N-14 1 d19019.htm



As filed with the Securities and Exchange Commission on April 21, 2006

Registration No. 333-      

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-14

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.   
Post-Effective Amendment No.   

(Check appropriate box or boxes.)


TIAA-CREF Institutional Mutual Funds
(Exact Name of Registrant as Specified in Charter)

730 Third Avenue
New York, New York 10017-3206
(Address of Principal Executive Offices) (Zip Code)

Registrant’s Telephone Number, including Area Code: (800) 842-2733

Stewart P. Greene, 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.
David S. Goldstein, Esq.
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2415

Approximate Date of Proposed Public Offering: As soon as practicable after this Registration Statement becomes effective under the Securities Act of 1933.

It is proposed that this filing will become effective on May 21, 2006 pursuant to Rule 488 under the Securities Act of 1933.

Title of securities being registered: Retail Class and Institutional Class shares of beneficial interest, par value $0.0001 per share, of the following series of the Registrant: International Equity Fund, Large-Cap Growth Fund, Growth & Income Fund, Equity Index Fund, Social Choice Equity Fund, Managed Allocation Fund II, Bond Plus Fund II, Short-Term Bond Fund II, High-Yield Fund II, Tax-Exempt Bond Fund II and Money Market Fund.

No filing fee is required because of reliance on Section 24(f) under the Investment Company Act of 1940, as amended, pursuant to which the Registrant has previously registered an indefinite number of shares.






 

TIAA-CREF MUTUAL FUNDS
730 Third Avenue
New York, New York 10017-3206

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 8, 2006

The TIAA-CREF Mutual Funds will hold a special meeting of the shareholders of each of its investment portfolios (each, a “Retail Fund” and collectively, the “Retail Funds”) to be held on August 8, 2006, at [     a.m.] at 730 Third Avenue, New York, New York (17th floor). At each meeting, shareholders will be asked to vote:

1.  
  With respect to their Fund, to approve an Agreement and Plan of Reorganization and Termination (the “Plan”), pursuant to which each of the following Retail Funds will be reorganized into the corresponding investment portfolio of the TIAA-CREF Institutional Mutual Funds (each such investment portfolio, an “TIAA-CREF Fund”) listed opposite its name:

Retail Funds
        
 
     TIAA-CREF Funds
International Equity Fund
              
————>
    
Institutional International Equity Fund
Growth Equity Fund
              
————>
    
Institutional Large-Cap Growth Fund
Growth & Income Fund
              
————>
    
Institutional Growth & Income Fund
Equity Index Fund
              
————>
    
Institutional Equity Index Fund
Social Choice Equity Fund
              
————>
    
Institutional Social Choice Equity Fund
Managed Allocation Fund
              
————>
    
Institutional Managed Allocation Fund II
Bond Plus Fund
              
————>
    
Institutional Bond Plus Fund II
Short-Term Bond Fund
              
————>
    
Institutional Short-Term Bond Fund II
High-Yield Bond Fund
              
————>
    
Institutional High-Yield Fund II
Tax-Exempt Bond Fund
              
————>
    
Institutional Tax-Exempt Bond Fund II
Money Market Fund
              
————>
    
Institutional Money Market Fund
 

Under the Plan, each reorganization would be structured as follows: (a) the TIAA-CREF Fund will acquire the assets and assume the liabilities of the corresponding Retail Fund, in exchange for shares of the TIAA-CREF Fund; (b) the Retail Fund will distribute to its shareholders the TIAA-CREF Fund shares received in the transaction described in (a) above in exchange for the shareholders’ Retail Fund shares; and (c) as soon as practicable following the distribution of shares, each Retail Fund will be liquidated.

2.  
  To address any other business that may properly come before the meeting or any adjournments thereof.



The Board of Trustees of the TIAA-CREF Mutual Funds has set May 18, 2006 as the record date for determining the number of votes entitled to be cast at the meeting or any adjournments thereof. You may vote at the meeting (or any adjournments of the meeting) for a Retail Fund only if you were a shareholder of that Retail Fund as of May 18, 2006.

By Order of the Board of Trustees,

 

E. Laverne Jones
Secretary

Please vote as soon as possible before the meeting, even if you plan to attend the meeting. You can vote quickly and easily over the Internet, by telephone, or by mail. Just follow the simple instructions that appear on your enclosed proxy card(s). A separate proxy card is provided for each Retail Fund in which you own shares. Since we cannot hold the meeting unless a quorum is reached, please help avoid the expense of a follow-up mailing by voting today!

If you plan to attend the meeting, please call 1 877-535-3910, ext. 2440 to obtain an admission pass. In accordance with TIAA-CREF’s security procedures, a pass and appropriate picture identification will be required to enter the special meeting. Please note that no laptop computers, recording equipment or cameras will be permitted, and please read the instructions on the pass for additional information.

May [  ], 2006



TIAA-CREF MUTUAL FUNDS
TIAA-CREF INSTITUTIONAL MUTUAL FUNDS
730 Third Avenue
New York, New York 10017-3206
(800) 842-2733
COMBINED PROXY STATEMENT AND PROSPECTUS
Dated: May [  ], 2006

This Combined Proxy Statement and Prospectus (“Proxy Statement/Prospectus”) is being furnished to shareholders of the International Equity Fund, Growth Equity Fund, Growth & Income Fund, Equity Index Fund, Social Choice Equity Fund, Managed Allocation Fund, Bond Plus Fund, Short-Term Bond Fund, High-Yield Bond Fund, Tax-Exempt Bond Fund and Money Market Fund, each of which is an investment portfolio of TIAA-CREF Mutual Funds (each a “Retail Fund” and, collectively, the “Retail Funds”), in connection with the solicitation of proxies by the Board of Trustees of TIAA-CREF Mutual Funds for use at the special meeting of the shareholders of the Retail Funds to be held on August 8, 2006, at [     a.m.] at 730 Third Avenue, New York, New York (17th floor), and at any adjournment(s) of the meeting.

The proposal contained in this Proxy Statement/Prospectus on which you are being asked to vote is part of TIAA-CREF’s ongoing efforts to consolidate operations by offering a streamlined mutual fund family with consistent and sustainable pricing, greater efficiencies and a continued high level of shareholder services. As more fully described in this Proxy Statement/Prospectus, at the meeting, shareholders of each Retail Fund will be asked to vote to approve an Agreement and Plan of Reorganization and Termination (the “Plan”), pursuant to which their Retail Fund will be reorganized into the corresponding investment portfolio of the TIAA-CREF Institutional Mutual Funds (each such investment portfolio, a “TIAA-CREF Fund,” and each such transaction, a “Reorganization”), as described below.

Under the Plan, each Reorganization would be structured as follows: (1) each TIAA-CREF Fund will acquire the assets, and assume the liabilities, of its Retail Fund counterpart, in exchange for shares of the TIAA-CREF Fund; (2) the Retail Fund will distribute to its shareholders the TIAA-CREF Fund shares it has received in exchange for its shares held by Retail Fund shareholders; and (3) as soon as practicable, the Retail Fund will be liquidated. If the Plan is approved, as a Retail Fund shareholder, you will receive on the effective date of the Reorganization a number of full and fractional shares of the corresponding TIAA-CREF Fund having an aggregate value (or total account value) that will equal the total aggregate value of your Retail Fund shares.

This Proxy Statement/Prospectus, which you should retain for future reference, sets forth concisely the information regarding the Retail Funds, the TIAA-CREF Funds and the Reorganizations that you should know before voting. A Statement of Additional Information, dated May [  ], 2006, relating to the Reorganizations (“Reorganization SAI”) has been filed with the Securities and Exchange Commission (“SEC”) and is incorporated




by this reference into the Proxy Statement/Prospectus. The following documents, each of which has additional information about the Retail or TIAA-CREF Funds, also have been filed with the SEC and are incorporated by reference herein:

1.  
  The Prospectus and Statement of Additional Information of the Retail Funds, each dated May 1, 2006, as supplemented (File Nos. 333-21821, 811-08055);

2.  
  The 2005 Annual Report to Shareholders of the Retail Funds for the fiscal year ended December 31, 2005;

3.  
  The Retail and Institutional Class Prospectuses and Statement of Additional Information of the TIAA-CREF Funds, each dated February 1, 2006, as supplemented (File Nos. 333-76651, 811-09301);

4.  
  The Retail and Institutional Class Prospectuses and Statement of Additional Information of the TIAA-CREF Funds, each dated March 31, 2006, as supplemented (File Nos. 333-76651, 811-09301); and

5.  
  The 2005 Retail and Institutional Class Annual Reports to Shareholders of the TIAA-CREF Funds for the fiscal year ended September 30, 2005.

For a free copy of any of the above documents, please visit the TIAA-CREF Web site at www.tiaa-cref.org or use our on-line request form to request mailed versions. Alternatively, you can call (877) 518-9161 or write to us at 730 Third Avenue, New York, New York 10017-3206 to request free copies of these documents.

TIAA-CREF Mutual Funds and TIAA-CREF Institutional Mutual Funds are both open-end management investment companies, and each of their portfolios are considered to be diversified. Additional information about TIAA-CREF Mutual Funds and TIAA-CREF Institutional Mutual Funds has been filed with the SEC. You can copy and review information about the Retail Funds and the TIAA-CREF Funds at the SEC’s Public Reference Room in Washington, DC. You may obtain information on the operation of the Public Reference Room by calling the SEC at (800) SEC-0330. Reports and other information about the Retail and TIAA-CREF Funds are available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov. You may obtain copies of this information, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Branch, Office of Consumer Affairs and Information Services, Washington, DC 20549.
 

THE SEC HAS NOT APPROVED OR DISAPPROVED THE SECURITIES DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS, OR DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.



TABLE OF CONTENTS

SYNOPSIS
                    1   
What is being proposed?
                    1   
Why are you seeking to reorganize the Retail Funds?
                    2   
What are the key details of the proposed Reorganizations?
                    3   
How does each Retail Fund compare to its corresponding
TIAA-CREF Fund?
                    4   
If approved, when would the Reorganizations occur?
                    4   
Has the Board of Trustees approved the Reorganizations?
                    5   
What level of shareholder support is needed to approve
the Reorganizations?
                    5   
What are the fees and expenses of each Retail Fund and what are they expected to be after the Reorganizations?
                    6   
What are the general tax consequences of the Reorganizations?
                    21   
How do the investment objectives and principal strategies of the Retail and TIAA-CREF Funds compare?
                    21   
How have the Retail and TIAA-CREF Funds performed?
                    28   
Are there differences in the oversight and organization of the Retail Funds and TIAA-CREF Funds?
                    40   
Will any other service providers to the Retail or TIAA-CREF Funds change after the Reorganizations?
                    41   
How do I purchase, redeem or exchange shares Retail Class shares of the TIAA-CREF Funds and will it be different than for Retail Fund shares?
                    42   
How do I purchase, redeem or exchange shares of the Institutional Class of the TIAA-CREF Funds?
                    43   
How do the dividend and distribution policies of the Retail and TIAA-CREF Funds compare?
                    44   
COMPARISON OF RISK FACTORS
                    45   
INFORMATION ABOUT THE REORGANIZATION
                    47   
What are the reasons for the Reorganizations and what did the Board consider in determining to recommend the Reorganizations?
                    47   
What are the terms of the Plan?
                    52   
What TIAA-CREF Fund shares will I receive under the Reorganizations?
                    54   
What are the tax consequences of the Reorganizations?
                    54   
What is the capitalization of each Retail Fund and its corresponding TIAA-CREF Fund (net assets, net asset value and shares outstanding)?
                    55   
 

i



 
COMPARATIVE FINANCIAL HIGHLIGHTS
                    59   
 
VOTING INFORMATION
                    60   
 
ADDITIONAL INFORMATION
                    62   
Additional Information About the TIAA-CREF Funds
                    62   
Beneficial Ownership
                    62   
Means of Soliciting Proxies
                    62   
Proposals of Persons with Voting Rights
                    62   
Legal Matters
                    63   
Available Information
                    63   
Annual Reports
                    63   
 
EXHIBIT A: Form of Agreement and Plan of Reorganization
and Termination
                    A-1   
 
EXHIBIT B: Portfolio Management Teams of the Retail Funds and
TIAA-CREF Funds
                    B-1   
 
EXHIBIT C: TIAA-CREF Funds’ Management Fees and Current
Expense Caps
                    C-1   
 
EXHIBIT D: Comparative Financial Highlights
                    D-1   
 
EXHIBIT E: Principal Holders of Retail Fund Shares
                    E-1   
 
EXHIBIT F: Principal Holders of TIAA-CREF Fund Shares
                    F-1   
 
APPENDIX: ADDITIONAL INFORMATION ABOUT THE
TIAA-CREF FUNDS
                    Appendix-1   
 

ii



PROPOSAL — APPROVAL OF REORGANIZATIONS

The Board of Trustees of TIAA-CREF Mutual Funds believes that the Reorganizations would be in the best interests of the shareholders of each Retail Fund and unanimously recommends that shareholders of each of the Retail Funds vote “FOR” the Reorganizations.

SYNOPSIS

What is being proposed?

Shareholders of each Retail Fund are being asked to approve the Reorganization of their Retail Fund into a corresponding TIAA-CREF Fund whereby: (1) the assets and liabilities of the Retail Fund will be acquired and assumed by the corresponding TIAA-CREF Fund; and (2) shareholders of the Retail Fund will become shareholders of the TIAA-CREF Fund.

Regarding this proposal, it is important to note the following points:

•  
  This proposal is the second step in TIAA-CREF’s ongoing efforts to consolidate and streamline operations by offering a mutual fund family with consistent and sustainable pricing, greater efficiencies and a continued high level of shareholder services. As part of the first step of this process, the TIAA-CREF Funds recently sought and obtained Institutional Trust Board and shareholder approval to: (1) amend the investment management agreement to increase the management fees on the actively-managed TIAA-CREF Funds; (2) add a 12b-1 distribution plan on Retail Class shares to finance distribution; and (3) reallocate to the Funds the responsibility for payment of most of the Funds’ “other expenses” from Teachers Advisors, Inc. (the “Advisor”), the investment adviser to the Retail Funds and the TIAA-CREF Funds.

•  
  As the second step in TIAA-CREF’s overall plan, the Reorganizations contained in this proposal are intended to eliminate potential investor confusion with respect to duplicative offerings and assist in the growth and viability of its funds. Over time, the relatively low fees of the Retail Funds have led to ongoing losses by the Advisor, which the Advisor believes are unsustainable. The recently approved increases in the investment management fee for certain of the actively managed TIAA-CREF Funds, in contrast, are designed to provide the Advisor with reasonable profits to sustain its services to the Funds.

•  
  If shareholders of a Retail Fund approve the Reorganization, shareholders will become shareholders of the corresponding TIAA-CREF Fund after the closing of the Reorganization. The effect of this action is that your investment will change from an investment in a Retail Fund whose fee structure leads to losses for the Advisor to an investment in a very similar TIAA-CREF Fund whose fees allow the Advisor to make a reasonable profit.

1



The Reorganizations would occur pursuant to the Plan (which is described below and attached as Exhibit A), for each of the following pairs of corresponding Funds:

Retail Funds


   

   
TIAA-CREF Funds
International Equity Fund
              
————————————>
    
Institutional International Equity Fund
Growth Equity Fund
              
————————————>
    
Institutional Large-Cap Growth Fund
Growth & Income Fund
              
————————————>
    
Institutional Growth & Income Fund
Equity Index Fund
              
————————————>
    
Institutional Equity Index Fund
Social Choice Equity Fund
              
————————————>
    
Institutional Social Choice Equity Fund
Managed Allocation Fund
              
————————————>
    
Institutional Managed Allocation Fund II
Bond Plus Fund
              
————————————>
    
Institutional Bond Plus Fund II
Short-Term Bond Fund
              
————————————>
    
Institutional Short-Term Bond Fund II
High-Yield Bond Fund
              
————————————>
    
Institutional High-Yield Fund II
Tax-Exempt Bond Fund
              
————————————>
    
Institutional Tax-Exempt Bond Fund II
Money Market Fund
              
————————————>
    
Institutional Money Market Fund
 

Upon shareholder approval and the closing of a Reorganization with respect to your Retail Fund, you will become a shareholder of a TIAA-CREF Fund with an investment objective and strategies that are very similar to the Retail Fund you currently own. Your investment, however, will be subject to the fee and expense structure of the TIAA-CREF Funds, which have an unbundled fee and expense structure, resulting in higher total operating expenses. Additionally, Retail Class shares of the TIAA-CREF Funds are subject to a 12b-1 distribution plan, leading to potentially higher total expense ratios than those of the Retail Funds.

Shareholders of the Growth Equity Fund are not being asked to approve a Reorganization of their Fund into the Institutional Growth Equity Fund because shareholders of the Institutional Growth Equity Fund did not approve an amendment to their Fund’s investment management agreement. Because the expense structure of the Institutional Growth Equity Fund continues to be unsustainable for the Advisor, shareholders of the Growth Equity Fund are being asked to approve a Reorganization of their Fund into the Institutional Large-Cap Growth Fund, which has the same investment objective and strategies as the Institutional Growth Equity Fund.

Why are you seeking to reorganize the Retail Funds?

