485BPOS 1 y84378bpe485bpos.txt 485BPOS As filed with the Securities and Exchange Commission on April 29, 2003 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. 9 [X] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X] Amendment No. 12 [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 May 1, 2003 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. PROSPECTUS DATED MAY 1, 2003 INDIVIDUAL DEFERRED VARIABLE ANNUITIES FUNDED THROUGH TIAA SEPARATE ACCOUNT VA-1 OF TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA [TIAA CREF LOGO] 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 May 1, 2003. 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 May 1, 2003. TABLE OF CONTENTS DEFINITIONS................................................. 3 SUMMARY..................................................... 5 CONDENSED FINANCIAL INFORMATION............................. 7 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA....... 9 THE SEPARATE ACCOUNT........................................ 9 ADDING, CLOSING, OR SUBSTITUTING PORTFOLIOS................. 10 INVESTMENT PRACTICES........................................ 10 PERFORMANCE INFORMATION..................................... 13 VALUATION OF ASSETS......................................... 13 MANAGEMENT AND INVESTMENT ADVISORY ARRANGEMENTS............. 14 THE CONTRACT................................................ 14 Eligible Purchasers of the Contract.................... 14 Remitting Premiums..................................... 14 Accumulation Units..................................... 16 The Fixed Account...................................... 17 Transfers Between the Separate Account and the Fixed Account............................................... 17 Cash Withdrawals....................................... 17 General Considerations for All Transfers and Cash Withdrawals........................................... 17 Tax Issues............................................. 18 Charges................................................ 18 Other Charges.......................................... 19 Brokerage Fees and Related Transaction Expenses........ 19 The Annuity Period..................................... 19 Annuity Starting Date.................................. 20 Income Options......................................... 20 Death Benefits......................................... 21 Methods of Payment..................................... 22 TIMING OF PAYMENTS.......................................... 23 FEDERAL INCOME TAXES........................................ 24 VOTING RIGHTS............................................... 27 GENERAL MATTERS............................................. 27 DISTRIBUTION OF THE CONTRACTS............................... 28 LEGAL PROCEEDINGS........................................... 29 TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION... 30
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. 2 PROSPECTUS TIAA Separate Account VA-1 DEFINITIONS DEFINITIONS Throughout the prospectus, "TIAA," "we," and "our" refer to Teachers Insurance and Annuity Association of America. "You" and "your" mean any contractowner or any prospective contractowner. The terms and phrases below are defined so you'll know precisely how we're using them. To understand some definitions, you may have to refer to other defined terms. ACCUMULATION The total value of your accumulation units. ACCUMULATION PERIOD The period that begins with your first premium and continues as long as you still have an amount accumulated in either the separate account or the fixed account. ACCUMULATION UNIT A share of participation in the separate account. ANNUITANT The natural person whose life is used in determining the annuity payments to be received. The annuitant may be the contractowner or another person. ANNUITY PARTNER The natural person whose life is used in determining the annuity payments to be received under a survivor income option. 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. TIAA Separate Account VA-1 PROSPECTUS 3 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. 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. 4 PROSPECTUS TIAA Separate Account VA-1 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 17). 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 14). 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 ----------------------------------------------------------------------
Beginning July 1, 2003, we will be increasing the annual mortality and expense risk charge deducted under your Teachers Personal Annuity Individual Deferred Variable Annuity contract from 0.10% to 0.40% of average net assets. Annual expenses will be as follows: ANNUAL EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
CURRENT EXPENSES EFFECTIVE EXPENSES JULY 1, 2003 -------------------------------------------------------------------------------------- MORTALITY AND EXPENSE RISK CHARGE(1) 0.10% 0.40% ADMINISTRATIVE EXPENSE CHARGE 0.20% 0.20% INVESTMENT ADVISORY CHARGE (AFTER FEE WAIVER)(2) 0.07% 0.07% TOTAL ANNUAL EXPENSES(3) 0.37% 0.67% --------------------------------------------------------------------------------------
(1) TIAA reserves the right to increase the mortality and expense risk charge to a maximum of 1.00 percent per year. (2) 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. (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 percent. TIAA guarantees that total annual expenses will never exceed this level. TIAA Separate Account VA-1 PROSPECTUS 5 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 19). The table below 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. Expense deductions reflect administrative, investment advisory and mortality and expense risk charges as in effect on July 1, 2003, including Advisors' voluntary waiver of a portion of the investment advisory charge. ANNUAL EXPENSE DEDUCTIONS FROM NET ASSETS
1 YEAR(1) 3 YEARS 5 YEARS 10 YEARS -------------------------------------------------------------------------------------------- If you withdraw your entire accumulation at the end of the applicable time period: $ 7 $ 21 $ 37 $ 83 If you annuitize at the end of the applicable time period: $ 7 $ 21 $ 37 $ 83 If you do not withdraw your entire accumulation: $ 7 $ 21 $ 37 $ 83 --------------------------------------------------------------------------------------------
(1) If your investment is made prior to July 1, 2003, your first year expenses may be slightly lower. 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 18. "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, 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 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 20, and "Federal Income Taxes," page 24. 6 PROSPECTUS TIAA Separate Account VA-1 CONDENSED FINANCIAL INFORMATION Presented below is condensed financial information for the separate account. The condensed financial information is derived from the separate account financial statements audited by Ernst & Young LLP, independent auditors, for the year ended December 31, 2002. The table shows per accumulation unit data for each variable investment account of the separate account. The data should be read in conjunction with the financial statements and other financial information included in the SAI. It is available without charge upon request.
