400 o SD M.S. CARRIERS, INC ................................ 13
1,200 o SD PIERCE LEAHY CORP ................................. 31
2,200 ROADWAY EXPRESS, INC ................................. 32
3,950 o SD SWIFT TRANSPORTATION CO, INC ...................... 111
4,300 USFREIGHTWAYS CORP ................................... 125
50 WERNER ENTERPRISES, INC .............................. 1
3,800 o SD YELLOW CORP ....................................... 73
--------
661
--------
WATER TRANSPORTATION--0.06%
6,000 ALEXANDER & BALDWIN, INC ............................. 140
500 o SD KIRBY CORP ........................................ 10
950 o SD MARINE TRANSPORT CORP ............................. 2
6,100 o SD OMI CORP (NEW) .................................... 20
1,400 OVERSEAS SHIPHOLDING GROUP, INC ...................... 22
9,600 TIDEWATER, INC ....................................... 223
--------
417
--------
WHOLESALE TRADE-DURABLE GOODS--0.21%
2,300 o SD ACTION PERFORMANCE COS, INC ....................... 81
1,500 o SD ANICOM, INC ....................................... 14
1,000 o SD ANIXTER INTERNATIONAL, INC ........................ 20
14,700 o SD ARROW ELECTRONICS, INC ............................ 392
100 o SD AVIATION SALES CO ................................. 4
50 o SD BRIGHTPOINT, INC .................................. 1
1,200 CASTLE (A.M.) & CO ................................... 18
4,300 o SD CHS ELECTRONICS, INC .............................. 73
800 COMMERCIAL METALS CO ................................. 22
6,000 o SD FISHER SCIENTIFIC INTERNATIONAL, INC .............. 120
450 GENUINE PARTS CO ..................................... 15
4,300 o SD HANDLEMAN CO ...................................... 60
20,700 IKON OFFICE SOLUTIONS, INC ........................... 177
1,000 LAWSON PRODUCTS, INC ................................. 23
6,600 o SD MERISEL, INC ...................................... 16
3,400 OWENS & MINOR, INC ................................... 54
50 o SD PATTERSON DENTAL CO ............................... 2
1,500 o SD POMEROY COMPUTER RESOURCES, INC ................... 34
300 RELIANCE STEEL & ALUMINUM CO ......................... 8
8,500 o SD TECH DATA CORP .................................... 342
200 o SD VWR SCIENTIFIC PRODUCTS CORP ...................... 3
220 WESCO FINANCIAL CORP ................................. 78
--------
1,557
--------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------ ---------
<S> <C> <C>
WHOLESALE TRADE-NONDURABLE GOODS--0.65%
7,700 o SD AIRGAS, INC ....................................... $ 69
300 o SD AMERISOURCE HEALTH CORP (CLASS A) ................. 20
900 o SD BARNETT RESOURCES CORP ............................ 22
16,550 BERGEN BRUNSWIG CORP (CLASS A) ....................... 577
63 BINDLEY WESTERN INDUSTRIES, INC ...................... 3
700 o SD BOISE CASCADE OFFICE PRODUCTS CORP ................ 9
18,264 CARDINAL HEALTH, INC ................................. 1,386
600 o SD DAISYTEK INTERNATIONAL CORP ....................... 11
200 DIMON, INC ........................................... 1
21 FLEMING COS, INC ..................................... 0
33 HERBALIFE INTERNATIONAL, INC (CLASS A) ............... 0
1,566 HERBALIFE INTERNATIONAL, INC (CLASS B) ............... 18
300 HUNT CORP ............................................ 3
2,800 INTERNATIONAL MULTIFOODS CORP ........................ 72
800 o SD KENNETH COLE PRODUCTIONS, INC ..................... 15
10,400 MCKESSON CORP NEW .................................... 822
5,500 o SD NATIONAL-OILWELL, INC ............................. 62
1,600 o SD NU SKIN ENTERPRISES, INC (CLASS A) ................ 38
1,100 o SD PERFORMANCE FOOD GROUP CO ......................... 31
3,549 o SD PHARMERICA, INC ................................... 21
1,800 o SD PRIORITY HEALTHCARE CORP (CLASS B) ................ 93
678 o SD SCHOOL SPECIALTY, INC ............................. 14
20,400 SUPERVALU, INC ....................................... 571
22,000 SYSCO CORP ........................................... 582
1,900 TERRA INDUSTRIES, INC ................................ 12
500 o SD U.S.A. FLORAL PRODUCTS, INC ....................... 6
10,750 UNISOURCE WORLDWIDE, INC ............................. 78
6,000 o SD UNITED STATIONERS, INC ............................ 156
5,400 o SD UNIVERSAL CORP .................................... 190
--------
4,882
--------
TOTAL COMMON STOCK
(Cost $511,548) ........................................ 753,592
--------
PRINCIPAL
- -------------
SHORT TERM INVESTMENT--0.32%
U.S. GOVERNMENT AGENCY--0.32%
$2,400,000 FEDERAL HOME LOAN MORTGAGE CORP
4.250% 1/4/99 .................................. 2,399
--------
TOTAL SHORT TERM INVESTMENT
(Cost $2,399) .................................. 2,399
--------
TOTAL PORTFOLIO
(Cost $514,100) ................................ $756,157
========
</TABLE>
- --------------------
o Non-income producing
X In bankruptcy
# Restricted Securities--Investment in securities not registered under the
Securities Act of 1933 or not publicly traded in foreign markets. At
December 31, 1998, the value of these securities amounted to $131 or 0.00%
of net assets.
Additional information on each restricted security is as follows:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATE COST
- --------------------- ------------- ------------
<S> <C> <C>
Physician Computer
Network, Inc 06/04/96 $28,018
=======
</TABLE>
B-40
<PAGE>
CHAIRMAN'S LETTER
To the Policyholders of
Teachers Insurance and Annuity
Association of America:
We are pleased to provide you with the accompanying audited statutory-basis
financial statements of Teachers Insurance and Annuity Association of America
("TIAA") for the year-ended December 31, 1998. We continue to manage TIAA in a
prudent manner with the goal of maximizing our long-term performance within
reasonable risk parameters for the long-term benefit of our policyholders. As
you review these statements, it is also important to note that TIAA continues
to maintain the highest possible financial strength ratings from each of the
four nationally recognized independent rating organizations.
The report of management responsibility, on the following page, demonstrates
our ongoing commitment to conduct TIAA's activities in a well-controlled
management environment. Additionally, the accompanying audit report indicates
an unqualified opinion regarding TIAA's statutory-basis financial statements
from the independent auditing firm of Ernst & Young LLP. These statements have
been prepared consistently in accordance with statutory accounting practices, a
comprehensive basis of accounting comprised of accounting practices prescribed
or permitted by the New York State Insurance Department ("Department").
There is also a reference in the auditors' report to generally accepted
accounting principles ("GAAP"); this reference to GAAP is required by the
auditors' professional standards. GAAP is an overall accounting methodology
that, while similar in many respects to statutory accounting practices, is a
separate basis of accounting. Statutory accounting is generally more
conservative than GAAP, and these statutory-basis financial statements are not
intended to be in conformity with GAAP.
Statutory accounting is the only basis of accounting recognized by the
Department for regulatory purposes, and it is the only basis of accounting used
by the Department in measuring the financial condition and results of
operations of an insurance company. It is also the basis for determining
insurance company solvency under the New York Insurance Law. While we could
prepare a separate set of GAAP financial statements, there is no legal
requirement for us to do so. Additionally, TIAA does not believe at this time
that it would be a worthwhile expenditure to maintain another separate set of
financial records, particularly since it would provide little added value for
our policyholders. Accordingly, we believe that it is prudent for us to
continue to manage and report on the operations of TIAA under the conservative
statutory accounting methodology that we have always utilized.
/s/ John H. Biggs
------------------------------
Chairman, President and
Chief Executive Officer
B-41
<PAGE>
REPORT OF MANAGEMENT RESPONSIBILITY
To the Policyholders of
Teachers Insurance and Annuity
Association of America:
The accompanying statutory-basis 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 practices, a
comprehensive basis of accounting comprised of accounting practices 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 statutory accounting practices.
TIAA has established and maintains a strong system of internal control 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 control and operations of TIAA, and
the internal Auditor regularly reports to the Audit Committee of the TIAA Board
of Trustees.
The accompanying statutory-basis financial statements of TIAA have been audited
by the independent auditing firm of Ernst & Young LLP. The independent
auditors' report, which appears on the following page, expresses an independent
opinion on the fairness of presentation of these statutory financial
statements.
The Audit Committee of the TIAA Board of Trustees, comprised entirely of
independent, nonmanagement trustees, meets regularly with management,
representatives of Ernst & Young LLP and internal auditing personnel to review
matters relating to financial reporting, internal control 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.
/s/ John H. Biggs
------------------------------
Chairman, President and
Chief Executive Officer
/s/ Richard L. Gibbs
------------------------------
Executive Vice President and
Principal Accounting Officer
B-42
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees of
Teachers Insurance and Annuity
Association of America:
We have audited the accompanying statutory-basis balance sheets of Teachers
Insurance and Annuity Association of America ("TIAA") as of December 31, 1998
and 1997, and the related statutory-basis statements of operations, changes in
contingency reserves, and cash flows for the years then ended. 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. TIAA's
financial statements for the year ended December 31, 1996 were audited by other
auditors whose report, dated March 11, 1997, expressed an adverse opinion as to
their conformity with generally accepted accounting principles, because the
financial statements were presented in accordance with statutory accounting
practices prescribed or permitted by the New York State Insurance Department,
and an unqualified opinion as to their conformity with such statutory
accounting practices.
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.
As described in Note 2 to the financial statements, TIAA prepares its financial
statements in conformity with statutory accounting practices, which practices
differ from generally accepted accounting principles. The differences between
such statutory accounting practices and generally accepted accounting principles
and the effects on the accompanying financial statements are described in Note
2.
In our opinion, because of the effects of the matter described in the preceding
paragraph, the 1998 and 1997 statutory-basis financial statements referred to
above do not present fairly, in conformity with generally accepted accounting
principles, the financial position of TIAA at December 31, 1998 and 1997, or
the results of its operations or its cash flows for the years then ended.
However, in our opinion, the 1998 and 1997 statutory-basis financial statements
referred to above present fairly, in all material respects, the financial
position of TIAA at December 31, 1998 and 1997, and the results of its
operations and its cash flows for the years then ended in conformity with
statutory accounting practices prescribed or permitted by the New York State
Insurance Department.
/s/ Ernst & Young LLP
March 10, 1999
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
B-43
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
STATUTORY-BASIS BALANCE SHEETS
(amounts in thousands)
<TABLE>
<CAPTION>
December 31,
----------------------------------
1998 1997
------------ -----------
<S> <C> <C>
ASSETS
Bonds ................................................. $ 69,067,549 $63,469,596
Mortgages ............................................. 20,248,446 18,901,926
Real estate ........................................... 6,099,403 6,434,359
Stocks ................................................ 1,257,044 965,295
Other long-term investments ........................... 1,513,274 1,018,052
Cash and short-term investments ....................... 511,966 178,852
Investment income due and accrued ..................... 1,181,140 1,230,046
Separate account assets ............................... 1,965,047 1,340,154
Other assets .......................................... 372,369 257,038
------------- ------------
Total Assets $102,216,238 $93,795,318
============= ============
LIABILITIES, CAPITAL AND CONTINGENCY RESERVES
Policy and contract reserves .......................... $ 87,772,711 $81,149,016
Dividends declared for the following year ............. 1,923,463 1,778,732
Asset Valuation Reserve ............................... 2,454,123 2,338,643
Interest Maintenance Reserve .......................... 936,641 781,272
Separate account liabilities .......................... 1,965,047 1,265,447
Other liabilities ..................................... 841,044 705,633
------------- ------------
Total Liabilities 95,893,029 88,018,743
------------- ------------
Capital: 2,500 shares of $1,000 par value common stock
issued and outstanding ............................... 2,500 2,500
------------- ------------
Contingency reserves:
For group life insurance .............................. 11,013 9,846
For investment losses, annuity and insurance mortality,
and other risks ...................................... 6,309,696 5,764,229
------------- ------------
Total Contingency Reserves 6,320,709 5,774,075
------------- ------------
Total Capital and Contingency Reserves 6,323,209 5,776,575
------------- ------------
TOTAL LIABILITIES, CAPITAL AND CONTINGENCY RESERVES $102,216,238 $93,795,318
============= ============
</TABLE>
See notes to statutory-basis financial statements.
B-44
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
STATUTORY-BASIS STATEMENTS OF OPERATIONS
(amounts in thousands)
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
INCOME
Insurance and annuity premiums and deposits .......... $ 2,957,870 $ 2,844,792 $ 2,781,827
Transfers from CREF, net ............................. 1,274,152 686,373 366,920
Annuity dividend additions ........................... 2,427,685 2,284,029 2,131,890
Net investment income ................................ 7,446,656 6,902,123 6,525,529
Supplementary contract considerations ................ 297,074 227,936 203,770
------------- ------------ ------------
TOTAL INCOME $14,403,437 $12,945,253 $12,009,936
============= ============ ============
DISTRIBUTION OF INCOME
Policy and contract benefits ......................... $ 2,413,220 $ 2,138,424 $ 1,916,597
Dividends ............................................ 3,844,313 3,617,551 3,399,581
Increase in policy and contract reserves ............. 6,636,704 5,234,590 5,097,213
Operating expenses ................................... 327,085 272,584 249,000
Transfers to separate accounts, net .................. 487,976 543,891 395,686
Federal income taxes ................................. (11,854) 24,194 13,154
Other, net ........................................... (4,639) 307 1,112
Increase in contingency reserves ..................... 710,632 1,113,712 937,593
------------- ------------ ------------
TOTAL DISTRIBUTION OF INCOME $14,403,437 $12,945,253 $12,009,936
============= ============ ============
</TABLE>
See notes to statutory-basis financial statements.
B-45
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
STATUTORY-BASIS STATEMENTS OF CHANGES IN CONTINGENCY RESERVES
(amounts in thousands)
<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
CHANGES IN CONTINGENCY RESERVES
From operations .............................................. $ 710,632 $1,113,712 $ 937,593
Net realized capital gains on investments .................... 394,727 249,412 163,950
Net unrealized capital gains (losses) on investments ......... (171,049) (2,482) 30,452
Transfers to the Interest Maintenance Reserve ................ (264,997) (136,512) (167,086)
Transfers from (to) the Asset Valuation Reserve:
Required formula contributions .............................. (297,442) (205,450) (246,181)
Net capital (gains) losses absorbed ......................... 181,961 (117,961) (27,872)
Adjustment down to maximum .................................. -- 119,690 --
Decrease (increase) in non-admitted assets,
other than investments. ..................................... (17,829) 1,200 (4,764)
Change in valuation basis of policy reserves ................. 8,671 (4,657) --
Other, net ................................................... 1,960 8,918 8,433
----------- ----------- -----------
NET CHANGE IN CONTINGENCY RESERVES 546,634 1,025,870 694,525
CONTINGENCY RESERVES AT BEGINNING OF YEAR 5,774,075 4,748,205 4,053,680
----------- ----------- -----------
CONTINGENCY RESERVES AT END OF YEAR $6,320,709 $5,774,075 $4,748,205
=========== =========== ===========
</TABLE>
See notes to statutory-basis financial statements.
B-46
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
STATUTORY-BASIS STATEMENTS OF CASH FLOWS
(amounts in thousands)
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
CASH PROVIDED
By operating activities:
Insurance and annuity premiums,
deposits and considerations ...................... $ 3,254,238 $ 3,053,452 $ 2,973,899
Transfers from CREF, net .......................... 1,274,152 686,373 366,920
Annuity dividend additions ........................ 2,427,685 2,284,029 2,131,890
Investment income, net ............................ 7,338,368 6,777,023 6,485,403
------------ ------------ ------------
Total Receipts 14,294,443 12,800,877 11,958,112
------------ ------------ ------------
Policy and contract benefits ...................... 2,410,824 2,143,927 2,084,122
Dividends ......................................... 3,699,582 3,475,557 3,251,329
Operating expenses ................................ 311,460 269,041 247,251
Federal income taxes .............................. 506 27,277 14,985
Transfers to separate accounts, net ............... 486,945 543,933 396,239
Separate account seed money redemptions ........... (76,666) (37,915) (7,387)
Other, net ........................................ 494 (46,076) 48,215
------------ ------------ ------------
Total Disbursements 6,833,145 6,375,744 6,034,754
------------ ------------ ------------
Cash Provided by Operating Activities 7,461,298 6,425,133 5,923,358
------------ ------------ ------------
By investing activities:
Sales and redemptions of bonds and stocks ......... 9,781,071 4,716,915 4,480,206
Repayment of mortgage principal ................... 2,129,896 3,773,723 3,481,965
Sales of real estate .............................. 834,298 1,030,385 834,010
Other, net ........................................ 279,097 258,489 276,394
------------ ------------ ------------
Cash Provided by Investing Activities 13,024,362 9,779,512 9,072,575
------------ ------------ ------------
TOTAL CASH PROVIDED 20,485,660 16,204,645 14,995,933
------------ ------------ ------------
DISBURSEMENTS FOR NEW INVESTMENTS
Investments acquired:
Bonds and stocks .................................. 15,298,648 12,711,227 11,577,235
Mortgages ......................................... 3,704,940 3,152,563 2,761,897
Real estate ....................................... 351,109 310,159 488,543
Other, net ........................................ 797,849 466,926 266,227
------------ ------------ ------------
TOTAL DISBURSEMENTS FOR NEW INVESTMENTS 20,152,546 16,640,875 15,093,902
------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND
SHORT-TERM INVESTMENTS 333,114 (436,230) (97,969)
CASH AND SHORT-TERM INVESTMENTS
AT BEGINNING OF YEAR 178,852 615,082 713,051
------------ ------------ ------------
CASH AND SHORT-TERM INVESTMENTS
AT END OF YEAR $ 511,966 $ 178,852 $ 615,082
============ ============ ============
</TABLE>
See notes to statutory-basis financial statements.
B-47
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
December 31, 1998
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 statutory-basis financial statements have been prepared on the basis of
statutory accounting practices prescribed or permitted by the New York State
Insurance Department ("Department"), a comprehensive basis of accounting that
differs from generally accepted accounting principles ("GAAP"). (Refer to the
separate sections, entitled "Permitted Statutory Accounting Practices" 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.
For loan-backed bonds and structured securities, amortized cost is determined
using actual and anticipated cash flows under the prospective method for
interest-only securities and under the retrospective method for all other
securities. Anticipated prepayments are based on life-to-date prepayment
speeds, using historical cash flows, and internal estimates. Mortgages are
stated at amortized cost, and directly-owned real estate at depreciated cost
(net of encumbrances). Investments in wholly-owned subsidiaries, real estate
limited partnerships and securities limited partnerships are stated at TIAA's
equity in the net admitted assets of the underlying entities. Policy loans are
stated at outstanding principal amounts. Separate account assets are generally
stated at market value. Seed money investments in the TIAA-CREF Mutual Funds
and in new accounts established by College Retirement Equities Fund ("CREF"), a
companion organization, are stated at market value. 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 foreign currency contracts are valued in U.S. dollars,
based on exchange rates 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 foreign currencies are adjusted to reflect exchange rates 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 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 return the securities
in a timely manner.
B-48
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--(Continued)
Foreign Currency Swap Contracts: TIAA enters into foreign currency swap
contracts to exchange fixed and variable amounts of foreign currency at
specified future dates and at specified rates (in U.S. dollars) 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.
Foreign currency 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. Foreign currency 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 its counterparties. The maximum potential loss from
such risk is equal to the change in the value of the foreign currency 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.
Foreign Currency Forward Contracts: TIAA enters into foreign currency forward
contracts to exchange fixed amounts of foreign currency at specified future
dates and at specified rates (in U.S. dollars) 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. Forward contracts incorporate one
swap transaction which results in the exchange of TIAA's fixed foreign currency
cash flow into a fixed amount of U.S. dollar cash flow. A foreign exchange
premium (discount) is recorded at the time the contract is opened, and it is
calculated based on the difference between the forward exchange rate and the
spot rate. TIAA amortizes the foreign exchange premium (discount) into
investment income over the life of the forward contract, or at the settlement
date if the forward contract is less than a year. TIAA is subject to
counterparty credit risk upon entering into foreign currency forward contracts
and monitors that risk, as discussed above for foreign currency swap contracts.
Interest Rate Swap Contracts: TIAA enters into interest rate swap contracts 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 exchange the cash flows on certain
fixed interest rate bonds into variable interest rate cash flows in connection
with certain interest sensitive products. Payments received and payments made
under interest rate swap contracts are reflected in net investment income.
Interest rate swap 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 its counterparties. In order to minimize the risk associated with potential
counterparty default, TIAA monitors the credit quality of its counterparties.
Swap Options: TIAA writes (sells) swap options on selected bonds to hedge
against the effect of interest rate fluctuations as part of TIAA's asset and
liability management program. Swap options give the holder the right, but not
the obligation, to enter into an interest rate swap contract with TIAA where
TIAA would pay a fixed interest rate and would receive a variable interest rate
on a specified notional amount. When a swap option is written, the premium
received is recorded as a liability. Because the swap options expire within one
year of their inception date, the premium is recognized as investment income at
the earlier of the exercise date or the expiration of the swap option. TIAA
would be exposed to counterparty credit risk upon entering into an interest
rate swap contract and monitors that risk, as discussed above.
Interest Rate Cap Contracts: TIAA purchases interest rate cap contracts to
hedge against the risk of a rising interest rate environment as part of TIAA's
asset and liability management program. Under the terms of the interest rate
cap contracts, the selling entity makes payments to TIAA on a specified
notional amount if an agreed-upon index exceeds a predetermined strike rate.
Such payments received under interest rate cap contracts are recognized as
investment income. When an interest rate cap contract is purchased, the premium
paid is recorded as an asset, and the premium is amortized into investment
expense from the date of purchase of the cap to the maturity of the hedged item
or program. Upon expiration of the cap, any unamortized premium will be treated
as a loss subject to the Interest Maintenance Reserve ("IMR"). TIAA would be
subject to counterparty credit risk if the index exceeds the predetermined
strike rate, causing a payment to be payable to TIAA. In order to minimize the
risk associated with potential counterparty default, TIAA monitors the credit
quality of its counterparties.
B-49
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--(Continued)
Non-Admitted Assets: Certain investment balances and corresponding investment
income due and accrued are designated as non-admitted assets by the Department,
based on delinquencies, defaults, and other statutory criteria, and, cannot be
included in life insurance company balance sheets filed with the Department.
Such investment-related non-admitted assets totaled approximately $466,107,000
and $436,405,000 at December 31, 1998 and 1997, respectively. Income on bonds
in default is not accrued and, therefore, is not included in the non-admitted
totals. Certain non-investment assets, such as furniture and fixtures and
various receivables, are also designated as non-admitted assets. Such
non-admitted assets approximated $195,987,000 at December 31, 1998 and
$178,158,000 at December 31, 1997. Changes in such non-admitted assets are
charged or credited directly to contingency reserves.
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 permitted or approved by the
Department. Reserves are stated at the present value of all future guaranteed
benefits 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, and insurance companies may also make
voluntary contributions to any component; however, the resulting ending balance
can not exceed the computed maximum reserve for that component. Any computed
excess amounts are eliminated through transfers to other components or
adjustments down to the maximum reserve amounts. Contributions and adjustments
to the AVR are reported as transfers to or from contingency reserves.
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, under the grouped method of amortization,
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 to provide benefits in accordance with
TIAA's charter purpose.
Income and Expenses: Premiums, investment income and expenses are reported as
earned/incurred.
Federal Income Taxes: TIAA is a nonprofit educational organization and, through
December 31, 1997, was exempt from federal income taxation under the Internal
Revenue Code ("Code"). Any non-pension related income, however, was subject to
federal income taxation as unrelated business income. The federal income tax
provisions included in the accompanying statements of operations are based on
taxes actually paid or anticipated to be paid with the tax return filings.
Effective January 1, 1998, as a result of federal legislation, TIAA is no
longer exempt from federal income taxation and is taxed as a stock life
insurance company. Effective for 1998, TIAA will file a consolidated federal
income tax return with its qualifying subsidiary affiliates. The tax sharing
agreement will follow the current reimbursement method, whereby members of the
consolidated group will generally be reimbursed for their losses on a pro-rata
basis by other members of the group to the extent that they have taxable
income, subject to limitations imposed under the Code. The approximate twelve
million dollar federal income tax recoverable for 1998 that is reflected in the
accompanying statement
B-50
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--(Concluded)
of operations is the amount that is receivable from certain of TIAA's
subsidiaries which generated taxable income, under such tax sharing agreement.
TIAA has not yet prepared or filed its 1998 federal income tax return. In
conjunction with this initial federal income tax return filing, TIAA currently
expects to report a significant net tax loss for 1998, due primarily to
required increases in policy and contract reserves computed for tax reporting
purposes in accordance with the requirements of the Code. Such reserve
increases will reverse over time, thereby increasing TIAA's taxable income in
future years. Under the Code, any tax loss carryforwards will expire after
twenty years, if not previously used.
Permitted Statutory Accounting Practices: Statutory accounting practices
prescribed by the Department include accounting requirements contained in New
York State Insurance Laws and Regulations as well as in NAIC publications.
Permitted statutory accounting practices encompass all accounting practices
which are allowed by the Department but which are not prescribed. The Department
permits TIAA to follow certain reporting and disclosure conventions reflected in
these statutory-basis financial statements.
Such reporting and disclosure conventions include the following: (i)
classification of real estate subsidiaries and real estate limited partnerships
in the "Real estate" caption in the accompanying balance sheets, (ii) the
netting of securities lending collateral against the "Cash and short-term
investments" caption in the accompanying balance sheets, (iii) the preceding
federal income taxes disclosure, and (iv) the recognition of permanent
impairments of individual assets.
Generally Accepted Accounting Principles: The Financial Accounting Standards
Board ("FASB") requires that financial statements that are intended to be in
conformity with GAAP should follow all applicable authoritative accounting
pronouncements. As a result, TIAA cannot refer to financial statements prepared
in accordance with statutory accounting practices as having been prepared in
accordance with GAAP.
The differences between generally accepted accounting principles and statutory
accounting practices would have a material effect on TIAA's financial
statements, and the primary differences can be summarized as follows. Under
GAAP:
- - The AVR is eliminated and valuation allowances are established as contra
assets based on asset-specific analyses rather than the formula-based AVR
being reflected as a liability reserve;
- - The IMR is eliminated and realized gains and losses resulting from interest
rate fluctuations are reported as a component of net income rather than
being accumulated in and subsequently amortized out of the IMR;
- - Dividends on insurance policies and annuity contracts are accrued as the
necessary earnings emerge from operations rather than being accrued in the
year when they are declared;
- - The "non-admitted" asset designation is not utilized;
- - Policy acquisition costs are deferred and amortized over the lives of the
policies issued rather than being charged to operations as incurred;
- - Policy and contract reserves are based on estimates of expected mortality and
interest rather than being based on statutory mortality and interest
requirements;
- - Investments in wholly-owned subsidiaries are consolidated in the parent's
financial statements rather than being carried at the parent's equity in the
net assets of the subsidiaries;
- - Long-term bond investments considered to be "available for sale" are carried
at fair value rather than at amortized cost;
- - Deferred tax assets and liabilities are determined based on the differences
between the financial statement amounts and the tax bases of assets and
liabilities rather than not being recognized.
Management believes that the effects of these differences would increase TIAA's
total capital if GAAP were implemented.
Reclassifications: Certain amounts in the 1997 financial statements have been
reclassified to conform with the 1998 presentation.
B-51
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued)
NOTE 3--INVESTMENTS
Securities Investments: At December 31, 1998 and 1997, the carrying values
(balance sheet amounts) and estimated market values of long-term bond
investments, and the gross unrealized gains and losses with respect to such
market values, are shown below:
<TABLE>
<CAPTION>
Gross Gross
Carrying Unrealized Unrealized Estimated
Value Gains Losses Market Value
------------------ ---------------- ------------------ ------------------
<S> <C> <C> <C> <C>
December 31, 1998
- ------------------------------------------
U.S. Treasury securities and
obligations of U.S. government
agencies and corporations ............... $ 23,269,573 $ 8,137,457 $ (618,292) $ 30,788,738
Debt securities issued by foreign
governments ............................. 1,670,480,048 278,650,027 (13,102,912) 1,936,027,163
Corporate securities ..................... 34,143,277,454 2,758,241,791 (90,974,189) 36,810,545,056
Mortgage-backed securities ............... 20,309,833,989 1,143,783,128 (62,707,409) 21,390,909,708
Asset-backed securities .................. 12,920,687,576 463,968,128 (210,450,588) 13,174,205,116
--------------- -------------- -------------- ---------------
$69,067,548,640 $4,652,780,531 $ (377,853,390) $73,342,475,781
=============== ============== ============== ===============
December 31, 1997
- ------------------------------------------
U.S. Treasury securities and
obligations of U.S. government
agencies and corporations ............... $ 765,179,973 $ 187,633,872 $ 952,813,845
Debt securities issued by foreign
governments ............................. 1,591,333,014 258,518,816 $ (23,329,983) 1,826,521,847
Corporate securities ..................... 31,671,902,704 2,564,486,392 (78,849,935) 34,157,539,161
Mortgage-backed securities ............... 19,667,177,051 1,069,124,042 (107,193,640) 20,629,107,453
Asset-backed securities .................. 9,774,003,292 350,882,825 (50,168,914) 10,074,717,203
--------------- -------------- -------------- ---------------
$63,469,596,034 $4,430,645,947 $ (259,542,472) $67,640,699,509
=============== ============== ============== ===============
</TABLE>
At December 31, 1998 and 1997, approximately 94.5% and 94.6%, respectively, of
the long-term bond portfolio was comprised of investment grade securities. At
December 31, 1998, outstanding forward commitments for future long-term bond
and equity investments approximated $3,106,923,000. Of this, $2,473,692,000 is
scheduled for disbursement in 1999, $174,580,000 in 2000, $155,377,000 in 2001
and $303,274,000 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 $2,587,000 and $2,749,000 at
December 31, 1998 and 1997, 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, 1998, by contractual maturity, are shown below:
<TABLE>
<CAPTION>
Estimated
Carrying Value Market Value
------------------ -----------------
<S> <C> <C>
December 31, 1998
- ---------------------------------------------------------
Due in one year or less ................................. $ 625,974,908 $ 634,407,454
Due after one year through five years ................... 7,178,956,866 7,534,037,459
Due after five years through ten years .................. 11,242,906,773 11,898,171,146
Due after ten years ..................................... 16,789,188,528 18,710,744,898
--------------- ---------------
Subtotal .............................. 35,837,027,075 38,777,360,957
--------------- ---------------
Mortgage-backed securities .............................. 20,309,833,989 21,390,909,708
Asset-backed securities ................................. 12,920,687,576 13,174,205,116
--------------- ---------------
Total ................................. $69,067,548,640 $73,342,475,781
=============== ===============
</TABLE>
B-52
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued)
NOTE 3--INVESTMENTS--(Continued)
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, 1998 and 1997, the carrying values of long-term bond
investments were diversified by industry classification as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Mortgage-backed securities ................... 29.4% 31.0%
Asset-backed securities ...................... 18.7 15.4
Manufacturing ................................ 11.6 11.9
Public utilities ............................. 9.7 11.1
Finance and financial services ............... 9.2 9.0
Communications ............................... 3.8 3.8
Retail and wholesale trade ................... 3.7 3.8
Oil and gas .................................. 3.7 3.4
Government ................................... 3.1 4.3
Other ........................................ 7.1 6.3
----- -----
Total ....................... 100.0% 100.0%
===== =====
</TABLE>
The approximate carrying values and market values of debt securities loaned,
and the cash collateral received in connection therewith, were as follows:
<TABLE>
<CAPTION>
Carrying Value Market Value Cash Collateral
---------------- ----------------- ----------------
<S> <C> <C> <C>
December 31, 1998 .......... $1,687,699,000 $1,803,100,000 $1,844,563,000
December 31, 1997 .......... 1,634,267,000 1,742,556,000 1,790,560,000
</TABLE>
At December 31, 1998 and 1997, TIAA had interest rate swap contracts
outstanding with a total notional value of $451,366,000 and $267,755,000,
respectively.
At December 31, 1998 and 1997, TIAA had foreign currency swap contracts
outstanding with a total notional value of approximately $654,242,000 and
$485,274,000, respectively. The unrealized gains (losses) on foreign currency
swap contracts outstanding at year-end were approximately $(6,511,000),
$25,864,000 and $1,367,000 at December 31, 1998, 1997 and 1996, respectively.
At December 31, 1998 and 1997, TIAA had foreign currency forward contracts
outstanding with a total notional value of approximately $179,820,000 and
$2,274,000, respectively, and the unamortized value of the premiums was
approximately $621,000 and $29,000, respectively. The unrealized gains on the
forward contracts outstanding at year-end were approximately $1,143,000 and
$65,000 at December 31, 1998 and 1997, respectively.
At December 31, 1998, TIAA had no swap options outstanding. At December 31,
1997, TIAA had swap options outstanding with a total notional value of
$170,700,000 and the unamortized value of the premiums was approximately
$677,000. The interest rate swap contracts created from the exercise of swap
options are reflected in the aggregate totals for the interest rate swap
contracts disclosed in the related paragraph above.
At December 31, 1998 and 1997, TIAA had interest rate cap contracts outstanding
with a total notional value of $110,270,000 and $5,978,970,000, respectively,
and the unamortized value of the premiums was approximately $669,000 and
$37,758,000, respectively.
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 result in 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%. 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. The range of coupon
rates for mortgage loans issued during 1998 was from 6.00% to 8.45%. At
December 31, 1998 and 1997, TIAA's mortgage portfolio included loans totaling
approximately $308,570,000 and $341,662,000, respectively, which were
collateralized by real estate with prior liens not held by TIAA.
B-53
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued)
NOTE 3--INVESTMENTS--(Continued)
At December 31, 1998 and 1997, the carrying values of mortgage loan investments
were diversified by property type and geographic region as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Property Type
- -------------
Office building .................... 39.2% 40.0%
Shopping centers ................... 31.6 30.7
Mixed-use projects ................. 11.1 10.2
Apartments ......................... 6.6 6.9
Industrial buildings ............... 6.0 5.6
Hotel .............................. 3.5 4.3
Other .............................. 2.0 2.3
----- -----
Total ............... 100.0% 100.0%
===== =====
Geographic Region
- -----------------
Pacific ............................ 22.3% 25.4%
South Atlantic ..................... 18.7 18.3
East North Central ................. 12.4 11.1
Middle Atlantic .................... 11.7 12.4
New England ........................ 9.6 9.9
West North Central ................. 9.0 8.1
West South Central ................. 7.5 6.8
Mountain ........................... 7.2 6.3
East South Central ................. 1.6 1.7
----- -----
Total ............... 100.0% 100.0%
===== =====
</TABLE>
At December 31, 1998 and 1997, approximately 17% and 20%, respectively, of the
mortgage portfolio was invested in California and is included in the Pacific
region shown above.
At December 31, 1998, the contractual maturity schedule of mortgage loans is
shown below:
<TABLE>
<CAPTION>
Carrying Value
-----------------
<S> <C>
Due in one year or less .............................. $ 692,373,552
Due after one year through five years ................ 3,754,946,379
Due after five years through ten years ............... 11,382,817,297
Due after ten years .................................. 4,418,308,604
---------------
Total ......................... $20,248,445,832
===============
</TABLE>
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, 1998, outstanding forward commitments for future mortgage loan
investments approximated $2,190,631,000, including commitments under
litigation. Of this, $2,136,631,000 is scheduled for disbursement in 1999,
$54,000,000 in 2000. The funding of mortgage loan commitments is contingent
upon the underlying properties meeting specified requirements, including
construction, leasing and occupancy.
At December 31, 1998, 1997 and 1996, the aggregate carrying values of mortgages
with restructured or modified terms, as defined by generally accepted
accounting principles, were approximately $44,153,000, $552,070,000 and
$621,056,000, respectively. For the years ended December 31, 1998, 1997 and
1996, the investment income earned on such mortgages was approximately
$7,381,000, $39,945,000 and $43,408,000, respectively, which would have been
approximately $5,030,000, $56,034,000 and $68,371,000, 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.
