April 1, 2000
Teachers Insurance and Annuity Association
Teachers Personal Annuity
individual deferred variable annuities
Prospectus
Funded Through
TIAA Separate Account VA-1
[TIAA LOGO]
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Prospectus
Dated April 1, 2000
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, 2000. 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, 2000.
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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 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 18) 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,
1999 1998 1997 1996 1995 1994(1)
------------- ------------- ------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Per accumulation unit data:
Investment income $ 0.961 $ 0.908 $ 0.847 $ 0.807 $ 0.745 $ 0.138
Expense charges 0.270 0.223 0.182 0.150 0.170 0.023
-------------------------------------------------------------------------------
Investment income--net 0.691 0.685 0.665 0.657 0.575 0.115
Net realized and unrealized
gain (loss) on investments 13.051 12.407 12.429 6.755 8.565 (0.676)
-------------------------------------------------------------------------------
Net increase (decrease) in
accumulation unit value 13.742 13.092 13.094 7.412 9.140 (0.561)
Accumulation unit value:
Beginning of period 68.009 54.917 41.823 34.411 25.271 25.832
-------------------------------------------------------------------------------
End of period $81.751 $68.009 $54.917 $41.823 $34.411 $25.271
===============================================================================
Ratios to average net assets:
Expenses(2) 0.37% 0.37% 0.37% 0.40% 0.55% 0.09%
Investment income- net 0.95% 1.14% 1.36% 1.74% 1.87% 0.45%
Portfolio turnover rate 37.93% 45.93% 2.39% 4.55% 0.98% 0.04%
Thousands of accumulation
units outstanding at end
of period 12,630 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 one of the largest retirement
systems in the world, based on assets under management. TIAA-CREF serves
approximately 2.2 million people at about 9,600 institutions. As of December
31, 1999, TIAA's assets were approximately $110 billion; the combined assets
for TIAA and CREF totalled approximately $288 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,
TIAA-CREF Mutual Funds and TIAA-CREF Institutional 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[RegTM] 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
$178 million to $407.2 billion, with an average of $5.34 billion as of December
31, 1999.
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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).
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.
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 indirect 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.
- --------------------------------------------------------------------------------
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. 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 has
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 530189
Atlanta, GA 30353-0189
(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 530195
Atlanta, GA 30353-0195
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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<TABLE>
<CAPTION>
"Free Look"
Jurisdiction Period (days)
- ------------ -------------
<S> <C>
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
</TABLE>
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 for any reason.
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 indirect 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
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principal underwriter of the variable component of the contract for
distribution of the variable component of the contract.
Other Charges
No Deductions from Premiums The contract provides for no front-end charges.
Premium Taxes Currently, contracts issued to residents of several states and
the District of Columbia are subject to a premium tax. Charges for premium
taxes on a particular contract ordinarily will be deducted from the
accumulation when it's applied to provide annuity payments. However, if a
jurisdiction requires payment of premium taxes at other times, such as when
premiums are paid or when cash withdrawals are taken, we'll deduct premium
taxes at those times. Current state premium taxes, where charged, range from
1.00 percent to 3.50 percent of annuity payments.
Brokerage Fees and Related
Transaction Expenses
Brokers' commissions, transfer taxes, and other portfolio fees are charged to
the separate account (see the SAI).
The Annuity Period
All annuity payments are paid to the contractowner from the fixed account. 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
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some countries where the U.S. Treasury Department imposes restrictions.
Annuity Starting Date
Generally you pick an annuity starting date (it has to be the first day of a
month) when you first apply for a contract. If you don't, we'll tentatively
assume the annuity starting date will be the latest permissible annuity
starting date (i.e., the first day of the month 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.
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The owner of any annuity contract who is not a natural person generally must
include in income any increase in the excess of the accumulation over the
"investment in the contract" during the taxable year. There are some exceptions
to this, and agents of prospective owners that are not natural persons may wish
to discuss them with a competent tax advisor.
The following discussion applies generally to contracts owned by a natural
person:
Withdrawals If you withdraw funds from your contract before the annuity
starting date, IRC section 72(e) usually deems taxable any amounts received to
the extent that the accumulation value immediately before the withdrawal
exceeds the investment in the contract. Any 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 59 1/2;
(2) after you die (or after the annuitant dies, if the owner isn't an
individual);
(3) after you become disabled; or
(4) that are part of a series of substantially equal periodic (at least annual)
payments for your life (or life expectancy) or the joint life (or life
expectancy) of you and your beneficiary.
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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, effective 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 adviser.
30
<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
31
<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 for any reason.
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.
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 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.
32
<PAGE>
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.
- --------------------------------------------------------------------------------
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.
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" Securities B-6
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-11
Auditors B-11
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>
------------
[TIAA LOGO] 730 Third Avenue PRESORTED
New York 10017-3206 STANDARD
U.S. POSTAGE
PAID
TIAA-CREF
------------
[Recycle Logo] Printed on recycled paper
TVA1PRO-4/00
<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, 2000
This Statement of Additional Information is not a prospectus and should be read
in connection with the current prospectus dated April 1, 2000 (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
Page in the Additional
Statement Information
of Additional in Prospectus,
Item Information 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 15-16
</TABLE>
<TABLE>
<CAPTION>
Location of
Page in the Additional
Statement Information
of Additional in Prospectus,
Item Information if applicable
---- -------------- -------------
<S> <C> <C>
Investment Advisory
Services .................. B-10
Administrative Services ...... B-10
Advisors and TIAA ............ B-10
Custody of Portfolio ......... B-11
Auditors ..................... B-11
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 33 1/3% of the
market value of the separate account's assets at the time of borrowing),
and, from other sources, for temporary purposes (only in amounts not
exceeding 5% of the separate account's total assets taken at market value
at the time of borrowing). Money may be temporarily obtained through bank
borrowing, rather than through the sale of portfolio securities, when such
borrowing appears more attractive for the separate account;
3. The separate account will not underwrite the securities of other companies,
except to the extent that it may be deemed an underwriter in connection
with the disposition of securities from its portfolio;
4. The separate account will not, with respect to at least 75% of the value of
its total assets, invest more than 5% of its total assets in the securities
of any one issuer other than securities issued or guaranteed by the United
States Government, its agencies or instrumentalities;
5. The separate account will not make an investment in an industry if after
giving effect to that investment the separate account's holding in that
industry would exceed 25% of the separate account's total assets--this
restriction, however, does not apply to investments in obligations issued
or guaranteed by the United States Government, its agencies or
instrumentalities;
6. The separate account will not purchase real estate or mortgages directly;
7. The separate account will not purchase commodities or commodities
contracts, except to the extent futures are purchased as described herein;
8. The separate account will not make loans, except: (a) that it may make
loans of portfolio securities not exceeding 331/3% 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
B-4
<PAGE>
changes in the specified index of equity securities on which the future is
based.
Stock index futures may be used to hedge the equity investments of the separate
account with regard to market (systematic) risk (involving the market's
assessment of overall economic prospects), as distinguished from stock-specific
risk (involving the market's evaluation of the merits of the issuer of a
particular security). By establishing an appropriate "short" position in stock
index futures, the separate account may seek to protect the value of its
securities portfolio against an overall decline in the market for equity
securities. Alternatively, in anticipation of a generally rising market, the
separate account can seek to avoid losing the benefit of apparently low current
prices by establishing a "long" position in stock index futures and later
liquidating that position as particular equity securities are in fact acquired.
To the extent that these hedging strategies are successful, the separate
account will be affected to a lesser degree by adverse overall market price
movements, unrelated to the merits of specific portfolio equity securities,
than would otherwise be the case.
Unlike the purchase or sale of a security, no price is paid or received by the
separate account upon the purchase or sale of a futures contract. Initially,
the separate account will be required to deposit in a custodial account an
amount of cash, United States Treasury securities, or other permissible assets
equal to approximately 5% of the contract amount. This amount is known as
"initial margin." The nature of initial margin in futures transactions is
different from that of margin in security transactions in that futures contract
margin does not involve the borrowing of funds by the customer to finance the
transactions. Rather, the initial margin is in the nature of a performance bond
or good faith deposit on the contract which is returned to the separate account
upon termination of the futures contract assuming all contractual obligations
have been satisfied. Subsequent payments to and from the broker, called
"variation margin," will be made on a daily basis as the price of the
underlying stock index fluctuates making the long and short positions in the
futures contract more or less valuable, a process known as "marking to the
market." For example, when the separate account has purchased a stock index
futures contract and the price of the underlying stock index has risen, that
position will have increased in value, and the separate account will receive
from the broker a variation margin payment equal to that increase in value.
Conversely, where the separate account has purchased a stock index futures
contract and the price of the underlying stock index has declined, the position
would be less valuable and the separate account would be required to make a
variation margin payment to the broker. At any time prior to expiration of the
futures contract, the separate account may elect to close the position by
taking an opposite position which will operate to terminate the separate
account's position in the futures contract. A final determination of variation
margin is then made, additional cash is required to be paid by or released to
the separate account, and the separate account realizes a loss or a gain. All
margin payments will be made to a custodian in the broker's name.
There are several risks in connection with the use by the separate account of a
futures contract as a hedging device. One risk arises because of the imperfect
correlation between movements in the prices of the futures contracts and
movements in the securities or instruments which are the subject of the hedge.
The separate account will attempt to reduce this risk by engaging in futures
transactions, to the extent possible, where, in our judgment, there is a
significant correlation between changes in the prices of the futures contracts
and the prices of the separate account's portfolio securities or instruments
sought to be hedged.
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,
B-5
<PAGE>
even a correct forecast of general market trends by Advisors still may not
result in a successful hedging transaction over a very short time period.
The separate account may also use futures contracts and options on futures
contracts to manage its cash flow more effectively. To the extent that the
separate account enters into non-hedging positions, it will do so only in
accordance with certain CFTC exemptive provisions. Thus, pursuant to CFTC Rule
4.5, the aggregate initial margin and premiums required to establish
non-hedging positions in commodity futures or commodity options contracts may
not exceed 5% of the liquidation value of the separate account's portfolio,
after taking into account unrealized profits and unrealized losses on any such
contracts it has entered into (provided that the in-the-money amount of an
option that is in-the-money when purchased may be excluded in computing such
5%).
Options and futures transactions may increase the separate account's
transaction costs and portfolio turnover rate and will be initiated only when
consistent with its investment objectives.
Firm Commitment Agreements and Purchase of
"When-Issued" Securities
The separate account can enter into firm commitment agreements for the purchase
of securities on a specified future date. When the separate account enters into
firm commitment agreements, liability for the purchase price--and the rights
and risks of ownership of the securities--accrues to the separate account at
the time it becomes obligated to purchase such securities, although delivery
and payment occur at a later date. Accordingly, 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 and 1999 for the separate account was
45.93% and 37.93%, respectively.
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 Principal Occupation(s)
Name and Address* Age Registrant During Past 5 Years
- ----------------- --- ----------- -------------------
<S> <C> <C> <C>
Laurence W. Franz 60 Manager Vice President, Business and Finance, and Treasurer, Canisius
Canisius College College
2001 Main Street
Buffalo, New York 14208 ....
Jeanmarie C. Grisi 41 Manager Senior Manager, Pension Administration, Lucent Technologies
Lucent Technologies Inc.; formerly, Treasurer, Carnegie Corporation of New York
600 Mountain Avenue
Room 7F523
Murray Hill, NJ 07974 ......
Richard M. Norman 55 Manager Vice President for Finance and Business Services and Treasurer,
Miami University Miami University, formerly, Vice President for Administration and
274 McGuffey Hall Associate Treasurer, Rutgers, The State University of New Jersey
Oxford, OH 45056 ...........
John J. McCormack** ........ 55 Chairman of Executive Vice President, TIAA and CREF, since November 1983
the Management and President, TIAA-CREF Enterprises, Inc., since June 1998
Committee
Martin E. Galt III ......... 58 President Executive Vice President, TIAA and CREF, formerly President,
Institutional Investment Management Division of Asset Manage-
ment Group (September 1997-February 2000) and Principal
Investment Officer (September 1997-September 1998) of Bank
of America, Chairman and Chief Executive Officer, Boatman's
Trust Company (May 1995-September 1997)
Richard L. Gibbs ........... 53 Executive Executive Vice President, TIAA, CREF, TIAA-CREF Investment
Vice Management, LLC ("Investment Management") and TIAA-CREF
President Individual & Institutional Services, Inc. ("Services"), since 1993
Lisa Snow .................. 44 Secretary and Vice President, Chief Counsel, Corporate Law, TIAA and CREF
Vice President, Chief
Counsel, Corporate Law
Richard J. Adamski ......... 58 Vice Vice President and Treasurer, Investment Management and Ser-
President and vices, since January 1992 and Teachers Personal Investors Ser-
Treasurer vices, Inc. ("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, 1999.
B-9
<PAGE>
<TABLE>
<CAPTION>
(3) (4)
(1) (2) Pension or Retirement Ben- Estimated (5)
Name of Person, Aggregate Compensation efits Accrued As Part of Benefits Upon Total Compensation From
Position From Separate Account Separate Account Expenses Retirement Fund Complex*
-------- --------------------- ------------------------- --------------- ------------------------
<S> <C> <C> <C> <C>
Laurence W. Franz,
Manager ........... $7,703.90 $-0- $-0- $8,000
Jeanmarie C. Grisi,
Manager ........... $6,740.91 $-0- $-0- $7,000
Richard M. Norman,
Manager ........... $7,703.90 $-0- $-0- $8,000
</TABLE>
* For purposes of this information, the Fund Complex consists of College
Retirement Equities Fund, TIAA-CREF Mutual Funds, TIAA-CREF Institutional
Mutual Funds, 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, 1999, 1998 and 1997, the separate account paid
investment advisory fees of $610,363, $454,592 and $293,938, respectively.
These fees reflect the waiver by Advisors of a portion of its investment
advisory fee for the years ended December 31, 1999, 1998 and 1997 of
$2,005,161,$1,493,423 and $965,646, respectively.
Personal Trading Policy. The Separate Account has adopted a Personal Trading
Policy (the "Policy") under Rule 17j-1 of the Investment Company Act of 1940.
Under the Policy, personnel of Advisors and members of their households are
limited in trading for their own accounts. The Policy generally requires these
individuals to preclear and report all their securities transactions including
transactions in securities that are held or purchased by the Separate Account.
The Policy can be reviewed and copied at the SEC's Public Reference Room in
Washington, D.C. Information on the operation of the Public Reference Room may
be obtained by calling the SEC at 1-202-942-8090. The Policy is also available
on the EDGAR Database on the SEC's Internet site at http://www.sec.gov. Copies
of the Policy may be obtained, after paying a duplication fee, by electronic
request at the following E-mail address: [email protected], or by writing the
SEC's Public Reference Section, Washington, D.C. 20549-0102.
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, 1999, 1998 and 1997,
administrative expenses incurred were $1,743,577, $1,298,597, $839,672,
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 one of the
largest retirement systems in the world, based on assets under management.
TIAA-CREF serves approximately 2.1 million people. As of December 31, 1999,
TIAA's assets were approximately $110 billion; the combined assets for TIAA and
CREF totalled approximately $288 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.
B-10
<PAGE>
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.
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,
TIAA-CREF Institutional 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 1999, 1998 and 1997 was
$307,938, $257,121 and $42,630, 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 1999, 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 1999, 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, 1999, are set forth below:
A. Regular broker or dealer based on brokerage
commission paid
None
B. Regular broker or dealer based on entities acting
as principal
<TABLE>
<S> <C>
Goldman Sachs & Co.
(Parent-Goldman Sachs Group) $ 762,918.75
Lehman Brothers Inc.
(Parent-Lehman Brothers Holdings) $ 855,343.75
JP Morgan Securities Inc.
(Parent-Morgan (J.P.) & Co., Inc.) $1,760,087.50
Merrill Lynch, Pierce, Fenner & Smith
(Parent-Merrill Lynch & Co., Inc.) $2,095,850.00
Chase Securities
(Parent-Chase Manhattan Corp.) $5,138,251.25
</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 hypotheti-cal $1,000 investment made at the beginning of the
period through the end of that period, according to the following formula:
n
P(1 + T) = 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.
B-11
<PAGE>
To derive the total return quotations from this formula, the percentage net
change in the value of the $1,000 investment from the beginning of the period
to the end of such period ("cumulative total return") is determined. Cumulative
total returns simply reflect the change in value of an investment over a stated
period. Since the accumulation unit value is a "total return" unit value that
reflects the investment experience of the separate account and all expense
deductions made against the assets of the separate account, the ending value,
or EV, of the $1,000 hypothetical investment is determined by applying the
percentage change in the accumulation unit value over the period to the
hypothetical initial payment of $1,000 less the current deductions from
premiums (0%). We then solve the equation for T to derive the average annual
compounded rate of return for the separate account over the span of the period,
and the resulting "total return" quotation is carried out to the nearest
hundredth of one percent.
Set forth below is the total return information for the separate account, which
reflects all deductions made from the assets in the account, applied to a
hypothetical investment of $1,000:
<TABLE>
<CAPTION>
Average Annual
Compound Rate of Cumulative Rate of
Period Total Return Total Return
------ ---------------- ------------------
<S> <C> <C>
1 year
(from January 1, 1999 to December 31, 1999). 20.21% 20.21%
5 years
(from January 1, 1995 to
December 31, 1999) ......................... 26.47% 223.50%
5 years and 2 months
(from November 1, 1994 date of SEC
registration to December 31, 1999) ......... 24.96% 216.47%
</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
B-12
<PAGE>
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 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
B-13
<PAGE>
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.
We may discuss and compare our array of products and services. At such times we
disclose which of our subsidiaries or affiliates issues which products or types
of products, as follows: TIAA-CREF Individual and Institutional Services, Inc.
distributes CREF certificates and interests in the TIAA Real Estate Account.
Teachers Personal Investors Services, Inc. distributes the variable component
of personal annuities, mutual funds and tuition savings agreements. TIAA and
TIAA-CREF Life Insurance Company issue insurance and annuities. TIAA-CREF Trust
Company, FSB provides trust services. We also disclose that the investment
products are not FDIC insured, may lose value and are not bank guaranteed.
The separate account's Stock Index Account is ideal for people who are seeking
growth and are able to make long-term investments. Although past performance is
no guarantee of future results, in the past stocks have outperformed many other
types of investments. Investors who seek to counter the effects of inflation on
their long-term investments should therefore consider investing in stocks. The
Stock Index Account could be an appropriate investment for someone who is
seeking to supplement his or her retirement income, to purchase a retirement
home, finance an extended trip, or build a fund for philanthropic purposes. Of
course, there is no guarantee that the investment objective of that or any
other fund will be met.
Before investing, you should consider whether your pension plan and social
security payments will meet your retirement needs. You should look at your
assets and liabilities to help determine whether you need to invest 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.
Customer service may be an important consideration for you. In our
advertisements we may report the results of surveys conducted by independent
agencies regarding customer service. We may also use certain testimonials and
quote financial experts, financial and other publications, or other services
regarding our products and services. We may also discuss in advertisements and
sales literature general economic and/or market conditions that may impact
investments in variable annuities.
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, 1999
<TABLE>
<S> <C>
Page
----
TIAA SEPARATE ACCOUNT VA-1--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
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA:
Chairman's Letter B-44
Report of Management Responsibility B-45
Report of Independent Auditors B-46
STATUTORY-BASIS FINANCIAL STATEMENTS:
Balance Sheets B-47
Statements of Operations B-48
Statements of Changes in Capital and Contingency Reserves B-49
Statements of Cash Flows B-50
Notes to Financial Statements B-51
</TABLE>
B-15
<PAGE>
[TIAA LOGO]
- --------------------------------------------------------------------------------
REPORT OF MANAGEMENT RESPONSIBILITY
To the Contractowners of
TIAA Separate Account VA-1:
The accompanying financial statements of the Stock Index Account of TIAA
Separate Account VA-1 ("VA-1") are the responsibility of management. They have
been prepared in accordance with accounting principles generally accepted in
the United States 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 Mills
---------------------------------
Executive Vice President and
Chief Financial Officer
B-16
<PAGE>
Ernst & Young LLP 787 Seventh Avenue Phone 212 773 3000
[Logo] New York, New York 10019
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 of the
Stock Index Account of TIAA Separate Account VA-1 ("VA-1"), including the
statement of investments, as of December 31, 1999, and the related statement of
operations for the year then ended and the statements 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 auditing standards generally
accepted in the United States. 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 as of
December 31, 1999, by correspondence with the custodian 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, 1999, 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 accounting principles generally accepted in the
United States.
/s/ Ernst & Young LLP
February 4, 2000
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
B-17
<PAGE>
TIAA SEPARATE ACCOUNT VA-1
STOCK INDEX ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
(amounts in thousands, except per accumulation unit amount)
<TABLE>
<S> <C>
ASSETS
Investments, at cost ........................................... $ 665,685
Net unrealized appreciation of investments ..................... 367,131
-----------
Investments, at value .......................................... 1,032,816
Cash ........................................................... 476
Dividends and interest receivable .............................. 993
Receivable from securities transactions ........................ 6
-----------
TOTAL ASSETS 1,034,291
-----------
LIABILITIES
Payable for securities transactions ............................ 1,139
Amounts due to General Account ................................. 598
-----------
TOTAL LIABILITIES 1,737
-----------
NET ASSETS--Accumulation Fund ................................... $ 1,032,554
===========
NUMBER OF ACCUMULATION UNITS OUTSTANDING--Notes 5 and 6 ......... 12,630
===========
NET ASSET VALUE, PER ACCUMULATION UNIT--Note 5 .................. $ 81.75
===========
</TABLE>
See notes to financial statements.
B-18
<PAGE>
TIAA SEPARATE ACCOUNT VA-1
STOCK INDEX ACCOUNT
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(amounts in thousands)
<TABLE>
<S> <C>
INVESTMENT INCOME
Income:
Interest ..................................................... $ 220
Dividends .................................................... 11,288
--------
TOTAL INCOME 11,508
--------
Expenses--Note 3:
Investment advisory charges .................................. 2,615
Administrative expenses ...................................... 1,744
Mortality and expense risk charges ........................... 872
--------
EXPENSES BEFORE WAIVER 5,231
Investment advisory charges waived--Note 3 ................... (2,005)
--------
NET EXPENSES 3,226
--------
INVESTMENT INCOME--NET 8,282
--------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS--Note 4
Net realized gain on investments ............................. 33,295
Net change in unrealized appreciation on investments ......... 125,074
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 158,369
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $166,651
========
</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,
-----------------------------
1999 1998
-------------- ------------
<S> <C> <C>
FROM OPERATIONS
Investment income--net ....................................... $ 8,282 $ 7,390
Net realized gain on investments ............................. 33,295 31,091
Net change in unrealized appreciation on investments ......... 125,074 97,186
---------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 166,651 135,667
---------- ---------
FROM CONTRACTOWNER TRANSACTIONS
Premiums ..................................................... 130,503 135,735
Net contractowner transfers (to) from fixed account .......... 4,267 (36,831)
Withdrawals and death benefits ............................... (26,849) (20,320)
---------- ---------
NET INCREASE IN NET ASSETS RESULTING
FROM CONTRACTOWNER TRANSACTIONS 107,921 78,584
---------- ---------
NET INCREASE IN NET ASSETS 274,572 214,251
NET ASSETS
Beginning of year ............................................ 757,982 543,731
---------- ---------
End of year .................................................. $1,032,554 $ 757,982
========== =========
</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 ("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 consistently followed by the Account, which are in
conformity with accounting principles generally accepted in the United States.
Valuation of Investments: Securities listed or traded on any United States
national securities exchange are valued at the last sale 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 sale 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 securities transactions are
accounted for on the average cost basis.
Federal Income Taxes: Based on provisions of the Internal Revenue Code, no
federal taxes are attributable to the net investment experience of the Account.
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 (Concluded)
NOTE 4--INVESTMENTS
At December 31, 1999, the net unrealized appreciation on investments was
$367,130,676, consisting of gross unrealized appreciation of $408,796,778 and
gross unrealized depreciation of $41,666,102.
Purchases and sales of securities, other than short-term money market
instruments, for the year ended December 31, 1999, were $445,205,509 and
$328,569,867, 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,
----------------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Per Accumulation Unit Data:
Investment income .................. $ .961 $ .908 $ .847 $ .807 $ .745
Expenses ........................... .270 .223 .182 .150 .170
--------- --------- --------- --------- ---------
Investment income--net ............. .691 .685 .665 .657 .575
Net realized and unrealized gain
on investments ................... 13.051 12.407 12.429 6.755 8.565
--------- --------- --------- --------- ---------
Net increase in
Accumulation Unit Value ........... 13.742 13.092 13.094 7.412 9.140
Accumulation Unit Value:
Beginning of year ................. 68.009 54.917 41.823 34.411 25.271
--------- --------- --------- --------- ---------
End of year ....................... $ 81.751 $ 68.009 $ 54.917 $ 41.823 $ 34.411
========= ========= ========= ========= =========
Total return ........................ 20.21 % 23.84 % 31.31 % 21.54 % 36.17 %
Ratio to Average Net Assets:
Expenses (1) ....................... 0.37 % 0.37 % 0.37 % 0.40 % 0.55 %
Investment income--net ............. 0.95 % 1.14 % 1.36 % 1.74 % 1.87 %
Portfolio turnover rate ............. 37.93 % 45.93 % 2.39 % 4.55 % 0.98 %
Thousands of Accumulation Units
outstanding at end of year ......... 12,630 11,145 9,901 6,768 2,605
</TABLE>
(1) 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,
--------------------------------
1999 1998
-------------- ---------------
<S> <C> <C>
Accumulation Units:
Credited for premiums ........................................ 1,798,810 2,250,490
Credited (cancelled) for transfers and disbursements ......... (313,740) (1,006,137)
Outstanding:
Beginning of year ........................................... 11,145,401 9,901,048
---------- ----------
End of year ................................................. 12,630,471 11,145,401
========== ==========
</TABLE>
B-22
<PAGE>
TIAA SEPARATE ACCOUNT VA-1
STATEMENT OF INVESTMENTS--STOCK INDEX ACCOUNT
DECEMBER 31, 1999
SUMMARY BY INDUSTRY
(000)
<TABLE>
<CAPTION>
VALUE %
---------- -----
<S> <C> <C>
BONDS
CORPORATE BONDS
AUTOMOTIVE DEALERS AND SERVICE STATIONS $ 2 0.00%
---------- -----
REAL ESTATE ................................. 4 0.00
---------- -----
TOTAL CORPORATE BONDS
(Cost $7) ................................... 6 0.00
---------- -----
TOTAL BONDS
(Cost $7) ................................... 6 0.00
---------- -----
PREFERRED STOCK
FURNITURE AND FIXTURES ...................... 1 0.00
HOLDING AND OTHER INVESTMENT OFFICES ........ 17 0.00
INSTRUMENTS AND RELATED PRODUCTS ............ 0 0.00
RUBBER AND MISCELLANEOUS PLASTIC
PRODUCTS ................................... 115 0.01
---------- -----
TOTAL PREFERRED STOCK
(Cost $127) ................................. 133 0.01
---------- -----
COMMON STOCK
AGRICULTURAL SERVICES ....................... 15 0.00
AMUSEMENT AND RECREATION SERVICES ........... 965 0.09
APPAREL AND ACCESSORY STORES ................ 5,099 0.49
APPAREL AND OTHER TEXTILE PRODUCTS .......... 748 0.07
AUTO REPAIR, SERVICES AND PARKING ........... 554 0.05
AUTOMOTIVE DEALERS AND SERVICE STATIONS ..... 704 0.07
BUILDING MATERIALS AND GARDEN SUPPLIES ...... 13,548 1.31
BUSINESS SERVICES ........................... 126,177 12.22
CHEMICALS AND ALLIED PRODUCTS ............... 112,004 10.85
COAL MINING ................................. 24 0.00
COMMUNICATIONS .............................. 124,106 12.02
DEPOSITORY INSTITUTIONS ..................... 62,560 6.06
EATING AND DRINKING PLACES .................. 6,808 0.66
EDUCATIONAL SERVICES ........................ 305 0.03
ELECTRIC, GAS, AND SANITARY SERVICES ........ 27,396 2.65
ELECTRONIC AND OTHER ELECTRIC EQUIPMENT ..... 119,068 11.53
ENGINEERING AND MANAGEMENT SERVICES ......... 1,967 0.19
FABRICATED METAL PRODUCTS ................... 6,043 0.59
FOOD AND KINDRED PRODUCTS ................... 30,124 2.92
FOOD STORES ................................. 4,493 0.44
FORESTRY .................................... 78 0.01
FURNITURE AND FIXTURES ...................... 1,822 0.18
FURNITURE AND HOMEFURNISHINGS STORES ........ 2,629 0.25
GENERAL BUILDING CONTRACTORS ................ 651 0.06
GENERAL MERCHANDISE STORES .................. 24,440 2.37
HEALTH SERVICES ............................. 3,792 0.37
HEAVY CONSTRUCTION, EXCEPT BUILDING ......... 536 0.05
HOLDING AND OTHER INVESTMENT OFFICES ........ 7,324 0.71
HOTELS AND OTHER LODGING PLACES ............. 1,187 0.11
<CAPTION>
VALUE %
---------- -----
<S> <C> <C>
INDUSTRIAL MACHINERY AND EQUIPMENT .......... $ 93,404 9.05%
INSTRUMENTS AND RELATED PRODUCTS ............ 19,169 1.86
INSURANCE AGENTS, BROKERS AND SERVICE ....... 1,931 0.19
INSURANCE CARRIERS .......................... 44,525 4.31
LEATHER AND LEATHER PRODUCTS ................ 164 0.02
LEGAL SERVICES .............................. 50 0.00
LOCAL AND INTERURBAN PASSENGER TRANSIT ...... 4 0.00
LUMBER AND WOOD PRODUCTS .................... 2,564 0.25
METAL MINING ................................ 1,175 0.11
MISCELLANEOUS MANUFACTURING INDUSTRIES ...... 4,488 0.43
MISCELLANEOUS RETAIL ........................ 7,768 0.75
MOTION PICTURES ............................. 11,875 1.15
NONDEPOSITORY INSTITUTIONS .................. 18,200 1.76
NONMETALLIC MINERALS, EXCEPT FUELS .......... 477 0.05
OIL AND GAS EXTRACTION ...................... 7,980 0.77
PAPER AND ALLIED PRODUCTS ................... 8,361 0.81
PERSONAL SERVICES ........................... 819 0.08
PETROLEUM AND COAL PRODUCTS ................. 35,042 3.39
PRIMARY METAL INDUSTRIES .................... 4,312 0.42
PRINTING AND PUBLISHING ..................... 8,219 0.80
RAILROAD TRANSPORTATION ..................... 3,329 0.32
REAL ESTATE ................................. 411 0.04
RUBBER AND MISCELLANEOUS PLASTIC
PRODUCTS ................................... 3,620 0.35
SECURITY AND COMMODITY BROKERS .............. 15,396 1.49
SOCIAL SERVICES ............................. 35 0.00
SPECIAL TRADE CONTRACTORS ................... 43 0.00
STONE, CLAY, AND GLASS PRODUCTS ............. 3,462 0.34
TEXTILE MILL PRODUCTS ....................... 733 0.07
TOBACCO PRODUCTS ............................ 4,956 0.48
TRANSPORTATION BY AIR ....................... 3,935 0.38
TRANSPORTATION EQUIPMENT .................... 27,414 2.66
TRANSPORTATION SERVICES ..................... 548 0.05
TRUCKING AND WAREHOUSING .................... 893 0.09
WATER TRANSPORTATION ........................ 378 0.04
WHOLESALE TRADE-DURABLE GOODS ............... 1,923 0.19
WHOLESALE TRADE-NONDURABLE GOODS ............ 5,855 0.57
---------- ------
TOTAL COMMON STOCK
(Cost $661,498) ............................. 1,028,625 99.62
---------- ------
SHORT TERM INVESTMENT
U.S. GOVERNMENT AGENCY ...................... 4,052 0.39
---------- ------
TOTAL SHORT TERM INVESTMENT
(Cost $4,053) ............................... 4,052 0.39
---------- ------
TOTAL PORTFOLIO
(Cost $665,685) ............................. 1,032,816 100.02
OTHER ASSETS & LIABILITIES, NET .............. (262) ( 0.02)
---------- ------
NET ASSETS .................................. $1,032,554 100.00%
========== ======
</TABLE>
See notes to financial statements.