YEAR ENDED DECEMBER 31, -------------------------------------- 2002 2001 2000 1999 ------------------------------------------------------------------------------------ PER ACCUMULATION UNIT DATA: Investment income $0.965 $0.916 $0.966 $0.961 Expense charges 0.218 0.253 0.301 0.270 ------------------------------------------------------------------------------------ Investment income--net 0.747 0.663 0.665 0.691 Net realized and unrealized gain (loss) on investments (15.200) (9.499) (7.024) 13.051 ------------------------------------------------------------------------------------ Net increase (decrease) in Accumulation Unit Value (14.453) (8.836) (6.359) 13.742 ACCUMULATION UNIT VALUE: Beginning of period 66.556 75.392 81.751 68.009 ------------------------------------------------------------------------------------ End of period $52.103 $66.556 $75.392 $81.751 RATIOS TO AVERAGE NET ASSETS: Expenses(2) 0.37% 0.37% 0.37% 0.37% Investment income--net 1.27% 0.97% 0.82% 0.95% Portfolio turnover rate 5.33% 9.86% 20.68% 37.93% Thousands of Accumulation Units outstanding at end of period 11,801 12,517 13,147 12,630 ------------------------------------------------------------------------------------
(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. TIAA Separate Account VA-1 PROSPECTUS 7
NOVEMBER 1, 1994 (DATE OF INITIAL YEAR ENDED DECEMBER 31, REGISTRATION) TO ------------------------------------- DECEMBER 31, 1998 1997 1996 1995 1994(1) ---------------------------------------------------------------------------------------- PER ACCUMULATION UNIT DATA: Investment income $0.908 $0.847 $0.807 $0.745 $0.138 Expense charges 0.223 0.182 0.150 0.170 0.023 ---------------------------------------------------------------------------------------- Investment income--net 0.685 0.665 0.657 0.575 0.115 Net realized and unrealized gain (loss) on investments 12.407 12.429 6.755 8.565 (0.676) ---------------------------------------------------------------------------------------- Net increase (decrease) in Accumulation Unit Value 13.092 13.094 7.412 9.140 (0.561) ACCUMULATION UNIT VALUE: Beginning of period 54.917 41.823 34.411 25.271 25.832 ---------------------------------------------------------------------------------------- End of period $68.009 $54.917 $41.823 $34.411 $25.271 ---------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Expenses(2) 0.37% 0.37% 0.40% 0.55% 0.09% Investment income--net 1.14% 1.36% 1.74% 1.87% 0.45% Portfolio turnover rate 45.93% 2.39% 4.55% 0.98% 0.04% Thousands of Accumulation Units outstanding at end of period 11,145 9,901 6,768 2,605 1,171 ----------------------------------------------------------------------------------------
8 PROSPECTUS TIAA Separate Account VA-1 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 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 2.5 million people at over 15,000 institutions. As of December 31, 2002, TIAA's assets were approximately $141.8 billion; the combined assets for TIAA and CREF totaled approximately $255.6 billion (although CREF doesn't stand behind TIAA's guarantees). 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 TIAA Separate Account VA-1 PROSPECTUS 9 on accumulations in the separate account aren't taxed until withdrawn or paid as annuity income (see "Federal Income Taxes," page 24). 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 with the same or different fees and charges, 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 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 Stock Index Account has a policy of investing, under normal circumstances, at least 80% of its assets in the particular type of securities implied by its name. The Stock Index Account will provide its shareholders with at least 60 days prior notice before making changes to this policy. 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 14). 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 10 PROSPECTUS TIAA Separate Account VA-1 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. 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 $10 million to $280 billion, with an average of $3.4 billion as of December 31, 2002. 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. TIAA Separate Account VA-1 PROSPECTUS 11 OTHER INVESTMENTS The separate account can also hold other investments whose return depends on stock market prices. These include stock index futures contracts, options (puts and calls) on futures contracts, and debt securities whose prices or interest rates are linked to the return of a recognized stock market index. The separate account can also make swap arrangements where the return is linked to a recognized stock market index. The separate account would make such investments in order to seek to match the total return of the Russell 3000. However, they might not track the return of the Russell 3000 in all cases and can involve additional credit risks. Investing in options or futures contracts and entering into equity swaps involve special risks. For more information, see the SAI. Such investing by the separate account is subject to any necessary regulatory approvals. The separate account can hold other types of securities with equity characteristics, such as bonds convertible into common stock, warrants, preferred stock, and depository receipts for such securities. In addition, the separate account can hold fixed-income securities that it acquires because of mergers, recapitalizations, or otherwise. For liquidity, the separate account can also invest in short-term debt securities and other money market instruments, including those denominated in foreign currencies. OTHER INVESTMENT ISSUES AND RISKS OPTIONS, FUTURES, AND OTHER INVESTMENTS The separate account can buy and sell options (puts and calls) and futures to the extent permitted by the New York State Insurance Department, the SEC, and the Commodity Futures Trading Commission. We intend to use options and futures primarily as hedging techniques or for cash management, not for speculation, but they involve special considerations and risks nonetheless. For more information, see the SAI. 