-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J+ZO4vMOYLrtbLzJw5rnjXXp8QalpgOwHvOR1w8m2RjCN0tDcI0AdKhGiXcMqm79 nKqIsaozAFpePMaWJ2JzzA== 0000950123-01-002865.txt : 20010402 0000950123-01-002865.hdr.sgml : 20010402 ACCESSION NUMBER: 0000950123-01-002865 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20010329 EFFECTIVENESS DATE: 20010329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TIAA SEPARATE ACCOUNT VA 1 CENTRAL INDEX KEY: 0000923524 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 033-79124 FILM NUMBER: 1585164 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-08520 FILM NUMBER: 1585165 BUSINESS ADDRESS: STREET 1: 730 THIRD AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 MAIL ADDRESS: STREET 2: 730 THIRD AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 485BPOS 1 y46340e485bpos.txt POST-EFFECTIVE AMENDMENT NO. 7 TO FORM N-3 1 As filed with the Securities and Exchange Commission on March 29, 2001 Registration File Nos. 33-79124 and 811-8520 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X] Pre-Effective Amendment No. [__] [_] Post-Effective Amendment No. [7] [X] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X] Amendment No. [10] [X] (Check appropriate box or boxes.) TIAA Separate Account VA-1 -------------------------- (Exact Name of Registrant) Teacher's Insurance and Annuity Association of America ------------------------------------------------------ (Name of Insurance Company) 730 Third Avenue New York, New York 10017 ------------------------ (Address of Insurance Company's Principal Executive Offices) Insurance Company's Telephone Number, Including Area Code: (212) 490-9000 Name and Address of Agent for Service: Copy to: Lisa Snow, Esquire Steven B. Boehm, Esquire Teachers Insurance and Annuity Sutherland Asbill & Brennan LLP Association of America 1275 Pennsylvania Avenue, N.W. 730 Third Ave Washington, D. C. 20004-2415 New York, New York 10017-3206 Approximate Date of Proposed Public Offering: As soon as practicable after effectiveness of the Registration Statement. It is proposed that this filing will become effective (check appropriate box): [_] immediately upon filing pursuant to paragraph (b) [X] on April 1, 2001 pursuant to paragraph (b) [_] 60 days after filing pursuant to paragraph (a)(1) [_] on (date) pursuant to paragraph (a)(1) [_] 75 days after filing pursuant to paragraph (a)(2) [_] on (date) pursuant to paragraph (a)(2) of rule 485 If appropriate, check the following box: [_] This post-effective amendment designates a new effective date for a previously filed post-effective amendment. Title & Securities Being Registered: Interests in a separate account funding variable annuity contracts. 2 CROSS REFERENCE SHEET Show Location of Information Required by From N-3 in Part A (Prospectus) and Part B (Statement of Additional Information) of Registration Statement. PART A (PROSPECTUS)
ITEM OF FORM N-3 PART A (PROSPECTUS) CAPTION - ---------------- --------------------------- 1. Cover Page............................................ Cover Page 2. Definitions........................................... Definitions 3. Synopsis.............................................. Summary 4. Condensed Financial Information....................... Condensed Financial Information; Performance Information 5. General Description of Registrant and Insurance Company..................................... Teachers Insurance and Annuity Association of America: The Separate Account; Investment practices 6. Management............................................ Management and Investment Advisory Arrangements 7. Deductions and Expenses............................... The Contract (Charges) 8. General Description of Variable Annuity Contracts..... Adding, Closing, or Substituting Portfolios; The Contract; Voting Rights; General Matters 9. Annuity Period........................................ The Contract (The Annuity Period; Income Options) 10. Death Benefit......................................... The Contract (Death Benefits) 11. Purchase and Contract Value........................... 12. Redemptions........................................... 13. Taxes................................................. The Contract (Tax Issues); Federal Income Taxes 14. Legal Proceedings..................................... Legal Proceedings 15. Table of Contents for the Statement of Additional Information........................................... Table of Contents for the Statement of Additional Information
3 PART B (STATEMENT OF ADDITIONAL INFORMATION)
ITEM OF FORM N-3 PART B (STATEMENT OF ADDITIONAL - ---------------- ------------------------------- INFORMATION) CAPTION -------------------- 16. Cover Page............................................ Cover Page 17. Table of Contents..................................... Table of Contents 18. General Information and History....................... (Prospectus) Teacher Insurance and Annuity Association 19. Investment Objectives and Policies.................... Investment Restrictions; Investment Policies and Risk Consideration; Portfolio Turnover 20. Management............................................ Management 21. Investment Advisory and Other Services................ Investment Advisory and Related Services 22. Brokerage Allocation.................................. Brokerage Allocation 23. Purchase and Pricing of Securities Being Offered...... Valuation of Assets; (Prospectus) The Contract (Transfers Between the Separate Account and the Fixed Account; General Considerations for all Transfer and Cash Withdrawals) 24. Underwriters.......................................... (Prospectus) Distribution of the Contracts 25. Calculation of Performance Data....................... Performance Information; (Prospectus) Performance Information 26. Annuity Payments...................................... (Prospectus) The Contract (The Annuity Period; Income Options) 27. Financial Statements.................................. Financial Statements; (Prospectus) Condensed Financial Information
4 Prospectus Teachers Insurance and Annuity Association Teachers Personal Annuity Individual Deferred Variable Annuities Funded Through TIAA Separate Account VA-1 --------------------------------------------------- April 1, 2001 [TIAA LOGO] 5 6 Prospectus Dated April 1, 2001 Individual Deferred Variable Annuities FUNDED THROUGH TIAA SEPARATE ACCOUNT VA-1 OF TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA This prospectus tells you about an individual deferred variable annuity funded through TIAA Separate Account VA-1 of Teachers Insurance and Annuity Association of America (TIAA). Read it carefully before investing, and keep it for future reference. TIAA Separate Account VA-1 (the separate account) is a segregated investment account of TIAA. The separate account provides individual variable annuities for employees of nonprofit institutions, including governmental institutions, organized in the United States. Its main purpose is to accumulate, invest, and then disburse funds for lifetime income or through other payment options. TIAA offers this variable annuity as part of the contract, which also has a fixed account. Whether the variable annuity is available to you is subject to approval by regulatory authorities in your state. As with all variable annuities, your accumulation can increase or decrease, depending on how well the underlying investments in the separate account do over time. TIAA doesn't guarantee the investment performance of the separate account, and you bear the entire investment risk. More information about the separate account and the variable component of the contract is on file with the Securities and Exchange Commission (SEC) in a "Statement of Additional Information" (SAI) dated April 1, 2001. You can get it by writing us at TIAA, 730 Third Avenue, New York, New York 10017-3206 (attention: Central Services), or by calling 1 800 842-2733, extension 5509. The SAI, as supplemented from time to time, is "incorporated by reference" into the prospectus; that means it's legally part of the prospectus. The SAI's table of contents is on the last page of this prospectus. The SEC maintains a Website (http://www.sec.gov) that contains the SAI, material incorporated by reference and other information regarding the separate account. These securities have not been approved or disapproved by the Securities and Exchange Commission nor has the commission passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offense. An investment in the contract is not a deposit of the TIAA-CREF Trust Company, FSB, and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. The date of this prospectus is April 1, 2001. 1 7 Table of Contents 2 3 DEFINITIONS 5 SUMMARY 8 CONDENSED FINANCIAL INFORMATION 9 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA 10 THE SEPARATE ACCOUNT 10 ADDING, CLOSING, OR SUBSTITUTING PORTFOLIOS 11 INVESTMENT PRACTICES 14 PERFORMANCE INFORMATION 14 VALUATION OF ASSETS 15 MANAGEMENT AND INVESTMENT ADVISORY ARRANGEMENTS 15 THE CONTRACT 16 Eligible Purchasers of the Contract 16 Remitting Premiums 17 Accumulation Units 18 The Fixed Account 19 Transfers Between the Separate Account and the Fixed Account 19 Cash Withdrawals 19 General Considerations for All Transfers and Cash Withdrawals 20 Tax Issues 20 Charges 21 Other Charges 21 Brokerage Fees and Related Expenses 21 The Annuity Period 22 Annuity Starting Date 22 Income Options 24 Death Benefits 26 TIMING OF PAYMENTS 27 FEDERAL INCOME TAXES 30 VOTING RIGHTS 31 GENERAL MATTERS 32 DISTRIBUTION OF THE CONTRACTS 32 LEGAL PROCEEDINGS 33 TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION
This prospectus outlines the terms under which the variable annuity issued by TIAA is available. It doesn't constitute an offering in any jurisdiction where such an offering can't lawfully be made. No dealer, salesman, or anyone else is authorized to give any information or to make any representation in connection with this offering other than those contained in this prospectus. If anyone does offer you such information or representations, you shouldn't rely on them. 8 Definitions 3 Throughout the prospectus, "TIAA," "we," and "our" refer to Teachers Insurance and Annuity Association of America. "You" and "your" mean any contractowner or any prospective contractowner. The terms and phrases below are defined so you'll know precisely how we're using them. To understand some definitions, you may have to refer to other defined terms. ACCUMULATION The total value of your accumulation units. ACCUMULATION PERIOD The period that begins with your first premium and continues as long as you still have an amount accumulated in either the separate account or the fixed account. ACCUMULATION UNIT A share of participation in the separate account. ANNUITANT The natural person whose life is used in determining the annuity payments to be received. The annuitant may be the contractowner or another person. ANNUITY PARTNER The natural person whose life is used in determining the annuity payments to be received under a survivor income option. The annuity partner is also known as the second annuitant. BENEFICIARY Any person or institution named to receive benefits if you die during the accumulation period or if you die while any annuity income or death benefit payments remain due. You don't have to name the same beneficiary for each of these two situations. BUSINESS DAY Any day the New York Stock Exchange (NYSE) is open for trading. A business day ends at 4 p.m. Eastern Time, or when trading closes on the NYSE, if earlier. CALENDAR DAY Any day of the year. Calendar days end at the same time as business days. CONTRACT The fixed and variable components of the individual, flexible premium, deferred annuity described in this prospectus. CONTRACTOWNER The person (or persons) who controls all the rights and benefits under a contract. CREF The College Retirement Equities Fund, TIAA's companion organization. ELIGIBLE INSTITUTION A nonprofit institution, including any governmental institution, organized in the United States. 9 4 FIXED ACCOUNT The component of the contract guaranteeing principal plus a specified rate of interest supported by assets in the general account. GENERAL ACCOUNT All of TIAA's assets other than those allocated to TIAA Separate Account VA-1 or to any other TIAA separate account. INCOME OPTION Any of the ways you can receive annuity income, which must be from the fixed account. INTERNAL REVENUE CODE (IRC) The Internal Revenue Code of 1986, as amended. PREMIUM Any amount you invest in the contract. SEPARATE ACCOUNT TIAA Separate Account VA-1, which was established by TIAA under New York State law to fund your variable annuity. The account holds its assets apart from TIAA's other assets. SURVIVOR INCOME OPTION An option that continues lifetime annuity payments as long as either the annuitant or the annuity partner is alive. TIAA Teachers Insurance and Annuity Association of America. VALUATION DAY Any day the NYSE is open for trading, as well as the last calendar day of each month. Valuation days end as of the close of all U.S. national exchanges where securities or other investments of the separate account are principally traded. Valuation days that aren't business days end at 4 p.m. Eastern Time. 10 Summary Read this summary together with the detailed information you'll find in the rest of the prospectus. This prospectus describes the variable component of the contract, which also provides fixed annuity benefits (see "The Fixed Account," page 18). The contract is an individual deferred annuity that is available to any employee, trustee, or retired employee of an eligible institution, or his or her spouse (or surviving spouse) as well as certain other eligible persons (see "Eligible Purchasers of the Contract," page 16). THE SEPARATE ACCOUNT TIAA Separate Account VA-1 is an open-end management investment company. Currently the separate account has only one investment portfolio, the Stock Index Account. Like any other portfolio that we might add in the future, the Stock Index Account is subject to the risks involved in professional investment management, including those resulting from general economic conditions. The value of your accumulation in any portfolio can fluctuate, and you bear the entire risk. EXPENSES Here's a summary of the direct and indirect expenses under the contract. CONTRACTOWNER TRANSACTION EXPENSES Deductions from premiums (as a percentage of premiums) None CHARGES FOR TRANSFERS AND CASH WITHDRAWALS (AS A PERCENTAGE OF TRANSACTION AMOUNT) Transfers to the fixed account None Cash withdrawals None ANNUAL EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) Investment Advisory Charge (after fee waiver) (1) .07% Mortality and Expense Risk Charge (current) (2) .10% Administrative Expense Charge .20% ---- TOTAL ANNUAL EXPENSES (3) .37%
(1) Although Teachers Advisors, Inc. (Advisors), the separate account's investment adviser, is entitled to an annual fee of 0.30 percent of the separate account's average daily net assets, it has voluntarily agreed to waive a portion of its fee. (2) TIAA reserves the right to increase the mortality and expense risk charge to a maximum of 1.00 percent per year. (3) If we imposed the full amount of the administrative expense, investment advisory and mortality and expense risk charges, total annual expenses would be 1.50%. TIAA guarantees that total annual expenses will never exceed this level. 5 11 You will receive at least three months' notice before we raise any of these charges. Premium taxes apply to certain contracts (see "Other Charges," page 21). The table at the bottom of this page gives an example of the expenses you'd incur on a hypothetical investment of $1,000 over several periods. The table assumes a 5 percent annual return on assets. This table is designed to help you understand the various expenses you would bear directly or indirectly as an owner of a contract. REMEMBER THAT THIS TABLE DOESN'T REPRESENT ACTUAL PAST OR FUTURE EXPENSES OR INVESTMENT PERFORMANCE. ACTUAL EXPENSES MAY BE HIGHER OR LOWER. For more information, see "Charges," page 20. "FREE LOOK" RIGHT Until the end of the period of time specified in the contract (the "free look" period), you can examine the contract and return it to TIAA for a refund. The time period will depend on the state in which you live. In states that permit it, we'll refund the accumulation value calculated on the date that you mailed or delivered the contract and the refund request to us. In states that don't allow us to refund accumulation value only, we'll refund the premiums you paid to the contract. If you live in a state that requires refund of premiums (see page 17) and we issued you a contract on or after November 1, 1994, your premiums and transfers allocated to the separate account during the "free look" period can't exceed $10,000. We will consider the contract returned on the date it's postmarked and properly addressed with postage pre-paid or, if it's not postmarked, on the day we receive it. We will send you the refund within seven (7) days after we get written notice of cancellation and the returned contract. We will cancel the contract as of the date of issue. RESTRICTIONS ON TRANSFERS AND CASH WITHDRAWALS Currently, you can transfer funds from the separate (variable) account to the fixed account as often as you like, but you can transfer from the fixed account to the separate account no more than once every 180 days. After you have been given three months' notice, we may limit the number of transfers from the separate account to one in
ANNUAL EXPENSE DEDUCTIONS FROM NET ASSETS 1 YEAR 3 YEARS 5 YEARS 10 YEARS - --------------------------------------------------------------------------------- If you withdraw your entire accumulation at the end of the applicable time period: $4 $12 $21 $47 - --------------------------------------------------------------------------------- If you annuitize at the end of the applicable time period: $4 $12 $21 $47 - --------------------------------------------------------------------------------- If you do not withdraw your entire accumulation: $4 $12 $21 $47 - ---------------------------------------------------------------------------------
6 12 any 90-day period. All transfers must be for at least $250 or your entire account balance. All cash withdrawals must be for at least $1,000 or your entire account balance. YOU MAY HAVE TO PAY A TAX PENALTY IF YOU WANT TO MAKE A CASH WITHDRAWAL BEFORE AGE 59 1/2. For more, see "Income Options," page 22, and "Federal Income Taxes," page 27. 7 13 Condensed Financial Information Below you'll find condensed audited financial information for the separate account for the periods presented. The audited financial statements for the separate account and TIAA are in the SAI, which is available free upon request. The table should be read in conjunction with the audited financial statements and related notes appearing in the SAI.
NOVEMBER 1, 1994 (DATE OF INITIAL YEAR ENDED DECEMBER 31, REGISTRATION) ---------------------------------------------------------------- TO DECEMBER 31, 2000 1999 1998 1997 1996 1995 1994(1) ---- ---- ---- ---- ---- ---- ------- Per Accumulation Unit data: Investment income $ 0.966 $ 0.961 $ 0.908 $ 0.847 $ 0.807 $ 0.745 $ 0.138 Expense charges 0.301 0.270 0.223 0.182 0.150 0.170 0.023 ----------------------------------------------------------------------------------- Investment income-net 0.665 0.691 0.685 0.665 0.657 0.575 0.115 Net realized and unrealized gain (loss) on investments (7.024) 13.051 12.407 12.429 6.755 8.565 (0.676) ----------------------------------------------------------------------------------- Net increase (decrease) in Accumulation Unit value (6.359) 13.742 13.092 13.094 7.412 9.140 (0.561) Accumulation Unit value: Beginning of period 81.751 68.009 54.917 41.823 34.411 25.271 25.832 ----------------------------------------------------------------------------------- End of period $75.392 $81.751 $68.009 $54.917 $41.823 $34.411 $25.271 =================================================================================== Ratios to average net assets: Expenses(2) 0.37% 0.37% 0.37% 0.37% 0.40% 0.55% 0.09% Investment income-net 0.82% 0.95% 1.14% 1.36% 1.74% 1.87% 0.45% Portfolio turnover rate 20.68% 37.93% 45.93% 2.39% 4.55% 0.98% 0.04% Thousands of Accumulation Units outstanding at end of period 13,147 12,630 11,145 9,901 6,768 2,605 1,171
(1) The percentages shown for this period are not annualized. (2)Advisors has agreed to waive a portion of its investment advisory fee. Without this waiver the Stock Index Account's expense ratio for the periods listed would have been higher. 8 14 Teachers Insurance and Annuity Association of America TIAA is a nonprofit stock life insurance company, organized under the laws of New York State. It was founded on March 4, 1918, by the Carnegie Foundation for the Advancement of Teaching. All of the stock of TIAA is held by the TIAA Board of Overseers, a nonprofit New York membership corporation whose main purpose is to hold TIAA's stock. TIAA's headquarters are at 730 Third Avenue, New York, New York 10017-3206. TIAA's general account offers traditional annuities, which guarantee principal and a specified interest rate while providing the opportunity for additional dividends. TIAA also offers life, long-term disability, and long-term care insurance. TIAA has received the highest ratings from the leading independent insurance industry rating agencies: A++ (Superior) from A.M. Best Company, AAA from Duff & Phelps Credit Rating Company, Aaa from Moody's Investor's Service and AAA from Standard and Poor's. TIAA is the companion organization of the College Retirement Equities Fund (CREF), the first company in the United States to issue a variable annuity. CREF is a nonprofit membership corporation established in New York State in 1952. Together, TIAA and CREF form the principal retirement system for the nation's education and research communities and one of the largest retirement systems in the world, based on assets under management. TIAA-CREF serves approximately 2.3 million people at over 10,000 institutions. As of December 31, 2000, TIAA's assets were approximately $114.3 billion; the combined assets for TIAA and CREF totaled approximately $275.6 billion (although CREF doesn't stand behind TIAA's guarantees). 9 15 The Separate Account Separate Account VA-1 was established on February 16, 1994, as a separate investment account of TIAA under New York law, by resolution of TIAA's Board of Trustees. The separate account is governed by a management committee. As an "open-end" diversified management investment company, the separate account has no limit on how many units of participation it can issue. The separate account is registered with the SEC under the Investment Company Act of 1940, as amended (the 1940 Act), though registration doesn't entail SEC supervision of its management and investment practices. As part of TIAA, the separate account is also subject to regulation by the State of New York Insurance Department (NYID) and the insurance departments of some other jurisdictions in which the contracts are offered (see the SAI). Although TIAA owns the assets of the separate account, the contract states that the separate account's income, investment gains, and investment losses are credited to or charged against the assets of the separate account without regard to TIAA's other income, gains, or losses. Under New York law, we cannot charge the separate account with liabilities incurred by any other TIAA separate account or other business activity TIAA may undertake. The contract accepts only after-tax dollars. In contrast, most of TIAA-CREF's other fixed and variable annuity products are part of employer retirement plans and accept premiums consisting primarily of before-tax dollars. Like earnings from other annuity products, earnings on accumulations in the separate account aren't taxed until withdrawn or paid as annuity income (see "Federal Income Taxes," page 27). Adding, closing, or substituting portfolios The separate account currently consists of a single investment portfolio, but we can add new investment portfolios in the future. We don't guarantee that the separate account, or any investment portfolio added in the future, will always be available. We reserve the right, subject to any applicable law, to change the separate account and its investments. We can add or close portfolios, substitute one portfolio for another, or combine portfolios, subject to the requirements of applicable law. We can also make any changes to the separate account or to the contract required by applicable insurance law, the Internal Revenue Code, or the 1940 Act. TIAA can make some changes at its discretion, subject to NYID and SEC approval as required. The separate account can (i) operate under the 1940 Act as a unit investment trust that invests in another investment company, or in any other form permitted by law, (ii) deregister under the 1940 Act if 10 16 registration is no longer required, or (iii) combine with other separate accounts. As permitted by law, TIAA can transfer the separate account assets to another separate account or accounts of TIAA or another insurance company or transfer the contract to another insurance company. Investment practices The separate account is subject to several types of risks. One is market risk-price volatility due to changing conditions in the financial markets. Another is financial risk. For stocks or other equity securities, financial risk comes from the possibility that current earnings will fall or that overall financial soundness will decline, reducing the securities' value. The separate account currently consists solely of the Stock Index Account. Changing the investment objective of the separate account won't require a vote by contractowners. The separate account can also change some of its investment policies (that is, the methods used to pursue the objective) without such approval. Of course, there's no guarantee that the separate account will meet its investment objective. The separate account's general perspective is long-term, and we avoid both extreme conservatism and high risk in investing. Advisors manages the separate account's assets (see "Management and Investment Advisory Arrangements," page 15). Personnel of Advisors, a subsidiary of TIAA, also manage assets of one or more CREF accounts on behalf of TIAA-CREF Investment Management, LLC, an investment adviser that is also a TIAA subsidiary. Personnel of Advisors also manage assets of other investment companies, including TIAA-CREF Life Funds, TIAA-CREF Mutual Funds and TIAA-CREF Institutional Mutual Funds. Ordinarily, investment decisions for the separate account will be made independently, but managers for the separate account may at times decide to buy or sell a particular security at the same time as for a CREF account or another investment company whose assets they may also be managing. If so, investment opportunities are allocated equitably, which can have an adverse effect on the size of the position the separate account buys or sells, as well as the price paid or received for it. INVESTMENT OBJECTIVE The investment objective of the separate account is favorable long-term return from a diversified portfolio selected to track the overall market for common stocks publicly traded in the U.S., as represented by a broad stock market index. 11 17 INVESTMENT MIX The separate account seeks a favorable long-term rate of return from a diversified portfolio selected to track the overall market for common stocks publicly traded in the U.S., as represented by the Russell 3000(R), a broad market index (see "The Russell 3000 Index" below). Although the separate account invests in stocks in the Russell 3000 Index, it doesn't invest in all 3,000 stocks in the index. Rather, we use a sampling approach to create a portfolio that closely matches the overall investment characteristics (for example, yield and industry weight) of the index. This means that a company can remain in the portfolio even if it performs poorly, unless the company is removed from the Russell 3000. Using the Russell 3000 Index isn't fundamental to the separate account's investment objective and policies. We can change the index used in the separate account at any time and will notify you if we do so. THE RUSSELL 3000 INDEX The Russell 3000 is an index of the 3,000 largest publicly traded U.S. corporations, based on the value of their outstanding stock. According to the Frank Russell Company, Russell 3000 companies account for about 98 percent of the total market capitalization of the publicly traded U.S. equity market. The market capitalization of individual companies in the Russell 3000 ranged from $2.26 million to $475 billion, with an average of $94.86 billion as of December 31, 2000. The Frank Russell Company includes stocks in the Index solely on their market capitalization and weights them by relative market value. The Frank Russell Company can change stocks and their weightings in the Index. We'll adjust the separate account's portfolio to reflect the changes as appropriate. We can also adjust the separate account's portfolio because of mergers and similar events. The separate account isn't promoted, endorsed, sponsored or sold by and isn't affiliated with the Frank Russell Company. A stock's presence in the Russell 3000 doesn't mean that the Frank Russell Company believes that it's an attractive investment. The Frank Russell Company isn't responsible for any literature about the separate account and makes no representations or warranties about its content. The Russell 3000 is a trademark and service mark of the Frank Russell Company. OTHER INVESTMENTS The separate account can also hold other investments whose return depends on stock market prices. These include stock index futures contracts, options (puts and calls) on futures contracts, and debt securities whose prices or interest rates are linked to the return of a recognized stock market index. The separate account can also make swap 12 18 arrangements where the return is linked to a recognized stock market index. The separate account would make such investments in order to seek to match the total return of the Russell 3000. However, they might not track the return of the Russell 3000 in all cases and can involve additional credit risks. Investing in options or futures contracts and entering into equity swaps involve special risks. For more information, see the SAI. Such investing by the separate account is subject to any necessary regulatory approvals. The separate account can hold other types of securities with equity characteristics, such as bonds convertible into common stock, warrants, preferred stock, and depository receipts for such securities. In addition, the separate account can hold fixed-income securities that it acquires because of mergers, recapitalizations, or otherwise. For liquidity, the separate account can also invest in short-term debt securities and other money market instruments, including those denominated in foreign currencies. OTHER INVESTMENT ISSUES AND RISKS OPTIONS, FUTURES, AND OTHER INVESTMENTS The separate account can buy and sell options (puts and calls) and futures to the extent permitted by the New York State Insurance Department, the SEC, and the Commodity Futures Trading Commission. We intend to use options and futures primarily as hedging techniques or for cash management, not for speculation, but they involve special considerations and risks nonetheless. For more information, see the SAI. The separate account can also invest in newly developed financial instruments, such as equity swaps and equity-linked fixed-income securities, so long as these are consistent with its investment objective and regulatory requirements. For more information, see the SAI. ILLIQUID SECURITIES The separate account can invest up to 10 percent of its assets in investments that may not be readily marketable. It may be difficult to sell these investments for their fair market value. REPURCHASE AGREEMENTS The separate account can use repurchase agreements to manage cash balances. In a repurchase agreement, we buy an underlying debt instrument on condition that the seller agrees to buy it back at a fixed time (usually a relatively short period) and price. The period from purchase to repurchase is usually no more than a week and never more than a year. Repurchase agreements may involve special risks. For more information, see the SAI. FIRM COMMITMENT AGREEMENTS The separate account can enter "firm commitment" agreements to buy securities at a fixed price or yield on a specified future 13 19 date. We expect that these transactions will be relatively infrequent. For more information, see the SAI. INVESTMENT COMPANIES The separate account can invest up to 10 percent of its assets in other investment companies. SECURITIES LENDING Subject to certain restrictions, the separate account can seek additional income by lending securities to brokers, dealers, and other financial institutions. Brokers and dealers must be registered with the SEC and be members of the National Association of Securities Dealers, Inc. (NASD); any recipient must be unaffiliated with TIAA. All loans will be fully collateralized. If we lend a security, we can call in the loan at any time. For more information, see the SAI. BORROWING The separate account can borrow money from banks (no more than 33 1/3 percent of the market value of its assets at the time of borrowing). It can also borrow money from other sources temporarily (no more than 5 percent of the total market value of its assets at the time of borrowing). For more information, see the SAI. Performance information From time to time, we advertise the total return and average annual total return of the separate account. "Total return" means the cumulative percentage increase or decrease in the value of an investment over standard one-, five-, and ten-year periods (and occasionally other periods as well). "Average annual total return" means the annually compounded rate that would result in the same cumulative total return over the stated period. All performance figures are based on past investment results. They aren't a guarantee that the separate account will perform equally or similarly in the future. Write or call us for current performance figures for the separate account (see "Contacting TIAA," page 31). Valuation of assets We calculate the value of the assets as of the close of every valuation day. Except as noted below, we use market quotations or independent pricing services to value securities and other instruments. If market quotations or independent pricing services aren't readily available, we'll use "fair value," as determined in good faith under the direction of the management committee. We may also use "fair value" in certain other circumstances. For more information, see the SAI. 14 20 Management and investment advisory arrangements The principal responsibility for directing the separate account's investments and administration rests with its management committee. Advisors manages the assets in the separate account. A wholly-owned indirect subsidiary of TIAA, Advisors is registered under the Investment Advisers Act of 1940. Its duties include conducting research, recommending investments, and placing orders to buy and sell securities. It also provides for all portfolio accounting, custodial, and related services for the separate account. Advisors and its personnel act consistently with the investment objectives, policies, and restrictions of the separate account. TIAA restricts the ability of those personnel of Advisors who have direct responsibility and authority for making investment decisions for the separate account to trade in securities for their own accounts. The restrictions also apply to members of their households. Transactions in securities by those individuals must be reported and approved and they must also send duplicate confirmation statements and other account reports to a special compliance unit. The Contract The contract is an individual flexible-premium (you can contribute varying amounts) deferred annuity that accepts only after-tax dollars from eligible purchasers. The rights and benefits under the variable component of the contract are summarized below; however, the descriptions you read here are qualified entirely by the contract itself. The contracts are approved for sale in all of the fifty states, the District of Columbia, and the United States Virgin Islands. We are not currently offering the contracts in states in which the TIAA-CREF Life Insurance Company offers the Personal Annuity Select individual deferred variable annuity contract, however, although we are accepting additional premiums for existing contracts in these states. 15 21 ELIGIBLE PURCHASERS OF THE CONTRACT An employee, trustee or a retiree of an eligible institution can purchase a contract. For this purpose, an individual who is at least 55 years old and has completed at least five years of service at an eligible institution is considered to be a "retiree." A spouse (or surviving spouse) of an employee, trustee or retiree of an eligible institution can also purchase a contract. Any individual who owns a TIAA or CREF annuity contract or certificate or individual insurance policy, as well as the spouse or surviving spouse of such a person can also purchase a contract. REMITTING PREMIUMS INITIAL PREMIUMS We'll issue you a contract as soon as we receive your completed application and your initial premium of at least $250 at our home office, even if you don't initially allocate any premiums to the separate account. Please send your check, payable to TIAA, along with your application to: TIAA-CREF P.O. Box 530189 Atlanta, GA 30353-0189 (The $250 minimum doesn't apply if application and payment of at least $25 is accompanied by an agreement for electronic funds transfer (EFT) or if you are using payroll deduction. We also reserve the right to temporarily waive the $250 minimum initial premium amount.) We will credit your initial premium within two business days after we receive all necessary information or the premium itself, whichever is later. If we don't have the necessary information within five business days, we'll contact you to explain the delay. We'll return the initial premium at that time unless you consent to our keeping it and crediting it as soon as we receive the missing information from you. ADDITIONAL PREMIUMS Subsequent premiums must be for at least $25. Send a check payable to TIAA, along with a personalized payment coupon (supplied upon purchasing a contract) to: TIAA-CREF P.O. Box 530195 Atlanta, GA 30353-0195 If you don't have a coupon, use a separate piece of paper to give us your name, address and contract number. These premiums will be credited as of the business day we receive them. Currently, TIAA will accept premiums at any time both the contractowner and the annuitant are living and your contract is in the accumulation period. However, we reserve the right not to accept premiums under this contract after you have been given three months' notice. If TIAA stops accepting premiums under this contract, we will accept premiums under a new contract issued to you with the same annuitant, annuity starting date, beneficiary, and methods of benefit payment as those under this contract at the time of replacement. 16 22 ELECTRONIC PAYMENT You may make initial or subsequent investments by electronic payment. A federal wire is usually received the same day and an ACH is usually received by the second day after transmission. Be aware that your bank may charge you a fee to wire funds, although ACH is usually less expensive than a federal wire. Here's what you need to do: 1. If you are sending in an initial premium, send us your application; 2. Instruct your bank to wire money to: Citibank, N.A. ABA Number 021000089 New York, NY Account of: TIAA Account Number: 4068-4865 3. Specify on the wire: [-] Your name, address and Social Security Number(s) or Taxpayer Identification Number [-] Indicate if this is for a new application or existing contract (provide contract number if existing) CERTAIN RESTRICTIONS Except as described below, the contract doesn't restrict how large your premiums are or how often you send them, although we reserve the right to impose restrictions in the future. Unless your contract was issued before November 1, 1994, your total premiums and transfers to the separate account during the "free look" period can't exceed $10,000 if you live in any of the following states:
"FREE LOOK" JURISDICTION PERIOD (DAYS) ------------ ------------- Georgia 10 Idaho 20 Massachusetts 10 Nebraska 10 Nevada 10 North Carolina 30 South Carolina 31 Texas 30 Utah 10 Washington 10 West Virginia 10
Total premiums and transfers to the fixed account in any 12-month period could be limited to $300,000, so you should contact us if you want more than $300,000 to be credited to the fixed account during any such period (see "Contacting TIAA," page 31). ACCUMULATION UNITS Premiums paid to the separate account purchase accumulation units. When you remit premiums or transfer amounts into the separate account, the number of your units will increase; when you transfer amounts from the account (including applying funds to the fixed account to begin annuity income) or take a cash withdrawal, the number of your units will decrease. We calculate how many accumulation units to credit by dividing the 17 23 amount allocated to the separate account by its unit value for the business day when we received your premium. We may use a later business day for your initial premium. To determine how many accumulation units to subtract for transfers and cash withdrawals, we use the unit value for the business day when we receive your completed transaction request and all required information and documents. (You can choose to have your transaction completed at a later date; if you do, we will use that later date as the valuation day.) For amounts to be applied to begin annuity income, the unit value will be the one for the last valuation day of the month when we receive all required information and documentation (see "The Annuity Period," page 21). For amounts to be applied to begin death benefits, the unit value will be the one for the valuation day when we receive proof of death (see "Death Benefits," page 24). The value of the accumulation units will depend mainly on investment experience, though the unit value reflects expense deductions from assets (see "Charges," page 20). The unit value is calculated at the close of each valuation day. We multiply the previous day's unit value by the net investment factor for the separate account. The net investment factor is calculated as A divided by B, where A and B are defined as: A equals the value of the separate account's net assets at the end of the day, excluding the net effect of transactions (i.e., premiums received, benefits paid, and transfers to and from the account) made during that day. This amount is equal to the net assets at the end of the prior day (including the net effect of transactions made during the prior day) increased/decreased by realized and unrealized capital gains/losses, dividends, and investment income and decreased by expense and risk charges. B is the value of the separate account's net assets at the end of the prior day (including the net effect of transactions made during the prior day). THE FIXED ACCOUNT Premiums allocated and amounts transferred to the fixed account become part of the general account assets of TIAA, which support insurance and annuity obligations. The general account includes all the assets of TIAA, except those in the separate account or in any other TIAA separate investment account. Interests in the fixed account have not been registered under the Securities Act of 1933 (the 1933 Act), nor is the fixed account registered as an investment company under the 1940 Act. Neither the fixed account nor any interests therein are generally subject to the 1933 Act or 1940 Act. The SEC staff has told us that they haven't reviewed the information in this prospectus about the fixed account. You can allocate premiums to the fixed account or transfer from the separate account to the fixed account at any time. In contrast, you can transfer or take a cash withdrawal from the fixed account only once every 18 24 180 days. TIAA may defer payment of a transfer or cash withdrawal from the fixed account for up to six months. When you invest in the separate account, you bear the investment risk. However, TIAA bears the full investment risk for all accumulations in the fixed account. Currently TIAA guarantees that amounts in the fixed account will earn interest of at least 3 percent per year. At its discretion, TIAA can credit amounts in the fixed account with interest at a higher rate than 3 percent per year. TIAA has sole investment discretion for the fixed account, subject to applicable law. This prospectus provides information mainly about the contract's variable component, which is funded by the separate account. For more about the fixed account, see the contract itself. TRANSFERS BETWEEN THE SEPARATE ACCOUNT AND THE FIXED ACCOUNT Subject to the conditions above, you can transfer some (at least $250 at a time) or all of the amount accumulated under your contract between the separate account and the fixed account. Currently, we don't charge you for transfers from the separate account to the fixed account. We don't currently limit the number of transfers from the separate account, but we reserve the right to do so in the future to one every 90 days. Transfers to the fixed account begin participating on the day following effectiveness of the transfer (see below). CASH WITHDRAWALS You can withdraw some or all of your accumulation in the separate account as cash. Cash withdrawals must be for at least $1,000 (or your entire accumulation, if less). We reserve the right to cancel any contract where no premiums have been paid to either the separate account or the fixed account for three years and your total amount in the separate account and the fixed account falls below $250. Currently, there's no charge for cash withdrawals. If you withdraw your entire accumulation in the separate account and the fixed account, we'll cancel your contract and all of our obligations to you under the contract will end. GENERAL CONSIDERATIONS FOR ALL TRANSFERS AND CASH WITHDRAWALS You can tell us how much you want to transfer or withdraw in dollars, accumulation units, or as a percentage of your accumulation. Transfers and cash withdrawals are effective at the end of the business day we receive your request and any required information and documentation. Transfers and cash withdrawals made at any time other than during a business day will be effective at the close of the next business day. You can also 19 25 defer the effective date of a transfer or cash withdrawal to a future business day acceptable to us. To request a transfer, write to TIAA's home office, call our Automated Telephone Service at 1 800 842-2252 (there is an option to speak with a live person, if you wish) or use the TIAA-CREF Web Center's account access feature over the Internet at www.tiaa-cref.org. If you make a telephone or Internet transfer at any time other than during a business day, it will be effective at the close of the next business day. We can suspend or terminate your ability to transfer by telephone or over the Internet at any time for any reason. TAX ISSUES Make sure you understand the possible federal and other income tax consequences of transfers and cash withdrawals. Cash withdrawals are usually taxed at the rates for ordinary income--i.e., they are not treated as capital gains. They may subject you to early-distribution taxes or penalties as well. For details, see "Federal Income Taxes," page 27. CHARGES SEPARATE ACCOUNT CHARGES Charges are deducted each valuation day from the assets of the separate account for various services required to manage investments, administer the separate account and the contracts, and to cover certain insurance risks borne by TIAA. We expect that expense deductions will be relatively low. Advisors, a wholly-owned indirect subsidiary of TIAA, provides the investment management services. TIAA itself provides the administrative services for the separate account and the contracts. INVESTMENT ADVISORY CHARGE This charge is for investment advice, portfolio accounting, custodial, and similar services provided for by Advisors. The investment management agreement between Advisors and the separate account sets the investment advisory fee at 0.30 percent annually. Currently, Advisors has agreed to waive a portion of that fee, so that the daily deduction is equivalent to 0.07 percent of net assets annually. ADMINISTRATIVE EXPENSE CHARGE This charge is for administration and operations, such as allocating premiums and administering accumulations. The current daily deduction is equivalent to 0.20 percent of net assets annually. MORTALITY AND EXPENSE RISK CHARGE TIAA imposes a daily charge as compensation for bearing certain mortality and expense risks in connection with the contract. The current daily deduction is equal to 0.10 percent of net assets annually. Accumulations and annuity payments aren't affected by changes in actual mortality experience or by TIAA's actual expenses. 20 26 TIAA's mortality risks come from its contractual obligations to make annuity payments and to pay death benefits before the annuity starting date. This assures that neither your own longevity nor any collective increase in life expectancy will lower the amount of your annuity payments. TIAA also bears a risk in connection with its death benefit guarantee, since a death benefit may exceed the actual amount of an accumulation at the time when it's payable. TIAA's expense risk is the possibility that TIAA's actual expenses for administering the contract and the separate account will exceed the amount recovered through the administrative expense deduction. If the mortality and expense risk charge isn't enough to cover TIAA's actual costs, TIAA will absorb the deficit. On the other hand, if the charge more than covers costs, the excess will belong to TIAA. TIAA will pay a fee from its general account assets, which may include amounts derived from the mortality and expense risk charge, to Teachers Personal Investors Services, Inc. (TPIS), the principal underwriter of the variable component of the contract for distribution of the variable component of the contract. OTHER CHARGES NO DEDUCTIONS FROM PREMIUMS The contract provides for no front-end charges. PREMIUM TAXES Currently, contracts issued to residents of several states and the District of Columbia are subject to a premium tax. Charges for premium taxes on a particular contract ordinarily will be deducted from the accumulation when it's applied to provide annuity payments. However, if a jurisdiction requires payment of premium taxes at other times, such as when premiums are paid or when cash withdrawals are taken, we'll deduct premium taxes at those times. Current state premium taxes, where charged, range from 1.00 percent to 3.50 percent of annuity payments. BROKERAGE FEES AND RELATED TRANSACTION EXPENSES Brokers' commissions, transfer taxes, and other portfolio fees are charged to the separate account (see the SAI). THE ANNUITY PERIOD All annuity payments are paid to the contractowner from the fixed account. TIAA fixed annuity payments are usually monthly. You can choose quarterly, semi-annual, and annual payments as well. TIAA reserves the right not to make payments at any interval that would cause the initial payment to be less than $100. The value of the amount accumulated upon which payments are based will be set at the end of the last calendar day of the month before the annuity starting date. We transfer your separate account accumulation to the fixed account on that day. At the annuity 21 27 starting date, the dollar amount of each periodic annuity payment is fixed, based upon the number and value of the separate account accumulation units being converted to annuity income, the annuity option chosen, the ages of the annuitant and (under a survivor income option) the annuity partner, and the annuity purchase rates at that time. (These will not be lower than the rates provided in your contract.) Payments won't change while the annuitant and the annuity partner (under a survivor income option) are alive. After the end of the accumulation period, your contract will no longer participate in the separate account. The total value of annuity payments may be more or less than total premiums paid by the contractowner. Technically all benefits are payable at TIAA's home office, but we'll send your annuity payments by mail to your home address or (on your request) by mail or electronic fund transfer to your bank. If the address or bank where you want your payments sent changes, it's your responsibility to let us know. We can send payments to your residence or bank abroad, although there are some countries where the U.S. Treasury Department imposes restrictions. ANNUITY STARTING DATE Generally you pick an annuity starting date (it has to be the first day of a month) when you first apply for a contract. If you don't, we'll tentatively assume the annuity starting date will be the latest permissible annuity starting date (i.e., the first day of the month of the annuitant's ninetieth birthday). You can change the annuity starting date at any time before annuity payments begin (see "Choices and Changes," page 31). In any case, the annuity starting date must be at least fourteen months after the date your contract is issued. For payments to begin on the annuity starting date, we must have received all information and documentation necessary for the income option you've picked. (For more information, contact TIAA--see page 31.) If we haven't received all the necessary information, we'll defer the annuity starting date until the first day of the month after the information has reached us, but not beyond the latest permissible annuity starting date. If, by the latest permissible annuity starting date, you haven't picked an income option or if we have not otherwise received all the necessary information, we will begin payments under a Single Life Annuity. Your first annuity check may be delayed while we process your choice of income options and calculate the amount of your initial payment. INCOME OPTIONS You may select from the several income options set forth in your contract (all from the fixed account) or any other annuity option available from TIAA at the time of selection. However, federal tax law might limit the options available to you. You may change 22 28 your choice any time before payments begin, but once they have begun no change can be made. You have a number of different annuity options to choose among. The current options are: SINGLE LIFE ANNUITY Pays income (usually monthly) as long as the annuitant lives. Remember: All payments end at the annuitant's death so that it would be possible, for example, for the contractowner to receive only one payment if the annuitant died less than a month after annuity payments started. If you die before the annuitant, your beneficiary becomes the contractowner. SINGLE LIFE ANNUITY WITH A 10-, 15-, OR 20-YEAR GUARANTEED PERIOD Pays income (usually monthly) as long as the annuitant lives or until the end of the guaranteed period, whichever is longer. If the annuitant dies before the period is up, payments continue for the remaining time. If you die while any payments remain due, your beneficiary becomes the contractowner. PAYMENTS FOR A FIXED PERIOD Pays income (usually monthly) for a stipulated period of not less than two nor more than thirty years. At the end of the period you've chosen, payments stop. If you die before the period is up, your beneficiary becomes the contractowner. SURVIVOR INCOME OPTIONS Pays income at least as long as the annuitant and the annuity partner are alive, then continues upon the death of one at either the same or a reduced level at least until the second person dies. Once annuity payments begin under a survivor annuity, you can't change the annuity partner. If you die while any payments remain due, your beneficiary becomes the contractowner. FULL BENEFIT, WITH OR WITHOUT GUARANTEED PERIOD If the annuitant or the annuity partner dies, payments continue for the life of the survivor. If you haven't chosen a guaranteed period, all payments stop when the second person dies. If you've chosen a guaranteed period of 10, 15, or 20 years and both the annuitant and the annuity partner die before it elapses, payments continue for the rest of the period. TWO-THIRDS BENEFIT, WITH OR WITHOUT GUARANTEED PERIOD If the annuitant or the annuity partner dies, payments of two-thirds of the amount that would have been paid if both had lived continue for the life of the survivor. If you haven't chosen a guaranteed period, all payments stop when the second person dies. If you've chosen a guaranteed period of 10, 15, or 20 years and both the annuitant and the annuity partner die before it elapses, payments of two-thirds of the amount that would have been paid if both had lived continue for the rest of the period. 23 29 HALF-BENEFIT AFTER THE DEATH OF THE ANNUITANT, WITH OR WITHOUT GUARANTEED PERIOD If the annuity partner outlives the annuitant, payments of half the amount that would have been paid if the annuitant had lived will continue for the life of the annuity partner. If you haven't chosen a guaranteed period, all payments stop when the second person dies. If you've chosen a guaranteed period of 10, 15, or 20 years and both the annuitant and the annuity partner die before it elapses, payments of half the amount that would have been paid if the annuitant had lived continue for the rest of the period. We may make variable income options available in the future, subject to applicable law. DEATH BENEFITS Death benefits become payable when we receive proof that you or the annuitant has died during the accumulation period. When you fill out an application for a contract, you name one or more beneficiaries to receive the death benefit if you die. You can change your beneficiary at any time during the accumulation period (see "Choices and Changes," page 31). For more information on designating beneficiaries, contact TIAA or your legal advisor. If the annuitant dies during the accumulation period, you become the death benefit payee. Your accumulation will continue participating in the investment experience of the separate account up to and including the day when we receive proof of death. Ordinarily, we will transfer your separate account accumulation to the fixed account as of the day we receive proof of death. However, if the contractown- er's spouse is the sole beneficiary, when the contractowner dies the spouse can choose to become the contractowner and continue the contract, or receive the death benefit. If the spouse does not make a choice within 60 days after we receive proof of death, the spouse will automatically become the contractowner. The spouse will also become the annuitant if the contractowner was the annuitant. The amount of the death benefit will equal the greater of (1) the amount you have accumulated in the separate and fixed accounts on the day we receive proof of death or, if that isn't a business day, on the next business day, or (2) the total premiums paid under your contract minus any cash withdrawals (or surrender charges on cash withdrawals or transfers from the fixed account). If (2) is greater than (1), we'll deposit the difference in the fixed account as of the day we receive proof of death. You can choose in advance the method by which death benefits should be paid, or you can leave it up to the death benefit payee. Except with the Single-Sum Payment and Interest Payments methods, the amount of each periodic payment is fixed (see "The 24 30 Fixed Account," page 18). While you and the annuitant are both alive, you can change the method of payment you've chosen. You can also stipulate that your beneficiary not change the method you've specified in advance. (To choose, change, or restrict the method by which death benefits are to be paid, you or your beneficiary has to notify us in writing.) Once death benefits start, the method of payment can't be changed. To pay a death benefit, TIAA must have received all necessary forms and documentation. (For more information, contact TIAA--see page 31.) Even if we have not received all of the required information, death benefits must begin by the first day of the month following the 60th day after we receive proof of death. If no method of payment has been chosen by that time, we'll have the option of paying the entire death benefit to the death benefit payee within five years of death, using the Payments for a Fixed Period method. If the contractowner isn't a natural person (e.g., it's an estate or a corporation), we'll apply these distribution requirements if the annuitant dies. METHODS OF PAYMENT TIAA limits the methods of payment for death benefits to those suitable under federal income tax law for annuity contracts. (For more information, see "Taxation of Annuities," page 28.) With methods offering periodic payments, benefits are usually monthly, but the death benefit payee can request to receive them quarterly, semiannually, or annually instead. Federal law may restrict the availability of certain methods to the death benefit payee; conversely, TIAA may offer additional methods in the future. At present, the methods of payment for TIAA death benefits are: SINGLE-SUM PAYMENT The entire death benefit is paid at once (within seven days after we receive all necessary forms and documentation). When the beneficiary is an estate, the single-sum method is automatic, and TIAA reserves the right to pay death benefits only as a single sum to corporations, trustees, partnerships, guardians, or any beneficiary not a natural person. SINGLE LIFE ANNUITY Payable monthly for the life of the death benefit payee, with payments ending when he or she dies. SINGLE LIFE ANNUITY WITH A 10-, 15-, OR 20-YEAR GUARANTEED PERIOD Payable monthly for the death benefit payee's lifetime or until the end of the period chosen, which-ever is later. If he or she dies before the period is up, the remaining payments continue to the person named to receive them (see "Choices and Changes," page 31). Federal tax law says the guaranteed period selected can't exceed the death benefit payee's life expectancy. PAYMENTS FOR A FIXED PERIOD Payable over two to thirty years, as determined by you or your beneficiary. At the end of the selected period, payments stop. If the death benefit 25 31 payee dies before the period is up, the remaining payments continue to the person named to receive them. Federal tax law says the fixed period selected can't exceed the death benefit payee's life expectancy. INTEREST PAYMENTS We'll pay interest on the amount of the death benefit each month for two to thirty years. You (or your beneficiary, unless you specify otherwise) choose the period. The death benefit is payable at the end of the period chosen. If the death benefit payee dies before the interest payment period is up, the death benefit becomes payable immediately. For this interest-only method, the death benefit must be at least $5,000. The Single Life Annuity and the Single Life Annuity with a 10-, 15-, or 20-Year Guaranteed Period methods are available only if the death benefit payee is a natural person. Under any method (except the Interest Payments method) that would result in payments of less than $100 a month, we reserve the right to require a change in choice that will result in payments of $100 or more. You or your beneficiary can use more than one method of payment, but each has to meet the same $100 minimum-payment requirement. Timing of payments Usually we'll make the following kinds of payments from the separate account within seven calendar days after we've received the information we need to process a request: 1. Cash withdrawals; 2. Transfers to the fixed account; and 3. Death benefits. We can extend the seven-day period only if (1) the New York Stock Exchange is closed (or trading restricted by the SEC) on a day that isn't a weekend or holiday; (2) an SEC-recognized emergency makes it impractical for us to sell securities or determine the value of assets in the separate account; or (3) the SEC says by order that we can or must postpone payments to protect you and other separate account contractowners. 