-----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, QZ0ceflNDGmNUknAtaFAmWw0nOwyJ0u0yP0iESVDiFKeF/1FQ5pZfX0t8GjxQS5h TBAG1Uw16RmyvVmrcZc+nA== 0000950123-99-005915.txt : 19990625 0000950123-99-005915.hdr.sgml : 19990625 ACCESSION NUMBER: 0000950123-99-005915 CONFORMED SUBMISSION TYPE: N-1A/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19990624 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 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-1A/A SEC ACT: SEC FILE NUMBER: 333-76651 FILM NUMBER: 99651503 FILING VALUES: FORM TYPE: N-1A/A SEC ACT: SEC FILE NUMBER: 811-09301 FILM NUMBER: 99651504 BUSINESS ADDRESS: STREET 1: 730 THIRD AVE. CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2124909000 N-1A/A 1 TCIMF PRE-EFFECTIVE AMENDMENT NO. 2 1 File Nos. 333-76651, 811-9301 As filed with the Securities and Exchange Commission on June 24, 1999 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ] Pre-Effective Amendment No. _2_ [X] Post-Effective Amendment No. ___ [ ] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ] Amendment No. _2_ [X] (Check appropriate box or boxes.) ----------------------------------- TIAA-CREF Institutional Mutual Funds (Exact Name of Registrant as Specified in Charter) 730 Third Avenue New York, New York 10017-3206 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code: (800) 842-2733 Peter C. Clapman, Esq. TIAA-CREF Institutional Mutual Funds 730 Third Avenue New York, New York 10017-3206 (Name and Address of Agent for Service) Copy to: Steven B. Boehm, Esq. Sutherland Asbill & Brennan LLP 1275 Pennsylvania Avenue, N.W. Washington, D.C. 20004-2415 Approximate Date of Proposed Public Offering: July 1, 1999 The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a), may determine. 2 PROSPECTUS, DATED JULY 1, 1999 TIAA-CREF Institutional Mutual Funds Institutional International Equity Fund Institutional Growth Equity Fund Institutional Growth and Income Fund Institutional Equity Index Fund Institutional Social Choice Equity Fund Institutional Bond Fund Institutional Money Market Fund Each investment portfolio, or "Fund," currently offers a single class of shares, which is described in this prospectus. The shares are only available for purchase by certain intermediaries affiliated with TIAA-CREF ("TIAA-CREF Intermediaries") or other persons, such as state-sponsored tuition savings plans, who have entered into a contract with a TIAA-CREF Intermediary that enables them to purchase shares of the Funds. The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. 3 TABLE OF CONTENTS SUMMARY INFORMATION...............................................................1 INVESTMENT OBJECTIVES, STRATEGIES AND RISKS..............................1 Dual Investment Management Strategy(SM).........................1 General Risks of Investing in the Funds.........................1 Institutional International Equity Fund.........................2 Institutional Growth Equity Fund................................3 Institutional Growth and Income Fund............................4 Institutional Equity Index Fund.................................5 Institutional Social Choice Equity Fund.........................5 Institutional Bond Fund.........................................6 Institutional Money Market Fund.................................7 PAST PERFORMANCE.........................................................7 FEES AND EXPENSES........................................................7 INVESTMENT OBJECTIVES, STRATEGIES AND RISKS.......................................9 EQUITY FUNDS USING THE DUAL INVESTMENT MANAGEMENT STRATEGY(SM)...........9 Institutional International Equity Fund........................10 Institutional Growth Equity Fund...............................11 Institutional Growth and Income Fund...........................12 OTHER EQUITY FUNDS......................................................12 Institutional Equity Index Fund................................12 Institutional Social Choice Equity Fund........................13 ADDITIONAL INVESTMENT STRATEGIES FOR THE EQUITY FUNDS...................14 THE FIXED-INCOME FUNDS..................................................15 Institutional Bond Fund........................................15 Institutional Money Market Fund................................17 RISKS OF INVESTING IN ANY OF THE FUNDS..................................18 General Investment Risks.......................................18 Year 2000 Risks................................................19 MANAGEMENT OF THE FUNDS.................................................19 The Funds' Investment Adviser..................................19 Prior Performance of Investment Adviser........................20 Fund Managers..................................................22 Service Providers..............................................23 CALCULATING SHARE PRICE..........................................................23 DIVIDENDS AND DISTRIBUTIONS......................................................24 TAXES............................................................................25 YOUR ACCOUNT: BUYING, SELLING OR EXCHANGING SHARES..............................26
ii 4 ELIGIBLE INVESTORS......................................................26 PURCHASE OF FUND SHARES.................................................27 Purchases by Eligible Investors................................27 Investing through the Trust Company............................27 Points to Remember for All Purchases...........................27 In-Kind Purchases of Shares....................................28 HOW TO REDEEM SHARES....................................................28 Redemptions by Eligible Investors..............................28 Redeeming Shares through the Trust Company.....................29 In-Kind Redemptions of Shares..................................29 HOW TO EXCHANGE SHARES..................................................29 Exchanges by Eligible Investors................................29 Making Exchanges through the Trust Company.....................29 OTHER INVESTOR INFORMATION..............................................30 FINANCIAL HIGHLIGHTS.............................................................30
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 DUAL INVESTMENT MANAGEMENT STRATEGY(SM) Three of the Funds (the Institutional International Equity Fund, the Institutional Growth Equity Fund, and the Institutional Growth and Income Fund) use TIAA-CREF's Dual Investment Management Strategy(SM). Each of these Funds has a "stock selection" and an "enhanced index" segment. - - The stock selection segment holds a relatively small number of stocks that the Fund manager believes offer superior returns. These stocks are chosen using fundamental analysis. - - The enhanced index segment seeks to outperform the Fund's benchmark index while limiting the possibility of significantly underperforming the benchmark. The Fund manager attempts to outperform the benchmark index by over- or under-weighting many stocks in the index by small amounts, based on proprietary scoring models. The Fund manager has certain flexibilities, using the Dual Investment Management Strategy, to allocate amounts between the stock selection segment and the enhanced index segment, based upon investment opportunities that the Fund manager determines to be available at any particular time. This approach enables the Funds to stay fully invested even when the Fund manager cannot find sufficient investment opportunities for the stock selection segment. The Institutional Equity Index Fund, the Institutional Social Choice Equity Fund, the Institutional Bond Fund, and the Institutional Money Market Fund do not use the Dual Investment Management Strategy. See their descriptions below. GENERAL RISKS OF INVESTING IN THE FUNDS The Funds are subject to the following general risks: - - Market Risk -- Stock and bond prices in general can decline over short or 1 6 extended periods as a result of political or economic events. - - Interest Rate Risk -- Bond or stock prices may decline if interest rates change. - - Company Risk -- A company's current earnings can fall or its overall financial soundness may decline. As a result, the price of its securities may go down, or the company may not be able to pay principal and interest on its bonds when due. Special risks associated with particular Funds are discussed in the following Fund summaries. The use of a particular benchmark index by a Fund is not a fundamental policy and can be changed. An investment in TIAA-CREF Institutional Mutual Funds is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. An investor can lose money in any of the Funds, or the Funds could underperform other investments. INSTITUTIONAL INTERNATIONAL EQUITY FUND INVESTMENT The Fund seeks favorable long-term returns, mainly through OBJECTIVE capital appreciation. PRINCIPAL The Fund invests in a broadly diversified portfolio of INVESTMENT primarily foreign equity investments, using the Dual STRATEGIES Investment Management Strategy. For the Fund's stock selection segment, we concentrate on individual stocks rather than on geographic regions, sectors, or industries. We look for companies of all sizes that have certain characteristics such as sustainable rowth, consistent cash flow and attractive stock prices based on current earnings, assets and long-term growth prospects. The benchmark index for the Fund is the Morgan Stanley Capital International ("MSCI") EAFE(R) (Europe, Australia, Far East) Index. SPECIAL Changes in currency exchange rates, the possible 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. These risks may be even more pronounced for the Fund's investments in emerging market countries. WHO MAY The Fund may be appropriate for investors who seek WANT TO above-average long-term returns, who understand the INVEST advantages of diversification across international markets and are willing to tolerate the greater risks of international investing. 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. PRINCIPAL The Fund invests in stocks of companies in new and emerging INVESTMENT areas of the economy and companies with distinctive products STRATEGIES or promising market conditions, using the Dual Investment Management Strategy. For its stock selection segment, the Fund looks primarily for companies that we believe have the potential for strong earnings or sales growth, or that appear to be undervalued based on current earnings, assets or growth prospects. It can also invest in companies to benefit from prospective acquisitions, reorganizations, or corporate restructurings or other special situations. Foreign investments may range from 0 to 40 percent of the Fund's portfolio. The benchmark index for the Fund is the Russell 3000(R) Growth Index. (Russell 3000 is a trademark and a service mark of the Frank Russell Company.) SPECIAL The Fund may sometimes hold a significant amount of 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. 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. PRINCIPAL The Fund invests in a broadly diversified portfolio of INVESTMENT common stocks selected for their investment potential, using STRATEGIES the Dual Investment Management Strategy. For its stock selection segment, the Fund manager looks primarily for stocks of larger, well-established, mature growth companies that we believe are attractively priced, show the potential to grow faster than the rest of the market, and offer a growing stream of dividend income. The Fund may also invest in rapidly growing smaller companies and may have up to 20 percent of its assets in foreign securities. Normally, at least 80 percent of the Fund's assets will be income-producing equity securities selected for their investment potential. The benchmark index for the Fund is the Standard & Poor's 500 ("S&P 500") Index. SPECIAL Stocks paying relatively high dividends may at times INVESTMENT significantly underperform other stocks during 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. 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. The Fund STRATEGIES uses a sampling approach to create a portfolio that closely matches the overall investment characteristics (for example, yield and industry weight) of the Index without actually investing in all 3,000 stocks in the index. 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 U.S. equity market index. INVEST INSTITUTIONAL SOCIAL CHOICE EQUITY FUND INVESTMENT The Fund seeks a favorable long-term rate of return that OBJECTIVE tracks the investment performance of the U.S. stock market while giving special consideration to certain social criteria. PRINCIPAL The Fund invests primarily in a diversified set of common INVESTMENT stocks. The Fund attempts to track the return of the U.S. STRATEGIES stock market as represented by the S&P 500 Index, while investing only in companies whose activities are consistent with the Fund's social criteria. It does this primarily by investing in S&P 500 companies that are not excluded by the Fund's social criteria, so that the Fund's portfolio approaches the overall investment characteristics (e.g., yield and industry weight) of the S&P 500. 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 equity WANT TO investment that is generally broad-based but excludes INVEST 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. PRINCIPAL The Fund invests 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 investment grade securities rated in the top four credit categories by Moody's or Standard & Poor's. The Fund is managed to track the duration of the benchmark index for the Fund, the Lehman Brothers Aggregate Bond Index. (Duration is a measurement of the change in the value of a bond portfolio in response to a change in interest rates.) The Fund will overweight or underweight individual securities or sectors depending on where we find undervalued, overlooked or misunderstood issues that offer the potential for superior returns compared to the Lehman index. The Fund may also invest in non-investment grade securities (also called "high-yield" or "junk" bonds) or privately placed (non-registered) securities. SPECIAL The Fund is subject to interest rate risk -- that is, prices INVESTMENT of bonds held by the Fund may decline if interest rates RISKS rise. For example, if interest rates rise by 1%, the market value of a portfolio with a duration of 5 years would decline by approximately 5%. Investments in mortgage-backed securities are subject to prepayment or extension risk. This is the possibility that a change in interest rates would cause the underlying mortgages to be paid off sooner or later than expected. If unanticipated prepayments occur as a result of a declining interest rate environment, the Fund would have to reinvest the amounts that had been invested in the mortgage-backed securities, possibly at a lower rate of return. If unanticipated extensions occur as a result of a rising interest rate environment, the Fund may not have sufficient cash available for reinvestment when expected. High-yield securities involve higher risks than investment grade bonds. WHO MAY The Fund may be appropriate for those who want to invest in WANT TO a general bond fund with a slightly higher level of risk INVEST than a traditional bond fund. 6 11 INSTITUTIONAL MONEY MARKET FUND INVESTMENT The Fund seeks high current income consistent with OBJECTIVE maintaining liquidity and preserving capital. PRINCIPAL The Fund invests primarily in high-quality short-term 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. The benchmark index for the Fund is the IBC Money Fund All-Taxable Average. SPECIAL The Fund is subject to current income volatility -- that is, INVESTMENT the income received by the Fund may decrease as a result of RISKS a decline in interest rates. 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 may be lower than those offered by longer-term fixed-income investments. An investment in the Institutional Money Market Fund, like the other Funds, is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Institutional Money Market Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. PAST PERFORMANCE No performance data for TIAA-CREF Institutional Mutual Funds is included in this prospectus because none of the Funds has been in operation for one full calendar year. Performance information for other registered investment companies managed by the investment advisory personnel who manage TIAA-CREF Institutional Mutual Funds is provided on page 20 of this prospectus. FEES AND EXPENSES The following table describes the fees and expenses that you pay if you buy and hold shares of the Funds. 7 12 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%
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets) - ---------------------------------------------------------- Total Fee Waiver Manage- Other Annual Fund and/or Expense ment Expenses Operating Reimburse- Net Fees (1) Expenses ment (2,3) Expenses ---------- ---------- ----------- -------------- -------- Institutional International Equity Fund 0.27% 0.28% 0.55% 0.26% 0.29% Institutional Growth Equity Fund 0.23% 0.23% 0.46% 0.24% 0.22% Institutional Growth and Income Fund 0.23% 0.23% 0.46% 0.24% 0.22% Institutional Equity Index Fund 0.18% 0.23% 0.41% 0.24% 0.17% Institutional Social Choice Equity Fund 0.19% 0.23% 0.42% 0.24% 0.18% Institutional Bond Fund 0.18% 0.23% 0.41% 0.22% 0.19% Institutional Money Market Fund 0.15% 0.23% 0.38% 0.22% 0.16%
- -------------------------- (1) "Other Expenses" is based on estimated amounts for the current fiscal year. (2) Teachers Advisors, Inc. ("Advisors"), the investment manager for the Funds, has agreed to waive a portion of the Management Fees equal to, on an annual basis: 0.09% of the average daily net assets of the Institutional International Equity Fund; 0.07% of the average daily net assets of each of the Institutional Growth Equity Fund, the Institutional Growth and Income Fund, the Institutional Equity Index Fund, and the Institutional Social Choice Equity Fund; and 0.05% of the average daily net assets of each of the Institutional Bond Fund and the Institutional Money Market Fund. This waiver is contractual and will remain in effect until July 1, 2002. (3) Advisors has agreed to reimburse the Institutional International Equity Fund so that Other Expenses, which do not include investment management fee expenses, do not exceed, on an annual basis, 0.11% of its average daily net assets and to reimburse each of the other Funds so that Other Expenses do not exceed, on an annual basis, 0.06% of its average daily net assets. This reimbursement agreement is contractual and will remain in effect until July 1, 2002. EXAMPLE This example is intended to help you compare the cost of investing in the Funds with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in a Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5 percent return each year and that the Funds' operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be: 8 13
1 Year 3 Years ------ ------- Institutional International Equity Fund $30 $93 Institutional Growth Equity Fund $23 $71 Institutional Growth and Income Fund $23 $71 Institutional Equity Index Fund $17 $55 Institutional Social Choice Equity Fund $18 $58 Institutional Bond Fund $19 $61 Institutional Money Market Fund $16 $52
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS Each of the individual investment portfolios, or Funds, described below has its own investment objective. The following describes each Fund's investment objective, the principal investment strategies and techniques each Fund uses to accomplish its objective, and the principal types of securities each Fund purchases. These policies and techniques are not fundamental and may be changed by our Board of Trustees without shareholder approval. However, we'll notify you of any significant changes. For a complete listing of the Funds' policies and restrictions, see the Statement of Additional Information ("SAI"). There is no guarantee that any Fund will meet its investment objective. EQUITY FUNDS USING THE DUAL INVESTMENT MANAGEMENT STRATEGY(SM) The Institutional International Equity Fund, the Institutional Growth Equity Fund, and the Institutional Growth and Income Fund use TIAA-CREF's Dual Investment Management Strategy(SM), which works like this: Each of these three equity Funds has two separate segments called the "stock selection" 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 9 14 words, a Fund will hold more or less of some stocks than does its benchmark index. The managers attempt to control the risk of underperforming the benchmarks by maintaining the same overall financial characteristics (such as volatility, dividend yield and industry weights) as the benchmarks. The Dual Investment Management Strategy enables the Funds to stay fully invested even when the Fund manager cannot find sufficient investment opportunities for the stock selection segment. The benchmarks for each Fund's enhanced index segment currently are as follows:
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. INSTITUTIONAL INTERNATIONAL EQUITY FUND The INSTITUTIONAL INTERNATIONAL EQUITY FUND seeks a favorable long-term return, mainly through capital appreciation from a broadly diversified portfolio that consists primarily of foreign equity investments. The Fund intends to always have at least 80 percent of its assets in equity securities of companies located in at least three different countries, other than the United States. The Fund uses the Dual Investment Management Strategy. The Fund may invest in companies of all sizes. For the Fund's stock selection segment, we concentrate on individual stocks rather than on geographic regions, sectors, or industries. We do, however, regularly monitor the Fund's sector and country exposure in order to control risk. In particular, we look for companies of all sizes that have certain characteristics, such as: - sustainable growth - focused management with successful track records - unique and easy-to-understand franchises (brands) - undervalued stock prices based on current earnings, assets, and long-term growth prospects - consistent generation of free cash flow SPECIAL INVESTMENT RISKS: The Fund is subject to the general investment risks described on page 18. In addition, investing in securities traded on foreign exchanges or in foreign markets can involve risks beyond those of domestic investing. These include: (1) changes in currency exchange rates; (2) possible imposition of market controls or currency exchange controls; (3) 10 15 possible imposition of withholding taxes on dividends and interest; (4) possible seizure, expropriation, or nationalization of assets; (5) more limited foreign financial information or difficulty in interpreting it because of foreign regulations and accounting standards; (6) the lower liquidity and higher volatility in some foreign markets; (7) the impact of political, social, or diplomatic events; (8) the difficulty of evaluating some foreign economic trends; or (9) the possibility that a foreign government could restrict an issuer from paying principal and interest to investors outside the country. Brokerage commissions and transaction costs are often higher for foreign investments, and it may be harder to use foreign laws and courts to enforce financial or legal obligations. The risks noted above often increase in countries with emerging markets. For example, these countries may have more unstable governments than developed countries, and their economies may be based on only a few industries. Because their securities markets may be very small, share prices may be volatile. In addition, foreign investors are subject to a variety of special restrictions in many emerging countries. The Fund will focus its investments primarily in those countries which are included in the MSCI EAFE Index. INSTITUTIONAL GROWTH EQUITY FUND The INSTITUTIONAL GROWTH EQUITY FUND seeks a favorable long-term return, mainly through capital appreciation, primarily from a diversified portfolio of common stocks that present the opportunity for exceptional growth. Normally, the Fund will have at least 80 percent of its assets in equity securities that have the potential for capital appreciation. The Fund uses the Dual Investment Management Strategy. The Fund's stock selection segment can invest in companies of all sizes, including companies in new and emerging areas of the economy and companies with distinctive products or promising market conditions. We choose individual investments based on a company's prospects under current or forecasted economic, financial and market conditions, looking for companies we believe have the potential for strong earnings or sales growth, or that appear to be undervalued based on current earnings, assets, or growth prospects. The Fund can also invest in large, well-known, established companies, particularly when we believe they have new or innovative products, services, or processes that enhance future earnings prospects. The Fund can also invest in companies in order to benefit from prospective acquisitions, reorganizations, or corporate restructurings or other special situations. The Institutional Growth Equity Fund can buy foreign securities and other instruments if we believe they have superior investment potential. Depending on investment opportunities, the Fund may have from 0 to 40 percent of its assets in foreign securities. The securities will be those traded on foreign exchanges or in other foreign markets and may be denominated in foreign currencies or other units of account. SPECIAL INVESTMENT RISKS: The Fund is subject to the general investment risks described on page 18. In addition, there are special risks to investing in growth stocks. The Fund may at times hold a significant amount of stocks of smaller, lesser-known companies. Their stock 11 16 prices may fluctuate more than those of larger companies because smaller companies may depend on narrow product lines, have limited track records, lack depth of management, or have thinly-traded securities. Also, stocks of companies involved in reorganizations and other special situations can often involve more risk than ordinary securities. Accordingly, the Institutional Growth Equity Fund will probably be more volatile than the overall stock market, and it could significantly outperform or underperform the stock market during any particular period. The Fund's foreign holdings are subject to the risks of foreign investments. These include, among others: changes in currency exchange rates; possible imposition of market controls or currency exchange controls; possible imposition of withholding taxes on dividends and interest; and possible seizure, expropriation, or nationalization of assets. INSTITUTIONAL GROWTH AND INCOME FUND The INSTITUTIONAL GROWTH AND INCOME FUND seeks a favorable long-term return through capital appreciation and investment income, primarily from a broadly diversified portfolio of common stocks. Normally, at least 80 percent of the Fund's assets will be income-producing equity securities selected for their investment potential. The Fund invests in a broadly diversified portfolio of common stocks, using the Dual Investment Management Strategy. The Fund's stock selection segment concentrates on individual companies rather than sectors or industries. We look for stocks of larger, well-established companies that we believe are attractively priced, show the potential to grow faster than the rest of the market, and offer a growing stream of dividend income. In particular, we look for companies that are leaders in their industries. We also look for companies with shareholder-oriented managements dedicated to creating shareholder value. The Fund may also invest in rapidly growing smaller companies. It can have up to 20 percent of its assets in foreign securities. SPECIAL INVESTMENT RISKS: The Fund is subject to the general investments risks described on page 18. The Fund's foreign holdings are subject to the risks of foreign investments. These include, among others: changes in currency exchange rates; possible imposition of market controls or currency exchange controls; possible imposition of withholding taxes on dividends and interest; and possible seizure, expropriation, or nationalization of assets. OTHER EQUITY FUNDS INSTITUTIONAL EQUITY INDEX FUND The INSTITUTIONAL EQUITY INDEX FUND seeks a favorable long-term rate of return from a diversified portfolio selected to track the overall market for common stocks publicly traded in the U.S., as represented by the Russell 3000(R), a broad market index. 12 17 Although the Fund invests in stocks in the Russell 3000 Index, it doesn't invest in all 3,000 stocks in the index. Rather, we use a sampling approach to create a portfolio that closely matches the overall investment characteristics (for example, yield and industry weight) of the index. This means that a company can remain in the Fund even if it performs poorly, unless the company is removed from the Russell 3000. Using the Russell 3000 Index isn't fundamental to the Fund's investment objective and policies. We can change the index used in this Fund at any time and will notify you if we do so. The Fund can also invest in securities and other instruments, such as futures, whose return depends on stock market prices. We select these instruments to attempt to match the total return of the Russell 3000 but may not always do so. The Russell 3000 Index is an unmanaged index of stocks of the 3,000 largest publicly traded U.S. companies, based on market capitalization. Russell 3000 companies represent about 98% of the total market capitalization of the publicly traded U.S. equity market. The market capitalization of the individual companies in the index ranged from $2 million to $333 billion with an average of $72 billion as of December 31, 1998. The Frank Russell Company determines the composition of the index based only on market capitalization and can change its composition at any time. The Russell 3000 Index is not a mutual fund and you cannot invest directly in the index. SPECIAL INVESTMENT RISKS: While the Fund attempts to closely track the Russell 3000 Index and changes are made to its holdings to reflect changes in the index, the Fund does not invest in all 3,000 stocks in the index. Thus, there is no guarantee that the performance of the Fund will match that of the index. Also, because the index's returns aren't reduced by investment and other operating expenses, the Fund's ability to match the index will be adversely affected by the costs of buying and selling stocks as well as other expenses. The stock prices of smaller, lesser-known companies, which make up a small portion of the index, may fluctuate more than those of larger companies because smaller companies may depend on narrow product lines, have limited track records, lack depth of management, or have thinly-traded securities. INSTITUTIONAL SOCIAL CHOICE EQUITY FUND The INSTITUTIONAL SOCIAL CHOICE EQUITY FUND seeks a favorable long-term rate of return that reflects the investment performance of the U.S. stock market while giving special consideration to certain social criteria. Normally, at least 80% of the Fund's assets will be invested in common stocks. The Fund attempts to track the return of the U.S. stock market as represented by the Standard & Poor's 500 Index. It does this primarily by investing in S&P 500 companies that are not excluded by the Fund's social criteria, so that the Fund's portfolio approaches the overall investment characteristics (e.g., yield and industry weight) of the S&P 500. The social criteria the Fund takes into consideration are non-fundamental investment policies. They can change without the approval of the Fund's shareholders. Currently, the Fund 13 18 invests only in companies that do not: - - engage in activities that result or are likely to result in significant damage to the natural environment; - - have a significant portion of its business in weapons manufacturing; - - produce and market alcoholic beverages or tobacco products; - - produce nuclear energy; or - - have operations in Northern Ireland and have not adopted the MacBride Principles (a fair employment code for U.S. firms operating in Northern Ireland) or have not operated consistently with such principals and in compliance with the Fair Employment Act of 1989 (Northern Ireland). For the first three 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. In determining whether a particular actitivity is significant to a company, we do not rely on strict objective criteria, but rather make judgments based on the facts and circumstances pertaining to the company. The Corporate Governance and Social Responsibility Committee of our Board of Trustees provides guidance in deciding whether investments meet the social criteria. It uses information from independent organizations such as the Investor Responsibility Research Center, Inc. We'll do our best to make sure the Fund's investments meet the social criteria, but we can't guarantee that every holding will always do so. Even if an investment is not excluded by the social criteria, we have the option of excluding it if we decide it is not suitable. The Fund isn't restricted from investing in any securities issued or guaranteed by the U.S. government or its agencies or instrumentalities. The Fund can also invest in securities issued by other countries or their agencies and instrumentalities as approved by the Committee on Corporate Governance and Social Responsibility. The Fund can also invest up to 15% of its assets in foreign securities. SPECIAL INVESTMENT RISKS: Because its social criteria exclude some investments, this Fund may not be able to take advantage of the same opportunities or market trends as do the Funds that don't use such criteria. ADDITIONAL INVESTMENT STRATEGIES FOR THE EQUITY FUNDS While the equity Funds invest primarily in common stocks, each equity Fund can also invest, to a limited extent, in other equity securities such as preferred stock, convertible securities, and warrants. Each equity Fund can also hold short-term debt securities of the same type as those held by the Institutional Money Market Fund (see page 17) and other kinds of short-term instruments. These help the Funds maintain liquidity, use cash balances effectively, and take advantage of attractive investment opportunities. The equity Funds can also hold fixed-income securities they acquire because of mergers, recapitalizations, or otherwise. 14 19 Similarly, each equity Fund may also buy and sell options, futures contracts, and options on futures. We intend to use options and futures primarily for hedging or for cash management. To manage currency risk, the equity Funds can also enter into forward currency contracts, and buy or sell options and futures on foreign currencies. The equity Funds can also invest in newly developed financial instruments, such as equity swaps (including arrangements where the return is linked to a stock market index) and equity-linked fixed-income securities, so long as these are consistent with a Fund's investment objective and restrictions. THE FIXED-INCOME FUNDS INSTITUTIONAL BOND FUND The INSTITUTIONAL BOND FUND seeks a favorable long-term return, primarily through high current income consistent with preserving capital. Normally, at least 80 percent of the Fund's assets will be invested in bonds. The Fund's portfolio is invested primarily in a broad range of debt securities. The majority is invested in U.S. Treasury and Agency securities, corporate bonds, and mortgage-backed or other asset-backed securities. The Fund's holdings are mainly investment grade securities rated in the top four credit categories by Moody's or Standard & Poor's, or that we determine are of comparable quality. The Fund is managed to track the duration of the benchmark index for the Fund, the Lehman Brothers Aggregate Bond Index. (Duration is a measurement of the change in the value of a bond portfolio in response to a change in interest rates.) The Fund will overweight or underweight individual securities or sectors, as compared to their weight in the Lehman index, depending on where we find undervalued, overlooked or misunderstood issues that offer the potential for superior investment returns compared to the Lehman index. The Fund can make foreign investments, but we don't expect them to exceed 15 percent of the Fund's assets. The Fund can also invest in money market instruments. The Fund may also invest in securities with special features in an effort to enhance its total return. This category of the Fund's portfolio will primarily consist of privately placed securities (including "Rule 144A" private placements) or non-investment grade securities (also called "high-yield" or "junk" bonds, which are rated Ba1 or lower by Moody's or BB+ or lower by Standard & Poor's). The Fund will not invest more than 25 percent of its assets in privately 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 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 15 20 principal and interest by the CMOs. The Fund may use an investment strategy called "mortgage rolls," in which we "roll over" an investment in a mortgage-backed security before its settlement date for a similar security with a later settlement date. The Fund may also engage in duration-neutral relative value trading, a strategy in which we buy and sell government bonds of identical credit quality but different maturity dates in an attempt to take advantage of spread differentials along the yield curve. These strategies are both designed to enhance the Fund's returns, but they do increase the Fund's portfolio turnover rate. However, we don't expect these strategies to significantly raise the Fund's capital gains. To some extent, and not as a principal strategy, the Fund may also invest in interest-only and principal-only mortgage-backed securities. These instruments have unique characteristics and are more sensitive to prepayment and extension risks than traditional mortgage-backed securities. Similarly, the Fund may also buy and sell options, futures contracts, and options on futures. We intend to use options and futures primarily as a hedging technique or for cash management. To manage currency risk, the Fund can also enter into forward currency contracts, and buy or sell options and futures on foreign currencies. The Fund can also buy and sell swaps and options on swaps, so long as these are consistent with the Fund's investment objective and restrictions. SPECIAL INVESTMENT RISKS: The Fund is subject to interest rate risk -- that is, prices of portfolio securities held by the Fund may decline if interest rates rise. For example, if interest rates decline by 1%, the market value of a portfolio with a duration of 5 years would rise by approximately 5%. Conversely, if interest rates rise by 1%, the market value of the portfolio would decline by approximately 5%. The duration of the Lehman Brothers Aggregate Bond Index as of May 31, 1999 was 4.86 years. By keeping the duration of the Fund close to the duration of Lehman index, the returns due to changes in interest rates should be similar between the Fund and the index. 