The Advisor, which serves as investment adviser to both the Retail Funds and the TIAA-CREF Funds, has been incurring substantial losses on its mutual funds business since the Retail Funds were launched in 1997. Among the many factors contributing to these losses is that the fees charged by the Advisor did not cover the actual expenses incurred by the Advisor to manage and operate the Retail Funds. As part of the larger effort to continue offering competitively priced mutual funds, the Advisor is seeking to combine duplicative

2




mutual funds through the Reorganizations. Streamlining its mutual fund offerings at a reasonable and sustainable fee and expense structure will allow the Advisor to continue offering high quality, lower cost Funds to our shareholders for the foreseeable future. The Reorganizations are designed to accomplish the following:

•  
  Reduce potential investor confusion through the consolidation of duplicative funds with similar names and investment objectives and strategies;

•  
  Enable shareholders to benefit over the long term from future economies of scale that are expected to result from combining the assets of the Retail and TIAA-CREF Funds;

•  
  Maintain overall fees at a level that keeps the combined Funds competitive with the lower-priced offerings in the industry, while reflecting the costs associated with operating the Funds and maintaining a high level of service to Fund shareholders;

•  
  Provide continuity of investment management, since both the Retail and TIAA-CREF Funds are managed by the same investment adviser and portfolio management teams; and

•  
  Allow for the exchange of Fund shares through a process that is intended to qualify as a tax-free event for Retail Fund shareholders for federal income tax purposes.

What are the key details of the proposed Reorganizations?

The following is a summary of certain information contained in this Proxy Statement/Prospectus and the Plan. The Plan that would govern the terms of each of the Reorganizations is attached as Exhibit A. Any description herein of that Plan is qualified by the actual terms of the Plan.

As set forth in the Plan, each Reorganization between a Retail Fund and its corresponding TIAA-CREF Fund will involve the following steps:

•  
  the TIAA-CREF Fund will acquire the assets and assume the liabilities of its Retail Fund counterpart, in exchange for shares of the TIAA-CREF Fund having an aggregate value equal to the net asset value of the Retail Fund as of the day of the Reorganization;

•  
  the TIAA-CREF Fund shares received by the Retail Fund will be distributed pro rata (on an anticipated tax-free basis for federal income tax purposes) to each Retail Fund shareholder in an amount equal in value to the holder’s Retail Fund shares as of the day of the Reorganization; and

•  
  as soon as practicable, the Retail Fund will be liquidated.

If a Reorganization with respect to a Retail Fund and its TIAA-CREF Fund counterpart is approved, shareholders of that Retail Fund will receive Retail Class shares of the TIAA-CREF Fund. However, shareholders who meet the eligibility requirements for purchasing Institutional Class shares will receive Institutional Class shares of that TIAA-CREF Fund. For further details on the share class you may receive under the

3




Reorganizations, please see “Information About the Reorganizations — What TIAA-CREF Fund shares will I receive in the Reorganization” on page 54.

Who will bear the costs incurred in connection with the Reorganizations?

All costs incurred in connection with effecting the Reorganizations, including the costs associated with the drafting, printing and mailing of this Proxy Statement/Prospectus, the solicitation of proxies, the holding of the special meeting, and the subsequent termination of the Retail Funds, will be borne by the Advisor, and not by any of the Retail Funds or TIAA-CREF Funds.

How does each Retail Fund compare to its corresponding TIAA-CREF Fund?

As described in more detail below, each Retail Fund and its corresponding TIAA-CREF Fund:

•  
  have very similar investment objectives and principal investment strategies;

•  
  have very similar investment restrictions;

•  
  have a very similar portfolio composition; and

•  
  are managed by the same portfolio management teams.

If the Reorganization is implemented with respect to your Retail Fund, your shares will be subject to the expense structure of the corresponding TIAA-CREF Fund, which has a different expense structure and higher total operating expenses. In addition, Retail Class shares of the TIAA-CREF Funds are subject to a 12b-1 distribution plan. The fees and expenses are more fully described below, under the section entitled “What are the fees and expenses of each Retail Fund and what are they expected to be after the Reorganization?” on page 6.

If approved, when would the Reorganizations occur?

If approved, each Reorganization would occur by the end of the third quarter of 2006, or another date selected by the Retail and TIAA-CREF Funds (the “Closing Date”). See “Information About the Reorganizations” on page 47 and “Voting Information” on page 60.

4



Has the Board of Trustees of the Retail Funds approved the Reorganizations?

The Board of Trustees of the Retail Funds has unanimously approved the Plan and associated Reorganizations with respect to each Retail and TIAA-CREF Fund. The proposal to approve the Reorganizations and present them to shareholders for their approval was carefully considered by the Board of Trustees of the Retail Funds over the course of a number of meetings. General discussions of the Advisor’s recommendation to combine the Funds began in December 2004 and continued at meetings held on May 17, 2005, and July 19, 2005. The Board made its ultimate decision to approve the Reorganizations at a meeting held on February 14, 2006. During this process the Trustees, who were advised by independent counsel, deliberated over the Advisor’s comprehensive plan to restructure the Funds and their expense structure to help ensure that the Advisor could continue to manage them. At the meeting held on February 14, 2006, the Board of Trustees of the Retail Funds considered and approved the Plan and each Reorganization.

For the reasons set forth below under “Information About the Reorganizations — What are the reasons for the Reorganizations and what did the Board consider in determining to recommend the Reorganizations” on page 47, the Board of Trustees of the Retail Funds, which is comprised entirely of Trustees who are not “interested persons” of the Retail Funds or the Advisor (as that term is defined in the 1940 Act), determined that each Reorganization would be in the best interests of the Retail Fund and its shareholders. In addition, the Board determined with respect to each Reorganization that the interests of Retail Fund shareholders would not be diluted as a result of the Reorganization.

Accordingly, the Board of Trustees of the Retail Funds unanimously recommends that shareholders of the Retail Funds vote to approve the Reorganizations.

Likewise, the Board of Trustees of the TIAA-CREF Funds, which is comprised of the same individuals as the Board of Trustees of the Retail Funds, determined that each Reorganization would be in the best interests of the shareholders of the corresponding TIAA-CREF Fund and would not dilute the value of their shares. After careful consideration, the Board of Trustees of the TIAA-CREF Funds unanimously approved the Plan and each Reorganization at a meeting held on February 14, 2006.

What level of shareholder support is needed to approve the Reorganizations?

Each Reorganization must be approved by shareholders of each respective Retail Fund, and will require the affirmative vote of the lesser of either (1) more than 50% of the outstanding voting shares of the Fund, or (2) 67% or more of the outstanding voting shares present (in person or by proxy) at the meeting, if more than 50% of the outstanding voting shares are present at the meeting. Approval of a Reorganization with respect to a Retail Fund and its corresponding TIAA-CREF Fund is not contingent on shareholder approval of one or more Reorganizations of other Retail Funds and their corresponding TIAA-CREF Funds. Therefore, in the event that a Reorganization with

5




respect to a particular Retail Fund is not approved by its shareholders, or if such Reorganization is not completed for any other reason, the remaining Reorganizations will proceed as planned to the extent such Reorganizations are approved by their respective Retail Fund shareholders.

What are the fees and expenses of each Retail Fund and what are they expected to be after the Reorganizations?

It is important to note that if the Reorganizations are implemented, your shares will be subject to the fee and expense structure of the TIAA-CREF Funds, which have a different, unbundled expense structure and higher total operating expenses. In addition, Retail Class shares of the TIAA-CREF Funds are subject to a 12b-1 distribution plan. The Funds’ comparative fees and expenses are more fully described below. For more information on the differences between a “bundled” pricing structure and an “unbundled” (or “unitary”) pricing structure, please see page 7.

Shareholder Fees

Shares of the Retail Funds and TIAA-CREF Funds are not currently, and after the Reorganizations (on a pro forma basis) will not be, subject to any front-end or deferred sales charges (loads), redemption fees or exchange fees.

Annual Expenses

Expenses of mutual funds are generally measured by their expense ratios: the ratio of their total expenses for a year divided by their average daily net asset value over the same year. The main components of a fund’s expense ratio are investment advisory fees, distribution fees and “other expenses.” Below is a summary of the Retail and TIAA-CREF Funds’ current and proposed expense arrangements and comparative expense charts.

Investment Management Arrangements.  The Advisor is the investment adviser to both the Retail and the TIAA-CREF Funds. The Advisor manages the assets of the Funds under the supervision of the Retail and Institutional Trusts’ respective Board of Trustees pursuant to the terms of the Funds’ investment management agreement. The Advisor is a wholly owned indirect subsidiary of Teachers Insurance and Annuity Association of America (“TIAA”) and is registered as an investment adviser with the SEC under the Investment Advisers Act of 1940. The Advisor also manages the investments of TIAA Separate Account VA-1 and the TIAA-CREF Life Funds. Through an affiliated investment advisor, TIAA-CREF Investment Management, LLC (“Investment Management”), the personnel of the Advisor also manage the investment accounts of the College Retirement Equities Fund (“CREF”). As of April 30, 2006, the Advisor and Investment Management together had $[   ] billion of registered investment company assets under management. The Advisor is located at 730 Third Avenue, New York, NY 10017.

6



The Retail and TIAA-CREF Funds each are managed by a team of portfolio managers, who are jointly responsible for the day-to-day management of the Fund, and who have expertise in the area(s) applicable to the Fund’s investments. Each Retail Fund and its counterpart TIAA-CREF Fund are managed by the same team of portfolio managers. A list of the current members of the management teams primarily responsible for managing each Fund’s investments, along with their relevant experience, is found in Exhibit B.

An important reason for the difference in the expenses of the Retail and TIAA-CREF Funds is that they have different arrangements with the Advisor. These differences are outlined below:

•  
  The Retail Funds. Under its investment management agreement with the Retail Funds, the Advisor provides, or obtains at its own expense, virtually all of the services needed for the operation of each Retail Fund for a single set fee, also described as a “bundled” or “unitary” fee. The Advisor’s duties include conducting research, recommending investments and placing orders to buy and sell securities, as well as providing or obtaining distribution, custodial, administrative, transfer agency, portfolio accounting, dividend disbursing, auditing, and ordinary legal services for the Retail Funds. The Advisor also acts as liaison among the various service providers to the Retail Funds, including custodians, portfolio accounting agents, portfolio managers and transfer agents and pays for the services of each service provider out of its management fee.

•  
  The TIAA-CREF Funds. Under its investment management agreement with the TIAA-CREF Funds, the Advisor receives an annual fee for managing the assets of each TIAA-CREF Fund. The Advisor conducts research, recommends investments and places orders to buy and sell securities. However, since the TIAA-CREF Funds’ investment management fee is not “bundled” or “unitary,” certain expenses of the TIAA-CREF Funds, such as transfer agency, audit fees, custody, and other operational expenses, are not paid by the Advisor out of its management fee, but rather by the TIAA-CREF Funds directly (and therefore, incurred indirectly by the shareholders of the TIAA-CREF Funds and not by the Advisor). These expenses (i.e., the TIAA-CREF Funds’ “other expenses”) can vary based on actual cost. This direct payment of “other expenses” by the TIAA-CREF Funds is more customary in the mutual fund industry.

The Advisor has contractually agreed to various waivers and reimbursements on the investment management fees, “other expenses” and total annual operating expenses of the TIAA-CREF Funds. These waivers and reimbursements would continue in effect after the Reorganizations, so that shareholders of the Retail Funds merging into the TIAA-CREF Funds would receive the benefit of these fee reductions. If these waivers and reimbursements are not extended, they will expire on September 30, 2007 (or April 30, 2010 in the case of the Institutional Equity Index Fund). Thereafter, the Board, in consultation with the Advisor, will consider at least annually the appropriate levels for such waivers and reimbursements.

7



The Advisor’s current fee waivers and reductions for the TIAA-CREF Funds’ include:

•  
  An agreement that the Institutional Large-Cap Growth Fund and Institutional Growth & Income Fund pay an investment management fee of only 0.08%, instead of their contractual fee rate of 0.45%, through at least September 30, 2007. Thereafter, this waiver may be adjusted or discontinued by the Advisor based on the Board’s continuing review of the performance of these Funds.

•  
  An agreement capping the “other expenses” of the Institutional Class shares of the TIAA-CREF Funds at the levels set forth in Exhibit C through at least September 30, 2007 (or April 30, 2010 in the case of the Institutional Equity Index Fund).

•  
  An agreement capping the total annual operating expenses of the Retail Class shares of the TIAA-CREF Funds at the levels set forth in Exhibit C through at least September 30, 2007 (or April 30, 2010 in the case of the Institutional Equity Index Fund).

Please see the expense tables below beginning on page 10 for a comparison of the current investment management fees paid by the Retail and TIAA-CREF Funds and the proposed investment management fees of the combined Funds.

Distribution Arrangements.  The Retail Class of the TIAA-CREF Funds has adopted a distribution plan pursuant to Rule 12b-1 of the 1940 Act (“Distribution Plan”). Under the terms of the Distribution Plan, Teachers Personal Investors Services, Inc. (“TPIS”), the TIAA-CREF Funds’ distributor, can be reimbursed for all or part of certain expenses that it incurs in connection with the promotion and distribution of the Retail Class shares, as approved by the Board, up to an annual rate of 0.25% of the average daily net asset value of shares of the Retail Class. Because this is a reimbursement plan, TPIS will only be paid for amounts actually spent on the distribution and marketing of Retail Class shares and approved by the Board; it will not necessarily receive the full 0.25% fee automatically every year. Reimbursements by the Retail Class shares under the Distribution Plan are calculated daily and paid monthly. The expenses eligible for reimbursement under the Distribution Plan include, but are not limited to, compensation of dealers and others for the expenses of their various activities primarily intended to promote the sale of its shares, and for providing personal and account maintenance services to holders of shares and salaries and other expenses relating to account servicing efforts.

TPIS has contractually agreed not to seek reimbursement under the Distribution Plan through September 30, 2007, unless extended to a later date. This agreement would continue in effect after the Reorganizations, so that Retail Fund shareholders merging into the Retail Class of the TIAA-CREF Funds also would receive the benefit of this agreement. The level of reimbursements by the Funds under the Distribution Plan would be reviewed by the Board at least annually.

Expense Tables.  Below are tables showing the current expense ratios of each Retail Fund and its corresponding TIAA-CREF Fund. In addition, the tables show the anticipated

8



expenses of the Retail and Institutional Class of the TIAA-CREF Funds if the Reorganization of each Retail Fund into its corresponding TIAA-CREF Fund occurs (labeled as “pro forma combined”). The tables enable you to compare and contrast the recent expense levels for the Retail Funds and the TIAA-CREF Funds and obtain a general idea of what the expense levels would be if the Reorganizations occur.

The expenses set forth below are based on the expenses of the Retail Funds for the fiscal year ended December 31, 2005 and the recently-approved new expense structure of the TIAA-CREF Funds as if the new expenses had been in effect for the Funds’ fiscal year ended September 30, 2005 (i.e., on a pro forma basis). The pro forma information for the TIAA-CREF Funds reflects the anticipated effect of the Reorganizations. These figures include current fee and expense waivers and reimbursements set to expire on September 30, 2007 (or April 30, 2010 in the case of the Institutional Equity Index Fund), unless extended, and the full amounts authorized for reimbursement under the Distribution Plan for the Retail Class shares of the TIAA-CREF Funds. The TIAA-CREF Funds’ distributor has agreed not to seek any reimbursement under the Distribution Plan until September 30, 2007. This means that Retail Class shares of the TIAA-CREF Funds would not pay any 12b-1 fees until that time.

The terms used in the expense tables have the following meanings:

•  
  “Management Fees” means investment advisory fees or any other management or administrative fees paid to the advisor or its affiliates that are not included in “other expenses.”

•  
  “Distribution (12b-1) Fees” means all distribution and other expenses incurred by a Fund under a plan adopted pursuant to Rule 12b-1 of the 1940 Act.

•  
  “Other Expenses” means all expenses not otherwise disclosed in the table that are deducted from Fund assets or charged to all shareholder accounts (not including any extraordinary expenses).

•  
  “Total Annual Fund Operating Expenses” means the sum of a Fund’s “Management Fees,” “Distribution (12b-1) Fees,” and “Other Expenses.”

•  
  “Expense Reimbursements and Waivers” means the aggregate amount of expenses that are not actually paid by a Fund due to contractual waivers and reimbursements.

•  
  “Net Annual Fund Operating Expenses” means the amount of expenses actually paid by Fund shareholders after the “Expense Reimbursements and Waivers” category is subtracted from the Fund’s expenses.

9



Examples of Fund Expenses.  Following each expense ratio table is an expense example intended to help you compare and contrast the cost of investing in: (1) a Retail Fund as it currently exists; (2) the Retail Class and Institutional Class of its corresponding TIAA-CREF Fund as they currently exist; and (3) the Retail Class and Institutional Class of the same TIAA-CREF Fund if a Reorganization occurs (i.e., the “pro forma” figure).

The examples assume that you make an investment of $10,000 in shares of the Retail Funds or the indicated classes of the TIAA-CREF Funds for the time periods indicated and then redeem all of your shares at the end of those periods. The examples also assume a 5% annual return each year and that there will be no expense reimbursements or waivers in place after one year. Your actual costs may be higher or lower. The “pro forma” categories correspond to what the expenses of the TIAA-CREF Funds are expected to be if the Retail Funds are reorganized into the TIAA-CREF Funds.