26 32 Federal income taxes The following discussion is based on our understanding of current federal income tax law as the IRS now interprets it. We can't guarantee that the law or the IRS's interpretation won't change. We haven't considered any applicable state or other tax laws. Of course, your own tax status or that of your beneficiary can affect your final outcome. TAX STATUS OF THE CONTRACT Diversification Requirements. Section 817(h) of the Internal Revenue Code (IRC) and the regulations under it provide that separate account investments underlying a contract must be "adequately diversified" for it to qualify as an annuity contract under IRC section 72. The separate account intends to comply with the diversification requirements of the regulations under section 817(h). This will affect how we make investments. Under the IRC, you could be considered the owner of the assets of the separate account used to support your contract. If this happens, you'd have to include income and gains from the separate account assets in your gross income. The IRS has published rulings stating that a variable contractowner will be considered the owner of separate account assets if the contractowner has any powers that the actual owner of the assets might have, such as the ability to exercise investment control. The Treasury Department says that the regulations on investment diversification don't provide guidance about when and how investor control of a segregated asset account's investment could cause the investor rather than the insurance company to be treated as the owner of the assets for tax purposes. The Treasury Department has also stated that the IRS would issue regulations or rulings clarifying the "extent to which policyholders may direct their investments to particular subaccounts without being treated as owners of the underlying assets." Your ownership rights under the contract are similar but not identical to those described by the IRS in rulings that held that contractowners were not owners of separate account assets, so the IRS might not rule the same way in your case. TIAA reserves the right to change the contract if necessary to help prevent your being considered the owner of the separate account's assets. REQUIRED DISTRIBUTIONS To qualify as an annuity contract under section 72(s) of the IRC, a contract must provide that: (a) if any owner dies on or after the annuity starting date but before all amounts under the contract have been distributed, the remaining amounts will be distributed at least as quickly as under the method being used when the owner died; and (b) if any owner dies before the annuity starting date, all amounts under the contract will be distributed within five years of the date of death. So long as the distributions begin within a year of the owner's death, the IRS will consider these 27 33 requirements satisfied for any part of the owner's interest payable to or for the benefit of a "designated beneficiary" and distributed over the beneficiary's life or over a period that cannot exceed the beneficiary's life expectancy. A designated beneficiary is the person the owner names to assume ownership when the owner dies. A designated beneficiary must be a natural person. If a contractowner's spouse is the designated beneficiary, he or she can continue the contract when the contractowner dies. The contract is designed to comply with section 72(s). TIAA will review the contract and amend it if necessary to make sure that it continues to comply with the section's requirements. TAXATION OF ANNUITIES Assuming the contracts qualify as annuity contracts for federal income tax purposes: IN GENERAL IRC section 72 governs annuity taxation generally. We believe an owner who is a natural person usually won't be taxed on increases in the value of a contract until there is a distribution (i.e., the owner withdraws all or part of the accumulation or takes annuity payments). Assigning, pledging, or agreeing to assign or pledge any part of the accumulation usually will be considered a distribution. Withdrawals of accumulated investment earnings are taxable as ordinary income. Generally under the IRC, withdrawals are first allocated to investment earnings. The owner of any annuity contract who is not a natural person generally must include in income any increase in the excess of the accumulation over the "investment in the contract" during the taxable year. There are some exceptions to this, and agents of prospective owners that are not natural persons may wish to discuss them with a competent tax advisor. The following discussion applies generally to contracts owned by a natural person: WITHDRAWALS If you withdraw funds from your contract before the annuity starting date, IRC section 72(e) usually deems taxable any amounts received to the extent that the accumulation value immediately before the withdrawal exceeds the investment in the contract. Any remaining portion of the withdrawal is not taxable. The investment in the contract usually equals all premiums paid by the contractowner or on the contractowner's behalf. If you withdraw your entire accumulation under a contract, you will be taxed only on the part that exceeds your investment in the contract. ANNUITY PAYMENTS Although tax consequences can vary with the income option you pick, IRC section 72(b) provides generally that, before you recover the investment in the contract, gross income does not include that fraction of any annuity income payments that equals the ratio of investment in the contract to the expected return at the annuity starting 28 34 date. After you recover your investment in the contract, all additional annuity payments are fully taxable. TAXATION OF DEATH BENEFIT PROCEEDS Amounts may be paid from a contract because an owner has died. If the payments are made in a single sum, they're taxed the same way a full withdrawal from the contract is taxed. If they are distributed as annuity payments, they're taxed as annuity payments. Generally, under the Interest Payments method the death benefit will be taxed as though it were distributed as a single-sum payment at the beginning of the payment period, with interest taxed as it is paid. PENALTY TAX ON SOME WITHDRAWALS You may have to pay a penalty tax (10 percent of the amount treated as taxable income) on some withdrawals. However, there is usually no penalty on distributions: (1) on or after you reach 59 1/2; (2) after you die (or after the annuitant dies, if the owner isn't an individual); (3) after you become disabled; or (4) that are part of a series of substantially equal periodic (at least annual) payments for your life (or life expectancy) or the joint life (or life expectancy) of you and your beneficiary. POSSIBLE TAX CHANGES Legislation is proposed from time to time that would change the taxation of annuity contracts. It is possible that such legislation could be enacted and that it could be retroactive (that is, effective prior to the date of the change). You should consult a tax adviser with respect to legislative developments and their effect on the Contract. TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF A CONTRACT Transferring contract ownership, designating an annuitant, payee or other beneficiary who is not also the owner, or exchanging a contract can have other tax consequences that we don't discuss here. If you're thinking about any of those transactions, contact a tax advisor. WITHHOLDING Annuity distributions usually are subject to withholding for the recipient's federal income tax liability at rates that vary according to the type of distribution and the recipient's tax status. However, recipients can usually choose not to have tax withheld from distributions. MULTIPLE CONTRACTS In determining gross income, section 72(e) generally treats as one contract all TIAA and its affiliates' non-qualified deferred annuity contracts issued after October 21, 1988 to the same owner during any calendar year. This could affect when income is taxable and how much might be subject to the 10 percent 29 35 penalty tax (see above). It is possible, for instance, that if you take annuity payments from only one of the contracts, they could be taxed like individual withdrawals (see above). There might be other situations where Treasury concludes that it would be appropriate to treat two or more annuity contracts purchased by the same owner as if they were one contract. Consult a tax advisor before buying more than one annuity contract for the purpose of gaining a tax advantage. POSSIBLE CHARGE FOR TIAA'S TAXES Currently we don't charge the separate account for any federal, state, or local taxes on it or its contracts (other than premium taxes--see page 21), but we reserve the right to charge the separate account or the contracts for any tax or other cost resulting from the tax laws that we believe should be attributed to them. TAX ADVICE What we tell you here about federal and other taxes isn't comprehensive and is for general information only. It doesn't cover every situation. Taxation varies depending on the circumstances, and state and local taxes may also be involved. For complete information on your personal tax situation, check with a qualified tax adviser. Voting rights The separate account doesn't plan to hold annual meetings of contractowners. When contractowner meetings are held, contractowners generally can vote (1) to elect the management committee; (2) to ratify the selection of an independent auditor for the separate account; and (3) on any other matter that requires a vote by contractowners. On the record date, you'll have one vote per dollar of your accumulation. When we use the phrase "majority of outstanding voting securities" in this prospectus and the SAI, we mean the lesser of (a) 67 percent of the voting securities present, as long as the holders of at least half the voting securities are present or represented by proxy; or (b) 50 percent of the outstanding voting securities. If a majority of outstanding voting securities isn't required to decide a question, we'll generally require a quorum of 10 percent of the securities, with a simple majority required to decide the issue. If laws, regulations, or legal interpretations make it unnecessary to submit any issue to a vote, or otherwise restrict your voting rights, we reserve the right to act as permitted. 30 36 General matters CHOICES AND CHANGES As long as the contract permits, the contractowner (or the annuitant, the annuity partner, beneficiary, or any other payee) can choose or change any of the following: (1) an annuity starting date; (2) an income option; (3) a transfer; (4) a method of payment for death benefits; (5) an annuity partner, beneficiary, or other person named to receive payments; and (6) a cash withdrawal or other distribution. You have to make your choices or changes via a written notice satisfactory to us and received at our home office (see below). You can change the terms of a transfer, cash withdrawal, or other cash distribution only before they're scheduled to take place. When we receive a notice of a change in beneficiary or other person named to receive payments, we'll execute the change as of the date it was signed, even if the signer dies in the meantime. We execute all other changes as of the date received. As already mentioned, we'll delay the effective date of some transactions until we receive additional documentation (see "Remitting Premiums," page 16). TELEPHONE AND INTERNET TRANSACTIONS You can use our Automated Telephone Service (ATS) or the TIAA-CREF Web Center's account access feature over the Internet to check your accumulation balances and/or your current allocation percentages, transfer between the separate account and the fixed account, and/or allocate future premiums to the separate account or the fixed account. You will be asked to enter your Personal Identification Number (PIN) and Social Security Number for both systems. Both will lead you through the transaction process and will use reasonable procedures to confirm that instructions given are genuine. All transactions made over the ATS and through the Web Center are electronically recorded. To use the ATS, you need to call 1 800 842-2252 on a touch-tone phone. To use the Web Center's account access feature, access the TIAA-CREF Internet home page at www.tiaa-cref.org. We can suspend or terminate your ability to transact by telephone or over the Internet at any time for any reason. CONTACTING TIAA We won't consider any notice, form, request, or payment to have been received by TIAA until it reaches our home office: Teachers Insurance and Annuity Association of America, 730 Third Avenue, New York, New York 10017-3206, or the post office box specifically designated for the purpose. You can ask questions by calling toll-free 1 800 223-1200. ELECTRONIC PROSPECTUSES If you received this prospectus electronically and would like a paper copy, please call 1 800 842-2733, extension 5509, and we will send it to you. 31 37 HOUSEHOLDING To cut costs and eliminate duplicate documents sent to your home, we may begin mailing only one copy of the separate account prospectus, prospectus supplements, annual and semi-annual reports, or any other required documents, to your household, even if more than one contractowner lives there. If you would prefer to continue receiving your own copy of any of these documents, you may call us toll-free at 1 800 842-2733, extension 5509, or write us. SIGNATURE REQUIREMENTS For some transactions, we may require your signature to be notarized or guaranteed by a commercial bank or a member of a national securities exchange. ERRORS OR OMISSIONS We reserve the right to correct any errors or omissions on any form, report, or statement that we send you. Distribution of the contracts The contracts are offered continuously by Teachers Personal Investors Services, Inc. (TPIS) and, in some instances, TIAA-CREF Individual & Institutional Services, Inc. (Services), which are both registered with the SEC as broker-dealers, are members of the NASD and are direct or indirect subsidiaries of TIAA. TPIS may be considered the "principal underwriter" for interests in the contract. Anyone distributing the contract must be a registered representative of either TPIS or Services, whose main offices are both at 730 Third Avenue, New York, New York 10017-3206. No commissions are paid in connection with the distribution of the contracts. Legal Proceedings The assets of the separate account are not subject to any legal actions. Neither TIAA nor TPIS nor Advisors is involved in any legal action that we consider material to its obligations to the separate account. 32 38 Table of Contents for Statement of Additional Information
PAGE IN THE STATEMENT OF ADDITIONAL ITEM INFORMATION ---- ----------- Investment Restrictions B-3 Investment Policies and Risk Considerations B-3 Options and Futures B-3 Firm Commitment Agreements and Purchase of "When-Issued" Securities B-6 Lending of Securities B-6 Repurchase Agreements B-6 Swap Transactions B-7 Segregated Accounts B-7 Other Investment Techniques and Opportunities B-7 Portfolio Turnover B-7 Valuation of Assets B-8 Equity Securities B-8 Money Market Instruments B-8 Options B-8 Investments for Which Market Quotations Are Not Readily Available B-8 Management B-9 Separate Account Management Committee and Officers B-9 Compensation of Managers B-9 Investment Advisory and Related Services B-10 Investment Advisory Services B-10 Administrative Services B-10 Advisors and TIAA B-10 Custody of Portfolio B-11 Auditors B-11 Brokerage Allocation B-11 Performance Information B-11 Total Return Information for the Separate Account B-11 Performance Comparisons B-12 Illustrating Compounding, Tax Deferral, and Expense Deductions B-12 Periodic Reports B-13 General Matters B-13 Assignment of Contracts B-13 Payment to an Estate, Guardian, Trustee, etc. B-13 Benefits Based on Incorrect Information B-13 Proof of Survival B-13 State Regulation B-13 Legal Matters B-13 Experts B-13 Additional Considerations B-13 Additional Information B-14 Financial Statements B-14
33 39 [Back Cover Wrap Page--Mailer] 40 Individual Deferred Variable Annuities Funded Through TIAA SEPARATE ACCOUNT VA-1 OF TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA STATEMENT OF ADDITIONAL INFORMATION April 1, 2001 This Statement of Additional Information is not a prospectus and should be read in connection with the current prospectus dated April 1, 2001 (the "Prospectus"), for the variable annuity that is the variable component of the contract. The Prospectus is available without charge upon written or oral request to: Teachers Insurance and Annuity Association of America, 730 Third Avenue, New York, New York 10017-3206, Attention: Central Services; telephone 1 800 842-2733, extension 5509. Terms used in the Prospectus are incorporated in this Statement. THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACTS. 41 Table of Contents
LOCATION OF PAGE IN THE ADDITIONAL STATEMENT INFORMATION OF ADDITIONAL IN PROSPECTUS, ITEM INFORMATION IF APPLICABLE ---- ------------- -------------- Investment Restrictions........... B-3 13 Investment Policies and Risk Considerations.... B-3 11-14 Options and Futures.... B-3 13-14 Firm Commitment Agreements and Purchase of "When- Issued Securities"......... B-6 14 Lending of Securities.......... B-6 14 Repurchase Agreements.......... B-6 14 Swap Transactions...... B-7 13 Segregated Accounts.... B-7 Other Investment Techniques and Opportunities....... B-7 Portfolio Turnover....... B-7 Valuation of Assets...... B-8 14 Equity Securities...... B-8 Money Market Instruments......... B-8 Options................ B-8 Investments for Which Market Quotations are Not Readily Available........... B-8 Management............... B-9 15 Separate Account Management Committee and Officers........ B-9 15 Compensation of Managers............ B-9 Investment Advisory and Related Services....... B-10 15 Investment Advisory Services............ B-10
LOCATION OF PAGE IN THE ADDITIONAL STATEMENT INFORMATION OF ADDITIONAL IN PROSPECTUS, ITEM INFORMATION IF APPLICABLE ---- ------------- -------------- Administrative Services............ B-10 Advisors and TIAA...... B-10 Custody of Portfolio... B-11 Auditors............... B-11 Brokerage Allocation..... B-11 Performance Information............ B-11 14 Total Return Information for the Separate Account.... B-11 Performance Comparisons......... B-12 Illustrating Compounding, Tax Deferral, and Expense Deductions.......... B-12 Periodic Reports......... B-13 General Matters.......... B-13 Assignment of Contracts........... B-13 Payment to an Estate, Guardian, Trustee, etc................. B-13 Benefits Based on Incorrect Information......... B-13 Proof of Survival...... B-13 State Regulation......... B-13 10 Legal Matters............ B-13 32 Experts.................. B-13 Additional Considerations......... B-13 Additional Information... B-14 Financial Statements..... B-14 8
B-2 42 Investment Restrictions The following restrictions are fundamental policies with respect to the separate account and may not be changed without the approval of a majority of the outstanding voting securities, as that term is defined under the 1940 Act, in the separate account: 1. The separate account will not issue senior securities except as SEC regulations permit; 2. The separate account will not borrow money, except: (a) the separate account may purchase securities on margin, as described in restriction 9 below; and (b) from banks (only in amounts not in excess of 33 1/3% of the market value of the separate account's assets at the time of borrowing), and, from other sources, for temporary purposes (only in amounts not exceeding 5% of the separate account's total assets taken at market value at the time of borrowing). Money may be temporarily obtained through bank borrowing, rather than through the sale of portfolio securities, when such borrowing appears more attractive for the separate account; 3. The separate account will not underwrite the securities of other companies, except to the extent that it may be deemed an underwriter in connection with the disposition of securities from its portfolio; 4. The separate account will not, with respect to at least 75% of the value of its total assets, invest more than 5% of its total assets in the securities of any one issuer other than securities issued or guaranteed by the United States Government, its agencies or instrumentalities; 5. The separate account will not make an investment in an industry if after giving effect to that investment the separate account's holding in that industry would exceed 25% of the separate account's total assets--this restriction, however, does not apply to investments in obligations issued or guaranteed by the United States Government, its agencies or instrumentalities; 6. The separate account will not purchase real estate or mortgages directly; 7. The separate account will not purchase commodities or commodities contracts, except to the extent futures are purchased as described herein; 8. The separate account will not make loans, except: (a) that it may make loans of portfolio securities not exceeding 33 1/3% of the value of its total assets, which are collateralized by either cash, United States Government securities, or other means permitted by applicable law, equal to at least 102% of the market value of the loaned securities, or such lesser percentage as may be permitted by the New York State Insurance Department (not to fall below 100% of the market value of the loaned securities), as reviewed daily; (b) loans through entry into repurchase agreements may be made; (c) privately placed debt securities may be purchased; or (d) participation interests in loans, and similar investments, may be purchased; and 9. The separate account will not purchase any security on margin (except that the separate account may obtain such short-term credit as may be necessary for the clearance of purchases and sales of portfolio securities). If a percentage restriction is adhered to at the time of investment, a later increase or decrease in percentage beyond the specified limit resulting from a change of values in portfolio securities will not be considered a violation. Investment Policies and Risk Considerations OPTIONS AND FUTURES The separate account may engage in options and futures strategies to the extent permitted by the New York State Insurance Department and subject to SEC and Commodity Futures Trading Commission ("CFTC") requirements. It is not the intention of the separate account to use options and futures strategies in a speculative manner but rather to use them primarily as hedging techniques or for cash management purposes. OPTIONS. Option-related activities could include (1) the sale of covered call option contracts, and the purchase of call option contracts for the purpose of a closing purchase transaction; (2) the buying of covered put option contracts, and the selling of put option contracts to close out a position acquired through the purchase of such options; and (3) the selling of call option contracts or the buying of put option contracts on groups of securities and on futures on groups of securities and the buying of similar call option contracts or the selling of put option contracts to close out a position acquired through a sale of such options. This list of options-related activities is not intended to be exclusive, and the separate account may engage in other types of options transactions consistent with its investment objective and policies and applicable law. A call option is a short-term contract (generally having a duration of nine months or less) which gives the purchaser of the option the right to purchase the underlying security at a fixed exercise price at any time prior to the expiration of the option regardless of the market price of the security during the option period. As consideration for the call option, the purchaser pays the seller a premium, which the seller retains whether or not the option is exercised. As the seller of a call option, the separate account has the obligation, upon the exercise of the option by the purchaser, to sell the underlying security at the exercise price at any time during the option period. The selling of a call option benefits the separate account if over the option period the underlying security declines in value or does not appreciate above the aggregate of the exercise price and the premium. However, the separate account risks an B-3 43 "opportunity loss" of profits if the underlying security appreciates above the aggregate value of the exercise price and the premium. The separate account may close out a position acquired through selling a call option by buying a call option on the same security with the same exercise price and expiration date as the call option which it had previously sold on that security. Depending on the premium for the call option purchased by the separate account, the separate account will realize a profit or loss on the transaction. A put option is a similar short-term contract that gives the purchaser of the option the right to sell the underlying security at a fixed exercise price at any time prior to the expiration of the option regardless of the market price of the security during the option period. As consideration for the put option the separate account, as purchaser, pays the seller a premium, which the seller retains whether or not the option is exercised. The seller of a put option has the obligation, upon the exercise of the option by the separate account, to purchase the underlying security at the exercise price at any time during the option period. The buying of a covered put contract limits the downside exposure for the investment in the underlying security to the combination of the exercise price less the premium paid. The risk of purchasing a put is that the market price of the underlying stock prevailing on the expiration date may be above the option's exercise price. In that case the option would expire worthless and the entire premium would be lost. The separate account may close out a position acquired through buying a put option by selling a put option on the same security with the same exercise price and expiration date as the put option which it had previously bought on the security. Depending on the premium of the put option sold by the separate account, the separate account would realize a profit or loss on the transaction. In addition to options (both calls and puts) on individual securities, there are also options on groups of securities, such as the Standard & Poor's 100 Index traded on the Chicago Board Options Exchange. There are also options on the futures of groups of securities such as the Standard & Poor's 500 Stock Index and the New York Stock Exchange Composite Index. The selling of such calls can be used in anticipation of, or in, a general market or market sector decline that may adversely affect the market value of the separate account's portfolio of securities. To the extent that the separate account's portfolio of securities changes in value in correlation with a given stock index, the sale of call options on the futures of that index would substantially reduce the risk to the portfolio of a market decline, and, by so doing, provides an alternative to the liquidation of securities positions in the portfolio with resultant transaction costs. A risk in all options, particularly the relatively new options on groups of securities and on the futures on groups of securities, is a possible lack of liquidity. This will be a major consideration before the separate account deals in any option. There is another risk in connection with selling a call option on a group of securities or on the futures of groups of securities. This arises because of the imperfect correlation between movements in the price of the call option on a particular group of securities and the price of the underlying securities held in the portfolio. Unlike a covered call on an individual security, where a large movement on the upside for the call option will be offset by a similar move on the underlying stock, a move in the price of a call option on a group of securities may not be offset by a similar move in the price of securities held due to the difference in the composition of the particular group and the portfolio itself. FUTURES. To the extent permitted by applicable regulatory authorities, the separate account may purchase and sell futures contracts on securities or other instruments, or on groups or indexes of securities or other instruments. The purpose of hedging techniques using financial futures is to protect the principal value of a fund against adverse changes in the market value of securities or instruments in its portfolio, and to obtain better returns on future investments than actually may be available at the future time. Since these are hedging techniques, the gains or losses on the futures contract normally will be offset by losses or gains respectively on the hedged investment. Futures contracts also may be offset prior to the future date by executing an opposite futures contract transaction. A futures contract on an investment is a binding contractual commitment which, if held to maturity, will result in an obligation to make or accept delivery, during a particular future month, of the securities or instrument underlying the contract. By purchasing a futures contract--assuming a "long" position--the separate account legally will obligate itself to accept the future delivery of the underlying security or instrument and pay the agreed price. By selling a futures contract--assuming a "short" position--it legally will obligate itself to make the future delivery of the security or instrument against payment of the agreed price. Positions taken in the futures markets are not normally held to maturity, but are instead liquidated through offsetting transactions which may result in a profit or a loss. While futures positions taken by the separate account usually will be liquidated in this manner, the separate account may instead make or take delivery of the underlying securities or instruments whenever it appears economically advantageous to the separate account to do so. A clearing corporation associated with the exchange on which futures are traded assumes responsibility for closing-out positions and guarantees that the sale and purchase obligations will be performed with regard to all positions that remain open at the termination of the contract. A stock index futures contract, unlike a contract on a specific security, does not provide for the physical delivery of securities, but merely provides for profits and losses resulting from changes in the market value of the contract to be credited or debited at the close of each trading day to the respective accounts of the parties to the contract. On the contract's expiration date, a final cash settlement occurs and the futures positions simply are closed out. Changes in the market value of a particular stock index futures contract reflect B-4 44 changes in the specified index of equity securities on which the future is based. Stock index futures may be used to hedge the equity investments of the separate account with regard to market (systematic) risk (involving the market's assessment of overall economic prospects), as distinguished from stock-specific risk (involving the market's evaluation of the merits of the issuer of a particular security). By establishing an appropriate "short" position in stock index futures, the separate account may seek to protect the value of its securities portfolio against an overall decline in the market for equity securities. Alternatively, in anticipation of a generally rising market, the separate account can seek to avoid losing the benefit of apparently low current prices by establishing a "long" position in stock index futures and later liquidating that position as particular equity securities are in fact acquired. To the extent that these hedging strategies are successful, the separate account will be affected to a lesser degree by adverse overall market price movements, unrelated to the merits of specific portfolio equity securities, than would otherwise be the case. Unlike the purchase or sale of a security, no price is paid or received by the separate account upon the purchase or sale of a futures contract. Initially, the separate account will be required to deposit in a custodial account an amount of cash, United States Treasury securities, or other permissible assets equal to approximately 5% of the contract amount. This amount is known as "initial margin." The nature of initial margin in futures transactions is different from that of margin in security transactions in that futures contract margin does not involve the borrowing of funds by the customer to finance the transactions. Rather, the initial margin is in the nature of a performance bond or good faith deposit on the contract that is returned to the separate account upon termination of the futures contract assuming all contractual obligations have been satisfied. Subsequent payments to and from the broker, called "variation margin," will be made on a daily basis as the price of the underlying stock index fluctuates making the long and short positions in the futures contract more or less valuable, a process known as "marking to the market." For example, when the separate account has purchased a stock index futures contract and the price of the underlying stock index has risen, that position will have increased in value, and the separate account will receive from the broker a variation margin payment equal to that increase in value. Conversely, where the separate account has purchased a stock index futures contract and the price of the underlying stock index has declined, the position would be less valuable and the separate account would be required to make a variation margin payment to the broker. At any time prior to expiration of the futures contract, the separate account may elect to close the position by taking an opposite position which will operate to terminate the separate account's position in the futures contract. A final determination of variation margin is then made, additional cash is required to be paid by or released to the separate account, and the separate account realizes a loss or a gain. All margin payments will be made to a custodian in the broker's name. There are several risks in connection with the use by the separate account of a futures contract as a hedging device. One risk arises because of the imperfect correlation between movements in the prices of the futures contracts and movements in the securities or instruments that are the subject of the hedge. The separate account will attempt to reduce this risk by engaging in futures transactions, to the extent possible, where, in our judgment, there is a significant correlation between changes in the prices of the futures contracts and the prices of the separate account's portfolio securities or instruments sought to be hedged. Successful use of futures contracts by the separate account for hedging purposes also is subject to the user's ability to predict correctly movements in the direction of the market. For example, it is possible that, where the separate account has sold futures to hedge its portfolio against declines in the market, the index on which the futures are written may advance and the values of securities or instruments held in the separate account's portfolio may decline. If this occurred, the separate account would lose money on the futures and also experience a decline in value in its portfolio investments. However, we believe that over time the value of the separate account's portfolio will tend to move in the same direction as the market indices that are intended to correlate to the price movements of the portfolio securities or instruments sought to be hedged. It also is possible that, for example, if the separate account has hedged against the possibility of the decline in the market adversely affecting stocks held in its portfolio and stock prices increased instead, the separate account will lose part or all of the benefit of increased value of those stocks that it has hedged because it will have offsetting losses in its futures positions. In addition, in such situations, if the separate account has insufficient cash, it may have to sell securities or instruments to meet daily variation margin requirements. Such sales may be, but will not necessarily be, at increased prices which that the rising market. The separate account may have to sell securities or instruments at a time when it may be disadvantageous to do so. In addition to the possibility that there may be an imperfect correlation, or no correlation at all, between movements in the futures contracts and the portion of the portfolio being hedged, the prices of futures contracts may not correlate perfectly with movements in the underlying security or instrument due to certain market distortions. First, all transactions in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions that could distort the normal relationship between the index and futures markets. Second, the margin requirements in the futures market are less onerous than margin requirements in the securities market, and as a result the futures market may attract more speculators than the securities market does. Increased participation by speculators in the futures market also may cause temporary price distortions. Due to the possibility of price distortion in the B-5 45 futures market and also because of the imperfect correlation between movements in the futures contracts and the portion of the portfolio being hedged, even a correct forecast of general market trends by Advisors still may not result in a successful hedging transaction over a very short time period. The separate account may also use futures contracts and options on futures contracts to manage its cash flow more effectively. To the extent that the separate account enters into non-hedging positions, it will do so only in accordance with certain CFTC exemptive provisions. Thus, pursuant to CFTC Rule 4.5, the aggregate initial margin and premiums required to establish non- hedging positions in commodity futures or commodity options contracts may not exceed 5% of the liquidation value of the separate account's portfolio, after taking into account unrealized profits and unrealized losses on any such contracts it has entered into (provided that the in-the-money amount of an option that is in-the-money when purchased may be excluded in computing such 5%). Options and futures transactions may increase the separate account's transaction costs and portfolio turnover rate and will be initiated only when consistent with its investment objectives. FIRM COMMITMENT AGREEMENTS AND PURCHASE OF "WHEN-ISSUED" SECURITIES The separate account can enter into firm commitment agreements for the purchase of securities on a specified future date. When the separate account enters into firm commitment agreements, liability for the purchase price--and the rights and risks of ownership of the securities--accrues to the separate account at the time it becomes obligated to purchase such securities, although delivery and payment occur at a later date. Accordingly, if the market price of the security should decline, the effect of the agreement would be to obligate the separate account to purchase the security at a price above the current market price on the date of delivery and payment. During the time the separate account is obligated to purchase such securities, it will be required to segregate assets (see "Segregated Accounts," page B-7). The separate account will not purchase securities on a "when issued" basis if, as a result, more than 15% of its net assets would be so invested. LENDING OF SECURITIES Subject to investment restriction 8(a) on page B-3 (relating to loans of portfolio securities), the separate account may lend its securities to brokers and dealers that are not affiliated with TIAA, are registered with the SEC and are members of the NASD, and also to certain other financial institutions. All loans will be fully collateralized. In connection with the lending of its securities, the separate account will receive as collateral cash, securities issued or guaranteed by the United States Government (i.e., Treasury securities), or other collateral permitted by applicable law, which at all times while the loan is outstanding will be maintained in amounts equal to at least 102% of the current market value of the loaned securities, or such lesser percentage as may be permitted by the New York State Insurance Department (not to fall below 100% of the market value of the loaned securities), as reviewed daily. By lending its securities, the separate account will receive amounts equal to the interest or dividends paid on the securities loaned and in addition will expect to receive a portion of the income generated by the short-term investment of cash received as collateral or, alternatively, where securities or a letter of credit are used as collateral, a lending fee paid directly to the separate account by the borrower of the securities. Such loans will be terminable by the separate account at any time and will not be made to affiliates of TIAA. The separate account may terminate a loan of securities in order to regain record ownership of, and to exercise beneficial rights related to, the loaned securities, including but not necessarily limited to voting or subscription rights, and may, in the exercise of its fiduciary duties, terminate a loan in the event that a vote of holders of those securities is required on a material matter. The separate account may pay reasonable fees to persons unaffiliated with the separate account for services or for arranging such loans. Loans of securities will be made only to firms deemed creditworthy. As with any extension of credit, however, there are risks of delay in recovering the loaned securities, should the borrower of securities default, become the subject of bankruptcy proceedings, or otherwise be unable to fulfill its obligations or fail financially. REPURCHASE AGREEMENTS Repurchase agreements have the characteristics of loans by the separate account, and will be fully collateralized (either with physical securities or evidence of book entry transfer to the account of the custodian bank) at all times. During the term of the repurchase agreement, the separate account retains the security subject to the repurchase agreement as collateral securing the seller's repurchase obligation, continually monitors the market value of the security subject to the agreement, and requires the separate account's seller to deposit with the separate account additional collateral equal to any amount by which the market value of the security subject to the repurchase agreement falls below the resale amount provided under the repurchase agreement. The separate account will enter into repurchase agreements only with member banks of the Federal Reserve System, and with primary dealers in United States Government securities or their wholly-owned subsidiaries whose creditworthiness has been reviewed and found satisfactory by Advisors and who have, therefore, been determined to present minimal credit risk. Securities underlying repurchase agreements will be limited to certificates of deposit, commercial paper, bankers' acceptances, or obligations issued or guaranteed by the United States Government or its agencies or instrumentalities, in which the separate account may otherwise invest. If a seller of a repurchase agreement defaults and does not repurchase the security subject to the agreement, the separate B-6 46 account would look to the collateral security underlying the seller's repurchase agreement, including the securities subject to the repurchase agreement, for satisfaction of the seller's obligation to the separate account; in such event the separate account might incur disposition costs in liquidating the collateral and might suffer a loss if the value of the collateral declines. In addition, if bankruptcy proceedings are instituted against a seller of a repurchase agreement, realization upon the collateral may be delayed or limited. SWAP TRANSACTIONS The separate account may, to the extent permitted by the New York State Insurance Department and the SEC, enter into privately negotiated "swap" transactions with other financial institutions in order to take advantage of investment opportunities generally not available in public markets. In general, these transactions involve "swapping" a return based on certain securities, instruments, or financial indices with another party, such as a commercial bank, in exchange for a return based on different securities, instruments, or financial indices. By entering into swap transactions, the separate account may be able to protect the value of a portion of its portfolio against declines in market value. The separate account may also enter into swap transactions to facilitate implementation of allocation strategies between different market segments or countries or to take advantage of market opportunities that may arise from time to time. The separate account may be able to enhance its overall performance if the return offered by the other party to the swap transaction exceeds the return swapped by the separate account. However, there can be no assurance that the return the separate account receives from the counterparty to the swap transaction will exceed the return it swaps to that party. While the separate account will only enter into swap transactions with counterparties it considers creditworthy (and will monitor the creditworthiness of parties with which it enters into swap transactions), a risk inherent in swap transactions is that the other party to the transaction may default on its obligations under the swap agreement. If the other party to the swap transaction defaults on its obligations, the separate account would be limited to contractual remedies under the swap agreement. There can be no assurance that the separate account will succeed when pursuing its contractual remedies. To minimize the separate account's exposure in the event of default, the separate account will usually enter into swap transactions on a net basis (i.e., the parties to the transaction will net the payments payable to each other before such payments are made). When the separate account enters into swap transactions on a net basis, the net amount of the excess, if any, of the separate account's obligations over its entitlements with respect to each such swap agreement will be accrued on a daily basis and an amount of liquid assets having an aggregate market value at least equal to the accrued excess will be segregated by the separate account's custodian. To the extent the separate account enters into swap transactions other than on a net basis, the amount segregated will be the full amount of the separate account's obligations, if any, with respect to each such swap agreement, accrued on a daily basis (see "Segregated Accounts," below). Swap agreements may be considered illiquid by the SEC staff and subject to the limitations on illiquid investments. To the extent that there is an imperfect correlation between the return the separate account is obligated to swap and the securities or instruments representing such return, the value of the swap transaction may be adversely affected. The separate account therefore will not enter into a swap transaction unless it owns or has the right to acquire the securities or instruments representative of the return it is obligated to swap with the counterparty to the swap transaction. It is not the intention of the separate account to engage in swap transactions in a speculative manner but rather primarily to hedge or manage the risks associated with assets held in, or to facilitate the implementation of portfolio strategies of purchasing and selling assets for, the separate account. SEGREGATED ACCOUNTS In connection with when-issued securities, firm commitment agreements, and certain other transactions in which the separate account incurs an obligation to make payments in the future, the separate account may be required to segregate assets with its custodian bank in amounts sufficient to settle the transaction. To the extent required, such segregated assets will consist of liquid assets such as cash, United States Government securities or other appropriate high grade debt obligations or other securities as may be permitted by law. OTHER INVESTMENT TECHNIQUES AND OPPORTUNITIES The separate account may take certain actions with respect to merger proposals, tender offers, conversion of equity-related securities and other investment opportunities with the objective of enhancing the portfolio's overall return, irrespective of how these actions may affect the weight of the particular securities in the separate account's portfolio. Portfolio Turnover The transactions engaged in by the separate account are reflected in the separate account's portfolio turnover rate. The rate of portfolio turnover is calculated by dividing the lesser of the amount of purchases or sales of portfolio securities during the fiscal year by the monthly average of the value of the separate account's portfolio securities (excluding from the computation all securities, including options, with maturities at the time of acquisition of one year or less). A high rate of portfolio turnover generally involves correspondingly greater brokerage commission expenses, which must be borne directly by the separate account and ultimately by the separate account's contractowners. However, because portfolio turnover is not a limiting factor in determining whether or B-7 47 not to sell portfolio securities, a particular investment may be sold at any time, if investment judgment or account operations make a sale advisable. The separate account has no fixed policy on portfolio turnover. Because a higher portfolio turnover rate will increase brokerage costs to the separate account, however, Advisors will carefully weigh the added costs of short-term investment against the gains and reductions in index tracking error anticipated from such transactions. The portfolio turnover rate in 2000 and 1999 for the separate account were 20.68% and 37.93%, respectively. The decrease in portfolio turnover rates for the separate account were due in part to fewer opportunities for gain from enhanced indexing techniques in 2000. Valuation of Assets The assets of the separate account are valued as of the close of each valuation day. EQUITY SECURITIES Investments for which market quotations are readily available are valued at the market value of such investments, determined as follows: Equity securities listed or traded on the New York Stock Exchange or the American Stock Exchange are valued based on their last sale price on such exchange on the date of valuation, or at the mean of the closing bid and asked prices if no sale is reported. Equity securities that are listed or traded on any other exchange are valued in a comparable manner on the principal exchange where traded. Equity securities traded in the United States over-the-counter market are valued based on the last sale price on the date of valuation for NASDAQ National Market System securities, or at the mean of the closing bid and asked prices if no sale is reported. Other U.S. over-the-counter equity securities are valued at the mean of the closing bid and asked prices. Equity securities traded in the United States may be valued at fair value as determined in good faith under the direction of the Management Committee (see "Management," below) if events materially affecting the value of a domestic investment (as determined in our sole discretion) occur between the time when its price is determined and the time the separate account's net asset value is calculated. MONEY MARKET INSTRUMENTS Money market instruments for which market quotations are readily available are valued based on the most recent bid price or the equivalent quoted yield for such securities (or those of comparable maturity, quality, and type). Values for money market instruments will be obtained either from one or more of the major market makers or from one or more of the financial information services for the securities to be valued. OPTIONS Portfolio investments underlying options are valued as described above. Stock options written by the separate account are valued at the last quoted sale price, or at the closing bid price if no sale is reported for the day of valuation as determined on the principal exchange on which the option is traded. The value of the separate account net assets will be increased or decreased by the difference between the premiums received on writing options and the costs of liquidating such positions measured by the closing price of the options on the date of valuation. For example, when the separate account writes a call option, the amount of the premium is included in the separate account's assets and an equal amount is included in its liabilities. The liability thereafter is adjusted to the current market value of the call. Thus, if the current market value of the call exceeds the premium received, the excess would be unrealized depreciation; conversely, if the premium exceeds the current market value, such excess would be unrealized appreciation. If a call expires or if the separate account enters into a closing purchase transaction it realizes a gain (or a loss if the cost of the transaction exceeds the premium received when the call was written) without regard to any unrealized appreciation or depreciation in the underlying securities, and the liability related to such call is extinguished. If a call is exercised, the separate account realizes a gain or loss from the sale of the underlying securities and the proceeds of the sale increased by the premium originally received. A premium paid on the purchase of a put will be deducted from the separate account's assets and an equal amount will be included as an investment and subsequently adjusted to the current market value of the put. For example, if the current market value of the put exceeds the premium paid, the excess would be unrealized appreciation; conversely, if the premium exceeds the current market value, such excess would be unrealized depreciation. Stock and bond index futures, and options thereon, which are traded on commodities exchanges, are valued at their last sale prices as of the close of such commodities exchanges. INVESTMENTS FOR WHICH MARKET QUOTATIONS ARE NOT READILY AVAILABLE Portfolio securities or other assets for which market quotations are not readily available will be valued at fair value as determined in good faith under the direction of the Management Committee (see "Management," below). B-8 48 Management SEPARATE ACCOUNT MANAGEMENT COMMITTEE AND OFFICERS The names of the members of the separate account Management Committee ("Managers") and certain officers of the separate account and information about their principal occupations during the past five years are shown below:
POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) NAME AND ADDRESS* AGE REGISTRANT DURING PAST 5 YEARS ----------------- --- ----------- ----------------------- Laurence W. Franz.............. 61 Manager Vice President, Business and Finance, and Canisius College Treasurer, Canisius College 2001 Main Street Buffalo, New York 14208 Jeanmarie C. Grisi............. 42 Manager Director of Investment Operations, Pension Lucent Technologies Inc. Investment Administration, Lucent Technologies 600 Mountain Avenue Inc.; formerly, Treasurer, Carnegie Corporation of Room 7F514 New York Murray Hill, NJ 07974 Richard M. Norman.............. 56 Manager Vice President for Finance and Business Services Miami University and Treasurer, Miami University; formerly, Vice 274 McGuffey Hall President for Administration and Associate Oxford, OH 45056 Treasurer, Rutgers, The State University of New Jersey Martin E. Galt III**........... 59 President and Executive Vice President and President, TIAA-CREF Chairman of the Investment Products, CREF and TIAA, since February Management 2000. Formerly, Executive Vice President and Committee President, Institutional Investments, of Bank of America (formerly, Nationsbank) and principal investment officer of Nationsbank (February 1997-January 2000); President, Boatman's Trust Company (May 1995-February 1997). Richard L. Gibbs............... 54 Executive Vice Executive Vice President, TIAA, CREF, TIAA-CREF President Investment Management, LLC ("Investment Management"), Teachers Advisors, Inc. ("Advisors"), and TIAA-CREF Tuition Financing, Inc. ("Tuition Financing") Lisa Snow...................... 45 Secretary and Vice Vice President, Chief Counsel, Corporate Law, TIAA President, Chief and CREF Counsel, Corporate Law Richard J. Adamski............. 59 Vice President and Vice President and Treasurer, Investment Management Treasurer and Services, and Teachers Personal Investors Services, Inc. ("TPIS"), and Vice President and Treasurer, TIAA and CREF
* The address for all officers of the separate account is 730 Third Avenue, New York, New York 10017-3206. ** This Manager is or may be an "interested person" within the meaning of the Investment Company Act of 1940. COMPENSATION OF MANAGERS Currently, Managers who are not active officers of TIAA each receive $5,000 per year, plus $1,000 for each meeting of the Management Committee and $500 for each meeting of any other committee attended for their services to both TIAA Separate Account VA-1 and TIAA-CREF Life Funds (the "Fund Complex"). Compensation is allocated between the companies in the Fund Complex based on assets. Managers who are active officers of TIAA do not receive any additional compensation for their services as Managers. The following table sets forth the compensation paid to the separate account's Managers for the year ended December 31, 2000. B-9 49 B-10
(3) PENSION OR RETIREMENT (4) (1) (2) BENEFITS ACCRUED AS PART OF ESTIMATED (5) NAME OF PERSON, AGGREGATE COMPENSATION SEPARATE ACCOUNT BENEFITS UPON TOTAL COMPENSATION FROM POSITION FROM SEPARATE ACCOUNT EXPENSES RETIREMENT FUND COMPLEX* -------- --------------------- -------- ---------- ------------- Laurence W. Franz, Manager.................... $7,200 $-0- $-0- $9,000 Jeanmarie C. Grisi, Manager.................... $5,600 $-0- $-0- $7,000 Richard M. Norman, Manager.................... $7,200 $-0- $-0- $9,000
* For purposes of this information, the Fund Complex consists of College Retirement Equities Fund, TIAA-CREF Mutual Funds, TIAA-CREF Institutional Mutual Funds, TIAA Separate Account VA-1 and TIAA-CREF Life Funds. Investment Advisory and Related Services INVESTMENT ADVISORY SERVICES Investment advisory services and related services for the separate account are provided by personnel of Teachers Advisors, Inc. ("Advisors"). Advisors is registered as an investment adviser under the Investment Advisers Act of 1940. Advisors manages the investment and reinvestment of the assets of the separate account, subject to the direction and control of the Management Committee of the separate account. The advisory personnel of Advisors perform all research, make recommendations, and place orders for the purchase and sale of securities. Advisors also provides for all portfolio accounting, custodial, and related services for the assets of the separate account. As described in the Prospectus, the investment management agreement between Advisors and the separate account provides for payment by the separate account of an investment advisory fee of 0.30% of assets annually. Currently, with Advisors waiving a portion of that fee, a daily deduction from the net assets of the separate account is made at an annual rate of 0.07% for expenses related to the management of the assets of the separate account. For the years ended December 31, 2000, 1999, and 1998, the separate account paid investment advisory fees of $739,618, $610,363, and $454,592, respectively. These fees reflect the waiver by Advisors of a portion of its investment advisory fee for the years ended December 31, 2000, 1999, and 1998 of $2,429,788, $2,005,161, and $1,493,423, respectively. PERSONAL TRADING POLICY The Separate Account has adopted a Personal Trading Policy (the "Policy") under Rule 17j-1 of the Investment Company Act of 1940. Under the Policy, personnel of Advisors and members of their households are limited in trading for their own accounts. The Policy generally requires these individuals to preclear and report all their securities transactions including transactions in securities that are held or purchased by the Separate Account. The Policy can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-202-942-8090. The Policy is also available on the EDGAR Database on the SEC's Internet site at http://www.sec.gov. Copies of the Policy may be obtained, after paying a duplication fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing the SEC's Public Reference Section, Washington, D.C. 20549-0102. ADMINISTRATIVE SERVICES TIAA provides the administrative services for the separate account and the contracts. The current daily deduction for such services equates to 0.20% of net assets annually. For the years ended December 31, 2000, 1999, and 1998, administrative expenses incurred were $2,112,809, $1,743,577, and $1,298,597, respectively. ADVISORS AND TIAA Advisors is a wholly-owned indirect subsidiary of TIAA. The main offices of both TIAA and Advisors are at 730 Third Avenue, New York, New York 10017-3206. TIAA is a stock life insurance company, organized under the laws of New York State. It was founded on March 4, 1918, by the Carnegie Foundation for the Advancement of Teaching. TIAA is the companion organization of the College Retirement Equities Fund ("CREF"), the first company in the United States to issue a variable annuity. Together, TIAA and CREF form the principal retirement system for the nation's education and research communities and the largest retirement system in the world, based on assets under management. TIAA-CREF serves approximately 2.3 million people. As of December 31, 2000, TIAA's assets were approximately $114.3 billion; the combined assets for TIAA and CREF totaled approximately $275.6 billion. TIAA holds all of the shares of TIAA-CREF Enterprises, Inc., which in turn holds all the shares of Advisors, and Teachers Personal Investors Services, Inc., the principal underwriter for the interests in the variable annuity contracts funded through the separate account. TIAA also holds all the shares of TIAA-CREF Investment Management, LLC ("Investment Management"). Investment Management provides investment advisory services to CREF, 50 TIAA's companion organization. All of the foregoing are affiliates of the separate account and Advisors. CUSTODY OF PORTFOLIO The custodian for the assets of the separate account is Bankers Trust Company, 130 Liberty Street, New York, New York 10006. AUDITORS Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, serves as the separate account's independent auditors and, in that regard, provides general auditing services for the separate account. Brokerage Allocation Advisors is responsible for decisions to buy and sell securities for the separate account as well as for selecting brokers and, where applicable, negotiating the amount of the commission rate paid. It is the intention of Advisors to place brokerage orders with the objective of obtaining the best price, execution, and available data. When purchasing or selling securities traded on the over-the-counter market, Advisors generally will execute the transaction with a broker engaged in making a market for such securities. When Advisors deems the purchase or sale of a security to be in the best interests of the separate account, its personnel may, consistent with their fiduciary obligations, decide either to buy or to sell a particular security for the separate account at the same time as for (i) a CREF account or any other account that they may also be managing on behalf of TIAA-CREF Investment Management, LLC ("Investment Management"), another investment adviser also affiliated with TIAA, or (ii) TIAA-CREF Life Funds, TIAA-CREF Mutual Funds, TIAA-CREF Institutional Mutual Funds or any other investment account whose assets Advisors may be managing. In that event, allocation of the securities purchased or sold, as well as the expenses incurred in the transaction, will be made in an equitable manner. Domestic brokerage commissions are negotiated, as there are no standard rates. All brokerage firms provide the service of execution of the order made; some brokerage firms also provide research and statistical data, and research reports on particular companies and industries are customarily provided by brokerage firms to large investors. In negotiating commissions, consideration is given by Advisors to the quality of execution provided and to the use and value of the data. The valuation of such data may be judged with reference to a particular order or, alternatively, may be judged in terms of its value to the overall management of the separate account. The aggregate amount of brokerage commissions paid by the separate account during 2000, 1999, and 1998 was $121,152, $307,938, and $257,121, respectively. Advisors will place orders with brokers providing useful research and statistical data services if reasonable commissions can be negotiated for the total services furnished even though lower commissions may be available from brokers not providing such services. Advisors follows guidelines established by the Management Committee of the separate account for the placing of orders with brokers providing such services. In 2000, no brokerage commissions were paid by the separate account to such brokers as a result of such allocation. Research or services obtained for the separate account may be used by personnel of Advisors in managing other investment company accounts and other accounts, or the CREF accounts for Investment Management. In such circumstances, the expenses incurred will be allocated in an equitable manner consistent with the fiduciary obligations of personnel of Advisors to the separate account. During 2000, the separate account acquired securities of certain of its regular brokers or dealers or their parents, where the parent derives more than 15% of its total income from securities related activities. These entities and the value of the securities of these entities held by the separate account as of December 31, 2000, are set forth below: A. REGULAR BROKER OR DEALER BASED ON BROKERAGE COMMISSION PAID Spear, Leeds & Kellogg LP (Parent-The Goldman Sachs Group, Inc.) $1,454,350
B. REGULAR BROKER OR DEALER BASED ON ENTITIES ACTING AS PRINCIPAL Spear, Leeds & Kellogg LP (Parent-The Goldman Sachs Group, Inc.) $1,454,350
Performance Information TOTAL RETURN INFORMATION FOR THE SEPARATE ACCOUNT Total return quotations for the separate account may be advertised. Total return quotations will reflect all aspects of the separate account's return. Average annual total returns are determined by finding the average annual compounded rate of return over a period that reflects the growth (or decline) in value of a hypothetical $1,000 investment made at the beginning of the period through the end of that period, according to the following formula: (n) P(1 + T) = EV P = the hypothetical initial payment where: of $1,000 T = average annual total return (n) = number of years in the period EV = ending value of the hypothetical investment at the end of the 1-, 5- or 10-year period.