B-54
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued)
NOTE 3--INVESTMENTS--(Concluded)
At December 31, 1998 and 1997, the carrying values of real estate investments
were diversified by property type and geographic region as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Property Type
- -------------
Office buildings ..................................................... 64.3% 61.6%
Shopping centers ..................................................... 17.2 17.8
Mixed-use projects ................................................... 4.8 7.9
Income-producing land underlying improved real estate. ............... 4.2 3.3
Industrial buildings. ................................................ 2.9 3.0
Land held for future development. .................................... 2.6 1.9
Apartments ........................................................... 0.3 0.3
Other ................................................................ 3.7 4.2
----- -----
Total .............................. 100.0% 100.0%
===== =====
Geographic Region
- -----------------
South Atlantic ...................................................... 22.6% 26.4%
East North Central ................................................... 18.5 18.8
Pacific .............................................................. 17.1 14.4
West North Central ................................................... 12.9 13.9
Middle Atlantic ...................................................... 11.0 11.9
West South Central ................................................... 7.5 7.0
Mountain ............................................................ 3.3 2.8
New England ......................................................... 1.3 1.5
East South Central ................................................... 0.8 0.8
Other. ............................................................... 5.0 2.5
----- -----
Total .............................. 100.0% 100.0%
===== =====
</TABLE>
At December 31, 1998 and 1997, approximately 12% and 11%, respectively, of the
real estate portfolio was invested in both California and Florida. California
is included in the Pacific region shown above, and Florida is included in the
South Atlantic region shown above.
At December 31, 1998, outstanding forward commitments for future real estate
investments approximated $263,468,000. Under these commitments, it is estimated
that $242,903,000 will be disbursed in 1999 and $20,565,000 in later years. The
funding of real estate investment commitments is contingent upon the properties
meeting specified requirements, including construction, leasing and occupancy.
Depreciation expense on real estate investments for the years ended December
31, 1998, 1997 and 1996, was approximately $176,237,000, $147,494,000 and
$135,982,000, respectively; the amount of accumulated depreciation at December
31, 1998 and 1997 was approximately $674,541,000 and $440,659,000,
respectively.
Asset Valuation Reserves: The AVR balances at December 31, 1998 and 1997 were
comprised of the following asset-specific reserves:
<TABLE>
<CAPTION>
1998 1997
----------------- -----------------
<S> <C> <C>
Bonds and preferred stocks ............... $ 560,477,946 $ 545,863,951
Mortgages. ............................... 1,117,503,060 975,041,395
Real estate .............................. 689,550,807 756,720,622
Common stocks ............................ 48,573,376 27,266,124
Other invested assets .................... 38,018,128 33,750,538
-------------- --------------
Total ................ $2,454,123,317 $2,338,642,630
============== ==============
</TABLE>
B-55
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued)
NOTE 4--INVESTMENT INCOME AND CAPITAL GAINS AND LOSSES
Net Investment Income: For the years ended December 31, 1998, 1997 and 1996,
the components of net investment income were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Gross investment income:
Bonds ........................................... $5,441,796,398 $4,919,147,802 $4,397,330,653
Mortgages ....................................... 1,569,281,835 1,561,650,688 1,704,612,536
Real estate (net of property
expenses, taxes
and depreciation) .............................. 275,402,304 282,710,437 349,550,153
Stocks .......................................... 82,871,728 45,018,729 14,512,747
Other long-term investments ..................... 46,399,969 49,877,245 16,299,166
Cash and short-term investments ................. 59,637,401 81,908,105 64,600,106
Other ........................................... 4,430,354 1,863,273 30,748,262
-------------- -------------- --------------
Total ........................ 7,479,819,989 6,942,176,279 6,577,653,623
Less investment expenses ........................ (142,791,775) (124,382,062) (111,487,052)
-------------- -------------- --------------
Net investment income before
amortization of net IMR gains ................... 7,337,028,214 6,817,794,217 6,466,166,571
Plus amortization of net IMR gains ............... 109,627,953 84,329,279 59,362,364
-------------- -------------- --------------
Net investment income. ........................... $7,446,656,167 $6,902,123,496 $6,525,528,935
============== ============== ==============
</TABLE>
Participation income received on securities, mortgages and real estate included
in the above table was approximately $12,512,000, $20,894,000 and $21,121,000
in 1998, 1997 and 1996, respectively.
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 7.95%, 7.99% and 8.17% in 1998, 1997 and 1996,
respectively.
Future rental income expected to be received during the next five years under
existing real estate leases in effect as of December 31, 1998 is approximately
$547,703,000 in 1999, $472,791,000 in 2000, $389,192,000 in 2001, $306,191,000
in 2002 and $60,172,000 in 2003.
Realized Capital Gains and Losses: For the years ended December 31, 1998, 1997
and 1996, the net realized capital gains (losses) on sales, redemptions and
writedowns of investments were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------------- ---------------- -----------------
<S> <C> <C> <C>
Bonds ......................................... $ 398,363,008 $ 99,205,212 $ 83,521,853
Mortgages ..................................... (50,492,383) (18,206,968) (120,569,347)
Real estate ................................... 76,983,899 172,463,239 62,836,567
Stocks ........................................ 15,778,492 651,273 123,374,256
Other long-term investments ................... (49,832,409) (2,552,791) 27,068,040
Cash and short-term investments ............... 3,926,077 (121,752) (13,797,036)
Other ......................................... -- -- 14,400
-------------- -------------- --------------
Total realized gains (losses) before
capital gains tax ............................ 394,726,684 251,438,213 162,448,733
Capital gains (tax) benefit. .................. -- (2,026,003) 1,501,742
-------------- -------------- --------------
Total ................... $ 394,726,684 $ 249,412,210 $ 163,950,475
============== ============== ==============
</TABLE>
B-56
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued)
NOTE 4--INVESTMENT INCOME AND CAPITAL GAINS AND LOSSES--(Concluded)
Writedowns of investments resulting from permanent impairments and mortgage
foreclosures, reflected in the preceding table as realized capital losses, were
as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- ---------------
<S> <C> <C> <C>
Permanent impairments:
Bonds .............................. $ 9,345,164 $ 1,499,190 $ 3,292,468
Mortgages ......................... 23,344,175 38,855,209 106,869,780
Real estate ........................ 4,468,490 20,797,149 20,000,001
----------- ----------- ------------
Total ................ $37,157,829 $61,151,548 $130,162,249
=========== =========== ============
Mortgage foreclosures ............... $63,907,494 $31,579,934 $ 43,025,114
=========== =========== ============
</TABLE>
Proceeds from sales and redemptions of long-term bond investments during 1998,
1997 and 1996 were approximately $9,445,709,000, $4,652,635,000 and
$4,329,771,000, respectively. Gross gains of approximately $422,231,000,
$111,635,000 and $133,807,000 and gross losses of approximately $14,523,000,
$10,931,000 and $45,397,000 were realized on these sales and redemptions during
1998, 1997 and 1996, respectively.
Unrealized Capital Gains and Losses: For the years ended December 31, 1998,
1997 and 1996, the net changes in unrealized capital gains (losses) on
investments, resulting in a net increase (decrease) in the valuation of
investments, were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ----------------- ----------------
<S> <C> <C> <C>
Bonds ......................................... $ (48,352,549) $ (68,528,047) $ 3,982,108
Mortgages .................................... (6,500,000) 1,232,724 2,393,812
Real estate ................................... (8,435,351) 14,315,196 20,766,890
Stocks ....................................... (31,866,148) 30,350,946 (26,004,886)
Other long-term investments .................. 19,347,901 20,169,489 10,306,026
Cash and short-term investments ............... -- (21,987) 8,605
Other ......................................... (95,242,707) _ 18,999,590
--------------- --------------- -------------
Total ...................... $ (171,048,854) $ (2,481,679) $ 30,452,145
=============== =============== =============
</TABLE>
B-57
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO STATUTORY-BASIS 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, 1998 and 1997 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
Value Value Fair Value
---------------- ------------------ ------------------
<S> <C> <C> <C>
December 31, 1998
Assets
Bonds ................................. $69,067,548,640 $73,342,475,781
Mortgages. ............................ 20,248,445,832 21,556,575,796
Common stocks ......................... 240,209,436 240,209,436
Preferred stocks ...................... 1,016,834,232 1,020,529,083
Cash and short-term investments ....... 511,966,433 511,966,433
Policy loans .......................... 317,939,719 317,939,719
Seed money investments ................ 383,288,422 383,288,422
Liabilities
Teachers Personal Annuity-Fixed
Account. ............................. 1,089,268,569 1,089,268,569
Other financial instruments ............
Foreign currency swap contracts ....... $ 654,241,992 18,569,714 4,938,964
Foreign currency forward contracts..... 179,820,224 1,764,608 1,929,656
Interest rate swap contracts .......... 451,365,681 -- 16,874,273
Interest rate cap contracts. .......... 110,270,000 668,710 114,699
Stock warrants ........................ -- 8,987,029
December 31, 1997
Assets
Bonds ................................. $63,469,596,034 $67,640,699,509
Mortgages ............................. 18,901,926,005 20,197,917,668
Common stocks ......................... 81,903,321 81,903,321
Preferred stocks ...................... 883,392,062 912,783,530
Cash and short-term investments ....... 178,851,723 178,851,723
Policy loans .......................... 245,941,298 245,941,298
Seed money investments ................ 304,563,735 304,563,735
Liabilities
Teachers Personal Annuity-Fixed
Account .............................. 867,671,667 867,671,667
Other financial instruments
Foreign currency swap contracts ....... $ 485,274,391 25,012,137 8,717,339
Foreign currency forward contracts..... 2,273,584 94,430 89,302
Interest rate swap contracts .......... 267,755,000 -- 13,599,458
Swap options ......................... 170,700,000 (676,870) (839,432)
Interest rate cap contracts. .......... 5,978,970,000 37,757,743 642,577
Stock warrants ........................ -- 5,795,468
</TABLE>
B-58
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued)
NOTE 5--DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS--(Concluded)
Bonds: The fair values for publicly traded long-term bond investments are
determined using quoted market prices. For privately placed long-term bond
investments without a readily ascertainable market value, such values are
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, 1998 and
1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------------------------- ---------------------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Publicly traded bonds ................ $41,212,863,245 $43,921,621,760 $37,479,723,007 $40,216,394,144
Privately placed bonds ............... 27,854,685,395 29,420,854,021 25,989,873,027 27,424,305,365
--------------- --------------- --------------- ---------------
Total .................... $69,067,548,640 $73,342,475,781 $63,469,596,034 $67,640,699,509
=============== =============== =============== ===============
</TABLE>
Mortgages: The fair values of mortgages are 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.
Common Stocks, Cash and Short-Term Investments, Policy Loans, and Seed Money
Investments: The carrying values are reasonable estimates of their fair values.
Preferred Stocks: The fair values of preferred stocks are determined using
quoted market prices or valuations from the NAIC.
Teachers Personal Annuity--Fixed Account: The carrying values of the
liabilities are reasonable estimates of their fair values.
Foreign Currency Swap Contracts: The fair values of foreign currency swap
contracts, which are used for hedging purposes, are the estimated net gains
that TIAA would record if the foreign currency swaps were liquidated at
year-end. The fair values of foreign currency swap contracts are estimated
internally based on future cash flows and anticipated exchange relationships,
and such values are reviewed for reasonableness with values from TIAA's
counterparties.
Foreign Currency Forward Contracts: The fair values of foreign currency forward
contracts, which are used for hedging purposes, are the estimated net gains
that TIAA would record if the foreign currency forward contracts were
liquidated at year-end. The fair values of the foreign currency forward
contracts are estimated internally based on future cash flows and anticipated
exchange relationships, and such values are reviewed for reasonableness with
estimates from TIAA's counterparties.
Interest Rate Swap Contracts: The fair values of interest rate swap contracts,
which are used for hedging purposes, are the estimated net gains that TIAA
would record if the interest rate swaps were liquidated at year-end. The swap
agreements have no carrying value. The fair values of interest rate swap
contracts are estimated internally based on anticipated interest rates and
estimated future cash flows, and such values are reviewed for reasonableness
with estimates from TIAA's counterparties.
Swap Options: The fair values of swap options, which are used for hedging
purposes, are the estimated amounts that TIAA would receive/(pay) if the swap
options were liquidated at year-end. The fair values of the swap options are
estimated by external parties, including TIAA's counterparties, and such values
are reviewed internally for reasonableness based on anticipated interest rates
and estimated future cash flows.
Interest Rate Cap Contracts: The fair values of interest rate cap contracts,
which are used for hedging purposes, are the estimated amounts that TIAA would
receive if the interest rate cap contracts were liquidated at year-end. The
fair values of the interest rate cap contracts are estimated by external
parties, including TIAA's counterparties, and such values are reviewed
internally for reasonableness based on anticipated interest rates and estimated
future cash flows.
Stock Warrants: The fair values of stock warrants represent the excess, if any,
of the market values of the related stocks over the exercise prices associated
with the stock warrants. 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-59
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued)
NOTE 6--MANAGEMENT AGREEMENTS
All services necessary for the operation of CREF are provided, at cost, by two
subsidiaries of TIAA, TIAA-CREF Investment Management, LLC ("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 Securities and Exchange Commission ("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. ("NASD"). 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
the actual expenses incurred and the management fees received are adjusted
quarterly. Such fees and the equivalent allocated expenses, which amounted to
approximately $474,611,000, $340,898,000 and $274,447,000 in 1998, 1997 and
1996, respectively, are not included in the statements of operations and had no
effect on TIAA's operations. Beginning in 1998, TIAA provides guarantees for
the CREF Accounts for certain mortality and expense risks pursuant to an
Immediate Annuity Purchase Rate Guarantee Agreement.
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 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 $22,640,000, $20,862,000 and $20,808,000
in 1998, 1997 and 1996, 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 postretirement benefit obligation
for retirees and fully eligible employees was $31,672,000 as of January 1, 1998
and $26,233,000 as of January 1, 1997. The postretirement benefit obligation
for non-vested employees was $25,823,000 as of January 1, 1998 and $20,857,000
as of January 1, 1997. The cost of such benefits reflected in the accompanying
statements of operations was approximately $3,008,000, $3,398,000 and
$3,022,000 for 1998, 1997 and 1996, respectively. The discount rate used in
determining the postretirement benefit obligations was 7.0% per year and the
medical care cost trend rate was 9.0% per year in 1998, decreasing by 1% in
each future year, to an ultimate rate of 6% per year in 2001.
TIAA also maintains a deferred compensation plan for non-employee trustees and
members of the TIAA Board of Overseers. Prior to January 2, 1998, this plan
provided each eligible trustee or member with a single-sum payment upon leaving
the board equal to 50% of the annual stipend then in effect multiplied by years
of service, up to a maximum of 20 years. Effective January 2, 1998, the plan
provides a total award each year equal to 50% of the basic annual stipend. Each
award is invested in company-owned annuity contracts. Payout of accumulations
in the company-owned contracts is normally made as a lump sum following the
trustee's or member's separation from the Board.
NOTE 8--UNCONSOLIDATED SUBSIDIARIES AND OTHER AFFILIATES
TIAA's unconsolidated subsidiaries and affiliates primarily consist of
TIAA-CREF Enterprises, Inc. ("Enterprises") and wholly-owned investment
subsidiaries, which are primarily involved in real estate investment
activities. The carrying value of TIAA's investments in unconsolidated
subsidiaries and affiliates totaled approximately $5,564,491,000 and
$3,971,101,000 at December 31, 1998 and 1997, respectively. TIAA's investment
in Enterprises is included in the other long-term investments caption on the
accompanying balance sheets and totaled approximately $285,528,000 and
$94,514,000 at December 31, 1998 and 1997, respectively. At December 31, 1998
and 1997, the carrying values of TIAA's investments in real estate subsidiaries
and other affiliates were approximately $4,643,100,000 and $3,423,910,000,
respectively.
B-60
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued)
NOTE 8--UNCONSOLIDATED SUBSIDIARIES AND OTHER AFFILIATES (Concluded)
Total assets, liabilities and gross rental income of real estate subsidiaries,
at December 31, 1998, 1997 and 1996 and for the years then ended, were
approximately as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Assets ....................... $5,723,222,000 $4,387,482,000 $5,149,487,000
Liabilities .................. 724,361,000 792,142,000 933,678,000
Gross rental income .......... 783,261,000 688,963,000 760,704,000
</TABLE>
Earnings of approximately $161,885,000, $156,648,000 and $238,313,000 in 1998,
1997 and 1996, respectively, primarily from real estate subsidiaries 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, 1998 and 1997, the carrying values of TIAA real
estate subsidiaries that are partners in joint ventures were approximately
$1,147,216,000 and $1,382,378,000, respectively. Joint venture total assets,
liabilities and gross rental income, at December 31, 1998, 1997 and 1996 and
for the years then ended, were approximately as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Assets ....................... $1,709,297,000 $2,075,352,000 $3,099,467,000
Liabilities .................. 556,823,000 997,969,000 1,116,222,000
Gross rental income .......... 274,106,000 377,919,000 484,657,000
</TABLE>
The subsidiaries' equity share in these total assets, liabilities and gross
rental income were approximately as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Assets ....................... $1,701,668,000 $1,960,400,000 $2,981,156,000
Liabilities .................. 554,451,000 577,826,000 778,312,000
Gross rental income .......... 270,208,000 349,770,000 455,196,000
</TABLE>
Net income earned by the subsidiaries from joint venture investments was
approximately $16,123,000, $56,362,000 and $130,887,000 in 1998, 1997 and 1996,
respectively. Some of the real estate joint ventures have loans from TIAA. At
December 31, 1998 and 1997, the unpaid principal of such loans was
approximately $529,504,000 and $437,932,000, respectively.
NOTE 9--ANNUITY RESERVES
At December 31, 1998 and 1997, TIAA's general account annuity reserves are
summarized as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------------- ------------------------------
Amount Percent Amount Percent
----------------- --------- ----------------- ----------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal:
At book value without adjustment ......... $ 9,066,466,368 10.4% $ 7,856,442,214 9.8%
At market value ......................... -- -- -- --
Not subject to discretionary
withdrawal .............................. 77,797,831,264 89.6 72,437,186,123 90.2
---------------- ----- ---------------- -----
Total annuity reserves ................... 86,864,297,632 100.0% 80,293,628,337 100.0%
===== =====
Reconciliation to total policy and
contract reserves shown on the
balance sheet:
Reserves on other life policies
and contracts ........................ 377,741,433 348,411,715
Reserves on accident and health
policies ............................. 530,672,352 506,976,271
---------------- ----------------
Total policy and contract reserves ....... $87,772,711,417 $81,149,016,323
================ ================
</TABLE>
B-61
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued)
NOTE 10--SEPARATE ACCOUNTS
TIAA currently has two separate accounts. The 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 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 shared in the pro rata investment
experience of SIA and were 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. TIAA
redeemed all of its SIA units by the end of 1996.
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's target is to invest between 70% and 95% of its assets directly in real
estate or in real estate-related investments, with the remainder of its assets
invested in 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 shared in the
pro rata investment experience of REA and were 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, 1997, the number of units retained by TIAA in
REA was 610,864, with a total value of approximately $74,706,520. TIAA redeemed
all of its REA units by the end of 1998.
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. Total separate account premiums were approximately $226,984,000,
$206,808,000 and $153,919,000 in 1998, 1997 and 1996, respectively. Total
separate account net transfers from other accounts were approximately
$300,737,000, $360,391,000 and $249,836,000 in 1998, 1997 and 1996,
respectively. Annuities offered through VA-1 include a nominal guaranteed
minimum death benefit. For the REA, TIAA guarantees that actual mortality
experience will not reduce payments once they have begun. TIAA makes no further
guarantees to policyholders on any of its separate accounts. Both accounts
offer full or partial withdrawal at market value with no surrender charge.
NOTE 11--MUTUAL FUNDS
On July 17, 1997, TIAA made a $250,000,000 seed money investment to launch the
TIAA-CREF Mutual Funds ("the Funds"), a Delaware business trust that was
organized on January 13, 1997 and is registered with the Commission under the
Investment Company Act of 1940 as an open-end management investment company.
The Funds consist of six series (each referred to as a "Fund"), each of which
commenced operations on July 17, 1997. TIAA invested $48,000,000 in the Money
Market Fund; $32,000,000 in the Bond Plus Fund; $38,000,000 in the Growth &
Income Fund; $38,000,000 in the Growth Equity Fund; $44,000,000 in the
International Equity Fund; and $50,000,000 in the Managed Allocation Fund.
Shortly after being seeded, the Managed Allocation Fund invested its seed money
and its earnings to date in the other Funds. On September 2, 1997, the Funds
began to publicly offer their shares, without a sales load, through their
distributor, TPIS. Advisors provides investment management services for the
Funds and is also responsible for providing, or obtaining at its own expense,
the services reasonably necessary for the ordinary operation of the Funds.
TIAA's original seed money investment in the Funds, plus reinvested dividends
and undistributed earnings, totaled approximately $303,017,000 and $252,327,000
at December 31, 1998 and 1997, respectively, and such amounts are reflected in
the "Other long-term investments" caption in the accompanying balance sheets.
NOTE 12--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.
B-62
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Concluded)
NOTE 13--YEAR 2000 (UNAUDITED)
Like all other financial service organizations, TIAA could be adversely
affected if the computer systems that it uses and those used by its major
service providers do not properly process and calculate date-related
information on or after January 1, 2000. TIAA has taken steps that management
believes are prudent and reasonably designed to address the Year 2000 issue.
TIAA has developed, and is executing, an extensive Year 2000 remediation and
certification plan that addresses its critical computer systems, as well as the
interfaces with its important external vendors and service providers. TIAA has
also developed contingency plans intended to minimize the impact that
unexpected systems failures (internal and external) may have on its operations.
Management has periodically apprised the TIAA Board of Trustees regarding these
plans and the progress of efforts to deal with the Year 2000 issue. Although
there can be no absolute assurance that these steps will be sufficient to
address all aspects of the Year 2000 issue, management does not anticipate that
the Year 2000 issue will have a significant adverse impact on TIAA's business
operations.
B-63
<PAGE>
Part C - OTHER INFORMATION
Item 28. Financial Statements and Exhibits
(a) Financial Statements
The following Financial Statements for TIAA Separate Account
VA-1 are included with Part A (Prospectus) of this Registration Statement:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Condensed Financial Information...........................................................8
</TABLE>
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
----
<S> <C>
(1) The Registrant--Stock Index Account
Report of Management Responsibility.........................................................B-16
Report of Independent Auditors..............................................................B-17
Audited Financial Statements:
Statement of Assets and Liabilities.......................................................B-18
Statement of Operations...................................................................B-19
Statements of Changes in Net Assets.......................................................B-20
Notes to Financial Statements...............................................................B-21
Statement of Investments....................................................................B-23
(2) TIAA
Chairman's Letter...........................................................................B-41
Report of Management Responsibility.........................................................B-42
Report of Independent Auditors..............................................................B-43
Audited Financial Statements:
Balance Sheets ...........................................................................B-44
Statements of Operations..................................................................B-45
Statements of Changes in Contingency Reserves.............................................B-46
Statements of Cash Flows..................................................................B-47
Notes to Financial Statements...............................................................B-48
</TABLE>
(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 between TIAA and
Bankers Trust Company 3/
(4) Investment Management Agreement by and among TIAA,
the Registrant, and Teachers Advisors, Inc. 2/
C-1
<PAGE>
(5) (A) Distribution Agreement by and among TIAA, the
Registrant, and Teachers Personal Investors Services,
Inc. dated September 15, 1994 ("Distribution Agreement")
2/
(B) Amendment dated August 1, 1995 to Distribution Agreement
4/
(C) Amendment dated November 3, 1997 to Distribution
Agreement 5/
(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, as amended*
(B) Bylaws of TIAA, as amended*
(9) None
(10) Not Applicable
(11)(A) Administrative Services Agreement by and
between TIAA and the Registrant dated September 15, 1994
("Administration Agreement") 2/
(B) Amendment dated August 1, 1995 to Administration
Agreement 4/
(12)(A) Consent of Charles H. Stamm, Esquire*
(B) Consent of Sutherland, Asbill & Brennan LLP*
(13) Consent of Ernst & Young 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/ Filed herewith electronically (previously filed in the initial
Registration Statement on Form N-3 dated May 18, 1994 (File No.
33-79124)).
2/ Filed herewith electronically (previously filed in
Pre-Effective Amendment No. 1 to Form N-3 dated October 7,
1994 (File No. 33-79124)).
3/ Filed herewith electronically (previously filed in
Pre-Effective Amendment No. 2 to Form N-3 dated October 18,
1994 (File No. 33-79124)).
4/ Previously filed in Post-Effective Amendment No. 2 to Form N-3 dated
March 26, 1996 (File No. 33-79124) and incorporated herein by reference.
5/ Previously filed in Post-Effective Amendment No. 4 to Form
N-3 dated March 27, 1998 (File No. 33-79124) and
incorporated herein by reference.
C-2
<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
President Emeritus
Pomona College
Summer Hall, 330 College Way
Claremont, California 91711-6305
Marcus Alexis Trustee
Board of Trustees 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
John H. Biggs Trustee, Chairman,
TIAA-CREF President and Chief
730 Third Avenue Executive Officer
New York, New York 10017-3206
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
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 Emeritus
Purdue University
1032 Hovde Hall of Administration
West Lafayette, Indiana 47907-1032
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name and Principal Business Address Insurance Company Registrant
- ----------------------------------- ----------------- ----------
<S> <C> <C>
Martin J. Gruber Trustee
Nomura Professor of Finance
Leonard N. Stern School of Business
New York University
Management Education Center
44 West 4th Street, Suite 9-190
New York, New York 10012-1126
Ruth Simms Hamilton Trustee
Professor of Sociology and Director of
African Diaspora Research Project
Michigan State University
W142 Owen Graduate Hall
East Lansing, Michigan 48824
Dorothy Ann Kelly, O.S.U. Trustee
Chancellor
Office of the Chancellor
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 22911-8691
Leonard S. Simon Trustee
Vice Chairman
Charter One 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, P.O. Box 488
Bowling Green, Ohio 43402
Paul R. Tregurtha Trustee
Chairman and Chief Executive
Mormac Marine Group, Inc.
Three Landmark Square
Stamford, Connecticut 06901
</TABLE>
C-4
<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
Technology Solutions
1261 Pequot Avenue
Southport, CT 06490
Rosalie J. Wolf Trustee
Treasurer and Chief Investment Officer
The Rockefeller Foundation
420 Fifth Avenue
New York, New York 10018-2702
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
Anthony V. Betro Director, Director,
TIAA-CREF Investment Investment
730 Third Avenue Accounting Accounting
New York, New York 10017-3206
Laura M. Bramson Senior Counsel Assistant
TIAA-CREF Secretary
730 Third Avenue and Senior 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 President,
730 Third Avenue and Chief Counsel, Secretary and
New York, New York 10017-3206 Investments Chief Counsel,
Investments
Madeleine d'Ambrosio Vice President
TIAA-CREF
730 Third Avenue
New York, New York 10017-3206
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name and Principal Business Address Insurance Company Registrant
- ----------------------------------- ----------------- ----------
<S> <C> <C>
Douglas Dial Senior Managing Senior Managing
TIAA-CREF Director Director
730 Third Avenue
New York, New York 10017-3206
Scott Evans Executive Vice Executive Vice
TIAA-CREF President President
730 Third Avenue
New York, New York 10017-3206
Eric E. Fisher Senior Managing Senior Managing
TIAA-CREF Director Director
730 Third Avenue
New York, New York 10017-3206
Dennis D. Foley Vice President, Vice President,
TIAA-CREF Annuity and Mutual Annuity and Mutual
730 Third Avenue Funds Funds
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
Don Harrell Executive Executive Vice
TIAA-CREF Vice President President
730 Third Avenue
New York, New York 10017-3206
Matina Horner Executive Executive Vice
TIAA-CREF Vice President President
730 Third Avenue
New York, New York 10017-3206
Laverne E. Jones Vice President and
TIAA-CREF Corporate Secretary
730 Third Avenue
New York, New York 10017-3206
Michael Kahn Second Vice
TIAA-CREF President
730 Third Avenue
New York, New York 10017-3206
Roseanne Lipman Klein Vice President and
TIAA-CREF Chief Counsel, Tax
730 Third Avenue
New York, New York 10017-3206
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name and Principal Business Address Insurance Company Registrant
- ----------------------------------- ----------------- ----------
<S> <C> <C>
Kirk Kozero Officer, Marketing
TIAA-CREF Manager
730 Third Avenue
New York, New York 10017-3206
Seema Luthra Director, Insurance
TIAA-CREF Planning and Service
730 Third Avenue Center
New York, New York 10017-3206
Henry Liedtka Second Vice
TIAA-CREF President
730 Third Avenue
New York, New York 10017-3206
John J. McCormack, Jr. Executive Vice Executive Vice
TIAA-CREF President President
730 Third Avenue
New York, New York 10017-3206
Gerald K. McCullough Vice President and Vice President and
TIAA-CREF Chief Accountant, Chief Accountant,
730 Third Avenue Investment Investment
New York, New York 10017-3206 Accounting Accounting
and Reporting and Reporting
John J. McGovern Vice President
TIAA-CREF
730 Third Avenue
New York, New York 10017-3206
Maureen Milet Second Vice Second Vice
TIAA-CREF President and President and
730 Third Avenue Director Director
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
John A. Putney, Jr. Executive
TIAA-CREF Vice President
730 Third Avenue
New York, New York 10017-3206
Jeanne Ray Vice President and
TIAA-CREF Chief Counsel,
730 Third Avenue Insurance
New York, New York 10017-3206
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name and Principal Business Address Insurance Company Registrant
- ----------------------------------- ----------------- ----------
<S> <C> <C>
David Rubel Actuary Actuary
TIAA-CREF
730 Third Avenue
New York, New York 10017-3206
Larry H. Rubin Vice President, Vice President
TIAA-CREF Insurance Actuarial Insurance
730 Third Avenue Actuarial
New York, New York 10017-3206
Rita Santos Manager, Quality
TIAA-CREF Assurance and
730 Third Avenue Training
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
Mark L. Serlen Senior Counsel Assistant
TIAA-CREF Secretary and
730 Third Avenue Senior Counsel
New York, New York 10017-3206
David Shunk Executive Vice Executive Vice
TIAA-CREF President President
730 Third Avenue
New York, New York 10017-3206
John Somers Executive Vice Executive Vice
TIAA-CREF President President
730 Third Avenue
New York, New York 10017-3206
Lisa Snow Vice President, Vice President,
TIAA-CREF Chief Counsel and Chief Counsel and
730 Third Avenue Assistant Assistant
New York, New York 10017-3206 Secretary, Secretary,
Corporate Law 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
Steven I. Traum Director--
TIAA-CREF Portfolio
730 Third Avenue Management
New York, New York 10017-3206
Kathleen D. VanNoy Director, Insurance
TIAA-CREF Services Compliance
730 Third Avenue
New York, New York 10017-3206
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name and Principal Business Address Insurance Company Registrant
- ----------------------------------- ----------------- ----------
<S> <C> <C>
Bruce Wallach Vice President and Vice President and
TIAA-CREF Corporate Actuary Corporate Actuary
730 Third Avenue
New York, New York 10017-3206
Thomas G. Walsh Executive Chairman of the
TIAA-CREF Vice President Management
730 Third Avenue Committee and
New York, New York 10017-3206 President
Steven Weisbart Vice President, Vice President,
TIAA-CREF Corporate Corporate
730 Third Avenue Publications Publications
New York, New York 10017-3206
John Wesley Product Manager,
TIAA-CREF Research and
730 Third Avenue Development Officer
New York, New York 10017-3206
Leonard B. Zimmerman Vice President Vice President
TIAA-CREF and Chief and Chief Actuary,
730 Third Avenue Actuary, Insurance Insurance Services
New York, New York 10017-3206 Services
</TABLE>
C-9
<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.
BT Properties, Inc.
College Credit Trust
DAN Properties, Inc.
ETC Repackaging, Inc.
Illinois Teachers Properties, Inc.
JV California Two, Inc.
JV California Three, Inc.
JV Florida One, Inc.
JV Florida Four, Inc.
JV Georgia One, Inc.
JV Maryland One, Inc.
JV Michigan One, Inc.
JV Michigan Two, Inc.
JV Michigan Three, Inc.
JV Minnesota One, Inc.
JV North Carolina One, Inc.
JWL Properties, Inc.
Liberty Place Retail, Inc.
Light Street Partners, LLP
Macallister Holdings, Inc.
Minnesota Teachers Realty Corp.
MN Properties, Inc.
M.O.A. Enterprises, Inc.
ND Properties, Inc.
OWP Hawaii, LLC
Savannah Teachers Properties, Inc.
T114 Properties, Inc.
T-Investment Properties Corp.
T-Land Corp.
T-Las Colinas Towers Corp.
TCT Holdings, Inc.
Teachers Advisors, Inc.
Teachers Boca Properties II, Inc.
Teachers Pennsylvania Realty, Inc.
Teachers Personal Investors Services,
Inc.
Teachers Properties, Inc.
Teachers REA, LLC
Teachers REA II, Inc.
Teachers REA II, LLC
Teachers REA III, LLC
Teachers Realty Corporation
TEO-NP, LLC
Tethys Slu, Inc.
TIAA Realty, Inc.
TIAA Timberlands I, LLC
TIAA-CREF Enterprises, Inc.
TIAA-CREF Individual & Institutional
Services, Inc.
TIAA-CREF Investment Management,
LLC
TIAA-CREF Life Insurance Company
TIAA-CREF Tuition Financing, Inc.
TIAA-CREF Trust Company, FSB
TIAA-Fund Equities, Inc.
TPI Housing, Inc.
Washington Teachers Properties II,
Inc.
WRC Properties, Inc.
730 Properties, Inc.
730 Cal Hotel Properties I, Inc.
730 Cal Hotel Properties II, Inc.
730 Penn. Hotel Properties I, Inc.
C-10
<PAGE>
(1) All subsidiaries are Delaware corporations except as follows:
D) Pennsylvania non-stock, non-profit corporations:
Liberty Place Retail, Inc.
Teachers Pennsylvania Realty, Inc.
Teachers Realty Corporation
E) Minnesota Teachers Realty Corporation is a Minnesota
corporation.
F) College Credit Trust, a New York Trust.`
G) TIAA-CREF Life Insurance Company is a New York corporation.
H) TIAA-CREF Trust Company, FSB is a Federal Savings Bank.
(2) All subsidiaries are 100% owned directly by TIAA, except as follows:
A) TIAA-CREF Enterprises, Inc. owns 100% of the stock of
Teachers Advisors, Inc., Teachers Personal Investors
Services, Inc., TIAA-CREF Life Insurance Company, TIAA-CREF
Tuition Financing, Inc. and TCT Holdings, Inc.
B) TCT Holdings, Inc. owns 100% of TIAA-CREF Trust Company, FSB.
C) Macallister Holdings, Inc. owns 100% of T-Investment
Properties Corp. and T-Land Corp.
D) Teachers Properties, Inc. owns 100% of TPI Housing, Inc.
E) 730 Properties, Inc. owns 100% of the stock of 730 Cal Hotel
Properties I, Inc., 730 Cal Hotel Properties II, Inc. and 730
Penn. Hotel Properties I, Inc.
(3) All subsidiaries have as their sole purpose the ownership of investments
which could, pursuant to New York State Insurance Law, be owned by TIAA itself,
except the following:
A) Teachers Advisors, Inc., which provides investment advice for the Registrant
and others.
B) Teachers Personal Investors Services, Inc., which provides broker-dealer
services for the Registrant and others.
C) TIAA-CREF Investment Management, LLC, which provides investment advice for
College Retirement Equities Fund.
D) TIAA-CREF Individual & Institutional Services, Inc., which provides
broker-dealer and administrative services for College Retirement Equities
Fund.
E) TCT Holdings, Inc., which is a unitary thrift holding company, was
formed for the sole purpose of holding stock of a federal chartered
savings bank.
F) TIAA-CREF Life Insurance Company, which is a subsidiary life
insurance company of TIAA, is licensed under the State of New York to
market certain life insurance products not currently offered by TIAA.
G) TIAA-CREF Trust Company, FSB which is a federal chartered savings bank.
H) ETC Repackaging, Inc. which was formed to hold securities
investments.
C-11
<PAGE>
I) TIAA-CREF Tuition Financing, Inc. which was formed to administer
tuition assistance plans.
Item 31. Number of Contractowners
As of February 23, 1999, 20,973 contractowners have allocated premiums to
the Separate Account (Stock Index Account).
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
C-12
<PAGE>
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.
Item 34. Principal Underwriters
(a) Teachers Personal Investors Service, Inc. ("TPIS"), acts as
principal underwriter for TIAA-CREF Mutual Funds and TIAA-CREF Life
Funds.
(b) 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 are
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 and Representations
(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
C-13
<PAGE>
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.
(e) TIAA represents that the fees and charges deducted under the Contracts,
in the aggregate, are reasonable in relation to the services rendered, the
expenses expected to be incurred, and the risks assumed by TIAA.
C-14
<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 1st day of April, 1999.