International Equity Fund and Institutional International Equity Fund




   
Retail
Fund
   
TIAA-CREF
Fund
(Retail
Class)
   
TIAA-CREF
Fund
(Institutional
Class)
   
Pro Forma
Combined
Institutional
Fund
(Retail
Class)
   
Pro Forma
Combined
Institutional
Fund
(Institutional
Class)
Management Fees
                    0.49 %             0.50 %1             0.50 %1             0.50 %1             0.50 %1  
Distribution (12b-1) Fees
                    N/A               0.25 %2             N/A               0.25 %2             N/A    
Other Expenses
                    0.00 %             0.13 %3             0.12 %             0.13 %3             0.13 %  
Total Annual
Operating Expenses
                    0.49 %             0.88 %             0.62 %             0.88 %             0.63 %  
Expense Reimbursements and Waivers
                    0.00 %             0.25 %4             0.02 %4             0.25 %4             0.03 %4  
Net Annual Fund
Operating Expenses
                    0.49 %             0.63 %             0.60 %             0.63 %             0.60 %  
 
(1)  
  This management fee has breakpoints that gradually reduce the fee rates indicated in the chart (both current and pro forma) from the amounts indicated in the chart as the Fund’s assets grow. To see the full breakpoint schedule see Exhibit C.

(2)  
  Retail Class shares are subject to a Distribution (12b-1) Plan. The Plan provides for a maximum annual reimbursement rate of 0.25% of average daily net assets of the Fund. TPIS has contractually agreed not to seek any reimbursements under the Plan through September 30, 2007, so the table reflects the waiver of this whole amount.

(3)  
  As this class of this particular TIAA-CREF Fund will have been in existence substantially less than a year prior to the Reorganizations, the “Other Expenses” for this class are estimated.

(4)  
  The Advisor has contractually agreed to certain fee waivers and reimbursements that cap the amount of “Other Expenses” or “Total Annual Fund Operating Expenses” the TIAA-CREF Funds would pay through at least September 30, 2007. Please see Exhibit C for more information on the levels of these waivers and reimbursements.

10



International Equity Fund and Institutional International Equity Fund




   
1 year
   
3 years
   
5 years
   
10 years
Retail Fund
                 $ 50            $ 157            $ 274            $ 616    
TIAA-CREF Fund (Retail Class)
                 $ 64            $ 256            $ 463            $ 1,061   
TIAA-CREF Fund (Institutional Class)
                 $ 61            $ 197            $ 344            $ 772    
Pro Forma Combined TIAA-CREF Fund (Retail Class)
                 $ 64            $ 256            $ 463            $ 1,061   
Pro Forma Combined TIAA-CREF Fund
(Institutional Class)
                 $ 61            $ 199            $ 348            $ 783    
 

Growth Equity Fund and Institutional Large-Cap Growth Fund




   
Retail
Fund
   
TIAA-CREF
Fund
(Retail
Class)
   
TIAA-CREF
Fund
(Institutional
Class)
   
Pro Forma
Combined
Institutional
Fund
(Retail
Class)
   
Pro Forma
Combined
Institutional
Fund
(Institutional
Class)
Management Fees
                    0.45 %             0.45 %1             0.45 %1             0.45 %1             0.45 %1  
Distribution (12b-1) Fees
                    N/A               0.25 %2             N/A               0.25 %2             N/A    
Other Expenses
                    0.00 %             0.16 %3             0.37 %3             0.16 %3             0.38 %3  
Total Annual
Operating Expenses
                    0.45 %             0.86 %             0.82 %             0.86 %             0.83 %  
Expense Reimbursements and Waivers
                    0.00 %             0.62 %4             0.69 %4             0.62 %4             0.70 %4  
Net Annual Fund
Operating Expenses
                    0.45 %             0.24 %             0.13 %             0.24 %             0.13 %  
 
(1)  
  This management fee has breakpoints that gradually reduce the fee rates indicated in the chart (both current and pro forma) from the amounts indicated in the chart as the Fund’s assets grow. To see the full breakpoint schedule see Exhibit C. Notwithstanding these breakpoints, the Advisor has contractually agreed to waive the investment management fees to 0.08% through at least April 30, 2007.

(2)  
  Retail Class shares are subject to a Distribution (12b-1) Plan. The Plan provides for a maximum annual reimbursement rate of 0.25% of average daily net assets of the Fund. TPIS has contractually agreed not to seek any reimbursements under the Plan through September 30, 2007, so the table reflects the waiver of this whole amount.

(3)  
  As this class of this particular TIAA-CREF Fund will have been in existence substantially less than a year prior to the Reorganizations, the “Other Expenses” for this class are estimated.

(4)  
  The Advisor has contractually agreed to certain fee waivers and reimbursements that cap the amount of “Other Expenses” or “Total Annual Fund Operating Expenses” the TIAA-CREF Funds would pay through at least September 30, 2007. Please see Exhibit C for more information on the levels of these waivers and reimbursements.

11



Growth Equity Fund and Institutional Large-Cap Growth Fund




   
1 year
   
3 years
   
5 years
   
10 years
Retail Fund
                 $ 46            $ 144            $ 252            $ 567    
TIAA-CREF Fund (Retail Class)
                 $ 25            $ 212                                
TIAA-CREF Fund (Institutional Class)
                 $ 13            $ 193                                
Pro Forma Combined TIAA-CREF Fund (Retail Class)
                 $ 25            $ 212                                
Pro Forma Combined TIAA-CREF Fund
(Institutional Class)
                 $ 13            $ 195                                
 

Growth & Income Fund and Institutional Growth & Income Fund




   
Retail
Fund
   
TIAA-CREF
Fund
(Retail
Class)
   
TIAA-CREF
Fund
(Institutional
Class)
   
Pro Forma
Combined
Institutional
Fund
(Retail
Class)
   
Pro Forma
Combined
Institutional
Fund
(Institutional
Class)
Management Fees
                    0.43 %             0.45 %1             0.45 %1             0.45 %1             0.45 %1  
Distribution (12b-1) Fees
                    N/A               0.25 %2             N/A               0.25 %2             N/A    
Other Expenses
                    0.00 %             0.63 %3             0.07 %             0.63 %3             0.07 %  
Total Annual
Operating Expenses
                    0.43 %             1.33 %             0.52 %             1.33 %             0.52 %  
Expense Reimbursements and Waivers
                    0.00 %             0.90 %4             0.39 %4             0.90 %4             0.39 %4  
Net Annual Fund
Operating Expenses
                    0.43 %             0.43 %             0.13 %             0.43 %             0.13 %  
 
(1)  
  This management fee has breakpoints that gradually reduce the fee rates indicated in the chart (both current and pro forma) from the amounts indicated in the chart as the Fund’s assets grow. To see the full breakpoint schedule see Exhibit C. Notwithstanding these breakpoints, the Advisor has contractually agreed to waive the investment management fees of these Funds to 0.08% through at least April 30, 2007.

(2)  
  Retail Class shares are subject to a Distribution (12b-1) Plan. The Plan provides for a maximum annual reimbursement rate of 0.25% of average daily net assets of the Fund. TPIS has contractually agreed not to seek any reimbursements under the Plan through September 30, 2007, so the table reflects the waiver of this whole amount.

(3)  
  As this class of this particular TIAA-CREF Fund will have been in existence substantially less than a year prior to the Reorganizations, the “Other Expenses” for this class are estimated.

(4)  
  The Advisor has contractually agreed to certain fee waivers and reimbursements that cap the amount of “Other Expenses” or “Total Annual Fund Operating Expenses” the TIAA-CREF Funds would pay through at least September 30, 2007. Please see Exhibit C for more information on the levels of these waivers and reimbursements.

12



Growth & Income Fund and Institutional Growth & Income Fund




   
1 year
   
3 years
   
5 years
   
10 years
Retail Fund
                 $ 44            $ 138            $ 241            $ 542    
TIAA-CREF Fund (Retail Class)
                 $ 44            $ 332            $ 642            $ 1,523   
TIAA-CREF Fund (Institutional Class)
                 $ 13            $ 127            $ 252            $ 615    
Pro Forma Combined TIAA-CREF Fund (Retail Class)
                 $ 44            $ 332            $ 642            $ 1,523   
Pro Forma Combined TIAA-CREF Fund
(Institutional Class)
                 $ 13            $ 127            $ 252            $ 615    
 

Equity Index Fund and Institutional Equity Index Fund




   
Retail
Fund
   
TIAA-CREF
Fund
(Retail
Class)
   
TIAA-CREF
Fund
(Institutional
Class)
   
Pro Forma
Combined
Institutional
Fund
(Retail
Class)
   
Pro Forma
Combined
Institutional
Fund
(Institutional
Class)
Management Fees
                    0.26 %             0.04 %             0.04 %             0.04 %             0.04 %  
Distribution (12b-1) Fees
                    N/A               0.25 %1             N/A               0.25 %1             N/A    
Other Expenses
                    0.00 %             0.28 %2             0.04 %             0.28 %2             0.05 %  
Total Annual
Operating Expenses
                    0.26 %             0.57 %             0.08 %             0.57 %             0.09 %  
Expense Reimbursements and Waivers
                    0.00 %             0.33 %3             0.00 %3             0.33 %3             0.01 %3  
Net Annual Fund
Operating Expenses
                    0.26 %             0.24 %             0.08 %             0.24 %             0.08 %  
 
(1)  
  Retail Class shares are subject to a Distribution (12b-1) Plan. The Plan provides for a maximum annual reimbursement rate of 0.25% of average daily net assets of the Fund. TPIS has contractually agreed not to seek any reimbursements under the Plan through September 30, 2007, so the table reflects the waiver of this whole amount.

(2)  
  As this class of this particular TIAA-CREF Fund will have been in existence substantially less than a year prior to the Reorganizations, the “Other Expenses” for this class are estimated.

(3)  
  The Advisor has contractually agreed to certain fee waivers and reimbursements that cap the amount of “Other Expenses” or “Total Annual Fund Operating Expenses” the TIAA-CREF Funds would pay through at least April 30, 2010. Please see Exhibit C for more information on the levels of these waivers and reimbursements.

13



Equity Index Fund and Institutional Equity Index Fund




   
1 year
   
3 years
   
5 years
   
10 years
Retail Fund
                 $ 27            $ 84            $ 146            $ 331    
TIAA-CREF Fund (Retail Class)
                 $ 25            $ 77            $ 176            $ 576    
TIAA-CREF Fund (Institutional Class)
                 $ 8            $ 26            $ 45            $ 103    
Pro Forma Combined TIAA-CREF Fund (Retail Class)
                 $ 25            $ 77            $ 176            $ 576    
Pro Forma Combined TIAA-CREF Fund
(Institutional Class)
                 $ 8            $ 26            $ 46            $ 111    
 

Social Choice Equity Fund and Institutional Social Choice Equity Fund




   
Retail
Fund
   
TIAA-CREF
Fund
(Retail
Class)
   
TIAA-CREF
Fund
(Institutional
Class)
   
Pro Forma
Combined
Institutional
Fund
(Retail
Class)
   
Pro Forma
Combined
Institutional
Fund
(Institutional
Class)
Management Fees
                    0.27 %             0.15 %             0.15 %             0.15 %             0.15 %  
Distribution (12b-1) Fees
                    N/A               0.25 %1             N/A               0.25 %1             N/A    
Other Expenses
                    0.00 %             0.11 %2             0.06 %             0.11 %2             0.07 %  
Total Annual
Operating Expenses
                    0.27 %             0.51 %             0.21 %             0.51 %             0.22 %  
Expense Reimbursements and Waivers
                    0.00 %             0.25 %3             0.01 %3             0.25 %3             0.02 %3  
Net Annual Fund
Operating Expenses
                    0.27 %             0.26 %             0.20 %             0.26 %             0.20 %  
 
(1)  
  Retail Class shares are subject to a Distribution (12b-1) Plan. The Plan provides for a maximum annual reimbursement rate of 0.25% of average daily net assets of the Fund. TPIS has contractually agreed not to seek any reimbursements under the Plan through September 30, 2007, so the table reflects the waiver of this whole amount.

(2)  
  As this class of this particular TIAA-CREF Fund will have been in existence substantially less than a year prior to the Reorganizations, the “Other Expenses” for this class are estimated.

(3)  
  The Advisor has contractually agreed to certain fee waivers and reimbursements that cap the amount of “Other Expenses” or “Total Annual Fund Operating Expenses” the TIAA-CREF Funds would pay through at least September 30, 2007. Please see Exhibit C for more information on the levels of these waivers and reimbursements.

14



Social Choice Equity Fund and Institutional Social Choice Equity Fund




   
1 year
   
3 years
   
5 years
   
10 years
Retail Fund
                 $ 28            $ 87            $ 152            $ 343    
TIAA-CREF Fund (Retail Class)
                 $ 27            $ 138            $ 260            $ 616    
TIAA-CREF Fund (Institutional Class)
                 $ 20            $ 67            $ 117            $ 267    
Pro Forma Combined TIAA-CREF Fund (Retail Class)
                 $ 27            $ 138            $ 260            $ 616    
Pro Forma Combined TIAA-CREF Fund
(Institutional Class)
                 $ 20            $ 69            $ 122            $ 278    
 

Managed Allocation Fund and Institutional Managed Allocation Fund II




   
Retail
Fund
   
TIAA-CREF
Fund
(Retail
Class)
   
TIAA-CREF
Fund
(Institutional
Class)
   
Pro Forma
Combined
Institutional
Fund
(Retail
Class)
   
Pro Forma
Combined
Institutional
Fund
(Institutional
Class)
Management Fees
                    0.00 %1             0.00 %1             0.00 %1             0.00 %1             0.00 %1  
Distribution (12b-1) Fees
                    N/A               0.25 %2             N/A               0.25 %2             N/A    
Other Expenses
                    0.49 %1             0.62 %1             0.57 %1             0.62 %1             0.57 %1  
Total Annual
Operating Expenses
                    0.49 %             0.87 %             0.57 %             0.87 %             0.57 %  
Expense Reimbursements and Waivers
                    0.00 %             0.50 %             0.20 %             0.50 %             0.20 %  
Net Annual Fund
Operating Expenses
                    0.49 %             0.37 %             0.37 %             0.37 %             0.37 %  
 
(1)  
  The Advisor does not and will not receive a management fee for its services to the Managed Allocation Fund and Institutional Managed Allocation Fund II. However, shareholders in these Funds currently bear, and will continue to bear after the Reorganization, indirectly their pro rata shares of the fees and expenses incurred by the underlying funds in which these Funds invest. The expenses in the table are based on the Retail Managed Allocation Fund’s allocations during 2005 and the current allocations of the Institutional Managed Allocation Fund II. Based upon the current expected allocations of the Retail Managed Allocation Fund and Institutional Managed Allocation Fund II, the underlying fund expenses are expected to be 0.49% and 0.37%, respectively (each of which includes waivers and reimbursements of the underlying funds’ expenses).

(2)  
  Retail Class shares are subject to a Distribution (12b-1) Plan. The Plan provides for a maximum annual reimbursement rate of 0.25% of average daily net assets of the Fund. TPIS has contractually agreed not to seek any reimbursements under the Plan through September 30, 2007, so the table reflects the waiver of this whole amount.

(3)  
  As this class of this particular TIAA-CREF Fund will have been in existence substantially less than a year prior to the Reorganizations, the “Other Expenses” for this class are estimated.

15



Managed Allocation Fund and Institutional Managed Allocation Fund II




   
1 year
   
3 years
   
5 years
   
10 years
Retail Fund
                 $ 50            $ 157            $ 274            $ 616    
TIAA-CREF Fund (Retail Class)
                 $ 38            $ 228                                
TIAA-CREF Fund (Institutional Class)
                 $ 38            $ 162                                
Pro Forma Combined TIAA-CREF Fund (Retail Class)
                 $ 38            $ 228                                
Pro Forma Combined TIAA-CREF Fund
(Institutional Class)
                 $ 38            $ 162                                
 

Bond Plus Fund and Institutional Bond Plus Fund II




   
Retail
Fund
   
TIAA-CREF
Fund
(Retail
Class)
   
TIAA-CREF
Fund
(Institutional
Class)
   
Pro Forma
Combined
Institutional
Fund
(Retail
Class)
   
Pro Forma
Combined
Institutional
Fund
(Institutional
Class)
Management Fees
                    0.30 %             0.30 %1             0.30 %1             0.30 %1             0.30 %1  
Distribution (12b-1) Fees
                    N/A               0.25 %2             N/A               0.25 %2             N/A    
Other Expenses
                    0.00 %             0.09 %3             0.23 %3             0.09 %3             0.24 %3  
Total Annual
Operating Expenses
                    0.30 %             0.64 %             0.53 %             0.64 %             0.54 %  
Expense Reimbursements and Waivers
                    0.00 %             0.25 %4             0.18 %4             0.25 %4             0.19 %4  
Net Annual Fund
Operating Expenses
                    0.30 %             0.39 %             0.35 %             0.39 %             0.35 %  
 
(1)  
  This management fee has breakpoints that gradually reduce the fee rates indicated in the chart (both current and pro forma) from the amounts indicated in the chart as each Fund’s assets grow. To see the full breakpoint schedule see Exhibit C.

(2)  
  Retail Class shares are subject to a Distribution (12b-1) Plan. The Plan provides for a maximum annual reimbursement rate of 0.25% of average daily net assets of the Fund. TPIS has contractually agreed not to seek any reimbursements under the Plan through September 30, 2007, so the table reflects the waiver of this whole amount.

(3)  
  As this class of this particular TIAA-CREF Fund will have been in existence substantially less than a year prior to the Reorganizations, the “Other Expenses” for this class are estimated.

(4)  
  The Advisor has contractually agreed to certain fee waivers and reimbursements that cap the amount of “Other Expenses” or “Total Annual Fund Operating Expenses” the TIAA-CREF Funds would pay through at least September 30, 2007. Please see Exhibit C for more information on the levels of these waivers and reimbursements.