To derive the total return quotations from this formula, the percentage net change in the value of the $1,000 investment from the beginning of the period to the end of such period ("cumulative B-11 51 total return") is determined. Cumulative total returns simply reflect the change in value of an investment over a stated period. Since the accumulation unit value is a "total return" unit value that reflects the investment experience of the separate account and all expense deductions made against the assets of the separate account, the ending value, or EV, of the $1,000 hypothetical investment is determined by applying the percentage change in the accumulation unit value over the period to the hypothetical initial payment of $1,000 less the current deductions from premiums (0%). We then solve the equation for T to derive the average annual compounded rate of return for the separate account over the span of the period, and the resulting "total return" quotation is carried out to the nearest hundredth of 1%. Set forth below is the total return information for the separate account, which reflects all deductions made from the assets in the account, applied to a hypothetical investment of $1,000:
AVERAGE ANNUAL COMPOUND RATE OF CUMULATIVE RATE OF PERIOD TOTAL RETURN TOTAL RETURN ------ ------------ ------------ 1 year (from January 1, 2000 to December 31, 2000)..... (7.78)% (7.78)% 5 years (from January 1, 1996 to December 31, 2000).............................. 16.98 % 119.09 % 6 years and 2 months (from November 1, 1994 date of SEC registration to December 31, 2000).............. 18.95 % 191.86 %
PERFORMANCE COMPARISONS Performance information for the separate account may be compared, in advertisements, sales literature, and reports to contract owners and annuitants, to the performance information reported by other investments and to various indices and averages. Such comparisons may be made with, but are not limited to (1) the S&P 500, (2) the Dow Jones Industrial Average ("DJIA"), (3) Lipper Analytical Services, Inc. Mutual Fund Performance Analysis Reports and the Lipper General Equity Funds Average, (4) Money Magazine Fund Watch, (5) Business Week's Mutual Fund Scoreboard, (6) SEI Funds Evaluation Services Equity Fund Report, (7) CDA Mutual Funds Performance Review and CDA Growth Mutual Fund Performance Index, (8) Value Line Composite Average (geometric), (9) Wilshire 5000 Equity Index, (10) Russell 1000, 2000, and 3000 indices, (11) the Consumer Price Index, published by the U.S. Bureau of Labor Statistics (measurement of inflation), (12) VARDS, and (13) Morningstar, Inc. We may also discuss ratings or rankings received from these entities, accompanied in some cases by an explanation of those ratings or rankings, when applicable. In addition, advertisements may discuss the performance of the indices listed above. The performance of the separate account also may be compared to other indices or averages that measure performance of a pertinent group of securities. Contractowners should keep in mind that the composition of the investments in the reported averages will not be identical to that of the separate account and that certain formula calculations (e.g., yield) may differ from index to index. In addition, there can be no assurance that the separate account will continue its performance as compared to such indices. The separate account is not promoted, sponsored, endorsed, or sold by, nor affiliated with, Frank Russell Company. Frank Russell Company is not responsible for and has not reviewed the separate account literature or publications and makes no representation or warranty, express or implied, as to their accuracy, completeness, or otherwise. Frank Russell Company reserves the right, at any time and without notice, to change or terminate the Russell 3000 Index. Frank Russell Company has no obligation to take the needs of the separate account or its contractowners into consideration in determining the Index. Frank Russell Company's publication of the Russell 3000 Index in no way suggests or implies an opinion by Frank Russell Company as to the attractiveness or appropriateness of investment in any or all of the securities upon which the Index is based. Frank Russell Company makes no representation, warranty, or guarantee as to the accuracy, completeness or reliability of the Index or any data included in the Index. Frank Russell Company makes no representation or warranty regarding the use, or the results of use, of the Index or any securities comprising the Index. FRANK RUSSELL COMPANY MAKES NO EXPRESS OR IMPLIED WARRANTIES OF ANY KIND OR NATURE, INCLUDING WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDEX OR ANY DATA OR SECURITIES INCLUDED THEREIN. ILLUSTRATING COMPOUNDING, TAX DEFERRAL, AND EXPENSE DEDUCTIONS TIAA may illustrate in advertisements, sales literature, and reports to contractowners or annuitants the effects of tax deferral and/or compounding of earnings on an investment in the separate account. We may do this using a hypothetical investment earning a specified rate of return. To illustrate the effects of compounding, we would show how the total return from an investment of the same dollar amount, earning the same or different interest rate, varies depending on when the investment was made. To illustrate B-12 52 the effects of tax deferral, we will show how the total return from an investment of the same dollar amount, earning the same or different interest rates, for individuals in the same tax bracket, would vary between tax-deferred and taxable investments. TIAA may also illustrate in advertisements, sales literature, and reports to contractowners or annuitants the effect of an investment fund's expenses on total return over time. We may do this using a hypothetical investment earning a specified rate of return. We would show how the total return, net of expenses, from an investment of the same dollar amount in funds with the same investment results but different expense deductions varies increasingly over time. In the alternative, we would show the difference in the dollar amount of total expense charges paid over time by an investor in two or more different funds that have the same annual total return but different asset-based expense charges. We may also compare the separate account's expense charges to those of other variable annuities and other investment products. Periodic Reports Prior to the time an entire accumulation has been withdrawn in cash or transferred to the fixed account a contractowner will be sent a statement each quarter which sets forth the following: (1) Premiums paid during the quarter; (2) the number and dollar value of accumulation units in the separate account credited to the contractowner during the quarter and in total; (3) cash withdrawals from the separate account during the quarter; and (4) any transfers between the separate account and the fixed account during the quarter. The separate account also will transmit to contractowners, at least semi-annually, reports showing the financial condition of the separate account and a schedule of investments held in the separate account in which they have accumulations. General Matters ASSIGNMENT OF CONTRACTS You can assign the contract at any time. PAYMENT TO AN ESTATE, GUARDIAN, TRUSTEE, ETC. We reserve the right to pay in one sum the commuted value of any benefits due an estate, corporation, partnership, trustee or other entity not a natural person. Neither TIAA nor the separate account will be responsible for the conduct of any executor, trustee, guardian, or other third party to whom payment is made. BENEFITS BASED ON INCORRECT INFORMATION If the amounts of benefits provided under a contract were based on information that is incorrect, benefits will be recalculated on the basis of the correct data. If any overpayments or underpayments have been made by the separate account, appropriate adjustments will be made. PROOF OF SURVIVAL We reserve the right to require satisfactory proof that anyone named to receive benefits under a contract is living on the date payment is due. If this proof is not received after a request in writing, the separate account will have the right to make reduced payments or to withhold payments entirely until such proof is received. State Regulation TIAA and the separate account are subject to regulation by the New York State Superintendent of Insurance ("Superintendent") as well as by the insurance regulatory authorities of certain other states and jurisdictions. TIAA and the separate account must file with the Superintendent both quarterly and annual statements on forms promulgated by the New York State Insurance Department. The separate account books and assets are subject to review and examination by the Superintendent and the Superintendent's agents at all times, and a full examination into the affairs of the separate account is made at least every five years. In addition, a full examination of the separate account's operations is usually conducted periodically by some other states. Legal Matters All matters of applicable state law pertaining to the contracts, including TIAA's right to issue the contracts, have been passed upon by Charles H. Stamm, Executive Vice President and General Counsel of TIAA. Legal matters relating to the federal securities laws have been passed upon by Sutherland, Asbill & Brennan LLP, Washington, D.C. Experts The financial statements of TIAA and the separate account included in this Statement of Additional Information have been audited by Ernst & Young LLP, independent auditors, as stated in their reports appearing herein (which report on the financial statements of TIAA expresses an opinion that such financial statements are presented in conformity with statutory accounting practices, a comprehensive basis of accounting as described in Note 2, and not in conformity with generally accepted accounting principles), and have been so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. Additional Considerations Over the past several years, TIAA and CREF have added many new investment vehicles to their line of products. The growing family of TIAA and CREF products is designed to provide additional investment options for those who want to diversify their holdings. Most experts recommend diversification as a good strategy for B-13 53 retirement and other long-term investing, both because a diversified portfolio offers a degree of safety from the volatility of specific markets, and because it allows the investor to benefit from the potential for growth in several different types of investments. We may discuss and compare our array of products and services. At such times we disclose which of our subsidiaries or affiliates issues which products or types of products, as follows: TIAA-CREF Individual and Institutional Services, Inc. distributes CREF certificates and interests in the TIAA Real Estate Account. Teachers Personal Investors Services, Inc. distributes the variable component of personal annuities, mutual funds and tuition savings agreements. TIAA and TIAA-CREF Life Insurance Company issue insurance and annuities. TIAA-CREF Trust Company, FSB provides trust services. We also disclose that the investment products are not FDIC insured, may lose value, and are not bank guaranteed. The separate account's Stock Index Account is ideal for people who are seeking growth and are able to make long-term investments. Although past performance is no guarantee of future results, in the past stocks have outperformed many other types of investments. Investors who seek to counter the effects of inflation on their long-term investments should therefore consider investing in stocks. The Stock Index Account could be an appropriate investment for someone who is seeking to supplement his or her retirement income, to purchase a retirement home, finance an extended trip, or build a fund for philanthropic purposes. Of course, there is no guarantee that the investment objective of that or any other fund will be met. Before investing, you should consider whether your pension plan and social security payments will meet your retirement needs. You should look at your assets and liabilities to help determine whether you need to invest more money to help provide retirement income. You should consider how much time you have until retirement and the effect of inflation and taxes on your savings and investments. You should also keep in mind that experts say that people need 70% to 80% of their pre-retirement income to maintain the same standard of living after retirement. Before contributing to a contract, you should consider whether you have already reached your contribution limit on your TIAA-CREF basic Retirement Annuities, Supplemental Retirement Annuities, and other 403(b) savings plans. Consult your tax advisor to learn more about these limits. You should also consider what types of investments are best suited for you and your current needs. In particular, you should consider the tax treatment of a variable annuity as compared with a standard mutual fund product. With annuities, earnings generally grow tax-deferred and investors are provided the option of lifetime income upon retirement. However, annuities may have restrictions on withdrawals before age 59 1/2, and thus may not be suitable for goals other than retirement. We may compare annuities to mutual funds in sales literature and advertisements. You should also consider the risks of any investment relative to its potential rewards. In particular, you should be aware of the risk that arises from market timing. Market timing is an investment technique whereby amounts are transferred from one category of investment to another (for example, from stocks to bonds) based upon a perception of how each of those categories of investments will perform relative to the others at a particular time. Investors who engage in market timing run the risk that they may transfer out of a type of investment with a rising market value or transfer into a type of investment with a falling market value. We do not endorse the practice of market timing. The variety of issues to consider highlights the importance of the support and services that TIAA provides. These services include: (1) retirement and life insurance planning expertise from professional counselors rather than commissioned salespeople; (2) detailed information through quarterly transaction reports, newsletters and other publications about retirement planning; and (3) seminars, individual counseling, a Participant Information Center, and 24-hour toll-free numbers for transactions and inquiries. If you request it, we will send you periodic reminders to remit premiums to the contract. Customer service may be an important consideration for you. In our advertisements we may report the results of surveys conducted by independent agencies regarding customer service. We may also use certain testimonials and quote financial experts, financial and other publications, or other services regarding our products and services. We may also discuss in advertisements and sales literature general economic and/or market conditions that may impact investments in variable annuities. Additional Information A Registration Statement has been filed with the Securities and Exchange Commission, under the 1933 Act, with respect to the contracts discussed in the Prospectus and in this Statement of Additional Information. Not all of the information set forth in the Registration Statement, amendments, and exhibits thereto has been included in the Prospectus or this Statement of Additional Information. Statements contained herein concerning the contents of the contracts and other legal instruments are intended to be summaries. For a complete statement of the terms of these documents, reference should be made to the instruments filed with the Commission. Financial Statements The audited financial statements of the separate account and TIAA follow. The financial statements of TIAA should be distinguished from the financial statements of the separate account and should be considered only as bearing upon the ability of TIAA to meet its obligations under the contracts. They should not be considered as bearing on the investment performance of the assets held in the separate account. B-14 54 INDEX TO AUDITED FINANCIAL STATEMENTS DECEMBER 31, 2000
Page ---- TIAA SEPARATE ACCOUNT VA-1--STOCK INDEX ACCOUNT: Report of Management Responsibility B-16 Report of the Audit Committee B-17 Report of Independent Auditors B-18 AUDITED FINANCIAL STATEMENTS: Statement of Assets and Liabilities B-19 Statement of Operations B-20 Statements of Changes in Net Assets B-21 Notes to Financial Statements B-22 Statement of Investments B-24 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA: Chairman's Letter B-43 Report of Management Responsibility B-44 Report of the Audit Committee B-45 Report of Independent Auditors B-46 STATUTORY-BASIS FINANCIAL STATEMENTS: Balance Sheets B-47 Statements of Operations B-48 Statements of Changes in Capital and Contingency Reserves B-49 Statements of Cash Flows B-50 Notes to Statutory-Basis Financial Statements B-51
B-15 55 [TIAA LOGO] - ------------------------------------------------------------------------------- REPORT OF MANAGEMENT RESPONSIBILITY To the Contractowners of TIAA Separate Account VA-1: The accompanying financial statements of the Stock Index Account of TIAA Separate Account VA-1 ("VA-1") are the responsibility of management. They have been prepared in accordance with accounting principles generally accepted in the United States and have been presented fairly and objectively in accordance with such principles. Teachers Insurance and Annuity Association of America ("TIAA") has established and maintains a strong system of internal controls designed to provide reasonable assurance that assets are properly safeguarded and transactions are properly executed in accordance with management's authorization, and to carry out the ongoing responsibilities of management for reliable financial statements. In addition, TIAA's internal audit personnel provide a continuing review of the internal controls and operations of VA-1. The accompanying financial statements have been audited by the independent auditing firm of Ernst & Young LLP. For the periods covered by these financial statements, all services provided by Ernst & Young LLP for VA-1 were limited exclusively to auditing. It is VA-1's policy that any non-audit services be obtained from a firm other than the external audit firm. The independent auditors' report, which appears on the second following page, expresses an independent opinion on the fairness of presentation of these financial statements. /s/ Martin E. Galt, III ------------------------------------ President /s/ Richard L. Gibbs ------------------------------------ Executive Vice President and Chief Financial Officer B-16 56 [TIAA LOGO] - -------------------------------------------------------------------------------- REPORT OF THE AUDIT COMMITTEE To the Contractowners of TIAA Separate Account VA-1: The Audit Committee oversees the financial reporting process of the Stock Index Account of TIAA Separate Account VA-1 ("VA-1") on behalf of VA-1's Management Committee. The Audit Committee is a standing committee of the Management Committee and operates in accordance with a formal written charter (copies are available upon request) which describes the Audit Committee's responsibilities. All members of the Audit Committee ("Committee") are independent, as defined under the listing standards of the New York Stock Exchange. Management has the primary responsibility for VA-1's financial statements, development and maintenance of a strong system of internal controls, and compliance with applicable laws and regulations. In fulfilling its oversight responsibilities, the Committee Members, as members of VA-1's Management Committee, reviewed and approved the audit plan of the independent auditing firm in connection with their audit. The Committee will also be meeting regularly with the internal and independent auditors, both with and without management present, to discuss the results of their examinations, their evaluation of internal controls, and the overall quality of financial reporting. The Committee reviewed and discussed the accompanying audited financial statements with management, including a discussion of the quality and appropriateness of the accounting principles and financial reporting practices followed, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The Committee has also discussed the audited financial statements with Ernst & Young LLP, the independent auditing firm responsible for expressing an opinion on the conformity of these audited financial statements with generally accepted accounting principles. The discussion with Ernst & Young LLP focused on their judgments concerning the quality and appropriateness of the accounting principles and financial reporting practices followed by VA-1, the clarity of the financial statements and related disclosures, and other significant matters, such as any significant changes in accounting policies, management judgments and estimates, and the nature of any uncertainties or unusual transactions. In addition, the Committee discussed with Ernst & Young LLP the auditors' independence from management and VA-1, and has received a written disclosure regarding such independence, as required by the Independence Standards Board. Based on the review and discussions referred to above, the Committee has approved the release of the accompanying audited financial statements for publication and filing with appropriate regulatory authorities. Laurence Franz, Audit Committee Chair Jeanmarie Grisi, Audit Committee Member Richard M. Norman, Audit Committee Member February 26, 2001 B-17 57 [ERNST & YOUNG LLP LOGO] - 787 Seventh Avenue - Phone: 212-773-3000 New York, NY 10019 REPORT OF INDEPENDENT AUDITORS To the Contractowners and Management Committee of TIAA Separate Account VA-1: We have audited the accompanying statement of assets and liabilities of the Stock Index Account of TIAA Separate Account VA-1 ("VA-1") , including the statement of investments, as of December 31, 2000, and the related statement of operations for the year then ended and the statements of changes in net assets for each of the two years in the period then ended. These financial statements are the responsibility of VA-1's management. Our responsibility is to express an opinion on these financial statements based on our audits. The condensed financial information for the year ended December 31, 1996 was audited by other auditors, whose report dated February 6, 1997 expressed an unqualified opinion on such condensed financial information. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2000, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Stock Index Account of VA-1 at December 31, 2000, the results of its operations for the year then ended and the changes in its net assets for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP February 5, 2001 Ernst & Young LLP is a member of Ernst & Young International, Ltd. B-18 58 TIAA SEPARATE ACCOUNT VA-1 STOCK INDEX ACCOUNT STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2000 (amounts in thousands, except amount per accumulation unit) ASSETS Investments, at cost .............................................................. $752,532 Net unrealized appreciation of investments ........................................ 239,638 -------- Investments, at value ............................................................. 992,170 Cash .............................................................................. 87 Dividends and interest receivable ................................................. 881 Receivable from securities transactions ........................................... 4,807 -------- TOTAL ASSETS 997,945 -------- LIABILITIES Payable for securities transactions ............................................... 6,189 Amounts due to General Account .................................................... 568 -------- TOTAL LIABILITIES 6,757 -------- NET ASSETS--Accumulation Fund ........................................................ $991,188 ======== NUMBER OF ACCUMULATION UNITS OUTSTANDING--NOTES 5 AND 6 .............................. 13,147 ====== NET ASSET VALUE, PER ACCUMULATION UNIT--NOTE 5 ....................................... $75.39 ======
See notes to financial statements. B-19 59 TIAA SEPARATE ACCOUNT VA-1 STOCK INDEX ACCOUNT STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2000 (amounts in thousands) INVESTMENT INCOME Income: Interest .................................................................. $ 232 Dividends ................................................................. 12,318 -------- TOTAL INCOME 12,550 -------- Expenses--Note 3: Investment advisory charges ............................................... 3,169 Administrative expenses ................................................... 2,113 Mortality and expense risk charges ........................................ 1,057 -------- EXPENSES BEFORE WAIVER 6,339 Investment advisory charges waived ........................................ (2,430) -------- NET EXPENSES 3,909 -------- INVESTMENT INCOME--NET 8,641 -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 Net realized gain on investments .......................................... 36,794 Net change in unrealized appreciation on investments ...................... (127,492) -------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (90,698) -------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(82,057) ========
See notes to financial statements. B-20 60 TIAA SEPARATE ACCOUNT VA-1 STOCK INDEX ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS (amounts in thousands)
YEARS ENDED DECEMBER 31, ------------------------------ 2000 1999 ------------ ---------- FROM OPERATIONS Investment income--net ................................................ $ 8,641 $ 8,282 Net realized gain on investments ...................................... 36,794 33,295 Net change in unrealized appreciation on investments .................. (127,492) 125,074 ------------ ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (82,057) 166,651 ------------ ---------- FROM CONTRACTOWNER TRANSACTIONS Premiums .............................................................. 90,169 130,503 Net contractowner transfers from fixed account ........................ 3,408 4,267 Withdrawals and death benefits ........................................ (52,886) (26,849) ------------ ---------- NET INCREASE IN NET ASSETS RESULTING FROM CONTRACTOWNER TRANSACTIONS 40,691 107,921 ------------ ---------- NET INCREASE (DECREASE) IN NET ASSETS (41,366) 274,572 NET ASSETS Beginning of year ..................................................... 1,032,554 757,982 ------------ ---------- End of year ........................................................... $ 991,188 $1,032,554 ============ ==========
See notes to financial statements. B-21 61 TIAA SEPARATE ACCOUNT VA-1 STOCK INDEX ACCOUNT NOTES TO FINANCIAL STATEMENTS NOTE 1--ORGANIZATION TIAA Separate Account VA-1 ("VA-1") is a segregated investment account of Teachers Insurance and Annuity Association of America ("TIAA") and was organized on February 16, 1994 under the insurance laws of the State of New York for the purpose of issuing and funding variable annuity contracts. VA-1 was registered with the Securities and Exchange Commission ("Commission") effective November 1, 1994 as an open-end, diversified management investment company under the Investment Company Act of 1940. VA-1 consists of a single investment portfolio, the Stock Index Account ("Account"), which invests in a diversified portfolio of equity securities selected to track the overall United States stock market. Teachers Advisors, Inc. ("Advisors"), an indirect subsidiary of TIAA, which is registered with the Commission as an investment adviser, provides investment advisory services for VA-1 pursuant to an Investment Management Agreement between TIAA, Advisors and VA-1. TIAA provides all administrative services for VA-1 pursuant to an Administrative Services Agreement with VA-1. The contracts are distributed primarily by Teachers Personal Investors Services, Inc. ("TPIS"), also an indirect subsidiary of TIAA, which is registered with the Commission as a broker-dealer and is a member of the National Association of Securities Dealers, Inc. NOTE 2--SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements may require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income, expenses and related disclosures. Actual results may differ from those estimates. The following is a summary of the significant accounting policies consistently followed by the Account, which are in conformity with accounting principles generally accepted in the United States. VALUATION OF INVESTMENTS: Securities listed or traded on any United States national securities exchange are valued at the last sale price as of the close of the principal securities exchange on which such securities are traded or, if there is no sale, at the mean of the last bid and asked prices on such exchange. Securities traded only in the over-the-counter market and quoted in the NASDAQ National Market System are valued at the last sale price, or at the mean of the last bid and asked prices if no sale is reported. All other over-the-counter securities are valued at the mean of the last bid and asked prices. Short-term money market instruments are stated at market value. Portfolio securities for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of and in accordance with the responsibilities of the Management Committee of VA-1. ACCOUNTING FOR INVESTMENTS: Securities transactions are accounted for as of the date the securities are purchased or sold (trade date). Interest income is recorded as earned and, for short-term money market instruments, includes accrual of discount and amortization of premium. Dividend income is recorded on the ex-dividend date. Realized gains and losses on securities transactions are accounted for on the average cost basis. FEDERAL INCOME TAXES: Based on provisions of the Internal Revenue Code, no federal income taxes are attributable to the net investment experience of the Account. NOTE 3--MANAGEMENT AGREEMENTS Daily charges are deducted from the net assets of the Account for services required to manage investments, administer the separate account and the contracts, and to cover certain insurance risks borne by TIAA. The Investment Management Agreement sets the investment advisory charge at an annual rate of 0.30% of the net assets of the Account. Currently, Advisors has agreed to waive a portion of such fee, so that the daily deduction is equivalent to an annual charge of 0.07% of the net assets of the Account. The Administrative Services Agreement sets the administrative expense charge at an annual rate of 0.20% of the net assets of the Account. TIAA also imposes a daily charge for bearing certain mortality and expense risks in connection with the contracts equivalent to an annual rate of 0.10% of the net assets of the Account. NOTE 4--INVESTMENTS At December 31, 2000, the net unrealized appreciation on investments was $239,638,264, consisting of gross unrealized appreciation of $326,474,061 and gross unrealized depreciation of $86,835,797. Purchases and sales of securities, other than short-term money market instruments, for the year ended December 31, 2000, were $266,410,969 and $216,399,636, respectively. B-22 62 TIAA SEPARATE ACCOUNT VA-1 STOCK INDEX ACCOUNT NOTES TO FINANCIAL STATEMENTS--(CONCLUDED) NOTE 5--CONDENSED FINANCIAL INFORMATION Selected condensed financial information for an Accumulation Unit of the Account is presented below.
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 2000 1999 1998 1997 1996 --------- --------- --------- --------- --------- Per Accumulation Unit data: Investment income ....................... $ .966 $ .961 $ .908 $ .847 $ .807 Expenses ................................ .301 .270 .223 .182 .150 --------- --------- --------- --------- --------- Investment income--net .................. .665 .691 .685 .665 .657 Net realized and unrealized gain (loss) on investments ....................... (7.024) 13.051 12.407 12.429 6.755 --------- --------- --------- --------- --------- Net increase (decrease) in Accumulation Unit Value .............. (6.359) 13.742 13.092 13.094 7.412 Accumulation Unit Value: Beginning of year .................... 81.751 68.009 54.917 41.823 34.411 --------- --------- --------- --------- --------- End of year .......................... $ 75.392 $ 81.751 $ 68.009 $ 54.917 $ 41.823 ========= ========= ========= ========= ========= Total return ............................... (7.78%) 20.21% 23.84% 31.31% 21.54% Ratio to Average Net Assets: Expenses (1) ............................ 0.37% 0.37% 0.37% 0.37% 0.40% Investment income--net .................. 0.82% 0.95% 1.14% 1.36% 1.74% Portfolio turnover rate .................... 20.68% 37.93% 45.93% 2.39% 4.55% Thousands of Accumulation Units outstanding at end of year .............. 13,147 12,630 11,145 9,901 6,768
(1) Advisors has agreed to waive a portion of its investment advisory fee. Without this waiver, the Account's expense ratio for the periods listed would have been higher (see Note 3). NOTE 6--ACCUMULATION UNITS Changes in the number of Accumulation Units outstanding were as follows:
YEARS ENDED DECEMBER 31, ---------------------------- 2000 1999 ---------- ---------- Accumulation Units: Credited for premiums .............................................. 1,116,722 1,798,810 Cancelled for transfers and disbursements .......................... (600,122) (313,740) Outstanding: Beginning of year ................................................ 12,630,471 11,145,401 ---------- ---------- End of year ...................................................... 13,147,071 12,630,471 ========== ==========
NOTE 7--SUBSEQUENT EVENT--LINE OF CREDIT In January 2001, the Account began to share in a $2.5 billion unsecured revolving credit facility for temporary or emergency purposes, including, without limitation, the funding of contractowner redemptions that otherwise might require the untimely disposition of securities. Certain College Retirement Equities Fund Accounts, TIAA-CREF Mutual Funds, TIAA-CREF Institutional Mutual Funds and, commencing in January 2001, the TIAA-CREF Life Funds, all of which are managed by Advisors, or an affiliate of Advisors, also participate in this facility. An annual commitment fee for the credit facility is borne by the participating Accounts and Funds. Interest associated with any borrowing under the facility will be charged to the borrowing Accounts or Funds at rates which are based on the Federal Funds Rate in effect during the time of the borrowing. B-23 63 TIAA SEPARATE ACCOUNT -- VA-1 STATEMENT OF INVESTMENTS -- STOCK INDEX ACCOUNT DECEMBER 31, 2000
PRINCIPAL VALUE (000) - --------- ---------- CORPORATE BONDS--0.00% CONSUMER CYCLICAL--0.00% EXCEL LEGACY CORP $ 3,000 9.000%, 11/05/04 ............................... $ 3 1,000 10.000%, 11/05/04 .............................. 1 UGLY DUCKLING CORP (SUB DEB) 1,950 12.000%, 10/23/2003 ............................ 2 ------ TOTAL CONSUMER CYCLICAL .......................... 6 ------ TOTAL CORPORATE BONDS (COST $6,725) .................................. 6 ------ SHARES - ------ PREFERRED STOCK--0.01% BASIC INDUSTRIES--0.01% 2,280 SEALED AIR CORP (CLASS A) ........................ 74 ------ TOTAL BASIC INDUSTRIES ........................... 74 ------ CONSUMER CYCLICAL--0.00% 2,800 * OSULLIVAN INDUSTRIES HOLDINGS, INC ............... 1 ------ TOTAL CONSUMER CYCLICAL .......................... 1 ------ FINANCIAL SERVICES--0.00% 421 * CORRECTIONS CORP OF AMERICA (CLASS B) ............ 3 ------ TOTAL FINANCIAL SERVICES ......................... 3 ------ HEALTH CARE--0.00% 3,500 * FRESENIUS MEDICAL CARE HOLDINGS .................. 0 ------ TOTAL HEALTH CARE ................................ 0 ------ TECHNOLOGY--0.00% 503 SUPERIOR TRUST I SERIES A ........................ 3 ------ TOTAL TECHNOLOGY ................................. 3 ------ TOTAL PREFERRED STOCK (COST $154,143) ................................ 81 ------ COMMON STOCK--99.68% AEROSPACE AND DEFENSE--1.02% 1,000 AAR CORP ......................................... 13 450 * ALLIANT TECHSYSTEMS, INC ......................... 30 69,754 BOEING CO ........................................ 4,604 9,800 * ECHOSTAR COMMUNICATIONS CORP (CLASS A) ........... 223 11,800 GENERAL DYNAMICS CORP ............................ 920 56,343 * GENERAL MOTORS CORP (CLASS H) .................... 1,296 1,700 * HEXCEL CORP ...................................... 15 28,283 LOCKHEED MARTIN CORP ............................. 960 800 * MOOG, INC (CLASS A) .............................. 23 5,700 * MOTIENT CORP ..................................... 23 4,777 NORTHROP GRUMMAN CORP ............................ 396 3,600 * ORBITAL SCIENCES CORP ............................ 15 1,269 * PANAMSAT CORP .................................... 44 2,800 * PEGASUS COMMUNICATIONS CORP ...................... 72 3,400 PERKINELMER, INC ................................. 357 5,500 PRECISION CAST PARTS CORP ........................ 231 4,018 RAYTHEON CO (CLASS A) ............................ 117 21,300 RAYTHEON CO (CLASS B) ............................ 662 2,750 * REMEC, INC ....................................... 26 1,386 * TELEDYNE TECHNOLOGIES, INC ....................... 33 1,100 * TRIUMPH GROUP, INC ............................... 45 ------ TOTAL AEROSPACE AND DEFENSE ...................... 10,105 ------ BASIC INDUSTRIES--3.11% 18,600 AIR PRODUCTS & CHEMICALS, INC .................... $ 763 3,800 * AIRGAS, INC ...................................... 26 1,300 AK STEEL HOLDINGS CORP ........................... 11 3,040 * ALBANY INTERNATIONAL CORP (CLASS A) NEW .......... 41 1,900 ALBEMARLE CORP ................................... 47 65,680 ALCOA, INC ....................................... 2,200 7,804 ALLEGHENY TECHNOLOGIES, INC ...................... 124 7,000 AMCOL INTERNATIONAL CORP ......................... 33 6,100 * AMERICAN STANDARD COS, INC ....................... 301 3,300 APTARGROUP, INC .................................. 97 1,500 ARCH CHEMICALS, INC .............................. 27 3,502 ARCH COAL, INC ................................... 49 5,100 ARMSTRONG HOLDINGS, INC .......................... 11 1,343 BALL CORP ........................................ 62 23,100 * BATTLE MOUNTAIN GOLD CO .......................... 39 2,400 BEMIS CO ......................................... 81 9,300 * BETHLEHEM STEEL CORP ............................. 16 8,300 BLACK & DECKER CORP .............................. 326 5,000 BOISE CASCADE CORP ............................... 168 5,100 BOWATER, INC ..................................... 288 4,100 * BUCKEYE TECHNOLOGIES, INC ........................ 58 6,900 CABOT CORP ....................................... 182 1,935 * CABOT MICROELECTRONICS CORP ...................... 100 800 CALGON CARBON CORP ............................... 5 2,500 CAMBREX CORP ..................................... 113 1,400 CARAUSTAR INDUSTRIES, INC ........................ 13 1,300 CARLISLE COS, INC ................................ 56 2,700 CARPENTER TECHNOLOGY CORP ........................ 95 5,200 * CELGENE CORP ..................................... 169 1,600 CENTEX CONSTRUCTION PRODUCTS, INC ................ 44 6,400 CENTEX CORP ...................................... 240 4,200 * CHAMPION ENTERPRISES, INC ........................ 12 3,100 CHESAPEAKE CORP .................................. 64 4,000 CLARCOR, INC ..................................... 83 8,407 CLAYTON HOMES, INC ............................... 97 1,500 CLEVELAND CLIFFS, INC ............................ 32 2,400 * COLLINS & AIKMAN CORP ............................ 10 400 * COMFORT SYSTEMS U.S.A., INC ...................... 1 4,100 COMMERCIAL METALS CO ............................. 91 600 CONSOL ENERGY, INC ............................... 17 9,695 CROMPTON CORP .................................... 102 400 * CROSSMANN COMMUNITIES, INC ....................... 8 6,100 CROWN CORK & SEAL CO, INC ........................ 45 60 b * CROWN VANTAGE, INC ............................... 0 3,600 * CYTEC INDUSTRIES, INC ............................ 144 2,200 * DAL-TILE INTERNATIONAL, INC ...................... 31 200 * DEL WEBB CORP .................................... 6 1,242 DELTIC TIMBER CORP ............................... 30 1,200 * DIONEX CORP ...................................... 41 50,700 DOW CHEMICAL CO .................................. 1,857 74,391 DU PONT (E.I.) DE NEMOURS & CO ................... 3,594 4,300 * EARTHSHELL CORP .................................. 6 7,400 EASTMAN CHEMICAL CO .............................. 361 9,600 ECOLAB, INC ...................................... 415 2,750 ELCOR CORP ....................................... 46 300 * EMCOR GROUP, INC ................................. 8 1,396 * ENCOMPASS SERVICES CORP .......................... 7 900 * ENERGY CONVERSION DEVICES, INC ................... 18 7,700 ENGELHARD CORP ................................... 157 1,950 FERRO CORP ....................................... 45 5,100 FLEETWOOD ENTERPRISES, INC ....................... 54 800 FLORIDA ROCK INDUSTRIES, INC ..................... 31 5,900 * FLUOR CORP (NEW) ................................. 195 900 * FMC CORP ......................................... 65 2,900 FOSTER WHEELER CORP .............................. 15 11,363 * FREEPORT-MCMORAN COPPER & GOLD, INC (CLASS B) .... 97 1,448 FULLER (H.B.) CO ................................. 57 3,000 GEORGIA GULF CORP ................................ 51 15,212 GEORGIA-PACIFIC CORP (PACKING GROUP) ............. 473 3,900 GEORGIA-PACIFIC CORP (TIMBER GROUP) .............. 117 1,000 GIBRALTAR STEEL CORP ............................. 18 4,300 GLATFELTER (P.H.) CO ............................. 54
See notes to financial statements. B-24 64
SHARES VALUE (000) - ------ ---------- BASIC INDUSTRIES--(CONTINUED) 5,806 GOODRICH (B.F.) CO ............................... $ 211 3,100 * GRACE W.R. & CO .................................. 10 1,350 GRANITE CONSTRUCTION, INC ........................ 39 3,000 GREAT LAKES CHEMICAL CORP ........................ 112 1,000 GREIF BROTHERS CORP (CLASS A) .................... 29 6,900 HERCULES, INC .................................... 132 19,800 HOMESTAKE MINING CO .............................. 83 4,687 HORTON (D.R.), INC ............................... 115 8,451 ICN PHARMACEUTICALS, INC ......................... 259 7,200 IMC GLOBAL, INC .................................. 112 2,600 * INSITUFORM TECHNOLOGIES, INC (CLASS A) ........... 104 36,019 INTERNATIONAL PAPER CO ........................... 1,470 2,100 * INTERNATIONAL SPECIALTY PRODUCTS, INC ............ 14 800 INTERPOOL, INC ................................... 14 1,600 * IVEX PACKAGING CORP .............................. 18 300 * JACOBS ENGINEERING GROUP, INC .................... 14 4,700 KAUFMAN & BROAD HOME CORP ........................ 158 40,262 KIMBERLY-CLARK CORP .............................. 2,846 4,116 LAFARGE CORP ..................................... 97 2,200 LENNAR CORP ...................................... 80 2,500 * LONE STAR TECHNOLOGIES, INC ...................... 96 2,800 LONGVIEW FIBRE CO ................................ 38 4,600 LOUISIANA PACIFIC CORP ........................... 47 10,800 LTV CORP ......................................... 4 4,100 LUBRIZOL CORP .................................... 106 7,100 LYONDELL CHEMICAL CO ............................. 109 1,300 MACDERMID, INC ................................... 25 3,600 MARTIN MARIETTA MATERIALS, INC ................... 152 31,700 MASCO CORP ....................................... 814 5,900 MASSEY ENERGY CO ................................. 75 400 MDC HOLDINGS, INC ................................ 13 9,500 MEAD CORP ........................................ 298 800 METALS U.S.A., INC ............................... 2 5,007 METRIS COS, INC .................................. 132 3,100 MILLENNIUM CHEMICAL, INC ......................... 56 1,600 MINERALS TECHNOLOGIES, INC ....................... 55 2,700 * MUELLER INDUSTRIES, INC .......................... 72 200 NCH CORP ......................................... 8 4,000 * NCI BUILDING SYSTEMS, INC ........................ 75 10,300 NEWMONT MINING CORP .............................. 176 300 * NORTEK, INC ...................................... 7 4,500 NUCOR CORP ....................................... 179 700 * NVR, INC ......................................... 87 5,600 * OAK TECHNOLOGY, INC .............................. 49 1,500 * OAKLEY, INC ...................................... 20 3,900 OLIN CORP ........................................ 86 1,100 OM GROUP, INC .................................... 60 4,100 OMNOVA SOLUTIONS, INC ............................ 25 5,600 b OWENS CORNING CO ................................. 5 12,000 * OWENS ILLINOIS, INC .............................. 68 3,500 * PACKAGING CORP OF AMERICA ........................ 56 13,400 * PACTIV CORP ...................................... 166 350 * PALM HARBOR HOMES, INC ........................... 6 4,100 PENTAIR, INC ..................................... 99 7,341 PHELPS DODGE CORP ................................ 410 40 PLACER DOME, INC (U.S.) .......................... 0 3,300 PLUM CREEK TIMBER CO, INC ........................ 86 9,150 POLYONE CORP ..................................... 54 100 POPE & TALBOT, INC ............................... 2 1,889 POTLATCH CORP .................................... 63 11,500 PPG INDUSTRIES, INC .............................. 533 10,900 PRAXAIR, INC ..................................... 484 4,000 PULTE CORP ....................................... 169 1,100 QUANEX CORP ...................................... 22 1,100 RAYONIER, INC .................................... 44 1,650 RELIANCE STEEL & ALUMINUM CO ..................... 41 600 ROCK-TENN CO (CLASS A) ........................... 4 9,700 ROHM & HAAS CO ................................... 352 8,831 RPM, INC ......................................... 76 300 * RTI INTERNATIONAL METALS, INC .................... 4 1,061 RYERSON TULL, INC ................................ 9 2,500 RYLAND GROUP, INC ................................ 102 3,500 SCHULMAN (A.), INC ............................... $ 40 2,300 * SCICLONE PHARMACEUTICALS, INC .................... 9 6,072 * SEALED AIR CORP .................................. 185 2,000 * SHAW GROUP, INC .................................. 100 7,800 SHERWIN-WILLIAMS CO .............................. 205 7,400 SIGMA ALDRICH CORP ............................... 291 600 * SIMPSON MANUFACTURING CO, INC .................... 31 7,353 * SMURFIT-STONE CONTAINER CORP ..................... 110 8,560 SOLUTIA, INC ..................................... 103 7,631 SONOCO PRODUCTS CO ............................... 165 1,200 SPARTECH CORP .................................... 25 2,400 ST. JOE CO ....................................... 53 2,400 STANDARD-PACIFIC CORP ............................ 56 3,900 STANLEY WORKS CO ................................. 122 800 * STEEL DYNAMICS, INC .............................. 9 3,700 * STILLWATER MINING CO ............................. 146 400 b * STONE & WEBSTER, INC ............................. 1 3,400 * TECHNE CORP ...................................... 123 2,400 TEMPLE-INLAND, INC ............................... 129 2,600 TEXAS INDUSTRIES, INC ............................ 78 3,100 * TOLL BROTHERS, INC ............................... 127 800 TREDEGAR CORP .................................... 14 400 * TREX CO, INC ..................................... 10 10,600 UNION CARBIDE CORP ............................... 570 2,500 UNIVERSAL FOREST PRODUCTS, INC ................... 33 2,000 * URS CORP ......................................... 29 3,500 USEC, INC ........................................ 15 1,400 USG CORP ......................................... 32 4,200 USX-US STEEL GROUP, INC .......................... 76 5,700 VULCAN MATERIALS CO .............................. 273 200 * WASHINGTON GROUP INTERNATIONAL, INC .............. 2 6,900 WAUSAU-MOSINEE PAPER CORP ........................ 70 1,100 WD-40 CO ......................................... 21 1,400 WELLMAN, INC ..................................... 20 2,000 WEST PHARMACEUTICAL SERVICES, INC ................ 49 10,200 WESTVACO CORP .................................... 298 15,000 WEYERHAEUSER CO .................................. 761 6,500 WILLAMETTE INDUSTRIES, INC ....................... 305 10,600 WORTHINGTON INDUSTRIES, INC ...................... 85 1,100 YORK INTERNATIONAL CORP .......................... 34 ------- TOTAL BASIC INDUSTRIES ........................... 30,783 ------- CONSUMER CYCLICAL--7.96% 100 * 99 CENTS ONLY STORES ............................. 3 2,200 AARON RENTS, INC ................................. 31 6,800 * ABERCROMBIE & FITCH CO (CLASS A) ................. 136 4,133 * ACNEILSEN CORP ................................... 150 1,000 * ADVANTICA RESTAURANT GROUP, INC .................. 1 500 * AMERCO ........................................... 10 600 * AMERICAN CLASSIC VOYAGES CO ...................... 8 1,000 * AMERICAN EAGLE OUTFITTERS, INC ................... 42 4,100 AMERICAN GREETINGS CORP (CLASS A) ................ 39 5,200 * AMERICREDIT CORP ................................. 142 1,500 * AMES DEPARTMENT STORES, INC ...................... 2 1,800 * ANCHOR GAMING CO ................................. 70 900 * ANN TAYLOR STORES CORP ........................... 22 5,900 * APOLLO GROUP, INC (CLASS A) ...................... 290 2,700 * APPLEBEE'S INTERNATIONAL, INC .................... 85 700 ARCTIC CAT, INC .................................. 8 2,800 * ARGOSY GAMING CO ................................. 54 6,899 ARVINMERITOR, INC ................................ 78 197,122 * AT & T CORP - LIBERTY MEDIA (CLASS A) ............ 2,673 8,084 AUTOLIV, INC ..................................... 129 2,400 * AVIS GROUP HOLDINGS, INC ......................... 78 3,500 * AZTAR CORP ....................................... 45 3,000 * BALLY TOTAL FITNESS HOLDINGS CORP ................ 102 700 BANDAG, INC ...................................... 28 1,700 * BE FREE, INC ..................................... 4 18,900 * BED BATH & BEYOND, INC ........................... 423 10,700 BELO (A.H.) CORP SERIES A ........................ 171 400 BHC COMMUNICATIONS, INC (CLASS A) ................ 52 2,300 BLOCKBUSTER, INC (CLASS A) ....................... 19 6,100 BOB EVANS FARMS, INC ............................. 130 2,400 * BOCA RESORTS, INC (CLASS A) ...................... 35 2,400 BORGWARNER, INC .................................. 96 4,500 * BOYD GAMING CORP ................................. 15 1,000 * BOYDS COLLECTION LTD ............................. 9
See notes to financial statements. B-25 65