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. 12 PROSPECTUS TIAA Separate Account VA-1 FIRM COMMITMENT AGREEMENTS The separate account can enter "firm commitment" agreements to buy securities at a fixed price or yield on a specified future date. We expect that these transactions will be relatively infrequent. For more information, see the SAI. INVESTMENT COMPANIES The separate account can invest up to 10 percent of its assets in other investment companies. SECURITIES LENDING Subject to certain restrictions, the separate account can seek additional income by lending securities to brokers, dealers, and other financial institutions. Brokers and dealers must be registered with the SEC and be members of the National Association of Securities Dealers, Inc. (NASD); any recipient must be unaffiliated with TIAA. All loans will be fully collateralized. If we lend a security, we can call in the loan at any time. For more information, see the SAI. BORROWING The separate account can borrow money from banks (no more than 33 1/3 percent of the market value of its assets at the time of borrowing). It can also borrow money from other sources temporarily (no more than 5 percent of the total market value of its assets at the time of borrowing). For more information, see the SAI. 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 28). 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. TIAA Separate Account VA-1 PROSPECTUS 13 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. 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 14 PROSPECTUS TIAA Separate Account VA-1 (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.) Note that we cannot accept money orders or travelers checks. In addition, we will not accept a third-party check where the relationship of the payor to the account owner cannot be identified from the face of the check. 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. 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) TIAA Separate Account VA-1 PROSPECTUS 15 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. Your total premiums and transfers to the separate account during the "free look" period can't exceed $10,000 if you live in a state which requires us to refund all payments upon the cancellation of your contract during the free look period. 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 28). We reserve the right to reject any premium payment or to place dollar limitations on the amount of a premium. If mandated under applicable law, including federal laws designed to counter terrorism and prevent money laundering, we may be required to reject a premium payment. We may also be required to block a contractowner's account and refuse to pay any request for transfers, withdrawals, surrenders, or death benefits, until instructions are received from the appropriate regulator. We may also be required to provide additional information about you and your contract to government regulators. ACCUMULATION UNITS Premiums paid to the separate account purchase accumulation units. When you remit premiums or transfer amounts into the separate account, the number of your units will increase; when you transfer amounts from the account (including applying funds to the fixed account to begin annuity income) or take a cash withdrawal, the number of your units will decrease. We calculate how many accumulation units to credit by dividing the amount allocated to the separate account by its unit value for the business day when we received your premium. We may use a later business day for your initial premium. To determine how many accumulation units to subtract for transfers and cash withdrawals, we use the unit value for the business day when we receive your completed transaction request and all required information and documents. (You can choose to have your transaction completed at a later date; if you do, we will use that later date as the valuation day.) For amounts to be applied to begin annuity income, the unit value will be the one for the last valuation day of the month when we receive all required information and documentation (see "The Annuity Period," page 19). 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 21). The value of the accumulation units will depend mainly on investment experience, though the unit value reflects expense deductions from assets (see "Charges," page 18). 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). 16PROSPECTUS TIAA Separate Account VA-1 THE FIXED ACCOUNT Premiums allocated and amounts transferred to the fixed account become part of the general account assets of TIAA, which support insurance and annuity obligations. The general account includes all the assets of TIAA, except those in the separate account or in any other TIAA separate investment account. Interests in the fixed account have not been registered under the Securities Act of 1933 (the 1933 Act), nor is the fixed account registered as an investment company under the 1940 Act. Neither the fixed account nor any interests therein are generally subject to the 1933 Act or 1940 Act. The SEC staff has told us that they haven't reviewed the information in this prospectus about the fixed account. You can allocate premiums to the fixed account or transfer from the separate account to the fixed account at any time. In contrast, you can transfer or take a cash withdrawal from the fixed account only once every 180 days. TIAA may defer payment of a transfer or cash withdrawal from the