16



Bond Plus Fund and Institutional Bond Plus Fund II




   
1 year
   
3 years
   
5 years
   
10 years
Retail Fund
                 $ 31            $ 97            $ 169            $ 381    
TIAA-CREF Fund (Retail Class)
                 $ 40            $ 180                                
TIAA-CREF Fund (Institutional Class)
                 $ 36            $ 152                                
Pro Forma Combined TIAA-CREF Fund (Retail Class)
                 $ 40            $ 180                                
Pro Forma Combined TIAA-CREF Fund
(Institutional Class)
                 $ 36            $ 154                                
 

Short-Term Bond Fund and Institutional Short-Term Bond Fund II




   
Retail
Fund
   
TIAA-CREF
Fund
(Retail
Class)
   
TIAA-CREF
Fund
(Institutional
Class)
   
Pro Forma
Combined
Institutional
Fund
(Retail
Class)
   
Pro Forma
Combined
Institutional
Fund
(Institutional
Class)
Management Fees
                    0.30 %             0.25 %1             0.25 %1             0.25 %1             0.25 %1  
Distribution (12b-1) Fees
                    N/A               0.25 %2             N/A               0.25 %2             N/A    
Other Expenses
                    0.00 %             0.24 %3             0.13 %3             0.24 %3             0.143   
Total Annual
Operating Expenses
                    0.30 %             0.74 %             0.38 %             0.74 %             0.39 %  
Expense Reimbursements and Waivers
                    0.00 %             0.29 %4             0.08 %4             0.29 %4             0.09 %4  
Net Annual Fund
Operating Expenses
                    0.30 %             0.45 %             0.30 %             0.45 %             0.30 %  
 
(1)  
  This management fee has breakpoints that gradually reduce the fee rates indicated in the chart (both current and pro forma) from the amounts indicated in the chart as each Fund’s assets grow. To see the full breakpoint schedule see Exhibit C.

(2)  
  Retail Class shares are subject to a Distribution (12b-1) Plan. The Plan provides for a maximum annual reimbursement rate of 0.25% of average daily net assets of the Fund. TPIS has contractually agreed not to seek any reimbursements under the Plan through September 30, 2007, so the table reflects the waiver of this whole amount.

(3)  
  As this class of this particular TIAA-CREF Fund will have been in existence substantially less than a year prior to the Reorganizations, the “Other Expenses” for this class are estimated.

(4)  
  The Advisor has contractually agreed to certain fee waivers and reimbursements that cap the amount of “Other Expenses” or “Total Annual Fund Operating Expenses” the TIAA-CREF Funds would pay through at least September 30, 2007. Please see Exhibit C for more information on the levels of these waivers and reimbursements.

17



Short-Term Bond Fund and Institutional Short-Term Bond Fund II




   
1 year
   
3 years
   
5 years
   
10 years
Retail Fund
                 $ 31            $ 97            $ 169            $ 381    
TIAA-CREF Fund (Retail Class)
                 $ 46            $ 207                                
TIAA-CREF Fund (Institutional Class)
                 $ 31            $ 114                                
Pro Forma Combined TIAA-CREF Fund (Retail Class)
                 $ 46            $ 207                                
Pro Forma Combined TIAA-CREF Fund
(Institutional Class)
                 $ 31            $ 116                                
 

High-Yield Bond Fund and Institutional High-Yield Fund II




   
Retail
Fund
   
TIAA-CREF
Fund
(Retail
Class)
   
TIAA-CREF
Fund
(Institutional
Class)
   
Pro Forma
Combined
Institutional
Fund
(Retail
Class)
   
Pro Forma
Combined
Institutional
Fund
(Institutional
Class)
Management Fees
                    0.34 %             0.35 %1             0.35 %1             0.35 %1             0.35 %1  
Distribution (12b-1) Fees
                    N/A               0.25 %2             N/A               0.25 %2             N/A    
Other Expenses
                    0.00 %             0.06 %3             0.10 %3             0.06 %3             0.11 %3  
Total Annual
Operating Expenses
                    0.34 %             0.66 %             0.45 %             0.66 %             0.46 %  
Expense Reimbursements and Waivers
                    0.00 %             0.25 %4             0.05 %4             0.25 %4             0.05 %4  
Net Annual Fund
Operating Expenses
                    0.34 %             0.41 %             0.40 %             0.41 %             0.40 %  
 
(1)  
  This management fee has breakpoints that gradually reduce the fee rates indicated in the chart (both current and pro forma) from the amounts indicated in the chart as each Fund’s assets grow. To see the full breakpoint schedule see Exhibit C.

(2)  
  Retail Class shares are subject to a Distribution (12b-1) Plan. The Plan provides for a maximum annual reimbursement rate of 0.25% of average daily net assets of the Fund. TPIS has contractually agreed not to seek any reimbursements under the Plan through September 30, 2007, so the table reflects the waiver of this whole amount.

(3)  
  As this class of this particular TIAA-CREF Fund will have been in existence substantially less than a year prior to the Reorganizations, the “Other Expenses” for this class are estimated.

(4)  
  The Advisor has contractually agreed to certain fee waivers and reimbursements that cap the amount of “Other Expenses” or “Total Annual Fund Operating Expenses” the TIAA-CREF Funds would pay through at least September 30, 2007. Please see Exhibit C for more information on the levels of these waivers and reimbursements.

18



High-Yield Bond Fund and Institutional High-Yield Fund II




   
1 year
   
3 years
   
5 years
   
10 years
Retail Fund
                 $ 35            $ 109            $ 191            $ 431    
TIAA-CREF Fund (Retail Class)
                 $ 42            $ 186                                
TIAA-CREF Fund (Institutional Class)
                 $ 41            $ 139                                
Pro Forma Combined TIAA-CREF Fund (Retail Class)
                 $ 42            $ 186                                
Pro Forma Combined TIAA-CREF Fund
(Institutional Class)
                 $ 41            $ 142                                
 

Tax-Exempt Bond Fund and Institutional Tax-Exempt Bond Fund II




   
Retail
Fund
   
TIAA-CREF
Fund
(Retail
Class)
   
TIAA-CREF
Fund
(Institutional
Class)
   
Pro Forma
Combined
Institutional
Fund
(Retail
Class)
   
Pro Forma
Combined
Institutional
Fund
(Institutional
Class)
Management Fees
                    0.30 %             0.30 %1             0.30 %1             0.30 %1             0.30 %1  
Distribution (12b-1) Fees
                    N/A               0.25 %2             N/A               0.25 %2             N/A    
Other Expenses
                    0.00 %             0.10 %3             0.20 %3             0.10 %3             0.21 %3  
Total Annual
Operating Expenses
                    0.30 %             0.65 %             0.50 %             0.65 %             0.51 %  
Expense Reimbursements and Waivers
                    0.00 %             0.25 %4             0.15 %4             0.25 %4             0.16 %4  
Net Annual Fund
Operating Expenses
                    0.30 %             0.40 %             0.35 %             0.40 %             0.35 %  
 
(1)  
  This management fee has breakpoints that gradually reduce the fee rates indicated in the chart (both current and pro forma) from the amounts indicated in the chart as each Fund’s assets grow. To see the full breakpoint schedule see Exhibit C.

(2)  
  Retail Class shares are subject to a Distribution (12b-1) Plan. The Plan provides for a maximum annual reimbursement rate of 0.25% of average daily net assets of the Fund. TPIS has contractually agreed not to seek any reimbursements under the Plan through September 30, 2007, so the table reflects the waiver of this whole amount.

(3)  
  As this class of this particular TIAA-CREF Fund will have been in existence substantially less than a year prior to the Reorganizations, the “Other Expenses” for this class are estimated.

(4)  
  The Advisor has contractually agreed to certain fee waivers and reimbursements that cap the amount of “Other Expenses” or “Total Annual Fund Operating Expenses” the TIAA-CREF Funds would pay through at least September 30, 2007. Please see Exhibit C for more information on the levels of these waivers and reimbursements.

19



Tax-Exempt Bond Fund and Institutional Tax-Exempt Bond Fund II




   
1 year
   
3 years
   
5 years
   
10 years
Retail Fund
                 $ 31            $ 97            $ 169            $ 381    
TIAA-CREF Fund (Retail Class)
                 $ 41            $ 183                                
TIAA-CREF Fund (Institutional Class)
                 $ 36            $ 145                                
Pro Forma Combined TIAA-CREF Fund (Retail Class)
                 $ 41            $ 183                                
Pro Forma Combined TIAA-CREF Fund
(Institutional Class)
                 $ 36            $ 147                                
 

Money Market Fund and Institutional Money Market Fund




   
Retail
Fund
   
TIAA-CREF
Fund
(Retail
Class)
   
TIAA-CREF
Fund
(Institutional
Class)
   
Pro Forma
Combined
Institutional
Fund
(Retail
Class)
   
Pro Forma
Combined
Institutional
Fund
(Institutional
Class)
Management Fees
                    0.29 %             0.10 %             0.10 %             0.10 %             0.10 %  
Distribution (12b-1) Fees
                    N/A               0.25 %1             N/A               0.25 %1             N/A    
Other Expenses
                    0.00 %             0.04 %2             0.05 %             0.04 %2             0.05 %  
Total Annual
Operating Expenses
                    0.29 %             0.39 %             0.15 %             0.39 %             0.15 %  
Expense Reimbursements and Waivers
                    0.00 %             0.25 %3             0.00 %3             0.25 %3             0.00 %3  
Net Annual Fund
Operating Expenses
                    0.29 %             0.14 %             0.15 %             0.14 %             0.15 %  
 
(1)  
  Retail Class shares are subject to a Distribution (12b-1) Plan. The Plan provides for a maximum annual reimbursement rate of 0.25% of average daily net assets of the Fund. TPIS has contractually agreed not to seek any reimbursements under the Plan through September 30, 2007, so the table reflects the waiver of this whole amount.

(2)  
  As this class of this particular TIAA-CREF Fund will have been in existence substantially less than a year prior to the Reorganizations, the “Other Expenses” for this class are estimated.

(3)  
  The Advisor has contractually agreed to certain fee waivers and reimbursements that cap the amount of “Other Expenses” or “Total Annual Fund Operating Expenses” the TIAA-CREF Funds would pay through at least September 30, 2007. Please see Exhibit C for more information on the levels of these waivers and reimbursements.

Money Market Fund and Institutional Money Market Fund




   
1 year
   
3 years
   
5 years
   
10 years
Retail Fund
                 $ 30            $ 93            $ 163            $ 368    
TIAA-CREF Fund (Retail Class)
                 $ 14            $ 100            $ 194            $ 468    
TIAA-CREF Fund (Institutional Class)
                 $ 15            $ 48            $ 85            $ 192    
Pro Forma Combined TIAA-CREF Fund (Retail Class)
                 $ 14            $ 100            $ 194            $ 468    
Pro Forma Combined TIAA-CREF Fund
(Institutional Class)
                 $ 15            $ 48            $ 85            $ 192    
 

20



What are the general tax consequences of the Reorganizations?

As a condition to the closing of the Reorganizations, the Retail Funds and the TIAA-CREF Funds will receive an opinion of Sutherland Asbill & Brennan LLP to the effect that each Reorganization between a Retail Fund and its corresponding TIAA-CREF Fund will qualify as a tax-free reorganization within the meaning of Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the “Code”). It is expected that neither the Retail Funds nor their respective shareholders will recognize any gain or loss as a result of the Reorganizations. If a Retail Fund sells securities prior to the closing date of the Reorganizations, there may be net realized gains or losses to the Retail Fund. Any net realized gains would increase the amount of the distribution made to the shareholders of the Retail Fund prior to the closing date of the Reorganizations. See “Information About the Reorganizations — Federal Income Tax Issues,” below. In addition, for more information on the TIAA-CREF Funds’ treatment of taxes, see the Appendix.

How do the investment objectives and principal strategies of the Retail and TIAA-CREF Funds compare?

Each Retail Fund and its corresponding TIAA-CREF Fund have substantially similar investment objectives and principal investment strategies, as described below. These investment objectives and principal investment strategies are not fundamental (except where specifically noted), which means that they may be changed by the Retail or Institutional Trust Boards of Trustees at any time without shareholder approval.

International Equity Fund and Institutional International Equity Fund

The International Equity Fund and the Institutional International Equity Fund have very similar investment objectives and principal investment strategies. Their common investment objective is favorable long-term total return, mainly through capital appreciation, and they both pursue this objective by investing in a broadly diversified portfolio that consists primarily of equity securities of foreign issuers. The Institutional International Equity Fund normally invests at least 80% of its assets in equity securities of foreign issuers and has a policy of investing in at least three countries other than the United States, while International Equity Fund has a very similar policy of investing at least 80% of its assets in equity securities of companies located in at least three countries other than the United States. Each may invest in emerging market securities or hold a significant amount of stocks of smaller, lesser-known companies. Furthermore, each has the same benchmark index, the Morgan Stanley Capital International EAFE® (Europe, Australasia, Far East) Index (the “MSCI EAFE® Index”). Additionally, each Fund may occasionally invest a portion of its assets through quantitative techniques to maintain similar overall financial characteristics to its benchmark index and to control risk.

21



Growth Equity Fund and Institutional Large-Cap Growth Fund

The Growth Equity Fund and the Institutional Large-Cap Growth Fund share a very similar investment objective of seeking favorable long-term return, mainly through capital appreciation, primarily from equity securities. Normally, each Fund invests at least 80% of its assets in equity securities that the managers believe present the opportunity for growth. With respect to the Large-Cap Growth Fund’s 80% policy, such investments must be considered to be “large-cap” securities (generally securities included in the Russell 1000® Index). However, this is not a substantive difference from the Growth Equity Fund since the Growth Equity Fund also predominantly invests in “large-cap” securities. Generally, these equity securities will be those of large capitalized companies in new and emerging areas of the economy, and companies with distinctive products or promising markets. With respect to each Fund, the active managers look for companies that they believe have the potential for strong earnings or sales growth, or that appear to be mispriced based on current earnings, assets or growth prospects. Each Fund can invest in companies expected to benefit from prospective acquisitions, reorganizations, corporate restructurings or other special situations. Foreign investments can be up to 20% of each Fund’s portfolio. The benchmark index for each Fund is the Russell 1000® Growth Index (Russell 1000® is a trademark and a service mark of the Frank Russell Company). Additionally, each Fund may occasionally invest a portion of its assets through quantitative techniques to maintain similar overall financial characteristics to its benchmark index and to control risk.

Growth & Income Fund and Institutional Growth & Income Fund

The Growth & Income Fund and the Institutional Growth & Income Fund share a very similar investment objective of seeking a favorable long-term return through capital appreciation and investment income. Each Fund normally invests at least 80% of its assets in: (1) income-producing equity securities, or (2) other securities defined by its benchmark index, the Standard & Poor’s 500 Index (“S&P 500® Index”). Each Fund looks primarily for stocks of larger, well-established, mature growth companies that are believed to be attractively priced, show the potential to grow faster than the rest of the market, and offer a growing stream of dividend income. Each Fund may also invest in a few rapidly growing smaller companies and may have up to 20% of assets in foreign securities. Additionally, each Fund may occasionally invest a portion of its assets through quantitative techniques to maintain similar overall financial characteristics to its benchmark index and to control risk.

Equity Index Fund and Institutional Equity Index Fund

The Equity Index Fund and the Institutional Equity Index Fund share similar investment objectives. The 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® Index, a broad stock market index. The Institutional Equity Index Fund seeks a favorable long-term rate of return, mainly from

22




capital appreciation, by investing primarily in a portfolio of equity securities selected to track the overall U.S. equity markets based on the Russell 3000® Index. Each Fund is designed to track U.S. equity markets as a whole and invests substantially all of its net assets in stocks in the Russell 3000® Index. Each Fund uses indexing, a strategy that seeks a favorable long-term total return from a diversified portfolio of equity securities selected to track its benchmark index. As part of its indexing strategy, each Fund uses a sampling approach to create a portfolio that closely matches the overall investment characteristics (for example, market capitalization and industry weightings of securities) of its index without investing in all of the stocks in the index.

Social Choice Equity Fund and Institutional Social Choice Equity Fund

The Social Choice Equity Fund and the Institutional Social Choice Equity Fund share identical investment objectives and principal investment strategies. Each Fund seeks a favorable long-term rate of return that tracks the investment performance of the U.S. stock market while giving special consideration to certain social criteria. Each Fund attempts to track the return of the U.S. stock market as represented by the Russell 3000® Index, while investing only in companies whose activities are consistent with the Fund’s social criteria. Each Fund does this by investing in companies included in the KLD Research & Analytics, Inc.’s (“KLD”) Broad Market Social IndexSM (the “KLD BMS Index”), which is a subset of companies in the Russell 3000® Index screened to eliminate companies that do not meet certain “social” criteria.

