-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EWpAC/5zTQKjpuruAEu9vmUYLd3vT1QjZphcAbebfiepjY99lG++bAN3iVWTRiet 4gA9qKbE9t/V8URgDubARw== 0000950123-99-003505.txt : 19990421 0000950123-99-003505.hdr.sgml : 19990421 ACCESSION NUMBER: 0000950123-99-003505 CONFORMED SUBMISSION TYPE: N-1A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19990420 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TIAA CREF INSTITUTIONAL MUTUAL FUNDS CENTRAL INDEX KEY: 0001084380 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 134054536 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: N-1A SEC ACT: SEC FILE NUMBER: 333-76651 FILM NUMBER: 99597671 FILING VALUES: FORM TYPE: N-1A SEC ACT: SEC FILE NUMBER: 811-09301 FILM NUMBER: 99597672 BUSINESS ADDRESS: STREET 1: 730 THIRD AVE. CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2124909000 N-1A 1 TIAA-CREF INSTITUTIONAL MUTUAL FUNDS 1 File Nos. 333-_____, 811-_____ As filed with the Securities and Exchange Commission on April 20, 1999 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X] Pre-Effective Amendment No. __ [ ] Post-Effective Amendment No. __ [ ] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X] Amendment No. __ [ ] (Check appropriate box or boxes.) ----------------------------------- TIAA-CREF INSTITUTIONAL MUTUAL FUNDS (Exact Name of Registrant as Specified in Charter) 730 Third Avenue New York, New York 10017-3206 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code: (800) 842-2733 Peter C. Clapman, Esq. TIAA-CREF Institutional Mutual Funds 730 Third Avenue New York, New York 10017-3206 (Name and Address of Agent for Service) Copy to: Steven B. Boehm, Esq. Sutherland Asbill & Brennan LLP 1275 Pennsylvania Avenue, N.W. Washington, D.C. 20004-2415 Approximate Date of Proposed Public Offering: July 1, 1999 The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a), may determine. 2 PROSPECTUS, DATED JULY _____, 1999 TIAA-CREF Institutional Mutual Funds Institutional International Equity Fund Institutional Growth Equity Fund Institutional Growth and Income Fund Institutional Equity Index Fund Institutional Social Choice Equity Fund Institutional Bond Fund Institutional Money Market Fund Each investment portfolio, or "Fund," currently offers a single class of shares, which is described in this prospectus. The shares are only available for purchase by certain intermediaries affiliated with TIAA-CREF ("TIAA-CREF Intermediaries") or other persons, such as state-sponsored tuition savings plans, who have entered into a contract with a TIAA-CREF Intermediary that enables them to purchase shares of the Funds. The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. 3 TABLE OF CONTENTS SUMMARY INFORMATION...............................................................................................1 INVESTMENT OBJECTIVES, STRATEGIES AND RISKS..............................................................1 Institutional International Equity Fund.........................................................2 Institutional Growth Equity Fund................................................................3 Institutional Growth and Income Fund............................................................4 Institutional Equity Index Fund.................................................................5 Institutional Social Choice Equity Fund.........................................................5 Institutional Bond Fund.........................................................................6 Institutional Money Market Fund.................................................................7 PAST PERFORMANCE.........................................................................................7 FEES AND EXPENSES........................................................................................7 INVESTMENT OBJECTIVES, STRATEGIES AND RISKS.......................................................................8 EQUITY FUNDS USING THE DUAL INVESTMENT MANAGEMENT STRATEGY(SM)...........................................9 Institutional International Equity Fund........................................................10 Institutional Growth Equity Fund...............................................................10 Institutional Growth and Income Fund...........................................................11 OTHER EQUITY FUNDS......................................................................................12 Institutional Equity Index Fund................................................................12 Institutional Social Choice Equity Fund........................................................12 ADDITIONAL INVESTMENT STRATEGIES FOR THE EQUITY FUNDS...................................................13 THE FIXED-INCOME FUNDS..................................................................................14 Institutional Bond Fund........................................................................14 Institutional Money Market Fund................................................................16 RISKS OF INVESTING IN ANY OF THE FUNDS..................................................................17 General Investment Risks.......................................................................17 Year 2000 Risks................................................................................17 MANAGEMENT OF THE FUNDS.................................................................................18 The Funds' Investment Adviser..................................................................18 Prior Performance of Investment Adviser........................................................19 Fund Managers..................................................................................20 Service Providers..............................................................................21 CALCULATING SHARE PRICE..........................................................................................21 DIVIDENDS AND DISTRIBUTIONS......................................................................................22 TAXES............................................................................................................23 YOUR ACCOUNT: BUYING, SELLING OR EXCHANGING SHARES..............................................................24 ELIGIBLE INVESTORS......................................................................................24 PURCHASE OF FUND SHARES.................................................................................24
ii 4 Purchases by Eligible Investors................................................................25 Investing through the Trust Company............................................................25 Points to Remember for All Purchases...........................................................25 In-Kind Purchases of Shares....................................................................26 HOW TO REDEEM SHARES....................................................................................26 Redemptions by Eligible Investors..............................................................26 Redeeming Shares through the Trust Company.....................................................27 In-Kind Redemptions of Shares..................................................................27 HOW TO EXCHANGE SHARES..................................................................................27 Exchanges by Eligible Investors................................................................27 Making Exchanges through the Trust Company.....................................................28 OTHER INVESTOR INFORMATION..............................................................................28 FINANCIAL HIGHLIGHTS.............................................................................................29
iii 5 SUMMARY INFORMATION INVESTMENT OBJECTIVES, STRATEGIES AND RISKS TIAA-CREF Institutional Mutual Funds consists of seven different Funds: Institutional International Equity Fund Institutional Growth Equity Fund Institutional Growth and Income Fund Institutional Equity Index Fund Institutional Social Choice Equity Fund Institutional Bond Fund Institutional Money Market Fund The Institutional International Equity Fund, the Institutional Growth Equity Fund, and the Institutional Growth and Income Fund use TIAA-CREF's Dual Investment Management Strategy(SM). Each of these Funds has a "stock selection" and an "enhanced index" segment. The stock selection segment holds a relatively small number of stocks that the Fund manager believes offer superior returns. These stocks are chosen using fundamental analysis. The rest of the Fund is invested in its enhanced index segment, which seeks to outperform the Fund's benchmark index while limiting the possibility of significantly underperforming the benchmark. This approach enables the Funds to stay fully invested even when the Fund manager cannot find sufficient investment opportunities for the stock selection segment. The Funds are subject to the following general risks: - - Market Risk -- Stock and bond prices in general can decline over short or extended periods as a result of political or economic events. - - Company Risk -- A company's current earnings can fall or its overall financial soundness may decline. As a result, the price of its stock may go down, or the company may not be able to pay principal and interest on its bonds when due. - - Interest Rate Risk -- Bond or stock prices may decline if interest rates change. - - Current Income Volatility -- Your income from an investment in a Fund may fall as a result of overall interest rate changes. An investment in TIAA-CREF Institutional Mutual Funds is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. An investor can lose money in any of the Funds, or the Funds could underperform other investments. Special risks associated with particular Funds are discussed in the following Fund summaries. The use of a particular benchmark index by a Fund is not a fundamental policy and 6 can be changed. INSTITUTIONAL INTERNATIONAL EQUITY FUND INVESTMENT The Fund seeks favorable long-term returns, mainly through OBJECTIVE capital appreciation. BENCHMARK Morgan Stanley Capital International ("MSCI") EAFE(R) INDEX (Europe, Australia, Far East) Index. PRINCIPAL The Fund invests in a broadly diversified portfolio of INVESTMENT primarily foreign equity investments. For the Fund's stock STRATEGIES selection segment, we select individual stocks and let the Fund's country and regional asset allocation evolve from that stock selection. We look for companies that meet a number of criteria including sustainable growth, consistent cash flow and attractive stock prices based on current earnings, assets and long-term growth prospects. SPECIAL Changes in currency exchange rates, the possible imposition INVESTMENT of market controls or currency exchange controls, lower RISKS liquidity and higher volatility in some foreign markets and/or political, social or diplomatic events could reduce the value of the Fund's investments. WHO MAY The Fund may be appropriate for investors who seek WANT TO above-average long-term returns, who understand the INVEST advantages of diversification across international markets and are willing to tolerate the greater risks of international investing. 2 7 INSTITUTIONAL GROWTH EQUITY FUND INVESTMENT The Fund seeks a favorable long-term return, mainly through OBJECTIVE capital appreciation, primarily from a diversified portfolio of common stocks that present the opportunity for exceptional growth. BENCHMARK Russell 3000(R) Growth Index. (Russell 3000 is a trademark INDEX and a service mark of the Frank Russell Company.) PRINCIPAL The Fund invests in stocks of companies in new and emerging INVESTMENT areas of the economy and companies with distinctive STRATEGIES products or promising market conditions. For its stock selection segment, the Fund looks for companies that we believe have the potential for strong earnings or sales growth, or that appear to be undervalued based on current earnings, assets or growth prospects. It can invest in companies to benefit from prospective acquisitions, reorganizations, or corporate restructurings or other special situations. Foreign investments can be up to 40 percent of the Fund's portfolio. SPECIAL The Fund may sometimes hold a significant amount of stocks INVESTMENT of smaller, lesser-known companies whose stock prices may RISKS fluctuate more than those of larger companies. This means the Fund will probably be more volatile than the overall stock market, and could significantly outperform or underperform the market. With foreign investments, changes in currency exchange rates, the possible imposition of market controls or currency exchange controls, lower liquidity and higher volatility in some foreign markets and/or political, social or diplomatic events could reduce the value of the Fund's investments. WHO MAY The Fund may be appropriate for investors who are looking WANT TO for long-term capital appreciation, but who are willing to INVEST tolerate fluctuations in value. 3 8 INSTITUTIONAL GROWTH AND INCOME FUND INVESTMENT The Fund seeks a favorable long-term return through capital OBJECTIVE appreciation and investment income. BENCHMARK Standard & Poor's 500 ("S&P 500") Index. INDEX PRINCIPAL The Fund invests in a broadly diversified portfolio of INVESTMENT common stocks selected for their investment potential. For STRATEGIES its stock selection segment, the Fund manager looks primarily for stocks of larger, well-established, mature growth companies that we believe are attractively priced, show the potential to grow faster than the rest of the market, and offer a growing stream of dividend income. The Fund may also invest in rapidly growing smaller companies and may have up to 20 percent of its assets in foreign securities. Normally, at least 80 percent of the Fund's assets will be income-producing equity securities selected for their investment potential. SPECIAL Stocks paying relatively high dividends may at times INVESTMENT significantly underperform other stocks during periods of RISKS rapid market appreciation. Changes in currency exchange rates, the possible imposition of market controls or currency exchange controls, lower liquidity and higher volatility in some foreign markets and/or political, social or diplomatic events could reduce the value of the Fund's foreign investments. WHO MAY The Fund may be appropriate for investors who want capital WANT TO appreciation and current income but who also can accept the INVEST risk of market fluctuations. 4 9 INSTITUTIONAL EQUITY INDEX FUND INVESTMENT The Fund seeks a favorable long-term rate of return from a OBJECTIVE diversified portfolio selected to track the overall market for common stocks publicly traded in the U.S., as represented by a broad stock market index. BENCHMARK Russell 3000(R) Index. INDEX PRINCIPAL The Fund is designed to track U.S. equity markets as a whole INVESTMENT and invests in stocks in the Russell 3000(R) Index. STRATEGIES SPECIAL While the Fund attempts to closely track the Russell 3000(R) INVESTMENT Index, it does not invest in all 3,000 stocks in the index. RISKS Thus there is no guarantee that the performance of the Fund will match that of the index. WHO MAY The Fund may be appropriate for investors who seek a fund WANT TO that tracks the return of a broad market index. INVEST INSTITUTIONAL SOCIAL CHOICE EQUITY FUND INVESTMENT The Fund seeks a favorable long-term rate of return that OBJECTIVE reflects the investment performance of the U.S. stock markets while giving special consideration to certain social criteria. BENCHMARK S&P 500 Index. INDEX PRINCIPAL The Fund invests in a diversified set of common stocks and INVESTMENT other equity securities. Its goal is to perform STRATEGIES consistently with the U.S. stock markets as represented by the S&P 500 Index. The Fund invests only in companies whose activities are consistent with the Fund's social criteria. SPECIAL Because its social criteria exclude some investments, this INVESTMENT Fund may not be able to take advantage of the same RISKS opportunities or market trends as do the Funds that don't use such criteria. WHO MAY The Fund may be appropriate for investors who seek an WANT TO equity investment that is generally broad-based but INVEST excludes companies that engage in certain activities. 5 10 INSTITUTIONAL BOND FUND INVESTMENT The Fund seeks a favorable long-term return, primarily OBJECTIVE through high current income consistent with preserving capital. BENCHMARK Lehman Brothers Aggregate Bond Index INDEX PRINCIPAL The Fund is invested primarily in a broad range of debt INVESTMENT securities. The majority of the Fund's portfolio is invested STRATEGIES in U.S. Treasury and Agency securities, corporate bonds, and mortgage-backed or other asset-backed securities. The Fund holds mainly high-quality securities rated in the top four credit categories by Moody's or Standard & Poor's. The Fund will overweight or underweight individual securities or sectors depending on where we find undervalued, overlooked or misunderstood issues that offer the potential for superior returns compared to the Lehman index. The Fund may also invest in non-investment grade securities (also called "high-yield" or "junk" bonds) or privately placed (non-registered) securities. SPECIAL Investments in mortgage-backed securities are subject to INVESTMENT prepayment or extension risk. This is the possibility that a RISKS change in interest rates would cause the underlying mortgages to be paid off sooner or later than expected. If unanticipated prepayment occurs as a result of a declining interest rate environment, the Fund would have to reinvest the amounts that had been invested in the mortgage-backed securities, possibly at a lower rate of return. If unanticipated extension occurs as a result of a rising interest rate environment, the Fund may not have sufficient cash available for reinvestment when expected. High-yield securities offer higher returns but also involve higher risks than investment grade bonds. Their issuers may be less creditworthy and/or have a higher risk of becoming insolvent. WHO MAY The Fund may be appropriate for more conservative investors WANT TO who want to invest in a general bond fund that has the INVEST potential for a higher yield and a slightly higher level of risk than traditional bond funds. 6 11 INSTITUTIONAL MONEY MARKET FUND INVESTMENT The Fund seeks high current income consistent with OBJECTIVE maintaining liquidity and preserving capital. BENCHMARK IBC Money Fund All-Taxable Average INDEX PRINCIPAL The Fund invests primarily in high quality short-term money INVESTMENT market instruments. It limits its investments to securities STRATEGIES that present minimal credit risk and are rated in the highest rating categories for short-term instruments. WHO MAY The Fund may be suitable for conservative investors who are WANT TO looking for a high degree of principal stability and INVEST liquidity, and are willing to accept returns that are lower than those offered by longer-term investments. An investment in the Institutional Money Market Fund, like the other Funds, is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Institutional Money Market Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. PAST PERFORMANCE No performance data for TIAA-CREF Institutional Mutual Funds is included in this prospectus because none of the Funds has been in operation for one full calendar year. Performance information for other registered investment companies managed by the investment advisory personnel who manage TIAA-CREF Institutional Mutual Funds is provided on page 19 of this prospectus. FEES AND EXPENSES The following table describes the fees and expenses that you pay if you buy and hold shares of the Funds. SHAREHOLDER FEES (deducted directly from gross amount of transaction) - -------------------------------------------------------------------- Maximum Sales Charge Imposed on Purchases (percentage of offering price) 0% Maximum Deferred Sales Charge 0% Maximum Sales Charge Imposed on Reinvested Dividends and Other Distributions 0% Redemption Fee 0% Exchange Fee 0%
7 12
Investment Total Fund ANNUAL FUND OPERATING EXPENSES Manage- Other Operating (deducted from Fund assets) ment Fee Expenses(1) Expenses - ------------------------------ ---------- ----------- -------- Institutional International Equity Fund 0.__% 0.__% 0.__% Institutional Growth Equity Fund 0.__% 0.__% 0.__% Institutional Growth and Income Fund 0.__% 0.__% 0.__% Institutional Equity Index Fund 0.__% 0.__% 0.__% Institutional Social Choice Equity Fund 0.__% 0.__% 0.__% Institutional Bond Fund 0.__% 0.__% 0.__% Institutional Money Market Fund 0.__% 0.__% 0.__%
- --------------------------- (1) "Other Expenses" is based on estimated amounts for the current fiscal year. EXAMPLE This example is intended to help you compare the cost of investing in the Funds with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in a Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5 percent return each year and that the Funds' operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 Year 3 Years ------ ------- Institutional International Equity Fund $___ $___ Institutional Growth Equity Fund $___ $___ Institutional Growth and Income Fund $___ $___ Institutional Equity Index Fund $___ $___ Institutional Social Choice Equity Fund $___ $___ Institutional Bond Fund $___ $___ Institutional Money Market Fund $___ $___
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS Each of the individual investment portfolios, or Funds, described below has its own investment objective. The following describes each Fund's investment objective, the principal investment strategies and techniques each Fund uses to accomplish its objective, and the principal types of securities each Fund plans to purchase. These policies and techniques are not fundamental and may be changed by our Board of Trustees without shareholder approval. 8 13 However, we'll notify you of any significant changes. For a complete listing of the Funds' policies and restrictions, see the Statement of Additional Information ("SAI"). There's no guarantee that any Fund will meet its investment objective. EQUITY FUNDS USING THE DUAL INVESTMENT MANAGEMENT STRATEGY(SM) The Institutional International Equity Fund, the Institutional Growth Equity Fund, and the Institutional Growth and Income Fund use TIAA-CREF's Dual Investment Management Strategy(SM), which works like this: Each of these three equity Funds has two separate segments called the "stock selection" segment and the "enhanced index" segment. The relative sizes of these two segments vary as the Fund manager shifts money between them in response to investment opportunities. The stock selection segment holds a relatively small number of stocks that the Fund manager believes offer superior returns. The managers of these equity Funds will usually use fundamental analysis to select individual stocks or sectors for investment in the stock selection segment. Each equity Fund's stock selection segment is described further below. Money that is not invested in an equity Fund's stock selection segment goes to its enhanced index segment. Here the goal is two-fold: (1) to outperform each Fund's benchmark index and (2) to limit the possibility of significantly underperforming that benchmark. The Funds' managers attempt to outperform the benchmark indexes by over- or under-weighting many stocks in the index by small amounts, based on proprietary stock scoring models. In other words, a Fund will hold more or less of some stocks than does its benchmark index. The managers attempt to control the risk of underperforming the benchmarks by maintaining the same overall financial characteristics (such as volatility, dividend yield and industry weights) as the benchmarks. The Dual Investment Management Strategy enables the Funds to stay invested even when the Fund manager cannot find sufficient investment opportunities for the stock selection segment. The benchmarks for each Fund's enhanced index segment currently are as follows:
Fund Benchmark - ---- --------- Institutional International Equity Fund MSCI EAFE(R) (Europe, Australia, Far East) Index Institutional Growth Equity Fund Russell 3000(R) Growth Index Institutional Growth and Income Fund S&P 500(R) Index
Using these indices is not a fundamental policy of TIAA-CREF Institutional Mutual Funds, so we can substitute other indices without shareholder approval. We'll notify you before we make such a change. 9 14 INSTITUTIONAL INTERNATIONAL EQUITY FUND The INSTITUTIONAL INTERNATIONAL EQUITY FUND seeks a favorable long-term return, mainly through capital appreciation from a broadly diversified portfolio that consists primarily of foreign equity investments. The Fund intends to always have at least 80 percent of its assets in securities of companies located in at least three different countries, other than the United States. For the Fund's stock selection segment, we select individual stocks and let the Fund's country and regional asset allocation evolve from that stock selection. We do, however, regularly monitor the Fund's sector and country exposure in order to control risk. In particular, we look for companies with: - sustainable growth - focused management with successful track records - unique and easy-to-understand franchises (brands) - undervalued stock prices based on current earnings, assets, and long-term growth prospects - consistent generation of free cash flow INVESTMENT RISKS: The Fund is subject to the general investment risks described on page 17. In addition, investing in securities traded on foreign exchanges or in foreign markets can involve risks beyond those of domestic investing. These include: (1) changes in currency exchange rates; (2) possible imposition of market controls or currency exchange controls; (3) possible imposition of withholding taxes on dividends and interest; (4) possible seizure, expropriation, or nationalization of assets; (5) more limited foreign financial information or difficulty in interpreting it because of foreign regulations and accounting standards; (6) the lower liquidity and higher volatility in some foreign markets; (7) the impact of political, social, or diplomatic events; (8) the difficulty of evaluating some foreign economic trends; or (9) the possibility that a foreign government could restrict an issuer from paying principal and interest to investors outside the country. Brokerage commissions and transaction costs are often higher for foreign investments, and it may be harder to use foreign laws and courts to enforce financial or legal obligations. The risks noted above often increase in countries with emerging markets. For example, these countries may have more unstable governments than developed countries, and their economies may be based on only a few industries. Because their securities markets may be very small, share prices may be volatile. In addition, foreign investors are subject to a variety of special restrictions in many emerging countries. INSTITUTIONAL GROWTH EQUITY FUND The INSTITUTIONAL GROWTH EQUITY FUND seeks a favorable long-term return, mainly through capital appreciation, primarily from a diversified portfolio of common stocks that present the opportunity for exceptional growth. Normally, the Fund will have at least 80 percent of its assets in equity securities that have the potential for capital appreciation. 10 15 The Fund's stock selection segment can invest in companies of all sizes, including companies in new and emerging areas of the economy and companies with distinctive products or promising market conditions. We choose individual investments based on a company's prospects under current or forecasted economic, financial and market conditions, looking for companies we believe have the potential for strong earnings or sales growth, or that appear to be undervalued based on current earnings, assets, or growth prospects. The Fund can also invest in large, well-known, established companies, particularly when we believe they have new or innovative products, services, or processes that enhance future earnings prospects. The Fund can also invest in companies in order to benefit from prospective acquisitions, reorganizations, or corporate restructurings or other special situations. The Institutional Growth Equity Fund can buy foreign securities and other instruments if we believe they have superior investment potential. Depending on investment opportunities, the Fund may have from 0 to 40 percent of its assets in foreign securities. The securities will be those traded on foreign exchanges or in other foreign markets and may be denominated in foreign currencies or other units of account. For more information about the risks of foreign investments, see page 10. INVESTMENT RISKS: The Fund is subject to the general investment risks described on page 17. In addition, there are special risks to investing in growth stocks. The Fund may at times hold a significant amount of stocks of smaller, lesser-known companies. Their stock prices may fluctuate more than those of larger companies because smaller companies may depend on narrow product lines, have limited track records, lack depth of management, or have thinly-traded securities. Also, stocks of companies involved in reorganizations and other special situations can often involve more risk than ordinary securities. Accordingly, the Institutional Growth Equity Fund will probably be more volatile than the overall stock market, and it could significantly outperform or underperform the stock market during any particular period. The Fund's foreign holdings are subject to the risks of foreign investments described for the Institutional International Equity Fund on page 10. INSTITUTIONAL GROWTH AND INCOME FUND The INSTITUTIONAL GROWTH AND INCOME FUND seeks a favorable long-term return through capital appreciation and investment income, primarily from a broadly diversified portfolio of common stocks. Normally, at least 80 percent of the Fund's assets will be income-producing equity securities selected for their investment potential. The Fund invests in a broadly diversified portfolio of common stocks. The Fund's stock selection segment concentrates on individual companies rather than sectors or industries. We look for stocks of larger, well-established, mature growth companies that we believe are attractively priced, show the potential to grow faster than the rest of the market, and offer a growing stream of dividend income. In particular, we look for companies that are leaders in their industries. We also look for companies with shareholder-oriented managements dedicated to creating shareholder value. The Fund may also invest in rapidly growing smaller companies. It can have up to 20 percent of its assets in foreign securities. 