fixed account for up to six months. When you invest in the separate account, you bear the investment risk. However, TIAA bears the full investment risk for all accumulations in the fixed account. Currently TIAA guarantees that amounts in the fixed account will earn interest of at least 3 percent per year. At its discretion, TIAA can credit amounts in the fixed account with interest at a higher rate than 3 percent per year. TIAA has sole investment discretion for the fixed account, subject to applicable law. This prospectus provides information mainly about the contract's variable component, which is funded by the separate account. For more about the fixed account, see the contract itself. TRANSFERS BETWEEN THE SEPARATE ACCOUNT AND THE FIXED ACCOUNT Subject to the conditions 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. TIAA Separate Account VA-1 PROSPECTUS 17 Transfers and cash withdrawals are effective at the end of the business day we receive your request and any required information and documentation. Transfers and cash withdrawals made at any time other than during a business day will be effective at the close of the next business day. You can also defer the effective date of a transfer or cash withdrawal to a future business day acceptable to us. To request a transfer, write to TIAA's home office, call our Automated Telephone Service at 1 800 842-2252 (there is an option to speak with a live person, if you wish) or use 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 24. 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. You will receive at least three months' notice before we raise any of these charges. 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, but this charge will be raised to 0.40 percent of net assets annually beginning on July 1, 2003. Accumulations and annuity 18 PROSPECTUS TIAA Separate Account VA-1 payments aren't affected by changes in actual mortality experience or by TIAA's actual expenses. TIAA's mortality risks come from its contractual obligations to make annuity payments and to pay death benefits before the annuity starting date. This assures that neither your own longevity nor any collective increase in life expectancy will lower the amount of your annuity payments. TIAA also bears a risk in connection with its death benefit guarantee, since a death benefit may exceed the actual amount of an accumulation at the time when it's payable. TIAA's expense risk is the possibility that TIAA's actual expenses for administering the contract and the separate account will exceed the amount recovered through the administrative expense deduction. If the mortality and expense risk charge isn't enough to cover TIAA's actual costs, TIAA will absorb the deficit. On the other hand, if the charge more than covers costs, the excess will belong to TIAA. TIAA will pay a fee from its general account assets, which may include amounts derived from the mortality and expense risk charge, to Teachers Personal Investors Services, Inc. (TPIS), the principal underwriter of the variable component of the contract for distribution of the variable component of the contract. OTHER CHARGES NO DEDUCTIONS FROM PREMIUMS: The contract provides for no front-end charges. PREMIUM TAXES: Currently, contracts issued to residents of several states and the District of Columbia are subject to a premium tax. Charges for premium taxes on a particular contract ordinarily will be deducted from the accumulation when it's applied to provide annuity payments. However, if a jurisdiction requires payment of premium taxes at other times, such as when premiums are paid or when cash withdrawals are taken, we'll deduct premium taxes at those times. Current state premium taxes, where charged, range from 1.00 percent to 3.50 percent of annuity payments. BROKERAGE FEES AND RELATED TRANSACTION EXPENSES Brokers' commissions, transfer taxes, and other portfolio fees are charged to the separate account (see the SAI). THE ANNUITY PERIOD All annuity payments are paid to the contractowner from the fixed account. TIAA fixed annuity payments are usually monthly. You can choose quarterly, semi-annual, and annual payments as well. TIAA reserves the right not to make payments at any interval that would cause the initial payment to be less than $100. The value of the amount accumulated upon which payments are based will be set at the end of the last calendar day of the month before the annuity starting date. We transfer your separate account accumulation to the fixed account on that day. At the annuity starting date, the dollar amount of each periodic annuity payment is fixed, based upon the number and value of the separate account accumulation units being converted to annuity income, the annuity option chosen, the ages of the annuitant and (under a survivor income option) the TIAA Separate Account VA-1 PROSPECTUS 19 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 27). 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 28.) 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 the automatic election option stated in your contract. Your first annuity check may be delayed while we process your choice of income options and calculate the amount of your initial payment. INCOME OPTIONS You may select from the several income options set forth in your contract (all from the fixed account) or any other annuity option available from TIAA at the time of selection. However, federal tax law might limit the options available to you. You may change your choice any time before payments begin, but once they have begun no change can be made. You have a number of different annuity options to choose among. The current options are: SINGLE LIFE ANNUITY: Pays income (usually monthly) as long as the annuitant lives. Remember: All payments end at the annuitant's death so that it would be possible, for example, for the contractowner to receive only one payment if the annuitant died less than a month after annuity payments started. If you die before the annuitant, your beneficiary becomes the contractowner. 