Managed Allocation Fund and Institutional Managed Allocation Fund II

The Managed Allocation Fund and Institutional Managed Allocation Fund II share identical investment objectives and substantially similar principal investment strategies. Each Fund seeks a return that reflects the broad investment performance of the financial markets through capital appreciation and investment income. Each Fund is a “fund of funds,” which means that its portfolio primarily consists of investments in other mutual funds (“underlying funds”). The Managed Allocation Fund may invest in shares of underlying funds such as: (1) TIAA-CREF Mutual Funds’ other investment funds; (2) Retail Class shares of the TIAA-CREF Funds, which are affiliated funds of the Retail Funds; and (3) other mutual funds that may be selected by the Board of Trustees from time to time. The Institutional Managed Allocation Fund II invests in these same underlying funds, except that it generally invests in the Institutional Class shares of the other TIAA-CREF Funds and also may invest in other types of permissible investment products or pools as selected by the Board from time to time. Generally, each Fund seeks to meet its objective by investing: (1) approximately 55% of its net assets in mutual funds that invest primarily in equity securities (“equity funds”); (2) up to 5% of its net assets in mutual funds that invest primarily in real estate securities (“real estate funds”); and (3) approximately 40% of its net assets in mutual funds that invest primarily in fixed-income securities (“fixed-income funds”). When the managers believe that changes in financial and economic conditions affect the relative attractiveness of the markets in which the equity and

23




fixed-income funds are invested, they may adjust a Fund’s percentage holdings of these underlying funds up or down by up to 5%

Bond Plus Fund and Institutional Bond Plus Fund II

The Bond Plus Fund and the Institutional Bond Plus Fund II share identical investment objectives and principal investment strategies. Each Fund seeks a favorable long-term return, primarily through high current income consistent with preserving capital. The portfolio of each Fund is divided into two segments. The first segment, which makes up at least 75% of the Fund, is invested primarily in a broad range of the debt securities in the Lehman Brothers U.S. Aggregate Index. The majority of this segment is invested in U.S. Treasury and agency securities, corporate bonds, and mortgage-backed and asset-backed securities. Each Fund is managed to track the duration of the Lehman Index. Each Fund holds mainly investment-grade securities rated in the top four credit categories by Moody’s Investors Service, Inc. (“Moody’s”) or Standard & Poor’s Corporation (“Standard & Poor’s”). Each Fund overweights or underweights individual securities or sectors as compared to their weight in the Lehman Index depending on where we find undervalued or overlooked issues that we believe offer the potential for superior returns. Each Fund’s second segment seeks enhanced returns through investments in illiquid securities (such as private placements) or non-investment-grade securities, but investments in illiquid securities will not be more than 15% of the Fund’s net assets.

Short-Term Bond Fund and Institutional Short-Term Bond Fund

The Short-Term Bond Fund and the Institutional Short-Term Bond Fund share an identical investment objective of seeking high current income consistent with preservation of capital. The Funds also share identical principal investment strategies. Each Fund invests primarily in a broad range of investment-grade debt securities that make up the Lehman Brothers Mutual Fund Short (1-5 year) Government/Credit Index. These are primarily U.S. Treasury and agency securities and corporate bonds with 1–5 year maturities. Each Fund can also hold domestic and foreign corporate bonds, debentures, notes, mortgage-backed securities, asset-backed securities, convertible securities and preferred stocks. Each Fund is managed to track the duration of the Lehman Index. Each Fund has a policy of maintaining a dollar-weighted average maturity of portfolio holdings of no more than three years. Each Fund may overweight or underweight individual securities or sectors as compared to their weight in the Lehman Index, or hold securities not in the index, depending on where we find undervalued or overlooked issues that we believe offer the potential for superior returns.

High-Yield Bond Fund and Institutional High-Yield Fund II

The High-Yield Bond Fund and the Institutional High-Yield Fund II share identical investment objectives and principal investment strategies. Each Fund seeks high current income and, when consistent with its primary objective, capital appreciation. Each Fund invests primarily in lower-rated, higher-yielding fixed-income securities, such as domestic

24




and foreign corporate bonds, debentures, loans and notes, as well as convertible securities and preferred stocks. Under normal market conditions, each Fund invests at least 80% of its assets in bonds, including debt and other fixed-income securities, rated lower than investment grade (and their unrated equivalents) — often called ‘junk bonds.” Most of these investments will be rated in the BB or B categories by Standard & Poor’s or in the Ba or B categories by Moody’s. Each Fund may invest up to 20% of its assets in the following other types of instruments: payment-in-kind or deferred interest obligations, defaulted securities, asset-backed securities, securities rated below B- and illiquid securities. Each Fund can also hold U.S. Treasury and Agency securities whenever suitable corporate securities are not available or we want to increase the fund’s liquidity. Up to 20% of a Fund’s assets can be invested in securities of foreign issuers. Investments in illiquid securities will never be more than 15% of either fund’s assets. The securities each Fund owns will usually have maturities of ten years or less.

Tax-Exempt Bond Fund and Institutional Tax-Exempt Bond Fund II

The Tax-Exempt Bond Fund and the Institutional Tax-Exempt Bond Fund II share identical investment objectives and principal investment strategies. Each Fund seeks a high level of current income that is exempt from regular federal income tax, consistent with preservation of capital. Each Fund invests primarily in investment-grade municipal securities, the interest on which is exempt from regular federal income tax (i.e., excludable from gross income for individuals for federal income tax purposes). Under normal market conditions, each Fund has a fundamental policy to invest at least 80% of its assets in tax-exempt bonds. Each Fund can invest up to 20% of its assets in private activity bonds. Each Fund invests in intermediate- and long-term securities with remaining maturities at the time of purchase from approximately 8 to 12 years. Each Fund seeks to maintain the average duration of its benchmark, the Lehman Brothers 10-Year Municipal Bond Index, which is approximately 7 years. Each Fund may invest up to 20% of its assets in non-investment-grade securities such as “junk bonds” or in non-rated securities.

Money Market Fund and Institutional Money Market Fund

The Money Market Fund and the Institutional Money Market Fund share very similar investment objectives and principal investment strategies. Each Fund seeks high current income consistent with maintaining liquidity and preserving capital, by investing primarily in high-quality short-term money market instruments. Each Fund limits its investments to securities that present minimal credit risk and are rated in the highest rating categories for short-term instruments. Each Fund only purchases money market instruments that at the time of purchase are “First Tier Securities” — that is, instruments 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. Each Fund can also invest up to 30% of its assets in money market and debt instruments of foreign issuers denominated in U.S. dollars. An investment in either Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

25




Although each Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in either Fund.

How do the investment restrictions of the Retail and TIAA-CREF Funds compare?

This section briefly compares and contrasts the investment restrictions of each Retail Fund with those of its corresponding TIAA-CREF Fund. In general, the Retail and TIAA-CREF Funds’ investment restrictions are substantially similar, with some minor differences that are outlined below. More complete information may be found in the respective SAIs for the Retail and TIAA-CREF Funds.

Issuance of Senior Securities.  The Retail Funds may not issue senior securities except as SEC regulations permit. The TIAA-CREF Funds may not issue senior securities except as permitted by law.

Borrowings.  The Retail and TIAA-CREF Funds may not borrow money, except (1) the Retail and TIAA-CREF Funds may purchase securities on margin, as described below, and (2) from banks (only in amounts not in excess of 33-1/3% of the market value of the fund’s assets at the time of borrowing). The Retail and TIAA-CREF Funds may also borrow from other sources for temporary purposes, except that (1) each of the Retail Funds is restricted with respect to such borrowings to amounts not exceeding 5% of the Retail Fund’s total assets taken at market value at the time of borrowing), and (2) each of the TIAA-CREF Funds is restricted with respect to such borrowings to amounts not exceeding 5%, or such greater amount as may be permitted by law, of the TIAA-CREF Fund’s total assets taken at market value at the time of borrowing.

Securities Underwritings.  Both the Retail and TIAA-CREF Funds may not underwrite the securities of other companies, except to the extent that they may be deemed an underwriter in connection with the disposition of securities from their portfolios.

Real Estate or Mortgages.  Both the Retail and TIAA-CREF Funds may not purchase real estate or mortgages directly.

Commodities.  Both the Retail and TIAA-CREF Funds may not purchase commodities or commodities contracts, except to the extent futures are purchased.

Purchases of Securities on Margin.  Both the Retail and TIAA-CREF Funds may not purchase securities on margin except that they may obtain such short-term credits as may be necessary for the clearance of purchases and sales of portfolio securities.

Loans.  The Equity Index Fund, the Social Choice Equity Fund, the Short-Term Bond Fund, the High-Yield Bond Fund, the Tax-Exempt Bond Fund and each of the TIAA-CREF Funds will not lend any security or make any other loan if, as a result, more than 33-1/3% of its total assets would be lent to other parties, except that this limit does not apply to repurchase agreements. The International Equity Fund, Growth Equity Fund, Growth &

26




Income Fund, Managed Allocation Fund, Bond Plus Fund and Money Market Fund will not make loans, except: (1) that a Fund may make loans of portfolio securities not exceeding 33-1/3% of the value of its total assets, which are collateralized by either cash, U.S. Government securities, or other means permitted by applicable law, equal to at least 100% of the market value of the loaned securities, as reviewed daily; (2) loans through entry into repurchase agreements; (3) privately-placed debt securities may be purchased; or (4) participation interests in loans, and similar investments, may be purchased.

Concentration in Issuers (Diversification).  Each of the Retail and TIAA-CREF Funds will not, with respect to at least 75% of the value of its total assets, invest more than 5% of its total assets in the securities of any one issuer, other than securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities, or hold more than 10% of the outstanding voting securities of any one issuer.

Concentration in Industries.  Each of the Funds, with the exception of the Managed Allocation Fund and the Money Market Fund II, and each of the TIAA-CREF Funds, with the exception of the Institutional Managed Allocation Fund II, may not invest in an industry if after giving effect to that investment, the Fund’s holding in that industry would exceed 25% of its total assets. The Managed Allocation Fund and the Institutional Managed Allocation Fund II each may invest up to 100% of its assets in securities issued by mutual funds and other investment companies. The Money Market Fund may invest more than 25% of its assets in obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, and will not otherwise invest in an industry if after giving effect to that investment, its holdings in that industry would exceed 25% of its total assets.

Temporary Waiver of Investment Restrictions.  The issuer and industry concentration investment restrictions of the Retail Funds, which prohibit them from acquiring more than a stated percentage of ownership of another issuer or industry, might be construed as restricting their ability to carry out the Reorganizations. By approving the Plan, Retail Fund shareholders will be agreeing to waive, only for the purpose of the Reorganizations, those fundamental investment restrictions that could prohibit or otherwise impede these transactions.

Securities of Registered Investment Companies.  The Managed Allocation Fund may not invest in securities other than securities of other registered investment companies or registered unit investment trusts that are part of the TIAA-CREF family of funds, government securities or short-term securities. The Institutional Managed Allocation Fund II is subject to a similar, yet broader limitation, in that it may only invest in registered investment companies or other permissible investment products or pools approved by the Board, government securities or short-term securities.

Tax-Exempt Securities.  Under normal market conditions, the Tax-Exempt Bond Fund and the Institutional Tax-Exempt Bond Fund II each invests at least 80% of its assets in tax-exempt bonds, a type of municipal security, the interest on which is exempt from

27




federal income tax, including federal alternative minimum tax. The Tax-Exempt Bond Fund and the Institutional Tax-Exempt Bond Fund II each may invest more than 25% of its assets in tax-exempt securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities, or by a state or local government or political subdivision of any of the foregoing. Each of the Funds may not otherwise invest in an industry if after giving effect to that investment the Fund’s holding in that industry would exceed 25% of its total assets.

How have the Retail and TIAA-CREF Funds performed?

The bar charts and performance tables below help illustrate some of the risks of investing in the Retail and TIAA-CREF Funds, and how investment performance varies. Performance information for Retail Class and Institutional Class shares of the Institutional Large-Cap Growth Fund, Institutional Managed Allocation Fund II, Institutional Bond Plus Fund II, Institutional Short-Term Bond Fund II, Institutional High-Yield Fund II and Institutional Tax-Exempt Bond Fund II, as well as performance information for Retail Class shares of the Institutional International Equity Fund, Institutional Growth & Income Fund, Institutional Equity Index Fund, Institutional Social Choice Equity Fund and Institutional Money Market Fund, is not presented because such shares were not offered during the time periods shown. However, for those time periods where both a corresponding Retail Fund and TIAA-CREF Fund were in existence, the charts and tables show that their performance has been relatively similar. How the Retail and TIAA-CREF Funds have performed (before and after taxes) in the past is not necessarily an indication of how they will perform in the future.

Bar Charts.  The bar charts show the performance of the Retail Funds and, if available, the performance of the Institutional Class shares of each counterpart TIAA-CREF Fund, before taxes, in each full calendar year since inception of the Fund. Below each chart we note the best and worst calendar quarter returns since inception of the Fund. Please note that how the Funds have performed in the past is not necessarily an indication of how they will perform in the future.

28



International Equity Funds

Retail Fund: International Equity Fund

  

 

Best quarter: 36.65%, for the quarter ended December 31, 1999.
Worst quarter: –20.18%, for the quarter ended September 30, 2002.

TIAA-CREF Fund: International Equity Fund

 

 

Best quarter: 37.68%, for the quarter ended December 31, 1999.
Worst quarter: –19.39%, for the quarter ended September 30, 2002.

29



Growth Equity Fund/Institutional Large-Cap Growth Fund

Retail Fund: Growth Equity Fund

  

 

Best quarter: 28.36%, for the quarter ended December 31, 1998.
Worst quarter: –22.69%, for the quarter ended March 31, 2001.

TIAA-CREF Fund: Large-Cap Growth Fund

No comparative performance since not in existence for at least one calendar year.

Growth & Income Funds

Retail Fund: Growth & Income Fund

 

Best quarter: 22.99%, for the quarter ended December 31, 1998.
Worst quarter: –16.54%, for the quarter ended September 30, 2002.

30



TIAA-CREF Fund: Growth & Income Fund

 

Best quarter: 15.98%, for the quarter ended December 31, 1999.
Worst quarter: –16.46%, for the quarter ended September 30, 2002.

Equity Index Funds

Retail Fund: Equity Index Fund

 

Best quarter: 16.06%, for the quarter ended June 30, 2003.
Worst quarter: –17.00%, for the quarter ended September 30, 2002.

31



TIAA-CREF Fund: Equity Index Fund

 

Best quarter: 16.22%, for the quarter ended June 30, 2003.
Worst quarter: –17.24%, for the quarter ended September 30, 2002.

Social Choice Equity Funds

Retail Fund: Social Choice Equity Fund

 

Best quarter: 16.43%, for the quarter ended June 30, 2003.
Worst quarter: –16.41%, for the quarter ended September 30, 2002.

32



TIAA-CREF Fund: Social Choice Equity Fund

 

Best quarter: 16.24%, for the quarter ended June 30, 2003.
Worst quarter: –16.32%, for the quarter ended September 30, 2002.

Managed Allocation Funds

Retail Fund: Managed Allocation Fund

 

Best quarter: 14.01%, for the quarter ended December 31, 1998.
Worst quarter: –9.43%, for the quarter ended March 31, 2001.

TIAA-CREF Fund: Managed Allocation Fund II

No comparative performance since not in existence for at least one calendar year.

33



Bond Plus Funds

Retail Fund: Bond Plus Fund

 

Best quarter: 5.11%, for the quarter ended September 30, 2002.
Worst quarter: –2.42%, for the quarter ended June 30, 2004.

TIAA-CREF Fund: Bond Plus Fund II

No comparative performance since not in existence for at least one calendar year.

Short-Term Bond Funds

Retail Fund: Short-Term Bond Fund

 

Best quarter: 4.10% for the quarter ended September 30, 2001.
Worst quarter: –1.71%, for the quarter ended June 30, 2004.

TIAA-CREF Fund: Short-Term Bond Fund II

No comparative performance since not in existence for at least one calendar year.

34



High-Yield Bond Funds

Retail Fund: High-Yield Bond Fund

 

Best quarter: 8.35%, for the quarter ended June 30, 2003.
Worst quarter: –5.57%, for the quarter ended June 30, 2002.

TIAA-CREF Fund: High-Yield Fund II

No comparative performance since not in existence for at least one calendar year.

Tax-Exempt Bond Funds

Retail Fund: Tax-Exempt Bond Fund

 

Best quarter: 5.29%, for the quarter ended September 30, 2002.
Worst quarter: –2.41%, for the quarter ended June 30, 2004.

TIAA-CREF Fund: Tax-Exempt Bond Fund II

No comparative performance since not in existence for at least one calendar year.

35



Money Market Funds

Retail Fund: Money Market Fund

 

Best quarter: 1.63%, for the quarter ended December 31, 2000.
Worst quarter: 0.20%, for the quarter ended March 31, 2004.

TIAA-CREF Fund: Money Market Fund

 

Best quarter: 1.65%, for the quarter ended December 31, 2000.
Worst quarter: 0.25%, for the quarter ended September 30, 2003.

Performance Tables.  The performance tables following the charts show the returns (before and after taxes) for the Retail Funds and, if available, Institutional Class shares of the TIAA-CREF Funds over the 2005 calendar year, for the five-year period from 2001 to 2005 for those Funds (or classes thereof) with five years of performance returns, and since inception and how those returns compare to those of broad-based securities market indices. No performance is presented for Funds and/or classes with less than one calendar year of performance. After-tax returns are calculated using the historical highest individual federal marginal income tax rates in effect during the periods shown, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements such as 401(a), 401(k) or 403(b) plans or Individual Retirement Accounts (“IRAs”). In addition, the benchmark indices reflect no deductions for fees, expenses or taxes.