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 16 21 attention to economic trends and other market events. The Fund can also invest in privately placed debt securities. One risk of investing in private placements is that they may be difficult to sell for their fair market value. The Fund's investments in mortgage-backed securities are subject to prepayment or extension risk, which is the possibility that a change in interest rates may cause the underlying mortgages to be paid off sooner or later than expected. If unanticipated prepayment occurs as a result of a declining interest rate environment, the Fund would then have to reinvest the amounts that had been invested in the mortgage-backed securities, possibly at a lower rate of return. If unanticipated extension occurs as a result of a rising interest rate environment, the Fund may not have sufficient cash available for reinvestment when expected. INSTITUTIONAL MONEY MARKET FUND The INSTITUTIONAL MONEY MARKET FUND seeks high current income to the extent consistent with maintaining liquidity and preserving capital. We seek to maintain a stable net asset value of $1.00 per share of the Institutional Money Market Fund by investing in assets that present minimal credit risk, maintaining an average weighted maturity of 90 days or less, and investing all of the Fund's assets in dollar-denominated securities or other instruments maturing in 397 days or less. We can't assure you that we will be able to maintain a stable net asset value of $1.00 per share for this Fund. The Fund will invest primarily in: (1) commercial paper (short-term "IOUs" issued by corporations and others) or variable-rate, floating-rate, or variable-amount securities of domestic or foreign companies; (2) obligations of commercial banks, savings banks, savings and loan associations, and foreign banks whose latest annual financial statements show more than $1 billion in assets. These include certificates of deposit, time deposits, bankers' acceptances, and other short-term debt; (3) securities issued by or whose principal and interest are guaranteed by the U.S. government or one of its agencies or instrumentalities; (4) other debt obligations with a remaining maturity of 397 days or less issued by domestic or foreign companies; (5) repurchase agreements involving securities issued or guaranteed by the U.S. government or one of its agencies or instrumentalities, or involving certificates of deposit, commercial paper, or bankers' acceptances; (6) participation interests in loans banks have made to the issuers of (1) and (4) above 17 22 (these may be considered illiquid); (7) asset-backed securities issued by domestic corporations or trusts; (8) obligations issued or guaranteed by foreign governments or their political subdivisions, agencies, or instrumentalities; and (9) obligations of international organizations (and related government agencies) designated or supported by the U.S. or foreign government agencies to promote economic development or international banking. The Institutional Money Market Fund will only purchase money market instruments that at the time of purchase are "First Tier Securities", that is rated within the highest category by at least two nationally recognized statistical rating organizations ("NRSROs"), or rated within the highest category by one NRSRO if it is the only NRSRO to have issued a rating for the security, or unrated securities of comparable quality. The Fund can also invest up to 30 percent of its assets in money-market and debt instruments of foreign issuers denominated in U.S. dollars. The above list of investments is not exclusive and the Fund may make other investments consistent with its investment objective and policies. SPECIAL INVESTMENT RISKS: The Fund is subject to the risk of current income volatility -- that is, the income the Fund receives may fall as a result of a decline in interest rates. To a lesser extent, the Fund is also subject to the general risks described below. RISKS OF INVESTING IN ANY OF THE FUNDS GENERAL INVESTMENT RISKS To varying degrees, the Funds are all subject to several general types of risks. (1) One is market risk -- stock and bond price volatility due to changing conditions in the financial markets. (2) Another is interest rate risk -- the risk that a bond's or stock's value will decline if interest rates change. For example, a rise in interest rates usually causes the market value of fixed-rate securities to go down. (3) Another kind of risk is company risk. For stocks and bonds, it comes from the possibility that current earnings will fall or that overall financial soundness will decline, reducing the security's value. In addition, for bonds and other debt securities, company risk comes from the possibility the issuer won't be able to pay principal and interest when due. 18 23 YEAR 2000 RISKS Many services provided to the Funds and their shareholders depend on the smooth functioning of computer systems. Many computer systems now in use can't distinguish the year 2000 from the year 1900 because dates have been encoded using only the last two digits of the year. Like other mutual funds, financial and business organizations, and individuals around the world, TIAA-CREF Institutional Mutual Funds could be adversely affected if the computer systems it relies on do not properly process and calculate information and data involving dates from and after January 1, 2000. These computer systems include those used by its investment adviser and other service providers. Together, TIAA-CREF Institutional Mutual Funds and its investment adviser are taking steps that we believe are reasonably designed to address issues involving the Year 2000 for the computer systems we use. We are also seeking reasonable assurances that our service providers are taking comparable steps. However, currently we can't assure you that these steps will be sufficient to avoid any adverse impact on the Funds. If the computer systems the Funds rely on do fail or produce faulty data, there could be delays in processing transactions, or we may temporarily be unable to engage in normal business activities. Also, a Fund's performance could be affected if a systems failure at a company or government entity, either in the U.S. or abroad (where Year 2000 compliance may be less prevalent), affects the price of securities that the Fund owns. The Fund managers consider Year 2000 readiness when selecting investments. However, there is no guarantee that the information (including Year 2000 readiness) a Fund manager receives about a company is completely accurate. As a result, a Fund's performance could suffer if a company in which the Fund is invested has not satisfactorily addressed Year 2000 issues. MANAGEMENT OF THE FUNDS THE FUNDS' INVESTMENT ADVISER Teachers Advisors, Inc. ("Advisors") manages the assets of TIAA-CREF Institutional Mutual Funds, under the supervision of the Funds' Board of Trustees (the "Board"). Advisors is an indirect wholly-owned subsidiary of Teachers Insurance and Annuity Association of America ("TIAA"). It is registered as an investment adviser with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940. Advisors also manages the investments of TIAA Separate Account VA-1, the TIAA-CREF Life Funds, the TIAA-CREF Mutual Funds, and the investment portfolio of New York State's College Choice Tuition Savings Plan. Through an affiliated investment adviser, TIAA-CREF Investment Management, LLC ("Investment Management"), the personnel of Advisors also manage the investment accounts of the College Retirement Equities Fund ("CREF"). As of March 31,1999, Advisors and Investment Management together had $__._ billion of registered investment company assets under management. Advisors is located at 730 Third Avenue, New York, NY 10017. 19 24 Advisors' duties include conducting research, recommending investments, and placing orders to buy and sell securities. Advisors also acts as liaison among the various service providers to the Funds, including custodians, fund administrators, and transfer agents. Under the terms of an Investment Management Agreement between TIAA-CREF Institutional Mutual Funds and Advisors, Advisors is entitled to an annual fee of 0.27%, 0.23%, 0.23%, 0.18%, 0.19%, 0.18%, and 0.15% of the average daily net assets of the Institutional International Equity Fund, the Institutional Growth Equity Fund, the Institutional Growth and Income Fund, the Institutional Equity Index Fund, the Institutional Social Choice Equity Fund, the Institutional Bond Fund, and the Institutional Money Market Fund, respectively. Advisors has agreed to waive a portion of its investment management fee equal to, on an annual basis: 0.09% of the average daily net assets of the Institutional International Equity Fund; 0.07% of the average daily net assets of each of the Institutional Growth Equity Fund, the Institutional Growth and Income Fund, the Institutional Equity Index Fund, and the Institutional Social Choice Equity Fund; and 0.05% of the average daily net assets of each of the Institutional Bond Fund and the Institutional Money Market Fund. This waiver is contractual and will remain in effect until July 1, 2002. PRIOR PERFORMANCE OF INVESTMENT ADVISER Please do not confuse the Funds with other registered investment company portfolios using very similar or nearly identical names that are offered by TIAA-CREF Mutual Funds, by CREF, by a separate account of TIAA, or by a mutual fund dedicated to a separate account of TIAA-CREF Life Insurance Company (a wholly-owned subsidiary of TIAA). However, the investment objectives and policies of certain Funds are very similar to the investment objectives and policies of other registered investment company portfolios that are managed by Advisors or Investment Management. Nevertheless, the investment performance of the Funds may be lower, or higher, than the investment results of such other portfolios. We do not promise that the investment results of any of the Funds will be comparable to the investment results of any other mutual fund, CREF account, or separate account portfolio, even if the other portfolio uses a very similar name, is managed by the same investment advisory personnel, and has the same investment objective and policies as the applicable Fund. TIAA-CREF Institutional Mutual Funds commenced operations on June 14, 1999, and each Fund has a limited performance record. However, the investment objective, policies, strategies, and risks of each of the Funds (except the Institutional Social Choice Equity Fund) is substantially similar to one or more other registered investment company portfolios managed by Advisors or Investment Management. The performance of these other portfolios may be relevant to prospective investors in TIAA-CREF Institutional Mutual Funds. The charts below show historical performance for: the International Equity Fund, the Growth Equity Fund, the Growth & Income Fund, the Bond Plus Fund, and the Money Market Fund of TIAA-CREF Mutual Funds (managed by Advisors); the Stock Index Account of TIAA Separate Account VA-1 (managed by Advisors); the Stock Index Fund of TIAA-CREF Life Funds (managed by Advisors); and the Growth Account, the Equity Index Account, and the Money Market Account of CREF (managed by the same personnel in their capacities with 20 25 Investment Management). The data are provided to illustrate the experience of Advisors' personnel in managing investment portfolios substantially similar to the Institutional International Equity Fund, the Institutional Growth Equity Fund, the Institutional Growth and Income Fund, the Institutional Equity Index Fund, the Institutional Bond Fund, and the Institutional Money Market Fund of TIAA-CREF Institutional Mutual Funds. (Because CREF's Social Choice Account is a balanced portfolio with both debt and equity components, there exists no investment portfolio managed by Advisors' personnel that is substantially similar to the Institutional Social Choice Equity Fund.) The performance of an appropriate broad-based securities market index, adjusted to reflect the reinvestment of dividends on securities in the index, is also presented for each Fund. The historical performance information presented is not intended to predict or suggest the returns that the corresponding Fund of TIAA-CREF Institutional Mutual Funds might experience. The results are net of investment management and other operating expenses of the portfolios. After taking into account the contractual fee waiver and expense reimbursement arrangement, each Fund of TIAA-CREF Institutional Mutual Funds has lower total annual operating expenses than the corresponding portfolios of the TIAA-CREF Mutual Funds, TIAA-CREF Life Funds (a mutual fund portfolio offered solely to a separate account of TIAA-CREF Life Insurance Company), TIAA Separate Account VA-1 (a variable annuity managed account offered solely to TIAA), and CREF (variable annuity managed accounts) during the periods illustrated.
- ----------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL 1 year ended 5 years ended 10 years ended Inception to Inception of RETURN Period: Mar. 31, 1999 Mar. 31, 1999 Mar. 31, 1999 Mar. 31, 1999 Account/Fund - ----------------------------------------------------------------------------------------------------------------------------- Accounts/Funds similar to: INSTITUTIONAL INTERNATIONAL EQUITY FUND - ----------------------------------------------------------------------------------------------------------------------------- International Equity Fund of TIAA-CREF Mutual Funds 7.36% N/A N/A 12.35% Sept. 2, 1997 - ----------------------------------------------------------------------------------------------------------------------------- MSCI EAFE Index 6.06% N/A N/A 11.81% Sept. 2, 1997 - ----------------------------------------------------------------------------------------------------------------------------- Accounts/Funds similar to: INSTITUTIONAL GROWTH EQUITY FUND - ----------------------------------------------------------------------------------------------------------------------------- Growth Equity Fund of TIAA-CREF Mutual Funds 24.82% N/A N/A 32.12% Sept. 2, 1997 - ----------------------------------------------------------------------------------------------------------------------------- Russell 3000 Growth Index 24.35% N/A N/A 29.85% Sept. 2, 1997 - ----------------------------------------------------------------------------------------------------------------------------- Growth Account of CREF 21.34% N/A N/A 26.40% Apr. 29, 1994 - ----------------------------------------------------------------------------------------------------------------------------- Russell 3000 Growth Index 24.35% N/A N/A 27.18% Apr. 29, 1994 - ----------------------------------------------------------------------------------------------------------------------------- Accounts/Funds similar to: INSTITUTIONAL GROWTH AND INCOME FUND - ----------------------------------------------------------------------------------------------------------------------------- Growth & Income Fund of TIAA-CREF Mutual Funds 20.81% N/A N/A 29.39% Sept 2, 1997 - ----------------------------------------------------------------------------------------------------------------------------- S&P 500 Index 18.46% N/A N/A 27.36% Sept. 2, 1997 - ----------------------------------------------------------------------------------------------------------------------------- Accounts/Funds similar to: INSTITUTIONAL BOND FUND - ----------------------------------------------------------------------------------------------------------------------------- Bond Plus Fund of TIAA-CREF Mutual Funds 6.36% N/A N/A 8.20% Sept. 2, 1997 - ----------------------------------------------------------------------------------------------------------------------------- Lehman Aggregate Bond Index 6.49% N/A N/A 8.04% Sept. 2, 1997 - ----------------------------------------------------------------------------------------------------------------------------- Bond Market Account of CREF 6.04% 7.34% N/A 8.35% Mar. 1, 1990 - ----------------------------------------------------------------------------------------------------------------------------- Lehman Aggregate Bond Index 6.49% 7.79% N/A 8.64% Mar. 1, 1990 - -----------------------------------------------------------------------------------------------------------------------------
21 26
- ----------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL 1 year ended 5 years ended 10 years ended Inception to Inception of RETURN Period: Mar. 31, 1999 Mar. 31, 1999 Mar. 31, 1999 Mar. 31, 1999 Account/Fund - ----------------------------------------------------------------------------------------------------------------------------- Accounts/Funds similar to: INSTITUTIONAL EQUITY INDEX FUND - ----------------------------------------------------------------------------------------------------------------------------- Stock Index Fund of TIAA-CREF Life Funds N/A N/A N/A 3.92% Jan. 4, 1999 - ----------------------------------------------------------------------------------------------------------------------------- Russell 3000 Index 13.54% N/A N/A 3.39% Jan. 4, 1999 - ----------------------------------------------------------------------------------------------------------------------------- Stock Index Account of TIAA Separate Account VA-1 12.85% N/A N/A 25.32% Nov. 1, 1994 - ----------------------------------------------------------------------------------------------------------------------------- Russell 3000 Index 13.54% N/A N/A 26.53% Nov. 1, 1994 - ----------------------------------------------------------------------------------------------------------------------------- Equity Index Account of CREF 13.60% N/A N/A 23.94% Apr. 29, 1994 - ----------------------------------------------------------------------------------------------------------------------------- Russell 3000 Index 13.54% N/A N/A 24.28% Apr. 29, 1994 - ----------------------------------------------------------------------------------------------------------------------------- Accounts/Funds similar to: INSTITUTIONAL MONEY MARKET FUND - ----------------------------------------------------------------------------------------------------------------------------- Money Market Fund of TIAA-CREF Mutual Funds 5.27% N/A N/A 5.38% Sept. 2, 1997 - ----------------------------------------------------------------------------------------------------------------------------- IBC Money Fund All-Taxable Avg. 4.86% N/A N/A 4.98% Sept. 2, 1997 - ----------------------------------------------------------------------------------------------------------------------------- Money Market Account of CREF 5.25% 5.13% 5.55% 5.78% Apr. 1, 1988 - ----------------------------------------------------------------------------------------------------------------------------- IBC Money Fund All-Taxable Avg. 4.86% 4.95% 5.15% 5.38% Apr. 1, 1988 - ----------------------------------------------------------------------------------------------------------------------------- As of Mar. 30, 1999: 7-Day Yield 7-Day Effective Yield - ----------------------------------------------------------------------------------------------------------------------------- Money Market Fund of TIAA-CREF Mutual Funds 4.68% 4.79% - ----------------------------------------------------------------------------------------------------------------------------- Money Market Account of CREF 4.62% 4.72% - ----------------------------------------------------------------------------------------------------------------------------- IBC Money Fund All-Taxable Avg. 4.35% 4.44% - -----------------------------------------------------------------------------------------------------------------------------
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 Advisors' growth portfolio management group, whose members are jointly responsible for the day-to-day management of the Fund. The Institutional Growth and Income Fund is managed by 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. 22 27 The Institutional Equity Index Fund and the Institutional Social Choice Equity Fund are managed by Advisors' quantitative portfolio management group, whose members are jointly responsible for the day-to-day management of the Funds. The Institutional Bond Fund is managed by 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. 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 23 28 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. 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 intend to pay net capital gains from Funds that have them once a year. You can elect from among the following distribution options: 1. REINVESTMENT OPTION, SAME FUND. We'll automatically reinvest your dividend and capital gain distributions in additional shares of the Fund. Unless you elect otherwise, this will be your distribution option. 2. INCOME-EARNED OPTION. We'll automatically reinvest your capital gain distributions, but you will be sent a check for each dividend distribution. 3. CAPITAL GAINS OPTION. We'll automatically reinvest your dividend distributions, but you will be sent a check for each capital gain distribution. 4. CASH OPTION. We'll send a check for your dividend and each capital gain distribution. We make distributions for each Fund on a per share basis to the shareholders of record on 24 29 the Fund's distribution date. We do this regardless of how long the shares have been held. That means if you buy shares just before or on a record date, you will pay the full price for the shares and then you may receive a portion of the price back as a taxable distribution. (See the discussion of "buying a dividend" below.) Cash distribution checks will be mailed within seven days of the distribution date. 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. 25 30 Effect of foreign taxes. Foreign governments may impose taxes on a Fund and its investments and these taxes generally will reduce such Fund's distributions. If a Fund qualifies to pass through a credit for such taxes paid and elects to do so, an offsetting tax credit or deduction may be available to you. If so, your tax statement will show more taxable income than was actually distributed by the Fund, but will also show the amount of the available offsetting credit or deduction. Other restrictions. There are tax requirements that all mutual funds must follow in order to avoid federal taxation. In its effort to adhere to these requirements, a Fund may have to limit its investment in some types of instruments. Special considerations for certain institutional investors. If you are a corporate investor, a portion of the dividends from net investment income paid by the Institutional Growth Equity Fund, the Institutional Growth and Income Fund, the Institutional Equity Index Fund, and the Institutional Social Choice Equity Fund will generally qualify for the corporate dividends-received deduction. However, the portion of the dividends that qualify depends on the aggregate qualifying dividend income received by each Fund from domestic (U.S.) sources. Certain holding period and debt financing restrictions may apply to corporate investors seeking to claim the deduction. We expect that little or none of the distributions paid by the Institutional International Equity Fund, the Institutional Bond Fund, and the Institutional Money Market Fund will qualify for the corporate dividends-received deduction. YOUR ACCOUNT: BUYING, SELLING OR EXCHANGING SHARES ELIGIBLE INVESTORS Shares of TIAA-CREF Institutional Mutual Funds are only available for purchase by certain intermediaries affiliated with TIAA-CREF ("TIAA-CREF Intermediaries"), such as TIAA-CREF Trust Company, FSB (the "Trust Company"), or other persons, such as state-sponsored tuition savings plans, who have entered into a contract with a TIAA-CREF Intermediary that enables them to purchase shares of the Funds. Collectively with TIAA-CREF Intermediaries, these contractually eligible investors are referred to as "Eligible Investors" in the rest of this prospectus. In the future, TIAA-CREF Institutional Mutual Funds may offer additional classes of shares (with different shareholder servicing, distribution, administrative, or other fees and expenses) for some or all of its Funds. For example, we may introduce another class of shares to be sold directly to investors who do not have a specific contractual relationship with a TIAA-CREF Intermediary. 26 31 PURCHASE OF FUND SHARES There is no minimum investment requirement for Eligible Investors. All purchases must be in U.S. dollars. We consider all requests for purchases to be received when they are received in "good order" (see page 30). There may be circumstances when we will not permit Eligible Investors to invest in one or more of the Funds. We reserve the right to suspend or terminate the offering of shares by one or more Funds. We also reserve the right to reject any specific purchase request. PURCHASES BY ELIGIBLE INVESTORS Only Eligible Investors may invest in the Funds. All other prospective investors should contact their TIAA-CREF Intermediary for applicable purchase requirements. To purchase shares, an Eligible Investor should instruct its bank to wire money to State Street Bank and Trust Company, ABA Number ____________, DDA Number ____________. Specify on the wire: (1) TIAA-CREF Institutional Mutual Funds; (2) account registration (names of registered owners), address and Social Security Number(s) or Taxpayer Identification Number; (3) whether the investment is for a new or existing account (provide Fund account number if existing); and (4) the Fund or Funds in which you want to invest, and amount to be invested in each. INVESTING THROUGH THE TRUST COMPANY Clients of the Trust Company may invest in TIAA-CREF Institutional Mutual Funds only through the Trust Company, which is an Eligible Investor and serves as the TIAA-CREF Intermediary for its clients. Contact the Trust Company regarding how investments in Fund shares are held for your benefit. In addition to the fees and expenses deducted by the Funds, you may be charged a fee by the Trust Company for the services it provides you. POINTS TO REMEMBER FOR ALL PURCHASES - - Each investment by an Eligible Investor in TIAA-CREF Institutional Mutual Funds must be for a specified dollar amount. We can't accept purchase requests specifying a certain price, date, or number of shares; we'll return these investments. - - If you invest in TIAA-CREF Institutional Mutual Funds through an Eligible Investor, the Eligible Investor may charge you a fee in connection with your investment (in addition to the fees and expenses deducted by the Funds). Contact the Eligible Investor to learn whether there are any other conditions, such as a minimum investment requirement, on your transactions. In addition, Eligible Investors that are not themselves affiliated with TIAA-CREF may be charged a fee by their TIAA-CREF Intermediary (in addition to the fees and expenses deducted by the Funds). 27 32 If we do not receive good funds through wire transfer, we will treat this as a redemption of the shares purchased when your wire transfer is 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 through a telephone request made by calling ___________. Usually, we send redemption proceeds to the Eligible Investor on the second business day after we receive a redemption request, but not later than seven days afterwards, assuming the request is in good order (see page 30). If a redemption is requested shortly after a recent purchase by check, the redemption proceeds may not be paid until payment for the purchase is collected. This can take up to ten days. We can postpone payment if (a) the New York Stock Exchange is closed for other than usual weekends or holidays, or trading on the New York Stock Exchange is restricted; (b) an emergency exists as defined by the SEC, or the SEC requires that trading be restricted; or (c) the SEC permits a delay for the protection of investors. We send redemption proceeds to the Eligible Investor at the address or bank account of 28 33 record. If proceeds are to be sent elsewhere, we will require a letter of instruction from the Eligible Investor with a signature guarantee. 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 telephone request by calling ___________. Once made, an exchange request cannot be modified or canceled. 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. 29 34 OTHER INVESTOR INFORMATION Good Order. Requests for transactions by Eligible Investors will not be processed until they are received in good order by our transfer agent, Boston Financial Data Services. "Good order" means that an Eligible Investor's transaction request includes its Fund account number, the amount of the transaction (in dollars or shares), signatures of all account owners exactly as registered on the account, and any other supporting legal documentation that may be required. Share Price. The share price we use for transactions will be the NAV per share next calculated after Boston Financial Data Services receives an Eligible Investor's request in good order. If an Eligible Investor purchases or redeems shares anytime before the New York Stock Exchange closes (usually 4:00 p.m. Eastern Time), the transaction price will be the NAV per share for that day. If an Eligible Investor makes a purchase or redemption request after the New York Stock Exchange closes, the transaction price will be the NAV per share for the next business day. If you purchased shares through an Eligible Investor, the Eligible Investor (including the Trust Company) may require you to communicate to it any purchase, redemption, or exchange request before a specified deadline earlier than 4:00 p.m. in order to receive that day's NAV per share as the transaction price. Tax Identification Number. Each Eligible Investor must provide its Taxpayer Identification Number (which, for most individuals, is your Social Security Number) to us and indicate whether or not it is subject to back-up withholding. If an Eligible Investor doesn't furnish its Taxpayer Identification Number, redemptions and exchanges of shares, as well as dividends and capital gains distributions, will be subject to back-up tax withholding. Signature Guarantee. For some transaction requests by an Eligible Investor, we may require a letter of instruction from the Eligible Investor with a signature guarantee. 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. 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. 30 35 [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 1999, 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 P.O. Box 4674 New York, NY 10164 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. 36 TIAA-CREF INSTITUTIONAL MUTUAL FUNDS STATEMENT OF ADDITIONAL INFORMATION This Statement of Additional Information ("SAI") contains additional information that you should consider before investing in TIAA-CREF Institutional Mutual Funds (the "Trust"). It is not a prospectus and should be read carefully in conjunction with the Trust's prospectus dated July 1, 1999 (the "Prospectus"), which may be obtained by writing us at TIAA-CREF Institutional Mutual Funds, P.O. Box 4674, New York, NY 10164 or by calling 800 223-1200. Terms used in the Prospectus are incorporated in this SAI. The date of this SAI is July 1, 1999. 37 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.........................................................18 ABOUT TIAA-CREF INSTITUTIONAL MUTUAL FUNDS AND THE SHARES......................................19 Indemnification of Shareholders.......................................................19 Indemnification of Trustees...........................................................20 Limitation of Fund Liability..........................................................20 Shareholder Meetings and Voting Rights................................................20 Additional Funds or Classes...........................................................21 Dividends and Distributions...........................................................21 PRICING OF SHARES..............................................................................21 Investments for Which Market Quotations Are Readily Available.........................21 Foreign Investments...................................................................22 Debt Securities.......................................................................22 Special Valuation Procedures for the Institutional Money Market Fund..................22 Options and Futures...................................................................23 Investments for Which Market Quotations Are Not Readily Available.....................24 TAX STATUS.....................................................................................24 BROKERAGE ALLOCATION...........................................................................26 UNDERWRITERS...................................................................................27 CALCULATION OF PERFORMANCE DATA................................................................27 Total Return Calculations.............................................................27 Yield Calculations....................................................................28 Performance Comparisons...............................................................30 Illustrating Compounding..............................................................30 Net Asset Value.......................................................................30 Moving Averages.......................................................................31 VOTING RIGHTS..................................................................................31
- ii - 38 LEGAL MATTERS..................................................................................31 EXPERTS........................................................................................31 ADDITIONAL CONSIDERATIONS......................................................................31 FINANCIAL STATEMENTS...........................................................................32
- iii - 39 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 - 40 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 - 41 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 - 42 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 - 43 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 - 44 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 - 45 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 - 46 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 - 47 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 - 48 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 - 49 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 - 50 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 - 51 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 - 52 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 - 53
TRUSTEE AGE PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS - ------- --- ----------------------------------------- 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) 62 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 - 54
TRUSTEE AGE PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS - ------- --- ----------------------------------------- Bevis Longstreth (2) 65 Of Counsel, Debevoise & Plimpton, since 1998. Debevoise & Plimpton Formerly, Partner, Debevoise & Plimpton. Adjunct 875 Third Avenue Professor of Law, Columbia University. New York, NY 10022 Robert M. Lovell, Jr. (2) 68 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 Economics, 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) 54 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) 40 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 - 55 (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 39 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. Executive Executive Vice President, TIAA and CREF, since March Richard L. Gibbs 52 Vice President 1993. Executive Vice President, Advisors, Investment Management, Teachers Personal Investors Services, Inc. ("TPIS") and TIAA-CREF Individual & Institutional Services, Inc. ("Services"). E. Laverne Jones 50 Secretary Vice President, and Corporate Secretary, TIAA and CREF, since August 1998. Previously, Senior Counsel, TIAA and CREF. Richard J. Adamski 57 Vice President 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 September 30, 1999. The Funds' officers receive no compensation from any fund in the TIAA-CREF fund complex. The TIAA-CREF fund complex consists of: College Retirement Equities Fund, TIAA Separate Account VA-1, TIAA-CREF Life Funds, TIAA-CREF Mutual Funds and TIAA-CREF Institutional Mutual Funds, each a registered investment company. TIAA-CREF Institutional Mutual Funds has long-term performance deferred compensation plan for non-employee Trustees. Under this unfunded plan, annual contributions - 17 - 56 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.