20 PROSPECTUS TIAA Separate Account VA-1 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. 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 27). 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. TIAA Separate Account VA-1 PROSPECTUS 21 Your accumulation will continue participating in the investment experience of the separate account up to and including the day when we receive proof of death. Ordinarily, we will transfer your separate account accumulation to the fixed account as of the day we receive proof of death. However, if the contractowner's spouse is the sole beneficiary, when the contractowner dies the spouse can choose to become the contractowner and continue the contract, or receive the death benefit. If the spouse does not make a choice within 60 days after we receive proof of death, no transfer will be made and the spouse will automatically become the contractowner. The spouse will also become the annuitant if the contractowner was the annuitant. The amount of the death benefit will equal the greater of (1) the amount you have accumulated in the separate and fixed accounts on the day we receive proof of death or, if that isn't a business day, on the next business day, or (2) the total premiums paid under your contract minus any cash withdrawals (or surrender charges on cash withdrawals or transfers from the fixed account). If (2) is greater than (1), we'll deposit the difference in the fixed account as of the day we receive proof of death. You can choose in advance the method by which death benefits should be paid, or you can leave it up to the death benefit payee. Except with the Single-Sum Payment and Interest Payments methods, the amount of each periodic payment is fixed (see "The Fixed Account," page 17). 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 28.) 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 25.) 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- 22 PROSPECTUS TIAA Separate Account VA-1 sum method is automatic, and TIAA reserves the right to pay death benefits only as a single sum to corporations, trustees, partnerships, guardians, or any beneficiary not a natural person. SINGLE LIFE ANNUITY: Payable monthly for the life of the death benefit payee, with payments ending when he or she dies. SINGLE LIFE ANNUITY WITH A 10-, 15-, OR 20-YEAR GUARANTEED PERIOD: Payable monthly for the death benefit payee's lifetime or until the end of the period chosen, whichever is later. If he or she dies before the period is up, the remaining payments continue to the person named to receive them (see "Choices and Changes," page 27). Federal tax law says the guaranteed period selected can't exceed the death benefit payee's life expectancy. PAYMENTS FOR A FIXED PERIOD: Payable over two to thirty years, as determined by you or your beneficiary. At the end of the selected period, payments stop. If the death benefit payee dies before the period is up, the remaining payments continue to the person named to receive them. Federal tax law says the fixed period selected can't exceed the death benefit payee's life expectancy. INTEREST PAYMENTS: We'll pay interest on the amount of the death benefit each month for two to thirty years. You (or your beneficiary, unless you specify otherwise) choose the period. The death benefit is payable at the end of the period chosen. If the death benefit payee dies before the interest payment period is up, the death benefit becomes payable immediately. For this interest-only method, the death benefit must be at least $5,000. The Single Life Annuity and the Single Life Annuity With a 10-, 15-, or 20-Year Guaranteed Period methods are available only if the death benefit payee is a natural person. Under any method (except the Interest Payments method) that would result in payments of less than $100 a month, we reserve the right to require a change in choice that will result in payments of $100 or more. 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. TIAA Separate Account VA-1 PROSPECTUS 23 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 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. 24 PROSPECTUS TIAA Separate Account VA-1 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 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. TIAA Separate Account VA-1 PROSPECTUS 25 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 adviser. 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, most 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 affiliate's non-qualified deferred annuity contracts issued after October 21, 1988 to the same owner during any calendar year. This could affect when income is taxable and how much might be subject to the 10 percent penalty tax (see above). It is possible, for instance, that if you take annuity payments from only one of the contracts, they could be taxed like individual withdrawals (see above). There might be other situations where Treasury concludes that it would be appropriate to treat two or more annuity contracts purchased by the same owner as if they were one contract. Consult a tax adviser before buying more than one annuity contract that falls within the scope of these rules. 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 19), 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 26 PROSPECTUS TIAA Separate Account VA-1 circumstances, and foreign, 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. 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 14). 