TIAA SEPARATE ACCOUNT VA-1
By: /s/ Thomas G. Walsh
-------------------
Thomas G. Walsh
President
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Thomas G. Walsh Chairman of the Management 4/1/99
- ------------------- Committee and President
Thomas G. Walsh (Principal Executive and
Financial Officer)
/s/ Richard L. Gibbs Executive Vice President 4/1/99
- -------------------- (Principal Accounting Officer)
Richard L. Gibbs
</TABLE>
C-15
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Laurence W. Franz Manager 4/1/99
- ---------------------
Laurence W. Franz
/s/ Jeanmarie C. Grisi Manager 4/1/99
- ----------------------
Jeanmarie C. Grisi
/s/ Richard M. Norman Manager 4/1/99
- ---------------------
Richard M. Norman
</TABLE>
C-16
<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 1st day of
April, 1999.
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.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ John H. Biggs Chairman of the Board, 4/1/99
- ----------------- President, and Chief
John H. Biggs Executive Officer (Principal
Executive and Financial
Officer)
/s/ Martin L. Leibowitz Vice Chairman, Chief 4/1/99
- ----------------------- Investment Officer, and
Martin L. Leibowitz Trustee (Principal Investment
Officer)
/s/ Richard L. Gibbs Executive Vice President 4/1/99
- -------------------- (Principal Accounting Officer)
Richard L. Gibbs
</TABLE>
C-17
<PAGE>
<TABLE>
<CAPTION>
Signature of Trustee Date Signature of Trustee Date
- -------------------- ---- -------------------- ----
<S> <C> <C> <C>
/s/ David Alexander 4/1/99 /s/ Dorothy Ann Kelly 4/1/99
- ------------------ -------------------------
David Alexander Dorothy Ann Kelly, O.S.U.
/s/ Marcus Alexis 4/1/99 /s/ Robert M. O'Neil 4/1/99
- ------------------------- -----------------------
Marcus Alexis Robert M. O'Neil
/s/ Willard T. Carleton 4/1/99 /s/ Leonard S. Simon 4/1/99
- ------------------------- -----------------------
Willard T. Carleton Leonard S. Simon
/s/ Robert C. Clark 4/1/99 /s/ Ronald L. Thompson 4/1/99
- ------------------------- -----------------------
Robert C. Clark Ronald L. Thompson
- ------------------- -----------------
Estelle A. Fishbein Paul R. Tregurtha
/s/ Frederick R. Ford 4/1/99 /s/ William H. Waltrip 4/1/99
- --------------------- ---------------------
Frederick R. Ford William H. Waltrip
/s/ Martin J. Gruber 4/1/99 /s/ Rosalie J. Wolf 4/1/99
- -------------------- -------------------
Martin J. Gruber Rosalie J. Wolf
/s/ Ruth Simms Hamilton 4/1/99
- -----------------------
Ruth Simms Hamilton
</TABLE>
C-18
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------ ----------------------
<S> <C>
1 Resolution of the Board of Trustees of TIAA establishing
the Registrant
2 Rules and Regulations of the Registrant
3 Custodial Services Agreement between TIAA and Bankers
Trust Company
4 Investment Management Agreement by and among TIAA, the
Registrant, and Teachers Advisors, Inc.
5 Distribution Agreement by and among TIAA, the Registrant,
and Teachers Personal Investors Services, Inc. dated
September 15, 1994
6(A) Form of Teachers Personal Annuity Contract (effective
November 1, 1994)
6(B) Form of Endorsement to Teachers Personal Annuity Contract
(in force prior to November 1, 1994)
7 Form of Application for Teachers Personal Annuity Contract
8(A) Charter of TIAA, as amended
8(B) Bylaws of TIAA, as amended
11 Administrative Services Agreement by and between TIAA and
the Registrant dated September 15, 1994
12(A) Opinion and Consent of Charles H. Stamm, Esquire
12(B) Consent of Sutherland, Asbill & Brennan LLP
13 Consent of Ernst & Young LLP
15 Seed Money Agreement by and between TIAA and the
Registrant
16 Schedules for Computation of Performance Quotations
17 Financial Data Schedule
</TABLE>
C-19
Exhibit 1
5/94
1. Approval of Registration Statement Mr. Clapman
Resolved: That the Registration Statement on Form N-3 for the Contracts,
which describes the Contracts and the Separate Account, annexed
to the official minutes as an Exhibit and made a part thereof,
filed in the office of the Corporate Secretary, be and hereby is
approved, and that any executive officer of TIAA will be and
each of them hereby is authorized in the name and on behalf of
TIAA to take such further action with respect thereto, including
the making of any changes prior to filing, the filing of
amendments to such Registration Statement thereafter, and the
filing of any applications for exemption or other relief
necessary in connection therewith, that such executive officer
may deem appropriate.
Exhibit 2
RULES AND REGULATIONS
of
TIAA Separate Account VA-1
Amended as of July 25, 1994
<PAGE>
RULES AND REGULATIONS
of
TIAA Separate Account VA-1
Article I - GENERAL............................................................1
Section 1.01 -- Name.....................................................1
Section 1.02 -- Office...................................................1
Section 1.03 -- Purpose..................................................1
Section 1.04 -- Status under the Act.....................................2
Article II - UNITS OF BENEFICIAL INTEREST......................................3
Section 2.01 -- General..................................................3
Section 2.02 -- Segregation of Assets among Subaccounts..................4
Section 2.03 -- Insulation between Subaccounts...........................5
Section 2.04 -- Liquidation Preferences among Subaccounts................6
Article III - CONTRACTOWNERS...................................................7
Section 3.01 -- Definition...............................................7
Section 3.02 -- Voting Rights and Meetings...............................7
Section 3.03 -- Place of Meetings........................................8
Section 3.04 -- Fixing of Record Date....................................8
Section 3.05 -- Notice of Meetings.......................................9
Section 3.06 -- Proxies.................................................10
Section 3.07 -- Quorum..................................................11
Section 3.08 -- Proper Matters for Action by
Contractowners..........................................13
Section 3.09 -- Number of Votes Sufficient to Take or
Authorize Action........................................14
Section 3.10 -- Dollar-Weighted Voting..................................16
Section 3.11 -- Order of Business and Presiding Officer.................16
Section 3.12 -- Action without a Meeting................................17
Article IV - MANAGEMENT COMMITTEE.............................................17
Section 4.01 -- General.................................................17
Section 4.02 -- Composition.............................................18
Section 4.03 -- Term of Office..........................................19
Section 4.04 -- Election of Managers by the
Contractowners..........................................19
Section 4.05 -- Regular Meetings........................................19
i
<PAGE>
Section 4.06 -- Special Meetings........................................20
Section 4.07 -- Notice of Meetings......................................20
Section 4.08 -- Quorum..................................................21
Section 4.09 -- Action Without a Meeting................................22
Section 4.10 -- Meeting by Conference Telephone.........................22
Section 4.11 -- Chairman................................................23
Section 4.12 -- Removal of Managers.....................................23
Section 4.13 -- Resignation of Managers.................................25
Section 4.14 -- Vacancies and Newly Created
Managerships ...........................................25
Section 4.15 -- Powers and Duties of the Committee......................27
Section 4.16 -- Executive Committee and Other Subcommittees.............30
Article V - OFFICERS..........................................................32
Section 5.01 -- Selection...............................................32
Section 5.02 -- Term of Office..........................................32
Section 5.03 -- Powers and Duties.......................................33
Article VI - INVESTMENT POLICIES..............................................33
Article VII - CUSTODY OF ASSETS...............................................34
Article VIII - VALUATION OF ASSETS............................................35
Section 8.01 -- General.................................................35
Section 8.02 -- Suspension of Determination of Value....................36
Section 8.03 -- Computation of Net Assets...............................36
Section 8.04 -- The Separate Account's Assets...........................36
Section 8.05 -- Valuation of Assets.....................................37
Section 8.06 -- The Separate Account's Liabilities......................37
Section 8.07 -- Determination Binding...................................38
Article IX - REMUNERATION.....................................................39
Article X- INDEMNIFICATION....................................................40
Section 10.01 -- Persons Indemnified....................................40
Section 10.02 -- Disabling Conduct......................................41
Section 10.03 -- Determination..........................................41
Section 10.04 -- Expenses Prior to Determination........................43
Section 10.05 -- Provisions Not Exclusive...............................44
Section 10.06 -- General................................................44
Article XI - FISCAL YEAR......................................................45
ii
<PAGE>
Article XII - REPORTS.........................................................45
Article XIII - AMENDMENTS.....................................................45
iii
<PAGE>
RULES AND REGULATIONS
of
TIAA Separate Account VA-1
Amended as of July 25, 1994
Article I
GENERAL
Section 1.01 -- Name. The name of this separate account shall be
TIAA Separate Account VA-1 (the "Separate Account"). The name of the Separate
Account has been selected by and belongs to Teachers Insurance and Annuity
Association of America (the "Company").
Section 1.02 -- Office. The principal office of the Separate Account
shall be at 730 Third Avenue, New York, New York 10017-3206.
Section 1.03 -- Purpose. (a) The Separate Account is a separate
account of the Company established by a resolution of the Board of Trustees of
the Company on February 16, 1994,
- 1 -
<PAGE>
pursuant to the provisions of Section 4240 of the New York Insurance Law. Its
purpose is to provide a segregated investment account in which assets are set
aside, separate and apart from the other assets of the Company, and held for the
benefit of owners of, and persons entitled to payment under, variable annuity
contracts and other agreements (collectively the "Contracts") which are funded
through the Separate Account and issued by the Company. The value of a Contract
varies in accordance with the investment results of the Separate Account.
(b) As provided in the Contracts, the assets of the Separate
Account, other than those which the Company is entitled to withdraw from time to
time under applicable state law, shall be held and applied to meet the
obligations (including expenses) of, and to provide benefits under, the
Contracts. The management of the assets of the Separate Account will be in
accordance with applicable state law and in a manner as may be required to
comply with the requirements of the Investment Company Act of 1940, as amended
(the "Act"), and the rules and regulations of the Securities and Exchange
Commission ("SEC") thereunder.
Section 1.04 -- Status under the Act. (a) The Account may be
registered as an open-end management investment company under the Act.
Such registration may be terminated, however, if
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and to the extent permitted by law; or the Separate Account may be reorganized
and registered as a unit investment trust under the Act, in each case with the
approval (if required by the Act) of the Contractowners, as provided in Article
III of these Rules and Regulations.
(b) Any question of interpretation of any term or provisions of
these Rules and Regulations having a counterpart in or otherwise derived from a
term or provision of the Act shall be resolved by reference to the corresponding
term or provision of the Act and to any definition thereof in the Act or to
judicial interpretations thereof, if any, or, in the absence of any controlling
judicial decisions, to rules, regulations, or orders of the SEC validly issued
pursuant to the Act.
Article II
UNITS OF BENEFICIAL INTEREST
Section 2.01 -- General. (a) Interests in the Separate Account shall
take the form of units of beneficial interest ("Units"). Each Unit shall be
valued in the manner described in Article VIII of these Rules and Regulations.
All
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Units represent an equal proportionate interest in the net assets of the
Separate Account (subject to the liabilities of the Separate Account), and each
Unit in the Separate Account shall be equal to each other Unit in the Separate
Account, except as provided in paragraph (c) of this Section 2.01 in the event
of creation of Subaccounts.
(b) The Management Committee, as described in Section 4.01 of these
Rules and Regulations, shall have the authority to establish two or more
Subaccounts within the Separate Account, each issuing its own Units with a
distinct value. Each Subaccount will have its own investment objective and
policies. Any reference in these Rules and Regulations to the Separate Account
shall also refer to any Subaccount thereof where the context so requires.
(c) Within each Subaccount, all Units represent an equal
proportionate interest in the net assets of that Subaccount (subject to the
liabilities of that Subaccount), and each Unit in a particular Subaccount shall
be equal to each other Unit in that Subaccount.
Section 2.02 -- Segregation of Assets among Subaccounts. All net
purchase payments received by the Separate
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Account in exchange for the crediting of Units in a particular Subaccount,
together with all assets in which such net purchase payments are invested and
reinvested, all income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange, or liquidation of such assets, and any
funds or payments derived from the reinvestment of such proceeds, shall
constitute the assets of that Subaccount, in contrast to other Subaccounts
(subject only to the rights of creditors of that Subaccount). The Management
Committee shall determine the allocation of the assets of the Separate Account
to a given Subaccount.
Section 2.03 -- Insulation between Subaccounts. The assets of a
particular Subaccount shall be charged only with the liabilities of the Separate
Account in respect of that Subaccount and only with all expenses, costs,
charges, and reserves attributable to that Subaccount. No Subaccount shall be
charged with the liabilities of the Separate Account arising from any other
Subaccount or with the expenses, costs, charges, and reserves attributable to
any other Subaccount. Such liabilities, expenses, costs, charges, and reserves,
together with any liabilities allocated to that Subaccount, in contrast to other
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Subaccounts, shall constitute the liabilities of that Subaccount. The Management
Committee shall determine the allocation of the liabilities of the Separate
Account to a given Subaccount.
Section 2.04 -- Liquidation Preferences among Subaccounts. (a) In
the event of any liquidation, dissolution, or winding up (whether voluntary or
involuntary) of the Company or of the Separate Account, the Contractowners whose
Contracts are credited with Units in a particular Subaccount shall be entitled
to receive an amount equal to the aggregate accumulated values of their
Contracts in that Subaccount before any distribution of assets allocated to the
Subaccount is made to any other Contractowners.
(b) If, upon any such liquidation, dissolution, or winding up, the
net asset value allocated to a particular Subaccount is insufficient to permit
payment to Contractowners of the full amount of the aggregate accumulated values
of all Contracts credited with Units in that Subaccount, then the net asset
value allocated to that Subaccount shall be paid to such Contractowners in
proportion to the relative accumulated values attributable to the Contracts of
each such Contractowner. If, upon any such liquidation, dissolution, or winding
up, the net
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asset value allocated to any Subaccount exceeds the aggregate accumulated values
of all Contracts credited with Units in that Subaccount, the excess shall be
paid to the Company.
Article III
CONTRACTOWNERS
Section 3.01 -- Definition. For purposes of these Rules and
Regulations, the Contractowner shall be the person identified on TIAA's records
as the owner of the Contract. Where the context so requires, "Contractowner"
shall also include the person who, as contributor of initial capital of the
Separate Account, holds Units in the Separate Account.
Section 3.02 -- Voting Rights and Meetings. (a) Contractowners are
entitled to vote their Units in the Separate Account that fund the outstanding
Contracts.
(b) The Separate Account is not required to hold an annual meeting
of Contractowners in any year in which the election of members of the Management
Committee by the Contractowners is not required by the Act.
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(c) Meetings of Contractowners may be called by a majority of the
members of the Management Committee then holding office, including a majority of
the members of the Management Committee who are not "interested persons" of the
Separate Account or of the Company as that term is defined in the Act. Business
transacted at any meeting of Contractowners shall be limited to the purposes
stated in the notice of meeting.
Section 3.03 -- Place of Meetings. Meetings of Contractowners shall
be held at the principal office of the Separate Account or at any other place
within the United States as shall be designated from time to time by the
Management Committee and stated in the notice of meeting or in a duly executed
waiver of notice thereof.
Section 3.04 -- Fixing of Record Date. The Management Committee
shall fix in advance a date as a record date for the determination of the
Contractowners entitled to notice of or to vote at any meeting of Contractowners
or any adjournment thereof, provided that such record date shall be not more
than fifty (50) nor less than ten (10) days before the date of such meeting of
Contractowners. Only such Contractowners as shall be owners of
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record on the record date so fixed shall be entitled to notice of such meeting
or adjournment and shall be entitled to vote thereat. For purposes of
determining the Contractowners entitled to notice of or to vote at any meeting
of Contractowners, the person shown in the records of the Company as the "owner"
of such contract shall be regarded as the Contractowner.
Section 3.05 -- Notice of Meetings. (a) The Management Committee
shall cause notice of the place, the date and hour, and the purpose or purposes
of each meeting of Contractowners to be mailed not more than fifty (50) nor less
than ten (10) days before the date of the meeting, to each Contractowner
entitled to vote at such meeting, at his or her address as it appears in the
records of the Company at the time of such mailing. Unless an adjournment is for
more than thirty (30) days or a new record date is fixed, notice of adjournment
of a meeting of Contractowners to another time or place need not be given if
such time and place are announced at such meeting.
(b) No notice of the place, the date and hour, or the purpose or
purposes of any meeting of Contractowners need be given to any Contractowner who
attends in person or is represented by proxy or to any Contractowner who, in a
writing
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executed and filed with the records of the meeting, either before or after the
holding thereof, waives such notice. Waivers of notice need not state the
purpose or purposes of such meeting.
Section 3.06 -- Proxies. (a) A Contractowner entitled to vote on a
matter may vote either in person or by proxy duly executed in writing by the
Contractowner or his duly authorized attorney-in-fact. A proxy for any meeting
shall be valid for any adjournment of such meeting, but no proxy shall be valid
after eleven (11) months from its date of execution, unless otherwise provided
in the proxy. The Company will furnish to the Contractowner (or mail in
accordance with his or her instructions) proxy materials necessary to permit the
Contractowner to cast votes, and each Contractowner entitled to vote on a matter
will receive a statement of the number of votes, including fractional votes,
attributable to his or her beneficial interest in the net asset value of each
Subaccount affected by such matter and stating his or her right to vote with
respect to such beneficial interest.
(b) At all meetings of Contractowners, all questions relating to the
qualification of Contractowners, the validity of
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proxies, and the acceptance or rejection of votes shall be decided by the
presiding officer of the meeting.
Section 3.07 -- Quorum. (a) In general, the presence in person or by
proxy of the holders of ten percent (10%) of the votes entitled to be cast at a
meeting of Contractowners shall constitute a quorum for the transaction of
business at any such meeting, except as otherwise provided by law or these Rules
and Regulations. Notwithstanding the foregoing and except as otherwise required
by applicable law or these Rules and Regulations, where the holders of Units in
any Subaccount are entitled or required to vote as a distinct class (an
"individual class") or where the holders of Units in any two or more (but not
all) Subaccounts are entitled or required to vote as a distinct class (a
"combined class"), the presence in person or by proxy of the holders of ten
percent (10%) of the votes of such individual class or combined class, as the
case may be, entitled to be cast at any meeting shall constitute a quorum for
the transaction of business via such a vote.
(b) If the vote of "a majority of the outstanding voting
securities," as that term is used in the Act, is required for any action to be
taken on any matter brought before the
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meeting, the presence in person or by proxy of the holders of fifty percent
(50%) of all votes entitled to be cast at a meeting of Contractowners shall
constitute a quorum for the transaction of business via such a vote.
(c) If a quorum with respect to the Separate Account, an individual
class, or a combined class, as the case may be, is not present in person or by
proxy at any meeting of Contractowners, the holders of a majority of the votes
of the Separate Account, such individual class, or such combined class, as the
case may be, present in person or by proxy and entitled to vote at such meeting
may, without further notice, adjourn the same from time to time as to the
Separate Account, such individual class, or such combined class, as the case may
be, until a requisite quorum for such meeting shall be present. The absence from
any meeting of the holders of the requisite number of votes of the Separate
Account, any individual class, or any combined class, as the case may be, that
may be required by applicable law or these Rules and Regulations for action upon
any given matter shall not prevent action at such meeting upon any other matter
or matters that may properly come before the meeting if there shall be present
thereat, in person or by proxy, holders
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of the number of votes required for action in respect of such other matter or
matters.
Section 3.08 -- Proper Matters for Action by Contractowners. Subject
to applicable law, the Contractowners shall have authority, at any meeting, to:
(a) elect members of the Management Committee and fill vacancies therein
when such action is required under applicable law or requested by
the Management Committee;
(b) remove any member of the Management Committee or any officer elected
or appointed by the Management Committee;
(c) ratify the selection of an independent public accountant for the
Separate Account, and terminate the employment of that independent
public accountant;
(d) approve the adoption, amendment, termination, or, in the absence of
approval by the Management Committee, continuance of an agreement
providing investment advisory services to the Separate Account;
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(e) authorize changes, proposed by the Management Committee, in the
fundamental investment policies of the Separate Account or any
Subaccount; and
(f) approve any acts, transactions, or other agreements that may be
submitted to a vote of Contractowners by the Management Committee.
Action with respect to at least the matters referred to in paragraphs (a), (c),
and (d) of this Section 3.08 will be taken at the first meeting of
Contractowners or of such other persons entitled to vote with respect to the
Separate Account.
Section 3.09 -- Number of Votes Sufficient to Take or Authorize
Action. (a) Except as otherwise specifically provided in these Rules and
Regulations or as required by the provisions of the Act, all matters shall be
decided by a vote of the majority of the votes validly cast.
(b) Matters required, by applicable law or as otherwise determined
by the Management Committee, to be approved by "a majority of the outstanding
voting securities" of the Separate Account shall require the vote of the lesser
of: (1) sixty-seven percent (67%) or more of the outstanding voting securities
of the Separate Account present at a meeting of
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Contractowners if more than fifty percent (50%) of the outstanding voting
securities of the Separate Account are present or represented by proxy; or (2)
more than fifty percent (50%) of the outstanding voting securities of the
Separate Account.
(c) Any matter required to be approved, by the provisions of the Act
or otherwise, by "a majority of the outstanding voting securities" shall not be
deemed to have been effectively acted upon unless approved by "a majority of the
outstanding voting securities" of: (1) each Subaccount affected by such matter,
where the holders of Units in that Subaccount are entitled or required to vote
as an individual class; (2) any two or more (but not all) Subaccounts affected
by such matter, where the holders of Units in these Subaccounts are entitled or
required to vote as a combined class; or (3) the Separate Account, where no
Subaccount is deemed to be affected by such matter. For purposes of this Article
III, a Subaccount will be deemed to be "affected by such matter" unless (1) the
interests of each Subaccount are identical or (2) the matter does not affect any
interest of such Subaccount. Notwithstanding the foregoing, the submission to
the Contractowners of (1) the selection of an independent public accountant, (2)
a contract with a principal underwriter, and (3) nominees for election as
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members of the Management Committee shall be exempt from the individual-class or
combined-class Subaccount voting requirement.
Section 3.10 -- Dollar-Weighted Voting. At all meetings of
Contractowners, every Contractowner entitled to vote on a matter submitted for
approval shall have one vote for each dollar of his or her beneficial interest
in the net asset value of the Separate Account, or, in the case of
individual-class or combined-class Subaccount voting, one vote for each dollar
of his or her beneficial interest in the net asset value of each Subaccount
affected by such matter. Fractional votes shall be counted.
Section 3.11 -- Order of Business and Presiding Officer. The order
of business at meetings of Contractowners shall be determined by the presiding
officer to accomplish the purpose or purposes of the meeting. At all meetings of
Contractowners: (1) the Chairman of the Management Committee, or such other
person as may be designated by the Management Committee, shall be the presiding
officer; and (2) the Secretary of the Separate Account, if any, or such other
person as may be designated by the Management Committee or, in their absence,
the
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appointee of the presiding officer of the meeting, shall act as secretary of the
meeting.
Section 3.12 -- Action without a Meeting. Any action to be taken by
Contractowners may be taken without a meeting or prior notice if (1) all
Contractowners entitled to vote on the matter consent to the action in writing,
(2) all Contractowners entitled to notice of the meeting, but not entitled to
vote at it, sign a written waiver of any right to dissent, and (3) such consents
and waivers are filed with the records of the meetings of Contractowners. Such
consent shall be treated for all purposes as a vote at the meeting.
Article IV
MANAGEMENT COMMITTEE
Section 4.01 -- General. The business and affairs of the Separate
Account shall be managed by its Management Committee (the "Committee"), which
may exercise all of the powers of the Separate Account, except those that are
conferred upon or reserved to the Contractowners by the Act or the rules
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promulgated thereunder or by these Rules and Regulations. Hereinafter, the
members of the Committee may be referred to as the "Managers."
Section 4.02 -- Composition. The Committee shall consist of at least
two (2) but not more than fifteen (15) members. At the inception of the Separate
Account, the Committee shall consist of two (2) members, including a Chairman,
as appointed by the appropriate officers of the Company. Thereafter, the number
of memberships constituting the Committee ("Managerships") may be increased or
decreased from time to time, within the maximum and minimum stated in this
Section 4.02, by a majority of the total number of members which the Committee
would have if there were no vacancies thereon, and the tenure in office of a
Manager shall not be affected by any decrease in the number of Managerships so
made by the Committee. A majority of the members of the Committee shall be
persons who are not officers, employees, or other interested persons of the
Separate Account or of the Company. Members of the Committee need not be
Contractowners.
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Section 4.03 -- Term of Office. Each member of the Committee shall
hold office until the earliest of the following: (1) a successor is duly elected
and qualified; (2) his or her death; or (3) his or her resignation or removal in
the manner provided for in these Rules and Regulations.
Section 4.04 -- Election of Managers by the Contractowners. The
persons initially appointed to the Committee shall serve until an initial
meeting at which the Company, as the sole person having a beneficial interest in
the Separate Account at its inception, shall have the right to elect a Committee
or until their successors are duly elected and qualified. Thereafter, except as
otherwise provided by law or these Rules and Regulations, the Managers shall be
elected at any meeting of Contractowners called for such purpose. At each
meeting of Contractowners for the election of Managers, the Managers shall be
elected by a plurality of the votes validly cast at such election.
Section 4.05 -- Regular Meetings. Regular meetings of the Committee
shall be held at such times and places as the Committee from time to time may
determine. Notice of such
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regular meetings need not be given, provided that notice of any change in the
time or place of such meetings shall be promptly sent (in the manner provided
for notice of special meetings) to each Manager not present at the meeting at
which such change was made.
Section 4.06 -- Special Meetings. Special meetings of the Committee
shall be held, whenever called by the Chairman of the Committee or a majority of
the Managers then holding office, at the time and place specified in the
respective notices or waivers of notice of such meetings.
Section 4.07 -- Notice of Meetings. Except with respect to a Manager
present at the time the meeting was called, notice of meetings, stating the
place and the date and hour, shall be given to each Manager orally (in person or
by telephone) or sent by facsimile, telegraph, or mail, or left at his or her
residence or usual place of business, not less than one (1) day before the date
of the meeting. If mailed, such notice shall be deemed to be given four (4)
business days after being deposited in the United States mail, addressed to the
Manager at his or her residence or regular place of business with postage
thereon
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prepaid. Such notice may be given by the Secretary, if any, or by the person or
persons calling the meeting. Unless required by applicable law or otherwise
determined by resolution of the Committee in accordance with these Rules and
Regulations, notices need not state the business to be transacted at or the
purpose of any meeting, and no notice need be given to any Manager who is
present in person at the meeting or to any Manager who, before or after the
meeting, signs a waiver of notice which is filed with the records of the
meeting. Waivers of notice need not state the purpose or purposes of such
meeting.
Section 4.08 -- Quorum. At all meetings of the Committee, a majority
of the members of the Committee then holding office shall constitute a quorum
for the transaction of business, and the action of a majority of the Managers
present at any meeting at which a quorum is present shall be the action of the
Committee, unless the concurrence of a greater proportion is required for such
action by the Act, other applicable law, or these Rules and Regulations. A
quorum shall be present at the time any vote or other action is taken. If a
quorum shall not be present at any meeting of the Committee, the Managers
present may, by a majority vote, adjourn the meeting from time to time,
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without notice other than announcement at the meeting, until a quorum shall be
present.
Section 4.09 -- Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Committee or of any subcommittee
thereof may be taken without a meeting, if a written consent to such action is
signed by each member of the Committee or of such subcommittee, as the case may
be, and such written consent is filed with the minutes of proceedings of the
Committee or subcommittee.
Section 4.10 -- Meeting by Conference Telephone. Members of the
Committee or any subcommittee thereof may participate in a meeting by means of
conference telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same time. Participation
in a meeting by these means shall constitute presence in person at the meeting
except with respect to (1) any meeting to consider the entry into or renewal of
any contract or agreement whereby any person agrees to serve as investment
adviser or principal underwriter of the Separate Account, (2) any meeting to
select an independent public accountant for the preparation or audit of any
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of the Separate Account's financial statements, or (3) any meeting to consider
another item of business for which the Act requires Managers to meet in person.
Section 4.11 -- Chairman. (a) At the inception of the Separate
Account, the appropriate officers of the Company shall appoint the Chairman from
among the initial members of the Committee. Thereafter, whenever a vacancy in
the office of Chairman shall occur for any reason, the Committee shall elect one
of its members to act as Chairman and to hold such office until a successor is
elected and qualified. The Committee may, by vote of a majority of the Managers
then holding office, remove the Chairman from such office.
(b) The Chairman, when present, shall preside at all meetings of the
Committee or of the Contractowners. The Chairman may sign contracts or other
instruments that the Committee has authorized to be executed, including, but not
limited to, any application for an order of the SEC.
Section 4.12 -- Removal of Managers. (a) Any member of the Committee
may be removed for cause at any time by a vote of at least a majority of the
number of members of the Committee
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prior to such removal, specifying the date upon which such removal shall become
effective.
(b) Any member of the Committee may be removed with or without cause
by the vote of the Contractowners entitled to vote more than fifty percent (50%)
of the votes entitled to be cast on the matter at any meeting called for such
purpose.
(c) A meeting of Contractowners will be called for the purpose of
voting on the removal of a member or members of the Committee when so requested
in writing by Contractowners of record who hold not less than ten percent (10%)
of the outstanding Units in the Separate Account.
(d) Whenever ten (10) or more Contractowners of record who have been
such for at least six (6) months preceding the date of application, and who in
the aggregate hold Units constituting at least one percent (1%) or $25,000, if
less, of the outstanding Units in the Separate Account, shall apply to the
Committee in writing, stating that they wish to communicate with other
Contractowners with a view to obtaining signatures to a request for a meeting to
consider removal of a member of the Committee and accompanied by a form of
communication and request that they wish to transmit, the Committee shall,
within five (5) business days after receipt of such application, inform such
applicants as
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to the approximate cost of mailing to the Contractowners of record the proposed
communication and form of request. Upon the written request of such applicants,
accompanied by a tender of the material to be mailed and of the reasonable
expenses of mailing, the Committee shall, with reasonable promptness, mail such
material to all Contractowners of record at their addresses as recorded on the
books of the Separate Account. Notwithstanding the foregoing, the Committee may
decline to mail such material on the basis of and in accordance with the
procedures set forth in the last two paragraphs of Section 16(c) of the Act.
Section 4.13 -- Resignation of Managers. Any Manager may resign at
any time by mailing or delivering his or her resignation in writing to the
Chairman of the Committee or to a meeting of the Committee. Any such resignation
shall take effect at the time specified in the writing or, if not specified,
upon acceptance thereof by the Committee.
Section 4.14 -- Vacancies and Newly Created Managerships. (a) Any
vacancy occurring on the Committee by
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reason of removal, resignation, or any cause other than an increase in the
number of Managerships may be filled by the vote of a majority of the remaining
members of the Committee, notwithstanding that the number of such remaining
members may not constitute a quorum. Any vacancy occurring by reason of an
increase in the number of Managerships may be filled by the vote of a majority
of the total number of Managerships constituting the Committee prior to such
increase. An individual who, pursuant to action by the Committee, fills a
vacancy on the Committee shall hold office until his or her successor is duly
elected and qualified.
(b) The Committee may not elect any Manager to fill any vacancy as
provided herein unless, immediately after filling any such vacancy, at least
two-thirds (2/3) of the Managers then holding office shall have been elected
either by the Company as the initial holder of Units in the Separate Account or
by the Contractowners at a meeting thereof. If, at any time after the initial
meeting of holders of beneficial interests in the Separate Account, less than a
majority of the Managers holding office at that time were so elected either by
the Company or by the Contractowners, a meeting of Contractowners shall be
called forthwith and shall be held, as promptly as possible and in any
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event within sixty (60) days unless the SEC shall by order extend such period,
for the purpose of electing Managers to fill any existing vacancies in the
Committee.
Section 4.15 -- Powers and Duties of the Committee. The Committee
shall have the following powers, responsibilities, and duties:
(a) to select annually, by the vote of a majority of those Managers who
are not "interested persons" of the Separate Account within the
meaning of the Act, an independent public accountant for the
Separate Account, whose selection shall be submitted to the
Contractowners for ratification or rejection to the extent required
by applicable law;
(b) to enter into an agreement or agreements for investment advisory
services with one or more investment advisers, which agreement(s)
shall be approved by the vote of a majority of those Managers who
are neither parties to such agreement(s) nor "interested persons" of
any such party within the meaning of the Act and shall be submitted
to the Contractowners for approval or rejection as required by
applicable law;
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(c) to enter into an underwriting agreement or agreements with one or
more principal underwriters for the Separate Account, which
agreement(s) shall be approved by the vote of a majority of those
Managers who are neither parties to such agreement(s) nor
"interested persons" of any such party within the meaning of the
Act;
(d) to consider annually the terms of any agreement or agreements of the
nature contemplated by paragraphs (b) or (c) of this Section 4.15
and to approve amendments thereto or a continuance or termination
thereof, which amendments, continuance, or termination shall also be
approved by the vote of a majority of those Managers who are neither
parties to such agreement(s) nor "interested persons" of any such
party within the meaning of the Act, subject to any action by the
Contractowners required by applicable law;
(e) to enter into an agreement or agreements for administrative services
and/or custody of the assets of the Separate Account, if deemed
appropriate;
(f) to take such action as may be necessary or appropriate with respect
to the registration and qualification of
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the Separate Account and of the variable annuity contracts under the
Act, the Securities Act of 1933, and any applicable state securities
and insurance laws;
(g) to recommend or make any changes in the fundamental investment
policies of the Separate Account or in the status or classification
of the Separate Account under the Act as contemplated by Section
1.04 of these Rules and Regulations, and to submit the same to the
Contractowners for approval or rejection, to the extent required by
applicable law;
(h) to adopt and amend from time to time any investment policies or
restrictions, of the Separate Account or any Subaccount, not deemed
fundamental;
(i) to add new Subaccounts to the Separate Account or eliminate existing
Subaccounts, as the Committee deems appropriate;
(j) to review regularly the investment of the assets of the Separate
Account or any Subaccount and to ascertain that they are being
managed in accordance with the investment policies and restrictions
of the Separate Account or any Subaccount;
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(k) to determine the value of the net assets of the Separate Account and
in particular to determine, in good faith, the fair value of all
assets of the Separate Account for which market quotations are not
readily available;
(l) to enter into any other agreements, or authorize the entrance into
the same, on behalf of the Separate Account, and to take any and all
actions necessary or proper in connection with the operation and
management of the Separate Account and the assets thereof; and
(m) at TIAA's request, to transfer the assets of the Separate Account
to, or merge the Separate Account with, another separate account
that may or may not be affiliated with the Company, or to take any
such similar action as shall be consistent with applicable legal
requirements, in each case with the approval (if required by the
Act) of the Contractowners.
Section 4.16 -- Executive Committee and Other Subcommittees. (a) The
Committee may appoint, by resolution adopted by a majority of the total number
of members which the Committee would have if there were no vacancies on the
Committee,
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which majority shall include a majority of the Managers who are not "interested
persons" of the Separate Account or the Company within the meaning of the Act,
two or more of its members to constitute an Executive Committee, which shall
have and may exercise any and all powers of the Committee in the management of
the business and affairs of the Separate Account between meetings of the
Committee, except that such Executive Committee shall not have the power to
amend any provision of these Rules and Regulations, the power to approve the
selections or agreements provided in paragraphs (a), (b), (c), (d), (e), or (m)
of Section 4.15 of this Article IV, or any other power prohibited by law.
(b) The Committee may establish, from time to time and by vote of a
majority of the Managers then holding office, other subcommittees of its members
and may designate the number (not less than two) of Managers comprising any such
subcommittee and the functions to be performed by each such subcommittee.
(c) Each Executive Committee or other subcommittee member shall hold
office until his or her successor shall be duly elected and qualified, or until
he or she sooner dies, resigns, or becomes disqualified.
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Article V
OFFICERS
Section 5.01 -- Selection. The Separate Account may have a President
and such other officers as the Committee, in its discretion, may determine, each
of whom may or may not be a member of the Committee. At the inception of the
Separate Account, the appropriate officers of the Company may appoint the
President and such other officers of the Separate Account as they shall
determine. Thereafter, any such officers of the Separate Account shall be
appointed by the Committee, which may also fill any vacancy that may occur in
such office. The Committee may also, in its discretion, appoint agents and
employees, who shall have such authority and perform such duties as the
Committee or the Executive Committee thereof, if any, may determine.
Section 5.02 -- Term of Office. The term of office of all officers
of the Separate Account shall be until their respective successors are duly
appointed and qualified. Any such officer may be removed from office at any time
by the vote of a majority of the Managers then holding office upon a finding
that removal is in the best interest of the Separate Account.