11 16 INVESTMENT RISKS: The Fund is subject to the general investments risks described on page 17. Its foreign holdings are subject to the risks of foreign investments described for the Institutional International Equity Fund on page 10. OTHER EQUITY FUNDS INSTITUTIONAL EQUITY INDEX FUND The INSTITUTIONAL EQUITY INDEX FUND seeks a favorable long-term rate of return from a diversified portfolio selected to track the overall market for common stocks publicly traded in the U.S., as represented by the Russell 3000(R), a broad market index. Although the Fund invests in stocks in the Russell 3000 Index, it doesn't invest in all 3,000 stocks in the index. Rather, we use a sampling approach to ensure that the Fund closely matches the overall investment characteristics (for example, yield and industry weight) of the index. This means that a company can remain in the Fund even if it performs poorly, unless the company is removed from the Russell 3000. Using the Russell 3000 Index isn't fundamental to the Fund's investment objective and policies. We can change the index used in this Fund at any time and will notify you if we do so. The Fund can also invest in securities and other instruments, such as futures, whose return depends on stock market prices. We select these securities to attempt to match the total return of the Russell 3000 but may not always do so. The Russell 3000 Index is an unmanaged index of stocks of the 3,000 largest publicly traded U.S. companies, based on market capitalization. Russell 3000 companies represent about 98% of the total market capitalization of the publicly traded U.S. equity market. The market capitalization of the individual companies in the index ranged from $2 million to $333 billion with an average of $72 billion as of December 31, 1998. The Frank Russell Company determines the composition of the index based only on market capitalization and can change its composition at any time. The Russell 3000 Index is not a mutual fund and you cannot invest directly in the index. INVESTMENT RISKS: While the Fund attempts to closely track the Russell 3000 Index and changes are made to its holdings to reflect changes in the index, the Fund does not invest in all 3,000 stocks in the index. Thus, there is no guarantee that the performance of the Fund will match that of the index. Also, because the index's returns aren't reduced by investment and other operating expenses, the Fund's ability to match the index will be adversely affected by the costs of buying and selling stocks as well as other expenses. INSTITUTIONAL SOCIAL CHOICE EQUITY FUND The INSTITUTIONAL SOCIAL CHOICE EQUITY FUND seeks a favorable long-term rate of return that reflects the investment performance of the U.S. stock markets while giving special 12 17 consideration to certain social criteria. Normally, at least 80% of the Fund's assets will be invested in common stocks. The social criteria the Fund takes into consideration are non-fundamental investment policies. They can change without the approval of the Fund's shareholders. Currently, the Fund invests only in companies that do not: - - engage in activities that result or are likely to result in significant damage to the natural environment; - - have significant portion of its business in weapons manufacturing; - - produce and market alcoholic beverages or tobacco products; - - produce nuclear energy; or - - have operations in Northern Ireland and have not adopted the MacBride Principles (a fair employment code for U.S. firms operating in Northern Ireland) or have not operated consistently with such principals and in compliance with the Fair Employment Act of 1989 (Northern Ireland). For the second and third criteria, we assess the issuer to decide whether the activity is a "significant" part of its business -- basing our decision on, for example, how large a part of a company's operation the activity involves or how much revenue it brings in. The Corporate Governance and Social Responsibility Committee of our Board of Trustees provides guidance in deciding whether investments meet the social criteria. It uses information from independent organizations such as the Investor Responsibility Research Center, Inc. We'll do our best to make sure the Fund's investments meet the social criteria, but we can't guarantee that every holding will always do so. Even if an investment is not excluded by the social criteria, we have the option of excluding it if we decide it is not suitable. The Fund attempts to perform consistently with the U.S. stock markets as represented by the Standard & Poor's 500 Index. The Fund can also invest up to 15% of its assets in foreign securities. The Fund isn't restricted from investing in any securities issued or guaranteed by the U.S. government or its agencies or instrumentalities. The Fund can also invest in securities issued by other countries or their agencies and instrumentalities as approved by the Committee on Corporate Governance and Social Responsibility. INVESTMENT RISKS: Because its social criteria exclude some investments, this Fund may not be able to take advantage of the same opportunities or market trends as do the Funds that don't use such criteria. ADDITIONAL INVESTMENT STRATEGIES FOR THE EQUITY FUNDS In addition to the principal types of securities identified in the individual Fund descriptions above, each equity Fund can hold short-term debt securities of the same type as 13 18 those held by the Institutional Money Market Fund (see page 16) and other kinds of short-term instruments. These help the Funds maintain liquidity, use cash balances effectively, and take advantage of attractive investment opportunities. The equity Funds can also hold fixed-income securities they acquire because of mergers, recapitalizations, or otherwise. Similarly, each Fund may also buy and sell options, futures contracts, and options on futures. We intend to use options and futures primarily for hedging or for cash management. To manage currency risk, the equity Funds can also enter into forward currency contracts, and buy or sell options and futures on foreign currencies. The equity Funds can also invest in newly developed financial instruments, such as equity swaps (including arrangements where the return is linked to a stock market index) and equity-linked fixed-income securities, so long as these are consistent with a Fund's investment objective and restrictions. THE FIXED-INCOME FUNDS INSTITUTIONAL BOND FUND The INSTITUTIONAL BOND FUND seeks a favorable long-term return, primarily through high current income consistent with preserving capital. Normally, at least 80 percent of the Fund's assets will be invested in bonds. The Fund's portfolio is invested primarily in a broad range of debt securities. The majority is invested in U.S. Treasury and Agency securities, corporate bonds, and mortgage-backed or other asset-backed securities. The Fund's holdings are mainly high-quality securities rated in the top four credit categories by Moody's or Standard & Poor's, or that we determine are of comparable quality. The Fund will overweight or underweight individual securities or sectors, as compared to their weight in the Lehman index, depending on where we find undervalued, overlooked or misunderstood issues that offer the potential for superior investment returns compared to the Lehman index. The Fund can make foreign investments, but we don't expect them to exceed 15 percent of the Fund's assets. The Fund can also invest in money market instruments. The Fund may also invest in securities with special features in an effort to enhance its total return. This category of the Fund's portfolio will primarily consist of privately placed securities (including "Rule 144A" private placements) or non-investment grade securities (those rated Ba1 or lower by Moody's or BB+ or lower by Standard & Poor's). The Fund will not invest more than 25 percent of its assets in privately placed and high-yield securities. The Institutional Bond Fund's investments in mortgage-backed securities can include pass-through securities sold by private, governmental and government-related organizations and collateralized mortgage obligations ("CMOs"). Mortgage pass-through securities are created when mortgages are pooled together and interests in the pool are sold to investors. The cash flow from the underlying mortgages is "passed through" to investors in periodic principal and 14 19 interest payments. CMOs are obligations that are fully collateralized directly or indirectly by a pool of mortgages from which payments of principal and interest are dedicated to the payment of principal and interest by the CMOs. The Fund can also invest in interest-only and principal-only mortgage-backed securities. These instruments have unique characteristics and are more sensitive to prepayment and extension risks than traditional mortgage-backed securities. These risks are described below in the "Investment Risks" section for this Fund. The Fund may use an investment strategy called "mortgage rolls," in which we "roll over" an investment in a mortgage-backed security before its settlement date for a similar security with a later settlement date. The Fund may also engage in duration-neutral relative value trading, a strategy in which we buy and sell government bonds of identical credit quality but different maturity dates in an attempt to take advantage of spread differentials along the yield curve. These strategies are both designed to enhance the Fund's returns, but they do increase the Fund's portfolio turnover rate. However, we don't expect these strategies to significantly raise the Fund's capital gains. The Fund may also buy and sell options, futures contracts, and options on futures. We intend to use options and futures primarily for hedging or for cash management. To manage currency risk, the Fund can also enter into forward currency contracts, and buy or sell options and futures on foreign currencies. The Fund can also buy and sell swaps and options on swaps, so long as these are consistent with the Fund's investment objective and restrictions. INVESTMENT RISKS: Non-investment-grade securities are usually called "high-yield" or "junk" bonds. These lower-rated bonds offer higher returns but also entail higher risks. Their issuers may be less creditworthy or have a higher risk of becoming insolvent. Small changes in the issuer's creditworthiness can have more impact on the price of lower-rated bonds than would comparable changes for investment-grade bonds (those rated Baa or higher by Moody's or rated BBB or higher by S&P). Lower-rated bonds can also be harder to value or sell, and their prices can be more volatile than the prices of higher-quality securities. The above risks of holding high-yield bonds can also apply to the lower levels of "investment grade" bonds (for example, Moody's Baa and S&P's BBB). Also, securities originally rated "investment grade" are sometimes downgraded later on, should a ratings agency like Moody's or S&P believe the issuer's business outlook or creditworthiness has deteriorated. A downgraded security already held in the Fund's portfolio may or may not be sold, depending on our analysis of the issuer's financial prospects. We don't rely exclusively on ratings agencies when making investment decisions because they may not alone be an accurate measure of the risk of lower-rated bonds. Instead, we also do our own credit analysis, paying particular attention to economic trends and other market events. The Fund can also invest in privately placed debt securities. One risk of investing in private placements is that they may be difficult to sell for their fair market value. The Fund's investments in mortgage-backed securities are subject to prepayment or 15 20 extension risk, which is the possibility that a change in interest rates may cause the underlying mortgages to be paid off sooner or later than expected. If unanticipated prepayment occurs as a result of a declining interest rate environment, the Fund would then have to reinvest the amounts that had been invested in the mortgage-backed securities, possibly at a lower rate of return. If unanticipated extension occurs as a result of a rising interest rate environment, the Fund may not have sufficient cash available for reinvestment when expected. INSTITUTIONAL MONEY MARKET FUND The INSTITUTIONAL MONEY MARKET FUND seeks high current income to the extent consistent with maintaining liquidity and preserving capital. We seek to maintain a stable net asset value of $1.00 per share of the Institutional Money Market Fund by investing in assets that present minimal credit risk, maintaining an average weighted maturity of 90 days or less, and investing all of the Fund's assets in dollar-denominated securities or other instruments maturing in 397 days or less. We can't assure you that we will be able to maintain a stable net asset value of $1.00 per share for this Fund. The Fund will invest primarily in: (1) commercial paper (short-term "IOUs" issued by corporations and others) or variable-rate, floating-rate, or variable-amount securities of domestic or foreign companies; (2) obligations of commercial banks, savings banks, savings and loan associations, and foreign banks whose latest annual financial statements show more than $1 billion in assets. These include certificates of deposit, time deposits, bankers' acceptances, and other short-term debt; (3) securities issued by or whose principal and interest are guaranteed by the U.S. government or one of its agencies or instrumentalities; (4) other debt obligations with a remaining maturity of 397 days or less issued by domestic or foreign companies; (5) repurchase agreements involving securities issued or guaranteed by the U.S. government or one of its agencies or instrumentalities, or involving certificates of deposit, commercial paper, or bankers' acceptances; (6) participation interests in loans banks have made to the issuers of (1) and (4) above (these may be considered illiquid); (7) asset-backed securities issued by domestic corporations or trusts; (8) obligations issued or guaranteed by foreign governments or their political subdivisions, agencies, or instrumentalities; and 16 21 (9) obligations of international organizations (and related government agencies) designated or supported by the U.S. or foreign government agencies to promote economic development or international banking. The Institutional Money Market Fund will only purchase money market instruments that at the time of purchase are "First Tier Securities", that is rated within the highest category by at least two nationally recognized statistical rating organizations ("NRSROs"), or rated within the highest category by one NRSRO if it is the only NRSRO to have issued a rating for the security, or unrated securities of comparable quality. The Fund can also invest up to 30 percent of its assets in money-market and debt instruments of foreign issuers denominated in U.S. dollars. The above list of investments is not exclusive and the Fund may make other investments consistent with its investment objective and policies. INVESTMENT RISKS: The fund is subject to the general investment risks described below. RISKS OF INVESTING IN ANY OF THE FUNDS GENERAL INVESTMENT RISKS To varying degrees, the Funds are all subject to several general types of risks. (1) One is market risk -- stock and bond price volatility due to changing conditions in the financial markets. (2) Another is interest rate risk -- the risk that a bond's or stock's value will decline if interest rates change. For example, a rise in interest rates usually causes the market value of fixed-rate securities to go down. (3) Another kind of risk is company risk. For stocks or other equity securities, it comes from the possibility that current earnings will fall or that overall financial soundness will decline, reducing the security's value. For bonds and other debt securities, company risk comes from the possibility the issuer won't be able to pay principal and interest when due. (4) Finally, investments can be subject to current income volatility. Your income from an investment in a Fund may fall as a result of overall interest rate changes. YEAR 2000 RISKS Many services provided to the Funds and their shareholders depend on the smooth functioning of computer systems. Many computer systems now in use can't distinguish the year 2000 from the year 1900 because dates have been encoded using only the last two digits of the year. 17 22 Like other mutual funds, financial and business organizations, and individuals around the world, TIAA-CREF Institutional Mutual Funds could be adversely affected if the computer systems it relies on do not properly process and calculate information and data involving dates from and after January 1, 2000. These computer systems include those used by its investment adviser and other service providers. Together, TIAA-CREF Institutional Mutual Funds and its investment adviser are taking steps that we believe are reasonably designed to address issues involving the Year 2000 for the computer systems we use. We are also seeking reasonable assurances that our service providers are taking comparable steps. However, currently we can't assure you that these steps will be sufficient to avoid any adverse impact on the Funds. If the systems the Funds rely on do fail or produce faulty data, there could be delays in processing transactions, or we may temporarily be unable to engage in normal business activities. Also, a Fund's performance could be affected if a systems failure at a company or government entity, either in the U.S. or abroad (where Year 2000 compliance may be less prevalent), affects the price of securities that the Fund owns. MANAGEMENT OF THE FUNDS THE FUNDS' INVESTMENT ADVISER Teachers Advisors, Inc. ("Advisors") manages the assets of TIAA-CREF Institutional Mutual Funds, under the supervision of the Funds' Board of Trustees (the "Board"). Advisors is an indirect wholly-owned subsidiary of Teachers Insurance and Annuity Association of America ("TIAA"). It is registered as an investment adviser with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940. Advisors also manages the investments of TIAA Separate Account VA-1, the TIAA-CREF Life Funds, the TIAA-CREF Mutual Funds, and the investment portfolio of New York State's College Choice Tuition Savings Plan. Through an affiliated investment adviser, TIAA-CREF Investment Management, LLC ("Investment Management"), the personnel of Advisors also manage the investment accounts of the College Retirement Equities Fund ("CREF"). As of March 31,1999, Advisors and Investment Management together had $__._ billion of registered investment company assets under management. Advisors is located at 730 Third Avenue, New York, NY 10017. Advisors' duties include conducting research, recommending investments, and placing orders to buy and sell securities. Advisors also acts as liaison among the various service providers to the Funds, including custodians, fund administrators, and transfer agents. Under the terms of an Investment Management Agreement between TIAA-CREF Institutional Mutual Funds and Advisors, Advisors is entitled to an annual fee of 0.__%, 0.__%, 0._%, 0.__%, 0.__%, 0.__% and 0.__% of the average daily net assets of the Institutional International Equity Fund, the Institutional Growth Equity Fund, the Institutional Growth and Income Fund, the Institutional Equity Index Fund, the Institutional Social Choice Equity Fund, the Institutional Bond Fund, and the Institutional Money Market Fund, respectively. 18 23 PRIOR PERFORMANCE OF INVESTMENT ADVISER Please do not confuse the Funds with other registered investment company portfolios using very similar or nearly identical names that are offered by TIAA-CREF Mutual Funds, CREF, or a separate account of TIAA or of its subsidiary TIAA-CREF Life Insurance Company. However, the investment objectives and policies of certain Funds are very similar to the investment objectives and policies of other registered investment company portfolios that are managed by Advisors or Investment Management. Nevertheless, the investment performance of the Funds may be lower, or higher, than the investment results of such other portfolios. We do not promise that the investment results of any of the Funds will be comparable to the investment results of any other mutual fund, CREF account, or separate account portfolio, even if the other portfolio uses a very similar name, is managed by the same investment advisory personnel, and has the same investment objective and policies as the applicable Fund. TIAA-CREF Institutional Mutual Funds commenced operations on _________ ___, 1999, and each Fund has a limited performance record. However, the investment objective, policies, strategies, and risks of each of the Funds (except the Institutional Social Choice Equity Fund) is substantially similar to one or more other registered investment company portfolios managed by Advisors or Investment Management. The performance of these other portfolios may be relevant to prospective investors in TIAA-CREF Institutional Mutual Funds. The charts below show historical performance for the International Equity Fund, the Growth Equity Fund, the Growth & Income Fund, the Bond Plus Fund, and the Money Market Fund of TIAA-CREF Mutual Funds (managed by Advisors) and for the Equity Index Account of CREF (managed by the same personnel in their capacities with Investment Management). The data are provided to illustrate the experience of Advisors' personnel in managing an investment portfolio substantially similar to the Institutional International Equity Fund, the Institutional Growth Equity Fund, the Institutional Growth and Income Fund, the Institutional Bond Fund, the Institutional Money Market Fund, and the Institutional Equity Index Fund, respectively, of TIAA-CREF Institutional Mutual Funds. This historical performance information is not intended to predict or suggest the returns that the corresponding Fund of TIAA-CREF Institutional Mutual Funds might experience. The results are net of investment management and other operating expenses of the portfolios. The funds of TIAA-CREF Mutual Funds are retail mutual fund portfolios with higher total annual operating expenses than the corresponding Funds of TIAA-CREF Institutional Mutual Funds during the period illustrated. The Equity Index Account of CREF is a variable annuity account (rather than a mutual fund portfolio) with slightly higher total annual operating expenses than the Institutional Equity Index Fund of TIAA-CREF Institutional Mutual Funds during the period illustrated. 19 24
- -------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN TIAA-CREF Mutual Funds CREF - -------------------------------------------------------------------------------------------------------------------- International Growth Equity Growth & Income Bond Plus Money Market Equity Index Period Equity Fund Fund Fund Fund Fund Account - -------------------------------------------------------------------------------------------------------------------- 1 year ended June 30, 1999 __.__% __.__% __.__% __.__% _.__% __.__% - -------------------------------------------------------------------------------------------------------------------- 3 years ended June 30, 1999 N/A N/A N/A N/A N/A __.__% - -------------------------------------------------------------------------------------------------------------------- 5 years ended June 30, 1999 N/A N/A N/A N/A N/A __.__% - -------------------------------------------------------------------------------------------------------------------- Inception through June 30, 1999 __.__% __.__% __.__% __.__% _.__% __.__% - -------------------------------------------------------------------------------------------------------------------- Date of inception 9/2/97 9/2/97 9/2/97 9/2/97 9/2/97 4/29/94 - --------------------------------------------------------------------------------------------------------------------
FUND MANAGERS The Institutional International Equity Fund is managed by Chris Semenuk, Director-Global Portfolio Management for Advisors. He is also one of three co-managers of the CREF Global Equities Account and is also responsible for managing TIAA-CREF Mutual Funds' International Equity Fund. From 1995 to 1997, he was responsible for company research and analysis for the CREF Global Equities Account. Previously he was a senior securities analyst for the CREF Stock Account. Mr. Semenuk joined TIAA-CREF in 1993. The Institutional Growth Equity Fund is managed by Jeffrey Siegel, Managing Director for Advisors. Mr. Siegel is also responsible for managing the investments of the CREF Growth Account and TIAA-CREF Mutual Funds' Growth Equity Fund. From 1992 to 1997, he was manager of the CREF Global Equities Account. Mr. Siegel joined TIAA-CREF in 1988. The Institutional Growth and Income Fund is managed by Carlton N. Martin, Managing Director-Global Research for Advisors. He has also been one of three co-managers of the CREF Global Equities Account since 1998 and manages TIAA-CREF Mutual Funds' Growth & Income Fund. Prior to 1998, he was responsible for investments in the chemical, paper and forest products as well as the environmental, engineering and construction industries for certain CREF Accounts. Mr. Martin joined TIAA-CREF in 1980. The Institutional Equity Index Fund and the Institutional Social Choice Equity Fund are managed by Advisors' quantitative portfolio management group, whose members are jointly responsible for the day-to-day management of these Funds. The Institutional Bond Fund is managed by Elizabeth D. Black, Managing Director-Portfolio Management for Advisors. Ms. Black has also been responsible for managing the investments in CREF's Bond Market Account and the bond portion of CREF's Social Choice Account since 1996, and TIAA-CREF Mutual Funds' Bond Plus Fund since 1997. 20 25 Prior to 1996, she was sector manager of TIAA's mortgage-backed securities group. Ms. Black joined TIAA-CREF in 1987. The Institutional Money Market Fund is managed by Steven Traum, Managing Director-Money Markets and Inflation Linked Bond for Advisors. Mr. Traum has also been responsible for managing the investments of the CREF Money Market Account since 1988, the CREF Inflation Linked Bond Account since 1997, and TIAA-CREF Mutual Funds' Money Market Fund since 1997. He also manages the cash components of the other TIAA-CREF Institutional Mutual Funds, the other TIAA-CREF Mutual Funds and the CREF accounts. Mr. Traum joined TIAA-CREF in 1983. SERVICE PROVIDERS TIAA-CREF Institutional Mutual Funds may rely on affiliated or unaffiliated persons for services related to record keeping and other shareholder services (e.g., unaffiliated transfer agents maintaining individual account records for omnibus accounts in certain circumstances), may compensate such service providers, and may reflect these payments as an administrative expense of the applicable class of shares. CALCULATING SHARE PRICE We determine the net asset value ("NAV") per share, or share price, of a Fund on each day the New York Stock Exchange is open for business. We do this when trading closes on all U.S. national exchanges where securities or other investments of a Fund are principally traded. We will not price Fund shares on days that the New York Stock Exchange is closed. We compute a Fund's NAV by dividing the value of the Fund's assets, less its liabilities, by the number of outstanding shares of that Fund. We usually use market quotations or independent pricing services to value securities and other instruments held by the Funds, except the Institutional Money Market Fund. If market quotations or independent pricing services aren't readily available, we'll use a security's "fair value," as determined in good faith by or under the direction of the TIAA-CREF Institutional Mutual Funds' Board of Trustees. We may also use fair value if events that have a significant effect on the value of an investment (as determined in our sole discretion) occur between the time when its price is determined and the time a Fund's net asset value is calculated. To calculate the Institutional Money Market Fund's net asset value per share, we value its portfolio securities at their amortized cost. This valuation method does not take into account unrealized gains or losses on the Fund's portfolio securities. Amortized cost valuation involves first valuing a security at cost, and thereafter assuming an amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the security's market value. While this method provides certainty in valuation, there may be times when the value of a security, as determined by amortized cost, may be higher or lower than the price the Institutional Money Market Fund would receive if it sold the security. 21 26 DIVIDENDS AND DISTRIBUTIONS Each Fund expects to declare and distribute to shareholders substantially all of its net investment income and net realized capital gains, if any. The amount distributed will vary according to the income received from securities held by the Fund and capital gains realized from the sale of securities. The following table shows how often we plan to pay dividends on each Fund:
Fund Dividend Paid - ---- ------------- Institutional International Equity Fund Annually Institutional Growth Equity Fund Annually Institutional Growth and Income Fund Quarterly Institutional Equity Index Fund Annually Institutional Social Choice Equity Fund Annually Institutional Bond Fund Monthly Institutional Money Market Fund Monthly
Although we pay dividends monthly from the Institutional Money Market Fund, these dividends are calculated and declared daily. We pay capital gains from Funds that have them once a year. You can elect from among the following distribution options: 1. REINVESTMENT OPTION, SAME FUND. We'll automatically reinvest your dividend and capital gain distributions in additional shares of the Fund. Unless you elect otherwise, this will be your distribution option. 2. REINVESTMENT OPTION, DIFFERENT FUND. We'll automatically reinvest your dividend and capital gain distributions in additional shares of another Fund in which you already hold shares. 3. INCOME-EARNED OPTION. We'll automatically reinvest your capital gain distributions, but you will be sent a check for each dividend distribution. 4. CAPITAL GAINS OPTION. We'll automatically reinvest your dividend distributions, but you will be sent a check for each capital gain distribution. 5. CASH OPTION. We'll send a check for your dividend and each capital gain distribution. We make distributions for each Fund on a per share basis to the shareholders of record on the Fund's distribution date. We do this regardless of how long the shares have been held. That means if you buy shares just before or on a record date, you will pay the full price for the shares and then you may receive a portion of the price back as a taxable distribution. Cash distribution checks will be mailed within seven days. 22 27 TAXES As with any investment, you should consider how your investment in any Fund will be taxed. Taxes on distributions. Unless you are tax-exempt or hold Fund shares in a tax-deferred account, you must pay federal income tax, and possibly also state or local taxes, on distributions each year. Your distributions are taxable when they are paid, whether you take them in cash or reinvest them. However, distributions declared in October, November or December and paid in January are taxable as if they were paid on December 31 of the prior year. For federal tax purposes, income and short-term capital gain distributions from a Fund are taxed as ordinary income; long-term capital gain distributions are taxed as long-term capital gains. Every January, we will send you and the IRS a statement showing the taxable distributions paid to you in the previous year from each Fund. Long-term capital gain distributions may be taxed at a maximum federal rate of 20 percent to individual investors (or at 10 percent to individual investors who are in the 15 percent tax bracket). Taxes on transactions. Redemptions, including exchanges to other Funds, are also subject to capital gains tax or capital loss deductions. A capital gain or loss is the difference between the cost of your shares and the price you receive when you sell them. Whenever you sell shares of a Fund, we will send you a confirmation statement showing how many shares you sold and at what price. However, you or your tax preparer must determine whether this sale resulted in a capital gain or loss and the amount of tax to be paid on any gain. Be sure to keep your regular account statements; the information they contain will be essential in calculating the amount of your capital gains or losses. Backup withholding. If you fail to provide a correct taxpayer identification number or fail to certify that it is correct, we are required by law to withhold 31% of all the taxable distributions and redemption proceeds paid from your account. We are also required to begin backup withholding if instructed by the IRS to do so. "Buying a dividend." If you buy shares just before a Fund deducts a distribution from its net asset value, you will pay the full price for the shares and then receive a portion of the price back in the form of a taxable distribution. This is referred to as "buying a dividend." For example, assume you bought shares of a Fund for $10.00 per share the day before the Fund paid a $0.25 dividend. After the dividend was paid, each share would be worth $9.75, and you would have to include the $0.25 dividend in your gross income for tax purposes. Effect of foreign taxes. Foreign governments may impose taxes on a Fund and its investments and these taxes generally will reduce such Fund's distributions. If a Fund qualifies to pass through a credit for such taxes paid, an offsetting tax credit or deduction may be available to you. If so, your tax statement will show more taxable income than was actually distributed by the Fund, but will also show the amount of the available offsetting credit or deduction. 23 28 Other restrictions. There are tax requirements that all mutual funds must follow in order to avoid federal taxation. In its effort to adhere to these requirements, a Fund may have to limit its investment in some types of instruments. Special considerations for certain institutional investors. If you are a corporate investor, a portion of the dividends from net investment income paid by the Institutional Growth Equity Fund, the Institutional Growth and Income Fund, the Institutional Equity Index Fund, and the Institutional Social Choice Equity Fund will generally qualify for the corporate dividends-received deduction. However, the portion of the dividends that qualify depends on the aggregate qualifying dividend income received by each Fund from domestic (U.S.) sources. Certain holding period and debt financing restrictions may apply to corporate investors seeking to claim the deduction. We expect that little or none of the distributions paid by the Institutional International Equity Fund, the Institutional Bond Fund, and the Institutional Money Market Fund will qualify for the corporate dividends-received deduction. YOUR ACCOUNT: BUYING, SELLING OR EXCHANGING SHARES ELIGIBLE INVESTORS Shares of TIAA-CREF Institutional Mutual Funds are only available for purchase by certain intermediaries affiliated with TIAA-CREF ("TIAA-CREF Intermediaries"), such as TIAA-CREF Trust Company, FSB (the "Trust Company"), or other persons, such as state-sponsored tuition savings plans, who have entered into a contract with a TIAA-CREF Intermediary that enables them to purchase shares of the Funds. Collectively with TIAA-CREF Intermediaries, these contractually eligible investors are referred to as "Eligible Investors" in the rest of this prospectus. In the future, TIAA-CREF Institutional Mutual Funds may offer additional classes of shares (with different shareholder servicing, distribution, administrative, or other fees and expenses) for some or all of its Funds. For example, we may introduce another class of shares to be sold directly to investors who do not have a specific contractual relationship with a TIAA-CREF Intermediary. PURCHASE OF FUND SHARES There is no minimum investment requirement for Eligible Investors. All purchases must be in U.S. dollars and checks must be drawn on U.S. banks. We consider all requests for purchases, checks, and other forms of payments to be received when they are received in "good order" (see page 28). We won't accept third-party checks. There may be circumstances when we will not permit Eligible Investors to invest in one 24 29 or more of the Funds. We reserve the right to suspend or terminate the offering of shares by one or more Funds. We also reserve the right to reject any specific purchase request. PURCHASES BY ELIGIBLE INVESTORS Eligible Investors may invest in the Funds in any of the following ways. All other existing and prospective investors should contact their TIAA-CREF Intermediary for applicable purchase requirements. To purchase shares by mail, an Eligible Investor should make its check payable to TIAA-CREF Institutional Mutual Funds. Send the check by First Class Mail to TIAA-CREF Institutional Mutual Funds, c/o State Street Bank and Trust Company, P.O. Box ____, Boston, MA 02266-____, or by overnight delivery to TIAA-CREF Institutional Mutual Funds, c/o State Street Bank and Trust Company, 66 Brooks Drive, Braintree, MA 02184-3839. To purchase shares by wire, an Eligible Investor should instruct its bank to wire money to State Street Bank and Trust Company, ABA Number ____________, DDA Number ____________. Specify on the wire: (1) TIAA-CREF Institutional Mutual Funds; (2) account registration (names of registered owners), address and Social Security Number(s) or Taxpayer Identification Number; (3) whether the investment is for a new or existing account (provide Fund account number if existing); and (4) the Fund or Funds in which you want to invest, and amount to be invested in each. INVESTING THROUGH THE TRUST COMPANY Clients of the Trust Company may invest in TIAA-CREF Institutional Mutual Funds only through the Trust Company, which is an Eligible Investor and serves as the TIAA-CREF Intermediary for its clients. Contact the Trust Company regarding how investments in Fund shares are held for your benefit. In addition to the fees and expenses deducted by the Funds, you may be charged a fee by the Trust Company for the services it provides you. POINTS TO REMEMBER FOR ALL PURCHASES - - Each investment by an Eligible Investor in TIAA-CREF Institutional Mutual Funds must be for a specified dollar amount. We can't accept purchase requests specifying a certain price, date, or number of shares; we'll return these investments. - - If you invest in TIAA-CREF Institutional Mutual Funds through an Eligible Investor, the Eligible Investor may charge you a fee in connection with your investment (in addition to the fees and expenses deducted by the Funds). Contact the Eligible Investor to learn whether there are any other conditions, such as a minimum investment requirement, on your transactions. In addition, Eligible Investors that are not themselves affiliated with TIAA-CREF may be charged a fee by their TIAA-CREF Intermediary (in addition to the fees and expenses deducted by the Funds). 