SHARES VALUE (000) - ------ ---------- CONSUMER CYCLICAL--(CONTINUED) 900 * BREED TECHNOLOGIES, INC .......................... $ 0 4,700 * BRINKER INTERNATIONAL, INC ....................... 199 1,400 BROWN SHOE CO, INC ............................... 18 9,000 BRUNSWICK CORP ................................... 148 500 * BUCKLE, INC (THE) ................................ 9 620 BURLINGTON COAT FACTORY WAREHOUSE CORP ........... 12 800 BUSH INDUSTRIES, INC (CLASS A) ................... 9 2,400 b * CALDOR CORP ...................................... 0 5,100 CALLAWAY GOLF CO ................................. 95 3,300 * CATALINA MARKETING CORP .......................... 128 2,800 CATO CORP (CLASS A) .............................. 39 3,300 CBRL GROUP, INC .................................. 60 2,650 * CEC ENTERTAINMENT, INC ........................... 90 1,700 * CHAMPIONSHIP AUTO RACING TEAMS, INC .............. 36 7,400 * CHARMING SHOPPES, INC ............................ 44 700 * CHICO'S FAS, INC ................................. 15 2,100 * CHILDREN'S PLACE RETAIL STORES, INC .............. 43 5,900 * CHOICE HOTELS INTERNATIONAL, INC ................. 81 462 CHRIS CRAFT INDUSTRIES, INC ...................... 31 4,100 * CITADEL COMMUNICATIONS CORP ...................... 49 2,000 CLAIRE'S STORES, INC ............................. 36 36,178 * CLEAR CHANNEL COMMUNICATIONS, INC ................ 1,752 1,400 * CLEAR CHANNEL COMMUNICATIONS, INC WTS 09/18/01 ....................................... 9 300 COACHMEN INDUSTRIES, INC ......................... 3 500 * COLDWATER CREEK, INC ............................. 16 300 * COLUMBIA SPORTSWEAR CO ........................... 15 8,500 * CONSOLIDATED STORES CORP ......................... 90 4,300 COOPER TIRE & RUBBER CO .......................... 46 4,400 * COPART, INC ...................................... 95 3,900 * COX RADIO, INC (CLASS A) ......................... 88 700 * CROWN MEDIA HOLDINGS, INC (CLASS A) .............. 14 1,000 * CSS INDUSTRIES, INC .............................. 21 2,900 * CUMULUS MEDIA, INC (CLASS A) ..................... 11 7,024 DANA CORP ........................................ 108 6,500 DANAHER CORP ..................................... 444 9,300 DARDEN RESTAURANTS, INC .......................... 213 3,400 * DATA BROADCASTING CORP ........................... 12 80 * DAY RUNNER, INC .................................. 0 1,700 * DELCO REMY INTERNATIONAL , INC ................... 15 49,682 DELPHI AUTOMOTIVE SYSTEMS CORP ................... 559 6,100 DILLARD'S, INC (CLASS A) ......................... 72 450 * DIRECT FOCUS, INC ................................ 15 163,534 DISNEY (WALT) CO ................................. 4,732 12,425 DOLLAR GENERAL CORP .............................. 235 4,200 * DOLLAR THRIFTY AUTOMOTIVE GROUP, INC ............. 79 9,175 * DOLLAR TREE STORES, INC .......................... 225 1,100 DONALDSON CO, INC ................................ 31 6,000 DONNELLEY (R.R.) & SONS CO ....................... 162 1,000 DOVER DOWNS ENTERTAINMENT, INC ................... 11 2,700 DOW JONES & CO, INC .............................. 153 2,400 * E4L, INC ......................................... 0 21,900 EASTMAN KODAK CO ................................. 862 2,600 * EMMIS COMMUNICATIONS CORP (CLASS A) .............. 75 1,600 * ENTERCOM COMMUNICATIONS CORP ..................... 55 2,300 EQUITY INNS, INC ................................. 14 8,600 * EXTENDED STAY AMERICA, INC ....................... 111 2,600 FACTSET RESEARCH SYSTEMS, INC .................... 96 2,200 * FAIRFIELD COMMUNITIES, INC ....................... 31 8,300 FAMILY DOLLAR STORES, INC ........................ 178 4,500 FEDDERS CORP ..................................... 21 19,770 * FEDERATED DEPARTMENT STORES, INC ................. 692 6,600 FELCOR LODGING TRUST, INC ........................ 158 554 FLORIDA EAST COAST INDUSTRIES, INC (CLASS B ...... 19 2,200 * FOOTSTAR, INC .................................... 109 140,126 FORD MOTOR CO (NEW) .............................. 3,284 900 FOREST CITY ENTERPRISES, INC (CLASS A) ........... 35 2,100 * FOSSIL, INC ...................................... 30 8,800 * FOX ENTERTAINMENT GROUP, INC (CLASS A) ........... 157 700 G & K SERVICES, INC (CLASS A) .................... 20 21,500 GANNETT CO, INC .................................. 1,356 40,612 GAP, INC ......................................... 1,036 54 * GAYLORD ENTERTAINMENT CO ......................... $ 1 900 b * GC COS, INC ...................................... 2 6 * GEMSTAR-TV GUIDE INTERNATIONAL, INC .............. 0 4,100 GENCORP, INC ..................................... 39 42,849 GENERAL MOTORS CORP .............................. 2,183 7,800 * GENESCO, INC ..................................... 191 5,900 * GENTEX CORP ...................................... 110 10,600 GENUINE PARTS CO ................................. 278 9,200 GOODYEAR TIRE & RUBBER CO ........................ 212 1,800 GRACO, INC ....................................... 74 1,300 * GUITAR CENTER, INC ............................... 15 3,500 * HANDLEMAN CO ..................................... 26 16,100 * HANOVER DIRECT, INC .............................. 6 3,700 HARCOURT GENERAL, INC ............................ 212 3,870 HARMAN INTERNATIONAL INDUSTRIES, INC ............. 141 6,100 * HARRAH'S ENTERTAINMENT, INC ...................... 161 4,200 HARTE-HANKS, INC ................................. 99 1,300 HAVERTY FURNITURE COS, INC ....................... 13 2,500 * HAYES LEMMERZ INTERNATIONAL, INC ................. 17 3,800 * HEARST-ARGYLE TELEVISION, INC .................... 78 1,200 HERTZ CORP (CLASS A) ............................. 41 19,127 HILTON HOTELS CORP ............................... 201 5,600 * HISPANIC BROADCASTING CORP ....................... 143 2,900 HOLLINGER INTERNATIONAL, INC ..................... 46 4,100 * HOLLYWOOD ENTERTAINMENT CORP ..................... 4 900 HOUGHTON MIFFLIN CO .............................. 42 2,800 * IHOP CORP (NEW) .................................. 61 22,050 * INFINITY BROADCASTING CORP (CLASS A) ............. 616 700 * INFORMATION HOLDINGS, INC ........................ 16 4,200 * INTELECT COMMUNICATIONS, INC ..................... 2 4,753 * INTERNATIONAL GAME TECHNOLOGY CO ................. 228 1,900 INTERNATIONAL SPEEDWAY CORP (CLASS A ) ........... 72 23,869 INTERPUBLIC GROUP OF COS, INC .................... 1,016 1,900 * INTERTAN, INC .................................... 22 8,200 INTIMATE BRANDS, INC (CLASS A) ................... 123 1,200 * INTRANET SOLUTIONS, INC .......................... 61 1,000 * ISLE OF CAPRI CASINOS, INC ....................... 11 3,100 * JACK IN THE BOX, INC ............................. 91 1,000 * JAKKS PACIFIC, INC ............................... 9 7,400 JOHNSON CONTROLS, INC ............................ 385 9,902 * JONES APPAREL GROUP, INC ......................... 319 3,400 * JOURNAL REGISTER CO .............................. 55 25,500 * K MART CORP ...................................... 135 300 KELLWOOD CO ...................................... 6 300 * KENNETH COLE PRODUCTIONS, INC (CLASS A) .......... 12 1,200 * KEY3MEDIA GROUP, INC ............................. 15 4,800 KIMBALL INTERNATIONAL, INC (CLASS B) ............. 70 800 * KIRBY CORP ....................................... 17 4,000 KNIGHT-RIDDER, INC ............................... 228 24,300 * KOHL'S CORP ...................................... 1,482 25 * LAKES GAMING, INC ................................ 0 4,050 * LAMAR ADVERTISING CO (CLASS A) ................... 156 2,000 LANDRY'S SEAFOOD RESTAURANTS, INC ................ 20 2,000 LASALLE HOTEL PROPERTIES ......................... 30 2,700 LA-Z-BOY, INC .................................... 43 6,100 * LEAR CORP ........................................ 151 3,400 LEE ENTERPRISES, INC ............................. 101 11,100 LEGGETT & PLATT, INC ............................. 210 2,700 LIBBEY, INC ...................................... 82 1,700 * LIBERTY DIGITAL, INC (CLASS A) ................... 9 9,880 * LIBERTY SATELLITE & TECHNOLOGY, INC .............. 31 1,000 * LIFEMINDERS, INC ................................. 4 28,802 LIMITED, INC ..................................... 491 5,100 LINENS `N THINGS, INC. ........................... 141 3,100 LIZ CLAIBORNE, INC ............................... 129 200 * LODGENET ENTERTAINMENT CORP ...................... 4 4,800 LONE STAR STEAKHOUSE & SALOON, INC ............... 46 1,800 LUBY'S, INC ...................................... 11 7,900 * MANDALAY RESORT GROUP ............................ 173 200 MARCUS CORP ...................................... 3 16,700 MARRIOTT INTERNATIONAL, INC (CLASS A) ............ 706 81 * MARVEL ENTERPRISES (CLASS A) WTS 10/02/01 ........ 0 138 * MARVEL ENTERPRISES (CLASS C) WTS 10/02/02 ........ 0 23,200 MAY DEPARTMENT STORES CO ......................... 760 7,000 MAYTAG CO ........................................ 226 1,300 MCCLATCHY CO (CLASS A) ........................... 55 99,200 MCDONALD'S CORP .................................. 3,373
See notes to financial statements. B-26 66
SHARES VALUE (000) - ------ ---------- CONSUMER CYCLICAL--(CONTINUED) 13,900 MCGRAW HILL COS, INC ............................. $ 815 1,585 MEDIA GENERAL, INC (CLASS A) ..................... 58 1,050 * MEN'S WEARHOUSE, INC ............................. 29 3,000 MEREDITH CORP .................................... 97 1,344 * METRO-GOLDWYN-MAYER, INC ......................... 22 2,300 MGM MIRAGE ....................................... 65 3,300 * MICHAELS STORES, INC ............................. 87 2,000 * MICROS SYSTEMS, INC .............................. 37 1,333 MIDAS, INC ....................................... 16 1,100 * MIDWAY GAMES, INC ................................ 8 1,600 MODINE MANUFACTURING CO .......................... 33 4,200 * MOHAWK INDUSTRIES, INC ........................... 115 1,250 * MONACO COACH CORP ................................ 22 1,600 * MSC INDUSTRIAL DIRECT CO (CLASS A) ............... 29 3,157 MYERS INDUSTRIES, INC ............................ 46 1,300 * MYPOINTS.COM, INC ................................ 2 1,600 * NAUTICA ENTERPRISES, INC ......................... 24 3,400 * NBC INTERNET, INC ................................ 12 2,200 * NEIMAN MARCUS GROUP, INC (CLASS A) ............... 78 723 * NEIMAN MARCUS GROUP, INC (CLASS B) ............... 24 1,500 * NETCENTIVES, INC ................................. 6 14,300 NEW YORK TIMES CO (CLASS A) ...................... 573 82 NEWS CORP LTD .................................... 2 7,400 NIKE, INC (CLASS B) .............................. 413 7,700 NORDSTROM, INC ................................... 140 1,400 * O'CHARLEY'S, INC ................................. 25 14,600 OMNICOM GROUP, INC ............................... 1,210 1,800 * ON COMMAND CORP .................................. 16 2,400 * O'REILLY AUTOMOTIVE, INC ......................... 64 1,400 OSHKOSH B'GOSH, INC (CLASS A) .................... 26 1,050 OSHKOSH TRUCK CORP ............................... 46 9,150 * OUTBACK STEAKHOUSE, INC .......................... 237 2,350 * PACIFIC SUNWEAR CALIFORNIA, INC .................. 60 900 * PAPA JOHN'S INTERNATIONAL, INC ................... 20 21,800 * PARK PLACE ENTERTAINMENT CORP .................... 260 500 * PARKERVISION, INC ................................ 18 1,746 * PAYLESS SHOESOURCE, INC .......................... 124 16,145 PENNEY, (J.C.) CO, INC ........................... 176 2,500 PENTON MEDIA, INC ................................ 67 1,900 * PERFORMANCE FOOD GROUP CO ........................ 97 8,000 PIER 1 IMPORTS, INC .............................. 83 2,400 * PINNACLE ENTERTAINMENT, INC ...................... 32 3,200 * PINNACLE SYSTEMS, INC ............................ 24 1,300 * PIXAR, INC ....................................... 39 1,000 * PLAYBOY ENTERPRISES, INC (CLASS B) ............... 10 3,000 POLARIS INDUSTRIES, INC .......................... 119 4,100 * POLO RALPH LAUREN CORP ........................... 91 3,800 POLYMER GROUP, INC ............................... 20 1,700 * PRESSTEK, INC .................................... 18 4,800 * PRIME HOSPITALITY CORP ........................... 56 11,200 * PRIMEDIA, INC .................................... 134 600 PULITZER, INC .................................... 28 2,800 * QUICKSILVER, INC ................................. 54 3,800 * RADIO ONE, INC (CLASS A) ......................... 41 1,000 * RADIO ONE, INC (CLASS D) ......................... 11 9,800 READER'S DIGEST ASSOCIATION, INC (CLASS A) (NON-VOTE) ..................................... 383 2,700 * REEBOK INTERNATIONAL LTD ......................... 74 2,050 REGIS CORP ....................................... 30 1,200 * RENT-A-CENTER, INC ............................... 41 800 RIVIANA FOODS, INC ............................... 16 6,500 ROSS STORES, INC ................................. 110 2,700 ROUSE CO ......................................... 69 9,400 RUBY TUESDAY, INC ................................ 143 3,000 RUSSELL CORP ..................................... 46 5,300 * RYAN'S FAMILY STEAK HOUSES, INC .................. 50 17,900 * SAKS, INC ........................................ 179 2,850 * SALTON, INC ...................................... 59 79 * SAMSONITE CORP ................................... 0 1,700 * SCHOLASTIC CORP .................................. 151 1,200 * SCOTTS CO (CLASS A) .............................. 44 2,000 SCRIPPS (E.W.) CO (CLASS A) ...................... 126 25,400 SEARS ROEBUCK & CO ............................... $ 883 900 b * SERVICE MERCHANDISE CO, INC ...................... 0 9,120 SHAW INDUSTRIES, INC ............................. 173 3,000 * SHOPKO STORES, INC ............................... 15 3,400 * SINCLAIR BROADCASTING GROUP, INC (CLASS A ) ...... 34 2,700 * SIRIUS SATELLITE RADIO, INC ...................... 81 2,400 SMITH (A.O.) CORP ................................ 41 4,500 SNAP-ON, INC ..................................... 125 8,200 * SONIC AUTOMOTIVE, INC ............................ 56 2,400 * SONIC CORP ....................................... 56 2,200 * SOTHEBY'S HOLDINGS, INC (CLASS A) ................ 51 2,300 * SPANISH BROADCASTING SYSTEM, INC ................. 12 700 SPIEGEL, INC (CLASS A) ........................... 3 3,000 * SPORTSLINE.COM, INC .............................. 16 1,700 SPRING INDUSTRIES, INC (CLASS A) ................. 55 2,603 * SPX CORP ......................................... 282 16,100 * STARBUCKS CORP ................................... 712 3,600 * STATION CASINOS, INC ............................. 54 5,900 STEELCASE, INC (CLASS A) ......................... 82 700 * STEIN MART, INC .................................. 8 700 * STONERIDGE, INC .................................. 5 5,400 STRIDE RITE CORP ................................. 38 10,200 * SUNBEAM CORP ..................................... 3 2,600 * SUNGLASS HUT INTERNATIONAL, INC .................. 13 1,400 SUPERIOR INDUSTRIES INTERNATIONAL, INC ........... 44 49,700 SYSCO CORP ....................................... 1,491 1,100 * SYSTEMAX, INC .................................... 1 3,300 TALBOTS, INC ..................................... 151 400 TANGER FACTORY OUTLET CENTERS, INC ............... 9 67,800 TARGET CORP ...................................... 2,187 1,980 TENNECO AUTOMOTIVE, INC .......................... 6 1,500 * THE CHEESECAKE FACTORY, INC ...................... 58 1,200 THOR INDUSTRIES, INC ............................. 24 2,000 * THQ, INC ......................................... 49 10,500 TIFFANY & CO ..................................... 332 500 * TIMBERLAND CO (CLASS A) .......................... 33 84,243 TIME WARNER, INC ................................. 4,401 20,400 TJX COS, INC ..................................... 566 1,207 * TOO, INC ......................................... 15 4,300 * TOPPS, INC ....................................... 40 4,400 * TOWER AUTOMOTIVE, INC ............................ 40 15,222 TRIBUNE CO ....................................... 643 9,140 * TRICON GLOBAL RESTAURANTS, INC ................... 302 3,800 TRUE NORTH COMMUNICATIONS, INC ................... 162 6,400 TRW, INC ......................................... 248 6,300 * U.S.A. NETWORKS, INC ............................. 122 4,300 * UNIFI, INC ....................................... 38 800 * UNIVERSAL ELECTRONICS, INC ....................... 12 11,700 * UNIVISION COMMUNICATIONS, INC (CLASS A) .......... 479 5,700 V.F. CORP ........................................ 207 600 * VAIL RESORTS, INC ................................ 14 4,800 * VALASSIS COMMUNICATIONS, INC ..................... 152 15,100 * VENATOR GROUP, INC ............................... 234 7,400 * VIACOM, INC (CLASS A) ............................ 348 75,016 * VIACOM, INC (CLASS B) ............................ 3,507 4,756 VISTEON CORP ..................................... 55 800 WABASH NATIONAL CORP ............................. 7 209,900 WAL-MART STORES, INC ............................. 11,151 300 WASHINGTON POST CO (CLASS B) ..................... 185 8,300 WENDY'S INTERNATIONAL, INC ....................... 218 4,100 WESTPOINT STEVENS, INC ........................... 31 5,200 * WESTWOOD ONE, INC ................................ 100 3,700 WHIRLPOOL CORP ................................... 176 6,400 WILEY (JOHN) & SONS, INC (CLASS A) ............... 138 5,400 * WILLIAMS-SONOMA, INC ............................. 108 1,600 * WINK COMMUNICATIONS, INC ......................... 10 1,100 WINNEBAGO INDUSTRIES, INC ........................ 19 1,000 * WMS INDUSTRIES, INC .............................. 20 725 WOLVERINE WORLD WIDE, INC ........................ 11 500 WOODWARD GOVERNOR CO ............................. 22 70 WPP GROUP PLC (SPON ADR) ......................... 4 900 * XM SATELLITE RADIO HOLDINGS, INC (CLASS A) ....... 14 800 * YOUNG BROADCASTING, INC (CLASS A) ................ 27 4,900 * ZALE CORP ........................................ 142 2,400 * ZOMAX, INC ....................................... 11 ------- TOTAL CONSUMER CYCLICAL .......................... 78,871 -------
See notes to financial statements. B-27 67
SHARES VALUE (000) - ------ ---------- CONSUMER NON-CYCLICAL--8.32% 3,140 * 7-ELEVEN, INC ................................... $ 27 1,800 * AGRIBRANDS INTERNATIONAL, INC ................... 96 4,300 ALBERTO CULVER CO (CLASS B) ..................... 184 19,936 ALBERTSON'S, INC ................................ 528 14,000 * AMAZON.COM, INC ................................. 218 2,100 * AMERICAN ITALIAN PASTA CO (CLASS A) ............. 56 69,000 ANHEUSER-BUSCH COS, INC ......................... 3,140 51,335 ARCHER DANIELS MIDLAND CO ....................... 770 11,500 * AUTOZONE, INC ................................... 328 17,300 AVON PRODUCTS, INC .............................. 828 3,900 * BARNES & NOBLE, INC ............................. 103 3,700 * BARNESANDNOBLE.COM, INC ......................... 5 12,300 * BEST BUY CO, INC ................................ 364 4,300 * BJ'S WHOLESALE CLUB, INC ........................ 165 709 BLOCK DRUG, INC (CLASS A) ....................... 37 1,900 BLYTH, INC ...................................... 46 7,800 * BORDERS GROUP, INC .............................. 91 3,100 BROWN FORMAN, INC (CLASS B) ..................... 206 1,000 * CADIZ, INC ...................................... 9 21,400 CAMPBELL SOUP CO ................................ 741 3,700 CARTER WALLACE, INC ............................. 123 7,400 * CASEY'S GENERAL STORES, INC ..................... 111 3,200 * CDW COMPUTER CENTERS, INC ....................... 89 5,500 * CHIQUITA BRANDS INTERNATIONAL, INC .............. 6 2,900 CHURCH & DWIGHT CO, INC ......................... 65 13,300 CIRCUIT CITY STORES-CIRCUIT CITY GROUP .......... 153 20,300 CLOROX CO ....................................... 721 154,700 COCA COLA CO .................................... 9,427 23,000 COCA COLA ENTERPRISES, INC ...................... 437 43,400 COLGATE PALMOLIVE CO ............................ 2,801 44,059 CONAGRA FOODS, INC .............................. 1,146 1,500 * CONSTELLATION BRANDS, INC (CLASS A) ............. 88 1,900 COORS (ADOLPH) CO (CLASS B) ..................... 153 2,975 CORN PRODUCTS INTERNATIONAL, INC ................ 86 2,150 * COST PLUS, INC .................................. 63 36,400 * COSTCO WHOLESALE CORP ........................... 1,454 29,442 CVS CORP ........................................ 1,765 2,800 DEAN FOODS CO ................................... 86 2,000 * DEL MONTE FOODS CO .............................. 15 8,566 DELHAIZE AMERICA, INC (CLASS B) ................. 154 2,400 DELTA & PINE LAND CO ............................ 50 6,000 DIAL CORP ....................................... 66 5,200 DOLE FOOD CO .................................... 85 1,200 DREYERS GRAND ICE CREAM, INC .................... 39 900 * DUANE READE, INC ................................ 28 5,816 EARTHGRAINS CO .................................. 108 51 * EGGHEAD.COM, INC ................................ 0 5,300 * ENERGIZER HOLDINGS, INC ......................... 113 3,400 ETHAN ALLEN INTERIORS, INC ...................... 114 4,300 * ETOYS, INC ...................................... 1 200 * EXPEDIA, INC (CLASS A) .......................... 2 900 * FACTORY 2-U STORES, INC ......................... 30 100 FARMER BROTHERS CO .............................. 21 1,900 FASTENAL CO ..................................... 104 2,200 FLEMING COS, INC ................................ 26 7,650 FLOWERS INDUSTRIES, INC ......................... 120 4,200 * FURNITURE BRANDS INTERNATIONAL, INC ............. 88 20,314 GENERAL MILLS, INC .............................. 905 83,378 GILLETTE CO ..................................... 3,012 1,600 * HAIN CELESTIAL GROUP, INC ....................... 52 20,750 HASBRO, INC ..................................... 220 5,100 b HEILIG MEYERS CO ................................ 0 25,300 HEINZ (H.J.) CO ................................. 1,200 33 HERBALIFE INTERNATIONAL, INC (CLASS A) .......... 0 2,566 HERBALIFE INTERNATIONAL, INC (CLASS B) .......... 19 8,400 HERSHEY FOODS CORP .............................. 541 178,050 HOME DEPOT, INC ................................. 8,135 6,000 HORMEL FOODS CORP ............................... 112 1,700 HUGHES SUPPLY, INC .............................. 30 5,200 IBP, INC ........................................ 139 2,400 * INSIGHT ENTERPRISES, INC ........................ 43 3,400 INTERFACE, INC (CLASS A) ........................ 30 3,800 INTERNATIONAL MULTIFOODS CORP ................... $ 77 2,400 INTERSTATE BAKERIES CORP ........................ 34 7,000 * INTERNATIONAL FLAVORS & FRAGRANCES, INC ......... 142 50 b JUST FOR FEET, INC. ............................. 0 15,100 KELLOGG CO ...................................... 396 66,208 * KROGER CO ....................................... 1,792 4,450 LANCASTER COLONY CORP ........................... 125 3,600 LANCE, INC ...................................... 46 5,800 LAUDER (ESTEE) CO (CLASS A) ..................... 254 700 LONGS DRUG STORES CORP .......................... 17 25,100 LOWE'S COS, INC ................................. 1,117 29,589 MATTEL, INC ..................................... 427 5,400 MCCORMICK & CO, INC (NON-VOTE) .................. 195 600 * MEADE INSTRUMENTS CO ............................ 4 6,400 MILLER (HERMAN), INC ............................ 184 2,100 * MUSICLAND STORES CORP ........................... 26 2,800 * NBTY, INC ....................................... 13 2,100 * NETWORK COMMERCE, INC ........................... 2 17,500 NEWELL RUBBERMAID, INC .......................... 398 4,500 * NU SKIN ENTERPRISES, INC (CLASS A) .............. 24 33,400 * OFFICE DEPOT, INC ............................... 238 8,050 * OFFICEMAX, INC .................................. 23 2,400 ONEIDA LTD ...................................... 45 4,000 * ONVIA.COM, INC .................................. 3 600 * PARTY CITY CORP ................................. 2 400 * PC CONNECTION, INC .............................. 4 2,500 PEP BOYS MANNY, MOE, & JACK CO .................. 9 6,800 PEPSI BOTTLING GROUP, INC ....................... 272 110,800 PEPSICO, INC .................................... 5,492 13,600 * PERRIGO CO ...................................... 113 4,500 * PETSMART, INC ................................... 13 173,600 PHILIP MORRIS COS, INC .......................... 7,638 600 PILGRIM'S PRIDE CORP (CLASS B) .................. 5 1,900 * PLAYTEX PRODUCTS, INC ........................... 18 4,500 * PRICELINE.COM, INC .............................. 6 101,700 PROCTER & GAMBLE CO ............................. 7,977 9,400 QUAKER OATS CO .................................. 915 15,500 RADIOSHACK CORP ................................. 664 1,200 * RALCORP HOLDINGS, INC ........................... 20 21,400 RALSTON PURINA CO ............................... 559 1,500 * REVLON, INC (CLASS A) ........................... 7 18,320 * RITE AID CORP ................................... 44 7,500 RJR REYNOLDS TOBACCO HOLDINGS, INC .............. 366 1,600 * ROBERT MONDAVI CORP (CLASS A) ................... 87 2,200 RUDDICK CORP .................................... 25 1,500 RUSS BERRIE & CO, INC ........................... 32 36,004 * SAFEWAY, INC .................................... 2,250 67,300 SARA LEE CORP ................................... 1,653 340 SCHWEITZER-MAUDUIT INTERNATIONAL, INC ........... 7 1,400 * SCIQUEST.COM, INC ............................... 2 5,800 SENSIENT TECHNOLOGIES CORP ...................... 132 1,850 SLI, INC ........................................ 12 2,700 * SMITHFIELD FOODS, INC ........................... 82 200 SMUCKER (J.M) CO ................................ 6 2,200 * STAMPS.COM, INC ................................. 6 31,262 * STAPLES, INC .................................... 369 1,000 STEPAN CO ....................................... 24 2,700 * SUIZA FOODS CORP ................................ 130 10,806 SUPERVALU, INC .................................. 150 500 THOMAS INDUSTRIES, INC .......................... 12 2,400 * TICKETMASTER ONLINE-CITYSEARCH, INC (CLASS B) ... 20 2,630 TOOTSIE ROLL INDUSTRIES, INC .................... 121 20,087 * TOYS `R' US, INC ................................ 335 2,550 * TRANS WORLD ENTERTAINMENT CORP .................. 23 4,700 TUPPERWARE CORP ................................. 96 1,000 * TWEETER HOME ENTERTAINMENT GROUP, INC ........... 12 14,000 TYSON FOODS, INC (CLASS A) ...................... 179 1,100 UNIVERSAL CORP .................................. 39 10,700 UST, INC ........................................ 300 2,900 * VALUEVISION INTERNATIONAL, INC (CLASS A) ........ 37 200 * VLASIC FOODS INTERNATIONAL, INC ................. 0 77,300 WALGREEN CO ..................................... 3,232 1,900 WEIS MARKETS, INC ............................... 73 7,700 WHITMAN CORP .................................... 126 2,000 * WHOLE FOODS MARKET, INC ......................... 122 4,550 * WILD OATS MARKETS, INC .......................... 19 4,500 WINN DIXIE STORES, INC .......................... 87 7,101 WRIGLEY (WM) JR CO .............................. 680 ------- TOTAL CONSUMER NON-CYCLICAL ..................... 82,504 -------
See notes to financial statements. B-28 68
SHARES VALUE (000) - ------ ---------- ENERGY--5.20% 6,900 AMERADA HESS CORP ............................... $ 504 20,213 ANADARKO PETROLEUM CORP ......................... 1,437 9,800 APACHE CORP ..................................... 687 3,800 ASHLAND, INC .................................... 136 1,400 * ATWOOD OCEANICS, INC ............................ 61 22,415 BAKER HUGHES, INC ............................... 932 2,100 * BARNETT RESOURCES CORP .......................... 119 700 * BASIN EXPLORATION, INC .......................... 18 1,200 * BELCO OIL & GAS CORP ............................ 15 5,500 * BJ SERVICES CO .................................. 379 1,700 * BROWN (TOM), INC ................................ 56 18,049 BURLINGTON RESOURCES, INC ....................... 911 1,100 CABOT OIL & GAS CORP (CLASS A) .................. 34 1,400 * CAL DIVE INTERNATIONAL, INC ..................... 37 100 CARBO CERAMICS, INC ............................. 4 7,100 * CHESAPEAKE ENERGY CORP .......................... 72 49,700 CHEVRON CORP .................................... 4,197 50,652 CONOCO, INC (CLASS B) ........................... 1,466 1,100 * CONTOUR ENERGY CO ............................... 1 3,100 * COOPER CAMERON CORP ............................. 205 4,387 CROSS TIMBERS OIL CO ............................ 122 7,587 DEVON ENERGY CORP (NEW) ......................... 463 3,200 DIAMOND OFFSHORE DRILLING, INC .................. 128 700 * DRIL-QUIP, INC .................................. 24 2,449 * EEX CORP ........................................ 12 12,800 ENSCO INTERNATIONAL, INC ........................ 436 9,400 EOG RESOURCES, INC .............................. 514 268,457 EXXON MOBIL CORP ................................ 23,339 2,013 * FOREST OIL CORP ................................. 74 14 * FOREST OIL CORP WTS 02/15/04 .................... 0 14 * FOREST OIL CORP WTS 02/15/05 .................... 0 2,866 * FRIEDE GOLDMAN HALTER, INC ...................... 10 4,800 * GLOBAL INDUSTRIES LTD ........................... 66 10,300 * GLOBAL MARINE, INC .............................. 292 6,700 * GRANT PRIDECO, INC .............................. 147 18,700 * GREY WOLF, INC .................................. 110 32,132 HALLIBURTON CO .................................. 1,165 4,000 * HANOVER COMPRESSOR CO ........................... 178 2,200 HELMERICH & PAYNE, INC .......................... 97 2,000 * HORIZON OFFSHORE, INC ........................... 40 500 * HOUSTON EXPLORATION CO .......................... 19 2,100 * HS RESOURCES, INC ............................... 89 3,100 * INPUT/OUTPUT, INC ............................... 32 8,347 KERR-MCGEE CORP ................................. 559 11,000 * KEY ENERGY SERVICES, INC ........................ 115 1,000 * LOUIS DREYFUS NATURAL GAS CORP .................. 46 7,200 * MARINE DRILLING COS, INC ........................ 193 1,300 * MAVERICK TUBE CORP .............................. 29 1,263 * MCMORAN EXPLORATION CO .......................... 17 1,200 MITCHELL ENERGY & DEVELOPMENT CORP (CLASS A) .... 74 4,700 MURPHY OIL CORP ................................. 284 11,300 * NABORS INDUSTRIES, INC .......................... 668 2,900 * NATIONAL-OILWELL, INC ........................... 112 2,200 * NEWFIELD EXPLORATION CO ......................... 104 5,800 NOBLE AFFILIATES, INC ........................... 267 9,000 * NOBLE DRILLING CORP ............................. 391 1,400 * NUEVO ENERGY CO ................................. 24 31,300 OCCIDENTAL PETROLEUM CORP ....................... 759 16,900 * OCEAN ENERGY, INC (NEW) ......................... 294 2,100 * OCEANEERING INTERNATIONAL, INC .................. 41 11,800 * PARKER DRILLING CO .............................. 60 3,700 * PATTERSON ENERGY, INC ........................... 138 3,900 PENNZOIL-QUAKER STATE CO ........................ 50 15,200 PHILLIPS PETROLEUM CO ........................... 865 6,500 * PIONEER NATURAL RESOURCES CO .................... 128 1,200 * PLAINS RESOURCES, INC ........................... 25 2,100 POGO PRODUCING CO ............................... 65 7,900 * PRIDE INTERNATIONAL, INC ........................ 195 450 * PRIMA ENERGY CORP ............................... 16 2,600 * PURE RESOURCES, INC ............................. 53 17,900 * R & B FALCON CORP ............................... 411 8,900 * ROWAN COS, INC .................................. 240 700 RPC, INC ........................................ $ 10 16 SCHLUMBERGER LTD ................................ 1 1,200 * SEACOR SMIT, INC ................................ 63 2,600 * SEITEL, INC ..................................... 48 4,900 * SMITH INTERNATIONAL, INC ........................ 365 1,900 ST. MARY LAND & EXPLORATION CO .................. 63 900 * STONE ENERGY CORP ............................... 58 8,700 SUNOCO, INC ..................................... 293 3,300 * SUPERIOR ENERGY SERVICES, INC ................... 38 600 * SWIFT ENERGY CO ................................. 23 600 * TESORO PETROLEUM CORP ........................... 7 41,316 TEXACO, INC ..................................... 2,567 2,700 TIDEWATER, INC .................................. 120 9,048 TOSCO CORP ...................................... 307 486 * TOTAL FINA WTS 08/05/03 ......................... 15 13 * TRANSTEXAS GAS CORP (CLASS A) ................... 0 1,700 * TRICO MARINE SERVICES, INC ...................... 26 7,826 ULTRAMAR DIAMOND SHAMROCK CORP .................. 242 800 * UNIT CORP ....................................... 15 500 * UNIVERSAL COMPRESSION HOLDINGS, INC ............. 19 20,616 UNOCAL CORP ..................................... 798 26,600 USX-MARATHON GROUP, INC ......................... 738 1,800 * UTI ENERGY CORP ................................. 59 6,000 VALERO ENERGY CORP .............................. 223 1,700 * VARCO INTERNATIONAL, INC (NEW) .................. 37 2,500 * VERITAS DGC, INC ................................ 81 1,900 VINTAGE PETROLEUM, INC .......................... 41 9,930 * WEATHERFORD INTERNATIONAL, INC .................. 469 ------- TOTAL ENERGY .................................... 51,577 ------- FINANCIAL SERVICES--18.25% 400 21ST CENTURY INSURANCE GROUP .................... 6 2,325 ADVANTA CORP (CLASS A) .......................... 20 2,700 * AFFILIATED MANAGERS GROUP, INC .................. 148 21,500 AFLAC, INC ...................................... 1,552 700 ALEXANDRIA REAL ESTATE EQUITIES, INC ............ 26 2,100 ALFA CORP ....................................... 39 622 ALLEGHANY CORP (DELAWARE) ....................... 128 5,200 ALLIED CAPITAL CORP ............................. 109 3,400 ALLMERICA FINANCIAL CORP ........................ 247 58,156 ALLSTATE CORP ................................... 2,533 3,900 AMB PROPERTY CORP ............................... 101 6,450 AMBAC FINANCIAL GROUP, INC ...................... 376 4,700 AMCORE FINANCIAL, INC ........................... 97 1,500 AMERICAN CAPITAL STRATEGIES LTD ................. 38 102,700 AMERICAN EXPRESS CO ............................. 5,642 2,800 AMERICAN FINANCIAL GROUP, INC ................... 74 400 AMERICAN FINANCIAL HOLDINGS, INC ................ 8 18,840 AMERICAN GENERAL CORP ........................... 1,535 1,300 AMERICAN INDUSTRIAL PROPERTIES REIT ............. 16 155,241 AMERICAN INTERNATIONAL GROUP, INC ............... 15,301 500 AMERICAN NATIONAL INSURANCE CO .................. 37 9,500 * AMERITRADE HOLDINGS CORP (CLASS A) .............. 67 1,800 AMLI RESIDENTIAL PROPERTIES TRUST ............... 44 26,453 AMSOUTH BANCORPORATION .......................... 403 3,237 * ANC RENTAL CORP ................................. 11 16,775 AON CORP ........................................ 575 5,145 APARTMENT INVESTMENT & MANAGEMENT CO (CLASS A) ....................... 257 300 * ARCH CAPITAL GROUP LTD .......................... 5 6,600 ARCHSTONE COMMUNITIES TRUST ..................... 170 7,400 ARDEN REALTY GROUP, INC ......................... 186 1,300 ARGONAUT GROUP, INC ............................. 27 8,154 ASSOCIATED BANC-CORP ............................ 248 6,800 * ASSOCIATES FIRST CAP. RESIDUAL VALUE ............ 0 4,645 ASTORIA FINANCIAL CORP .......................... 252 25,900 * AUTONATION, INC ................................. 155 3,700 AVALONBAY COMMUNITIES, INC ...................... 185 1,900 BALDWIN & LYONS, INC (CLASS B) .................. 44 600 BANCFIRST CORP .................................. 24 7,500 BANCORPSOUTH, INC ............................... 91 8,400 BANCWEST CORP ................................... 219 127,495 BANK OF AMERICA CORP ............................ 5,849 58,300 BANK OF NEW YORK CO, INC ........................ 3,217 91,333 BANK ONE CORP ................................... 3,345 2,800 BANK UNITED CORP (CLASS A) ...................... 191 11,278 BANKNORTH GROUP, INC ............................ 225
See notes to financial statements. B-29 69
SHARES VALUE (000) - ------ ---------- FINANCIAL SERVICES--(CONTINUED) 3,300 BAY VIEW CAPITAL CORP ........................... $ 21 32,269 BB&T CORP ....................................... 1,204 9,712 BEAR STEARNS COS, INC ........................... 492 3,900 BEDFORD PROPERTY INVESTORS, INC ................. 79 850 BERKLEY (W.R.) CORP ............................. 40 1,300 * BLACKROCK, INC .................................. 55 300 BLANCH (E.W.) HOLDINGS, INC ..................... 5 4,100 BOSTON PROPERTIES, INC .......................... 178 3,400 BOYKIN LODGING CO ............................... 29 3,600 BRANDYWINE REALTY TRUST ......................... 74 1,300 BRE PROPERTIES, INC (CLASS A) ................... 41 900 BROOKLINE BANCORP, INC .......................... 10 1,000 BROWN & BROWN, INC .............................. 35 1,000 BSB BANCORP, INC ................................ 13 2,400 BURNHAM PACIFIC PROPERTIES, INC ................. 11 6,200 CAMDEN PROPERTY TRUST ........................... 208 3,400 CAPITAL AUTOMOTIVE REIT ......................... 47 14,800 CAPITAL ONE FINANCIAL CORP ...................... 974 2,600 CAPITOL FEDERAL FINANCIAL ....................... 44 1,200 CAPSTEAD MORTGAGE CORP .......................... 13 7,400 CARRAMERICA REALTY CORP ......................... 232 400 CASH AMERICA INTERNATIONAL, INC ................. 2 5,500 * CATELLUS DEVELOPMENT CORP ....................... 96 800 CATHAY BANCORP, INC ............................. 47 2,300 * CB RICHARD ELLIS SERVICES GROUP, INC ............ 34 1,840 CBL & ASSOCIATES PROPERTIES, INC ................ 47 2,700 * CCC INFORMATION SERVICES GROUP, INC ............. 17 33 CENTENNIAL BANCORP .............................. 0 300 CENTERPOINT PROPERTIES CORP ..................... 14 2,100 CENTURA BANKS, INC .............................. 101 2,500 CHARTER MUNICIPAL MORTGAGE ACCEPTANCE CO ................................. 34 14,407 CHARTER ONE FINANCIAL, INC ...................... 416 1,800 CHATEAU COMMUNITIES, INC ........................ 55 1,400 CHELSEA PROPERTY GROUP, INC ..................... 52 525 CHEMICAL FINANCIAL CORP ......................... 12 2,400 CHITTENDEN CORP ................................. 73 2,730 * CHOICEPOINT, INC ................................ 179 14,394 CHUBB CORP ...................................... 1,245 11,588 CINCINNATI FINANCIAL CORP ....................... 458 13,800 CIT GROUP, INC (CLASS A) ........................ 278 389,687 CITIGROUP, INC .................................. 19,898 2,521 CITIZENS BANKING CORP (MICHIGAN) ................ 73 88 CITY HOLDINGS CO ................................ 1 4,700 CITY NATIONAL CORP .............................. 182 1,900 * CNA FINANCIAL CORP .............................. 74 1,300 * COAST FEDERAL LITIGATION CONTINGENT RTS ......... 2 6,000 COLONIAL BANCGROUP, INC ......................... 65 4,200 COLONIAL PROPERTIES TRUST ....................... 109 14,800 COMDISCO, INC ................................... 169 11,000 COMERICA, INC ................................... 653 1,812 COMMERCE BANCORP, INC ........................... 124 6,655 COMMERCE BANCSHARES, INC ........................ 283 2,850 COMMERCIAL FEDERAL CORP ......................... 55 2,270 COMMERCIAL NET LEASE REALTY, INC ................ 23 6,800 COMMUNITY FIRST BANKSHARES, INC ................. 128 94 COMMUNITY TRUST BANCORP, INC .................... 1 8,550 COMPASS BANCSHARES, INC ......................... 204 900 * COMPUCREDIT CORP ................................ 16 22,613 CONSECO, INC .................................... 298 1,900 (b)* CONTIFINANCIAL CORP ............................. 0 2,300 CORNERSTONE REALTY INCOME TRUST, INC ............ 24 6,800 * CORRECTIONS CORP OF AMERICA ..................... 2 400 CORUS BANKSHARES, INC ........................... 20 7,849 COUNTRYWIDE CREDIT INDUSTRIES, INC .............. 394 5,649 COUSINS PROPERTIES, INC ......................... 158 1,500 CRAWFORD & CO (CLASS B) ......................... 17 1,100 * CREDIT ACCEPTANCE CORP .......................... 7 7,100 CRESCENT REAL ESTATE EQUITIES CO ................ 158 400 * CRESECENT OPERATING, INC ........................ 0 1,900 * CRESTLINE CAPITAL CORP .......................... 49 2,700 * CSK AUTO CORP ................................... 10 5,700 CULLEN FROST BANKERS, INC ....................... $ 238 600 DAIN RAUSCHER CORP .............................. 57 800 DEVELOPERS DIVERSIFIED REALTY CORP .............. 11 11,800 DIME BANCORP, INC ............................... 349 2,000 DIME COMMUNITY BANCSHARES ....................... 51 1,400 * DLJ DIRECT, INC ................................. 5 1,300 DORAL FINANCIAL CORP ............................ 31 1,530 DOWNEY FINANCIAL CORP ........................... 84 7,062 DUKE-WEEKS REALTY CORP .......................... 174 15,685 * E TRADE GROUP, INC .............................. 116 500 EAST WEST BANCORP, INC .......................... 12 2,900 EASTGROUP PROPERTIES, INC ....................... 65 6,000 EATON VANCE CORP ................................ 194 5,150 EDWARDS (A.G.), INC ............................. 244 1,800 ENHANCE FINANCIAL SERVICES GROUP, INC ........... 28 2,900 ENTERTAINMENT PROPERTIES TRUST .................. 32 23,143 EQUITY OFFICE PROPERTIES TRUST .................. 755 9,778 EQUITY RESIDENTIAL PROPERTIES TRUST CO .......... 541 2,000 ERIE INDEMNITY CO (CLASS A) ..................... 60 200 ESSEX PROPERTY TRUST, INC ....................... 11 1,800 F & M NATIONAL CORP ............................. 47 600 FARMERS CAPITAL BANK CORP ....................... 17 1,581 FBL FINANCIAL GROUP, INC (CLASS A) .............. 28 4,900 FEDERAL REALTY INVESTMENT TRUST ................. 93 9,000 FEDERATED INVESTORS, INC (CLASS B) .............. 262 54,700 FGLMC ........................................... 3,767 3,224 FIDELITY NATIONAL FINANCIAL, INC ................ 119 29,171 FIFTH THIRD BANCORP ............................. 1,743 1,300 * FINANCIAL FEDERAL CORP .......................... 31 4,716 FINOVA GROUP, INC ............................... 4 3,000 FIRST AMERICAN CORP ............................. 99 300 FIRST BANCORP (PUERTO RICO) ..................... 7 2,300 FIRST CHARTER CORP .............................. 34 100 FIRST CITIZENS BANCSHARES, INC (CLASS A) ........ 8 2,900 FIRST COMMONWEALTH FINANCIAL CORP ............... 29 2,411 FIRST FINANCIAL BANCORP ......................... 41 1,500 FIRST INDIANA CORP .............................. 35 800 FIRST MIDWEST BANCORP, INC ...................... 23 400 FIRST SENTINEL BANCORP, INC ..................... 5 8,200 FIRST TENNESSEE NATIONAL CORP ................... 237 76,043 FIRST UNION CORP ................................ 2,115 3,300 FIRST VIRGINIA BANKS, INC ....................... 158 600 FIRST WASHINGTON REALTY TRUST, INC .............. 15 76,429 FIRSTAR CORP .................................... 1,777 1,200 * FIRSTFED FINANCIAL CORP ......................... 39 4,700 FIRSTMERIT CORP ................................. 126 4,500 * FIRSTPLUS FINANCIAL GROUP, INC .................. 0 69,589 FLEETBOSTON FINANCIAL CORP ...................... 2,614 78,900 FNMA ............................................ 6,845 1,386 FRANCHISE FINANCE CORP OF AMERICA ............... 32 12,300 FRANKLIN RESOURCES, INC ......................... 469 1,700 FREMONT GENERAL CORP ............................ 5 2,300 * FRIEDMAN, BILLINGS, RAMSEY GROUP, INC (CLASS A) ................... 15 1,600 FRONTIER FINANCIAL CORP ......................... 40 1,764 * FRONTLINE CAPITAL GROUP, INC .................... 23 8,853 FULTON FINANCIAL CORP ........................... 204 2,800 GALLAGHER (ARTHUR J.) & CO ...................... 178 4,603 * GARTNER GROUP, INC (CLASS A) .................... 32 2,624 * GARTNER GROUP, INC (CLASS B) .................... 17 800 GBC BANCORP ..................................... 31 1,900 GENERAL GROWTH PROPERTIES, INC .................. 69 2,200 GLENBOROUGH REALTY TRUST, INC ................... 38 2,300 GLIMCHER REALTY TRUST ........................... 29 4,800 GOLDEN STATE BANCORP, INC ....................... 151 3,400 * GOLDEN STATE BANCORP, INC 01/27/02 WTS .......... 4 9,000 GOLDEN WEST FINANCIAL CORP ...................... 608 2,600 GREAT AMERICAN FINANCIAL RESOURCES, INC ......... 50 2,600 GREAT LAKES REIT, INC ........................... 45 2,100 GREATER BAY BANCORP ............................. 86 7,300 GREENPOINT FINANCIAL CORP ....................... 299 1,000 HANCOCK HOLDINGS CO ............................. 38 700 HARLEYSVILLE GROUP, INC ......................... 20 16,800 HARTFORD FINANCIAL SERVICES GROUP, INC .......... 1,187 2,200 HCC INSURANCE HOLDINGS, INC ..................... 59 2,300 HEALTH CARE PROPERTY INVESTORS, INC ............. 69 2,070 HEALTH CARE REIT, INC ........................... 34
See notes to financial statements. B-30 70
SHARES VALUE (000) - ------ ---------- FINANCIAL SERVICES--(CONTINUED) 3,000 HEALTHCARE REALTY TRUST, INC .................... $ 64 2,719 HELLER FINANCIAL, INC (CLASS A) ................. 83 14,672 HIBERNIA CORP (CLASS A) ......................... 187 2,500 HIGHWOODS PROPERTIES, INC ....................... 62 900 HILB, ROGAL & HAMILTON CO ....................... 36 400 HOME PROPERTIES OF NEW YORK, INC ................ 11 5,308 * HOMEFED CORP .................................... 5 5,800 HOOPER HOLMES, INC .............................. 64 2,300 HORACE MANN EDUCATORS CORP ...................... 49 1,200 HOSPITALITY PROPERTIES TRUST .................... 27 12,249 HOST MARRIOTT CORP (NEW) ........................ 158 35,948 HOUSEHOLD INTERNATIONAL, INC .................... 1,977 10,000 HRPT PROPERTIES TRUST ........................... 76 1,300 HUDSON CITY BANCORP, INC ........................ 26 7,253 HUDSON UNITED BANCORP ........................... 152 17,735 HUNTINGTON BANCSHARES, INC ...................... 287 1,000 * IMC MORTGAGE CO ................................. 0 4,687 IMPERIAL BANCORP ................................ 123 8,900 INDEPENDENCE COMMUNITY BANK CORP ................ 142 162 INDEPENDENT BANK CORP ........................... 2 6,212 * INDYMAC BANCORP, INC ............................ 183 5,100 INNKEEPERS U.S.A. TRUST ......................... 56 1,033 * INSIGNIA FINANCIAL GROUP, INC ................... 12 350 INTERNATIONAL BANCSHARES CORP ................... 12 65 * INTERSTATE HOTELS CORP .......................... 0 2,059 * INVESTMENT TECHNOLOGY GROUP, INC ................ 86 2,200 INVESTORS FINANCIAL SERVICES CORP ............... 189 1,800 IRT PROPERTY CO ................................. 15 500 IRWIN FINANCIAL CORP ............................ 11 9,678 ISTAR FINANCIAL, INC ............................ 191 1,600 * ITT EDUCATIONAL SERVICES, INC ................... 35 4,100 JDN REALTY CORP ................................. 43 1,800 JEFFERIES GROUP, INC (NEW) ...................... 56 8,950 JEFFERSON-PILOT CORP ............................ 669 9,700 JOHN HANCOCK FINANCIAL SERVICES, INC ............ 365 200 JOHN NUVEEN CO (CLASS A) ........................ 12 1,400 * JONES LANG LA SALLE ............................. 19 112,810 JP MORGAN CHASE & CO ............................ 6,699 900 JP REALTY, INC .................................. 14 1,000 KANSAS CITY LIFE INSURANCE CO ................... 35 35,460 KEYCORP ......................................... 993 4,500 KILROY REALTY CORP .............................. 126 2,000 KIMCO REALTY CORP ............................... 88 7,100 * KNIGHT TRADING GROUP, INC ....................... 99 2,000 KOGER EQUITY, INC ............................... 31 2,800 * LABRANCHE & CO, INC ............................. 86 900 b * LEASING SOLUTIONS, INC .......................... 0 3,900 LEGG MASON, INC ................................. 213 19,800 LEHMAN BROTHERS HOLDINGS, INC ................... 1,339 4,900 LEUCADIA NATIONAL CORP .......................... 174 600 LIBERTY CORP .................................... 24 1,000 LIBERTY FINANCIAL COS, INC ...................... 45 13,900 LINCOLN NATIONAL CORP ........................... 658 300 LNR PROPERTY CORP ............................... 7 100 * LTC HEALTHCARE, INC ............................. 0 6,364 M & T BANK CORP ................................. 433 1,600 MACERICH CO ..................................... 31 4,600 MACK-CALI REALTY CORP ........................... 131 1,075 MAF BANCORP, INC ................................ 31 100 * MARKEL CORP ..................................... 18 20,700 MARSH & MCLENNAN COS, INC ....................... 2,422 7,759 MARSHALL & ILSLEY CORP .......................... 394 7,241 MBIA, INC ....................................... 537 56,755 MBNA CORP ....................................... 2,096 100 MEDICAL ASSURANCE, INC .......................... 2 5,099 * MEDITRUST CORP PAIRED ........................... 13 36,800 MELLON FINANCIAL CORP ........................... 1,810 3,855 MERCANTILE BANKSHARES CORP ...................... 166 600 MERCHANTS NEW YORK BANCORP, INC ................. 15 900 MERCURY GENERAL CORP ............................ 39 3,800 MERISTAR HOSPITALITY CORP ....................... 75 61,900 MERRILL LYNCH & CO, INC ......................... 4,221 85 * MERRY LAND PROPERTIES, INC ...................... $ 0 23,800 METROPOLITAN LIFE INSURANCE CO .................. 833 19 * MFN FINANCIAL CORP .............................. 0 22 * MFN FINANCIAL CORP WTS SERIES A 03/23/02 ........ 0 22 * MFN FINANCIAL CORP WTS SERIES B 03/23/03 ........ 0 22 * MFN FINANCIAL CORP WTS SERIES C 03/23/04 ........ 0 7,600 MGIC INVESTMENT CORP ............................ 513 1,300 MID-AMERICA APARTMENT COMMUNITIES, INC .......... 29 1,200 MILLS CORP ...................................... 20 2,100 MONY GROUP, INC ................................. 104 1,600 MORGAN KEEGAN, INC .............................. 42 87,510 MORGAN STANLEY DEAN WITTER & CO ................. 6,935 49,424 NATIONAL CITY CORP .............................. 1,421 17,210 NATIONAL COMMERCE BANCORP ....................... 426 2,200 NATIONAL HEALTH INVESTORS, INC .................. 16 100 * NATIONAL WESTERN LIFE INSURANCE CO .............. 10 1,400 NATIONWIDE FINANCIAL SERVICES, INC (CLASS A) .... 67 2,100 NATIONWIDE HEALTH PROPERTIES, INC ............... 27 1,100 * NETBANK, INC .................................... 7 2,400 NEUBERGER BERMAN, INC ........................... 195 5,831 NEW PLAN EXCEL REALTY TRUST ..................... 77 2,600 * NEXTCARD, INC ................................... 21 10,248 NORTH FORK BANCORP, INC ......................... 252 15,700 NORTHERN TRUST CORP ............................. 1,281 350 NY COMMUNITY BANCORP ............................ 13 2,100 OCEANFIRST FINANCIAL CORP ....................... 52 2,900 OHIO CASUALTY CORP .............................. 29 9,628 OLD KENT FINANCIAL CORP ......................... 421 2,780 OLD NATIONAL BANCORP ............................ 83 11,300 OLD REPUBLIC INTERNATIONAL CORP ................. 362 1,100 PACIFIC CAPITAL BANCORP ......................... 31 9,400 PACIFIC CENTURY FINANCIAL CORP .................. 166 2,700 PACIFIC GULF PROPERTIES, INC .................... 17 250 PACIFIC NORTHWEST BANCORP ....................... 3 1,902 PAN PACIFIC RETAIL PROPERTIES, INC .............. 42 945 PARK NATIONAL CORP .............................. 85 800 PARKWAY PROPERTIES, INC ......................... 24 1,800 PENNSYLVANIA REAL ESTATE INVESTMENT TRUST ....... 34 2,700 PFF BANCORP, INC ................................ 56 800 * PHILADELPHIA CONSOLIDATED HOLDINGS CORP ......... 25 2,700 PHOENIX INVESTMENT PARTNERS LTD ................. 42 1,000 PMA CAPITAL CORP (CLASS A) ...................... 17 1,600 PMI GROUP, INC .................................. 108 21,650 PNC FINANCIAL SERVICES GROUP, INC ............... 1,582 10,476 POPULAR, INC .................................... 276 1,701 POST PROPERTIES, INC ............................ 64 5,400 PRENTISS PROPERTIES TRUST ....................... 145 900 PRESIDENTIAL LIFE CORP .......................... 13 700 PRIME GROUP REALTY TRUST ........................ 10 20 * PROFESSIONALS GROUP, INC ........................ 0 4,800 PROGRESSIVE CORP ................................ 497 4,410 PROLOGIS TRUST .................................. 98 1,050 PROMISTAR FINANCIAL CORP ........................ 18 2,500 PROTECTIVE LIFE CORP ............................ 81 820 PROVIDENT BANKSHARES CORP ....................... 17 3,500 PROVIDENT FINANCIAL GROUP, INC .................. 131 21,500 PROVIDIAN FINANCIAL CORP ........................ 1,236 1,700 PS BUSINESS PARKS, INC .......................... 47 6,100 PUBLIC STORAGE, INC ............................. 148 2,026 RADIAN GROUP, INC ............................... 152 3,850 RAYMOND JAMES FINANCIAL CORP .................... 134 2,300 REALTY INCOME CORP .............................. 57 5,200 RECKSON ASSOCIATES REALTY CORP .................. 130 2,300 REGENCY REALTY CORP ............................. 54 15,459 REGIONS FINANCIAL CORP .......................... 422 3,025 REINSURANCE GROUP OF AMERICA, INC ............... 107 6,294 REPUBLIC BANCORP, INC ........................... 68 1,300 REPUBLIC SECURITY FINANCIAL CORP ................ 9 5,100 RFS HOTEL INVESTORS, INC ........................ 67 2,100 RICHMOND COUNTY FINANCIAL CORP .................. 55 1,500 RIGGS NATIONAL CORP ............................. 21 600 RLI CORP ........................................ 27 5,600 ROSLYN BANCORP, INC ............................. 153 900 S & T BANCORP, INC .............................. 19 8,600 SAFECO CORP ..................................... 283 800 SANDY SPRING BANCORP, INC ....................... 18
See notes to financial statements. B-31 71