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Section 5.03 -- Powers and Duties. (a) The officers of the Separate
Account shall have such powers and duties as generally pertain to their
respective offices as well as such powers and duties as may from time to time be
conferred by the Committee or its Executive Committee, if any.
(b) The Secretary of the Separate Account, if any, shall have the
power to keep and certify the minutes of the meetings of Contractowners and the
meetings of the Committee or committees thereof and shall have such other powers
and perform such other duties as the Committee may prescribe. If at any time
there is no Secretary of the Separate Account, the Committee may designate an
individual to serve as secretary of any such meeting, for the purpose of keeping
and certifying the minutes thereof.
Article VI
INVESTMENT POLICIES
The investment policies and restrictions applicable to the
management of the Separate Account's assets shall be adopted by the Committee
and set forth in the registration statement of
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the Separate Account under the Act and the 1933 Act and in accordance with
applicable state and federal laws.
Article VII
CUSTODY OF ASSETS
All cash and securities owned by the Separate Account shall be held
by a bank or trust company of good standing, having a capital surplus and
undivided profits aggregating not less than $2,000,000, provided such a bank or
trust company can be found ready and willing to act. Upon the resignation or
inability to serve of any such bank or trust company the Separate Account shall
(1) use its best efforts to obtain a qualified successor, (2) require the cash
and securities of the Separate Account held by such bank or trust company to be
delivered directly to the successor, and (3) in the event that no qualified
successor can be found, submit to the Contractowners (before permitting delivery
of such cash and securities to anyone other than a qualified successor) the
question whether the Separate Account shall be dissolved and liquidated or shall
function without a qualified bank or trust company to hold such cash and
securities.
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Upon such resignation or inability to serve, such bank or trust company may
deliver any assets of the Separate Account held by it to a qualified bank or
trust company selected by it, such assets to be held subject to the terms of the
agreement which governed such retiring bank or trust company, pending action by
the Separate Account as set forth in this Article VII. Nothing herein contained,
however, shall prevent the termination of any agreement between the Separate
Account and any such bank or trust company by the Separate Account at the
discretion of the Committee, and any such agreement shall be terminated upon the
affirmative vote of the holders of a majority of all the votes attributable to
the Units in the Separate Account at the time outstanding and entitled to vote.
Article VIII
VALUATION OF ASSETS
Section 8.01 -- General. The Committee shall have the power and duty
to determine the value of the net assets of the Separate Account. The Committee
may establish a subcommittee, appoint one or more agents, or enter into other
arrangements with
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third parties to assist it in the determination of the value of some or all of
the securities in the Separate Account and to make the actual calculations
pursuant to directions of the Committee. The data and information considered in
implementing the valuation methods adopted by the Committee will be retained for
inspection by the Separate Account's independent auditors.
Section 8.02 -- Suspension of Determination of Value. The Committee
may declare a suspension of the determination of the value of the net assets of
the Separate Account to the extent permitted by the Act.
Section 8.03 -- Computation of Net Assets. The value of the net
assets of the Separate Account as of any particular time shall be the value of
the assets of the Separate Account less its liabilities.
Section 8.04 -- The Separate Account's Assets. The Separate
Account's assets shall be deemed to include: (a) all cash on hand or on deposit,
including any interest accrued thereon, (b) all bills and demand notes and
accounts receivable, (c) all securities owned by or on behalf of the Separate
Account,
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(d) all stock and cash dividends and cash distributions payable but not yet
received on behalf of the Separate Account (when the valuation of the underlying
security is being determined ex-dividend), (e) all interest accrued on any
interest-bearing securities owned on behalf of the Separate Account (except
accrued interest included in the valuation of the underlying security), and (f)
all other property of every kind and nature, including prepaid expenses.
Section 8.05 -- Valuation of Assets. The value of the Separate
Accounts' assets will be determined in accordance with the Act and rules and
regulations, releases and orders of the SEC from time to time in effect
thereunder. A valuation committee, if established, or any agents appointed by
the Committee, will have the duty and responsibility to continuously review the
appropriateness of any valuation method established by the Committee and to
inform the Committee whenever they determine that any method is no longer
appropriate.
Section 8.06 -- The Separate Account's Liabilities. The Separate
Account's liabilities will be deemed to include (a) all bills and accounts
payable, (b) all administrative or other
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expenses accrued which are chargeable to the Separate Account, (c) all
contractual obligations for the payment of money or property, (d) all reserves
authorized or approved by the Committee for taxes or contingencies, and (e) all
other liabilities of whatsoever kind and nature.
Section 8.07 -- Determination Binding. Any determination made in
good faith and, so far as accounting matters are involved, in accordance with
generally accepted accounting principles, by or pursuant to the direction of the
Committee, as to the amount of the assets, debts, obligations, or liabilities of
the Separate Account, as to the amount of any reserves, liabilities, or expenses
set up and the propriety thereof, as to the time of or purpose for creating such
reserves, liabilities, or expenses, as to the use, alteration, or cancellation
of any reserves, liabilities, or expenses (whether or not any debt, obligation,
or liability for which such reserves, liabilities, or expenses shall have been
created, shall have been paid or discharged, or shall be then or thereafter
required to be paid or discharged), as to the price or closing bid or asked
price of any security owned or held by the Separate Account, as to the market
value of any security or fair value of
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any other asset of the Separate Account, as to the estimated expense to the
Separate Account in connection with purchases of assets, as to the ability to
liquidate securities in an orderly fashion, as to the number of Units in the
Separate Account outstanding, or as to any other matters relating to the sale,
purchase, and/or other acquisition or disposition of securities or Units in the
Separate Account, shall be final, conclusive, and binding. The foregoing
sentence shall not be construed to protect any member of the Committee or
officer or agent of the Separate Account against any liability to the Separate
Account or the Contractowners to which such person would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office or agency; nor
shall the foregoing sentence be construed as a waiver of compliance with any
provision of the Act or with any rule, regulation, or order promulgated
thereunder.
Article IX
REMUNERATION
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Managers may receive such compensation for their services as may be
fixed from time to time by appropriate officers of the Company, and in addition
may be reimbursed for reasonable expenses incurred in connection with the
discharge of their duties and responsibilities, including but not limited to
attendance at regular or special meetings of the Committee or of any committees
thereof. No such remuneration may be paid to any person who is also an officer,
trustee, or employee of the Company.
Article X
INDEMNIFICATION
Section 10.01 -- Persons Indemnified. In the manner and to the full
extent permitted by law, the Account shall indemnify each of the members of its
Committee and officers 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
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<PAGE>
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 Committee member or such an officer, including the
advancement of expenses prior to the final disposition of the claim, action,
suit or proceeding.
Section 10.02 -- Disabling Conduct. "Disabling conduct" means
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of office.
Section 10.03 -- Determination. (a) Whether any such liability or
expense arose out of disabling conduct shall be determined: (1) by a final
decision on the merits (including, but not limited to, a dismissal for
insufficient evidence of any disabling conduct) by a court or other body before
whom the proceeding was brought, that the person to be indemnified was not
liable by reason of disabling conduct; or (2) in the absence of such a decision,
a reasonable determination, based upon a review of the facts, that such person
was not liable by reason of
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<PAGE>
disabling conduct, (A) by the vote of a majority of a quorum of Managers who are
neither "interested persons" of the Separate Account within the meaning of the
Act nor parties to the action, suit, or proceeding in question or another
action, suit, or proceeding on the same or similar grounds ("disinterested,
non-party Managers"), (B) by independent legal counsel in a written opinion if
such quorum is not obtainable, or, even if obtainable, if a quorum of
disinterested Managers of the Separate Account so directs, (C) by majority vote
of the Contractowners, or (D) by any other reasonable and fair means not
inconsistent with any of the above.
(b) The termination of any action, suit, or proceeding by judgment,
order, settlement, or conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that any liability or
expense arose by reason of disabling conduct, or that such person did not act in
good faith and in the reasonable belief that such action was in the best
interests of the Separate Account, or, with respect to any criminal action or
proceeding, that such person had reasonable cause to believe that the conduct
was unlawful.
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<PAGE>
Section 10.04 -- Expenses Prior to Determination. (a) Any
liabilities or expenses of the type described in Section 10.01 of this Article X
may be paid by the Separate Account in advance of the final disposition of the
claim, action, suit, or proceeding, as authorized by the Committee in the
specific case, (1) upon receipt of an undertaking by or on behalf of the Manager
or officer to repay the advance unless it shall be ultimately determined that
such person is entitled to indemnification and (2) provided that (A) the
indemnitee shall provide security for that undertaking, (B) the Separate Account
shall be insured against losses arising by reason of any lawful advances, or (C)
a majority of a quorum of disinterested, non-party Managers of the Separate
Account, or an independent legal counsel in a written opinion, shall determine,
based on a review of readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the indemnitee ultimately will be
found entitled to indemnification.
(b) A determination pursuant to item (2)(C) of paragraph (a) of this
Section 10.04 shall not prevent the recovery from any member of the Committee or
officer of any amount advanced to such person as indemnification if such member
of the Committee or officer is subsequently determined not to be
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<PAGE>
entitled to indemnification; nor shall a determination pursuant to said
subparagraph prevent the payment of indemnification if such member of the
Committee or officer is subsequently found to be entitled to indemnification.
Section 10.05 -- Provisions Not Exclusive. The indemnification
provided by this Article X shall not be deemed exclusive of any rights to which
those seeking indemnification may be entitled under any law, agreement
(including agreements of the nature contemplated by Section 4.15 of these Rules
and Regulations), vote of Contractowners, or otherwise.
Section 10.06 -- General. (a) No indemnification provided by this
Article X shall be inconsistent with the Act or the Securities Act of 1933.
(b) Any indemnification provided by this Article X shall continue as
to a person who has ceased to be a member of the Committee or an officer of the
Separate Account and shall inure to the benefit of the heirs, executors, and
administrators of such person.
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Article XI
FISCAL YEAR
The fiscal year for the Separate Account, unless otherwise ordered
by the Committee, shall be the calendar year.
Article XII
REPORTS
The Company shall transmit or file, or cause to be transmitted or
filed, such reports, including financial reports, as may be required to be
transmitted to each Contractowner or to be filed with governmental agencies
pursuant to the Act, the applicable securities and insurance laws of the various
states, and the rules and regulations thereunder.
Article XIII
AMENDMENTS
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<PAGE>
These Rules and Regulations may be altered, amended, or repealed,
and new Rules and Regulations may be adopted, by a majority vote of the
Committee, except that such alteration, amendment, or repeal, and such adoption
of new Rules and Regulations, shall be effected in another manner to the extent
required by the Act or any other applicable law.
* * * * *
ADOPTED as of ______________, 1994, pursuant to authorization of the
Board of Trustees of the Company.
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By______________________________________
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RESOLVED, that the Rules and Regulations of TIAA Separate Account
VA-1 presented to this meeting be, and hereby are, adopted as the Rules and
Regulations of the Separate Account and that a copy of such Rules and
Regulations be filed herewith for the purpose of identification.
Exhibit 3
CUSTODIAL SERVICES AGREEMENT
FOR DOMESTIC ASSETS
AGREEMENT dated as of September 19, 1994 between BANKERS TRUST
COMPANY ("Bank") and TEACHERS INSURANCE AND ANNUITY ASSOCIATION ("TIAA") on
behalf of each investment portfolio of the TIAA Separate Account VA-1 listed on
Exhibit A attached hereto, as such Exhibit may be amended from time to time
(each such investment portfolio being referred to herein as a "Variable
Account").
WHEREAS, the parties desire to arrange for the custody of
certain assets of TIAA, specifically those of each Variable Account, by the
Bank;
NOW THEREFORE, in consideration of the mutual agreement made
herein, the Bank and TIAA agree as follows:
1. Establishment of Accounts
a. Bank agrees to open and maintain custodial account(s)
("Custody Account(s)") on behalf of the Variable Account, or such other TIAA
portfolios or accounts ("TIAA Accounts") as the parties may from time to time
agree to include within the scope of this Agreement, for any and all securities
or other property acceptable to Bank received by Bank for the account of each
Variable Account.
b. Bank also hereby agrees to establish and maintain one or
more deposit accounts ("Deposit Accounts") for all cash (including cash proceeds
from the sale of such securities and similar investments and cash monies
hereinafter termed "Cash")
<PAGE>
received by Bank for the Variable Account. Such Custody and Deposit Accounts
will be in the name of the Variable Account or in the name of Bank or Bank's
branches, on behalf of the Variable Account.
It is hereby agreed that all securities, Cash, or other
property now or hereinafter held by Bank hereunder are held for the Variable
Account and are to be maintained and disposed of by Bank only for the Variable
Account in accordance with the terms and conditions set forth in this Agreement.
2. Location of Assets
a. Securities, cash and other property are permitted to be
held by
(1) Bank at any of its offices wherever located; and
(2) domestic securities depositories ("Securities
Depositories") selected by Bank with the approval of TIAA on behalf of the
Variable Account.
b. Such entities described in (2) above shall be deemed to be
Sub-Custodians of Bank, and all securities, Cash and other property held by such
entities shall, unless otherwise specifically agreed to in writing by Bank and
TIAA, be considered for all purposes of this agreement as being held directly by
Bank and subject to the terms of this Agreement.
c. For purposes of this Agreement, a Securities Depository
shall mean a system for the handling of securities of any particular class or
series of any particular issuer deposited
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therein which may be treated as a part of a fungible bulk and may be transferred
by bookkeeping entry without physical delivery of such securities. With respect
to a Securities Depository, such entity shall be a clearing agency registered
with the Securities and Exchange Commission ("Commission") under Section 17A of
the Securities Exchange Act of 1934 ("Exchange Act"), which acts as a securities
depository, or the book-entry system authorized by the U.S. Department of the
Treasury and certain federal agencies in accordance with applicable Federal
Reserve Board and Commission rules and regulations.
3. Bank's Duties
a. Bank will be responsible for the safekeeping, handling,
servicing and disposition of all securities, cash or other property of the
Variable Account held by it hereunder including, without limitation, any and all
of the Variable Account's Cash held by or received by Bank in the name of the
Variable Account or Bank's name.
b. Bank agrees to be liable and to indemnify and hold TIAA
harmless for any and all liability for loss or damage to TIAA with respect to
any such securities, Cash and other property, if such liability, loss or damage
results from any negligence, misfeasance or misconduct on the part of Bank, its
officers or employees, its branches or its affiliates. Bank shall have no
liability for any losses or damages occasioned by delay in receipt of notice by
Bank of any payment, redemption, proceeding or other transaction regarding, or
of any rights exercisable by the Variable
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Account in connection with any securities, Cash or other property with respect
to which Bank has agreed to take action. Notwithstanding anything in this
Agreement to the contrary, Bank shall not be liable for any indirect,
consequential, or special damages, or for any loss resulting from, or caused by,
or resulting from the inability or failure of a local clearing and settlement
system to settle transactions for reasons beyond the control of Bank.
c. Notwithstanding the foregoing, Bank further agrees that it
will at all times give the securities or other property of a similar character
held by it hereunder the same care as it gives its own property.
d. It is understood and agreed that Bank is not under any duty
to supervise the investment of, or to advise or make any recommendation to TIAA
with respect to, the purchase or sale of any securities or other property.
e. In connection with Bank's responsibilities hereunder, it
has advised TIAA that it currently has in force, for its own protection, Bankers
Blanket Bond Insurance, and it is Bank's present intention to continue to
maintain such insurance in substantially the same form and amount. TIAA
understands that such policies would apply to certain losses under this
agreement. Bank agrees to give TIAA written notice of any reduction in the
amount, or material change in the form of such insurance, at least once a year
upon request.
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<PAGE>
f. Bank shall have responsibility as a bailee for hire under
the law of the State of New York with respect to any Sub-Custodian of Bank.
Without limiting the generality of the foregoing, Bank will hold TIAA harmless
from and indemnify it against any loss that occurs as a result of the
negligence, misfeasance or misconduct of Bank, its officers or employees, and
any Sub-Custodian of Bank other than a Securities Depository.
4. Receipt and Disbursement of Cash
a. Bank shall open and maintain separate Deposit Accounts for
the Variable Account, in the name of the Variable Account, subject only to
actions by Bank acting pursuant to the terms of this Agreement. Bank shall hold
in such accounts, subject to the provisions hereof, all Cash received by it from
or for the Variable Account. Cash held by Bank hereunder shall be subject to
withdrawal and deposit by Bank from time to time on behalf of the Variable
Account for the purpose of consummating the purchases or sales of designated
securities upon Bank's receipt of express directions in the form of Authorized
Instructions in accordance with the provisions of Section 19.
b. Directions to withdraw Cash shall also include, but are not
limited to:
(1) the debiting or crediting of deposit accounts of
the Variable Account held by Bank, pursuant to this Agreement as of settlement
date or such other date as specified in such instructions;
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(2) the purchase of securities, options on
securities, futures contracts, options on futures contracts, or other property
for the Variable Account but only (i) upon the delivery of such securities or
other property or evidence of title for such options on securities, futures
contracts or options on futures contracts to Bank, registered in the name of
TIAA or of the nominee of Bank referred to in Section 10 hereof or in proper
form for transfer; (ii) in the case of repurchase agreements for securities
entered into between TIAA on behalf of the Variable Account and the Bank, or
another bank, or a broker-dealer which is a member of the National Association
of Securities Dealers ("NASD") against delivery of the securities either in
certificate form or through an entry crediting Bank's account at the Federal
Reserve Bank with such securities or against delivery of the receipt evidencing
purchase by the Variable Account of securities owned by Bank, another bank, or a
broker-dealer along with written evidence of the agreement by Bank, another
bank, or a broker-dealer, to repurchase such securities from the Variable
Account; or (iii) in the case of a purchase effected through a Securities
Depository in accordance with the provisions of Section 7 hereof.
(3) the payment of interest, taxes (if any),
management or supervisory fees or operating expenses including, without
limitation thereto, fees for legal, accounting and auditing services, if any;
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<PAGE>
(4) payments in connection with the conversion,
exchange or surrender of securities owned or subscribed to by the Variable
Account held by or to be delivered to Bank; or
(5) other corporate purposes.
c. Bank is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received by it for the
accounts of TIAA.
5. Holding Securities
Bank shall hold in separate Custody Accounts for the Variable Account,
and physically segregated at all times from those of any other persons, firms or
corporations, or any other of TIAA's Accounts, pursuant to the provisions
hereof, all securities and other property to be held by it for the Variable
Account, except those held in a Securities Depository as described in Section 7
of this Agreement. All such securities are to be held or disposed of by Bank
for, and subject at all times to the instructions of, TIAA pursuant to the terms
of this Agreement. Bank shall have no power or authority to assign, hypothecate,
pledge or otherwise dispose of any such securities and investments, except
pursuant to the Authorized Instructions of TIAA on behalf of the Variable
Account and only through authorized instructions as set forth in Section 19 of
this Agreement.
6. Receipt and Delivery of Securities
From time to time TIAA on behalf of the Variable Account will
instruct Bank to receive or deliver securities through Authorized
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Instructions as set forth in Section 19. Such instructions may be continuing if
agreed to by the parties.
a. In accordance with this Agreement, notwithstanding such
instructions that relate to settlement date entries, Bank agrees to receive such
securities against payment or exchange as directed in any Authorized
Instructions and debit cash held in a Deposit Account on behalf of the Variable
Account only against satisfactory delivery of securities.
b. In accordance with this Agreement, notwithstanding
instructions that relate to settlement date entries, Bank agrees to transfer,
exchange, or deliver securities held by it hereunder including, but not limited
to, the following:
(1) for sales of such securities for the Variable Account upon
receipt by Bank of payment therefor;
(2) when such securities are called, redeemed or retired or
otherwise become payable;
(3) for examination by any broker selling any securities
located in the U.S. in accordance with "U.S. street delivery" custom, provided
that in any such case, Bank shall have no responsibility or liability for any
loss arising from the delivery of such securities prior to receiving payment for
such securities except as may result from Bank's negligence, misfeasance, or
misconduct;
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<PAGE>
(4) in exchange for or upon conversion into other securities
alone or other securities and cash whether pursuant to any plan or merger,
consolidation, reorganization, recapitalization or readjustment, or otherwise;
(5) upon conversion of such securities pursuant to their terms
into other securities;
(6) upon exercise of subscription, purchase or other similar
rights represented by such securities;
(7) for the purpose of exchanging interim receipts or
temporary securities for definitive securities;
(8) upon receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Variable Account;
(9) for delivery in connection with any loans of securities
made by the Variable Account, in accordance with the provisions of Section 11
herein;
(10) for other purely ministerial exchanges; or
(11) for other corporate purposes.
As to any deliveries made by you pursuant to Items (2), (4), (5), (6),
(7) and (10), securities or cash receivable in exchange therefor shall be
deliverable to Bank.
c. Actual delivery of securities is to be made by Bank on the
contractual settlement date only upon express instructions to such effect,
provided that:
(1) the securities are on deposit in a Custody Account for the
Variable Account; and
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<PAGE>
(2) the delivery instructions are received by Bank in timely
fashion.
d. In addition, Bank will withdraw and deliver securities
"Free of Payment" as directed in any such written instructions as set forth in
paragraph b of Section 19 herein, provided, however, that under no circumstances
are any securities to be withdrawn and delivered by Bank to any individual; such
delivery is to be made only to another custodial or other account in the name of
TIAA or the Variable Account or for TIAA's benefit.
e. Notwithstanding any provision of this Agreement to the
contrary, including but not limited to sections 6a, 6b, 6f and 7c, settlement
and payment for securities received for the account of the Variable Account and
delivery of securities maintained for the account of the Variable Account may be
effected in accordance with the customary established securities trading or
securities processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer therefor (or an agent for
such purchaser or dealer) against a receipt with the expectation of receiving
later payment for such securities from such purchaser or dealer.
f. Except as specifically otherwise stated in this Agreement,
in any and every case where payment for purchase of securities for the account
of the Variable Account is made by the Bank in advance of receipt of the
securities purchased in the absence of specific written instructions from TIAA
on behalf of the
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Variable Account to so pay in advance, Bank shall be liable for any loss to TIAA
for such securities to the same extent as if the securities had been received by
Bank.
g. Bank shall promptly furnish the Variable Account with
advice or notices of any receipts or deliveries of securities.
h. Bank will not be responsible for any act or omission, or
for the insolvency of any broker or agent selected by Bank to effect a
transaction for the account of the Variable Account; provided, however, Bank is
not negligent in the selection of such broker or agent.
7. Deposit of Variable Account Assets in a Securities
Depository
Bank may deposit and maintain securities owned by the Variable Account
in a Securities Depository subject to the following provisions:
a. Bank may keep the Variable Account's securities in a
Securities Depository provided that such securities are represented in an
account of Bank ("Bank's Account") in a Securities Depository which shall not
include any assets of Bank other than assets held as a fiduciary, custodian or
otherwise for customers;
b. The records of Bank will identify those securities of the
Variable Account held in a Securities Depository as being held in book-entry on
behalf of the Variable Account;
c. Bank shall pay for securities purchased for the account of
the Variable Account upon (i) receipt of advice from the Securities Depository
that such securities have been transferred to Bank's Account, and (ii) the
making of an entry on the records of
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<PAGE>
Bank to reflect such payment and transfer for the account of the Variable
Account. Bank shall transfer securities sold for the account of the Variable
Account upon (i) receipt of advice from the Securities Depository that payment
for such securities has been transferred to Bank's Account, and (ii) the making
of an entry on the records of Bank to reflect such transfer and payment for the
account of the Variable Account.
d. Anything to the contrary in this Agreement notwithstanding,
the Bank shall be liable to TIAA for the benefit of the Variable Account for any
loss or damage to the Variable Account resulting from the use of Securities
Depositories by reason of any negligence, misfeasance or misconduct of the Bank
or any of its agents or of any of its or their employees or from failure of the
Bank or any such agent to enforce effectively such rights as it may have against
the Securities Depository; at the election of TIAA, on behalf of the Variable
Account, it shall be entitled to be subrogated to the rights of the Bank with
respect to any claim against the Securities Depository which the Bank may have
relating to the assets of the Variable Account, if the Bank (i) refuses to
enforce such claim, (ii) takes no action with respect to such claim within 60
days after the loss resulting in such claim is discovered by Bank, or (iii)
becomes insolvent, or the equivalent to an insolvency proceeding is commenced
against the Bank.
8. Segregated Account
Bank shall upon receipt of Authorized Instructions from TIAA on behalf
of the Variable Account establish and maintain a
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segregated account or accounts for and on behalf of the Variable Account, into
which account or accounts may be transferred Cash and/or securities, including
securities maintained by Bank in a Securities Depository pursuant to Section 7
hereof: (a) in accordance with the provisions of any agreement among TIAA on
behalf of the Variable Account, Bank and a broker-dealer registered under the
Exchange Act and a member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by the
Variable Account; (b) for purposes of segregating cash or government securities
in connection with options purchased, sold or written by the Variable Account or
commodity futures contracts or options thereon purchased or sold by the Variable
Account; (c) for the purposes of compliance by the Variable Account with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Commission relating to the maintenance of
segregated accounts by registered investment companies; and (d) for other
corporate purposes, but only upon receipt of Authorized Instructions from TIAA
on behalf of the Variable Account. TIAA on behalf of the Variable Account shall
be solely responsible for negotiating the terms of any agreement with a
broker-dealer or other party pursuant to this section.
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<PAGE>
9. Income and Principal
a. Income on securities and cash held by Bank hereunder will
be credited automatically to a Deposit Account or Custody Account upon receipt
and in accordance with local market practices. Principal received in connection
with securities which mature or are redeemed shall be credited to a Deposit
Account or a Custody Account on the date such principal is received. All
collections of income or principal paid or distributed with respect to any
securities, Cash or other property shall be made at the risk of the Variable
Account, provided however, that Bank takes reasonable steps to collect such
income or principal and there is no negligence, misfeasance or misconduct on the
part of Bank.
b. Unless instructed otherwise, collections of income in
foreign currency are to be converted into United States dollars, and in
effecting such conversion Bank may use such methods or agencies as it may see
fit including its own facilities at prevailing rates. All risk and expense
incident to such collection of income regardless of the particular currency or
currencies involved is for the account of the Variable Account, and Bank shall
have no responsibility for fluctuations in exchange rates affecting such
conversion.
c. Unless and until Bank receives written instructions to the
contrary, it shall:
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(1) present for payment all coupons and other income items
held by it for the account of the Variable Account which call for payment upon
presentation and hold the cash received by it upon such payment for the
appropriate account;
(2) collect interest and cash dividends received, with notice
to TIAA, for the Variable Account;
(3) hold for the Variable Account all stock dividends, rights
and similar securities issued with respect to any securities held by Bank
hereunder, and with respect to stock dividends, it is hereby authorized to sell
any fractional interest and credit the Deposit Account with the proceeds
thereof; and
(4) with respect to any dividend reinvestment plan in which
the Variable Account participates, and as to which Bank has been so notified, it
agrees to acquire and hold hereunder the appropriate number of shares issuable
under such plan in lieu of the cash dividend, except that fractional shares may
be sold in the case of shares physically held, unless the Bank receives
appropriate instructions from TIAA to do otherwise.
d. Any dividends or interest automatically credited to the
Deposit Accounts which are not subsequently collected by Bank from the
corporation or other issuer making such payment will be reimbursed to Bank and
Bank may debit the Deposit Accounts for this purpose.
10. Registration
Securities which are eligible for deposit in Securities Depositories
may be maintained in Bank's Account with such
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<PAGE>
Depositories. Subject to the aforesaid provision, Bank will register all
securities (except such as are in bearer form) in the name of its nominee or the
nominee of the Securities Depository, unless alternate registration instructions
are furnished by TIAA. Bank will retain and have available at all times for
inspection by regulatory authorities evidence that its nominee is registered as
required by the laws and regulations of the United States and the State of New
York, as appropriate. All such agents shall be appointed in conformance with
Section 20. TIAA on behalf of the Variable Account agrees to hold such nominee
and Bank harmless from any liability as a holder of record of such securities
and TIAA will have the same responsibility as if the securities were registered
in the name of the Variable Account. The foregoing shall not relieve Bank of its
responsibilities or liabilities hereunder.
11. Provisions Relating to Securities Lending
a. From time to time TIAA on behalf of the Variable Account
shall direct Bank by Authorized Instructions to lend securities held by Bank in
its Custodial Account to borrowers ("Borrowers"). Such securities shall be
termed the "Loaned Securities". This Section shall apply to and shall be
controlling solely with respect to such Loaned Securities and lending services
relating thereto. Loaned Securities which are returned by the Borrower to Bank
shall upon receipt thereof constitute securities and property held by Bank to
which the other provisions of this Agreement shall be applicable unless
otherwise provided herein.
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<PAGE>
b. From time to time TIAA on behalf of the Variable Account
will provide Bank with Authorized Instructions regarding the delivery or return
of Loaned Securities. In this connection, Bank is authorized and directed, all
in accordance with such instructions to promptly:
(1) Deliver the Loaned Securities to the Borrower for the
Variable Account, against receipt by Bank of collateral in respect of such
Loaned Securities (the "Collateral"), in the form and amount specified in such
instructions. Bank shall promptly place the specified Collateral in a Deposit or
Custody Account and promptly notify TIAA on behalf of the Variable Account of
such transaction.
(2) Receive Loaned Securities being returned by Borrower in
the form and amount specified in the Authorized Instructions. Upon satisfactory
delivery of such Loaned Securities, Bank shall debit the defined Collateral from
TIAA's Deposit Account in accordance with such instructions and pay or redeliver
the specified Collateral to Borrower and promptly notify TIAA on behalf of the
Variable Account of such transaction.
(3) Release to Borrower any excess Collateral or receive
Collateral from Borrower as specified in instructions issued by TIAA on behalf
of the Variable Account. Bank shall promptly transmit the specified Collateral
to be released, or accept delivery and transmit Collateral received to a Deposit
Account, as the case may be, and notify TIAA on behalf of the Variable Account
of such transmittal or receipt. Bank shall debit
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or credit the defined Collateral from the Deposit Account, as
appropriate.
c. Where Bank has received Authorized Instructions from TIAA
indicating that TIAA has previously received adequate Collateral covering
contemplated loans, Bank is authorized to deliver Loaned Securities "Free of
Payment" upon express direction from TIAA with respect to designated Loaned
Securities. A list of authorized Borrowers who are eligible to receive such
Loaned Securities Free of Payment will be signed by any two Authorized Officers,
with the title of Chairman, President, Executive Vice President and Treasurer,
or by any one of these officers together with any TIAA officers with the title
of Senior Vice President or Vice President, in accordance with paragraph b. of
Section 19.
d. TIAA on behalf of the Variable Account shall also provide
Bank with written instructions regarding Loaned Securities for which TIAA has
previously received adequate Collateral and their delivery "Free of Payment" to
designated Borrowers in accordance with paragraph c. hereof or the return of
Loaned Securities. Bank shall be authorized, in accordance with such written
instructions, to:
(1) Deliver the Loaned Securities, "Free of Payment" to the
listed Borrower, and
(2) Receive Loaned Securities specified in such instructions.
Bank shall promptly advise TIAA on behalf of the Variable Account of
the completion of any such specified transaction.
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<PAGE>
e. Bank agrees to receive from the Borrower any income,
dividends, and/or distributions made by the issuer with respect to the Loaned
Securities, and to credit the Deposit Account or Custody Account when such
amounts and properties are received from the Borrower in accordance with the
provisions of Section 9.
f. Bank shall be responsible for the Collateral and Loaned
Securities in its possession and for the handling and servicing of such property
in accordance with written instructions. Bank is hereby designated to acquire
possession of Collateral on behalf of the Variable Account and to act as bailee
or financial intermediary (as defined in the Uniform Commercial Code of the
State of New York, as amended the "UCC"), as the case may be, to enable TIAA on
behalf of the Variable Account to perfect and maintain perfection of a security
interest in such Collateral, pursuant to the provisions of the UCC or other
applicable laws, as amended from time to time. It is understood that Bank shall
not be responsible for obtaining or perfecting TIAA's security interest in the
Collateral other than possessing and handling the Collateral in accordance with
the preceding sentence and the instructions of TIAA regarding delivery and
receipt, and shall not be responsible to advise TIAA of the steps necessary to
obtain or perfect such interest or for effecting any statutory filing, unless
mutually agreed upon at such time. Under no circumstances and in no event shall
Bank have or be charged with any responsibility or liability for (i) the credit
worthiness or continued credit worthiness of any Borrower, (ii) the adequacy or
value of any Collateral in
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connection with any loan of securities, (iii) the failure of the Borrower to pay
any income, dividend and/or distribution made by the issuer on the Loaned
Securities, or (iv) any act taken by it in accordance with the direction of the
Variable Account, or omitted by it in the absence of such direction.
g. Bank shall report as assets of its Custody Account property
which is Loaned Securities that have previously been delivered to Borrowers and
hence are not in Bank's possession. Bank shall have no responsibility or
liability whatsoever with respect to such Loaned Securities and shall perform no
services with respect thereto, except as specifically set forth herein.
h. Bank shall provide to TIAA a Report of Assets Held which
shall include all Loaned Securities (whether or not such securities are in the
possession of Borrowers) designated in such report to indicate that the same is
reported on a memorandum entry basis or on such other basis as shall be mutually
agreed upon. Bank shall also provide to TIAA all information and data specified
in paragraphs a., b., c. and f. of Section 14, and such further information
concerning the Loaned Securities and Collateral as TIAA shall reasonably
request, so that TIAA may properly account for and segregate such property. Bank
shall furnish TIAA with all such other reports and information as TIAA shall
reasonably request. Bank shall furnish TIAA with all reports and information
pursuant to this Amendment within a reasonable time after request therefor.
12. Voting and Other Action
No person may vote (other than pursuant to Authorized Instructions) any
securities held by Bank hereunder. Bank will
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promptly transmit to TIAA, or direct to be transmitted to TIAA, all notices,
proxies and proxy soliciting materials with respect to securities held by it
hereunder, which proxies will be executed by the registered holder thereof if
registered otherwise than in the name of TIAA or the Variable Account, but
without indicating the manner in which such proxies are to be voted.
Bank will promptly transmit to TIAA all written information (including,
without limitation, pendency of calls and maturities of securities and
expirations of rights in connection therewith) received by it from the issuers
of securities or other property held by it hereunder. With respect to tender or
exchange offers, Bank will promptly transmit to TIAA all written information
received by it from issuers of the securities or other property whose tender or
exchange is sought and from the party (or its agents) making the tender or
exchange offer.
13. Fees and Expenses
Bank will be compensated for the services rendered under this Agreement
and reimbursed for out-of-pocket expenses through arrangements negotiated
between TIAA on behalf of the Variable Account and Bank from time to time. Bank
will also be compensated for reasonable counsel fees incurred in the performance
of its duties hereunder, provided, however, that Bank gives TIAA written notice
in advance of the incurrence of such fees.
TIAA acknowledges its responsibility as a principal for all of its
obligations to Bank arising under or in connection with this Agreement.
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<PAGE>
14. Records, Affidavits and Reports
With respect to the securities and other property held by Bank
hereunder, Bank agrees:
a. To maintain records sufficient to verify information TIAA
is required to report in Schedule D of the Annual Statement Blank of the
Insurance Department of the State of New York ("Insurance Department") as
amended from time to time, which records will consist of a list of such
securities showing a complete description of each issue, including the number of
shares and par value of securities so held at the end of such month and such
other information as may be agreed to by Bank and required by such report or any
other report required by the Insurance Department;
b. To maintain records regarding transactions and related
activities described in Sections 4, 5, 6, 7, 8, 9, 10 and 11 sufficient to
verify the accuracy of regular monthly and other reports and income received on
such securities and other property;
c. To maintain records sufficient to verify information
relating to Cash held by Bank;
d. To create, maintain and preserve all reports and records
relating to Bank's activities and obligations listed in Exhibit B attached
hereto, as such Exhibit may be amended from time to time under this Agreement as
provided for in this Section in such manner as will meet the requirements of the
1940 Act, including Section 31 thereof and Rules 31a-1 and 31a-2 and the Bank
agrees that such reports and records are the property of the
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Variable Account and will be surrendered to the Variable Account promptly upon
request;
e. To permit examination of such books and records as provided
for in this Section at any time or from time to time during business hours as
provided for in Section 16 by representatives or designees of the Commission,
and to promptly furnish to the Commission or its designees true, correct,
complete and current hard copy of any or all or any part of such books and
records;
f. To furnish the Variable Account with the appropriate
affidavit(s) in such form acceptable to Bank as may be submitted to Bank by TIAA
on behalf of the Variable Account from time to time which is acceptable to the
Insurance Department or any other state or federal governmental agency having
jurisdiction over TIAA, in order for the securities and other property referred
to in such affidavit(s) to be recognized as admitted assets of TIAA and in order
for TIAA to comply with any other requirements of such Department or agencies;
g. To furnish upon request the Variable Account with any
report obtained by Bank on a Securities Depository's system of internal
accounting control; and to furnish upon request, the Variable Account with such
reports on Bank's system of internal accounting control as TIAA on behalf of the
Variable Account may reasonably require;
h. To furnish all such other reports and information as shall
be reasonably requested by TIAA on behalf of the Variable
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<PAGE>
Account relating to all property held by Bank on the Variable Account's behalf
pursuant to the terms of this Agreement; and
i. That all such information, records, reports, and affidavits
maintained or held by Bank pursuant to this Section remain the property of
Variable Account and copies of all such information which are reasonably
available will be surrendered to Variable Account within a reasonable time after
request therefor.
j. The specific records, reports and affidavits required in a.
through i. above shall be set forth in a separate document which may be modified
from time to time by agreement of the parties to this Agreement.