25 30 - - As an Eligible Investor, if your purchase check does not clear or payment on it is stopped, or if we do not receive good funds through wire transfer, we will treat this as a redemption of the shares purchased when your check or wire transfer was received. You will be responsible for any resulting loss incurred by any of the Funds. If you are already a shareholder, we can redeem shares from any of your account(s) as reimbursement for all losses. We also reserve the right to restrict you from making future purchases in any of the Funds. IN-KIND PURCHASES OF SHARES Advisors, at its sole discretion, may permit an Eligible Investor to purchase shares with investment securities (instead of cash), if: (1) Advisors believes the securities are appropriate investments for the particular Fund; (2) the securities offered to the Fund are not subject to any restrictions upon their sale by the Fund under the Securities Act of 1933, or otherwise; and (3) the securities are permissible holdings under the Fund's investment restrictions. If the Fund accepts the securities, the Eligible Investor's account will be credited with Fund shares equal in net asset value to the market value of the securities received. Eligible Investors interested in making in-kind purchases should contact their TIAA-CREF Intermediary. HOW TO REDEEM SHARES REDEMPTIONS BY ELIGIBLE INVESTORS Eligible Investors can redeem (sell) their Fund shares at any time. If your shares were purchased through an Eligible Investor, contact the Eligible Investor for applicable redemption requirements. Shares purchased through an Eligible Investor must be redeemed by the Eligible Investor. For further information, contact your TIAA-CREF Intermediary. We will only accept redemption requests that specify a dollar amount or number of shares to be redeemed. All other requests, including those specifying a certain price or date, will be returned. We accept redemption orders either through a written request delivered to one of the addresses listed in "Purchases by Eligible Investors" (page 25) or through a telephone request made by calling _______________. Once a redemption request is communicated to us, it becomes irrevocable and cannot be modified or canceled. Usually, we send redemption proceeds to the Eligible Investor on the second business day after we receive a redemption request, but not later than seven days afterwards, assuming the request is in good order (see page 28). If a redemption is requested shortly after a recent purchase by check, the redemption proceeds may not be paid until payment for the purchase is collected. This can take up to ten days. We can postpone payment if (a) the New York Stock Exchange is closed for other than usual weekends or holidays, or trading on the New York Stock Exchange is restricted; (b) an 26 31 emergency exists as defined by the SEC, or the SEC requires that trading be restricted; or (c) the SEC permits a delay for the protection of investors. We send redemption proceeds to the Eligible Investor at the address or bank account of record. If proceeds are to be sent elsewhere, we will require a letter of instruction from the Eligible Investor with signature guarantee (see page 28). We can send the redemption proceeds by check to the address of record or by wire transfer. REDEEMING SHARES THROUGH THE TRUST COMPANY If you purchased shares through the Trust Company, it is responsible for making any redemption proceeds available to you. In addition, the Trust Company may impose its own restrictions on your ability to redeem shares. Please contact the Trust Company directly for more information. IN-KIND REDEMPTIONS OF SHARES Large redemptions by any Eligible Investor that exceed $250,000 or 1% of a Fund's assets during any 90-day period may be considered detrimental to the Fund's existing shareholders. Therefore, at its sole discretion, the Fund may require that you take a "distribution in kind" upon redemption and may give you portfolio securities instead of cash. The securities you receive in this manner will need to be sold through a broker, and you may therefore incur transaction costs when you sell them. HOW TO EXCHANGE SHARES EXCHANGES BY ELIGIBLE INVESTORS Eligible Investors can exchange shares in a Fund for shares of any other Fund at any time. (An exchange is a simultaneous redemption of shares in one Fund and a purchase of shares in another Fund.) If you hold shares through a TIAA-CREF Intermediary or other Eligible Investor, contact the Eligible Investor for applicable exchange requirements. Exchanges between accounts can be made only if the accounts are registered in the same name(s), address and Social Security or Tax Identification Number. An exchange is considered a sale of securities, and therefore is a taxable event. We reserve the right, at our sole discretion, to reject any exchange request and to modify, suspend, or terminate the exchange privilege at any time. Eligible Investors can make an exchange through a letter or instruction delivered to one of the addresses listed in "Purchases by Eligible Investors" (page 25) or through a telephone request by calling _______________. The letter must include the Eligible Investor's name, address and the Funds the Eligible Investor wants to exchange between. Once made, an exchange request cannot be modified or canceled. 27 32 MAKING EXCHANGES THROUGH THE TRUST COMPANY If you purchased shares through the Trust Company, it is responsible for making any exchanges on your behalf. In addition, the Trust Company may impose its own restrictions on your ability to make exchanges. Please contact the Trust Company directly for more information. OTHER INVESTOR INFORMATION Good Order. Requests for transactions by Eligible Investors will not be processed until they are received in good order by our transfer agent, Boston Financial Data Services. "Good order" means that an Eligible Investor's transaction request includes its Fund account number, the amount of the transaction (in dollars or shares), signatures of all account owners exactly as registered on the account, and any other supporting legal documentation that may be required. Share Price. The share price we use for transactions will be the NAV per share next calculated after Boston Financial Data Services receives an Eligible Investor's request in good order. If an Eligible Investor purchases or redeems shares anytime before the New York Stock Exchange closes (usually 4:00 p.m. Eastern Time), the transaction price will be the NAV per share for that day. If an Eligible Investor makes a purchase or redemption request after the New York Stock Exchange closes, the transaction price will be the NAV per share for the next business day. If you purchased shares through an Eligible Investor, the Eligible Investor (including the Trust Company) may require you to communicate to it any purchase or redemption request before a specified deadline earlier than 4:00 p.m. in order to receive that day's NAV per share as the transaction price. Tax Identification Number. Each Eligible Investor must provide its Taxpayer Identification Number (which, for most individuals, is your Social Security Number) to us and indicate whether or not it is subject to back-up withholding. If an Eligible Investor doesn't furnish its Taxpayer Identification Number, redemptions and exchanges of shares, as well as dividends and capital gains distributions, will be subject to back-up tax withholding. Signature Guarantee. For some transaction requests by an Eligible Investor, we may require a signature guarantee of the Eligible Investor. This requirement is designed to protect you and the TIAA-CREF Institutional Mutual Funds from fraud, and to comply with rules on stock transfers. Transferring Shares. An Eligible Investor may transfer ownership of its shares to another person or organization that also qualifies as an Eligible Investor or may change the name on its account by sending us written instructions. All registered owners of the account must sign the request and provide signature guarantees. 28 33 FINANCIAL HIGHLIGHTS Because the Funds have limited operating history, no financial highlights information is included in this prospectus. Financial statements for each Fund are in the SAI, which is available free upon request. 29 34 [BACK COVER] FOR MORE INFORMATION ABOUT TIAA-CREF INSTITUTIONAL MUTUAL FUNDS The following documents contain more information about the Funds and are available free upon request: STATEMENT OF ADDITIONAL INFORMATION ("SAI"). The SAI contains more information about all aspects of the Funds. A current SAI has been filed with the U.S. Securities and Exchange Commission ("SEC") and is incorporated in this prospectus by reference. ANNUAL AND SEMI-ANNUAL REPORTS. The Funds' annual and semi-annual reports provide additional information about the Funds' investments. The first annual report, to be available in November 2000, will contain a discussion of the market conditions and investment strategies that significantly affected each Fund's performance during the preceding fiscal year. REQUESTING DOCUMENTS. You can request a copy of the SAI or these reports, or contact us for any other purpose, in any of the following ways: By telephone: Call 800 ____-______ In writing: TIAA-CREF Institutional Mutual Funds c/o State Street Bank and Trust Company P.O. Box 8009 Boston, MA 02266-8009 Information about TIAA-CREF Institutional Mutual Funds (including the SAI) can be reviewed and copied at the SEC's public reference room (1-800-SEC-0339) in Washington, D.C. The reports and other information are also available through the SEC's internet website at www.sec.gov. Copies of the information can also be obtained, upon payment of a duplicating fee, by writing the SEC's Public Reference Section, Washington, D.C. 20549-6009. Investment Company Act File No. 811- ---------- 35 TIAA-CREF INSTITUTIONAL MUTUAL FUNDS STATEMENT OF ADDITIONAL INFORMATION This Statement of Additional Information ("SAI") contains additional information that you should consider before investing in TIAA-CREF Institutional Mutual Funds (the "Trust"). It is not a prospectus and should be read carefully in conjunction with the Trust's prospectus dated July ___, 1999 (the "Prospectus"), which may be obtained by writing us at TIAA-CREF Institutional Mutual Funds, c/o State Street Bank and Trust Company, P.O. Box 9081, Boston, MA 02266 or by calling 800 223-1200. Terms used in the Prospectus are incorporated in this SAI. The date of this SAI is July ___, 1999. 36 TABLE OF CONTENTS
Page ---- INVESTMENT OBJECTIVES, POLICIES, AND RESTRICTIONS.................................................................1 Fundamental Policies.....................................................................................1 Investment Policies and Risk Considerations..............................................................2 MANAGEMENT OF TIAA-CREF INSTITUTIONAL MUTUAL FUNDS...............................................................14 Trustees and Officers of TIAA-CREF Institutional Mutual Funds...........................................14 Trustee and Officer Compensation........................................................................17 PRINCIPAL HOLDERS OF SECURITIES..................................................................................18 INVESTMENT ADVISORY AND OTHER SERVICES...........................................................................19 ABOUT TIAA-CREF INSTITUTIONAL MUTUAL FUNDS AND THE SHARES........................................................19 Indemnification of Shareholders.........................................................................20 Indemnification of Trustees.............................................................................20 Limitation of Fund Liability............................................................................20 Shareholder Meetings and Voting Rights..................................................................21 Additional Portfolios...................................................................................21 Dividends and Distributions.............................................................................21 PRICING OF SHARES................................................................................................21 Investments for Which Market Quotations Are Readily Available...........................................22 Foreign Investments.....................................................................................22 Debt Securities.........................................................................................22 Special Valuation Procedures for the Institutional Money Market Fund....................................22 Options and Futures.....................................................................................23 Investments for Which Market Quotations Are Not Readily Available.......................................24 TAX STATUS.......................................................................................................24 BROKERAGE ALLOCATION.............................................................................................26 UNDERWRITERS.....................................................................................................27 CALCULATION OF PERFORMANCE DATA..................................................................................27 Total Return Calculations...............................................................................28 Yield Calculations......................................................................................28 Performance Comparisons.................................................................................30 Illustrating Compounding................................................................................30 Net Asset Value.........................................................................................31 Moving Averages.........................................................................................31 VOTING RIGHTS....................................................................................................31
- ii - 37 LEGAL MATTERS....................................................................................................31 EXPERTS..........................................................................................................31 ADDITIONAL CONSIDERATIONS........................................................................................31 FINANCIAL STATEMENTS.............................................................................................32
- iii - 38 INVESTMENT OBJECTIVES, POLICIES, AND RESTRICTIONS The following discussion of investment policies and restrictions supplements the Prospectus descriptions of the investment objective and principal investment strategies of each of the Trust's seven separate investment portfolios or funds ("Funds"). Under the Investment Company Act of 1940, as amended (the "1940 Act"), any fundamental policy of a registered investment company may not be changed without the vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of that series. However, each Fund's investment objective, policies and principal investment strategies described in the Prospectus, as well as the investment restrictions contained in "Investment Policies and Risk Considerations" below, are not fundamental and therefore may be changed by the Trust's board of trustees (the "Board of Trustees" or the "Board") at any time. Each Fund will be "diversified" within the meaning of the 1940 Act. Unless stated otherwise, each of the following investment policies and risk considerations apply to each Fund. FUNDAMENTAL POLICIES The following restrictions are fundamental policies of each Fund: 1. The Fund will not issue senior securities except as permitted by law. 2. The Fund will not borrow money, except: (a) each Fund may purchase securities on margin, as described in restriction 7 below; and (b) from banks (only in amounts not in excess of 33 1/3 percent of the market value of that Fund's assets at the time of borrowing), and, from other sources, for temporary purposes (only in amounts not exceeding 5 percent, or such greater amount as may be permitted by law, of that Fund's total assets taken at market value at the time of borrowing). 3. The Fund will not underwrite the securities of other companies, except to the extent that it may be deemed an underwriter in connection with the disposition of securities from its portfolio. 4. The Fund will not purchase real estate or mortgages directly. 5. The Fund will not purchase commodities or commodities contracts, except to the extent futures are purchased as described herein. 6. The Fund will not lend any security or make any other loan if, as a result, more than 33 1/3 percent of its total assets would be lent to other parties, but this limit does not apply to repurchase agreements. 7. The Fund will not purchase any security on margin except that the Fund may obtain such short-term credit as may be necessary for the clearance of purchases and sales of portfolio securities. - 1 - 39 8. The Fund will not, with respect to at least 75 percent of the value of its total assets, invest more than 5 percent of its total assets in the securities of any one issuer, other than securities issued or guaranteed by the United States Government, its agencies or instrumentalities, or hold more than 10 percent of the outstanding voting securities of any one issuer. The following restriction is a fundamental policy of each Fund other than the Institutional Money Market Fund. 9. The Fund will not invest in an industry if after giving effect to that investment that Fund's holding in that industry would exceed 25 percent of its total assets. The following restriction is a fundamental policy of the Institutional Money Market Fund: 10. The Fund may invest more than 25 percent of its assets in obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities; the Fund will not otherwise invest in an industry if after giving effect to that investment the Fund's holding in that industry would exceed 25 percent of its total assets. INVESTMENT POLICIES AND RISK CONSIDERATIONS The following restrictions are non-fundamental policies of each Fund. These restrictions may be changed without the approval of the shareholders in the affected Fund. Non-Equity Investments of the Equity Funds. The equity Funds can, in addition to stocks, hold other types of securities with equity characteristics, such as convertible bonds, preferred stock, warrants and depository receipts or rights. Pending more permanent investments or to use cash balances effectively, these Funds can hold the same types of money market instruments the Institutional Money Market Fund invests in (see Prospectus, page __), as well as other short-term instruments. These other instruments are the same type of instruments the Institutional Money Market Fund holds, but they have longer maturities than the instruments allowed in the Institutional Money Market Fund, or else don't meet the requirements for "First Tier Securities" (see Prospectus, page __). When market conditions warrant, the equity Funds can invest directly in debt securities similar to those the Institutional Bond Fund may invest in (see Prospectus, page __). The equity Funds can also hold debt securities that they acquire because of mergers, recapitalizations or otherwise. Borrowing and Lending Among Affiliates. At some time in the future, the Funds may establish a facility for borrowing and lending money among themselves as well as with TIAA or other registered investment companies managed by Advisors or Investment Management. If a Fund borrows money, it could leverage its portfolio by keeping securities it might otherwise have had to sell. Leveraging exposes a Fund to special risks, including greater - 2 - 40 fluctuations in net asset value in response to market changes. Illiquid Securities. Each Fund can invest up to 15 percent of its assets (10 percent for the Institutional Money Market Fund) in investments that may not be readily marketable. It may be difficult to sell these investments for their fair market value. Preferred Stock. The Funds can invest in preferred stock consistent with their investment objectives. Options and Futures. Each of the Funds may engage in options and futures strategies to the extent permitted by the SEC and Commodity Futures Trading Commission ("CFTC"). We do not intend for any Fund to use options and futures strategies in a speculative manner but rather we would use them primarily as hedging techniques or for cash management purposes. Option-related activities could include: (1) selling of covered call option contracts, and the purchase of call option contracts for the purpose of a closing purchase transaction; (2) buying covered put option contracts, and selling put option contracts to close out a position acquired through the purchase of such options; and (3) selling call option contracts or buying put option contracts on groups of securities and on futures on groups of securities and buying similar call option contracts or selling put option contracts to close out a position acquired through a sale of such options. This list of options-related activities is not intended to be exclusive, and each Fund may engage in other types of options transactions consistent with its investment objective and policies and applicable law. A call option is a short-term contract (generally for nine months or less) which gives the purchaser of the option the right to purchase the underlying security at a fixed exercise price at any time (American style) or at a set time (European style) prior to the expiration of the option regardless of the market price of the security during the option period. As consideration for the call option, the purchaser pays the seller a premium, which the seller retains whether or not the option is exercised. The seller of a call option has the obligation, upon the exercise of the option by the purchaser, to sell the underlying security at the exercise price at any time during the option period. Selling a call option would benefit the seller if, over the option period, the underlying security declines in value or does not appreciate above the aggregate of the exercise price and the premium. However, the seller risks an "opportunity loss" of profits if the underlying security appreciates above the aggregate value of the exercise price and the premium. A Fund may close out a position acquired through selling a call option by buying a call option on the same security with the same exercise price and expiration date as the call option that it had previously sold on that security. Depending on the premium for the call option purchased by the Fund, the Fund will realize a profit or loss on the transaction. A put option is a similar short-term contract that gives the purchaser of the option the right to sell the underlying security at a fixed exercise price prior to the expiration of the option regardless of the market price of the security during the option period. As consideration for the put option, the purchaser pays the seller a premium, which the seller retains whether or not the option is exercised. The seller of a put option has the obligation, upon the exercise of the option - 3 - 41 by the purchaser, to purchase the underlying security at the exercise price during the option period. The buying of a covered put contract limits the downside exposure for the investment in the underlying security to the combination of the exercise price less the premium paid. The risk of purchasing a put is that the market price of the underlying stock prevailing on the expiration date may be above the option's exercise price. In that case the option would expire worthless and the entire premium would be lost. A Fund may close out a position acquired through buying a put option by selling a put option on the same security with the same exercise price and expiration date as the put option which it had previously bought on the security. Depending on the premium of the put option sold by the Fund, the Fund would realize a profit or loss on the transaction. In addition to options (both calls and puts) on individual securities, there are also options on groups of securities, such as the Standard & Poor's 100 Index traded on the Chicago Board Options Exchange. There are also options on futures of groups of securities such as the Standard & Poor's 500 Stock Index and the New York Stock Exchange Composite Index. The selling of calls can be used in anticipation of, or in, a general market or market sector decline that may adversely affect the market value of a Fund's portfolio of securities. To the extent that a Fund's portfolio of securities changes in value in correlation with a given stock index, the sale of call options on the futures of that index would substantially reduce the risk to the portfolio of a market decline, and, by so doing, provides an alternative to the liquidation of securities positions in the portfolio with resultant transaction costs. A risk in all options, particularly the relatively new options on groups of securities and on futures on groups of securities, is a possible lack of liquidity. This will be a major consideration before a Fund deals in any option. There is another risk in connection with selling a call option on a group of securities or on the futures of groups of securities. This arises because of the imperfect correlation between movements in the price of the call option on a particular group of securities and the price of the underlying securities held in the portfolio. Unlike a covered call on an individual security, where a large movement on the upside for the call option will be offset by a similar move on the underlying stock, a move in the price of a call option on a group of securities may not be offset by a similar move in the price of securities held due to the difference in the composition of the particular group and the portfolio itself. To the extent permitted by applicable regulatory authorities, each Fund may purchase and sell futures contracts on securities or other instruments, or on groups or indexes of securities or other instruments. The purpose of hedging techniques using financial futures is to protect the principal value of a Fund against adverse changes in the market value of securities or instruments in its portfolio, and to obtain better returns on future investments than actually may be available at the future time. Since these are hedging techniques, the gains or losses on the futures contract normally will be offset by losses or gains, respectively, on the hedged investment. Futures contracts also may be offset prior to the future date by executing an opposite futures contract transaction. A futures contract on an investment is a binding contractual commitment which, if held to maturity, will result in an obligation to make or accept delivery, during a particular future - 4 - 42 month, of the securities or instrument underlying the contract. By purchasing a futures contract -- assuming a "long" position -- a Fund legally will obligate itself to accept the future delivery of the underlying security or instrument and pay the agreed price. By selling a futures contract -- assuming a "short" position -- it legally will obligate itself to make the future delivery of the security or instrument against payment of the agreed price. Positions taken in the futures markets are not normally held to maturity, but are instead liquidated through offsetting transactions which may result in a profit or a loss. While futures positions taken by a Fund usually will be liquidated in this manner, a Fund may instead make or take delivery of the underlying securities or instruments whenever it appears economically advantageous to the Fund to do so. A clearing corporation associated with the exchange on which futures are traded assumes responsibility for closing out positions and guarantees that the sale and purchase obligations will be performed with regard to all positions that remain open at the termination of the contract. A stock index futures contract, unlike a contract on a specific security, does not provide for the physical delivery of securities, but merely provides for profits and losses resulting from changes in the market value of the contract to be credited or debited at the close of each trading day to the respective accounts of the parties to the contract. On the contract's expiration date, a final cash settlement occurs and the futures positions are closed out. Changes in the market value of a particular stock index futures contract reflect changes in the specified index of equity securities on which the future is based. Stock index futures may be used to hedge the equity investments of each Fund with regard to market (systematic) risk (involving the market's assessment of overall economic prospects), as distinguished from stock specific risk (involving the market's evaluation of the merits of the issuer of a particular security). By establishing an appropriate "short" position in stock index futures, a Fund may seek to protect the value of its securities portfolio against an overall decline in the market for equity securities. Alternatively, in anticipation of a generally rising market, a Fund can seek to avoid losing the benefit of apparently low current prices by establishing a "long" position in stock index futures and later liquidating that position as particular equity securities are in fact acquired. To the extent that these hedging strategies are successful, a Fund will be affected to a lesser degree by adverse overall market price movements, unrelated to the merits of specific portfolio equity securities, than would otherwise be the case. Unlike the purchase or sale of a security, no price is paid or received by a Fund upon the purchase or sale of a futures contract. Initially, the Fund will be required to deposit in a custodial account an amount of cash, United States Treasury securities, or other permissible assets equal to approximately 5 percent of the contract amount. This amount is known as "initial margin." The nature of initial margin in futures transactions is different from that of margin in security transactions in that futures contract margin does not involve the borrowing of funds by the customer to finance the transactions. Rather, the initial margin is in the nature of a performance bond or good faith deposit on the contract which is returned to the Fund upon termination of the futures contract assuming all contractual obligations have been satisfied. Subsequent payments to and from the broker, called "variation margin," will be made on a daily basis as the price of the underlying stock index fluctuates making the long and short positions in the futures - 5 - 43 contract more or less valuable, a process known as "marking to the market." For example, when a Fund has purchased a stock index futures contract and the price of the underlying stock index has risen, that position will have increased in value, and the Fund will receive from the broker a variation margin payment equal to that increase in value. Conversely, where a Fund has purchased a stock index futures contract and the price of the underlying stock index has declined, the position would be less valuable and the Fund would be required to make a variation margin payment to the broker. At any time prior to expiration of the futures contract, the Fund may elect to close the position by taking an opposite position which will operate to terminate the Fund's position in the futures contract. A final determination of variation margin is then made, additional cash is required to be paid by or released to the Fund, and the Fund realizes a loss or a gain. There are several risks in connection with the use of a futures contract as a hedging device. One risk arises because of the imperfect correlation between movements in the prices of the futures contracts and movements in the securities or instruments which are the subject of the hedge. Each Fund will attempt to reduce this risk by engaging in futures transactions, to the extent possible, where, in our judgment, there is a significant correlation between changes in the prices of the futures contracts and the prices of each Fund's portfolio securities or instruments sought to be hedged. Successful use of futures contracts for hedging purposes also is subject to the user's ability to predict correctly movements in the direction of the market. For example, it is possible that, where a Fund has sold futures to hedge its portfolio against declines in the market, the index on which the futures are written may advance and the values of securities or instruments held in the Fund's portfolio may decline. If this occurred, the Fund would lose money on the futures and also experience a decline in value in its portfolio investments. However, we believe that over time the value of a Fund's portfolio will tend to move in the same direction as the market indices which are intended to correlate to the price movements of the portfolio securities or instruments sought to be hedged. It also is possible that, for example, if a Fund has hedged against the possibility of the decline in the market adversely affecting stocks held in its portfolio and stock prices increased instead, the Fund will lose part or all of the benefit of increased value of those stocks that it has hedged because it will have offsetting losses in its futures positions. In addition, in such situations, if the Fund has insufficient cash, it may have to sell securities or instruments to meet daily variation margin requirements. Such sales may be, but will not necessarily be, at increased prices which reflect the rising market. The Fund may have to sell securities or instruments at a time when it may be disadvantageous to do so. In