SHARES VALUE (000) - ------ ---------- FINANCIAL SERVICES--(CONTINUED) 82,052 SCHWAB (CHARLES) CORP ........................... $ 2,328 2,100 SCPIE HOLDINGS, INC ............................. 50 2,200 * SECURITY CAPITAL GROUP, INC (CLASS B) ........... 44 3,500 SEI INVESTMENTS CO .............................. 392 4,200 SELECTIVE INSURANCE GROUP, INC .................. 102 450 SENIOR HOUSING PROPERTIES TRUST ................. 4 5,300 * SILICON VALLEY BANCSHARES ....................... 183 8,000 SIMON PROPERTY GROUP, INC ....................... 192 10,397 SKY FINANCIAL GROUP, INC ........................ 174 1,600 SL GREEN REALTY CORP ............................ 45 2,000 SOUTH FINANCIAL GROUP, INC ...................... 27 11,450 SOUTHTRUST CORP ................................. 466 1,500 * SOUTHWEST BANCORP OF TEXAS, INC ................. 64 1,309 SOUTHWEST SECURITIES GROUP, INC ................. 34 10,260 SOVEREIGN BANCORP, INC .......................... 83 1,400 SOVRAN SELF STORAGE, INC ........................ 28 4,500 SPIEKER PROPERTIES, INC ......................... 226 17,922 ST. PAUL COS, INC ............................... 973 2,400 STANCORP FINANCIAL GROUP, INC ................... 115 13,293 STARWOOD HOTELS & RESORTS WORLDWIDE, INC ........ 469 2,200 STATE AUTO FINANCIAL CORP ....................... 39 12,100 STATE STREET CORP ............................... 1,503 4,100 STATEN ISLAND BANCORP, INC ...................... 88 1,300 STERLING BANCSHARES, INC ........................ 26 25 STERLING FINANCIAL CORP ......................... 0 2,000 * STEWART INFORMATION SERVICES CORP ............... 44 16,100 STILWELL FINANCIAL, INC ......................... 635 2,700 STORAGE U.S.A., INC ............................. 86 15,867 SUMMIT BANCORP .................................. 606 765 SUMMIT PROPERTIES, INC .......................... 20 1,000 SUN COMMUNITIES, INC ............................ 34 1,500 b * SUNTERRA CORP ................................... 0 20,962 SUNTRUST BANKS, INC ............................. 1,321 6,350 SUSQUEHANNA BANCSHARES, INC ..................... 105 18,200 SYNOVUS FINANCIAL CORP .......................... 490 4,700 * SYNTROLEUM CORP ................................. 80 8,100 T ROWE PRICE GROUP, INC ......................... 342 2,400 TAUBMAN CENTERS, INC ............................ 26 5,000 TCF FINANCIAL CORP .............................. 223 2,000 * TD WATERHOUSE GROUP ............................. 27 2,750 TEXAS REGIONAL BANCSHARES, INC (CLASS A) ........ 89 13,600 THE GOLDMAN SACHS GROUP, INC .................... 1,454 10,600 TORCHMARK CORP .................................. 407 2,500 TOWN & COUNTRY TRUST ............................ 48 1,200 * TRAMMELL CROW CO ................................ 16 700 TRANSATLANTIC HOLDINGS, INC ..................... 74 3,800 * TRIAD GUARANTY, INC ............................. 126 2,400 TRUST CO OF NEW JERSEY .......................... 30 2,050 TRUSTCO BANK CORP (NEW YORK) .................... 25 7,600 TRUSTMARK CORP .................................. 160 1,200 TUCKER ANTHONY SUTRO CORP ....................... 29 56,436 U.S. BANCORP .................................... 1,647 2,100 * UICI ............................................ 12 2,750 UMB FINANCIAL CORP .............................. 103 12,350 UNION PLANTERS CORP ............................. 442 4,469 UNIONBANCAL CORP ................................ 108 800 UNITED BANKSHARES, INC .......................... 17 2,200 b * UNITED COS FINANCIAL CORP ....................... 0 11,126 UNITED DOMINION REALTY TRUST, INC ............... 120 4,070 * UNITED RENTALS, INC ............................. 55 6,000 * UNITEDGLOBALCOM, INC (CLASS A) .................. 82 2,400 UNITRIN, INC .................................... 98 14,793 UNUMPROVIDENT CORP .............................. 398 13,750 USA EDUCATION, INC .............................. 935 800 VALHI, INC ...................................... 9 6,868 VALLEY NATIONAL BANCORP ......................... 229 4,800 VORNADO REALTY TRUST ............................ 184 900 W HOLDING CO, INC ............................... 10 16,936 WACHOVIA CORP ................................... 984 6,400 WADDELL & REED FINANCIAL, INC (CLASS A) ......... 241 85 WADDELL & REED FINANCIAL, INC (CLASS B) ......... 3 8,942 WASHINGTON FEDERAL, INC ......................... 254 43,022 WASHINGTON MUTUAL, INC .......................... $ 2,283 5,600 WASHINGTON REAL ESTATE INVESTMENT TRUST ......... 132 20 * WAYPOINT FINANCIAL CORP ......................... 0 5,100 WEBSTER FINANCIAL CORP .......................... 144 3,400 WEINGARTEN REALTY INVESTORS, INC ................ 149 133,432 WELLS FARGO CO .................................. 7,430 1,000 WESBANCO, INC ................................... 24 220 WESCO FINANCIAL CORP ............................ 62 34 WEST COAST BANCORP (OREGON) ..................... 0 1,300 WESTAMERICA BANCORP ............................. 56 2,100 WESTFIELD AMERICA, INC .......................... 30 1,400 WHITNEY HOLDINGS CORP ........................... 51 1,400 WILMINGTON TRUST CORP ........................... 87 5,600 * WIT SOUNDVIEW GROUP, INC ........................ 20 9,771 * WYNDHAM INTERNATIONAL, INC (CLASS A) ............ 17 700 ZENITH NATIONAL INSURANCE CORP .................. 21 7,900 ZIONS BANCORP ................................... 493 ------- TOTAL FINANCIAL SERVICES ........................ 180,850 ------- HEALTH CARE--15.22% 118,310 ABBOTT LABORATORIES CO .......................... 5,731 5,800 * ABGENIX, INC .................................... 343 600 * ABIOMED, INC .................................... 15 700 * ACCREDO HEALTH, INC ............................. 35 700 * ACLARA BIOSCIENCES, INC ......................... 8 1,800 * ADVANCE PCS ..................................... 82 3,400 * ADVANCED TISSUE SCIENCES, INC ................... 10 9,085 AETNA, INC (NEW) ................................ 373 3,200 * AFFYMETRIX, INC ................................. 238 1,200 * ALBANY MOLECULAR RESEARCH, INC .................. 74 900 * ALEXION PHARMACEUTICALS, INC .................... 58 5,900 * ALKERMES, INC ................................... 185 95 * ALLERGAN SPECIALTY THERAPEUTICS, INC (CLASS A) .. 3 9,400 ALLERGAN, INC ................................... 910 3,500 * ALLIANCE PHARMACEUTICAL CORP .................... 30 1,000 * ALLSCRIPTS, INC ................................. 9 700 ALPHARMA, INC (CLASS A) ......................... 31 13,300 * ALZA CORP ....................................... 565 100,800 AMERICAN HOME PRODUCTS CORP ..................... 6,406 1,800 * AMERICAN HOMEPATIENT, INC ....................... 0 2,600 * AMERIPATH, INC .................................. 65 3,000 * AMERISOURCE HEALTH CORP (CLASS A) ............... 152 78,680 * AMGEN, INC ...................................... 5,031 4,200 * AMYLIN PHARMACEUTICALS, INC ..................... 33 2,600 * ANDRX CORP ...................................... 150 1,000 * APHTON CORP ..................................... 18 11,500 * APOGENT TECHNOLOGIES, INC ....................... 236 16,000 APPLERA CORP (APPLIED BIOSYSTEMS GROUP) ......... 1,505 5,500 * APPLERA CORP (CELERA GENOMICS GROUP) ............ 198 4,300 * APRIA HEALTHCARE GROUP, INC ..................... 128 1,300 * ARADIGM CORP .................................... 19 1,700 * ARIAD PHARMACEUTICAL, INC ....................... 8 800 ARROW INTERNATIONAL, INC ........................ 30 3,400 * ARTHROCARE CORP ................................. 66 900 * ATS MEDICAL, INC ................................ 13 1,400 * AURORA BIOSCIENCE CORP .......................... 44 3,700 * AVANT IMMUNOTHERAPEUTICS, INC ................... 25 1,000 * AVIGEN, INC ..................................... 21 2,000 * AVIRON, INC ..................................... 134 700 * BACOU U.S.A., INC ............................... 18 5,600 BARD (C.R.), INC ................................ 261 900 * BARR LABORATORIES, INC .......................... 66 5,600 BAUSCH & LOMB, INC .............................. 226 21,700 * BAXTER INTERNATIONAL, INC ....................... 1,916 2,800 BECKMAN COULTER, INC ............................ 117 18,100 BECTON DICKINSON & CO ........................... 627 11,025 BERGEN BRUNSWIG CORP (CLASS A) .................. 175 14,400 * BEVERLY ENTERPRISES, INC ........................ 118 3,450 BINDLEY WESTERN INDUSTRIES, INC ................. 143 900 * BIOCRYST PHARMACEUTICALS, INC ................... 6 11,300 * BIOGEN, INC ..................................... 679 11,050 BIOMET, INC ..................................... 439 1,100 * BIOPURE CORP .................................... 22 400 * BIO-RAD LABORATORIES, INC (CLASS A) ............. 13 1,000 * BIOSITE DIAGNOSTICS, INC ........................ 40 3,200 * BIO-TECHNOLOGY GENERAL CORP ..................... 23 23,900 * BOSTON SCIENTIFIC CORP .......................... 327
See notes to financial statements. B-32 72
SHARES VALUE (000) - ------ ---------- HEALTH CARE--(CONTINUED) 152,100 BRISTOL MYERS SQUIBB CO ......................... $ 11,246 300 * CALIPER TECHNOLOGIES CORP ....................... 14 20,864 CARDINAL HEALTH, INC ............................ 2,079 15,500 * CAREMARK RX, INC ................................ 210 2,500 * CELL GENESYS, INC ............................... 57 1,500 * CELL PATHWAYS, INC .............................. 7 3,300 * CELL THERAPEUTICS, INC .......................... 149 2,900 * CELSION CORP .................................... 3 4,428 * CEPHALON, INC ................................... 280 1,800 * CERNER CORP ..................................... 83 500 * CERUS CORP ...................................... 38 7,140 * CHIRON CORP ..................................... 318 12,400 CIGNA CORP ...................................... 1,641 50 * CLINTRIALS RESEARCH, INC ........................ 0 100 * CLOSURE MEDICAL CORP ............................ 4 1,800 * COHERENT, INC ................................... 59 400 * COLLATERAL THERAPEUTICS, INC .................... 7 1,100 * COLUMBIA LABORATORIES, INC ...................... 5 1,800 * CONMED CORP ..................................... 31 1,500 * CONNETICS CORP .................................. 7 1,800 COOPER COS, INC ................................. 72 5,500 * COR THERAPEUTICS, INC ........................... 194 2,703 * CORIXA CORP ..................................... 75 5,500 * COVANCE, INC .................................... 59 5,000 * COVENTRY HEALTH CARE, INC ....................... 133 600 * CRYOLIFE, INC ................................... 18 2,000 * CUBIST PHARMACEUTICALS, INC ..................... 58 2,800 * CURAGEN CORP .................................... 76 1,800 * CV THERAPEUTICS, INC ............................ 127 282 * CYBEAR GROUP, INC ............................... 0 3,400 * CYBER-CARE, INC ................................. 7 1,200 * CYBERONICS, INC ................................. 28 3,200 * CYGNUS, INC ..................................... 16 5,100 * CYTOGEN CORP .................................... 12 3,700 * CYTYC CORP ...................................... 231 800 DATASCOPE CORP .................................. 27 4,500 * DAVITA, INC ..................................... 77 2,700 * DENDRITE INTERNATIONAL, INC ..................... 60 5,100 DENTSPLY INTERNATIONAL, INC ..................... 200 700 DIAGNOSTIC PRODUCTS CORP ........................ 38 700 * DIGENE CORP ..................................... 31 500 * DIVERSA CORP .................................... 9 1,000 * DUSA PHARMACEUTICALS, INC ....................... 17 2,700 * ECLIPSYS CORP ................................... 66 8,640 * EDWARDS LIFESCIENCES CORP ....................... 153 4,500 * ELAN CORP CONTINGENT VALUE RIGHT ................ 4 1,000 * EMISPHERE TECHNOLOGIES, INC ..................... 25 900 * ENDO PHARMACEUTICALS, INC WTS 12/31/02 .......... 0 700 * ENDOCARE, INC ................................... 9 900 * ENTREMED, INC ................................... 16 1,700 * ENZO BIOCHEM, INC ............................... 42 3,200 * ENZON, INC ...................................... 199 600 * EXELIXIS, INC ................................... 9 1,300 * EXPRESS SCRIPTS, INC ............................ 133 2,400 * FIRST HEALTH GROUP CORP ......................... 112 3,000 * FISHER SCIENTIFIC INTERNATIONAL, INC ............ 111 6,300 * FOREST LABORATORIES, INC ........................ 837 1,400 b * FPA MEDICAL MANAGEMENT, INC ..................... 0 1,900 * GENE LOGIC, INC ................................. 35 17,600 * GENENTECH, INC .................................. 1,434 1,500 * GENOME THERAPEUTICS CORP ........................ 10 338 * GENZYME CORP (BIOSURGERY DIVISION) .............. 3 6,943 * GENZYME CORP (GENERAL DIVISION) ................. 624 86 * GENZYME-MOLECULAR ONCOLOGY ...................... 1 1,600 * GERON CORP ...................................... 25 3,802 * GILEAD SCIENCES, INC ............................ 315 1,700 * GLIATECH, INC ................................... 7 24,465 * GUIDANT CORP .................................... 1,320 200 * GUILFORD PHARMACEUTICALS, INC ................... 4 900 * HAEMONETICS CORP ................................ 28 39,438 HCA-THE HEALTHCARE CO ........................... 1,736 17,200 * HEALTH MANAGEMENT ASSOCIATES, INC (CLASS A) NEW ................. 357 6,400 * HEALTH NET, INC ................................. 168 34,060 * HEALTHSOUTH CORP ................................ $ 556 2,100 HILLENBRAND INDUSTRIES, INC ..................... 108 8,900 * HUMAN GENOME SCIENCES, INC ...................... 617 12,100 * HUMANA, INC ..................................... 185 700 * HYSEQ, INC ...................................... 10 3,100 * ICOS CORP ....................................... 161 2,400 * IDEC PHARMACEUTICALS CORP ....................... 455 2,400 * IDEXX LABORATORIES, INC ......................... 53 300 * IDX SYSTEMS CORP ................................ 8 900 * IGEN INTERNATIONAL, INC ......................... 11 1,900 * ILEX ONCOLOGY, INC .............................. 50 200 * IMATRON, INC .................................... 0 4,400 * IMCLONE SYSTEMS, INC ............................ 194 17,500 * IMMUNEX CORP .................................... 711 2,500 * IMMUNOGEN, INC .................................. 54 2,400 * IMMUNOMEDICS, INC ............................... 52 900 * IMPATH, INC ..................................... 60 20,900 IMS HEALTH, INC ................................. 564 900 * INAMED CORP ..................................... 18 4,000 * INCYTE GENOMICS, INC ............................ 100 2,200 * INHALE THERAPEUTIC SYSTEMS, INC ................. 111 77 b * INTEGRATED HEALTH SERVICES, INC ................. 0 5,200 * INTEGRATED SILICON SOLUTION, INC ................ 75 100 * INTERMUNE PHARMACEUTICALS, INC .................. 4 200 * INTERNEURON PHARMACEUTICALS, INC ................ 0 500 * INTRABIOTICS PHARMACEUTICALS, INC ............... 5 1,600 INVACARE CORP ................................... 55 2,400 * INVITROGEN CORP ................................. 207 7,100 * ISIS PHARMACEUTICALS, INC ....................... 75 1,200 * I-STAT CORP ..................................... 32 12,800 * IVAX CORP ....................................... 490 106,760 JOHNSON & JOHNSON CO ............................ 11,216 10,522 * KING PHARMACEUTICALS, INC ....................... 544 300 * KOS PHARMACEUTICALS, INC ........................ 5 2,700 * KV PHARMACEUTICAL CO (CLASS B) .................. 65 1,840 * LABORATORY CORP OF AMERICA HOLDINGS ............. 324 63 * LCA-VISION, INC ................................. 0 2,728 * LIFEPOINT HOSPITALS, INC ........................ 137 3,600 * LIGAND PHARMACEUTICALS CO (CLASS A) ............. 50 72,692 LILLY (ELI) & CO ................................ 6,765 4,400 * LINCARE HOLDINGS, INC ........................... 251 300 * LUMINEX CORP .................................... 8 700 * LYNX THERAPEUTICS, INC .......................... 6 5,500 * MANOR CARE, INC ................................. 113 4,900 b * MARINER POST-ACUTE NETWORK, INC ................. 0 1,800 * MATRIX PHARMACEUTICALS, INC ..................... 31 1,500 * MAXIM PHARMACEUTICALS, INC ...................... 10 1,400 * MAXIMUS, INC .................................... 49 500 * MAXYGEN, INC .................................... 12 23,997 MCKESSON HBOC, INC .............................. 861 5,600 * MEDAREX, INC .................................... 228 2,950 * MEDICIS PHARMACEUTICAL CORP (CLASS A) ........... 174 16,400 * MEDIMMUNE, INC .................................. 782 987 * MEDQUIST, INC ................................... 16 91,950 MEDTRONIC, INC .................................. 5,551 1,100 MENTOR CORP ..................................... 21 177,500 MERCK & CO, INC ................................. 16,618 1,200 * MGI PHARMA, INC ................................. 20 3,300 * MID ATLANTIC MEDICAL SERVICES, INC .............. 65 14,100 * MILLENNIUM PHARMACEUTICALS, INC ................. 872 4,800 MILLIPORE CORP .................................. 302 3,900 * MINIMED, INC .................................... 164 1,000 * MIRAVANT MEDICAL TECHNOLOGIES ................... 9 800 * MOLECULAR DEVICES CORP .......................... 55 952 MORRISON MANAGEMENT SPECIALISTS, INC ............ 33 8,300 MYLAN LABORATORIES, INC ......................... 209 1,300 * MYRIAD GENETICS, INC ............................ 108 200 * NAHC, INC ....................................... 0 1,000 * NANOGEN, INC .................................... 9 1,000 * NEOPROBE CORP ................................... 0 1,600 * NEORX CORP ...................................... 8 500 * NEOSE TECHNOLOGIES, INC ......................... 17 1,500 * NEUROCRINE BIOSCIENCES, INC ..................... 50 2,000 * NEUROGEN CORP ................................... 70 17,000 b * NEUROMEDICAL SYSTEMS, INC ....................... 2
See notes to financial statements. B-33 73
SHARES VALUE (000) - ------ ---------- HEALTH CARE--(CONTINUED) 1,400 * NOVEN PHARMACEUTICALS, INC ...................... $ 52 1,400 * NOVOSTE CORP .................................... 39 1,500 * NPS PHARMACEUTICALS, INC ........................ 72 1,600 * OCULAR SCIENCES, INC ............................ 19 25 * OMEGA WORLDWIDE, INC ............................ 0 5,000 OMNICARE, INC ................................... 108 1,400 * ON ASSIGNMENT, INC .............................. 40 300 * ORATEC INTERVENTIONS, INC ....................... 2 400 * ORCHID BIOSCIENCES, INC ......................... 6 4,225 * ORGANOGENESIS, INC .............................. 38 2,600 * ORTHODONTIC CENTERS OF AMERICA, INC ............. 81 2,000 * OSI PHARMACEUTICALS, INC ........................ 160 3,400 OWENS & MINOR, INC .............................. 60 7,000 * OXFORD HEALTH PLANS, INC ........................ 277 2,900 * PACIFICARE HEALTH SYSTEMS, INC (CLASS A) ........ 44 900 * PACKARD BIOSCIENCE CO ........................... 10 6,900 PALL CORP ....................................... 147 4,500 * PATTERSON DENTAL CO ............................. 152 1,466 * PER SE TECHNOLOGIES, INC ........................ 5 4,800 * PEREGRINE PHARMACEUTICALS, INC .................. 5 486,649 PFIZER, INC ..................................... 22,386 700 * PHARMACEUTICAL PRODUCT DEVELOPMENT, INC ......... 35 98,708 PHARMACIA CORP .................................. 6,021 1,500 * PHARMACOPEIA, INC ............................... 33 1,100 * PHARMACYCLICS, INC .............................. 38 4,200 * PHYCOR, INC ..................................... 0 6,600 b * PHYSICIANS RESOURCE GROUP, INC .................. 0 700 * POLYMEDIA CORP .................................. 23 600 * PRAECIS PHARMACEUTICALS, INC .................... 18 84 * PRIORITY HEALTHCARE CORP (CLASS A) .............. 3 2,300 * PRIORITY HEALTHCARE CORP (CLASS B) .............. 94 6,300 * PROCURENET, INC ................................. 1 300 * PROFESSIONAL DETAILING, INC ..................... 32 3,100 * PROTEIN DESIGN LABORATORIES, INC ................ 269 2,100 * PROVINCE HEALTHCARE CO .......................... 83 3,000 * PSS WORLD MEDICAL, INC .......................... 15 2,862 * QUEST DIAGNOSTICS, INC .......................... 406 7,897 * QUINTILES TRANSNATIONAL CORP .................... 165 15,250 * QUORUM HEALTH GROUP, INC ........................ 240 1,700 * REGENERON PHARMACEUTICALS, INC .................. 60 900 * REHABCARE GROUP, INC ............................ 46 2,250 * RENAL CARE GROUP, INC ........................... 62 3,400 * RESMED, INC ..................................... 136 2,000 * RESPIRONICS, INC ................................ 57 600 * RIBOZYME PHARMACEUTICALS, INC ................... 9 1,000 * SANGSTAT MEDICAL CORP ........................... 12 3,600 * SCHEIN (HENRY), INC ............................. 125 113,800 SCHERING-PLOUGH CORP ............................ 6,458 5,000 * SEPRACOR, INC ................................... 401 300 * SEQUENOM, INC ................................... 4 17,400 * SERVICE CORP INTERNATIONAL ...................... 30 74 * SHIRE PHARMACEUTICALS GROUP PLC ADR ............. 3 7,500 * SICOR, INC ...................................... 108 533 * SONOSITE, INC ................................... 7 5,688 * ST. JUDE MEDICAL, INC ........................... 349 300 * STAAR SURGICAL CO ............................... 4 1,200 * STERICYCLE, INC ................................. 46 4,900 * STERIS CORP ..................................... 79 3,800 STEWART ENTERPRISES, INC (CLASS A) .............. 7 11,700 * STRYKER CORP .................................... 592 1,700 b * SUN HEALTHCARE GROUP, INC ....................... 0 6,400 * SUNRISE TECHNOLOGIES INTERNATIONAL, INC ......... 11 1,900 * SUPERGEN, INC ................................... 26 400 * SURMODICS, INC .................................. 15 4,166 * SYBRON DENTAL SPECIALTIES, INC .................. 70 5 * SYNAVANT, INC ................................... 0 3,400 * SYNCOR INTERNATIONAL CORP ....................... 124 2,000 * TARGETED GENETICS CORP .......................... 13 22,825 TENET HEALTHCARE CORP ........................... 1,014 3,100 * TEXAS BIOTECHNOLOGY CORP ........................ 27 1,400 * THERAGENICS CORP ................................ 7 300 * THERMO CARDIOSYSTEMS, INC ....................... 3 2,600 * TITAN PHARMACEUTICALS, INC ...................... $ 92 2,100 * TRANSKARYOTIC THERAPIES, INC .................... 77 2,728 * TRIAD HOSPITALS, INC ............................ 89 3,700 * TRIANGLE PHARMACEUTICALS, INC ................... 18 2,300 * TRIGON HEALTHCARE, INC .......................... 179 1,600 * TRIMERIS, INC ................................... 88 800 * TULARIK, INC .................................... 24 1,400 * TWINLAB CORP .................................... 2 1,900 * UNITED THERAPEUTICS CORP ........................ 28 26,400 UNITEDHEALTH GROUP, INC ......................... 1,620 2,600 * UNIVERSAL HEALTH SERVICES, INC (CLASS B) ........ 291 4,580 * US ONCOLOGY, INC ................................ 29 1,900 * VARIAN MEDICAL SYSTEMS, INC ..................... 129 2,300 * VARIAN, INC ..................................... 78 600 * VAXGEN, INC ..................................... 12 1,000 * VENTANA MEDICAL SYSTEMS, INC .................... 19 841 VENTAS, INC ..................................... 5 1,733 * VENTIV HEALTH, INC .............................. 22 5,400 * VERTEX PHARMACEUTICALS, INC ..................... 386 1,800 * VICAL, INC ...................................... 33 5,400 * VISX, INC ....................................... 56 9,500 * WATERS CORP ..................................... 793 8,164 * WATSON PHARMACEUTICALS, INC ..................... 418 19,236 * WEBMD CORP ...................................... 153 4,200 * WELLPOINT HEALTH NETWORKS, INC .................. 484 600 * ZOLL MEDICAL CORP ............................... 21 ------- TOTAL HEALTH CARE ............................... 150,865 ------- OTHER--1.45% 2,000 * 4 KIDS ENTERTAINMENT, INC ....................... 18 1,000 ABM INDUSTRIES, INC ............................. 31 900 * ACACIA RESEARCH CORP ............................ 16 1,400 * ADMINSTAFF, INC ................................. 38 2,400 * ADVO, INC ....................................... 107 900 ALEXANDER & BALDWIN, INC ........................ 24 1,400 BANTA CORP ...................................... 36 2,300 * BELL & HOWELL CO ................................ 38 8,800 BLOCK (H&R), INC ................................ 364 1,200 BRADY CORP (CLASS A) ............................ 41 1,700 * BRIGHT HORIZONS FAMILY SOLUTIONS, INC ........... 44 1,400 * CAREER EDUCATION CORP ........................... 55 1,500 * CDI CORP ........................................ 22 54,347 * CENDANT CORP .................................... 523 850 CENTRAL PARKING CORP ............................ 17 5,500 * CENTURY BUSINESS SERVICES, INC .................. 6 8,050 CINTAS CORP ..................................... 428 200 * CORINTHIAN COLLEGES, INC ........................ 8 1,400 * CORPORATE EXECUTIVE BOARD CO .................... 56 1,200 * COSTAR GROUP, INC ............................... 28 5,600 CRANE CO ........................................ 159 5,800 * DEVRY, INC ...................................... 219 14,200 DOVER CORP ...................................... 576 5,250 * DUN & BRADSTREET CORP (NEW) ..................... 136 1,000 * EDISON SCHOOLS, INC ............................. 32 3,000 * EDUCATION MANAGEMENT CORP ....................... 107 2,700 * FIRST CONSULTING GROUP, INC ..................... 13 5,000 FIRST INDUSTRIAL REALTY TRUST, INC .............. 170 800 * FORRESTER RESEARCH, INC ......................... 40 14,300 FORTUNE BRANDS, INC ............................. 429 1,600 * FRITZ COS, INC .................................. 10 25 * GENTIVA HEALTH SERVICES, INC .................... 0 2,400 * GETTY IMAGES, INC ............................... 77 4,900 * GTECH HOLDINGS CORP ............................. 101 600 * HALL KINION & ASSOCIATES, INC ................... 12 2,500 * HA-LO INDUSTRIES, INC ........................... 6 2,200 HARLAND (JOHN H.) CO ............................ 31 55 * HAVAS ADVERTISING S.A. ADR ...................... 1 1,400 * HEIDRICK & STRUGGLES INTERNATIONAL,INC .......... 59 63,487 HONEYWELL INTERNATIONAL, INC .................... 3,004 400 * HOTEL RESERVATIONS NETWORK, INC (CLASS A) ....... 11 1,200 * HOTJOBS.COM LTD ................................. 14 100 * INDUSTRI-MATEMATIK INTERNATIONAL CORP ........... 0 3,500 * INFOUSA, INC .................................... 12 8,100 ITT INDUSTRIES, INC ............................. 314 3,100 JOHNS MANVILLE CORP ............................. 40 2,900 KELLY SERVICES, INC (CLASS A) ................... 69 2,700 * KORN FERRY INTERNATIONAL ........................ 57 3,750 * LABOR READY, INC ................................ 12 2,800 LIBERTY PROPERTY TRUST CO ....................... 80
See notes to financial statements. B-34 74
SHARES VALUE (000) - ------ ---------- OTHER--(CONTINUED) 2,500 * LITTON INDUSTRIES, INC .......................... $ 197 5,800 LOEWS CORP ...................................... 601 400 * MANAGEMENT NETWORK GROUP, INC ................... 5 5,800 MANPOWER, INC ................................... 220 200 MATTHEWS INTERNATIONAL CORP (CLASS A) ........... 6 700 MCGRATH RENTCORP ................................ 14 1,300 * MEMBERWORKS, INC ................................ 28 13,600 * METROMEDIA INTERNATIONAL GROUP, INC ............. 35 1,000 * MODEM MEDIA, INC ................................ 3 7,283 * MODIS PROFESSIONAL SERVICES, INC ................ 30 10,600 MOODYS CORP ..................................... 272 3,100 NATIONAL SERVICE INDUSTRIES, INC ................ 80 2,500 * NAVIGANT CONSULTING CO .......................... 10 4,100 * NCO GROUP, INC .................................. 125 3,700 * OFFSHORE LOGISTICS, INC ......................... 80 97 * PFSWEB, INC ..................................... 0 5,181 PITTSTON CO ..................................... 103 2,100 * PREPAID LEGAL SERVICES, INC ..................... 54 800 * PROSOFTTRAINING.COM ............................. 10 360 * R.H. DONNELLEY CORP ............................. 9 2,900 * RENT WAY, INC ................................... 13 12,100 * ROBERT HALF INTERNATIONAL, INC .................. 321 3,100 ROLLINS, INC .................................... 62 3,778 * SCHOOL SPECIALTY, INC ........................... 76 23,300 SERVICEMASTER CO ................................ 268 600 * SOURCE INFORMATION MANAGEMENT CO ................ 2 2,500 * SPHERION CORP ................................... 28 100 STANDARD REGISTER, INC .......................... 1 1,600 STANDEX INTERNATIONAL CORP ...................... 33 1,000 * SYMYX TECHNOLOGIES, INC ......................... 36 1,300 * TEJON RANCH CO .................................. 25 1,300 * TEJON RANCH CO RTS 01/08/01 ..................... 0 1,900 * TELETECH HOLDINGS, INC .......................... 35 9,400 * TERREMARK WORLDWIDE, INC ........................ 7 10,800 TEXTRON, INC .................................... 502 5,500 * TMP WORLDWIDE, INC .............................. 303 2,400 * TRAVELOCITY.COM, INC ............................ 29 11,850 U.S. INDUSTRIES, INC ............................ 95 600 * U.S. LEC CORP (CLASS A) ......................... 3 3,400 * UNITED STATIONERS, INC .......................... 82 33,029 UNITED TECHNOLOGIES CORP ........................ 2,597 2,900 VALSPAR CORP .................................... 93 5,900 VIAD CORP ....................................... 136 1,000 * WACKENHUT CORP (CLASS A) ........................ 14 2,300 WALTER INDUSTRIES, INC .......................... 17 4,400 * WORLD ACCESS, INC ............................... 11 ------ TOTAL OTHER ..................................... 14,362 ------ PRODUCER DURABLES--5.83% 3,400 ACTUANT CORP .................................... 10 1,000 * ADVANCED LIGHTING TECHNOLOGIES, INC ............. 7 5,200 AGCO CORP ....................................... 63 13,200 * ALLIED WASTE INDUSTRIES, INC .................... 192 5,499 AMERICAN WATER WORKS CO, INC .................... 162 3,000 AMETEK, INC ..................................... 78 800 APPLIED INDUSTRIAL TECHNOLOGIES, INC ............ 16 2,200 * ASTEC INDUSTRIES, INC ........................... 29 2,000 * AZURIX CORP ..................................... 16 1,800 BALDOR ELECTRIC CO .............................. 38 3,400 BELDEN, INC ..................................... 86 1,700 BRIGGS & STRATTON CORP .......................... 75 2,000 * BROOKS AUTOMATION, INC .......................... 56 700 CALIFORNIA WATER SERVICE GROUP .................. 19 1,100 * CASELLA WASTE SYSTEMS, INC (CLASS A) ............ 10 94 * CATAYTICA ENERGY SYSTEMS ........................ 2 27,000 CATERPILLAR, INC ................................ 1,277 3,600 * COGNEX CORP ..................................... 80 1,400 * COINSTAR, INC ................................... 21 1,000 COLUMBUS MCKINNON CORP .......................... 9 537 CONECTIV, INC (CLASS A) ......................... 7 8,300 COOPER INDUSTRIES, INC .......................... 381 225 * COORSTEK, INC ................................... 7 1,400 CUMMINS ENGINE CO, INC .......................... 53 19,700 DEERE & CO ...................................... 903 3,750 * DYCOM INDUSTRIES, INC ........................... $ 135 4,400 EATON CORP ...................................... 331 32,100 EMERSON ELECTRIC CO ............................. 2,530 2,100 FEDERAL SIGNAL CORP ............................. 41 5,900 * FLOWSERVE CORP .................................. 126 500 * FUELCELL ENERGY, INC ............................ 34 2,400 * GARDNER DENVER, INC ............................. 51 5,100 GATX CORP ....................................... 254 2,100 GENERAL CABLE CORP .............................. 9 765,506 GENERAL ELECTRIC CO ............................. 36,696 7,800 GRAINGER (W.W.), INC ............................ 285 25,000 HARLEY DAVIDSON, INC ............................ 994 2,200 b *HARNISCHFEGER INDUSTRIES, INC ................... 0 4,000 HARSCO CORP ..................................... 99 3,100 HUBBELL, INC (CLASS B) .......................... 82 600 * IBIS TECHNOLOGY CORP ............................ 12 2,050 IDEX CORP ....................................... 68 20,188 ILLINOIS TOOL WORKS, INC ........................ 1,202 9,950 INGERSOLL-RAND CO ............................... 417 400 * IONICS, INC ..................................... 11 4,900 JLG INDUSTRIES, INC ............................. 52 400 KAYDON CORP ..................................... 10 3,749 KENNAMETAL, INC ................................. 109 1,000 LAWSON PRODUCTS, INC ............................ 27 6,200 LINCOLN ELECTRIC HOLDINGS CO .................... 122 400 LINDSAY MANUFACTURING CO ........................ 9 4,100 * LITTELFUSE, INC ................................. 117 1,200 * MAGNETEK, INC ................................... 16 1,875 MANITOWOC CO, INC ............................... 54 1,500 * MECHANICAL TECHNOLOGY, INC ...................... 5 2,300 MILACRON, INC ................................... 37 600 MINE SAFETY APPLIANCE CO ........................ 15 31,100 MINNESOTA MINING & MANUFACTURING CO ............. 3,748 6,100 b * MOLTEN METAL TECHNOLOGY, INC .................... 0 500 NACCO INDUSTRIES, INC (CLASS A) ................. 22 2,475 * NATIONAL INSTRUMENTS CORP ....................... 120 2,800 * NAVISTAR INTERNATIONAL CORP ..................... 73 2,600 * NEWPARK RESOURCES, INC .......................... 25 1,800 NEWPORT NEWS SHIPBUILDING, INC .................. 94 2,000 NORDSON CORP .................................... 51 2,300 * OGDEN CORP ...................................... 35 4,800 PACCAR, INC ..................................... 236 10,500 PARKER-HANNIFIN CORP ............................ 463 3,267 PHILADELPHIA SUBURBAN CORP ...................... 80 900 * PHOTON DYNAMICS, INC ............................ 20 21,900 PITNEY BOWES, INC ............................... 725 3,700 * POWER-ONE, INC .................................. 145 1,000 PRIMEX TECHNOLOGIES, INC ........................ 32 3,250 * QUANTA SERVICES, INC ............................ 105 1,900 * RAYOVAC CORP .................................... 27 2,100 REGAL-BELOIT CORP ............................... 36 10,900 * REPUBLIC SERVICES, INC (CLASS A) ................ 187 600 ROBBINS & MYERS, INC ............................ 14 10,600 ROCKWELL INTERNATIONAL CORP ..................... 505 7,750 ROLLINS TRUCK LEASING CORP ...................... 62 3,400 ROPER INDUSTRIES, INC ........................... 112 4,600 b * SAFETY-KLEEN CORP ............................... 0 1,500 SAUER-DANFOSS, INC .............................. 14 300 * SEQUA CORP (CLASS A) ............................ 11 300 SJW CORP ........................................ 31 1,300 * SPS TECHNOLOGIES, INC ........................... 71 2,600 STEWART & STEVENSON SERVICES, INC ............... 59 2,700 * SUPERCONDUCTOR TECHNOLOGIES, INC ................ 10 3,100 TECUMSEH PRODUCTS CO (CLASS A) .................. 130 2,900 TELEFLEX, INC ................................... 128 1,600 TENNANT CO ...................................... 77 2,500 * TEREX CORP ...................................... 40 3,193 * TETRA TECH, INC ................................. 102 22,669 * THERMO ELECTRON CORP ............................ 674 900 * THERMO FIBERTEK, INC ............................ 3 4,599 THOMAS & BETTS CORP ............................. 74 5,429 TIMKEN CO ....................................... 82 700 TORO CO ......................................... 26 3,500 TRINITY INDUSTRIES, INC ......................... 88 1,300 * UNOVA, INC ...................................... 5 3,500 * VALENCE TECHNOLOGY, INC ......................... 33
See notes to financial statements. B-35 75
SHARES VALUE (000) - ------ ---------- PRODUCER DURABLES--(CONTINUED) 1,000 VALMONT INDUSTRIES, INC ......................... $ 18 5,101 WABTEC CORP ..................................... 60 1,500 * WASTE CONNECTIONS, INC .......................... 50 47,834 WASTE MANAGEMENT, INC ........................... 1,327 45,000 XEROX CORP ...................................... 208 ------- TOTAL PRODUCER DURABLES ......................... 57,785 ------- TECHNOLOGY--22.40% 3,000 * 24/7 MEDIA, INC ................................. 2 26,642 * 3COM CORP ....................................... 226 900 * ABOUT.COM, INC .................................. 24 1,600 * ACCRUE SOFTWARE, INC ............................ 4 800 * ACT MANUFACTURING, INC .......................... 13 700 * ACTEL CORP ...................................... 17 80 * ACTERNA CORP .................................... 1 4,200 * ACTUATE CORP .................................... 80 6,760 * ACXIOM CORP ..................................... 263 5,600 * ADAPTEC, INC .................................... 57 900 * ADAPTIVE BROADBAND CORP ......................... 6 57,810 * ADC TELECOMMUNICATIONS, INC ..................... 1,048 600 * ADEPT TECHNOLOGY, INC ........................... 9 17,900 ADOBE SYSTEMS, INC .............................. 1,042 1,100 * ADTRAN, INC ..................................... 23 3,000 * ADVANCED DIGITAL INFORMATION CORP ............... 69 1,100 * ADVANCED ENERGY INDUSTRIES, INC ................. 25 6,000 * ADVANCED FIBRE COMMUNICATIONS, INC .............. 108 22,300 * ADVANCED MICRO DEVICES, INC ..................... 308 2,100 * ADVENT SOFTWARE, INC ............................ 84 4,000 * AEROFLEX, INC ................................... 115 2,100 * AETHER SYSTEMS, INC ............................. 82 3,500 * AFFILIATED COMPUTER SERVICES, INC (CLASS A) ..... 212 1,800 * AGILE SOFTWARE CORP ............................. 89 36,316 * AGILENT TECHNOLOGIES, INC ....................... 1,988 600 * AIRGATE PCS, INC ................................ 21 400 * AIRNET COMMUNICATION CORP ....................... 3 3,036 * AKAMAI TECHNOLOGIES, INC ........................ 64 1,500 * ALLAIRE CORP .................................... 8 2,100 * ALLEN TELECOM, INC .............................. 38 5,000 * ALLIANCE SEMICONDUCTOR CORP ..................... 57 3,900 * ALLIED RISER COMMUNICATION CORP ................. 8 2,300 * ALPHA INDUSTRIES, INC ........................... 85 29,700 * ALTERA CORP ..................................... 781 40 * AMDOCS LTD ...................................... 3 180,222 * AMERICA ONLINE, INC ............................. 6,272 4,350 * AMERICAN MANAGEMENT SYSTEMS, INC ................ 86 5,000 b * AMERICAN PAD & PAPER CO ......................... 0 12,100 * AMERICAN POWER CONVERSION CORP .................. 150 2,000 * AMERICAN SUPERCONDUCTOR CORP .................... 57 4,200 * AMERICAN TELESOURCE INTERNATIONAL, INC .......... 2 10,300 * AMKOR TECHNOLOGY, INC ........................... 160 2,700 * AMPHENOL CORP (CLASS A) ......................... 106 2,400 * ANADIGICS, INC .................................. 39 28,400 * ANALOG DEVICES, INC ............................. 1,454 400 ANALOGIC CORP ................................... 18 3,300 ANALYSTS INTERNATIONAL CORP ..................... 13 1,800 * ANAREN MICROWAVE, INC ........................... 121 9,175 * ANDREW CORP ..................................... 200 4,000 * ANICOM, INC ..................................... 0 2,100 * ANIXTER INTERNATIONAL, INC ...................... 45 2,600 * ANSWERTHINK, INC ................................ 9 3,400 * ANTEC CORP ...................................... 27 1,700 * APAC CUSTOMER SERVICES, INC ..................... 6 23,000 * APPLE COMPUTER, INC ............................. 342 800 b * APPLIED MAGNETICS CORP .......................... 0 62,647 * APPLIED MATERIALS, INC .......................... 2,392 19,298 * APPLIED MICRO CIRCUITS CORP ..................... 1,448 900 * APPLIEDTHEORY CORP .............................. 2 4,587 * ARCH WIRELESS, INC .............................. 3 7,950 * ARCH WIRELESS, INC WTS 09/01/01 ................. 0 1,400 * AREMISSOFT CORP ................................. 60 12,700 * ARIBA, INC ...................................... $ 681 10,100 * ARROW ELECTRONICS, INC .......................... 289 4,000 * ART TECHNOLOGY GROUP, INC ....................... 122 1,500 * ARTESYN TECHNOLOGIES, INC ....................... 24 1,200 * ASIAINFO HOLDINGS, INC .......................... 11 1,500 * ASK JEEVES, INC ................................. 4 8,000 * ASPECT COMMUNICATIONS CORP ...................... 64 1,800 * ASPEN TECHNOLOGY, INC ........................... 60 5,600 * ASYST TECHNOLOGIES, INC ......................... 75 28,400 * ATMEL CORP ...................................... 330 2,600 * ATMI, INC ....................................... 51 3,900 AUTODESK, INC ................................... 105 49,195 AUTOMATIC DATA PROCESSING, INC .................. 3,115 700 * AVANEX CORP ..................................... 42 2,700 * AVANT CORP ...................................... 49 21,006 * AVAYA, INC ...................................... 217 8,800 AVERY DENNISON CORP ............................. 483 3,400 * AVID TECHNOLOGY, INC ............................ 62 10,650 AVNET, INC ...................................... 229 3,167 * AVOCENT CORP .................................... 86 2,200 * AVT CORP ........................................ 11 7,300 AVX CORP ........................................ 120 2,300 * AWARE, INC ...................................... 41 1,000 * AXT, INC ........................................ 33 20 * AZTEC TECHNOLOGY PARTNERS, INC .................. 0 1,200 * BARRA, INC ...................................... 57 29,000 * BEA SYSTEMS, INC ................................ 1,952 300 BEL FUSE, INC (CLASS B) ......................... 10 700 * BENCHMARK ELECTRONICS, INC ...................... 16 3,200 * BINDVIEW DEVELOPMENT CORP ....................... 30 3,700 * BISYS GROUP, INC ................................ 193 900 * BLACK BOX CORP .................................. 43 900 * BLUESTONE SOFTWARE, INC ......................... 14 20,500 * BMC SOFTWARE, INC ............................... 287 600 * BOTTOMLINE TECHNOLOGIES, INC .................... 15 700 * BREAKAWAY SOLUTIONS, INC ........................ 1 4,150 * BRIGHTPOINT, INC ................................ 15 3,800 * BRIO TECHNOLOGY, INC ............................ 16 2,100 * BROADBASE SOFTWARE, INC ......................... 13 10,800 * BROADCOM CORP (CLASS A) ......................... 907 14,500 * BROADVISION, INC ................................ 171 16,800 * BROCADE COMMUNICATIONS SYSTEMS, INC ............. 1,542 900 * BROOKTROUT, INC ................................. 9 800 * BSQUARE CORP .................................... 5 1,300 C&D TECHNOLOGIES, INC ........................... 56 3,975 * CABLE DESIGN TECHNOLOGIES CO .................... 67 12,500 * CABLETRON SYSTEMS, INC .......................... 188 1,100 * CACHEFLOW, INC .................................. 19 21,600 * CADENCE DESIGN SYSTEMS, INC ..................... 594 2,000 * CAIS INTERNET, INC .............................. 2 1,000 * CALICO COMMERCE, INC ............................ 1 3,300 * CALIFORNIA AMPLIFIER, INC ....................... 31 2,900 * CAMBRIDGE TECHNOLOGY PARTNERS, INC .............. 8 400 * CARREKER CORP ................................... 14 2,000 * CARRIER ACCESS CORP ............................. 18 2,000 * C-COR.NET CORP .................................. 19 3,200 * C-CUBE MICROSYSTEMS, INC (NEW) .................. 39 600 * CELERITEL, INC .................................. 23 7,500 * CERIDIAN CORP ................................... 150 3,700 * CHECKFREE CORP .................................. 157 2,400 * CHECKPOINT SYSTEMS, INC ......................... 18 2,100 * CHOICE ONE COMMUNICATIONS, INC .................. 20 2,800 * CIBER, INC ...................................... 14 21,600 * CIENA CORP ...................................... 1,755 3,900 * CIRRUS LOGIC, INC ............................... 73 553,254 * CISCO SYSTEMS, INC .............................. 21,162 12,300 * CITRIX SYSTEMS, INC ............................. 277 1,413 * CLARENT CORP .................................... 16 1,000 * CLARUS CORP ..................................... 7 16,265 * CMGI, INC ....................................... 91 5,815 * CNET NETWORKS, INC .............................. 93 1,000 * COGNIZANT TECHNOLOGY SOLUTIONS CORP ............. 36 1,400 COHU, INC ....................................... 20 1,700 * COM21, INC ...................................... 8 14,700 * COMMERCE ONE, INC ............................... 372 1,900 * COMMSCOPE, INC .................................. 31 135,884 COMPAQ COMPUTER CORP ............................ 2,045 2,400 * COMPLETE BUSINESS SOLUTIONS, INC ................ 25 38,676 COMPUTER ASSOCIATES INTERNATIONAL, INC .......... 754
See notes to financial statements. B-36 76
SHARES VALUE (000) - ------ ---------- TECHNOLOGY--(CONTINUED) 1,050 * COMPUTER HORIZONS CORP .......................... $ 3 1,900 * COMPUTER NETWORK TECHNOLOGY CORP ................ 55 13,496 * COMPUTER SCIENCES CORP .......................... 811 29,500 * COMPUWARE CORP .................................. 184 12,324 * COMVERSE TECHNOLOGY, INC ........................ 1,339 1,600 * CONCORD CAMERA CORP ............................. 26 1,400 * CONCORD COMMUNICATIONS, INC ..................... 12 17,343 * CONCORD EFS, INC ................................ 762 5,000 * CONCURRENT COMPUTER CORP ........................ 27 17,298 * CONEXANT SYSTEMS, INC ........................... 266 1,100 * CONVERA CORP .................................... 20 600 * CONVERGYS CORP .................................. 27 4,500 * COPPER MOUNTAIN NETWORKS, INC ................... 27 67,588 CORNING, INC .................................... 3,569 3,000 * CORSAIR COMMUNICATIONS, INC ..................... 21 10,200 * COVAD COMMUNICATIONS GROUP, INC ................. 17 5,700 * CREDENCE SYSTEMS CORP ........................... 131 4,600 * CREE, INC ....................................... 163 3,300 * CRITICAL PATH, INC .............................. 101 600 * CROSSROADS SYSTEMS, INC ......................... 3 3,500 * CSG SYSTEMS INTERNATIONAL, INC .................. 164 2,150 * CTC COMMUNICATIONS GROUP, INC ................... 10 900 CTS CORP ........................................ 33 600 CUBIC CORP ...................................... 15 5,860 * CYBERGUARD CORP ................................. 10 1,000 * CYLINK CORP ..................................... 2 1,100 * CYMER, INC ...................................... 28 11,800 * CYPRESS SEMICONDUCTOR CORP ...................... 232 4,200 DALLAS SEMICONDUCTOR CORP ....................... 108 900 * DATA RETURN CORP ................................ 3 2,000 * DATASTREAM SYSTEMS, INC ......................... 20 800 * DDI CORP ........................................ 22 168,586 * DELL COMPUTER CORP .............................. 2,940 4,900 DELUXE CORP ..................................... 124 1,000 * DIAMONDCLUSTER INTERNATIONAL, INC (CLASS A) ..... 31 4,650 DIEBOLD, INC .................................... 155 1,700 * DIGEX, INC ...................................... 38 600 * DIGIMARC CORP ................................... 10 2,300 * DIGITAL COURIER TECHNOLOGIES, INC ............... 1 1,200 * DIGITAL INSIGHT CO .............................. 22 5,900 * DIGITAL ISLAND, INC ............................. 24 3,100 * DIGITAL RIVER, INC .............................. 7 300 * DIGITALTHINK INC ................................ 5 600 * DIGITAS, INC .................................... 3 6,200 * DMC STRATEX NETWORKS, INC ....................... 93 1,000 * DOBSON COMMUNICATIONS CORP (CLASS A) ............ 15 2,400 * DOCUMENTUM, INC ................................. 119 7,800 * DOUBLECLICK, INC ................................ 86 700 * DSET CORP ....................................... 1 2,600 * DSP GROUP, INC .................................. 55 4,972 * DST SYSTEMS, INC ................................ 333 900 * DUPONT PHOTOMASKS, INC .......................... 48 5,300 * E.PIPHANY, INC .................................. 286 9,200 * EBAY, INC ....................................... 304 1,800 * ECHELON CORP .................................... 29 1,300 * EGAIN COMMUNICATIONS CORP ....................... 4 340 * EGLOBE, INC ..................................... 0 1,400 * ELANTEC SEMICONDUCTOR, INC ...................... 39 1,900 * ELECTRO SCIENTIFIC INDUSTRIES, INC .............. 53 2,500 * ELECTROGLAS, INC ................................ 38 9,400 * ELECTRONIC ARTS, INC ............................ 401 32,500 ELECTRONIC DATA SYSTEMS CORP .................... 1,877 2,100 * ELECTRONICS FOR IMAGING, INC .................... 29 3,475 * ELOYALTY CORP ................................... 22 900 * EMAGIN CORP ..................................... 2 168,200 * EMC CORP ........................................ 11,185 1,800 * EMCORE CORP ..................................... 85 1,100 * E-MEDSOFT.COM ................................... 1 90 * EMERGE INTERACTIVE, INC (CLASS A) ............... 0 5,500 * EMPLOYEE SOLUTIONS, INC ......................... 0 5,400 * EMULEX CORP ..................................... 432 4,100 * ENGAGE, INC ..................................... 3 175 * ENTRADA NETWORKS, INC ........................... $ 0 2,500 * ENTRUST TECHNOLOGIES, INC ....................... 33 1,000 * EPLUS, INC ...................................... 11 1,600 * EPRESENCE, INC .................................. 7 9,700 EQUIFAX, INC .................................... 278 600 * ESPEED, INC (CLASS A) ........................... 9 3,300 * ESS TECHNOLOGY, INC ............................. 17 2,400 * EXAR CORP ....................................... 74 600 * EXCEL TECHNOLOGY, INC ........................... 12 1,900 * EXCELON CORP .................................... 3 2,800 * EXCHANGE APPLICATIONS, INC ...................... 3 16,150 * EXCITE AT HOME .................................. 89 32,200 * EXODUS COMMUNICATIONS, INC ...................... 644 500 * EXTENDED SYSTEMS, INC ........................... 6 3,500 * EXTREME NETWORKS, INC ........................... 137 1,800 * F.Y.I., INC ..................................... 66 1,200 * F5 NETWORKS, INC ................................ 11 1,700 FAIR ISSAC & CO, INC ............................ 87 6,500 * FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC (CLASS A) .................. 94 1,000 * FEI CO .......................................... 23 3,100 * FILENET CORP .................................... 84 7,800 * FINISAR CORP .................................... 226 400 * FIREPOND, INC ................................... 4 32,706 FIRST DATA CORP ................................. 1,723 8,675 * FISERV, INC ..................................... 412 2,000 * FOCAL COMMUNICATIONS CORP ....................... 14 6,200 * FOUNDRY NETWORKS, INC ........................... 93 500 * FREEMARKETS, INC ................................ 10 2,000 * FSI INTERNATIONAL, INC .......................... 17 2,600 * FUTURELINK CORP ................................. 2 4,000 GALILEO INTERNATIONAL, INC ...................... 80 900 * GASONICS INTERNATIONAL CORP ..................... 17 13,800 * GATEWAY, INC .................................... 248 1,625 * GENERAL SEMICONDUCTOR, INC ...................... 10 2,400 * GENRAD, INC ..................................... 24 1,400 * GENZYME TRANSGENICS CORP ........................ 20 3,400 GERBER SCIENTIFIC, INC .......................... 29 1,500 * GLOBALNETFINANCIAL.COM, INC ..................... 2 2,900 * GLOBESPAN, INC .................................. 80 1,300 * GLOBIX CORP ..................................... 4 2,100 * GOAMERICA, INC .................................. 11 500 * GOLDEN TELECOM, INC ............................. 3 1,800 * GOTO.COM, INC ................................... 13 1,300 * GREAT PLAINS SOFTWARE, INC ...................... 61 2,936 * HARMONIC, INC ................................... 17 7,000 HARRIS CORP ..................................... 214 2,300 HELIX TECHNOLOGY CORP ........................... 54 2,936 * HARMONIC, INC ................................... 17 7,000 HARRIS CORP ..................................... 214 2,300 HELIX TECHNOLOGY CORP ........................... 54 129,000 HEWLETT-PACKARD CO .............................. 4,072 600 * HI/FN, INC ...................................... 17 2,400 * HIGH SPEED ACCESS CORP .......................... 3 1,800 * HNC SOFTWARE, INC ............................... 53 3,600 * HOMESTORE.COM, INC .............................. 72 5,600 HON INDUSTRIES, INC ............................. 143 1,100 * HUTCHINSON TECHNOLOGY, INC ...................... 15 1,200 * HYPERCOM CORP ................................... 4 2,830 * HYPERION SOLUTIONS CORP ......................... 44 14,960 * I2 TECHNOLOGIES, INC ............................ 813 800 * IBASIS, INC ..................................... 3 800 * IBEAM BROADCASTING CORP ......................... 1 1,300 * IDENTIX, INC .................................... 10 3,300 * IGATE CAPITAL CORP .............................. 9 600 * II-VI, INC ...................................... 9 12,800 IKON OFFICE SOLUTIONS, INC ...................... 32 1,500 * ILLUMINET HOLDINGS, INC ......................... 34 2,230 * IMATION CORP .................................... 35 900 * IMMERSION CORP .................................. 7 900 * IMPSAT FIBER NETWORKS, INC ...................... 4 1,900 * IMRGLOBAL CORP .................................. 10 8,700 b * INACOM CORP ..................................... 0 900 * INET TECHNOLOGIES, INC .......................... 36 2,100 * INFOCUS CORP .................................... 31 440 * INFOGRAMES, INC ................................. 2 2,700 * INFONET SERVICES CORP (CLASS B) ................. 14 4,600 * INFORMATICA CORP ................................ 182 400 * INFORMATION ARCHITECTS CORP ..................... 1 18,100 * INFORMIX CORP ................................... 54
See notes to financial statements. B-37 77