15. Reconciliation of Statements or Advice TIAA agrees that it will
reconcile statements and advice sent
by mail or electronic media and that all such statements and advice will be
considered final sixty days from the date of dispatch unless TIAA has notified
Bank orally or in writing regarding any questions, problems or objections.
16. Access
a. During the course of Bank's regular banking hours, any duly
authorized officer, employee or agent of TIAA, any independent accountants
selected by TIAA, any member of the Insurance Department, and any representative
or designee of the Commission or other governmental agencies having jurisdiction
over TIAA, shall be entitled to examine, on Bank's premises, securities and
records of all securities, Cash and other property held by Bank, its branches,
or other entities hereunder and its books and records pertaining to its actions
under this Agreement, but only
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<PAGE>
upon furnishing Bank with one day notice of such examination signed by a duly
authorized officer of TIAA. Bank's books and records used in connection with
TIAA's indirect participation in a depository or other entities, to the extent
that they relate to depository, custodial or other services rendered to TIAA by
Bank, pursuant to this Agreement, shall at all times during Bank's regular
business hours be open to inspection by duly authorized employees or agents of
TIAA, or governmental agencies having jurisdiction over TIAA, but only upon
furnishing Bank with one day's notice to that effect as specified in the
preceding sentence.
b. Upon receiving a request from TIAA, Bank agrees that it
will to the extent consistent with its Agreement with each Subcustodian take
such steps as are within its power to enable any of the aforementioned officers,
accountants, employees, agents and members of TIAA, the Insurance Department,
the Commission or other governmental agencies having jurisdiction over TIAA, to
inspect and examine securities and other property of TIAA and books and records
of such property not located on Bank's premises, which property and records are
held on TIAA's behalf by its branches or other entities pursuant to this
Agreement.
17. Exemption from Income Tax
a. TIAA is exempt from the payment of United States income
tax. Documentation evidencing TIAA's tax exempt status has heretofore been
furnished by TIAA to the Bank. Bank is hereby authorized and empowered as TIAA's
agent to sign in its name any certificate of ownership or other certificate
which is or may be
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<PAGE>
required by any regulations of the Internal Revenue Service, the laws of any
state, or other authority of the United States.
b. To enable Bank properly to execute the certificate
described in a. above, TIAA hereby certifies that TIAA is a corporation duly
organized and existing under the laws of the State of New York, having its
principal place of business in the City of New York. TIAA's Employer
Identification No. is 13-1624203.
18. Amendments
No amendment or change to this Agreement shall be authorized by TIAA on
behalf of the Variable Account without the written consent signed by an officer
with the title of either Chairman or President and any officer with the title of
Executive Vice President or Treasurer and accepted in writing by any Vice
President or Managing Director of Bank.
19. Authorization
a. Except as otherwise provided for in this Agreement, written
instructions by TIAA hereunder shall be signed by any two of its Authorized
Officers specified in a separate list for this purpose which will be furnished
to Bank from time to time signed by the Treasurer or any Associate Treasurer or
Assistant Treasurer and by the Secretary or any Assistant Secretary as certified
under the corporate seal of TIAA. Such instructions are referred to herein as
"Authorized Instructions". Upon receipt of written instructions pursuant to
paragraph b., below accompanied by a detailed description of procedures approved
by such instructions, Authorized Instructions may include communications
effected directly between electro-mechanical or electronic devices provided that
TIAA and
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Bank are satisfied that such procedures afford adequate safeguards for the
Variable Account's assets. Such satisfaction shall be evidenced when TIAA has
given instructions and Bank has acted upon such instructions given by such
device.
b. As provided for in Sections 11.c. and 19.a. herein or in
connection with the delivery of securities or other property "Free of Payment,"
written instructions shall be acted upon only if received in writing manually
signed by any two of such Authorized Officers with the title Chairman,
President, Executive Vice President, or Treasurer, or by any one of those
officers together with any TIAA officer with the title Senior Vice President or
Vice President.
c. Bank shall not be liable for any action taken in good faith
upon Authorized Instructions or upon written instructions pursuant to b., above,
and may rely on such documents that it in good faith believes to be validly
executed. Bank may assume, in the absence of written notice to the contrary from
TIAA, that the authority of each person designated an Authorized Officer
pursuant to this section has not been revoked.
20. Appointment of Agents
The Bank may at any time or times in its discretion appoint (and may at
any time remove) any other bank or trust company which is itself qualified under
the 1940 Act, as amended, to act as a custodian, as its agent to carry out such
of the provisions of this Agreement as the Bank may from time to time direct;
provided, however, that the appointment of any agent shall not relieve the Bank
of its responsibilities or liabilities hereunder.
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<PAGE>
21. Notices
a. Confirmations and advices of all types relating to the
securities, cash or other property held by Bank hereunder will be provided to
the particular divisions of TIAA on behalf of the Variable Account indicated in
a separate listing which the treasurer will furnish to Bank from time to time.
b. Written notices hereunder shall be hand-delivered,
delivered by overnight courier or mailed first class, addressed, if to Bank, at
16 Wall Street New York, New York 10015, or if to TIAA, at 730 Third Avenue, New
York, New York 10017, Attention: Treasurer. Written notice of (i) termination of
this Agreement, (ii) termination of Bank's participation in DTC or any other
securities depository, (iii) changes in Bank's designation of any of its
branches or Sub-Custodians having custody of any of the Variable Account's
assets under this Agreement, or (iv) changes in Bank's insurance coverage, shall
be sent by hand or overnight courier; provided, however, that any such notice
pursuant hereto shall not constitute approval by TIAA of any such termination,
change or designation nor shall such notice relieve Bank of its responsibilities
hereunder.
c. Any notice so addressed, delivered or mailed shall be
deemed to be given upon receipt by the other party.
22. Termination or Assignment
This Agreement may be terminated by either party on sixty days' written
notice sent by certified mail. Upon any termination of this Agreement, upon
appointment of a successor to Bank or if a
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vote of the participants of TIAA to dissolve or to function without a custodian
of its cash, securities or other property has occurred, Bank shall deliver Cash,
securities or other property to a bank or trust company selected by TIAA on
behalf of the Variable Account having an aggregate capital, surplus and
undivided profits, as shown by its last published report of not less than
twenty-five million dollars ($25,000,000) as a custodian for TIAA to be held
under a custodial agreement with that institution; provided, however, that Bank
shall not be required to make any such delivery or payment until full payment
shall have been made by TIAA on behalf of the Variable Account of all
liabilities constituting a charge on or against the properties then held by Bank
or on or against it, and until full payment shall have been made to Bank of all
fees, compensation, costs and expenses, subject to the provisions of Section 13
of this Agreement.
This Agreement may not be assigned by Bank without the consent of TIAA,
authorized or approved by a resolution of TIAA's trustees.
23. Effect of Headings
The Section headings herein are for convenience only and shall not
affect the construction thereof.
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<PAGE>
24. Governing Law
This Agreement shall be governed by and construed in accordance with
the law of the State of New York.
IN WITNESS WHEREOF, the undersigned have signed this Agreement as of
the date first written above.
TEACHERS INSURANCE AND ANNUITY ASSOCIATION,
ON BEHALF OF EACH VARIABLE ACCOUNT LISTED
ON EXHIBIT A
BY: /s/ Thomas W. Jones
-----------------------------
Thomas W. Jones
President
BY: /s/ Richard J. Adamski
-----------------------------
Richard J. Adamski
Vice President and Treasurer
BANKERS TRUST COMPANY
BY: /s/ Edward F. Lynch
-----------------------------
Edward F. Lynch, V.P.
BY: /s/ Diane I. Wiley
-----------------------------
Diane I. Wiley, V.P.
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<PAGE>
EXHIBIT A
Investment portfolios of TIAA Separate Account VA-1 included
within this Agreement (the Variable Accounts):
1. Stock Index Fund
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EXHIBIT B
Information and records the bank will provide, maintain, and
preserve for each investment portfolio of the TIAA Separate Account VA-1 for
which you may be appointed custodian, and to provide such information to TIAA,
and/or the appropriate regulatory authorities:
INFORMATION AND RECORD REQUIREMENT FREQUENCY OF DELIVERY
1. Statement of Holdings a. Daily, Monthly
2. Securities in lien position b. Monthly
3. Location of securities c. Monthly
4. Securities out for transfer d. Upon request
5. Actual securities settlement date e. Upon request
6. Certification number (if applicable) f. Upon request
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Exhibit 4
INVESTMENT MANAGEMENT AGREEMENT
FOR TIAA SEPARATE ACCOUNT VA-1
This Agreement made this 15th day of September, 1994, by and among:
Teachers Insurance and Annuity Association of America ("TIAA"), a non-profit New
York insurance company; TIAA Separate Account VA-1 (the "Separate Account"), a
separate account of TIAA established pursuant to the New York State Insurance
Law; and Teachers Advisors, Inc. ("Advisors") a Delaware corporation.
WITNESSETH;
WHEREAS, TIAA has established the Separate Account to segregate assets
funding the variable benefits provided by the Teachers Personal Annuity, an
individual, flexible premium, deferred annuity, as well as by other contracts
that may be offered by TIAA in the future; and
WHEREAS, the Separate Account is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"Act"), and currently consists of a single investment portfolio (known as the
Stock Index Account), and may consist of additional investment portfolios in the
future (collectively, with the Stock Index Account, referred to herein as
"Portfolios"); and
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<PAGE>
WHEREAS, the assets of the Separate Account are and will be owned by TIAA,
its successors and assigns, although held separately from the other assets of
TIAA;
WHEREAS, Advisors will be engaged principally in the business of rendering
investment management services and is registered as an investment advisor under
the Investment Advisors Act of 1940;
WHEREAS, the Separate Account desires to retain Advisors to render
investment management services to the Separate Account in the manner and on the
terms set forth herein;
WHEREAS, the Management Committee of the Separate Account (the "Management
Committee") believes that Advisors' expertise and business contacts are and will
be of material benefit to the Separate Account in employing and supervising any
sub-advisor of a Portfolio ("Sub-Advisors"), in the event that one or more
Sub-Advisors are so employed in the future; and
WHEREAS, Advisors is willing to provide investment management services to
the Separate Account in the manner and on the terms set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, TIAA, the Separate Account, and Advisors hereby agree as
follows:
1. DUTIES OF ADVISORS. TIAA and the Separate Account hereby employ
Advisors to act as the investment manager for the Separate Account. Advisors
hereby agrees, subject to the
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<PAGE>
supervision of the Management Committee, for the period and on the terms and
conditions set forth in this Agreement: to act as the investment manager for the
Separate Account and to manage the investment and reinvestment of the assets of
each Portfolio of the Separate Account for the period and on the terms and
conditions set forth in this Agreement. In taking any action hereunder, Advisors
shall always be subject to, and shall follow at all times (i) any restriction of
the Separate Account's Rules and Regulations, as amended from time to time, (ii)
the applicable provisions of the Act and the rules thereunder, (iii) the
statements relating to each Portfolio's investment objectives, policies, and
restrictions as the same are set forth in the registration statement for the
Separate Account and the variable contracts then currently effective under the
Securities Act of 1933 (the "Registration Statement"), and (iv) any other
provisions of state and federal law applicable to Advisors in connection with
its duties hereunder, including any applicable provisions imposed by state
insurance regulations or by the Internal Revenue Code of 1986, as amended, and
regulations thereunder.
(a) INVESTMENT MANAGEMENT SERVICES. In performing the duties stated
in paragraph 1 above, Advisors will regularly provide each Portfolio of the
Separate Account with such investment research, advice, and management as the
Management Committee or officers of the Separate Account may from time to time
consider necessary for the proper management of each Portfolio. Advisors will
furnish continuously an investment program and will conduct a
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<PAGE>
continuous program of evaluation of assets in each Portfolio. In this
connection, Advisors will determine which securities or other investments shall
be purchased, sold, or exchanged and what portion of the assets of each
Portfolio shall be held in the various securities or other investments in which
the Portfolio may invest. Should the Management Committee at any time, however,
make any definite determination as to investment policy for a Portfolio and
notify, in writing, Advisors thereof, Advisors shall be bound by such
determination for the period, if any, specified in such notice or until
similarly notified that such determination has been revoked. In addition,
Advisors will determine the value of each Portfolio's assets and liabilities and
will provide the Separate Account with such valuations and with all statistical
information with respect to investments of each Portfolio and such periodic and
special reports and information as the Management Committee of officers of the
Separate Account may reasonably request. Advisors shall take, on behalf of each
Portfolio, all actions which it deems necessary to implement the investment
objectives, policies, and restrictions of the Portfolio, determined as provided
above, and in particular shall place orders for the purchase or sale of
securities and other investments for the Portfolio with brokers or dealers
selected by Advisors.
(b) SUB-CONTRACTING. Notwithstanding any other provision hereof,
Advisors, with the approval of the owners of contracts with interests in the
Separate Account to the extent required by applicable law and the Management
Committee, may
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<PAGE>
contract with one or more Sub-Advisors to perform any of the investment
management services required of Advisors; provided, however, that the
compensation of such Sub-Advisors will be the sole responsibility of Advisors
and the duties and responsibilities of such Sub-Advisors shall be as set forth
in a written agreement.
TIAA shall provide Advisors, at Advisors' expense, the staff,
facilities, and services necessary to meet Advisors' obligations hereunder.
TIAA's providing of staff, facilities, and services for such purpose shall in no
way diminish any obligation or liability of Advisors hereunder.
Advisors shall exercise reasonable care in recommending, monitoring,
and supervising the performance of such Sub-Advisors and any other
sub-contractors serving pursuant to this paragraph 1(b), but Advisors shall not
otherwise be liable or legally responsible for the conduct of any Sub-Advisors.
In this connection, it shall be a particular responsibility of Advisors to
evaluate the investment performance of Sub-Advisors and that of potential
Sub-Advisors, and Advisors shall supply the Management Committee with such
statistical and research data bearing on each Portfolio's performance and that
of any Sub-Advisors and potential Sub-Advisors as the Management Committee and
Advisors deem necessary. It shall also be a particular responsibility of
Advisors to supervise and monitor (i) the practices of any Sub-Advisors in
placing orders and selecting brokers and dealers to effect portfolio
transactions, and (ii) the services provided by such brokers and dealers.
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<PAGE>
2. (a) PURCHASE AND SALE OF ASSETS. Nothing in this Agreement shall
preclude the combining of orders for the sale or purchase of securities or other
investments by two or more Portfolios of the Separate Account or by the Separate
Account and other separate accounts or other accounts (collectively, "accounts")
managed by Advisors, provided that Advisors does not favor any account over any
other account and provided further that any purchase or sale orders executed
contemporaneously shall be allocated in a manner that Advisors deems to be
equitable to all accounts involved and, under normal circumstances, such
transactions will be (i) done on a pro rata basis substantially in proportion to
the amounts ordered by each account, (ii) entered into only if, in Advisors'
opinion, the trade is likely to produce a benefit for the Portfolio involved,
and (iii) is at a price which is approximately the same for all parties
involved. Neither Advisors, nor any of its directors, officers, or personnel,
nor any person, firm, or corporation controlling, controlled by, or under common
control with it shall act as a principal or receive any commission as agent in
connection with the purchase or sale of assets for a Portfolio, except as may be
permitted under applicable law.
(b) BROKERAGE FEES. In placing orders for the purchase or sale of
securities or other investments for a portfolio, in the name of a Portfolio or
its nominees, Advisors shall use its best efforts to obtain for the Portfolio
the most favorable price and best execution available, considering all of the
circumstances, and
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<PAGE>
shall maintain records adequate to demonstrate compliance with this requirement.
Notwithstanding the foregoing, however, Advisors may, to the extent authorized
by Section 28(e) of the Securities Exchange Act of 1934, cause the Separate
Account to pay a broker or dealer that provides research or other brokerage
services to Advisors and the Separate Account with respect to the Portfolio an
amount of commission for effecting a portfolio transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if Advisors determines in good faith that such amount of
commission is reasonable in relationship to the value of such services, viewed
in terms of that particular transaction or Advisors's overall responsibilities
to the Portfolio or its other advisory clients. To the extent authorized by such
Section 28(e) and the Management Committee, Advisors shall not be deemed to have
acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of such action.
3. COMPENSATION OF ADVISORS. Except as hereinafter provided, for the
services rendered and expenses assumed by Advisors while this Agreement is in
effect, the Separate Account shall pay to Advisors on each Valuation Day (as
that term is defined in the Registration Statement), a fee based on an annual
rate of thirty one-hundredths of one percent (0.30%) of the net assets of the
Stock Index Account.
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<PAGE>
The fees payable to Advisors by the Separate Account hereunder shall
be reduced by any tender solicitation fees or similar payments received by
Advisors, or any affiliated person of Advisors, in connection with the tender of
investments of a Portfolio (less any direct expenses incurred by Advisors, or
any affiliated person of Advisors, in connection with obtaining such fees or
payments). Advisors shall use its best efforts to recapture all available tender
offer solicitation fees and similar payments in connection with tenders of the
securities or other investments of a Portfolio, provided, however, that Advisors
shall not be required to register as a broker-dealer for this purpose. Advisors
shall advise the Management Committee of any fees or payments of whatever type
that it may be possible for Advisors to receive in connection with the purchase
or sale of securities or other investments for a Portfolio.
4. NON-EXCLUSIVITY. TIAA and the Separate Account agree that the services
to be provided by Advisors hereunder are not to be deemed exclusive and Advisors
is free to act as investment manager to other investment companies and as
fiduciary for other managed accounts affiliated with TIAA. Advisors shall, for
all purposes herein, be deemed to be an independent contractor and shall, unless
otherwise provided or authorized, have no authority to act for or represent TIAA
or the Separate Account in any way or otherwise be deemed an agent of TIAA or
the Separate Account other than in furtherance of its duties and
responsibilities as set forth
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<PAGE>
in this Agreement, which shall be deemed to include the voting of proxies for
shares held by a Portfolio at Advisors' discretion on behalf of the Separate
Account.
5. BOOKS AND RECORDS. Advisors will maintain all books and records
required for the Separate Account with respect to each Portfolio's investments,
to the extent not maintained by the custodian or any Sub-Advisors. Advisors
agrees that all books and records which it maintains for the Separate Account
are the Separate Account's property,and, in the event of termination of this
Agreement for any reason, Advisors agrees promptly to return to the Separate
Account, free from any claim or retention of rights by Advisors, all records
relating to the Separate Account. Advisors also agrees, upon request of the
Separate Account, promptly to surrender such books and records to the Separate
Account or, at the Separate Account's expense, to make copies thereof available
to the Separate Account or to make such books and records available for
inspection by representatives of regulatory authorities or other persons
reasonably designated by the Separate Account. Advisors further agrees to
maintain, prepare, and preserve such books and records in accordance with the
Act and rules thereunder, including but not limited to, Rules 31a-1 and 31a-2.
Advisors will use records or information obtained under this
Agreement only for the purposes contemplated hereby, and will not disclose such
records or information in any manner other than
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<PAGE>
as expressly authorized by the Management Committee or officers of the Separate
Account, or unless disclosure is expressly required by applicable federal or
state regulatory authorities or by this Agreement. Advisors shall supply all
information requested by any insurance regulatory authorities to determine
whether all insurance laws and regulations are being complied with.
6. LIABILITY. Advisors will not be liable for any error of judgment or
mistake of law or for any loss suffered by a Portfolio in connection with any
investment policy established by the Separate Account for the purchase, sale, or
redemption of any securities or other investments at the direction of the
Management Committee. Nothing herein contained shall be construed to protect
Advisors against any liability resulting from the willful misfeasance, bad
faith, or gross negligence of Advisors in the performance of its obligations and
duties or from reckless disregard of its obligations and duties under this
Agreement or by virtue of violation of any applicable law.
7. (a) EXPENSES OF THE SEPARATE ACCOUNT. As between the Separate
Account and Advisors, the following expenses shall be borne exclusively by the
Separate Account:
(i) brokerage commissions and transfer taxes and any similar
fees and charges incurred in connection with the acquisition, disposition,
lending, or borrowing of Portfolio securities or other investments;
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<PAGE>
(ii) any and all other state, federal, local, or foreign
governmental fees and taxes (including any insurance, transfer, franchise, or
income taxes) payable by the Separate Account, and all corporate or filing fees
payable by the Separate Account to any governmental entity or agency; and
(iii) interest and any other cost related to borrowings by the
Separate Account.
(b) EXPENSES OF ADVISORS. Except as provided in paragraph 7(a)
above, Advisors shall be responsible for all expenses related to management of
the investment of the assets of each Portfolio, which expenses shall include,
not be limited to:
(i) the cost of obtaining quotes necessary for valuing the
assets and related liabilities for each Portfolio;
(ii) the cost of obtaining quotes necessary for valuing the
assets and related liabilities for each Portfolio;
(iii) the charges and expenses of the custodian(s) for the
Portfolios;
(iv) the charges and expenses of outside legal counsel
retained with respect to the Separate Account's investment-related activity; and
(v) the costs and expenses of any Sub-Advisor or other
sub-contractor retained by Advisors pursuant to paragraph 1(b) of this
Agreement.
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<PAGE>
8. DURATION AND TERMINATION OF THE AGREEMENT.
(a) This Agreement shall become effective with respect to the Stock
Index Account as of the date first written above. It shall become effective as
to any subsequently created Portfolio when it has been approved by the
Management Committee (including a majority of members thereof who are neither
parties to this Agreement nor interested persons of any such party) cast in
person at a meeting called for the purpose of voting on such approval
specifically for such Portfolio. "Subsequently created Portfolio" means a
Portfolio created subsequent to the initial effective date of this Agreement.
(b) This Agreement shall continue in effect with respect to the
Stock Index Account for two years from the date of execution and thereafter from
year to year, but only so long as such continuance is specifically approved at
least annually by (i) the Management Committee, or by the vote of a majority of
the outstanding shares of the Portfolio, and (ii) a vote of a majority of those
members of the Management Committee who are neither parties to this Agreement
nor interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. As to each subsequently created
Portfolio, this Agreement shall continue in effect with respect to that
Portfolio for two years and thereafter from year to year, but only so long as
such continuance is specifically approved at least annually in the manner
described in (i) and (ii) above.
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<PAGE>
(c) This Agreement may be terminated with respect to a Portfolio,
without the payment of any penalty, by the Management Committee or by vote of a
majority of the outstanding shares of the Portfolio on sixty days' written
notice to Advisors, or by Advisors on sixty days' written notice to the Separate
Account. This Agreement shall automatically terminate in the event of its
assignment.
9. DEFINITIONS. The terms "assignment", "interested person" and "majority
of the outstanding shares", when used in this Agreement, shall have the
respective meanings specified under the Act and rules thereunder.
10. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
11. GOVERNING LAW. The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York, as at the time
in effect, and the applicable provisions of the Act and rules thereunder or
other federal laws and regulations which may be applicable. To the extent that
the applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Act and rules thereunder or other
federal laws and regulations which may be applicable, the latter shall control.
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<PAGE>
12. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
be deemed one instrument.
13. NOTICES. All notices and other communications provided for hereunder
shall be in writing and shall be delivered by hand or mailed first class,
postage prepaid, addressed as follows:
(a) If to TIAA -
Teachers Insurance and Annuity
Association of America
730 Third Avenue
New York, New York 10017-3206
Attention: Thomas G. Walsh
(b) If to the Separate Account -
TIAA Separate Account VA-1
730 Third Avenue
New York, New York 10017-3206
Attention: Thomas W. Jones
(c) If to Advisors -
Teachers Advisors, Inc.
730 Third Avenue
New York, New York 10017-3206
Attention: James S. Martin
or to such other address as TIAA, the Separate Account, or Advisors shall
designate by written notice to the other.
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<PAGE>
14. Miscellaneous. Captions in this Agreement are included for convenience
or reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
IN WITNESS WHEREOF, TIAA, the Separate Account, and Advisors, have caused
this Agreement to be executed in their names and on their behalf by and through
their duly authorized officers on the day and year first above written.
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
By: /s/ Thomas G. Walsh Attest: /s/ Lisa Snow
--------------------------- ------------------------
Title: Executive Vice President Title: Assistant Secretary
TIAA SEPARATE ACCOUNT VA-1
By: /s/ Thomas W. Jones Attest: /s/ Lisa Snow
-------------------------- ------------------------
Title: President Title: Assistant Secretary
TEACHERS ADVISORS, INC.
By: /s/ James S. Martin Attest: /s/ Lisa Snow
--------------------------- ------------------------
Title: President Title: Assistant Secretary
-15-
Exhibit 5
DISTRIBUTION AGREEMENT
FOR THE CONTRACTS FUNDED BY
TIAA SEPARATE ACCOUNT VA-1
THIS AGREEMENT made this 15th day of September, 1994, by and among:
Teachers Insurance and Annuity Association of America ("TIAA"), a non-profit New
York insurance corporation; TIAA Separate Account VA-1 (the "Separate Account"),
a separate account of TIAA established pursuant to the New York State Insurance
Law; and Teachers Personal Investors Services, Inc. ("TPIS"), a Delaware
corporation.
WITNESSETH:
WHEREAS, TIAA has established the Separate Account to segregate assets
funding the variable benefits provided by the Teachers Personal Annuity, an
individual, flexible premium, deferred annuity (the "Contracts"), as well as by
other contracts that may be offered by TIAA in the future; and
WHEREAS, the Separate Account is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and currently consists of a single investment portfolio (known as
the Stock Index Account), and may consist of additional investment portfolios in
the future
-1-
<PAGE>
(collectively, with the Stock Index Account, referred to herein as
"Portfolios"); and
WHEREAS, TPIS will be engaged principally in the business of distributing
the Contracts and possibly other variable insurance products or investment
company shares, and is registered as a broker-dealer under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and will become a member of
the National Association of Securities Dealers, Inc.("NASD"); and
WHEREAS, TIAA and the Separate Account have registered the Contracts under
the Securities Act of 1933, as amended (the "1933 Act"), and desires to retain
TPIS to distribute the Contracts and TPIS is willing to distribute the Contracts
in the manner and on the terms set forth herein; and
WHEREAS, TIAA is willing to compensate TPIS for the services to be
provided in the manner and on the terms set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, TIAA, the Separate Account, and TPIS hereby agree as
follows:
1. DISTRIBUTION OF THE CONTRACTS.
(a) TIAA and the Separate Account hereby grant to TPIS the exclusive
right, subject to the requirements of the 1933 Act,
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<PAGE>
the 1934 Act, and the 1940 Act, and the terms set forth herein, to distribute
the Contracts during the term of this Agreement. TPIS agrees to use its best
efforts to distribute the Contracts, and to advise owners of Contracts in
connection therewith.
(b) To the extent necessary to offer the Contracts, TPIS shall be
duly registered or otherwise qualified under the securities laws of any state or
other jurisdiction in which such Contracts may lawfully be sold and in which
TPIS is licensed or otherwise authorized to sell the Contracts. TPIS shall be
responsible for the training, supervision and control of its registered
representatives for the purpose of the NASD Rules and Fair Practice and federal
and state securities law requirements applicable in connection with the offering
and sale of the Contracts. In this connection, TPIS shall retain written
supervisory procedures in compliance with Section 27 of the NASD Rules of Fair
Practice.
(c) TPIS agrees to offer the Contracts for sale in accordance with
the then-current prospectus and statement of additional information ("SAI")
therefor filed with the Securities and Exchange Commission (the "Commission").
(d) TIAA shall furnish TPIS with copies of all prospectuses, SAIs,
financial statements and other documents which TPIS reasonably requires for use
in connection with the distribution of the Contracts. TPIS will be entitled to
rely on all documentation and information furnished to it by TIAA's or the
Separate Account's management.
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<PAGE>
(e) It is understood that no payments made under the Contracts shall
be paid or remitted to TPIS.
2. BOOKS AND RECORDS
(a) TIAA, the Separate Account, and TPIS shall cause to be
maintained and preserved all required books of account and related financial
records as are required by the 1934 Act, the NASD and any other applicable laws
and regulations. All the books and records maintained by TIAA (on behalf of
TPIS) in connection with the offer and sale of the Contracts shall be maintained
and preserved in conformity with the requirements of Rules 17a-3 and 17a-4 under
the 1934 Act or the corresponding provisions of any future federal securities
laws or regulations, to the extent that such requirements are applicable to the
variable annuity operations. All such books and records shall be maintained and
held by TIAA on behalf of and as agent for TPIS, whose property they are and
shall remain. Such books and records shall be at all times subject to inspection
by the Commission in accordance with Section 17(a) of the 1934 Act.
(b) TPIS shall have the responsibility for maintaining the records
of sales representatives licensed, registered and otherwise qualified to sell
the Contracts.
3. REPORTS. TPIS shall cause TIAA and/or the Separate Account to be
furnished with such reports as either or both may reasonably request for the
purpose of meeting reporting and
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<PAGE>
recordkeeping requirements under the insurance laws of the State of New York and
any other applicable states or jurisdictions.
4. STAFF, FACILITIES, AND SERVICES. TIAA shall provide TPIS, at TPIS's
expense, the staff, facilities, and services necessary to meet TPIS's
obligations hereunder in connection with the distribution of the Contracts.
TIAA's providing of staff, facilities, and services for such purpose shall in no
way diminish any obligation or liability of TPIS hereunder.
5. COMPENSATION AND EXPENSES.
(a) In consideration of the services performed by TPIS hereunder,
TIAA shall compensate TPIS monthly. The amount of this compensation shall be
based on the premiums (which shall include amounts from investment vehicles of
companies other than TIAA) received by TIAA and allocated to the Separate
Account under the Contracts. The current rate of compensation is shown on
Schedule A, attached herewith.
(b) The Separate Account shall not be liable to TPIS (or TIAA) for
any expenses incurred for services related to the distribution of the Contracts
(except to the extent that amounts arising from the mortality and expense risk
charge paid to TIAA are deemed to cover such distribution expenses). TPIS shall
be responsible for all expenses relating to the distribution of the Contracts,
including but not limited to:
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<PAGE>
(i) the costs and expenses of providing the necessary
facilities, personnel, office equipment and supplies, telephone service, and
other utility service necessary to carry out its obligations hereunder;
(ii) charges and expenses of outside legal counsel retained
with respect to activities related to the distribution of the Contracts;
(iii) the costs and expenses of underwriting and issuance of
the Contracts;
(iv) the costs and expenses of printing definitive
prospectuses and statements of additional information and any supplements
thereto for prospective purchasers;
(v) expenses incurred in connection with TPIS's registration
as a broker or dealer or in the registration or qualification of its officers,
directors or representatives under federal and state securities laws;
(vi) the costs of promotional, sales and advertising
materials; and
(vii) any other expenses incurred by TPIS or its
representatives in connection with performing the obligations of TPIS under this
Agreement.
6. NON-EXCLUSIVITY. TIAA and the Separate Account agree that the services
to be provided by TPIS hereunder are not to be deemed exclusive and TPIS is free
to act as distributor of other variable insurance products or investment company
shares issued by
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<PAGE>
TIAA or any entity affiliated therewith. TPIS shall, for all purposes herein, be
deemed to be an independent contractor and shall, unless otherwise provided or
authorized, have no authority to act for or represent TIAA or the Separate
Account in any way or otherwise be deemed an agent of TIAA or the Separate
Account other than in furtherance of its duties and responsibilities as set
forth in this Agreement.
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 willful
misfeasance, bad faith, or gross negligence of TPIS in the performance of its
obligations and duties or from reckless disregard of its obligations and duties
under this Agreement or by virtue of violation of any applicable law.
8. REGULATION.
(a) This Agreement shall be subject to the provisions of the 1940
Act, the 1934 Act and the rules, regulations and rulings thereunder, and of the
NASD, as in effect from time to time, including such exemptions and other relief
as the Commission, its staff, or the NASD may grant, and the terms hereof shall
be interpreted and construed in accordance therewith. Without limiting the
generality of the foregoing, the term "assigned" shall
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<PAGE>
not include any transactions exempted from Section 15(b)(2) of the 1940 Act.
(b) TPIS shall submit to all regulatory and administrative bodies
having jurisdiction over the present and future operations of the Separate
Account, any information, reports or other material which any such body by
reason of this Agreement may request or require pursuant to applicable law or
regulations. Without limiting the generality of the foregoing, TPIS shall
furnish the SEC, the State of New York Secretary of State and/or the
Superintendent of Insurance with any information or reports which the SEC, the
Secretary of State and/or the Superintendent of Insurance may request in order
to ascertain whether the operations of the Separate Account are being conducted
in a manner consistent with applicable laws or regulations.
9. INVESTIGATION AND PROCEEDINGS.
(a) TIAA, the Separate Account, and TPIS agree to cooperate fully in
any insurance or securities regulatory inspection, inquiry, investigation, or
proceeding or any judicial proceeding with respect to TIAA, the Separate
Account, or TPIS, their affiliates and their representatives to the extent that
such inspection, inquiry, investigation or proceeding is in connection with the
Contracts distributed under this Agreement.
(b) In the case of a customer complaint, TIAA, the Separate Account,
and TPIS will cooperate in investigating such complaint and shall arrive at a
mutually satisfactory response.
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<PAGE>
10. DURATION AND TERMINATION OF THE AGREEMENT.
(a) This Agreement shall become effective with respect to the
Contracts as of the date first written above. It shall become effective as to
any subsequently offered contract when it has been approved by the Management
Committee (including a majority of members thereof who are not parties to this
Agreement not interested persons of any such parties) specifically for such
contract. "Subsequently offered contract" means a contract issued and funded by
the Separate Account subsequent to the initial effective date of this Agreement.
(b) This Agreement shall continue in effect for two years from the
date of its execution and thereafter from year to year, but only so long as such
continuance is specifically approved at least annually by (i) the Management
Committee, or by the vote of a majority of the outstanding shares of the
Separate Account, and (ii) a vote of a majority of those members of the
Management Committee who are not parties to this Agreement nor interested
persons of any such parties, cast in person at a meeting called for the purpose
of voting on such approval. As to each subsequently created Portfolio, this
Agreement shall continue in effect with respect to that Portfolio so long as
such continuance is specifically approved at least annually in the manner
described in (i) and (ii) above.
(c) This Agreement may be terminated, without the payment of any
penalty, by TIAA, the Separate Account, or TPIS on
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<PAGE>
sixty days' written notice to the other parties. This Agreement shall
automatically terminate in the event of its assignment.
(d) Upon termination of this agreement, all authorizations, rights
and obligations shall cease except the obligation to settle accounts hereunder
and the agreements contained in paragraph 9 hereunder.
11. DEFINITIONS. The term "assignment", "interested person" and "majority
of the outstanding shares", when used in this Agreement, shall have the
respective meanings specified under the 1940 Act and rules thereunder.
12. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
13. GOVERNING LAW. The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York, as at the time
in effect, and the applicable provisions of the 1940 Act and rules thereunder or
other federal laws and regulations which may be applicable. To the extent that
the applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the 1940 Act and rules thereunder or
other federal laws and regulations which may be applicable, the latter shall
control.
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<PAGE>
14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
be deemed one instrument.
15. NOTICES. All notices and other communications provided for hereunder
shall be in writing and shall be delivered by hand or mailed first class,
postage prepaid, addressed as follows:
(a) If to TIAA -
Teachers Insurance and Annuity
Association of America
730 Third Avenue
New York, new York 10017-3206
Attention: Thomas G. Walsh
(b) If to the Separate Account -
TIAA Separate Account VA-1
730 Third Avenue
New York, new York 10017-3206
Attention: Thomas w. Jones
(c) If to TPIS -
Teachers Personal Investors
Services, Inc.
730 Third Avenue
New York, new York 10017-3206
Attention: Ronald P. McPhee
or to such other address as TIAA, the Separate Account, or TPIS shall designate
by written notice to the others.
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<PAGE>
16. MISCELLANEOUS. Captions in this Agreement are included for convenience
or reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
IN WITNESS WHEREOF, TIAA, the Separate Account, and TPIS, have caused this
Agreement to be executed in their names and on their behalf by and through their
duly authorized officers on the day and year first above written.