addition to the possibility that there may be an imperfect correlation, or no correlation at all, between movements in the futures contracts and the portion of the portfolio being hedged, the prices of futures contracts may not correlate perfectly with movements in the underlying security or instrument due to certain market distortions. First, all transactions in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions which could distort the normal relationship between the index and futures markets. Second, the margin requirements in the futures market are less onerous than margin requirements in the securities market, and as a result the futures market may attract more speculators than the - 6 - 44 securities market does. Increased participation by speculators in the futures market also may cause temporary price distortions. Due to the possibility of price distortion in the futures market and also because of the imperfect correlation between movements in the futures contracts and the portion of the portfolio being hedged, even a correct forecast of general market trends by Teachers Advisors, Inc. ("Advisors"), the investment adviser for TIAA-CREF Institutional Mutual Funds, still may not result in a successful hedging transaction over a very short time period. Each Fund may also use futures contracts and options on futures contracts to manage its cash flow more effectively. To the extent that a Fund enters into non-hedging positions, it will do so only in accordance with certain CFTC exemptive provisions. Thus, pursuant to CFTC Rule 4.5, the aggregate initial margin and premiums required to establish non-hedging positions in commodity futures or commodity options contracts may not exceed 5 percent of the liquidation value of the Fund's portfolio, after-taking into account unrealized profits and unrealized losses on any such contracts it has entered into (provided that the in-the-money amount of an option that is in-the-money when purchased may be excluded in computing such 5 percent). Options and futures transactions may increase a Fund's transaction costs and portfolio turnover rate and will be initiated only when consistent with its investment objectives. Investment Companies. Each Fund can invest up to 5 percent of its assets in any single investment company and up to 10 percent of its assets in all other investment companies in the aggregate. However, no Fund can hold more than 3 percent of the total outstanding voting stock of any single investment company. Firm Commitment Agreements and Purchase of "When-Issued" Securities. Each Fund can enter into firm commitment agreements for the purchase of securities on a specified future date. When a Fund enters into a firm commitment agreement, liability for the purchase price -- and the rights and risks of ownership of the securities -- accrues to the Fund at the time it becomes obligated to purchase such securities, although delivery and payment occur at a later date. Accordingly, if the market price of the security should decline, the effect of the agreement would be to obligate the Fund to purchase the security at a price above the current market price on the date of delivery and payment. During the time the Fund is obligated to purchase such securities, it will be required to segregate assets. See below, "Segregated Accounts." Pass-Through Securities. The Funds may invest in mortgage pass-through securities such as GNMA certificates or FNMA and FHLMC mortgage-backed obligations, or modified pass-through securities such as collateralized mortgage obligations issued by various financial institutions. In connection with these investments, early repayment of principal arising from prepayments of principal on the underlying mortgage loans due to the sale of the underlying property, the refinancing of the loan, or foreclosure may expose a Fund to a lower rate of return upon reinvestment of the principal. Prepayment rates vary widely and may be affected by changes in market interest rates. In periods of falling interest rates, the rate of prepayment tends to increase, thereby shortening the actual average life of the mortgage-related security. Conversely, when interest rates are rising, the rate of prepayment tends to decrease, thereby - 7 - 45 lengthening the actual average life of the mortgage-related security. Accordingly, it is not possible to accurately predict the average life of a particular pool. Reinvestment of prepayments may occur at higher or lower rates than the original yield on the certificates. Therefore, the actual maturity and realized yield on pass-through or modified pass-through mortgage-related securities will vary based upon the prepayment experience of the underlying pool of mortgages. For purposes of calculating the average life of the assets of the relevant Fund, the maturity of each of these securities will be the average life of such securities based on the most recent or estimated annual prepayment rate. Lending of Securities. Subject to investment policy 6 on page 1 (relating to loans of portfolio securities), each Fund may lend its securities to brokers and dealers that are not affiliated with Teachers Insurance and Annuity Association of America ("TIAA"), are registered with the SEC and are members of the NASD, and also to certain other financial institutions. All loans will be fully collateralized. In connection with the lending of its securities, a Fund will receive as collateral cash, securities issued or guaranteed by the United States Government (i.e., Treasury securities), or other collateral permitted by applicable law, which at all times while the loan is outstanding will be maintained in amounts equal to at least 102 percent of the current market value of the loaned securities, or such lesser percentage as may be permitted by the Securities and Exchange Commission ("SEC") (not to fall below 100 percent of the market value of the loaned securities), as reviewed daily. By lending its securities, a Fund will receive amounts equal to the interest or dividends paid on the securities loaned and in addition will expect to receive a portion of the income generated by the short-term investment of cash received as collateral or, alternatively, where securities or a letter of credit are used as collateral, a lending fee paid directly to the Fund by the borrower of the securities. Such loans will be terminable by the Fund at any time and will not be made to affiliates of TIAA. The Fund may terminate a loan of securities in order to regain record ownership of, and to exercise beneficial rights related to, the loaned securities, including but not necessarily limited to voting or subscription rights, and may, in the exercise of its fiduciary duties, terminate a loan in the event that a vote of holders of those securities is required on a material matter. The Fund may pay reasonable fees to persons unaffiliated with the Fund for services or for arranging such loans. Loans of securities will be made only to firms deemed creditworthy. As with any extension of credit, however, there are risks of delay in recovering the loaned securities, should the borrower of securities default, become the subject of bankruptcy proceedings, or otherwise be unable to fulfill its obligations or fail financially. Repurchase Agreements. Repurchase agreements have the characteristics of loans, and will be fully collateralized (either with physical securities or evidence of book entry transfer to the account of the custodian bank) at all times. During the term of the repurchase agreement, the Fund entering into the agreement retains the security subject to the repurchase agreement as collateral securing the seller's repurchase obligation, continually monitors the market value of the security subject to the agreement, and requires the Fund's seller to deposit with the Fund additional collateral equal to any amount by which the market value of the security subject to the repurchase agreement falls below the resale amount provided under the repurchase agreement. Each Fund will enter into repurchase agreements only with member banks of the Federal Reserve System, and with primary government securities dealers or other domestic or foreign broker-dealers whose creditworthiness has been reviewed and found satisfactory by Advisors - 8 - 46 and who have, therefore, been determined to present minimal credit risk. Securities underlying repurchase agreements will be limited to certificates of deposit, commercial paper, bankers' acceptances, or obligations issued or guaranteed by the United States Government or its agencies or instrumentalities, in which the Fund entering into the agreement may otherwise invest. If a seller of a repurchase agreement defaults and does not repurchase the security subject to the agreement, the Fund entering into the agreement would look to the collateral security underlying the seller's repurchase agreement, including the securities subject to the repurchase agreement, for satisfaction of the seller's obligation to the Fund; in such event the Fund might incur disposition costs in liquidating the collateral and might suffer a loss if the value of the collateral declines. In addition, if bankruptcy proceedings are instituted against a seller of a repurchase agreement, realization upon the collateral may be delayed or limited. Swap Transactions. Each Fund may, to the extent permitted by the SEC, enter into privately negotiated "swap" transactions with other financial institutions in order to take advantage of investment opportunities generally not available in public markets. In general, these transactions involve "swapping" a return based on certain securities, instruments, or financial indices with another party, such as a commercial bank, in exchange for a return based on different securities, instruments, or financial indices. By entering into a swap transaction, a Fund may be able to protect the value of a portion of its portfolio against declines in market value. Each Fund may also enter into swap transactions to facilitate implementation of allocation strategies between different market segments or countries or to take advantage of market opportunities which may arise from time to time. A Fund may be able to enhance its overall performance if the return offered by the other party to the swap transaction exceeds the return swapped by the Fund. However, there can be no assurance that the return a Fund receives from the counterparty to the swap transaction will exceed the return it swaps to that party. While a Fund will only enter into swap transactions with counterparties it considers creditworthy (and will monitor the creditworthiness of parties with which it enters into swap transactions), a risk inherent in swap transactions is that the other party to the transaction may default on its obligations under the swap agreement. If the other party to the swap transaction defaults on its obligations, the Fund entering into the agreement would be limited to the agreement's contractual remedies. There can be no assurance that a Fund will succeed when pursuing its contractual remedies. To minimize a Fund's exposure in the event of default, it will usually enter into swap transactions on a net basis (i.e., the parties to the transaction will net the payments payable to each other before such payments are made). When a Fund enters into swap transactions on a net basis, the net amount of the excess, if any, of the Fund's obligations over its entitlements with respect to each such swap agreement will be accrued on a daily basis and an amount of liquid assets having an aggregate market value at least equal to the accrued excess will be segregated by the Fund's custodian. To the extent a Fund enters into swap transactions other than on a net basis, the amount segregated will be the full amount of the Fund's obligations, if any, with respect to each such swap agreement, accrued on a daily basis. See "Segregated - 9 - 47 Accounts," below. Swap agreements may be considered illiquid by the SEC staff and subject to the limitations on illiquid investments. To the extent that there is an imperfect correlation between the return a Fund is obligated to swap and the securities or instruments representing such return, the value of the swap transaction may be adversely affected. No Fund therefore will enter into a swap transaction unless it owns or has the right to acquire the securities or instruments representative of the return it is obligated to swap with the counterparty to the swap transaction. It is not the intention of any Fund to engage in swap transactions in a speculative manner but rather primarily to hedge or manage the risks associated with assets held in, or to facilitate the implementation of portfolio strategies of purchasing and selling assets for, the Fund. Segregated Accounts. In connection with when-issued securities, firm commitment and certain other transactions in which a Fund incurs an obligation to make payments in the future, a Fund may be required to segregate assets with its custodian bank in amounts sufficient to settle the transaction. To the extent required, such segregated assets can consist of liquid assets, including equity or other securities, or other instruments such as cash, United States Government securities or other securities as may be permitted by law. Currency Transactions. The value of a Fund's assets as measured in United States dollars may be affected favorably or unfavorably by changes in foreign currency exchange rates and exchange control regulations, and the Fund may incur costs in connection with conversions between various currencies. To minimize the impact of such factors on net asset values, the Fund may engage in foreign currency transactions in connection with their investments in foreign securities. The Funds will not speculate in foreign currency exchange, and will enter into foreign currency transactions only to "hedge" the currency risk associated with investing in foreign securities. Although such transactions tend to minimize the risk of loss due to a decline in the value of the hedged currency, they also may limit any potential gain which might result should the value of such currency increase. The Funds will conduct their currency exchange transactions either on a spot (i.e., cash) basis at the rate prevailing in the currency exchange market, or through forward contracts to purchase or sell foreign currencies. A forward currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are entered into with large commercial banks or other currency traders who are participants in the interbank market. By entering into a forward contract for the purchase or sale of foreign currency involved in underlying security transactions, a Fund is able to protect itself against possible loss between trade and settlement dates for that purchase or sale resulting from an adverse change in the relationship between the U.S. dollar and such foreign currency. This practice is sometimes referred to as "transaction hedging." In addition, when it appears that a particular foreign currency may suffer a substantial decline against the U.S. dollar, a Fund may enter into a forward - 10 - 48 contract to sell an amount of foreign currency approximating the value of some or all of its portfolio securities denominated in such foreign currency. This practice is sometimes referred to as "portfolio hedging." Similarly, when it appears that the U.S. dollar may suffer a substantial decline against a foreign currency, a Fund may enter into a forward contract to buy that foreign currency for a fixed dollar amount. The Funds may also hedge their foreign currency exchange rate risk by engaging in currency financial futures, options and "cross-hedge" transactions. In "cross-hedge" transactions, a Fund holding securities denominated in one foreign currency will enter into a forward currency contract to buy or sell a different foreign currency (one that generally tracks the currency being hedged with regard to price movements). Such cross-hedges are expected to help protect a Fund against an increase or decrease in the value of the U.S. dollar against certain foreign currencies. The Funds may hold a portion of their respective assets in bank deposits denominated in foreign currencies, so as to facilitate investment in foreign securities as well as protect against currency fluctuations and the need to convert such assets into U.S. dollars (thereby also reducing transaction costs). To the extent these monies are converted back into U.S. dollars, the value of the assets so maintained will be affected favorably or unfavorably by changes in foreign currency exchange rates and exchange control regulations. The forecasting of short-term currency market movement is extremely difficult and whether a short-term hedging strategy will be successful is highly uncertain. Moreover, it is impossible to forecast with absolute precision the market value of portfolio securities at the expiration of a foreign currency forward contract. Accordingly, a Fund may be required to buy or sell additional currency on the spot market (and bear the expense of such transaction) if its predictions regarding the movement of foreign currency or securities markets prove inaccurate. In addition, the use of cross-hedging transactions may involve special risks, and may leave a Fund in a less advantageous position than if such a hedge had not been established. Because foreign currency forward contracts are privately negotiated transactions, there can be no assurance that a Fund will have flexibility to roll-over the foreign currency forward contract upon its expiration if it desires to do so. Additionally, there can be no assurance that the other party to the contract will perform its obligations thereunder. There is no express limitation on the percentage of a Fund's assets that may be committed to foreign currency exchange contracts. A Fund will not enter into foreign currency forward contracts or maintain a net exposure in such contracts where that Fund would be obligated to deliver an amount of foreign currency in excess of the value of that Fund's portfolio securities or other assets denominated in that currency or, in the case of a cross-hedge transaction, denominated in a currency or currencies that Fund's investment adviser believes will correlate closely to the currency's price movements. The Funds generally will not enter into forward contracts with terms longer than one year. Foreign Investments. As described more fully in the Prospectus, certain Funds may invest in foreign securities, including those in emerging markets. In addition to the general risk factors discussed in the Prospectus, there are a number of country- or region-specific risks and - 11 - 49 other considerations that may affect these investments. Investment in Europe. The total European market (consisting of the European Union, the European Free Trade Association and Eastern European countries) contains over 450 million consumers, a market larger than either the United States or Japan. European businesses compete both intra-regionally and globally in a wide range of industries, and recent political and economic changes throughout Europe are likely further to expand the role of Europe in the global economy. As a result, a great deal of interest and activity has been generated aimed at understanding and benefiting from the "new" Europe that may result. The incipient aspects of major developments in Europe as well as other considerations means that there can be no guarantee that outcomes will be as anticipated or will have results that investors would regard as favorable. The European Union. The European Union ("EU") consists of Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, and the United Kingdom (the "EU Nations"), with a total population exceeding 370 million. The EU Nations have undertaken to establish, among themselves, a single market that is largely free of internal barriers and hindrances to the free movement of goods, persons, services and capital. Although it is difficult to predict when this goal will be fully realized, macro- and micro-economic adjustments already in train are indicative of significant increases in efficiency and the ability of the EU Nations to compete globally by simplifying product distribution networks, promoting economies of scale, and increasing labor mobility, among other effects. The establishment of the eleven-country European Monetary Union, a subset of the European Union countries, with its own central bank, the European Central Bank; its own currency, the Euro; and a single interest rate structure, represents a new economic entity, the Euro-area. While authority for monetary policy thus shifts from national hands to an independent supranational body, sovereignty elsewhere remains at the national level. Uncertainties with regard to balancing of monetary policy against national fiscal and other political issues and their extensive ramifications represent important risk considerations for investors in these countries. Investment in the Pacific Basin. The economies of the Pacific Basin vary widely in their stages of economic development. Some (such as Japan, Australia, Singapore, and Hong Kong) are considered advanced by Western standards; others (such as Thailand, Indonesia, and Malaysia) are considered "emerging" -- rapidly shifting from natural resource- and agriculture-based systems to more technologically advanced systems oriented toward manufacturing and services. The major reform of China's economy and polity continues to be an important stimulus to economic growth internally, and, through trade, across the region. Intra-regional trade has become increasingly important to a number of these economies. Japan, the second largest economy in the world, is the dominant economy in the Pacific Basin, with one of the highest per capita incomes in the world. Its extensive trade relationships also contribute to expectations for regional and global economic growth. Economic growth has historically been relatively strong in the region, but recent economic turmoil among the emerging economies, and unmitigated recessionary impulses in Japan, in the recent past have raised important questions with regard to prospective longer-term outcomes. Potential policy miscalculations or other events could pose important risks to equity investors in any of these economies. - 12 - 50 Investment in Canada. Canada, a country rich in natural resources and a leading industrial country of the world, is by far the most important trading partner of the United States. The U.S. and Canada have entered into the U.S.-Canada Free Trade Agreement which, over a 10-year period from 1989, will remove trade barriers affecting all important sectors of each country's economy. In addition, the U.S., Canada, and Mexico have established the North American Free Trade Agreement ("NAFTA"), which is expected to significantly benefit the economies of each of the countries through the more rational allocation of resources and production over the region. Uncertainty regarding the longer-run political structure of Canada is an added risk to investors, along with weak commodity prices. Investment in Latin America. Latin America (including Mexico and Central America) has a population of approximately 455 million and is rich in natural resources. Important gains in the manufacturing sector have developed in several of the major countries in the region. A number of countries in the region have taken steps to reduce impediments to trade, most notably through the NAFTA agreement between the U.S., Canada and Mexico and the Mercosur agreement between Argentina, Brazil, Paraguay and Uruguay, with Chile as an associate member. Restrictions on international capital flows, intermittent problems with capital flight, and some potential difficulties in the repayment of external debt, however, remain important concerns in the region -- exacerbating the risks in these equity markets. As a result Latin American equity markets have been extremely volatile. Efforts to restructure these economies through privatization and fiscal and monetary reform have been met with some success, with gains in output growth and slowing rates of inflation. These efforts may result in attractive investment opportunities. However, recent events have shown that large shifts in sentiment in markets elsewhere on the globe may very quickly reverberate among these markets, adding greater risk to already volatile markets. There can be no assurance that attempted reforms will ultimately be successful or will bring about results investors would regard as favorable. Other Regions. There are developments in other regions and countries around the world which could lead to additional investment opportunities. We will monitor these developments and may invest when appropriate. Depository Receipts. The equity Funds can invest in American, European and Global Depository Receipts ("ADRs," "EDRs" and "GDRs"). They are alternatives to the purchase of the underlying securities in their national markets and currencies. Although their prices are quoted in U.S. dollars, they don't eliminate all the risks of foreign investing. ADRs represent the right to receive securities of foreign issuers deposited in a domestic bank or a foreign correspondent bank. To the extent that a Fund acquires ADRs through banks which do not have a contractual relationship with the foreign issuer of the security underlying the ADR to issue and service such ADRs, there may be an increased possibility that the Fund would not become aware of and be able to respond to corporate actions such as stock splits or rights offerings involving the foreign issuer in a timely manner. In addition, the lack of information may result in inefficiencies in the valuation of such instruments. However, by investing in ADRs rather than directly in the stock of foreign issuers, a Fund will avoid currency risks during the settlement period for either purchases or sales. In general, there is a large, liquid market in the U.S. for ADRs quoted on a national securities exchange or the NASD's national - 13 - 51 market system. The information available for ADRs is subject to the accounting, auditing and financial reporting standards of the domestic market or exchange on which they are traded, which standards are more uniform and more exacting than those to which many foreign issuers may be subject. EDRs and GDRs are receipts evidencing an arrangement with a non-U.S. bank similar to that for ADRs and are designed for use in non-U.S. securities markets. EDRs and GDRs are not necessarily quoted in the same currency as the underlying security. Other Investment Techniques and Opportunities. Each Fund may take certain actions with respect to merger proposals, tender offers, conversion of equity-related securities and other investment opportunities with the objective of enhancing the portfolio's overall return, regardless of how these actions may affect the weight of the particular securities in the Fund's portfolio. Industry Concentrations. None of the Funds will concentrate more than 25 percent of its total assets in any one industry. MANAGEMENT OF TIAA-CREF INSTITUTIONAL MUTUAL FUNDS TRUSTEES AND OFFICERS OF TIAA-CREF INSTITUTIONAL MUTUAL FUNDS Trustees who are "interested persons" within the meaning of the 1940 Act are indicated by an asterisk (*).
TRUSTEE AGE PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS - ------- --- ----------------------------------------- Robert H. Atwell 68 President Emeritus, American Counsel on Education and 447 Bird Key Drive senior consultant for A.T. Kearney, since November Sarasota, FL 34236 1996. Previously, President, American Counsel on Education. Elizabeth E. Bailey 60 John C. Hower Professor of Public Policy and The Wharton School Management, The Wharton School of the University of University of Pennsylvania Pennsylvania. Suite 3100 Steinberg-Dietrich Hall Philadelphia, PA 19104-6372 John H. Biggs* (3) 62 Chairman, Chief Executive Officer, and President, TIAA-CREF College Retirement Equities Fund ("CREF") and TIAA, 730 Third Avenue since 1997. Previously, Chairman and Chief Executive New York, NY 10017-3206 Officer, CREF and TIAA.
- 14 - 52 Joyce A. Fecske (1) 52 Vice President Emerita, DePaul University, since 4800 South Karlov Avenue 1994. Formerly, Vice President for Human Resources, Chicago, IL 60632 DePaul University. Edes P. Gilbert 67 Consultant, Independent Education Services, since Independent Education Services 1998. Formerly, Head, The Spence School. 49 East 78th Street New York, NY 10021 Stuart Tse Kong Ho (3) 63 Chairman and President, Capital Investment of Hawaii, Capital Investment of Hawaii, Inc. Inc.; Chairman, Gannett Pacific Corporation. Suite 1700 733 Bishop Street Honolulu, HI 96813 Nancy L. Jacob (2) 56 President and Managing Principal, Windermere Windermere Investment Associates Investment Associates, since January 1997. 121 S.W. Morrison Street Previously, Chairman and Chief Executive Officer, CTC Portland, OR 97204 Consulting, Inc. and Managing Director, Capital Trust Company. Marjorie Fine Knowles 59 Professor of Law, Georgia State University College of College of Law Law. Georgia State University University Plaza Atlanta, GA 30303-3092 Martin L. Leibowitz* (3) 63 Vice Chairman and Chief Investment Officer, CREF and TIAA-CREF TIAA, since 1995. President, TIAA-CREF Investment 730 Third Avenue Management, Inc. (Investment Management), and New York, NY 10017-3206 President, Teachers Advisors, Inc. (Advisors). Executive Vice President, CREF and TIAA from June 1995 to November 1995. Formerly, managing director-director of research and a member of the executive committee, Salomon Brothers, Inc. Jay O. Light (2) 57 Professor of Business Administration and Senior Harvard Business School Associate Dean for Planning and Development, Harvard Morgan Hall 489 University Graduate School of Business Administration. Soldiers Field Boston, MA 02163
- 15 - 53 Bevis Longstreth (2) Debevoise & Plimpton 65 Of Counsel, Debevoise & Plimpton, since 1998. 875 Third Avenue Formerly, Partner, Debevoise & Plimpton. Adjunct New York, NY 10022 Professor of Law, Columbia University. Robert M. Lovell, Jr. (2) 69 Founding Partner, First Quadrant L.P. Formerly, First Quadrant L.P. Chairman and Chief Executive Officer, First Quadrant 100 Campus Drive Corp. (Investment Management Firm). P.O. Box 939 Florham Park, NJ 07932 Stephen A. Ross (2) 55 Franco Modigliani Professor of Finance and Management, Sloan School of Management Sloan School of Management, Massachusetts Institute of Massachusetts Institute of Technology Technology, since 1998. Co-Chairman, Roll & Ross 77 Massachusetts Avenue Asset Management Corp. Cambridge, MA 02139 Eugene C. Sit (3) 60 Chairman, Chief Executive and Chief Investment Sit Investment Associates, Inc. Executive Officer, Sit Investment Associates, Inc. and 4600 Norwest Center Sit/Kim International Investment Associates, Inc. 90 South Seventh Street Minneapolis, MN 55402 Maceo K. Sloan (2) 49 Chairman, President, and Chief Executive Officer, NCM Capital Management Group, Inc. Sloan Financial Group, Inc., and NCM Capital Suite 400 Management Group, Inc. 103 West Main Street Durham, NC 27701-3638 David K. Storrs (2) 55 President and Chief Executive Officer, Alternative Alternative Investment Group, LLC Investment Group, L.L.C., since August 1996. Adviser 65 South Gate Lane to the President, The Common Fund, since January Southport, CT 06490 1996. Formerly, President and Chief Executive Officer, The Common Fund. Robert W. Vishny (3) 39 Eric J. Gleacher Professor of Finance, University of Graduate School of Business Chicago Graduate School of Business. Founding University of Chicago Partner, LSV Asset Management. 1101 East 58th Street Chicago, IL 60637
(1) Member of the Executive Committee. The Executive Committee is responsible for day to day oversight of the Funds' operation. (2) Member of the Finance Committee. The Finance Committee oversees the investments of TIAA-CREF Institutional Mutual Funds. - 16 - 54 (3) Member of the Executive and Finance Committees.
POSITION WITH OFFICER* AGE REGISTRANT PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS - -------- --- ---------- ----------------------------------------- John J. McCormack 54 President Executive Vice President, TIAA and CREF, since November 1983, and President, TIAA-CREF Enterprises, since June 1998. Scott C. Evans 40 Executive Executive Vice President, TIAA and CREF, Advisors and Vice President Investment Management, since September 1997. Previously, Managing Director, TIAA, CREF, Advisors and Investment Management from March 1997 to September 1997. Previously Second Vice President, TIAA and CREF, Advisors and Investment Management. Richard L. Gibbs 52 Executive Executive Vice President, TIAA and CREF, since March Vice President 1993. Executive Vice President, Advisors, Management, Teachers Personal Investors Services, Inc. ("TPIS") and TIAA-CREF Individual & Institutional Services, Inc. ("Services"). E. Laverne Jones 50 Secretary Vice President, and Corporate Secretary, TIAA and CREF, since August 1998. Previously, Senior Counsel, TIAA and CREF. Richard J. Adamski 57 Vice President and Vice President and Treasurer, TIAA and CREF, Investment Treasurer Management, Advisors, TPIS and Services.
- ------------------------- * The address for all officers of TIAA-CREF Institutional Mutual Funds is 730 Third Avenue, New York, NY 10017-3206. TRUSTEE AND OFFICER COMPENSATION The following table shows the estimated compensation to be received by each non-officer Trustee from the Funds and the TIAA-CREF fund complex for TIAA-CREF Institutional Mutual Funds' partial fiscal year ending December 31, 1999. The Funds' officers receive no compensation from any fund in the TIAA-CREF fund complex. The TIAA-CREF fund complex consists of: College Retirement Equities Fund, TIAA Separate Account VA-1, TIAA-CREF Life Funds, TIAA-CREF Mutual Funds and TIAA-CREF Institutional Mutual Funds, each a registered investment company. TIAA-CREF Institutional Mutual Funds has long-term performance deferred compensation plan for non-employee Trustees. Under this unfunded plan, annual contributions - 17 - 55 equal to half the amount of the basic annual Trustee stipend are allocated to notional CREF and TIAA accounts, in predetermined percentages. Benefits will be paid in a lump sum after the Trustee leaves the Board. Pursuant to a separate deferred compensation plan, non-employee Trustees also have the option to defer payment of their basic stipend and allocate it to notional TIAA and CREF accounts chosen by the individual Trustee. Benefits under that plan are also paid in a lump sum after the Trustee leaves the Board.