SHARES VALUE (000) - ------ ---------- TECHNOLOGY--(CONTINUED) 14,622 * INFOSPACE.COM, INC ........................... $ 129 2,600 * INGRAM MICRO, INC (CLASS A) .................. 29 5,900 * INKTOMI CORP ................................. 105 1,400 * INPRISE CORP ................................. 8 8,200 * INTEGRATED DEVICE TECHNOLOGY, INC ............ 272 516,296 INTEL CORP ................................... 15,521 1,800 * INTELIDATA TECHNOLOGIES CORP ................. 5 900 * INTERACT COMMERCE CORP ....................... 8 200 * INTERACTIVE INTELLIGENCE, INC ................ 5 200 * INTERCEPT GROUP, INC ......................... 5 3,700 * INTERDIGITAL COMMUNICATIONS CORP ............. 20 5,800 * INTERGRAPH CORP .............................. 35 3,200 * INTERLIANT, INC .............................. 10 500 * INTERLINK ELECTRONICS, INC ................... 6 275 * INTERLOGIX, INC .............................. 5 4,900 * INTERNAP NETWORK SERVICES CORP ............... 36 135,100 INTERNATIONAL BUSINESS MACHINES CORP ......... 11,484 2,700 * INTERNATIONAL FIBERCOM, INC .................. 13 5,400 * INTERNATIONAL RECTIFIER CORP ................. 162 12,880 * INTERNET CAPITAL GROUP, INC .................. 42 3,500 * INTERNET PICTURES CORP ....................... 3 1,800 * INTERNET SECURITY SYSTEMS, INC ............... 141 800 * INTERNET.COM CORP ............................ 5 3,100 * INTERSIL HOLDINGS CORP ....................... 71 5,600 * INTERTRUST TECHNOLOGIES CORP ................. 19 3,600 * INTERVOICE-BRITE, INC ........................ 26 1,300 * INTERWORLD CORP .............................. 1 2,600 * INTERWOVEN, INC .............................. 171 3,000 * INTRAWARE, INC ............................... 4 13,400 * INTUIT, INC .................................. 528 18,400 * IOMEGA CORP .................................. 62 2,990 IRON MOUNTAIN, INC ........................... 111 2,600 * IVILLAGE, INC ................................ 3 3,100 * IXL ENTERPRISES, INC ......................... 3 500 * IXYS CORP .................................... 7 6,400 * J.D. EDWARDS & CO ............................ 114 665 * J2 GLOBAL COMMUNICATIONS, INC ................ 0 8,100 * JABIL CIRCUIT, INC ........................... 206 2,200 JACK HENRY & ASSOCIATES, INC ................. 137 1,500 * JDA SOFTWARE GROUP, INC ...................... 20 60,058 * JDS UNIPHASE CORP ............................ 2,504 400 * JNI CORP ..................................... 9 15,800 * JUNIPER NETWORKS, INC ........................ 1,992 2,000 * JUNO ONLINE SERVICES, INC .................... 1 500 * JUPITER MEDIA METRIX, INC .................... 5 5,464 * KANA COMMUNICATIONS, INC ..................... 63 2,700 * KEANE, INC ................................... 26 200 KEITHLEY INSTRUMENTS, INC .................... 9 9,600 * KEMET CORP ................................... 145 1,500 * KENT ELECTRONICS CORP ........................ 25 2,000 * KEYNOTE SYSTEMS, INC ......................... 28 569 * KFORCE.COM, INC .............................. 2 15,400 * KLA-TENCOR CORP .............................. 519 3,100 * KOPIN CORP ................................... 34 1,500 * KRONOS, INC .................................. 46 700 * KULICKE & SOFFA INDUSTRIES, INC .............. 8 13,100 * LAM RESEARCH CORP ............................ 190 1,000 * LANTE CORP ................................... 2 6,400 * LATTICE SEMICONDUCTOR CORP ................... 118 700 * LCC INTERNATIONAL, INC (CLASS A) ............. 8 800 * LEARNING TREE INTERNATIONAL, INC ............. 40 5,000 * LEGATO SYSTEMS, INC .......................... 37 9,400 * LEXMARK INTERNATIONAL, INC ................... 417 3,200 * LIBERATE TECHNOLOGIES ........................ 44 900 * LIGHTPATH TECHNOLOGIES, INC .................. 12 23,500 LINEAR TECHNOLOGY CORP ....................... 1,087 3,000 * LOOKSMART LTD ................................ 7 23,800 * LSI LOGIC CORP ............................... 407 6,800 * LTX CORP ..................................... 88 255,381 LUCENT TECHNOLOGIES, INC ..................... 3,448 5,100 * MACROMEDIA, INC .............................. 310 2,500 * MACROVISION CORP ............................. 185 2,000 * MAIL.COM, INC ................................ $ 1 4,000 * MAIL-WELL, INC ............................... 17 500 * MANHATTAN ASSOCIATES, INC .................... 21 3,200 * MANUGISTICS GROUP, INC ....................... 182 900 * MAPINFO CORP ................................. 43 12,695 * MARCHFIRST, INC .............................. 19 1,200 * MARIMBA, INC ................................. 5 3,050 * MASTEC, INC .................................. 61 400 * MATRIXONE, INC ............................... 7 21,100 * MAXIM INTEGRATED PRODUCTS, INC ............... 1,009 11,100 * MAXTOR CORP .................................. 62 700 * MCK COMMUNICATIONS, INC ...................... 6 700 * MCSI, INC .................................... 15 3,900 * MEMC ELECTRONIC MATERIALS, INC ............... 38 5,000 * MENTOR GRAPHICS CORP ......................... 137 60 * MERANT PLC (SPON ADR) ........................ 0 1,800 * MERCATOR SOFTWARE, INC ....................... 10 1,500 * MERCURY COMPUTER SYSTEMS, INC ................ 70 6,100 * MERCURY INTERACTIVE CORP ..................... 551 7,200 * MERISEL, INC ................................. 1 700 * METASOLV, INC ................................ 6 1,900 METHODE ELECTRONICS, INC (CLASS A) ........... 44 1,200 * METRICOM, INC ................................ 12 5,500 * METROCALL, INC ............................... 3 4,200 * METTLER-TOLEDO INTERNATIONAL, INC ............ 228 4,500 * MICREL, INC .................................. 152 800 b * MICROAGE, INC ................................ 0 7,305 * MICROCHIP TECHNOLOGY, INC .................... 160 5,100 * MICROMUSE, INC ............................... 308 38,400 * MICRON TECHNOLOGY, INC ....................... 1,363 600 * MICROSEMI CORP ............................... 17 306,868 * MICROSOFT CORP ............................... 13,310 2,700 * MICROSTRATEGY, INC ........................... 26 800 * MICROVISION, INC ............................. 14 1,900 * MIPS TECHNOLOGIES, INC (CLASS A) ............. 51 582 * MIPS TECHNOLOGIES, INC (CLASS B) ............. 15 100 * MKS INSTRUMENTS, INC ......................... 2 12,471 MOLEX, INC ................................... 443 4 * MOMENTUM BUSINESS APPLICATIONS, INC .......... 0 166,405 MOTOROLA, INC ................................ 3,370 5,250 * MPOWER COMMUNICATIONS CORP ................... 27 4,000 * MRV COMMUNICATIONS, INC ...................... 54 1,800 * MTI TECHNOLOGY CORP .......................... 7 1,000 * MULTEX.COM, INC .............................. 13 300 * NANOMETRICS, INC ............................. 4 2,700 NATIONAL DATA CORP ........................... 99 1,000 * NATIONAL INFORMATION CONSORTIUM, INC ......... 2 1,100 * NATIONAL PROCESSING, INC ..................... 19 16,200 * NATIONAL SEMICONDUCTOR CORP .................. 326 3,700 * NATURAL MICROSYSTEMS CORP .................... 37 10 * NAVIGANT INTERNATIONAL, INC .................. 0 1,200 * NAVISITE, INC ................................ 3 6,300 * NCR CORP ..................................... 309 1,300 * NET PERCEPTIONS, INC ......................... 3 700 * NET2PHONE, INC ............................... 5 2,900 * NETEGRITY, INC ............................... 158 1,900 * NETIQ CORP ................................... 166 500 * NETOBJECTS, INC .............................. 0 1,000 * NETOPIA, INC ................................. 4 3,300 * NETRO CORP ................................... 23 900 * NETSCOUT SYSTEMS, INC ........................ 9 400 * NETSOLVE, INC ................................ 3 24,100 * NETWORK APPLIANCE, INC ....................... 1,547 10,899 * NETWORK ASSOCIATES, INC ...................... 46 2,100 * NETWORK EQUIPMENT TECHNOLOGIES, INC .......... 14 3,500 * NETWORK PERIPHERALS, INC ..................... 23 2,300 * NETZERO, INC ................................. 2 1,600 * NEW ERA OF NETWORKS, INC ..................... 9 1,600 * NEW FOCUS, INC ............................... 56 2,100 NEWPORT CORP ................................. 165 2,100 * NEXT LEVEL COMMUNICATIONS, INC ............... 24 2,800 * NEXTEL PARTNERS, INC (CLASS A) ............... 47 800 * NHANCEMENT TECHNOLOGIES, INC ................. 4 600 * NIKU CORP .................................... 4 1,000 NORTH PITTSBURGH SYSTEMS, INC ................ 11 4,300 * NOVA CORP (GEORGIA) .......................... 86 21,800 * NOVELL, INC .................................. 114
See notes to financial statements. B-38 78
SHARES VALUE (000) - ------ ---------- TECHNOLOGY--(CONTINUED) 10,300 * NOVELLUS SYSTEMS, INC ........................ $ 370 900 NTELOS, INC .................................. 16 200 * NUANCE COMMUNICATIONS, INC ................... 9 500 * NUCENTRIX BROADBAND NETWORKS, INC ............ 6 3,600 * NVIDIA CORP .................................. 118 2,500 * NX NETWORKS, INC ............................. 2 2,500 * NYFIX, INC ................................... 60 1,000 * OBJECTIVE SYSTEMS INTEGRATORS, INC ........... 18 2,300 * ON SEMICONDUCTOR CORP ........................ 12 1,500 * ONYX SOFTWARE CORP ........................... 17 2,600 * OPEN MARKET, INC ............................. 3 85 * OPENTV CORP .................................. 1 5,104 * OPENWAVE SYSTEMS, INC ........................ 245 95 * OPUS360 CORP ................................. 0 327,848 * ORACLE CORP .................................. 9,528 700 * OSICOM TECHNOLOGIES, INC ..................... 11 1,200 * PACKETEER, INC ............................... 15 1,090 * PAC-WEST TELECOMM, INC ....................... 4 44,790 * PALM, INC .................................... 1,268 1,000 * PARADYNE NETWORKS, INC ....................... 2 23,710 * PARAMETRIC TECHNOLOGY CORP ................... 319 1,650 PARK ELECTROCHEMICAL CORP .................... 51 2,975 * PAXAR CORP ................................... 30 4,600 * PAXSON COMMUNICATIONS CORP ................... 55 26,975 PAYCHEX, INC ................................. 1,312 7,000 * P-COM, INC ................................... 21 900 * PC-TEL, INC .................................. 10 600 * PEGASUS SOLUTIONS, INC ....................... 4 18,500 * PEOPLESOFT, INC .............................. 688 10,600 * PEREGRINE SYSTEMS, INC ....................... 209 1,400 * PERICOM SEMICONDUCTOR CORP ................... 26 2,900 * PEROT SYSTEMS CORP (CLASS A) ................. 27 800 * PERSISTENCE SOFTWARE, INC .................... 4 900 * PHOENIX TECHNOLOGIES LTD ..................... 12 1,300 * PHOTRONICS, INC .............................. 30 4,200 b * PHYSICIAN COMPUTER NETWORK, INC .............. 0 1,600 PIONEER-STANDARD ELECTRONICS, INC ............ 18 400 * PIXELWORKS, INC .............................. 9 3,100 * PLANTRONICS, INC ............................. 146 2,400 * PLEXUS CORP .................................. 73 1,100 * PLX TECHNOLOGY, INC .......................... 9 11,977 * PMC-SIERRA, INC .............................. 942 3,600 * POLYCOM, INC ................................. 116 6,700 * PORTAL SOFTWARE, INC ......................... 53 1,400 * POWER INTEGRATIONS, INC ...................... 16 2,600 * POWERTEL, INC ................................ 161 2,900 * POWERWAVE TECHNOLOGIES, INC .................. 170 1,300 * PRI AUTOMATION, INC .......................... 24 900 * PRIMUS KNOWLEDGE SOLUTIONS, INC .............. 6 200 * PROBUSINESS SERVICES, INC .................... 5 300 * PROCOM TECHNOLOGY, INC ....................... 4 1,000 * PRODIGY COMMUNICATIONS CORP (CLASS A) ........ 2 2,050 * PROFIT RECOVERY GROUP INTERNATIONAL, INC ..... 13 4,100 * PROGRESS SOFTWARE CORP ....................... 59 1,000 * PROJECT SOFTWARE & DEVELOPMENT, INC .......... 11 2,100 * PROXICOM, INC ................................ 9 1,600 * PROXIM, INC .................................. 69 1,100 * PUMA TECHNOLOGY, INC ......................... 5 2,700 * PURCHASEPRO.COM, INC ......................... 47 6,740 * QLOGIC CORP .................................. 519 1,050 * QRS CORP ..................................... 13 51,400 * QUALCOMM, INC ................................ 4,224 11,800 * QUANTUM CORP-DLT & STORAGE SYSTEMS GROUP ..... 157 7,600 * QUANTUM CORP-HARD DISK DRIVE GROUP ........... 61 2,000 * QUEST SOFTWARE, INC .......................... 56 1,600 * QUICKLOGIC CORP .............................. 11 1,000 * QUINTUS CORP ................................. 3 1,600 * QUOKKA SPORTS, INC ........................... 1 1,100 * RADIANT SYSTEMS, INC ......................... 23 1,000 * RADISYS CORP ................................. 26 1,400 * RAINBOW TECHNOLOGIES, INC .................... 22 5,900 * RAMBUS, INC .................................. 213 500 * RAMP NETWORKS, INC ........................... $ 3 1,950 * RARE MEDIUM GROUP, INC ....................... 19 14,366 * RATIONAL SOFTWARE CORP ....................... 559 3,400 * RAZORFISH, INC (CLASS (A) .................... 6 5,300 * REALNETWORKS, INC ............................ 46 6,900 * RED HAT, INC ................................. 43 8,000 * REDBACK NETWORKS, INC ........................ 328 300 * REGISTER.COM, INC ............................ 2 2,000 * REMEDY CORP .................................. 33 700 * RESEARCH FRONTIERS, INC ...................... 12 3,113 * RETEK, INC ................................... 76 7,000 REYNOLDS & REYNOLDS CO (CLASS A) ............. 142 8,800 * RF MICRO DEVICES, INC ........................ 241 5,100 * ROBOTIC VISION SYSTEMS, INC .................. 14 1,100 * ROGERS CORP .................................. 45 2,400 * RSA SECURITY, INC ............................ 127 300 * RUDOLPH TECHNOLOGIES, INC .................... 9 1,700 * RURAL CELLULAR CORP (CLASS A) ................ 50 3,300 * S1 CORP ...................................... 17 11,100 * SAFEGUARD SCIENTIFICS, INC ................... 74 1,900 * SAGA SYSTEMS, INC ............................ 22 900 * SAGENT TECHNOLOGY, INC ....................... 1 1,200 * SANCHEZ COMPUTER ASSOCIATES, INC ............. 10 4,046 * SANDISK CORP ................................. 112 11,400 * SANMINA CORP ................................. 874 5,600 * SAPIENT CORP ................................. 67 1,200 * SAVVIS COMMUNICATIONS CORP ................... 1 3,200 * SAWTEK, INC .................................. 148 10,000 * SCI SYSTEMS, INC ............................. 264 2,300 * SCIENT CORP .................................. 7 11,500 SCIENTIFIC-ATLANTA, INC ...................... 374 1,900 * SCM MICROSYSTEMS, INC ........................ 63 5,900 * SDL, INC ..................................... 874 1,200 * SEACHANGE INTERNATIONAL, INC ................. 24 1,300 * SECURE COMPUTING CORP ........................ 13 100 * SELECTICA, INC ............................... 2 90 SEMA PLC ADR ................................. 1 500 * SEMITOOL, INC ................................ 5 5,200 * SEMTECH CORP ................................. 115 6,300 * SENSORMATIC ELECTRONICS CORP ................. 126 1,100 * SERENA SOFTWARE, INC ......................... 38 26,168 * SIEBEL SYSTEMS, INC .......................... 1,770 24,700 * SILICON GRAPHICS, INC ........................ 99 2,400 * SILICON IMAGE, INC ........................... 13 7,900 * SILICON STORAGE TECHNOLOGY, INC .............. 93 2,600 * SILICON VALLEY GROUP, INC .................... 75 900 * SILICONIX, INC ............................... 20 800 * SILVERSTREAM SOFTWARE, INC ................... 17 1,600 * SIPEX CORP ................................... 38 12,500 * SITEL CORP ................................... 36 400 * SMARTSERV ONLINE, INC ........................ 3 3,300 * SOFTNET SYSTEMS, INC ......................... 6 42,736 * SOLECTRON CORP ............................... 1,449 1,500 * SOMERA COMMUNICATIONS, INC ................... 13 700 * SONIC FOUNDRY, INC ........................... 1 5,900 * SONICBLUE, INC ............................... 24 3,800 * SONICWALL, INC ............................... 62 2,400 * SONUS NETWORKS, INC .......................... 61 200 * SPECTRA-PHYSICS LASERS, INC .................. 5 1,852 * SPEEDFAM-IPEC, INC ........................... 11 700 * STANDARD MICROSYSTEM, INC .................... 14 3,200 * STARBASE CORP ................................ 8 2,800 * STARMEDIA NETWORK, INC ....................... 5 7,200 * STORAGE TECHNOLOGY CORP ...................... 65 4,300 * STRUCTURAL DYNAMICS RESEARCH CORP ............ 43 250,550 * SUN MICROSYSTEMS, INC ........................ 6,984 9,300 * SUNGARD DATA SYSTEMS, INC .................... 438 824 SUPERIOR TELECOM, INC ........................ 2 500 * SUPERTEX, INC ................................ 10 2,000 * SVI HOLDINGS, INC ............................ 2 8,600 * SYBASE, INC .................................. 170 8,200 * SYCAMORE NETWORKS, INC ....................... 305 1,700 * SYKES ENTERPRISES, INC ....................... 8 7,650 * SYMANTEC CORP ................................ 255 11,550 SYMBOL TECHNOLOGIES, INC ..................... 416 1,500 * SYMMETRICOM, INC ............................. 15 4,100 * SYNOPSYS, INC ................................ 194
See notes to financial statements. B-39 79
SHARES VALUE (000) - ------ ---------- TECHNOLOGY--(CONTINUED) 800 * SYNTEL, INC .................................. $ 5 3,500 * SYSTEMS & COMPUTER TECHNOLOGY CORP ........... 43 500 * TAKE-TWO INTERACTIVE SOFTWARE, INC ........... 6 900 * TANNING TECHNOLOGY, INC ...................... 3 3,300 * TECH DATA CORP ............................... 89 1,100 TECHNITROL, INC .............................. 45 5,475 * TECHNOLOGY SOLUTIONS CO ...................... 12 2,600 * TEKELEC ...................................... 78 8,100 TEKTRONIX, INC ............................... 273 300 * TELCOM SEMICONDUCTOR, INC .................... 3 2,080 * TELECORP PCS, INC (CLASS A) .................. 47 200 * TELESCAN, INC ................................ 0 27,400 * TELLABS, INC ................................. 1,548 1,500 * TELOCITY, INC ................................ 3 14,900 * TERADYNE, INC ................................ 555 3,300 * TERAYON COMMUNICATION SYSTEMS, INC ........... 13 132,738 TEXAS INSTRUMENTS, INC ....................... 6,288 800 * THERMA-WAVE, INC ............................. 11 1,600 * THREE-FIVE SYSTEMS, INC ...................... 29 9,600 * TIBCO SOFTWARE, INC .......................... 460 4,800 * TITAN CORP ................................... 78 1,000 * TIVO, INC .................................... 5 1,000 * TOLLGRADE COMMUNICATIONS, INC ................ 37 1,000 TOTAL SYSTEM SERVICES, INC ................... 22 1,600 * TRANSACTION SYSTEMS ARCHITECTS, INC (CLASS A). 19 6,200 * TRANSWITCH CORP .............................. 243 1,400 * TRICORD SYSTEMS, INC ......................... 12 1,800 * TRIMBLE NAVIGATION LTD ....................... 43 4,900 * TRIQUINT SEMICONDUCTOR, INC .................. 214 1,200 * TRIZETTO GROUP, INC .......................... 20 600 * TUMBLEWEED COMMUNICATIONS CORP ............... 10 1,800 * TURNSTONE SYSTEMS, INC ....................... 13 2,100 * TUT SYSTEMS, INC ............................. 17 3,025 * U.S. OFFICE PRODUCTS CO ...................... 0 2,400 * UCAR INTERNATIONAL, INC ...................... 23 1,200 * ULTRATECH STEPPER, INC ....................... 31 700 * UNIGRAPHICS SOLUTIONS, INC ................... 11 22,408 * UNISYS CORP .................................. 328 1,800 * UNIVERSAL ACCESS, INC ........................ 14 900 * UNIVERSAL DISPLAY CORP ....................... 6 195 * US INTERACTIVE, INC .......................... 0 600 * US WIRELESS CORP ............................. 3 2,400 * USINTERNETWORKING, INC ....................... 12 2,000 * UTSTARCOM, INC ............................... 31 1,000 * VA LINUX SYSTEMS, INC ........................ 8 2,900 * VARIAN SEMICONDUCTOR EQUIPMENT ASSOCIATES, INC ............................ 69 1,500 * VEECO INSTRUMENTS, INC ....................... 60 14,865 * VERISIGN, INC ................................ 1,103 30,556 * VERITAS SOFTWARE CORP ........................ 2,674 2,300 * VERITY, INC .................................. 55 1,200 * VERSATA, INC ................................. 11 2,000 * VERTEL CORP .................................. 5 6,100 * VERTICALNET, INC ............................. 41 300 * VIADOR, INC .................................. 0 1,000 * VIALINK CO ................................... 3 1,300 * VIANT CORP ................................... 5 3,300 * VIASYSTEMS GROUP, INC ........................ 27 1,700 * VICOR CORP ................................... 52 1,600 * VIEWPOINT CORP ............................... 9 14,600 * VIGNETTE CORP ................................ 263 7,900 * VISHAY INTERTECHNOLOGY, INC .................. 119 3,300 * VISUAL NETWORKS, INC ......................... 11 13,500 * VITESSE SEMICONDUCTOR CORP ................... 747 4,200 * VITRIA TECHNOLOGY, INC ....................... 33 500 * VYYO, INC .................................... 3 4,900 WALLACE COMPUTER SERVICES, INC ............... 83 5,350 * WALT DISNEY INTERNET GROUP ................... 23 1,500 * WATCHGUARD TECHNOLOGIES, INC ................. 47 3,900 * WAVE SYSTEMS CORP (CLASS A) .................. 18 1,058 * WEBMETHODS, INC .............................. 94 1,600 * WEBTRENDS CORP ............................... 46 15,504 * WEBVAN GROUP, INC ............................ $ 7 800 * WESCO INTERNATIONAL, INC ..................... 6 5,200 * WESTELL TECHNOLOGIES, INC (CLASS A) .......... 16 23,700 * WESTERN DIGITAL CORP ......................... 58 3,763 * WIND RIVER SYSTEMS, INC ...................... 128 1,600 * WIRELESS FACILITIES, INC ..................... 58 13 * WORKFLOW MANAGEMENT, INC ..................... 0 21,200 * XILINX, INC .................................. 978 600 * XIRCOM, INC .................................. 9 2,300 * XYBERNAUT CORP ............................... 4 19,212 * YAHOO, INC ................................... 578 1,700 * ZEBRA TECHNOLOGIES CORP (CLASS A) ............ 69 7 * ZENGINE, INC ................................. 0 800 * ZIXIT CORP ................................... 7 2,000 * ZORAN CORP ................................... 31 900 * ZYGO CORP .................................... 25 ------- TOTAL TECHNOLOGY ............................. 222,027 ------- TRANSPORTATION--0.94% 2,100 AIRBORNE,INC ................................. 20 7,100 * AIRTRAN HOLDINGS, INC ........................ 51 1,900 * ALASKA AIR GROUP, INC ........................ 57 3,200 * AMERICA WEST HOLDINGS CORP (CLASS B) ......... 41 81 * AMERICAN FREIGHTWAYS CORP .................... 2 13,600 * AMR CORP ..................................... 533 3,400 ARNOLD INDUSTRIES, INC ....................... 61 900 * ATLANTIC COAST AIRLINES HOLDINGS, INC ........ 37 1,100 * ATLAS AIR, INC ............................... 36 28,020 BURLINGTON NORTHERN SANTA FE CORP ............ 793 6,200 C.H. ROBINSON WORLDWIDE, INC ................. 195 3,700 CNF, INC ..................................... 125 50 * CONSOLIDATED FREIGHTWAYS CORP ................ 0 4,100 * CONTINENTAL AIRLINES, INC (CLASS B) .......... 212 13,700 CSX CORP ..................................... 355 11,000 DELTA AIRLINES, INC .......................... 552 1,500 * EGL, INC ..................................... 36 3,000 EXPEDITORS INTERNATIONAL OF WASHINGTON, INC .. 161 23,840 * FEDEX CORP ................................... 953 1,000 FLORIDA EAST COAST INDUSTRIES, INC (CLASS A).. 36 1,000 * FORWARD AIR CORP ............................. 37 300 * FRONTIER AIRLINES, INC ....................... 9 3,300 HUNT (J.B.) TRANSPORT SERVICES, INC .......... 55 12,650 * KANSAS CITY SOUTHERN INDUSTRIES, INC ......... 128 1,800 * LANDSTAR SYSTEM, INC ......................... 100 1,500 * M.S. CARRIERS, INC ........................... 49 50 * MARINE TRANSPORT CORP ........................ 0 400 * MESA AIR GROUP, INC .......................... 3 600 * MESABA HOLDINGS, INC ......................... 8 400 * MIDWEST EXPRESS HOLDINGS, INC ................ 6 35,000 NORFOLK SOUTHERN CORP ........................ 466 900 * NORTHWEST AIRLINES CORP (CLASS A) ............ 27 1,900 OVERSEAS SHIPHOLDING GROUP, INC .............. 44 2,500 ROADWAY EXPRESS, INC ......................... 53 9,100 RYDER SYSTEM, INC ............................ 151 11,716 SABRE HOLDINGS CORP .......................... 505 4,000 SHURGARD STORAGE CENTERS, INC ................ 98 3,200 SKYWEST, INC ................................. 92 39,901 SOUTHWEST AIRLINES CO ........................ 1,338 975 * SWIFT TRANSPORTATION CO, INC ................. 19 3,800 * U.S. AIRWAYS GROUP, INC ...................... 154 2,000 UAL CORP ..................................... 78 17,682 UNION PACIFIC CORP ........................... 897 6,800 UNITED PARCEL SERVICE, INC (CLASS B) ......... 400 2,700 USFREIGHTWAYS CORP ........................... 81 4,950 WERNER ENTERPRISES, INC ...................... 84 2,500 * WISCONSIN CENTRAL TRANSIT CORP ............... 38 1,400 * XTRA CORP .................................... 67 3,800 * YELLOW CORP .................................. 77 ------- TOTAL TRANSPORTATION ......................... 9,320 ------- UTILITIES--9.98% 3,500 * ACTV, INC .................................... 15 1,600 * ADELPHIA BUSINESS SOLUTIONS, INC ............. 7 4,800 * ADELPHIA COMMUNICATIONS CORP (CLASS A) ....... 248 4,300 * ADVANCED RADIO TELECOM CORP .................. 4 26,400 * AES CORP ..................................... 1,462 6,400 AGL RESOURCES, INC ........................... 141 7,000 ALLEGHENY ENERGY, INC ........................ 337
See notes to financial statements. B-40 80
SHARES VALUE (000) - ------ ---------- UTILITIES--(CONTINUED) 9,100 * ALLEGIANCE TELECOM, INC ...................... $ 203 5,600 ALLETE ....................................... 139 3,900 ALLIANT ENERGY CORP .......................... 124 23,152 ALLTEL CORP .................................. 1,446 9,160 AMEREN CORP .................................. 424 26,300 AMERICAN ELECTRIC POWER CO, INC .............. 1,223 11,300 * AMERICAN TOWER CORP (CLASS A) ................ 428 100 * ARGUSS COMMUNICATIONS, INC ................... 1 288,321 AT & T CORP .................................. 4,992 31,400 * AT&T WIRELESS GROUP .......................... 544 1,129 ATMOS ENERGY CORP ............................ 28 3,500 AVISTA CORP .................................. 72 144,700 BELLSOUTH CORP ............................... 5,924 3,300 BLACK HILLS CORP ............................. 148 15,600 * BROADWING, INC ............................... 356 8,100 * CABLEVISION SYSTEMS CORP (CLASS A) ........... 688 23,200 * CALPINE CORP ................................. 1,045 500 CASCADE NATURAL GAS CORP ..................... 9 11,075 CENTURYTEL, INC .............................. 396 1,600 CH ENERGY GROUP, INC ......................... 72 5,800 * CHARTER COMMUNICATIONS (CLASS A) ............. 132 9,600 CINERGY CORP ................................. 337 20,080 * CITIZENS COMMUNICATIONS CO ................... 264 1,900 CLECO CORP ................................... 104 7,000 CMS ENERGY CORP .............................. 222 14,100 COASTAL CORP ................................. 1,245 68,247 * COMCAST CORP (CLASS A) SPECIAL ............... 2,849 800 * COMMONWEALTH TELEPHONE ENTERPRISES,INC ....... 28 10,025 CONECTIV, INC ................................ 201 18,200 CONSOLIDATED EDISON, INC ..................... 701 10,200 CONSTELLATION ENERGY GROUP, INC .............. 460 12,017 * COX COMMUNICATIONS, INC (CLASS A) ............ 560 6,800 * CROWN CASTLE INTERNATIONAL CORP .............. 184 1,000 CT COMMUNICATIONS, INC ....................... 14 1,100 * DIGITAL LIGHTWAVE, INC ....................... 35 2,200 * DITECH COMMUNICATIONS CORP ................... 35 17,538 DOMINION RESOURCES, INC ...................... 1,175 7,893 DPL, INC ..................................... 262 3,800 DQE, INC ..................................... 124 1,600 * DSL.NET, INC ................................. 1 9,200 DTE ENERGY CO ................................ 358 27,633 DUKE ENERGY CORP ............................. 2,356 18,800 DYNEGY, INC (CLASS A) ........................ 1,054 8,900 * E.SPIRE COMMUNICATIONS, INC .................. 4 4,899 * EARTHLINK, INC ............................... 25 30,300 EDISON INTERNATIONAL CO ...................... 473 1,900 * EFFICIENT NETWORKS, INC ...................... 27 2,300 * EL PASO ELECTRIC CO .......................... 30 15,902 EL PASO ENERGY CORP .......................... 1,139 1,600 * ELECTRIC LIGHTWAVE, INC (CLASS A) ............ 5 1,600 EMPIRE DISTRICT ELECTRIC CO .................. 42 2,200 ENERGEN CORP ................................. 71 5,502 ENERGY EAST CORP ............................. 108 56,622 ENRON CORP ................................... 4,707 18,400 ENTERGY CORP ................................. 779 2,500 EQUITABLE RESOURCES, INC ..................... 167 26,050 EXELON CORP .................................. 1,829 15,402 FIRSTENERGY CORP ............................. 486 12,800 FPL GROUP, INC ............................... 918 4,500 * GENERAL COMMUNICATION, INC (CLASS A) ......... 32 17,200 b * GEOTEK COMMUNICATIONS, INC ................... 0 3,025 * GLENAYRE TECHNOLOGIES, INC ................... 11 58 * GLOBAL CROSSING LTD .......................... 1 17,400 GLOBAL TELESYSTEMS, INC ...................... 14 9,600 GPU, INC ..................................... 353 2,400 HAWAIIAN ELECTRIC INDUSTRIES, INC ............ 89 4,700 b * ICG COMMUNICATIONS, INC ...................... 1 4,300 IDACORP, INC ................................. 211 2,700 * IDT CORP ..................................... 55 2,600 * INSIGHT COMMUNICATIONS CO, INC ............... 61 3,200 * INTERMEDIA COMMUNICATIONS, INC ............... 23 2,200 INTER-TEL, INC ............................... 17 5,000 IPALCO ENTERPRISES, INC ...................... $ 121 3,500 * ITC DELTACOM, INC ............................ 19 7,300 KANSAS CITY POWER & LIGHT CO ................. 200 12,100 KEYSPAN CORP ................................. 513 7,600 KINDER MORGAN, INC ........................... 397 2,500 * L-3 COMMUNICATIONS HOLDINGS, INC ............. 193 3,000 LACLEDE GAS CO ............................... 70 2,250 * LEAP WIRELESS INTERNATIONAL, INC ............. 56 22,000 * LEVEL 3 COMMUNICATIONS, INC .................. 722 31,952 * MCLEODUSA, INC (CLASS A) ..................... 451 6,000 MCN ENERGY GROUP, INC ........................ 166 5,200 MDU RESOURCES GROUP, INC ..................... 169 1,500 * MEDIACOM COMMUNICATIONS CORP ................. 26 27,394 * METROMEDIA FIBER NETWORK, INC (CLASS A) ...... 277 6,000 MONTANA POWER CO ............................. 125 3,000 NATIONAL FUEL GAS CO ......................... 189 1,200 * NEON COMMUNICATIONS, INC ..................... 8 800 * NETWORK PLUS CORP ............................ 2 1,300 NEW JERSEY RESOURCES CORP .................... 56 39,300 * NEXTEL COMMUNICATIONS, INC (CLASS A) ......... 973 13,400 * NIAGARA MOHAWK HOLDINGS, INC ................. 224 5,200 NICOR, INC ................................... 225 12,452 NISOURCE, INC ................................ 383 2,809 * NISOURCE, INC (SAILS) ........................ 8 9,300 NORTHEAST UTILITIES CO ....................... 226 5,900 * NORTHPOINT COMMUNICATIONS GROUP, INC ......... 2 1,650 NORTHWEST NATURAL GAS CO ..................... 44 1,800 NORTHWESTERN CORP ............................ 42 4,800 * NRG ENERGY, INC .............................. 134 2,772 NSTAR ........................................ 119 20,638 * NTL, INC ..................................... 494 1,000 NUI CORP ..................................... 32 6,500 OGE ENERGY CORP .............................. 159 3,580 ONEOK, INC ................................... 172 1,000 OTTER TAIL POWER CO .......................... 28 4,300 PEOPLES ENERGY CORP .......................... 192 33,429 PG&E CORP .................................... 669 605 PIEDMONT NATURAL GAS CO, INC ................. 23 4,100 * PINNACLE HOLDINGS, INC ....................... 37 5,000 PINNACLE WEST CAPITAL CORP ................... 238 5,800 POTOMAC ELECTRIC POWER CO .................... 143 12,794 PPL CORP ..................................... 578 3,300 * PRICE COMMUNICATIONS CORP .................... 55 2,900 * PRIMUS TELECOMMUNICATIONS GROUP, INC ......... 7 14,400 PROGRESS ENERGY, INC ......................... 708 5,000 * PROGRESS ENERGY, INC- CVO .................... 2 11,272 * PSINET, INC .................................. 8 3,200 PUBLIC SERVICE CO OF NEW MEXICO .............. 86 15,300 PUBLIC SERVICE ENTERPRISE GROUP, INC ......... 744 9,178 PUGENT ENERGY, INC ........................... 255 6,100 QUESTAR CORP ................................. 183 80,525 * QWEST COMMUNICATIONS INTERNATIONAL , INC ..... 3,302 3,300 * RCN CORP ..................................... 21 20,603 RELIANT ENERGY, INC .......................... 892 4,800 RGS ENERGY GROUP, INC ........................ 156 3,600 * RHYTHMS NETCONNECTIONS, INC .................. 4 1,800 * SBA COMMUNICATIONS CORP ...................... 74 261,266 SBC COMMUNICATIONS, INC ...................... 12,475 6,000 SCANA CORP ................................... 177 18 SCOTTISH POWER PLC ADR ....................... 1 15,720 SEMPRA ENERGY ................................ 365 5,900 SIERRA PACIFIC RESOURCES (NEW) ............... 95 2,400 * SMARTALK TELESERVICES, INC ................... 0 1,300 SOUTH JERSEY INDUSTRIES, INC ................. 39 48,900 SOUTHERN CO .................................. 1,626 2,300 SOUTHERN UNION CO ............................ 61 600 SOUTHWEST GAS CORP ........................... 13 700 SOUTHWESTERN ENERGY CO ....................... 7 3,800 * SPECTRASITE HOLDINGS, INC .................... 50 53,600 SPRINT CORP (FON GROUP) ...................... 1,089 41,700 * SPRINT CORP (PCS GROUP) ...................... 852 3,570 * TALK.COM, INC ................................ 5 11,900 TECO ENERGY, INC ............................. 385 3,127 TELEPHONE & DATA SYSTEMS, INC ................ 281 2,400 * TELIGENT, INC (CLASS A) ...................... 5 4,700 * TIME WARNER TELECOM, INC (CLASS A) ........... 298 2,400 * TRITON PCS HOLDINGS, INC (CLASS A) ........... 81
See notes to financial statements. B-41 81
SHARES VALUE (000) - ------ ---------- UTILITIES--(CONTINUED) 22,067 TXU CORP ..................................... $ 978 1,200 * U.S. CELLULAR CORP ........................... 72 5,637 UGI CORP ..................................... 143 1,100 UIL HOLDINGS CORP ............................ 55 3,600 UNISOURCE ENERGY CORP HOLDINGS CO ............ 68 600 b * USN COMMUNICATIONS, INC ...................... 0 9,601 UTILICORP UNITED, INC ........................ 298 5,133 VECTREN CORP ................................. 132 209,900 VERIZON COMMUNICATIONS ....................... 10,483 600 * VIA NET.WORKS, INC ........................... 2 1,000 * VIASAT, INC .................................. 13 900 * VIATEL, INC .................................. 3 2,600 * VIRATA CORP .................................. 28 17,249 * VOICESTREAM WIRELESS CORP .................... 1,736 4,100 * WEBLINK WIRELESS, INC ........................ 14 700 * WEST CORP .................................... 20 2,400 WESTERN GAS RESOURCES, INC ................... 81 4,300 WESTERN RESOURCES, INC ....................... 107 5,000 * WESTERN WIRELESS CORP (CLASS A) .............. 196 3,800 WGL HOLDINGS, INC ............................ 116 4,300 * WILLIAMS COMMUNICATIONS GROUP, INC ........... 51 35,929 WILLIAMS COS, INC ............................ 1,435 6,450 * WINSTAR COMMUNICATIONS, INC .................. 75 7,600 WISCONSIN ENERGY CORP ........................ 171 220,113 * WORLDCOM, INC ................................ 3,095 800 * WORLDGATE COMMUNICATIONS, INC ................ 3 2,100 * WORLDPAGES.COM, INC .......................... 6 2,000 WPS RESOURCES CORP ........................... 74 28,681 XCEL ENERGY, INC ............................. 834 27,489 * XO COMMUNICATIONS, INC (CLASS A) ............. 490 -------- TOTAL UTILITIES ............................ 98,941 -------- TOTAL COMMON STOCK (COST $748,276,624) ........................ 987,990 -------- PRINCIPAL - --------- SHORT TERM INVESTMENT--0.41% U.S. GOVERNMENT AND AGENCY--0.41% $4,095,000 FEDERAL HOME LOAN MORTGAGE CORP 5.150%, 01/02/01............................ 4,093 --------- TOTAL SHORT TERM INVESTMENT (COST $4,094,414)........................... 4,093 --------- TOTAL PORTFOLIO--100.10% (COST $752,531,906)......................... 992,170 OTHER ASSETS & LIABILITIES, NET--(0.10)%...... (982) -------- NET ASSETS--100.00%........................... $991,188 ========
- ------------- * Non-income producing (b) In bankruptcy See notes to financial statements. B-42 82 [TIAA LOGO] - -------------------------------------------------------------------------------- CHAIRMAN'S LETTER To the Policyholders of Teachers Insurance and Annuity Association of America: We are pleased to provide you with the accompanying audited statutory-basis financial statements of Teachers Insurance and Annuity Association of America ("TIAA") for the year ended December 31, 2000. We continue to manage TIAA in a prudent manner with the goal of maximizing our long-term performance within reasonable risk parameters for the long-term benefit of our policyholders. As you review these statements, it is also important to note that TIAA continues to maintain the highest possible financial strength ratings from each of the four nationally recognized independent rating organizations. The report of management responsibility, on the following page, demonstrates our ongoing commitment to conduct TIAA's activities in a well-controlled management environment. Additionally, the accompanying audit report indicates an unqualified opinion regarding TIAA's statutory-basis financial statements from the independent auditing firm of Ernst & Young LLP. These statements have been prepared consistently in accordance with statutory accounting practices, a comprehensive basis of accounting comprised of accounting practices prescribed or permitted by the New York State Insurance Department ("Department"). There is also a reference in the auditors' report to accounting principles generally accepted in the United States ("GAAP"); this reference to GAAP is required by the auditors' professional standards. GAAP is an overall accounting methodology that, while similar in many respects to statutory accounting practices, is a separate basis of accounting. Statutory accounting is generally more conservative than GAAP, and these statutory-basis financial statements are not intended to be in conformity with GAAP. Statutory accounting is the only basis of accounting recognized by the Department for regulatory purposes, and it is the only basis of accounting used by the Department in measuring the financial condition and results of operations of an insurance company. It is also the basis for determining insurance company solvency under the New York Insurance Law. While we could prepare a separate set of GAAP financial statements, there is no legal requirement for us to do so. Additionally, TIAA does not believe at this time that it would be a worthwhile expenditure to maintain another separate set of financial records, particularly since it would provide little additional value for our policyholders. Accordingly, we believe that it is prudent for us to continue to manage and report on the operations of TIAA under the conservative statutory accounting methodology that we have always utilized. /s/ JOHN H. BRIGGS --------------------------------- Chairman, President and Chief Executive Officer B-43 83 [TIAA LOGO] - -------------------------------------------------------------------------------- REPORT OF MANAGEMENT RESPONSIBILITY To the Policyholders of Teachers Insurance and Annuity Association of America: The accompanying statutory-basis financial statements of Teachers Insurance and Annuity Association of America ("TIAA") are the responsibility of management. They have been prepared on the basis of statutory accounting practices, a comprehensive basis of accounting comprised of accounting practices prescribed or permitted by the New York State Insurance Department. The financial statements of TIAA have been presented fairly and objectively in accordance with such statutory accounting practices. TIAA has established and maintains a strong system of internal controls designed to provide reasonable assurance that assets are properly safeguarded and transactions are properly executed in accordance with management's authorization, and to carry out the ongoing responsibilities of management for reliable financial statements. In addition, TIAA's internal audit personnel provide a continuing review of the internal controls and operations of TIAA, and the internal auditor regularly reports to the Audit Committee of the TIAA Board of Trustees. The accompanying statutory-basis financial statements of TIAA have been audited by the independent auditing firm of Ernst & Young LLP. For the periods covered by these financial statements, all services provided by Ernst & Young LLP were limited exclusively to auditing. It is TIAA's policy that any non-audit services be obtained from a firm other than the external financial audit firm. The independent auditors' report, which appears on page five, expresses an independent opinion on the fairness of presentation of these statutory-basis financial statements. The Audit Committee of the TIAA Board of Trustees, comprised entirely of independent, nonmanagement trustees, meets regularly with management, representatives of Ernst & Young LLP and internal auditing personnel to review matters relating to financial reporting, internal controls and auditing. In addition to the annual audit of the TIAA financial statements, the New York State Insurance Department and other state insurance departments regularly examine the financial statements of TIAA as part of their periodic corporate examinations. /s/ JOHN H. BRIGGS --------------------------------- Chairman, President and Chief Executive Officer /s/ RICHARD L.GIBBS --------------------------------- Executive Vice President and Principal Accounting Officer B-44 84 [TIAA LOGO] - -------------------------------------------------------------------------------- REPORT OF THE AUDIT COMMITTEE To the Policyholders of Teachers Insurance and Annuity Association of America: The Audit Committee oversees the financial reporting process of Teachers Insurance and Annuity Association of America ("TIAA") on behalf of the Company's Board of Trustees. The Audit Committee is a standing committee of the Board and operates in accordance with a formal written charter (copies are available upon request) which describes the Audit Committee's responsibilities. All members of the Audit Committee ("Committee") are independent, as defined under the listing standards of the New York Stock Exchange. Management has the primary responsibility for TIAA's financial statements, development and maintenance of a strong system of internal controls, and compliance with applicable laws and regulations. In fulfilling its oversight responsibilities, the Committee reviewed and approved the audit plans of the internal auditing group and the independent auditing firm in connection with their respective audits. The Committee also meets regularly with the internal and independent auditors, both with and without management present, to discuss the results of their examinations, their evaluation of internal controls, and the overall quality of financial reporting. The Committee reviewed and discussed the accompanying audited financial statements with management, including a discussion of the quality and appropriateness of the accounting principles and financial reporting practices followed, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The Committee has also discussed the audited financial statements with Ernst & Young LLP, the independent auditing firm responsible for expressing an opinion on the conformity of these audited financial statements with statutory accounting principles. The discussion with Ernst & Young LLP focused on their judgments concerning the quality and appropriateness of the accounting principles and financial reporting practices followed by TIAA, the clarity of the financial statements and related disclosures, and other significant matters, such as any significant changes in accounting policies, management judgments and estimates, and the nature of any uncertainties or unusual transactions. In addition, the Committee discussed with Ernst & Young LLP the auditors' independence from management and TIAA, and has received a written disclosure regarding such independence, as required by the Independence Standards Board. Based on the review and discussions referred to above, the Committee has approved the release of the accompanying audited financial statements for publication and filing with appropriate regulatory authorities. Willard T. Carleton, Audit Committee Chair Frederick R. Ford, Audit Committee Member Leonard S. Simon, Audit Committee Member Rosalie J. Wolf, Audit Committee Member B-45 85 [ERNST & YOUNG LETTERHEAD] REPORT OF INDEPENDENT AUDITORS To the Board of Trustees of Teachers Insurance and Annuity Association of America: We have audited the accompanying statutory-basis balance sheets of Teachers Insurance and Annuity Association of America ("TIAA") as of December 31, 2000 and 1999, and the related statutory-basis statements of operations, changes in capital and contingency reserves, and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of TIAA's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As described in Note 2 to the financial statements, TIAA presents its financial statements in conformity with accounting practices prescribed or permitted by the New York State Insurance Department, which practices differ from accounting principles generally accepted in the United States. The variances between such practices and accounting principles generally accepted in the United States and the effects on the accompanying financial statements are described in Note 2. In our opinion, because of the effects of the matter described in the preceding paragraph, the financial statements referred to above do not present fairly, in conformity with accounting principles generally accepted in the United States, the financial position of TIAA at December 31, 2000 and 1999, or the results of its operations or its cash flows for each of the three years in the period ended December 31, 2000. However, in our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of TIAA at December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting practices prescribed or permitted by the New York State Insurance Department. /s/ ERNST & YOUNG LLP February 15, 2001 B-46 86 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA STATUTORY-BASIS BALANCE SHEETS (amounts in thousands)
December 31, --------------------------- 2000 1999 ------------ ------------ ASSETS Bonds...................................................... $ 80,809,152 $ 75,394,268 Mortgages.................................................. 21,952,809 21,412,239 Real estate................................................ 5,296,235 5,192,229 Stocks..................................................... 1,738,069 1,247,242 Other long-term investments................................ 3,329,278 2,116,490 Cash and short-term investments............................ 244,169 410,053 Investment income due and accrued.......................... 1,286,268 1,233,604 Separate account assets.................................... 3,408,570 2,751,054 Other assets............................................... 502,933 740,252 ------------ ------------ TOTAL ASSETS $118,567,483 $110,497,431 ============ ============ LIABILITIES, CAPITAL AND CONTINGENCY RESERVES Policy and contract reserves............................... $ 99,859,231 $ 93,869,708 Dividends declared for the following year.................. 2,197,454 2,039,605 Asset Valuation Reserve.................................... 2,870,533 2,637,779 Interest Maintenance Reserve............................... 1,118,965 1,110,349 Separate account liabilities............................... 3,408,570 2,751,054 Other liabilities.......................................... 1,015,325 1,063,508 ------------ ------------ Total Liabilities 110,470,078 103,472,003 ------------ ------------ Capital (2,500 shares of $1,000 par value common stock issued and outstanding) and paid-in surplus.............. 3,050 3,050 ------------ ------------ Contingency reserves: For group life insurance................................. -- 12,218 For investment losses, annuity and insurance mortality, and other risks....................................... 8,094,355 7,010,160 ------------ ------------ Total Contingency Reserves 8,094,355 7,022,378 ------------ ------------ Total Capital and Contingency Reserves 8,097,405 7,025,428 ------------ ------------ TOTAL LIABILITIES, CAPITAL AND CONTINGENCY RESERVES $118,567,483 $110,497,431 ============ ============
See notes to statutory-basis financial statements. B-47 87 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA STATUTORY-BASIS STATEMENTS OF OPERATIONS (amounts in thousands)
For the Years Ended December 31, --------------------------------------- 2000 1999 1998 ----------- ----------- ----------- INCOME Insurance and annuity premiums and deposits................ $ 3,228,948 $ 3,087,045 $ 2,957,870 Transfers from CREF, net................................... 572,211 752,512 1,274,152 Annuity dividend additions................................. 2,728,561 2,553,655 2,427,685 Net investment income...................................... 8,556,537 7,923,564 7,446,656 Supplementary contract considerations...................... 365,858 325,704 297,074 ----------- ----------- ----------- TOTAL INCOME $15,452,115 $14,642,480 $14,403,437 =========== =========== =========== DISTRIBUTION OF INCOME Policy and contract benefits............................... $ 2,976,305 $ 2,653,962 $ 2,413,220 Dividends.................................................. 4,315,895 4,026,907 3,844,313 Increase in policy and contract reserves................... 5,991,167 6,100,240 6,636,704 Operating expenses......................................... 356,975 335,039 327,085 Transfers to separate accounts, net........................ 527,255 490,880 487,976 Federal income tax expense (benefit)....................... 24,048 (25,213) (11,854) Other, net................................................. (18,442) (11,437) (4,639) Increase in contingency reserves........................... 1,278,912 1,072,102 710,632 ----------- ----------- ----------- TOTAL DISTRIBUTION OF INCOME $15,452,115 $14,642,480 $14,403,437 =========== =========== ===========
See notes to statutory-basis financial statements. B-48 88 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA STATUTORY-BASIS STATEMENTS OF CHANGES IN CAPITAL AND CONTINGENCY RESERVES (amounts in thousands)
For the Years Ended December 31, ------------------------------------ 2000 1999 1998 ---------- ---------- ---------- CHANGES IN CAPITAL AND CONTINGENCY RESERVES From operations............................................ $1,278,912 $1,072,102 $ 710,632 Net realized capital gains on investments.................. 104,949 282,079 394,727 Net unrealized capital gains (losses) on investments....... 123,349 (112,613) (171,049) Transfers to the Interest Maintenance Reserve.............. (161,865) (330,107) (264,997) Transfers to the Asset Valuation Reserve................... (232,754) (183,656) (115,481) Increase in non-admitted assets, other than investments................................... (40,614) (25,586) (17,829) Change in valuation basis of policy reserves............... -- -- 8,671 Stockholder dividend....................................... -- (550) -- Contribution to paid-in surplus............................ -- 550 -- Other, net................................................. -- -- 1,960 ---------- ---------- ---------- NET CHANGE IN CAPITAL AND CONTINGENCY RESERVES 1,071,977 702,219 546,634 CAPITAL AND CONTINGENCY RESERVES AT BEGINNING OF YEAR 7,025,428 6,323,209 5,776,575 ---------- ---------- ---------- CAPITAL AND CONTINGENCY RESERVES AT END OF YEAR $8,097,405 $7,025,428 $6,323,209 ========== ========== ==========
See notes to statutory-basis financial statements. B-49 89 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA STATUTORY-BASIS STATEMENTS OF CASH FLOWS (amounts in thousands)
For the Years Ended December 31, --------------------------------------- 2000 1999 1998 ----------- ----------- ----------- CASH PROVIDED By operating activities: Insurance and annuity premiums, deposits and other considerations..................... $ 3,586,141 $ 3,408,713 $ 3,254,238 Transfers from CREF, net................................. 572,211 752,512 1,274,152 Annuity dividend additions............................... 2,728,562 2,553,651 2,427,685 Investment income, net................................... 8,378,040 7,692,392 7,338,368 ----------- ----------- ----------- Total Receipts 15,264,954 14,407,268 14,294,443 ----------- ----------- ----------- Policy and contract benefits............................. 2,993,038 2,655,772 2,410,824 Dividends................................................ 4,158,047 3,910,764 3,699,582 Operating expenses....................................... 353,859 325,039 311,460 Federal income tax expense (benefit)..................... 2,168 (43,713) 506 Transfers to separate accounts, net...................... 526,334 492,504 486,945 Separate account seed money redemptions.................. -- -- (76,666) Other, net............................................... (139,862) 183,783 494 ----------- ----------- ----------- Total Disbursements 7,893,584 7,524,149 6,833,145 ----------- ----------- ----------- Cash Provided by Operating Activities 7,371,370 6,883,119 7,461,298 ----------- ----------- ----------- By financing activities: Stockholder dividend..................................... -- (550) -- Contribution to paid-in surplus.......................... -- 550 -- ----------- ----------- ----------- Cash Provided by Financing Activities -- -- -- ----------- ----------- ----------- By investing activities: Sales and redemptions of bonds and stocks................ 10,427,498 10,428,890 9,781,071 Sales and repayments of mortgage principal............... 2,894,511 3,716,069 2,129,896 Sales of real estate..................................... 708,838 1,500,916 834,298 Other, net............................................... 739,325 448,429 279,097 ----------- ----------- ----------- Cash Provided by Investing Activities 14,770,172 16,094,304 13,024,362 ----------- ----------- ----------- TOTAL CASH PROVIDED 22,141,542 22,977,423 20,485,660 ----------- ----------- ----------- DISBURSEMENTS FOR NEW INVESTMENTS Investments acquired: Bonds and stocks......................................... 16,082,049 16,695,529 15,298,648 Mortgages................................................ 3,508,065 4,894,308 3,704,940 Real estate.............................................. 978,864 590,720 351,109 Other, net............................................... 1,738,448 898,779 797,849 ----------- ----------- ----------- TOTAL DISBURSEMENTS FOR NEW INVESTMENTS 22,307,426 23,079,336 20,152,546 ----------- ----------- ----------- INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS (165,884) (101,913) 333,114 CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF YEAR 410,053 511,966 178,852 ----------- ----------- ----------- CASH AND SHORT-TERM INVESTMENTS AT END OF YEAR $ 244,169 $ 410,053 $ 511,966 =========== =========== ===========