COMPENSATION OF TRUSTEES(1) LONG TERM PERFORMANCE DEFERRED AGGREGATE COMPENSATION TOTAL COMPENSATION COMPENSATION CONTRIBUTION FROM TIAA-CREF NAME FROM THE FUND AS PART OF EXPENSES FUND COMPLEX - ---- ------------- ---------------------- ------------------ Robert H. Atwell $ 1,527 $6 $16,500 Elizabeth E. Bailey $ 1,522 $6 $13,875 Joyce A. Fecske $ 1,522 $6 $13,875 Edes P. Gilbert $ 1,527 $6 $16,500 Stuart Tse Kong Ho $ 1,519 $6 $12,375 Nancy L. Jacob $ 1,524 $6 $15,000 Marjorie Fine Knowles $ 1,522 $6 $13,875 Jay O. Light $ 1,519 $6 $12,375 Bevis Longstreth $ 1,522 $6 $13,875 Robert M. Lovell, Jr. $ 1,522 $6 $13,875 Stephen A. Ross $ 1,525 $6 $15,375 Eugene C. Sit $ 1,519 $6 $12,375 Maceo K. Sloan $ 1,522 $6 $13,875 David K. Storrs $ 1,522 $6 $13,875 Robert W. Vishny $ 1,525 $6 $15,375
- ----------------------- (1) Estimated payments for the partial fiscal year ending September 30, 1999. 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 - 57 Employees of Advisors and members of their households are limited in trading for their own accounts. Certain transactions must be reported and approved, and duplicates of all confirmation statements and other account reports must be sent to a special compliance unit. Advisory fees are payable monthly to Advisors. They are calculated as a percentage of the average value of the net assets each day for each Fund, and are accrued daily proportionately at 1/365th (1/366th in a leap year) of the rates set forth in the Prospectus. State Street Bank and Trust Company ("State Street"), 225 Franklin Street, Boston, MA 02209 acts as custodian for TIAA-CREF Institutional Mutual Funds. Ernst & Young LLP, 787 Seventh Avenue, New York, NY 10019, serves as independent auditors of TIAA-CREF Institutional Mutual Funds. In addition to serving as custodian of the Funds' portfolio securities, State Street provides the Funds with limited administrative services, including preparation of each Fund's federal, state and local tax returns, preparation of each Fund's financial information, and certain other administrative services. State Street also acts as the transfer and dividend paying agent for the Funds. Teachers Insurance and Annuity Association of America ("TIAA") holds all of the shares of TIAA-CREF Enterprises, Inc., which in turn holds all the shares of Advisors and of Teachers Personal Investors Services, Inc., the principal underwriter for TIAA-CREF Institutional Mutual Funds. ABOUT TIAA-CREF INSTITUTIONAL MUTUAL FUNDS AND THE SHARES TIAA-CREF Institutional Mutual Funds, was organized as a Delaware business trust on April 15, 1999. A copy of TIAA-CREF Institutional Mutual Funds' Certificate of Trust, dated April 15, 1999, as amended, is on file with the Office of the Secretary of State of the State of Delaware. As a Delaware business trust, TIAA-CREF Institutional Mutual Funds' operations are governed by its Declaration of Trust dated April 15, 1999, as amended (the "Declaration"). Upon the initial purchase of shares of beneficial interest in TIAA-CREF Institutional Mutual Funds, each shareholder agrees to be bound by the Declaration, as amended from time to time. INDEMNIFICATION OF SHAREHOLDERS Generally, Delaware business trust shareholders are not personally liable for obligations of the Delaware business trust under Delaware law. The Delaware Business Trust Act ("DBTA") provides that a shareholder of a Delaware business trust shall be entitled to the same limitation of liability extended to shareholders of private for-profit corporations. TIAA-CREF Institutional Mutual Funds' Declaration expressly provides that TIAA-CREF Institutional Mutual Funds has been organized under the DBTA and that the Declaration is to be governed by and interpreted in accordance with Delaware law. It is nevertheless possible that a Delaware business trust, such as TIAA-CREF Institutional Mutual Funds, might become a party to an - 19 - 58 action in another state whose courts refuse to apply Delaware law, in which case TIAA-CREF Institutional Mutual Funds' shareholders could possibly be subject to personal liability. To guard against this risk, the Declaration (i) contains an express disclaimer of shareholder liability for acts or obligations of TIAA-CREF Institutional Mutual Funds and provides that notice of such disclaimer may be given in each agreement, obligation and instrument entered into or executed by TIAA-CREF Institutional Mutual Funds or its Trustees, (ii) provides for the indemnification out of Trust property of any shareholders held personally liable for any obligations of TIAA-CREF Institutional Mutual Funds or any series of TIAA-CREF Institutional Mutual Funds, and (iii) provides that TIAA-CREF Institutional Mutual Funds shall, upon request, assume the defense of any claim made against any shareholder for any act or obligation of TIAA-CREF Institutional Mutual Funds and satisfy any judgment thereon. Thus, the risk of a Trust shareholder incurring financial loss beyond his or her investment because of shareholder liability is limited to circumstances in which all of the following factors are present: (1) a court refuses to apply Delaware law; (2) the liability arose under tort law or, if not, no contractual limitation of liability was in effect; and (3) TIAA-CREF Institutional Mutual Funds itself would be unable to meet its obligations. In the light of DBTA, the nature of TIAA-CREF Institutional Mutual Funds' business, and the nature of its assets, the risk of personal liability to a TIAA-CREF Institutional Mutual Funds shareholder is remote. INDEMNIFICATION OF TRUSTEES The Declaration further provides that TIAA-CREF Institutional Mutual Funds shall indemnify each of its Trustees and officers against liabilities and expenses reasonably incurred by them, in connection with, or arising out of, any action, suit or proceeding, threatened against or otherwise involving such Trustee or officer, directly or indirectly, by reason of being or having been a Trustee or officer of TIAA-CREF Institutional Mutual Funds. The Declaration does not authorize TIAA-CREF Institutional Mutual Funds to indemnify any Trustee or officer against any liability to which he or she would otherwise be subject by reason of or for willful misfeasance, bad faith, gross negligence or reckless disregard of such person's duties. LIMITATION OF FUND LIABILITY All persons dealing with a Fund must look solely to the property of that particular Fund for the enforcement of any claims against that Fund, as neither the Trustees, officers, agents or shareholders assume any personal liability for obligations entered into on behalf of a Fund or TIAA-CREF Institutional Mutual Funds. No Fund is liable for the obligations of any other Fund. Since the Funds use a combined Prospectus, however, it is possible that one Fund might become liable for a misstatement or omission in the Prospectus regarding another Fund with which its disclosure is combined. The Trustees have considered this factor in approving the use of the combined Prospectus. SHAREHOLDER MEETINGS AND VOTING RIGHTS Under the Declaration, TIAA-CREF Institutional Mutual Funds is not required to hold annual meetings to elect Trustees or for other purposes. It is not anticipated that TIAA-CREF - 20 - 59 Institutional Mutual Funds will hold shareholders' meetings unless required by law or the Declaration. TIAA-CREF Institutional Mutual Funds will be required to hold a meeting to elect Trustees to fill any existing vacancies on the Board if, at any time, fewer than a majority of the Trustees holding office were elected by the shareholders of TIAA-CREF Institutional Mutual Funds. Shares of TIAA-CREF Institutional Mutual Funds do not entitle their holders to cumulative voting rights, so that the holders of more than 50 percent of the net asset value represented by the outstanding shares of TIAA-CREF Institutional Mutual Funds may elect all of the Trustees, in which case the holders of the remaining shares would not be able to elect any Trustees. Shareholders are entitled to one vote for each dollar of net asset value (number of shares held times the net asset value of the applicable Fund). ADDITIONAL FUNDS OR CLASSES Pursuant to the Declaration, the Trustees may establish additional Funds (technically "series" of shares) or "classes" of shares in TIAA-CREF Institutional Mutual Funds without shareholder approval. The establishment of additional Funds or classes would not affect the interests of current shareholders in the existing eight Funds. As of the date of this SAI, the Trustees do not have any plan to establish another Fund or class. DIVIDENDS AND DISTRIBUTIONS Each share of a Fund is entitled to such dividends and distributions out of the income earned on the assets belonging to that Fund as are declared in the discretion of the Trustees. In the event of the liquidation or dissolution of TIAA-CREF Institutional Mutual Funds as a whole or any individual Fund, shares of the affected Fund are entitled to receive their proportionate share of the assets which are attributable to such shares and which are available for distribution as the Trustees in their sole discretion may determine. Shareholders are not entitled to any preemptive, conversion, or subscription rights. All shares, when issued, will be fully paid and non-assessable. PRICING OF SHARES The assets of the Funds are valued as of the close of each valuation day in the following manner: INVESTMENTS FOR WHICH MARKET QUOTATIONS ARE READILY AVAILABLE Investments for which market quotations are readily available are valued at the market value of such investments, determined as follows: Equity securities listed or traded on a national market or exchange are valued based on their sale price on such market or exchange at the close of business (usually 4:00 p.m. Eastern Time) on the date of valuation, or at the mean of the closing bid and asked prices if no sale is - 21 - 60 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 - 61 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 - 62 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 - 63 excise tax. Each Fund intends to make the required distributions, but they cannot guarantee that they will do so. Dividends attributable to a Fund's ordinary income and capital gains distributions are taxable as such to shareholders in the year in which they are received except dividends declared in October, November or December and paid in January, which dividends are treated as paid on the prior December 31. A distribution of net capital gains reflects a Fund's excess of net long-term capital gains over its net short-term capital losses. Each Fund will designate income dividends and must designate distributions of net capital gains and must notify shareholders of these designations within sixty days after the close of the Fund's taxable year. Foreign currency gains and losses are generally taxable as ordinary income. If the net effect of these transactions is a gain, the dividend paid by the Fund will be increased; if the result is a loss, the income dividend paid by the Fund will be decreased. At the time of purchase, each Fund's net asset value may reflect undistributed income or net capital gains. A subsequent distribution to shareholders of such amounts, although constituting a return of their investment, would be taxable either as dividends or capital gain distributions. For federal income tax purposes, each Fund is permitted to carry forward its net realized capital losses, if any, for eight years, and realize net capital gains up to the amount of such losses without being required to pay taxes on, or distribute such gains. If a shareholder held shares for six months or less and during that period received a distribution taxable to such shareholder as a long term capital gain, any loss realized on the sale of such shares during the six month period would be a long term loss to the extent of such distribution. Income received by any Fund from sources within various foreign countries may be subject to foreign income taxes withheld at the source. Under the Code, if more than 50 percent of the value of a Fund's total assets at the close of its taxable year consists of securities issued by foreign corporations, the Fund (e.g., the Institutional International Equity Fund) may file an election with the Internal Revenue Service to "pass through" to the Fund's shareholders the amount of any foreign income taxes paid by the Fund. Pursuant to this election, shareholders will be required to: (i) include in gross income, even though not actually received, their respective pro rata share of foreign taxes paid by the Fund; (ii) treat their pro rata share of foreign taxes as paid by them; and (iii) either deduct their pro rata share of foreign taxes in computing their taxable income, or use it as a foreign tax credit against U.S. income taxes (but not both). No deduction for foreign taxes may be claimed by a shareholder who does not itemize deductions. Each shareholder will be notified within 60 days after the close of each taxable year of a Fund, if that Fund will "pass through" qualifying foreign taxes paid for that year, and, if so, the amount of each shareholder's pro rata share (by country) of (i) the foreign taxes paid, and (ii) the Fund's gross income from foreign sources. Of course, shareholders who are not liable for federal income taxes, such as retirement plans qualified under Section 401 of the Code, will not be able to utilize any such "pass through" of foreign tax credits. Each Fund is required by federal law to withhold 31 percent of reportable payments - 25 - 64 (which may include income dividends, capital gains distributions, and share redemption proceeds) paid to shareholders who have not complied with IRS regulations. In order to avoid this back-up withholding requirement, a shareholder must certify to the Fund on the application form or on a separate Internal Revenue Service W-9 Form, that the shareholder's Social Security Number or Taxpayer Identification Number is correct and that the shareholder is not currently subject to back-up withholding or is exempt from back-up withholding. The foregoing discussion does not address the special tax rules applicable to certain classes of investors. For example, each shareholder who is not a U.S. person should consider the U.S. and foreign tax consequences of ownership of shares of the Funds, including the possibility that such a shareholder may be subject to a U.S. withholding tax at a rate of 30 percent (or at a lower rate under an applicable income tax treaty) on Fund distributions treated as ordinary dividends. This discussion of the tax treatment of the Funds and their distributions is based on the federal, Delaware and New York tax laws in effect as of the date of this SAI. Shareholders should consult their tax advisors to determine the tax treatment of an investment by him or her in any Fund, including state and local taxes. BROKERAGE ALLOCATION Advisors is responsible for decisions to buy and sell securities for the Funds as well as for selecting brokers and, where applicable negotiating the amount of the commission rate paid. It is the intention of Advisors to place brokerage orders with the objective of obtaining the best execution, which includes such factors as best price, research and available data. When purchasing or selling securities traded on the over-the-counter market, Advisors generally will execute the transactions with a broker engaged in making a market for such securities. When Advisors deems the purchase or sale of a security to be in the best interests of a Fund, its personnel may, consistent with their fiduciary obligations, decide either to buy or to sell a particular security for the Fund at the same time as for other funds it may be managing, or that may be managed by its affiliate, TIAA-CREF Investment Management, Inc. ("Investment Management"), another investment adviser subsidiary of TIAA. In that event, allocation of the securities purchased or sold, as well as the expenses incurred in the transaction, will be made in an equitable manner. Domestic brokerage commissions are negotiated, as there are no standard rates. All brokerage firms provide the service of execution of the order made; some brokerage firms also provide research and statistical data, and research reports on particular companies and industries are customarily provided by brokerage firms to large investors. In negotiating commissions, consideration is given by Advisors to the quality of execution provided and to the use and value of the data. The valuation of such data may be judged with reference to a particular order or, alternatively, may be judged in terms of its value to the overall management of the portfolio. Advisors will place orders with brokers providing useful research and statistical data services if reasonable commissions can be negotiated for the total services furnished even though - 26 - 65 lower commissions may be available from brokers not providing such services. Advisors follows guidelines established by the Board for the placing of orders with the brokers providing such services. Research or service obtained for one Fund may be used by Advisors in managing the other Funds. In such circumstances, the expenses incurred will be allocated equitably consistent with Advisors' fiduciary duty to the other Funds. Research or services obtained for TIAA-CREF Institutional Mutual Funds may be used by personnel of Advisors in managing other investment company accounts, or by Investment Management for the CREF accounts. In such circumstances, the expenses incurred will be allocated in an equitable manner consistent with the fiduciary obligations of personnel of Advisors to TIAA-CREF Institutional Mutual Funds. UNDERWRITERS Teachers Personal Investors Services, Inc. ("TPIS") may be considered the "principal underwriter" for TIAA-CREF Institutional Mutual Funds. Shares of TIAA-CREF Institutional Mutual Funds are offered on a continuous basis with no sales load. Pursuant to a Distribution Agreement with TIAA-CREF Institutional Mutual Funds, TPIS has the right to distribute shares of TIAA-CREF Institutional Mutual Funds for the two-year period beginning June 1, 1999, and thereafter from year to year subject to approval by the Funds' Board of Trustees. TPIS may enter into Selling Agreements with one or more broker-dealers, which may or may not be affiliated with TPIS, to provide distribution-related services to TIAA-CREF Institutional Mutual Funds. CALCULATION OF PERFORMANCE DATA We may quote a Fund's performance in various ways. All performance information in advertising is historical and is not intended to indicate future returns. A Fund's share price, yield, and total return fluctuate in response to market conditions and other factors, and the value of Fund shares when redeemed may be more or less than their original cost. TOTAL RETURN CALCULATIONS Total returns quoted in advertising reflect all aspects of a Fund's returns, including the effect of reinvesting dividends and capital gain distributions, and any change in the Fund's net asset value ("NAV") over a stated period. Average annual returns are calculated by determining the growth or decline in value of a hypothetical historical investment in a Fund over a stated period, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period according to the following formula: n P (1 + T) = ERV - 27 - 66 where: P = the hypothetical initial payment T = average annual total return n = number of years in the period ERV = ending redeemable value of the hypothetical payment made at the beginning of the one-, five-, or 10-year period at the end of the one-, five-, or 10-year period (or fractional portion thereof). For example, a cumulative return of 100 percent over ten years would produce an average annual return of 7.18 percent, which is the steady annual rate that would equal 100 percent growth on a compounded basis in ten years. While average annual returns are a convenient means of comparing investment alternatives, investors should realize that a Fund's performance is not constant over time, but changes from year to year, and that average annual returns represent averaged figures as opposed to the actual year-to-year performance of the Fund. In addition to average annual returns, we may quote a Fund's unaveraged or cumulative total returns reflecting the actual change in value of an investment over a stated period. Average annual and cumulative total returns may be quoted as a percentage or as a dollar amount, and may be calculated for a single investment, a series of investments, or a series of redemptions, over any time period. Total returns may be broken down into their components of income and capital (including capital gains and changes in share price) in order to illustrate the relationship of these factors and their contributions to total return. Total returns may be quoted on a before or after tax basis. Total returns, yields, and other performance information may be quoted numerically or in a table, graph, or similar illustration. YIELD CALCULATIONS All Funds other than the Institutional Money Market Fund. Yields are computed by dividing the Fund's net investment income for a given 30-day or one-month period, by the average number of Fund shares, dividing this figure by the Fund's NAV at the end of the period, and annualizing the result (assuming compounding of income) in order to arrive at an annual percentage rate. Income is calculated for purposes of yield quotations in accordance with standardized methods applicable to all stock and bond funds. In general, interest income is reduced with respect to bonds trading at a premium over their par value by subtracting a portion of the premium from income on a daily basis, and is increased with respect to bonds trading at a discount by adding a portion of the discount to daily income. For a Fund's investments denominated in foreign currencies, income and expenses are calculated first in their respective currencies, and are then converted to U.S. dollars, either when they are actually converted or at the end of the 30-day or one-month period, whichever is earlier. Income is adjusted to reflect gains and losses from principal repayments received by the Fund with respect to mortgage-related securities and other asset-backed securities. Other capital gains and losses generally are excluded from the calculation as are gains and losses currently from exchange rate fluctuations. Income calculated for the purposes of calculating a Fund's yield differs from income as determined for other accounting purposes. Because of the different accounting methods used, and because of the compounding of income assumed in yield calculations, a Fund's yield may - 28 - 67 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 - 68 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 - 69 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 - 70 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 - 71 PART C: OTHER INFORMATION ITEM 23. EXHIBITS (a) Declaration of Trust, dated as of April 15, 1999 1/ (b) Registrant has adopted no bylaws. (c) The relevant portions of Registrant's certificate of trust and declaration of trust are incorporated herein by reference to Exhibits (a)(1) and (2) above. (d) Investment Management Agreement by and between Registrant and Teachers Advisors, Inc. ("Advisors"), dated as of June 1, 1999 2/ (e) (1) Distribution Agreement by and between Registrant and Teachers Personal Investors Services, Inc. ("TPIS"), dated as of June 1, 1999 2/ (2) Selling Agreement by and between TPIS and TIAA-CREF Individual & Institutional Services, Inc., dated as of June 1, 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 June 11, 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 June 1, 1999 * C - 1 72 (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. - --------------------------- 1/ Incorporated herein by reference to the initial registration statement on Form N-1A (File No. 333-76651) as filed with the Commission on April 20, 1999. 2/ Incorporated herein by reference to Pre-Effective Amendment No. 1 to the registration statement on Form N-1A (File No. 333-76651) as filed with the Commission on June 11, 1999. * Filed herewith. ** To be filed by amendment. ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND As the ultimate parent (holding indirectly 100% of the voting securities of Advisors, investment adviser of Registrant, TIAA may be deemed to control Registrant (although Registrant does not concede such control). As the beneficial owner of more than 25% of the voting securities of one or more series of Registrant's shares (pursuant to the Seed Money Agreement), TIAA controls Registrant. Therefore, persons directly or indirectly controlled by TIAA may be deemed to be under common control with Registrant. AIC Properties, Inc. MN Properties, Inc. BT Properties, Inc. M.O.A. Enterprises, Inc. College Credit Trust ND Properties, Inc. DAN Properties, Inc. OWP Hawaii, LLC ETC Repackaging, Inc. Savannah Teachers Properties, Inc. Illinois Teachers Properties, LLC T114 Properties, Inc. JV California Two, Inc. T-Investment Properties Corp. JV California Three, Inc. T-Land Corp. JV Florida One, Inc. T-Las Colinas Towers Corp. JV Florida Four, Inc. TCT Holdings, Inc. JV Georgia One, Inc. Teachers Advisors, Inc. JV Maryland One, Inc. Teachers Boca Properties II, Inc. JV Michigan One, Inc. Teachers Pennsylvania Realty, Inc. JV Michigan Two, Inc. Teachers Personal Investors Services, Inc. JV Michigan Three, Inc. Teachers Properties, Inc. JV Minnesota One, Inc. Teachers REA, LLC JV North Carolina One, Inc. Teachers REA II, Inc. JWL Properties, Inc. Teachers REA II, LLC Liberty Place Retail, Inc. Teachers REA III, LLC Macallister Holdings, Inc. Teachers Realty Corporation Minnesota Teachers Realty Corp. TEO-NP, LLC C - 2 73 Tethys Slu, Inc. TIAA-Fund Equities, Inc. TIAA Realty, Inc. TPI Housing, Inc. TIAA Timberlands I, LLC Washington Teachers Properties II, Inc. TIAA-CREF Enterprises, Inc. WRC Properties, Inc. TIAA-CREF Individual & Institutional 730 Properties, Inc. Services, Inc. 730 Cal Hotel Properties I, Inc. TIAA-CREF Investment Management, LLC 730 Cal Hotel Properties II, Inc. TIAA-CREF Life Insurance Company 730 Penn. Hotel Properties I, Inc. TIAA-CREF Tuition Financing, Inc. 485 Properties, LLC TIAA-CREF Trust Company, FSB
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- C - 3 74 dealer and administrative services for College Retirement Equities Fund. H) TCT Holdings, Inc., holds the stock of TIAA-CREF Trust Company, FSB. 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 C - 4 75 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 in the Act and will be governed by the final adjudication of such issue. ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER Teachers Advisors, Inc. ("Advisors") also provides investment management services to TIAA-CREF Life Funds, TIAA-CREF Mutual Funds, and TIAA Separate Account VA-1. The trustees of Advisors are John H. Biggs, Martin L. Leibowitz, and Charles H. Stamm. Other officers of Advisors are Richard J. Adamski and Richard L. Gibbs. All officers of Advisors are also officers of TIAA-CREF Investment Management, LLC ("Investment Management"), and are employees of TIAA. Mr. Biggs is also a trustee of TIAA, College Retirement Equities Fund ("CREF"), TIAA-CREF Individual & Institutional Services, Inc. ("Services"), a manager of Investment Management, and a director of Teachers Personal Investor Services, Inc. ("TPIS"). He is Chief Executive Officer of TIAA and CREF. Mr. Biggs is also a director of: Ralston Purina Company, Checkerboard Square, St. Louis, MO 63164; and The Boeing Company, 7755 East Marginal Way South, Seattle, WA 98108. Mr. Leibowitz is a trustee of TIAA and CREF and a manager of Investment Management. He is Vice Chairman and Chief Investment Officer of TIAA and CREF. Mr. Stamm is a trustee of Services, a manager of Investment Management, and a director of TPIS. He is General Counsel of TIAA and CREF. Mr. Adamski is Treasurer of Services and TPIS. Mr. Gibbs is Executive Vice President of Services and TPIS. The principal business address of TIAA, CREF, Services, Investment Management, and TPIS is 730 Third Avenue, New York, NY 10017-3206. ITEM 27. PRINCIPAL UNDERWRITERS TPIS may be considered the principal underwriter for the Registrant. The officers of TPIS and their positions and offices with TPIS and the Registrant are listed in Schedule A of Form BD as currently on file with the Commission (File No. 8-47051), the text of which is hereby incorporated by reference. C - 5 76 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 will provide certain management-related services to the Registrant pursuant to a Custodian Agreement between the Registrant, State Street and Teachers Advisors, Inc. ("Advisors"), the investment adviser of the Registrant. Under the Custodian Agreement, State Street will, among other things, act as custodian of the assets of the portfolios of the Registrant, keep the Registrant's books of account and compute the net asset value per share of the outstanding shares of each of the Registrant's portfolios. These services will be rendered pursuant to instructions received by State Street from Advisors or the Registrant in the ordinary course of business. ITEM 30. UNDERTAKINGS Because registrant does not intend to raise its initial capital under Section 14(a)(3) of the 1940 Act, no undertaking is required. C - 6 77 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 24th day of June, 1999. TIAA-CREF INSTITUTIONAL MUTUAL FUNDS /s/ Peter C. Clapman By: ----------------------------------- Name: Peter C. Clapman Title: Senior Vice President Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates indicated. Signature Title Date - --------- ----- ---- /s/ John J. McCormack - ----------------------------------- President June 24, 1999 John J. McCormack (Principal Executive Officer) /s/ Scott C. Evans - ----------------------------------- Executive Vice President June 24, 1999 Scott C. Evans (Principal Financial Officer) /s/ Richard L. Gibbs - ----------------------------------- Executive Vice President June 24, 1999 Richard L. Gibbs (Principal Accounting Officer)
78 Signature of Trustee Date Signature of Trustee Date - -------------------- ---- -------------------- ---- /s/ Robert H. Atwell /s/ Bevis Longstreth 6/24/99 6/24/99 - ----------------------------------- ----------------------------------- Robert H. Atwell Bevis Longstreth /s/ Elizabeth E. Bailey /s/ Robert M Lovell, Jr. 6/24/99 6/24/99 - ----------------------------------- ----------------------------------- Elizabeth E. Bailey Robert M. Lovell, Jr. /s/ Joyce A. Fescke /s/ Stephen A. Ross 6/24/99 6/24/99 - ----------------------------------- ----------------------------------- Joyce A. Fescke Stephen A. Ross /s/ Edes P. Gilbert /s/ Eugene C. Sit 6/24/99 6/24/99 - ----------------------------------- ----------------------------------- Edes P. Gilbert Eugene C. Sit /s/ Stuart Tse Kong Ho /s/ Maceo K. Sloan 6/24/99 6/24/99 - ----------------------------------- ----------------------------------- Stuart Tse Kong Ho Maceo K. Sloan /s/ David K. Storrs 6/24/99 - ----------------------------------- ----------------------------------- Nancy L. Jacob David K. Storrs /s/ Marjorie Fine Knowles /s/ Robert W. Vishny 6/24/99 6/24/99 - ----------------------------------- ----------------------------------- Marjorie Fine Knowles Robert W. Vishny /s/ Jay O. Light 6/24/99 - ----------------------------------- Jay O. Light
79 EXHIBIT INDEX
Exhibit No. Exhibit Name - ----------- ------------ (e)(2) Selling Agreement by and between TPIS and TIAA-CREF Individual & Institutional Services, Inc., dated as of June 1, 1999 (g) Custodian Agreement by and between Registrant and State Street Bank and Trust Company ("State Street"), dated as of June 11, 1999 (including schedule of remuneration) (h)(1) Administration Agreement by and between Registrant and State Street, dated as of __________ ___, 1999 (h)(2) Transfer Agency Agreement by and between Registrant and State Street, dated as of __________ ___, 1999 (l) Seed Money Agreement by and between Registrant and Teachers Insurance and Annuity Association of America, dated as of June 1, 1999