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. TIAA Separate Account VA-1 PROSPECTUS 27 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. Also, telephone and Internet transactions may not always be available. TIAA will not be responsible for loss due to unauthorized or fraudulent transactions if it follows such procedures. 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. CUSTOMER COMPLAINTS Customer complaints may be directed to our Planning and Service Center, Customer Relations Unit (A2-01), 8500 Andrew Carnegie Blvd., Charlotte, NC 28262, telephone 800-223-1200. ELECTRONIC PROSPECTUSES If you received this prospectus electronically and would like a paper copy, please call 1 800 842-2733, extension 5509, and we will send it to you. HOUSEHOLDING To cut costs and eliminate duplicate documents sent to your home, we may begin mailing only one copy of the separate account prospectus, prospectus supplements, annual and semi-annual reports, or any other required documents, to your household, even if more than one contractowner lives there. If you would prefer to continue receiving your own copy of any of these documents, you may call us toll-free at 1 800 842-2733, extension 5509, or write us. SIGNATURE REQUIREMENTS For some transactions, we may require your signature to be notarized or guaranteed by a commercial bank or a member of a national securities exchange. ERRORS OR OMISSIONS We reserve the right to correct any errors or omissions on any form, report, or statement that we send you. 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, 28 PROSPECTUS TIAA Separate Account VA-1 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. TIAA Separate Account VA-1 PROSPECTUS 29 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-5 Lending of Securities....................................... B-5 Repurchase Agreements....................................... B-5 Swap Transactions........................................... B-6 Segregated Accounts......................................... B-6 Other Investment Techniques and Opportunities............... B-6 Portfolio Turnover.......................................... B-6 Valuation of Assets......................................... B-7 Equity Securities........................................... B-7 Money Market Instruments.................................... B-7 Options..................................................... B-7 Investments for Which Market Quotations Are Not Readily Available.................................................. B-7 Management.................................................. B-8 Separate Account Management Committee and Officers.......... B-8 Compensation of Managers.................................... B-12 Investment Advisory and Related Services.................... B-13 Investment Advisory Services................................ B-13 Administrative Services..................................... B-13 Advisors and TIAA........................................... B-13 Custody of Portfolio........................................ B-13 Auditors.................................................... B-13 Brokerage Allocation........................................ B-13 Performance Information..................................... B-14 Total Return Information for the Separate Account........... B-14 Performance Comparisons..................................... B-14 Illustrating Compounding, Tax Deferral, and Expense Deductions................................................. B-15 Periodic Reports............................................ B-15 General Matters............................................. B-15 Assignment of Contracts..................................... B-15 Payment to an Estate, Guardian, Trustee, etc................ B-15 Benefits Based on Incorrect Information..................... B-15 Proof of Survival........................................... B-15 State Regulation............................................ B-15 Legal Matters............................................... B-15 Experts..................................................... B-15 Additional Considerations................................... B-16 Additional Information...................................... B-16 Financial Statements........................................ B-16
30 PROSPECTUS TIAA Separate Account VA-1 STATEMENT OF ADDITIONAL INFORMATION May 1, 2003 Individual Deferred Variable Annuities Funded through TIAA SEPARATE ACCOUNT VA-1 of Teachers Insurance and Annuity Association of America This Statement of Additional Information is not a prospectus and should be read in connection with the current prospectus dated May 1, 2003 (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 into this Statement. THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACTS. [TIAA CREF LOGO] TABLE OF CONTENTS
Location of Page in the Additional Statement of Information in Additional Prospectus, if Item Information Applicable -------------------------------------------------------------------------------------------------- Investment Restrictions..................................... B-3 12 Investment Policies and Risk Considerations................. B-3 10-13 Options and Futures.................................. B-3 12-13 Firm Commitment Agreements and Purchase of "When-Issued Securities"............................................... B-5 13 Lending of Securities................................ B-5 13 Repurchase Agreements................................ B-5 12 Swap Transactions.................................... B-6 12 Segregated Accounts.................................. B-6 Other Investment Techniques and Opportunities........ B-6 Portfolio Turnover.......................................... B-6 Valuation of Assets......................................... B-7 13 Equity Securities.................................... B-7 Money Market Instruments............................. B-7 Options.............................................. B-7 Investments for Which Market Quotations are Not Readily Available................................... B-7 Management.................................................. B-8 14 Separate Account Management Committee and Officers... B-8 14 Compensation of Managers............................. B-12 Investment Advisory and Related Services.................... B-13 Investment Advisory Services......................... B-13 Administrative Services.............................. B-13 Advisors and TIAA.................................... B-13 Custody of Portfolio................................. B-13 Auditors............................................. B-13 Brokerage Allocation........................................ B-13 Performance Information..................................... B-14 13 Total Return Information for the Separate Account.... B-14 Performance Comparisons.............................. B-14 Illustrating Compounding, Tax Deferral, and Expense Deductions.......................................... B-15 Periodic Reports............................................ B-15 General Matters............................................. B-15 Assignment of Contracts.............................. B-15 Payment to an Estate, Guardian, Trustee, etc......... B-15 Benefits Based on Incorrect Information.............. B-15 Proof of Survival.................................... B-15 State Regulation............................................ B-15 9-10 Legal Matters............................................... B-15 29 Experts..................................................... B-15 Additional Considerations................................... B-16 Additional Information...................................... B-16 Financial Statements........................................ B-16 7-8
B- 2 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 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 "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 TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 3 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 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 B- 4 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 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 that reflect the rising market. The separate account may have to sell securities or instruments at a time when it may be disadvantageous to do so. In addition to the possibility that there may be an imperfect correlation, or no correlation at all, between movements in the futures contracts and the portion of the portfolio being hedged, the prices of futures contracts may not correlate perfectly with movements in the underlying security or instrument due to certain market distortions. First, all transactions in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions 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 futures market and also because of the imperfect correlation between movements in the futures contracts and the portion of the portfolio being hedged, even a correct forecast of general market trends by Teachers Advisors, Inc. ("Advisors") 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-6). 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 TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 5 the seller's repurchase obligation, continually monitors the market value of the security subject to the agreement, and requires the separate account's seller to deposit with the separate account additional collateral equal to any amount by which the market value of the security subject to the repurchase agreement falls below the resale amount provided under the repurchase agreement. The separate account will enter into repurchase agreements only with member banks of the Federal Reserve System, and with primary dealers in United States Government securities or their wholly-owned subsidiaries whose creditworthiness has been reviewed and found satisfactory by Advisors and who have, therefore, been determined to present minimal credit risk. Securities underlying repurchase agreements will be limited to certificates of deposit, commercial paper, bankers' acceptances, or obligations issued or guaranteed by the United States Government or its agencies or instrumentalities, in which the separate account may otherwise invest. If a seller of a repurchase agreement defaults and does not repurchase the security subject to the agreement, the separate account would look to the collateral security underlying the seller's repurchase agreement, including the securities subject to the repurchase agreement, for satisfaction of the seller's obligation to the separate account; in such event the separate account might incur disposition costs in liquidating the collateral and might suffer a loss if the value of the collateral declines. In addition, if bankruptcy proceedings are instituted against a seller of a repurchase agreement, realization upon the collateral may be delayed or limited. 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 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 B- 6 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 anticipated from such transactions. The portfolio turnover rate in 2002 and 2001 for the separate account were 5.33% and 9.86%, respectively. 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 are derived from a pricing matrix that has various types of money market instruments along one axis and various maturities along the other. 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). TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 7 MANAGEMENT SEPARATE ACCOUNT MANAGEMENT COMMITTEE AND OFFICERS The following table includes certain information about the separate account's Management Committee members ("Managers") and officers including positions held with the separate account, length of office and time served and principal occupations in the last five years. The table also includes the number of portfolios in the fund complex overseen by each Manager and certain directorships held by each of them. The first table includes information about the separate account's disinterested Managers and the second table includes information about the separate account's interested Managers and officers. DISINTERESTED MANAGERS