LONG TERM PERFORMANCE DEFERRED COMPENSATION TOTAL COMPENSATION AGGREGATE COMPENSATION CONTRIBUTION FROM TIAA-CREF NAME FROM THE FUND AS PART OF EXPENSES(1) [FUND] COMPLEX - ---- ------------- ---------------------- -------------- Robert H. Atwell $ $ Elizabeth E. Bailey $ $ Joyce A. Fecske $ $ Edes P. Gilbert $ $ Stuart Tse Kong Ho $ $ Nancy L. Jacob $ $ Marjorie Fine Knowles $ $ Jay O. Light $ $ Bevis Longstreth $ $ Robert M. Lovell, Jr. $ $ Stephen A. Ross $ $ Eugene C. Sit $ $ Maceo K. Sloan $ $ David K. Storrs $ $ Robert W. Vishny $ $
- --------------------------------- (1) Includes earnings, if any, on amounts contributed. PRINCIPAL HOLDERS OF SECURITIES TIAA, as the contributor of the initial capital for each of the Funds, owned 100% of the shares of each Fund as of June 30, 1999. INVESTMENT ADVISORY AND OTHER SERVICES As explained in the Prospectus, investment advisory and related services for each of the Funds are provided by personnel of Teachers Advisors, Inc. ("Advisors"). Advisors manages the investment and reinvestment of the assets of each Fund, subject to the direction and control of the Finance Committee of the Board of Trustees. As the prospectus describes, Advisors has agreed to waive a portion of its fee for managing each Fund. - 18 - 56 Employees of Advisors and members of their households are limited in trading for their own accounts. Certain transactions must be reported and approved, and duplicates of all confirmation statements and other account reports must be sent to a special compliance unit. Advisory fees are payable monthly to Advisors. They are calculated as a percentage of the average value of the net assets each day for each Fund, and are accrued daily proportionately at 1/365th (1/366th in a leap year) of the rates set forth in the Prospectus. State Street Bank and Trust Company ("State Street"), 225 Franklin Street, Boston, MA 02209 acts as custodian for TIAA-CREF Institutional Mutual Funds. Ernst & Young LLP, 787 Seventh Avenue, New York, NY 10019, serves as independent auditors of TIAA-CREF Institutional Mutual Funds. In addition to serving as custodian of the Funds' portfolio securities, State Street provides the Funds with certain administrative services, including preparation of each Fund's federal, state and local tax returns, preparation of each Fund's financial information, and various other administrative services. State Street is compensated by TIAA-CREF Institutional Mutual Funds at the rate of $________ per year for providing these administrative services. State Street also acts as the transfer and dividend paying agent for the Funds. Teachers Insurance and Annuity Association of America ("TIAA") holds all of the shares of TIAA-CREF Enterprises, Inc., which in turn holds all the shares of Advisors and of Teachers Personal Investors Services, Inc., the principal underwriter for TIAA-CREF Institutional Mutual Funds. ABOUT TIAA-CREF INSTITUTIONAL MUTUAL FUNDS AND THE SHARES TIAA-CREF Institutional Mutual Funds, was organized as a Delaware business trust on April 15, 1999. A copy of TIAA-CREF Institutional Mutual Funds' Certificate of Trust, dated April 15, 1999, as amended, is on file with the Office of the Secretary of State of the State of Delaware. As a Delaware business trust, TIAA-CREF Institutional Mutual Funds' operations are governed by its Declaration of Trust dated April 15, 1999, as amended (the "Declaration"). Upon the initial purchase of shares of beneficial interest in TIAA-CREF Institutional Mutual Funds, each shareholder agrees to be bound by the Declaration, as amended from time to time. INDEMNIFICATION OF SHAREHOLDERS Generally, Delaware business trust shareholders are not personally liable for obligations of the Delaware business trust under Delaware law. The Delaware Business Trust Act ("DBTA") provides that a shareholder of a Delaware business trust shall be entitled to the same limitation of liability extended to shareholders of private for-profit corporations. TIAA-CREF Institutional Mutual Funds' Declaration expressly provides that TIAA-CREF Institutional Mutual Funds has been organized under the DBTA and that the Declaration is to be governed by and interpreted in accordance with Delaware law. It is nevertheless possible that a Delaware - 19 - 57 business trust, such as TIAA-CREF Institutional Mutual Funds, might become a party to an action in another state whose courts refuse to apply Delaware law, in which case TIAA-CREF Institutional Mutual Funds' shareholders could possibly be subject to personal liability. To guard against this risk, the Declaration (i) contains an express disclaimer of shareholder liability for acts or obligations of TIAA-CREF Institutional Mutual Funds and provides that notice of such disclaimer may be given in each agreement, obligation and instrument entered into or executed by TIAA-CREF Institutional Mutual Funds or its Trustees, (ii) provides for the indemnification out of Trust property of any shareholders held personally liable for any obligations of TIAA-CREF Institutional Mutual Funds or any series of TIAA-CREF Institutional Mutual Funds, and (iii) provides that TIAA-CREF Institutional Mutual Funds shall, upon request, assume the defense of any claim made against any shareholder for any act or obligation of TIAA-CREF Institutional Mutual Funds and satisfy any judgment thereon. Thus, the risk of a Trust shareholder incurring financial loss beyond his or her investment because of shareholder liability is limited to circumstances in which all of the following factors are present: (1) a court refuses to apply Delaware law; (2) the liability arose under tort law or, if not, no contractual limitation of liability was in effect; and (3) TIAA-CREF Institutional Mutual Funds itself would be unable to meet its obligations. In the light of DBTA, the nature of TIAA-CREF Institutional Mutual Funds' business, and the nature of its assets, the risk of personal liability to a TIAA-CREF Institutional Mutual Funds shareholder is remote. INDEMNIFICATION OF TRUSTEES The Declaration further provides that TIAA-CREF Institutional Mutual Funds shall indemnify each of its Trustees and officers against liabilities and expenses reasonably incurred by them, in connection with, or arising out of, any action, suit or proceeding, threatened against or otherwise involving such Trustee or officer, directly or indirectly, by reason of being or having been a Trustee or officer of TIAA-CREF Institutional Mutual Funds. The Declaration does not authorize TIAA-CREF Institutional Mutual Funds to indemnify any Trustee or officer against any liability to which he or she would otherwise be subject by reason of or for willful misfeasance, bad faith, gross negligence or reckless disregard of such person's duties. LIMITATION OF FUND LIABILITY All persons dealing with a Fund must look solely to the property of that particular Fund for the enforcement of any claims against that Fund, as neither the Trustees, officers, agents or shareholders assume any personal liability for obligations entered into on behalf of a Fund or TIAA-CREF Institutional Mutual Funds. No Fund is liable for the obligations of any other Fund. Since the Funds use a combined Prospectus, however, it is possible that one Fund might become liable for a misstatement or omission in the Prospectus regarding another Fund with which its disclosure is combined. The Trustees have considered this factor in approving the use of the combined Prospectus. SHAREHOLDER MEETINGS AND VOTING RIGHTS Under the Declaration, TIAA-CREF Institutional Mutual Funds is not required to hold - 20 - 58 annual meetings to elect Trustees or for other purposes. It is not anticipated that TIAA-CREF Institutional Mutual Funds will hold shareholders' meetings unless required by law or the Declaration. TIAA-CREF Institutional Mutual Funds will be required to hold a meeting to elect Trustees to fill any existing vacancies on the Board if, at any time, fewer than a majority of the Trustees holding office were elected by the shareholders of TIAA-CREF Institutional Mutual Funds. Shares of TIAA-CREF Institutional Mutual Funds do not entitle their holders to cumulative voting rights, so that the holders of more than 50 percent of the net asset value represented by the outstanding shares of TIAA-CREF Institutional Mutual Funds may elect all of the Trustees, in which case the holders of the remaining shares would not be able to elect any Trustees. Shareholders are entitled to one vote for each dollar of net asset value (number of shares held times the net asset value of the applicable Fund). ADDITIONAL PORTFOLIOS Pursuant to the Declaration, the Trustees may establish additional investment portfolios (technically "series" of shares) in TIAA-CREF Institutional Mutual Funds. The establishment of additional Funds would not affect the interests of current shareholders in the existing eight Funds. As of the date of this SAI, the Trustees do not have any plan to establish another Fund. DIVIDENDS AND DISTRIBUTIONS Each share of a Fund is entitled to such dividends and distributions out of the income earned on the assets belonging to that Fund as are declared in the discretion of the Trustees. In the event of the liquidation or dissolution of TIAA-CREF Institutional Mutual Funds as a whole or any individual Fund, shares of the affected Fund are entitled to receive their proportionate share of the assets which are attributable to such shares and which are available for distribution as the Trustees in their sole discretion may determine. Shareholders are not entitled to any preemptive, conversion, or subscription rights. All shares, when issued, will be fully paid and non-assessable. PRICING OF SHARES The assets of the Funds are valued as of the close of each valuation day in the following manner: INVESTMENTS FOR WHICH MARKET QUOTATIONS ARE READILY AVAILABLE Investments for which market quotations are readily available are valued at the market value of such investments, determined as follows: Equity securities listed or traded on a national market or exchange are valued based on their sale price on such market or exchange at the close of business (usually 4:00 p.m. Eastern Time) on the date of valuation, or at the mean of the closing bid and asked prices if no sale is - 21 - 59 reported. Such an equity security may also be valued at fair value as determined in good faith by the Finance Committee of the Board of Trustees if events materially affecting its value occur between the time its price is determined and the time a Fund's net asset value is calculated. FOREIGN INVESTMENTS Investments traded on a foreign exchange or in foreign markets are valued at the closing values of such securities as of the date of valuation under the generally accepted valuation method in the country where traded, converted to U.S. dollars at the prevailing rates of exchange on the date of valuation. Since the trading of investments on a foreign exchange or in foreign markets is normally completed before the end of a valuation day, such valuation does not take place contemporaneously with the determination of the valuation of certain other investments held by the Fund. If events materially affecting the value of foreign investments occur between the time their share price is determined and the time when a Fund's net asset value is calculated, such investments will be valued at fair value as determined in good faith by the Finance Committee of the Board and in accordance with the responsibilities of the Board as a whole. DEBT SECURITIES Debt securities (including money market instruments) for which market quotations are readily available are valued based on the most recent bid price or the equivalent quoted yield for such securities (or those of comparable maturity, quality and type). Values for money market instruments (other than those in the Institutional Money Market Fund) with maturities of one year or less will be obtained from either one or more of the major market makers or derived from a pricing matrix that has various types of money market instruments along one axis and maturities, ranging from overnight to one year, along the other. This information is derived from one or more financial information services. For securities with maturities longer than one year, these values will be derived utilizing an independent pricing service when such prices are believed to reflect the fair value of these securities. We use an independent pricing service to value securities with maturities longer than one year, except when we believe prices don't accurately reflect the security's fair value. SPECIAL VALUATION PROCEDURES FOR THE INSTITUTIONAL MONEY MARKET FUND For the Institutional Money Market Fund, all of its assets are valued on the basis of amortized cost in an effort to maintain a constant net asset value per share of $1.00. The Board has determined that such valuation is in the best interests of the Fund and its shareholders. Under the amortized cost method of valuation, securities are valued at cost on the date of their acquisition, and thereafter a constant accretion of any discount or amortization of any premium to maturity is assumed. While this method provides certainty in valuation, it may result in periods in which value as determined by amortized cost is higher or lower than the price the Fund would receive if it sold the security. During such periods, the quoted yield to investors may differ somewhat from that obtained by a similar fund which uses available market quotations to value all of its securities. The Board has established procedures reasonably designed, taking into account current - 22 - 60 market conditions and the Institutional Money Market Fund's investment objective, to stabilize the net asset value per share for purposes of sales and redemptions at $1.00. These procedures include review by the Board, at such intervals as it deems appropriate, to determine the extent, if any, to which the net asset value per share calculated by using available market quotations deviates by more than 1/2 of one percent from $1.00 per share. In the event such deviation should exceed 1/2 of one percent, the Board will promptly consider initiating corrective action. If the Board believes that the extent of any deviation from a $1.00 amortized cost price per share may result in material dilution or other unfair results to new or existing shareholders, it will take such steps as it considers appropriate to eliminate or reduce these consequences to the extent reasonably practicable. Such steps may include: (1) selling securities prior to maturity; (2) shortening the average maturity of the Fund; (3) withholding or reducing dividends; or (4) utilizing a net asset value per share determined from available market quotations. Even if these steps were taken, the Institutional Money Market Fund's net asset value might still decline. OPTIONS AND FUTURES Portfolio investments underlying options are valued as described above. Stock options written by a Fund are valued at the last quoted sale price, or at the closing bid price if no sale is reported for the day of valuation as determined on the principal exchange on which the option is traded. The value of a Fund's net assets will be increased or decreased by the difference between the premiums received on written options and the costs of liquidating such positions measured by the closing price of the options on the date of valuation. For example, when a Fund writes a call option, the amount of the premium is included in the Fund's assets and an equal amount is included in its liabilities. The liability thereafter is adjusted to the current market value of the call. Thus, if the current market value of the call exceeds the premium received, the excess would be unrealized depreciation; conversely, if the premium exceeds the current market value, such excess would be unrealized appreciation. If a call expires or if the Fund enters into a closing purchase transaction, it realizes a gain (or a loss if the cost of the transaction exceeds the premium received when the call was written) without regard to any unrealized appreciation or depreciation in the underlying securities, and the liability related to such call is extinguished. If a call is exercised, the Fund realizes a gain or loss from the sale of the underlying securities and the proceeds of the sale increased by the premium originally received. A premium paid on the purchase of a put will be deducted from a Fund's assets and an equal amount will be included as an investment and subsequently adjusted to the current market value of the put. For example, if the current market value of the put exceeds the premium paid, the excess would be unrealized appreciation; conversely, if the premium exceeds the current market value, such excess would be unrealized depreciation. Stock and bond index futures, and options thereon, which are traded on commodities exchanges, are valued at their last sale prices as of the close of such commodities exchanges. - 23 - 61 INVESTMENTS FOR WHICH MARKET QUOTATIONS ARE NOT READILY AVAILABLE Portfolio securities or other assets for which market quotations are not readily available will be valued at fair value, as determined in good faith under the direction of the Trustees. TAX STATUS Although TIAA-CREF Institutional Mutual Funds is organized as a Delaware business trust, neither TIAA-CREF Institutional Mutual Funds nor its individual Funds will be subject to any corporate excise or franchise tax in the State of Delaware, nor will they be liable for Delaware income taxes provided that each Fund qualifies as a regulated investment company for federal income tax purposes and satisfies certain income source requirements of Delaware law. If each Fund so qualifies and distributes all of its income and capital gains, it will also be exempt from applicable New York State taxes and the New York City general corporation tax, except for small minimum taxes. Each Fund intends to qualify as a "regulated investment company" ("RIC") under Subchapter M of the Code. In general, to qualify as a RIC: (a) at least 90 percent of the gross income of a Fund for the taxable year must be derived from dividends, interest, payments with respect to loans of securities, gains from the sale or other disposition of securities or foreign currency, or other income derived with respect to its business of investing in securities; (b) a Fund must distribute to its shareholders 90 percent of its ordinary income and net short-term capital gains (undistributed net income may be subject to tax at the Fund level); and (c) a Fund must diversify its assets so that, at the close of each quarter of its taxable year, (i) at least 50 percent of the fair market value of its total (gross) assets is comprised of cash, cash items, U.S. Government securities, securities of other regulated investment companies and other securities limited in respect of any one issuer to no more than 5 percent of the fair market value of the Fund's total assets and 10 percent of the outstanding voting securities of such issuer and (ii) no more than 25 percent of the fair market value of its total assets is invested in the securities of any one issuer (other than U.S. Government securities and securities of other regulated investment companies) or of two or more issuers controlled by the Fund and engaged in the same, similar, or related trades or businesses. If, in any taxable year, a Fund should not qualify as a RIC under the Code: (1) that Fund would be taxed at normal corporate rates on the entire amount of its taxable income without deduction for dividends or other distributions to its shareholders, and (2) that Fund's distributions to the extent made out of that Fund's current or accumulated earnings and profits would be taxable to its shareholders (other than tax-exempt shareholders and shareholders in tax deferred accounts) as ordinary dividends (regardless of whether they would otherwise have been considered capital gains dividends), and may qualify for the deduction for dividends received by corporations. Each Fund must declare and distribute dividends equal to at least 98 percent of its ordinary income (as of the twelve months ended December 31) and at least 98 percent of its capital gain net income (as of the twelve months ended October 31), in order to avoid a federal - 24 - 62 excise tax. Each Fund intends to make the required distributions, but they cannot guarantee that they will do so. Dividends attributable to a Fund's ordinary income and capital gains distributions are taxable as such to shareholders in the year in which they are received except dividends declared in October, November or December and paid in January, which dividends are treated as paid on the prior December 31. A distribution of net capital gains reflects a Fund's excess of net long-term capital gains over its net short-term capital losses. Each Fund must designate income dividends and distributions of net capital gains and must notify shareholders of these designations within sixty days after the close of the Fund's taxable year. Foreign currency gains and losses are taxable as ordinary income. If the net effect of these transactions is a gain, the dividend paid by the Fund will be increased; if the result is a loss, the income dividend paid by the Fund will be decreased. Adjustments to reflect these gains and losses will be made throughout each Fund's taxable year. At the time of purchase, each Fund's net asset value may reflect undistributed income or net capital gains. A subsequent distribution to shareholders of such amounts, although constituting a return of their investment, would be taxable either as dividends or capital gain distributions. For federal income tax purposes, each Fund is permitted to carry forward its net realized capital losses, if any, for eight years, and realize net capital gains up to the amount of such losses without being required to pay taxes on, or distribute such gains. If a shareholder held shares for six months or less and during that period received a distribution taxable to such shareholder as a long term capital gain, any loss realized on the sale of such shares during the six month period would be a long term loss to the extent of such distribution. Income received by any Fund from sources within various foreign countries may be subject to foreign income taxes withheld at the source. Under the Code, if more than 50 percent of the value of a Fund's total assets at the close of its taxable year consists of securities issued by foreign corporations, the Fund (e.g., the Institutional International Equity Fund) may file an election with the Internal Revenue Service to "pass through" to the Fund's shareholders the amount of any foreign income taxes paid by the Fund. Pursuant to this election, shareholders will be required to: (i) include in gross income, even though not actually received, their respective pro rata share of foreign taxes paid by the Fund; (ii) treat their pro rata share of foreign taxes as paid by them; and (iii) either deduct their pro rata share of foreign taxes in computing their taxable income, or use it as a foreign tax credit against U.S. income taxes (but not both). No deduction for foreign taxes may be claimed by a shareholder who does not itemize deductions. Each shareholder will be notified within 60 days after the close of each taxable year of a Fund, if that Fund will "pass through" foreign taxes paid for that year, and, if so, the amount of each shareholder's pro rata share (by country) of (i) the foreign taxes paid, and (ii) the Fund's gross income from foreign sources. Of course, shareholders who are not liable for federal income taxes, such as retirement plans qualified under Section 401 of the Code, will not be able to utilize any such "pass through" of foreign tax credits. - 25 - 63 Each Fund is required by federal law to withhold 31 percent of reportable payments (which may include income dividends, capital gains distributions, and share redemption proceeds) paid to shareholders who have not complied with IRS regulations. In order to avoid this back-up withholding requirement, a shareholder must certify to the Fund on the application form or on a separate Internal Revenue Service W-9 Form, that the shareholder's Social Security Number or Taxpayer Identification Number is correct and that the shareholder is not currently subject to back-up withholding or is exempt from back-up withholding. The foregoing discussion does not address the special tax rules applicable to certain classes of investors. For example, each shareholder who is not a U.S. person should consider the U.S. and foreign tax consequences of ownership of shares of the Funds, including the possibility that such a shareholder may be subject to a U.S. withholding tax at a rate of 30 percent (or at a lower rate under an applicable income tax treaty) on Fund distributions treated as ordinary dividends. This discussion of the tax treatment of the Funds and their distributions is based on the federal, Delaware and New York tax laws in effect as of the date of this SAI. Shareholders should consult their tax advisors to determine the tax treatment of an investment by him or her in any Fund, including state and local taxes. BROKERAGE ALLOCATION Advisors is responsible for decisions to buy and sell securities for the Funds as well as for selecting brokers and, where applicable negotiating the amount of the commission rate paid. It is the intention of Advisors to place brokerage orders with the objective of obtaining the best execution, which includes such factors as best price, research and available data. When purchasing or selling securities traded on the over-the-counter market, Advisors generally will execute the transactions with a broker engaged in making a market for such securities. When Advisors deems the purchase or sale of a security to be in the best interests of a Fund, its personnel may, consistent with their fiduciary obligations, decide either to buy or to sell a particular security for the Fund at the same time as for other funds it may be managing, or that may be managed by its affiliate, TIAA-CREF Investment Management, Inc. ("Investment Management"), another investment adviser subsidiary of TIAA. In that event, allocation of the securities purchased or sold, as well as the expenses incurred in the transaction, will be made in an equitable manner. Domestic brokerage commissions are negotiated, as there are no standard rates. All brokerage firms provide the service of execution of the order made; some brokerage firms also provide research and statistical data, and research reports on particular companies and industries are customarily provided by brokerage firms to large investors. In negotiating commissions, consideration is given by Advisors to the quality of execution provided and to the use and value of the data. The valuation of such data may be judged with reference to a particular order or, alternatively, may be judged in terms of its value to the overall management of the portfolio. Advisors will place orders with brokers providing useful research and statistical data - 26 - 64 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 Board for the placing of orders with the brokers providing such services. Research or service obtained for one Fund may be used by Advisors in managing the other Funds. In such circumstances, the expenses incurred will be allocated equitably consistent with Advisors' fiduciary duty to the other Funds. Research or services obtained for TIAA-CREF Institutional Mutual Funds may be used by personnel of Advisors in managing other investment company accounts, or by Investment Management for the CREF accounts. In such circumstances, the expenses incurred will be allocated in an equitable manner consistent with the fiduciary obligations of personnel of Advisors to TIAA-CREF Institutional Mutual Funds. UNDERWRITERS Teachers Personal Investors Services, Inc. ("TPIS") may be considered the "principal underwriter" for TIAA-CREF Institutional Mutual Funds. Shares of TIAA-CREF Institutional Mutual Funds are offered on a continuous basis with no sales load. Pursuant to a Distribution Agreement with TIAA-CREF Institutional Mutual Funds, TPIS has the right to distribute shares of TIAA-CREF Institutional Mutual Funds for the two-year period beginning ________ ___, 1999, and thereafter from year to year subject to approval by the Funds' Board of Trustees. TPIS may enter into Selling Agreements with one or more broker-dealers, which may or may not be affiliated with TPIS, to provide distribution-related services to TIAA-CREF Institutional Mutual Funds. CALCULATION OF PERFORMANCE DATA We may quote a Fund's performance in various ways. All performance information in advertising is historical and is not intended to indicate future returns. A Fund's share price, yield, and total return fluctuate in response to market conditions and other factors, and the value of Fund shares when redeemed may be more or less than their original cost. TOTAL RETURN CALCULATIONS Total returns quoted in advertising reflect all aspects of a Fund's returns, including the effect of reinvesting dividends and capital gain distributions, and any change in the Fund's net asset value ("NAV") over a stated period. Average annual returns are calculated by determining the growth or decline in value of a hypothetical historical investment in a Fund over a stated period, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period according to the following formula: - 27 - 65 n P (1 + T) = ERV where: P = the hypothetical initial payment T = average annual total return n = number of years in the period ERV = ending redeemable value of the hypothetical payment made at the beginning of the one-, five-, or 10-year period at the end of the one-, five-, or 10-year period (or fractional portion thereof). For example, a cumulative return of 100 percent over ten years would produce an average annual return of 7.18 percent, which is the steady annual rate that would equal 100 percent growth on a compounded basis in ten years. While average annual returns are a convenient means of comparing investment alternatives, investors should realize that a Fund's performance is not constant over time, but changes from year to year, and that average annual returns represent averaged figures as opposed to the actual year-to-year performance of the Fund. In addition to average annual returns, we may quote a Fund's unaveraged or cumulative total returns reflecting the actual change in value of an investment over a stated period. Average annual and cumulative total returns may be quoted as a percentage or as a dollar amount, and may be calculated for a single investment, a series of investments, or a series of redemptions, over any time period. Total returns may be broken down into their components of income and capital (including capital gains and changes in share price) in order to illustrate the relationship of these factors and their contributions to total return. Total returns may be quoted on a before or after tax basis. Total returns, yields, and other performance information may be quoted numerically or in a table, graph, or similar illustration. YIELD CALCULATIONS All Funds other than the Institutional Money Market Fund. Yields are computed by dividing the Fund's net investment income for a given 30-day or one-month period, by the average number of Fund shares, dividing this figure by the Fund's NAV at the end of the period, and annualizing the result (assuming compounding of income) in order to arrive at an annual percentage rate. Income is calculated for purposes of yield quotations in accordance with standardized methods applicable to all stock and bond funds. In general, interest income is reduced with respect to bonds trading at a premium over their par value by subtracting a portion of the premium from income on a daily basis, and is increased with respect to bonds trading at a discount by adding a portion of the discount to daily income. For a Fund's investments denominated in foreign currencies, income and expenses are calculated first in their respective currencies, and are then converted to U.S. dollars, either when they are actually converted or at the end of the 30-day or one-month period, whichever is earlier. Income is adjusted to reflect gains and losses from principal repayments received by the Fund with respect to mortgage-related securities and other asset-backed securities. Other capital gains and losses generally are excluded from the calculation as are gains and losses currently from exchange rate fluctuations. Income calculated for the purposes of calculating a Fund's yield differs from income as - 28 - 66 determined for other accounting purposes. Because of the different accounting methods used, and because of the compounding of income assumed in yield calculations, a Fund's yield may not equal its distribution rate, the income paid to your account, or the income reported in a Fund's financial statements. Yield information may be useful in reviewing a Fund's performance and in providing a basis for comparison with other investment alternatives. However, a Fund's yield fluctuates, unlike investments that pay a fixed interest rate over a stated period of time. When comparing investment alternatives, investors should also note the quality and maturity of the portfolio securities of respective investment companies they have chosen to consider. Investors should also recognize that in periods of declining interest rates a Fund's yield will tend to be somewhat higher than prevailing market rates, and in periods of rising interest rates a Fund's yield will tend to be somewhat lower. Also, when interest rates are falling, the inflow of net new money to a Fund from the continuous sale of its shares will likely be invested in instruments producing lower yields than the balance of the Fund's holdings, thereby reducing the Fund's current yield. In periods of rising interest rates, the opposite can be expected to occur. The Institutional Money Market Fund. Yield quotations for the Institutional Money Market Fund, including yield quotations based upon the seven-day period ended on the date of calculation, may also be made available. These yield quotations are based on a hypothetical pre-existing account with a balance of one share. In arriving at any such yield quotations, the net change during the period in the value of that hypothetical account is first determined. Such net change includes net investment income attributable to portfolio securities but excludes realized gains and losses from the sale of securities and unrealized appreciation and depreciation and income other than investment income (which are included in the calculation of Net Asset Value). For this purpose, net investment income includes accrued interest on portfolio securities, plus or minus amortized premiums or purchase discount (including original issue discount), less all accrued expenses. Such net change is then divided by the value of that hypothetical account at the beginning of the period to obtain the base period return, and then the base period return is multiplied by 365/7 to annualize the current yield figure which is carried to at least the nearest hundredth of one percent. The effective yield of the Institutional Money Market Fund for the same seven-day period may also be disclosed. The effective yield is obtained by adjusting the current yield to give effect to the compounding nature of the Fund's investments, and is calculated by the use of the following formula: 365/7 Effective Yield = (Base Period Return + 1) - 1 The Institutional Money Market Fund's yield fluctuates, unlike many bank deposits or other investments which pay a fixed yield for a stated period of time. The annualization of one period's income is not necessarily indicative of future actual yields. Actual yields will depend on such variables as portfolio quality, average portfolio maturity, the type of instruments held in the portfolio, changes in interest rates on money market instruments, portfolio expenses, and other factors. - 29 - 67 PERFORMANCE COMPARISONS Performance information for the Funds, may be compared in advertisements, sales literature, and reports to shareholders, to the performance information reported by other investments and to various indices and averages. Such comparisons may be made with, but are not limited to (1) the S&P 500, (2) the Dow Jones Industrial Average ("DJIA"), (3) Lipper Analytical Services, Inc. Mutual Fund Performance Analysis Reports and the Lipper General Equity Funds Average, (4) Money Magazine Fund Watch, (5) Business Week's Mutual Fund Scoreboard, (6) SEI Funds Evaluation Services Equity Fund Report, (7) CDA Mutual Funds Performance Review and CDA Growth Mutual Fund Performance Index, (8) Value Line Composite Average (geometric), (9) Wilshire Associates indices, (10) Frank Russell Co. Inc. indices, (11) the Consumer Price Index, published by the U.S. Bureau of Labor Statistics (measurement of inflation), (12) Morningstar, Inc., (13) the Morgan Stanley Capital International ("MSCI") global market indices, including the EAFE(R) (Europe, Australasia, Far East) Index, the EAFE+Canada Index and the International Perspective Index, (14) Lehman Brothers Aggregate Bond Index, and (15) IBC Money Fund Report Average. We may also discuss ratings or rankings received from these entities, accompanied in some cases by an explanation of those ratings or rankings, when applicable. In addition, advertisements may discuss the performance of the indices listed above. The performance of each of the Funds also may be compared to other indices or averages that measure performance of a pertinent group of securities. Shareholders should keep in mind that the composition of the investments in the reported averages will not be identical to that of the Fund and that certain formula calculations (e.g., yield) may differ from index to index. In addition, there can be no assurance that any of the Funds will continue its performance as compared to such indices. We may also advertise ratings or rankings the Funds receive from various rating services and organizations, including but not limited to any organization listed above. ILLUSTRATING COMPOUNDING We may illustrate in advertisements, sales literature and reports to shareholders the effects of compounding of earnings on an investment in a Fund. We may do this using a hypothetical investment earning a specified rate of return. To illustrate the effects of compounding, we would show how the total return from an investment of the same dollar amount, earning the same or a different rate of return, varies depending on when the investment was made. NET ASSET VALUE Charts and graphs using a Fund's NAVs, adjusted NAVs, and benchmark indices may be used to exhibit performance. An adjusted NAV includes any distributions paid by the Fund (i.e., assuming reinvestment) and reflects all elements of its return. Unless otherwise indicated, a Fund's adjusted NAVs are not adjusted for sales charges, if any. Currently there are no sales charges. - 30 - 68 MOVING AVERAGES We may illustrate a Fund's performance using moving averages. A long-term moving average is the average of each week's adjusted closing NAV for a specified period. A short-term moving average is the average of each day's adjusted closing NAV for a specified period. "Moving Average Activity Indicators" combine adjusted closing NAVs from the last business day of each week with moving averages for a specified period to produce indicators showing when an NAV has crossed, stayed above, or stayed below its moving average. VOTING RIGHTS We don't plan to hold annual shareholder meetings. However, we may hold special meetings to elect trustees, change fundamental policies, approve a management agreement, or for other purposes. We will mail proxy materials to shareholders for these meetings, and we encourage shareholders who can't attend to vote by proxy. The number of votes you have on any matter submitted to shareholders depends on the dollar value of your investment in the Funds. LEGAL MATTERS All matters of applicable state law pertaining to the Funds have been passed upon by Charles H. Stamm, Executive Vice President and General Counsel of TIAA and CREF. Legal matters relating to the federal securities laws have been passed upon by Sutherland Asbill & Brennan LLP of Washington, D.C. EXPERTS The financial statements in this Statement of Additional Information have been audited by Ernst & Young LLP, independent auditors, as stated in their report appearing herein and have been so included in reliance upon the report of such firm given upon its authority as experts in accounting and auditing. ADDITIONAL CONSIDERATIONS TIAA-CREF Institutional Mutual Funds is part of the TIAA-CREF family of companies. TIAA, founded in 1918, is a non-profit stock life insurance company. Its companion organization, CREF, founded in 1952, is a non-profit corporation registered with the Securities and Exchange Commission as an investment company. Together, through the issuance of fixed and variable annuity contracts, TIAA and CREF form the principal retirement system for the nation's education and research communities and the largest retirement system in the United States based on assets under management. Investors should also consider TIAA-CREF Institutional Mutual Funds' expense charges - 31 - 69 as compared to the expenses of other mutual funds. TIAA-CREF Institutional Mutual Funds' expense charges are currently among the lowest in the industry. When deciding how to invest in mutual funds, it's important for investors to determine their investment goals so they can choose the mutual fund(s) whose objective closely matches it. They should also determine their time horizon (i.e., the period of time they plan to keep money invested in the fund). Time horizon affects how much risk an investor may be willing to take. Risk tolerance in turn affects asset allocation decisions. For example, an aggressive investor who is willing to accept a high level of risk in return for potentially greater returns over the long term, probably would invest more heavily in equity funds. To preserve the current value of an investment and avoid losses of principal, an investor might invest more heavily in non-equity funds. FINANCIAL STATEMENTS Financial statements for each Fund appear on the following pages. - 32 - 70 PART C: OTHER INFORMATION ITEM 23. EXHIBITS -------- (a) Declaration of Trust, dated as of April 15, 1999* (b) Registrant has adopted no bylaws. (c) The relevant portions of Registrant's certificate of trust and declaration of trust are incorporated herein by reference to Exhibits (a)(1) and (2) above. (d) Investment Management Agreement by and between Registrant and Teachers Advisors, Inc. ("Advisors"), dated as of __________ ___, 1999** (e) (1) Distribution Agreement by and between Registrant and Teachers Personal Investors Services, Inc. ("TPIS"), dated as of __________ ___, 1999** (2) Selling Agreement by and between TPIS and TIAA-CREF Individual & Institutional Services, Inc., dated as of __________ ___, 1999** (f) Trustees' Long-Term Performance Deferred Compensation Plan, dated as of __________ ___, 1999** (g) Custodian Agreement by and between Registrant and State Street Bank and Trust Company ("State Street"), dated as of __________ ___, 1999 (including schedule of remuneration)** (h) (1) Administration Agreement by and between Registrant and State Street, dated as of __________ ___, 1999** (2) Transfer Agency Agreement by and between Registrant and State Street, dated as of __________ ___, 1999** (i) Opinion and Consent of Charles H. Stamm, Esq.** (j) (1) Consent of Sutherland Asbill & Brennan LLP** (2) Consent of Ernst & Young LLP** (k) No required financial statements have been omitted from item 22 in Part B of this registration statement. (l) Seed Money Agreement by and between Registrant and Teachers Insurance and Annuity Association of America, dated as of _________ ___, 1999** C - 1 71 (m) No plan has been entered into by Registrant under Rule 12b-1. (n) Financial Data Schedules** (o) No plan has been entered into by Registrant under Rule 18f-3. - ---------------------------------- * Filed herewith. ** To be filed by amendment. ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND As the ultimate parent (holding indirectly 100% of the voting securities of Advisors, investment adviser of Registrant, TIAA may be deemed to control Registrant (although Registrant does not concede such control). As the beneficial owner of more than 25% of the voting securities of one or more series of Registrant's shares (pursuant to the Seed Money Agreement), TIAA controls Registrant. Therefore, persons directly or indirectly controlled by TIAA may be deemed to be under common control with Registrant. AIC Properties, Inc. T114 Properties, Inc. BT Properties, Inc. T-Investment Properties Corp. College Credit Trust T-Land Corp. DAN Properties, Inc. T-Las Colinas Towers Corp. ETC Repackaging, Inc. TCT Holdings, Inc. Illinois Teachers Properties, LLC Teachers Advisors, Inc. JV California Two, Inc. Teachers Boca Properties II, Inc. JV California Three, Inc. Teachers Pennsylvania Realty, Inc. JV Florida One, Inc. Teachers Personal Investors Services, Inc. JV Florida Four, Inc. Teachers Properties, Inc. JV Georgia One, Inc. Teachers REA, LLC JV Maryland One, Inc. Teachers REA II, Inc. JV Michigan One, Inc. Teachers REA II, LLC JV Michigan Two, Inc. Teachers REA III, LLC JV Michigan Three, Inc. Teachers Realty Corporation JV Minnesota One, Inc. TEO-NP, LLC JV North Carolina One, Inc. Tethys Slu, Inc. JWL Properties, Inc. TIAA Realty, Inc. Liberty Place Retail, Inc. TIAA Timberlands I, LLC Macallister Holdings, Inc. TIAA-CREF Enterprises, Inc. Minnesota Teachers Realty Corp. TIAA-CREF Individual & Institutional MN Properties, Inc. Services, Inc. M.O.A. Enterprises, Inc. TIAA-CREF Investment Management, LLC ND Properties, Inc. TIAA-CREF Life Insurance Company OWP Hawaii, LLC Savannah Teachers Properties, Inc. TIAA-CREF Tuition Financing, Inc.