EX-99.E.2 2 SELLING AGREEMENT 1 SELLING AGREEMENT FOR THE CONTRACTS FUNDED BY TIAA SEPARATE ACCOUNT VA-1 THIS AGREEMENT made this 31st day of May, 1995, by and between Teachers Personal Investors Services, Inc. ("TPIS"), a Delaware corporation, and TIAA-CREF Individual & Institutional Services, Inc. ("T-C Services"), a Delaware nonprofit corporation. WITNESSETH: WHEREAS, TPIS has entered into an agreement with Teachers Insurance and Annuity Association of America ("TIAA") and TIAA Separate Account VA-1 (the "Separate Account"), pursuant to which it serves as the distributor of the Teachers Personal Annuity, an individual flexible premium deferred annuity funded by the Separate Account (the "Contracts"); and WHEREAS, TPIS proposes to have T-C Services sell, and T-C Services is willing to sell, the Contracts; and WHEREAS, each of TPIS and T-C Services is registered as a broker-dealer under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and each is a member of the National Association of Securities Dealers, Inc. ("NASD"). NOW, THEREFORE, TPIS and T-C Services hereby mutually agree as follows: 1. Appointment of T-C Services (a) TPIS hereby appoints T-C Services to distribute the Contracts, subject to the requirements of the Securities Act of 1933 (the "1933 Act"), the 1934 Act and the Investment Company Act of 1940 (the "1940 Act") during the term of this Agreement. 2 T-C Services agrees to distribute the Contracts and to advise owners of Contracts in connection therewith, in each case subject to the direction of and any limitation imposed by TPIS. (b) To the extent necessary to offer the Contracts, T-C Services shall be duly registered or otherwise qualified under the securities laws of any state or other jurisdiction. The sales representatives of T-C Services shall be duly and appropriately licensed, registered or otherwise qualified for the sale of such Contracts under the federal securities laws, any applicable state insurance laws and securities laws of each state or other jurisdiction in which such Contracts may lawfully be sold and in which T-C Services is licensed or otherwise authorized to sell the Contracts. T-C Services shall be responsible for the training, supervision and control of its registered representatives for the purpose of the NASD Rules of Fair Practice and federal and state securities law requirements applicable in connection with the offering and sale of the Contracts. (c) T-C Services agrees to offer the Contracts for sale in accordance with the then-current prospectus and statement of additional information ("SAI") therefor filed with the Securities and Exchange Commission (the "Commission"). (d) TPIS shall be responsible for furnishing T-C Services with copies of all prospectuses, SAIs, financial statements and other documents which T-C Services reasonably requires for use in connection with the distribution of the 2 3 Contracts. T-C Services will be entitled to rely on all documentation and information furnished to it by TPIS. 2. Books and Records (a) T-C Services shall cause to be maintained and preserved all required books of account and related financial records as are required by the 1934 Act, the NASD and any other applicable laws and regulations in connection with its distribution of the Contracts. All such books and records maintained by or on behalf of T-C Services shall be maintained and preserved in conformity with the requirements of Rules 17a-3 and 17a-4 under the 1934 Act or the corresponding provisions of any future federal securities laws or regulations, to the extent that such requirements are applicable to the Contracts operations. Such books and records shall be at all times subject to inspection by the Commission in accordance with Section 17(a) of the 1934 Act. (b) T-C Services shall have the responsibility for maintaining the records of sales representatives licensed, registered and otherwise qualified to sell the Contracts. 3. Reports T-C Services shall cause TIAA and/or the Separate Account to be furnished with such reports as either or both may reasonably request for the purpose of meeting reporting and recordkeeping requirements under the insurance laws of the State of New York and any other applicable states or jurisdictions. 4. Staff, Facilities, and Services 3 4 T-C Services shall be responsible for the maintenance of staff, facilities and services necessary to meet its obligations hereunder in connection with the distribution of the Contracts. 5. Expenses and Reimbursement (a) T-C Services shall be responsible for all expenses relating to its activities in connection with the distribution of the Contracts pursuant to the terms of this Agreement. (b) TPIS shall reimburse T-C Services for those expenses T-C Services incurs solely in connection with its distribution of the Contracts pursuant to this Agreement. Reimbursement shall be made quarterly by means of a single payment made within 30 days following the end of each quarter. These expenses include, but not limited to expenses incurred in connection with T-C Services' registration as a broker or dealer or in the registration or qualification of its officers, trustees or representatives under federal and state securities laws. 6. Non-Exclusivity TPIS understands and agrees that the services to be provided by T-C Services hereunder are not to be deemed exclusive and T-C Services is free to act as distributor of other variable insurance products or investment company shares issued by TIAA, the College Retirement Equities Fund, or any entity affiliated therewith. T-C Services shall, for all purposes herein, be deemed to be an independent contractor and shall, unless otherwise provided and authorized, have no authority to act for or represent TPIS in any way or otherwise be deemed an agent of 4 5 TPIS other than in furtherance of its duties and responsibilities as set forth in this Agreement. 7. Liability T-C Services will not be liable for any error of judgment or mistake of law or for any loss suffered by TPIS in connection with the matters to which this Agreement relates. Nothing herein contained shall be construed to protect T-C Services against any liability resulting from the willful misfeasance, bad faith, or gross negligence of T-C Services in the performance of its obligations and duties, or from reckless disregard of its obligations and duties under this Agreement or by virtue of violation of any applicable law. 8. Regulation (a) This Agreement shall be subject to the provisions of the 1940 Act, the 1934 Act and the rules, regulations and rulings thereunder, and of the NASD, as in effect from time to time, including such exemptions and other relief as the Commission, its staff, or the NASD may grant, and the terms hereof shall be interpreted and construed in accordance therewith. (b) T-C Services shall submit to all regulatory and administrative bodies having jurisdiction over the present and future operations of the Separate Account, any information, reports or other material which any such body by reason of this Agreement may request or require pursuant to applicable laws or regulations. Without limiting the generality of the foregoing, 5 6 T-C Services shall furnish the SEC, the State of New York Secretary of State and/or the Superintendent of Insurance with any information or reports which the SEC, the Secretary of State and/or the Superintendent of Insurance may request in order to ascertain whether the operations of the Separate Account are being conducted in a manner consistent with applicable laws or regulations. 9. Investigation and Proceedings (a) TPIS and T-C Services agree to cooperate fully in any insurance or securities regulatory inspection, inquiry, investigation, or proceeding or any judicial proceeding with respect to TIAA, the Separate Account, TPIS or T-C Services, their affiliates and their representatives to the extent that such inspection, inquiry, investigation or proceeding is in connection with the Contracts distributed under this Agreement. (b) In the case of a customer complaint, T-C Services and TPIS will cooperate in investigating such complaint and shall arrive at a mutually satisfactory response. 10. Duration and Termination of the Agreement (a) This Agreement shall become effective with respect to the Contracts as of July 1, 1995 and shall continue in effect indefinitely. (b) This Agreement may be terminated, without the payment of any penalty, by T-C Services or TPIS on sixty days' written notice to the other parties. This Agreement shall automatically terminate in the event of its assignment. Without 6 7 limiting the generality of the foregoing, the term "assigned" shall not include any transactions exempted from Section 15 (b) (2) of the 1940 Act. Upon termination of this Agreement, all authorizations, rights and obligations shall cease except the obligation to settle accounts hereunder and the agreements contained in paragraph 9 hereunder. 11. Definitions The terms "Assignment", "interested person", and "majority of the outstanding shares", when used in this Agreement, shall have the respective meanings specified under the 1940 Act and rules thereunder. 12. Further Actions Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof. 13. Governing Law The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of New York, as at the time in effect, and the applicable provisions of the 1940 Act and rules thereunder or other federal laws and regulations which may be applicable. To the extent that the applicable law of the State of New York, or any of the provisions herein, conflict with the applicable provisions of the 1940 Act and rules thereunder or other federal laws and regulations which may be applicable, the latter shall control. 14. Counterparts 7 8 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall be deemed one instrument. 15. Notices All notices and other communications provided for hereunder shall be in writing and shall be delivered by hand or mailed first class, postage prepaid, addressed as follows: (a) If to TPIS Teachers Personal Investors Services, Inc. 730 Third Avenue New York, New York 10017-3206 Attention: Ronald P. McPhee (b) If to T-C Services TIAA-CREF Individual & Institutional Services, Inc. 730 Third Avenue New York, New York 10017-3206 Attention: John McCormack or to such other address as T-C Services or TPIS shall designate by written notice to the others. 16. Miscellaneous Captions in this Agreement are included for convenience or reference only and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect. In WITNESS WHEREOF, TPIS and T-C Services have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers on the day and year 8 9 first above written. TEACHERS PERSONAL INVESTORS SERVICES, INC. /s/ THOMAS G. WALSH Attest: /s/ LISA SNOW ---------------------------------- ------------------- Title: President Title: Assistant Secretary ----------------------------- ------------------ TIAA-CREF INDIVIDUAL & INSTITUTIONAL SERVICES, INC. By: /s/ JOHN J. McCORMACK Attest: /s/ LISA SNOW -------------------------------- ----------------- Title: President Title: Assistant Secretary ----------------------------- ------------------ 9 10 AMENDMENT TO THE SELLING AGREEMENT FOR THE CONTRACTS FUNDED BY TIAA SEPARATE ACCOUNT VA-1, TIAA-CREF LIFE SEPARATE ACCOUNT VA-1 AND THE SHARES ISSUED BY TIAA-CREF MUTUAL FUNDS Amendment to the Selling Agreement for the Contracts Funded by the TIAA Separate Account VA-1 dated May 31, 1995, by and between Teachers Personal Investors Services, Inc. ("TPIS") and TIAA-CREF Individual & Institutional Services, Inc. ("T-C Services") as amended November 30, 1998. T-C Services and TPIS mutually agree that upon execution of this Amendment, the Agreement shall be amended as set forth below: 1. The title of the Agreement is hereby amended to read as follows: "Selling Agreement for the Contracts Funded by the TIAA Separate Account VA-1, TIAA-CREF Life Separate Account VA-1 and the Shares Issued by TIAA-CREF Mutual Funds and TIAA-CREF Institutional Mutual Funds. 2. The first Whereas clause is hereby amended to read as follows: "WHEREAS, TPIS has entered into agreements with the Teachers Insurance and Annuity Association of America ("TIAA"), TIAA Separate Account VA-1 ("VA-1"), TIAA-CREF Mutual Funds (the "Retail Fund"), TIAA-CREF Institutional Mutual Funds (the "Institutional Fund"), and TIAA-CREF Life Insurance Company, for itself and on behalf of TIAA-CREF Life Separate Account VA-1 ("TIAA-CREF Life VA-1"), pursuant to which it serves as the principal underwriter of the variable annuity Contracts (the "Contracts") issued by VA-1 and TIAA-CREF Life VA-1 and the shares issued by the Retail Fund and Institutional Fund (the "Shares"). IN WITNESS WHEREOF, T-C Services and TPIS have caused this Amendment to the Agreement to be executed in their names and on their behalf as of this day of 1st day of June, 1999 by and through their duly authorized officers. TIAA-CREF INDIVIDUAL & INSTITUTIONAL SERVICES, INC. /s/ LISA SNOW Attest: /s/ STEWART P. GREENE --------------------------- ------------------------ Title: Vice President, Chief Title: Senior Counsel and Counsel Corporate Law Assistant Secretary and Secretary TEACHERS PERSONAL INVESTORS SERVICES, INC. By: /s/ THOMAS G. WALSH Attest: /s/ STEWART P. GREENE ------------------------- ---------------------- Title: President Title: Senior Counsel and Assistant Secretary EX-99.G 3 CUSTODIAN AGREEMENT 1 CUSTODIAN CONTRACT Between TIAA-CREF INSTITUTIONAL MUTUAL FUNDS, and STATE STREET BANK AND TRUST COMPANY 2 TABLE OF CONTENTS Page 1. Employment of Custodian and Property to be Held By It.....................................................................1 2. Duties of the Custodian with Respect to Property of the Fund Held by the Custodian in the United States.................2 2.1 Holding Securities...............................................2 2.2 Delivery of Securities...........................................2 2.3 Registration of Securities.......................................4 2.4 Bank Accounts....................................................4 2.5 Availability of Federal Funds....................................4 2.6 Collection of Income and Dividends...............................4 2.7 Payment of Fund Monies...........................................5 2.8 Liability for Payment in Advance of Receipt of Securities Purchased..................................6 2.9 Appointment of Agents............................................6 2.10 Deposit of Fund Assets in U.S. Securities System.................6 2.11 Fund Assets Held in the Custodian's Direct Paper System.....................................................7 2.12 Segregated Account...............................................8 2.13 Ownership Certificates for Tax Purposes..........................8 2.14 Proxies..........................................................8 2.15 Communications Relating to Portfolio Securities..................9 3. Duties of the Custodian with Respect to Property of the Fund Held Outside of the United States.............................9 3.1 Appointment of Foreign Sub-Custodians............................9 3.2 Assets to be Held................................................9 3.3 Foreign Securities Systems.......................................9 3.4 Holding Securities...............................................9 3.5 Agreements with Foreign Banking Institutions....................10 3.6 Access of Independent Accountants of the Fund...................10 3.7 Reports by Custodian............................................10 3.8 Transactions in Foreign Custody Account.........................10 3.9 Liability of Foreign Sub-Custodians.............................11 3.10 Liability of Custodian..........................................11 3.11 Monitoring Responsibilities.....................................12 3.12 Branches of U.S. Banks..........................................12 3.13 Tax Law.........................................................12 3.14 Proxies.........................................................12 4. Payments for Sales or Repurchase or Redemptions of Shares of the Fund.................................................13 3 5. Proper Instructions...................................................13 6. Actions Permitted Without Express Authority...........................14 7. Evidence of Authority.................................................14 8. Duties of Custodian With Respect to the Books of Account and Calculation of Net Asset Value and Net Income.........................14 9. Records...............................................................15 10. Opinion of Fund's Independent Accountants.............................15 11. Reports to Fund by Independent Public Accountants.....................15 12. Compensation of Custodian.............................................15 13. Responsibility of Custodian, Indemnification..........................15 13.1 Standard of Care................................................15 13.2 Liability of Custodian for Actions of Other Persons.............17 13.3 Indemnification.................................................18 13.4 Fund's Right to Proceed.........................................19 14. Effective Period, Termination and Assignment..........................20 15. Successor Custodian...................................................21 16. Amendments............................................................21 17. Interpretive and Additional Provisions................................21 18. Additional Funds......................................................22 19. Massachusetts Law to Apply............................................22 20. Prior Contracts.......................................................22 21. Reproduction of Documents.............................................22 22. Shareholder Communications............................................23 23. No Liability of Shareholders..........................................23 4 CUSTODIAN CONTRACT This Contract between TIAA-CREF Institutional Mutual Funds, a business trust organized and existing under the laws of Delaware, having its principal place of business at 730 Third Avenue, New York, New York 10017-3206 hereinafter called the "Fund" and State Street Bank and Trust Company, a Massachusetts trust company, having its principal place of business at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter called the "Custodian", WITNESSETH: WHEREAS, the Fund is authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets; WHEREAS, the Fund intends to initially offer shares in seven series, the 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 and Institutional Money Market Fund (such series together with all other series subsequently established by the Fund and made subject to this Contract in accordance with Article 18, being herein referred to as the "Portfolio(s)"); and WHEREAS, the Fund desires to appoint the Custodian as custodian on behalf of each of its Portfolios in accordance with the provisions of the Investment Company Act of 1940, as amended (the "1940 Act"), and the rules and regulations thereunder, under the terms and conditions set forth in this Contract, and the Custodian has agreed so to act as custodian. NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows: 1. Employment of Custodian and Property to be Held by It The Fund hereby employs the Custodian as the custodian of the assets of the Portfolios of the Fund, including securities which the Fund, on behalf of the applicable Portfolio desires to be held in places within the United States ("domestic securities") and securities it desires to be held outside the United States ("foreign securities") pursuant to the provisions of the Fund's governing documents. The Fund on behalf of the Portfolio(s) agrees to deliver to the Custodian all securities and cash of the Portfolios, and all payments of income, payments of principal or capital distributions received by it with respect to all securities owned by the Portfolio(s) from time to time, and the cash consideration received by it for such new or treasury shares of capital stock of the Fund representing interests in the Portfolios, ("Shares") as may be issued or sold from time to time. The Custodian shall be responsible for all securities, cash and other property owned or held by the fund which is received by the Custodian in accordance with the provisions of Article 13. The Custodian shall not be responsible for any property of a Portfolio held or received by the Portfolio and not delivered to the Custodian. Upon receipt of "Proper Instructions" (within the meaning of Article 5), the Custodian shall on behalf of the applicable Portfolio(s) from time to time employ one or more sub-custodians, located in the United States but only in accordance with an applicable vote by the Board of Trustees of the Fund on behalf of the applicable Portfolio(s), and provided that the Custodian shall have not more or less responsibility to the Fund on account of any actions or omissions of any sub-custodian so employed than any sub-custodian has to the Custodian, and further provided that the Custodian shall not release the sub- 5 custodian from any responsibility or liability unless mutually agreed upon by the parties in writing. The Custodian may employ as sub-custodian for the Fund's foreign securities on behalf of the applicable Portfolio(s) the foreign banking institutions and foreign securities depositories designated in Schedule A hereto but only in accordance with the provisions of Article 3. 2. Duties of the Custodian with Respect to Property of the Fund Held By the Custodian in the United States. 2.1 Holding Securities. The Custodian shall hold and physically segregate for the account of each Portfolio all non-cash property, to be held by it in the United States including all domestic securities owned by such Portfolio, other than (a) securities which are maintained pursuant to Section 2.10 in a clearing agency which acts as a securities depository or in a book-entry system authorized by the U.S. Department of the Treasury and certain federal agencies (each, a "U.S. Securities System") and (b) commercial paper of an issuer for which State Street Bank and Trust Company acts as issuing and paying agent ("Direct Paper") which is deposited and/or maintained in the Direct Paper System of the Custodian (the "Direct Paper System") pursuant to Section 2.11. 2.2 Delivery of Securities. The Custodian shall release and deliver domestic securities owned by a Portfolio held by the Custodian or in a U.S. Securities System account of the Custodian or in the Custodian's Direct Paper book entry system account ("Direct Paper System Account") only upon receipt of Proper Instructions from the Fund on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases: 1) Upon sale of such securities for the account of the Portfolio and receipt of payment therefor; 2) Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Portfolio; 3) In the case of a sale effected through a U.S. Securities System, in accordance with the provisions of Section 2.10 hereof; 4) To the depository agent in connection with tender or other similar offers for securities of the Portfolio; 5) To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian; 6) To the issuer thereof, or its agent, for transfer into the name of the Portfolio or into the name of any nominee or nominees of the Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.9 or into the name or nominee name of any sub-custodian appointed pursuant to Article 1; or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or 6 6 number of units; provided that, in any such case, the new securities are to be delivered to the Custodian; 7) Upon the sale of such securities for the account of the Portfolio, to the broker or its clearing agent, against a receipt, for examination in accordance with "street delivery" custom; provided that in any such case, the Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Custodian's failure to act in accordance with its duties as set forth in Section 13; 8) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian; 9) In the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian; 10) For delivery in connection with any loans of securities made by the Portfolio, but only against receipt of adequate collateral as agreed upon from time to time by the Custodian and the Fund on behalf of the Portfolio, which may be in the form of cash or obligations issued by the United States government, its agencies or instrumentalities or such other property as mutually agreed upon by the parties. 11) For delivery as security in connection with any borrowings by the Fund on behalf of the Portfolio requiring a pledge of assets by the Fund on behalf of the Portfolio, but only against receipt of amounts borrowed; 12) For delivery in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian and a broker-dealer registered under the Securities Exchange Act of 1934 (the "Exchange Act") and a member of The National Association of Securities Dealers, Inc. ("NASD"), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Portfolio of the Fund; 13) For delivery in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian, and a Futures Commission Merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission and/or any Contract Market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Portfolio 7 7 of the Fund; 14) Upon receipt of instructions from the transfer agent ("Transfer Agent") for the Fund, for delivery to such Transfer Agent or to the holders of shares in connection with distributions in kind, as may be described from time to time in the currently effective prospectus and statement of additional information of the Fund, related to the Portfolio ("Prospectus"), in satisfaction of requests by holders of Shares for repurchase or redemption; and 15) For any other corporate purpose, but only upon receipt of, Proper Instructions from the Fund on behalf of the applicable Portfolio. 2.3 Registration of Securities. Domestic securities held by the Custodian (other than bearer securities) shall be registered in the name of the Portfolio or in the name of any nominee of the Fund on behalf of the Portfolio or of any nominee of the Custodian which nominee shall be assigned exclusively to the Portfolio, unless the Fund has authorized in writing the appointment of a nominee to be used in common with other registered investment companies having the same investment adviser as the Portfolio, or in the name or nominee name of any agent appointed pursuant to Section 2.9 or in the name or nominee name of any sub-custodian appointed pursuant to Article 1. All securities accepted by the Custodian on behalf of the Portfolio under the terms of this Contract shall be in "street name" or other good delivery form. If, however, the Fund directs the Custodian to maintain securities in "street name", the Custodian shall utilize its best efforts only to timely collect income due the Fund on such securities and to notify the Fund on a best efforts basis only of relevant corporate actions including, without limitation, pendency of calls, maturities, tender or exchange offers. 2.4 Bank Accounts. The Custodian shall open and maintain a separate bank account or accounts in the United States in the name of each Portfolio of the Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Contract, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Portfolio, other than cash maintained by the Portfolio in a bank account established and used in accordance with Rule 17f-3 under the Investment Company Act of 1940. Funds held by the Custodian for a Portfolio may be deposited by it to its credit as Custodian in the Banking Department of the Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable; provided, however, that every such bank or trust company shall be qualified to act as a custodian under the Investment Company Act of 1940 and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall on behalf of each applicable Portfolio be approved by vote of a majority of the Board of Trustees of the Fund. Such funds shall be deposited by the Custodian in its capacity as Custodian and shall be withdrawable by the Custodian only in that capacity. 2.5 Availability of Federal Funds. Upon mutual agreement between the Fund on behalf of each applicable Portfolio and the Custodian, the Custodian shall, upon the receipt of Proper Instructions from the Fund on behalf of a Portfolio, make federal funds available to such Portfolio as of specified times agreed upon from time to time by the Fund and the Custodian in the amount of 8 8 checks received in payment for Shares of such Portfolio which are deposited into the Portfolio's account. 2.6 Collection of Income and Dividends. Subject to the provisions of Section 2.3, the Custodian shall collect on a timely basis all income and other payments with respect to registered domestic securities held hereunder to which each Portfolio shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to bearer domestic securities if, on the date of payment by the issuer, such securities are held by the Custodian or its agent thereof and shall credit such income, as collected, to such Portfolio's custodian account. Without limiting the generality of the foregoing, the Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. Income due each Portfolio on securities loaned pursuant to the provisions of Section 2.2 (10) shall be the responsibility of the Fund. Unless otherwise agreed to in writing, the Custodian will have no duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Custodian of the income to which the Portfolio is properly entitled. 2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the Fund on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out monies of a Portfolio in the following cases only: 1) Upon the purchase of domestic securities, options, futures contracts or options on futures contracts for the account of the Portfolio but only (a) against the delivery of such securities or evidence of title to such options, futures contracts or options on futures contracts to the Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the Investment Company Act of 1940, as amended, to act as a custodian and has been designated by the Custodian as its agent for this purpose) registered in the name of the Portfolio or in the name of a nominee of the Custodian referred to in Section 2.3 hereof or in proper form for transfer; (b) in the case of a purchase effected through a U.S. Securities System, in accordance with the conditions set forth in Section 2.10 hereof; (c) in the case of a purchase involving the Direct Paper System, in accordance with the conditions set forth in Section 2.11; (d) in the case of repurchase agreements entered into between the Fund on behalf of the Portfolio and the Custodian, or another bank, or a broker-dealer which is a member of NASD, (i) against delivery of the securities either in certificate form or through an entry crediting the Custodian's account at the Federal Reserve Bank with such securities or (ii) against delivery of the receipt evidencing purchase by the Portfolio of securities owned by the Custodian along with written evidence of the agreement by the Custodian to repurchase such securities from the Portfolio or (e) for transfer to a time deposit account of the Fund in any bank, whether domestic or foreign; such transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank pursuant to Proper Instructions from the Fund as defined in Article 5; 9 9 2) In connection with conversion, exchange or surrender of securities owned by the Portfolio as set forth in Section 2.2 hereof; 3) For the redemption or repurchase of Shares issued by the Portfolio as set forth in Article 4 hereof; 4) For the payment of any expense or liability incurred by the Portfolio, including but not limited to the following payments for the account of the Portfolio: interest, taxes, management, accounting, transfer agent and legal fees, and operating expenses of the Fund whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses; 5) For the payment of any dividends on Shares of the Portfolio declared pursuant to the governing documents of the Fund; 6) For payment of the amount of dividends received in respect of securities sold short; 7) For repayment of a loan upon redelivery of pledged securities and upon surrender of the loan note(s), if any, evidencing the loan; 8) For any other corporate purpose, but only upon receipt of Proper Instructions from the Fund on behalf of the Portfolio. 2.8 Liability for Payment in Advance of Receipt of Securities Purchased. Except as specifically stated otherwise in this Contract, in any and every case where payment for purchase of domestic securities for the account of a Portfolio is made by the Custodian in advance of receipt of the securities purchased in the absence of specific written instructions from the Fund on behalf of such Portfolio to so pay in advance, the Custodian shall be absolutely liable to the Fund for such securities to the same extent as if the securities had been received by the Custodian. 