B-23
<PAGE>
TIAA SEPARATE ACCOUNT VA-1
STATEMENT OF INVESTMENTS--STOCK INDEX ACCOUNT
DECEMBER 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL VALUE (000)
- -------------------------------------------------------------- ------------
<S> <C> <C>
BONDS--0.00%
CORPORATE BONDS--0.00%
AUTOMOTIVE DEALERS AND SERVICE STATIONS--0.00%
$1,950 UGLY DUCKLING CORP (SUB DEB)
12.000%, 10/23/03 ............................... $ 2
----------
REAL ESTATE--0.00%
EXCEL LEGACY
3,000 9.000%, 01/01/04 ............................... 3
1,000 10.000%, 01/10/04 .............................. 1
----------
4
----------
TOTAL CORPORATE BONDS
(Cost $7) ..................................... 6
----------
TOTAL BONDS
(Cost $7) ..................................... 6
----------
SHARES
- ------
PREFERRED STOCK--0.01%
FURNITURE AND FIXTURES--0.00%
2,800 * OSULLIVAN INDUSTRIES HOLDINGS, INC ........... 1
----------
HOLDING AND OTHER INVESTMENT OFFICES--0.00%
503 SUPERIOR TRUST SERIES A ......................... 17
----------
INSTRUMENTS AND RELATED PRODUCTS--0.00%
3,500 * FRESENIUS MEDICAL CARE (CLASS D) ............. 0
----------
RUBBER AND MISCELLANEOUS PLASTIC PRODUCTS--0.01%
2,280 SEALED AIR CORP (CLASS A) ....................... 115
----------
TOTAL PREFERRED STOCK
(Cost $127) ..................................... 133
----------
COMMON STOCK--99.62%
AGRICULTURAL SERVICES--0.00%
1,000 * CADIZ, INC ................................... 10
400 * VETERINARY CENTERS OF AMERICA, INC ........... 5
----------
15
----------
AMUSEMENT AND RECREATION SERVICES--0.09%
15,285 * AMF BOWLING, INC ............................. 48
1,400 * ANCHOR GAMING CO ............................. 61
3,500 * ARGOSY GAMING CORP ........................... 54
3,000 * BALLY TOTAL FITNESS HOLDINGS CORP ............ 80
2,400 * BOCA RESORTS, INC (CLASS A) .................. 23
4,500 * BOYD GAMING CORP ............................. 26
1,700 * CHAMPIONSHIP AUTO RACING TEAMS, INC .......... 39
9,800 * HARRAH'S ENTERTAINMENT, INC .................. 259
2,400 * HOLLYWOOD PARK, INC .......................... 54
1,300 INTERNATIONAL SPEEDWAY CORP (CLASS A) ........ 65
25 * LAKES GAMING, INC ............................ 0
5,600 * MIRAGE RESORTS, INC .......................... 86
50 * PLAYERS INTERNATIONAL, INC ................... 0
50 * SFX ENTERTAINMENT, INC (CLASS A) ............. 2
2,400 * STATION CASINOS, INC ......................... 54
1,500 * WESTWOOD ONE, INC ............................ 114
----------
965
----------
APPAREL AND ACCESSORY STORES--0.49%
7,764 * ABERCROMBIE & FITCH CO (CLASS A) ............. 207
2,100 * AMERICAN EAGLE OUTFITTERS, INC ............... 95
1,100 * ANN TAYLOR STORES CORP ....................... 38
500 * BUCKLE, INC .................................. 7
620 BURLINGTON COAT FACTORY WAREHOUSE CORP ....... 9
2,800 CATO CORP (CLASS A) .......................... 35
7,400 * CHARMING SHOPPES, INC ........................ 49
2,100 * CHILDRENS PLACE RETAIL STORES ................ 35
5,800 CLAIRES STORES, INC .......................... 130
<CAPTION>
SHARES VALUE (000)
- ---------- ------------
<S> <C> <C>
2,500 * FINISH LINE, INC (CLASS A) ....................... $ 14
4,000 * FOOTSTAR, INC .................................... 122
800 * GADZOOKS, INC .................................... 8
53,712 GAP, INC ........................................ 2,471
22,700 * GENESCO, INC ..................................... 295
400 * GOODYS FAMILY CLOTHING, INC ...................... 2
500 * GYMBOREE CORP .................................... 3
2,100 INTIMATE BRANDS, INC (CLASS A) ................... 91
8,451 LIMITED, INC ..................................... 366
1,050 * MEN'S WEARHOUSE, INC ............................. 31
3,800 NORDSTROM, INC ................................... 100
4,850 * PACIFIC SUNWEAR CALIFORNIA, INC .................. 155
2,800 * PAYLESS SHOESOURCE, INC .......................... 132
8,600 ROSS STORES, INC ................................. 154
200 * SHOE CARNIVAL, INC ............................... 2
24,700 TJX COS, INC ..................................... 505
1,207 * TOO, INC ......................................... 21
300 * URBAN OUTFITTERS, INC ............................ 9
1,100 * WET SEAL, INC (CLASS A) .......................... 13
----------
5,099
----------
APPAREL AND OTHER TEXTILE PRODUCTS--0.07%
300 * COLUMBIA SPORTSWEAR CO ........................... 6
8,002 * JONES APPAREL GROUP, INC ......................... 217
3,600 LIZ CLAIBORNE, INC ............................... 135
1,600 * NAUTICA ENTERPRISES, INC ......................... 18
1,400 OSHKOSH B'GOSH, INC (CLASS A) .................... 29
400 OXFORD INDUSTRIES, INC ........................... 8
500 PHILLIPS VAN HEUSEN CORP ......................... 4
200 PILLOWTEX CORP ................................... 1
2,800 * POLO RALPH LAUREN CORP ........................... 48
2,800 * QUIKSILVER, INC .................................. 43
5,700 VF CORP .......................................... 171
5,500 WARNACO GROUP, INC (CLASS A) ..................... 68
----------
748
----------
AUTO REPAIR, SERVICES AND PARKING--0.05%
1,000 * AUTOWEB.COM, INC ................................. 11
2,400 * AVIS RENT A CAR, INC ............................. 61
900 * BUDGET GROUP, INC ................................ 8
50 CENTRAL PARKING CORP ............................. 1
4,500 * DOLLAR THRIFTY AUTOMOTIVE GROUP, INC ............. 108
1,200 HERTZ CORP (CLASS A) ............................. 60
1,333 MIDAS, INC ....................................... 29
8,250 ROLLINS TRUCK LEASING CORP ....................... 98
7,300 RYDER SYSTEM, INC ................................ 178
----------
554
----------
AUTOMOTIVE DEALERS AND SERVICE STATIONS--0.07%
19,600 * AUTONATION, INC .................................. 181
8,200 * AUTOZONE, INC .................................... 265
2,900 * COPART, INC ...................................... 126
2,500 * CSK AUTO CORP .................................... 44
700 * LITHIA MOTORS, INC (CLASS A) ..................... 13
2,400 * OREILLY AUTOMOTIVE, INC .......................... 52
2,500 PEP BOYS MANNY, MOE, & JACK CO ................... 23
----------
704
----------
BUILDING MATERIALS AND GARDEN SUPPLIES--1.31%
2,400 FASTENAL CO ...................................... 108
174,150 HOME DEPOT, INC .................................. 11,940
25,100 LOWES COS, INC ................................... 1,500
----------
13,548
----------
</TABLE>
See notes to financial statements.
B-24
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE (000)
- ------ -----------
<S> <C> <C>
BUSINESS SERVICES--12.22%
500 * 24/7 MEDIA, INC ................................... $ 28
2,200 AARON RENTS, INC .................................. 39
3,000 * ABOUT.COM, INC .................................... 269
4,800 * ACCLAIM ENTERTAINMENT, INC ........................ 25
4,133 * ACNEILSEN CORP .................................... 102
500 * ACTIVISION, INC ................................... 8
1,400 * ACTUATE CORP ...................................... 60
4,760 * ACXIOM CORP ....................................... 114
800 * ADFORCE, INC ...................................... 57
100 * ADMINSTAFF, INC ................................... 3
10,400 ADOBE SYSTEMS, INC ................................ 699
1,350 * ADVENT SOFTWARE, INC .............................. 87
2,400 * ADVO, INC ......................................... 57
4,200 * AFFILIATED COMPUTER SERVICES, INC (CLASS A) ....... 193
1,040 * AMDOCS LTD ........................................ 36
168,302 * AMERICA ONLINE, INC ............................... 12,696
7,650 * AMERICAN MANAGEMENT SYSTEMS, INC .................. 240
3,300 ANALYSTS INTERNATIONAL CORP ....................... 41
5,200 * ANSWERTHINK CONSULTING GROUP ...................... 178
1,000 * APAC CUSTOMER SERVICES, INC ....................... 14
300 * APPLIEDTHEORY CORP ................................ 8
300 * ARDENT SOFTWARE, INC .............................. 12
2,700 * ASHTON TECHNOLOGY GROUP, INC ...................... 17
1,800 * ASPECT DEVELOPMENT, INC ........................... 123
400 * AUTOBYTEL.COM, INC ................................ 6
41,095 AUTOMATIC DATA PROCESSING, INC .................... 2,214
1,100 * AVT CORP .......................................... 52
1,500 * AXENT TECHNOLOGIES, INC ........................... 32
1,220 * AZTEC TECHNOLOGY PARTNERS, INC .................... 6
100 * BARRA, INC ........................................ 3
11,200 * BEA SYSTEMS, INC .................................. 783
800 * BEYOND.COM CORP ................................... 6
600 * BINDVIEW DEVELOPMENT CORP ......................... 30
900 * BISYS GROUP, INC .................................. 59
16,400 * BMC SOFTWARE, INC ................................. 1,311
600 * BOTTOMLINE TECHNOLOGIES, INC ...................... 22
3,500 * BROADVISION, INC .................................. 595
1,800 * BROCADE COMMUNICATIONS SYSTEMS, INC ............... 319
1,000 * BURNS INTERNATIONAL SERVICES ...................... 11
16,800 * CADENCE DESIGN SYSTEMS, INC ....................... 403
1,000 * CAIS INTERNET, INC ................................ 36
1,700 * CAMBRIDGE TECHNOLOGY PARTNERS, INC ................ 45
300 * CAREERBUILDER, INC ................................ 2
700 * CATALINA MARKETING CORP ........................... 81
2,700 * CCC INFORMATION SERVICES GROUP, INC ............... 46
1,500 * CDI CORP .......................................... 36
55,047 * CENDANT CORP ...................................... 1,462
5,500 * CENTURY BUSINESS SERVICES, INC .................... 46
7,400 * CERIDIAN CORP ..................................... 160
2,500 * CHECKFREE HOLDINGS CORP ........................... 261
1,200 * CHOICEPOINT, INC .................................. 50
2,800 * CIBER, INC ........................................ 77
5,300 * CITRIX SYSTEMS, INC ............................... 652
1,900 * CLARIFY, INC ...................................... 239
5,400 * CMGI, INC ......................................... 1,495
2,700 * CNET, INC ......................................... 153
500 * COGNIZANT TECHNOLOGY SOLUTIONS .................... 55
6,200 COMDISCO, INC ..................................... 231
3,600 * COMPLETE BUSINESS SOLUTIONS, INC .................. 90
32,500 COMPUTER ASSOCIATES INTERNATIONAL, INC ............ 2,273
50 * COMPUTER HORIZONS CORP ............................ 1
1,500 * COMPUTER NETWORK TECHNOLOGY CORP .................. 34
11,496 * COMPUTER SCIENCES CORP ............................ 1,088
1,300 COMPUTER TASK GROUP, INC .......................... 19
31,700 * COMPUWARE CORP .................................... 1,181
<CAPTION>
SHARES VALUE (000)
- ------ -----------
<S> <C> <C>
1,700 * CONCORD COMMUNICATIONS, INC ....................... $ 75
2,500 * CONVERGYS CORP .................................... 77
900 * CORT BUSINESS SERVICES CORP ....................... 16
1,200 * COSTAR GROUP ...................................... 43
2,100 * COTELLIGENT, INC .................................. 11
1,000 * CRITICAL PATH, INC ................................ 94
7,700 * CSG SYSTEMS INTERNATIONAL, INC .................... 307
1,100 * CTC COMMUNICATIONS GROUP .......................... 43
1,600 * CYBERCASH, INC .................................... 15
5,860 * CYBERGUARD CORP ................................... 23
500 * DATA BROADCASTING CORP ............................ 4
800 * DATA DIMENSIONS, INC .............................. 2
2,700 * DATASTREAM SYSTEMS, INC ........................... 66
1,200 * DBT ONLINE, INC ................................... 29
200 * DELTEK SYSTEMS, INC ............................... 3
4,200 * DENDRITE INTERNATIONAL, INC ....................... 142
800 * DIGITAL RIVER, INC ................................ 27
900 * DOCUMENTUM, INC ................................... 54
2,050 * DOUBLECLICK, INC .................................. 519
2,186 * DST SYSTEMS, INC .................................. 167
1,300 * EARTHLINK NETWORK, INC ............................ 55
1,100 * EARTHWEB, INC ..................................... 55
2,300 * EBAY, INC ......................................... 288
1,600 * ECLIPSYS CORP ..................................... 41
5,300 * ELECTRONIC ARTS, INC .............................. 445
28,400 ELECTRONIC DATA SYSTEMS CORP ...................... 1,901
4,300 * ELECTRONICS FOR IMAGING, INC ...................... 250
5,500 * EMPLOYEE SOLUTIONS, INC ........................... 4
500 * ENTRUST TECHNOLOGIES, INC ......................... 30
4,500 * EPICOR SOFTWARE CORP .............................. 23
8,900 EQUIFAX, INC ...................................... 210
300 * EXCHANGE APPLICATIONS, INC ........................ 17
8,850 * EXCITE AT HOME .................................... 379
1,300 FACTSET RESEARCH SYSTEMS, INC ..................... 104
1,700 FAIR ISSAC & CO, INC .............................. 90
5,500 * FILENET CORP ...................................... 140
37,506 FIRST DATA CORP ................................... 1,850
7,675 * FISERV, INC ....................................... 294
2,624 * GARTNER GROUP, INC (CLASS B) ...................... 36
1,500 * GENESYS TELECOMMUNICATIONS LABORATORIES, INC ...... 81
3,400 GERBER SCIENTIFIC, INC ............................ 75
2,400 * GETTY IMAGES, INC ................................. 117
3,450 * GO.COM ............................................ 82
1,900 * GO2NET, INC ....................................... 165
1,400 * GREAT PLAINS SOFTWARE, INC ........................ 105
2,200 * GT INTERACTIVE SOFTWARE CORP ...................... 4
4,900 * GTECH HOLDINGS CORP ............................... 108
4,000 * HARBINGER CORP .................................... 127
1,299 * HEALTHEON/WEBMD CORP .............................. 49
1,100 * HNC SOFTWARE ...................................... 116
530 * HYPERION SOLUTIONS CORP ........................... 23
2,300 * I2 TECHNOLOGIES, INC .............................. 449
2,230 * IMATION CORP ...................................... 75
1,900 * IMRGLOBAL CORP .................................... 24
24,000 IMS HEALTH, INC ................................... 653
1,500 * INACOM CORP ....................................... 11
2,000 * INDUSTRI-MATEMATIK INTERNATIONAL CORP ............. 12
2,400 * INFOCURE CORP ..................................... 75
1,300 * INFORMATION ARCHITECTS CORP ....................... 13
17,000 * INFORMIX CORP ..................................... 194
2,700 * INFOSPACE.COM, INC ................................ 578
3,500 * INFOUSA, INC ...................................... 49
3,800 * INKTOMI CORP ...................................... 337
400 * INTELLIGROUP, INC ................................. 10
5,800 * INTERGRAPH CORP ................................... 27
2,500 * INTERIM SERVICES, INC ............................. 62
</TABLE>
See notes to financial statements.
B-25
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE (000)
- ------ -----------
<S> <C> <C>
BUSINESS SERVICES--(Continued)
180 * INTERNET CAPITAL GROUP, INC .................. $ 31
800 INTERPOOL, INC ............................... 6
17,604 INTERPUBLIC GROUP OF COS, INC ................ 1,016
1,400 * INTERVU, INC ................................. 147
14,700 * INTUIT, INC .................................. 881
2,200 * ISS GROUP, INC ............................... 156
3,700 * IVILLAGE, INC ................................ 75
1,100 JACK HENRY & ASSOCIATES, INC ................. 59
1,500 * JDA SOFTWARE GROUP, INC ...................... 25
1,000 * JUNO ONLINE SERVICES, INC .................... 36
2,800 * KEANE, INC ................................... 89
2,800 KELLY SERVICES, INC (CLASS A) ................ 70
3,750 * LABOR READY, INC ............................. 45
2,550 * LAMAR ADVERTISING CO (CLASS A) ............... 154
2,200 * LEARN2.COM, INC .............................. 7
900 x * LEASING SOLUTIONS, INC ....................... 0
5,000 * LEGATO SYSTEMS, INC .......................... 344
1,300 * LHS GROUP, INC ............................... 32
6,200 * LYCOS, INC ................................... 493
4,600 * MACROMEDIA, INC .............................. 336
1,600 * MACROVISION CORP ............................. 118
5,800 MANPOWER, INC ................................ 218
2,600 * MANUGISTICS GROUP, INC ....................... 84
700 * MAPICS, INC .................................. 9
200 * MAPQUEST.COM, INC ............................ 5
200 * MARIMBA, INC ................................. 9
3,300 * MASTECH CORP ................................. 82
700 MCGRATH RENTCORP ............................. 12
500 * MEDIA METRIX, INC ............................ 18
4,100 * MEDQUIST, INC ................................ 106
1,300 * MEMBERWORKS, INC ............................. 43
11,500 * MENTOR GRAPHICS CORP ......................... 152
60 * MERANT PLC ADR ............................... 2
3,900 * MERCURY INTERACTIVE CORP ..................... 421
1,000 * MESSAGEMEDIA, INC ............................ 14
1,000 * METRO INFORMATION SERVICES, INC .............. 24
1,500 * MICROMUSE, INC ............................... 255
287,758 * MICROSOFT CORP ............................... 33,596
3,300 * MICROSTRATEGY, INC ........................... 693
2,200 * MINDSPRING ENTERPRISES, INC .................. 58
500 * MODEM MEDIA POPPE TYSON, INC ................. 35
9,483 * MODIS PROFESSIONAL SERVICES .................. 135
4 * MOMENTUM BUSINESS APPLICATIONS, INC .......... 0
1,000 * MPATH INTERACTIVE, INC ....................... 27
3,300 NATIONAL COMPUTER SYSTEMS, INC ............... 124
2,900 NATIONAL DATA CORP ........................... 98
700 * NBC INTERNET, INC ............................ 54
4,700 * NCO GROUP, INC ............................... 142
2,100 * NEFF CORP .................................... 13
600 * NETOPIA, INC ................................. 33
9,000 * NETWORK APPLIANCE, INC ....................... 748
2,100 * NETWORK PERIPHERALS, INC ..................... 99
1,500 * NETWORK SOLUTIONS, INC ....................... 326
8,499 * NETWORKS ASSOCIATES, INC ..................... 227
2,100 * NEW ERA OF NETWORKS, INC ..................... 100
5,700 * NOVA CORP (GEORGIA) .......................... 180
22,500 * NOVELL, INC .................................. 899
1,600 * OBJECTIVE SYSTEMS INTEGRATORS, INC ........... 11
7,700 OLSTEN CORP .................................. 87
11,000 OMNICOM GROUP, INC ........................... 1,100
700 * ON ASSIGNMENT, INC ........................... 21
1,600 * ONEMAIN.COM, INC ............................. 24
2,900 * OPEN MARKET, INC ............................. 131
85,612 * ORACLE CORP .................................. 9,594
16,410 * PARAMETRIC TECHNOLOGY CORP ................... 444
<CAPTION>
SHARES VALUE (000)
- ------ -----------
<S> <C> <C>
18,450 PAYCHEX, INC ................................. $ 738
400 * PCORDER.COM, INC ............................. 20
600 * PEGASYSTEMS, INC ............................. 7
8,200 * PEOPLESOFT, INC .............................. 175
1,466 * PER SE TECHNOLOGIES, INC ..................... 12
3,700 * PEREGRINE SYSTEMS, INC ....................... 311
2,900 * PEROT SYSTEMS CORP (CLASS A) ................. 55
1,900 * PERSONNEL GROUP OF AMERICA, INC .............. 19
400 * PERVASIVE SOFTWARE, INC ...................... 7
4,200 # * PHYSICIAN COMPUTER NETWORK, INC .............. 0
5,800 PITTSTON BRINKS GROUP CO ..................... 128
2,300 * POLICY MANAGEMENT SYSTEMS CORP ............... 59
2,200 * PORTAL SOFTWARE, INC ......................... 226
1,900 * PREVIEW TRAVEL, INC .......................... 99
6,400 * PRICELINE.COM, INC ........................... 303
6,300 # * PROCURENET, INC .............................. 1
2,950 * PROGRESS SOFTWARE CORP ....................... 167
600 * PROJECT SOFTWARE & DEVELOPMENT, INC .......... 33
2,900 * PROXICOM, INC ................................ 361
5,480 * PSINET, INC .................................. 338
1,750 * QRS CORP ..................................... 184
3,300 * QUADRAMED CORP ............................... 29
1,400 * RARE MEDIUM GROUP, INC ....................... 48
6,683 * RATIONAL SOFTWARE CORP ....................... 328
900 * RAZORFISH, INC ............................... 86
2,200 * REALNETWORKS, INC ............................ 265
800 * REDBACK NETWORKS, INC ........................ 142
3,500 * REMEDY CORP .................................. 166
1,900 * RENT WAY, INC ................................ 36
1,200 * RENT-A-CENTER, INC ........................... 24
5,400 * ROBERT HALF INTERNATIONAL, INC ............... 154
3,100 ROLLINS, INC ................................. 47
1,500 * ROMAC INTERNATIONAL, INC ..................... 20
200 * RSA SECURITY, INC ............................ 16
2,700 * SABRE HOLDINGS CORP .......................... 138
4,600 * SAFETY-KLEEN CORP ............................ 52
1,200 * SAGA SYSTEMS, INC ............................ 24
400 * SAGENT TECHNOLOGY, INC ....................... 12
400 * SALESLOGIX CORP .............................. 16
1,300 * SANCHEZ COMPUTER ASSOCIATES, INC ............. 54
3,000 * SANTA CRUZ OPERATION, INC .................... 91
2,000 * SAPIENT CORP ................................. 282
3,600 * SCIENT CORP .................................. 311
2,000 SEI INVESTMENT CO ............................ 238
400 * SERENA SOFTWARE, INC ......................... 12
2,400 SHARED MEDICAL SYSTEMS CORP .................. 122
8,984 * SIEBEL SYSTEMS, INC .......................... 755
1,000 * SILKNET SOFTWARE, INC ........................ 166
18,800 * SITEL CORP ................................... 132
5,200 * SNYDER COMMUNICATIONS, INC ................... 100
1,100 * SOFTNET SYSTEMS, INC ......................... 28
600 SOTHEBYS HOLDINGS, INC (CLASS A) ............. 18
1,900 * SOURCE MEDIA, INC ............................ 35
1,500 * SPORTSLINE.COM ............................... 75
700 * SPR, INC ..................................... 4
700 * SPYGLASS, INC ................................ 27
800 * STAFFMARK, INC ............................... 6
900 * STARMEDIA NETWORK, INC ....................... 36
6,600 * STERLING COMMERCE, INC ....................... 225
5,700 * STERLING SOFTWARE, INC ....................... 180
4,900 * STRUCTURAL DYNAMICS RESEARCH CORP ............ 62
117,636 * SUN MICROSYSTEMS, INC ........................ 9,109
8,200 * SUNGARD DATA SYSTEMS, INC .................... 195
10,500 * SYBASE, INC .................................. 179
1,700 * SYKES ENTERPRISES, INC ....................... 75
3,900 * SYMANTEC CORP ................................ 229
</TABLE>
See notes to financial statements.