See notes to statutory-basis financial statements. B-50 90 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS December 31, 2000 NOTE 1--ORGANIZATION Teachers Insurance and Annuity Association of America ("TIAA") was established as a legal reserve life insurance company under the insurance laws of the State of New York in 1918. Its purpose is to aid and strengthen nonprofit educational and research organizations, governmental entities and other nonprofit institutions by providing retirement and insurance benefits for their employees and their families, and by counseling these organizations and their employees on benefit plans and other measures of economic security. All of the outstanding common stock of TIAA is collectively held by the TIAA Board of Overseers, a nonprofit corporation created solely for the purpose of holding the stock of TIAA. NOTE 2--SIGNIFICANT ACCOUNTING POLICIES TIAA's statutory-basis financial statements have been prepared on the basis of statutory accounting practices prescribed or permitted by the New York State Insurance Department ("Department"), a comprehensive basis of accounting that differs from accounting principles generally accepted in the United States ("GAAP"). (Refer to the separate sections, entitled "Permitted Statutory Accounting Practices" and "Accounting Principles Generally Accepted in the United States", within this note and Note 14--Codification.) The preparation of TIAA's financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Actual results could differ from those estimates. The following is a summary of the significant accounting policies consistently followed by TIAA. VALUATION OF INVESTMENTS: Bonds and short-term investments (debt securities with maturities of one year or less at the time of acquisition) not in default are generally stated at amortized cost; medium to highest quality preferred stocks at cost; common stocks at market value; and all other bond, short-term and preferred stock investments at the lower of amortized cost or market value. For loan-backed bonds and structured securities, amortized cost is determined using actual and anticipated cash flows under the prospective method for interest-only securities and under the retrospective method for all other securities. Anticipated prepayments are based on life-to-date prepayment speeds, using historical cash flows, and internal estimates. Mortgages are stated at amortized cost and directly-owned real estate at depreciated cost (net of encumbrances). Investments in wholly-owned subsidiaries, real estate limited partnerships and securities limited partnerships are stated at TIAA's equity in the net admitted assets of the underlying entities. Policy loans are stated at outstanding principal amounts. Separate account assets are generally stated at market value. Seed money investments in the TIAA-CREF Mutual Funds, TIAA-CREF Institutional Mutual Funds and TIAA-CREF Life funds are stated at market value. All investments are stated net of any permanent impairments, which are determined on an individual asset basis. Depreciation is generally computed over a 40 year period on the constant yield method for properties acquired prior to 1991 and on the straight-line method for properties acquired thereafter. ACCOUNTING FOR INVESTMENTS: Investment transactions are accounted for as of the date the investments are purchased or sold (trade date) for publicly traded common stocks and as of the date the investment transactions are settled (settlement date) for all other investments. Realized capital gains and losses on investment transactions are accounted for under the specific identification method. FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION: Investments denominated in foreign currencies and foreign currency contracts are valued in U.S. dollars, based on exchange rates at the end of the period. Investment transactions in foreign currencies are recorded at the exchange rates prevailing on the respective transaction dates. All other asset and liability accounts that are denominated in foreign currencies are adjusted to reflect exchange rates at the end of the period. Realized and unrealized gains and losses due to foreign exchange transactions, and those due to translation adjustments, are not separately reported and are reflected in realized and unrealized capital gains and losses, respectively. SECURITIES LENDING: TIAA has a securities lending program whereby it loans securities to qualified brokers in exchange for cash collateral, generally at least equal to 102% of the market value of the securities loaned. When securities are loaned, TIAA receives additional income on the collateral and continues to receive income on the securities loaned. The collateral liability is netted against the balance sheet caption, "Cash and short-term investments". TIAA may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should a borrower of securities fail to return the securities in a timely manner. In order to minimize this risk, TIAA monitors the credit quality of its counterparties. FOREIGN CURRENCY SWAP CONTRACTS: TIAA enters into foreign currency swap contracts to exchange fixed and variable amounts of foreign currency at specified future dates and at specified rates (in U.S. dollars) to hedge against currency risks on investments denominated B-51 91 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED) NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) in foreign currencies. Changes in the value of the contracts related to foreign currency exchange rates are recognized at the end of the period as unrealized gains or losses. Foreign currency swap contracts incorporate a series of swap transactions which result in the exchange of TIAA's fixed and variable foreign currency cash flows into fixed amounts of U.S. dollar cash flows. Foreign currency swap contracts are entered into directly with a counterparty and TIAA is exposed to the risk of default of such counterparty, although TIAA does not anticipate non-performance by any of its counterparties. The maximum potential loss from such risk is equal to the change in the value of the foreign currency swap during the term of the contract. In order to minimize the risk associated with potential counterparty default, TIAA monitors the credit quality of its counterparties. FOREIGN CURRENCY FORWARD CONTRACTS: TIAA enters into foreign currency forward contracts to exchange fixed amounts of foreign currency at specified future dates and at specified rates (in U.S. dollars) to hedge against currency risks on investments denominated in foreign currencies. Changes in the value of the contracts related to foreign currency exchange rates are recognized at the end of the period as unrealized gains or losses. Forward contracts incorporate one swap transaction which results in the exchange of TIAA's fixed foreign currency cash flows into a fixed amount of U.S. dollar cash flows. A foreign exchange premium (discount) is recorded at the time the contract is opened, and it is calculated based on the difference between the forward exchange rate and the spot rate. TIAA amortizes the foreign exchange premium (discount) into investment income over the life of the forward contract, or at the settlement date if the forward contract is less than a year. TIAA is subject to counterparty credit risk upon entering into foreign currency forward contracts and monitors that risk, as discussed above for foreign currency swap contracts. INTEREST RATE SWAP CONTRACTS: TIAA enters into interest rate swap contracts to hedge against the effect of interest rate fluctuations on certain variable interest rate bonds. These contracts allow TIAA to lock in a fixed interest rate and to transfer the risk of higher or lower interest rates. TIAA also enters into interest rate swap contracts to exchange the cash flows on certain fixed interest rate bonds into variable interest rate cash flows in connection with certain interest sensitive products. Payments received and payments made under interest rate swap contracts are reflected in net investment income. Interest rate swap contracts subject TIAA to credit risk should the counterparties not perform according to the terms of the contracts. However, the maximum potential loss from such credit risk is less than the par value of the related notes, and TIAA does not anticipate non-performance by any of its counterparties. In order to minimize the risk associated with potential counterparty default, TIAA monitors the credit quality of its counterparties. SWAP OPTIONS: TIAA writes (sells) swap options on selected bonds to hedge against the effect of interest rate fluctuations as part of TIAA's asset and liability management program. Swap options give the holder the right, but not the obligation, to enter into an interest rate swap contract with TIAA where TIAA would pay a fixed interest rate and would receive a variable interest rate on a specified notional amount. When a swap option is written, the premium received is recorded as a liability. Because the swap options written by TIAA expire within one year of their inception date, the premium is recognized as investment income at the earlier of the exercise date or the expiration of the swap option. TIAA would be exposed to counterparty credit risk upon entering into an interest rate swap contract and monitors that risk, as discussed above. INTEREST RATE CAP CONTRACTS: TIAA purchases interest rate cap contracts to hedge against the risk of a rising interest rate environment as part of TIAA's asset and liability management program. Under the terms of the interest rate cap contracts, the selling entity makes payments to TIAA on a specified notional amount if an agreed-upon index exceeds a predetermined strike rate. Such payments received under interest rate cap contracts are recognized as investment income. When an interest rate cap contract is purchased, the premium paid is recorded as an asset, and the premium is amortized into investment expense over the life of the cap. TIAA would be subject to counterparty credit risk if the index exceeds the predetermined strike rate, causing a payment to be payable to TIAA. In order to minimize the risk associated with potential counterparty default, TIAA monitors the credit quality of its counterparties. NON-ADMITTED ASSETS: Certain investment balances and corresponding investment income due and accrued are designated as non-admitted assets by the Department, based on delinquencies, defaults, and other statutory criteria, and, cannot be included in life insurance company balance sheets filed with the Department. Such investment-related non-admitted assets totaled approximately $465,614,000 and $450,804,000 at December 31, 2000 and 1999, respectively. Income on bonds in default is not accrued and, therefore, is not included in the non-admitted totals. Certain non-investment assets, such as furniture and fixtures and various receivables, are also designated as non-admitted assets. Such non-admitted assets approximated $262,186,000 at December 31, 2000 and $221,573,000 at December 31, 1999. Changes in such non-admitted assets are charged or credited directly to contingency reserves. B-52 92 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED) NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) POLICY AND CONTRACT RESERVES: TIAA offers a range of group and individual retirement annuities and group and individual life and other insurance products. Policy and contract reserves for such products are determined in accordance with standard valuation methods approved by the Department and are computed in accordance with standard actuarial formulae. The reserves established utilize assumptions for interest (at an average rate of approximately 3%), mortality and other risks insured. Such reserves establish a sufficient provision for all contractual benefits guaranteed under policy and contract provisions. DIVIDENDS DECLARED FOR THE FOLLOWING YEAR: Dividends on insurance policies and pension annuity contracts in the payout phase are generally declared by the TIAA Board of Trustees ("Board") in November of each year, and such dividends are credited to policyholders in the following calendar year. Dividends on pension annuity contracts in the accumulation phase are generally declared by the Board in February of each year and such dividends on the various existing vintages of pension annuity contracts in the accumulation phase are credited to policyholders during the ensuing twelve month period beginning March 1. ASSET VALUATION RESERVE: The Asset Valuation Reserve ("AVR"), which covers all invested asset classes, is an explicit liability reserve required by the National Association of Insurance Commissioners ("NAIC") and is intended to provide for potential future credit and equity losses. Reserve components of the AVR are maintained for bonds, stocks, mortgages, real estate and other invested assets. Realized and unrealized credit and equity capital gains and losses, net of capital gains taxes, are credited to or charged against the related components of the AVR. Formula calculations determine the required contribution amounts for each component, and insurance companies may also make voluntary contributions to any component; however, the resulting ending balance can not exceed the computed maximum reserve for that component. Any computed excess amounts are eliminated through transfers to other components or adjustments down to the maximum reserve amounts. Contributions and adjustments to the AVR are reported as transfers to or from contingency reserves. INTEREST MAINTENANCE RESERVE: The Interest Maintenance Reserve ("IMR") is a liability reserve required by the NAIC which accumulates realized capital gains and losses resulting from interest rate fluctuations. Such capital gains and losses are amortized out of the IMR, under the grouped method of amortization, as an adjustment to net investment income over the remaining lives of the assets sold. CONTINGENCY RESERVES: By charter, TIAA operates without profit to the corporation or its sole shareholder, the TIAA Board of Overseers. As a result, all contingency reserves are held solely to provide benefits in accordance with TIAA's charter purpose. In 1999, TIAA paid a dividend of $550,000 to the TIAA Board of Overseers. This amount was recontributed as paid-in surplus. This was done to satisfy a regulatory licensing requirement. FEDERAL INCOME TAXES: TIAA is a nonprofit organization and, through December 31, 1997, was exempt from federal income taxation under the Internal Revenue Code ("Code"). Any non-pension related income, however, was subject to federal income taxation as unrelated business income. Effective January 1, 1998, as a result of federal legislation, TIAA is no longer exempt from federal income taxation and is taxed as a stock life insurance company. Beginning with 1998, TIAA files a consolidated federal income tax return with its subsidiary affiliates. The tax sharing agreement follows the current reimbursement method, whereby members of the consolidated group will generally be reimbursed for their losses on a pro-rata basis by other members of the group to the extent that they have taxable income, subject to limitations imposed under the Code. The federal income tax provisions included in the accompanying statements of operations are based on taxes actually paid or recovered or anticipated to be paid or recovered. The income tax expense (benefit) of $24,048,000, $(25,213,000) and $(11,854,000) for 2000, 1999 and 1998 respectively, reflected in the accompanying statements of operations are the amounts that are payable or receivable under such tax sharing agreement. TIAA reported a net tax loss for 1998 and 1999 and expects to report a net tax loss for 2000, due to required increases in policy and contract reserves computed for tax reporting purposes in accordance with the requirements of the Code, as well as deductions related to certain assets. The reserve increases will reverse over time, thereby increasing TIAA's taxable income in future years. Under the Code, tax loss carryforwards will generally expire after fifteen years, if not previously used, and capital loss carryforwards will expire in five years, if not previously used. PERMITTED STATUTORY ACCOUNTING PRACTICES: Statutory accounting practices prescribed by the Department include accounting requirements contained in New York State Insurance Laws and Regulations as well as in the NAIC Accounting Practices and Procedures Manual (the "Manual") and other publications. Permitted statutory accounting practices encompass all accounting practices which are allowed by the Department but which are not prescribed. The Department permits TIAA to follow certain reporting and disclosure conventions reflected in these statutory-basis financial statements. Such reporting and disclosure conventions include the following: (i) the classification of real estate subsidiaries and real estate limited partnerships in the "Real estate" caption in the accompanying balance sheets, (ii) the B-53 93 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED) NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--(CONCLUDED) netting of securities lending collateral against the "Cash and short-term investments" caption in the accompanying balance sheets, (iii) the preceding federal income taxes disclosure, and (iv) the recognition of permanent impairments of individual assets. ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES: The Financial Accounting Standards Board ("FASB") requires that financial statements that are intended to be in conformity with GAAP should follow all applicable authoritative accounting pronouncements. As a result, TIAA cannot refer to financial statements prepared in accordance with statutory accounting practices as having been prepared in accordance with GAAP. The differences between accounting principles generally accepted in the United States and statutory accounting practices would have a material effect on TIAA's financial statements, and the primary differences can be summarized as follows. Under GAAP: - - The AVR is eliminated and valuation allowances are established as contra assets based on asset-specific analyses rather than the formula-based AVR being reflected as a liability reserve; - - The IMR is eliminated and realized gains and losses resulting from interest rate fluctuations are reported as a component of net income rather than being accumulated in and subsequently amortized out of the IMR; - - Dividends on insurance policies and annuity contracts are accrued as the necessary earnings emerge from operations rather than being accrued in the year when they are declared; - - The "non-admitted" asset designation is not utilized; - - Policy acquisition costs are deferred and amortized over the lives of the policies issued rather than being charged to operations as incurred; - - Policy and contract reserves are based on estimates of expected mortality and interest rather than being based on statutory mortality and interest requirements; - - Investments in wholly-owned subsidiaries are consolidated in the parent's financial statements rather than being carried at the parent's equity in the net assets of the subsidiaries; - - Long-term bond investments considered to be "available for sale" are carried at fair value rather than at amortized cost; - - Deferred tax assets and liabilities are determined based on the differences between the financial statement amounts and the tax bases of assets and liabilities rather than not being recognized. - - For purposes of calculating the postretirement benefit obligation, active participants not currently eligible would also be included. Management believes that the effects of these differences would increase TIAA's total capital if GAAP were implemented. RECLASSIFICATIONS: Certain amounts in the 1999 and 1998 financial statements have been reclassified to conform with the 2000 presentation. B-54 94 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED) NOTE 3--INVESTMENTS SECURITIES INVESTMENTS: At December 31, 2000 and 1999, the carrying values (balance sheet amounts) and estimated market values of long-term bond investments, and the gross unrealized gains and losses with respect to such market values, are shown below:
GROSS GROSS CARRYING UNREALIZED UNREALIZED ESTIMATED VALUE GAINS LOSSES MARKET VALUE --------------- -------------- --------------- --------------- December 31, 2000 - ----------------- U.S. Treasury securities and obligations of U.S. government agencies and corporations.......... $ 25,921,194 $ 9,949,135 $ -- $ 35,870,329 Debt securities issued by foreign governments........................ 2,077,615,275 175,945,808 (24,480,272) 2,229,080,811 Corporate securities................. 39,185,016,604 875,106,469 (1,253,132,070) 38,806,991,003 Mortgage-backed securities........... 22,048,637,743 957,430,764 (166,716,404) 22,839,352,103 Asset-backed securities.............. 17,471,960,984 360,740,896 (488,944,947) 17,343,756,933 --------------- -------------- --------------- --------------- Total................. $80,809,151,800 $2,379,173,072 $(1,933,273,693) $81,255,051,179 =============== ============== =============== =============== December 31, 1999 - ----------------- U.S. Treasury securities and obligations of U.S. government agencies and corporations.......... $ 24,001,927 $ 4,768,518 $ (9,636) $ 28,760,809 Debt securities issued by foreign governments........................ 1,998,851,102 136,709,413 (38,121,907) 2,097,438,608 Corporate securities................. 36,859,895,277 570,889,898 (1,590,960,444) 35,839,824,731 Mortgage-backed securities........... 20,891,933,456 252,833,375 (851,223,861) 20,293,542,970 Asset-backed securities.............. 15,619,586,502 64,165,497 (1,003,669,811) 14,680,082,188 --------------- -------------- --------------- --------------- Total................. $75,394,268,264 $1,029,366,701 $(3,483,985,659) $72,939,649,306 =============== ============== =============== ===============
At December 31, 2000 and 1999, approximately 93.1% and 93.9%, respectively, of the long-term bond portfolio was comprised of investment grade securities. At December 31, 2000, outstanding forward commitments for future long-term bond and equity investments approximated $2,128,446,000. Of this, $1,055,439,000 is scheduled for disbursement in 2001, $536,727,000 in 2002, $274,223,000 in 2003 and $262,057,000 in later years. The funding of bond commitments is contingent upon the continued favorable financial performance of the potential borrowers. Debt securities amounting to approximately $2,594,000 and $2,574,000 at December 31, 2000 and 1999, respectively, were on deposit with governmental authorities or trustees, as required by law. The carrying values and estimated market values of long-term bond investments at December 31, 2000, by contractual maturity, are shown below:
CARRYING ESTIMATED VALUE MARKET VALUE --------------- --------------- Due in one year or less.................................... $ 782,701,599 $ 787,102,442 Due after one year through five years...................... 10,074,511,531 10,125,742,010 Due after five years through ten years..................... 12,389,418,833 12,415,710,424 Due after ten years........................................ 18,041,921,110 17,743,387,267 --------------- --------------- Subtotal.......................... 41,288,553,073 41,071,942,143 Mortgage-backed securities................................. 22,048,637,743 22,839,352,103 Asset-backed securities.................................... 17,471,960,984 17,343,756,933 --------------- --------------- Total........................... $80,809,151,800 $81,255,051,179 =============== ===============
B-55 95 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED) NOTE 3--INVESTMENTS--(CONTINUED) Bonds not due at a single maturity date have been included in the preceding table based on the year of final maturity. Actual maturities may differ from contractual maturities because borrowers may have the right to prepay obligations, although prepayment premiums may be applicable. At December 31, 2000 and 1999, the carrying values of long-term bond investments were diversified by industry classification as follows:
2000 1999 ----- ----- Mortgage-backed securities................................. 27.3% 27.7% Asset-backed securities.................................... 12.1 12.0 Manufacturing.............................................. 11.7 11.9 Commercial mortgage-backed securities...................... 9.5 8.7 Finance and financial services............................. 9.4 9.0 Public utilities........................................... 7.6 8.4 Communications............................................. 4.1 3.8 Oil and gas................................................ 3.4 3.6 Retail and wholesale trade................................. 3.2 3.5 Government................................................. 2.9 3.0 Real estate investment trusts.............................. 2.1 2.3 Other...................................................... 6.7 6.1 ----- ----- Total........................... 100.0% 100.0% ===== =====
The approximate carrying values and market values of debt securities loaned, and the cash collateral received in connection therewith, were as follows:
CARRYING VALUE MARKET VALUE CASH COLLATERAL -------------- -------------- --------------- December 31, 2000.......................................... $2,189,502,000 $2,283,079,000 $2,333,054,000 December 31, 1999.......................................... $2,321,999,000 $2,303,125,000 $2,380,927,000
At December 31, 2000 and 1999, TIAA had interest rate swap contracts outstanding with a total notional value of $416,181,000 and $388,411,000, respectively. At December 31, 2000 and 1999, TIAA had foreign currency swap contracts outstanding with a total notional value of approximately $1,020,545,000 and $891,159,000, respectively. The unrealized gains (losses) on foreign currency swap contracts outstanding were approximately $57,247,000, $25,575,000 and $(6,511,000), at December 31, 2000, 1999, and 1998, respectively. At December 31, 2000 and 1999, TIAA had foreign currency forward contracts outstanding with a total notional value of approximately $203,113,000 and 230,259,000, respectively, and the unamortized value of the premiums was approximately $4,827,000 and $16,952,000, respectively. The unrealized gains on the forward contracts outstanding were approximately $5,745,000, $20,395,000, and $1,143,000, at December 31, 2000, 1999, and 1998, respectively. At December 31, 2000, and 1999, TIAA had swap options outstanding with a total notional value of $219,100,000 and $54,000,000, respectively and the unamortized value of the premiums was approximately $823,000 and $511,000, at December 31, 2000 and 1999, respectively. The interest rate swap contracts created from the exercise of the swap options are reflected in the aggregate totals for the interest rate swap contracts disclosed in the related paragraph above. At December 31, 2000 and 1999, TIAA had interest rate cap contracts outstanding with a total notional value of $145,650,000 and $137,550,000, respectively, and the unamortized value of the premiums was approximately $959,000 and $658,000, respectively. MORTGAGE LOAN INVESTMENTS: TIAA makes mortgage loans that are principally collateralized by commercial real estate. TIAA's mortgage underwriting standards generally result in first mortgage liens on completed income-producing properties for which the loan-to-value ratio at the time of closing generally ranges between 65% and 75%. TIAA employs a system to monitor the effects of current and expected market conditions and other factors on the collectibility of mortgage loans. This system is utilized to identify and quantify any B-56 96 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED) NOTE 3--INVESTMENTS--(CONTINUED) permanent impairments in value. The range of coupon rates for mortgage loans issued during 2000 was from 7.00% to 9.00%. At December 31, 2000 and 1999, TIAA's mortgage portfolio included loans totaling approximately $63,914,000 and $312,251,000, respectively, which were collateralized by real estate with prior liens not held by TIAA. At December 31, 2000 and 1999, the carrying values of mortgage loan investments were diversified by property type and geographic region as follows:
2000 1999 ----- ----- Property Type - ------------- Office building............................................ 40.9% 39.4% Shopping centers........................................... 27.6 29.3 Industrial buildings....................................... 9.5 7.7 Mixed-use projects......................................... 9.1 10.4 Apartments................................................. 6.8 7.3 Hotel...................................................... 4.0 3.4 Other...................................................... 2.1 2.5 ----- ----- Total........................... 100.0% 100.0% ===== ===== Geographic Region - ----------------- Pacific.................................................... 24.1% 23.6% South Atlantic............................................. 22.1 20.5 North Central.............................................. 19.9 21.2 Middle Atlantic............................................ 10.2 9.3 South Central.............................................. 8.3 8.7 Mountain................................................... 7.7 7.2 New England................................................ 7.4 9.3 Other...................................................... 0.3 0.2 ----- ----- Total........................... 100.0% 100.0% ===== =====
At December 31, 2000 and 1999, approximately 19% and 18%, respectively, of the mortgage portfolio was invested in California and is included in the Pacific region shown above. At December 31, 2000, the contractual maturity schedule of mortgage loans is shown below:
CARRYING VALUE --------------- Due in one year or less.................................... $ 463,393,808 Due after one year through five years...................... 5,379,644,552 Due after five years through ten years..................... 13,329,641,284 Due after ten years........................................ 2,780,128,967 --------------- Total........................... $21,952,808,611 ===============
Actual maturities may differ from contractual maturities because borrowers may have the right to prepay mortgage loans, although prepayment premiums may be applicable. At December 31, 2000, outstanding forward commitments for future mortgage loan investments approximated $1,148,985,000. Of this, $770,443,000 is scheduled for disbursement in 2001 and $378,542,000 in later years. The funding of mortgage loan commitments is contingent upon the underlying properties meeting specified requirements, including construction, leasing and occupancy. At December 31, 2000, 1999 and 1998, the aggregate carrying values of mortgages with restructured or modified terms, as defined by GAAP, were approximately $37,300,000, $43,489,000, and $44,153,000, respectively. For the years ended December 31, 2000, 1999 and B-57 97 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED) NOTE 3--INVESTMENTS--(CONTINUED) 1998, the investment income earned on such mortgages was approximately $(4,628,000), $809,000, and $7,381,000, respectively, which would have been approximately $3,887,000, $4,950,000, and $5,030,000, respectively, if they had performed in accordance with their original terms. When restructuring mortgage loans, TIAA generally requires participation features, yield maintenance stipulations, and/or the establishment of property-specific escrow accounts funded by the borrowers. REAL ESTATE INVESTMENTS: TIAA makes investments in commercial real estate directly, through wholly-owned subsidiaries and through real estate limited partnerships. TIAA employs a system to monitor the effects of current and expected market conditions and other factors on the realizability of real estate investments. This system is utilized to identify and quantify any permanent impairments in value. At December 31, 2000 and 1999, the carrying values of real estate investments were diversified by property type and geographic region as follows:
2000 1999 ----- ----- Property Type - ------------- Office buildings........................................... 67.1% 65.2% Shopping centers........................................... 9.4 10.4 Mixed-use projects......................................... 5.3 6.2 Industrial buildings....................................... 4.0 3.3 Income-producing land underlying improved real estate...... 3.4 3.0 Land held for future development........................... 3.3 3.9 Apartments................................................. 0.1 0.4 Other...................................................... 7.4 7.6 ----- ----- Total........................... 100.0% 100.0% ===== ===== Geographic Region - ----------------- South Atlantic............................................. 27.7% 26.8% North Central.............................................. 26.5 25.4 Pacific.................................................... 14.5 16.5 South Central.............................................. 8.2 9.0 Middle Atlantic............................................ 5.4 8.8 Mountain................................................... 3.2 3.6 New England................................................ 1.0 1.1 Other...................................................... 13.5 8.8 ----- ----- Total........................... 100.0% 100.0% ===== =====
At December 31, 2000 and 1999, approximately 14% of the real estate portfolio was invested in Florida and approximately 11% was invested in California. Florida is included in the South Atlantic region and California is included in the Pacific region. At December 31, 2000, outstanding forward commitments for future real estate investments approximated $198,928,000. Under these commitments, it is estimated that $179,231,000 will be disbursed in 2001 and $19,697,000 in later years. The funding of real estate investment commitments is contingent upon the properties meeting specified requirements, including construction, leasing and occupancy. Depreciation expense on real estate investments was approximately $164,844,000, $179,605,000, and $176,237,000 for the years ended December 31, 2000, 1999 and 1998, respectively; the amount of accumulated depreciation at December 31, 2000 and 1999 was approximately $918,317,000 and $799,927,000, respectively. B-58 98 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED) NOTE 3--INVESTMENTS--(CONTINUED) ASSET VALUATION RESERVE: The AVR balances at December 31, 2000 and 1999 were comprised of the following asset-specific reserves:
2000 1999 -------------- -------------- Bonds and preferred stocks................................. $ 824,796,467 $ 701,676,744 Mortgages.................................................. 966,080,296 1,106,387,507 Real estate................................................ 455,182,391 502,041,173 Common stocks.............................................. 226,038,438 238,268,926 Other invested assets...................................... 398,435,894 89,404,877 -------------- -------------- Total........................... $2,870,533,486 $2,637,779,227 ============== ==============
SECURITIZATIONS: When TIAA sells bonds and mortgage loans in a securitization transaction, it may retain interest-only strips, one or more subordinated tranches, or servicing rights, all of which are retained interests in the securitized receivables. Gain or loss on a sale, net of transaction costs, is, in part, determined by allocating the previous carrying amount of the financial assets involved in the transfer between the assets sold and the retained interests, based on their relative fair values at the date of the transfer. Quoted market prices are used, if available. However, quotes are generally not available for retained interests, so TIAA generally estimates fair value based on the present value of future expected cash flows using management's best estimates of future credit losses, forward yield curves, and discount rates that are commensurate with the risks involved. During 2000, TIAA sold bonds in two securitization transactions in which TIAA retained subordinated interests. TIAA recognized a pretax loss of approximately $757,000 on the securitization of approximately $1.4 billion (principal amount) of bonds. The proceeds from the two securitizations and the fair value of the retained interests totaled approximately $1,284,000,000 and $162,103,000, respectively. The fair values of the residual interests in the securitization transactions were calculated by discounting the estimated future cash flows. The discount rates used ranged from 11% to 20%. An adverse 10% and 20% change in the discount rate would negatively impact the fair value of the retained interests by approximately $5,562,000 and $10,556,000, respectively, at December 31, 2000. TIAA also retained the rights to future cash flows that may arise after investors in the securitizations have received their contracted returns. Investors in the securitizations have no recourse to TIAA's other assets if the bonds that were securitized fail to pay when due. In one of these transactions, TIAA retained servicing responsibilities and will receive servicing fees of approximately .1%, per annum, on the outstanding principal balance of the collateral pools. During 1999, TIAA sold commercial mortgages with a principal balance of $893,460,000 in a securitization transaction in which TIAA retained subordinated interests with a fair value of approximately $428,486,000. The key assumptions used in measuring the fair value of the retained interests included an anticipated credit loss of approximately .3% and a discount rate of 7%. An adverse 10% and 20% change in the credit loss assumption would have a negative impact of approximately $831,000 and $2,018,000, respectively, on the fair value of the retained interests at December 31, 2000. An adverse 10% and 20% change in the discount factor would negatively impact the fair value of the retained interest by approximately $9,231,000 and $18,483,000, respectively, at December 31, 2000. B-59 99 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED) NOTE 3--INVESTMENTS--(CONCLUDED) The following table presents quantitative information about delinquencies, net credit losses, and components of securitized financial assets and other assets managed together with them:
TOTAL PRINCIPAL PRINCIPAL AMOUNT OF LOANS NET CREDIT LOSS AMOUNT OF LOANS 60 DAYS OR MORE PAST DUE DURING THE YEAR -------------------------- ------------------------- ----------------- AT DECEMBER 31 (AMOUNTS IN THOUSANDS) ------------------------------------------------------ 2000 1999 2000 1999 2000 1999 ------------ ----------- ----------- ----------- ------- ------- Type of Loan Bonds................................ $ 84,049,926 $77,030,941 $ -- $ -- $ -- $ -- Mortgages............................ 22,556,129 21,911,860 28,384 59,712 63,681 46,738 ------------ ----------- ------- ------- ------- ------- Total Loans managed or securitized... 106,606,055 98,942,801 $28,384 $59,712 $63,681 $46,738 ======= ======= ======= ======= Less: Loans securitized.................. 1,848,780 486,499 Loans held for sale or securitization................... -- -- ------------ ----------- Loans held in portfolio.............. $104,757,275 $98,456,302 ============ ===========
NOTE 4--INVESTMENT INCOME AND CAPITAL GAINS AND LOSSES NET INVESTMENT INCOME: For the years ended December 31, 2000, 1999 and 1998, the components of net investment income were as follows:
2000 1999 1998 -------------- -------------- -------------- GROSS INVESTMENT INCOME: Bonds.............................. $6,158,290,900 $5,775,161,816 $5,441,796,398 Mortgages.......................... 1,664,704,684 1,699,019,031 1,569,281,835 Real estate (net of property expenses, taxes and depreciation)................... 523,965,325 282,344,126 275,402,304 Stocks............................. 101,520,278 92,223,815 82,871,728 Other long-term investments........ 138,413,626 58,021,764 46,399,969 Cash and short-term investments.... 32,816,610 22,452,106 59,637,401 Other.............................. (650,251) 8,703,697 4,430,354 -------------- -------------- -------------- Total................ 8,619,061,172 7,937,926,355 7,479,819,989 Less investment expenses............. (215,773,092) (170,761,251) (142,791,775) -------------- -------------- -------------- Net investment income before amortization of net IMR gains...... 8,403,288,080 7,767,165,104 7,337,028,214 Plus amortization of net IMR gains... 153,248,647 156,399,394 109,627,953 -------------- -------------- -------------- Net investment income................ $8,556,536,727 $7,923,564,498 $7,446,656,167 ============== ============== ==============
Participation income received on securities, mortgages and real estate included in the above table was approximately $12,566,000, $14,112,000, and $12,512,000 in 2000, 1999 and 1998, respectively. The net earned rates of investment income on total invested assets (computed as net investment income before amortization of net IMR gains divided by mean invested assets) were 7.91%, 7.82% and 7.95% in 2000, 1999 and 1998, respectively. Future rental income expected to be received during the next five years under existing real estate leases in effect as of December 31, 2000 is approximately $579,288,000 in 2001, $525,815,000 in 2002, $433,984,000 in 2003, $361,944,000 in 2004 and $274,686,000 in 2005. B-60 100 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED) NOTE 4--INVESTMENT INCOME AND CAPITAL GAINS AND LOSSES--(CONCLUDED) REALIZED CAPITAL GAINS AND LOSSES: For the years ended December 31, 2000, 1999 and 1998, the net realized capital gains (losses) on sales, redemptions and writedowns of investments were as follows:
2000 1999 1998 ------------ ------------ ------------ Bonds................................ $ 67,168,839 $ 65,207,048 $398,363,008 Mortgages............................ (18,620,911) (22,897,373) (50,492,383) Real estate.......................... (14,419,646) 136,719,085 76,983,899 Stocks............................... 29,163,435 46,209,893 15,778,492 Other long-term investments.......... 40,797,748 49,549,108 (49,832,409) Cash and short-term investments...... 859,571 1,471,501 3,926,077 ------------ ------------ ------------ Total realized gains before capital gains tax.......................... 104,949,036 276,259,262 394,726,684 Capital gains tax benefit............ -- 5,819,369 -- ------------ ------------ ------------ Total................. $104,949,036 $282,078,631 $394,726,684 ============ ============ ============
Writedowns of investments resulting from permanent impairments and mortgage foreclosures, reflected in the preceding table as realized capital losses, were as follows:
2000 1999 1998 ------------ ----------- ----------- Permanent impairments: Bonds.............................. $ -- $21,137,423 $ 9,345,164 Mortgages.......................... 63,467,331 31,752,909 23,344,175 Real estate........................ 50,000,000 -- 4,468,490 ------------ ----------- ----------- Total................. $113,467,331 $52,890,332 $37,157,829 ------------ ----------- ----------- Mortgage foreclosures................ $ 213,640 $14,984,688 $63,907,494 ============ =========== ===========
Proceeds from sales and redemptions of long-term bond investments during 2000, 1999 and 1998 were approximately $10,199,202,000, $10,137,343,000 and $9,445,709,000, respectively. Gross gains of approximately $187,122,000, $177,537,000 and $422,231,000 and gross losses of approximately $119,953,000, $91,193,000 and $14,523,000 were realized on these sales and redemptions during 2000, 1999 and 1998, respectively. UNREALIZED CAPITAL GAINS AND LOSSES: For the years ended December 31, 2000, 1999 and 1998, the net changes in unrealized capital gains (losses) on investments, resulting in a net increase (decrease) in the valuation of investments, were as follows:
2000 1999 1998 ------------ ------------- ------------- Bonds................................ $(54,132,512) $ (69,713,061) $ (48,352,549) Mortgages............................ (70,888,318) 6,617,678 (6,500,000) Real estate.......................... (2,770,531) (33,864,537) (8,435,351) Stocks............................... 75,816,698 (118,886,764) (31,866,148) Other long-term investments.......... 175,323,484 103,233,602 19,347,901 Other................................ -- -- (95,242,707) ------------ ------------- ------------- Total................. $123,348,821 $(112,613,082) $(171,048,854) ============ ============= =============
NOTE 5-- DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value amounts of financial instruments presented in the following tables have been determined by TIAA using market information available as of December 31, 2000 and 1999 and appropriate valuation methodologies. However, considerable judgment is necessarily required to interpret market data in developing the estimates of fair value for financial instruments for which there are no available market value quotations. The estimates presented are not necessarily indicative of the amounts TIAA could have realized in a B-61 101 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED) NOTE 5-- DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS--(CONTINUED) market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
NOTIONAL CARRYING ESTIMATED VALUE VALUE FAIR VALUE -------------- --------------- --------------- December 31, 2000 - ----------------- Assets Bonds.............................. $80,809,151,800 $81,255,051,179 Mortgages.......................... 21,952,808,611 22,593,584,589 Common stocks...................... 767,862,699 767,862,699 Preferred stocks................... 970,206,730 940,926,347 Cash and short-term investments.... 244,168,519 244,168,519 Policy loans....................... 474,681,094 474,681,094 Seed money investments............. 394,002,467 394,002,467 Liabilities Teachers Personal Annuity-Fixed Account......................... 1,456,634,670 1,456,634,670 Other financial instruments Foreign currency swap contracts.... $1,020,545,319 101,339,491 105,396,376 Foreign currency forward contracts....................... 203,112,720 10,572,446 9,250,132 Interest rate swap contracts....... 409,035,615 -- 12,748,992 Swap options....................... 219,100,000 (822,873) (4,457,353) Interest rate cap contracts........ 145,650,000 959,423 771,354 December 31, 1999 - ----------------- Assets Bonds.............................. $75,394,268,264 $72,939,649,306 Mortgages.......................... 21,412,238,841 20,780,780,466 Common stocks...................... 422,555,522 422,555,522 Preferred stocks................... 824,686,388 765,075,902 Cash and short-term investments.... 410,052,667 410,052,667 Policy loans....................... 393,614,559 393,614,559 Seed money investments............. 263,018,916 263,018,916 Liabilities Teachers Personal Annuity-Fixed Account......................... 1,298,856,541 1,298,856,541 Commercial Paper................... 248,319,000 248,319,000 Other financial instruments Foreign currency swap contracts.... $ 891,158,813 44,252,417 18,274,618 Foreign currency forward contracts....................... 230,258,539 37,347,930 35,671,514 Interest rate swap contracts....... 388,411,461 -- 6,550,357 Swap options....................... 54,000,000 (510,600) -- Interest rate cap contracts........ 137,550,000 657,599 1,955,483
BONDS: The fair values for publicly traded long-term bond investments are determined using quoted market prices. For privately placed long-term bond investments without a readily ascertainable market value, such values are determined with the assistance of an independent pricing service utilizing a discounted cash flow methodology based on coupon rates, maturity provisions and assigned credit ratings. B-62 102 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED) NOTE 5-- DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS--(CONTINUED) The aggregate carrying values and estimated fair values of publicly traded and privately placed bonds at December 31, 2000 and 1999 are as follows:
2000 1999 --------------------------------- --------------------------------- CARRYING ESTIMATED CARRYING ESTIMATED VALUE FAIR VALUE VALUE FAIR VALUE --------------- --------------- --------------- --------------- Publicly traded bonds................ $50,734,031,251 $51,315,463,545 $46,676,624,017 $45,416,831,387 Privately placed bonds............... 30,075,120,549 29,939,587,634 28,717,644,247 27,522,817,919 --------------- --------------- --------------- --------------- Total................. $80,809,151,800 $81,255,051,179 $75,394,268,264 $72,939,649,306 =============== =============== =============== ===============
MORTGAGES: The fair values of mortgages are generally determined with the assistance of an independent pricing service utilizing a discounted cash flow methodology based on coupon rates, maturity provisions and assigned credit ratings. COMMON STOCKS, CASH AND SHORT-TERM INVESTMENTS, POLICY LOANS, AND SEED MONEY INVESTMENTS: The carrying values are reasonable estimates of their fair values. PREFERRED STOCKS: The fair values of preferred stocks are determined using quoted market prices or valuations from the NAIC. TEACHERS PERSONAL ANNUITY--FIXED ACCOUNT AND COMMERCIAL PAPER: The carrying values of the liabilities are reasonable estimates of their fair values. FOREIGN CURRENCY SWAP CONTRACTS: The fair values of foreign currency swap contracts, which are used for hedging purposes, are the estimated net gains that TIAA would record if the foreign currency swaps were liquidated at year-end. The fair values of foreign currency swap contracts are estimated internally based on future cash flows and anticipated foreign exchange relationships, and such values are reviewed for reasonableness with values from TIAA's counterparties. FOREIGN CURRENCY FORWARD CONTRACTS: The fair values of foreign currency forward contracts, which are used for hedging purposes, are the estimated net gains that TIAA would record if the foreign currency forward contracts were liquidated at year-end. The fair values of the foreign currency forward contracts are estimated internally based on future cash flows and anticipated foreign exchange relationships, and such values are reviewed for reasonableness with estimates from TIAA's counterparties. INTEREST RATE SWAP CONTRACTS: The fair values of interest rate swap contracts, which are used for hedging purposes, are the estimated net gains that TIAA would record if the interest rate swaps were liquidated at year-end. The swap agreements have no carrying value. The fair values of interest rate swap contracts are estimated internally based on anticipated interest rates and estimated future cash flows, and such values are reviewed for reasonableness with estimates from TIAA's counterparties. SWAP OPTIONS: The fair values of swap options, which are used for hedging purposes, are the estimated amounts that TIAA would receive (pay) if the swap options were liquidated at year-end. The fair values of the swap options are estimated by external parties, including TIAA's counterparties, and such values are reviewed internally for reasonableness based on anticipated interest rates and estimated future cash flows. INTEREST RATE CAP CONTRACTS: The fair values of interest rate cap contracts, which are used for hedging purposes, are the estimated amounts that TIAA would receive if the interest rate cap contracts were liquidated at year-end. The fair values of the interest rate cap contracts are estimated by external parties, including TIAA's counterparties, and such values are reviewed internally for reasonableness based on anticipated interest rates and estimated future cash flows. STOCK WARRANTS: The fair values of stock warrants represent the excess, if any, of the market values of the related stocks over the exercise prices associated with the stock warrants. The stock warrants have no carrying value. COMMITMENTS TO EXTEND CREDIT OR PURCHASE INVESTMENTS: TIAA does not charge commitment fees on these agreements, and the related interest rates reflect market levels at the time of the commitments. B-63 103 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED) NOTE 5-- DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS--(CONCLUDED) INSURANCE AND ANNUITY CONTRACTS: TIAA's insurance and annuity contracts, other than the Teachers Personal Annuity--Fixed Account disclosed above, entail mortality risks and are, therefore, exempt from the fair value disclosure requirements related to financial instruments. NOTE 6--MANAGEMENT AGREEMENTS Services necessary for the operation of College Retirement Equities Fund ("CREF") are provided, at cost, by two subsidiaries of TIAA, TIAA-CREF Investment Management, LLC ("Investment Management") and TIAA-CREF Individual & Institutional Services, Inc. ("Services"), which provide investment advisory, administrative and distribution services for CREF. Such services are provided in accordance with an Investment Management Services Agreement between CREF and Investment Management, and in accordance with a Principal Underwriting and Administrative Services Agreement between CREF and Services. Investment Management is registered with the Securities and Exchange Commission ("Commission") as an investment adviser; Services is registered with the Commission as a broker-dealer and is a member of the National Association of Securities Dealers, Inc. ("NASD"). Investment Management and Services receive management fee payments from each CREF account on a daily basis according to formulae established each year with the objective of keeping the management fees as close as possible to each account's actual expenses. Any differences between the actual expenses incurred and the management fees received are adjusted quarterly. Such fees and the equivalent allocated expenses, which amounted to approximately $561,396,000, $493,399,000 and $474,611,000 in 2000, 1999 and 1998, respectively, are not included in the statements of operations and had no effect on TIAA's operations. TIAA provides guarantees for the CREF Accounts for certain mortality and expense risks pursuant to an Immediate Annuity Purchase Rate Guarantee Agreement. NOTE 7--PENSION PLAN AND POSTRETIREMENT BENEFITS TIAA maintains a qualified, noncontributory defined contribution pension plan covering substantially all employees. All employee pension plan liabilities are fully funded through retirement annuity contracts. Contributions are made semi-monthly to each participant's contract based on a percentage of salary, with the applicable percentage varying by attained age. All contributions are fully vested after five years of service. Forfeitures arising from terminations prior to vesting are used to reduce future employer contributions. The accompanying statements of operations include contributions to the pension plan of approximately $25,484,000, $23,865,000 and $22,640,000 in 2000, 1999 and 1998, respectively. This includes supplemental contributions made to company-owned annuity contracts under a non-qualified deferred compensation plan. In addition to the pension plan, TIAA provides certain other postretirement life and health insurance benefits to eligible retired employees who meet prescribed age and service requirements. The postretirement benefit obligation for retirees and fully eligible employees was approximately $42,373,000, and $36,606,000 at December 31, 2000 and 1999, respectively. The postretirement benefit obligation for non-vested employees was approximately $25,399,000 and $28,580,000 as of January 1, 2000 and 1999, respectively. The unrecognized transition obligation was $9,380,000 and $10,161,000 at December 31, 2000 and 1999, respectively. The cost of such benefits reflected in the accompanying statements of operations was approximately $2,914,000, $3,180,000 and $3,008,000 for 2000, 1999 and 1998, respectively. The discount rate used in determining the postretirement benefit obligations was 7.5% per year and the medical care cost trend rate was 6% per year in 2000, decreasing by .25% in each future year, to an ultimate rate of 5.25% per year in 2003. As the plan is not pre-funded, the value of plan assets is zero. The accrued postretirement benefit liability was $32,325,000 and $27,312,000 as of December 31, 2000 and 1999, respectively. TIAA maintains a non-qualified deferred compensation plan for non-employee trustees and members of the TIAA Board of Overseers. Prior to January 2, 1998, this plan provided each eligible trustee or member with a single-sum payment upon leaving the board equal to 50% of the annual stipend then in effect multiplied by years of service, up to a maximum of 20 years. Effective January 2, 1998, the plan provides an award that is invested annually in company-owned annuity contracts. Payout of accumulations is normally made in a lump-sum following the trustee's or member's separation from the Board. NOTE 8--UNCONSOLIDATED SUBSIDIARIES AND OTHER AFFILIATES TIAA's unconsolidated subsidiaries and affiliates primarily consist of TIAA-CREF Enterprises, Inc. ("Enterprises") and wholly-owned investment subsidiaries, which are primarily involved in real estate investment activities. The carrying value of TIAA's investments in unconsolidated subsidiaries and affiliates totaled approximately $6,296,468,000 and $5,683,950,000 at December 31, 2000 and 1999, respectively. B-64 104 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED) NOTE 8-- UNCONSOLIDATED SUBSIDIARIES AND OTHER AFFILIATES--(CONCLUDED) TIAA's investment in Enterprises is included in the other long-term investments caption on the accompanying balance sheets and totaled approximately $255,858,000 and $305,326,000 at December 31, 2000 and 1999, respectively. At December 31, 2000 and 1999, the carrying values of TIAA's investments in real estate subsidiaries and other affiliates were approximately $3,947,783,000 and $3,902,522,000, respectively. Total assets, liabilities and gross rental income, on a GAAP basis, of real estate subsidiaries at December 31, 2000, 1999 and 1998 and for the years then ended, were approximately as follows:
2000 1999 1998 -------------- -------------- -------------- Assets............................... $4,818,342,000 $4,841,501,000 $5,723,222,000 Liabilities.......................... 735,368,000 772,068,000 724,361,000 Gross rental income.................. 693,694,000 826,366,000 783,261,000
Earnings of approximately $428,021,095, $186,329,000 and $161,885,000 in 2000, 1999 and 1998, respectively, primarily from real estate subsidiaries are included in net investment income in the accompanying statements of operations. Some of the real estate subsidiaries referred to above are partners in joint ventures. At December 31, 2000 and 1999, the carrying values of TIAA real estate subsidiaries that are partners in joint ventures were approximately $726,438,000 and $610,277,000, respectively. Joint venture total assets, liabilities and gross rental income at December 31, 2000, 1999 and 1998 and for the years then ended, were approximately as follows:
2000 1999 1998 -------------- -------------- -------------- Assets............................... $3,124,928,000 $1,410,531,000 $1,709,297,000 Liabilities.......................... 1,746,133,000 730,980,000 556,823,000 Gross rental income.................. 257,381,000 185,306,000 274,106,000
The subsidiaries' equity share in these total assets, liabilities and gross rental income were approximately as follows:
2000 1999 1998 -------------- -------------- -------------- Assets............................... $1,351,026,000 $1,392,388,000 $1,701,668,000 Liabilities.......................... 643,601,000 720,127,000 554,451,000 Gross rental income.................. 110,790,000 183,907,000 270,208,000
Net income earned by the subsidiaries from joint venture investments was approximately $19,668,000, $40,507,000 and $16,123,000 in 2000, 1999 and 1998, respectively. Some of the real estate subsidiaries and joint ventures have loans from TIAA. At December 31, 2000 and 1999, the unpaid principal of such loans was approximately $592,367,000 and $577,277,000 respectively. B-65 105 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED) NOTE 9--ANNUITY RESERVES At December 31, 2000 and 1999, TIAA's general account annuity reserves are summarized as follows:
2000 1999 ------------------------- ------------------------- AMOUNT PERCENT AMOUNT PERCENT --------------- ------- --------------- ------- Subject to discretionary withdrawal: At book value without adjustment... $11,594,104,000 11.7% $10,298,969,000 11.1% At market value.................... -- -- -- -- Not subject to discretionary withdrawal......................... 87,199,698,000 88.3 82,594,306,000 88.9 --------------- ----- --------------- ----- Total annuity reserves............... 98,793,802,000 100.0% 92,893,275,000 100.0% ===== ===== Reconciliation to total policy and contract reserves shown on the balance sheet: Reserves on other life policies and contracts....................... 427,109,000 399,675,000 Reserves on accident and health policies........................ 638,320,000 576,758,000 --------------- --------------- Total policy and contract reserves... $99,859,231,000 $93,869,708,000 =============== ===============
NOTE 10--SEPARATE ACCOUNTS TIAA currently has two separate accounts. The TIAA Separate Account VA-1 ("VA-1") is a segregated investment account and was organized on February 16, 1994 under the insurance laws of the State of New York for the purpose of issuing and funding variable annuity contracts. VA-1 was registered with the Commission effective November 1, 1994 as an open-end, diversified management investment company under the Investment Company Act of 1940. Currently, VA-1 consists of a single investment portfolio, the Stock Index Account ("SIA"). SIA was established on October 3, 1994 and invests in a diversified portfolio of equity securities selected to track the overall United States stock market. The TIAA Real Estate Account ("REA") is a segregated investment account and was organized on February 22, 1995 under the insurance laws of the State of New York for the purpose of funding variable annuity contracts. REA was registered with the Commission under the Securities Act of 1933 effective October 2, 1995. REA's target is to invest between 70% and 95% of its assets directly in real estate or in real estate-related investments, with the remainder of its assets invested in publicly-traded securities to maintain adequate liquidity. REA was established on July 3, 1995 with a $100,000,000 seed money investment by TIAA. TIAA purchased 1,000,000 Accumulation Units of REA and such units shared in the pro rata investment experience of REA and were subject to the same valuation procedures and expense deductions as all other Accumulation Units in REA. On October 2, 1995, TIAA began to offer Accumulation Units of REA to participants other than TIAA. TIAA redeemed all of its REA units by the end of 1998. The balance sheet captions for separate account assets and liabilities (which represent participant account values) are stated at market value. The separate accounts' operating results are reflected in the changes to these assets and liabilities. Total separate account premiums were approximately $251,837,000, $256,703,000 and $226,984,000 in 2000, 1999 and 1998, respectively. Total separate account net transfers from other accounts were approximately $383,019,000, $297,622,000 and $300,737,000 in 2000, 1999 and 1998, respectively. Annuities offered through VA-1 include a nominal guaranteed minimum death benefit. For REA, TIAA guarantees that actual mortality experience will not reduce payments once they have begun. Both accounts offer full or partial withdrawal at market value with no surrender charge. NOTE 11--MUTUAL FUNDS On July 17, 1997, TIAA made a $250,000,000 seed money investment to launch the six original funds of TIAA-CREF Mutual Funds (the "Funds"), a Delaware business trust that was organized on January 13, 1997 and is registered with the Commission under the Investment Company Act of 1940 as an open-end management investment company. On September 2, 1997, the Funds began to publicly offer their shares, without a sales load, through their distributor, Teachers Personal Investors Services, Inc. ("TPIS"). On March 1, 2000, TIAA made an B-66 106 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONCLUDED) NOTE 11--MUTUAL FUNDS--(CONCLUDED) additional $175,000,000 seed money investment to launch five additional funds. Teachers Advisors, Inc. ("Advisors") provides investment management services for the Funds and is also responsible for providing, or obtaining at its own expense, the services reasonably necessary for the ordinary operation of the Funds. During 1999, TIAA began to redeem its seed money investment. TIAA's remaining seed money investment in the Funds, plus reinvested dividends and undistributed earnings, totaled approximately $196,055,000 and $85,174,000 at December 31, 2000 and 1999, respectively, and such amounts are reflected in the "Other long-term investments" caption in the accompanying balance sheets. On June 14, 1999, TIAA made a $175,000,000 seed money investment to launch the seven TIAA-CREF Institutional Mutual Funds (the "Institutional Funds"), a Delaware business trust, that was organized on April 15, 1999 and is registered with the Commission under the Investment Company Act of 1940 as an open-end management investment company. On July 1, 1999, the Institutional Funds began to offer their shares, without a sales load, to participating institutions through their principal underwriter, TPIS. Advisors provides investment management services for the Institutional Funds. During 1999, TIAA began to redeem its seed money investment. TIAA's remaining seed money investment in the Institutional Funds, plus reinvested dividends and undistributed earnings, totaled approximately $26,671,000 and $144,017,000 at December 31, 2000 and 1999, respectively, and such amounts are reflected in the "Other long-term investments" caption in the accompanying balance sheets. On December 1, 1998, TIAA made a $25,000,000 seed money investment to launch the Stock Index Fund of the TIAA-CREF Life Funds, a Delaware business trust that was organized on August 13, 1998 and is registered with the Commission under the Investment Company Act of 1940 as an open-end management company. On March 1, 2000, TIAA made an additional $175,000,000 seed money investment to launch four additional funds (collectively the "Life Funds"). The Life Funds' shares are publicly offered, without a sales load, through their distributor, TPIS. Advisors provides investment management services for the Life Funds and is also responsible for providing, or obtaining at its own expense, the services reasonably necessary for the ordinary operations of the Life Funds. During 2000, TIAA began to redeem its seed money investment. The value of TIAA's remaining seed money investment in the Life Funds, plus reinvested dividends and undistributed earnings, totaled approximately $173,890,000 and $31,637,000 at December 31, 2000 and 1999, respectively, and such amounts are reflected in the "Other long-term investments" caption in the accompanying balance sheets. NOTE 12--COMMERCIAL PAPER/LIQUIDITY FACILITY TIAA began issuing commercial paper in May 1999 under a maximum authorized program of $2 billion and had an outstanding obligation of $-0- and $248,319,000 at December 31, 2000 and 1999, respectively. Interest expense totaled approximately $50,462,000 and $24,585,000 during 2000 and 1999, respectively. TIAA maintains a short-term revolving credit liquidity facility of approximately $1 billion to support the commercial paper program, but this liquidity facility has not been utilized. NOTE 13--CONTINGENCIES It is the opinion of management that any liabilities which might arise from litigation, state guaranty fund assessments and other matters, over and above amounts already provided for in the financial statements, are not considered material in relation to TIAA's financial position or the results of its operations. NOTE 14--CODIFICATION The NAIC revised its Accounting Practices and Procedures Manual (the "Manual") in a process referred to as Codification. The Manual will be effective January 1, 2001. The Department has adopted the provisions of the Manual with certain exceptions where there is a conflict with New York Insurance Law. The Manual has changed, to some extent, prescribed statutory accounting practices and will result in changes to the accounting practices that TIAA uses to prepare its statutory-based financial statements. The cumulative effect of changes in accounting principles adopted to conform to the Manual will be reported as an adjustment to TIAA's contingency reserves as of January 1, 2001. Management believes that the cumulative net impact of these changes will result in an increase of approximately 6% in TIAA's statutory-based capital and contingency reserves. B-67 107 (LOGO) Printed on recycled paper TVA1SAI-4/01 108 PART C OTHER INFORMATION ITEM 28. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements The following Financial Statements for TIAA Separate Account VA-1 are included with Part A (Prospectus) of this Registration Statement: Page ---- Condensed Financial Information.............................................. The following Financial Statements for TIAA Separate Account VA-1 (the "Registrant") and Teachers Insurance and Annuity Association of America ("TIAA") are included with Part B (the Statement of Additional Information) of this Registration Statement:
Page ---- (1) The Registrant--Stock Index Account Report of Management Responsibility..........................................B-16 Report of the Audit Committee................................................B-17 Report of Independent Auditors...............................................B-18 Audited Financial Statements: Statement of Assets and Liabilities........................................B-19 Statement of Operations....................................................B-20 Statements of Changes in Net Assets........................................B-21 Notes to Financial Statements................................................B-22 Statement of Investments.....................................................B-24 (2) TIAA Chairman's Letter............................................................B-43 Report of Management Responsibility..........................................B-44 Report of the Audit Committee................................................B-45 Report of Independent Auditors...............................................B-46 Statutory-Basis Financial Statements: Balance Sheets ............................................................B-47 Statements of Operations...................................................B-48 Statements of Changes in Capital and Contingency Reserves..................B-49 Statements of Cash Flows...................................................B-50 Notes to Financial Statements................................................B-51
(b) Exhibits (1) Resolution of the Board of Trustees of TIAA establishing the Registrant 1/ (2) Rules and Regulations of the Registrant 2/ C-1 109 (3) Custodial Services Agreement between TIAA and Bankers Trust Company 3/ (4) Investment Management Agreement by and among TIAA, the Registrant, and Teachers Advisors, Inc. 2/ (5) (A) Distribution Agreement by and among TIAA, the Registrant, and Teachers Personal Investors Services, Inc. dated September 15, 1994 ("Distribution Agreement") 2/ (B) Amendment dated August 1, 1995 to Distribution Agreement 4/ (C) Amendment dated November 3, 1997 to Distribution Agreement 5/ (6) (A) Form of Teachers Personal Annuity Contract (effective November 1, 1994) 2/ (B) Form of Endorsement to Teachers Personal Annuity Contract (in-force prior to November 1, 1994) 2/ (7) Form of Application for Teachers Personal Annuity Contract 2/ (8) (A) Charter of TIAA, as amended * (B) Bylaws of TIAA, as amended 6/ (9) None (10) Not Applicable (11) (A) Administrative Services Agreement by and between TIAA and the Registrant dated September 15, 1994 ("Administration Agreement") 2/ (B) Amendment dated August 1, 1995 to Administration Agreement 4/ (12) (A) Consent of Charles H. Stamm, Esquire* (B) Consent of Sutherland, Asbill & Brennan LLP* (13) (A) Consent of Ernst & Young LLP* (14) None (15) Seed Money Agreement by and between TIAA and the Registrant 2/ (16) Schedule of Computation of Performance Information* (17) Registrant's Policy Statement on Personal Trading 7/ * Filed herewith. 1/ Incorporated by reference to the Exhibit filed electronically with Post-Effective Amendment No. 5 to Form N-3 as filed on April 1, 1999 (previously filed in the initial Registration Statement on Form N-3 dated May 18, 1994 (File No. 33-79124)). 2/ Incorporated by reference to the Exhibit filed herewith electronically with Post-Effective Amendment No. 5 to Form N-3 as filed on April 1, 1999 (previously filed in Pre-Effective Amendment No. 1 to Form N-3 dated October 7, 1994 (File No. 33-79124)). C-2 110 3/ Incorporated by reference to the Exhibit filed herewith electronically with Post-Effective Amendment No. 5 to Form N-3 as filed on April 1, 1999 (previously filed in Pre-Effective Amendment No. 2 to Form N-3 dated October 18, 1994 (File No. 33-79124)). 4/ Previously filed in Post-Effective Amendment No. 2 to Form N-3 dated March 26, 1996 (File No. 33-79124) and incorporated herein by reference. 5/ Previously filed in Post-Effective Amendment No. 4 to Form N-3 dated March 27, 1998 (File No. 33-79124) and incorporated herein by reference. 6/ Previously filed in Post-Effective Amendment No. 5 to Form N-3 dated April 1, 1999 (File No. 33-79124) and incorporated herein by reference. 7/ Previously filed in Post-Effective Amendment No. 6 to Form N-3 dated March 30, 2000 (File No. 33-79124) and incorporated herein by reference. ITEM 29. DIRECTORS AND OFFICERS OF THE INSURANCE COMPANY
Positions and Offices Positions and Offices Name and Principal Business Address with Insurance Company with Registrant - ----------------------------------------------------- ------------------------------- ------------------------------- Laurence W. Franz, Ph.D. Trustee Canisius College 2001 Main Street Wehle Technology Center Buffalo, NY 14208-1098 Jeanmarie C. Grisi Trustee Lucent Technologies, Inc. 600 Mountain Avenue Murray Hill, NJ 07974 908-582-1342 Richard M. Norman Trustee Miami University 274 McGuffey Hall Oxford, OH 45056-1846 513-529-4226 Martin E. Galt, III Executive Vice Trustee, Chairman and TIAA-CREF President and President President 730 Third Avenue TIAA-CREF Investment New York, New York 10017-3206 Products
C-3 111
Positions and Offices Positions and Offices Name and Principal Business Address with Insurance Company with Registrant - ----------------------------------------------------- ------------------------------- ------------------------------- David Alexander Trustee President Emeritus Pomona College Sumner Hall 330 College Way Claremont, California 91711-6305 Marcus Alexis Trustee Board of Trustees, Professor of Economics and Professor of Management and Strategy J. L. Kellogg Graduate School of Management Northwestern University Leverone Hall 2001 Sheridan Road Evanston, Illinois 60208-2001 John H. Biggs Trustee, Chairman, TIAA-CREF President and Chief 730 Third Avenue Executive Officer New York, New York 10017-3206 Willard T. Carleton Trustee Donald R. Diamond Professor of Finance College of Business and Public Administration University of Arizona McClelland Hall Tucson, Arizona 85721 Robert C. Clark Trustee Dean and Royall Professor of Law Harvard Law School Harvard University Griswold 200 Cambridge, Massachusetts 02138 Estelle A. Fishbein Trustee Vice President and General Counsel The Johns Hopkins University 113 Garland Hall Baltimore, Maryland 21218 Frederick R. Ford Trustee Executive Vice President and Treasurer Emeritus Purdue University 1032 Hovde Hall of Administration West Lafayette, Indiana 47907-1032
C-4 112
Positions and Offices Positions and Offices Name and Principal Business Address with Insurance Company with Registrant - ----------------------------------------------------- ------------------------------- ------------------------------- Ruth Simms Hamilton Trustee Professor of Sociology and Director of African Diaspora Research Project Michigan State University W142 Owen Graduate Hall East Lansing, Michigan 48824 Rochelle B. Lazarus Trustee Chairman and Chief Executive Officer Ogilvy & Mather Worldwide Worldwide Plaza 309 West 49th Street New York, NY 10019 Martin L. Leibowitz Trustee, Vice Chairman Chief Investment Officer TIAA-CREF and Chief Investment 730 Third Avenue Officer New York, New York 10017-3206 Robert M. O'Neil Trustee Director The Thomas Jefferson Center for the Protection of Free Expression 400 Peter Jefferson Place Charlottesville, Virginia 22911-8691 Leonard S. Simon Trustee Vice Chairman Charter One Financial Inc. 235 East Main Street Rochester, New York 14604 Ronald L. Thompson Trustee Chairman and Chief Executive Officer Midwest Stamping Co. 3455 Briarfield Road, Suite A P.O. Box 1120 Maumee, Ohio 43537 Paul R. Tregurtha Trustee Chairman and Chief Executive Officer Mormac Marine Group, Inc. One Landmark Square Stamford, Connecticut 06901-2608
C-5 113
Positions and Offices Positions and Offices Name and Principal Business Address with Insurance Company with Registrant - ----------------------------------------------------- ------------------------------- ------------------------------- William H. Waltrip Trustee Chairman Technology Solutions Company 1261 Pequot Avenue Southport, CT 06490 Rosalie J. Wolf Trustee Managing Director Laurel Management, LLC c/o Rothschild Inc. 1251 Avenue of Americas New York, New York 10020 Richard J. Adamski Vice President Vice President TIAA-CREF and Treasurer and Treasurer 730 Third Avenue New York, New York 10017-3206 C. Victoria Apter Executive Vice TIAA-CREF President, Information 730 Third Avenue Technology New York, New York 10017-3206 Anthony V. Betro Administrative Director, Administrative Director, TIAA-CREF Finance and Planning Finance and Planning 730 Third Avenue New York, New York 10017-3206 Gary Chinery Second Vice President Second Vice President TIAA-CREF and Associate Treasurer 730 Third Avenue New York, New York 10017-3206 Peter C. Clapman Senior Vice President Senior Vice President TIAA-CREF and Chief Counsel, and Chief Counsel , 730 Third Avenue Corporate Governance Corporate Governance New York, New York 10017-3206 Matthew Daitch Actuary Assistant Actuary TIAA-CREF 730 Third Avenue New York, New York 10017-3206 Paul Davis Senior Managing Senior Managing TIAA-CREF Director, Quantitative Director 730 Third Avenue Investments New York, New York 10017-3206
C-6 114
Positions and Offices Positions and Offices Name and Principal Business Address with Insurance Company with Registrant - ----------------------------------------------------- ------------------------------- ------------------------------- Douglas A. Dial Senior Managing Senior Managing TIAA-CREF Director, Stock Account Director 730 Third Avenue New York, New York 10017-3206 Hans Erickson Senior Managing Senior Managing TIAA-CREF Director, Quantitative Director 730 Third Avenue Investments New York, New York 10017-3206 Scott C. Evans Executive Vice Executive Vice TIAA-CREF President, CREF President 730 Third Avenue Investments New York, New York 10017-3206 Dennis D. Foley Vice President, Vice President TIAA-CREF Annuities and Mutual 730 Third Avenue Funds New York, New York 10017-3206 Richard L. Gibbs Executive Executive TIAA-CREF Vice President, Finance Vice President and 730 Third Avenue and Planning Chief Financial Officer New York, New York 10017-3206 Stewart P. Greene Senior Counsel and Senior Counsel and TIAA-CREF Assistant Secretary Assistant Secretary 730 Third Avenue New York, New York 10017-3206 Don W. Harrell Executive TIAA-CREF Vice President, External 730 Third Avenue Affairs New York, New York 10017-3206 Ira J. Hoch Executive Vice TIAA-CREF President 730 Third Avenue New York, New York 10017-3206 Matina S. Horner Executive TIAA-CREF Vice President, Human 730 Third Avenue Resources New York, New York 10017-3206
C-7 115
Positions and Offices Positions and Offices Name and Principal Business Address with Insurance Company with Registrant - ----------------------------------------------------- ------------------------------- ------------------------------- Abby Ingber Senior Counsel and Senior Counsel and TIAA-CREF Assistant Secretary Assistant Secretary 730 Third Avenue New York, New York 10017-3206 E. Laverne Jones Vice President and TIAA-CREF Corporate Secretary 730 Third Avenue New York, New York 10017-3206 Harry I. Klaristenfeld Executive Vice TIAA-CREF President and Chief 730 Third Avenue Actuary New York, New York 10017-3206 Edward Leahy Director, Corporate Tax TIAA-CREF 730 Third Avenue New York, New York 10017-3206 Thomas Lynch Second Vice President, Second Vice President TIAA-CREF Investment Reporting 730 Third Avenue New York, New York 10017-3206 Gerald K. McCullough Vice President and Chief Vice President TIAA-CREF Accountant, 730 Third Avenue Investments New York, New York 10017-3206 Maureen Milet Second Vice President Second Vice President TIAA-CREF and Director 730 Third Avenue CREF/Change New York, New York 10017-3206 Management Frances Nolan Executive Vice TIAA-CREF President, Retirement 730 Third Avenue Services Administration New York, New York 10017-3206 Bertram L. Scott Executive Vice TIAA-CREF President and President 730 Third Avenue TIAA Life Insurance New York, New York 10017-3206 Company
C-8 116
Positions and Offices Positions and Offices Name and Principal Business Address with Insurance Company with Registrant - ----------------------------------------------------- ------------------------------- ------------------------------- Richard Schlefer Senior Managing Senior Managing TIAA-CREF Director, CREF Director 730 Third Avenue Administration New York, New York 10017-3206 Mark L. Serlen Senior Counsel and Senior Counsel and TIAA-CREF Assistant Secretary Assistant Secretary 730 Third Avenue New York, New York 10017-3206 Deanne Shallcross Executive Vice Executive Vice TIAA-CREF President, TIAA-CREF President 730 Third Avenue Marketing New York, New York 10017-3206 Jonathan D. Shane Managing Director Managing Director TIAA-CREF 730 Third Avenue New York, New York 10017-3206 David Shunk Executive Vice TIAA-CREF President, Consulting 730 Third Avenue Services New York, New York 10017-3206 Lisa Snow Vice President and Vice President and TIAA-CREF Chief Counsel, Chief Counsel, 730 Third Avenue Corporate and Insurance Corporate Law and New York, New York 10017-3206 Law and Secretary Secretary John Somers Executive Vice Executive Vice TIAA-CREF President, TIAA President 730 Third Avenue Investments New York, New York 10017-3206 Charles H. Stamm Executive Executive TIAA-CREF Vice President Vice President 730 Third Avenue and General Counsel and General Counsel New York, New York 10017-3206 Steven I. Traum Managing Director, Managing Director TIAA-CREF Money Market/ Inflation 730 Third Avenue Linked Bonds New York, New York 10017-3206
C-9 117
Positions and Offices Positions and Offices Name and Principal Business Address with Insurance Company with Registrant - ----------------------------------------------------- ------------------------------- ------------------------------- Roger A. Vellekamp Vice President, Vice President, TIAA-CREF Corporate Tax Corporate Tax Officer 730 Third Avenue and Assistant Secretary New York, New York 10017-3206 Bruce Wallach Vice President and Vice President TIAA-CREF Corporate Actuary 730 Third Avenue New York, New York 10017-3206 Maryanne Werner Executive Vice Executive Vice TIAA-CREF President and President President 730 Third Avenue TIAA Shared Services New York, New York 10017-3206 John P. Wesley Second Vice President Second Vice President TIAA-CREF and Product Manager, 730 Third Avenue Personal Annuity New York, New York 10017-3206 James Wolf Executive Vice TIAA-CREF President and President, 730 Third Avenue TIAA Retirement New York, New York 10017-3206 Services
ITEM 30. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE INSURANCE COMPANY OR REGISTRANT The following companies are subsidiaries of TIAA and are included in the consolidated financial statements of TIAA: BT Properties, Inc. Liberty Place Retail, Inc. College Credit Trust Liberty Place Retail II, Inc. DAN Properties, Inc. Light St. Partners, LLP ETC Repackaging, Inc. Macallister Holdings, Inc. Illinois Teachers Properties, LLC M.O.A. Enterprises, Inc. JV Florida One, Inc. MOA Investors I, Inc. JV Florida Four, Inc. NCDC Funding, LLC JV Georgia One, Inc. ND Properties, Inc. JV Michigan Three, Inc. OWP Hawaii, LLC JV Minnesota One, Inc. Rouse-Teachers Holding Company JV North Carolina One, Inc. Savannah Teachers Properties, Inc. JWL Properties, Inc. T114 Properties, Inc. C-10 118 T-Investment Properties Corp. TIAA SF One, LLC T-Land Corp. TIAA Realty, Inc. TCT Holdings, Inc. TIAA Retail Commercial, LLC Teachers Advisors, Inc. TIAA Tri-State, LLC Teachers Boca Properties II, Inc. TIAA Timberlands I, LLC TIAA Teachers Boca Properties III, Inc. Timberlands II, LLC Teachers Mayflower, LLC TIAA-CREF Enterprises, Inc. Teachers Michigan Properties, Inc. TIAA-CREF Individual & Institutional Teachers Pennsylvania Realty, Inc. Services, In. Teachers Personal Investors Services, Inc. TIAA-CREF Investment Management, LLC Teachers Properties, Inc. TIAA-CREF Life Insurance Company Teachers REA, LLC TIAA-CREF Trust Company, FSB Teachers REA II, LLC TIAA-CREF Tuition Financing, Inc. Teachers REA III, LLC TIAA-Fund Equities, Inc. Teachers REA IV, LLC TPI Housing, Inc. Teachers Realty Corporation Washington Teachers Properties Teachers West, LLC II, Inc. TEO-NP, LLC WRC Properties, Inc. TIAA European Funding Trust 730 Texas Forest Holdings, Inc. TIAA Lakepointe, LLC 485 Properties, LLC Subsidiaries of Teachers Properties, Inc.: Rouse-Teachers Holding Company Rouse-Teachers Land Holdings, Inc. (1) All subsidiaries are Delaware corporations except as follows: A) Pennsylvania non-stock, non-profit corporations: Liberty Place Retail, Inc. Teachers Pennsylvania Realty, Inc. Teachers Realty Corporation B) College Credit Trust, a New York Trust C) TIAA-CREF Life Insurance Company is a New York Corporation D) TIAA-CREF Trust Company, FSB is a Federal Savings Bank E) TIAA European Funding Trust, a Delaware Trust F) Teachers Realty, Inc., a Real Estate Investment Trust G) Light St. Partners, LLP, a Maryland Limited Liability Partnership H) Rouse-Teachers Holding Company, a Nevada Corporation (2) All subsidiaries are 100% owned directly by TIAA, except as follows: A) TIAA-CREF Enterprises, Inc. owns 100% of the stock of Teachers Advisors, Inc., Teachers Personal Investors Services, Inc., TIAA-CREF Life Insurance Company, TIAA-CREF Tuition Financing, Inc. and TCT Holdings, Inc. B) TIAA-CREF Trust Company, FSB is 100% owned by TCT Holdings, Inc. C-11 119 C) TPI Housing, Inc. is 100% owned by Teachers Properties, Inc. (3) All subsidiaries have as their sole purpose the ownership of investments which could, pursuant to New York State Insurance Law, be owned by TIAA itself, except the following: A) Teachers Advisors, Inc., which provides investment advice for the Registrant and others. B) Teachers Personal Investors Services, Inc., which provides broker-dealer services for the Registrant and others. C) TIAA-CREF Investment Management, LLC, which provides investment advice for College Retirement Equities Fund. D) TIAA-CREF Individual & Institutional Services, Inc., which provides broker-dealer and administrative services for College Retirement Equities Fund. E) TCT Holdings, Inc., which is a unitary thrift holding company, was formed for the sole purpose of holding stock of a federal chartered savings bank. F) TIAA-CREF Life Insurance Company, which is a subsidiary life insurance company of TIAA, is licensed under the State of New York to market certain life insurance products not currently offered by TIAA. G) TIAA-CREF Trust Company, FSB which is a federal chartered savings bank. H) TIAA-CREF Tuition Financing, Inc. which was formed to administer tuition assistance plans. ITEM 31. NUMBER OF CONTRACTOWNERS As of March 16, 2001, there were 22,434 contracts in force. ITEM 32. INDEMNIFICATION The Registrant shall indemnify each of the members of the Management Committee ("Managers") and officers of the Registrant against all liabilities and expenses, including but not limited to counsel fees, amounts paid in satisfaction of judgments, as fines or penalties, or in compromise or settlement, reasonably incurred in connection with the defense or disposition of any threatened, pending, or completed claim, action, suit, or other proceeding, whether civil, criminal, administrative, or investigative, whether before any court or administrative or legislative body, to which such person may be or may have been subject, while holding office or thereafter, by reason of being or having been such a Manager or officer; provided that such person acted, or failed to act, in good faith and in the reasonable belief that such action was in the best interests of the Separate Account, and, with respect to any criminal action or proceeding, such person had no reasonable cause to believe the conduct was unlawful; and except that no such person shall be indemnified for any liabilities or expenses arising by reason of disabling conduct, whether or not there is an adjudication of liability. C-12 120 Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to Managers and officers of the Registrant, pursuant to the foregoing provision or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in that Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment of expenses incurred or paid by a Manager or officer in the successful defense of any action, suit or proceeding) is asserted by a Manager or officer in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in that Act and will be governed by the final adjudication of such issue. ITEM 33. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER Investment advisory services for the Registrant are provided by Teachers Advisors, Inc. ("Advisors"). In this connection, Advisors is registered as an investment adviser under the Investment Advisers Act of 1940, as amended. The business and other connections of Advisors' officers are listed in Schedules A and D of Form ADV as currently on file with the Commission (File No. 801-46887), the text of which is hereby incorporated by reference. ITEM 34. PRINCIPAL UNDERWRITERS (a) Teachers Personal Investors Service, Inc. ("TPIS"), acts as principal underwriter for TIAA-CREF Mutual Funds, TIAA-CREF Institutional Mutual Funds and TIAA-CREF Life Funds. (b) TPIS may be considered the principal underwriter for the Registrant. The officers of TPIS and their positions and offices with TPIS and the Registrant are listed in Schedule A of Form BD as currently on file with the Commission (File No. 8-47051), the text of which is hereby incorporated by reference. (c) Not Applicable. ITEM 35. LOCATION OF ACCOUNTS AND RECORDS All accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act and the rules promulgated thereunder are maintained at the Registrant's home office, 730 Third Avenue, New York, New York 10017, and at other offices of the C-13 121 Registrant located at 750 Third Avenue and 485 Lexington Avenue, both in New York, New York 10017. In addition, certain duplicated records are maintained at Pierce Leahy Archives, 64 Leone Lane, Chester, New York 10918. ITEM 36. MANAGEMENT SERVICES Not Applicable. ITEM 37. UNDERTAKINGS AND REPRESENTATIONS (a) Not Applicable. (b) The Registrant undertakes to file a post-effective amendment to this Registration Statement as frequently as is necessary to ensure that the audited financial statements in the Registration Statement are never more than 16 months old for so long as payments under the variable annuity contracts may be accepted. (c) The Registrant undertakes to include either (1) as part of any application to purchase a contract offered by the Prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a post card or similar written communication affixed to or included in the Prospectus that the applicant can remove to send for a Statement of Additional Information. (d) The Registrant undertakes to deliver any Statement of Additional Information and any financial statements required to be made available under Form N-3 promptly upon written or oral request. (e) TIAA represents that the fees and charges deducted under the Contracts, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by TIAA. C-14 122 SIGNATURES As required by the Securities Act of 1933 and the Investment Company Act of 1940, TIAA Separate Account VA-1 certifies that it meets the requirements of Securities Act Rule 485(b) for effectiveness of this Registration Statement and has caused this Registration Statement to be signed on its behalf, in the City of New York and State of New York on the 29th day of March, 2001. TIAA SEPARATE ACCOUNT VA-1 By: /s/ Martin E. Galt, III -------------------------- Martin E. Galt, III Chairman and President As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- /s/ Martin E. Galt, III Chairman and President (Principal Executive 3/29/01 - ------------------------------ Officer) Martin E. Galt, III /s/ Richard L. Gibbs Executive Vice President and Chief Financial 3/29/01 - ------------------------------ Officer (Principal Financial and Accounting Richard L. Gibbs Officer)
123
Signature Title Date - --------- ----- ---- /s/ Laurence W. Franz Manager 3/29/01 - ------------------------------ Laurence W. Franz /s/ Jeanmarie C. Grisi Manager 3/29/01 - ------------------------------ Jeanmarie C. Grisi /s/ Richard M. Norman Manager 3/29/01 - ------------------------------ Richard M. Norman
124 SIGNATURES As required by the Securities Act of 1933 and the Investment Company Act of 1940, Teachers Insurance and Annuity Association of America certifies that it meets the requirements of Securities Act Rule 485(b) for effectiveness of this Registration Statement and has caused this Registration Statement to be signed on its behalf, in the City of New York and State of New York on the 29th day of March, 2001. TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA By: /s/ Lisa Snow Name: Lisa Snow Title: Vice President and Chief Counsel, Corporate Law As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- /s/ John H. Biggs Chairman of the Board, President, and Chief 3/29/01 - ------------------------------ Executive Officer (Principal Executive and Financial John H. Biggs Officer) /s/ Martin L. Leibowitz Vice Chairman and Chief Investment Officer 3/29/01 - ------------------------------ (Principal Investment Officer) Martin L. Leibowitz /s/ Richard L. Gibbs Executive Vice President (Principal Accounting 3/29/01 - ------------------------------ Officer) Richard L. Gibbs
125
Signature of Trustee Date Signature of Trustee Date - -------------------- ---- -------------------- ---- /s/ David Alexander 3/29/01 - ------------------------------ ------------------------------ David Alexander Rochelle B. Lazarus /s/ Marcus Alexis 3/29/01 /s/ Robert M. O'Neil 3/29/01 - ------------------------------ ------------------------------ Marcus Alexis Robert M. O'Neil /s/ Willard T. Carleton 3/29/01 /s/ Leonard S. Simon 3/29/01 - ------------------------------ ------------------------------ Willard T. Carleton Leonard S. Simon /s/ Robert C. Clark 3/29/01 - ------------------------------ ------------------------------ Robert C. Clark Ronald L. Thompson /s/ Estelle A. Fishbein 3/29/01 /s/ Paul R. Tregurtha 3/29/01 - ------------------------------ ------------------------------ Estelle A. Fishbein Paul R. Tregurtha /s/ Frederick R. Ford 3/29/01 /s/ William H. Waltrip 3/29/01 - ------------------------------ ------------------------------ Frederick R. Ford William H. Waltrip /s/ Ruth Simms Hamilton 3/29/01 /s/ Rosalie J. Wolf 3/29/01 - ------------------------------ ------------------------------ Ruth Simms Hamilton Rosalie J. Wolf
126 EXHIBIT INDEX
Exhibit Number Description of Exhibit - ------ ---------------------- 8(A) Charter of TIAA, as amended 12(A) Opinion and Consent of Charles H. Stamm, Esquire 12(B) Consent of Sutherland, Asbill & Brennan LLP 13(A) Consent of Ernst & Young LLP 16 Schedules for Computation of Performance Quotations
EX-99.8.A 2 y46340ex99-8_a.txt CHARTER OF TIAA 1 CHARTER OF TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA Originally Filed March 4, 1918 As Amended September 11, 2000 ARTICLE ONE This corporation shall be named "Teachers Insurance and Annuity Association of America." ARTICLE TWO The place where the corporation is to be located and have its principal office for the transaction of business is the City of New York, State of New York. ARTICLE THREE The corporation shall have power to do any and all kinds of business specified in paragraphs 1, 2 and 3 of Section 46 of the Insurance Law of the State of New York, being Chapter 882 of the Laws of 1939, as amended, and any amendments to such paragraphs or provisions in substitution therefor which may be hereafter adopted, provided the corporation is qualified under such amendments to do such kinds of business, together with any other kind or kinds of business to the extent necessarily or properly incidental to the kinds of insurance business which the corporation is so authorized to do. The corporation shall also have the general rights, powers and privileges of a corporation, as the same now or hereafter are declared by the applicable laws of the State of New York and any and all other rights, powers and privileges now or hereafter granted by the Insurance Law of the State of New York or any other law or laws of the State of New York to life insurance companies having power to do the kinds of business hereinabove referred to. The corporation shall transact its business exclusively on a non-mutual basis and shall issue only nonparticipating policies. ARTICLE FOUR The corporate powers of the corporation shall be vested in and exercised by a board of trustees, and by such officers and agents as the board of trustees may from time to time elect or appoint. ARTICLE FIVE Section 1. The board of trustees shall consist of four classes of trustees, each class to consist of four trustees, and the trustees of one class shall be elected at the annual election in each year, each to serve for a term of four years. The term of office of each trustee so elected shall commence at the close of the meeting of the board of trustees next succeeding such election, and shall continue until a successor shall take office. A majority of trustees shall be citizens and residents of the United States, and not 2 less than three trustees shall be residents of the State of New York. A trustee need not be a stockholder. The number of trustees shall in no case be less than the minimum number of incorporators required to organize a life insurance corporation. Section 2. The annual meeting of stockholders for the election of trustees shall be held each year in the month of November on a date and at an hour specified by notice mailed at least thirty days in advance. Any vacancy in the board of trustees occurring in an interval between the annual meetings of stockholders may be filled for the unexpired portion of such trustee's term by the board of trustees in such manner as the bylaws of the corporation may provide. Section 3. The board of trustees shall have power to adopt bylaws providing for the appointment of an executive committee, not less than three in number, to exercise all the powers of the trustees in the intervals between meetings of the board of trustees, and prescribing such other rules and regulations, not inconsistent with law or this charter, for the conduct of the affairs of the corporation as may be deemed expedient, and such bylaws may be amended or repealed by them at pleasure. The board of trustees shall also have all other powers usually vested in boards of directors of life insurance companies not inconsistent with law or this charter, and may at any time accept or exercise any and all additional powers and privileges which may be conferred upon this corporation, or upon life insurance companies in general. One-third of the trustees shall constitute a quorum at all meetings of the board. ARTICLE SIX The board of trustees, at each annual meeting, shall elect the executive officers of the corporation as provided in the bylaws. Other officers may be elected or appointed as provided in the bylaws. One person may hold more than one office, except that no person shall be both president and secretary. The chairman and the president shall be members of the board of trustees, but no other officer need be a trustee. ARTICLE SEVEN The capital of the corporation shall be Two Million Five Hundred Thousand Dollars ($2,500,000) which shall be divided into two thousand five hundred (2,500) shares of One Thousand Dollars ($1,000) each. ARTICLE EIGHT The purpose of the corporation is to aid and strengthen nonprofit colleges, universities, institutions engaged primarily in education or research, governments and their agencies and instrumentalities, and other nonprofit institutions by providing annuities, life insurance, and accident and health insurance, suited to the needs of such entities, their employees and their families, on terms as advantageous to the holders and beneficiaries of such contracts and policies as shall be practicable, and by counseling such entities and individuals concerning pension plans or other measures of security, all without profit to the corporation or its stockholders. The corporation may receive gifts and bequests to aid it in performing such services. ARTICLE NINE The fiscal year of the corporation shall commence on the first day of January and shall end on the thirty-first day of December. EX-99.12.A 3 y46340ex99-12_a.txt OPINION AND CONSENT OF CHARLES H. STAMM, ESQUIRE 1 [TIAA LOGO] TIAA-CREF MUTUAL FUNDS CHARLES H. STAMM 730 Third Avenue Executive Vice President and New York, NY 10017-3206 General Counsel 212 490-9000 (212) 916-4700 March 29, 2001 The Management Committee TIAA Separate Account VA-1 730 Third Avenue New York, New York 10017-3206 Dear Committee Members: This opinion is furnished in connection with the filing by TIAA Separate Account VA-1 (the "Separate Account") of Post-Effective Amendment No. 7 to the Registration Statement (File Nos. 33-79124 and 811-8520) of Form N-3 under the Securities Act of 1933 for certain individual variable annuity contracts (the "Contracts") offered and funded by the Separate Account. The Registration Statement covers an indefinite amount of securities in the form of interests in the Contracts. I have examined the Charter, Bylaws and other corporate records of Teachers Insurance and Annuity Association of America ("TIAA"), the Rules and Regulations and other organizational records of the Separate Account, and the relevant statutes and regulations of the State of New York. On the basis of such examination, it is my opinion that: 1. TIAA is a nonprofit life insurance company duly organized and validly existing under the laws of the State of New York. 2. The Separate Account is a "separate account" of TIAA within the meaning of Section 4240 of the New York Insurance Law, duly established by a resolution of TIAA's Board of Trustees and validly existing under the laws of the State of New York. 3. To the extent New York State law governs, the Contracts have been duly authorized by TIAA and, when issued as contemplated by the Registration Statement, will constitute legal, validly issued and binding obligations of TIAA enforceable in accordance with their terms. 2 I hereby consent to the use of this opinion as an exhibit to the Registration Statement, and to the reference to my name under the heading "Legal Matters" in the Statement of Additional Information. Sincerely, /s/ Charles H. Stamm -------------------------- Executive Vice President and General Counsel EX-99.12.B 4 y46340ex99-12_b.txt CONSENT OF SUTHERLAND, ASBILL & BRENNAN LLP 1 Sutherland 1275 Pennsylvania Avenue, N.W. Asbill & Washington, D.C. 20004-2415 Brennan LLP 202.383.0100 fax 202.637.3593 ATTORNEYS AT LAW www.sablaw.com Steven B. Boehm DIRECT LINE: 202.383.0176 Internet: sboehm@sablaw.com March 29, 2001 The Management Committee TIAA Separate Account VA-1 730 Third Avenue New York, New York 10017-3206 Re: Registration of Individual Deferred Variable Annuity Contracts (Registration Nos. 33-79124 and 811-8520) Ladies and Gentlemen: We hereby consent to the reference to our name under the caption "Legal Matters" in the Statement of Additional Information filed as a part of Post-Effective Amendment No. 7 to the above-captioned registration statement on Form N-3. In giving this consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933. Sincerely, SUTHERLAND, ASBILL & BRENNAN LLP By: /s/ Steven B. Boehm ------------------------------------ cc: George Djurasovic, TIAA-CREF Atlanta [ ] Austin [ ] New York [ ] Tallahassee [ ] Washington DC EX-99.13.A 5 y46340ex99-13_a.txt CONSENT OF ERNST & YOUNG LLP 1 CONSENT OF INDEPENDENT AUDITORS We consent to the reference made to our firm under the caption "Auditors" and "Experts" and to the use of our report dated February 5, 2001 on the Stock Index Account of TIAA Separate Account VA-1 included in this Registration Statement (Form N-3 file No. 33-79124) of TIAA Separate Account VA-1. We also consent to the use of our report on Teachers Insurance and Annuity Association of America ("TIAA") dated February 15, 2001 included in this Registration Statement. Such report expresses our opinion that TIAA's statutory-basis financial statements present fairly, in all material respects, the financial position of TIAA at December 31, 2000 and December 31, 1999, respectively, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000 in conformity with statutory accounting practices prescribed or permitted by the New York State Insurance Department and not in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP ERNST & YOUNG LLP New York, New York March 26, 2001 EX-99.16 6 y46340ex99-16.txt SCHEDULES - COMPUTATION OF PERFORMANCE QUOTATIONS 1 Schedule of Computation Total Return Information for the TIAA Separate Account VA-1 Stock Index Account
January 1, 2000 January 1, 1996 74 months (From November 1, 1994 to to Commencement of operations to December 31, 2000 December 31, 2000 December 31, 2000) ----------------- ----------------- ------------------ Hypothetical initial payment of $1,000 (P) $ 1,000 $ 1,000 $ 1,000 Accumulation unit value: At start of period (A) $ 81.7510 $ 34.4112 $ 25.8318 At end of period (B) $ 75.3923 $ 75.3923 $ 75.3923 Ending value of hypothetical investment (EV) = P x (B/A) $ 922.22 $ 2,190.92 $ 2,918.58 Cumulative rate of total return = {(EV/P) - 1} x 100 (7.78)% 119.09% 191.86% Number of years in period (n) 1 5 6.17 Net change factor (1 +T) = EV/P .9222 2.1909 2.9186 Average annual compound rate of total return (T) (7.78)% 16.98% 18.95%
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