2.9 Appointment of Agents. The Custodian may at any time or times in its discretion appoint (and may at any time remove) any other bank or trust company which is itself qualified under the Investment Company Act of 1940, as amended, to act as a custodian, as its agent to carry out such of the provisions of this Article 2 as the Custodian may from time to time direct; provided, however, that the appointment of any agent shall not relieve the Custodian of its responsibilities or liabilities hereunder. 2.10 Deposit of Fund Assets in U.S. Securities Systems. The Custodian may deposit and/or maintain securities owned by a Portfolio in a clearing agency registered with the Securities and Exchange Commission under Section 17A of the Securities Exchange Act of 1934, which acts as a securities depository, or in the book-entry system authorized by the U.S. Department of the Treasury and certain federal agencies, collectively referred to herein as "U.S. Securities System" in accordance with applicable Federal Reserve Board and Securities and Exchange Commission rules and regulations, if any, and subject to the following provisions: 10 10 1) The Custodian may keep securities of the Portfolio in a U.S. Securities System provided that such securities are represented in an account ("Account") of the Custodian in the U.S. Securities System which shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers; 2) The records of the Custodian with respect to securities of the Portfolio which are maintained in a U.S. Securities System shall identify by book-entry those securities belonging to the Portfolio; 3) The Custodian shall pay for securities purchased for the account of the Portfolio upon (i) receipt of advice from the U.S. Securities System that such securities have been transferred to the Account, and (ii) the making of an entry on the records of the Custodian to reflect such payment and transfer for the account of the Portfolio. The Custodian shall transfer securities sold for the account of the Portfolio upon (i) receipt of advice from the U.S. Securities System that payment for such securities has been transferred to the Account, and (ii) the making of an entry on the records of the Custodian to reflect such transfer and payment for the account of the Portfolio. Copies of all advices from the U.S. Securities System of transfers of securities for the account of the Portfolio shall identify the Portfolio, be maintained for the Portfolio by the Custodian and be provided to the Fund at its request. Upon request, the Custodian shall furnish the Fund on behalf of the Portfolio confirmation of each transfer to or from the account of the Portfolio in the form of a written advice or notice and shall furnish to the Fund on behalf of the Portfolio copies of daily transaction sheets reflecting each day's transactions in the U.S. Securities System for the account of the Portfolio. 4) The Custodian shall provide the Fund for the Portfolio with any report obtained by the Custodian on the U.S. Securities System's accounting system, internal accounting control and procedures for safeguarding securities deposited in the U.S. Securities System; 5) The Custodian shall have received from the Fund on behalf of the Portfolio the initial or annual certificate, as the case may be, required by Article 14 hereof; 6) Anything to the contrary in this Contract notwithstanding, the Custodian shall be liable to the Fund for the benefit of the Portfolio for any loss or damage to the Portfolio resulting from use of the U.S. Securities System by reason of any negligence, misfeasance or misconduct of the Custodian or any of its agents or of any of its or their employees or from failure of the Custodian or any such agent to enforce effectively such rights as it may have against the U.S. Securities System; at the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claim against the U.S. Securities System or any other person which the Custodian may have as a consequence of any such loss or damage if and to the extent that the Portfolio has not been made whole for any such loss or damage. 11 11 2.11 Fund Assets Held in the Custodian's Direct Paper System. The Custodian may deposit and/or maintain securities owned by a Portfolio in the Direct Paper System of the Custodian subject to the following provisions: 1) No transaction relating to securities in the Direct Paper System will be effected in the absence of Proper Instructions from the Fund on behalf of the Portfolio; 2) The Custodian may keep securities of the Portfolio in the Direct Paper System only if such securities are represented in an account ("Account") of the Custodian in the Direct Paper System which shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers; 3) The records of the Custodian with respect to securities of the Portfolio which are maintained in the Direct Paper System shall identify by book-entry those securities belonging to the Portfolio; 4) The Custodian shall pay for securities purchased for the account of the Portfolio upon the making of an entry on the records of the Custodian to reflect such payment and transfer of securities to the account of the Portfolio. The Custodian shall transfer securities sold for the account of the Portfolio upon the making of an entry on the records of the Custodian to reflect such transfer and receipt of payment for the account of the Portfolio; 5) The Custodian shall furnish the Fund on behalf of the Portfolio confirmation of each transfer to or from the account of the Portfolio, in the form of a written advice or notice, of Direct Paper on the next business day following such transfer and shall furnish to the Fund on behalf of the Portfolio copies of daily transaction sheets reflecting each day's transaction in the U.S. Securities System for the account of the Portfolio; 6) The Custodian shall provide the Fund on behalf of the Portfolio with any report on its system of internal accounting control as the Fund may reasonably request from time to time. 2.12 Segregated Account. The Custodian shall upon receipt of Proper Instructions from the Fund on behalf of each applicable Portfolio establish and maintain a segregated account or accounts for and on behalf of each such Portfolio, into which account or accounts may be transferred cash and/or securities, including securities maintained in an account by the Custodian pursuant to Section 2.10 hereof, (i) in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian and a broker-dealer registered under the Exchange Act and a member of the NASD (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or the Commodity Futures Trading Commission or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Portfolio, (ii) for purposes of segregating cash or government securities in connection with options purchased, sold or written by the Portfolio or 12 12 commodity futures contracts or options thereon purchased or sold by the Portfolio, (iii) for the purposes of compliance by the Portfolio with the procedures required by Investment Company Act Release No. 10666, or any subsequent release or releases of the Securities and Exchange Commission relating to the maintenance of segregated accounts by registered investment companies and (iv) for other corporate purposes, upon receipt of Proper Instructions from the Fund on behalf of the applicable Portfolio. 2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with receipt of income or other payments with respect to domestic securities of each Portfolio held by it and in connection with transfers of securities. 2.14 Proxies. The Custodian shall, with respect to the domestic securities held hereunder, cause to be promptly executed by the registered holder of such securities, if the securities are registered otherwise than in the name of the Portfolio or a nominee of the Portfolio, all proxies, without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Portfolio such proxies, all proxy soliciting materials and all notices relating to such securities. 2.15 Communications Relating to Portfolio Securities. Subject to the provisions of Section 2.3, the Custodian shall transmit promptly to the Fund for each Portfolio all written information (including, without limitation, pendency of calls and maturities of domestic securities and expirations of rights in connection therewith and notices of exercise of call and put options written by the Fund on behalf of the Portfolio and the maturity of futures contracts purchased or sold by the Portfolio) received by the Custodian from issuers of the securities being held for the Portfolio. With respect to tender or exchange offers, the Custodian shall transmit promptly to the Portfolio all written information received by the Custodian from issuers of the securities whose tender or exchange is sought and from the party (or his agents) making the tender or exchange offer. If the Portfolio desires to take action with respect to any tender offer, exchange offer or any other similar transaction, the Portfolio shall notify the Custodian to take such action prior to the time agreed to by the Custodian and the Fund. 3. Duties of the Custodian with Respect to Property of the Fund Held Outside of the United States 3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and instructs the Custodian to employ as sub-custodians for the Portfolio's securities, cash and other assets maintained outside the United States the foreign banking institutions and foreign securities depositories designated on Schedule A hereto ("foreign sub-custodians"). Upon receipt of "Proper Instructions", as defined in Article 5 of this Contract, together with a certified resolution of the Fund's Board of Trustees, the Custodian and the Fund may agree to amend Schedule A hereto from time to time to designate additional foreign banking institutions and foreign securities depositories to act as sub-custodian. Upon receipt of Proper Instructions, the Fund may instruct the Custodian to cease the employment of any one or more such sub-custodians for maintaining custody of the Portfolio's assets. 3.2 Assets to be Held. The Custodian shall limit the securities and other assets maintained in the 13 13 custody of the foreign sub-custodians to: (a) "foreign securities", as defined in Rule 17f-5 under the Investment Company Act of 1940, (b) cash and cash equivalents in such amounts as the Fund may determine; and (c) other assets as are mutually agreed by the parties. The Custodian shall identify on its books as belonging to the Fund, the foreign securities, cash and other assets of the Fund held by each foreign sub-custodian. 3.3 Foreign Securities Systems. Except as may otherwise be agreed upon in writing by the Custodian and the Fund, assets of the Portfolios shall be maintained in a clearing agency which acts as a securities depository or in a book-entry system for the central handling of securities located outside of the United States (each a "Foreign Securities System") only through arrangements implemented by the foreign banking institutions serving as sub-custodians pursuant to the terms hereof (Foreign Securities Systems and U.S. Securities Systems are collectively referred to herein as the "Securities Systems"). Where possible, such arrangements shall include entry into agreements containing the provisions set forth in Section 3.5 hereof. 3.4 Holding Securities. The Custodian may hold securities and other non-cash property for all of its customers, including the Fund, with a foreign sub-custodian in a single account that is identified as belonging to the Custodian for the benefit of its customers, provided however, that (i) the records of the Custodian with respect to securities and other non-cash property of the Fund which are maintained in such account shall identify by book-entry those securities and other non-cash property belonging to the Fund and (ii) the Custodian shall require that securities and other non-cash property so held by the foreign sub-custodian be held separately from any assets of the foreign sub-custodian or of others. 3.5 Agreements with Foreign Banking Institutions. Each agreement with a foreign banking institution shall provide that: (a) the assets of each Portfolio will not be subject to any right, charge, security interest, lien or claim of any kind in favor of the foreign banking institution or its creditors or agent, except a claim of payment for their safe custody or administration; (b) beneficial ownership for the assets of each Portfolio will be freely transferable without the payment of money or value other than for custody or administration; (c) adequate records will be maintained identifying the assets as belonging to each applicable Portfolio; (d) officers of or auditors employed by, or other representatives of the Custodian, including to the extent permitted under applicable law the independent public accountants for the Fund, will be given access to the books and records of the foreign banking institution relating to its actions under its agreement with the Custodian; and (e) assets of the Portfolios held by the foreign sub-custodian will be subject only to the instructions of the Custodian or its agents. 3.6 Access of Independent Accountants of the Fund. Upon request of the Fund, the Custodian will use its best efforts to arrange for the independent accountants of the Fund to be afforded access to the books and records of any foreign banking institution employed as a foreign sub-custodian insofar as such books and records relate to the performance of such foreign banking institution under its agreement with the Custodian. 3.7 Reports by Custodian. The Custodian will supply to the Fund from time to time, as mutually 14 14 agreed upon, statements in respect of the securities, cash and other assets of the Portfolio(s) held by foreign sub-custodians, including but not limited to an identification of entities having possession of the Portfolio(s) securities, cash and other assets and advices or notifications of any transfers of securities to or from each custodial account maintained by a foreign banking institution for the Custodian on behalf of each applicable Portfolio indicating, as to securities acquired for a Portfolio, the identity of the entity having physical possession of such securities. 3.8 Transactions in Foreign Custody Account. (a) Except as otherwise provided in paragraph (b) of this Section 3.8, the provision of Sections 2.2 and 2.7 of this Contract shall apply, mutatis mutandis to the foreign securities of the Fund held outside the United States by foreign sub-custodians. (b) In the case of the purchase of securities, the settlement of which occurs outside of the United States of America: (i) the Custodian may make payment therefor and receive delivery of such securities in accordance with local custom and practice generally accepted by Institutional Clients (as hereinafter defined) in the country in which the settlement occurs, but in all events subject to the standard of care set forth in Section 13 hereof; (ii) in the case of the purchase of securities in which, in accordance with standard industry custom and practice generally accepted by Institutional Clients with respect to such securities, the receipt of such securities and the payment therefor take place in different countries, the Custodian may receive delivery of such securities and make payment therefor in accordance with standard industry custom and practice for such securities generally accepted by Institutional Clients, but in all events subject to the standard of Care set forth in Section 13 hereof. In the case of the sale of securities, the settlement of which occurs outside of the United States of America: (i) such securities shall be delivered and paid for in accordance with local custom and practice generally accepted by Institutional Clients in the country in which the settlement occurs, but in all events subject to the standard of care set forth in Section 13 hereof; (ii) in the case of the sale of securities in which, in accordance with standard industry custom and practice generally accepted by Institutional Clients with respect to such securities, the delivery of such securities and receipt of payment therefor take place in different countries, the Custodian may deliver such securities and receive payment therefor in accordance with standard industry custom and practice for such securities generally accepted by Institutional Clients, but in all events subject to the standard of care set forth in Section 13 hereof; and (iii) in the case of securities held in physical form, such securities shall be delivered and paid for in accordance with "street delivery custom" to a broker or its clearing agent, against delivery to the Custodian of a receipt for such securities, prompt collection of the payment for, or the return of, such securities by the broker or its clearing agent, and provided further that the Custodian shall not be responsible for the selection of or the failure or inability to perform of such broker or its clearing agent. For purposes of this Contract , an "Institutional Client" shall mean a major commercial bank, corporation, insurance company or substantially similar institution, which, as a substantial part of its business operations, purchases or sells securities and makes use of custodial services. 15 15 (c) Securities maintained in the custody of a foreign sub-custodian may be maintained in the name of such entity's nominee to the same extent as set forth in Section 2.3 of this Contract, and the Fund agrees to hold any such nominee harmless from any liability as a holder of record of such securities. 3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to which the Custodian employs a foreign banking institution as a foreign sub-custodian, other than a branch or subsidiary of the Custodian, shall require the institution to exercise reasonable care in the performance of its duties and to indemnify, and hold harmless, the Custodian and each Fund from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the institution's performance of such obligations. At the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claims against a foreign banking institution as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Fund has not been made whole for any such loss, damage, cost, expense, liability or claim. A foreign sub-custodian which is a branch or subsidiary of the Custodian shall be held to the standard of care set forth in Section 13 for the Custodian. 3.10 Liability of Custodian. Except as provided in paragraph 3.9 hereof with respect to a branch or subsidiary of the Custodian, the Custodian shall be liable for the acts or omissions of a foreign banking institution to the same extent as set forth with respect to sub-custodians generally in this Contract and, regardless of whether assets are maintained in the custody of a foreign banking institution, a foreign securities depository or a branch of a U.S. bank as contemplated by paragraph 3.13 hereof, the Custodian shall not be liable for any loss, damage, cost, expense, liability or claim resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism or any loss where the sub-custodian has otherwise exercised reasonable care. Notwithstanding the foregoing provisions of this paragraph 3.10, in delegating custody duties to State Street London Ltd., or other branches or subsidiaries of the Custodian, the Custodian shall not be relieved of any responsibility to the Fund for any loss due to such delegation, except such loss as may result from (a) political risk (including, but not limited to, exchange control restrictions, confiscation, expropriation, nationalization, insurrection, civil strife or armed hostilities) or (b) other losses (excluding a bankruptcy or insolvency of State Street London Ltd. not caused by political risk) due to Acts of God, nuclear incident or other losses under circumstances where the Custodian and State Street London Ltd. have exercised the standard of care set forth in Article 13 hereof. 3.11 Monitoring Responsibilities. The Custodian shall furnish annually to the Fund, during the month of June, or such other periods as the parties may agree, information concerning the foreign sub-custodians employed by the Custodian. Such information shall be similar in kind and scope to that furnished to the Fund in connection with the initial approval of this Contract. In addition, the Custodian will promptly inform the Fund in the event that the Custodian learns of a material adverse change in the financial condition of a foreign sub-custodian or any material loss of the assets of the Fund or in the case of any foreign sub-custodian not the subject of an exemptive order from the Securities and Exchange Commission is notified by such foreign sub-custodian that there appears to be a substantial likelihood that its shareholders' equity will not meet the requirements of 16 16 Rule 17f-5 under the Investment Company Act of 1940 for custodians of an investment company. 3.12 Branches of U.S. Banks. (a) Except as otherwise set forth in this Contract, the provisions hereof shall not apply where the custody of the Portfolios assets are maintained in a foreign branch of a banking institution which is a "bank" as defined by Section 2(a)(5) of the Investment Company Act of 1940 meeting the qualification set forth in Section 26(a) of said Act. The appointment of any such branch as a sub-custodian shall be governed by paragraph 1 of this Contract. (b) Cash held for each Portfolio of the Fund in the United Kingdom shall be maintained in an interest bearing account established for the Fund with the Custodian's London branch, which account shall be subject to the direction of the Custodian, State Street London Ltd. or both. 3.13 Tax Law. The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on the Fund or the Custodian as custodian of the Fund by the tax law of the United States of America or any state or political subdivision thereof. It shall be the responsibility of the Fund to notify the Custodian of the obligations imposed on the Fund or the Custodian as custodian of the Fund by the tax law of jurisdictions other than those mentioned in the above sentence, including responsibility for withholding and other taxes, assessments or other governmental charges, certifications and governmental reporting. The sole responsibility of the Custodian with regard to such tax law shall be to use reasonable efforts to assist the Fund with respect to any claim for exemption or refund under the tax law of jurisdictions for which the Fund has provided such information. 3.14 Proxies. The Custodian will generally, with respect to foreign securities held under this Article 3, use best efforts accepted by Institutional Clients to facilitate the exercise of voting and other shareholder proxy rights, subject always to the laws, regulations and practical constraints that may obtain in the jurisdiction where such securities are issued. The Fund acknowledges that local conditions may have the effect of severely limiting the ability of the Fund to exercise shareholder rights. 4. Payments for Sales or Repurchases or Redemptions of Shares of the Fund The Custodian shall receive from the distributor for the Shares or from the Transfer Agent of the Fund and deposit into the account of the appropriate Portfolio such payments as are received for Shares of that Portfolio issued or sold from time to time by the Fund. The Custodian will provide timely notification to the Fund on behalf of each such Portfolio and the Transfer Agent of any receipt by it of payments for Shares of such Portfolio. From such funds as may be available for the purpose but subject to the limitations of the Articles of Incorporation and any applicable votes of the Board of Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt of instructions from the Transfer Agent, make funds available for payment to holders of Shares who have delivered to the Transfer Agent a request for redemption or repurchase of their Shares. In connection with the redemption or repurchase of Shares of a Portfolio, the Custodian is 17 17 authorized upon receipt of instructions from the Transfer Agent to wire funds to or through a commercial bank designated by the redeeming shareholders. In connection with the redemption or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on the Custodian by a holder of Shares, which checks have been furnished by the Fund to the holder of Shares, when presented to the Custodian in accordance with such procedures and controls as are mutually agreed upon from time to time between the Fund and the Custodian. 5. Proper Instructions Proper Instructions as used throughout this Contract means (a) with respect to the purchase and sale of short-term debt securities with a maturity of less than one year when value is exchanged, written instructions from the Fund by any one individual authorized by the Board of Trustees and specified in a separate list for this purpose which will be furnished to the Custodian from time to time signed by the treasurer or any associate treasurer or any assistant treasurer and by the secretary or any assistant secretary as certified under the corporate seal of the Fund (an "Authorized Person"); (b) with respect to other transaction, written instructions from the Fund signed by any two Authorized Persons ; and (c) notwithstanding (a) and (b) above of this Article 5, with respect to "Free of Payment" deliveries, a writing manually signed by any two Authorized Persons who are officers of the Fund with the title Chairman, President, Executive Vice President, or Treasurer. Upon receipt of a writing manually signed by any two Authorized Persons who are officers of the Fund with the title Chairman, President, Executive Vice President, or Treasurer accompanied by a detailed description of procedures approved by such writing, Proper Instructions may include communications effected directly between electro-mechanical or electronic devices provided that the Fund and the Custodian are satisfied that such procedures afford adequate safeguards for the Fund's assets. Oral instructions will be considered Proper Instructions if the Custodian reasonably believes them to have been given by a person authorized to give such instructions with respect to the transaction involved. The Fund shall cause all oral instructions to be confirmed in writing. For purposes of this Section, Proper Instructions shall include instructions received by the Custodian pursuant to any three-party agreement which requires a segregated asset account in accordance with Section 2.12. 18 18 6. Actions Permitted without Express Authority The Custodian may in its discretion, without express authority from the Fund on behalf of each applicable Portfolio: 1) make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Contract, provided that all such payments shall be accounted for to the Fund on behalf of the Portfolio; 2) surrender securities in temporary form for securities in definitive form; 3) endorse for collection, in the name of the Portfolio, checks, drafts and other negotiable instruments; and 4) in general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Portfolio except as otherwise directed by the Board of Trustees of the Fund. 7. Evidence of Authority The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper believed by it to be genuine and to have been properly executed by or on behalf of the Fund. The Custodian may receive and accept a certified copy of a vote of the Board of Trustees of the Fund as conclusive evidence (a) of the authority of any person to act in accordance with such vote or (b) of any determination or of any action by the Board of Trustees pursuant to the Declaration of Trust as described in such vote, and such vote may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary. 8. Duties of Custodian with Respect to the Books of Account and Calculation of Net Asset Value and Net Income The Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the Board of Trustees of the Fund to keep the books of account of each Portfolio and/or compute the net asset value per share of the outstanding shares of each Portfolio or, unless otherwise directed in writing to do so by the Fund on behalf of the Portfolio, shall itself keep such books of account and/or compute such net asset value per share. Until otherwise directed in writing, the Custodian shall also calculate daily the net income of the Portfolio as described in the Fund's currently effective prospectus related to such Portfolio and shall advise the Fund and the Transfer Agent daily of the total amounts of such net income and, if instructed in writing by an officer of the Fund to do so, shall advise the Transfer Agent periodically of the division of such net income among its various components. The calculations of the net asset value per share and the daily income of each Portfolio shall be made in accordance with and at the time or times described from time to time in the Fund's currently effective prospectus related to such Portfolio and in accordance with the procedures agreed to in writing between the Fund and the Custodian and shall at all times comply with the standard of care set forth in Section 13 hereof. 19 19 9. Records The Custodian shall with respect to each Portfolio create and maintain all records relating to its activities and obligations under this Contract in such manner as will meet the obligations of the Fund under the Investment Company Act of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of the Fund and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of the Fund and employees and agents of the Securities and Exchange Commission. The Custodian shall, at the Fund's request, supply the Fund with a tabulation of securities owned by each Portfolio and held by the Custodian and shall, when requested to do so by the Fund and for such compensation as shall be agreed upon between the Fund and the Custodian, include certificate numbers in such tabulations. 10. Opinion of Fund's Independent Accountant The Custodian shall take all reasonable action, as the Fund on behalf of each applicable Portfolio may from time to time request, to obtain from year to year favorable opinions from the Fund's independent accountants with respect to its activities hereunder in connection with the preparation of the Fund's Form N-1A, and Form N-SAR or other annual reports to the Securities and Exchange Commission and with respect to any other requirements of such Commission. 11. Reports to Fund by Independent Public Accountants The Custodian shall provide the Fund, on behalf of each of the Portfolios at such times as the Fund may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding securities, futures contracts and options on futures contracts, including securities deposited and/or maintained in a Securities System, relating to the services provided by the Custodian under this Contract; such reports, shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Fund to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state. 12. Compensation of Custodian The Custodian shall be entitled to reasonable compensation for its services and expenses as Custodian, as agreed upon in writing from time to time between the Fund on behalf of each applicable Portfolio and the Custodian. 13. Responsibility of Custodian, Indemnification 13.1 Standard of Care 1) General Standard of Care. The Custodian shall exercise reasonable care and diligence in carrying out all of its duties and obligations under this Contract, and shall be liable to the Fund on behalf of the applicable Portfolio(s), for all loss, damage and expense suffered or 20 20 incurred by such Portfolio resulting from the failure of the Custodian to exercise such reasonable care and diligence. 