B-26
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE (000)
- ------ -----------
<S> <C> <C>
BUSINESS SERVICES--(Continued)
4,100 * SYNOPSYS, INC ........................................... $ 274
800 * SYNTEL, INC ............................................. 13
3,500 * SYSTEMS & COMPUTER TECHNOLOGY CORP ...................... 57
4,500 * SYSTEMSOFT CORP ......................................... 0
1,975 * TECHNOLOGY SOLUTIONS CO ................................. 65
1,900 * TELETECH HOLDINGS, INC .................................. 64
2,000 * THEGLOBE.COM, INC ....................................... 17
3,000 * THQ, INC ................................................ 70
2,300 * TICKETMASTER ONLINE-CITYSEARCH, INC ..................... 88
1,500 * TMP WORLDWIDE, INC ...................................... 213
1,000 TOTAL SYSTEM SERVICES, INC .............................. 16
800 * TRANSACTION SYSTEM ARCHITECTURE ......................... 22
5,000 TRUE NORTH COMMUNICATIONS, INC .......................... 223
1,000 * TSI INTERNATIONAL SOFTWARE LTD .......................... 57
700 * UNIGRAPHICS SOLUTIONS, INC .............................. 19
5,470 * UNITED RENTALS, INC ..................................... 94
95 * US INTERACTIVE, INC ..................................... 4
300 * USINTERNETWORKING, INC .................................. 21
8,100 * USWEB CORP .............................................. 360
4,800 * VALASSIS COMMUNICATIONS, INC ............................ 203
7,200 * VERIO, INC .............................................. 333
4,800 * VERISIGN, INC ........................................... 917
18,375 * VERITAS SOFTWARE CORP ................................... 2,630
4,400 * VERITY, INC ............................................. 187
2,200 * VERTICALNET, INC ........................................ 361
1,200 * VIASOFT, INC ............................................ 7
4,600 * VIGNETTE CORP ........................................... 750
1,800 * VISIO CORP .............................................. 86
2,000 WACKENHUT CORP SERIES A ................................. 30
1,000 * WAVE SYSTEMS CORP (CLASS A) ............................. 12
1,000 * WEBTRENDS CORP .......................................... 81
700 * WEST TELESERVICES CORP .................................. 17
75 * WIND RIVER SYSTEMS, INC ................................. 3
2,000 * XTRA CORP ............................................... 85
9,231 * YAHOO, INC .............................................. 3,994
4,500 YOUNG & RUBICAM, INC .................................... 318
-------
26,177
-------
CHEMICALS AND ALLIED PRODUCTS--10.85%
111,810 ABBOTT LABORATORIES CO .................................. 4,060
1,000 * ABGENIX, INC ............................................ 133
300 * ADVANCED TISSUE SCIENCE CO .............................. 1
14,900 AIR PRODUCTS & CHEMICALS, INC ........................... 500
3,300 ALBEMARLE CORP .......................................... 63
4,300 ALBERTO CULVER CO (CLASS B) ............................. 111
2,700 * ALKERMES, INC ........................................... 133
95 * ALLERGAN SPECIALTY THERAPEUTICS, INC (CLASS A) .......... 1
8,600 ALLERGAN, INC ........................................... 428
3,400 ALPHARMA, INC (CLASS A) ................................. 105
3,600 * ALZA CORP ............................................... 125
97,700 AMERICAN HOME PRODUCTS CORP ............................. 3,853
82,080 * AMGEN, INC .............................................. 4,930
4,700 * ANDRX CORP .............................................. 199
2,700 ARCH CHEMICALS, INC ..................................... 57
2,000 * AVIRON, INC ............................................. 32
19,600 AVON PRODUCTS, INC ...................................... 647
1,900 * BIO-TECHNOLOGY GENERAL CORP ............................. 29
10,600 * BIOGEN, INC ............................................. 896
1,800 * BIOMATRIX, INC .......................................... 35
119 * BIOVAIL CORP INTERNATIONAL .............................. 11
309 BLOCK DRUG, INC (CLASS A) ............................... 10
149,800 BRISTOL MYERS SQUIBB CO ................................. 9,615
6,900 CABOT CORP .............................................. 141
800 CALGON CARBON CORP ...................................... 5
4,000 CAMBREX CORP ............................................ 138
200 * CARBIDE/GRAPHITE GROUP, INC ............................. 1
<CAPTION>
SHARES VALUE (000)
- ------ -----------
<S> <C> <C>
400 * CAREMARK RX, INC ........................................ $ 2
3,700 CARTER WALLACE, INC ..................................... 66
1,200 * CELL PATHWAYS, INC ...................................... 11
4,400 * CEPHALON, INC ........................................... 152
2,400 * CHIREX, INC ............................................. 35
5,640 * CHIRON CORP ............................................. 239
4,000 CHURCH & DWIGHT CO, INC ................................. 107
9,695 CK WITCO CORP ........................................... 130
15,200 CLOROX CO ............................................... 766
42,800 COLGATE PALMOLIVE CO .................................... 2,782
4,000 * COR THERAPEUTICS, INC ................................... 108
1,000 * CORIXA CORP ............................................. 17
2,600 * COULTER PHARMACEUTICALS, INC ............................ 59
800 * CREATIVE BIOMOLECULES, INC .............................. 4
60 * CRESCENDO PHARMACEUTICALS CORP .......................... 1
500 * CYGNUS, INC ............................................. 9
4,900 * CYTEC INDUSTRIES, INC ................................... 113
2,300 DEXTER CORP ............................................. 91
700 DIAGNOSTIC PRODUCTS CORP ................................ 17
6,000 DIAL CORP ............................................... 146
18,700 DOW CHEMICAL CO ......................................... 2,499
77,591 DU PONT (E.I.) DE NEMOURS & CO .......................... 5,111
2,800 * DURA PHARMACEUTICALS, INC ............................... 39
900 * DURAMED PHARMACEUTICALS, INC ............................ 6
4,000 EASTMAN CHEMICAL CO ..................................... 191
9,900 ECOLAB, INC ............................................. 387
1,950 FERRO CORP .............................................. 43
3,600 * FMC CORP ................................................ 206
5,700 * FOREST LABORATORIES, INC ................................ 350
1,420 FULLER (H.B.) CO ........................................ 79
6,100 * GENZYME CORP (GENERAL DIVISION) ......................... 275
160 * GENZYME CORP (TISSUE REPAIR DIVISION) ................... 0
91 * GENZYME SURGICAL PRODUCTS ............................... 1
86 * GENZYME-MOLECULAR ONCOLOGY .............................. 1
3,600 GEON CO ................................................. 117
3,002 * GILEAD SCIENCES, INC .................................... 162
18,200 * GRACE W.R. & CO ......................................... 253
3,000 GREAT LAKES CHEMICAL CORP ............................... 115
200 * GUILFORD PHARMACEUTICALS, INC ........................... 3
2,750 HANNA (M.A.) CO ......................................... 30
8,200 HERCULES, INC ........................................... 229
2,800 * HESKA CORP .............................................. 6
2,500 * HUMAN GENOME SCIENCES, INC .............................. 382
6,151 ICN PHARMACEUTICALS, INC ................................ 156
4,000 * ICOS CORP ............................................... 117
2,200 * IDEC PHARMACEUTICALS CORP ............................... 216
1,300 * IDEXX LABORATORIES, INC ................................. 21
9,100 IMC GLOBAL, INC ......................................... 149
666 * IMC GLOBAL, INC WTS 12/22/00 ............................ 0
1,900 * IMCLONE SYSTEMS, INC .................................... 75
700 * IMMUNE RESPONSE CORP .................................... 3
6,000 * IMMUNEX CORP ............................................ 657
400 * INHALE THERAPEUTIC SYSTEMS .............................. 17
2,100 * INTERNATIONAL SPECIALTY PRODUCTS, INC ................... 19
200 * INTERNEURON PHARMACEUTICALS, INC ........................ 1
4,300 INTERNATIONAL FLAVORS & FRAGRANCES, INC ................. 162
4,000 * ISIS PHARMACEUTICALS, INC ............................... 25
9,200 * IVAX CORP ............................................... 237
107,760 JOHNSON & JOHNSON CO .................................... 10,035
1,800 JONES PHARMACEUTICAL, INC ............................... 78
900 * KING PHARMACEUTICALS, INC ............................... 50
1,800 * KV PHARMACEUTICAL CO (CLASS B) .......................... 39
11,400 LAUDER (ESTEE) CO (CLASS A) ............................. 575
72,492 LILLY (ELI) & CO ........................................ 4,821
3,700 LILLY INDUSTRIES, INC (CLASS A) ......................... 50
4,500 * LIPOSOME CO, INC ........................................ 55
</TABLE>
See notes to financial statements.
B-27
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE (000)
- -------------- --------------
<S> <C> <C>
CHEMICALS AND ALLIED PRODUCTS--(Continued)
5,200 LUBRIZOL CORP ...................................... $ 161
1,300 MACDERMID, INC ..................................... 53
2,400 * MACROCHEM CORP (DELAWARE) .......................... 10
11,000 MALLINCKRODT, INC .................................. 350
100 * MATRIX PHARMACEUTICALS, INC ........................ 0
800 * MEDCO RESEARCH, INC ................................ 24
1,750 * MEDICIS PHARMACEUTICAL CORP (CLASS A) .............. 74
4,300 * MEDIMMUNE, INC ..................................... 713
180,600 MERCK & CO, INC .................................... 12,111
3,400 * MILLENNIUM PHARMACEUTICALS, INC .................... 415
1,600 MINERALS TECHNOLOGIES, INC ......................... 64
200 MISSISSIPPI CHEMICAL CORP .......................... 1
49,000 MONSANTO CO ........................................ 1,746
8,800 MYLAN LABORATORIES, INC ............................ 222
800 * NABI, INC .......................................... 4
1,900 NATURES SUNSHINE PRODUCTS, INC ..................... 15
1,900 * NBTY, INC .......................................... 22
200 NCH CORP ........................................... 9
1,000 * NEOPROBE CORP ...................................... 0
2,000 * NEUROGEN CORP ...................................... 33
275 * OCTEL CORP ......................................... 3
4,100 OMNOVA SOLUTIONS, INC .............................. 32
525 * ORGANOGENESIS, INC ................................. 5
18,500 * PERRIGO CO ......................................... 148
293,500 PFIZER, INC ........................................ 9,520
35,515 PHARMACIA & UPJOHN, INC ............................ 1,598
1,100 * PHARMACYCLICS, INC ................................. 45
12,700 PPG INDUSTRIES, INC ................................ 795
10,100 PRAXAIR, INC ....................................... 508
102,500 PROCTER & GAMBLE CO ................................ 11,230
1,700 * REGENERON PHARMACEUTICALS, INC ..................... 22
4,000 * REXALL SUNDOWN, INC ................................ 41
7,400 ROHM & HAAS CO ..................................... 301
4,031 RPM, INC ........................................... 41
400 * SANGSTAT MEDICAL CORP .............................. 12
800 * SCHEIN PHARMACEUTICAL, INC ......................... 10
112,700 SCHERING-PLOUGH CORP ............................... 4,755
3,500 SCHULMAN (A.), INC ................................. 57
2,200 * SCOTTS CO (CLASS A) ................................ 89
1,800 * SEPRACOR, INC ...................................... 179
1,400 * SEROLOGICALS CORP .................................. 8
12,800 SHERWIN-WILLIAMS CO ................................ 269
4,274 * SHIRE PHARMACEUTICALS CORP ......................... 124
5,000 * SICOR, INC ......................................... 39
14,100 SIGMA ALDRICH CORP ................................. 424
1,000 STEPAN CO .......................................... 23
2,600 * SUPERGEN, INC ...................................... 76
3,200 * TECHNE CORP ........................................ 176
1,400 * THERAGENICS CORP ................................... 13
1,200 * THERMOLASE CORP .................................... 2
2,400 * TRANSKARYOTIC THERAPIES, INC ....................... 92
3,400 * TRIANGLE PHARMACEUTICALS, INC ...................... 44
1,400 * TWINLAB CORP ....................................... 11
600 * U.S.A. DETERGENTS, INC ............................. 2
6,000 UNION CARBIDE CORP ................................. 401
3,700 VALSPAR CORP ....................................... 155
1,733 * VENTIV HEALTH, INC ................................. 16
1,000 * VERTEX PHARMACEUTICALS, INC ........................ 35
2,600 * VICAL, INC ......................................... 78
63,118 WARNER-LAMBERT CO .................................. 5,172
5,300 * WATSON PHARMACEUTICALS, INC ........................ 190
600 WELLMAN, INC ....................................... 11
2,000 WEST PHARMACEUTICAL SERVICES ....................... 62
1,500 * ZILA, INC .......................................... 4
500 * ZONAGEN, INC ....................................... 2
--------
112,004
--------
<CAPTION>
SHARES VALUE (000)
- ------ -----------
<S> <C> <C>
COAL MINING--0.00%
2,100 ARCH COAL, INC ..................................... $ 24
-------
COMMUNICATIONS--12.02%
1,700 * ADELPHIA BUSINESS SOLUTIONS, INC ................... 82
5,000 * ADELPHIA COMMUNICATIONS CORP (CLASS A) ............. 328
2,100 * ADVANCED COMMUNICATIONS GROUP ...................... 29
3,500 * ADVANCED RADIO TELECOM CORP ........................ 84
1,700 * AERIAL COMMUNICATIONS, INC ......................... 103
100 ALCATEL S.A. ADR ................................... 5
3,600 * ALLEGIANCE TELECOM, INC ............................ 332
19,152 ALLTEL CORP ........................................ 1,584
2,300 * AMERICAN MOBILE SATELLITE CORP ..................... 48
10,436 * AMFM, INC .......................................... 817
700 * ARCH COMMUNICATIONS GROUP, INC ..................... 5
7,950 * ARCH COMMUNICATIONS GROUP, INC
WTS 09/01/03 ....................................... 4
4,522 * ASCENT ENTERTAINMENT GROUP, INC .................... 57
2,800 * ASSOCIATED GROUP, INC (CLASS A) .................... 256
241,815 AT & T CORP ........................................ 12,272
82,782 * AT & T CORP-LIBERTY MEDIA GROUP (CLASS A) .......... 4,698
119,510 BELL ATLANTIC CORP ................................. 7,357
146,900 BELLSOUTH CORP ..................................... 6,877
300 * BHC COMMUNICATIONS, INC (CLASS A) .................. 48
8,600 BROADWING, INC ..................................... 317
9,000 * CABLEVISION SYSTEMS CORP (CLASS A) ................. 680
58,170 * CBS CORP ........................................... 3,719
10,275 CENTURYTEL, INC .................................... 487
149 * CHRIS CRAFT INDUSTRIES, INC ........................ 11
200 * CITADEL COMMUNICATIONS CORP ........................ 13
17,313 * CLEAR CHANNEL COMMUNICATIONS, INC .................. 1,545
1,400 * CLEAR CHANNEL COMMUNICATIONS, INC
WTS 09/18/01 ....................................... 22
2,900 * COM21, INC ......................................... 65
55,278 COMCAST CORP (CLASS A) SPECIAL ..................... 2,795
200 * COMMONWEALTH TELEPHONE ENTERPRISES ................. 11
91 COMSAT CORP SERIES 1 ............................... 2
4,200 * CONCENTRIC NETWORK CORP ............................ 129
5,000 * COVAD COMMUNICATIONS GROUP ......................... 280
8,417 * COX COMMUNICATIONS, INC (CLASS A) .................. 433
900 * COX RADIO, INC (CLASS A) ........................... 90
1,500 * CROWN CASTLE INTERNATIONAL CORP .................... 48
1,100 * CUMULUS MEDIA, INC ................................. 56
4,000 * E.SPIRE COMMUNICATIONS, INC ........................ 23
1,500 * ELECTRIC LIGHTWAVE, INC (CLASS A) .................. 28
700 * EMMIS COMMUNICATIONS (CLASS A) ..................... 87
1,100 * ENTERCOM COMMUNICATIONS CORP ....................... 73
11,800 * EXODUS COMMUNICATIONS, INC ......................... 1,048
6,500 * FOX ENTERTAINMENT GROUP, INC ....................... 162
54 GAYLORD ENTERTAINMENT CO ........................... 2
4,500 * GENERAL COMMUNICATIONS (CLASS A) ................... 20
50 * GLOBAL CROSSING LTD ................................ 3
11,000 * GLOBAL TELESYSTEMS GROUP, INC ...................... 381
78,200 GTE CORP ........................................... 5,518
3,800 * HEARST-ARGYLE TELEVISION, INC ...................... 101
3,300 * HIGHWAYMASTER COMMUNICATIONS, INC .................. 7
2,900 * HISPANIC BROADCASTING CORP ......................... 267
1,600 * IDT CORP ........................................... 30
19,150 * INFINITY BROADCASTING CORP (CLASS A) ............... 693
2,600 * INTERMEDIA COMMUNICATIONS, INC ..................... 101
1,600 * INTRAWARE, INC ..................................... 128
3,200 * ITC DELTACOM, INC .................................. 88
2,500 * JONES INTERCABLE, INC (CLASS A) .................... 173
700 * LAUNCH MEDIA, INC .................................. 13
1,450 * LEAP WIRELESS INTERNATIONAL, INC ................... 114
20,400 * LEVEL 3 COMMUNICATIONS, INC ........................ 1,670
2,800 * LIBERTY DIGITAL, INC (CLASS A) ..................... 208
237,381 LUCENT TECHNOLOGIES, INC ........................... 17,759
214,813 * MCI WORLDCOM, INC .................................. 11,399
</TABLE>
See notes to financial statements.
B-28
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE (000)
- -------------- --------------
<S> <C> <C>
COMMUNICATIONS--(Continued)
4,800 * MCLEODUSA, INC (CLASS A) .......................... $ 283
45,300 * MEDIA ONE GROUP, INC .............................. 3,480
7,297 * METROMEDIA FIBER NETWORK (CLASS A) ................ 350
100 * MGC COMMUNICATIONS, INC ........................... 5
14,300 * NEXTEL COMMUNICATIONS, INC (CLASS A) .............. 1,475
8,600 * NEXTLINK COMMUNICATIONS, INC ...................... 714
1,000 NORTH PITTSBURGH SYSTEMS, INC ..................... 15
900 * NORTHEAST OPTIC NETWORK, INC ...................... 56
300 * NORTHPOINT COMMUNICATIONS GROUP, INC .............. 7
8,750 * NTL, INC .......................................... 1,092
1,900 * OMNIPOINT CORP .................................... 229
190 * PAC WEST TELECOMM, INC ............................ 5
200 * PACIFIC GATEWAY EXCHANGE, INC ..................... 3
58,300 * PAGING NETWORK, INC ............................... 47
4,869 * PANAMSAT CORP ..................................... 289
2,700 * PAXSON COMMUNICATIONS CORP ........................ 32
1,300 * PEGASUS COMMUNICATIONS CORP ....................... 127
3,700 * POWERTEL, INC ..................................... 371
4,200 * PREMIERE TECHNOLOGIES, INC ........................ 29
8,200 * PRIMUS TELECOMMUNICATIONS GROUP, INC .............. 314
12,946 * QWEST COMMUNICATIONS INTERNATIONAL , INC .......... 557
400 * RADIO ONE, INC .................................... 37
6,400 * RCN CORP .......................................... 310
5,600 * RHYTHMS NETCONNECTIONS, INC ....................... 174
266,266 SBC COMMUNICATIONS, INC ........................... 12,980
1,800 * SIRIUS SATELLITE RADIO, INC ....................... 80
2,400 * SMARTALK TELESERVICES, INC ........................ 0
51,600 SPRINT CORP (FON GROUP) ........................... 3,473
17,950 * SPRINT CORP (PCS GROUP) ........................... 1,840
700 * STAR TELECOMMUNICATIONS, INC ...................... 6
4,800 * TALK.COM, INC ..................................... 85
70 * TALK.COM, INC RTS ................................. 0
9,880 * TCI SATELLITE ENTERTAINMENT (CLASS A) ............. 158
2,707 TELEPHONE & DATA SYSTEMS, INC ..................... 341
1,200 * TELIGENT, INC ..................................... 74
3,100 * TIME WARNER TELECOM, INC .......................... 155
1,000 * TV GUIDE, INC ..................................... 43
600 * U.S. LEC CORP (CLASS A) ........................... 19
42,411 U.S. WEST, INC .................................... 3,054
5,750 * U.S.A. NETWORKS, INC .............................. 318
7,800 * UNITEDGLOBALCOM, INC (CLASS A) .................... 551
5,500 * UNIVISION COMMUNICATIONS, INC ..................... 562
600 x * USN COMMUNICATIONS, INC ........................... 0
7,400 * VIACOM, INC (CLASS A) ............................. 447
36,100 * VIACOM, INC (CLASS B) ............................. 2,182
900 * VIATEL, INC ....................................... 48
6,900 * VOICESTREAM WIRELESS CORP ......................... 982
3,200 * WAVO CORP ......................................... 12
6,100 * WESTERN WIRELESS CORP (CLASS A) ................... 407
6,200 * WINSTAR COMMUNICATIONS, INC ....................... 467
700 * YOUNG BROADCASTING, INC (CLASS A) ................. 36
----------
124,106
----------
DEPOSITORY INSTITUTIONS--6.06%
4,700 AMCORE FINANCIAL, INC ............................. 113
32,554 AMSOUTH BANCORP ................................... 629
9,140 ASSOCIATED BANC-CORP .............................. 313
4,645 ASTORIA FINANCIAL CORP ............................ 141
600 BANCFIRST CORP .................................... 20
900 BANCFIRST OHIO CORP ............................... 21
7,500 BANCORPSOUTH, INC ................................. 122
8,400 BANCWEST CORP ..................................... 164
136,095 BANK OF AMERICA CORP .............................. 6,830
55,600 BANK OF NEW YORK CO, INC .......................... 2,224
95,533 BANK ONE CORP ..................................... 3,063
<CAPTION>
SHARES VALUE (000)
- -------------- --------------
<S> <C> <C>
2,800 BANK UNITED CORP (CLASS A) ........................... 76
120 BANKATLANTIC BANCORP, INC (CLASS A) .................. $ 0
800 BANKATLANTIC BANCORP, INC (CLASS B) .................. 4
2,800 BANKNORTH GROUP, INC ................................. 75
100 * BANKUNITED FINANCIAL CORP (CLASS A) .................. 1
3,300 BAY VIEW CAPITAL CORP ................................ 47
17,922 BB&T CORP ............................................ 491
2,090 BRENTON BANKS, INC ................................... 21
900 BROOKLINE BANCORP, INC ............................... 9
1,000 BSB BANCORP, INC ..................................... 19
1,050 BT FINANCIAL CORP .................................... 23
800 CATHAY BANCORP, INC .................................. 33
5,900 CCB FINANCIAL CORP ................................... 257
462 * CENTENNIAL BANCORP ................................... 5
1,100 CENTURA BANKS, INC ................................... 49
19,102 CHARTER ONE FINANCIAL, INC ........................... 365
66,140 CHASE MANHATTAN CORP ................................. 5,138
500 CHEMICAL FINANCIAL CORP .............................. 16
2,400 CHITTENDEN CORP ...................................... 71
2,521 CITIZENS BANKING CORP (MICHIGAN) ..................... 56
88 CITY HOLDINGS CO ..................................... 1
5,700 CITY NATIONAL CORP ................................... 188
6,000 COLONIAL BANCGROUP, INC .............................. 62
13,500 COMERICA, INC ........................................ 630
6,339 COMMERCE BANCSHARES, INC ............................. 215
50 COMMERCIAL FEDERAL CORP .............................. 1
6,800 COMMUNITY FIRST BANKSHARES, INC ...................... 107
1,540 COMMUNITY TRUST BANCORP, INC ......................... 31
8,550 COMPASS BANCSHARES, INC .............................. 191
14,043 * CONCORD EFS, INC ..................................... 362
400 CORUS BANKSHARES, INC ................................ 10
8,800 CULLEN FROST BANKERS, INC ............................ 227
10,200 DIME BANCORP, INC .................................... 154
2,000 DIME COMMUNITY BANCORP, INC .......................... 37
330 DOWNEY FINANCIAL CORP ................................ 7
600 FARMERS CAPITAL BANK CORP ............................ 18
17,314 FIFTH THIRD BANCORP .................................. 1,270
300 FIRST BANCORP (PUERTO RICO) .......................... 6
100 FIRST CITIZENS BANCSHARES, INC (CLASS A) ............. 7
500 FIRST COMMERCE BANCSHARES, INC ....................... 10
111 FIRST FINANCIAL BANCORP .............................. 2
1,500 FIRST INDIANA CORP ................................... 33
12,300 FIRST SECURITY CORP .................................. 314
400 FIRST SENTINEL BANCORP, INC .......................... 3
6,500 FIRST TENNESSEE NATIONAL CORP ........................ 185
76,696 FIRST UNION CORP ..................................... 2,517
3,300 FIRST VIRGINIA BANKS, INC ............................ 142
1,500 FIRST WASHINGTON BANCORP, INC ........................ 22
66,329 FIRSTAR CORP ......................................... 1,401
1,200 * FIRSTFED FINANCIAL CORP .............................. 17
2,500 FIRSTMERIT CORP ...................................... 58
72,889 FLEETBOSTON FINANCIAL CORP ........................... 2,537
1,600 FRONTIER FINANCIAL CORP .............................. 32
9,099 FULTON FINANCIAL CORP ................................ 164
800 GBC BANCORP .......................................... 15
500 GOLD BANC CORP, INC .................................. 5
12,100 * GOLDEN STATE BANCORP, INC ............................ 209
3,400 * GOLDEN STATE BANCORP, INC WTS 12/31/00 ............... 3
18,900 GOLDEN WEST FINANCIAL CORP ........................... 633
1,500 GRAND PREMIER FINANCIAL, INC ......................... 22
200 GREATER BAY BANCORP .................................. 9
7,300 GREENPOINT FINANCIAL CORP ............................ 174
1,200 * HAMILTON BANCORP, INC ................................ 21
1,000 HANCOCK HOLDINGS CO .................................. 39
1,200 HARRIS FINANCIAL, INC ................................ 9
12,816 HIBERNIA CORP (CLASS A) .............................. 136
6,594 HUDSON UNITED BANCORP ................................ 169
</TABLE>
See notes to financial statements.
B-29
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE (000)
- -------------- --------------
<S> <C> <C>
DEPOSITORY INSTITUTIONS--(Continued)
16,423 HUNTINGTON BANCSHARES, INC ........................ $ 392
4,340 * IMPERIAL BANCORP .................................. 105
8,900 INDEPENDENCE COMMUNITY BANK CORP .................. 111
1,813 INDEPENDENT BANK CORP ............................. 23
200 INTERNATIONAL BANCSHARES CORP ..................... 9
250 INTERWEST BANCORP, INC ............................ 5
500 IRWIN FINANCIAL CORP .............................. 9
1,200 JSB FINANCIAL, INC ................................ 62
33,160 KEYCORP ........................................... 734
1,250 KEYSTONE FINANCIAL, INC ........................... 26
1,000 * LOCAL FINANCIAL CORP .............................. 10
690 M & T BANK CORP ................................... 286
75 MAF BANCORP, INC .................................. 2
6,759 MARSHALL & ILSLEY CORP ............................ 425
60,755 MBNA CORP ......................................... 1,656
34,200 MELLON FINANCIAL CORP ............................. 1,165
1,955 MERCANTILE BANKSHARES CORP ........................ 62
600 MERCHANTS NEW YORK BANCORP, INC ................... 10
1,000 MIDWEST BANC HOLDING, INC ......................... 14
13,900 MORGAN (J.P.) & CO, INC ........................... 1,760
2,200 NATIONAL BANCORP OF ALASKA, INC ................... 62
48,519 NATIONAL CITY CORP ................................ 1,149
1,500 NATIONAL COMMERCE BANCORP ......................... 34
1,100 * NATIONAL PROCESSING, INC .......................... 10
14,448 NORTH FORK BANCORP, INC ........................... 253
9,800 NORTHERN TRUST CORP ............................... 519
2,100 OCEANFIRST FINANCIAL CORP ......................... 36
5,450 OLD KENT FINANCIAL CORP ........................... 193
2,216 OLD NATIONAL BANCORP .............................. 72
193 ONE VALLEY BANCORP, INC ........................... 6
1,100 PACIFIC CAPITAL BANCORP ........................... 34
11,700 PACIFIC CENTURY FINANCIAL CORP .................... 219
945 PARK NATIONAL CORP ................................ 91
1,968 PEOPLES HERITAGE FINANCIAL GROUP, INC ............. 30
2,700 PFF BANCORP, INC .................................. 52
27,550 PNC BANK CORP ..................................... 1,226
15,206 POPULAR, INC ...................................... 425
200 PRIME BANCSHARES, INC ............................. 5
400 PROVIDENT BANKSHARES CORP ......................... 7
3,500 PROVIDENT FINANCIAL GROUP ......................... 126
14,200 PROVIDIAN FINANCIAL CORP .......................... 1,293
50 QUEENS COUNTY BANCORP, INC ........................ 1
15,459 REGIONS FINANCIAL CORP ............................ 388
400 RELIANCE BANCORP, INC ............................. 14
5,722 REPUBLIC BANCORP, INC ............................. 69
9,100 REPUBLIC NEW YORK CORP ............................ 655
900 REPUBLIC SECURITY FINANCIAL CORP .................. 6
200 RICHMOND COUNTY FINANCIAL CORP .................... 4
1,500 RIGGS NATIONAL CORP ............................... 20
5,600 ROSLYN BANCORP, INC ............................... 104
100 S & T BANCORP, INC ................................ 2
900 * S1 CORP ........................................... 70
800 SANDY SPRING BANCORP, INC ......................... 22
3,200 * SILICON VALLEY BANCSHARES ......................... 158
100 SIMMONS FIRST NATIONAL CORP (CLASS A) ............. 3
9,452 SKY FINANCIAL GROUP, INC .......................... 190
12,750 SOUTHTRUST CORP ................................... 482
8,060 SOVEREIGN BANCORP, INC ............................ 60
10,800 STATE STREET CORP ................................. 789
3,300 STATEN ISLAND BANCORP, INC ........................ 59
100 STERLING BANCSHARES, INC .......................... 1
625 STERLING FINANCIAL CORP ........................... 19
15,667 SUMMIT BANCORP .................................... 480
22,962 SUNTRUST BANKS, INC ............................... 1,580
6,350 SUSQUEHANNA BANCSHARES, INC ....................... 101
<CAPTION>
SHARES VALUE (000)
- -------------- --------------
<S> <C> <C>
12,800 SYNOVUS FINANCIAL CORP ............................ $ 254
15,100 TCF FINANCIAL CORP ................................ 376
1,700 * TELEBANC FINANCIAL CORP ........................... 44
2,500 TEXAS REGIONAL BANCSHARES, INC (CLASS A) .......... 73
2,400 TRUST CO OF NEW JERSEY ............................ 55
7,600 TRUSTMARK CORP .................................... 164
53,836 U.S. BANCORP ...................................... 1,282
2,500 U.S. TRUST CORP ................................... 200
2,750 UMB FINANCIAL CORP ................................ 104
14,750 UNION PLANTERS CORP ............................... 582
9,751 UNIONBANCAL CORP .................................. 385
1,600 UST CORP .......................................... 51
6,922 VALLEY NATIONAL BANCORP ........................... 194
900 W HOLDING CO, INC ................................. 9
15,236 WACHOVIA CORP ..................................... 1,036
9,342 WASHINGTON FEDERAL, INC ........................... 185
47,122 WASHINGTON MUTUAL, INC ............................ 1,225
700 WASHINGTON TRUST BANCORP, INC ..................... 12
5,100 WEBSTER FINANCIAL CORP ............................ 120
124,440 WELLS FARGO CO .................................... 5,032
2,640 WEST COAST BANCORP (OREGON) ....................... 36
1,100 WESTAMERICA BANCORP ............................... 31
1,400 WHITNEY HOLDINGS CORP ............................. 52
4,600 ZIONS BANCORP ..................................... 272
----------
62,560
----------
EATING AND DRINKING PLACES--0.66%
1,000 * ADVANTICA RESTAURANT GROUP, INC ................... 2
4,100 APPLEBEES INTERNATIONAL, INC ...................... 121
7,100 BOB EVANS FARMS, INC .............................. 110
8,300 x * BOSTON CHICKEN, INC ............................... 1
6,500 * BRINKER INTERNATIONAL, INC ........................ 156
2,100 CBRL GROUP, INC ................................... 20
4,350 * CEC ENTERTAINMENT, INC ............................ 123
2,000 CKE RESTAURANTS, INC .............................. 12
12,400 DARDEN RESTAURANTS, INC ........................... 225
2,000 * DAVE & BUSTERS, INC ............................... 16
7,149 HOST MARRIOTT CORP (NEW) .......................... 59
2,800 * IHOP CORP (NEW) ................................... 47
5,200 * JACK IN THE BOX, INC .............................. 108
5,100 * LANDRYS SEAFOOD RESTAURANTS, INC .................. 44
4,800 * LONE STAR STEAKHOUSE & SALOON, INC ................ 43
3,900 LUBYS, INC ........................................ 44
15,400 MARRIOTT INTERNATIONAL (CLASS A) .................. 486
102,600 MCDONALD'S CORP ................................... 4,136
866 MORRISON MANAGEMENT SPECIALISTS, INC .............. 19
1,400 * O'CHARLEY'S, INC .................................. 18
3,950 * OUTBACK STEAKHOUSE, INC ........................... 102
900 * PAPA JOHNS INTERNATIONAL, INC ..................... 23
1,900 x * PLANET HOLLYWOOD, INC (CLASS A) ................... 0
50 * RAINFOREST CAFE, INC .............................. 0
5,200 RUBY TUESDAY, INC ................................. 95
6,300 * RYANS FAMILY STEAK HOUSES, INC .................... 54
3,200 * SONIC CORP ........................................ 91
1,000 * THE CHEESECAKE FACTORY CO ......................... 35
10,940 * TRICON GLOBAL RESTAURANTS, INC .................... 423
2,920 * U.S. FOODSERVICE, INC ............................. 49
7,100 WENDY'S INTERNATIONAL, INC ........................ 146
----------
6,808
----------
EDUCATIONAL SERVICES--0.03%
2,900 * APOLLO GROUP, INC (CLASS A) ........................ 58
100 * CAREER EDUCATION CORP .............................. 4
5,800 * DEVRY, INC ......................................... 108
3,000 * EDUCATION MANAGEMENT CORP .......................... 42
1,600 * ITT EDUCATIONAL SERVICES, INC ...................... 25
800 * LEARNING TREE INTERNATIONAL, INC ................... 22
</TABLE>
See notes to financial statements.