C - 2 72 TIAA-CREF Trust Company, FSB 730 Properties, Inc. TIAA-Fund Equities, Inc. 730 Cal Hotel Properties I, Inc. TPI Housing, Inc. 730 Cal Hotel Properties II, Inc. Washington Teachers Properties II, Inc. 730 Penn. Hotel Properties I, Inc. WRC Properties, Inc. 485 Properties, LLC Subsidiaries of Teachers Properties, Inc.: Rouse-Teachers Holding Company Rouse-Teachers Land Holdings, Inc.
1) All subsidiaries are Delaware corporations except as follows: A) Pennsylvania non-stock, non-profit corporations: Liberty Place Retail, Inc. Teachers Pennsylvania Realty, Inc. Teachers Realty Corporation B) Minnesota Teachers Realty Corporation is a Minnesota corporation. C) College Credit Trust, a New York Trust 2) All subsidiaries are 100% owned directly by TIAA, except as follows: A) TIAA-CREF Enterprises, Inc. owns 100% of the stock of Teachers Advisors, Inc., Teachers Personal Investors Services, Inc., TIAA-CREF Life Insurance Company, TIAA-CREF Tuition Financing, Inc. and TCT Holdings, Inc. B) TIAA-CREF Trust Company, FSB is 100% owned by TCT Holdings, Inc. C) T-Investment Properties Corp. and T-Land Corp. are 100% owned by Macallister Holdings, Inc. D) TPI Housing, Inc. is 100% owned by Teachers Properties, Inc. E) 730 Properties, Inc. owns 100% of the stock of 730 Cal Hotel Properties I, Inc., 730 Cal Hotel Properties II, Inc. and 730 Penn. Hotel Properties I, Inc. 3) All subsidiaries have as their sole purpose the ownership of investments which could, pursuant to New York State Insurance Law, be owned by TIAA itself, except the following: A) TIAA-CREF Life Insurance Company is a New York State insurance subsidiary of TIAA, whose stock is owned by TIAA-CREF Enterprises, Inc. B) TIAA Realty, Inc. is an investment subsidiary with minority stockholders and owns commercial real estate. C) TIAA-CREF Trust Company, FSB is a federally chartered savings bank. D) Teachers Advisors, Inc. provides investment advice for the Registrant. E) Teachers Personal Investors Services, Inc. provides broker-dealer services for the Registrant and TIAA Separate Account VA-1. F) TIAA-CREF Investment Management, LLC, provides investment advice for College Retirement Equities Fund. G) TIAA-CREF Individual & Institutional Services, Inc., which provides broker-dealer and administrative services for College Retirement Equities Fund. H) TCT Holdings, Inc., holds the stock of TIAA-CREF Trust Company, FSB. C - 3 73 ITEM 25. INDEMNIFICATION As a Delaware business trust, Registrant's operations are governed by its Declaration of Trust dated as of April 15, 1999 (the "Declaration"). Generally, Delaware business trust shareholders are not personally liable for obligations of the Delaware business trust under Delaware law. The Delaware Business Trust Act (the "DBTA") provides that a shareholder of a trust shall be entitled to the same limitation of liability extended to shareholders of private for-profit Delaware corporations. Registrant's Declaration expressly provides that it has been organized under the DBTA and that the Declaration is to be governed by Delaware law. It is nevertheless possible that a Delaware business trust, such as Registrant, might become a party to an action in another state whose courts refuse to apply Delaware law, in which case Registrant's shareholders could be subject to personal liability. To protect Registrant's shareholders against the risk of personal liability, the Declaration (i) contains an express disclaimer of shareholder liability for acts or obligations of Registrant and provides that notice of such disclaimer may be given in each agreement, obligation and instrument entered into or executed by Registrant or its Trustees; (ii) provides for the indemnification out of Registrant's property of any shareholders held personally liable for any obligations of Registrant or any series of Registrant; and (iii) provides that Registrant shall, upon request, assume the defense of any claim made against any shareholder for any act or obligation of Registrant and satisfy any judgment thereon. Thus, the risk of a shareholder incurring financial loss beyond his or her investment because of shareholder liability is limited to circumstances in which all of the following factors are present: (i) a court refuses to apply Delaware law; (ii) the liability arose under tort law or, if not, no contractual limitation of liability was in effect; and (iii) Registrant itself would be unable to meet its obligations. In the light of Delaware law, the nature of Registrant's business and the nature of its assets, the risk of personal liability to a shareholder is remote. The Declaration further provides that Registrant shall indemnify each of its Trustees and officers against liabilities and expenses reasonably incurred by them, in connection with, or arising out of, any action, suit or proceeding, threatened against or otherwise involving such Trustee or officer, directly or indirectly, by reason of being or having been a Trustee or officer of Registrant. The Declaration does not authorize Registrant to indemnify any Trustee or officer against any liability to which he or she would otherwise be subject by reason of or for willful misfeasance, bad faith, gross negligence or reckless disregard of such person's duties. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to Trustees, officers and controlling persons, or otherwise, Registrant has been advised that in the opinion of the Commission such indemnification may be against public policy as expressed in the Act and may be, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a Trustee, officer or controlling person of Registrant in the successful defense of any action, suit or proceeding) is asserted by such Trustee, officer or controlling person in connection with the securities being registered, Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed C - 4 74 in the Act and will be governed by the final adjudication of such issue. ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER Teachers Advisors, Inc. ("Advisors") also provides investment management service to TIAA Separate Account VA-1. All officers of Advisors are also officers of TIAA-CREF Investment Management, LLC ("Investment Management") and are employees of TIAA. John H. Biggs is also a trustee of TIAA, College Retirement Equities Fund ("CREF"), TIAA-CREF Individual & Institutional Services, Inc. ("Services") and Investment Management, and a director of Teachers Personal Investor Services, Inc. ("TPIS"). He is Chief Executive Officer of TIAA and CREF. Martin L. Leibowitz is a trustee of TIAA, CREF and Investment Management. He is Vice Chairman and Chief Investment Officer of CREF and TIAA. Charles H. Stamm is a trustee of Investment Management and Services, and a director of TPIS. He is General Counsel of CREF and TIAA. Richard J. Adamski is also Treasurer of TPIS and Services. Richard L. Gibbs is also Executive Vice President of TPIS and Services. The principal business address of Investment Management, Services and TPIS is 730 Third Avenue, New York, NY 10017-3206. Mr. Biggs is also a director of: Ralston Purina Company, Checkerboard Square, St. Louis, MO 63164; and The Boeing Company, 7755 East Marginal Way South, Seattle, WA 98108. ITEM 27. PRINCIPAL UNDERWRITERS TPIS may be considered the principal underwriter for the Registrant. The officers of TPIS and their positions and offices with TPIS and the Registrant are listed in Schedule A of Form BD as currently on file with the Commission (File No. 8-47051), the text of which is hereby incorporated by reference. ITEM 28. LOCATION OF ACCOUNTS AND RECORDS All accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act and the rules promulgated thereunder will be maintained at the Registrant's home office, 730 Third Avenue, New York, NY 10017-3206, at other offices of the Registrant located at 750 Third Avenue and 485 Lexington Avenue, both in New York, NY 10017-3206, and at the offices of the Registrant's custodian, State Street Bank and Trust Company, 225 Franklin Street, Boston, MA 02110. In addition, certain duplicated records are maintained at Pierce Leahy Archives, 64 Leone Lane, Chester, NY 10918. ITEM 29. MANAGEMENT SERVICES State Street Bank and Trust Company, a Massachusetts trust company ("State Street") will provide certain management-related services to the Registrant pursuant to a Custodian C - 5 75 Agreement between the Registrant, State Street and Teachers Advisors, Inc. ("Advisors"), the investment adviser of the Registrant. Under the Custodian Agreement, State Street will, among other things, act as custodian of the assets of the portfolios of the Registrant, keep the Registrant's books of account and compute the net asset value per share of the outstanding shares of each of the Registrant's portfolios. These services will be rendered pursuant to instructions received by State Street from Advisors or the Registrant in the ordinary course of business. ITEM 30. UNDERTAKINGS Because registrant does not intend to raise its initial capital under Section 14(a)(3) of the 1940 Act, no undertaking is required. C - 6 76 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, TIAA-CREF Institutional Mutual Funds, has duly caused this registration statement to be signed on its behalf by the undersigned, duly authorized, in the City of New York, and State of New York, on the 20th day of April, 1999. TIAA-CREF INSTITUTIONAL MUTUAL FUNDS By: /s/ Peter C. Clapman --------------------------- Name: Peter C. Clapman Title: President Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- /s/ Peter C. Clapman 4/20/99 - ----------------------------- --------- Peter C. Clapman Trustee and President /s/ Lisa Snow 4/20/99 - ----------------------------- --------- Lisa Snow Trustee and Secretary
77 EXHIBIT INDEX
Exhibit No. Exhibit Name - ---------- ------------ (a) Declaration of Trust, dated as of April 15, 1999
EX-99.A 2 DECLARATION OF TRUST 1 DECLARATION OF TRUST OF TIAA-CREF INSTITUTIONAL MUTUAL FUNDS 2
TABLE OF CONTENTS ARTICLE 1 Name and Definitions...................................................1 1.1. Name.............................................................1 1.2. Definitions......................................................1 ARTICLE 2 Nature and Purpose of Trust............................................2 2.1. Nature of Trust..................................................2 2.2. Purpose of Trust.................................................3 2.3. Interpretation of Declaration of Trust...........................3 2.3.1. Governing Instrument.....................................3 2.3.2. No Waiver of Compliance with Applicable Law..............3 2.3.3. Power of the Trustees Generally..........................3 2.4. Tax Status.......................................................3 ARTICLE 3 Registered Agent; Offices..............................................3 3.1. Registered Agent.................................................3 3.2 Offices..........................................................3 ARTICLE 4 Shares of Beneficial Interest..........................................4 4.1. Shares of Beneficial Interest....................................4 4.2. Number of Authorized Shares......................................4 4.3. Ownership and Certification of Shares............................4 4.4. Status of Shares.................................................4 4.4.1. Fully Paid and Non-Assessable............................4 4.4.2. Personal Property........................................4 4.4.3. Party to Declaration of Trust............................4 4.4.4. Death of Shareholder.....................................4 4.4.5. Title to Trust; Right to Accounting......................5 4.5. Determination of Shareholders....................................5 4.6. Shares Held by Trust.............................................5 4.7. Shares Held by Persons Related to Trust..........................5 4.8. Preemptive and Appraisal Rights..................................5 4.9. Series and Classes of Shares.....................................5 4.9.1. Generally................................................5 4.9.2. Establishment and Designation............................5 4.9.3. Conversion Rights........................................6 4.9.4. Separate and Distinct Nature.............................6
ii 3 4.9.5. Rights and Preferences of Series.........................6 4.9.5.1. Assets and Liabilities "Belonging" to a Series...6 4.9.5.2. Treatment of Particular Items....................7 4.9.5.3. Limitation on Interseries Liabilities............7 4.9.5.4. Dividends........................................7 4.9.5.5. Redemption by Shareholder........................8 4.9.5.6. Redemption by Trust..............................8 4.9.5.7. Prevention of Personal Holding Company Status....8 4.9.5.8. Net Asset Value..................................8 4.9.5.9. Maintenance of Stable Net Asset Value............9 4.9.5.10. Transfer of Shares..............................9 4.9.5.11. Equality of Shares..............................9 4.9.5.12. Fractional Shares...............................9 4.9.6. Rights and Preferences of Classes........................9 ARTICLE 5 Trustees..............................................................10 5.1. Management of the Trust.........................................10 5.2. Qualification...................................................11 5.3. Number..........................................................11 5.4. Term and Election...............................................11 5.5. Composition of the Board of Trustees............................11 5.6. Resignation and Retirement......................................11 5.7. Removal.........................................................11 5.8. Vacancies.......................................................11 5.9. Ownership of Assets of the Trust................................12 5.10. Powers.........................................................12 5.10.1. By-Laws................................................12 5.10.2. Officers, Agents, and Employees........................12 5.10.3. Committees.............................................12 5.10.3.1. Generally......................................12 5.10.3.2. Executive Committee............................13 5.10.4. Advisers, Administrators, Depositories, and Custodians.13 5.10.5. Compensation...........................................13 5.10.6. Delegation of Authority................................13 5.10.7. Suspension of Sales....................................13 5.11. Certain Additional Powers......................................13 5.11.1. Investments............................................14 5.11.2. Disposition of Assets..................................14 5.11.3. Ownership..............................................14 5.11.4. Subscription...........................................14 5.11.5. Payment of Expenses....................................14 5.11.6. Form of Holding........................................14
iii 4 5.11.7. Reorganization, Consolidation, or Merger...............14 5.11.8. Compromise.............................................14 5.11.9. Partnerships...........................................15 5.11.10. Borrowing..............................................15 5.11.11. Guarantees.............................................15 5.11.12. Insurance..............................................15 5.11.13. Pensions...............................................15 5.12. Meetings and Vote of Trustees...................................15 5.12.1. Regular Meetings.......................................15 5.12.2. Special Meetings.......................................15 5.12.3. Telephonic Meetings....................................16 5.12.4. Quorum.................................................16 5.12.5. Required Vote..........................................16 5.12.6. Consent in Lieu of a Meeting...........................16 ARTICLE 6 Service Providers.....................................................16 6.1. Investment Adviser..............................................16 6.2. Underwriter and Transfer Agent..................................16 6.3. Custodians......................................................17 6.4. Administrator...................................................17 6.5. Other Contracts.................................................17 6.6. Parties to Contracts............................................17 ARTICLE 7 Shareholders' Voting Powers and Meetings..............................17 7.1. Voting Powers...................................................17 7.1.1. Matters Requiring Shareholders Action...................17 7.1.2. Separate Voting by Series and Class.....................18 7.1.3. Number of Votes.........................................18 7.1.4. Cumulative Voting.......................................18 7.1.5. Voting of Shares; Proxies...............................18 7.1.6. Actions Prior to the Issuance of Shares.................19 7.2. Meetings of Shareholders........................................19 7.2.1. Annual or Other Regular Meetings........................19 7.2.2. Special Meetings........................................19 7.2.3. Notice of Meetings......................................19 7.2.4. Call of Meetings........................................19 7.3. Record Dates....................................................19 7.4. Quorum..........................................................20 7.5. Required Vote...................................................20 7.6. Adjournments....................................................20 7.7. Actions by Written Consent......................................20
iv 5 7.8. Inspection of Records...........................................20 7.9. Additional Provisions...........................................20 ARTICLE 8 Limitation of Liability and Indemnification...........................20 8.1. General Provisions..............................................20 8.1.1. General Limitation of Liability.........................20 8.1.2. Notice of Limited Liability.............................21 8.1.3. Liability Limited to Assets of the Trust................21 8.2. Liability of Trustees...........................................21 8.2.1. Liability for Own Actions...............................21 8.2.2. Liability for Actions of Others.........................21 8.2.3. Advice of Experts and Reports of Others.................21 8.2.4. Bond....................................................22 8.2.5. Declaration of Trust Governs Issues of Liability........22 8.3. Liability of Third Persons Dealing with Trustees................22 8.4. Liability of Shareholders.......................................22 8.4.1. Limitation of Liability.................................22 8.4.2. Indemnification of Shareholders.........................22 8.5. Indemnification.................................................23 8.5.1. Indemnification of Covered Persons......................23 8.5.2. Exceptions..............................................23 8.5.3. Rights of Indemnification...............................23 8.5.4. Expenses of Indemnification.............................24 8.5.5. Certain Defined Terms Relating to Indemnification.......24 ARTICLE 9 Termination or Reorganization.........................................24 9.1. Termination of Trust, Series, or Class..........................24 9.1.1. Termination.............................................25 9.1.2. Distribution of Assets..................................25 9.1.3. Certificate of Cancellation.............................25 9.2. Reorganization..................................................25 9.3. Merger or Consolidation.........................................25 9.3.1. Authority to Merge or Consolidate.......................25 9.3.2. No Shareholder Approval Required........................26 9.3.3. Subsequent Amendments...................................26 9.3.4. Certificate of Merger or Consolidation..................26 ARTICLE 10 Amendments............................................................26 10.1. Generally......................................................26 10.2. Certificate of Amendment.......................................26
v 6 10.3. Prohibited Retrospective Amendments............................26 ARTICLE 11 Miscellaneous Provisions..............................................27 11.1. Certified Copies...............................................27 11.2. Certain Internal References....................................27 11.3. Headings; Counterparts.........................................27 11.4. Resolution of Ambiguities......................................27 11.5. Signatures.....................................................27 11.6. Governing Law..................................................27 11.7. Severability...................................................28
vi 7 DECLARATION OF TRUST OF TIAA-CREF INSTITUTIONAL MUTUAL FUNDS This DECLARATION OF TRUST is made as of this 15th day of April 1999, by the Trustees hereunder. WHEREAS, the Trustees desire to establish a trust for the purpose of carrying on the business of an open-end management investment company; and WHEREAS, in furtherance of such purpose, the Trustees and any successor Trustees elected in accordance with Article 5 hereof are acquiring and may hereafter acquire assets which they will hold and manage as trustees of a Delaware business trust in accordance with the provisions hereinafter set forth; and WHEREAS, this Trust is authorized to issue its shares of beneficial interest in one or more separate series and classes of series, all in accordance with the provisions set forth in this Declaration of Trust; NOW, THEREFORE, the Trustees hereby declare that they will hold in trust all cash, securities, and other assets which they may from time to time acquire in any manner as Trustees hereunder, and that they will manage and dispose of the same upon the following terms and conditions for the benefit of the holders of shares of beneficial interest in this Trust as hereinafter set forth. ARTICLE 1 NAME AND DEFINITIONS SECTION 1.1. NAME. This Trust shall be known as the "TIAA-CREF Institutional Mutual Funds" and the Trustees shall conduct the business of the Trust under that name or any other name or names as they may from time to time determine. SECTION 1.2. DEFINITIONS. Whenever used herein, unless otherwise required by the context or specifically provided below: (a) The "Trust" shall mean the Delaware business trust established by this Declaration of Trust, as amended from time to time; (b) "Trustee" and "Trustees" shall mean each signatory to this Declaration of Trust so long as such signatory shall continue in office in accordance with the terms hereof, and all other individuals who at the time in question have been duly elected or appointed and qualified in accordance with Article 5 hereof and are then in office; 8 (c) "Shares" shall mean the shares of beneficial interest in the Trust described in Article 4 hereof and shall include fractional and whole Shares; (d) "Shareholder" shall mean a beneficial owner of Shares, except that with regard to Shares owned by trusts established in connection with employee benefit plans, "Shareholder" shall mean the trust; (e) The "1940 Act" refers to the Investment Company Act of 1940 (and any successor statute) and the rules and regulations thereunder, all as amended from time to time; (f) "Person," "Interested Person," and "Principal Underwriter" shall have the meanings given them in the 1940 Act; (g) "Commission" shall mean the United States Securities and Exchange Commission (or any successor agency thereto); (h) "Declaration of Trust" or "Declaration" shall mean this Declaration of Trust as amended or restated from time to time; (i) "By-Laws" shall mean the By-Laws of the Trust, if any, as amended from time to time; (j) "Series" shall mean any of the separate series of Shares established and designated under or in accordance with the provisions of Article 4 and to which the Trustees have allocated assets and liabilities of the Trust in accordance with Article 4; (k) "DBTA" refers to the Delaware Business Trust Act, Chapter 38 of Title 12 of the Delaware Code (and any successor statute), as amended from time to time; and (l) "Code" refers to the Internal Revenue Code of 1986 (and any successor statute) and the rules and regulations thereunder, all as amended from time to time. ARTICLE 2 NATURE AND PURPOSE OF TRUST SECTION 2.1. NATURE OF TRUST. The Trust is a business trust of the type referred to in the DBTA. The Trustees shall file a certificate of trust in accordance with Sections 3810-3812 of the DBTA. The Trust is not intended to be, shall not be deemed to be, and shall not be treated as, a general or a limited partnership, joint venture, corporation or joint stock company, nor shall the Trustees or Shareholders or any of them for any purpose be deemed to be, or be treated in any way whatsoever as though they were, liable or responsible hereunder as partners or joint venturers. 2 9 SECTION 2.2. PURPOSE OF TRUST. The purpose of the Trust is to engage in, operate and carry on the business of an open-end management investment company and to do any and all acts or things as are necessary, convenient, appropriate, incidental or customary in connection therewith. SECTION 2.3. INTERPRETATION OF DECLARATION OF TRUST. SECTION 2.3.1. GOVERNING INSTRUMENT. This Declaration of Trust shall be the governing instrument of the Trust and shall be governed by and construed according to the laws of the State of Delaware. SECTION 2.3.2. NO WAIVER OF COMPLIANCE WITH APPLICABLE LAW. No provision of this Declaration shall be effective to require a waiver of compliance with any provision of the Securities Act of 1933, as amended, or the 1940 Act, or of any valid rule, regulation or order of the Commission thereunder. SECTION 2.3.3. POWER OF THE TRUSTEES GENERALLY. Except as otherwise set forth herein, a majority of the Trustees may exercise all powers of trustees on behalf of the Trust. SECTION 2.4. TAX STATUS. The Trust intends to qualify as a "regulated investment company" within the meaning of the Internal Revenue Code of 1986 (and any successor statute) and the rules and regulations thereunder, all as amended from time to time (the "Code"). To facilitate such qualification, the Fund intends to elect to be treated as an association taxable as a corporation under the Code. ARTICLE 3 REGISTERED AGENT; OFFICES SECTION 3.1. REGISTERED AGENT. The name of the registered agent of the Trust is The Corporation Trust Company and the registered agent's business address in Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. SECTION 3.2. OFFICES. The Trust shall maintain an office within the State of Delaware which shall be identical to the business office of the registered agent of the Trust as set forth in Section 3.1. The Trustees may, at any time, establish branch or subordinate offices at any place or places where the Trust intends to do business. 3 10 ARTICLE 4 SHARES OF BENEFICIAL INTEREST SECTION 4.1. SHARES OF BENEFICIAL INTEREST. The beneficial interests in the Trust shall be divided into Shares, each of which shall have a par value of one ten-thousandth of a Dollar ($0.0001). The Trustees shall have the authority from time to time to divide the Shares into two (2) or more separate and distinct series of Shares ("Series") and to divide each such Series of Shares into two (2) or more classes of Shares ("Classes"), all as provided in Section 4.9 of this Article 4. SECTION 4.2. NUMBER OF AUTHORIZED SHARES. The Trustees are authorized to issue an unlimited number of Shares. The Trustees may issue Shares for such consideration and on such terms as they may determine (or for no consideration if pursuant to a Share dividend or split), all without action or approval of the Shareholders. SECTION 4.3. OWNERSHIP AND CERTIFICATION OF SHARES. The Secretary of the Trust, or the Trust's transfer or similar agent, shall record the ownership and transfer of Shares of each Series and Class separately on the record books of the Trust. The record books of the Trust, as kept by the Secretary of the Trust or any transfer or similar agent, shall contain the name and address of and the number of Shares held by each Shareholder, and such record books shall be conclusive as to who are the holders of Shares and as to the number of Shares held from time to time by such Shareholders. No certificates certifying the ownership of Shares shall be issued except as the Trustees may otherwise determine from time to time. The Trustees may make such rules as they consider appropriate for the issuance of share certificates, transfer of Shares, and similar matters for the Trust or any Series or Class. SECTION 4.4. STATUS OF SHARES. SECTION 4.4.1. FULLY PAID AND NON-ASSESSABLE. All Shares when issued on the terms determined by the Trustees shall be fully paid and non-assessable. SECTION 4.4.2. PERSONAL PROPERTY. Shares shall be deemed to be personal property giving only the rights provided in this Declaration of Trust. SECTION 4.4.3. PARTY TO DECLARATION OF TRUST. Every Person by virtue of having become [REGISTERED AS] a Shareholder shall be held to have expressly assented and agreed to the terms of this Declaration of Trust and to have become a party thereto. SECTION 4.4.4. DEATH OF SHAREHOLDER. The death of a Shareholder during the continuance of the Trust shall not operate to terminate the Trust nor entitle the representative of any deceased Shareholder to an accounting or to take any action in court or elsewhere against the Trust or the Trustees. The representative shall be entitled to the same rights as the decedent under this Trust. 