2) Actions Prohibited by Applicable Law, etc. Except as may arise from the Custodian's own negligence, misfeasance or willful misconduct or the negligence, misfeasance or willful misconduct of a domestic sub-custodian or foreign banking institution acting as foreign sub-custodian or agent, the Custodian shall be without liability to the Fund for any loss, liability, claim or expense resulting from or caused by: (i) any provision of any present or future law or regulation or order of the United States of America, or any state thereof, or of any foreign country, or political subdivision thereof or of any court of competent jurisdiction; (ii) any act of God or war or other similar circumstance beyond the control of the Custodian, including, without limitation, nationalization or expropriation, imposition of currency controls or restrictions, the interruption, suspension or restriction of trading on or the closure of any securities market, power or other mechanical or technological failures or interruptions, computer viruses or communications disruptions, acts of terrorism, riots, revolutions or work stoppages; (iii) errors by the Fund or its investment advisor in their instructions to the Custodian provided such instructions have been in accordance with this Contract; (iv) the insolvency of or acts or omissions by a Securities System; (v) any delay or failure of any broker or agent selected by the Fund, or an intermediary or agent of such broker, or any central bank or other commercially prevalent payment or clearing system outside of the United States to deliver to the Custodian's sub-custodian or agent securities purchased or in the remittance or payment made in connection with securities sold provided that the subcustodians or agents have acted in accordance with the terms of this contract; (vi) any delay or failure of any company, corporation, or other body in charge of registering or transferring securities in the name of the Custodian, the Fund, the Custodian's sub-custodians, nominees or agents or any consequential losses arising out of such delay or failure to transfer such securities including non-receipt of bonus, dividends and rights and other accretions or benefits; (vii) delays or inability to perform its duties due to any disorder in market infrastructure with respect to any particular security or Securities System. In no event shall the Custodian be liable for indirect, special or consequential damages. 3) Reliance on Instruments, etc. So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Contract and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties, including any futures commission merchant acting pursuant to the terms of a three-party futures or options agreement. 4) Mitigation by Custodian. Upon the occurrence of any event which causes or may cause any loss, damage or expense to any Portfolio (i) the Custodian shall, (ii) the Custodian shall cause State Street London Ltd. to and (iii) the Custodian shall use all reasonable efforts to cause any applicable Subcustodian (other than State Street London Ltd.) 21 21 appointed to hold assets in the U.S. or Foreign banking institutions acting as a foreign subcustodian to, use all reasonable efforts and take all reasonable steps under the circumstances to mitigate the efforts of such event and to avoid continuing harm to the Fund and the Portfolios. 5) Advice of Counsel. The Custodian shall be entitled to rely on and act upon advice of counsel (who may be counsel for the Fund) on all matters and shall be without liability for any action reasonably taken or omitted in good faith pursuant to such advice; provided, however, with respect to the performance of any action or omission of any action upon such advice, the Custodian shall be required to conform to the standard of care set forth herein. 6) Expenses of Fund. In addition to the liability of the Custodian under this Section 13, the Custodian shall be liable to the Fund and each applicable Portfolio for all reasonable out-of-pocket costs and expenses incurred by the Fund in connection with any claim by the Fund against the Custodian arising from the obligations of the Custodian hereunder, including, without limitation, all reasonable attorneys' fees and expenses incurred by the Fund in asserting any such claim, and out-of-pocket expenses incurred by the Fund in connection with any lawsuits or proceedings relating to such claim; provided, that the Fund has recovered from the Custodian for such claim. 13.2 Liability of Custodian for Actions of Other Persons 1) Subcustodians located in the United States and Foreign banking institutions acting as foreign subcustodians. The Custodian shall be liable for the actions or omissions of any subcustodian located in the United States or any foreign banking institution acting as a foreign subcustodian to the same extent as if such action or omission were performed by the Custodian itself taking into account standards applicable to custodians in the relevant market. 2) Securities System. Notwithstanding the provisions of Section 13 to the contrary, the Custodian shall not be liable to the Fund or any applicable Portfolio for any loss, damage or expense suffered or incurred by the Fund or any of its Portfolios resulting from the use by the Custodian or a subcustodian located in the United States or foreign banking institution acting as a foreign subcustodian, of a Securities System including, without limitation, the insolvency of a Securities System, unless such loss, damage or expense is caused by, or results from, the negligence, misfeasance or misconduct of the Custodian or a subcustodian located in the United States or foreign banking institution acting as a foreign subcustodian; provided, however, that in the event of any such loss, damage or expense, the Custodian shall take all reasonable steps to enforce such rights as it or a subcustodian located in the United States or foreign banking institution acting as a foreign subcustodian may have against the Securities System to protect the interests of the Fund and the Portfolios. 22 22 3) Reimbursement of Expenses. The Fund agrees to reimburse the Custodian for all reasonable out-of-pocket expenses incurred by the Custodian on behalf of such Fund in connection with the fulfillment of its obligations under this Section 13; provided, however, that such reimbursement shall not apply to expenses occasioned by or resulting from the negligence, misfeasance or misconduct of the Custodian. 23 23 13.3 Indemnification 1) Indemnification Obligations. Subject to the limitations set forth in this Agreement, the Fund hereby indemnifies and holds harmless the Custodian and its nominees from all loss, damage and expense (including reasonable attorneys' fees) suffered or incurred by the Custodian or its nominees caused by or arising from actions taken or omitted by the Custodian on behalf of the Fund in the performance of its duties and obligations under this Contract; provided, however, that such indemnity shall not apply to loss, damage and expense arising from the negligence, misfeasance or misconduct of the Custodian or its nominee. In addition, the Fund hereby indemnifies the Custodian, any subcustodian, Securities System, or their respective nominees against any liability incurred by reason of taxes assessed to such person, or other loss, damage or expenses incurred by such person, resulting from the fact that securities and other property of such Fund's Portfolios are registered in the name of such person; provided, however, that in no event shall such indemnification be applicable to income, franchise or similar taxes which may be imposed or assessed against any person. Furthermore, if the Fund on behalf of a Portfolio requires the Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund or the Portfolio being liable for the payment of money or incurring liability of some other form, the Fund on behalf of the Portfolio, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it. If the Fund requires the Custodian, its affiliates, subsidiaries or agents, to advance cash or securities for any purpose (including but not limited to securities settlements, foreign exchange contracts and assumed settlement) or in the event that the Custodian or its nominees shall incur or be assessed any taxes, charges, expenses or assessments in connection with the performance of this Contract or from any actions taken or omitted by the Custodian or its nominees on behalf of the Fund in the performance of its duties under this Contract, except such as may arise from its or its nominee's own negligent action, negligent failure to act, misfeasance or willful misconduct, any property at any time held for the account of the applicable Portfolio shall be security therefor and should the Fund fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of such Portfolio's assets to the extent necessary to obtain reimbursement. 2) Notice of Litigation, Right to Prosecute, etc. If a person seeking indemnification pursuant to Section 13.3(1) hereof fails to promptly notify the Fund in writing of the commencement of any litigation or any proceeding brought against such person (a "Proceeding"), the Fund shall not be liable for indemnification under this Contract with respect to such Proceeding to the extent that the Fund's ability to defend is prejudiced by such failure. With respect to claims in a Proceeding for which indemnity by the Fund may be sought, the Fund shall be entitled to participate at its own expense in the defense, or, if it so elects, 24 24 to assume the control of the defense of any Proceeding. In the event the Fund elects to assume the control of the defense of any Proceeding, the persons seeking indemnification pursuant to Section 13.3(1) hereof involved in such Proceeding may retain additional counsel for purposes of the Proceeding but shall bear all fees and expenses of such retention of such counsel, unless (i) the Fund shall have specifically authorized the retention of such counsel, or (ii) if the Fund and such indemnified persons agree that the retention of such counsel is required as a result of a conflict of interest. If the Fund assumes control of any Proceeding hereunder, the Fund shall keep the persons seeking indemnification pursuant to Section 13.3(1) hereof notified of the progress of such Proceeding and, upon request, consult with such persons and their counsel concerning such Proceeding. The Fund will, upon request by the persons seeking indemnification pursuant to Section 13.3(1) hereof, either pay in the first instance or reimburse such persons for any expenses subject to indemnity hereunder. The Fund shall not settle or compromise any Proceeding without the prior written consent of each person seeking indemnification pursuant to Section 13.3(1) hereof involved in such Proceeding, which consent shall not be unreasonably upheld, unless (i) such settlement or compromise involves no admission of guilt, wrongdoing, or misconduct by any such person, (ii) such settlement or compromise does not impose any obligations or restrictions on any such person other than obligations to pay money that are subject to the indemnity under this Contract, and (iii) the Fund shall have paid, or made arrangements satisfactory to such person for payment of, all amounts payable by each such person in connection with such settlement. Except as part of a settlement or compromise by the Fund in accordance with the provisions of the immediately preceding paragraph, no person seeking indemnification pursuant to Section 13.3(1) hereof may consent to the entry of any judgment or settle any Proceeding subject to indemnity hereunder without providing the Fund with at least 15 days prior written notice of any such judgment or settlement and without the prior written consent of the Fund, which consent will not be reasonably withheld (to the extent such Proceeding relates to such person). Each person seeking indemnification pursuant to Section 13.3(1) hereof shall submit written evidence to the Fund with respect to any cost or expense for which such person is seeking indemnification in such form and detail as the Fund may reasonably request. 13.4 Fund's Right to Proceed. Notwithstanding anything to the contrary contained herein, the Fund shall have, at its election upon reasonable notice to the Custodian, the right to enforce, to the extent permitted by any applicable agreement and applicable law, the Custodian's right against any subcustodians, Securities System, or other person for loss, damage or expense caused the Fund by such subcustodian, Securities System, or other person, and shall be entitled to enforce the rights of the Custodian with respect to any claim against such subcustodian, Securities System, or other person, which the Custodian may have as a consequence of any such loss, damage or expense, if and to the extent that 25 25 the Fund has not been made whole for any such loss or damage. If the Custodian makes the Fund whole for any such loss or damage, the Custodian shall retain the ability to enforce its rights directly against such subcustodian, Securities System or other person. Upon the Fund's election to enforce any rights of the Custodian under this Section 13.4, the Fund shall reasonably prosecute all actions and proceedings directly relating to the rights of the Custodian in respect of the loss, damage or expense incurred by the Fund; provided that, so long as the Fund has acknowledged in writing its obligation to indemnify fully the Custodian under Section 13.3 hereof with respect to such claim, the Fund shall retain the right to settle, compromise and/or terminate any action or proceeding in respect of the loss, damage or expense incurred by the Fund without the Custodian's consent and provided further, that if the Fund has not made an acknowledgment of its obligation to indemnify, the Fund shall not settle, compromise or terminate any such action or proceeding without the written consent of the Custodian. The Custodian agrees to cooperate with the Fund and take all actions reasonably requested by such Fund in connection with the Fund's enforcement of any rights of the Custodian. The Fund agrees to reimburse the Custodian for all reasonable out-of-pocket expenses incurred by the Custodian on behalf of the Fund in connection with the fulfillment of its obligations under this Section 13.4; provided, however, that such reimbursement shall not apply to expenses occasioned by or resulting from the negligence, misfeasance or misconduct of the Custodian. In no event shall the Custodian be liable for indirect, special or consequential damages. 14. Effective Period, Termination and Assignment This Contract shall become effective as of its execution and shall continue in full force and effect until terminated by either party by an instrument in writing, hand delivered or sent by certified mail, such termination to take effect not sooner than sixty (60) days after the date of such delivery or mailing; provided, however that the Custodian shall not with respect to a Portfolio act under Section 2.10 hereof in the absence of receipt of an initial certificate of the Secretary or an Assistant Secretary that the Board of Trustees of the Fund has approved the initial use of a particular Securities System by such Portfolio, as required by Rule 17f-4 under the Investment Company Act of 1940, as amended and that the Custodian shall not with respect to a Portfolio act under Section 2.11 hereof in the absence of receipt of an initial certificate of the Secretary or an Assistant Secretary that the Board of Trustees has approved the initial use of the Direct Paper System by such Portfolio; provided further, however, that the Fund shall not amend or terminate this Contract in contravention of any applicable federal or state regulations, or any provision of the Articles of Incorporation, and further provided, that the Fund on behalf of one or more of the Portfolios may at any time by action of its Board of Trustees (i) substitute another bank or trust company for the Custodian by giving notice as described above to the Custodian, or (ii) immediately terminate this Contract in the event of the appointment of a conservator or receiver for the Custodian by the Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. Upon termination of the Contract, the Fund on behalf of each applicable Portfolio shall pay to the 26 26 Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Custodian for its costs, expenses and disbursements. This Contract may not be assigned by either party without the consent of the other party, which consent in the case of the Fund shall be authorized or approved by a resolution of the Board of Trustees of the Fund. 27 27 15. Successor Custodian If a successor custodian for the Fund, of one or more of the Portfolios shall be appointed by the Board of Trustees of the Fund, the Custodian shall, upon termination, deliver to such successor custodian at the office of the Custodian, duly endorsed and in the form for transfer, all securities of each applicable Portfolio then held by it hereunder and shall transfer to an account of the successor custodian all of the securities of each such Portfolio held in a Securities System. If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of a certified copy of a vote of the Board of Trustees of the Fund, deliver at the office of the Custodian and transfer such securities, funds and other properties in accordance with such vote. In the event that no written order designating a successor custodian or certified copy of a vote of the Board of Trustees shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which is a "bank" as defined in the Investment Company Act of 1940, doing business in Boston, Massachusetts, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by the Custodian on behalf of each applicable Portfolio and all instruments held by the Custodian relative thereto and all other property held by it under this Contract on behalf of each applicable Portfolio and to transfer to an account of such successor custodian all of the securities of each such Portfolio held in any Securities System. Thereafter, such bank or trust company shall be the successor of the Custodian under this Contract. In the event that securities, funds and other properties remain in the possession of the Custodian after the date of termination hereof owing to failure of the Fund to procure the certified copy of the vote referred to or of the Board of Trustees to appoint a successor custodian, the Custodian shall be entitled to fair compensation for its services during such period as the Custodian retains possession of such securities, funds and other properties and the provisions of this Contract relating to the duties and obligations of the Custodian shall remain in full force and effect. 16. Amendments This Contract may be amended at any time by mutual agreement of the parties hereto; provided that no amendment or change to this Contract shall be authorized by the Fund on behalf of its Accounts without the written consent signed by an officer with the title of either Chairman, Vice Chairman or President and any officer with the title of Executive Vice President or Treasurer and accepted in writing by any Vice President or Managing Director of the Custodian. 17. Interpretive and Additional Provisions In connection with the operation of this Contract, the Custodian and the Fund on behalf of each of the Portfolios, may from time to time agree on such provisions interpretive of or in addition to the provisions of this Contract as may in their joint opinion be consistent with the general tenor of this 28 28 Contract. Any such interpretive or additional provisions shall be in a writing signed by both parties and shall be annexed hereto, provided that no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of the Declaration of Trust of the Fund. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Contract. 18. Additional Funds In the event that the Fund establishes one or more series of Shares in addition to 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 and Institutional Money Market Fund with respect to which it desires to have the Custodian render services as custodian under the terms hereof, it shall so notify the Custodian in writing, and if the Custodian agrees in writing to provide such services, such series of Shares shall become a Portfolio hereunder. 19. Massachusetts Law to Apply This Contract shall be construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts. 20. Prior Contracts This Contract supersedes and terminates, as of the date hereof, all prior contracts between the Fund on behalf of each of the Portfolios and the Custodian relating to the custody of the Fund's assets. 21. Reproduction of Documents This Contract and all schedules, exhibits, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. 29 29 22. Shareholder Communications Securities and Exchange Commission Rule 14b-2 requires banks which hold securities for the account of customers to respond to requests by issuers of securities for the names, addresses and holdings of beneficial owners of securities of that issuer held by the bank unless the beneficial owner has expressly objected to disclosure of this information. In order to comply with the rule, the Custodian needs the Fund to indicate whether the Fund authorizes the Custodian to provide the Fund's name, address, and share position to requesting companies whose stock the Fund owns. If the Fund tells the Custodian "no", the Custodian will not provide this information to requesting companies. If the Fund tells the Custodian "yes" or do not check either "yes" or "no" below, the Custodian is required by the rule to treat the Fund as consenting to disclosure of this information for all securities owned by the Fund or any funds or accounts established by the Fund. For the Fund's protection, the Rule prohibits the requesting company from using the Fund's name and address for any purpose other than corporate communications. Please indicate below whether the Fund consent or object by checking one of the alternatives below. YES [ ] The Custodian is authorized to release the Fund's name, address, and share positions. NO [X] The Custodian is not authorized to release the Fund's name, address, and share positions. 23. No Liability of Shareholders. This Contract is executed by the Trustees of the Fund, not individually, but rather in their capacity as Trustees under the Declaration of Trust made April 15, 1999, as amended. None of the shareholders of the Fund, Trustees, officers, employees, or agents of the Fund shall be personally bound or liable under this Contract, nor shall resort be had to their private property for the satisfaction of any obligation or claim hereunder but only to the property of the Fund, and if the obligation or claim relates to the property held by the Fund for the benefit of one or more but fewer than all Funds, then only to the property held for the benefit of the affected Fund. 30 30 SIGNATURE PAGE IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative and its seal to be hereunder affixed as of the eleventh, day of June, 1999. ATTEST: TIAA-CREF INSTITUTIONAL MUTUAL FUNDS /s/ STEWART P. GREENE By: /s/ JOHN J. McCORMACK - ----------------------- ---------------------------------- Name: Stewart P. Greene Name: John J. McCormack Title: Senior Counsel and Title: President, Duly Authorized Assistant Secretary ATTEST /s/ STEWART P. GREENE By: /s/ RICHARD J. ADAMSKI - ----------------------- ---------------------------------- Name: Stewart P. Greene Name: Richard J. Adamski Title: Senior Counsel and Title: Vice President & Treasurer, Duly Assistant Secretary Authorized ATTEST: STATE STREET BANK AND TRUST COMPANY /s/ STEPHANIE L. POSTER By: /s/ RONALD E. LOGUE - --------------------- ---------------------------------- Stephanie L. Poster Ronald E. Logue, Vice Chairman, Duly Authorized Vice President 31 EX-99.H.1 4 ADMINISTRATION AGREEMENT 1 ADMINISTRATION AGREEMENT Agreement dated as of _____________ by and between State Street Bank and Trust Company, a Massachusetts trust company (the "Administrator"), and TIAA-CREF Institutional Mutual Funds (the "Fund"). WHEREAS, the Fund is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, the Fund desires to retain the Administrator to furnish certain administrative services to the Fund on its behalf, and the Administrator is willing to furnish such services, on the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto agree as follows: 1. APPOINTMENT OF ADMINISTRATOR The Fund hereby appoints the Administrator to act as administrator with respect to the Fund for purposes of providing certain administrative services for the period and on the terms set forth in this Agreement. The Administrator accepts such appointment and agrees to render the services stated herein. The Fund will initially consist of the portfolios (each an "Investment Fund") listed in Schedule A to this Agreement. In the event that the Fund establishes one or more additional Investment Funds with respect to which the Fund wishes to retain the Administrator to act as administrator hereunder, the Fund shall notify the Administrator in writing and such Investment Fund shall become subject to the provisions of this Agreement to the same extent as the existing Investment Funds, except with respect to compensation as otherwise provided in the Fee Schedule. 2. DELIVERY OF DOCUMENTS The Fund will promptly deliver to the Administrator copies of each of the following documents and all future amendments and supplements, if any: a. The Fund's Declaration of Trust; b. The Fund's registration statement under the Securities Act of 1933, as amended (the "1933 Act"), and the 1940 Act and the Fund's Prospectus(es) and Statement(s) of Additional Information relating to all Investment Funds and all amendments and supplements thereto as in effect from time to time; c. Certified copies of the resolutions of either the Board of Trustees of the Fund 2 (the "Board") approving (1) the Fund entering into this Agreement and (2) certain individuals on behalf of the Fund to (a) give instructions to the Administrator pursuant to this Agreement and (b) sign checks and pay expenses; d. A copy of the investment management agreement between the Fund and its investment adviser; and e. Such other certificates, documents or opinions which the Administrator may, in its reasonable discretion, deem necessary or appropriate in the proper performance of its duties. 3. REPRESENTATION, WARRANTIES AND COVENANTS OF THE ADMINISTRATOR The Administrator represents, warrants and covenants to TIAA that: a. The Administrator is a trust company duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts. b. The Administrator has the corporate power and authority to carry on its business in the Commonwealth of Massachusetts as it is currently conducted. c. The Administrator has the legal right and power and has taken all requisite corporate action necessary to authorize its execution, delivery and performance of this Agreement. d. No consent, approval or action of, or filing with or notice to, any governmental or regulatory authority or any other person is required on the part of the Administrator in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby. e. No legal or administrative proceedings have been instituted or, to the knowledge of the Administrator, threatened against the Administrator that would impair the Administrator's ability to perform its duties and obligations under this Agreement. f. The Administrator's execution, delivery and performance of this Agreement shall not cause a material breach or materially conflict with any other agreement or obligation of the Administrator or any law or regulation applicable to it. g. The Administrator has and will continue to have access to, and will take the commercially reasonable steps necessary to ensure appropriate maintenance of, 2 3 the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement 4. REPRESENTATIONS AND WARRANTIES OF THE FUND The Fund represents and warrants to the Administrator that: a. It has the corporate power and authority under applicable laws and by its charter and by-laws to enter into and perform this Agreement. b. All requisite proceedings have been taken to authorize it to enter into and perform this Agreement. c. The Fund is a business trust, duly organized and existing and in good standing under the laws of the State of Delaware. d. The Fund is an investment company properly registered under the 1940 Act. e. A registration statement under the 1933 Act and the 1940 Act has been filed by the Fund and will be effective prior to the initial offering of the Fund's shares to the public and will remain effective while the Fund's shares are offered to the public. f. No legal or administrative proceedings have been instituted or threatened which would impair the Fund's ability to perform its duties and obligations under this Agreement. g. Its entrance into this Agreement shall not cause a material breach or be in material conflict with any other agreement or obligation of the Fund or any law or regulation applicable to it. h. As of the date of this Agreement, the Fund is authorized to issue shares of beneficial interest, and it will initially offer shares, in the authorized amounts as set forth in Schedule A to this Agreement. 5. ADMINISTRATION SERVICES The Administrator shall provide the following services, in each case, subject to the control and direction of the Fund and the review and comment by the Fund's independent accountants and legal counsel and in accordance with procedures which may be established from time to time between the Fund and the Administrator: 3 4 a. Oversee the determination and publication of the Fund's net asset value in accordance with the Fund's policy as adopted from time to time by the Board; b. Oversee the maintenance by the Fund's custodian of certain books and records of the Fund as required under Rule 31a-1(b) of the 1940 Act; c. Prepare the Fund's federal, state and local income and excise tax returns for review by the Fund's independent accountants and officers and filing by a Fund officer or representative; d. Review calculation and appropriateness, submit for approval by officers of the Fund and arrange for payment of the Fund's expenses; e. Prepare for review and approval by officers of the Fund financial information for the Fund's semi-annual and annual reports, proxy statements and other communications required or otherwise to be sent to Fund shareholders, and consult with Advisors regarding arrangements for the printing and dissemination of such reports and communications to shareholders; f. Prepare for review by officers of and legal counsel for the Fund: (1) the Fund's periodic financial reports required to be filed with the U.S. Securities and Exchange Commission ("SEC") on Form N-SAR and file thereafter; and (2) financial information required by Form N-1A and such other reports, forms or filings as may be mutually agreed upon; g. Prepare and distribute reports to officers of the Fund relating to the business and affairs of the Fund as may be mutually agreed upon; h. Make such reports and recommendations to the Board concerning the performance and fees of the Fund's custodian and transfer and dividend disbursing agent ("Transfer Agent") as the Board may reasonably request or deems appropriate; i. Oversee and review calculations of fees paid to and any out-of-pocket expenses charged by the Fund's custodian and Transfer Agent; j. Consult with the Fund's officers, independent accountants, legal counsel, custodian and Transfer Agent in establishing the accounting policies of the Fund; k. Provide periodic testing of portfolios as may be mutually agreed upon, to assist the Fund's investment manager in complying with Internal Revenue Code mandatory qualification requirements, the requirements of the 1940 Act and Fund prospectus limitations, prepare and disseminate to the officers of the Fund 4 5 reports providing the results of such testing, prepare and distribute to officers of the Fund for review, reports determining the amount, if any, of the Fund's required annual distribution to shareholders and prepare and disseminate to the officers of the Fund such other reports as may be agreed upon from time to time and as are set forth in Schedule B to this Agreement. Details of the scope of the services provided by the Administrator hereunder shall be documented in the Fund Profile as agreed to by the Fund and the Administrator from time to time; Subject to review and comment by the Fund's legal counsel: l. Make Board presentations where appropriate; m. Prepare for review by officers of the Fund and file or assist in filing thereafter Rule 24f-2 notices with the SEC; and n. Assist the Fund in the handling of routine regulatory examinations and work closely with the Fund's legal counsel in response to any non-routine regulatory matters. The Administrator shall provide the office facilities and the personnel required by it to perform the services contemplated herein. 