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
By: /s/ Thomas G. Walsh Attest: /s/ Lisa Snow
--------------------------- ---------------------------
Title: Executive Vice President Title: Assistant Secretary
TIAA SEPARATE ACCOUNT VA-1
By: /s/ Thomas W. Jones Attest: /s/ Lisa Snow
--------------------------- --------------------------
Title: President Title: Assistant Secretary
TEACHERS PERSONAL INVESTORS SERVICES, INC.
By: /s/ Ronald P. McPhee Attest: /s/ Lisa Snow
--------------------------- --------------------------
Title: Senior Vice President Title: Assistant Secretary
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<PAGE>
SCHEDULE A to
Distribution Agreement
for the Contracts Funded By
TIAA Separate Account VA-1
The amount payable monthly by TIAA to TPIS in consideration of the services
performed by TPIS under this Agreement is seventy-five hundredths of one percent
(0.75%) of the premiums (as that term is used in paragraph 5(a) of this
Agreement) received by TIAA and allocated to the Separate Account under the
Contracts during each month.
730 Third Avenue, New York, N.Y. 10017
Telephone: 800-842-2733
TEACHERS PERSONAL ANNUITY CONTRACT
Annuity
Date of Starting Date of
Contract Issue Date Birth
Number mo day yr mo day yr mo day yr
---------------------------------------------------------------
[0-800135-6 10-01-1994 12-01-2018]
Annuitant [John J. Jones 12-20-1952]
Owner [Jane J. Doe 11-15-1950]
---------------------------------------------------------------
This is a contract between you, the Owner, and TEACHERS INSURANCE AND
ANNUITY ASSOCIATION OF AMERICA ("TIAA"). This page refers briefly to some of the
features of this Contract. The next pages set forth in detail the rights and
obligations of both TIAA and you under the Contract.
PLEASE READ YOUR CONTRACT. IT IS IMPORTANT.
GENERAL DESCRIPTION
This is a flexible premium deferred annuity contract. You may allocate
any future Premiums to the Fixed Account and/or to Investment Accounts. Your
Contract Accumulation (the value of your Contract) is the sum of your Fixed
Account Accumulation and your Investment Account Accumulations.
Accumulations in the Fixed Account are credited with a guaranteed
interest rate, and may also be credited with Additional Interest. Accumulations
in Investment Accounts are variable, are not guaranteed, and may increase or
decrease depending on investment results.
TIAA will pay the Income Benefit provided under this Contract to you,
the Owner. The Income Benefit is based on the life of the Annuitant named above,
who may be the Owner or another person. If you or the Annuitant die before the
Income Benefit begins, TIAA will pay the Death Benefit provided in this
Contract. Income and Death Benefits are based on your Contract Accumulation and
the Rate Schedule or Schedules under which Premiums are credited to this
Contract.
You may choose to withdraw all or a part of your Contract Accumulation
on or before the day Income Benefits begin. This contract does not provide for
loans.
10 Day Right to Examine Your Contract. You have 10 days from the day you
receive this Contract to examine it and to cancel it if you decide not to keep
it. To cancel this contract, return it to us at the address shown above. TIAA
will refund all premiums paid to this contract. The Contract will be void as of
the date of issue and no benefits will be provided.
If you have any questions you may contact us at the address or phone
number above.
Nonqualified Flexible Premium Deferred Annuity
Fixed and Variable Accumulations
Teachers insurance and annuity association
<PAGE>
Your Teachers Personal Annuity Contract
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New Jersey
Chairman and
Chief Executive Officer
<PAGE>
Your Teachers Personal Annuity Contract
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INDEX OF IMPORTANT TERMS AND PROVISIONS
Section
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Accumulation
Contract...........................................25
Fixed Account......................................26
Investment Account.................................28
Accumulation Unit
Number.............................................31
Definition.........................................29
Additional Interest.........................................27
Annuitant - Definition.......................................1
Annuity Starting Date
Change of..........................................36
Definition..........................................2
Assignment - Rights Subject to..............................53
Beneficiary
Definition..........................................3
Naming.............................................56
Benefits Based on Incorrect Age.............................60
Business Day.................................................4
Claims of Creditors
Protection Against.................................54
Contract - Consists of......................................19
Correspondence with Us......................................64
Death Benefit
Amount of Payments.................................41
Death Benefit Payee - Definition....................6
Definition..........................................5
Guaranteed Minimum.................................43
Methods of Payment.................................44
Naming Your Beneficiary............................56
Payment of (Availability)..........................39
Starting Payment...................................42
Transfer to Fixed Account..........................40
Distributions Required on Death of Owner
After the Annuity Starting Date....................38
Before the Annuity Starting Date...................45
Elections and Changes - Procedure...........................49
Fixed Account................................................7
General Account..............................................8
Income Benefit
Amount of Payments.................................34
Automatic Election.................................37
Definition..........................................9
Options............................................37
Two-Life Annuity Options...........................37
Payment of.........................................33
Starting Payments..................................35
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Section
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Investment Account
Addition or Deletion...............................21
Description........................................10
Investment Company Act of 1940..............................58
Lapse or Forfeiture -
Protection Against.................................20
Laws and Regulations -
Compliance with....................................62
Loans - Not available.......................................52
Lump-sum Benefit and Transfers
Availability.......................................46
Definition.........................................11
Effective Date.....................................48
From the Fixed Account.............................47
Net Investment Factor.......................................30
Non-Forfeiture of Benefits..................................55
Owner - Definition..........................................12
Payment to an Estate, Trustee, etc..........................50
Premiums
Allocation.........................................23
Limits on..........................................22
Taxes..............................................24
Proof of Survival...........................................61
Rate Schedule...............................................66
Change of .........................................65
Definition.........................................13
Report of Accumulation......................................51
Right to Amend..............................................63
Second Annuitant - Definition...............................14
Separate Account
Charge.............................................32
Description........................................15
Insulation of......................................57
Service of Process upon TIAA................................59
Surrender Charge
Amount of .........................................66
Definition.........................................16
Transfer....................................................17
Valuation Day...............................................18
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Annuity
Date of Starting Date of
Contract Issue Date Birth
Number mo day yr mo day yr mo day yr
---------------------------------------------------------------
[0-800135-6 10-01-1994 12-01-2018]
Annuitant [John J. Jones 12-20-1952]
Owner [Jane J. Doe 11-15-1950]
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Annuitant's Social Security Number: 111-11-1111
Owner's Social Security Number: ###-##-####
This Contract was made and delivered in New Jersey. The validity and effect of
the Contract are governed by the laws there in force.
Your initial Premium has been allocated to the Accounts shown below. All future
Premiums will be allocated to these Accounts as shown unless you change your
allocation instructions as described in Section 23.
Fixed Account: 30%
Stock Index Account: 70%
The following Investment Account is available as of the Date of Issue:
Stock Index Account: This Account maintains a broadly diversified
portfolio consisting primarily of common stocks selected to track the
overall U.S. stock market. As of the date of issue, the Stock Index
Account's Separate Account Charge is 0.37% per year of the Account's net
assets.
As described in Section 32, after we have given you three months' written
notice, an Investment Account's Separate Account Charge may be changed, but it
will not exceed 1.5% per year of the Account's net assets.
During the first 10 days following the Date of Issue, the total Premiums and
Transfers you may allocate to the Investment Accounts is limited to $10,000. Any
amount in excess of $10,000 must be allocated to the Fixed Account.
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PART A: TERMS USED IN THIS CONTRACT
1. The Annuitant is the natural person whose life is used in determining the
Income Benefit to be paid. The Annuitant is named on Page 3 of this Contract,
and may not be changed, except as provided in Section 39.
2. The Annuity Starting Date shown on Page 3 is the date the Income Benefit is
scheduled to begin. You may change the date as explained in Section 36.
3. Beneficiary. Beneficiaries are persons you name, in a form satisfactory to
TIAA, to:
A) receive the Death Benefit as Death Benefit Payee(s) if you die before
the Annuity Starting Date while the Annuitant is alive; or
B) become the Owner if you die on or after the Annuity Starting Date.
At any time you may name, change, add or delete Beneficiaries, by
written notice to TIAA as explained in Section 49.
4. A Business Day is any day that the New York Stock Exchange is open for
trading. A Business Day ends at 4:00 p.m. Eastern time, or when trading closes
on the New York Stock Exchange, if earlier.
5. The Death Benefit is the value of your Contract Accumulation, or if greater,
the sum of all Premiums credited to this Contract less any Lump-sum Benefits
paid and less any Surrender Charges on Lump-sum Benefits or Transfers from the
Fixed Account. It will be paid to the Death Benefit Payee under one of the
Methods of Payment set forth in Part E, if you or the Annuitant dies before the
Annuity Starting Date.
6. The Death Benefit Payee will receive the Death Benefit if you or the
Annuitant dies before the Annuity Starting Date. If you die, your Beneficiary
will be the Death Benefit Payee. If the Annuitant dies and you are not the
Annuitant, you will be the Death Benefit Payee. Where the Owner and the
Annuitant have died and there is not sufficient evidence that they have died
other than simultaneously, then the Beneficiary is the Death Benefit Payee,
unless you have provided otherwise.
7. Fixed Account. All Premiums and Transfers credited to the Fixed Account
become part of TIAA's General Account.
8. The General Account consists of all of TIAA's assets other than those in
separate accounts.
9. The Income Benefit is the periodic amount payable under one of the options
set forth in Part D. The first payment will be payable as of the Annuity
Starting Date.
10. An Investment Account is a subaccount of the Separate Account. The
Investment Account(s) available as of the Date of Issue are shown on Page 3.
TIAA may add or delete Investment Accounts as described in Section 21.
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11. A Lump-sum Benefit is a withdrawal in a single sum of all or part of your
Contract Accumulation. The provisions concerning Lump-sum Benefits are set forth
in Part F.
12. You are the Owner. During your lifetime, you may, subject to the rights of
any assignee and to the extent permitted by law, exercise every right given by
this Contract without the consent of any other person. The Owner may be changed
as explained in Section 49. The name of the Owner as of the Date of Issue is
shown on Page 3.
13. The Rate Schedule or Schedules set forth:
A) the guaranteed annuity purchase rates to be used in determining
Income and Death Benefit payments made from the General Account; and
B) any Surrender Charge to be assessed against Lump-Sum Benefits or
Transfers from your Fixed Account Accumulation.
A Rate Schedule applies to Contract Accumulations arising from Premiums
credited while the Rate Schedule is in effect. The minimum Income or Death
Benefit, paid as an annuity, is equal to your Contract Accumulation multiplied
by the guaranteed annuity purchase rate calculated on the basis specified in the
Rate Schedule. The Rate Schedule effective as of the Date of Issue is in Section
66. After we have given you three months' written notice, and to the extent
permitted by law, TIAA may change the Rate Schedule applicable to future
Premiums as described in Section 65. Any change in the Rate Schedule will not
affect the amount of benefits arising from Premiums credited prior to the
change.
14. You name a Second Annuitant if you choose an Income Benefit under a Two-Life
Annuity Option, as explained in Section 37. Under a Two-Life Annuity Option the
lives of the Annuitant and the Second Annuitant are used in determining the
Income Benefit.
15. Separate Account. All Premiums and Transfers credited to an Investment
Account become part of the Separate Account. The Separate Account is designated
as "VA-1" and was established by TIAA in accordance with New York law to provide
benefits from this Contract and other similar contracts. The assets and
liabilities of Separate Account VA-1 are segregated from the assets and
liabilities of the General Account.
16. A Surrender Charge is a charge assessed against a Lump-sum Benefit payment
from the Fixed Account or a Transfer from the Fixed Account. No Surrender Charge
will be assessed against the part of your Fixed Account Accumulation arising
from Premiums credited while your Contract's original Rate Schedule is in
effect. If a Surrender Charge is included in a future Rate Schedule, it will
apply only to the part of your Fixed Account Accumulation arising from Premiums
paid while such Rate Schedule is in effect. No Surrender Charge will ever be
assessed against an Investment Account Accumulation.
17. You may Transfer some or all of your Contract Accumulation between the Fixed
Account and the available Investment Accounts. The provisions concerning
Transfers, including restrictions, are set forth in Part F.
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18. A Valuation Day is any day that the New York Stock Exchange 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 a TIAA Investment Account are principally traded. Valuation Days
that aren't Business Days end at 4:00 p.m. Eastern time.
PART B: CONTRACT AND PREMIUMS
19. The Contract. This document is the entire contract between you and TIAA. We
have issued it in return for your completed application and the first Premium.
Any endorsement to or amendment of this Contract, waiver of any of its
provisions, or change in Rate Schedule will be valid only if in writing and
signed by an executive officer or a registrar of TIAA. All Premiums and benefits
are payable at TIAA's home office in New York, NY.
20. Protection Against Lapse or Forfeiture. While your Contract Accumulation is
at least $2,000, your rights under the Contract will not lapse after the first
Premium has been paid. No additional Premiums are required. You own this
Contract. If no Premiums have been paid for three years, and your Accumulation
is less than $2,000, we may pay you your Contract Accumulation and terminate
this Contract.
21. Addition or Deletion of an Investment Account. TIAA may, as permitted by
applicable law, add or delete Investment Accounts within the Separate Account.
If you have Accumulation Units in an Investment Account that is deleted, you
must Transfer them to another Investment Account or to the Fixed Account.
22. Premiums. Premiums for this Contract may be paid in any amount not less than
$100 each. TIAA may limit total Premiums and Transfers allocated to the Fixed
Account to $300,000 in any twelve-month period. TIAA may stop accepting Premiums
under this Contract after you have been given three months' written notice.
Otherwise, TIAA will accept Premiums at any time before the Annuity Starting
Date or the prior death of you or the Annuitant. If TIAA stops accepting
Premiums under this Contract, we will accept premiums under a new TIAA deferred
annuity 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.
Your initial Premium will be credited to your Contract within two
Business Days of the Business Day on which it is received by TIAA at its home
office in New York, NY. Each subsequent Premium will be credited to your
Contract as of the Business Day on which it is received by TIAA at its home
office in New York, NY.
23. Allocation of Premiums. You allocate Premiums among the Fixed Account and
the available Investment Accounts. Premiums allocated to the Fixed Account
increase your Fixed Account Accumulation. Premiums allocated to an Investment
Account purchase Accumulation Units in that Account. Your allocation
instructions as of the Date of Issue are shown on Page 3, and may be changed at
any time for future Premiums. Your Premiums are allocated according to the most
recent valid instructions TIAA has received from you in a form acceptable to
TIAA.
24. Premium Taxes. State and local government premium tax, if applicable, will
be deducted from your Contract Accumulation when incurred by TIAA. TIAA may
deduct these taxes when the
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Premium is received by TIAA or when annuity income or death benefit payments
commence. If no amount for Premium Tax was deducted, but Premium Tax is later
determined to be due, TIAA will reduce your Contract Accumulation by the amount
of tax which is determined to be due by TIAA.
PART C: ACCUMULATIONS
25. Your Contract Accumulation is equal to the sum of your Fixed Account
Accumulation and your Investment Account Accumulations. Your Fixed Account
Accumulation is guaranteed by TIAA's General Account and will earn interest at a
guaranteed effective annual rate of 3%. Investment Account Accumulations are not
guaranteed, and you bear the investment risk of your Investment Account
Accumulations.
26. Your Fixed Account Accumulation is equal to:
A) all Premiums allocated to your Fixed Account Accumulation; plus
B) all Transfers credited to your Fixed Account Accumulation; plus
C) interest credited to your Fixed Account Accumulation at a guaranteed
effective annual rate of 3%; plus
D) any Additional Interest in excess of the guaranteed 3% interest
credited to your Fixed
Account Accumulation; less
E) any Premium Taxes incurred by TIAA for your Fixed Account
Accumulation; less F) the amount of any Lump-sum Benefits paid, or
Transfers from your Fixed Account
Accumulation; less
G) any Surrender Charge assessed for Lump-sum Benefits or Transfers from
your Fixed Account Accumulation.
27. TIAA may credit Additional Interest to your Fixed Account Accumulation. TIAA
does not guarantee that there will be Additional Interest.
Additional Interest, if any, will be credited under a schedule of
Additional Interest rates declared by TIAA. For a Fixed Account Accumulation in
force as of the effective date of such a schedule, the Additional Interest rates
will not be decreased for a period of twelve months following the schedule's
effective date. For Premiums or Transfers credited to the Fixed Account during
the twelve-month period described in the preceding sentence, TIAA may declare
Additional Interest at higher or lower rates which remain in effect only through
the end of such twelve-month period. Thereafter, any Additional Interest rates
declared for such Premiums and Transfers will remain in effect for periods of
twelve months or more. The Fixed Account under this Contract will be interpreted
and administered by TIAA to comply with Securities and Exchange Commission (SEC)
Rule 151, including the preamble to that Rule (SEC Release No. 33-6645).
TIAA does not expect to pay or credit Additional Interest after Income
or Death Benefits begin under this Contract.
28. An Investment Account Accumulation (the value of your share of an Investment
Account) is equal to the number of your Accumulation Units multiplied by the
value of one Accumulation Unit in that Investment Account.
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29. Accumulation Unit. Each Investment Account maintains a separate Accumulation
Unit. The value of each Investment Account's Accumulation Unit is calculated at
the close of each Valuation Day. The value of an Investment Account's
Accumulation Unit is equal to the previous day's value multiplied by the
Account's Net Investment Factor.
30. The Net Investment Factor for an Investment Account equals (A) divided by
(B), as follows:
(A) equals the value of the Investment 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 Investment Account's net assets at the end of the
prior day (including the net effect of transactions made during the
prior day).
31. Number of Accumulation Units. The number of your Accumulation Units in an
Investment Account will be increased by:
A) any Premiums allocated to that Investment Account; and
B) any Transfers to that Investment Account;
and will be decreased by:
C) any Premium Taxes incurred by TIAA for your Investment Account
Accumulation;
D) any Lump-sum Benefits paid from that Investment Account; and
E) any Transfers from that Investment Account to the Fixed Account or
another Investment Account.
The increase or decrease in the number of your Accumulation Units on any
Valuation Day is equal to the net dollar value of all transactions divided by
the value of the Investment Account's Accumulation Unit as of the end of the
Valuation Day.
32. Separate Account Charge. Each Investment Account has a Separate Account
Charge for mortality and expense risk, administration, and investment advisory
services. After three months' written notice to you, TIAA, at its discretion,
may increase or decrease any Investment Account's Separate Account Charge. The
Separate Account Charge for any Investment Account is guaranteed not to exceed
1.5% per year of net assets. Each Investment Account's Separate Account Charge
as of the Date of Issue is shown on Page 3.
PART D: INCOME BENEFIT
33. Payment of the Income Benefit. Your Contract Accumulation can be used to
provide an Income Benefit guaranteed by TIAA's General Account. No Income
Benefit is available from the Separate Account. The Income Benefit will be paid
to you, the Owner. If you die while any Income Benefit payments remain due, the
Beneficiary will become the Owner. The new Owner will receive the Income Benefit
and may name or change the Beneficiary as described in Section 56.
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34. The Amount of the Income Benefit as of the Annuity Starting Date will be
determined by:
A) the amount of your Contract Accumulation;
B) the Rate Schedule or Schedules under which Premiums were credited
to your Contract and the Rate Schedule or Schedules under which
any Additional Interest was credited to your Fixed Account
Accumulation;
C) the Income Option you choose;
D) the Annuitant's age, if you choose an Income Option that pays a
lifetime income; and
E) the Second Annuitant's age, if you choose one of
the Two-Life Annuity Options.
If the Income Benefit would be less than $100 a month, TIAA will have
the right to change to quarterly, semi-annual or annual payments, whichever will
result in payments of $100 or more and the shortest interval between payments.
35. Starting the Income Benefit. Payment of the Income Benefit to you will begin
as of the Annuity Starting Date you have chosen, if you and the Annuitant are
then living and:
A) you have chosen one of the Income Options set forth in Section 37; and
B) if you have chosen an Income Option that pays a lifetime income, we have
received due proof of the Annuitant's age; and
C) if you have chosen a Two-Life Annuity Option, we have received due
proof of the Second Annuitant's age.
If the requirements of this section have not been completed by the
Annuity Starting Date you have chosen, the Annuity Starting Date will be
deferred to the first of the month after these requirements have been completed.
The Annuity Starting Date may not be deferred beyond the first of the month
following the Annuitant's eighty-fifth birthday.
36. Changing the Annuity Starting Date. You may change the Annuity Starting Date
at any time on or before the day the Income Benefit begins, by written notice to
TIAA as explained in Section 49. You may change the Annuity Starting Date to the
first of any month following the date of the change, but not to a month:
A) earlier than fourteen months after the Date of Issue shown on Page 3; or
B) later than the Annuitant's eighty-fifth birthday.
If you have not chosen an Annuity Starting Date prior to the first of
the month following the Annuitant's eighty-fifth birthday, you will be deemed to
have chosen that date.
37. Income Options are the ways in which you may have the Income Benefit paid.
Any time before the Annuity Starting Date you may choose one of the Options
listed below. Any choice or change of such choice must be made by written notice
to TIAA as explained in Section 49. You may change your choice at any time
before payments begin, but once they have begun no change can be made.
Each of the Income Options listed below is payable from TIAA's General
Account. No Income Option is payable from any Investment Account.
The Income Options from which you may choose are listed below. In
addition to providing an income during the lifetime of the Annuitant or for a
fixed period, some Options provide that payments will
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continue for the lifetime of a Second Annuitant, and some provide that
payments will continue in any event during a guaranteed period. The Income
Options are described as monthly payments, but you may choose quarterly,
semi-annual, or annual payments. You may not elect an Option which would not be
treated as an annuity under federal tax law. The periodic amount paid depends on
which of these Options you choose:
Single Life Annuity. A payment will be made each month as long as the
Annuitant lives. All payments will cease at the Annuitant's death. This
Option provides no benefits for anyone after the Annuitant's death.
Single Life Annuity with a 10-, 15- or 20-Year Guaranteed Period. A
payment will be made each month as long as the Annuitant lives. If the
Annuitant dies before the end of the guaranteed period you have chosen,
the monthly payments will continue to the end of that period.
Payments for a Fixed Period. A payment will be made each month for a
fixed period of not less than two nor more than thirty years, as chosen.
If the Annuitant dies before the end of the period chosen, the monthly
payments will continue to the end of that period. At the end of the
period chosen payments will stop.
Two-Life Annuity Options. Under each of the following Options a payment
will be made each month for as long as either the Annuitant or the
Second Annuitant is alive. After payments begin, you cannot change your
choice of Second Annuitant. If you choose a guaranteed period, payments
will continue to the end of that period even if the Annuitant and Second
Annuitant die before the end of that period. If you do not choose a
guaranteed period, all payments will cease at the death of the last
survivor of the Annuitant and Second Annuitant.
Full Benefit While Either the Annuitant or the Second Annuitant
is Alive, with or without a 10-, 15- or 20-Year Guaranteed
Period. The full monthly income will continue as long as either
the Annuitant or the Second Annuitant is alive. If you choose a
guaranteed period and the Annuitant and the Second Annuitant both
die before the end of the period chosen, the full monthly income
will continue to the end of that period.
Two-thirds Benefit After the Death of Either the Annuitant or the
Second Annuitant, with or without a 10-, 15- or 20-Year
Guaranteed Period. At the death of either the Annuitant or the
Second Annuitant, monthly payments equal to two-thirds of the
amount that would have been paid if both had lived will continue
for the life of the survivor. If you choose a guaranteed period
and the Annuitant and the Second Annuitant both die before the
end of the period chosen, monthly payments equal to two-thirds of
the amount that would have been paid if both had lived will
continue to the end of that period.
Half Benefit After the Death of the Annuitant, with or without a
10-, 15- or 20- Year Guaranteed Period. The full monthly income
will continue as long as the Annuitant is alive. If the Second
Annuitant survives the Annuitant, monthly payments equal to
one-half the amount that would have been paid if the Annuitant
had lived will continue for the life of the Second Annuitant. If
you choose a guaranteed period and the
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Annuitant and the Second Annuitant both die before the end of the
period chosen, monthly payments equal to one-half the amount that
would have been paid if the Annuitant had lived will continue to
the end of that period.
Automatic Election Provision. If, on the Annuity Starting Date
determined in accordance with Sections 35 and 36, you have not chosen an Income
Option, you will be deemed to have chosen a "Single Life Annuity with a 10-Year
Guaranteed Period," or a shorter period if required to meet federal tax law.
38. Distribution Requirements upon the Death of the Owner. If you die on or
after the Annuity Starting Date, any Income Benefit remaining due must be
distributed at least as rapidly as under the Income Option on which Income
Benefit Payments were being made.
PART E: DEATH BENEFIT
39. Availability. If you or the Annuitant dies before the Annuity Starting Date,
the Death Benefit will be payable when due proof of the death is received by
TIAA. If you die and your spouse is the sole Death Benefit Payee, he or she may
choose to become the Owner and continue the Contract, or may choose payment of
the Death Benefit. If your spouse does not make a choice, he or she will
automatically become the Owner of the Contract on the 60th day after we receive
due proof of your death. If you were also the Annuitant, your spouse upon
becoming the Owner, will also become the Annuitant.
40. Transfer to the Fixed Account. All amounts held in Investment Accounts will
be Transferred to the Fixed Account as of the date we receive due proof of the
death. If your spouse is the sole Death Benefit Payee and elects to become the
Owner at the time due proof of your death is provided, no such Transfer will be
made.
41. The Amount of the Death Benefit will be determined as of the date we receive
due proof of the death of you or the Annuitant by:
A) the amount of your Contract Accumulation, or if greater, the sum
of all Premiums credited to your Contract less any Lump-sum
Benefits paid and less any Surrender Charges on Lump-sum Benefits
or Transfers from the Fixed Account;
B) the Rate Schedule or Schedules under which Premiums were credited
to your Contract and the Rate Schedule or Schedules under which
any Additional Interest was credited to your Fixed Account
Accumulation;
C) the Method of Payment chosen for the Death Benefit; and
D) if the Method chosen pays a lifetime income, the age of the Death
Benefit Payee.
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42. Payment of the Death Benefit. Payment of the Death Benefit may begin after
we have received:
A) due proof of the death of you or the Annuitant;
B) the choice of a Method of Payment as provided in Section 44; and
C) due proof of the Death Benefit Payee's age if the Method of Payment
chosen pays a lifetime income.
Payment of the Death Benefit must begin no later than the first of the
month following the 60th day after we receive due proof of the death of you or
the Annuitant. If no Method of Payment is chosen, TIAA will pay the Death
Benefit as annual Payments for a Fixed Period ending in the twelve-month period
preceding the fifth anniversary of the date of the death.
43. Guaranteed Minimum Death Benefit. The Death Benefit will be the greater of
your Contract Accumulation and the sum of all Premiums credited less any
Lump-sum Benefits paid and less any Surrender Charges imposed on Lump-sum
Benefits or Transfers from the Fixed Account. As of the date TIAA receives due
proof of death of you or the Annuitant, your Fixed Account Accumulation will be
increased by the amount, if any, by which the sum of all Premiums credited to
your Contract (less any Lump-sum Benefits paid and less any Surrender Charges
imposed on Lump-sum Benefits or Transfers from the Fixed Account) exceeds your
Contract Accumulation.
44. Methods of Payment. TIAA will pay the Death Benefit to the Death Benefit
Payee under one of the Methods of Payment set forth below. You may choose or
change the Method of Payment at any time before payments begin. If your
Beneficiary is the Death Benefit Payee, he or she may change the Method chosen
by you, unless you specify otherwise. If you do not choose a Method, your
Beneficiary will make the choice if he or she becomes entitled to payments. Any
choice of Method or change of such choice must be made by written notice to
TIAA, as explained in Section 49. Once payment of the Death Benefit has begun,
the choice may not be changed. Methods providing a lifetime income may be
elected only if the Death Benefit Payee is a natural person. A fixed or
guaranteed period may not exceed the Death Benefit Payee's life expectancy. The
Methods of Payment are described as monthly payments, but the Death Benefit
Payee may choose quarterly, semi-annual or annual payments.
Each of the Methods of Payment listed below is payable from TIAA's
General Account. No Method of Payment is payable from any Investment Account.
Single-sum Payment. The Death Benefit will be paid to the Death Benefit
Payee in one sum.
Single Life Annuity. A payment will be made to the Death Benefit Payee
each month for life. All payments will cease at his or her death. This
Method provides no benefits for anyone after the death of the Death
Benefit Payee.
Single Life Annuity with a 10-, 15- or 20-Year Guaranteed Period. A
payment will be made to the Death Benefit Payee each month for life. If
he or she dies before the end of the guaranteed period chosen, the
monthly payments will continue to the end of that period.
Payments for a Fixed Period. A payment will be made to the Death
Benefit Payee each month for a fixed period of not less than two nor
more than thirty years, as chosen. If the
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Death Benefit Payee dies before the end of the period chosen, the
monthly payments will continue to the end of that period. At the end of
the period chosen payments will stop.
Interest Payments. A payment of interest on the Death Benefit will be
made each month for a chosen period of not less than two nor more than
thirty years. At the end of the period chosen, TIAA will pay the Death
Benefit. If the Death Benefit Payee dies while any part of the Death
Benefit is held by TIAA, that amount will become payable in a single
sum.
The value of the Death Benefit placed under this Method must be
at least $5,000.
If any Method chosen, except "Interest Payments", would result in
payments of less than $100 a month, TIAA will have the right to require a change
in choice that will result in payments of not less than $100 a month.
45. Distribution Requirements upon the Death of the Owner. If you die before the
Annuity Starting Date, TIAA will pay the Death Benefit in accordance with the
requirements of Section 72(s) of the Internal Revenue Code of 1986, as amended.
The Death Benefit must be distributed within five years of the death of the
Owner. However, if your Beneficiary is a natural person and payments begin
within one year of your death, and within 60 days of the date we receive due
proof of your death, the distribution may be made over the lifetime of your
Beneficiary or over a period not to exceed your Beneficiary's life expectancy.
If the Owner is not a natural person, the death of the Annuitant is treated as
the death of the Owner for these distribution requirements.
PART F: LUMP-SUM BENEFITS AND TRANSFERS
46. Availability. You may choose a Lump-sum Benefit or Transfer from an Account
before the Annuity Starting Date. Lump-sum Benefits or Transfers from an
Account's Accumulation must be at least $1,000 or for the entire Account
Accumulation. Only one Lump-sum Benefit or Transfer from the Fixed Account may
be made in any 180-day period. After we have given you three months' written
notice, we may limit Transfers from each Investment Account to no more than one
Transfer in any 90-day period.
TIAA may limit to $300,000 the total Premiums and Transfers credited to
your Fixed Account Accumulation in any twelve-month period.
Any request to receive a Lump-sum Benefit must be made by written notice
to TIAA as explained in Section 49. If your entire Contract Accumulation is
withdrawn, all obligations of TIAA to you under the Contract are fulfilled. Any
request to Transfer Accumulations must be in a form acceptable to TIAA.
47. Lump-sum Benefits and Transfers from the Fixed Account. Any part of your
Fixed Account Accumulation paid as a Lump-sum Benefit or Transferred to an
Investment Account will be reduced by the Surrender Charge (if any) specified in
the applicable Rate Schedule or Schedules. When different Rate Schedules apply
to different parts of your Fixed Account Accumulation, the parts accumulated
under the earliest applicable Rate Schedules will be reduced first.
No Surrender Charge will be assessed against any Lump-sum Benefit paid
or Transfer from your Fixed Account Accumulation arising from Premiums credited
while your Contract's original Rate Schedule is in effect. TIAA may include a
Surrender Charge in a future Rate Schedule, as described in Section 65. If a
Surrender Charge is included in a future Rate Schedule, it will apply
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only to the part of your Fixed Account Accumulation that arose from Premiums
paid under that Rate Schedule.
48. Effective Date. A Lump-sum Benefit payment or Transfer will be effective,
and all values determined as of the Business Day we receive your request, unless
you choose to defer the effective date to a future day acceptable to TIAA.
TIAA is required by law to reserve the right to defer payment of a
Lump-sum Benefit from the Fixed Account for up to six months. Also, TIAA
reserves the right to delay a Transfer from the Fixed Account for up to six
months. If we defer payment of a Lump-sum Benefit or a Transfer from the Fixed
Account for ten or more working days, we will credit interest at the total rate
then applicable to the "Interest Payments" Method of paying Death Benefits, but
not less than 3%. If at any time applicable state law requires a higher rate of
interest, such rate will be credited. Payment of a Lump- sum Benefit or a
Transfer from an Investment Account may be delayed to the extent permitted or
required under the Federal Investment Company Act of 1940, or any other
applicable federal or state law.
PART G: GENERAL PROVISIONS
49. Procedure for Elections and Changes. Any assignment, ownership, beneficiary
or benefit payment arrangement under this Contract is subject to TIAA's
acceptance. An election or change must be made, in accordance with the terms of
your Contract, by written notice satisfactory to TIAA. No such notice will take
effect unless it is received by TIAA at its home office in New York, NY. Any
notice of change in Owner, Beneficiary or other person named to receive payments
will take effect as of the date it was signed, whether or not the signer is
living at the time we receive it. Any other notice will take effect as of the
date it is received. Any action taken by TIAA in good faith before receiving the
notice will not subject TIAA to liability even though our acts were contrary to
what was stated in the notice.
50. Payment to an Estate, Guardian, Trustee, etc. TIAA will not be responsible
for the acts of or any omission by any executor, trustee, guardian or other
third party to whom payment is made.
51. Reports. At least once each year until the Annuity Starting Date, we will
mail you a report for the calendar year just ended. It will provide a statement
of the investments held in the Separate Account, and it will show the value of
your Contract Accumulation, the Death Benefit, your Fixed Account Accumulation,
and for each Investment Account Accumulation, the value of your Accumulation,
the number of your Accumulation Units, and the value of one Accumulation Unit.
52. No Loans. This Contract does not provide for loans.
53. Assignment. You may assign this Contract. We assume no responsibility for
the validity of any such assignment, nor will we be charged with notice of any
assignment unless it is in writing and has been received by us. The rights of
the Owner, Annuitant, any Second Annuitant, any Beneficiary and any other person
to receive benefits under this Contract will be subject to the terms of any
assignment. You should consult your tax advisor before making any assignment of
your Contract.
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54. Protection Against Claims of Creditors. The benefits and rights accruing to
you or any other person under this Contract are exempt from the claims of
creditors or legal process to the fullest extent permitted by law.
55. Non-Forfeiture of Benefits. Amounts payable under this Contract will not be
less than the minimum required as of the Date of Issue by any applicable statute
of the state or other jurisdiction in which this Contract was delivered.
56. Naming Your Beneficiary. Beneficiaries are persons you name, in a form
satisfactory to TIAA as explained in Section 49, to:
A) receive the Death Benefit (as Death Benefit Payees) if you die before
the Annuity Starting Date while the Annuitant is alive; or
B) become the Owner if you die on or after the Annuity Starting Date
while Income Benefit payments remain due.
At any time you may change, add or delete Beneficiaries by written
notice to TIAA, as explained in Section 49.
You may designate different classes of Beneficiaries, such as primary
and contingent. These classes set the priority of payment or ownership. If any
Primary Beneficiary is alive at the time of your death, the Primary
Beveficiary(ies) will receive the Death Benefit or become the Owner(s). If a
class contains more than one person, the then-living person(s) in the class will
receive the Death Benefit or become Owners in equal shares, unless you provide
otherwise. For example, if you die before the Annuity Starting Date, and you
named your spouse as primary Beneficiary and "children" as contingent
Beneficiaries, your spouse would receive the Death Benefit if he or she survived
you. But if your spouse did not survive you, then your surviving children would
receive the Death Benefit in equal shares.
The terms "children" or "my children" may be used to name a class of
Beneficiaries, either primary or contingent. Unless you specify otherwise, the
terms "children" or "my children" will mean all children born of your marriage
or marriages, and any children legally adopted by you. The term "children" also
has the same inclusive meaning when used to name as Beneficiaries the children
of your spouse, child, brother or sister.
If you die before the Annuity Starting Date and if you named your estate
as Beneficiary, none of the Beneficiaries you named is alive at the time of your
death, or you never named a Beneficiary, the Death Benefit will be paid to your
estate in one sum.
If you die on or after the Annuity Starting Date and if none of the
Beneficiaries you named is alive at the time of your death, or you never named a
Beneficiary, the Annuitant will become the Owner. If the Annuitant is not alive,
the Second Annuitant (if any) will become the Owner. If no Beneficiary or
Annuitant is alive, the present value of any Income Benefit remaining due will
be paid to your estate in one sum.
57. Insulation of Separate Account. TIAA owns the assets in Separate Account
VA-1. To the extent permitted by law, the assets of the Separate Account will
not be charged with liabilities arising out of any other business TIAA may
conduct. All income, gains and losses, whether or not realized, of an Investment
Account of the Separate Account will be credited to or charged against only that
Investment Account without regard to TIAA's other income, gains or losses.