B-30
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE (000)
- -------------- --------------
<S> <C> <C>
EDUCATIONAL SERVICES--(Continued)
3,550 * SYLVAN LEARNING SYSTEMS, INC .................. $ 46
----------
305
----------
ELECTRIC, GAS, AND SANITARY SERVICES--2.65%
9,300 * AES CORP ......................................... 695
6,400 AGL RESOURCES, INC ............................... 109
16,600 ALLEGHENY ENERGY, INC ............................ 447
2,800 ALLIANT ENERGY CORP .............................. 77
13,200 * ALLIED WASTE INDUSTRIES, INC ..................... 116
13,260 AMEREN CORP ...................................... 434
12,700 AMERICAN ELECTRIC POWER CO, INC .................. 408
302 AMERICAN WATER WORKS CO, INC ..................... 6
1,065 ATMOS ENERGY CORP ................................ 22
4,100 AVISTA CORP ...................................... 63
3,300 BLACK HILLS CORP ................................. 73
700 CALIFORNIA WATER SERVICE GROUP ................... 21
900 * CALPINE CORP ..................................... 58
10,300 CAROLINA POWER & LIGHT CO ........................ 314
500 CASCADE NATURAL GAS CORP ......................... 8
1,100 * CASELLA WASTE SYSTEMS, INC (CLASS A) ............. 21
23,200 CENTRAL & SOUTH WEST CORP ........................ 464
1,300 CH ENERGY GROUP, INC ............................. 43
16,800 CINERGY CORP ..................................... 405
8,680 * CITIZENS UTILITIES CO (CLASS B) .................. 123
1,600 CLECO CORP ....................................... 51
2,043 CMP GROUP, INC ................................... 56
5,300 CMS ENERGY CORP .................................. 165
17,000 COASTAL CORP ..................................... 602
7,800 COLUMBIA ENERGY GROUP ............................ 493
15,425 CONECTIV, INC .................................... 259
537 CONECTIV, INC (CLASS A) .......................... 16
500 CONNECTICUT ENERGY CORP .......................... 19
13,900 CONSOLIDATED EDISON CO OF NEW YORK, INC .......... 480
9,200 CONSOLIDATED NATURAL GAS CO ...................... 597
19,600 CONSTELLATION ENERGY GROUP ....................... 568
13,100 DOMINION RESOURCES, INC .......................... 514
3,500 DPL, INC ......................................... 61
300 DQE, INC ......................................... 10
17,200 DTE ENERGY CO .................................... 540
24,633 DUKE ENERGY CORP ................................. 1,235
1,600 EASTERN ENTERPRISES CO ........................... 92
31,300 EDISON INTERNATIONAL CO .......................... 820
14,102 EL PASO ENERGY CORP .............................. 547
4,400 ENERGEN CORP ..................................... 79
5,400 ENERGY EAST CORP ................................. 112
12,300 ENTERGY CORP ..................................... 317
5,700 EQUITABLE RESOURCES, INC ......................... 190
21,602 FIRSTENERGY CORP ................................. 490
10,300 FLORIDA PROGRESS CORP ............................ 436
15,000 FPL GROUP, INC ................................... 642
15,800 GPU, INC ......................................... 473
1,600 HAWAIIAN ELECTRIC INDUSTRIES, INC ................ 46
4,600 IDACORP, INC ..................................... 123
200 ILLINOVA CORP .................................... 7
5,133 INDIANA ENERGY, INC .............................. 91
10,500 KANSAS CITY POWER & LIGHT CO ..................... 232
4,900 KEYSPAN CORP ..................................... 114
3,000 LACLEDE GAS CO ................................... 65
18,100 LOUISVILLE GAS & ELECTRIC ENERGY CORP ............ 316
6,000 MCN ENERGY GROUP, INC ............................ 143
5,900 MDU RESOURCES GROUP, INC ......................... 118
2,500 * MIDAMERICAN ENERGY HOLDINGS CO ................... 84
6,100 x * MOLTEN METAL TECHNOLOGY, INC ..................... 0
1,000 MONTANA POWER CO ................................. 36
7,000 NATIONAL FUEL GAS CO ............................. 326
11,985 NEW CENTURY ENERGIES, INC ........................ 364
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (000)
- -------------- --------------
<S> <C> <C>
400 NEW JERSEY RESOURCES CORP ........................ $ 16
2,600 * NEWPARK RESOURCES, INC ........................ 16
8,400 * NIAGARA MOHAWK HOLDINGS, INC .................. 117
8,200 NICOR, INC ....................................... 267
2,400 NISOURCE, INC .................................... 43
3,200 NORTHEAST UTILITIES CO ........................... 66
18,500 NORTHERN STATES POWER CO ......................... 361
150 NORTHWEST NATURAL GAS CO ......................... 3
2,900 NORTHWESTERN CORP ................................ 64
1,772 NSTAR ............................................ 72
2,200 NUI CORP ......................................... 58
13,700 OGE ENERGY CORP .................................. 260
1,980 ONEOK, INC ....................................... 50
500 OTTER TAIL POWER CO .............................. 19
20,300 PECO ENERGY CO ................................... 705
5,500 PEOPLES ENERGY CORP .............................. 184
27,429 PG&E CORP ........................................ 562
101 PIEDMONT NATURAL GAS CO, INC ..................... 3
6,300 PINNACLE WEST CAPITAL CORP ....................... 193
600 POTOMAC ELECTRIC POWER CO ........................ 14
17,394 PP&L RESOURCES, INC .............................. 398
3,200 PUBLIC SERVICE CO OF NEW MEXICO .................. 52
18,900 PUBLIC SERVICE ENTERPRISE GROUP, INC ............. 658
10,178 PUGET SOUND ENERGY, INC .......................... 197
15,200 QUESTAR CORP ..................................... 228
28,603 RELIANT ENERGY, INC .............................. 654
1,500 * REPUBLIC SERVICES, INC (CLASS A) ................. 22
6,300 RGS ENERGY GROUP, INC ............................ 130
7,600 SCANA CORP ....................................... 204
4,118 SCOTTISH POWER PLC ADR ........................... 115
29,818 SEMPRA ENERGY .................................... 518
1,300 SOUTH JERSEY INDUSTRIES, INC ..................... 37
44,700 SOUTHERN CO ...................................... 1,050
700 SOUTHWESTERN ENERGY CO ........................... 5
1,200 * STERICYCLE, INC .................................. 23
16,400 TECO ENERGY, INC ................................. 304
27,367 TEXAS UTILITIES CO ............................... 973
1,500 TNP ENTERPRISES, INC ............................. 62
700 * U.S. LIQUIDS, INC ................................ 6
5,637 UGI CORP ......................................... 115
11,700 UNICOM CORP ...................................... 392
1,200 * UNISOURCE ENERGY CORP HOLDINGS CO ................ 13
800 UNITED ILLUMINATING CO ........................... 41
12,674 UTILICORP UNITED, INC ............................ 246
3,800 WASHINGTON GAS LIGHT CO .......................... 105
52,634 WASTE MANAGEMENT, INC ............................ 905
2,800 WESTERN GAS RESOURCES, INC ....................... 37
4,300 WESTERN RESOURCES, INC ........................... 73
800 WICOR, INC ....................................... 23
27,329 WILLIAMS COS, INC ................................ 835
2,800 WISCONSIN ENERGY CORP ............................ 54
300 WPS RESOURCES CORP ............................... 8
100 YANKEE ENERGY SYSTEMS, INC ....................... 4
----------
27,396
----------
ELECTRONIC AND OTHER ELECTRIC EQUIPMENT--11.53%
1,000 * AAVID THERMAL TECHNOLOGIES, INC .................. 25
900 * ACTEL CORP ....................................... 22
800 * ADAPTIVE BROADBAND CORP .......................... 59
10,900 * ADC TELECOMMUNICATIONS, INC ...................... 791
1,400 * ADTRAN, INC ...................................... 72
1,100 * ADVANCED ENERGY INDUSTRIES, INC .................. 54
4,000 * ADVANCED FIBRE COMMUNICATIONS .................... 179
200 * ADVANCED LIGHTING TECHNOLOGIES, INC .............. 1
8,600 * ADVANCED MICRO DEVICES, INC ...................... 249
1,100 * AEROFLEX, INC .................................... 11
3,500 * ALLIANCE SEMICONDUCTOR CORP ...................... 58
</TABLE>
See notes to financial statements.
B-31
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE (000)
- -------------- --------------
<S> <C> <C>
ELECTRONIC AND OTHER ELECTRIC EQUIPMENT--(Continued)
1,300 * ALPHA INDUSTRIES, INC ........................... $ 75
14,100 * ALTERA CORP ..................................... 699
10,600 * AMERICAN POWER CONVERSION CORP .................. 280
2,000 * AMERICAN SUPERCONDUCTOR CORP .................... 56
7,400 * AMERICAN TOWER SYSTEMS (CLASS A) ................ 226
100 * AMERICAN XTAL TECHNOLOGY, INC ................... 2
5,500 AMETEK, INC ..................................... 105
18,100 * AMKOR TECHNOLOGY, INC ........................... 511
800 * AMPHENOL CORP (CLASS A) ......................... 53
2,300 * ANADIGICS, INC .................................. 109
13,200 * ANALOG DEVICES, INC ............................. 1,228
1,800 * ANCOR COMMUNICATIONS, INC ....................... 122
9,375 * ANDREW CORP ..................................... 178
1,500 * ANTEC CORP ...................................... 55
800 * APPLIED MAGNETICS CORP .......................... 0
2,600 * APPLIED MICRO CIRCUITS CORP ..................... 331
4,000 * ARTESYN TECHNOLOGIES, INC ....................... 84
3,900 * ASPECT COMMUNICATIONS CORP ...................... 153
12,800 * ATMEL CORP ...................................... 378
300 AVX CORP ........................................ 15
9,100 BMC INDUSTRIES, INC ............................. 44
3,500 * BROADCOM CORP (CLASS A) ......................... 953
900 * BROOKTROUT, INC ................................. 17
2,025 * BURR BROWN CORP ................................. 73
1,100 C&D TECHNOLOGIES, INC ........................... 47
1,000 * C-COR.NET CORP .................................. 77
100 * CARRIER ACCESS CORP ............................. 7
700 * CATAPULT COMMUNICATIONS CORP .................... 7
7,000 * CELLNET DATA SYSTEMS, INC ....................... 8
9,400 * CIENA CORP ...................................... 541
5,000 * COMMSCOPE, INC .................................. 202
4,712 * COMVERSE TECHNOLOGY, INC ........................ 682
12,000 * CONEXANT SYSTEMS, INC ........................... 797
4,800 COOPER INDUSTRIES, INC .......................... 194
3,600 * COPPER MOUNTAIN NETWORKS, INC ................... 176
800 * CREE RESEARCH, INC .............................. 68
4,300 CTS CORP ........................................ 324
7,300 * CYPRESS SEMICONDUCTOR CORP ...................... 236
2,500 DALLAS SEMICONDUCTOR CORP ....................... 161
3,500 * DII GROUP, INC .................................. 248
1,900 * E-TEK DYNAMICS, INC ............................. 256
5,500 * ECHOSTAR COMMUNICATIONS CORP (CLASS A) .......... 536
800 * EMCORE CORP ..................................... 27
31,500 EMERSON ELECTRIC CO ............................. 1,807
4,100 * ESS TECHNOLOGY, INC ............................. 91
300 * EXAR CORP ....................................... 18
2,600 * EXECUTONE INFORMATION SYSTEMS, INC .............. 14
400 EXIDE CORP ...................................... 3
600 * GENERAL DATACOMM INDUSTRIES, INC ................ 4
253,702 GENERAL ELECTRIC CO ............................. 39,260
9,800 * GENERAL INSTRUMENT CORP ......................... 833
25 * GENERAL SEMICONDUCTOR, INC ...................... 0
17,200 x * GEOTEK COMMUNICATIONS, INC .................. 0
4,925 * GLENAYRE TECHNOLOGIES, INC ...................... 56
1,400 * GLOBIX CORP ..................................... 84
1,000 * HADCO CORP ...................................... 51
2,535 HARMAN INTERNATIONAL INDUSTRIES, INC ............ 142
1,400 * HARMONIC LIGHTWAVES, INC ........................ 133
4,600 HARRIS CORP ..................................... 123
1,000 HELIX TECHNOLOGY CORP ........................... 45
1,300 * HI / FN, INC .................................... 50
1,000 * HMT TECHNOLOGY CORP ............................. 4
3,100 HUBBELL, INC (CLASS B) .......................... 84
1,000 * INET TECHNOLOGIES, INC .......................... 70
700 INNOVEX, INC .................................... 7
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (000)
- -------------- --------------
<S> <C> <C>
11,600 * INTEGRATED DEVICE TECHNOLOGY, INC ............... $ 336
257,798 INTEL CORP ...................................... 21,220
2,800 INTER-TEL, INC .................................. 70
1,800 * INTERNATIONAL RECTIFIER CORP .................... 47
4,700 * INTERVOICE-BRITE, INC ........................... 109
100 * IPC COMMUNICATIONS, INC ......................... 7
600 * ITI TECHNOLOGIES, INC ........................... 18
500 * ITRON, INC ...................................... 3
3,200 * JABIL CIRCUIT, INC .............................. 234
16,600 * JDS UNIPHASE CORP ............................... 2,678
1,500 * KEMET CORP ...................................... 68
9,600 * KOMAG, INC ...................................... 30
1,600 * L-3 COMMUNICATIONS HOLDINGS, INC ................ 67
2,800 * LASERSIGHT, INC ................................. 28
4,200 * LATTICE SEMICONDUCTOR CORP ...................... 198
10,800 LINEAR TECHNOLOGY CO ............................ 773
8,100 * LITTLEFUSE, INC ................................. 197
300 * LO-JACK CORP .................................... 2
400 LSI INDUSTRIES, INC ............................. 9
11,000 * LSI LOGIC CORP .................................. 743
300 * MAKER COMMUNICATIONS, INC ....................... 13
19,400 * MAXIM INTEGRATED PRODUCTS ....................... 915
5,400 MAYTAG CO ....................................... 259
2,900 * MEMC ELECTRONIC MATERIALS, INC .................. 36
2,100 METHODE ELECTRONICS, INC (CLASS A) .............. 67
1,700 * METRICOM, INC ................................... 134
1,600 * MICREL, INC ..................................... 91
5,225 * MICROCHIP TECHNOLOGY, INC ....................... 358
17,200 * MICRON TECHNOLOGY, INC .......................... 1,337
2,800 * MMC NETWORKS, INC ............................... 96
4,237 MOLEX, INC ...................................... 240
800 * MOOG, INC (CLASS A) ............................. 22
48,300 MOTOROLA, INC ................................... 7,112
11,900 * NATIONAL SEMICONDUCTOR CORP ..................... 509
6,600 NATIONAL SERVICE INDUSTRIES, INC ................ 195
1,500 * NEOMAGIC CORP ................................... 16
2,400 * NVIDIA CORP ..................................... 113
900 * OAK INDUSTRIES, INC ............................. 96
1,500 PARK ELECTROCHEMICAL CORP ....................... 40
500 * PARKERVISION, INC ............................... 15
900 * PHOTRONICS, INC ................................. 26
1,600 * PICTURETEL CORP ................................. 7
3,200 PITTWAY CORP (CLASS A) .......................... 143
4,900 * PLANTRONICS, INC ................................ 351
1,800 * PLEXUS CORP ..................................... 79
5,000 * PMC-SIERRA, INC ................................. 802
3,000 * POLYCOM, INC .................................... 191
200 * POWER-ONE, INC .................................. 9
1,700 * POWERWAVE TECHNOLOGIES, INC ..................... 99
1,900 * QLOGIC CORP ..................................... 304
43,600 * QUALCOMM, INC ................................... 7,679
800 * RAMBUS, INC ..................................... 54
1,900 * RAYOVAC CORP .................................... 36
7,100 * READ RITE CORP .................................. 34
600 * RECOTON CORP .................................... 5
3,000 * RF MICRO DEVICES, INC ........................... 205
7,900 * S3, INC ......................................... 91
1,350 * SALTON, INC ..................................... 45
3,700 * SANMINA CORP .................................... 370
3,000 * SAWTEK, INC ..................................... 200
6,500 * SCI SYSTEMS, INC ................................ 534
6,300 SCIENTIFIC-ATLANTA, INC ......................... 350
2,900 * SCM MICROSYSTEMS, INC ........................... 185
2,400 * SDL, INC ........................................ 523
4,000 * SEMTECH CORP .................................... 209
3,100 * SENSORMATIC ELECTRONICS CORP .................... 54
</TABLE>
See notes to financial statements.
B-32
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE (000)
- -------------- --------------
<S> <C> <C>
ELECTRONIC AND OTHER ELECTRIC EQUIPMENT--(Continued)
400 * SILICONIX, INC ............................................ $ 53
2,250 * SLI, INC .................................................. 31
16,518 * SOLECTRON CORP ............................................ 1,571
2,600 STEWART & STEVENSON SERVICES, INC ......................... 31
15,400 * SUNBEAM CORP .............................................. 64
1,600 TECHNITROL, INC ........................................... 71
28,400 * TELLABS, INC .............................................. 1,823
2,700 * TERAYON COMMUNCIATION SYSTEMS, INC ........................ 170
61,408 TEXAS INSTRUMENTS, INC .................................... 5,949
7,799 THOMAS & BETTS CORP ....................................... 249
500 THOMAS INDUSTRIES, INC .................................... 10
3,400 * TITAN CORP ................................................ 160
1,400 * TRANSWITCH CORP ........................................... 102
1,600 * TRIQUINT SEMICONDUCTOR, INC ............................... 178
1,200 * TUT SYSTEMS, INC .......................................... 64
7,000 * UCAR INTERNATIONAL, INC ................................... 125
800 * VARIAN SEMICONDUCTOR EQUIPMENT ASSOCIATES,
INC ...................................................... 27
1,700 * VICOR CORP ................................................ 69
7,000 * VISHAY INTERTECHNOLOGY, INC ............................... 221
12,400 * VITESSE SEMICONDUCTOR CORP ................................ 650
380 * WATER PIK TECHNOLOGIES, INC ............................... 4
9,700 * WEBLINK WIRELESS, INC ..................................... 150
2,300 * WESTELL TECHNOLOGIES, INC (CLASS A) ....................... 25
4,900 WHIRLPOOL CORP ............................................ 319
500 WOODWARD GOVERNOR CO ...................................... 14
3,400 * WORLD ACCESS, INC ......................................... 65
20,600 * XILINX, INC ............................................... 937
1,300 ZENITH ELECTRONICS CORP ................................... 0
700 * ZIXIT CORP ................................................ 28
1,800 * ZOMAX, INC ................................................ 81
----------
119,068
----------
ENGINEERING AND MANAGEMENT SERVICES--0.19%
700 * AHL SERVICES, INC ......................................... 15
4,200 * CATALYTICA, INC ........................................... 57
700 * CHARLES RIVER ASSOCIATES .................................. 23
1,300 * CIRCLE.COM ................................................ 16
5,500 * COVANCE, INC .............................................. 59
100 * DATA TRANSMISSION NETWORK CORP ............................ 2
1,500 * DIAMOND TECHNOLOGY PARTNERS, INC (CLASS A) ................ 129
10,600 DUN & BRADSTREET CORP ..................................... 313
1,800 * F.Y.I., INC ............................................... 61
2,700 * FIRST CONSULTING GROUP, INC ............................... 42
2,600 * FLYCAST COMMUNICATIONS CORP ............................... 338
3,303 GARTNER GROUP, INC (CLASS A) .............................. 50
450 * INSPIRE INSURANCE SOLUTIONS, INC .......................... 2
400 * IT GROUP, INC ............................................. 4
200 * JACOBS ENGINEERING GROUP, INC ............................. 7
800 * KENDLE INTERNATIONAL, INC ................................. 8
500 * LASON, INC ................................................ 6
1,300 * MARKETING SERVICES GROUP .................................. 22
1,400 * MAXIMUS, INC .............................................. 48
200 * META GROUP, INC ........................................... 4
2,500 * NAVIGANT CONSULTING CO .................................... 27
17,000 x * NEUROMEDICAL SYSTEMS, INC ............................ 1
2,900 * NFO WORLDWIDE, INC ........................................ 65
300 * PHARMACEUTICAL PRODUCT DEVELOPMENT ........................ 4
200 * PROBUSINESS SERVICES, INC ................................. 7
1,650 * PROFIT RECOVERY GROUP INTERNATIONAL ....................... 44
6,697 * QUINTILES TRANSNATIONAL CORP .............................. 125
15,600 SERVICEMASTER CO .......................................... 192
2,700 * STAFF LEASING, INC ........................................ 26
400 STONE & WEBSTER, INC ...................................... 7
1,000 * SUPERIOR CONSULTANT HOLDINGS CORP ......................... 14
1,300 TEJON RANCH CO ............................................ 31
<CAPTION>
SHARES VALUE (000)
- -------------- --------------
<S> <C> <C>
1,086 * TELEDYNE TECHNOLOGIES, INC ................................ $ 10
3,093 * TETRA TECH, INC ........................................... 48
2,000 * URS CORP .................................................. 43
2,100 * WHITTMAN HART, INC ........................................ 113
100 * XCEED, INC ................................................ 4
----------
1,967
----------
FABRICATED METAL PRODUCTS--0.59%
100 * ALLIANT TECHSYSTEMS, INC .................................. 6
300 * ALLTRISTA CORP ............................................ 7
1,320 BALL CORP ................................................. 52
1,800 BUTLER MANUFACTURING CO ................................... 40
2,400 CHART INDUSTRIES, INC ..................................... 10
5,900 CRANE CO .................................................. 117
11,700 CROWN CORK & SEAL CO, INC ................................. 262
81,478 GILLETTE CO ............................................... 3,356
800 * GULF ISLAND FABRICATION, INC .............................. 8
4,000 HARSCO CORP ............................................... 127
2,200 MARK IV INDUSTRIES, INC ................................... 39
26,000 MASCO CORP ................................................ 660
1,900 * METALS U.S.A., INC ........................................ 16
600 * NCI BUILDING SYSTEMS, INC ................................. 11
300 * NORTEK, INC ............................................... 8
7,300 PARKER-HANNIFIN CORP ...................................... 375
1,000 PRIMEX TECHNOLOGIES, INC .................................. 21
9,800 ROCKWELL INTERNATIONAL CORP ............................... 469
2,400 * ROHN INDUSTRIES, INC ...................................... 7
600 * SIMPSON MANUFACTURING CO, INC ............................. 26
7,400 SNAP-ON, INC .............................................. 197
1,300 * SPS TECHNOLOGIES, INC ..................................... 42
3,600 STANLEY WORKS CO .......................................... 108
5,100 * TOWER AUTOMOTIVE, INC ..................................... 79
----------
6,043
----------
FOOD AND KINDRED PRODUCTS--2.92%
1,800 * AGRIBRANDS INTERNATIONAL, INC ............................. 83
2,100 * AMERICAN ITALIAN PASTA CO (CLASS A) ....................... 65
34,200 ANHEUSER-BUSCH COS, INC ................................... 2,424
31,672 ARCHER DANIELS MIDLAND CO ................................. 386
2,200 * BERINGER WINE ESTATES HOLDINGS, INC (CLASS B) ............. 88
24,000 BESTFOODS, INC ............................................ 1,262
2,700 BROWN FORMAN, INC (CLASS B) ............................... 155
20,600 CAMPBELL SOUP CO .......................................... 797
1,500 * CANANDAIGUA BRANDS, INC (CLASS A) ......................... 77
5,500 CHIQUITA BRANDS INTERNATIONAL, INC ........................ 26
177,800 COCA COLA CO .............................................. 10,357
18,500 COCA COLA ENTERPRISES, INC ................................ 372
41,600 CONAGRA, INC .............................................. 939
1,500 COORS (ADOLPH) CO (CLASS B) ............................... 79
6,775 CORN PRODUCTS INTERNATIONAL, INC .......................... 222
4,300 DEAN FOODS CO ............................................. 171
2,000 * DEL MONTE FOODS CO ........................................ 25
6,000 DOLE FOOD, INC ............................................ 98
100 DREYERS GRAND ICE CREAM, INC .............................. 2
6,416 EARTHGRAINS CO ............................................ 103
100 FARMER BROTHERS CO ........................................ 16
12,550 FLOWERS INDUSTRIES, INC ................................... 200
10,600 FORTUNE BRANDS, INC ....................................... 350
19,614 GENERAL MILLS, INC ........................................ 701
1,100 * HAIN FOOD GROUP, INC ...................................... 25
24,600 HEINZ (H.J.) CO ........................................... 979
4,000 HERSHEY FOODS CORP ........................................ 190
5,200 HORMEL FOODS CORP ......................................... 211
9,300 IBP, INC .................................................. 167
13,000 * INTERNATIONAL HOME FOODS, INC ............................. 226
4,300 INTERSTATE BAKERIES CORP .................................. 78
3,600 * KEEBLER FOODS CO .......................................... 101
</TABLE>
See notes to financial statements.