36






   
One Year
(January 1, 2005 to
December 31, 2005)
   
Five Years
(January 1, 2001 to
December 31, 2005)
   
Since Inception to
December 31, 2005
INTERNATIONAL EQUITY FUNDS
                                                                     
 
Retail Fund
                                                                     
Inception Date: September 2, 1997
                                                                     
Return Before Taxes
                    14.23 %             3.80 %             6.94 %  
Return After Taxes on Distributions
                    14.10 %             3.53 %             6.13 %  
Return After Taxes on Distributions
and Sale of Fund Shares
                    9.67 %             3.18 %             5.71 %  
MSCI EAFE® Index
                    13.54 %             4.60 %             5.74 %  
 
Institutional Class of TIAA-CREF Fund
                                                                     
Inception Date: July 1, 1999
                                                                     
Return Before Taxes
                    14.78 %             4.56 %             6.41 %  
Return After Taxes on Distributions
                    13.16 %             3.68 %             5.45 %  
Return After Taxes on Distributions
and Sale of Fund Shares
                    11.35 %             3.58 %             5.14 %  
MSCI EAFE® Index
                    13.54 %             4.60 %             4.26 %  
 
GROWTH EQUITY FUND
                                                                     
 
Retail Fund (Growth Equity Fund)
                                                                     
Inception Date: September 2, 1997
                                                                     
Return Before Taxes
                    5.24 %             –5.10 %             2.21 %  
Return After Taxes on Distributions
                    5.17 %             –5.22 %             1.72 %  
Return After Taxes on Distributions
and Sale of Fund Shares
                    3.49 %             –4.30 %             1.80 %  
Russell 1000® Growth Index
                    5.26 %             –3.58 %             2.92 %  
 
GROWTH & INCOME FUNDS
                                                                     
 
Retail Fund
                                                                     
Inception Date: September 2, 1997
                                                                     
Return Before Taxes
                    6.26 %             –0.69 %             5.60 %  
Return After Taxes on Distributions
                    6.07 %             –0.95 %             5.04 %  
Return After Taxes on Distributions
and Sale of Fund Shares
                    4.31 %             –0.69 %             4.62 %  
S&P 500® Index
                    4.91 %             0.54 %             5.61 %  
 
Institutional Class of TIAA-CREF Fund
                                                                     
Inception Date: July 1, 1999
                                                                     
Return Before Taxes
                    6.35 %             –0.45 %             –0.40 %  
Return After Taxes on Distributions
                    4.09 %             –1.14 %             –1.09 %  
Return After Taxes on Distributions
and Sale of Fund Shares
                    7.17 %             –1.09 %             –0.51 %  
S&P 500® Index
                    4.91 %             0.54 %             0.09 %  

37






   
One Year
(January 1, 2005 to
December 31, 2005)
   
Five Years
(January 1, 2001 to
December 31, 2005)
   
Since Inception to
December 31, 2005
EQUITY INDEX FUNDS
                                                                     
 
Retail Fund
                                                                     
Inception Date: April 3, 2000
                                                                     
Return Before Taxes
                    5.84 %             1.39 %             –0.88 %  
Return After Taxes on Distributions
                    5.61 %             0.95 %             –1.29 %  
Return After Taxes on Distributions
and Sale of Fund Shares
                    4.11 %             1.01 %             –0.92 %  
Russell 3000® Index
                    6.12 %             1.58 %             –0.76 %  
 
Institutional Class of TIAA-CREF Fund
                                                                     
Inception Date: July 1, 1999
                                                                     
Return Before Taxes
                    6.05 %             1.50 %             1.14 %  
Return After Taxes on Distributions
                    4.76 %             0.93 %             0.55 %  
Return After Taxes on Distributions
and Sale of Fund Shares
                    5.68 %             1.15 %             0.78 %  
Russell 3000® Index
                    6.12 %             1.58 %             1.28 %  
 
SOCIAL CHOICE EQUITY FUNDS
                                                                     
 
Retail Fund
                                                                     
Inception Date: April 3, 2000
                                                                     
Return Before Taxes
                    6.52 %             1.48 %             –0.44 %  
Return After Taxes on Distributions
                    6.32 %             1.18 %             –0.76 %  
Return After Taxes on Distributions
and Sale of Fund Shares
                    4.50 %             1.13 %             –0.52 %  
Russell 3000® Index
                    6.12 %             1.58 %             –0.76 %  
 
Institutional Class of TIAA-CREF Fund
                                                                     
Inception Date: July 1, 1999
                                                                     
Return Before Taxes
                    6.67 %             1.64 %             1.17 %  
Return After Taxes on Distributions
                    6.46 %             1.30 %             0.70 %  
Return After Taxes on Distributions
and Sale of Fund Shares
                    4.63 %             1.25 %             0.75 %  
Russell 3000® Index
                    6.12 %             1.58 %             1.28 %  

38






   
One Year
(January 1, 2005 to
December 31, 2005)
   
Five Years
(January 1, 2001 to
December 31, 2005)
   
Since Inception to
December 31, 2005
MANAGED ALLOCATION FUND
                                                                     
 
Retail Fund
                                                                     
Inception Date: September 2, 1997
                                                                     
Return Before Taxes
                    5.24 %             2.78 %             6.26 %  
Return After Taxes on Distributions
                    4.29 %             1.46 %             4.83 %  
Return After Taxes on Distributions
and Sale of Fund Shares
                    3.53 %             1.62 %             4.49 %  
MSCI EAFE® Index
                    13.54 %             4.60 %             5.74 %  
Russell 3000® Index
                    6.12 %             1.58 %             5.99 %  
Lehman Brothers US Aggregate Index
                    5.29 %             2.93 %             5.41 %  
Composite Index (12% MSCI EAFE® Index, 48% Russell 3000® Index and 40% Lehman Brothers US Aggregate Index)
                    5.68 %             4.18 %             6.77 %  
 
BOND PLUS FUND
                                                                     
 
Retail Fund
                                                                     
Inception Date: September 2, 1997
                                                                     
Return Before Taxes
                    2.42 %             5.90 %             6.39 %  
Return After Taxes on Distributions
                    0.89 %             3.80 %             4.05 %  
Return After Taxes on Distributions
and Sale of Fund Shares
                    1.58 %             3.80 %             4.03 %  
Lehman Brothers U.S. Aggregate Index
                    2.43 %             5.87 %             6.35 %  
 
SHORT-TERM BOND FUND
                                                                     
 
Retail Fund
                                                                     
Inception Date: April 3, 2000
                                                                     
Return Before Taxes
                    1.47 %             4.67 %             5.42 %  
Return After Taxes on Distributions
                    0.22 %             3.04 %             3.61 %  
Return After Taxes on Distributions
and Sale of Fund Shares
                    0.95 %             3.03 %             3.55 %  
Lehman Brothers U.S. Government/Credit (1–5 Year) Index
                    1.44 %             4.71 %             5.40 %  
 
HIGH-YIELD BOND FUND
                                                                     
 
Retail Fund
                                                                     
Inception Date: April 3, 2000
                                                                     
Return Before Taxes
                    2.72 %             7.80 %             7.35 %  
Return After Taxes on Distributions
                    0.20 %             4.59 %             4.04 %  
Return After Taxes on Distributions
and Sale of Fund Shares
                    1.74 %             4.67 %             4.20 %  
Merrill Lynch BB/B Cash Pay Issuer Constrained Index
                    3.41 %             8.56 %             7.28 %  

39






   
One Year
(January 1, 2005 to
December 31, 2005)
   
Five Years
(January 1, 2001 to
December 31, 2005)
   
Since Inception to
December 31, 2005
TAX-EXEMPT BOND FUND
                                                                     
 
Retail Fund
                                                                     
Inception Date: April 3, 2000
                                                                     
Return Before Taxes
                    2.12 %             5.61 %             6.22 %  
Return After Taxes on Distributions
                    2.04 %             5.31 %             5.94 %  
Return After Taxes on Distributions
and Sale of Fund Shares
                    2.72 %             5.25 %             5.82 %  
Lehman Brothers 10-Year Municipal
Bond Index
                    2.74 %             5.44 %             6.16 %  
 
MONEY MARKET FUNDS
                                                                     
 
Retail Fund
                                                                     
Inception Date: September 2, 1997
                                                                     
Return Before Taxes
                    3.02 %             2.15 %             3.52 %  
iMoneyNet Money Fund Report
AveragesTM — All Taxable
                    2.66 %             1.81 %             3.16 %  
 
Institutional Class of TIAA-CREF Fund
                                                                     
Inception Date: July 1, 1999
                                                                     
Return Before Taxes
                    3.22 %             2.28 %             3.15 %  
iMoneyNet Money Fund Report
AveragesTM — All Taxable
                    2.66 %             1.81 %             2.67 %  
 

For the most current 7-day yield of the Money Market Fund or the Institutional Money Market Fund, please call us at (800) 897-9069.

Are there differences in the oversight and organization of the Retail Funds and TIAA-CREF Funds?

Boards of Trustees.  The members of the Boards of Trustees of the Retail and Institutional Trusts are identical. The Retail and Institutional Trust Boards have the same Committee structure and generally hold concurrent meetings. Therefore, there is no expectation of a difference in the scope or level of Board oversight between the Retail and Institutional Trusts

Organization. Both the Retail and TIAA-CREF Funds are organized as Delaware statutory trusts. As Delaware statutory trusts, their operations are governed by their respective Declarations of Trusts.

The Retail Trust currently offers eleven (11) diversified portfolios, each with only one class of shares. Shares of the Funds generally are offered directly to the investing public.

40



Institutional Trust currently offers twenty-nine (29) diversified portfolios that offer up to three classes of shares:

•  
  Retail Class shares, which are offered directly to the investing public.

•  
  Institutional Class shares, which are only available for purchase by or through certain intermediaries affiliated with TIAA-CREF, or other persons, such as state-sponsored tuition savings plans, or employer-sponsored employee benefit plans, who have entered into a contract or arrangement to purchase shares of the Funds with a TIAA-CREF intermediary, other affiliates of TIAA-CREF or other persons that the TIAA-CREF Institutional Mutual Funds may approve from time to time. Under certain circumstances, this class may be offered through accounts established by employers, through TIAA-CREF, in connection with certain employee benefit plans, such as 401(a) (including 401(k) and Keogh plans), 403(a), 403(b) and 457 plans, or through custody accounts established by individuals through TIAA-CREF as Individual Retirement Accounts (“IRAs”).

•  
  Retirement Class shares, which are offered exclusively through accounts established by employees in connection with certain employee benefit plans, or through certain custody accounts established by individuals as IRAs. No Retail Fund shareholder will receive Retirement Class shares as part of a Reorganization.

In addition, the Institutional Trust offers seven diversified portfolios structured as “funds of funds” known as the Lifecycle Funds, which invest in Institutional Class shares of other TIAA-CREF Funds. The Lifecycle Funds have two classes of shares, Institutional and Retirement, which generally are offered to the same types of investors as noted above for Institutional and Retirement Class shares of the other portfolios of the Institutional Trust.

Will any other service providers to the Retail or TIAA-CREF Funds change after the Reorganizations?

The Retail and TIAA-CREF Funds currently have the same service providers, each of which is expected to continue in its current role after the Reorganizations. These service providers are noted below:

•  
  Distributor. Shares of the Retail and TIAA-CREF Funds are distributed by TPIS, 730 Third Avenue, New York, NY 10017-3206. TPIS is a broker-dealer and a member of the National Association of Securities Dealers, Inc. TPIS is a wholly-owned subsidiary of TIAA-CREF Enterprises, Inc., which is a wholly owned subsidiary of TIAA.

•  
  Custodian. JP Morgan Chase Bank, 4 Chase MetroTech Center, Brooklyn, NY 11245, acts as custodian for the Retail and TIAA-CREF Funds.

•  
  Transfer and Dividend-Paying Agent. Boston Financial Data Services, Inc., 2 Heritage Drive, Quincy, MA 02171, serves as the transfer and dividend-paying agent for the Retail and TIAA-CREF Funds.

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•  
  Independent Registered Public Accounting Firm. PricewaterhouseCoopers LLP serves as independent registered public accounting firm for both the Retail and TIAA-CREF Funds and has audited the Funds’ financials for their 2005 fiscal years. For prior fiscal periods, the Retail and TIAA-CREF Funds had a different independent registered public accounting firm, which audited their financials during those prior periods.

How do I purchase, redeem or exchange shares Retail Class shares of the TIAA-CREF Funds and will it be different than for Retail Fund shares?

Shares of the Retail Funds and the Retail Class of the TIAA-CREF Funds generally are purchased, redeemed and exchanged in the same manner.

Purchases of Shares.  Shares of the Retail Funds and Retail Class shares of the TIAA-CREF Funds may be purchased for the following accounts: (1) individual and joint accounts, including Transfer on Death Accounts; (2) trust accounts (other than foreign trust accounts), (3) accounts for a minor child under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfer to Minors Act (UTMA), (4) traditional IRAs and Roth IRAs, (5) Coverdell Education Savings Accounts (formerly, Education IRAs), and (6) corporate/institutional Accounts. Accounts may be opened on-line, by mail or by wire. Retail Class shares of the TIAA-CREF Funds may also be purchased by affiliated investment companies. The minimum initial investment for Traditional IRA, Roth IRA and Coverdell Accounts is $2,000 per Fund account. The minimum initial investment for all other accounts is $2,500 per Fund account. Initial investments made via the Automatic Investment Plan option require an initial investment of at least $50 per Fund account ($100 for TIAA-CREF Funds’ Retail Class). The minimum subsequent investment per Fund for all account types, as well as subsequent investments made via the Automatic Investment Plan, is $50 ($100 for TIAA-CREF Funds’ Retail Class). Additional shares may be purchased by mail, by Automatic Investment Plan, by telephone, over the internet or by wire. In addition, each reserves the right to redeem shares in any account if the value of that account drops below $1,500 either through redemption activity or declines in a Fund’s market value (shareholders are allowed at least 60 days, after written notice, to make an additional investment to bring the account value up to at least the specified minimum before the redemption is processed). Additionally, each reserves the right to reject any exchange request that is regarded as disruptive to a Fund’s efficient portfolio management.

Redemptions of Shares.  Shares of the Retail Funds and Retail Class shares of the TIAA-CREF Funds may be redeemed (sold) at any time. Shares may be redeemed by mail, telephone or by systematic redemption plan. In addition, shareholders of the Funds who have elected the Money Market Fund’s check writing privilege may make redemptions from the Money Market Fund by check. Redemptions of shares must be for at least $250 or the balance of an investment in a Fund, if less.

Exchanges of Shares.  Retail Class shares of the TIAA-CREF Funds currently are accorded the following exchange privileges: (1) exchange of Retail Class shares of a

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TIAA-CREF Fund for Retail Class shares of another TIAA-CREF Fund; (2) exchange of Retail Class shares of a TIAA-CREF Fund for shares of a Retail Fund; and (3) exchange of shares of a Retail Fund for Retail Class shares of a TIAA-CREF Fund. If the Reorganizations are consummated, TIAA-CREF Fund Retail Class shareholders will no longer be able to make exchanges to and from the Retail Funds. For any account, an exchange to a Fund in which an investor already owns shares must be at least $50, and an exchange to a new fund account must meet the account minimums specified for that particular account. Exchanges may be made by mail, by telephone, over the internet, or by systematic exchange. The TIAA-CREF Funds reserve the right to suspend an investor’s exchange privilege if the investor has made more than 12 exchanges within a 12-month period for Retail Class shares of any TIAA-CREF Fund except the International Equity Fund and the High-Yield Fund II and the High-Yield Bond Fund of the TIAA-CREF Mutual Funds. With respect to the International Equity Fund, High-Yield Fund II and the High-Yield Bond Fund, the TIAA-CREF Funds reserve the right to suspend an investor’s exchange privilege if the investor has made more than six (6) exchanges within a 12-month period. In addition, the TIAA-CREF Funds reserve the right to reject any exchange request that is regarded as disruptive to a TIAA-CREF Fund’s efficient portfolio management.

The exchange privileges of the Retail Funds are the same as for the Retail Class shares of the TIAA-CREF Funds, except that exchanges of shares of the Retail Funds are limited to shares of other Retail Funds.

For more information on the purchase, redemption or exchange of Retail Class shares of the TIAA-CREF Funds, please see the Appendix.

How do I purchase, redeem or exchange shares of the Institutional Class of the TIAA-CREF Funds?

The following descriptions are for those Retail Funds shareholders who, upon the Reorganizations, would receive Institutional Class shares of the TIAA-CREF Funds.

Purchases of Shares.  In contrast to the Retail Class, the Institutional Class shares of the TIAA-CREF Funds are only available for purchase by or through 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, or employer-sponsored employee benefit plans, who have entered into a contract or arrangement with a TIAA-CREF Intermediary that enables them to purchase shares of the Funds, or other affiliates of TIAA-CREF or other persons that the TIAA-CREF Institutional Mutual Funds may approve from time to time (collectively, such persons eligible to purchase Institutional Class shares are referred to as “Eligible Investors”). Under certain circumstances, this class may be offered through accounts established by employers, through TIAA-CREF, in connection with certain employee benefit plans, such as 401(a) (including 401(k) and Keogh plans), 403(a), 403(b) and 457 plans, or through custody accounts established by individuals through TIAA-CREF as IRAs. There is no minimum

43




investment requirement for Eligible Investors. Institutional Class shares may be purchased via wire or through the Trust Company. In addition, the Advisor, at its sole discretion, may permit an Eligible Investor to purchase Institutional Class shares with investment securities instead of cash in certain circumstances. The TIAA-CREF Funds reserve the right to reject any exchange request that is regarded as disruptive to a Fund’s efficient portfolio management.

Redemption of Shares.  Institutional Class shares of the TIAA-CREF Funds may be redeemed (sold) at any time. Institutional Class shares purchased through an Eligible Investor, including the Trust Company, may be subject to certain redemption requirements or restrictions. Eligible Investors making large redemptions that exceed the lesser of $250,000 or 1% of a TIAA-CREF Fund’s assets during any 90-day period may, at the TIAA-CREF Fund’s sole discretion, be required to receive a distribution in-kind upon redemption whereby the Eligible Investor receives portfolio securities instead of cash.