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58. Investment Company Act of 1940. The Separate Account is operated as a
registered management investment company under the Investment Company Act of
1940. TIAA may operate the Separate Account as a unit-investment trust, or any
other form permitted under the Act. Also, TIAA may deregister the Separate
Account under the Act, subject to compliance with applicable law.
59. Service of Process upon TIAA. We will accept service of process in any
action or suit against us on this Contract in any court of competent
jurisdiction in the United States, Puerto Rico or Canada provided such process
is properly made. We will also accept such process sent to us by registered mail
if the plaintiff is a resident of the state, district or territory, in which the
action or suit is brought. This section does not waive any of our rights,
including the right to remove such action or suit to another court.
60. Benefits Based on Incorrect Age. If the amount of benefits is determined by
data as to a person's age that is incorrect, benefits will be recalculated on
the basis of the correct age. Any amounts underpaid by TIAA on the basis of the
incorrect data will be paid at the time the correction is made. Any amounts
overpaid by TIAA on the basis of the incorrect data will be charged against the
payments due after the correction is made. Any underpayments paid or
overpayments charged will include compound interest at the effective rate of 6%
per year.
61. Proof of Survival. For any benefit that requires the Owner, Annuitant, any
Second Annuitant, any Beneficiary and/or any other person named to receive
benefits be alive on the date any benefit payment is due under the terms of this
Contract, TIAA may require satisfactory proof that such person or persons are
alive. If this proof is not received after requested in writing, TIAA will have
the right to make reduced payments or to withhold payments entirely until such
proof is received.
Under a Single-Life Annuity Option, you must return any overpayment made
because we have not been notified of the Annuitant's death. If under a Two-Life
Annuity Option TIAA has overpaid benefits because of a death of which we were
not notified, subsequent payments will be reduced or withheld until the amount
of the overpayment has been recovered.
62. Compliance with Laws and Regulations. TIAA will administer the Contract to
comply with all applicable laws and regulations pertaining to annuities and the
terms and conditions of the Contract. TIAA will withhold and forward to tax
authorities any amounts required by law.
63. Right to Amend. TIAA reserves the right to change this Contract from time to
time in order to comply with applicable federal and state laws on annuities. If
we make such a change, we will do so for all contracts written on this form and
delivered in the same state this Contract was delivered. When required by law,
TIAA will obtain the approval of any appropriate regulatory authority to such
amendment.
64. Correspondence and Requests for Benefits. No notice, application, form,
premium payment or request for benefits will be deemed to be received by us
unless it is received at our home office in New York, NY. All Premiums and
benefits are payable at our home office in New York, NY. Any questions about
your Contract or inquiries about our services should be directed to us at our
home office address: TIAA, 730 Third Avenue, New York, NY 10017-3206.
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65. Change of Rate Schedule. We may, from time to time, substitute a new Rate
Schedule for the one in Section 66. A change in the Rate Schedule will be made
only after we have given you three months' written notice of the change. Any
change in the Surrender Charge will comply with the applicable state
nonforfeiture law, if any.
A new Rate Schedule will apply only to benefits arising from any
Premiums credited while such Rate Schedule is in effect. Any change in the Rate
Schedule will not affect the amount of benefits arising from Premiums credited
prior to the change. Any new Rate Schedule will specify:
A) the guaranteed annuity purchase rates used for determining Income and
Death Benefit payments made from the General Account; and
B) the Surrender Charge, if any, on Lump-sum Benefits and Transfers from your
Fixed Account Accumulation.
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66. Rate Schedule. All Income and Death Benefits are payable from TIAA's General
Account. TIAA may pay Income or Death Benefits that are higher than the benefit
amounts guaranteed by this Rate Schedule. Once Income or Death Benefit payments
have begun, TIAA does not expect to modify the benefit payments.
The guaranteed annuity purchase rates applicable to the portion of your Contract
Accumulation arising from all Premiums credited under this Rate Schedule
(whether allocated to the Fixed Account or an Investment Account) and any
Additional Interest credited to the Fixed Account under this Rate Schedule will
be computed on this basis:
(1) a deduction for any Premium Taxes incurred by TIAA for your
Contract when annuity payments commence;
(2) interest at an effective annual rate of 2.5%; and (3) mortality
according to the 1983 Table a-D (TIAA Merged Gender Mod C).
<TABLE>
<CAPTION>
==============================================================================================================================
Guaranteed Annual Amount of Single Life Annuity with 10-Year
Guaranteed Period provided by $10,000 from your
Contract Accumulation (after any applicable
Premium Taxes have been deducted).
One-twelfth of the amount shown is payable each month.
==============================================================================================================================
Age When Annual Amount Age When Annual Amount Age When Annual Amount
Payments of Monthly Payments of Monthly Payments of Monthly
Begin Benefit Payments Begin Benefit Payments Begin Benefit Payments
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
40 347.66 57 430.30 74 611.75
41 351.03 58 437.32 75 628.00
42 354.55 59 444.66 76 645.01
43 358.22 60 452.35 77 662.79
44 362.05 61 460.40 78 681.32
45 366.04 62 468.84 79 700.62
46 370.22 63 477.70 80 720.65
47 374.58 64 487.00 81 741.38
48 379.13 65 496.79 82 762.74
49 383.89 66 507.09 83 784.65
50 388.85 67 517.93 84 807.00
51 394.04 68 529.36 85 829.66
52 399.45 69 541.39
53 405.10 70 554.07
54 411.00 71 567.43
55 417.16 72 581.48
56 423.59 73 596.25
===============================================================================================================================
"Age When Payments Begin" means that the Annuitant has reached the age shown, but has not passed that birthday by as much as
one month. All ages used in computing benefits are calculated in completed years and months. Guaranteed payments provided at ages
other than those shown and under other annuity forms are computed on the basis stated in this Rate Schedule. For a Contract
Accumulation other than $10,000, payments will be proportionate.
===============================================================================================================================
If a larger payment would result from the interest rate and mortality table TIAA uses for computing the amount of any
nonqualified individual single premium immediate annuity being offered when the payments start, that mortality
and interest basis will be used.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1291.1-NJ Page 19
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No Surrender Charge will be assessed against Lump-sum Benefit payments
or Transfers from the part of your Fixed Account Accumulation arising from
Premiums credited while this Rate Schedule is in effect.
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Page 20 1291.1-NJ
Ed. 9-94 TIAA PA
TEACHERS INSURANCE AND ANNUITY ASSOCIATION
730 Third Avenue, New York, New York
10017-3206
Telephone: 800-842-2733
Endorsement to Your Teachers Personal Annuity Contract
Effective Date: November 14, 1994
This endorsement changes your Teachers Personal Annuity Contract and
becomes part of that Contract. You retain all rights provided under your
original Contract. Please read this endorsement, and then attach it to your
Contract.
The purpose of this endorsement is to give you the option to accumulate
funds in Investment Accounts of a TIAA separate account. One Investment Account,
the Stock Index Account, is available as of the effective date of this
endorsement. The Stock Index Account maintains a broadly diversified portfolio
consisting primarily of common stocks selected to track the overall U.S. stock
market. As of the effective date of this endorsement, the Stock Index Account's
Separate Account Charge is 0.55% per year of the Account's net assets. This
charge is guaranteed not to exceed 1.50% per year.
As of the effective date of this endorsement, your Accumulation is
renamed your Fixed Account Accumulation. Your Contract will now have two types
of Accumulations, the Fixed Account Accumulation and Investment Account
Accumulations. Your Contract Accumulation (the value of your Contract) will now
equal the sum of your Fixed Account Accumulation and your Investment Account
Accumulations. Unless otherwise specified in this endorsement, all references to
Accumulation are hereby replaced with Contract Accumulation.
The first and third paragraph of the General Description on page one of your
Contract are replaced by the following:
The Income Benefit is paid to the Annuitant, unless you choose to
receive all Income Benefit payments. When you are ready for the Income Benefit
to begin, you choose the Income Option you want from among those described in
your Contract.
Accumulations in the Fixed Account are credited with a guaranteed
interest rate, and may also be credited with Additional Interest. Accumulations
in Investment Accounts are variable, are not guaranteed, and may increase or
decrease depending on investment results.
Income and Death Benefits are based on your Contract Accumulation and
the Rate Schedule or Schedules under which Premiums are credited to your
Contract.
You may allocate any future Premiums to the Fixed Account and/or to
Investment Accounts. Your future Premiums will be allocated to the Fixed
Account, unless you change your Premium Allocation instructions, as described on
page E4 of this endorsement.
You may Transfer funds between the Fixed Account and the Investment
Accounts and/or withdraw all or a part of your Contract Accumulation. Only one
Lump-sum Benefit payment or Transfer from the Fixed Account may be made in any
180-day period.
This endorsement follows the structure and organization of your
original contract.
Specimen
Chairman and
Chief Executive Officer
[GRAPHIC OMITTED]
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1291.1A Table of Contents on Next Page Page E1
TIAA PA Ed. 9-94
<PAGE>
Endorsement to Your
Teachers Personal Annuity Contract
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TABLE OF CONTENTS
for Endorsement
Page
PART A: TERMS USED IN YOUR
CONTRACT
Accumulation E3
Additional Interest E3
Death Benefit E3
Rate Schedule E3
Surrender Charge E3
Fixed Account E4
General Account E4
Separate Account E4
Investment Account E4
Transfer E4
Business Day E4
Valuation Day E4
PART B: CONTRACT AND PREMIUMS
Allocation of Premiums E4
Part B-2: ACCUMULATIONS
Contract Accumulation E5
Fixed Account Accumulation E5
Investment Account Accumulation E5
Accumulation Unit E5
Net Investment Factor E5
Number of Accumulation Units E6
Separate Account Charge E6
Page
PART C: INCOME BENEFITS
Income Options E6
Amount of the Income Benefit E7
PART D: DEATH BENEFIT
Transfer to the Fixed Account E7
Amount of the Death Benefit E7
Guaranteed Minimum Death Benefit E8
PART E: LUMP-SUM BENEFITS AND
TRANSFERS
Availability E8
Lump-sum Benefits and Transfers
from the Fixed Account E8
Effective Date E9
Part F: GENERAL PROVISIONS
Reports E9
Insulation of Separate Account E9
Investment Company Act of 1940 E9
Change of Rate Schedule E10
Rate Schedule E11
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Endorsement to Your
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PART A: TERMS USED IN YOUR CONTRACT
The term Accumulation in Section 1 of your Contract is renamed Fixed Account
Accumulation and is further described in Part B-2 of this endorsement.
The term Additional Amounts in Section 2 is renamed Additional Interest.
Section 7 (Death Benefit) is replaced with:
The Death Benefit is the value of your Contract Accumulation, or if greater, the
sum of all Premiums credited to this Contract less any Lump-sum Benefits paid
(and less any Surrender Charges on Lump-sum Benefits or Transfers from the Fixed
Account). It will be paid to the Death Benefit Payee under one of the Methods of
Payment set forth in Part D of your Contract, if you or the Annuitant dies
before the Annuity Starting Date.
For Premiums allocated to the Fixed Account (including your Accumulation as of
the effective date of this endorsement), the guarantees in your Contract's
original Rate Schedule remain in effect. Part F of this endorsement contains a
restatement and expansion of the Rate Schedule. Section 13 (Rate Schedule) is
replaced with:
The Rate Schedule or Schedules set forth:
A) the guaranteed annuity purchase rates to be used in determining
Income and Death Benefit payments made from the General Account; and
B) any Surrender Charge to be assessed against Lump-sum Benefits or
Transfers from your Fixed Account Accumulation.
A Rate Schedule applies to Contract Accumulations arising from Premiums
credited while the Rate Schedule is in effect. The minimum Income or Death
Benefit, paid as an annuity, is equal to your Contract Accumulation multiplied
by the guaranteed annuity purchase rate calculated on the basis specified in the
Rate Schedule. After we have given you three months' written notice, and to the
extent permitted by law, TIAA may change the Rate Schedule applicable to future
Premiums as described in Part F of this endorsement. Any change in the Rate
Schedule will not affect the amount of benefits arising from Premiums credited
prior to the change.
Section 14 (Surrender Charge) is replaced with:
A Surrender Charge is a charge assessed against a Lump-sum Benefit payment from
the Fixed Account or a Transfer from the Fixed Account. No Surrender Charge will
be assessed against the part of your Fixed Account Accumulation arising from
Premiums credited while your Contract's original Rate Schedule is in effect. If
a Surrender Charge is included in a future Rate Schedule, it will apply only to
the part of your Fixed Account Accumulation arising from Premiums paid while
such Rate Schedule is in effect. No Surrender Charge will ever be assessed
against an Investment Account Accumulation.
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<PAGE>
Endorsement to Your
Teachers Personal Annuity Contract
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The following terms are added:
Fixed Account. All Premiums and Transfers credited to the Fixed Account become
part of TIAA's General Account.
The General Account consists of all of TIAA's assets other than those in
separate accounts.
Separate Account. All Premiums and Transfers credited to an Investment Account
become part of the Separate Account. The Separate Account is designated as
"VA-1" and was established by TIAA in accordance with New York law to provide
benefits from this Contract and other similar contracts. The assets and
liabilities of Separate Account VA-1 are segregated from the assets and
liabilities of the General Account.
An Investment Account is a subaccount of the Separate Account. TIAA may add or
delete Investment Accounts as described in Part F of this endorsement.
You may Transfer some or all of your Contract Accumulation between the Fixed
Account and the available Investment Accounts. The provisions concerning
Transfers, including restrictions, are set forth in Part E of this endorsement.
A Business Day is any day that the New York Stock Exchange is open for trading.
A Business Day ends at 4:00 p.m. Eastern time, or when trading closes on the New
York Stock Exchange, if earlier.
A Valuation Day is any day Business Day, 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 a TIAA Investment Account are
principally traded. Valuation Days that aren't Business Days end at 4:00 p.m.
Eastern time.
PART B: CONTRACT AND PREMIUMS
The following provision is added:
Allocation of Premiums. You allocate Premiums among the Fixed Account and the
available Investment Accounts. Premiums allocated to the Fixed Account increase
your Fixed Account Accumulation. Premiums allocated to an Investment Account
purchase Accumulation Units in that Account. As of the effective date of this
endorsement, your Premiums are allocated to the Fixed Account only. You may
change this allocation at any time. Your Premiums are allocated according to the
most recent valid instructions TIAA has received from you in a form acceptable
to TIAA.
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Ed. 9-94 TIAA PA
<PAGE>
Endorsement to Your
Teachers Personal Annuity Contract
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Part B-2 is added to your Contract:
PART B-2: ACCUMULATIONS
Section 1 (Accumulation) is replaced with the following two provisions:
Your Contract Accumulation is equal to the sum of your Fixed Account
Accumulation and your Investment Account Accumulations. Your Fixed Account
Accumulation is guaranteed by TIAA's General Account and will earn interest at a
guaranteed effective annual rate of 3%. Investment Account Accumulations are not
guaranteed, and you bear the investment risk of your Investment Account
Accumulations.
Your Fixed Account Accumulation is equal to:
A) all Premiums allocated to your Fixed Account Accumulation; plus
B) all Transfers credited to your Fixed Account Accumulation; plus
C) interest credited to your Fixed Account Accumulation at a guaranteed
effective annual rate of 3%; plus D)ab any Additional Interest in excess of
the guaranteed 3% interest credited to your Fixed Account Accumulation; less
E) any Premium Taxes incurred by TIAA for your Fixed Account Accumulation; less
F) the amount of any Lump-sum Benefits paid or Transfers from your Fixed
Account Accumulation; less G)ab any Surrender Charge assessed for Lump-sum
Benefits or Transfers from your Fixed Account Accumulation.
The following provisions are added:
An Investment Account Accumulation (the value of your share of an Investment
Account) is equal to the number of your Accumulation Units multiplied by the
value of one Accumulation Unit in that Investment Account.
Accumulation Unit. Each Investment Account maintains a separate Accumulation
Unit. The value of each Investment Account's Accumulation Unit is calculated at
the close of each Valuation Day. The value of an Investment Account's
Accumulation Unit is equal to the previous day's value multiplied by the
Account's Net Investment Factor.
The Net Investment Factor for an Investment Account equals (A) divided by (B),
as follows:
(A) equals the value of the Investment 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 Investment 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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<PAGE>
Endorsement to Your
Teachers Personal Annuity Contract
- -------------------------------------------------------------------------------
Number of Accumulation Units. The number of your Accumulation Units in an
Investment Account will be increased by:
A) any Premiums allocated to that Investment Account; and
B) any Transfers to that Investment Account;
and will be decreased by:
C) any Premium Taxes incurred by TIAA for your Investment Account
Accumulation;
D) any Lump-sum Benefits paid from that Investment Account; and
E) any Transfers from that Investment Account to the Fixed Account or
another Investment Account.
The increase or decrease in the number of your Accumulation Units on
any Valuation Day is equal to the net dollar value of all transactions divided
by the value of the Investment Account's Accumulation Unit as of the end of the
Valuation Day.
Separate Account Charge. Each Investment Account has a Separate Account Charge
for mortality and expense risk, administration, and investment advisory
services. After three months' written notice to you, TIAA, at its discretion,
may increase or decrease any Investment Account's Separate Account Charge. The
Separate Account Charge for any Investment Account is guaranteed not to exceed
1.5% per year of net assets. The Separate Account Charge as of the effective
date of this endorsement is shown on page 1.
PART C: INCOME BENEFIT
The following sentence is added to Section 21 (Income Options):
Your Contract Accumulation can be used to provide an Income Benefit payable from
and guaranteed by TIAA's General Account. No Income Benefit is available from
the Separate Account.
- -------------------------------------------------------------------------------
Page E6 1291.1A
Ed. 9-94 TIAA PA
<PAGE>
Endorsement to Your
Teachers Personal Annuity Contract
- -------------------------------------------------------------------------------
Section 23 (The Amount of the Income Benefit) is replaced with:
The Amount of the Income Benefit as of the Annuity Starting Date will be
determined by:
A) the amount of your Contract Accumulation;
B) the Rate Schedule or Schedules under which Premiums were credited
to your Contract and the Rate Schedule or Schedules under which
any Additional Interest was credited to your Fixed Account
Accumulation;
C) the Income Option you choose;
D) the Annuitant's age, if you choose an Income Option that pays a
lifetime income; and E)ab the Second Annuitant's age, if you choose
one of the Survivor Annuity Options.
If the Income Benefit would be less than $100 a month, TIAA will have
the right to change to quarterly, semi-annual or annual payments, whichever will
result in payments of $100 or more and the shortest interval between payments.
PART D: DEATH BENEFIT
The following provision is added:
Transfer to the Fixed Account. All amounts held in Investment Accounts will be
Transferred to the Fixed Account as of the date we receive due proof of the
death. If your spouse is the Death Benefit Payee and elects to become the Owner
at the time due proof of your death is provided, no such Transfer will be made.
Section 26 (Amount of the Death Benefit) is replaced with:
The Amount of the Death Benefit will be determined as of the date we receive due
proof of the death of you or the Annuitant by:
A) the amount of your Contract Accumulation, or if greater, the sum of all
Premiums credited to your Contract less any Lump-sum Benefits paid and
less any Surrender Charges on Lump-sum Benefits or Transfers from the
Fixed Account;
B) the Rate Schedule or Schedules under which Premiums were credited
to your Contract and the Rate Schedule or Schedules under which
any Additional Interest was credited to your Fixed Account
Accumulation;
C) the Method of Payment chosen for the Death Benefit; and
D) if the Method chosen pays a lifetime income, the age of the Death
Benefit Payee.
- -------------------------------------------------------------------------------
1291.1A Page E7
TIAA PA Ed. 9-94
<PAGE>
Endorsement to Your
Teachers Personal Annuity Contract
- -------------------------------------------------------------------------------
The following provision is added:
Guaranteed Minimum Death Benefit. The Death Benefit will be the greater of (i)
your Contract Accumulation or (ii) the sum of all Premiums credited less any
Lump-sum Benefits paid and less any Surrender Charges on Lump-sum Benefits or
Transfers from the Fixed Account. As of the date TIAA receives due proof of
death of you or the Annuitant, your Fixed Account Accumulation will be increased
by the amount, if any, by which the sum of all Premiums credited to your
Contract (less any Lump-sum Benefits paid and less any Surrender Charges on
Lump-sum Benefits or Transfers from the Fixed Account) exceeds your Contract
Accumulation.
The title of Part E is changed as follows:
PART E: LUMP-SUM BENEFITS AND TRANSFERS
Section 31 (Availability of Lump-sum Benefit) is replaced with:
Availability. You may choose a Lump-sum Benefit or Transfer from an Account
before the Annuity Starting Date. Lump-sum Benefits or Transfers from an
Account's Accumulation must be at least $1,000 or for the entire Account
Accumulation. Only one Lump-sum Benefit or Transfer from the Fixed Account may
be made in any 180-day period. After we have given you three months' written
notice, we may limit Transfers from each Investment Account to no more than one
Transfer in any 90-day period.
TIAA may limit to $300,000 the combined Premiums and Transfers credited
to your Fixed Account Accumulation in any twelve-month period.
Any request to receive a Lump-sum Benefit must be made by written
notice to TIAA as explained in Section 39 of your Contract. If your entire
Contract Accumulation is withdrawn, all obligations of TIAA to you under the
Contract are fulfilled. Any request to Transfer Accumulations must be in a form
acceptable to TIAA.
Section 32 (Payment of the Lump-sum Benefit) is replaced with the following two
provisions:
Lump-sum Benefits and Transfers from the Fixed Account. Any part of your Fixed
Account Accumulation paid as a Lump-sum Benefit or Transferred to an Investment
Account will be reduced by the Surrender Charge (if any) specified in the
applicable Rate Schedule or Schedules. When different Rate Schedules apply to
different parts of your Fixed Account Accumulation, the parts accumulated under
the earliest applicable Rate Schedules will be reduced first.
No Surrender Charge will be assessed against any Lump-sum Benefit paid
or Transfer from your Fixed Account Accumulation arising from Premiums credited
while your Contract's original Rate Schedule is in effect. TIAA may include a
Surrender Charge in a future Rate Schedule, as described in Part F of this
endorsement. If a Surrender Charge is included in a future Rate Schedule, it
will apply only to the part of your Fixed Account Accumulation that arose from
Premiums paid under that Rate Schedule.
- -------------------------------------------------------------------------------
Page E8 1291.1A
Ed. 9-94 TIAA PA
<PAGE>
Endorsement to Your
Teachers Personal Annuity Contract
- -------------------------------------------------------------------------------
Effective Date. A Lump-sum Benefit payment or Transfer will be effective, and
all values determined as of the Business Day we receive your request, unless you
choose to defer the effective date to a future day acceptable to TIAA.
TIAA is required by law to reserve the right to defer payment of a
Lump-sum Benefit from the Fixed Account for up to six months. Also, TIAA
reserves the right to delay a Transfer from the Fixed Account for up to six
months. If we defer payment of a Lump-sum Benefit or a Transfer from the Fixed
Account for ten or more working days, we will credit interest at the total rate
then applicable to the "Interest Payments" Method of paying Death Benefits, but
not less than 3%. If at any time applicable state law requires a higher rate of
interest, such rate will be credited. Payment of a Lump-sum Benefit or a
Transfer from an Investment Account may be delayed to the extent permitted or
required under the Federal Investment Company Act of 1940, or any other
applicable federal or state law.
PART F: GENERAL PROVISIONS
Section 33 (Report of Accumulation) is replaced with:
Reports. At least once each year until the Annuity Starting Date, we will mail
you a report for the calendar year just ended. It will provide a statement of
the investments held in the Separate Account, and it will show the value of your
Contract Accumulation, the Death Benefit, your Fixed Account Accumulation, and
for each Investment Account Accumulation, the value of your Accumulation, the
number of your Accumulation Units, and the value of one Accumulation Unit.
The following provisions are added:
Insulation of Separate Account. TIAA owns the assets in Separate Account VA-1.
To the extent permitted by law, the assets of the Separate Account will not be
charged with liabilities arising out of any other business TIAA may conduct. All
income, gains and losses, whether or not realized, of an Investment Account of
the Separate Account will be credited to or charged against only that Investment
Account without regard to TIAA's other income, gains or losses.
Addition or Deletion of an Investment Account. TIAA may, as permitted by
applicable law, add or delete Investment Accounts within the Separate Account.
If you have Accumulation Units in an Investment Account that is deleted, you
must Transfer them to another Investment Account or to the Fixed Account.
Investment Company Act of 1940. The Separate Account is operated as a registered
management investment company under the Investment Company Act of 1940. TIAA may
operate the Separate Account as a unit-investment trust, or any other form
permitted under the Act. Also, TIAA may deregister the Separate Account under
the Act, subject to compliance with applicable law.
- -------------------------------------------------------------------------------
1291.1A Page E9
TIAA PA Ed. 9-94
<PAGE>
Endorsement to Your
Teachers Personal Annuity Contract
- -------------------------------------------------------------------------------
Section 46 (Change of Rate Schedule) is replaced with:
Change of Rate Schedule. We may, from time to time, substitute a new Rate
Schedule for the one currently in effect. A change in the Rate Schedule will be
made only after we have given you three months' written notice of the change.
Any change in the Surrender Charge will comply with the applicable state
nonforfeiture law, if any.
A new Rate Schedule will apply only to benefits arising from any
Premiums credited while such Rate Schedule is in effect. Any change in the Rate
Schedule will not affect the amount of benefits arising from Premiums credited
prior to the change. Any new Rate Schedule will specify:
A) the guaranteed annuity purchase rates used for determining Income and
Death Benefit payments made from the General Account; and
B) the Surrender Charge, if any, on Lump-sum Benefits and Transfers from your
Fixed Account Accumulation.
Premiums allocated to and Transfers to the Fixed Account (including your
Accumulation as of the effective date of this endorsement) continue to receive
the same guarantees specified by the Rate Schedule in your original Contract.
The deduction for expenses and contingencies has been eliminated. No charge for
expenses and contingencies will be assessed under this Contract.
The guarantee that 3% interest will be credited to your Fixed Account
Accumulation until you begin receiving Income Benefits or until you or the
Annuitant dies no longer appears in the Rate Schedule. This guarantee is
included in the definition of the Fixed Account Accumulation in Part B of this
endorsement.
The Rate Schedule has been modified to include a table illustrating guaranteed
minimum Income and Death Benefits based on $10,000 of your Contract Accumulation
at the time payment of the benefit begins. Premiums allocated to the Fixed
Account receive the same Income Benefit guarantees as under your original
Contract.
Section 47 (Rate Schedule) is replaced with the following two pages:
- -------------------------------------------------------------------------------
Page E10 1291.1A
Ed. 9-94 TIAA PA
<PAGE>
Endorsement to Your
Teachers Personal Annuity Contract
- -------------------------------------------------------------------------------
Rate Schedule. All Income and Death Benefits are payable from TIAA's General
Account. TIAA may pay Income or Death Benefits that are higher than the benefit
amounts guaranteed by this Rate Schedule. Once Income or Death Benefit payments
have begun, TIAA does not expect to modify the benefit payments.
The guaranteed annuity purchase rates applicable to the portion of your Contract
Accumulation arising from all Premiums credited under this Rate Schedule
(whether allocated to the Fixed Account or an Investment Account) and any
Additional Interest credited to the Fixed Account under this Rate Schedule will
be computed on this basis:
(1) a deduction for any Premium Taxes incurred by TIAA for your Contract
when ann uity payments commence; (2) interest at an effective annual
rate of 2.5%; and
(3 mortality according to the 1983 Table a-D (TIAA Merged Gender Mod C).
<PAGE>
<TABLE>
<CAPTION>
======================================================================================================================
Guaranteed Annual Amount of Single Life Annuity with 10-Year Guaranteed Period Provided by $10,000 from your
Contract Accumulation (after any
applicable Premium Taxes have been deducted).
One-twelfth of the amount shown is payable each
month.
======================================================================================================================
Age When Annual Amount Age When Annual Amount Age When Annual Amount
Payments of Monthly Payments of Monthly Payments of Monthly
Begin Benefit Payments Begin Benefit Payments Begin Benefit Payments
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
40 347.66 57 430.30 74 611.75
41 351.03 58 437.32 75 628.00
42 354.55 59 444.66 76 645.01
43 358.22 60 452.35 77 662.79
44 362.05 61 460.40 78 681.32
45 366.04 62 468.84 79 700.62
46 370.22 63 477.70 80 720.65
47 374.58 64 487.00 81 741.38
48 379.13 65 496.79 82 762.74
49 383.89 66 507.09 83 784.65
50 388.85 67 517.93 84 807.00
51 394.04 68 529.36 85 829.66
52 399.45 69 541.39 86 852.47
53 405.10 70 554.07 87 875.25
54 411.00 71 567.43 88 897.82
55 417.16 72 581.48 89 919.95
56 423.59 73 596.25 90 941.45
======================================================================================================================
"Age When Payments Begin" means that the Annuitant has reached the age shown, but has not passed that birthday by
as much as one month. All ages used in computing benefits are calculated in completed years and months. Guaranteed
payments provided at ages other than those shown and under other annuity forms are computed on the basis stated in this
Rate Schedule. For a Contract Accumulation other than $10,000, payments will be proportionate.
======================================================================================================================
</TABLE>
If a larger payment would result from the interest rate and mortality
table TIAA uses for computing the amount of any nonqualified individual single
premium immediate annuity being offered when the payments start, that mortality
and interest basis will be used.
No Surrender Charge will be assessed against Lump-sum Benefit payments
or Transfers from the part of your Fixed Account Accumulation arising from
Premiums credited while this Rate Schedule is in effect.
- -------------------------------------------------------------------------------
1291.1A Page E11
TIAA PA Ed. 9-94
<PAGE>
Endorsement to Your
Teachers Personal Annuity Contract
- -------------------------------------------------------------------------------
The table shown below is a restatement of the table in your original Contract's
Rate Schedule.
The table corrects two typographical errors in your Contract's Rate Schedule:
The "Annuity Beginning at" columns headings have been corrected to refer to ages
65, 70, and 75; and the rate for $100 credited at age 51 for an annuity
beginning at age 75 has been corrected. The errors in your original Contract's
Rate Schedule understated your benefit guarantees.
<TABLE>
<CAPTION>
===================================================================================================================================
Guaranteed Income Benefit Provided by a Premium Allocated to the Fixed Account
Guaranteed Annual Amount of Single Life Annuity with a 10-year Guaranteed Period
Provided by $100 (net of any reduction for any
applicable Premium Taxes) One-twelfth of
the amount shown is payable each month
===================================================================================================================================
Age Age Age
Attained Attained Attained
When Annuity Beginning at When Annuity Beginning at When Annuity Beginning at
$100 is Age 65 Age 70 Age 75 $100 is Age 65 Age 70 Age 75 $100 is Age 65 Age 70 Age 75
credited credited credited
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
35 $12.06 $15.59 $20.49 52 $7.29 $9.43 $12.39 69 $5.71 $7.50
36 11.70 15.13 19.89 53 7.08 9.15 12.03 70 5.54 7.28
37 11.36 14.69 19.30 54 6.88 8.89 11.68 71 7.07
38 11.03 14.27 18.75 55 6.67 8.63 11.34 72 6.86
39 10.71 13.85 18.20 56 6.48 8.38 11.01 73 6.66
40 10.40 13.45 17.67 57 6.29 8.13 10.69 74 6.47
41 10.09 13.05 17.15 58 6.11 7.90 10.37 75 6.28
42 9.80 12.67 16.65 59 5.93 7.67 10.07
43 9.52 12.31 16.17 60 5.76 7.44 9.78
44 9.24 11.95 15.70 61 5.59 7.23 9.50
45 8.97 11.60 15.24 62 5.43 7.01 9.22
46 8.71 11.26 14.80 63 5.27 6.81 8.95
47 8.46 10.93 14.36 64 5.12 6.62 8.69
48 8.21 10.62 13.95 65 4.97 6.42 8.43
49 7.97 10.31 13.54 66 6.23 8.19
50 7.74 10.01 13.14 67 6.05 7.95
51 7.51 9.71 12.76 68 5.87 7.72
====================================================================================================================================
"Age Attained" means that the Annuitant has reached the age shown but has not passed that birthday by as much as one month. All
ages used in computing benefits are calculated in completed years and months. Monthly payments for ages other than those shown,
and under other income methods, are computed on the basis stated in the
applicable Rate Schedule at the time the Premium is credited. For amounts other
than $100, payments will be proportionate.
====================================================================================================================================
</TABLE>
- -------------------------------------------------------------------------------
Page E12 1291.1A
Ed. 9-94 TIAA PA
[TIAA logo] Application for Teachers Personal Annuity Contract N
Please print in INK and provide all information requested.
- --------------------------------------------------------------------------------
1. Annuitant Last Name________________________ First__________ Middle____
Information [ ]Mr. [ ]Mrs. [ ]Ms. [ ]Other____
Sex: [ ]M [ ]F Date of Birth: Mo._____ Day_____ Yr._____
Soc. Sec. #__________ Home Tel.__________ Bus. Tel:_________
Employer_______________________ Status: [ ]Active [ ]Retired
Do you own any insurance or Annuity contracts issued by
TIAA-CREF? [ ]Yes [ ]No
Home Address: Street _______________________________________
City _____________________ State _______ Zip Code __________
- --------------------------------------------------------------------------------
2. Owner Last Name________________________ First__________ Middle____
Information [ ]Mr. [ ]Mrs. [ ]Ms. [ ]Other____
(Complete only Sex: [ ]M [ ]F Date of Birth: Mo._____ Day_____ Yr._____
if the Annuitant Soc. Sec. #__________ Home Tel.__________ Bus. Tel:_________
is not to be Employer_______________________ Status: [ ]Active [ ]Retired
the Owner.) Relationship of Owner to Annuitant__________________________
Do you own any insurance or Annuity contracts issued by
TIAA-CREF? [ ]Yes [ ]No
Home Address: Street _______________________________________
City _____________________ State _______ Zip Code __________
- --------------------------------------------------------------------------------
3. Existing Will this annuity contract replace an existing life
Contracts insurance or annuity contract from another company?
[ ]Yes [ ]No From what company? ____________________________
Contract number ____________________________________________
- --------------------------------------------------------------------------------
4. Annuity The first day of (Month) ______________ (Year)_____________,
Starting Date or at the Annuitant's age ______________
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
5. Your Name(s) and Address(es) Relationship to Owner Date of Birth Social Security #
Designation of Primary Beneficiary(ies)
of Beneficiary
(Very Important)
[stamp]
APPROVED
STATE OF NEW YORK
NOV 30 1992
/s/ [illegible]
SUPERINTENDENT OF INSURANCE
--------------------------------------------------------------------------------------------
Name(s) and Address(es) Relationship to Owner Date of Birth Social Security #
of Contingent Beneficiary(ies)
</TABLE>
- --------------------------------------------------------------------------------
6. Initial Premium The amount of premium paid with this application is
$______________________.
- --------------------------------------------------------------------------------
The Annuitant, if other than the Owner, consents to this application for an
annuity based on his or her life. The Owner has all rights to the benefits
provided by the annuity contract. Unless the Owner has assigned or irrevocably
transferred rights under the contract, the Owner may exercise every right given
by the contract without the consent of any other person. If the Annuitant dies
before income benefit payments begin, the Owner will receive the death benefit.
If the Owner dies before income benefit payments begin, the Beneficiary will
receive the death benefit. The annuity applied for will not take effect unless
and until, during the lifetimes of the proposed Owner and Annuitant, TIAA has
received the initial premium and TIAA has approved this application.
---------------------------------------- ------------------
Signature of Annuitant Date
---------------------------------------- ------------------
Signature of Owner Date
(if other than the Annuitant)
1291.APP.01
ED 10/92
Exhibit 8(a)
CHARTER
OF
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
Originally Filed March 4, 1918
As Amended October 31, 1997
ARTICLE ONE
This corporation shall be named "Teachers Insurance and Annuity
Association of America."
ARTICLE TWO
The place where the corporation is to be located and have its principal
office for the transaction of business is the City of New York, State of New
York.
ARTICLE THREE
The corporation shall have power to do any and all kinds of business
specified in paragraphs 1, 2 and 3 of Section 46 of the Insurance Law of the
State of New York, being Chapter 882 of the Laws of 1939, as amended, and any
amendments to such paragraphs or provisions in substitution therefor which may
be hereafter adopted, provided the corporation is qualified under such
amendments to do such kinds of business, together with any other kind or kinds
of business to the extent necessarily or properly incidental to the kinds of
insurance business which the corporation is so authorized to do. The corporation
shall also have the general rights, powers and privileges of a corporation, as
the same now or hereafter are declared by the applicable laws of the State of
New York and any and all other rights, powers and privileges now or hereafter
granted by the Insurance Law of the State of New York or any other law or laws
of the State of New York to life insurance companies having power to do the
kinds of business hereinabove referred to. The corporation shall transact its
business exclusively on a non-mutual basis and shall issue only nonparticipating
policies.