B-33
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE (000)
- -------------- --------------
<S> <C> <C>
FOOD AND KINDRED PRODUCTS--(Continued)
13,500 KELLOGG CO ...................................... $ 416
4,450 LANCASTER COLONY CORP ........................... 147
3,600 LANCE, INC ...................................... 36
5,400 MCCORMICK & CO, INC (NON-VOTE) .................. 161
25,501 NABISCO GROUP HOLDINGS .......................... 271
1,100 NABISCO HOLDINGS CORP (CLASS A) ................. 35
7,600 PEPSI BOTTLING GROUP, INC ....................... 126
109,800 PEPSICO, INC .................................... 3,870
300 PILGRIMS PRIDE CORP (CLASS A) ................... 2
600 PILGRIMS PRIDE CORP (CLASS B) ................... 5
10,000 QUAKER OATS CO .................................. 656
1,200 * RALCORP HOLDINGS, INC ........................... 24
22,500 RALSTON PURINA CO ............................... 627
800 RIVIANA FOODS, INC .............................. 14
1,500 * ROBERT MONDAVI CORP (CLASS A) ................... 52
62,000 SARA LEE CORP ................................... 1,368
4,200 * SMITHFIELD FOODS, INC ........................... 101
200 SMUCKER, (J.M.) CO (CLASS A) .................... 4
3,000 * SUIZA FOODS CORP ................................ 119
2,200 TCBY ENTERPRISES, INC ........................... 8
4,496 TOOTSIE ROLL INDUSTRIES, INC .................... 148
19,900 TYSON FOODS, INC ................................ 323
8,400 UNIVERSAL FOODS CORP ............................ 171
480 * VLASIC FOODS INTERNATIONAL, INC ................. 3
8,500 WHITMAN CORP .................................... 114
4,201 WRIGLEY (WM) JR CO .............................. 348
----------
30,124
----------
FOOD STORES--0.44%
15,700 * 7-ELEVEN, INC ................................... 28
29,536 ALBERTSONS, INC ................................. 953
39 x * BRUNO'S SUPERMARKETS, INC ................... 0
7,866 DELHAIZE AMERICA, INC (CLASS B) ................. 164
3,100 GREAT ATLANTIC & PACIFIC TEA CO, INC ............ 86
2,500 HANNAFORD BROTHERS, INC ......................... 173
57,608 * KROGER CO ....................................... 1,087
600 RUDDICK CORP .................................... 9
40,004 * SAFEWAY, INC .................................... 1,423
8,600 * STARBUCKS CORP .................................. 209
1,900 WEIS MARKETS, INC ............................... 83
7,650 * WILD OATS MARKETS, INC .......................... 170
4,500 WINN DIXIE STORES, INC .......................... 108
----------
4,493
----------
FORESTRY--0.01%
2,400 GEORGIA-PACIFIC CORP (TIMBER GROUP) ............. 59
400 RAYONIER, INC ................................... 19
----------
78
----------
FURNITURE AND FIXTURES--0.18%
800 BUSH INDUSTRIES, INC (CLASS A) .................. 14
3,600 ETHAN ALLEN INTERIORS, INC ...................... 115
4,200 * FURNITURE BRANDS INTERNATIONAL, INC ............. 92
5,600 HON INDUSTRIES, INC ............................. 123
4,800 KIMBALL INTERNATIONAL, INC (CLASS B) ............ 79
2,000 LA-Z-BOY, INC ................................... 34
5,900 * LEAR CORP ....................................... 189
11,500 LEGGETT & PLATT, INC ............................ 247
6,400 MILLER (HERMAN), INC ............................ 147
15,900 NEWELL RUBBERMAID, INC .......................... 461
3,600 STEELCASE, INC .................................. 43
19,850 U.S. INDUSTRIES, INC ............................ 278
----------
1,822
----------
FURNITURE AND HOME FURNISHINGS STORES--0.25%
8,800 * BED BATH & BEYOND, INC .......................... 306
11,700 * BEST BUY, INC ................................... 587
<CAPTION>
SHARES VALUE (000)
- -------------- --------------
<S> <C> <C>
2,279 * CDNOW, INC ...................................... $ 23
14,600 CIRCUIT CITY STORES-CIRCUIT CITY GROUP .......... 658
3,200 * COMPUSA, INC .................................... 16
1,900 * CYBERIAN OUTPOST, INC ........................... 19
1,300 * GUITAR CENTER, INC .............................. 13
2,800 HAVERTY FURNITURE COS, INC ...................... 35
3,500 HEILIG MEYERS CO ................................ 10
3,600 * LINENS 'N THINGS, INC ........................... 107
4,500 * MUSICLAND STORES CORP ........................... 38
8,000 PIER 1 IMPORTS, INC ............................. 51
13,800 TANDY CORP ...................................... 679
2,550 * TRANS WORLD ENTERTAINMENT CORP .................. 27
1,300 * WILLIAMS-SONOMA, INC ............................ 60
----------
2,629
----------
GENERAL BUILDING CONTRACTORS--0.06%
8,200 CENTEX CORP ..................................... 202
400 * CROSSMANN COMMUNITIES, INC ...................... 6
2,100 HILLENBRAND INDUSTRIES, INC ..................... 67
4,300 HORTON (D.R.), INC .............................. 59
1,400 KAUFMAN & BROAD HOME CORP ....................... 34
1,900 LENNAR CORP ..................................... 31
700 * NVR, INC ........................................ 33
3,200 PULTE CORP ...................................... 72
2,500 RYLAND GROUP, INC ............................... 58
2,400 STANDARD-PACIFIC CORP ........................... 26
3,100 * TOLL BROTHERS, INC .............................. 58
200 * WEBB (DEL) CORP ................................. 5
----------
651
----------
GENERAL MERCHANDISE STORES--2.37%
5,500 * BJ'S WHOLESALE CLUB, INC ........................ 201
2,400 x * CALDOR CORP ................................. 0
7,400 CASEYS GENERAL STORES, INC ...................... 77
2,900 * CONSOLIDATED STORES CORP ........................ 47
3,150 * COST PLUS, INC .................................. 112
16,100 * COSTCO WHOLESALE CORP ........................... 1,469
32,100 DAYTON HUDSON CORP .............................. 2,357
3,800 DILLARDS, INC (CLASS A) ......................... 77
14,500 DOLLAR GENERAL CORP ............................. 330
5,050 * DOLLAR TREE STORES, INC ......................... 245
8,100 FAMILY DOLLAR STORES, INC ....................... 132
21,070 * FEDERATED DEPARTMENT STORES, INC ................ 1,065
2,400 HARCOURT GENERAL, INC ........................... 97
39,000 * K MART CORP ..................................... 392
12,100 * KOHLS CORP ...................................... 873
23,000 MAY DEPARTMENT STORES CO ........................ 742
4,100 * NEIMAN MARCUS GROUP, INC (CLASS A) .............. 115
723 * NEIMAN MARCUS GROUP, INC (CLASS B) .............. 19
15,645 PENNEY, (J.C.) CO, INC .......................... 312
8,400 * SAKS, INC ....................................... 131
28,200 SEARS ROEBUCK & CO .............................. 858
900 x * SERVICE MERCHANDISE, INC .................... 0
3,000 * SHOPKO STORES, INC .............................. 69
100 * VALUE CITY DEPARTMENT STORES, INC ............... 2
6,200 * VENATOR GROUP, INC .............................. 43
212,300 WAL-MART STORES, INC ............................ 14,675
----------
24,440
----------
HEALTH SERVICES--0.37%
1,800 * AMERICAN HOMEPATIENT, INC ....................... 1
2,600 * AMERIPATH, INC .................................. 21
4,300 * APRIA HEALTHCARE GROUP, INC ..................... 77
12,200 * BEVERLY ENTERPRISES, INC ........................ 53
1,600 * CAREMATRIX CORP ................................. 4
1,700 * CENTENNIAL HEALTHCARE CORP ...................... 5
50 * CLINTRIALS, INC ................................. 0
47,838 COLUMBIA/HCA HEALTHCARE CORP .................... 1,402
</TABLE>
See notes to financial statements.
B-34
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE (000)
- -------------- --------------
<S> <C> <C>
HEALTH SERVICES--(Continued)
5,000 * COVENTRY HEALTH CARE, INC ........................... $ 34
2,600 * EXPRESS SCRIPTS, INC ................................ 166
1,400 x * FPA MEDICAL MANAGEMENT, INC ......................... 0
13,800 * HEALTH MANAGEMENT ASSOCIATES, INC (CLASS A)
(NEW) ............................................... 185
39,860 * HEALTHSOUTH CORP .................................... 214
4,800 HOOPER HOLMES, INC .................................. 124
77 * INTEGRATED HEALTH SERVICES, INC ..................... 0
2,400 * LABORATORY CORP OF AMERICA HOLDINGS ................. 9
260 * LABORATORY CORP OF AMERICA HOLDINGS
WTS 04/28/00 ........................................ 0
1,800 * LASER VISION CENTERS, INC ........................... 19
4,163 * LCA-VISION, INC ..................................... 20
2,728 * LIFEPOINT HOSPITALS, INC ............................ 32
5,300 * LINCARE HOLDINGS, INC ............................... 184
100 * LTC HEALTHCARE, INC ................................. 0
1,200 * MAGELLAN HEALTH SERVICES, INC ....................... 8
3,000 * MANOR CARE, INC ..................................... 48
4,900 * MARINER POST-ACUTE NETWORK, INC ..................... 0
4,500 * MATRIA HEALTHCARE, INC .............................. 19
1,100 * NATIONAL HEALTHCARE CORP ............................ 6
200 * NOVACARE, INC ....................................... 0
500 * ORTHODONTIC CENTERS OF AMERICA, INC ................. 6
300 * PEDIATRIX MEDICAL GROUP, INC ........................ 2
6,100 * PHYCOR, INC ......................................... 11
6,600 * PHYSICIANS RESOURCE GROUP, INC ...................... 2
1,400 * PROVINCE HEALTHCARE CO .............................. 27
5,162 * QUEST DIAGNOSTICS, INC .............................. 158
28,950 * QUORUM HEALTH GROUP, INC ............................ 270
2,250 * RENAL CARE GROUP, INC ............................... 53
1,700 x * SUN HEALTHCARE GROUP, INC ....................... 0
19,325 * TENET HEALTHCARE CORP ............................... 454
4,500 * TOTAL RENAL CARE HOLDINGS, INC ...................... 30
2,728 * TRIAD HOSPITALS, INC ................................ 41
300 * UNITED PAYORS & UNITED PROVIDERS, INC ............... 5
2,200 * UNIVERSAL HEALTH SERVICES, INC ...................... 79
4,580 * US ONCOLOGY, INC ................................... 23
----------
3,792
----------
HEAVY CONSTRUCTION, EXCEPT BUILDING--0.05%
1,300 * DYCOM INDUSTRIES, INC ............................... 57
6,100 FLUOR CORP .......................................... 280
500 FOSTER WHEELER CORP ................................. 4
450 GRANITE CONSTRUCTION, INC ........................... 8
3,600 * INSITUFORM TECHNOLOGIES, INC (CLASS A) .............. 102
1,900 * MASTEC, INC ......................................... 85
----------
536
----------
HOLDING AND OTHER INVESTMENT OFFICES--0.71%
3,900 AMB PROPERTY CORP ................................... 78
500 * AMERCO .............................................. 13
1,800 AMLI RESIDENTIAL PROPERTIES TRUST ................... 36
8,245 APARTMENT INVESTMENT & MANAGEMENT CO ................ 328
13,600 ARCHSTONE COMMUNITIES TRUST ......................... 279
2,500 AVALONBAY COMMUNITIES, INC .......................... 86
3,900 BEDFORD PROPERTY INVESTORS, INC ..................... 67
8,700 BOSTON PROPERTIES, INC .............................. 271
3,000 BOYKIN LODGING CO ................................... 33
607 BRADLEY REAL ESTATE, INC ............................ 11
3,600 BRANDYWINE REALTY TRUST ............................. 59
7,800 CAMDEN PROPERTY TRUST ............................... 214
3,000 CAPITAL AUTOMOTIVE REIT ............................. 37
9,139 CAPSTEAD MORTGAGE CORP .............................. 38
12,400 CARRAMERICA REALTY CORP ............................. 262
700 CENTER TRUST, INC ................................... 7
1,800 CHATEAU PROPERTIES, INC ............................. 47
<CAPTION>
SHARES VALUE (000)
- -------------- -----------
<S> <C> <C>
1,300 * COAST FEDERAL LITIGATION CONTINGENT RTS ............. $ 2
4,200 COLONIAL PROPERTIES TRUST ........................... 97
13,400 CORNERSTONE PROPERTIES, INC ......................... 196
4,469 COUSINS PROPERTIES, INC ............................. 152
7,100 CRESCENT REAL ESTATE EQUITIES CO .................... 130
400 * CRESECENT OPERATING, INC ............................ 1
3,000 CROWN AMERICAN REALTY TRUST ......................... 17
5 DUKE-WEEKS REALTY CORP .............................. 0
794 * DYNEX CAPITAL, INC .................................. 5
2,900 EASTGROUP PROPERTIES, INC ........................... 54
2,300 ENTERTAINMENT PROPERTIES TRUST ...................... 30
29,650 EQUITY OFFICE PROPERTIES TRUST ...................... 730
14,178 EQUITY RESIDENTIAL PROPERTIES TRUST CO .............. 605
4,900 FEDERAL REALTY INVESTMENT TRUST ..................... 92
8,600 FELCOR LODGING TRUST, INC ........................... 151
6,100 FIRST INDUSTRIAL REALTY TRUST, INC .................. 167
480 FIRST UNION REAL ESTATE INVESTMENTS ................. 2
100 GENERAL GROWTH PROPERTIES, INC ...................... 3
2,300 GLIMCHER REALTY TRUST ............................... 30
2,600 GREAT LAKES REIT, INC ............................... 37
1,200 HEALTH CARE PROPERTY INVESTORS, INC ................. 29
400 HIGHWOODS PROPERTIES, INC ........................... 9
1,200 HOSPITALITY PROPERTIES TRUST ........................ 23
4,500 HRPT PROPERTIES TRUST ............................... 41
5,700 IMPERIAL CREDIT COMMERCIAL MORTGAGE
INVESTMENT CORP ..................................... 65
6,212 INDYMAC MORTGAGE HOLDINGS, INC ...................... 79
3,300 INNKEEPERS U.S.A. TRUST ............................. 27
1,800 IRT PROPERTY CO ..................................... 14
500 JDN REALTY CORP ..................................... 8
4,500 KILROY REALTY CORP .................................. 99
2,000 KIMCO REALTY CORP ................................... 68
2,000 LASALLE HOTEL PROPERTIES ............................ 23
500 LIBERTY PROPERTY TRUST CO ........................... 12
4,600 MACK-CALI REALTY CORP ............................... 120
1,199 MEDITRUST CORP PAIRED ............................... 7
3,800 MERISTAR HOSPITALITY CORP ........................... 61
285 * MERRY LAND PROPERTIES, INC .......................... 1
215 MILLS CORP .......................................... 4
3,600 NATIONAL HEALTH INVESTORS, INC ...................... 54
728 NEW PLAN EXCEL REALTY TRUST ......................... 12
2,700 PACIFIC GULF PROPERTIES, INC ........................ 55
800 PARKWAY PROPERTIES, INC ............................. 23
1,800 PENNSYLVANIA REAL ESTATE INVESTMENT TRUST ........... 26
1,610 POST PROPERTIES, INC ................................ 62
6,800 PRENTISS PROPERTIES TRUST ........................... 143
700 PRIME GROUP REALTY TRUST ............................ 11
700 PRISON REALTY TRUST, INC ............................ 4
1,810 PROLOGIS TRUST ...................................... 35
6,100 PUBLIC STORAGE, INC ................................. 138
1,900 REALTY INCOME CORP .................................. 39
5,200 RECKSON ASSOCIATES REALTY CORP ...................... 107
709 REDWOOD TRUST, INC .................................. 9
3,900 RFS HOTEL INVESTORS, INC ............................ 41
1,000 ROUSE CO ............................................ 21
450 SENIOR HOUSING PROPERTIES TRUST ..................... 6
4,000 SHURGARD STORAGE CENTERS, INC ....................... 93
7,200 SIMON PROPERTY GROUP, INC ........................... 165
1,400 SOVRAN SELF STORAGE, INC ............................ 27
6,500 SPIEKER PROPERTIES, INC ............................. 237
4,178 STARWOOD FINANCIAL TRUST ............................ 71
2,700 STORAGE U.S.A., INC ................................. 82
613 SUMMIT PROPERTIES, INC .............................. 11
500 SUN COMMUNITIES, INC ................................ 16
900 TANGER FACTORY OUTLET CENTERS, INC .................. 19
3,985 THORNBURG MORTGAGE ASSET CORP ....................... 33
</TABLE>
See notes to financial statements.
B-35
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE (000)
- -------------- -----------
<S> <C> <C>
HOLDING AND OTHER INVESTMENT OFFICES--(Continued)
2,500 TOWN & COUNTRY TRUST ................................. $ 45
10,536 UNITED DOMINION REALTY TRUST, INC .................... 104
841 VENTAS, INC .......................................... 4
8,600 VORNADO REALTY TRUST ................................. 280
205 WALDEN RESIDENTIAL PROPERTIES, INC ................... 4
6,000 WASHINGTON REAL ESTATE INVESTMENT TRUST .............. 90
3,400 WEINGARTEN REALTY INVESTORS, INC ..................... 132
3,100 * WELLSFORD REAL PROPERTIES, INC ....................... 26
700 WESTERN PROPERTIES TRUST ............................. 7
900 WESTFIELD AMERICA, INC ............................... 11
200 WHITE MOUNTAINS INSURANCE ............................ 24
----------
7,324
----------
HOTELS AND OTHER LODGING PLACES--0.11%
10,500 * AZTAR CORP ........................................... 114
50 * BRISTOL HOTELS & RESORTS, INC ........................ 0
5,900 * CHOICE HOTELS INTERNATIONAL, INC ..................... 101
1,900 * CRESTLINE CAPITAL CORP ............................... 39
9,600 * EXTENDED STAY AMERICA, INC ........................... 73
12,927 HILTON HOTELS CORP ................................... 124
65 * INTERSTATE HOTELS CORP ............................... 0
4,600 * LODGIAN, INC ......................................... 23
2,400 * MANDALAY RESORT GROUP ................................ 48
846 * MGM GRAND, INC ....................................... 43
15,100 * PARK PLACE ENTERTAINMENT CORP ........................ 189
4,800 * PRIME HOSPITALITY CORP ............................... 42
14,693 STARWOOD HOTELS & RESORTS WORLDWIDE .................. 345
1,500 * SUNTERRA CORP ........................................ 17
9,771 * WYNDHAM INTERNATIONAL, INC ........................... 29
----------
1,187
----------
INDUSTRIAL MACHINERY AND EQUIPMENT--9.05%
28,042 * 3COM CORP ............................................ 1,318
8,400 * ADAPTEC, INC ......................................... 419
2,400 * ADVANCED DIGITAL INFORMATION CORP .................... 117
5,200 AGCO CORP ............................................ 70
6,900 * AMERICAN STANDARD COS, INC ........................... 317
1,300 * APEX, INC ............................................ 42
12,400 * APPLE COMPUTER, INC .................................. 1,275
30,500 * APPLIED MATERIALS, INC ............................... 3,864
1,800 APPLIED POWER, INC (CLASS A) ......................... 66
2,200 * ASTEC INDUSTRIES, INC ................................ 41
700 * ATMI, INC ............................................ 23
2,500 * AUSPEX SYSTEMS, INC .................................. 26
19,315 BAKER HUGHES, INC .................................... 407
2,300 * BELL & HOWELL CO ..................................... 73
5,300 BLACK & DECKER CORP .................................. 277
800 * BLACK BOX CORP ....................................... 54
16,600 BRUNSWICK CORP ....................................... 369
3,400 * C-CUBE MICROSYSTEMS, INC ............................. 212
10,600 * CABLETRON SYSTEMS, INC ............................... 276
23,600 CATERPILLAR, INC ..................................... 1,111
5,100 * CIRRUS LOGIC, INC .................................... 68
247,077 * CISCO SYSTEMS, INC ................................... 26,468
1,000 COLUMBUS MCKINNON CORP ............................... 10
127,484 COMPAQ COMPUTER CORP ................................. 3,450
400 * CONCURRENT COMPUTER CORP ............................. 7
2,000 * COOPER CAMERON CORP .................................. 98
7,600 CUMMINS ENGINE CO, INC ............................... 367
500 * CYBEX COMPUTER PRODUCTS CORP ......................... 20
400 * CYLINK CORP .......................................... 5
14,900 DEERE & CO ........................................... 646
158,486 * DELL COMPUTER CORP ................................... 8,083
1,400 DETROIT DIESEL CORP .................................. 27
6,650 DIEBOLD, INC ......................................... 156
1,100 DONALDSON CO, INC .................................... 26
<CAPTION>
SHARES VALUE (000)
- -------------- -----------
<S> <C> <C>
13,800 DOVER CORP ........................................... $ 626
2,900 * ELECTROGLAS, INC ..................................... 74
77,850 * EMC CORP ............................................. 8,505
1,600 * EMULEX CORP .......................................... 180
3,500 * EXTREME NETWORKS, INC ................................ 292
4,500 FEDDERS CORP ......................................... 25
5,900 FLOWSERVE CORP ....................................... 100
3,000 * FSI INTERNATIONAL, INC ............................... 35
2,400 * GARDNER DENVER, INC .................................. 40
10,600 * GATEWAY, INC ......................................... 764
100 GLEASON CORP ......................................... 2
2,600 * GLOBAL IMAGING SYSTEMS, INC .......................... 32
1,800 GRACO, INC ........................................... 65
2,200 x * HARNISCHFEGER INDUSTRIES, INC ........................ 1
68,400 HEWLETT-PACKARD CO ................................... 7,793
5,400 HUSSMANN INTERNATIONAL, INC .......................... 81
1,200 * HYPERCOM CORP ........................................ 12
2,050 IDEX CORP ............................................ 62
6,000 * IN FOCUS SYSTEMS, INC ................................ 139
11,850 INGERSOLL-RAND CO .................................... 652
137,100 INTERNATIONAL BUSINESS MACHINES CORP ................. 14,807
15,200 * IOMEGA CORP .......................................... 51
4,900 JLG INDUSTRIES, INC .................................. 78
3,548 KENNAMETAL, INC ...................................... 119
2,100 * KRONOS, INC .......................................... 126
1,100 * KULICHE & SOFFA INDUSTRIES, INC ...................... 47
4,200 * LAM RESEARCH CORP .................................... 469
11,000 * LEXMARK INTERNATIONAL GROUP (CLASS A) ................ 996
6,300 LINCOLN ELECTRIC HOLDINGS CO ......................... 130
400 LINDSAY MANUFACTURING CO ............................. 7
600 LUFKIN INDUSTRIES, INC ............................... 9
1,875 MANITOWOC, INC ....................................... 64
2,400 * MAXTOR CORP .......................................... 17
200 * MICRON ELECTRONICS, INC .............................. 2
2,100 * MICROS SYSTEMS, INC .................................. 155
1,100 MILACRON, INC ........................................ 17
4,800 * MTI TECHNOLOGY CORP .................................. 177
2,000 NACCO INDUSTRIES, INC (CLASS A) ...................... 111
2,475 * NATIONAL INSTRUMENTS CORP ............................ 95
3,300 * NOVELLUS SYSTEMS, INC ................................ 404
6,900 PALL CORP ............................................ 149
4,100 PENTAIR, INC ......................................... 158
19,300 PITNEY BOWES, INC .................................... 932
300 * PRESSTEK, INC ........................................ 4
200 * PROXIM, INC .......................................... 22
11,800 * QUANTUM CORP-DLT & STORAGE SYSTEMS GROUP ............. 178
5,900 * QUANTUM CORP-HARD DISK DRIVE GROUP ................... 41
600 ROBBINS & MYERS, INC ................................. 14
4,000 ROPER INDUSTRIES, INC ................................ 151
1,873 * SANDISK CORP ......................................... 180
1,500 SAUER, INC ........................................... 14
20,048 * SEAGATE TECHNOLOGY, INC .............................. 933
12,600 * SILICON GRAPHICS, INC ................................ 124
1,600 * SILICON VALLEY GROUP, INC ............................ 28
3,800 * SMITH INTERNATIONAL, INC ............................. 189
1,900 * SPECIALTY EQUIPMENT COS, INC ......................... 45
752 * SPEEDFAM-IPEC, INC ................................... 10
300 * SPLASH TECHNOLOGY HOLDINGS, INC ...................... 3
1,700 STANDEX INTERNATIONAL CORP ........................... 36
6,900 * STORAGE TECHNOLOGY CORP .............................. 127
6,300 SYMBOL TECHNOLOGIES, INC ............................. 400
3,200 TECUMSEH PRODUCTS CO (CLASS A) ....................... 151
1,600 TENNANT CO ........................................... 52
3,280 * TENNECO AUTOMOTIVE, INC .............................. 31
2,500 * TEREX CORP ........................................... 69
900 * THERMO FIBERTEK, INC ................................. 6
</TABLE>
See notes to financial statements.
B-36
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE (000)
- -------------- -----------
<S> <C> <C>
INDUSTRIAL MACHINERY AND EQUIPMENT--(Continued)
5,429 TIMKEN CO ......................................... $ 111
700 TORO CO ........................................... 26
800 TYCO INTERNATIONAL LTD ............................ 31
1,200 * ULTRATECH STEPPER, INC ............................ 19
21,208 * UNISYS CORP ....................................... 677
1,300 * UNOVA, INC ........................................ 17
8,400 * VARCO INTERNATIONAL, INC .......................... 86
2,700 * VISUAL NETWORKS, INC .............................. 214
100 WATKINS-JOHNSON CO ................................ 4
7,600 * WESTERN DIGITAL CORP .............................. 32
8,600 * XIRCOM, INC ....................................... 645
9,200 YORK INTERNATIONAL CORP ........................... 252
1,600 * ZEBRA TECHNOLOGY CORP ............................. 94
----------
93,404
----------
INSTRUMENTS AND RELATED PRODUCTS--1.86%
3,100 * ACUSON CORP ....................................... 39
1,800 * AFFYMETRIX, INC ................................... 305
1,200 * ANACOMP, INC ...................................... 22
400 ARROW INTERNATIONAL, INC .......................... 12
3,800 * AVID TECHNOLOGIES, INC ............................ 50
700 * BACOU U.S.A., INC ................................. 11
2,700 BARD (C.R.), INC .................................. 143
1,200 BAUSCH & LOMB, INC ................................ 82
21,600 BAXTER INTERNATIONAL, INC ......................... 1,357
4,200 BECKMAN COULTER, INC .............................. 214
17,100 BECTON DICKINSON & CO ............................. 457
400 * BIO-RAD LABORATORIES, INC (CLASS A) ............... 9
6,400 BIOMET, INC ....................................... 256
21,000 * BOSTON SCIENTIFIC CORP ............................ 459
1,000 * BRITESMILE, INC ................................... 8
3,500 * CHYRON CORP ....................................... 5
3,600 * COGNEX CORP ....................................... 140
2,800 * COHERENT, INC ..................................... 75
600 COHU, INC ......................................... 19
300 COLE NATIONAL CORP (CLASS A) ...................... 2
1,800 * CONMED CORP ....................................... 47
2,500 COOPER COS, INC ................................... 75
2,100 * CREDENCE SYSTEMS CORP ............................. 182
700 CUBIC CORP ........................................ 15
800 * CYBERONICS, INC ................................... 13
2,300 * CYMER, INC ........................................ 106
2,600 * CYTYC CORP ........................................ 159
800 DATASCOPE CORP .................................... 32
7,800 DENTSPLY INTERNATIONAL, INC ....................... 184
1,200 * DIONEX CORP ....................................... 49
850 * DYNATECH CORP ..................................... 6
24,200 EASTMAN KODAK CO .................................. 1,603
2,100 * FOSSIL, INC ....................................... 49
2,400 * GENRAD, INC ....................................... 39
23,565 * GUIDANT CORP ...................................... 1,108
3,100 * HANGER ORTHOPEDIC GROUP, INC ...................... 31
400 * IMATRON, INC ...................................... 1
1,600 INVACARE CORP ..................................... 32
6,300 JOHNSON CONTROLS, INC ............................. 358
6,800 * KLA-TENCOR CORP ................................... 757
400 * LIFECORE BIOMEDICAL, INC .......................... 8
2,400 * LITTON INDUSTRIES, INC ............................ 120
4,700 * LTX CORP .......................................... 105
2,525 * MEDICAL MANAGER CORP .............................. 213
86,850 MEDTRONIC, INC .................................... 3,165
500 MENTOR CORP ....................................... 13
4,600 * METTLER-TOLEDO INTERNATIONAL, INC ................. 176
3,100 MILLIPORE CORP .................................... 120
200 MINE SAFETY APPLIANCE CO .......................... 13
300 * MINIMED, INC ...................................... 22
<CAPTION>
SHARES VALUE (000)
- -------------- -----------
<S> <C> <C>
1,500 MOVADO GROUP, INC ................................. $ 33
1,400 * NOVOSTE CORP ...................................... 23
1,600 * OCULAR SCIENCES, INC .............................. 30
600 OPTICAL COATING LABORATORIES, INC ................. 178
3,250 * PE CORP-CELERA GENOMICS GROUP ..................... 484
6,100 PE CORP-PE BIOSYSTEMS GROUP ....................... 734
2,600 PERKINELMER, INC .................................. 108
2,200 * PINNACLE SYSTEMS, INC ............................. 90
4,018 RAYTHEON CO (CLASS A) ............................. 100
24,000 RAYTHEON CO (CLASS B) ............................. 638
2,600 * RESMED, INC ....................................... 109
1,200 * RESPIRONICS, INC .................................. 10
33 * SONOSITE, INC ..................................... 1
7,488 * ST. JUDE MEDICAL, INC ............................. 230
4,900 * STERIS CORP ....................................... 51
3,900 STRYKER CORP ...................................... 272
1,950 * SUMMIT TECHNOLOGY, INC ............................ 23
1,100 * SUNRISE MEDICAL, INC .............................. 7
4,100 * SUNRISE TECHNOLOGY INTERNATIONAL, INC ............. 48
8,500 * SYBRON INTERNATIONAL CORP ......................... 210
9,150 TEKTRONIX, INC .................................... 356
2,900 TELEFLEX, INC ..................................... 91
11,600 * TERADYNE, INC ..................................... 766
700 * THERMEDICS, INC ................................... 4
300 * THERMO BIOANALYSIS CORP ........................... 6
300 * THERMO CARDIOSYSTEMS, INC ......................... 2
7,875 * THERMO ELECTRON CORP .............................. 118
25 * THERMO INSTRUMENT SYSTEMS, INC .................... 0
1,100 * THERMOQUEST CORP .................................. 11
3,700 * TRIMBLE NAVIGATION LTD ............................ 80
700 * VARIAN, INC ....................................... 16
400 * VEECO INSTRUMENTS, INC ............................ 19
600 * VENTANA MEDICAL SYSTEMS, INC ...................... 15
6,000 * VISX, INC ......................................... 311
2,300 * WATERS CORP ....................................... 122
5,800 * WESLEY JESSEN VISIONCARE, INC ..................... 220
52,300 XEROX CORP ........................................ 1,187
----------
19,169
----------
INSURANCE AGENTS, BROKERS AND SERVICE--0.19%
1,900 BALDWIN & LYONS, INC (CLASS B) .................... 42
1,500 CRAWFORD & CO (CLASS B) ........................... 20
300 * FIRST HEALTH GROUP CORP ........................... 8
5,308 * HOMEFED CORP ...................................... 5
19,400 MARSH & MCLENNAN COS, INC ......................... 1,856
----------
1,931
----------
INSURANCE CARRIERS--4.31%
1,040 ACE LTD ........................................... 17
13,085 AETNA, INC ........................................ 730
20,700 AFLAC, INC ........................................ 977
600 ALFA CORP ......................................... 10
610 * ALLEGHANY CORP (DELAWARE) ......................... 113
6,500 ALLMERICA FINANCIAL CORP .......................... 362
58,356 ALLSTATE CORP ..................................... 1,401
5,500 AMBAC FINANCIAL GROUP, INC ........................ 287
300 AMERICAN ANNUITY GROUP, INC ....................... 5
2,800 AMERICAN FINANCIAL GROUP, INC ..................... 74
20,840 AMERICAN GENERAL CORP ............................. 1,581
101,455 AMERICAN INTERNATIONAL GROUP, INC ................. 10,970
300 AMERICAN NATIONAL INSURANCE CO .................... 19
2,600 AMERUS LIFE HOLDINGS, INC (CLASS A) ............... 60
17,775 AON CORP .......................................... 711
14,400 AXA FINANCIAL, INC ................................ 488
350 BERKLEY (W.R.) CORP ............................... 7
2,300 CHICAGO TITLE CORP ................................ 106
10,594 CHUBB CORP ........................................ 597
</TABLE>
See notes to financial statements.