Exchanges of Shares.  Eligible Investors may exchange Institutional Class shares of the TIAA-CREF Funds for Institutional Class shares of any other TIAA-CREF Fund. Eligible Investors may make an exchange by telephone or through the Trust Company. The TIAA-CREF Funds reserve the right to reject any exchange request that is regarded as disruptive to a Fund’s efficient portfolio management, and to modify, suspend or terminate the exchange privilege at any time for any shareholder or class of shareholders.

For more information on the purchase, redemption or exchange of Institutional Class shares of the TIAA-CREF Funds, please see the Appendix.

How do the dividend and distribution policies of the Retail and TIAA-CREF Funds compare?

Each Retail and TIAA-CREF Fund declares and pays dividends from net investment income and realized net capital gains (if any) at least annually. With respect to dividends and capital gains distributions, shareholders of the Retail and TIAA-CREF Funds may elect from among the following distribution options: (1) automatic reinvestment of dividend and capital gain distributions in additional shares of the Fund; (2) automatic reinvestment of dividend and capital gain distributions in additional shares another Fund in which you already hold shares; (3) automatic reinvestment of long-term capital gain distributions, and receipt of a check for each dividend and short-term capital gain distribution; (4) automatic reinvestment of dividend and short-term capital gain distributions, and receipt of a check for each long-term capital gain distributions; and (5) receipt of a check for each dividend and capital gain distribution. For more information on the dividend and distribution policies of the TIAA-CREF Funds, please see the Appendix.

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COMPARISON OF RISK FACTORS

What are the risks of investing in the TIAA-CREF Funds? How do the risks of investing in the TIAA-CREF Funds compare with those of the Retail Funds?

Because each Retail Fund’s respective investment objective, principal investment strategies and portfolios are very similar, and in some cases identical, to those of its corresponding TIAA-CREF Fund, an investment in the corresponding TIAA-CREF Fund is subject to similar risks as an investment in the Retail Fund. As a result, the Reorganizations are not expected to expose shareholders to any additional principal risks.

Of course, you can lose money by investing in any of the TIAA-CREF Funds, or the TIAA-CREF Funds could underperform other investments. An investment in the TIAA-CREF 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.

In particular, the Retail and TIAA-CREF Funds are subject to the following general risks:

Market Risk.  The risk that the price of equity securities may decline in response to general market and economic conditions or events. Accordingly, the value of the equity securities that a TIAA-CREF Fund holds may decline over short or extended periods of time. Any stock is subject to the risk that the stock market as a whole may decline in value, thereby depressing the stock’s price. This is known as market risk. Equity markets tend to be cyclical, with periods when prices generally rise and periods when prices generally decline. Foreign equity markets tend to reflect local economic and financial conditions and therefore trends often vary from country to country and region to region.

Company Risk (often called Financial Risk).  The risk that the earnings prospects and overall financial position of companies held in the Funds’ portfolios will deteriorate, causing a decline in the security’s value over short or extended periods of time.

Foreign Investment Risk.  The risks of investing in securities of foreign issuers, securities or contracts traded on foreign exchanges or in foreign markets, or securities or contracts payable in foreign currency. Investing in foreign investments entails risks beyond those of domestic investing. These include: (1) changes in currency exchange rates; (2) possible imposition of market controls or currency exchange controls; (3) possible imposition of withholding taxes on dividends and interest; (4) possible seizure, expropriation or nationalization of assets; (5) more limited foreign financial information or difficulty in interpreting it because of foreign regulations and accounting standards; (6) the lower liquidity and higher volatility in some foreign markets; (7) the impact of political, social or diplomatic events; (8) the difficulty of evaluating some foreign economic trends; and (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

45




use foreign laws and courts to enforce financial or legal obligations. The risks described 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 and difficult to establish. In addition, foreign investors such as a TIAA-CREF Fund are subject to a variety of special restrictions in many countries.

The Growth Equity Fund, Large-Cap Growth Fund, and Growth & Income Funds are subject to:

Style Risk.  Funds that use an investing style entail the risk that equity securities representing the style may be out of favor in the marketplace for various periods of time. When this occurs, investors holding such securities, such as the Growth & Income Funds and Growth Equity Funds, may experience significant declines in the value of their portfolios. Style risk, therefore, is the risk that a Fund’s investing style falls out of favor with investors for a period of time.

Growth Investing Risk.  Due to their relatively high valuations, growth stocks are typically more volatile than value stocks. Because the value of growth companies is a function of their expected earnings growth, there is a risk that such earnings growth may not occur or cannot be sustained.

The Equity Index Funds and Social Choice Equity Funds are subject to:

Index Risk.  This is the risk that a Fund’s performance will not match its index for any period of time. Although the Equity Index Funds and Social Choice Equity Funds attempt to closely track the investment performance of its respective index, these Funds may not duplicate the exact composition of its index. In addition, unlike a Fund, the returns of an index are not reduced by investment and other operating expenses, and therefore, the ability of these Funds to match the performance of its index is adversely affected by the costs of buying and selling investments as well as other expenses. Therefore, none of these Funds can guarantee that its performance will match its index for any period of time.

For any fixed-income investments, the Retail and TIAA-CREF Funds are subject to the following additional risks:

Interest Rate Risk (a type of Market Risk).  The risk that the value or yield of fixed-income securities may decline if interest rates change. In general, when prevailing interest rates decline, the market value of fixed-income securities (particularly those paying a fixed rate of interest) tends to increase. Conversely, when prevailing interest rates increase, the market value of fixed-income securities (particularly those paying a fixed rate of interest) tends to decline. Depending on the timing of the purchase of a fixed-income security and the price paid for it, changes in prevailing interest rates may increase or decrease the security’s yield.

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Credit Risk (a type of Company Risk).  The risk that a decline in a company’s financial position may prevent it from making principal and interest payments on fixed-income securities when due. Credit risk relates to the ability of an issuer of a fixed-income security to pay principal and interest on the security on a timely basis and is the risk that the issuer could default on its obligations, thereby causing a Fund to lose its investment in the security.

Income Volatility Risk.  Income volatility risk refers to the degree and speed with which changes in prevailing market interest rates diminish the level of current income from a portfolio of fixed-income securities. The risk of income volatility is the risk that the level of current income from a portfolio of fixed-income securities declines in certain interest rate environments.

Prepayment and Extension Risk.  The risk of a decline in value arising from changes in duration for certain fixed-income securities that allow for prepayment or extension. Prepayment risk and extension risk are normally present in adjustable-rate mortgage loans, mortgage-backed securities and other asset-backed securities. For example, homeowners have the option to prepay their mortgages. Therefore, the duration of a security backed by home mortgages can either shorten (prepayment risk) or lengthen (extension risk). If interest rates on new mortgage loans fall sufficiently below the interest rates on existing outstanding mortgage loans, the rate of prepayment generally increases. Conversely, if mortgage loan interest rates rise above the interest rates on existing outstanding mortgage loans, the rate of prepayment generally decreases. In either case, a change in the prepayment rate and the resulting change in duration of fixed-income securities held by a Fund can result in losses to investors in the fund.

INFORMATION ABOUT THE REORGANIZATIONS

What are the reasons for the Reorganizations and what did the Board consider in determining to recommend the Reorganizations?

The Advisor has proposed the Reorganizations as part of TIAA-CREF’s current efforts to consolidate and streamline operations by offering a single mutual fund family with consistent and sustainable pricing, greater efficiencies and a continued high level of shareholder services. In submitting this proposal to the Board of the Retail Funds for its review and approval, the Advisor explained that it has been incurring substantial losses on its mutual fund business since the Retail Funds were launched in 1997. Although the proposed Reorganizations would result in higher levels of total expenses for Retail Fund shareholders, the Advisor noted that the pricing structure of the TIAA-CREF Funds is designed so that their expense ratios are competitive with the lower-priced offerings in the industry. In this regard, the Advisor maintained that TIAA-CREF remains committed to being a low-cost, high-value mutual fund provider.

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General discussions between the Board and the Advisor regarding the Advisor’s recommendation to combine the Funds began in December 2004 and continued at meetings held on May 17, 2005, and July 19, 2005.* After careful consideration, the Board made its ultimate decision to approve the Reorganizations and present them to shareholders for their approval at a meeting held on February 14, 2006. During this process, the Trustees, who were advised by independent counsel, deliberated over the Advisor’s comprehensive plan to restructure the Funds and their pricing to help ensure that the Advisor could continue to manage them. At the meeting held on February 14, 2006, the Board of Trustees of the Retail Funds considered and approved the Plan and each Reorganization. Likewise, the Institutional Trust Board of Trustees considered and approved the Plan and each Reorganization at a meeting held on February 14, 2006.

At these meetings, the Advisor explained that among the factors contributing to its substantial losses with respect to its mutual funds business was the fact that the investment management agreement between the Advisor and the Retail Funds bundled all of the services and expenses associated with operating the Retail Funds under one agreement for a single set fee (the “unitary fee”) charged by the Advisor. This unitary fee did not in fact cover the actual expenses incurred by the Advisor to manage and operate the Retail Funds. This was exacerbated by the fact that with its low investment minimums, the Retail Funds attracted many small shareholder accounts, leading to increased transfer agency and other administrative costs, which were then also borne by the Advisor. The Advisor noted that generally, mutual funds sold to retail investors do not operate under a unitary fee basis. Instead, mutual funds generally operate under an unbundled, non-unitary fee structure whereby the funds pay a management fee to their respective advisers for management services and the funds separately bear all non-management related fees and expenses such as transfer agency and other administrative costs (i.e., the adviser is not contractually obligated to bear the fees and expenses associated with such non-management services).

Due to the inflexibility of a unitary fee, the Advisor introduced new funds in 1999 through a new fund family, the TIAA-CREF Funds, which has an unbundled, non-unitary fee structure. Many of the TIAA-CREF Fund investment objectives and strategies were very similar, and in some cases identical, to those of the Retail Funds, although their fee structure was different. Even with this unbundled structure, the Advisor asserted that it continued to incur losses on the TIAA-CREF Funds as well, and therefore recently sought and obtained Institutional Trust Board and shareholder approval to amend the investment management agreement to increase the management fees on the actively-managed TIAA-CREF Funds, add a 12b-1 distribution plan on Retail Class shares to finance distribution and reallocate the responsibility for payment of most “other expenses” from the Advisor to the Funds.


*  
  Note that Eugene Flood, Jr., Howell E. Jackson, and James M. Poterba, who are currently Trustees of both the Retail and TIAA-CREF Funds, did not become members of these Boards until August 31, 2005 (in the case of Messrs. Flood and Jackson) and April 3, 2006 (in the case of Mr. Poterba).

  

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Given the similar ongoing losses to the Advisor in managing the Retail Funds, as a secondary step, the Advisor proposed to the Retail and TIAA-CREF Fund Boards that the Retail Funds be reorganized into their counterpart TIAA-CREF Funds so that, in effect, the pricing structure of these publicly-offered TIAA-CREF mutual funds could be standardized and set at a level that was reasonable and sustainable. At this time, the Advisor also indicated that if the Reorganizations were not approved, it would need to consider alternative measures, including likely recommending that the Retail Funds be closed to new investments and/or liquidated.

Given these circumstances, the Retail Fund Board considered the Advisor’s assertion that the Reorganizations would allow it to:

•  
  Ensure that the combined Funds remain fairly and competitively priced for shareholders while enabling the Advisor to provide the same level of service to shareholders;

•  
  Maintain overall fees at a level that keeps the combined Funds competitive with the lower-priced offerings in the industry, while reflecting the Advisor’s costs associated with operating the Funds;

•  
  Provide continuity of investment management, since both the Retail and TIAA-CREF Funds are managed by the same adviser and portfolio managers;

•  
  Enable shareholders to benefit over the long term from economies of scale that are expected to result from the growth in assets of the combined TIAA-CREF Fund;

•  
  Allow for the exchange of Fund shares through a process that is intended to qualify as a tax-free event for shareholders for federal income tax purposes;

•  
  Reduce potential investor confusion and eliminate redundancies that currently exist because of TIAA-CREF’s multiple offerings of similar funds; and

•  
  Offer a more comprehensive and streamlined Fund family after the Reorganizations, which will increase opportunities for TIAA-CREF Fund growth.

The Retail Fund Board considered a variety of potential alternatives to the Reorganizations that the Advisor might recommend, including: (1) keeping the Retail Funds as a stand-alone fund family while seeking shareholder approval to modify and increase their fee structure; (2) closing the Retail Funds to new investments and creating new higher-priced funds; or (3) simply liquidating some or all of the Retail Funds. With respect to merely unbundling and increasing the Retail Funds’ fees, the Board considered that this option would not eliminate the overlapping investment mandates in TIAA-CREF’s fund offerings that have led to investor confusion and it would not promote the same potential economies of scale as the Reorganizations. With regard to closing the Retail Funds to new investments, the Board considered that this would likely result over time in greatly increasing losses for the Advisor

49




as assets gradually declined. Finally, the Board noted that liquidating the Retail Funds would force potentially adverse tax consequences on Retail Fund shareholders.

Over its months of discussions, the Retail Fund Board also reviewed comprehensive information provided by the Advisor relating to the nature, extent and quality of the services it provides to the Retail and TIAA-CREF Funds. In particular, the Board reviewed a detailed independent analysis of the comparative expenses and performance data for each of the Retail and TIAA-CREF Funds, prepared by Lipper, Inc., a Reuters company that is an independent provider of investment company data (“Lipper”). In addition, the Retail Board received financial information about the Advisor and its affiliated companies, including an analysis of the profitability of the Advisor’s operations, and the effect of the proposed Reorganizations on the Advisor’s short- and long-term financial condition. The Board considered that the Advisor was losing money managing the Retail Funds under their unitary fee structure. The Board determined that if the Reorganizations were effected the Advisor would be able to operate the combined Funds at profit margins that would be fair and reasonable given the combined Funds’ projected expenses. As part of this analysis, the Board considered that it would be able to review the profitability levels of the Advisor annually during its yearly review of the combined Funds’ management arrangements to ensure that the Advisor’s fees remained fair and reasonable and that its profits for managing the combined Funds were not excessive.

As one of the most significant differences between the Retail and TIAA-CREF Funds is the pricing structure, the differences in expense arrangements were a focal point for Board consideration. In particular, the Retail Fund Board of Trustees reviewed and discussed the current investment management arrangements of the TIAA-CREF Funds and compared and contrasted them to the Advisor’s existing management arrangements with the Retail Funds. The Board of Trustees examined those arrangements with respect to the allocation of various types of expenses, the levels of expenses, and resulting total expense ratios and compared these to the anticipated levels and types of expenses and the anticipated total expense ratios of the TIAA-CREF Funds in the event the Reorganizations occur. The Board also compared the current expenses of the Retail Funds and the pro forma expenses of the combined Funds to the expenses of peer mutual funds that were compiled by Lipper. The Board considered that the majority of the combined Funds would be subject to a breakpoint schedule on investment management fees. The Board ultimately determined that this modest breakpoint schedule might eventually allow some of the savings gained from the economies of scale inherent in the combinations to be passed on to shareholders of the combined Funds.

The Retail Board also considered the performance of the Retail and TIAA-CREF Funds over the one-year, three-year, five-year (as applicable), and since inception periods and compared it to the performance of the Funds’ benchmarks and peer mutual funds as prepared by Lipper. In looking at these data, the Retail Board noted the Advisor’s observation that the performance of the corresponding Retail and TIAA-CREF Funds

50




was similar over comparable time periods (after taking in effect differences in expenses) as compared to their benchmarks and other peer mutual funds.

Additionally, with respect to the TIAA-CREF Funds’ distribution arrangements, the Retail Fund Board reviewed the Distribution Plan adopted under Rule 12b-1 for the Retail Class of the TIAA-CREF Funds. Under the Distribution Plan, the Retail Class would be able to pay for distribution directly, which could help to increase the overall assets of the TIAA-CREF Funds, thereby decreasing expenses. The Board reviewed the terms of the Distribution Plan and compared its structure and fees to those of other peer mutual funds as compiled by Lipper.

The Retail Fund Board considered that if the Reorganizations were effected, the majority of existing Retail Fund shareholders would experience higher total expenses stemming from higher fund operating fees and expenses and the addition of Distribution Plan fees for the Retail Class. The Board also considered the TIAA-CREF Funds’ attempts to mitigate such expenses, such as the Advisor’s contractual waivers of certain expenses through at least September 30, 2007 (or April 30, 2010 in the case of the Institutional Equity Index Fund). These waivers included a complete waiver of the Distribution Plan’s fees until that time and significant waivers of the management fees of Large-Cap Growth Fund and Growth & Income Fund due to the underperformance of their portfolio management teams. The Board also noted that even with the TIAA-CREF Funds’ higher fees, their total annual operating expenses are still competitive with the lower-cost offerings in the industry. Finally, the Board considered that the combination of the Retail and TIAA-CREF Funds could create economies of scale that would lower Fund expenses and that their multi-class structure and Retail Class distribution plan would better position the TIAA-CREF Funds for future asset growth.