ARTICLE FOUR
The corporate powers of the corporation shall be vested in and exercised
by a board of trustees, and by such officers and agents as the board of trustees
may from time to time elect or appoint.
ARTICLE FIVE
Section 1. The board of trustees shall consist of four classes of
trustees, each class to consist of four trustees, and the trustees of one class
shall be elected at the annual election in each year, each to serve for a term
of four years. The term of office of each trustee so elected shall commence at
the close of the meeting of the board of trustees next succeeding such election,
and shall continue until a successor shall take office. A majority of trustees
shall be citizens and residents of the United States, and not less than three
trustees shall be residents of the State of New
- 1 -
<PAGE>
York. A trustee need not be a stockholder. The number of trustees shall in no
case be less than the minimum number of incorporators required to organize a
life insurance corporation.
Section 2. The annual meeting of stockholders for the election of
trustees shall be held each year in the month of November on a date and at an
hour specified by notice mailed at least thirty days in advance. Any vacancy in
the board of trustees occurring in an interval between the annual meetings of
stockholders may be filled for the unexpired portion of such trustee's term by
the board of trustees in such manner as the bylaws of the corporation may
provide.
Section 3. The board of trustees shall have power to adopt bylaws
providing for the appointment of an executive committee, not less than three in
number, to exercise all the powers of the trustees in the intervals between
meetings of the board of trustees, and prescribing such other rules and
regulations, not inconsistent with law or this charter, for the conduct of the
affairs of the corporation as may be deemed expedient, and such bylaws may be
amended or repealed by them at pleasure. The board of trustees shall also have
all other powers usually vested in boards of directors of life insurance
companies not inconsistent with law or this charter, and may at any time accept
or exercise any and all additional powers and privileges which may be conferred
upon this corporation, or upon life insurance companies in general. One-third of
the trustees shall constitute a quorum at all meetings of the board.
ARTICLE SIX
The board of trustees, at each annual meeting, shall elect the executive
officers of the corporation as provided in the bylaws. Other officers may be
elected or appointed as provided in the bylaws. One person may hold more than
one office, except that no person shall be both president and secretary. The
chairman and the president shall be members of the board of trustees, but no
other officer need be a trustee.
ARTICLE SEVEN
The capital of the corporation shall be Two Million Five Hundred Thousand
Dollars ($2,500,000) which shall be divided into two thousand five hundred
(2,500) shares of One Thousand Dollars ($1,000) each.
ARTICLE EIGHT
The purpose of the corporation is to aid and strengthen nonproprietary
and nonprofit-making colleges, universities and other institutions engaged
primarily in education or research by providing annuities, life insurance, and
sickness and accident benefits suited to the needs of such institutions and of
the teachers and other persons employed by them on terms as advantageous to the
holders and beneficiaries of such contracts and policies as shall be
practicable, and by counselling such institutions and their employees concerning
pension plans or other measures of security, all without profit to the
corporation or its stockholders. The corporation may receive gifts and bequests
to aid it in performing such services.
ARTICLE NINE
The fiscal year of the corporation shall commence on the first day of
January and shall end on the thirty-first day of December.
- 2 -
Exhibit 8(b)
BYLAWS
OF
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
As Amended January 1, 1998
ARTICLE ONE
Stockholders
Section 1. Annual Meeting. The annual meeting of stockholders for the
election of trustees and for the transaction of such other business as may
properly come before the meeting shall be held in the month of November each
year at the office of the Association in the City of New York on a day and at an
hour specified by notice mailed at least thirty days in advance. The notice
shall be in writing and shall be signed by the chairman, or the president, or a
vice president, or the secretary.
Special meetings of the stockholders may be held at the said office of
the Association whenever called by the chairman, or by the president, or by
order of the board of trustees, or by the holders of at least one-third of the
outstanding shares of stock of the Association, or may be held subject to the
provisions of the emergency bylaws of the Association.
Section 2. Notice. It shall be the duty of the secretary not less than
ten nor more than forty days prior to the date of each meeting of the
stockholders to cause a notice of the meeting to be mailed to each stockholder.
Section 3. Voting. At all meetings of stockholders each stockholder
shall be entitled to one vote upon each share of stock owned by him of record on
the books of the Association ten days before the meeting. Stockholders may vote
in person or by proxy appointed in writing.
Section 4. Quorum. The presence in person or by proxy of the holders of
a majority of the shares in the Association shall be necessary to constitute a
quorum at any meeting of stockholders.
Section 5. Telephonic Participation. At all meetings of stockholders or
any committee thereof, stockholders may participate by means of a conference
telephone or similar communications equipment allowing all persons participating
in the meeting to hear each other at the same time. Participation by such means
shall constitute presence in person at a meeting.
ARTICLE TWO
Trustees
Section 1. General Management. The general management of the property,
business and affairs of the Association shall be vested in the board of trustees
provided by the charter. A
- 1 -
<PAGE>
trustee need not be a stockholder. At least one-third of such trustees must be
persons who are not officers or employees of the Association or any entity
controlling, controlled by, or under common control with the Association and who
are not beneficial owners of a controlling interest in the voting stock of the
Association or any such entity. At least one such person must be included in the
quorum for the transaction of business at any meeting of the trustees.
Section 2. Quorum. One-third of the trustees shall constitute a quorum
at all meetings of the board. If less than a quorum shall be present at any
meeting, a majority of those present may adjourn the meeting from time to time
until a quorum shall attend. In case of a vacancy among the trustees of any
class through death, resignation or other cause, a successor to hold office for
the unexpired portion of the term may be elected at any meeting of the board at
which a quorum shall be present. Such successors shall not take office nor
exercise the duties thereof until ten days after written notice of their
election shall have been filed in the office of the Superintendent of Insurance
of the State of New York.
Section 3. Annual Meeting. There shall be a meeting of the board of
trustees in the month of November each year on a day and at an hour specified in
a notice mailed at least ten days and not more than twenty days in advance. This
shall be known as the annual meeting of the board of trustees. At this meeting
the board shall elect officers, appoint committees and transact such other
business as shall properly come before the meeting.
Section 4. Other Meetings. Stated meetings of the board of trustees
shall be held on such dates as the board by standing resolution may fix. No
notice of such stated meetings need be given. Special meetings of the board may
be called by order of the chairman, the president, or the executive committee by
notice mailed at least one week prior to the date of such meeting, and any
business may be transacted at the meeting.
Section 5. Telephonic Participation. At all meetings of the board of
trustees or any committee thereof, trustees may participate by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
Section 6. Action Without a Meeting. Where time is of the essence, but
not in lieu of a regularly scheduled meeting of the board of trustees or
committee thereof, any action required or permitted to be taken by the board, or
any committee thereof, may be taken without a meeting if all members of the
board or the committee consent in writing to the adoption of a resolution
authorizing the action. The resolution and the written consents thereto by the
members of the board or committee shall be filed with the minutes of the
proceedings of the board or committee.
Section 7. Trustees' Compensation and Expenses. A trustee may be paid an
annual stipend and fees and such other compensation or emolument in any amount
first authorized by the board in accordance with Section 1 of Article Five
hereof, including, but not limited to, a deferred compensation benefit, for
meetings of the board that he/she attends and for services that he/she renders
on or for committees or subcommittees of the board; and each trustee shall be
reimbursed for transportation and other expenses incurred by him/her in serving
the Association.
- 2 -
<PAGE>
Section 8. Chairman. The chairman, and in his absence the president,
shall preside at all meetings of the board.
ARTICLE THREE
Officers
Section 1. Election. At each annual meeting the board of trustees shall
elect the executive officers of the corporation including a chairman, a
president, one or more vice presidents, and such other executive officers as
they may determine. Each such executive officer shall hold office until the
close of the next annual meeting of the board or, if earlier, until his
retirement, death, resignation or removal. The board may appoint other officers
and agents, assign titles to them and determine their duties; such officers and
agents shall hold office during the pleasure of the board of trustees. It may
appoint persons to act temporarily in place of any officers of the Association
who may be absent, incapacitated, or for any other reason unable to act or may
delegate such authority to the chief executive officer.
Section 2. Removal of Officers. Any officer elected by the board of
trustees may be removed by the affirmative votes of a majority of all the
trustees holding office. Any other officer may be removed by the affirmative
votes of a majority of all members of the executive committee holding office.
Section 3. Removal of Other Employees. All other agents and employees
shall hold their positions at the pleasure of the executive committee or of such
executive officer as the executive committee may clothe with the powers of
engaging and dismissing.
Section 4. Qualifications. The chairman and the president shall be
members of the board of trustees, but none of the other officers need be a
trustee. One person may hold more than one office, except that no person shall
be both president and secretary.
Section 5. Chief Executive Officer. The board of trustees shall
designate either the chairman or the president as chief executive officer.
Subject to the control of the board of trustees and the provisions of these
bylaws, the chief executive officer shall be charged with the management of the
affairs of the Association, and shall perform such duties as are not
specifically delegated to other officers of the Association. He shall be ex
officio a member of all standing committees except the nominating and personnel
committee, audit committee and the committee on reimbursement agreements with
CREF. He shall report from time to time to the board of trustees on the affairs
of the Association.
Section 6. Chairman. The chairman, when present, shall preside at all
meetings of the stockholders and of the board. He shall be ex officio chairman
of the executive committee. He may appoint trustee committees, except those
appointed by the board of trustees, and may appoint members to fill vacancies on
trustee committees appointed by the board when such occur between meetings of
the trustees. If the chairman is not the chief executive officer, he shall, in
addition to the foregoing, perform such functions as are delegated to him by the
chief executive officer. In the absence of both the chairman and the president,
the chair of the nominating and personnel committee shall preside at all
meetings of the stockholders and of the board.
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Section 7. President. The president, in the event of the absence or
disability of the chairman, shall perform the duties of the chairman. If the
president is not the chief executive officer, he shall assist the chief
executive officer in his duties and shall perform such functions as are
delegated to him by the chief executive officer.
Section 8. Absence or Disability of Chief Executive Officer. In the
absence or disability of the chief executive officer, the president, if he is
not the chief executive officer, or the chairman, if he is not the chief
executive officer, or if neither is available, a vice president so designated by
the executive committee or chief executive officer shall perform the duties of
the chief executive officer, unless the board of trustees otherwise provides and
subject to the provisions of the emergency bylaws of the Association.
Section 9. Secretary. The secretary shall give all required notices of
meetings of the board of trustees, and shall attend and act as secretary at all
meetings of the board and of the executive committee and keep the records
thereof. He shall keep the seal of the corporation, and shall perform all duties
incident to the office of secretary and such other duties as from time to time
may be assigned to him by the board of trustees, the executive committee, or the
chief executive officer.
Section 10. Other Officers. The chief executive officer shall determine
the duties of the executive officers other than the chairman, president, and
secretary and of all officers other than executive officers, and he may assign
titles to and determine the duties of non-officers.
ARTICLE FOUR
Committees
Section 1. Appointment. At each annual meeting of the board of trustees,
the board shall appoint an executive committee, an investment committee, a
nominating and personnel committee, an audit committee, a committee on
reimbursement agreements with CREF, a committee on products and services, and a
committee on corporate governance and social responsibility, each member of
which shall hold office until the close of the next annual meeting of the board
and until a successor shall be appointed or until the member shall cease to be a
trustee except that for the audit committee, the board may specify a different
period of membership. The board of trustees, the executive committee, or the
chairman may appoint such other trustee committees and subcommittees as may from
time to time be found necessary or convenient for the proper conduct of the
business of the Association, and designate their duties. Not less than one third
of the members of each trustee committee shall be persons who are not officers
or employees of the Association or of any entity controlling, controlled by, or
under common control with the Association and who are not beneficial owners of a
controlling interest in the voting stock of the Association or any such entity,
except for the nominating and personnel committee and the audit committee, each
of which will be comprised solely of such persons. Further, at least one such
person must be included in the quorum for the transaction of business at any
meeting of any of the committees.
Section 2. Executive Committee. The executive committee shall consist of
eight trustees including the chairman and the president, but not more than three
members shall be officers or salaried employees of the Association. Three
members shall constitute a quorum, among whom only one salaried officer may be
counted for that purpose. The executive committee shall meet
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in regular meeting as it may from time to time determine, and in special meeting
whenever called by the chairman, and shall be vested with full powers of the
board of trustees during intervals between the meetings of the board in all
cases in which specific instructions shall not have been given by the board of
trustees and, in particular, said committee:
(a) shall have general supervision of the contracts issued by the
Association, and of all matters relating to the selection of risks, the
determination of premium rates, and of any other questions of detail in the
conduct of the business which may be referred to the executive committee by
resolutions of the board of trustees.
(b) shall review and oversee the design, development, improvement, and
marketing of new and existing products and services.
(c) shall review the specifications for and oversee the implementation
stages of new technology-based services and computer programs at participating
institutions.
(d) shall have supervision of the rules and methods for recording the
vouchers, accounts, receipts and disbursements of the Association.
(e) shall, in the event of an acute emergency, as defined by Article
Seven-A--Insurance, of the New York State Defense Emergency Act, (Section 9177,
Unconsolidated Laws of New York) and any amendments thereof, be responsible for
the emergency management of the Association as provided in the emergency bylaws
of the Association.
Section 3. Investment Committee. The investment committee shall consist
of at least thirteen members, including the chief executive officer, and such
additional trustees, if any, as the board of trustees or the executive committee
may appoint. A majority, but not less than three, of the members shall
constitute a quorum, among whom only one salaried officer of the Association may
be counted for that purpose. Not more than three members shall be officers or
salaried employees of the Association.
(a) subject to review by the board of trustees the investment committee
shall determine the investment policies of the Association.
(b) The investment committee shall supervise the investment of the funds
of the Association. No loan or investment other than policy loans shall be made
or disposed of without authorization or approval by the investment committee.
Section 4. Nominating and Personnel Committee. The nominating and
personnel committee shall consist of five trustees who are not officers or
salaried employees of the Association and whose terms do not expire in the year
following their appointment. Three members shall constitute a quorum. In the
year following their appointment the committee shall nominate executive officers
and the standing committees for the annual meeting of the board of trustees,
shall designate the principal officers of the Association, shall recommend to
the board of trustees the annual compensation of the principal officers and of
any salaried employee if the level of compensation to be paid to such employee
is equal to, or greater than, the compensation received or to be received by any
principal officer, nominate trustees to fill interim vacancies and, if requested
by the TIAA Board of Overseers, shall recommend the names of persons for
election as trustees at the annual meeting of the stockholders. In addition,
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the committee shall approve the titles and base salaries of all appointed
officers and the base salaries of executive officers, other than those
designated as principal officers or those officers to be paid on an equal or
greater level of compensation with principal officers, and shall recommend the
provisions of any incentive salary compensation program(s) and determine the
amounts of any incentive salary payments for those officers included in any
incentive salary plan.
Section 5. Audit Committee. The audit committee shall consist of four
trustees. The committee shall itself, or through public accountants or
otherwise, make such audits and examinations of the records and affairs of the
Association as it may deem necessary. The committee shall review the
reimbursement agreements among TIAA, CREF, TIAA-CREF Individual & Institutional
Services, Inc., and TIAA-CREF Investment Management, Inc., and make
recommendations regarding them to the board of trustees. A majority, but not
less than three, of the members shall constitute a quorum.
Section 6. Committee on corporate Governance and Social Responsibility.
The committee on corporate governance and social responsibility shall consist of
not less than five trustees and such additional trustees as the board of
trustees may appoint. No such trustee shall be an officer or salaried employee
of TIAA.
A committee quorum shall consist of a majority of the members. The
committee is responsible for addressing all corporate social responsibility and
corporate governance issues including the voting of TIAA shares and the
initiation of appropriate shareholder resolutions. In addition, the committee
will develop and recommend specific corporate policy in these areas for
consideration by the TIAA board of trustees.
Section 7. Reports. Within a reasonable time after their meetings, all
such committees and subcommittees shall report their transactions to each
trustee.
ARTICLE FIVE
Salaries, Compensation and Pensions
to Trustees, Officers and Employees
Section 1. Salaries and Pensions. The Association shall not pay any
salary, compensation or emolument in any amount to any officer, deemed by a
committee or committees of the board to be a principal officer pursuant to
subsection (b) of Section 1202 of the Insurance Law of the State of New York, or
to any salaried employee of the Association if the level of compensation to be
paid to such employee is equal to, or greater than, the compensation received by
any of its principal officers, or to any trustee thereof, unless such payment be
first authorized by a vote of the board of trustees of the Association. The
Association shall not make any agreement with any of its officers or salaried
employees whereby it agrees that for any services rendered or to be rendered he
shall receive any salary, compensation or emolument that will extend beyond a
period of thirty-six months from the date of such agreement, except as
specifically permitted by the Insurance Law of the State of New York. No
principal officer or employee of the class described in the first sentence of
this section, who is paid a salary for his services shall receive any other
compensation, bonus or emolument from the Association, directly or indirectly,
except in accordance with a plan recommended by a committee of the board
pursuant to subsection(b) of Section 1202 of the Insurance Law of the State of
New York and approved
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by the board of trustees. The Association shall not grant any pension to any
officer or trustee, or to any member of his family after his death, except that
the Association may pursuant to the terms of a retirement plan and other
appropriate staff benefit plans adopted by the board provide for any person who
is or has been a salaried officer or employee, a pension payable at the time of
retirement by reason of age or disability and also life insurance, health
insurance and disability benefits.
Section 2. Prohibitions. No trustee or officer of the Association shall
receive, in addition to fixed salary or compensation, any money or valuable
thing, either directly or indirectly, or through any substantial interest in any
other corporation or business unit, for negotiating, procuring, recommending or
aiding in any purchase or sale of property, or loan, made by the Association or
any affiliate or subsidiary thereof, nor be pecuniarily interested either as
principal, coprincipal, agent or beneficiary, either directly or indirectly, or
through any substantial interest in any other corporation or business unit, in
any such purchase, sale or loan; provided that nothing herein contained shall
prevent the Association from making a loan upon a policy held therein by the
borrower not in excess of the net reserve value thereof.
ARTICLE SIX
Indemnification of Trustees, Officers and Employees
The Association shall indemnify, in the manner and to the full extent
permitted by law, each person made or threatened to be made a party to any
action, suit or proceeding, whether or not by or in the right of the
Association, and whether civil, criminal, administrative, investigative or
otherwise, by reason of the fact that he or his testator or intestate is or was
a trustee, officer or employee of the Association or, while a trustee, officer
or employee of the Association, served any other corporation or organization of
any type or kind, domestic or foreign, in any capacity at the request of the
Association. To the full extent permitted by law such indemnification shall
include judgments, fines, amounts paid in settlement, and expenses, including
attorneys' fees. No payment of indemnification, advance or allowance under the
foregoing provisions shall be made unless a notice shall have been filed with
the Superintendent of Insurance of the State of New York not less than thirty
days prior to such payment specifying the persons to be paid, the amounts to be
paid, the manner in which payment is authorized and the nature and status, at
the time of such notice, of the litigation or threatened litigation.
ARTICLE SEVEN
Execution of Instruments
The board of trustees or the executive committee shall designate who is
authorized to execute certificates of stock, proxies, powers of attorney, deeds,
leases, releases of mortgages, satisfaction pieces, checks, drafts, contracts
for insurance or annuity and instruments relating thereto, and all other
contracts and instruments in writing necessary for the Association in the
management of its affairs, and to attach the Association's seal thereto; and may
further authorize the extent to which such execution may be done by facsimile
signature.
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ARTICLE EIGHT
Disbursements
No disbursements of $100 or more shall be made unless the same be
evidenced by a voucher signed by or on behalf of the person, firm or corporation
receiving the money and correctly describing the consideration for the payment,
and if the same be for services and disbursements, setting forth the services
rendered and an itemized statement of the disbursements made, and if it be in
connection with any matter pending before any legislative or public body, or
before any department or officer of any government, correctly describing in
addition the nature of the matter and of the interest of such corporation
therein, or if such voucher cannot be obtained, by an affidavit stating the
reasons therefor and setting forth the particulars above mentioned.
ARTICLE NINE
Corporate Seal
The seal of the Association shall be circular in form and shall contain
the words Teachers Insurance and Annuity Association of America, New York,
Corporate Seal, 1918," which seal shall be kept in the custody of the secretary
of the Association and be affixed to all instruments requiring such corporate
seal.
ARTICLE TEN
Amendments
Article One of these bylaws can be amended or repealed only by the
affirmative vote of the holders of a majority of the outstanding shares of the
capital stock of the Association, such vote being cast at a meeting held upon
notice stating that such meeting is to vote upon a proposed amendment or repeal
of such bylaw.
Any other bylaw may be amended or repealed at any meeting of the board
of trustees provided notice of the proposed amendment or repeal shall have been
mailed to each trustee at least one week and not more than two weeks prior to
the date of such meeting.
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Exhibit 11
ADMINISTRATIVE SERVICES AGREEMENT
FOR TIAA SEPARATE ACCOUNT VA-1
THIS AGREEMENT made this 15th day of September, 1994, by and between:
Teachers Insurance and Annuity Association of America ("TIAA"), a nonprofit New
York insurance corporation; and TIAA Separate Account VA-1 (the "Separate
Account"), a separate account of TIAA established pursuant to the New York State
Insurance Law.
WITNESSETH:
WHEREAS, TIAA has established the Separate Account to segregate assets
funding the variable benefits provided by the Teachers Personal Annuity, an
individual, flexible premium, deferred annuity, as well as by other contracts
that may be offered by TIAA in the future; and
WHEREAS, the Separate Account is registered as an open-end management
investment company under the Investment Company Act of 1940 as amended (the
"Act"), and currently consists of a single investment portfolio (known as the
Stock Index Account), and may consist of additional investment portfolios in the
future (collectively, with the Stock Index Account, referred to herein as
"Portfolios"); and
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WHEREAS, the assets of the Separate Account are held separately from
the other assets of TIAA; and
WHEREAS, the Management Committee of the Separate Account (the
"Management Committee") desires to retain TIAA to render administrative services
to the Separate Account in the manner and on the terms set forth herein; and
WHEREAS, TIAA is willing to provide administrative services to the
Separate Account in the manner and on the terms set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, TIAA and the Separate Account hereby agree as
follows:
1. ADMINISTRATIVE SERVICES. Subject to the direction and
control of the Management Committee, TIAA shall perform administrative services
for the Separate Account and the portion of any annuity contracts issued by TIAA
that are funded by the Separate Account (the "Contracts"). In this connection,
TIAA agrees to perform administrative functions including, but not limited to:
a. Compute the daily net asset value of each Portfolio, and
maintain the general ledge and other accounting records;
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b. Schedule, plan agendas for, and conduct meetings of the
Management Committee and holders of units of beneficial interest in the Separate
Account ("Contract Owners")'
c. Recommend independent accountants, counsel, and others
providing services required with respect to the Separate Account;
d. Coordinate, supervise, and/or direct the Separate Account's
independent accountants and counsel on a day- to-day basis;
e. Prepare and distribute all required proxy statements,
reports, and other communications with Contract Owners;
f. Prepare and file reports and other required filings with
the Securities and Exchange Commission ("SEC"), the National Association of
Securities Dealers, Inc., and state "blue sky" authorities, and generally
monitor compliance with all federal and state securities and insurance laws and
the Internal Revenue Code of 1986, as amended;
g. Provide persons to perform such professional,
administrative, and clerical functions as are necessary in connection with
Contract Owner relations, reports, premium collections, withdrawal and transfer
requests, and Contract Owner account adjustments, including the receipt,
handling, and coordination of Contract Owner complaints, other than functions
performed pursuant to any agreements between the Separate Account and its
principal underwriter;
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h. Provide clerical, secretarial, accounting, and bookkeeping
services, data processing services, office supplies, and stationery;
i. Provide adequate office space and related services
(including telephone and other utility service) necessary for each Portfolio's
operations;
j. Maintain initial and ongoing organizational records not
otherwise maintained by the Separate Account's custodian(s), principal
underwriter, or investment manager; and
k. Assist, generally, in all aspects of the Separate Account's
operations.
Nothing herein shall be construed to restrict the Separate
Account's right, at its own expense, to hire its employees or to contract for
services to be performed by third parties.
2. ISSUANCE OF UNITS. TIAA shall issue and record the issuance
of units of beneficial interest ("Units") in a Portfolio upon the receipt,
directly or indirectly, of orders therefor. TIAA shall compute the number of
Unites issuable in the case of an order for a dollar amount of Units at the net
asset value per Unit for the Portfolio, as described in the then-current
registration statement(s) for the Contracts (the "Registration Statement"). TIAA
will take reasonable steps to
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ensure that the custodian receives all payments due the Separate Account in
consideration of the issuance of Units.
3. WITHDRAWALS AND TRANSFERS. TIAA shall process each order
for the withdrawal or transfer of Units at the net asset value per Unit of the
Portfolio, as described in the Registration Statement. Where withdrawal or
transfer of a dollar amount is requested, TIAA shall calculate the number of
Units to be redeemed so as to provide the Contract Owner with the dollar value
identified in the withdrawal or transfer request. And, TIAA shall make the
required amount of funds available to the Contract Owner. Officers of the
Separate Account shall cause TIAA to make such funds available not more than
seven days after receipt of the withdrawal or transfer request, or within such
other time period as is consistent with the requirements of the federal
securities laws or other applicable laws.
4. BOOKS AND RECORDS. TIAA will maintain all general
accounting records required for the Separate Account, to the extent not
maintained by the custodian or the investment manager. TIAA agrees that all
books and records which it maintains for the Separate Account are the Separate
Account's property, and, in the event of termination of this Agreement for any
reason, TIAA agrees promptly to return to the Separate Account, free from any
claim or retention of rights by TIAA, all records relating to the Separate
Account. TIAA also agrees, upon request of the Separate
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Account, promptly to surrender such books and records to the Separate Account
or, at the Separate Account's expense, to make copies thereof available to the
Separate Account or to make such books and records available for inspection by
representatives of regulatory authorities or other persons reasonably designated
by the Separate Account. TIAA further agrees to maintain, prepare, and preserve
such books and records in accordance with the Act and rules thereunder,
including but not limited to, Rules 31a-1 and 31a-2.
The records maintained for the Separate Account hereunder by
TIAA shall include records showing, for each Contract Owner's account, the
following: (i) name, address, and tax identifying number; (ii) number of Units
held in each Portfolio; (iii) historical information regarding the account of
each Contract Owner, including the date, Portfolio, and price for all
transactions; (iv) any stop or restraining order placed against the account; (v)
any correspondence relating to the current maintenance of the account; (vi) any
other information required in order for TIAA to perform the calculations
contemplated or required by this Agreement; and (vii) such other records as the
Management Committee may from time to time reasonably request.
5. EXPENSES. TIAA shall be responsible for all expenses
related to performing administrative services for the
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Separate Account and with respect to the Contracts, which expenses shall
include, but not be limited to:
i) all expenses, incidental and otherwise, associated
with preparing and filing with appropriate state, federal, local, or foreign
governments or agencies all tax returns, including the expenses associated with
any mailings to the Contract Owners with respect to such returns;
ii) fees and expenses incurred in the registration or
qualification (and maintaining said registration or qualification) of the
Separate Account and Units therein under federal or state securities laws, if
deemed applicable, including all fees and expenses incurred in connection with
the preparation and filing of each Registration Statement (including each
pre-effective and post-effective amendment thereto), each Prospectus (including
any preliminary and each definitive Prospectus and any supplement thereto), and
each Statement of Additional Information;
iii) fees and expenses incurred in the registration,
qualification, or approval (and maintaining said registration, qualification, or
approval) of the Contracts for offer and sale under the securities or insurance
laws of any state;
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iv) registration and filing fees for the contracts
payable to the SEC and any state;
v) costs and expenses of the preparation, servicing
and administration of the Contracts;
vi) compensation paid to members of the Management
Committee who are not "interested persons" of the Separate Account within the
meaning of the Act, and travel expenses paid to all members of the Management
Committee;
vii) any extraordinary or non-recurring expenses
(such as legal claims and liabilities, and litigation costs and indemnification
related thereto);
viii) costs of printing and distributing, to current
Contract Owners, Contract Owner reports, proxy statements, Prospectuses and
Statements of Additional Information, and any stickers and supplements thereto,
and otherwise communicating with Contract Owners;
ix) costs and all incidental expenses associated with
conducting meetings of Contract Owners should they be held;
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x) the cost of the fidelity bond required by Rule
17g-1 of the Act, any other fidelity bond covering the Separate Account, and any
errors and omissions insurance or other liability insurance covering the
Separate Account and/or its officers, members of the Management Committee, and
its personnel; and
xi) the charges and expenses of the independent
accountants and outside legal counsel retained with respect to the Separate
Account other than for matters related to its investment activities, the charges
and expenses of any independent proxy solicitation firm retained by the Separate
Account to solicit votes from Contract Owners with respect to Units, and the
charges and expenses of any trade association fees.
6. COMPENSATION OF TIAA. For the services to be rendered, the
facilities furnished, and the expenses assumed by TIAA pursuant to this
Agreement, the Separate Account shall pay to TIAA on each Valuation Day (as that
term is defined in the Registration Statement), a fee based on an annual rate of
twenty one-hundredths of one percent (0.20%) of the net assets of each
Portfolio.
7. LIABILITY OF TIAA. TIAA will not be liable for any error of
judgment or mistake of law or for any loss suffered
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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 willful misfeasance, bad faith, or gross 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.
8. DURATION AND TERMINATION OF THE AGREEMENT. This
Agreement shall become effective as of the date first written above, and shall
continue in effect unless terminated by either party on not less than 90 days
prior written notice to the other party.
9. FURTHER ACTIONS. Each party agrees to perform such
further acts and execute such further documents as are necessary to effectuate
the purposes hereof.
10. GOVERNING LAW. The provisions of this Agreement
shall be construed and interpreted in accordance with the laws of the State of
New York, as at the time in effect, and the applicable provisions of the Act and
rules thereunder or other federal laws and regulations which may be applicable.
To the extent that the applicable law of the State of New York, or any of the
provisions herein, conflict with the applicable provisions
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of the Act and rules thereunder or other federal laws and regulations which may
be applicable, the latter shall control
11. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original and all of which
shall be deemed one instrument.
12. NOTICES. All notices and other communications
provided for hereunder shall be delivered by hand or mailed first
class, postage prepaid, addressed as follows:
a. If to TIAA -
Teachers Insurance and Annuity
Association of America
730 Third Avenue
New York, New York 10017-3206
Attention: Thomas G. Walsh
b. If to the Separate Account VA-1 -
TIAA Separate Account VA-1
730 Third Avenue
New York, New York 10017-3206
Attention: Thomas W. Jones
or to such other address as TIAA or the Separate Account shall designate by
written notices to the other.
13. MISCELLANEOUS. Captions in this Agreement are
included for convenience or reference only and in no way define
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or limit any of the provisions hereof or otherwise affect their construction or
effect.
IN WITNESS WHEREOF, TIAA and the Separate Account have cause this
Agreement to be executed in their names and on their behalf by and through their
duly authorized officers on the day and year first above written.
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
By: /s/ Thomas G. Walsh Attest: /s/ Lisa Snow
--------------------------- -----------------------
Title: Executive Vice President Title: Assistant Secretary
TIAA SEPARATE ACCOUNT VA-1
By: /s/ Thomas W. Jones Attest: /s/ Lisa Snow
---------------------- -------------------------
Title: President Title: Assistant Secretary
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Exhibit 12(A)--Opinion and Consent of Charles H. Stamm
EXHIBIT 12(A)
[Letterhead of Teachers Insurance and Annuity Association
and Charles H. Stamm]
March 31, 1999
The Management Committee
TIAA Separate Account VA-1
730 Third Avenue
New York, New York 10017-3206
Dear Committee Members:
This opinion is furnished in connection with the filing by TIAA
Separate Account VA-1 (the "Separate Account") of Post-Effective Amendment No.
5 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)--Consent of Sutherland, et al.
EXHIBIT 12(B)
March 30, 1999
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. 5 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 LLP
By:/s/ Steven B. Boehm
----------------------
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Auditors" and
"Experts" and to the use of our report dated February 5, 1999 on the Stock Index
Account of TIAA Separate Account VA-1 included in this Registration Statement on
Form N-3 (No. 33-79124) of TIAA Separate Account VA-1.
We also consent to the use of our report on Teachers Insurance and Annuity
Association of America ("TIAA") dated March 10, 1999 included in this
Registration Statement. Such report expresses our opinion that TIAA's 1998 and
1997 statutory-basis financial statements present fairly, in all material
respects, the financial position of TIAA at December 31, 1998 and December 31,
1997, respectively, and the results of its operations and its cash flows for the
year then ended in conformity with statutory accounting practices prescribed or
permitted by the New York State Insurance Department and not in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
March 29, 1999
Exhibit 15
SEED MONEY AGREEMENT
SEED MONEY AGREEMENT (the "Agreement") made this _____ day of
__________, 19___ by and between Teachers Insurance and Annuity Association of
America ("TIAA"), a nonprofit corporation existing under the laws of the State
of New York, and TIAA Separate Account VA-1 ("VA-1"), a segregated investment
account of TIAA.
1. TIAA hereby agrees to invest in VA-1 the sum of $25,000,000
on October 3 or as soon thereafter as practicable.
2. In consideration for such investment and without deduction
of any charges, VA-1 shall credit TIAA with 1,000,000 accumulation units, each
valued at $25.00, of which TIAA shall be the owner. Such accumulation units will
share pro rata in the investment performance of VA-1 and shall be subject to the
same valuation procedures and the same periodic deductions as are other
accumulation units in VA-1.
3. TIAA represents that the accumulation units acquired under
this Agreement are being, and will be, acquired for investment (and not with a
view to distribution or resale to the public) and can be disposed of only be
redemption.
4. Accumulation units acquired under this Agreement will be
held by TIAA for its own account until redeemed by TIAA. Amounts will be
redeemed at prices equal to the respective net asset value of accumulation units
of VA-1 next determined after VA-1 receives TIAA's proper notice of redemption.
<PAGE>
5. TIAA may purchase, and VA-1 may issue, additional
accumulation units as the parties may agree.
6. This Agreement will be construed and enforced in accordance
with and governed by the provisions of the Investment Company Act of 1940 and
the laws of the State of New York.
TEACHERS INSURANCE AND
ANNUITY ASSOCIATION OF AMERICA
By
--------------------------
Title:
--------------------------
TIAA SEPARATE ACCOUNT VA-1
By
--------------------------
Title:
--------------------------
Exhibit 16--Schedules for Computation
EXHIBIT 16
Schedule of Computation
Total Return Information for the TIAA Separate Account VA-1
Stock Index Account
<TABLE>
<CAPTION>
January 1, 1998 60 months (From November 1, 1994
to Commencement of operations to
December 31, 1998 December 31, 1998)
----------------- ------------------
<S> <C> <C>
Hypothetical initial
payment of $1,000 (P) $1,000 $1,000
Accumulation unit value:
At start of period (A) $54.9165 $25.8318
At end of period (B) $68.0085 $68.0085
Ending value of
hypothetical investment
(EV) = P x (B/A) $1,238.40 $2,632.74
Cumulative rate of total
return = {(EV/P) - 1} x 100 23.84% 163.27%
Number of years
in period (n) 1 4.17
Net change factor (1 + T)
= EV/P 1.2384 2.6327
Average annual compound
rate of total return (T) 23.84% 26.15%
</TABLE>
C-24
<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. ALL AMOUNTS ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS.
</LEGEND>
<CIK> 0000923524
<NAME> TIAA SEPARATE ACCOUNT VA-1
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 514,100
<INVESTMENTS-AT-VALUE> 756,157
<RECEIVABLES> 9,346
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 789
<TOTAL-ASSETS> 766,292
<PAYABLE-FOR-SECURITIES> 8,310
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 8,310
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 11,145
<SHARES-COMMON-PRIOR> 9,901
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 757,982
<DIVIDEND-INCOME> 9,662
<INTEREST-INCOME> 130
<OTHER-INCOME> 0
<EXPENSES-NET> (2,402)
<NET-INVESTMENT-INCOME> 7,390
<REALIZED-GAINS-CURRENT> 31,091
<APPREC-INCREASE-CURRENT> 97,186
<NET-CHANGE-FROM-OPS> 135,667
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,250
<NUMBER-OF-SHARES-REDEEMED> (1,006)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 214,251
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,948
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,896
<AVERAGE-NET-ASSETS> 649,646
<PER-SHARE-NAV-BEGIN> 54.917
<PER-SHARE-NII> .685
<PER-SHARE-GAIN-APPREC> 12.407
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 68.009
<EXPENSE-RATIO> .370
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