6. FEES; EXPENSES; EXPENSE REIMBURSEMENT The Administrator shall receive from the Fund such compensation for the Administrator's services provided pursuant to this Agreement as may be mutually agreed to by the parties from time to time in a separate fee schedule (the "Fee Schedule"). The Fund agrees to promptly reimburse the Administrator for any equipment and supplies specially ordered by the Administrator upon the Fund's written request or approval and for any other expenses not contemplated by this Agreement that the Administrator may incur on the Fund's behalf at the Fund's written request or approval. The Administrator will bear all expenses that are incurred in the performance of its duties under this Agreement and not specifically assumed by the Fund. Except as noted herein, expenses to be borne by the Fund are: cost of services of the Fund's independent accountants and outside legal and tax counsel (including such counsel's review of the Fund's registration statement, proxy materials, federal and state tax qualification as a regulated investment company and other reports and materials prepared by the Administrator under this Agreement); cost of any services contracted for by the Fund directly from parties other than the Administrator; cost of trading operations and brokerage fees, commissions and transfer taxes in connection with the purchase and sale of securities for the Fund; investment management fees; taxes, insurance premiums and other fees and expenses applicable to the Fund's operation; costs incidental to any meetings of the Fund's shareholders including, but not limited to, legal and accounting 5 6 fees, proxy filing fees and the costs of preparation, printing and mailing of any proxy materials; costs incidental to Board meetings; the salary and expenses of any officer or employee of the Fund; costs incidental to the preparation, filing, printing and distribution of the Fund's registration statements and any amendments thereto and shareholder reports; cost of typesetting and printing of prospectuses; cost of preparation and filing of the Fund's tax returns, Forms N-1A and N-SAR, and all notices, registrations and amendments associated with applicable federal and state tax and securities laws; all applicable registration fees and filing fees required under federal and state securities laws; and fidelity bond and directors' and officers' liability insurance. The Administrator is authorized to and may employ or associate with such person or persons as the Administrator may deem desirable to assist it in performing its duties under this Agreement; provided, however, that the compensation of such person or persons shall be paid by the Administrator and that the Administrator shall be as fully responsible to the Fund for the acts or omissions of any such person or persons as it is for its own acts or omissions. 7. INSTRUCTIONS AND ADVICE At any time, the Administrator may apply to authorized officers of the Fund for instructions and may consult with in-house legal counsel for the Fund or the independent accountants for the Fund or at its own cost may consult with its own legal counsel, with respect to any matter arising in connection with the services to be performed by the Administrator under this Agreement. The Administrator shall not be liable, and shall be indemnified by the Fund, for any action taken or omitted by it in good faith and with reasonable care and without negligence in reliance upon any such instructions or advice or upon any paper or document reasonably believed by it to be genuine and to have been signed by the proper person or persons; provided however, with respect to the performance of any action or omission of any action upon such legal advice by its own counsel, the Administrator shall be required to conform to the standard of care set forth herein and further provided that the Administrator shall follow the advice of the Fund's in-house legal counsel in instances where the advice of the Fund's in-house legal counsel and the Administrator's legal counsel differ. The Administrator shall not be held to have notice of any change of authority of any person until receipt of written notice thereof from the Fund. Nothing in this paragraph shall be construed as imposing upon the Administrator any obligation to seek such instructions or advice, or to act in accordance with such advice when received. 8. STANDARD OF CARE, LIMITATION OF LIABILITY AND INDEMNIFICATION The Administrator shall exercise reasonable care and diligence in carrying out the provisions of this Agreement. The Administrator shall be responsible for the performance of only such duties as are set forth in this Agreement and, except as otherwise provided under Section 6, shall have no responsibility for the actions or activities of any other party, including other service providers. The Administrator shall have no liability for any error of judgment or mistake of law or for any loss or damage resulting from the performance of or failure to perform its duties hereunder unless caused by or resulting from the negligence, willful misconduct or bad faith of the Administrator, its officers, employees or others provided under Section 6. The Administrator shall not be liable for any special, 6 7 indirect, incidental, or consequential damages of any kind whatsoever (including, without limitation, attorneys' fees) under any provision of this Agreement or for any such damages arising out of any act or failure to act hereunder. In any event, for any liability or loss suffered by the Fund including, but not limited to, any liability relating to qualification of the Fund as a regulated investment company or any liability relating to the Fund's compliance with any federal or state tax or securities statute, regulation or ruling, the Administrator's liability under this Agreement shall be limited to its total annual compensation earned by and fees paid to the Administrator hereunder during the twelve months preceding the date of the agreement of settlement of the claim or date of entry of final judgment, provided that in the event that such compensation is less than two million dollars and liabilities or losses suffered by the Fund exceed such compensation, the Administrator shall be liable for up to two million dollars of such liabilities or losses, and further provided that in the event that both such compensation and liabilities or losses exceed ten million dollars, the Administrator's liability hereunder shall be limited to ten million dollars. The Administrator shall not be responsible or liable for any failure or delay in performance of its obligations under this Agreement caused by acts of God, by equipment or transmission failure reasonably beyond its control or by other circumstances reasonably beyond its control, except to the extent that the Administrator shall have failed to use its best efforts to undertake commercially reasonable efforts to minimize the likelihood of occurrence of such circumstances or to mitigate any loss or damage caused to the Fund by such circumstances. The Fund shall indemnify and hold the Administrator harmless from all loss, cost, damage and expense, including reasonable fees and expenses for counsel, incurred by the Administrator resulting from any claim, demand, action or suit in connection with the Administrator's acceptance of this Agreement, any action or omission by the Administrator in the performance of its duties hereunder, or as a result of acting upon any instructions reasonably believed by it to have been duly authorized by authorized officers of the Fund, provided that this indemnification shall not apply to actions or omissions of the Administrator, its officers or employees in cases of its or their own negligence, willful misconduct or bad faith. The Fund will be entitled to participate at its own expense in the defense, or, if it so elects, to assume the defense of any suit brought to enforce any liability subject to the indemnification provided above. In the event the Fund elects to assume the defense of any such suit and retain counsel, the Administrator or any of its affiliated persons, named as defendant or defendants in the suit, may retain additional counsel but shall bear the fees and expenses of such counsel unless (i) the Fund shall have specifically authorized the retaining of such counsel or (ii) the Fund and the Administrator agree that the retention of such counsel is required as a result of a conflict of interest. The Administrator shall not settle any action, suit, claim or demand which indemnity may be sought hereunder without the prior written approval of the Fund, which approval shall not be unreasonably withheld. In addition to the liability of the Administrator under this Section 8, the Administrator shall also be liable to the Fund for all reasonable out-of-pocket costs and expenses incurred by the Fund in connection with any claim by the Fund against the Administrator arising from the obligations of the Administrator hereunder, including, without limitation, all reasonable attorneys' fees and expenses 7 8 incurred by the Fund in asserting any such claim, and out-of-pocket expenses incurred by the Fund in connection with any lawsuits or proceedings relating to such claim, provided that the Fund has recovered from the Administrator for such claim. The indemnification provisions contained herein shall survive the termination of this Agreement. 9. CONFIDENTIALITY The Administrator agrees that, except as otherwise required by law or in connection with any required disclosure to a banking or other regulatory authority, it will keep confidential all records and information in its possession relating to the Fund or its shareholders or shareholder accounts and will not disclose the same to any person except at the request or with the written consent of the Fund. The Administrator further agrees that it shall use such records and information solely for the purposes authorized in this Agreement. 10. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS; RECORDS Without derogating any of the Administrator's responsibilities under this Agreement, the Fund assumes full responsibility for complying with all securities, tax, commodities and other laws, rules and regulations applicable to the Fund. In performing all services under this Agreement, the Administrator shall act in conformity with the Fund's Declaration of Trust and any amendments thereto, Board authorizations and determinations and the fundamental policies of the Fund as reflected in the Fund's registration statement. In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Administrator agrees that all records which it maintains for the Fund shall at all times remain the property of the Fund, shall be readily accessible during normal business hours, and shall be promptly surrendered upon the termination of the Agreement or otherwise on written request. The Administrator further agrees that all records which it maintains for the Fund pursuant to Rule 31a-1 under the 1940 Act will be preserved for the periods prescribed by Rule 31a-2 under the 1940 Act unless any such records are earlier surrendered as provided above. Records shall be surrendered in usable machine-readable form or such other formats as reasonably requested by the Fund. 11. SERVICES NOT EXCLUSIVE The services of the Administrator to the Fund are not to be deemed exclusive, and the Administrator shall be free to render similar services to others; provided however that the Administrator shall equitably allocate its resources in supplying services to the Fund and others. The Administrator shall be deemed to be an independent contractor and shall, unless otherwise expressly provided herein or authorized by the Fund from time to time, have no authority to act or represent the Fund in any way or otherwise be deemed an agent of the Fund. 8 9 12. INSPECTION AND AUDITS The Administrator shall permit the Fund's representatives, during the term of this Agreement, upon reasonable prior notice, to conduct periodic inspections of any properties, documents, books, reports workpapers and other records of the Fund in the possession of the Administrator relating to any service, product or work provided to the Fund by the Administrator in connection with this Agreement. The Administrator agrees to provide reasonable notice to the Fund of any meeting between the Administrator and the Fund's independent accountants and to allow representatives of the Fund to attend any such meeting. The Administrator agrees to furnish to the Fund annual reports under SAS 70 prepared by an independent auditing firm. 13. NOTIFICATION OF CONTACTS BY REGULATORS The Administrator shall promptly notify the Fund of any and all legal notices received by or served on the Administrator with respect to the Fund. The Administrator shall promptly notify the Fund of all other contacts received by the Administrator from any regulatory department or agency or other governmental authority purporting to regulate the Fund and not the Administrator, regarding the Administrator's duties and activities under this Agreement. The Administrator will cooperate with the Fund's representatives in responding to these contacts, with the Fund responsible for the costs and expenses thereof. 14. TERM, TERMINATION AND AMENDMENT This Agreement shall become effective as of the date first written above. The Agreement shall remain in effect for a period of three (3) years from the effective date provided, however, that: (i) either party may terminate this Agreement without prejudice to any other remedy it may have, upon the material breach of this Agreement provided, however, that the non-breaching party shall have given the breaching party written notice of such breach and that the breaching party cannot or shall not have cured to the reasonable satisfaction of the non-breaching party any such breach within thirty (30) days of such notice; and (ii) the Administrator shall have the right to terminate this Agreement upon the termination by the Fund of the Custodian Contract between the Administrator and the Fund dated June 11, 1999 within the first three years of effectiveness of the Custodian Contract. Termination shall become effective in 120 days after the end of the 30 day cure period in the case of (i) above and concurrently with effective termination of the Custodian Contract in the case of (ii) above. This Agreement shall automatically continue in effect after such three period unless terminated by the Fund on ninety (90) days' prior written notice to the Administrator, or by the Administrator on one hundred eighty (180) days' prior written notice to the Fund, with such termination to be effective at the time specified in the written notice. Termination of this Agreement with respect to any given Investment Fund shall in no way affect the continued validity of this Agreement with respect to any other Investment Fund. Administrator shall, at 9 10 the Fund's expense, transfer all records maintained by the Administrator under this Agreement and shall cooperate in the transfer of its duties and responsibilities under this Agreement. This Agreement may be modified or amended from time to time by mutual written agreement of the parties hereto. 15. YEAR 2000 The Administrator will take reasonable steps to ensure that its products (and those of its third-party suppliers) reflect the available state of the art technology to offer products that are Year 2000 compliant, including, but not limited to, century recognition of dates, calculations that correctly compute same century and multi-century formulas and date values, and interface values that reflect the date issues arising between now and the next one hundred years. If any changes are required, the Administrator will make the changes to its products at no cost to the Fund and in a commercially reasonable time frame and will require third-party suppliers to do likewise. 16. NOTICES Any notice or other communication authorized or required by this Agreement to be given to either party shall be in writing and deemed to have been given when delivered in person or by confirmed facsimile, or posted by certified mail, return receipt requested, to the following address (or such other address as a party may specify by written notice to the other): if to the Fund: TIAA-CREF Institutional Mutual Funds, 730 Third Avenue, New York, New York 10017, Attn: TIAA-CREF Institutional Mutual Funds Product Manager, with a copy to General Counsel, fax: (212) 916-6230; if to the Administrator: State Street Bank and Trust Company, 2 Avenue de Lafayette, Boston MA 02111-1724, Attn: Mutual Funds Legal Division, fax: (617) 662-3805. 17. NON-ASSIGNABILITY This Agreement shall not be assigned by either party hereto without the prior consent in writing of the other party. 18. SUCCESSORS This Agreement shall be binding on and shall inure to the benefit of the Fund and the Administrator and their respective permitted assigns. 10 11 19. ENTIRE AGREEMENT This Agreement contains the entire understanding between the parties hereto with respect to the subject matter hereof and supersedes all previous representations, warranties or commitments regarding the services to be performed hereunder whether oral or in writing. 20. WAIVER The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver nor shall it deprive such party of the right thereafter to insist upon strict adherence to that term or any term of this Agreement. Any waiver must be in writing signed by the waiving party. 21. SEVERABILITY If any provision of this Agreement is invalid or unenforceable, the balance of the Agreement shall remain in effect, and if any provision is inapplicable to any person or circumstance it shall nevertheless remain applicable to all other persons and circumstances. 22. GOVERNING LAW This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of the State of New York. 23. REPRODUCTION OF DOCUMENTS This Agreement and all schedules, exhibits, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. 24. LIMITATION OF LIABILITY OF TRUSTEES AND SHAREHOLDERS The parties agree that the obligations of the Fund under the Agreement shall not be binding upon any of the Trustees, shareholders, nominees, officers, agents or employees of the Fund personally, but bind only the trust property of the Fund. The execution and delivery of this Agreement have been authorized by the Trustees of the Fund and signed by an officer of the Fund, acting as such, and neither such authorization nor such execution and delivery shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the trust property of the Fund. 11 12 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below as of the date first written above. TIAA-CREF INSTITUTIONAL MUTUAL FUNDS By: ----------------------------- Name: --------------------------- Title: -------------------------- STATE STREET BANK AND TRUST COMPANY By: ----------------------------- Name: --------------------------- Title: -------------------------- 12 13 ADMINISTRATION AGREEMENT TIAA-CREF LIFE FUNDS SCHEDULE A LISTING OF INVESTMENT FUNDS AND AUTHORIZED SHARES
- ----------------------------------------------------------------------------------------------------- VM1P Institutional International Equity Fund Unlimited number of shares of all Investment Funds - ----------------------------------------------------------------------------------------------------- VM1Q Institutional Growth Equity Fund - ----------------------------------------------------------------------------------------------------- VM1R Institutional Growth and Income Fund - ----------------------------------------------------------------------------------------------------- VM1S Institutional Equity Index Fund - ----------------------------------------------------------------------------------------------------- VM1U Institutional Social Choice Equity Fund - ----------------------------------------------------------------------------------------------------- VM1V Institutional Bond Fund - ----------------------------------------------------------------------------------------------------- VM1W Institutional Money Market Fund - -----------------------------------------------------------------------------------------------------
13 14 SCHEDULE B TIAA-CREF LISTING OF REPORTS PREPARED BY STATE STREET FUND ADMINISTRATION DEPARTMENT
REPORT NAME FREQUENCY - ----------- --------- Reports on Compliance with SEC and IRS Restrictions in accordance with the Fund Profile Monthly or more frequently, if requested and agreed to by the parties. Annual and Semi-Annual Financial Statements Bi-Annually Form N-SAR Bi-Annually 24f-2 Filing Report Annually Form 1099 Misc. Annually Form 1096 Annually Form 1042 and 1042S Annually Form 1902-AP Annually Form 1902-b Annually Form 8613 Annually Form 2758 As needed Form 1120 RIC Annually Form 7004 As needed Sec. 852(b)(3)(C) Notification As needed State and local income and excise tax filings As needed
14 EX-99.H.2 5 TRANSFER AGENCY AGREEMENT 1 TRANSFER AGENCY AND SERVICE AGREEMENT BETWEEN TIAA-CREF INSTITUTIONAL MUTUAL FUNDS AND BOSTON FINANCIAL DATA SERVICES, INC. 2
TABLE OF CONTENTS 1. Terms of Appointment: Duties of BFDS .........................................1 2. Provision by BFDS of Computer Software and Hardware ..........................4 3. Fees and Expenses ............................................................6 4. Representations and Warranties of BFDS .......................................7 5. Representations and Warranties of the Fund ...................................7 6. Year 2000 ....................................................................8 7. Data Access and Proprietary Information ......................................8 8. Indemnification ..............................................................9 9. Standard of Care ............................................................10 10. Covenants of the Fund and BFDS ..............................................11 11. Termination of Agreement ....................................................13 12. Additional Funds ............................................................14 13. Assignment ..................................................................14 14. Amendment ...................................................................14 15. New York Law to Apply .......................................................14 16. Force Majeure ...............................................................14 17. Consequential Damages .......................................................14 18. Merger of Agreement .........................................................15 19. Counterparts ................................................................15 20. Notices .....................................................................15
3 TRANSFER AGENCY AND SERVICE AGREEMENT AGREEMENT made as of ________________, 1999, by and between TIAA-CREF Institutional Mutual Funds (the "Fund") and Boston Financial Data Services, Inc., a Massachusetts corporation having its principal office and place of business at 225 Franklin Street, Boston, Massachusetts 02110 ("BFDS"). WHEREAS, the Fund is authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets; WHEREAS, the Fund intends to initially offer shares in seven series, the Growth and Income Series, Money Market Series, Growth Equity Series, International Equity Series, Bond Series, Equity Index Series, Social Choice Equity Series, (each such series, together with all other series subsequently established by the Fund and made subject to this Agreement in accordance with Article 11, being herein referred to as a "Portfolio", and collectively as the "Portfolios"); WHEREAS, the Fund and the Portfolios desires to appoint BFDS as the Fund's transfer agent, dividend disbursing agent, and agent in connection with certain other activities, and BFDS desires to accept such appointment; NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: 1. TERMS OF APPOINTMENT: DUTIES OF BFDS 1.1 Subject to the terms and conditions set forth in this Agreement, the Fund and its Portfolios hereby employs and appoints BFDS to act as, and BFDS agrees to act as transfer agent for the Fund's authorized and issued shares of beneficial interest ("Shares"), dividend disbursing agent, and agent in connection with any accumulation, open account or similar plans provided to shareholders of each of the respective Portfolios of the Fund ("Shareholders") and set out in the currently effective prospectus and statement of additional information ("prospectus") of the Fund on behalf of the applicable Portfolio, including without limitation any periodic investment plan or periodic withdrawal program. 1.2 BFDS agrees that it will perform the following services: (a) In accordance with procedures established from time to time by agreement between the Fund and each of the Portfolios, as applicable and BFDS, BFDS shall: (i) Receive for acceptance, orders for the purchase of Shares, and promptly deliver payment and appropriate documentation thereof to the custodian of the Fund authorized by the Trustees of the Fund pursuant to the Declaration of Trust of the Fund (the "Custodian"); (ii) Pursuant to purchase orders, issue the appropriate number of Shares and 4 hold such Shares in the appropriate Shareholder account(s); (iii) Receive for acceptance redemption requests and redemption directions and deliver the appropriate documentation thereof to the Custodian; (iv) At the appropriate time as and when it receives monies paid to it by the Custodian with respect to any redemption, pay over or cause to be paid over in the appropriate manner such monies as instructed by the redeeming Shareholder(s); (v) Effect transfers of Shares by the registered owners thereof upon receipt of appropriate instructions; (vi) Prepare and transmit payments for dividends and distributions declared by the Fund on behalf of the applicable Portfolio; (vii) Provide, on behalf of the Fund, timely, accurate and factual responses to Shareholder inquiries received over the phone, by mail, by facsimile, or by other electronic means. Also, maintain copies of written correspondence received, and produce, deliver, and maintain copies of correspondence generated in response to such inquiries; (viii) Maintain records of account for and advise the Fund and its Shareholders as to items (i) through (vii) and; (ix) Record the issuance of Shares of the Fund and maintain pursuant to SEC Rule 17Ad-10(e) a record of the total number of Shares of the Fund which are authorized, based upon data provided to it by the Fund, and issued and outstanding. BFDS shall also provide the Fund on a regular basis with the total number of Shares which are authorized and issued and outstanding and shall have no obligation, when recording the issuance of Shares, to monitor the issuance of such Shares or to take cognizance of any laws relating to the issue or sale of such Shares, which functions shall be the sole responsibility of the Fund. (b) In addition to and neither in lieu nor in contravention of the services set forth in the above paragraph (a), BFDS shall: (i) perform the customary services of a transfer agent, dividend disbursing agent, and, as relevant, agent in connection with accumulation, open-account or similar plans (including without limitation any periodic investment plan or periodic withdrawal program), including but not limited to: maintaining all Shareholder accounts, preparing Shareholder meeting lists, mailing and tabulating proxies, mailing Shareholder reports and prospectuses to current Shareholders, withholding, depositing and reporting taxes on U.S. resident and non-resident alien accounts, preparing, filing and issuing U.S. Treasury Department and IRS Forms 1099 and other appropriate forms required 2 5 with respect to dividends and distributions by federal authorities for all Shareholders and maintaining appropriate records in compliance with all applicable regulatory requirements, preparing and mailing confirmation forms and statements of account to Shareholders for all purchases and redemptions of Shares and other confirmable transactions in Shareholder accounts, preparing and mailing activity statements for Shareholders, and providing Shareholder account information; and (ii) provide a system which will enable the Fund and/or its designee to monitor the total number of Fund Shares sold in each State. Such system shall include the generation and delivery to the Fund and/or its designee of a daily report detailing the sale of Fund Shares for the previous day in each of the States Fund Shares are sold. (c) In connection with state tax reporting services to be provided by BFDS pursuant to this Agreement, BFDS and the Fund shall mutually agree on state tax reporting obligations on an annual or other mutually agreeable periodic basis. (d) In addition, the Fund and/or its designee shall: (i) identify to BFDS in writing those transactions and assets to be treated as exempt from blue sky reporting for each State; and (ii) verify the establishment of transactions for each State on the system prior to activation and thereafter monitor the daily activity for each State. The responsibility of BFDS for the Fund's blue sky registration status is solely limited to the initial establishment of transactions and the reporting of such transactions as provided above. (e) Procedures as to who shall provide certain of these services in this Section 1 may be established from time to time by agreement between the Fund and each Portfolio and BFDS per the attached service responsibility schedule. BFDS may at times perform only a portion of these services and the Fund or its agent may perform these services on the Fund's behalf. (f) BFDS shall provide additional services on behalf of the Fund (i.e., services pertaining to escheatments, garnishment orders, bankruptcy and divorce proceedings, IRS or State tax authority tax levies and summonses and all matters relating to the foregoing) which may be agreed upon in writing between the Fund and BFDS. (g) BFDS represents that: (i) It is in compliance with applicable money laundering and currency transaction reporting laws, regulations, and government guidance including suspicious activity reporting and recordkeeping requirements, and has adequate policies, procedures and internal controls to ensure compliance; (ii) It monitors transactions to identify unacceptable forms of payment (as defined in the Fund's current prospectus, as amended from time to time) 3 6 and reportable and suspicious transactions and reports to the appropriate authorities reportable and suspicious transactions; (iii) It is in compliance with applicable federal laws and U.S. Treasury Office of Foreign Assets Control ("OFAC") regulations, government guidance, and blocking and notification requirements, including, but not limited to, executive orders issued by the President of the United States (collectively referred to as "OFAC laws"), and has adequate policies, procedures and internal controls to ensure compliance as it pertains to embargoed and sanctioned countries and nationals, citizens and/or residents thereof and their financial transactions; and (iv) It will identify all (i) new accounts and (ii) accounts effecting registration changes in financial transactions against OFAC laws and OFAC lists identifying specially designated terrorists, nationals, narcotic traffickers, governments and persons. (h) BFDS shall provide trained customer transaction processing staff who will process Shareholder transaction requests. BFDS understands and agree that such staff will be considered to be dedicated to providing services primarily to the Fund, but may, from time to time, during periods of exceptional business volume, be utilized to provide services to one or another of BFDS' other clients. 2. PROVISION BY BFDS OF COMPUTER SOFTWARE AND HARDWARE 2.1 BFDS will provide computer software and hardware, or arrange for it to be provided, and provide for the maintenance of such software and hardware, for the purposes of performing its duties as described herein, specifically including, but not limited to establishing electronic interfaces with the Fund as necessary to provide daily file transfers from BFDS to the Fund and vice-versa. Specifically, but not by way of limitation, BFDS will make available to the Fund and each Portfolio the following systems: a. DST TA/2000 System and its peripheral applications b. DST AWD and AWD/View Manager Systems c. DST Investor System d. DST CSW/ISW 2.2 BFDS will insure that on-line environments are available each business day between the hours of 7:00 a.m. and 8:00 p.m. Eastern Standard Time. 2.3 BFDS will provide the Fund with full documentation of all computer software and hardware to be utilized for the purposes of administering its duties as described herein, including but without limitation, applications, interfaces, database structures, hardware architecture and communication links etc. 4 7 2.4 BFDS will notify the Fund, in writing, at least sixty (60) days in advance of the implementation of any and all changes to software and hardware that will materially affect the administration of its duties and/or the interfaces established with the Fund. Further, BFDS will plan and execute, to the reasonable satisfaction of the Fund, appropriate levels of unit and acceptance testing of any such changes before implementing them into the production environment(s) utilized to meet its responsibilities to the Fund as described herein. 