The Retail Fund Board also considered that the Retail Funds and TIAA-CREF Funds have substantially similar attributes and operations. The Advisor presented information to the Board confirming that each Retail Fund and corresponding existing TIAA-CREF Fund have substantially similar, if not identical, investment objectives, policies, restrictions, risks and portfolio composition. In addition, they have the same portfolio management teams and service providers. The Board also considered that where TIAA-CREF Funds were created to accept the merging Retail Funds’ assets, these new funds were established as virtual clones of the original Retail Funds. The Board noted that the investment and operational similarities of the Retail and TIAA-CREF Funds have led corresponding Funds to have comparable performance over similar timeframes. Based on these shared characteristics, the Board also considered that the investment goals and allocations of Retail Fund shareholders would not be disrupted by the Reorganizations. Additionally, the Board noted that merging similar Funds would lessen investor and marketplace confusion about TIAA-CREF’s fund offerings, possibly leading to increased assets in the surviving TIAA-CREF Funds.

The Retail Fund Board also reviewed the terms of the Plan to ensure that they were beneficial for Retail Fund shareholders. The Board considered that:

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•  
  there would be no fees or charges imposed on Retail Fund shareholders in effecting the Reorganizations;

•  
  some Retail Fund shareholders would receive the lower-cost Institutional Class of the TIAA-CREF Funds if they meet the eligibility requirements for this class;

•  
  the Reorganizations are intended to qualify as tax-free events for Retail Fund shareholders for federal income tax purposes;

•  
  the Reorganizations are not projected to limit the use of any capital loss carryforwards of the Retail Funds;

•  
  all expenses of the Reorganizations, the proxy solicitation and the shareholder meeting would be paid by the Advisor and not be borne by the Retail or TIAA-CREF Funds; and

•  
  the Reorganizations would not result in a dilution in the interests of any Retail shareholder’s interests because Retail Fund shareholders would receive TIAA-CREF Fund shares with the same aggregate value as their Retail Fund shares based upon each Fund’s net asset value.

Based on the factors reviewed above, the Retail Fund Board of Trustees determined that each of the Reorganizations was in the best interests of the respective Retail Fund and the Retail Fund’s shareholders. At the same time, the Board also determined that the interests of existing shareholders of each Retail Fund would not be diluted as a result of its Reorganization. The Board also resolved to call meetings of the shareholders of the Retail Funds and recommend to shareholders that they vote to approve each Reorganization. Similarly, at the same February 14, 2006 meeting, the Board of Trustees of the TIAA-CREF Funds also determined that each of the Reorganizations was in the best interests of each TIAA-CREF Fund and its shareholders. At that meeting, the Board of Trustees of the TIAA-CREF Funds also concluded that the interests of the existing shareholders invested in each TIAA-CREF Fund will not be diluted as a result of its Reorganization.

What are the terms of the Plan?

The terms and conditions under which the Reorganization will be consummated are set forth in the Plan. Significant provisions of the Plan are summarized below; however, this summary is qualified in its entirety by reference to the Plan, which is attached as Exhibit A to this Proxy Statement/Prospectus.

The Plan provides for: (1) the acquisition by each TIAA-CREF Fund on the Closing Date of all of the assets of the corresponding Retail Fund in exchange solely for TIAA-CREF Fund shares and the assumption by TIAA-CREF Fund of all of Retail Fund’s liabilities; and (2) the distribution of those TIAA-CREF Fund shares to the shareholders of Retail Fund.

The assets of each Retail Fund to be acquired by the corresponding TIAA-CREF Fund consist of all cash, cash equivalents, securities, receivables, claims and rights of action, rights to register shares under applicable securities laws, books and records, deferred and

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prepaid expenses shown as assets on Retail Fund’s books and all other property Retail Fund owns at the effective time of the Reorganization (“Effective Time”). Each TIAA-CREF Fund will assume all of the corresponding Retail Fund’s liabilities, debts, obligations and duties of whatever kind or nature; provided, however, that Retail Fund will use its best efforts to discharge all of its known liabilities before the Effective Time. Each TIAA-CREF Fund will deliver its shares to the corresponding Retail Fund, which will distribute the shares to Retail Fund’s shareholders.

The value of each Retail Fund’s assets to be acquired by the corresponding TIAA-CREF Fund and the NAV per share of the Retail or Institutional Class shares of the TIAA-CREF Fund to be exchanged for those assets will be determined as of the close of regular trading on the NYSE on the Closing Date (“Valuation Time”), using the valuation procedures described in each Fund’s then-current Prospectuses and Statements of Additional Information. Each Retail Fund’s net value shall be the value of its assets to be acquired by the corresponding TIAA-CREF Fund, less the amount of liabilities, as of the Valuation Time.

On, or as soon as practicable after, the Closing Date, each Retail Fund will distribute the TIAA-CREF Fund shares it receives pro rata to its shareholders of record as of the Effective Time, so that each Retail Fund shareholder will receive a number of full and fractional TIAA-CREF Fund Retail or Institutional Class shares equal in aggregate value to the shareholder’s holdings in the Retail Fund. The shares will be distributed by opening accounts on the books of each TIAA-CREF Fund in the names of Retail Fund shareholders and by transferring to those accounts the shares previously credited to the account of Retail Fund on those books. Each Retail Fund will be terminated as soon as practicable after the share distribution.

Because TIAA-CREF Fund shares will be issued at NAV in exchange for the net assets of each Retail Fund, the aggregate value of TIAA-CREF Fund shares issued to Retail Fund shareholders will equal the aggregate value of Retail Fund shares. The NAV per share of the Retail or Institutional Class shares of each TIAA-CREF Fund will be unchanged by the Reorganization. Thus, the Reorganization will not result in a dilution of any shareholder’s interest.

Any transfer taxes payable upon the issuance of TIAA-CREF Fund shares in a name other than that of the registered Retail Fund shareholder will be paid by the person to whom the shares are to be issued as a condition of the transfer. Any reporting responsibility of a Retail Fund to a public authority will continue to be its responsibility until it is dissolved.

The consummation of the Reorganization is subject to a number of conditions set forth in the Plan, some of which may be waived by either Fund. In addition, the Plan may be amended in any mutually agreeable manner, except that no amendment may be made subsequent to the shareholder meeting that has a material adverse effect on the interests of shareholders of either Fund.

53



What TIAA-CREF Fund shares will I receive under the Reorganizations?

Shareholders of each Retail Fund as of the Closing Date will receive full and/or fractional shares of the respective corresponding TIAA-CREF Fund in accordance with the procedures provided for in the Plan, as described above. The TIAA-CREF Fund shares to be issued in connection with each Reorganization will be fully paid and non-assessable when issued, and will have no pre-emptive or conversion rights.

Shareholders of the Retail Funds who are eligible to purchase Institutional Class shares of the TIAA-CREF Funds will receive Institutional Class shares of the respective TIAA-CREF Funds. Examples of the types of Retail Fund shareholders that are expected to receive Institutional Class shares of the TIAA-CREF Funds in the Reorganizations include, but are not limited to:

•  
  Shareholders who hold their shares through a trust company;

•  
  Shareholders who are registered investment companies;

•  
  Educations savings plans established under Section 529 of the Code; and

•  
  The Advisor and its affiliates who made investments in the Funds.

For a more detailed description of those shareholders that are eligible to purchase Institutional Class shares of the TIAA-CREF Funds, see “Your Investment in the TIAA-CREF Funds — Your Account: Buying, Selling or Exchanging Shares — Institutional Class Shares” in the attached Appendix. All other shareholders of the Retail Funds will receive Retail Class shares of the respective TIAA-CREF Funds.

What are the tax consequences of the Reorganizations?

The Reorganizations are intended to qualify for federal income tax purposes as tax- free reorganizations under Section 368(a)(1) of the Code. Accordingly, pursuant to this treatment, neither the Retail Funds nor their shareholders, nor the TIAA-CREF Funds nor their shareholders, are expected to recognize any gain or loss for federal income tax purposes from the transactions contemplated by the Plan. As a condition to the Closing of the Reorganizations, the Funds will receive an opinion from the law firm of Sutherland Asbill & Brennan LLP, to the effect that each Reorganization will qualify as a tax-free reorganization for federal income tax purposes. That opinion will be based in part upon certain assumptions and upon certain representations made by the Funds.

Shareholders of the Retail Funds should consult their tax advisers regarding the effect, if any, of the Reorganizations in light of their individual circumstances. Because the foregoing discussion only relates to the federal income tax consequences of the Reorganizations, shareholders also should consult their tax advisers about state and local tax consequences, if any, of the Reorganizations.

54



Immediately prior to the Reorganizations, each Retail Fund will pay a dividend or dividends which, together with all previous dividends, will have the effect of distributing to its shareholders all of the Retail Fund’s investment company taxable income for taxable years ending on or prior to the Reorganizations (computed without regard to any deduction for dividends paid) and all of its net capital gain, if any, realized in taxable years ending on or prior to the Reorganizations (after reduction for any available capital loss carryforward). Such dividends will be included in the taxable income of the Retail Fund shareholders.

When mutual funds like the Retail Funds and the TIAA-CREF Funds are involved in tax-free reorganizations, and one or both of the funds have capital loss carryovers, there are several tax rules that may limit the ability of a combined fund to utilize all of the capital losses carryforwards of the smaller fund involved in the reorganization. The actual amount of carryforwards the Retail Funds or TIAA-CREF Funds may lose cannot be ascertained with certainty until the date of their Reorganizations. However, a preliminary analysis of the potential limitations as of March 31, 2006 has determined that the entire capital loss carryovers of each smaller Fund in each Reorganization should be able to be utilized by the end of the relevant carryover periods, assuming the relevant post-Reorganization TIAA-CREF Fund generates sufficient capital gain.

For more information on the TIAA-CREF Funds’ tax treatment, please see the section entitled “Taxes” in the Appendix.

What is the capitalization of each Retail Fund and its corresponding TIAA-CREF Fund (net assets, net asset value and shares outstanding)?

The following tables show the capitalization (net assets, net asset value and outstanding shares) of each Retail Fund and its corresponding TIAA-CREF Fund as of December 31, 2005. In addition, the tables show the capitalization of each TIAA-CREF Fund if the Reorganizations had been effected as of this same date (called “pro forma” in the chart) — i.e., what the net assets, net asset value per share and number of shares outstanding of the combined Fund will be.

55



International Equity Funds


   
Net Assets:
   
Net Asset
Value Per
Share:
   
Shares
Outstanding:
Retail Fund
                 $ 421,431,309           $ 12.02              35,063,790   
TIAA-CREF Fund
                                                                     
Retail Class
                    *               *               *    
Institutional Class
                 $ 659,537,323           $ 11.56              57,035,383   
Retirement Class
                 $ 277,214,132           $ 11.87              23,349,533   
All Classes combined
                 $ 936,751,455              N/A               80,384,916   
Pro Forma Combined TIAA-CREF Fund
                                                                     
Retail Class
                 $ 295,844,779           $ 12.02              24,612,710   
Institutional Class
                 $ 785,123,853           $ 11.56              67,484,392   
Retirement Class
                 $ 277,214,132           $ 11.87              23,349,533   
All Classes combined
                 $ 1,358,182,764              N/A               115,446,706   
 

Growth Equity Fund and
Institutional Large-Cap Growth Funds


   
Net Assets:
   
Net Asset
Value Per
Share:
   
Shares
Outstanding:
Retail Fund
                 $ 552,361,440           $ 9.61              57,503,285   
TIAA-CREF Fund
                                                                     
Retail Class
                    *               *               *    
Institutional Class
                    *               *               *    
Retirement Class
                    *               *               *    
All Classes combined
                    *               N/A               *    
Pro Forma Combined TIAA-CREF Fund
                                                                     
Retail Class
                 $ 435,260,814           $ 9.61              45,312,589   
Institutional Class
                 $ 117,100,626           $ 9.61              12,190,696   
Retirement Class
                 $ 0               N/A               0    
All Classes combined
                 $ 552,361,440              N/A               57,503,285   
 

Growth & Income Funds


   
Net Assets:
   
Net Asset
Value Per
Share:
   
Shares
Outstanding:
Retail Fund
                 $ 515,065,002           $ 12.81              40,206,203   
TIAA-CREF Fund
                                                                     
Retail Class
                    *               *               *    
Institutional Class
                 $ 101,102,627           $ 8.07              12,528,049   
Retirement Class
                 $ 66,568,494           $ 8.17              8,145,770   
All Classes combined
                 $ 167,671,121              N/A               20,673,819   
Pro Forma Combined TIAA-CREF Fund
                                                                     
Retail Class
                 $ 515,065,002           $ 12.81              40,206,203   
Institutional Class
                 $ 101,102,627           $ 8.07              12,528,049   
Retirement Class
                 $ 66,568,494           $ 8.17              8,145,770   
All Classes combined
                 $ 682,736,123              N/A               60,880,022   
 

56



Equity Index Funds


   
Net Assets:
   
Net Asset
Value Per
Share:
   
Shares
Outstanding:
Retail Fund
                 $ 365,753,392           $ 8.96              40,820,859   
TIAA-CREF Fund
                                                                     
Retail Class
                    *               *               *    
Institutional Class
                 $ 605,266,183           $ 9.35              64,732,436   
Retirement Class
                    *               *               *    
All Classes combined
                 $ 605,266,183              N/A               64,732,436   
Pro Forma Combined TIAA-CREF Fund
                                                                     
Retail Class
                 $ 365,753,392           $ 8.96              40,820,859   
Institutional Class
                 $ 605,266,183           $ 9.35              64,732,436   
Retirement Class
                 $ 0               N/A               0    
All Classes combined
                 $ 971,019,575              N/A               105,553,295   
 

Social Choice Equity Funds


   
Net Assets:
   
Net Asset
Value Per
Share:
   
Shares
Outstanding:
Retail Fund
                 $ 158,920,864           $ 9.67              16,426,487   
TIAA-CREF Fund
                                                                     
Retail Class
                    *               *               *    
Institutional Class
                 $ 120,414,575           $ 10.24              11,756,018   
Retirement Class
                 $ 57,153,881           $ 10.37              5,512,632   
All Classes combined
                 $ 177,568,456              N/A               17,268,650   
Pro Forma Combined TIAA-CREF Fund
                                                                     
Retail Class
                 $ 144,617,986           $ 9.67              14,948,103   
Institutional Class
                 $ 134,717,453           $ 10.17              13,234,402   
Retirement Class
                 $ 57,153,881           $ 10.37              5,512,632   
All Classes combined
                 $ 336,489,320              N/A               33,695,137   
 

Managed Allocation Funds


   
Net Assets:
   
Net Asset
Value Per
Share:
   
Shares
Outstanding:
Retail Fund
                 $ 531,621,044           $ 11.37              46,772,766   
TIAA-CREF Fund
                                                                     
Retail Class
                    *               *               *    
Institutional Class
                    *               *               *    
Retirement Class
                    *               *               *    
All Classes combined
                    *               N/A               *    
Pro Forma Combined TIAA-CREF Fund
                                                                     
Retail Class
                 $ 531,621,044           $ 11.37              46,772,766   
Institutional Class
                 $ 0               N/A               0    
Retirement Class
                 $ 0               N/A               0    
All Classes combined
                 $ 531,621,044              N/A               46,772,776   
 

57



Bond Plus Funds


   
Net Assets:
   
Net Asset
Value Per
Share:
   
Shares
Outstanding:
Retail Fund
                 $ 483,416,790           $ 10.13              47,731,942   
TIAA-CREF Fund
                                                                     
Retail Class
                    *               *               *    
Institutional Class
                    *               *               *    
Retirement Class
                    *               *               *    
All Classes combined
                    *               N/A               *    
Pro Forma Combined TIAA-CREF Fund
                                                                     
Retail Class
                 $ 293,433,992           $ 10.13              28,973,289   
Institutional Class
                 $ 189,982,798              N/A               18,758,653   
Retirement Class
                 $ 0               N/A               0    
All Classes combined
                 $ 483,416,790              N/A               47,731,942   
 

Short-Term Bond Funds


   
Net Assets:
   
Net Asset
Value Per
Share:
   
Shares
Outstanding:
Retail Fund
                 $ 210,995,446           $ 10.33              20,422,186   
TIAA-CREF Fund
                                                                     
Retail Class
                    *               *               *    
Institutional Class
                    *               *               *    
Retirement Class
                    *               *               *    
All Classes combined
                    *               N/A               *    
Pro Forma Combined TIAA-CREF Fund
                                                                     
Retail Class
                 $ 112,882,564           $ 10.33              10,925,870   
Institutional Class
                    98,112,882           $ 10.33              9,496,316   
Retirement Class
                    0               N/A               0    
All Classes combined
                    210,995,446              N/A               20,422,186   
 

High-Yield Bond Funds


   
Net Assets:
   
Net Asset
Value Per
Share:
   
Shares
Outstanding:
Retail Fund
                 $ 280,253,344           $ 9.07              30,905,457   
TIAA-CREF Fund
                                                                     
Retail Class
                    *               *               *    
Institutional Class
                    *               *               *    
Retirement Class
                    *               *               *    
All Classes combined
                    *               N/A               *    
Pro Forma Combined TIAA-CREF Fund
                                                                     
Retail Class
                 $ 149,375,032           $ 9.07              16,472,608   
Institutional Class
                 $ 130,878,312           $ 9.07              14,432,848   
Retirement Class
                 $ 0               N/A               0    
All Classes combined
                 $ 280,253,344              N/A               30,905,456   
 

58



Tax-Exempt Bond Funds


   
Net Assets:
   
Net Asset
Value Per
Share:
   
Shares
Outstanding:
Retail Fund
                 $ 200,454,542           $ 10.72              18,703,553   
TIAA-CREF Fund
                                                                     
Retail Class
                    *               *               *    
Institutional Class
                    *               *  &nbs