4 11 SECTION 4.4.5. TITLE TO TRUST; RIGHT TO ACCOUNTING. Ownership of Shares shall not entitle the Shareholder to any title in or to the whole or any part of the Trust property or right to call for a partition or division of the same or for an accounting. SECTION 4.5. DETERMINATION OF SHAREHOLDERS. The Trustees may from time to time close the transfer books or establish record dates and times for the purposes of determining the Shareholders entitled to be treated as such, to the extent provided or referred to in Section 7.3. SECTION 4.6. SHARES HELD BY TRUST. The Trustees may hold as treasury shares, reissue for such consideration and on such terms as they may determine, or cancel, at their discretion from time to time, any Shares of any Series or Class reacquired by the Trust. SECTION 4.7. SHARES HELD BY PERSONS RELATED TO TRUST. Any Trustee, officer or other agent of the Trust, and any organization in which any such person is interested may acquire, own, hold and dispose of Shares of the Trust to the same extent as if such person were not a Trustee, officer or other agent of the Trust; and the Trust may issue and sell or cause to be issued and sold and may purchase Shares from any such person or any such organization subject only to the general limitations, restrictions or other provisions applicable to the sale or purchase of such Shares generally. SECTION 4.8. PREEMPTIVE AND APPRAISAL RIGHTS. Shareholders shall not, as Shareholders, have any right to acquire, purchase or subscribe for any Shares or other securities of the Trust which it may hereafter issue or sell, other than such right, if any, as the Trustees in their discretion may determine. Shareholders shall have no appraisal rights with respect to their Shares and, except as otherwise determined by resolution of the Trustees in their sole discretion, shall have no exchange or conversion rights with respect to their Shares. No action may be brought by a Shareholder on behalf of the Trust unless Shareholders owning no less than a majority of the then outstanding Shares, or Series or Class thereof, join in the bringing of such action. A Shareholder shall not be entitled to participate in a derivative or class action lawsuit on behalf of any other Series or any other Class or on behalf of the Shareholders in any other Series or any other Class of the Trust than the Series or Class owned by such Shareholder. SECTION 4.9. SERIES AND CLASSES OF SHARES. SECTION 4.9.1. GENERALLY. In addition to the Series and Class established and designated in Section 4.9.2, the Shares of the Trust shall be divided into one or more separate and distinct Series or Classes of a Series as the Trustees shall from time to time establish and designate. SECTION 4.9.2. ESTABLISHMENT AND DESIGNATION. The Trustees shall have exclusive power without the requirement of Shareholder approval to establish and designate separate and distinct Series of Shares (each of which may have a separate investment objective) and, with respect to any Series of Shares, to establish and designate separate and distinct Classes 5 12 of Shares. The establishment and designation of any Series (in addition to those established and designated in this Section below) or Class shall be effective upon the execution by a majority of the Trustees of an instrument setting forth such establishment and designation and the relative rights and preferences of the Shares of such Series or Class, or as otherwise provided in such instrument. Each such instrument shall have the status of an amendment to this Declaration of Trust. Without limiting the authority of the Trustees to establish and designate any further Series or Classes, the Trustees hereby establish and designate the following initial Series, the Shares of which shall all be of one Class: Institutional International Equity Fund Institutional Growth Equity Fund Institutional Growth and Income Fund Institutional Equity Index Fund Institutional Social Choice Equity Fund Institutional Bond Fund Institutional Money Market Fund SECTION 4.9.3. CONVERSION RIGHTS. Subject to compliance with the requirements of the 1940 Act, the Trustees shall have the authority to provide that holders of Shares of any Series or Class within a Series shall have the right to convert such Shares into Shares of one or more other Series or Classes in accordance with such requirements and procedures as may be established by the Trustees. SECTION 4.9.4. SEPARATE AND DISTINCT NATURE. Each Series and Class, including without limitation any Series and Class specifically established in Section 4.9.2, shall be separate and distinct from any other Series and Class. Separate and distinct records shall be maintained for each Series and Class on the books of the Trust, and the assets belonging to any such Series and Class shall be held and accounted for separately from the assets of the Trust or any other Series and Class. SECTION 4.9.5. RIGHTS AND PREFERENCES OF SERIES. The Trustees shall have exclusive power without the requirement of Shareholder approval to fix and determine the relative rights and preferences as between the Shares of the separate Series. The initial Series and any further Series that may from time to time be established and designated by the Trustees shall (unless the Trustees otherwise determine with respect to some further Series at the time of establishing and designating the same) have relative rights and preferences as set forth in this Section 4.9.5, subject to the relative rights and preferences of Classes within each such Series as set forth in Section 4.9.6. SECTION 4.9.5.1. ASSETS AND LIABILITIES "BELONGING" TO A SERIES. All consideration received by the Trust for the issue or sale of Shares of a particular Series, together with all assets in which such consideration is invested or reinvested, all income, earnings, profits, and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation of 6 13 such assets, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall be held and accounted for separately from the other assets of the Trust and of every other Series and may be referred to herein as "assets belonging to" that Series. The assets belonging to a particular Series shall belong to that Series for all purposes, and to no other Series, subject only to the rights of creditors of that Series. Such consideration, assets, income, earnings, profits, and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments which are not readily identifiable as belonging to any particular Series (collectively "General Items"), the Trustees shall allocate to and among any one or more of the Series in such manner and on such basis as they, in their sole discretion, deem fair and equitable. Any General Items so allocated to a particular Series shall belong to that Series. Each such allocation by the Trustees shall be conclusive and binding upon all Shareholders for all purposes. The assets belonging to each particular Series shall be charged with the liabilities in respect of that Series and all expenses, costs, charges and reserves attributable to that Series, and any general liabilities, expenses, costs, charges or reserves of the Trust which are not readily identifiable as belonging to any particular Series shall be allocated and charged by the Trustees to and among any one or more of the Series established and designated from time to time in such manner and on such basis as the Trustees in their sole discretion deem fair and equitable. Each allocation of liabilities, expenses, costs, charges and reserves by the Trustees shall be conclusive and binding upon all Shareholders for all purposes. SECTION 4.9.5.2. TREATMENT OF PARTICULAR ITEMS. The Trustees shall have full discretion, to the extent consistent with the 1940 Act and consistent with generally accepted accounting principles, to determine which items shall be treated as income and which items as capital; and each such determination and allocation shall be conclusive and binding upon the Shareholders. SECTION 4.9.5.3. LIMITATION ON INTERSERIES LIABILITIES. Subject to the right of the Trustees in their discretion to allocate general liabilities, expenses, costs, charges or reserves as provided in Section 4.9.5.1, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular Series shall be enforceable against the assets of such Series only, and not against the assets of any other Series. Notice of this limitation on liabilities between and among Series shall be set forth in the certificate of trust of the Trust (whether originally or by amendment) as filed or to be filed in the Office of the Secretary of State of the State of Delaware pursuant to the DBTA, and upon the giving of such notice in the certificate of trust, the statutory provisions of Section 3804 of the DBTA relating to limitations on liabilities between and among series (and the statutory effect under Section 3804 of setting forth such notice in the certificate of trust) shall become applicable to the Trust and each Series. SECTION 4.9.5.4. DIVIDENDS. Dividends and capital gains distributions on Shares of a particular Series or Class may be paid with such frequency, in such form, and in such amount as the Trustees may determine by resolution adopted from time to time, or pursuant to a standing resolution or resolutions adopted only once or with such frequency as the Trustees may determine. All dividends and distributions on Shares of a particular Series or Class thereof shall 7 14 be distributed pro rata to the holders of Shares of that Series or Class in proportion to the number of Shares of that Series or Class held by such holders at the date and time of record established for the payment of such dividends or distributions. Such dividends and distributions may be paid in cash, property or additional Shares of that Series or Class, or a combination thereof, as determined by the Trustees or pursuant to any program that the Trustees may have in effect at the time for the election by each Shareholder of the form in which dividends or distributions are to be paid to that Shareholder. Any such dividend or distribution paid in Shares shall be paid at the net asset value thereof as determined in accordance with Section 4.9.5.8. SECTION 4.9.5.5. REDEMPTION BY SHAREHOLDER. Each Shareholder shall have the right at such times as may be permitted by the Trust and as otherwise required by the 1940 Act to require the Trust to redeem all or any part of such Shareholder's Shares of a Series at a redemption price per Share equal to the net asset value per Share of such Series next determined in accordance with Section 4.9.5.8 after the Shares are properly tendered for redemption, less any charge which may be imposed by the Trust in connection with such redemption as may be established by the Trustees in their sole discretion and as described in the Trust's then current prospectus. Payment of the redemption price shall be in cash; provided, however, that the Trust may, subject to the requirements of the 1940 Act, make payment wholly or partly in securities or other assets belonging to the Series of which the Shares being redeemed are part at the value of such securities or assets used in such determination of net asset value. Notwithstanding the foregoing, the Trust may postpone payment of the redemption price and may suspend the right of the holders of Shares of any Series to require the Trust to redeem Shares of that Series during any period or at any time when and to the extent permissible under any applicable provision of the 1940 Act. SECTION 4.9.5.6. REDEMPTION BY TRUST. The Trustees may cause the Trust to redeem at net asset value the Shares of any Series held by a Shareholder upon such conditions as may from time to time be determined by the Trustees. Upon redemption of Shares pursuant to this Section 4.9.5.6, the Trust shall promptly cause payment of the full redemption price to be made to such Shareholder for Shares so redeemed. SECTION 4.9.5.7. PREVENTION OF PERSONAL HOLDING COMPANY STATUS. The Trust may reject any purchase order, refuse to transfer any Shares, and compel the redemption of Shares if, in its opinion, any such rejection, refusal, or redemption would prevent the Trust from becoming a personal holding company as defined by the Code. SECTION 4.9.5.8. NET ASSET VALUE. The net asset value per Share of any Series, and of any Class thereof, shall be determined in accordance with the methods and procedures established by the Trustees from time to time and, to the extent required by applicable law, as disclosed in the then current prospectus or statement of additional information for the Series or Class. 8 15 SECTION 4.9.5.9. MAINTENANCE OF STABLE NET ASSET VALUE. The Trustees may determine to maintain the net asset value per Share of any Series at a designated constant dollar amount and in connection therewith may adopt procedures not inconsistent with the 1940 Act for the continuing declarations of income attributable to that Series as dividends payable in additional Shares of that Series at the designated constant dollar amount and for the handling of any losses attributable to that Series. Such procedures may provide that in the event of any loss each Shareholder shall be deemed to have contributed to the capital of the Trust attributable to that Series his or her pro rata portion of the total number of Shares required to be canceled in order to permit the net asset value per Share of that Series to be maintained, after reflecting such loss, at the designated constant dollar amount. Each Shareholder of the Trust shall be deemed to have agreed, by his investment in any Series with respect to which the Trustees shall have adopted any such procedure, to make the contribution referred to in the preceding sentence in the event of any such loss. The Trustees may delegate any of their powers and duties under this Section 4.9.5.9 with respect to appraisal of assets and liabilities in the determination of net asset value or with respect to a suspension of the determination of net asset value to an officer or officers or agent or agents of the Trust designated from time to time by the Trustees. SECTION 4.9.5.10. TRANSFER OF SHARES. Except to the extent that applicable law requires otherwise or pursuant to such procedures as may be developed from time to time by the Trustees or the appropriate officers of the Trust, Shares shall be transferable on the records of the Trust only by the record holder thereof or by his agent thereunto duly authorized in writing, upon delivery to the Trustees or the Trust's transfer agent of a duly executed instrument of transfer, together with a Share certificate, if one is outstanding, and such evidence of the genuineness of each such execution and authorization and of such other matters as may be required by the Trustees. Upon such delivery the transfer shall be recorded on the register of the Trust. SECTION 4.9.5.11. EQUALITY OF SHARES. All Shares of each particular Series shall represent an equal proportionate interest in the assets belonging to that Series (subject to the liabilities belonging to that Series), and each Share of any particular Series shall be equal in this respect to each other Share of that Series. This Section 4.9.5.11. shall not restrict any distributions otherwise permissible under this Declaration of Trust with respect to any Classes within a Series. SECTION 4.9.5.12. FRACTIONAL SHARES. Any fractional Share of any Series, if any such fractional Share is outstanding, shall carry proportionately all the rights and obligations of a whole Share of that Series, including rights and obligations with respect to voting, receipt of dividends and distributions, redemption of Shares, and liquidation of the Trust or any Series. SECTION 4.9.6. RIGHTS AND PREFERENCES OF CLASSES. The Trustees shall have exclusive power without the requirement of Shareholder approval to fix and determine the relative rights and preferences as between the separate Classes within any Series. The initial Class and any further Classes that may from time to time be established and designated by the Trustees shall 9 16 (unless the Trustees otherwise determine with respect to some further Class at the time of establishing and designating the same) have relative rights and preferences as set forth in this Section 4.9.6. If a Series is divided into multiple Classes, the Classes may be invested with one or more other Classes in the common investment portfolio comprising the Series. Notwithstanding the provisions of Section 4.9.5, if two or more Classes are invested in a common investment portfolio, the Shares of each such Class shall be subject to the following preferences, conversion and other rights, voting powers, restrictions, conditions of redemption, and, if there are other Classes invested in a different investment portfolio comprising a different Series, shall also be subject to the provisions of Section 4.9.5 at the Series level as if the Classes invested in the common investment portfolio were one Class: (a) The income and expenses of the Series shall be allocated among the Classes comprising the Series in such manner as may be determined by the Trustees in accordance with applicable law; (b) As more fully set forth in this Section 4.9.6, the liabilities and expenses of the Classes comprising the Series shall be determined separately from those of each other and, accordingly, the net asset values, the dividends and distributions payable to Shareholders, and the amounts distributable in the event of liquidation of the Trust or termination of a Series to Shareholders may vary among the Classes comprising the Series. Except for these differences and certain other differences set forth in this Section 4.9.6 or elsewhere in this Declaration of Trust, all Shares of the various Classes comprising a Series shall have the same preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption. (c) The dividends and distributions of investment income and capital gains with respect to the Classes comprising a Series shall be in such amounts as may be declared from time to time by the Trustees, and such dividends and distributions may vary among the Classes comprising the Series to reflect differing allocations of the expenses and liabilities of the Trust among the Classes and any resultant differences between the net asset values per Share of the Classes, to such extent and for such purposes as the Trustees may deem appropriate. The allocation of investment income, capital gains, expenses, and liabilities of the Trust among the Classes comprising a Series shall be determined by the Trustees in a manner that is consistent with applicable law. ARTICLE 5 TRUSTEES SECTION 5.1. MANAGEMENT OF THE TRUST. The business and affairs of the Trust shall be managed by the Trustees, and they shall have all powers necessary and desirable to carry out that responsibility, including those specifically set forth in Sections 5.10 and 5.11 herein. 10 17 SECTION 5.2. QUALIFICATION. Each Trustee shall be a natural person. A Trustee need not be a Shareholder, a citizen of the United States, or a resident of the State of Delaware. SECTION 5.3. NUMBER. By the vote or consent of a majority of the Trustees then in office, the Trustees may fix the number of Trustees at a number not less than two (2) nor more than twenty-five (25). No decrease in the number of Trustees shall have the effect of removing any Trustee from office prior to the expiration of his or her term, but the number of Trustees may be decreased in conjunction with the removal of a Trustee pursuant to Section 5.7. SECTION 5.4. TERM AND ELECTION. Each Trustee shall hold office until the next meeting of Shareholders called for the purpose of considering the election or re-election of such Trustee or of a successor to such Trustee, and until his or her successor is elected and qualified, and any Trustee who is appointed by the Trustees in the interim to fill a vacancy as provided hereunder shall have the same remaining term as that of his or her predecessor, if any, or such term as the Trustees may determine. SECTION 5.5. COMPOSITION OF THE BOARD OF TRUSTEES. No election or appointment of any Trustee shall take effect if such election or appointment would cause the number of Trustees who are Interested Persons to exceed the number permitted by Section 10 of the 1940 Act. SECTION 5.6. RESIGNATION AND RETIREMENT. Any Trustee may resign or retire as a Trustee (without need for prior or subsequent accounting) by an instrument in writing signed by such Trustee and delivered or mailed to the Chairman, if any, the President, or the Secretary of the Trust. Such resignation or retirement shall be effective upon such delivery, or at a later date according to the terms of the instrument. SECTION 5.7. REMOVAL. Any Trustee may be removed with or without cause at any time: (1) by written instrument signed by two-thirds (2/3) of the number of Trustees in office prior to such removal, specifying the date upon which such removal shall become effective, or (2) by the affirmative vote of Shareholders holding not less than two-thirds (2/3) of Shares outstanding, cast in person or by proxy at any meeting called for that purpose. SECTION 5.8. VACANCIES. Any vacancy or anticipated vacancy resulting for any reason, including without limitation the death, resignation, retirement, removal, or incapacity of any of the Trustees, or resulting from an increase in the number of Trustees may (but need not unless required by the 1940 Act) be filled by a majority of the Trustees then in office, subject to the provisions of Section 16 of the 1940 Act, through the appointment in writing of such other person as such remaining Trustees in their discretion shall determine. The appointment shall be effective upon the acceptance of the person named therein to serve as a Trustee and agreement by such person to be bound by the provisions of this Declaration of Trust, except that any such appointment in anticipation of a vacancy occurring by reason of the resignation, retirement, or increase in number of Trustees to be effective at a later date shall become effective only at or after the effective date of such resignation, retirement, or increase in number of Trustees. 11 18 SECTION 5.9. OWNERSHIP OF ASSETS OF THE TRUST. The assets of the Trust shall be held separate and apart from any assets now or hereafter held in any capacity other than as Trustee hereunder by the Trustees or any successor Trustees. Legal title to all the Trust property shall be vested in the Trust as a separate legal entity under the DBTA, except that the Trustees shall have the power to cause legal title to any Trust property to be held by or in the name of one or more of the Trustees or in the name of any other Person on behalf of the Trust on such terms as the Trustees may determine. In the event that title to any part of the Trust property is vested in one or more Trustees, the right, title and interest of the Trustees in the Trust property shall vest automatically in each person who may hereafter become a Trustee upon his or her due election and qualification. Upon the resignation, removal or death of a Trustee he or she shall automatically cease to have any right, title or interest in any of the Trust property, and the right, title and interest of such Trustee in the Trust property shall vest automatically in the remaining Trustees. To the extent permitted by law, such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered. No Shareholder shall be deemed to have a severable ownership in any individual asset of the Trust or any right of partition or possession thereof. SECTION 5.10. POWERS. Subject to the provisions of this Declaration of Trust, the business of the Trust shall be managed by the Trustees, and they shall have all powers necessary or convenient to carry out that responsibility and the purpose of the Trust including, but not limited to, those enumerated in this Section 5.10. SECTION 5.10.1. BY-LAWS. The Trustees may adopt By-Laws not inconsistent with this Declaration of Trust providing for the conduct of the business and affairs of the Trust and may amend and repeal them to the extent that such By-Laws do not reserve that right to the Shareholders. SECTION 5.10.2. OFFICERS, AGENTS, AND EMPLOYEES. The Trustees may, as they consider appropriate, elect and remove officers and appoint and terminate agents and consultants and hire and terminate employees, any one or more of the foregoing of whom may be a Trustee, and may provide for the compensation of all of the foregoing. SECTION 5.10.3. COMMITTEES. SECTION 5.10.3.1. GENERALLY. The Trustees, by a vote of a majority of the Trustees then in office, may elect from their number, an Audit Committee, Executive Committee, Nominating Committee, or any other committee and may delegate thereto some or all of their powers except those which by law, by this Declaration of Trust, or by the By-Laws (if any) may not be delegated. Except as the Trustees may otherwise determine, any such committee may make rules for the conduct of its business, but unless otherwise provided by the Trustees or in such rules, its business shall be conducted so far as possible in the same manner as is provided by this Declaration of Trust or the By-Laws (if any) for the Trustees themselves. All members of such committees shall hold such offices at the pleasure of the Trustees. The Trustees may abolish 12 19 any committee at any time. Any committee to which the Trustees delegate any of their powers or duties shall keep records of its meetings and shall report its actions to the Trustees. The Trustees shall have power to rescind any action of any committee, but no such rescission shall have retroactive effect. SECTION 5.10.3.2. EXECUTIVE COMMITTEE. The Executive Committee, if there shall be one, shall have all of the powers and authority of the Trustees that may lawfully be exercised by an executive committee, except the power to: (i) declare dividends or distributions on Shares; (ii) issue Shares; (iii) recommend to the Shareholders any action which requires the Shareholders' approval; or (iv) approve any merger, reorganization, or share exchange which does not require Shareholder approval. Notwithstanding the foregoing, the Trustees may limit the powers and authority of the Executive Committee at any time. SECTION 5.10.4. ADVISERS, ADMINISTRATORS, DEPOSITORIES, AND CUSTODIANS. The Trustees may, in accordance with Article 6, employ one or more advisers, administrators, depositories, custodians, and other persons and may authorize any depository or custodian to employ subcustodians or agents and to deposit all or any part of such assets in a system or systems for the central handling of securities and debt instruments, retain transfer, dividend, accounting or Shareholder servicing agents or any of the foregoing, provide for the distribution of Shares by the Trust through one or more distributors, principal underwriters or otherwise, and set record dates or times for the determination of Shareholders. SECTION 5.10.5. COMPENSATION. The Trustees may compensate or provide for the compensation of the Trustees, officers, advisers, administrators, custodians, other agents, consultants and employees of the Trust or the Trustees on such terms as they deem appropriate. SECTION 5.10.6. DELEGATION OF AUTHORITY. In general, the Trustees may delegate to any officer of the Trust, to any committee of the Trustees and to any employee, adviser, administrator, distributor, depository, custodian, transfer and dividend disbursing agent, or any other agent or consultant of the Trust such authority, powers, functions and duties as they consider desirable or appropriate for the conduct of the business and affairs of the Trust, including without implied limitation, the power and authority to act in the name of the Trust and of the Trustees, to sign documents and to act as attorney-in-fact for the Trustees. SECTION 5.10.7. SUSPENSION OF SALES. The Trustees shall have the authority to suspend or terminate the sales of Shares of any Series or Class at any time or for such periods as the Trustees may from time to time decide. SECTION 5.11. CERTAIN ADDITIONAL POWERS. Without limiting the foregoing and to the extent not inconsistent with the 1940 Act, other applicable law, and the fundamental policies and limitations of the applicable Series or Class, the Trustees shall have power and authority for and on behalf of the Trust and each separate Series or Class as enumerated in this Section 5.11. 13 20 SECTION 5.11.1. INVESTMENTS. The Trustees shall have the power to invest and reinvest cash and other property, and to hold cash or other property uninvested without in any event being bound or limited by any present or future law or custom in regard to investments by trustees. SECTION 5.11.2. DISPOSITION OF ASSETS. The Trustees shall have the power to sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease any or all of the assets of the Trust. SECTION 5.11.3. OWNERSHIP. The Trustees shall have the power to vote, give assent, or exercise any rights of ownership with respect to securities or other property; and to execute and deliver proxies or powers of attorney to such person or persons as the Trustees shall deem proper, granting to such person or persons such power and discretion with relation to securities or other property as the Trustees shall deem proper. SECTION 5.11.4. SUBSCRIPTION. The Trustees shall have the power to exercise powers and rights of subscription or otherwise which in any manner arise out of ownership of securities. SECTION 5.11.5. PAYMENT OF EXPENSES. The Trustees shall have the power to pay or cause to be paid all expenses, fees, charges, taxes and liabilities incurred or arising in connection with the Trust or any Series or Class thereof, or in connection with the management thereof, including, but not limited to, the Trustees' compensation and such expenses and charges for the Trust's officers, employees, investment advisers, administrator, distributor, principal underwriter, auditor, counsel, depository, custodian, transfer agent, dividend disbursing agent, accounting agent, shareholder servicing agent, and such other agents, consultants, and independent contractors and such other expenses and charges as the Trustees may deem necessary or proper to incur. SECTION 5.11.6. FORM OF HOLDING. The Trustees shall have the power to hold any securities or other property in a form not indicating any trust, whether in bearer, unregistered or other negotiable form, or in the name of the Trustees or of the Trust or of any Series or in the name of a custodian, subcustodian or other depositary or a nominee or nominees or otherwise. SECTION 5.11.7. REORGANIZATION, CONSOLIDATION, OR MERGER. The Trustees shall have the power to consent to or participate in any plan for the reorganization, consolidation or merger of any corporation or issuer, any security of which is or was held in the Trust, and to consent to any contract, lease, mortgage, purchase or sale of property by such corporation or issuer, and to pay calls or subscriptions with respect to any security held in the Trust. SECTION 5.11.8. COMPROMISE. The Trustees shall have the power to arbitrate or otherwise adjust claims in favor of or against the Trust, any Series, or Class on any matter in controversy, including but not limited to claims for taxes. 14 21 SECTION 5.11.9. PARTNERSHIPS. The Trustees shall have the power to enter into joint ventures, general or limited partnerships and any other combinations or associations. SECTION 5.11.10. BORROWING. The Trustees shall have the power to borrow funds and to mortgage and pledge the assets of the Trust or any Series or any part thereof to secure obligations arising in connection with such borrowing, consistent with the provisions of the 1940 Act. SECTION 5.11.11. GUARANTEES. The Trustees shall have the power to endorse or guarantee the payment of any notes or other obligations of any person; to make contracts of guaranty or suretyship, or otherwise assume liability for payment thereof; and to mortgage and pledge the Trust property (or Series property) or any part thereof to secure any of or all such obligations. SECTION 5.11.12. INSURANCE. The Trustees shall have the power to purchase and pay for entirely out of Trust property such insurance as they may deem necessary or appropriate for the conduct of the business, including, without limitation, insurance policies insuring the assets of the Trust and payment of distributions and principal on its portfolio investments, and insurance policies insuring the Shareholders, Trustees, officers, employees, agents, consultants, investment advisers, managers, administrators, distributors, principal underwriters, or independent contractors, or any thereof (or any person connected therewith), of the Trust individually against all claims and liabilities of every nature arising by reason of holding, being or having held any such office or position, or by reason of any action alleged to have been taken or omitted by any such person in any such capacity, including any action taken or omitted that may be determined to constitute negligence, whether or not the Trust would have the power to indemnify such person against such liability. SECTION 5.11.13. PENSIONS. The Trustees shall have the power to pay pensions for faithful service, as deemed appropriate by the Trustees, and to adopt, establish and carry out pension, profit-sharing, share bonus, share purchase, savings, thrift and other retirement, incentive and benefit plans, including the purchasing of life insurance and annuity contracts as a means of providing such retirement and other benefits, for any or all of the Trustees, officers, employees and agents of the Trust. SECTION 5.12. MEETINGS AND VOTE OF TRUSTEES. SECTION 5.12.1. REGULAR MEETINGS. The Trustees from time to time may provide for the holding of regular meetings of the Trustees and fix their time and place. SECTION 5.12.2. SPECIAL MEETINGS. Special meetings of the Trustees may be called by the President of the Trust on twenty-four (24) hours notice to each Trustee, either personally, by mail, by telegram, or by facsimile transmission. Special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of a majority of 15 22 the Trustees then in office or a majority of the members of any executive (or comparable) committee of the Trustees. SECTION 5.12.3. TELEPHONIC MEETINGS. Trustees may participate in a meeting of the Trustees by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Except to the extent that the 1940 Act has been interpreted otherwise, participation by such means shall constitute presence in person at the meeting. SECTION 5.12.4. QUORUM. A majority of the Trustees then in office being present in person shall constitute a quorum. SECTION 5.12.5. REQUIRED VOTE. Except as otherwise provided by the 1940 Act or other applicable law, this Declaration of Trust, or the By-Laws (if any), any action to be taken by the Trustees on behalf of the Trust or any Series or Class may be taken by a majority of the Trustees present at a meeting of Trustees at which a quorum is present. SECTION 5.12.6. CONSENT IN LIEU OF A MEETING. Except as otherwise provided by the 1940 Act or other applicable law, the Trustees may, by unanimous written consent of the Trustees then in office, take any action which may have been taken at a meeting of the Trustees or any committee thereof. ARTICLE 6 SERVICE PROVIDERS SECTION 6.1. INVESTMENT ADVISER. The Trust may enter into written contracts with one or more persons to act as investment adviser or investment subadviser to each of the Series, and as such, to perform such functions as the Trustees may deem reasonable and proper, including, without limitation, investment advisory, management, research, valuation of assets, clerical and administrative functions, under such terms and conditions, and for such compensation, as the Trustees may in their discretion deem advisable. SECTION 6.2. UNDERWRITER AND TRANSFER AGENT. The Trust may enter into written contracts with one or more persons to act as principal underwriter or underwriter or distributor whereby the Trust may either agree to sell Shares to the other party or parties to the contract or appoint such other party or parties its sales agent or agents for such Shares and with such other provisions as the Trustees may deem reasonable and proper, and the Trustees may in their discretion from time to time enter into transfer agency, dividend disbursement, and/or shareholder service contract(s), in each case with such terms and conditions, and providing for such compensation, as the Trustees may in their discretion deem advisable. 