B-37
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE (000)
- ------ -----------
<S> <C> <C>
INSURANCE CARRIERS--(Continued)
13,800 CIGNA CORP ............................................ $ 1,112
14,088 CINCINNATI FINANCIAL CORP ............................. 439
259,494 CITIGROUP, INC ........................................ 14,418
1,900 * CNA FINANCIAL CORP .................................... 74
23,513 CONSECO, INC .......................................... 420
1,800 ENHANCE FINANCIAL SERVICES GROUP, INC ................. 29
2,000 ERIE INDEMNITY CO (CLASS A) ........................... 65
4,800 EVEREST REINSURANCE HOLDINGS, INC ..................... 107
600 * FARM FAMILY HOLDINGS, INC ............................. 25
2,000 FBL FINANCIAL GROUP, INC (CLASS A) .................... 40
500 FIDELITY NATIONAL FINANCIAL, INC ...................... 7
2,800 FINANCIAL SECURITY ASSURANCE HOLDINGS LTD ............. 146
2,500 FIRST AMERICAN FINANCIAL CORP ......................... 31
2,900 FOREMOST CORP OF AMERICA .............................. 82
6,400 * FOUNDATION HEALTH SYSTEMS (CLASS A) ................... 64
300 FREMONT GENERAL CORP .................................. 2
5,100 FRONTIER INSURANCE GROUP, INC ......................... 18
700 HARLEYSVILLE GROUP, INC ............................... 10
15,300 HARTFORD FINANCIAL SERVICES GROUP, INC ................ 725
1,700 HARTFORD LIFE, INC (CLASS A) .......................... 75
600 HCC INSURANCE HOLDINGS, INC ........................... 8
7,900 * HUMANA, INC ........................................... 65
8,150 JEFFERSON-PILOT CORP .................................. 556
1,000 KANSAS CITY LIFE INSURANCE CO ......................... 34
600 LIBERTY CORP .......................................... 25
15,800 LINCOLN NATIONAL CORP ................................. 632
4,700 LOEWS CORP ............................................ 285
1,600 * MAXICARE HEALTH PLANS, INC ............................ 5
4,941 MBIA, INC ............................................. 261
900 MERCURY GENERAL CORP .................................. 20
13,700 MGIC INVESTMENT CORP .................................. 825
2,800 MMI COS, INC .......................................... 24
300 MONY GROUP, INC ....................................... 9
100 * NATIONAL WESTERN LIFE INSURANCE CO .................... 7
5,100 NATIONWIDE FINANCIAL SERVICES, INC (CLASS A) .......... 142
11,400 OLD REPUBLIC INTERNATIONAL CORP ....................... 155
9,400 * OXFORD HEALTH PLANS, INC ........................... 119
4,564 * PACIFICARE HEALTH SYSTEMS, INC (CLASS A) .............. 242
600 * PENN TREATY AMERICAN CORP ............................. 9
4,100 * PENNCORP FINANCIAL GROUP, INC ......................... 2
800 * PHILADELPHIA CONSOLIDATED HOLDINGS CORP ............... 12
1,000 PMA CAPITAL CORP (CLASS A) ............................ 20
8,400 PMI GROUP, INC ........................................ 410
900 PRESIDENTIAL LIFE CORP ................................ 17
220 * PROFESSIONALS GROUP, INC .............................. 5
4,400 PROGRESSIVE CORP ...................................... 322
2,000 PROTECTIVE LIFE CORP .................................. 64
1,700 PXRE GROUP LTD ........................................ 22
5,526 RADIAN GROUP, INC ..................................... 264
3,025 REINSURANCE GROUP OF AMERICA, INC ..................... 84
4,797 RELIASTAR FINANCIAL CORP .............................. 188
1,700 * RISK CAPITAL HOLDINGS, INC ............................ 21
500 RLI CORP .............................................. 17
3,300 SAFECO CORP ........................................... 82
2,100 SCPIE HOLDINGS, INC ................................... 67
4,700 SELECTIVE INSURANCE GROUP, INC ........................ 81
450 * SIERRA HEALTH SERVICES, INC ........................... 3
16,522 ST. PAUL COS, INC ..................................... 557
2,200 STATE AUTO FINANCIAL CORP ............................. 20
2,000 STEWART INFORMATION SERVICES CORP ..................... 27
10,800 TORCHMARK CORP ........................................ 314
5,800 TRAVELERS PROPERTY CASUALTY CORP ...................... 199
1,500 TRENWICK GROUP, INC ................................... 25
4,600 * TRIAD GUARANTY, INC ................................... 105
2,600 * TRIGON HEALTHCARE, INC ................................ 77
<CAPTION>
SHARES VALUE (000)
- ------ -----------
<S> <C> <C>
2,100 * UICI .................................................. $ 22
200 UNITED FIRE & CASULTY CO .............................. 5
15,100 UNITED HEALTHCARE CORP ................................ 802
1,000 UNITRIN, INC .......................................... 38
15,093 UNUMPROVIDENT CORP .................................... 484
1,100 VESTA INSURANCE GROUP, INC ............................ 4
4,300 * WELLPOINT HEALTH NETWORKS, INC ........................ 284
220 WESCO FINANCIAL CORP .................................. 54
----------
44,525
----------
LEATHER AND LEATHER PRODUCTS--0.02%
2,800 BROWN SHOE CO, INC .................................... 40
679 * SAMSONITE CORP ........................................ 4
5,400 STRIDE RITE CORP ...................................... 35
1,600 * TIMBERLAND CO ......................................... 85
25 WOLVERINE WORLD WIDE, INC ............................. 0
----------
164
----------
LEGAL SERVICES--0.00%
2,100 * PREPAID LEGAL SERVICES, INC ........................... 50
----------
LOCAL AND INTERURBAN PASSENGER TRANSIT--0.00%
1,000 * RURAL/METRO CORP ...................................... 4
----------
LUMBER AND WOOD PRODUCTS--0.25%
4,200 * CHAMPION ENTERPRISES, INC ............................. 36
8,407 CLAYTON HOMES, INC .................................... 77
1,242 DELTIC TIMBER CORP .................................... 27
18,500 GEORGIA-PACIFIC CORP (PACKING GROUP) .................. 939
20,800 LOUISIANA PACIFIC CORP ................................ 296
350 * PALM HARBOR HOMES, INC ................................ 6
100 TJ INTERNATIONAL, INC ................................. 4
2,500 UNIVERSAL FOREST PRODUCTS, INC ........................ 37
15,900 WEYERHAEUSER CO ....................................... 1,142
----------
2,564
----------
METAL MINING--0.11%
16,200 * BATTLE MOUNTAIN GOLD CO ............................... 33
2,000 CLEVELAND CLIFFS, INC ................................. 62
18,263 * FREEPORT-MCMORAN COPPER & GOLD, INC
(CLASS B) ............................................. 386
10,700 NEWMONT MINING CORP ................................... 262
6,241 PHELPS DODGE CORP ..................................... 419
40 PLACER DOME, INC (U.S.) ............................... 0
400 * STILLWATER MINING CO .................................. 13
----------
1,175
----------
MISCELLANEOUS MANUFACTURING INDUSTRIES--0.43%
1,900 * BLYTH INDUSTRIES, INC ................................. 47
2,600 BRADY CORP (CLASS A) .................................. 88
5,100 CALLAWAY GOLF CO ...................................... 90
12,750 HASBRO, INC ........................................... 243
1,700 * HEXCEL CORP ........................................... 9
4,800 INTERNATIONAL GAME TECHNOLOGY CO ...................... 98
6,100 JOSTENS, INC .......................................... 148
200 K2, INC ............................................... 2
2,800 * LYDALL, INC ........................................... 19
81 * MARVEL ENTERPRISES (CLASS A) WTS 10/02/01 ............. 0
138 * MARVEL ENTERPRISES (CLASS C) WTS 10/02/02 ............. 0
30,389 MATTEL, INC ........................................... 399
32,900 MINNESOTA MINING & MANUFACTURING CO ................... 3,220
2,400 ONEIDA LTD ............................................ 52
1,000 * RACING CHAMPIONS CORP ................................. 4
1,500 RUSS BERRIE & CO, INC ................................. 39
1,500 * STEINWAY MUSICAL INSTRUMENTS, INC ..................... 30
----------
4,488
----------
MISCELLANEOUS RETAIL--0.75%
12,900 * AMAZON.COM, INC ....................................... 982
3,200 * BARNES & NOBLE, INC ................................... 66
</TABLE>
See notes to financial statements.
B-38
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE (000)
- ------ -----------
<S> <C> <C>
MISCELLANEOUS RETAIL--(Continued)
1,300 * BARNESANDNOBLE.COM, INC .............................. $ 18
700 * BARNETT, INC ......................................... 7
200 BLAIR CORP ........................................... 3
4,100 * BORDERS GROUP, INC ................................... 66
1,600 * CDW COMPUTER CENTERS, INC ............................ 126
500 * COLDWATER CREEK, INC ................................. 10
29,342 CVS CORP ............................................. 1,172
1,751 * EGGHEAD.COM, INC ..................................... 28
600 ENESCO GROUP, INC .................................... 7
3,200 * ETOYS, INC ........................................... 84
700 HANCOCK FABRICS, INC ................................. 2
16,100 * HANOVER DIRECT, INC .................................. 58
2,500 * INSIGHT ENTERPRISES, INC ............................. 102
700 * ITURF, INC ........................................... 9
300 LONGS DRUG STORES CORP ............................... 8
5,200 * MICHAELS STORES, INC ................................. 148
1,600 * MICRO WAREHOUSE, INC ................................. 30
24,300 * OFFICE DEPOT, INC .................................... 266
4,150 * OFFICEMAX, INC ....................................... 23
5,000 OMNICARE, INC ........................................ 60
600 * PARTY CITY CORP ...................................... 1
3,700 * PETCO ANIMAL SUPPLIES, INC ........................... 55
4,500 * PETSMART, INC ........................................ 26
17,020 RITE AID CORP ........................................ 190
3,600 * SCHEIN (HENRY), INC .................................. 48
34,262 * STAPLES, INC ......................................... 711
1,600 * SUNGLASS HUT INTERNATIONAL, INC ...................... 18
1,100 * SYSTEMAX, INC ........................................ 9
600 * THE SPORTS AUTHORITY, INC ............................ 1
5,400 TIFFANY & CO ......................................... 482
23,087 * TOYS R US, INC ....................................... 330
3,025 * U.S. OFFICE PRODUCTS CO .............................. 9
1,000 * VALUEVISION INTERNATIONAL, INC ....................... 57
80,600 WALGREEN CO .......................................... 2,358
4,100 * ZALE CORP ............................................ 198
----------
7,768
----------
MOTION PICTURES--1.15%
3,300 * AMC ENTERTAINMENT, INC ............................... 28
900 * CARMIKE CINEMAS, INC (CLASS A) ....................... 7
164,034 DISNEY (WALT) CO ..................................... 4,798
900 * GC COS, INC .......................................... 23
4,100 * HOLLYWOOD ENTERTAINMENT CORP ......................... 59
2,500 * LOEWS CINEPLEX ENTERTAINMENT CORP .................... 15
5,444 * METRO-GOLDWYN-MAYER, INC ............................. 128
10,400 * METROMEDIA INTERNATIONAL GROUP, INC .................. 49
1,800 * ON COMMAND CORP ...................................... 33
1,300 * PIXAR, INC ........................................... 46
92,344 TIME WARNER, INC ..................................... 6,689
----------
11,875
----------
NONDEPOSITORY INSTITUTIONS--1.76%
1,500 * AAMES FINANCIAL CORP ................................. 1
3,425 ADVANTA CORP (CLASS A) ............................... 63
35,700 AMERICAN EXPRESS CO .................................. 5,935
3,000 * AMERICREDIT CORP ..................................... 56
6,800 * ARCADIA FINANCIAL LTD ................................ 30
52,416 ASSOCIATES FIRST CAPITAL CORP ........................ 1,438
14,200 CAPITAL ONE FINANCIAL CORP ........................... 684
2,500 CHARTER MUNICIPAL MORTGAGE ACCEPTANCE ................ 29
800 CIT GROUP, INC (CLASS A) ............................. 17
2,100 x * CITYSCAPE FINANCIAL CORP ............................. 0
1,900 * CONTIFINANCIAL CORP .................................. 0
8,971 COUNTRYWIDE CREDIT INDUSTRIES, INC ................... 227
1,100 * CREDIT ACCEPTANCE CORP ............................... 4
100 DORAL FINANCIAL CORP ................................. 1
<CAPTION>
SHARES VALUE (000)
- ------ -----------
<S> <C> <C>
600 * FEDERAL AGRICULTURE MORTGAGE CORP .................... $ 12
76,200 FEDERAL NATIONAL MORTGAGE ASSOCIATION ................ 4,758
1,300 * FINANCIAL FEDERAL CORP ............................... 30
1,900 * FINET.COM, INC ....................................... 2
3,516 FINOVA GROUP, INC .................................... 125
900 * FIRST SIERRA FINANCIAL, INC .......................... 15
4,500 * FIRSTPLUS FINANCIAL GROUP, INC ....................... 0
52,800 FREDDIE MAC .......................................... 2,485
2,219 HELLER FINANCIAL, INC ................................ 45
35,441 HOUSEHOLD INTERNATIONAL, INC ......................... 1,320
1,000 * IMC MORTGAGE CO ...................................... 0
500 * IMPERIAL CREDIT INDUSTRIES, INC ...................... 3
7,500 LEUCADIA NATIONAL CORP ............................... 173
10,838 METRIS COS, INC ...................................... 387
19 * MFN FINANCIAL CORP ................................... 0
22 * MFN FINANCIAL CORP WTS SERIES A 03/23/02 ............. 0
22 * MFN FINANCIAL CORP WTS SERIES B 03/23/03 ............. 0
22 * MFN FINANCIAL CORP WTS SERIES C 03/23/04 ............. 0
2,400 * NEXTCARD, INC ........................................ 69
25 * OMEGA WORLDWIDE, INC ................................. 0
300 RESOURCE AMERICA, INC (CLASS A) ...................... 2
6,250 SLM HOLDINGS CORP .................................... 264
6,700 * UNICAPITAL CORP ...................................... 25
2,200 x * UNITED COS FINANCIAL CORP ........................ 0
----------
18,200
----------
NONMETALLIC MINERALS, EXCEPT FUELS--0.05%
7,000 AMCOL INTERNATIONAL CORP ............................. 113
3,100 JOHNS MANVILLE CORP .................................. 43
4,700 MARTIN MARIETTA MATERIALS, INC ....................... 193
3,200 VULCAN MATERIALS CO .................................. 128
----------
477
----------
OIL AND GAS EXTRACTION--0.77%
5,200 ANADARKO PETROLEUM CORP .............................. 177
8,400 APACHE CORP .......................................... 310
700 * ATWOOD OCEANICS, INC ................................. 27
1,100 * BASIN EXPLORATION, INC ............................... 19
1,200 * BELCO OIL & GAS CORP ................................. 7
4,000 * BENTON OIL & GAS CO .................................. 8
3,400 * BJ SERVICES CO ....................................... 142
4,200 * BROWN (TOM), INC ..................................... 56
10,749 BURLINGTON RESOURCES, INC ............................ 355
700 CABOT OIL & GAS CORP (CLASS A) ....................... 11
700 * CAL DIVE INTERNATIONAL, INC .......................... 23
12,800 * CHESAPEAKE ENERGY CORP ............................... 30
400 * COMSTOCK RESOURCES, INC .............................. 1
1,100 * CONTOUR ENERGY CO .................................... 1
5,425 CROSS TIMBERS OIL CO ................................. 49
3,347 DEVON ENERGY CORP (NEW) .............................. 110
6,700 DIAMOND OFFSHORE DRILLING, INC ....................... 205
231 x * EAGLE GEOPHYSICAL, INC ............................... 0
7,149 * EEX CORP ............................................. 21
15,400 ENSCO INTERNATIONAL, INC ............................. 352
3,500 EOG RESOURCES, INC ................................... 61
1,400 x * FORCENERGY GAS EXPLORATION, INC ...................... 1
4,900 * FOREST OIL CORP ...................................... 65
2,866 * FRIEDE GOLDMAN HALTER, INC ........................... 20
2,500 * GLOBAL INDUSTRIES LTD ................................ 22
14,200 * GLOBAL MARINE, INC ................................... 236
25,800 * GREY WOLF, INC ....................................... 74
32,832 HALLIBURTON CO ....................................... 1,321
400 * HANOVER COMPRESSOR CO ................................ 15
14,000 * HARKEN ENERGY CORP ................................... 11
5,700 HELMERICH & PAYNE, INC ............................... 124
500 * HOUSTON EXPLORATION CO ............................... 10
2,100 * HS RESOURCES, INC .................................... 36
</TABLE>
See notes to financial statements.
B-39
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE (000)
- ------ -----------
<S> <C> <C>
OIL AND GAS EXTRACTION--(Continued)
2,000 x* KCS ENERGY, INC ....................................... $ 2
10,547 KERR-MCGEE CORP ....................................... 654
24,500 * KEY ENERGY SERVICES, INC .............................. 127
3,300 * LOUIS DREYFUS NATURAL GAS CORP ........................ 60
2,700 * MARINE DRILLING CO, INC ............................... 61
1,263 * MCMORAN EXPLORATION CO ................................ 27
1,700 * MERIDIAN RESOURCE CORP ................................ 5
900 MITCHELL ENERGY & DEVELOPMENT CORP (CLASS A) .......... 20
5,100 * NABORS INDUSTRIES, INC ................................ 158
2,200 * NEWFIELD EXPLORATION CO ............................... 59
2,800 NOBLE AFFILIATES, INC ................................. 60
8,100 * NOBLE DRILLING CORP ................................... 265
2,800 * NUEVO ENERGY CO ....................................... 53
28,800 OCCIDENTAL PETROLEUM CORP ............................. 623
8,200 * OCEAN ENERGY, INC (NEW) ............................... 64
2,100 * OCEANEERING INTERNATIONAL, INC ........................ 31
11,800 * PARKER DRILLING CO .................................... 38
5,800 * PATTERSON ENERGY, INC ................................. 75
15,600 * PIONEER NATURAL RESOURCES CO .......................... 139
2,100 POGO PRODUCING CO ..................................... 43
900 * PRIDE INTERNATIONAL, INC .............................. 13
14,300 * R & B FALCON CORP ..................................... 189
2,100 * ROWAN COS, INC ........................................ 46
700 RPC, INC .............................................. 4
12,000 * SANTA FE SNYDER CORP .................................. 96
16 SCHLUMBERGER LTD ...................................... 1
2,600 * SEITEL, INC ........................................... 18
1,200 ST. MARY LAND & EXPLORATION CO ........................ 30
1,500 * STONE ENERGY CORP ..................................... 53
4,700 * SYNTROLEUM CORP ....................................... 38
600 * TITAN EXPLORATION, INC ................................ 3
486 * TOTAL FINA WTS 08/05/03 ............................... 14
7,303 * TRANSOCEAN SEDCO FOREX, INC ........................... 246
2,600 x* TRANSTEXAS GAS CORP ................................... 1
3,500 * TUBOSCOPE, INC ........................................ 56
20,914 UNION PACIFIC RESOURCES GROUP, INC .................... 267
400 * UTI ENERGY CORP ....................................... 9
3,000 VASTAR RESOURCES, INC ................................. 177
1,900 * VERITAS DGC, INC ...................................... 27
1,900 * VINTAGE PETROLEUM, INC ................................ 23
5,130 * WEATHERFORD INTERNATIONAL ............................. 205
----------
7,980
----------
PAPER AND ALLIED PRODUCTS--0.81%
1,300 * ACX TECHNOLOGIES, INC ................................. 14
5,000 * AMERICAN PAD & PAPER CO ............................... 1
7,100 AVERY DENNISON CORP ................................... 517
2,400 BEMIS, INC ............................................ 84
2,800 BOISE CASCADE CORP .................................... 113
1,600 BOWATER, INC .......................................... 87
4,100 * BUCKEYE TECHNOLOGIES, INC ............................. 61
1,400 CARAUSTAR INDUSTRIES, INC ............................. 34
5,900 CHAMPION INTERNATIONAL CORP ........................... 365
3,800 CHESAPEAKE CORP ....................................... 116
60 * CROWN VANTAGE, INC .................................... 0
4,300 * EARTHSHELL CORP ....................................... 18
19,325 FORT JAMES CORP ....................................... 529
4,300 GLATFELTER (P.H.) CO .................................. 63
300 GREIF BROTHERS CORP (CLASS A) ......................... 9
30,364 INTERNATIONAL PAPER CO ................................ 1,714
3,200 * IVEX PACKAGING CORP ................................... 32
40,900 KIMBERLY-CLARK CORP ................................... 2,669
1,600 LONGVIEW FIBRE CO ..................................... 23
4,000 * MAIL-WELL, INC ........................................ 54
6,500 MEAD CORP ............................................. 282
1,900 * PLAYTEX PRODUCTS, INC ................................. 29
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (000)
- ------ -----------
<S> <C> <C>
300 REPUBLIC GROUP, INC ................................... $ 5
600 ROCK-TENN CO (CLASS A) ................................ 9
340 SCHWEITZER-MAUDUIT INTERNATIONAL, INC ................. 5
2,300 * SHOREWOOD PACKAGING CORP .............................. 44
9,053 * SMURFIT-STONE CONTAINER CORP .......................... 222
10,631 SONOCO PRODUCTS CO .................................... 242
4,800 ST. JOE CO ............................................ 117
4,800 TEMPLE-INLAND, INC .................................... 317
6,900 WAUSAU-MOSINEE PAPER CORP ............................. 81
4,500 WESTVACO CORP ......................................... 147
7,700 WILLAMETTE INDUSTRIES, INC ............................ 358
----------
8,361
----------
PERSONAL SERVICES--0.08%
9,200 BLOCK (H&R), INC ...................................... 403
1,200 * CARRIAGE SERVICES, INC (CLASS A) ...................... 7
6,300 CINTAS CORP ........................................... 335
600 CPI CORP .............................................. 14
1,250 REGIS CORP ............................................ 24
2,600 SERVICE CORP INTERNATIONAL ............................ 18
1,400 UNIFIRST CORP ......................................... 18
----------
819
----------
PETROLEUM AND COAL PRODUCTS--3.39%
8,500 AMERADA HESS CORP ..................................... 482
5,800 ASHLAND, INC .......................................... 191
26,400 ATLANTIC RICHFIELD CO ................................. 2,284
52,500 CHEVRON CORP .......................................... 4,548
31,152 CONOCO, INC (CLASS B) ................................. 775
3,450 ELCOR CORP ............................................ 104
267,257 EXXON MOBIL CORP ...................................... 21,531
1,500 MURPHY OIL CORP ....................................... 86
2,440 PENNZOIL-QUAKER STATE CO .............................. 25
13,700 PHILLIPS PETROLEUM CO ................................. 644
4,700 SUNOCO, INC ........................................... 110
42,416 TEXACO, INC ........................................... 2,304
16,848 TOSCO CORP ............................................ 458
16,726 ULTRAMAR DIAMOND SHAMROCK CORP ........................ 379
14,765 UNOCAL CORP ........................................... 496
19,300 USX-MARATHON GROUP, INC ............................... 476
6,300 * VALERO ENERGY CORP .................................... 125
1,100 WD-40 CO .............................................. 24
----------
35,042
----------
PRIMARY METAL INDUSTRIES--0.42%
1,810 AK STEEL HOLDINGS CORP ................................ 34
25,580 ALCOA, INC ............................................ 2,123
3,804 ALLEGHENY TECHNOLOGIES, INC ........................... 85
500 * ALPINE GROUP, INC ..................................... 6
4,100 BELDEN, INC ........................................... 86
9,300 * BETHLEHEM STEEL CORP .................................. 78
50 * CABLE DESIGN TECHNOLOGIES CO .......................... 1
3,300 CARPENTER TECHNOLOGY CORP ............................. 91
300 COMMONWEALTH INDUSTRIES, INC .......................... 4
800 * ENCORE WIRE CORP ...................................... 6
6,300 ENGELHARD CORP ........................................ 119
2,100 GENERAL CABLE CORP .................................... 16
1,000 GIBRALTAR STEEL CORP .................................. 23
2,100 IMCO RECYCLING, INC ................................... 27
1,500 INTERMET CORP ......................................... 17
3,700 * LONE STAR TECHNOLOGIES, INC ........................... 103
12,200 LTV CORP .............................................. 50
200 MATTHEWS INTERNATIONAL CORP (CLASS A) ................. 6
1,300 * MAVERICK TUBE CORP .................................... 32
600 * MAXXAM, INC ........................................... 26
4,100 * MUELLER INDUSTRIES, INC ............................... 149
600 NATIONAL STEEL CORP (CLASS B) ......................... 4
7,100 NUCOR CORP ............................................ 389
</TABLE>
See notes to financial statements.