2.5 BFDS agrees to take all reasonable steps necessary to remedy production problems with the operation of the software and hardware, including but without limitation, those related to programming errors and operating environment malfunctions; until such problems have been remedied as mutually agreed to by the Fund and BFDS. 2.6 BFDS will maintain commercially reasonable security protocols for all software and hardware utilized in meeting its administrative duties as described herein; including but without limitation, those related to applications, data centers, systems, networks, telecommunication links, tape management facilities, and virus control mechanisms. BFDS, upon its knowledge of any material violation of the established security protocols, shall notify, by telephone, the Fund's or its designee's Manager of Technical Services, within twenty-four (24) hours following the discovery of said violation(s). Further, BFDS will comply, within one (1) business day, with any request from the Fund for a security lock out of any Officer of the Fund. 2.7 BFDS will provide for back-up of the computer software and hardware, maintain the Fund's data files in a manner so as to minimize risk of damage or loss and will provide for daily back-up of those data files. BFDS will maintain a comprehensive disaster recovery plan and will maintain back-up processing facilities, and will provide for transition to such back-up processing sites in the event that computer software or hardware downtime at BFDS' offices, or those of its subcontractors exceeds twenty-four (24) consecutive hours. 2.8 BFDS agrees to provide the Fund with a copy of its Disaster Recovery Plan upon the request of the Fund. BFDS will test its Disaster Recovery Plan at least once per calendar year at a time mutually agreeable with the Fund and a Fund representative shall have the right to be present at such test. BFDS further agrees to annually provide the Fund with copies of its audited SAS 70 report. 2.9 BFDS further agrees to provide connectivity for on-line access, transmissions of data files, and all other functions as described herein to the Fund in New York City, New York, White Plains, New York, Denver, Colorado, the Fund's back-up site in Sterling Forest, NY and such additional sites to be mutually agreed upon by the parties . In the event that the Fund must invoke their own disaster recovery plans, BFDS agrees to work with them to make alternative site access available for use within a forty-eight hour time period from the time of a disaster declaration by the Fund and to reasonably accommodate daily processing outside of a regular business day in the event of an emergency situation incurred by the Fund. 5 8 2.10 As part of the Fund's implementation plan for the service to be rendered under this Agreement, BFDS will provide for training on all systems that are proprietary to BFDS and that will be utilized by the Fund in connection with this Agreement. Such training will take place at the Fund's New York offices at times agreed to by the parties. Similarly, BFDS will provide training required as a result of administrative, systems or operating changes initiated by BFDS. However, training requested by the Fund for new employees of it designee, or for changes initiated by the Fund, will be provided on a schedule and in a location mutually agreed to in writing by the parties and BFDS' costs related to such subsequent training shall be billed to the Fund as an out-of-pocket expense. 2.11 BFDS will ensure that technical support services from DST Systems, Inc. ("DST") are available to the Fund 24 hours a day each day of the year. BFDS technical support staff will be made available each business day between the hours of 7:00 a.m. and 11:00 p.m. Eastern Standard Time. BFDS will provide a list of contact staff and phone numbers, including those of unit/shift managers at BFDS and DST, to the Fund or its designee. 2.12 BFDS will conduct batch processing of all Shareholder transactions each business day. Transactions received by 4:00 p.m. Eastern Time will be applied to the current business day. BFDS will ensure that batch processing files are available for electronic transmission to the Fund between the hours of 3:00 a.m. and no later than 5:00 a.m. Eastern Time each day. BFDS will ensure monitoring of batch on-line transmissions and will immediately notify the Fund's Production Processing staff in the event that production/transmission problems occur or when batch transmission windows are anticipated to be exceeded. 2.13 BFDS will provide the Fund with three (3) AWD/CSW compatible workstations for its use. The parties shall mutually agree upon any provision by BFDS of any additional connectivity and workstations requested by the Fund and any additional charges resulting therefrom. Each workstation will be configured to be fully compatible with BFDS/DST applications. 2.14 Upon request, BFDS will provide the Fund with connectivity to all appropriate computer or other systems for use by the Fund in servicing Shareholders at locations designated by the Fund in a mutually agreeable system configuration. 3. FEES AND EXPENSES 3.1 For the services rendered by BFDS pursuant to this Agreement, the Fund agrees to compensate BFDS by paying the fees set out in the fee schedule attached hereto. Such fees and out-of-pocket expenses referenced under Section 3.2 below may be changed from time to time subject to mutual written agreement between the Fund and BFDS. 3.2 In addition to the fees referenced under Section 3.1 above, the Fund agrees to reimburse BFDS for reasonable out-of-pocket expenses as reflected in the fee schedule attached hereto. 6 9 3.3 The Fund agrees to pay all fees and reimbursable expenses within thirty (30) days following the receipt of the monthly billing notice. Upon the termination of this Agreement before the end of any month, the fee for the part of the month before such termination shall be prorated according to the proportion which such part bears to the full monthly period and shall be payable within thirty (30) days following the receipt of the billing notice. 4. REPRESENTATIONS AND WARRANTIES OF BFDS BFDS represents and warrants to the Fund that: 4.1 It is a corporation duly organized and existing and in good standing under the laws of The Commonwealth of Massachusetts; 4.2 It is duly registered as a transfer agent pursuant to Section 17A(c)(2) of the Securities Exchange Act of 1934, as amended ("Section 17A(c)(2)"); 4.3 It is duly qualified to carry on its business in The Commonwealth of Massachusetts; 4.4 It is empowered under applicable laws and by its Charter and By-Laws to enter into and perform this Agreement; 4.5 All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement; 4.6 It has and will continue to have access to, and will take the commercially reasonable steps necessary to ensure appropriate maintenance of, the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement; and 4.7 It will comply with all applicable regulatory requirements. 5. REPRESENTATIONS AND WARRANTIES OF THE FUND The Fund represents and warrants to BFDS that: 5.1 The Fund is a business trust organized and existing and in good standing under the laws of the State of Delaware; 5.2 The Fund is empowered under applicable laws and by its Declaration of Trust to receive services pursuant to this Agreement; 5.3 The Fund has performed all requisite corporate proceedings to receive services pursuant to this Agreement; 5.4 The Fund is an open-end and diversified management investment company registered 7 10 under the Investment Company Act of 1940, as amended; and 5.5 A registration statement under the Securities Act of 1933, as amended, on behalf of each of the Portfolios will be effective upon or prior to the initial offering of the Fund's Shares to the public and will remain effective while the Fund's Shares are offered to the public, and appropriate State securities law filings have been or will be made and will continue to be made, with respect to all Shares of the Fund being offered for sale; 6. YEAR 2000 BFDS will take reasonable steps to ensure that its products (and those of its third-party suppliers) reflect the available state of the art technology to offer products that are Year 2000 compliant, including, but not limited to, century recognition of dates, calculations that correctly compute same century and multi century formulas and date values, and interface values that reflect the date issues arising between now and the next one-hundred years, and if any changes are required, BFDS will make the changes to its products at no cost to the Fund and in a commercially reasonable time frame and will require third-party suppliers to do likewise. 7. DATA ACCESS AND PROPRIETARY INFORMATION 7.1 The Fund acknowledges that the data bases, computer programs, screen formats, report formats, interactive design techniques, and documentation manuals furnished to the Fund by BFDS as part of the Fund's ability to access certain Fund-related data ("Customer Data") maintained by BFDS on data bases under the control and ownership of BFDS ("Data Access Services") constitute copyrighted, trade secret, or other proprietary information (collectively, "Proprietary Information") of substantial value to BFDS or other third party. In no event shall Proprietary Information be deemed Customer Data. The Fund agrees to treat all Proprietary Information as proprietary to BFDS and further agrees that it shall not divulge to any person or organization except as may be provided hereunder. Without limiting the foregoing, the Fund agrees for itself and its employees and agents: (a) to access Customer Data solely from locations as may be designated in writing by BFDS and agreed to by the Fund and solely in accordance with BFDS' applicable user documentation; (b) to refrain from copying or duplicating in any way the Proprietary Information; (c) to refrain from obtaining unauthorized access to any portion of the Proprietary Information, and if such access is inadvertently obtained, to inform in a timely manner of such fact and dispose of such information in accordance with BFDS' instructions; (d) to refrain from causing or allowing the data acquired hereunder from being 8 11 retransmitted to any other computer facility or other location, except with the prior written consent of BFDS; (e) that the Fund shall have access only to those authorized transactions agreed upon by the parties; and (f) to honor all reasonable written requests made by BFDS to protect at BFDS' expense the rights of BFDS in Proprietary Information at common law, under federal copyright law and under other federal or State law. Each party shall take reasonable efforts to advise its employees of their obligations pursuant to this Section 7. The obligations of this Section shall survive any earlier termination of this Agreement. 7.2 If the transactions available to the Fund include the ability to originate electronic instructions to BFDS in order to (i) effect the transfer or movement of cash or Shares or (ii) transmit Shareholder information or other information, then in such event BFDS shall be entitled to rely on the validity and authenticity of such instruction without undertaking any further inquiry as long as such instruction is undertaken in conformity with security procedures established by the Fund and BFDS from time to time. 8. INDEMNIFICATION 8.1 BFDS shall not be responsible for, and the Fund shall indemnify and hold BFDS harmless from any and all losses, damages, costs, charges, reasonable counsel fees, payments, expenses and liability arising out of or attributable to: (a) All actions of BFDS or its agents or subcontractors required to be taken pursuant to this Agreement, provided that such actions are taken in good faith and with reasonable care and without negligence or willful misconduct; (b) The Fund's lack of good faith, negligence or willful misconduct which arise out of the breach of any representation or warranty of the Fund hereunder; (c) The reliance on or use by BFDS or its agents or subcontractors of information, records, documents or services which (i) are received by BFDS or its agents or subcontractors, and (ii) have been prepared, maintained or performed by the Fund or any other person or firm on behalf of the Fund; and (d) The reliance on, or the carrying out by BFDS or its agents or subcontractors of any written instructions or request of the Fund and the applicable Portfolio. 8.2 At any time BFDS may apply to an authorized officer of the Fund for instructions, or may consult with the Fund's in-house legal counsel or may at its own expense consult with its own legal counsel with respect to any matter arising in connection with the services to be 9 12 performed by BFDS under this Agreement, and BFDS and its agents or subcontractors shall not be liable and shall be indemnified by the Fund for any action taken or omitted by it in good faith and with reasonable care and without negligence in reliance upon such instructions from an authorized officer of the Fund or the opinion of the Fund's in-house counsel or BFDS' legal counsel, provided however, with respect to the performance of any action or omission of any action upon such legal advice by BFDS' legal counsel, BFDS shall be required to conform to the standard of care set forth herein and further provided that BFDS shall follow the advice of the Fund's in-house legal counsel in any and all instances where the advice of the Fund's in-house legal counsel and BFDS' legal counsel differ. BFDS, its agents and subcontractors shall be protected and indemnified in acting in good faith and with reasonable care and without negligence upon any paper or document furnished by or on behalf of the Fund, reasonably believed to be genuine and to have been signed by duly authorized person or persons, or upon any instruction, information, data, records or documents provided to BFDS or its agents or subcontractors by machine readable input, telex, CRT data entry or other similar means authorized by the Fund, and shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Fund or its designee. 8.3 In order that the indemnification provisions contained in this Section 8 shall apply, upon the assertion of a suit for which the Fund may be required to indemnify BFDS, BFDS shall promptly notify the Fund of such assertion, and shall keep the Fund advised with respect to all developments concerning such suit. The Fund will be entitled to participate at its own expense in the defense, or, if it so elects, to assume the defense of any suit brought to enforce any liability subject to the indemnification provided above. In the event the Fund elects to assume the defense of any such suit and retain counsel, BFDS or any of its affiliated persons, named as defendant or defendants in the suit, may retain additional counsel but shall bear the fees and expenses of such counsel unless the Fund shall have specifically authorized in writing the retaining of such counsel. BFDS shall not settle any action, suit, claim, or demand, for which indemnity may be sought hereunder without the prior written approval of the Fund, which approval shall not be unreasonably withheld. The indemnification provisions contained herein shall survive the termination of this Agreement. 9. STANDARD OF CARE 9.1 BFDS shall at all times act in good faith and with reasonable care and agrees to use its best efforts to insure the accuracy of all services performed under this Agreement, but assumes no responsibility and shall not be liable for loss or damage due to errors unless said errors are caused by its negligence, bad faith, or willful misconduct or that of its employees, agents, or subcontractors. 9.2 In addition to the liability of BFDS under this Section 9, BFDS shall also be liable to the Fund for all reasonable out-of-pocket costs and expenses incurred by the Fund in connection with any claim by the Fund against BFDS, its agents or subcontractors arising from the obligations of BFDS hereunder, including, without limitation, all reasonable 10 13 attorneys' fees and expenses incurred by the Fund in asserting any such claim, and out-of-pocket expenses incurred by the Fund in connection with any lawsuits or proceedings relating to such claim, provided that the Fund has recovered from BFDS for such claim. 10. COVENANTS OF THE FUND AND BFDS 10.1 The Fund shall promptly furnish to BFDS the following: (a) A certified copy of the resolution of the Board of Trustees of the Fund approving this Agreement; and (b) A copy of the Declaration of Trust of the Fund and all amendments thereto. 10.2 BFDS hereby agrees to establish and maintain facilities and procedures reasonably acceptable to the Fund for safekeeping of check forms and facsimile signature imprinting devices, if any; and for the preparation or use, and for keeping account of such forms and devices. 10.3 BFDS shall keep records relating to the services to be performed hereunder, in the form and manner as it may deem advisable provided that it is in compliance with all applicable regulatory requirements and it is consistent with prevailing industry standards for transfer agents. To the extent required by Section 31 of the Investment Company Act of 1940, as amended, and the rules thereunder, BFDS agrees that all such records prepared or maintained by BFDS relating to the services to be performed by BFDS hereunder are the property of the Fund and will be preserved, maintained and make available in accordance with such Section and Rules, and will be surrendered promptly to the Fund on and in accordance with its their request. The Fund may, at any time and from time to time, reasonably request copies of such records and BFDS will provide same. 10.4 BFDS and the Fund agree that all books, records, information and data pertaining to the business of the other party which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person, except as may be required by law. 10.5 BFDS shaft maintain reasonable safeguards for maintaining any Shareholder records which are furnished by or on behalf of the Fund to BFDS in the form of computer tapes, data transmissions or any other medium. BFDS shall not, at any time, use such records or any information contained therein for any purpose other than as specifically authorized by this Agreement, or in writing by the Fund. No such record or any part thereof shall be disclosed or provided to any other person, except as specifically authorized by this Agreement, or upon the prior written consent of an authorized officer of the Fund or as otherwise required by law. 10.6 BFDS shall maintain reasonable safeguards for maintaining in confidence any and all documentation and information obtained in connection with this Agreement furnished to it 11 14 by or on behalf of the Fund or by any Shareholder or related to the Fund or any Shareholder, and all records created from that documentation and information (collectively, the "Mutual Fund Information"). BFDS shall not make use of or disclose the Mutual Fund Information nor authorize its use or disclose the same to any person or entity, other than the Fund, except as specifically authorized by this Agreement, or upon the prior written consent of an authorized officer of the Fund or as otherwise required by law. Copies of such documentation and information shall remain the property of the Fund. Upon termination of the Agreement or otherwise requested by the Fund, such documentation and information furnished to BFDS by the Fund or a Shareholder shall be promptly returned to the Fund, or BFDS will certify to the Fund that all such information has been destroyed. 10.7 BFDS shall promptly notify an authorized officer of the Fund in writing of any and all legal actions received by or served on BFDS and shall use its best efforts to promptly notify the Fund of all contacts and/or correspondence received by BFDS from any regulatory department or agency or other governmental authority purporting to regulate the Fund and not BFDS, regarding BFDS' duties and activities performed in connection with this Agreement, and will cooperate with the Fund in responding to these contacts and any necessary correspondence. 10.8 BFDS shall permit the Fund, during the term of this Agreement, through any person(s) designated by the Fund, at such reasonable times during normal business hours and as often as the Fund may reasonably deem appropriate but not so often as to place unreasonable burden on BFDS, within ten (10) business day's prior written notice to an Authorized Officer of BFDS, to conduct an inspection. As a matter of clarification, the Fund acknowledges and agrees that no such inspection shall include any visits, inspections, examinations, audits, or verification of any of the properties, documents, books, reports, work papers and other records belonging to, or in the possession of BFDS, involving any service, product or work BFDS does or possess other than those relating directly to this Agreement and the service performed by BFDS in connection therewith. 10.9 BFDS will provide the Fund with copies of audit reports filed with governmental authorities. 10.10 BFDS will provide the Fund with copies of all policies and procedure manuals utilized by any and all of BFDS' operating units performing duties related to BFDS' responsibilities to the fund as described herein. 10.11 In case of any requests or demands for the inspection of the Shareholder records of the Fund, that arise from persons other than authorized officers of the Fund, BFDS will immediately notify the Fund and secure instructions from an authorized officer of the Fund as to such inspection. 10.12 With respect to BFDS' performance of the services as outlined herein, BFDS agrees to work in concert with the Fund to establish and document performance measurement 12 15 standards for such services. BFDS and the Fund shall mutually agree as to the frequency, type, and format of reports which document BFDS's performance relative to those standards. These standards may be modified from time to time. subject to mutual written agreement between the Fund and BFDS. 10.13 Notwithstanding the restrictions on confidentiality in Section 10 herein, when required by law BFDS will disclose Shareholder records (e.g., subpoena for divorce) and Fund records (e.g., SEC inspection powers). The Fund and BFDS will agree on procedures regarding such mandatory disclosure and BFDS will make every reasonable effort to notify the Fund of requests for such information by the SEC or any other federal or State securities regulatory agencies prior to the release of such records. 11. TERMINATION OF AGREEMENT 11.1 This Agreement shall become effective as of the date first written above. The Agreement shall remain in effect for a period of 3 years from the effective date provided, however, that either party may terninate this Agreement without prejudice to any other remedy it may have, upon the material breach of this Agreement provided, however, that the non-breaching party shall have given the breaching party written notice of such breach and that the breaching party cannot or shall not have cured to the reasonable satisfaction of the non-breaching party any such breach within 30 days of such notice. Termination shall become effective 120 days after the end of the 30 day cure period. A material breach of this Agreement will include, without limitation, the failure by BFDS to conform to the performance measurements standards, which standards shall be mutually agreed to in writing by BFDS and the Fund within 45 days of the date of this Agreement and when mutually agreed to made a part of this Agreement by schedule. The parties agree that the failure to agree upon such standards within such 45 day period will enable either party to terminate this Agreement upon written notice to the other party, subject to the notice periods that are described herein that would otherwise apply to a termination of this Agreement. The parties further understand and agree that the party causing a "recurring problem" as such term is defined in the standards shall not be entitled to the aforementioned right to cure within 30 days. This Agreement shall automatically continue in effect after such three year period unless terminated by the Fund on ninety (90) days' prior written notice to BFDS or by BFDS on one hundred eighty (180) days' prior written notice to the Fund, with such termination to be effective at the time specified in the written notice. 11.2 Should the Fund exercise its right to terminate, all reasonable out-of-pocket expenses associated with the movement of records and material will be borne by the Fund on behalf of the applicable Portfolio(s). 11.3 If this Agreement is terminated, both parties will act in good faith to cooperate in an orderly transition. 12. ADDITIONAL FUNDS 13 16 12.1 In the event that the Fund establishes one or more series of Shares in addition to those described in the preamble of this Agreement with respect to which the Fund desires to have BFDS render services as transfer agent for such series of Fund Shares under the terms hereof, the Fund shall so notify BFDS in writing, and such series of Shares shall become a Portfolio hereunder. 13. ASSIGNMENT 13.1 Except as provided in Section 13.3 below, neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the written consent of the other party. 13.2 The Agreement shall inure to the benefit of and be binding upon the parties and their respective permitted assigns. 13.3 BFDS may, without further consent on the part of the Fund, subcontract for the performance hereof with (i) a BFDS subsidiary duly registered as a transfer agent pursuant to Section 17A(c)(2) or (ii) a BFDS affiliate duly registered as a transfer agent under 17A(c)(2); provided, however, that BFDS shall be as fully responsible to the Fund for the acts and omissions of any subcontractor or agent as it is for its own acts and omissions. 14. AMENDMENT This Agreement may be amended or modified by a written agreement executed by both parties. 15. NEW YORK LAW TO APPLY This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of the State of New York. 16. FORCE MAJEURE BFDS shall not be liable for any damages to the Fund resulting from BFDS' failure to perform under this Agreement or for the loss of all or part of any records or proprietary information of the Fund maintained or preserved by it pursuant to this Agreement or for any delays or errors occurring because of acts of God, equipment or transmission failure, or damage reasonably beyond its control except to the extent that BFDS shall have failed to undertake commercially reasonable efforts to minimize the likelihood of occurrence of such circumstances or to mitigate any loss or damage caused to the Fund by such circumstances. 17. CONSEQUENTIAL DAMAGES Neither party to this Agreement shall be liable to the other party for consequential 14 17 damages under any provision of this Agreement or for any consequential damages arising out of any act or failure to act hereunder. 18. MERGER OF AGREEMENT This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof whether oral or written. 19. COUNTERPARTS This Agreement may be executed by the parties hereto on any number of counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 20. NOTICES Any notice or other instrument in writing authorized or required by this Agreement to be given to the Fund shall be sufficiently given if addressed to the Fund and mailed by registered or certified mail or delivered to it or delivery refused therefore, at its offices at: TIAA-CREF Institutional Mutual Funds 730 Third Avenue New York, NY 10017 Attention: TIAA-CREF Institutional Mutual Funds Product Manager cc: Lisa Snow, Esq. Law Dept., 9th Floor TIAA-CREF 730 Third Avenue New York, NY 10017 or at such other place as the Fund may from time to time designate in writing. Any notice or other instrument in writing authorized or required by this Agreement to be given to BFDS shall be sufficiently given if addressed to BFDS and mailed by registered or certified mail or delivered to it or delivery refused therefor, at its offices at: President Boston Data Financial Services, Inc. 2 Heritage Drive Quincy, MA 02021 or at such other place as BFDS may from time to time designate in writing. 15 18 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers, as of the day and year first above written. TIAA-CREF INSTITUTIONAL MUTUAL FUNDS BY: ----------------------------- ATTEST: - --------------------- BOSTON FINANCIAL DATA SERVICES, INC. BY: ---------------------------- ATTEST: - --------------------- 16 19 BFDS FUND SERVICE RESPONSIBILITIES*
Service Performed Responsibility ----------------- -------------- BFDS Fund ---- ---- 1. Receives orders for the purchase of Shares. X 2. Issue Shares and hold Shares in Shareholders accounts. X 3. Receive redemption requests. X 4. Pay over monies to redeeming Shareholders. X 5. Effect transfers of Shares. X 6. Prepare and transmit dividends and distributions. X 7. Maintain records of account. X 8. Maintain and keep a current and account control book for the Fund and each series thereof X 9. Mail and tabulate proxies. X 10. Mail Shareholder reports. X 11. Mail prospectuses to current Shareholders. X 12. Withhold, deposit and report taxes on U.S. resident and non-resident alien accounts. X 13. Prepare and file and issue U.S. Treasury Department, IRS and other forms. X 14. Prepare and mail account and confirmation statement for Shareholders. X 15. Provide Shareholder account information. X 16. Blue sky reporting. X 17. Reporting of abandoned property and other Services pursuant to Section 1.2 (f) X 18. Reporting of transactions in compliance with money laundering, currency transactions and OFAC laws and regulations pursuant to Section 1.2(g) X 19. Provide customer transaction processing staff pursuant to Section 1.2 (h) to process Shareholder transaction requests. X
* Such services are more full described in Section 1.2 (a), (b), (c), (e), (f), (g) and (h) of the Agreement. 17 20 TIAA-CREF INSTITUTIONAL MUTUAL FUNDS BY: -------------------------- ATTEST: - ----------------------- BOSTON FINANCIAL DATA SERVICES, INC. BY: ------------------------- ATTEST: - ------------------------ 18 EX-99.L 6 SEED MONEY AGREEMENT 1 SEED MONEY AGREEMENT SEED MONEY AGREEMENT (the "Agreement") made as of this 1st day of June, 1999 by and between Teachers Insurance and Annuity Association of America ("TIAA"), a nonprofit corporation existing under the laws of the State of New York, and TIAA-CREF Institutional Mutual Funds ("Mutual Fund"), a Delaware Business Trust. 1. TIAA hereby agrees to invest in the Mutual Fund the sum of $175,000,000 on June 14th or as soon thereafter as practicable. 2. In consideration for such investment and without deduction of any charges, the Mutual Fund shall credit TIAA with such shares, of which TIAA shall be the owner, in each Series of the Mutual Fund in such amounts as shall be mutually agreed upon. Such shares will share pro rata in the investment performance of each Series and shall be subject to the same valuation procedures and the same periodic deductions as are other shares in that Series. The value of such shares in each series other than the Money Market Fund on the day the initial investment is made shall be $10.00. The value of a share in the Money Market Fund shall be $1.00. 3. TIAA represents that the shares acquired under this Agreement are being, and will be, acquired for investment (and not with a view to distribution or resale to the public) and can be disposed of only by redemption. 4. Shares acquired under this Agreement will be held by TIAA for its own account until redeemed by TIAA. Amounts will be redeemed at prices equal to the respective net asset value of shares of the applicable series of the Mutual Fund next determined after the Mutual Fund receives TIAA's proper notice of redemption. 2 5. TIAA may purchase, and the Mutual Fund may issue, additional shares as the parties may agree. 6. This Agreement will be construed and enforced in accordance with and governed by the provisions of the Investment Company Act of 1940 and the laws of the State of New York. TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA By /s/ JOHN A. SOMERS ----------------------------- Executive Vice President TIAA-CREF INSTITUTIONAL MUTUAL FUNDS By /s/ JOHN J. McCORMACK ----------------------------- President -----END PRIVACY-ENHANCED MESSAGE-----