16 23 SECTION 6.3. CUSTODIANS. The Trust may enter into written contracts with one or more persons to act as custodian to perform such functions as the Trustees may deem reasonable and proper, under such terms and conditions, and for such compensation, as the Trustees may in their discretion deem advisable. Each such custodian shall be a bank or trust company having an aggregate capital, surplus, and undivided profits of at least one million dollars ($1,000,000). SECTION 6.4. ADMINISTRATOR. The Trust may enter into written contracts with one or more persons to act as an administrator to perform such functions, including accounting functions, as the Trustees may deem reasonable and proper, under such terms and conditions, and for such compensation, as the Trustees may in their discretion deem advisable. SECTION 6.5. OTHER CONTRACTS. The Trust may enter into such other written contracts as the Trustees deem necessary and desirable, including contracts with one or more persons for the coordination or supervision of persons providing services to the Trust under one or more of the contracts described in Sections 6.1, 6.2, 6.3 and 6.4. SECTION 6.6. PARTIES TO CONTRACTS. Any contract of the character described in Sections 6.1, 6.2, 6.3, and 6.4 or in Article 8 hereof may be entered into with any corporation, firm, partnership, trust or association, including, without limitation, the investment adviser, any investment subadviser, or any affiliated person of the investment adviser or investment subadviser, although one or more of the Trustees or officers of the Trust may be an officer, director, trustee, shareholder, or member of such other party to the contract, or may otherwise be interested in such contract, and no such contract shall be invalidated or rendered voidable by reason of the existence of any such relationship, nor shall any person holding such relationship be liable merely by reason of such relationship for any loss or expense to the Trust under or by reason of said contract or be accountable for any profit realized directly or indirectly therefrom; provided, however, that the contract when entered into was not inconsistent with the provisions of this Article 6, Article 8, or the By-Laws (if any). The same person (including a firm, corporation, partnership, trust or association) may provide more than one of the services identified in this Article 6. ARTICLE 7 SHAREHOLDERS' VOTING POWERS AND MEETINGS SECTION 7.1. VOTING POWERS. The Shareholders shall have power to vote only with respect to matters expressly enumerated in Section 7.1.1, with respect to such additional matters relating to the Trust as may be required by the 1940 Act, this Declaration of Trust, the By-Laws (if any), any registration of the Trust with the Commission or any state, or as the Trustees may otherwise deem necessary or desirable. SECTION 7.1.1. MATTERS REQUIRING SHAREHOLDERS ACTION. Action by the Shareholders shall be required as to the following matters: 17 24 (a) The election or removal of Trustees as provided in Sections 5.4 and 5.7; (b) The approval to a contract with a third-party provider of services as to which Shareholder approval is required by the 1940 Act; (c) The termination or reorganization of the Trust to the extent and as provided in Sections 9.1 and 9.2; (d) The amendment of this Declaration of Trust to the extent and as may be provided by this Declaration of Trust or applicable law; and (e) Any court action, proceeding or claim brought or maintained derivatively or as a class action on behalf of the Trust, any Series or Class thereof or the Shareholders of the Trust; provided, however, that a Shareholder of a particular Series or Class shall not be entitled to vote upon a derivative or class action on behalf of any other Series or Class or Shareholder of any other Series or Class. SECTION 7.1.2. SEPARATE VOTING BY SERIES AND CLASS. On any matter submitted to a vote of the Shareholders, all Shares shall be voted separately by individual Series, except: (i) when required by the 1940 Act, Shares shall be voted in the aggregate and not by individual Series or Class thereof; and (ii) when the Trustees have determined that the matter affects the interests of more than one Series, then the Shareholders of all such Series shall be entitled to vote thereon. The Trustees may also determine that a matter affects only the interests of one or more Classes within a Series, in which case any such matter shall only be voted on by such Class or Classes. SECTION 7.1.3. NUMBER OF VOTES. On any matter submitted to a vote of the Shareholders, each Shareholder shall be entitled to one vote for each dollar of net asset value standing in such Shareholder's name on the books of each Series and Class in which such Shareholder owns Shares which are entitled to vote on the matter. SECTION 7.1.4. CUMULATIVE VOTING. There shall be no cumulative voting in the election of Trustees. SECTION 7.1.5. VOTING OF SHARES; PROXIES. Votes may be cast in person or by proxy. A proxy with respect to Shares held in the name of two or more persons shall be valid if executed by any one of them unless at or prior to exercise of the proxy the Trust receives a specific written notice to the contrary from any one of them. A proxy purporting to be executed by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving the invalidity of a proxy shall rest on the challenger. No proxy shall be valid more than eleven months after its date, unless it provides for a longer period. 18 25 SECTION 7.1.6. ACTIONS PRIOR TO THE ISSUANCE OF SHARES. Until Shares are issued, the Trustees may exercise all rights of Shareholders and may take any action required by law, this Declaration of Trust, or the By-Laws (if any) to be taken by Shareholders. SECTION 7.2. MEETINGS OF SHAREHOLDERS. SECTION 7.2.1. ANNUAL OR OTHER REGULAR MEETINGS. No annual or other regular meetings of Shareholders are required to be held. SECTION 7.2.2. SPECIAL MEETINGS. Special meetings of Shareholders may be called by the President of the Trust or the Trustees from time to time for the purpose of taking action upon any matter requiring the vote or authority of the Shareholders as herein provided or upon any other matter upon which Shareholder approval is deemed by the Trustees to be necessary or desirable. A special meeting shall be called by the Secretary of the Trust upon (i) the request of a majority of the Trustees then in office, or (ii) as may be required under the 1940 Act. SECTION 7.2.3. NOTICE OF MEETINGS. Written notice of any meeting of Shareholders shall be given or caused to be given by the Trustees by mailing or transmitting such notice not less than ten (10) nor more than ninety (90) days before such meeting, postage prepaid, stating the time, place and purpose of the meeting, to each Shareholder at the Shareholder's address as it appears on the records of the Trust. SECTION 7.2.4. CALL OF MEETINGS. The Trustees shall promptly call and give notice of a meeting of Shareholders for the purpose of voting upon removal of any Trustee of the Trust when requested to do so in writing by Shareholders holding not less than ten percent (10%) of the Shares of the Trust then outstanding. For all other matters, the Trustees shall call or give notice of a meeting within thirty (30) days after written application by Shareholders entitled to cast at least ten percent (10%) of all of the votes entitled to be cast on the matter requesting a meeting be called. SECTION 7.3. RECORD DATES. For the purpose of determining the Shareholders who are entitled to vote or act at any meeting or any adjournment thereof, or who are entitled to participate in any dividend or distribution, or for the purpose of any other action, the Trustees may from time to time close the transfer books for such period, not exceeding thirty (30) days (except at or in connection with the termination of the Trust), as the Trustees may determine; or without closing the transfer books the Trustees may fix a date and time not more than one hundred twenty (120) days prior to the date of any meeting of Shareholders or other action as the date and time of record for the determination of Shareholders entitled to vote at such meeting or any adjournment thereof or to be treated as Shareholders of record for purposes of such other action. Any Shareholder who was a Shareholder at the date and time so fixed shall be entitled to vote at such meeting or any adjournment thereof or to be treated as a Shareholder of record for purposes of such other action, even though such Shareholder has since that date and time disposed of its Shares, and no Shareholder becoming such after that date and time shall be so 19 26 entitled to vote at such meeting or any adjournment thereof or to be treated as a Shareholder of record for purposes of such other action. SECTION 7.4. QUORUM. Except as otherwise required by the 1940 Act or other applicable law, this Declaration of Trust, or the By-Laws (if any), one-tenth (1/10) of the Shares entitled to vote in person or by proxy shall be a quorum as to any particular matter; provided, however, that any lesser number shall be sufficient for matters upon which the Shareholders vote at any meeting called in accordance with Section 7.6. SECTION 7.5. REQUIRED VOTE. Except as required by applicable law, any matter upon which the Shareholders vote shall be approved by the affirmative vote of a majority of the votes cast on such matter at a meeting of the Shareholders at which a quorum is present, except that Trustees shall be elected by the affirmative vote of a plurality of the votes cast at such a meeting. SECTION 7.6. ADJOURNMENTS. Subject to applicable law, adjourned meetings may be held within a reasonable time after the date set for the original meeting without the necessity of further notice. SECTION 7.7. ACTIONS BY WRITTEN CONSENT. Except as otherwise required by the 1940 Act or other applicable law, this Declaration of Trust, or the By-Laws (if any), any action taken by Shareholders may be taken without a meeting if Shareholders entitled to cast at least a majority of all of the votes entitled to be cast on the matter (or such larger proportion thereof as shall be required by the 1940 Act or by any express provision of this Declaration of Trust or the By-Laws, if any) consent to the action in writing and such written consents are filed with the records of the meetings of Shareholders. Such consent shall be treated for all purposes as a vote taken at a meeting of Shareholders. SECTION 7.8. INSPECTION OF RECORDS. The records of the Trust shall be open to inspection by Shareholders to the same extent as is required for stockholders of a Delaware business corporation under the Delaware General Corporation Law. SECTION 7.9. ADDITIONAL PROVISIONS. The By-Laws (if any) may include further provisions for Shareholders' votes and meetings and related matters not inconsistent with the provisions hereof. ARTICLE 8 LIMITATION OF LIABILITY AND INDEMNIFICATION SECTION 8.1. GENERAL PROVISIONS. SECTION 8.1.1. GENERAL LIMITATION OF LIABILITY. No personal liability for any debt or obligation of the Trust shall attach to any Trustee of the Trust. Without limiting the 20 27 foregoing, a Trustee shall not be responsible for or liable in any event for any neglect or wrongdoing of any officer, agent, employee, investment adviser, subadviser, principal underwriter or custodian of the Trust, nor shall any Trustee be responsible or liable for the act or omission of any other Trustee. Every note, bond, contract, instrument, certificate, Share or undertaking and every other act or thing whatsoever executed or done by or on behalf of the Trust or the Trustees or any Trustee in connection with the Trust shall be conclusively deemed to have been executed or done only in or with respect to their or his or her capacity as Trustees or Trustee and neither such Trustees or Trustee nor the Shareholders shall be personally liable thereon. SECTION 8.1.2. NOTICE OF LIMITED LIABILITY. Every note, bond, contract, instrument, certificate or undertaking made or issued by the Trustees or by any officers or officer shall recite that the same was executed or made by or on behalf of the Trust by them as Trustees or Trustee or as officers or officer and not individually and that the obligations of such instrument are not binding upon any of them or the Shareholders individually but are binding only upon the assets and property of the Trust or belonging to a Series thereof, and may contain such further recitals as they or he may deem appropriate, but the omission thereof shall not operate to bind any Trustees or Trustee or officers or officer or Shareholders or Shareholder individually. SECTION 8.1.3. LIABILITY LIMITED TO ASSETS OF THE TRUST. All persons extending credit to, contracting with or having any claim against the Trust shall look only to the assets of the Trust or belonging to a Series thereof, as appropriate, for payment under such credit, contract or claim, and neither the Shareholders nor the Trustees nor any of the Trust's officers, employees or agents, whether past, present or future, shall be personally liable therefor. SECTION 8.2. LIABILITY OF TRUSTEES. The exercise by the Trustees of their powers and discretion hereunder shall be binding upon the Trust, the Shareholders, and any other person dealing with the Trust. The liability of the Trustees, however, shall be limited by this Section 8.2. SECTION 8.2.1. LIABILITY FOR OWN ACTIONS. A Trustee shall be liable to the Trust or the Shareholders only for his own willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of the office of Trustee, and for nothing else, and shall not be liable for errors of judgment or mistakes of fact or law. SECTION 8.2.2. LIABILITY FOR ACTIONS OF OTHERS. The Trustees shall not be responsible or liable in any event for any neglect or wrongdoing of any officer, agent, employee, consultant, adviser, administrative distributor, principal underwriter, custodian, transfer agent, dividend disbursing agent, Shareholder servicing agent, or accounting agent of the Trust, nor shall any Trustee be responsible for any act or omission of any other Trustee. SECTION 8.2.3. ADVICE OF EXPERTS AND REPORTS OF OTHERS. The Trustees may take advice of counsel or other experts with respect to the meaning and operation of this Declaration of Trust and their duties as Trustees hereunder, and shall be under no liability for any act or omission in accordance with such advice or for failing to follow such advice. In 21 28 discharging their duties, the Trustees, when acting in good faith, shall be entitled to rely upon the books of account of the Trust and upon written reports made to the Trustees by any officer appointed by them, any independent public accountant and (with respect to the subject matter of the contract involved) any officer, partner or responsible employee of any other party to any contract entered into hereunder. SECTION 8.2.4. BOND. The Trustees shall not be required to give any bond as such, nor any surety if a bond is required. SECTION 8.2.5. DECLARATION OF TRUST GOVERNS ISSUES OF LIABILITY. The provisions of this Declaration of Trust, to the extent that they restrict the duties and liabilities of the Trustees otherwise existing at law or in equity, are agreed by the Shareholders and all other Persons bound by this Declaration of Trust to replace such other duties and liabilities of the Trustees. SECTION 8.3. LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No person dealing with the Trustees shall be bound to make any inquiry concerning the validity of any transaction made or to be made by the Trustees or to see to the application of any payments made or property transferred to the Trust or upon its order. SECTION 8.4. LIABILITY OF SHAREHOLDERS. Without limiting the provisions of this Section 8.4 or the DBTA, the Shareholders shall be entitled to the same limitation of personal liability extended to stockholders of private corporations organized for profit under the General Corporation Law of the State of Delaware. SECTION 8.4.1. LIMITATION OF LIABILITY. No personal liability for any debt or obligation of the Trust shall attach to any Shareholder or former Shareholder of the Trust, and neither the Trustees, nor any officer, employee or agent of the Trust shall have any power to bind any Shareholder personally or to call upon any Shareholder for the payment of any sum of money or assessment whatsoever other than such as the Shareholder may at any time personally agree to pay by way of subscription for any Shares or otherwise. SECTION 8.4.2. INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder or former Shareholder of the Trust shall be held to be personally liable solely by reason of being or having been a Shareholder and not because of such Shareholder's acts or omissions or for some other reason, the Shareholder or former Shareholder (or, in the case of a natural person, his or her heirs, executors, administrators or other legal representatives or, in the case of a corporation or other entity, its corporate or other general successor) shall be entitled out of the assets of the Trust to be held harmless from and indemnified against all loss and expense arising from such liability; provided, however, there shall be no liability or obligation of the Trust arising hereunder to reimburse any Shareholder for taxes paid by reason of such Shareholder's ownership of any Shares or for losses suffered by reason of any changes in value of any Trust assets. The Trust shall, upon request by the Shareholder or former Shareholder, assume the defense of any claim 22 29 made against the Shareholder for any act or obligation of the Trust and satisfy any judgment thereon. SECTION 8.5. INDEMNIFICATION. SECTION 8.5.1. INDEMNIFICATION OF COVERED PERSONS. Subject to the exceptions and limitations contained in Section 8.5.2, every person who is, or has been, a Trustee, officer, employee or agent of the Trust, including persons who serve at the request of the Trust as directors, trustees, officers, employees or agents of another organization in which the Trust has an interest as a shareholder, creditor or otherwise (hereinafter referred to as a "Covered Person"), shall be indemnified by the Trust to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him in connection with any claim, action, suit or proceeding in which he becomes involved as a party or otherwise by virtue of his being or having been such a Trustee, director, officer, employee or agent and against amounts paid or incurred by him in settlement thereof. SECTION 8.5.2. EXCEPTIONS. No indemnification shall be provided hereunder to a Covered Person: (a) For any liability to the Trust or its Shareholders arising out of a final adjudication by the court or other body before which the proceeding was brought that the Covered Person engaged in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office; (b) With respect to any matter as to which the Covered Person shall have been finally adjudicated not to have acted in good faith in the reasonable belief that his or her action was in the best interests of the Trust; or (c) In the event of a settlement or other disposition not involving a final adjudication (as provided in paragraph (a) or (b) of this Section 8.5.2) and resulting in a payment by a Covered Person, unless there has been either a determination that such Covered Person did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office by the court or other body approving the settlement or other disposition, or a reasonable determination, based on a review of readily available facts (as opposed to a full trial-type inquiry), that he or she did not engage in such conduct, such determination being made by: (i) a vote of a majority of the Disinterested Trustees (as such term is defined in Section 8.5.5) acting on the matter (provided that a majority of Disinterested Trustees then in office act on the matter); or (ii) a written opinion of independent legal counsel. SECTION 8.5.3. RIGHTS OF INDEMNIFICATION. The rights of indemnification herein provided may be insured against by policies maintained by the Trust, and shall be severable, shall not affect any other rights to which any Covered Person may now or hereafter be entitled, shall continue as to a person who has ceased to be a Covered Person, and shall inure to the benefit of 23 30 the heirs, executors and administrators of such a person. Nothing contained herein shall affect any rights to indemnification to which Trust personnel other than Covered Persons may be entitled by contract or otherwise under law. SECTION 8.5.4. EXPENSES OF INDEMNIFICATION. Expenses of preparation and presentation of a defense to any claim, action, suit or proceeding subject to a claim for indemnification under this Section 8.5 shall be advanced by the Trust prior to final disposition thereof upon receipt of an undertaking by or on behalf of the recipient to repay such amount if it is ultimately determined that he or she is not entitled to indemnification under this Section 8.5, provided that either: (a) Such undertaking is secured by a surety bond or some other appropriate security or the Trust shall be insured against losses arising out of any such advances; or (b) A majority of the Disinterested Trustees acting on the matter (provided that a majority of the Disinterested Trustees then in office act on the matter) or independent legal counsel in a written opinion shall determine, based upon a review of the readily available facts (as opposed to the facts available upon a full trial), that there is reason to believe that the recipient ultimately will be found entitled to indemnification. SECTION 8.5.5. CERTAIN DEFINED TERMS RELATING TO INDEMNIFICATION. As used in this Section 8.5, the following words shall have the meanings set forth below: (a) A "Disinterested Trustee" is one (i) who is not an Interested Person of the Trust (including anyone, as such Disinterested Trustee, who has been exempted from being an Interested Person by any rule, regulation or order of the Commission), and (ii) against whom none of such actions, suits or other proceedings or another action, suit or other proceeding on the same or similar grounds is then or has been pending; (b) "Claim," "action," "suit" or "proceeding" shall apply to all claims, actions, suits, proceedings (civil, criminal, administrative or other, including appeals), actual or threatened; and (c) "Liability" and "expenses" shall include without limitation, attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties and other liabilities. ARTICLE 9 TERMINATION OR REORGANIZATION SECTION 9.1. TERMINATION OF TRUST, SERIES, OR CLASS. Unless terminated as provided herein, the Trust and each Series or Class designated and established pursuant to this Declaration of Trust shall continue without limitation of time. 24 31 SECTION 9.1.1. TERMINATION. Subject to approval by the affected Shareholders, the Trust, any Series, or any Class (and the establishment and designation thereof) may be terminated by an instrument executed by a majority of the Trustees then in office; provided, however, that no approval of affected Shareholders is necessary if a majority of the Trustees then in office determines that the continuation of the Trust, Series, or Class is not in the best interests of the Trust, such Series, such Class, or the affected Shareholders as a result of factors or events adversely affecting the ability of the Trust, Series, or Class to conduct its business and operations in an economically viable manner. SECTION 9.1.2. DISTRIBUTION OF ASSETS. Upon termination of the Trust or any Series or Class, after paying or otherwise providing for all charges, taxes, expenses and liabilities, whether due or accrued or anticipated, as may be determined by the Trustees, the Trust shall, in accordance with such procedures as the Trustees consider appropriate, reduce the remaining assets of the Trust to distributable form in cash or other securities, or any combination thereof, and distribute the proceeds to the affected Shareholders in the manner set forth by resolution of the Trustees. To the extent permitted by the 1940 Act or other applicable law, the Trustees may require affected Shareholders to receive Shares of any remaining Series or Class in lieu of such proceeds. SECTION 9.1.3. CERTIFICATE OF CANCELLATION. Upon termination of the Trust, the Trustees shall file a certificate of cancellation in accordance with Section 3810 of the DBTA. SECTION 9.2. REORGANIZATION. The Trustees may sell, convey, merge and transfer the assets of the Trust, or the assets belonging to any one or more Series, to another trust, partnership, association or corporation organized under the laws of any state of the United States, or to the Trust to be held as assets belonging to another Series of the Trust, in exchange for cash, shares or other securities (including, in the case of a transfer to another Series of the Trust, Shares corresponding to such other Series) with such transfer either (i) being made subject to, or with the assumption by the transferee of, the liabilities belonging to each Series the assets of which are so transferred, or (ii) not being made subject to, or not with the assumption of, such liabilities. Following such transfer, the Trustees shall distribute such cash, Shares or other securities (giving due effect to the assets and liabilities belonging to and any other differences among the various Series the assets belonging to which have so been transferred) among the Shareholders of the Series corresponding to the Series the assets belonging to which have been so transferred. If all of the assets of the Trust have been so transferred, the Trust shall be terminated. SECTION 9.3. MERGER OR CONSOLIDATION. SECTION 9.3.1. AUTHORITY TO MERGE OR CONSOLIDATE. The Trust, or any one or more Series, may, either as the successor, survivor, or non-survivor, (i) consolidate with one or more other trusts, partnerships, associations or corporations organized under the laws of the State of Delaware or any other state of the United States to form a new consolidated trust, partnership, association or corporation under the laws of the State of Delaware or any other state of the 25 32 United States, or have one or more such trusts, partnerships, associations or corporations merged into it, any such consolidation or merger to be upon such terms and conditions as are specified in an agreement and plan of reorganization entered into by the Trust, or one or more Series as the case may be, in connection therewith. The terms "merge" or "merger" as used herein shall also include the purchase or acquisition of any assets of any other trust, partnership, association or corporation which is an investment company organized under the laws of the State of Delaware or any other state of the United States. SECTION 9.3.2. NO SHAREHOLDER APPROVAL REQUIRED. Any such consolidation or merger shall not require the vote of the Shareholders affected thereby, unless such vote is required by the 1940 Act or other applicable laws, or unless such merger or consolidation would result in an amendment of this Declaration of Trust which would otherwise require the approval of such Shareholders. SECTION 9.3.3. SUBSEQUENT AMENDMENTS. In accordance with Section 3815(f) of DBTA, an agreement of merger or consolidation may effect any amendment to this Declaration of Trust or the By-Laws (if any) or may effect the adoption of a new declaration of trust or by-laws of the Trust if the Trust is the surviving or resulting business trust. SECTION 9.3.4. CERTIFICATE OF MERGER OR CONSOLIDATION. Upon completion of the merger or consolidation, the Trustees shall file a certificate of merger or consolidation in accordance with Section 3810 of the DBTA. ARTICLE 10 AMENDMENTS SECTION 10.1. GENERALLY. Except as otherwise specifically provided herein or as required by the 1940 Act or other applicable law, this Declaration of Trust may be amended at any time by an instrument in writing signed by a majority of the Trustees then in office. SECTION 10.2. CERTIFICATE OF AMENDMENT. In the event of any amendment to this Declaration of Trust which affects the certificate of trust filed by the Trust in accordance with Section 2.1, the Trustees shall file a certificate of amendment in accordance with Section 3810 of the DBTA. SECTION 10.3. PROHIBITED RETROSPECTIVE AMENDMENTS. No amendment of this Declaration of Trust or repeal of any of its provisions shall limit or eliminate the limitation of liability provided to Trustees and officers hereunder with respect to any act or omission occurring prior to such amendment or repeal. ARTICLE 11 26 33 MISCELLANEOUS PROVISIONS SECTION 11.1. CERTIFIED COPIES. The original or a copy of this Declaration of Trust and of each amendment hereto shall be kept in the office of the Trust where it may be inspected by any Shareholder. Anyone dealing with the Trust may rely on a certificate by an officer or Trustee of the Trust as to whether or not any such amendments have been made and as to any matters in connection with the Trust hereunder, and with the same effect as if it were the original, may rely on a copy certified by an officer or Trustee of the Trust to be a copy of this Declaration of Trust or of any such amendments. SECTION 11.2. CERTAIN INTERNAL REFERENCES. In this Declaration of Trust or in any such amendment, references to this Declaration of Trust, and all expressions like "herein," "hereof" and "hereunder," shall be deemed to refer to this Declaration of Trust as a whole and as amended or affected by any such amendment. SECTION 11.3. HEADINGS; COUNTERPARTS. Headings are placed herein for convenience of reference only, and in case of any conflict, the text of this instrument, rather than the headings, shall control. This instrument may be executed in any number of counterparts, each of which shall be deemed an original. SECTION 11.4. RESOLUTION OF AMBIGUITIES. The Trustees may construe any of the provisions of this Declaration insofar as the same may appear to be ambiguous or inconsistent with any other provisions hereof, and any such construction hereof by the Trustees in good faith shall be conclusive as to the meaning to be given to such provisions. In construing this Declaration, the presumption shall be in favor of a grant of power to the Trustees. SECTION 11.5. SIGNATURES. To the extent permitted by applicable law, any instrument signed pursuant to a validly executed power of attorney shall be deemed to have been signed by the Trustee or officer executing the power of attorney. SECTION 11.6. GOVERNING LAW. This Declaration of Trust is executed and delivered with reference to DBTA and the laws of the State of Delaware by all of the Trustees whose signatures appear below, and the rights of all parties and the validity and construction of every provision hereof shall be subject to and construed according to DBTA and the laws of the State of Delaware (unless and to the extent otherwise provided for and/or preempted by the 1940 Act or other applicable federal securities laws); provided, however, that there shall not be applicable to the Trust, the Trustees, or this Declaration of Trust (a) the provisions of Section 3540 of Title 12 of the Delaware Code or (b) any provisions of the laws (statutory or common) of the State of Delaware (other than the DBTA) pertaining to trusts which are inconsistent with the rights, duties, powers, limitations or liabilities of the Trustees set forth or referenced in this Declaration of Trust. All references to sections of the DBTA or the 1940 Act, or any rules or regulations thereunder, refer to such sections, rules, or regulations in effect as of the date of this Declaration of Trust, or any successor sections, rules, or regulations thereto. 27 34 SECTION 11.7. SEVERABILITY. The provisions of this Declaration of Trust are severable, and if the Trustees shall determine, with the advice of counsel, that any of such provisions is in conflict with the 1940 Act, the DBTA, or with other applicable laws and regulations, the conflicting provision shall be deemed never to have constituted a part of this Declaration of Trust; provided, however, that such determination shall not affect any of the remaining provisions of this Declaration of Trust or render invalid or improper any action taken or omitted prior to such determination. If any provision of this Declaration of Trust shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall attach only to such provision in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction or any other provision of this Declaration of Trust in any jurisdiction. 28 35 IN WITNESS WHEREOF, the undersigned, being the Trustees of the Trust, have executed this Declaration of Trust as of the date first written above. /s/ Peter C. Clapman --------------------------- Trustee /s/ Lisa Snow --------------------------- Trustee 29 -----END PRIVACY-ENHANCED MESSAGE-----