B-40
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE (000)
- ------ -----------
<S> <C> <C>
PRIMARY METAL INDUSTRIES--(Continued)
1,100 OREGON STEEL MILLS, INC ........................... $ 9
100 PRECISION CAST PARTS CORP ......................... 3
2,700 QUANEX CORP ....................................... 69
1,700 REYNOLDS METALS CO ................................ 130
1,861 RYERSON TULL, INC ................................. 36
800 * STEEL DYNAMICS, INC ............................... 13
800 SUPERIOR TELECOM, INC ............................. 12
2,600 TEXAS INDUSTRIES, INC ............................. 111
200 TITAN INTERNATIONAL, INC .......................... 1
7,400 USX-US STEEL GROUP, INC ........................... 244
12,600 WORTHINGTON INDUSTRIES, INC ....................... 209
----------
4,312
----------
PRINTING AND PUBLISHING--0.80%
4,400 AMERICAN GREETINGS CORP (CLASS A) ................. 104
4,400 BANTA CORP ........................................ 99
16,500 BELO (A.H.) CORP SERIES A ......................... 315
2,800 CENTRAL NEWSPAPERS, INC (CLASS A) ................. 110
1,500 * CONSOLIDATED GRAPHICS, INC ........................ 22
1,000 * CSS INDUSTRIES, INC ............................... 21
600 * DAY RUNNER, INC ................................... 2
9,900 DELUXE CORP ....................................... 272
8,000 DONNELLEY (R.R.) & SONS CO ........................ 199
2,200 DOW JONES & CO, INC ............................... 150
24,500 GANNETT CO, INC ................................... 1,998
2,200 HARLAND (JOHN H.) CO .............................. 40
4,200 HARTE-HANKS, INC .................................. 91
3,800 KNIGHT-RIDDER, INC ................................ 226
7,500 LEE ENTERPRISES, INC .............................. 240
1,300 MCCLATCHY CO (CLASS A) ............................ 56
15,800 MCGRAW HILL COS, INC .............................. 974
2,856 MEDIA GENERAL, INC (CLASS A) ...................... 149
5,400 MEREDITH CORP ..................................... 225
9,100 NEW YORK TIMES CO (CLASS A) ....................... 447
82 NEWS CORP LTD ..................................... 3
475 * PAXAR CORP ........................................ 4
2,500 PENTON MEDIA, INC ................................. 60
7,100 * PRIMEDIA, INC ..................................... 117
60 * R.H. DONNELLEY CORP ............................... 1
2,100 READER'S DIGEST ASSOCIATION, INC (CLASS A)
(NON-VOTE) ........................................ 61
7,800 REYNOLDS & REYNOLDS CO (CLASS A) .................. 176
1,600 SCHAWK, INC (CLASS A) ............................. 14
200 * SCHOLASTIC CORP ................................... 12
7,200 SCRIPPS (E.W.) CO (CLASS A) ....................... 323
100 STANDARD REGISTER, INC ............................ 2
1,400 TIMES MIRROR CO SERIES A .......................... 94
1,000 * TOPPS, INC ........................................ 10
17,600 TRIBUNE CO ........................................ 969
4,900 WALLACE COMPUTER SERVICES, INC .................... 81
800 WASHINGTON POST CO (CLASS B) ...................... 445
6,400 WILEY (JOHN) & SONS, INC (CLASS A) ................ 107
13 * WORKFLOW MANAGEMENT, INC .......................... 0
----------
8,219
----------
RAILROAD TRANSPORTATION--0.32%
38,120 BURLINGTON NORTHERN SANTA FE CORP ................. 924
100 CANADIAN NATIONAL RAILWAY CO ...................... 3
11,000 CSX CORP .......................................... 345
2,000 FLORIDA EAST COAST INDUSTRIES, INC ................ 84
10,100 KANSAS CITY SOUTHERN INDUSTRIES, INC .............. 754
20,200 NORFOLK SOUTHERN CORP ............................. 414
17,682 UNION PACIFIC CORP ................................ 771
2,500 * WISCONSIN CENTRAL TRANSIT CORP .................... 34
----------
3,329
----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (000)
- ------ ------------
<S> <C> <C>
REAL ESTATE--0.04%
9,900 ARDEN REALTY GROUP, INC ........................... $ 199
100 * AVATAR HOLDINGS, INC .............................. 2
2,466 * CASTLE & COOKE, INC ............................... 31
2,900 * CATELLUS DEVELOPMENT CORP ......................... 37
2,300 * CB RICHARD ELLIS SERVICES GROUP, INC .............. 28
40 * ECHELON INTERNATIONAL CORP ........................ 1
1,000 * FAIRFIELD COMMUNITIES, INC ........................ 11
900 FOREST CITY ENTERPRISES, INC (CLASS A) ............ 25
500 * GRUBB & ELLIS CO .................................. 2
33 * INSIGNIA FINANCIAL GROUP, INC ..................... 0
400 * JONES LANG LA SALLE ............................... 5
300 LNR PROPERTY CORP ................................. 6
1,000 * PINNACLE HOLDINGS, INC ............................ 42
64 * RECKSON SERVICES INDUSTRIES, INC .................. 4
800 STEWART ENTERPRISES, INC (CLASS A) ................ 4
1,200 * TRAMMELL CROW CO .................................. 14
----------
411
----------
RUBBER AND MISCELLANEOUS PLASTIC PRODUCTS--0.35%
3,500 APTARGROUP, INC ................................... 88
8,400 ARMSTRONG WORLD INDUSTRIES, INC ................... 280
700 BANDAG, INC ....................................... 18
1,300 CARLISLE COS, INC ................................. 47
4,300 COOPER TIRE & RUBBER CO ........................... 67
7,300 GOODYEAR TIRE & RUBBER CO ......................... 206
21,388 ILLINOIS TOOL WORKS, INC .......................... 1,445
2,970 MYERS INDUSTRIES, INC ............................. 47
9,500 NIKE, INC (CLASS B) ............................... 471
16,400 * PACTIV CORP ....................................... 174
1,300 * REEBOK INTERNATIONAL LTD .......................... 11
3,900 * SAFESKIN CORP ..................................... 47
5,072 * SEALED AIR CORP ................................... 263
8,560 SOLUTIA, INC ...................................... 132
2,200 SPARTECH CORP ..................................... 71
800 TREDEGAR CORP ..................................... 17
13,100 TUPPERWARE CORP ................................... 222
1,000 WYNNS INTERNATIONAL, INC .......................... 14
----------
3,620
----------
SECURITY AND COMMODITY BROKERS--1.49%
400 ADVEST GROUP, INC ................................. 7
4,200 * AFFILIATED MANAGERS GROUP, INC .................... 170
5,600 * AMERITRADE HOLDINGS CORP (CLASS A) ................ 121
9,612 BEAR STEARNS COS, INC ............................. 411
1,900 CONNING CORP ...................................... 16
600 DAIN RAUSCHER CORP ................................ 28
1,400 * DLJ DIRECT ........................................ 19
2,000 DONALDSON, LUFKIN & JENRETTE, INC ................. 97
500 DUFF & PHELPS CREDIT RATING CO .................... 44
12,800 * E TRADE GROUP, INC ................................ 334
3,000 EATON VANCE CORP .................................. 114
10,850 EDWARDS (A.G.), INC ............................... 348
6,400 FEDERATED INVESTORS INC ........................... 128
13,800 FRANKLIN RESOURCES, INC ........................... 442
600 * FRIEDMAN, BILLINGS, RAMSEY GROUP, INC ............. 5
1,659 INVESTMENT TECHNOLOGY GROUP, INC .................. 48
200 JEFFERIES GROUP, INC (NEW) ........................ 4
1,000 JOHN NUVEEN CO (CLASS A) .......................... 36
4,700 * KNIGHT/TRIMARK GROUP, INC ......................... 216
2,500 LEGG MASON, INC ................................... 91
10,100 LEHMAN BROTHERS HOLDINGS, INC ..................... 855
25,100 MERRILL LYNCH & CO, INC ........................... 2,096
42,555 MORGAN STANLEY, DEAN WITTER, & CO ................. 6,075
9,500 PAINE WEBBER GROUP, INC ........................... 369
2,700 PHOENIX INVESTMENT PARTNERS LTD ................... 22
7,500 PRICE (T. ROWE) ASSOCIATES, INC ................... 277
</TABLE>
See notes to financial statements.
B-41
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE (000)
- ------ -----------
<S> <C> <C>
SECURITY AND COMMODITY BROKERS--(Continued)
6,750 RAYMOND JAMES FINANCIAL CORP .......................... $ 126
48,400 SCHWAB (CHARLES) CORP ................................. 1,857
2,090 SOUTHWEST SECURITIES GROUP, INC ....................... 57
8,100 THE GOLDMAN SACHS GROUP, INC .......................... 763
800 UNITED ASSET MANAGEMENT CORP .......................... 15
7,400 WADDELL & REED FINANCIAL, INC (CLASS A) ............... 201
157 WADDELL & REED FINANCIAL, INC (CLASS B) ............... 4
----------
15,396
----------
SOCIAL SERVICES--0.00%
1,700 * BRIGHT HORIZON FAMILY SOLUTIONS, INC .................. 32
200 * RES-CARE, INC ......................................... 3
----------
35
SPECIAL TRADE CONTRACTORS--0.00%
400 * COMFORT SYSTEMS U.S.A., INC ........................... 3
300 * EMCOR GROUP, INC ...................................... 5
700 * GROUP MAINTENANCE AMERICA CORP ........................ 7
1,000 * QUANTA SERVICES, INC .................................. 28
----------
43
----------
STONE, CLAY, AND GLASS PRODUCTS--0.34%
100 AMERON INTERNATIONAL CORP ............................. 4
1,600 CENTEX CONSTRUCTION PRODUCTS, INC ..................... 62
17,900 CORNING, INC .......................................... 2,308
500 * DEPARTMENT 56, INC .................................... 11
2,000 * DUPONT PHOTOMASKS, INC ................................ 97
500 FLORIDA ROCK INDUSTRIES, INC .......................... 17
6,093 LAFARGE CORP .......................................... 168
2,700 LIBBEY, INC ........................................... 78
9,200 OWENS CORNING CO ...................................... 178
10,500 * OWENS ILLINOIS, INC ................................... 263
2,520 SOUTHDOWN, INC ........................................ 130
3,100 USG CORP .............................................. 146
----------
3,462
----------
TEXTILE MILL PRODUCTS--0.07%
3,040 * ALBANY INTERNATIONAL CORP (CLASS A) (NEW) ............. 47
2,400 COLLINS & AIKMAN CORP ................................. 14
300 * CONE MILLS CORP ....................................... 1
1,700 * DAN RIVER, INC (CLASS A) .............................. 9
3,400 INTERFACE, INC (CLASS A) .............................. 20
4,200 * MOHAWK INDUSTRIES, INC ................................ 111
3,800 POLYMER GROUP, INC .................................... 69
3,000 RUSSELL CORP .......................................... 50
15,900 SHAW INDUSTRIES, INC .................................. 245
1,700 SPRING INDUSTRIES, INC ................................ 68
300 * UNIFI, INC ............................................ 4
5,400 WESTPOINT STEVENS, INC ................................ 95
----------
733
----------
TOBACCO PRODUCTS--0.48%
183,800 PHILIP MORRIS COS, INC ................................ 4,262
8,500 RJR REYNOLDS TOBACCO HOLDINGS, INC .................... 150
21,600 UST, INC .............................................. 544
----------
4,956
----------
TRANSPORTATION BY AIR--0.38%
2,800 AIRBORNE FREIGHT CORP ................................. 62
1,000 * AIRNET SYSTEMS, INC ................................... 7
7,100 * AIRTRAN HOLDINGS, INC ................................. 32
2,600 * ALASKA AIR GROUP, INC ................................. 91
3,600 * AMERICA WEST HOLDINGS CORP (CLASS B) .................. 75
11,500 * AMR CORP .............................................. 771
200 * AVIALL, INC ........................................... 2
5,500 * CONTINENTAL AIRLINES, INC (CLASS B) ................... 244
12,400 DELTA AIRLINES, INC ................................... 618
22,040 * FDX CORP .............................................. 902
400 * MESA AIR GROUP, INC ................................... 2
<CAPTION>
SHARES VALUE (000)
- ------ -----------
<S> <C> <C>
600 * MESABA HOLDINGS, INC .................................. $ 7
2,000 * NORTHWEST AIRLINES CORP (CLASS A) ..................... 45
3,700 * OFFSHORE LOGISTICS, INC ............................... 35
3,400 OGDEN CORP ............................................ 41
1,200 PITTSTON BAX GROUP .................................... 13
900 SKYWEST, INC .......................................... 25
37,501 SOUTHWEST AIRLINES CO ................................. 607
8,600 * TRANS WORLD AIRLINES, INC ............................. 24
6,500 * U.S. AIRWAYS GROUP, INC ............................... 208
1,600 * UAL CORP .............................................. 124
----------
3,935
----------
TRANSPORTATION EQUIPMENT--2.66%
2,900 * ABC RAIL PRODUCTS CORP ................................ 24
900 * AFTERMARKET TECHNOLOGY CORP ........................... 11
700 ARCTIC CAT, INC ....................................... 7
4,100 ARVIN INDUSTRIES, INC ................................. 116
4,184 AUTOLIV, INC .......................................... 122
700 * BE AEROSPACE, INC ..................................... 6
74,354 BOEING CO ............................................. 3,090
2,400 BORG-WARNER AUTOMOTIVE, INC ........................... 97
900 x * BREED TECHNOLOGIES, INC ........................... 0
4,000 CLARCOR, INC .......................................... 72
6,900 CORDANT TECHNOLOGIES, INC ............................. 228
10,024 DANA CORP ............................................. 300
5,800 DANAHER CORP .......................................... 280
3,000 * DELCO REMY INTERNATIONAL, INC (CLASS A) ............... 25
39,282 DELPHI AUTOMOTIVE SYSTEMS CORP ........................ 619
8,000 EATON CORP ............................................ 581
2,100 FEDERAL SIGNAL CORP ................................... 34
4,100 FEDERAL-MOGUL CORP .................................... 83
3,500 FLEETWOOD ENTERPRISES, INC ............................ 72
89,300 FORD MOTOR CO ......................................... 4,772
4,100 GENCORP, INC .......................................... 40
13,900 GENERAL DYNAMICS CORP ................................. 733
51,126 GENERAL MOTORS CORP ................................... 3,716
10,600 * GENERAL MOTORS CORP (CLASS H) ......................... 1,018
5,900 * GENTEX CORP ........................................... 164
9,206 GOODRICH (B.F.) CO .................................... 253
11,900 HARLEY DAVIDSON, INC .................................. 762
2,500 * HAYES LEMMERZ INTERNATIONAL, INC ...................... 44
58,787 HONEYWELL INTERNATIONAL, INC .......................... 3,354
13,500 ITT INDUSTRIES, INC ................................... 451
1,800 * KELLSTROM INDUSTRIES, INC ............................. 16
24,292 LOCKHEED MARTIN CORP .................................. 531
4,500 MASCOTECH, INC ........................................ 57
8,866 MERITOR AUTOMOTIVE, INC ............................... 172
2,750 * MONACO COACH CORP ..................................... 70
1,600 * NATIONAL R.V. HOLDINGS, INC ........................... 31
5,500 * NAVISTAR INTERNATIONAL CORP ........................... 261
7,677 NORTHROP GRUMMAN CORP ................................. 415
450 OSHKOSH TRUCK CORP .................................... 13
9,900 PACCAR, INC ........................................... 439
3,000 POLARIS INDUSTRIES, INC ............................... 109
2,100 REGAL-BELOIT CORP ..................................... 43
2,800 SIMPSON INDUSTRIES, INC ............................... 32
2,400 SMITH (A.O.) CORP ..................................... 53
1,703 * SPX CORP .............................................. 138
700 * STONERIDGE, INC ....................................... 11
200 SUPERIOR INDUSTRIES INTERNATIONAL, INC ................ 5
9,900 TEXTRON, INC .......................................... 759
1,200 THOR INDUSTRIES, INC .................................. 37
5,200 TRINITY INDUSTRIES, INC ............................... 148
1,100 * TRIUMPH GROUP, INC .................................... 27
7,700 TRW, INC .............................................. 400
37,229 UNITED TECHNOLOGIES CORP .............................. 2,420
800 WABASH NATIONAL CORP .................................. 12
5,101 WESTINGHOUSE AIR BRAKE CO ............................. 91
</TABLE>
See notes to financial statements.
B-42
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE (000)
- -------------- -----------
<S> <C> <C>
TRANSPORTATION EQUIPMENT--(Continued)
2,500 WINNEBAGO INDUSTRIES, INC ........................... $ 50
----------
27,414
----------
TRANSPORTATION SERVICES--0.05%
25 AIR EXPRESS INTERNATIONAL CORP ...................... 1
1,800 C.H. ROBINSON WORLDWIDE, INC ........................ 72
900 * EAGLE U.S.A. AIRFREIGHT, INC ........................ 39
2,400 EXPEDITORS INTERNATIONAL OF WASHINGTON .............. 105
5,000 GALILEO INTERNATIONAL, INC .......................... 150
5,200 GATX CORP ........................................... 176
10 * NAVIGANT INTERNATIONAL, INC ......................... 0
700 * U.S. EXPRESS ENTERPRISES, INC (CLASS A) ............. 5
----------
548
----------
TRUCKING AND WAREHOUSING--0.09%
2,700 * AMERICAN FREIGHTWAYS CORP ........................... 44
3,400 ARNOLD INDUSTRIES, INC .............................. 48
2,900 CNF TRANSPORTATION, INC ............................. 100
50 * CONSOLIDATED FREIGHTWAYS CORP ....................... 0
1,000 * COVENANT TRANSPORT, INC (CLASS A) ................... 17
800 * DISPATCH MANAGEMENT SERVICES CORP ................... 2
3,300 HUNT (J.B.) TRANSPORT SERVICES, INC ................. 46
2,000 * IRON MOUNTAIN, INC .................................. 79
1,800 * LANDSTAR SYSTEM, INC ................................ 77
1,500 * M.S. CARRIERS, INC .................................. 36
900 * PIERCE LEAHY CORP ................................... 39
2,200 ROADWAY EXPRESS, INC ................................ 48
975 * SWIFT TRANSPORTATION CO, INC ........................ 17
4,300 USFREIGHTWAYS CORP .................................. 206
4,950 WERNER ENTERPRISES, INC ............................. 70
3,800 * YELLOW CORP ......................................... 64
----------
893
----------
WATER TRANSPORTATION--0.04%
200 ALEXANDER & BALDWIN, INC ............................ 5
600 * AMERICAN CLASSIC VOYAGES CO ......................... 21
500 * KIRBY CORP .......................................... 10
950 * MARINE TRANSPORT CORP ............................... 2
400 OVERSEAS SHIPHOLDING GROUP, INC ..................... 6
9,200 TIDEWATER, INC ...................................... 331
400 * TRICO MARINE SERVICES, INC .......................... 3
----------
378
----------
WHOLESALE TRADE-DURABLE GOODS--0.19%
1,400 * ACTION PERFORMANCE COS, INC ......................... 16
4,500 * ANICOM, INC ......................................... 19
600 * ANIXTER INTERNATIONAL, INC .......................... 12
800 APPLIED INDUSTRIAL TECHNOLOGIES, INC ................ 13
5,100 * ARROW ELECTRONICS, INC .............................. 129
1,175 AVNET, INC .......................................... 71
1,000 * BOYDS COLLECTION LTD ................................ 7
1,700 BRIGGS & STRATTON CORP .............................. 91
50 * BRIGHTPOINT, INC .................................... 1
800 CASTLE (A.M.) & CO .................................. 9
1,600 * CELLSTAR CORP ....................................... 16
5,600 COMMERCIAL METALS CO ................................ 190
1,900 * FISHER SCIENTIFIC INTERNATIONAL, INC ................ 69
5,000 GENUINE PARTS CO .................................... 124
5,700 GRAINGER (W.W.), INC ................................ 273
800 * HA-LO INDUSTRIES, INC ............................... 6
3,500 * HANDLEMAN CO ........................................ 47
1,311 * HUTTIG BUILDING PRODUCTS, INC ....................... 6
11,800 IKON OFFICE SOLUTIONS, INC .......................... 80
3,500 * INGRAM MICRO, INC (CLASS A) ......................... 46
4,600 * LANIER WORLDWIDE, INC ............................... 18
1,000 LAWSON PRODUCTS, INC ................................ 23
14,100 * MERISEL, INC ........................................ 19
<CAPTION>
SHARES VALUE (000)
- ------ -----------
<S> <C> <C>
1,000 * METAL MANAGEMENT, INC ............................... $ 4
800 * MICROAGE, INC ....................................... 3
1,600 * MSC INDUSTRIAL DIRECT CO (CLASS A) .................. 21
3,400 OWENS & MINOR, INC .................................. 30
2,250 * PATTERSON DENTAL CO ................................. 96
800 * PSS WORLD MEDICAL, INC .............................. 8
1,650 RELIANCE STEEL & ALUMINUM CO ........................ 39
2,100 * SAFEGUARD SCIENTIFICS, INC .......................... 340
3,300 * TECH DATA CORP ...................................... 90
800 * WESCO INTERNATIONAL, INC ............................ 7
----------
1,923
----------
WHOLESALE TRADE-NONDURABLE GOODS--0.57%
2,100 * AIRGAS, INC ......................................... 20
5,000 * AMERISOURCE HEALTH CORP (CLASS A) ................... 76
2,100 * BARNETT RESOURCES CORP .............................. 62
10,825 BERGEN BRUNSWIG CORP (CLASS A) ...................... 90
4,350 BINDLEY WESTERN INDUSTRIES, INC ..................... 66
2,100 * BOISE CASCADE OFFICE PRODUCTS CORP .................. 32
20,464 CARDINAL HEALTH, INC ................................ 980
1,600 * DAISYTEK INTERNATIONAL CORP ......................... 37
49,922 ENRON CORP .......................................... 2,215
33 HERBALIFE INTERNATIONAL, INC (CLASS A) .............. 0
2,566 HERBALIFE INTERNATIONAL, INC (CLASS B) .............. 34
500 HUNT CORP ........................................... 5
4,800 INTERNATIONAL MULTIFOODS CORP ....................... 64
200 * KENNETH COLE PRODUCTIONS, INC ....................... 9
21,097 MCKESSON HBOC, INC .................................. 476
4,500 * NU SKIN ENTERPRISES, INC (CLASS A) .................. 41
1,900 * PERFORMANCE FOOD GROUP CO ........................... 46
1,200 * PLAINS RESOURCES, INC ............................... 15
42 * PRIORITY HEALTHCARE CORP (CLASS A) .................. 1
650 * PRIORITY HEALTHCARE CORP (CLASS B) .................. 19
4,278 * SCHOOL SPECIALTY, INC ............................... 65
19,806 SUPERVALU, INC ...................................... 396
1,900 * SYNCOR INTERNATIONAL CORP ........................... 55
22,700 SYSCO CORP .......................................... 909
2,400 TERRA INDUSTRIES, INC ............................... 4
600 * U.S.A. FLORAL PRODUCTS, INC ......................... 1
4,500 * UNITED STATIONERS, INC .............................. 129
800 VALHI, INC .......................................... 8
----------
5,855
----------
TOTAL COMMON STOCK
(Cost $661,498) .................................... 1,028,625
----------
PRINCIPAL
- ---------
SHORT TERM INVESTMENT--0.39%
U.S. GOVERNMENT AGENCY--0.39%
$4,100,000 FEDERAL HOME LOAN MORTGAGE CORP (FHLMC)
5.550%, 03/16/00 .................................... 4,052
----------
TOTAL SHORT TERM INVESTMENT
(Cost $4,053) ...................................... 4,052
----------
TOTAL PORTFOLIO
(Cost $665,685) .................................... $1,032,816
==========
</TABLE>
- ------------------
* Non-income producing
x In bankruptcy
# Restricted Securities-Investment
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATE COST
- ------------------------ ----------- ------------
<S> <C> <C>
PHYSICIAN COMPTER NETWORK, INC. 06/04/96 $28,018
PROCURENET, INC. 04/19/99 544
-------
$28,562
=======
</TABLE>
See notes to financial sstatements.
B-43
<PAGE>
[TIAA LOGO] 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, 1999. 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 acconting 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 accounting principles
generally accepted in the United States ("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 J. Biggs
-----------------------
Chairman, President and
Chief Executive Officer
B-44
<PAGE>
[TIAA LOGO]
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 controls
designed to provide reasonable assurance that assets are properly safeguarded
and transactions are properly executed in accordance with management's
authorization, and to carry out the ongoing responsibilities of management for
reliable financial statements. In addition, TIAA's internal audit personnel
provide a continuing review of the internal controls and operations of TIAA,
and the internal Auditor regularly reports to the Audit Committee of the TIAA
Board of Trustees.
The accompanying 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-basis 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 controls and auditing. In
addition to the annual audit of the TIAA financial statements, the New York
State Insurance Department and other state insurance departments regularly
examine the financial statements of TIAA as part of their periodic corporate
examinations.
/s/ John J. Biggs
----------------------------
Chairman, President and
Chief Executive Officer
/s/ Richard Mills
----------------------------
Executive Vice President and
Principal Accounting Officer
B-45
<PAGE>
[Logo]Ernst & Young LLP 787 Seventh Avenue Phone: 212 773 3000
New York, New York 10019
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, 1999
and 1998, and the related statutory-basis statements of operations, changes in
capital and contingency reserves, and cash flows for each of the three years in
the period ended December 31, 1999. These financial statements are the
responsibility of TIAA's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 presents its financial
statements in conformity with accounting practices prescribed or permitted by
the New York State Insurance Department, which practices differ from accounting
principles generally accepted in the United States. The variances between such
practices and accounting principles generally accepted in the United States 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 financial statements referred to above do not present fairly, in
conformity with accounting principles generally accepted in the United States,
the financial position of TIAA at December 31, 1999 and 1998, or the results of
its operations or its cash flows for each of the three years in the period
ended December 31, 1999.
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of TIAA at December
31, 1999 and 1998, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1999 in conformity
with accounting practices prescribed or permitted by the New York State
Insurance Department.
March 9, 2000
/s/ Ernst & Young LLP
B-46
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
STATUTORY-BASIS BALANCE SHEETS
(amounts in thousands)
<TABLE>
<CAPTION>
December 31,
-------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
ASSETS
Bonds .......................................................... $ 75,394,268 $ 69,067,549
Mortgages ...................................................... 21,412,239 20,248,446
Real estate .................................................... 5,192,229 6,099,403
Stocks ......................................................... 1,247,242 1,257,044
Other long-term investments .................................... 2,116,490 1,513,274
Cash and short-term investments ................................ 410,053 511,966
Investment income due and accrued .............................. 1,233,604 1,181,140
Separate account assets ........................................ 2,751,054 1,965,047
Other assets ................................................... 740,252 372,369
------------ ------------
TOTAL ASSETS $110,497,431 $102,216,238
============ ============
LIABILITIES, CAPITAL AND CONTINGENCY RESERVES
Policy and contract reserves ................................... $ 93,869,708 $ 87,772,711
Dividends declared for the following year ...................... 2,039,605 1,923,463
Asset Valuation Reserve ........................................ 2,637,779 2,454,123
Interest Maintenance Reserve ................................... 1,110,349 936,641
Separate account liabilities ................................... 2,751,054 1,965,047
Other liabilities .............................................. 1,063,508 841,044
------------ ------------
Total Liabilities 103,472,003 95,893,029
------------ ------------
Capital (2,500 shares of $1,000 par value common stock
issued and outstanding) and paid-in surplus (in 1999) ......... 3,050 2,500
------------ ------------
Contingency reserves:
For group life insurance ...................................... 12,218 11,013
For investment losses, annuity and insurance mortality, and
other risks ................................................... 7,010,160 6,309,696
------------ ------------
Total Contingency Reserves 7,022,378 6,320,709
------------ ------------
Total Capital and Contingency Reserves 7,025,428 6,323,209
------------ ------------
TOTAL LIABILITIES, CAPITAL AND CONTINGENCY RESERVES $110,497,431 $102,216,238
============ ============
</TABLE>
See notes to statutory-basis financial statements.
B-47
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
STATUTORY-BASIS STATEMENTS OF OPERATIONS
(amounts in thousands)
<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
INCOME
Insurance and annuity premiums and deposits ......... $ 3,087,045 $ 2,957,870 $ 2,844,792
Transfers from CREF, net ............................ 752,512 1,274,152 686,373
Annuity dividend additions .......................... 2,553,655 2,427,685 2,284,029
Net investment income ............................... 7,923,564 7,446,656 6,902,123
Supplementary contract considerations ............... 325,704 297,074 227,936
----------- ----------- -----------
TOTAL INCOME $14,642,480 $14,403,437 $12,945,253
=========== =========== ===========
DISTRIBUTION OF INCOME
Policy and contract benefits ........................ $ 2,653,962 $ 2,413,220 $ 2,138,424
Dividends ........................................... 4,026,907 3,844,313 3,617,551
Increase in policy and contract reserves ............ 6,100,240 6,636,704 5,234,590
Operating expenses .................................. 335,039 327,085 272,584
Transfers to separate accounts, net ................. 490,880 487,976 543,891
Federal income tax expense (benefit) ................ (25,213) (11,854) 24,194
Other, net .......................................... (11,437) (4,639) 307
Increase in contingency reserves .................... 1,072,102 710,632 1,113,712
----------- ----------- -----------
TOTAL DISTRIBUTION OF INCOME $14,642,480 $14,403,437 $12,945,253
=========== =========== ===========
</TABLE>
See notes to statutory-basis financial statements.
B-48
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
STATUTORY-BASIS STATEMENTS OF CHANGES IN CAPITAL AND CONTINGENCY RESERVES
(amounts in thousands)
<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------
1999 1998 1997
------------- -------------- -------------
<S> <C> <C> <C>
CHANGES IN CAPITAL AND CONTINGENCY RESERVES
From operations .............................................. $1,072,102 $ 710,632 $1,113,712
Net realized capital gains on investments .................... 282,079 394,727 249,412
Net unrealized capital gains (losses) on investments ......... (112,613) (171,049) (2,482)
Transfers to the Interest Maintenance Reserve ................ (330,107) (264,997) (136,512)
Transfers to the Asset Valuation Reserve ..................... (183,656) (115,481) (203,721)
Decrease (increase) in non-admitted assets,
other than investments ...................................... (25,586) (17,829) 1,200
Change in valuation basis of policy reserves ................. -- 8,671 (4,657)
Stockholder dividend ......................................... (550) -- --
Contribution to paid-in surplus .............................. 550 -- --
Other, net ................................................... -- 1,960 8,918
---------- ---------- ----------
NET CHANGE IN CAPITAL AND CONTINGENCY RESERVES 702,219 546,634 1,025,870
CAPITAL AND CONTINGENCY RESERVES
AT BEGINNING OF YEAR 6,323,209 5,776,575 4,750,705
---------- ---------- ----------
CAPITAL AND CONTINGENCY RESERVES
AT END OF YEAR $7,025,428 $6,323,209 $5,776,575
========== ========== ==========
</TABLE>
See notes to statutory-basis financial statements.
B-49
<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,
----------------------------------------------
1999 1998 1997
-------------- ------------- -------------
<S> <C> <C> <C>
CASH PROVIDED
By operating activities:
Insurance and annuity premiums,
deposits and considerations ...................... $ 3,408,713 $ 3,254,238 $ 3,053,452
Transfers from CREF, net .......................... 752,512 1,274,152 686,373
Annuity dividend additions ........................ 2,553,651 2,427,685 2,284,029
Investment income, net ............................ 7,692,392 7,338,368 6,777,023
----------- ----------- -----------
Total Receipts 14,407,268 14,294,443 12,800,877
----------- ----------- -----------
Policy and contract benefits ...................... 2,655,772 2,410,824 2,143,927
Dividends ......................................... 3,910,764 3,699,582 3,475,557
Operating expenses ................................ 325,039 311,460 269,041
Federal Income tax expense (benefit) .............. (43,713) 506 27,277
Transfers to separate accounts, net ............... 492,504 486,945 543,933
Separate account seed money redemptions ........... -- (76,666) (37,915)
Other, net ........................................ 183,783 494 (46,076)
----------- ----------- -----------
Total Disbursements 7,524,149 6,833,145 6,375,744
----------- ----------- -----------
Cash Provided by Operating Activities 6,883,119 7,461,298 6,425,133
----------- ----------- -----------
By financing activities:
Stockholder dividend .............................. (550) -- --
Contribution to paid-in surplus ................... 550 -- --
----------- ----------- -----------
Cash Provided by Financing Activities -- -- --
----------- ----------- -----------
By investing activities:
Sales and redemptions of bonds and stocks ......... 10,428,890 9,781,071 4,716,915
Repayment of mortgage principal ................... 3,716,069 2,129,896 3,773,723
Sales of real estate .............................. 1,500,916 834,298 1,030,385
Other, net ........................................ 448,429 279,097 258,489
----------- ----------- -----------
Cash Provided by Investing Activities 16,094,304 13,024,362 9,779,512
----------- ----------- -----------
TOTAL CASH PROVIDED 22,977,423 20,485,660 16,204,645
----------- ----------- -----------
DISBURSEMENTS FOR NEW INVESTMENTS
Investments acquired:
Bonds and stocks .................................. 16,695,529 15,298,648 12,711,227
Mortgages ......................................... 4,894,308 3,704,940 3,152,563
Real estate ....................................... 590,720 351,109 310,159
Other, net ........................................ 898,779 797,849 466,926
----------- ----------- -----------
TOTAL DISBURSEMENTS FOR NEW INVESTMENTS 23,079,336 20,152,546 16,640,875
----------- ----------- -----------
INCREASE (DECREASE) IN CASH
AND SHORT-TERM INVESTMENTS (101,913) 333,114 (436,230)
CASH AND SHORT-TERM INVESTMENTS
AT BEGINNING OF YEAR 511,966 178,852 615,082
----------- ----------- -----------
CASH AND SHORT-TERM INVESTMENTS
AT END OF YEAR $ 410,053 $ 511,966 $ 178,852
=========== =========== ===========
</TABLE>
See notes to statutory-basis financial statements.
B-50
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
December 31, 1999
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 accounting principles generally accepted in the United States
("GAAP"). (Refer to the separate sections, entitled "Permitted Statutory
Accounting Practices" and "Accounting Principles Generally Accepted in the
United States", 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,
TIAA-CREF Institutional 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. For properties acquired after 1997, depreciation is generally
computed over a 39 year period.
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-51
<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 flows into a fixed amount of U.S. dollar cash flows. 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. 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-52
<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 $450,804,000
and $466,107,000 at December 31, 1999 and 1998, 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 $221,573,000 at December 31, 1999 and
$195,987,000 at December 31, 1998. 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 and are computed in accordance with standard actuarial formulas. The
reserves established utilize assumptions for interest (at an average rate of
approximately 3%), mortality and other risks insured. Such reserves establish a
sufficient provision for all contractual benefits guaranteed under policy and
contract provisions.
Dividends Declared for the Following Year: Dividends on insurance policies and
pension annuity contracts in the payout phase are generally declared by the
TIAA Board of Trustees ("Board") in November of each year, and such dividends
are credited to policyholders in the following calendar year. Dividends on
pension annuity contracts in the accumulation phase are generally declared by
the Board in February of each year and such dividends on the various existing
vintages of pension annuity contracts in the accumulation phase are credited to
policyholders during the ensuing twelve month period beginning March 1.
Asset Valuation Reserve: The Asset Valuation Reserve ("AVR"), which covers all
invested asset classes, is an explicit liability reserve required by the
National Association of Insurance Commissioners ("NAIC") and is intended to
provide for potential future credit and equity losses. Reserve components of
the AVR are maintained for bonds, stocks, mortgages, real estate and other
invested assets. Realized and unrealized credit and equity capital gains and
losses, net of capital gains taxes, are credited to or charged against the
related components of the AVR. Formula calculations determine the required
contribution amounts for each component, 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. In 1999, TIAA paid a dividend of $550,000 to the TIAA
Board of Overseers. This amount was recontributed as paid-in surplus. This was
done to satisfy a regulatory licensing requirement.
Income and Expenses: Premiums, investment income and expenses are reported as
earned/incurred.
Federal Income Taxes: TIAA is a nonprofit 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. 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. Beginning with 1998,
TIAA is filing a consolidated federal income tax return with its subsidiary
affiliates. The tax sharing agreement follows 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 federal income tax provisions included in the accompanying statements of
operations are based on taxes actually paid or recovered or anticipated to be
paid or recovered with the tax return filings. The income tax recoverable for
1999 and 1998 of $25.2 million and $11.9 million, respectively, that is
reflected in the accompanying statements of operations is the amount that is
receivable from certain of TIAA's subsidiaries which generated
B-53
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--(Concluded)
taxable income, under such tax sharing agreement. TIAA reported a significant
net tax loss for 1998 and expects to report a net tax loss for 1999, due
primarily to required increases in policy and contract reserves computed for
tax reporting purposes in accordance with the requirements of the Code, as well
as deductions related to certain assets. The reserve increases will reverse
over time, thereby increasing TIAA's taxable income in future years. Under the
Code, tax loss carryforwards will generally expire after fifteen years, if not
previously used, and capital loss carryforwards will expire in five 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) the 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.
Accounting Principles Generally Accepted in the United States: 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
accounting principles generally accepted in the United States 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 1998 and 1997 financial statements
have been reclassified to conform with the 1999 presentation.
B-54
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued)
NOTE 3--INVESTMENTS
Securities Investments: At December 31, 1999 and 1998, 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, 1999
- -----------------
U.S. Treasury securities and
obligations of U.S. government
agencies and corporations ............... $ 24,001,927 $ 4,768,518 $ (9,636) $ 28,760,809
Debt securities issued by foreign
governments ............................. 1,998,851,102 136,709,413 (38,121,907) 2,097,438,608
Corporate securities ..................... 36,859,895,277 570,889,898 (1,590,960,444) 35,839,824,731
Mortgage-backed securities ............... 20,891,933,456 252,833,375 (851,223,861) 20,293,542,970
Asset-backed securities .................. 15,619,586,502 64,165,497 (1,003,669,811) 14,680,082,188
--------------- -------------- ---------------- ---------------
Total .................. $75,394,268,264 $1,029,366,701 $ (3,483,985,659) $72,939,649,306
=============== ============== ================ ===============
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 ............................. 1,781,100,902 303,678,284 (13,984,906) 2,070,794,280
Corporate securities ..................... 33,871,645,660 2,726,722,179 (89,947,572) 36,508,420,267
Mortgage-backed securities ............... 20,554,922,491 1,152,206,546 (66,142,150) 21,640,986,887
Asset-backed securities .................. 12,836,610,014 462,036,065 (207,160,470) 13,091,485,609
--------------- -------------- ---------------- ---------------
Total ................... $69,067,548,640 $4,652,780,531 $ (377,853,390) $73,342,475,781
=============== ============== ================ ===============
</TABLE>
At December 31, 1999 and 1998, approximately 93.9% and 94.5%, respectively, of
the long-term bond portfolio was comprised of investment grade securities. At
December 31, 1999, outstanding forward commitments for future long-term bond
and equity investments approximated $2,940,494,000. Of this, $1,943,894,000 is
scheduled for disbursement in 2000, $364,883,000 in 2001, $386,196,000 in 2002
and $245,521,000 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 $2,574,000 and $2,587,000 at
December 31, 1999 and 1998, 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, 1999, by contractual maturity, are shown below:
<TABLE>
<CAPTION>
Carrying Estimated
Value Market Value
----------------- -----------------
<S> <C> <C>
December 31, 1999
- -----------------
Due in one year or less ................................. $ 328,768,748 $ 332,490,422
Due after one year through five years ................... 9,281,015,203 9,227,495,604
Due after five years through ten years .................. 12,052,312,032 11,689,540,814
Due after ten years ..................................... 17,220,652,323 16,716,497,308
--------------- ---------------
.......................................................... 38,882,748,306 37,966,024,148
Mortgage-backed securities .............................. 20,891,933,456 20,293,542,970
Asset-backed securities ................................. 15,619,586,502 14,680,082,188
--------------- ---------------
.......................................................... $75,394,268,264 $72,939,649,306
=============== ===============
</TABLE>
B-55
<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 prepay
obligations, although prepayment premiums may be applicable.
At December 31, 1999 and 1998, the carrying values of long-term bond
investments were diversified by industry classification as follows:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Mortgage-backed securities .......................... 27.7% 29.8%
Asset-backed securities ............................. 12.0 11.3
Manufacturing ....................................... 11.9 11.7
Finance and financial services ...................... 9.0 9.1
Commercial mortgage-backed securities ............... 8.7 7.3
Public utilities .................................... 8.4 9.7
Communications ...................................... 3.8 3.7
Oil and gas ......................................... 3.6 3.7
Retail and wholesale trade .......................... 3.5 3.6
Government .......................................... 3.0 3.1
Real estate investment trusts ....................... 2.3 1.9
Other ............................................... 6.1 5.1
----- -----
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, 1999 .......... $2,321,999,000 $2,303,125,000 $2,380,927,000
December 31, 1998 .......... $1,687,699,000 $1,803,100,000 $1,844,563,000
</TABLE>
At December 31, 1999 and 1998, TIAA had interest rate swap contracts
outstanding with a total notional value of $388,411,000 and $451,366,000,
respectively.
At December 31, 1999 and 1998, TIAA had foreign currency swap contracts
outstanding with a total notional value of approximately $891,159,000 and
$654,242,000, respectively. The unrealized gains (losses) on foreign currency
swap contracts outstanding at year-end was approximately $25,575,000,
$(6,511,000), and $25,864,000 at December 31, 1999, 1998 and 1997,
respectively.
At December 31, 1999 and 1998, TIAA had foreign currency forward contracts
outstanding with a total notional value of approximately $230,259,000 and
$179,820,000, respectively, and the unamortized value of the premiums was
approximately $16,952,000 and $621,000, respectively. The unrealized gains on
the forward contracts outstanding at year-end were approximately $20,395,000,
$1,143,000, and $65,000 at December 31, 1999, 1998 and 1997, respectively.
At December 31, 1999, TIAA had swap options outstanding with a total notional
value of $54,000,000, and the unamortized value of the premiums received were
approximately $511,000. At December 31, 1998, TIAA had no swap options
outstanding. The interest rate swap contracts created from the exercise of the
swap options are reflected in the aggregate totals for the interest rate swap
contracts disclosed in the related paragraph above.
At December 31, 1999 and 1998, TIAA had interest rate cap contracts outstanding
with a total notional value of $137,550,000 and $110,270,000, respectively, and
the unamortized value of the premiums paid were approximately $658,000 and
$669,000, 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 1999 was from 6.65% to 8.74%. At
December 31, 1999 and 1998, TIAA's mortgage portfolio included loans totaling
approximately $312,251,000 and $308,570,000, respectively, which were
collateralized by real estate with prior liens not held by TIAA.
B-56
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued)
NOTE 3--INVESTMENTS--(Continued)
At December 31, 1999 and 1998, the carrying values of mortgage loan investments
were diversified by property type and geographic region as follows:
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Property Type
- -------------
Office buildings ................... 39.4% 39.2%
Shopping centers ................... 29.3 31.6
Mixed-use projects ................. 10.4 11.1
Industrial buildings ............... 7.7 6.0
Apartments ......................... 7.3 6.6
Hotels ............................. 3.4 3.5
Other .............................. 2.5 2.0
----- -----
Total ........... 100.0% 100.0%
===== =====
Geographic Region
- -----------------
Pacific ............................ 23.6% 22.3%
South Atlantic ..................... 20.5 18.7
East North Central ................. 12.2 12.4
New England ........................ 9.3 9.6
Middle Atlantic .................... 9.3 11.7
West North Central ................. 9.0 9.0
West South Central ................. 7.3 7.5
Mountain ........................... 7.2 7.2
East South Central ................. 1.4 1.6
Other .............................. 0.2 0.0
----- -----
Total ........... 100.0% 100.0%
===== =====
</TABLE>
At December 31, 1999 and 1998, approximately 18% and 17%, respectively, of the
mortgage portfolio was invested in California and is included in the Pacific
region shown above.
At December 31, 1999, the contractual maturity schedule of mortgage loans is
shown below:
<TABLE>
<CAPTION>
Carrying Value
-----------------
<S> <C>
Due in one year or less .............................. $ 633,786,121
Due after one year through five years ................ 4,117,386,284
Due after five years through ten years ............... 13,385,265,691
Due after ten years .................................. 3,275,800,745
---------------
Total ............................ $21,412,238,841
===============
</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, 1999, outstanding forward commitments for future mortgage loan
investments approximated $1,555,790,000, including a commitment under
litigation. Of this, $1,227,604,000 is scheduled for disbursement in 2000 and
$328,186,000 in 2001. The funding of mortgage loan commitments is contingent
upon the underlying properties meeting specified requirements, including
construction, leasing and occupancy.
At December 31, 1999, 1998 and 1997, the aggregate carrying values of mortgages
with restructured or modified terms, as defined by GAAP, were approximately
$43,489,000, $44,153,000 and $552,070,000, respectively. For the years ended
December 31, 1999, 1998 and 1997, the investment income earned on such
mortgages was approximately $809,000, $7,381,000 and $39,945,000, respectively,
which would have been approximately $4,950,000, $5,030,000 and $56,034,000,
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-57
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued)
NOTE 3--INVESTMENTS--(Concluded)
At December 31, 1999 and 1998, the carrying values of real estate investments
were diversified by property type and geographic region as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Property Type
- -------------
Office buildings .................................................... 65.2% 64.3%
Shopping centers .................................................... 10.4 17.2
Mixed-use projects .................................................. 6.2 4.8
Land held for future development .................................... 3.9 2.6
Industrial buildings ................................................ 3.3 2.9
Income-producing land underlying improved real estate ............... 3.0 4.2
Apartments .......................................................... 0.4 0.3
Other ............................................................... 7.6 3.7
------ ------
Total ................................ 100.0% 100.0%
====== ======
Geographic Region
- -----------------
South Atlantic ...................................................... 26.8% 22.6%
East North Central .................................................. 18.1 18.5
Pacific ............................................................. 16.5 17.1
Middle Atlantic ..................................................... 8.8 11.0
West South Central .................................................. 8.0 7.5
West North Central .................................................. 7.3 12.9
Mountain ............................................................ 3.6 3.3
New England ......................................................... 1.1 1.3
East South Central .................................................. 1.0 0.8
Other ............................................................... 8.8 5.0
----- -----
Total ................................. 100.0% 100.0%
===== =====
</TABLE>
At December 31, 1999 and 1998, approximately 14% and 12%, 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, 1999, outstanding forward commitments for future real estate
investments approximated $114,023,000. Under these commitments, it is estimated
that $100,746,000 will be disbursed in 2000 and $13,277,000 in 2001. 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, 1999, 1998 and 1997, was approximately $179,605,000, $176,237,000 and
$147,494,000, respectively; the amount of accumulated depreciation at December
31, 1999 and 1998 was approximately $799,927,000 and $674,541,000,
respectively.
Asset Valuation Reserves: The AVR balances at December 31, 1999 and 1998 were
comprised of the following asset-specific reserves:
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
Bonds and preferred stocks ............... $ 701,676,744 $ 560,477,946
Mortgages ................................ 1,106,387,507 1,117,503,060
Real estate .............................. 502,041,173 689,550,807
Common stocks ............................ 238,268,926 48,573,376
Other invested assets .................... 89,404,877 38,018,128
-------------- --------------
Total .................. $2,637,779,227 $2,454,123,317
============== ==============
</TABLE>
B-58
<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, 1999, 1998 and 1997,
the components of net investment income were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Gross investment income:
Bonds ........................................... $5,775,161,816 $5,441,796,398 $4,919,147,802
Mortgages ....................................... 1,699,019,031 1,569,281,835 1,561,650,688
Real estate (net of property
expenses, taxes and
depreciation) .................................. 282,344,126 275,402,304 282,710,437
Stocks .......................................... 92,223,815 82,871,728 45,018,729
Other long-term investments ..................... 58,021,764 46,399,969 49,877,245
Cash and short-term investments ................. 22,452,106 59,637,401 81,908,105
Other ........................................... 8,703,697 4,430,354 1,863,273
-------------- -------------- --------------
Total ............................ 7,937,926,355 7,479,819,989 6,942,176,279
Less investment expenses ......................... (170,761,251) (142,791,775) (124,382,062)
-------------- -------------- --------------
Net investment income before
amortization of net IMR gains ................... 7,767,165,104 7,337,028,214 6,817,794,217
Plus amortization of net IMR gains ............... 156,399,394 109,627,953 84,329,279
-------------- -------------- --------------
Net investment income ............................ $7,923,564,498 $7,446,656,167 $6,902,123,496
============== ============== ==============
</TABLE>
Participation income received on securities, mortgages and real estate included
in the above table was approximately $14,112,000, $12,512,000 and $20,894,000
in 1999, 1998 and 1997, 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 7.82%, 7.95% and 7.99% in 1999, 1998 and 1997,
respectively.
Future rental income expected to be received during the next five years under
existing real estate leases in effect as of December 31, 1999 is approximately
$519,230,000 in 2000, $456,602,000 in 2001, $388,428,000 in 2002, $301,182,000
in 2003 and $254,646,000 in 2004.
Realized Capital Gains and Losses: For the years ended December 31, 1999, 1998
and 1997, the net realized capital gains (losses) on sales, redemptions and
writedowns of investments were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Bonds ......................................... $ 65,207,048 $ 398,363,008 $ 99,205,212
Mortgages ..................................... (22,897,373) (50,492,383) (18,206,968)
Real estate ................................... 136,719,085 76,983,899 172,463,239
Stocks ........................................ 46,209,893 15,778,492 651,273
Other long-term investments ................... 49,549,108 (49,832,409) (2,552,791)
Cash and short-term investments ............... 1,471,501 3,926,077 (121,752)
------------- ------------- -------------
Total realized gains before capital
gains tax .................................... 276,259,262 394,726,684 251,438,213
Capital gains (tax) benefit ................... 5,819,369 -- (2,026,003)
------------- ------------- -------------
Total ......................... $ 282,078,631 $ 394,726,684 $ 249,412,210
============= ============= =============
</TABLE>
B-59
<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>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Permanent impairments:
Bonds ............................... $21,137,423 $ 9,345,164 $ 1,499,190
Mortgages ........................... 31,752,909 23,344,175 38,855,209
Real estate ......................... -- 4,468,490 20,797,149
----------- ----------- -----------
Total ............ $52,890,332 $37,157,829 $61,151,548
=========== =========== ===========
Mortgage foreclosures ............... $14,984,688 $63,907,494 $31,579,934
=========== =========== ===========
</TABLE>
Proceeds from sales and redemptions of long-term bond investments during 1999,
1998 and 1997 were approximately $10,137,343,000, $9,445,709,000 and
$4,652,635,000, respectively. Gross gains of approximately $177,537,000,
$422,231,000 and $111,635,000 and gross losses of approximately $91,193,000,
$14,523,000 and $10,931,000 were realized on these sales and redemptions during
1999, 1998 and 1997, respectively.
Unrealized Capital Gains and Losses: For the years ended December 31, 1999,
1998 and 1997, 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>
1999 1998 1997
-------------- -------------- -------------
<S> <C> <C> <C>
Bonds ......................................... $ (69,713,061) $ (48,352,549) $ (68,528,047)
Mortgages ..................................... 6,617,678 (6,500,000) 1,232,724
Real estate ................................... (33,864,537) (8,435,351) 14,315,196
Stocks ........................................ (118,886,764) (31,866,148) 30,350,946
Other long-term investments ................... 103,233,602 19,347,901 20,169,489
Cash and short-term investments ............... -- -- (21,987)
Other ......................................... -- (95,242,707) --
-------------- -------------- -------------
Total .............. $ (112,613,082) $ (171,048,854) $ (2,481,679)
============== ============== =============
</TABLE>
B-60
<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, 1999 and 1998 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, 1999
- -----------------
Assets
Bonds ................................. $75,394,268,264 $72,939,649,306
Mortgages ............................. 21,412,238,841 20,780,780,466
Common stocks ......................... 422,555,522 422,555,522
Preferred stocks ...................... 824,686,388 765,075,902
Cash and short-term investments ....... 410,052,667 410,052,667
Policy loans .......................... 393,614,559 393,614,559
Seed money investments ................ 263,018,916 263,018,916
Liabilities
Teachers Personal Annuity-Fixed
Account ............................. 1,298,856,541 1,298,856,541
Commercial Paper ...................... 248,319,000 248,319,000
Other financial instruments
Foreign currency swap contracts ....... $891,158,813 44,252,417 18,274,618
Foreign currency forward contracts..... 230,258,539 37,347,930 35,671,514
Interest rate swap contracts .......... 388,411,461 -- 6,550,357
Swap options .......................... 54,000,000 (510,600) --
Interest rate cap contracts ........... 137,550,000 657,599 1,955,483
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
</TABLE>
B-61
<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, 1999 and
1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------------------- ---------------------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Publicly traded bonds ................ $46,676,624,017 $45,416,831,387 $41,212,863,245 $43,921,621,760
Privately placed bonds ............... 28,717,644,247 27,522,817,919 27,854,685,395 29,420,854,021
--------------- --------------- --------------- ---------------
....................................... $75,394,268,264 $72,939,649,306 $69,067,548,640 $73,342,475,781
=============== =============== =============== ===============
</TABLE>
Mortgages: The fair values of mortgages are generally 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.
Commercial Paper: The carrying values of the commercial paper 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-62
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued)
NOTE 6--MANAGEMENT AGREEMENTS
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 $493,399,000, $474,611,000 and $340,898,000 in 1999, 1998 and
1997, 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 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 $23,865,000, $22,640,000 and $20,862,000 in 1999, 1998 and
1997, respectively. This includes supplemental contributions made to company
owned annuity contracts under a non-qualified deferred compensation plan.
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 approximately $35,309,000 as of
January 1, 1999 and $31,672,000 as of January 1, 1998. The postretirement
benefit obligation for non-vested employees was approximately $28,580,000 as of
January 1, 1999 and $25,823,000 as of January 1, 1998. The cost of such
benefits reflected in the accompanying statements of operations was
approximately $3,180,000, $3,008,000 and $3,398,000 for 1999, 1998 and 1997,
respectively. The discount rate used in determining the postretirement benefit
obligations was 6.75% per year and the medical care cost trend rate was 8% per
year in 1999, decreasing by 1% in each future year, to an ultimate rate of 6%
per year in 2001. As the plan is not prefunded, the value of plan assets is
zero. The accrued postretirement benefit liabilities were approximately
$27,312,000 and $22,438,000, as of December 31, 1999 and 1998, respectively.
TIAA maintains a non-qualified 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 $5,284,313,000 and
$5,564,491,000 at December 31, 1999 and 1998, respectively. TIAA's investment
in Enterprises is included in the other long-term investments caption on the
accompanying balance sheets and totaled approximately $305,326,000 and
$285,528,000 at December 31, 1999 and 1998, respectively. At December 31, 1999
and 1998, the carrying values of TIAA's investments in real estate subsidiaries
and other affiliates were approximately $3,902,522,000 and $4,643,100,000,
respectively.
B-63
<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, 1999, 1998 and 1997 and for the years then ended, were
approximately as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Assets ....................... $4,841,501,000 $5,723,222,000 $4,387,482,000
Liabilities .................. 772,068,000 724,361,000 792,142,000
Gross rental income .......... 826,366,000 783,261,000 688,963,000
</TABLE>
Earnings of approximately $186,329,000, $161,885,000 and $156,648,000 in 1999,
1998 and 1997, 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, 1999 and 1998, the carrying values of TIAA real
estate subsidiaries that are partners in joint ventures were approximately
$610,277,000 and $1,147,216,000, respectively. Joint venture total assets,
liabilities and gross rental income, at December 31, 1999, 1998 and 1997 and
for the years then ended, were approximately as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Assets ....................... $1,410,531,000 $1,709,297,000 $2,075,352,000
Liabilities .................. 730,980,000 556,823,000 997,969,000
Gross rental income .......... 185,306,000 274,106,000 377,919,000
</TABLE>
The subsidiaries' equity share in these total assets, liabilities and gross
rental income were approximately as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Assets ....................... $1,392,388,000 $1,701,668,000 $1,960,400,000
Liabilities .................. 720,127,000 554,451,000 577,826,000
Gross rental income .......... 183,907,000 270,208,000 349,770,000
</TABLE>
Net income earned by the subsidiaries from joint venture investments was
approximately $40,507,000, $16,123,000 and $56,362,000 in 1999, 1998 and 1997,
respectively. Some of the real estate joint ventures have loans from TIAA. At
December 31, 1999 and 1998, the unpaid principal of such loans was
approximately $577,277,000 and $529,504,000, respectively.
NOTE 9--ANNUITY RESERVES
At December 31, 1999 and 1998, TIAA's general account annuity reserves are
summarized as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------------ ------------------------------
Amount Percent Amount Percent
------------------ --------- ----------------- ----------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal:
At book value without adjustment $10,298,969,000 11.1% $ 9,066,467,000 10.4%
At market value ........................... -- -- -- --
Not subject to discretionary
withdrawal ................................ 82,594,306,000 88.9 77,797,831,000 89.6
--------------- ----- --------------- -----
Total annuity reserves ..................... 92,893,275,000 100.0% 86,864,298,000 100.0%
===== =====
Reconciliation to total policy and
contract reserves shown on the
balance sheet:
Reserves on other life policies
and contracts ............................ 399,675,000 377,741,000
Reserves on accident and
health policies .......................... 576,758,000 530,672,000
--------------- ---------------
Total policy and contract reserves ......... $93,869,708,000 $87,772,711,000
=============== ===============
</TABLE>
B-64
<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 TIAA Separate Account VA-1
("VA-1") is a segregated investment account and was organized on February 16,
1994 under the insurance laws of the State of New York for the purpose of
issuing and funding variable annuity contracts. VA-1 was registered with the
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"). SIA
was established on October 3, 1994 and invests in a diversified portfolio of
equity securities selected to track the overall United States stock market.
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. TIAA redeemed all of its REA units by the end of 1998.
The balance sheet captions for separate account assets and liabilities (which
represent 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 $256,706,000,
$226,984,000 and $206,808,000 in 1999, 1998 and 1997 respectively. Total
separate account net transfers from other accounts were approximately
$310,791,000, $300,737,000 and $360,391,000 in 1999, 1998 and 1997,
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. 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 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, Teachers Personal
Investors Services, Inc. ("TPIS"). Teachers Advisors, Inc. ("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. During 1999, TIAA began to
redeem its seed money investments. TIAA's remaining seed money investment in
the Funds, plus reinvested dividends and undistributed earnings, totaled
approximately $85,174,000 and $303,017,000 at December 31, 1999 and 1998,
respectively, and such amounts are reflected in the "Other long-term
investments" caption in the accompanying balance sheets.
On June 14, 1999, TIAA made a $175,000,000 seed money investment to launch the
TIAA-CREF Institutional Mutual Funds (the "Institutional Funds"), a Delaware
business trust that was organized on April 15, 1999, and is registered with the
Commission under the Investment Company Act of 1940 as an open-end management
investment company. The Institutional Funds consist of seven series, each of
which commenced operations on June 14, 1999 when TIAA invested $25,000,000 in
each of the Institutional Funds. On July 1, 1999, the Institutional Funds began
to offer their shares, without a sales load, to participating institutions
through their principal underwriter, TPIS. Advisors provides investment
management services for the Institutional Funds. During 1999, TIAA began to
redeem its seed money investments. TIAA's remaining seed money investment in
the Institutional Funds, plus reinvested dividends and undistributed earnings,
totaled approximately $144,017,000 at December 31, 1999, and is reflected in
the "Other long-term investments" caption in the accompanying balance sheets.
NOTE 12--COMMERCIAL PAPER/LIQUIDITY FACILITY
TIAA began issuing commercial paper in May 1999 under a maximum authorized
program of $2 billion and, at December 31, 1999, had an outstanding obligation
of $248,319,000. Interest rates on outstanding obligations ranged from 5.90% to
6.35%. During 1999, interest expense totaled approximately $24,585,000. TIAA
maintains a short-term revolving credit liquidity facility of approximately $1
billion to support TIAA's commercial paper program, but this liquidity facility
has not been utilized.
B-65
<PAGE>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Concluded)
NOTE 13--CONTINGENCIES
It is the opinion of management that any liabilities which might arise from
litigation, state guaranty fund assessments, and other matters, over and above
amounts already provided for in the financial statements, are not considered
material in relation to TIAA's financial position or the results of its
operations.
NOTE 14--SUBSEQUENT EVENT--CODIFICATION
The Department has announced its intentions to implement, subject to any
conflicting provisions in New York statute, the new Accounting Practices and
Procedures Manual ("Codification") adopted by the NAIC to become effective
January 1, 2001. Because the Department has not yet determined the extent to
which Codification will be implemented, the effect on TIAA's statutory-basis
financial statements cannot yet be quantified.
NOTE 15--IMPACT OF YEAR 2000 (UNAUDITED)
In prior years, Management discussed the nature and progress of its plans to
become Year 2000 ready. In late 1999, TIAA completed its remediation and
testing of mission critical systems. As a result of those planning and
implementation efforts, TIAA has made a successful transition into the Year
2000. To the best of our knowledge, all of TIAA's internal systems and those of
its service providers are functioning normally in the Year 2000 environment.
TIAA will continue to monitor its mission critical computer applications and
those of its suppliers and vendors throughout the Year 2000 to ensure that any
latent Year 2000 matters that may arise are addressed promptly.
B-66
<PAGE>
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