NUMBER OF PORTFOLIOS IN FUND POSITION(S) TERM OF OFFICE PRINCIPAL COMPLEX OTHER HELD WITH AND LENGTH OF OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS NAME, ADDRESS AND AGE FUND TIME SERVED DURING PAST 5 YEARS MANAGER HELD BY MANAGERS ----------------------------------------------------------------------------------------------------------------------------- Martin J. Gruber Manager Indefinite term. Nomura Professor of 51 Director, New York University Manager since 2001. Finance, New York Deutsche Asset Stern School of University, Stern Management B.T. Business School of Business. Funds, Japan Henry Kaufman Formerly, Chairman, Equity Fund, Management Department of Inc., Singapore Education Center Finance, New York Equity Fund, 44 West 4th Street, University, Stern Inc., the Thai Suite 988 School of Business, Equity Fund, New York, NY 10012 and Trustee of Inc. and the DB Age: 65 TIAA, 1996 - 2000. Hedge Strategies Fund, L.L.C. ----------------------------------------------------------------------------------------------------------------------------- Nancy L. Jacob Manager Indefinite term. President and 51 None Windermere Manager since 2001. Managing Principal, Investment Windermere Associates Investment 121 S.W. Morrison Associates. Street Formerly, Chairman Suite 925 and Chief Executive Portland, OR 97204 Officer, CTC Age: 60 Consulting, Inc., and Executive Vice President, U.S. Trust of the Pacific Northwest. ----------------------------------------------------------------------------------------------------------------------------- Bevis Longstreth Manager Indefinite term. Retired Partner, 51 Member of the Debevoise & Manager since 2001. Debevoise & Board of Plimpton Plimpton. Formerly, Directors of 919 Third Avenue Partner and Of AMVESCAP, PLC New York, NY Counsel of and Chairman of 10022-6225 Debevoise & the Finance Age: 69 Plimpton, Adjunct Committee of the Professor at Rockefeller Columbia University Family Fund School of Law and Commissioner of the U.S. Securities and Exchange Commission. ----------------------------------------------------------------------------------------------------------------------------- Stephen A. Ross Manager Indefinite term. Franco Modigliani 51 Director, Sloan School of Manager since 2001. Professor of Freddie Mac; Management Finance and Co-Chairman, Massachusetts Economics, Sloan Roll & Ross Institute of School of Asset Management Technology Management, Corp.; and 77 Massachusetts Massachusetts Principal, IV Avenue Institute of Capital, Ltd. Cambridge, MA 02139 Technology, Age: 59 Co-Chairman, Roll & Ross Asset Management Corp. Formerly, Sterling Professor of Economics and Finance, Yale School of Management, Yale University. ----------------------------------------------------------------------------------------------------------------------------- Nestor V. Santiago Manager Indefinite term. Vice President and 51 Director, Howard Hughes Manager since 2001. Chief Investment Bank-Fund Credit Medical Institute Officer, Howard Union and 4000 Jones Bridge Hughes Medical Emerging Markets Road Institute. Growth Fund, Chevy Chase, MD Formerly, Inc. 20815 Investment Age: 53 Advisor/Head of Investment Office, International Monetary Fund. ----------------------------------------------------------------------------------------------------------------------------- Maceo K. Sloan Manager Indefinite term. Chairman, President 51 Director, SCANA NCM Capital Manager since 2001. and Chief Executive Corporation and Management Officer, Sloan M&F Bancorp, Group, Inc. Financial Group, Inc. 103 West Main Inc., and Chairman Street, and Chief Executive Suite 400 Officer, NCM Durham, NC Capital Management 27701-3638 Group, Inc., since Age: 53 1991. ----------------------------------------------------------------------------------------------------------------------------- Robert W. Vishny Manager Indefinite term. Eric J. Gleacher 51 None University of Manager since 2001. Distinguished Chicago Service Professor Graduate School of of Finance, Business University of 1101 East 58th Chicago, Graduate Street School of Business. Chicago, IL 60637 Founding Partner, Age: 43 LSV Asset Management. -----------------------------------------------------------------------------------------------------------------------------
B- 8 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 INTERESTED MANAGERS AND OFFICERS
NUMBER OF PORTFOLIOS IN FUND POSITION(S) TERM OF OFFICE PRINCIPAL COMPLEX OTHER HELD WITH AND LENGTH OF OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS NAME, ADDRESS AND AGE FUND TIME SERVED DURING PAST 5 YEARS MANAGER HELD BY MANAGERS ----------------------------------------------------------------------------------------------------------------------------- Martin L. Manager and Vice Indefinite term. Vice Chairman and 51 None Leibowitz(1) Chairman and Manager since 2001. Chief Investment TIAA-CREF Chief Investment Vice Chairman and Officer of CREF, 730 Third Avenue Officer Chief Investment TIAA- CREF Mutual New York, NY Officer since 2001. Funds, TIAA-CREF 10017-3206 Chief Investment Institutional Age: 66 Officer since 1998. Mutual Funds, TIAA- Indefinite term as CREF Life Funds and officer. TIAA Separate Account VA-1 (these funds are collectively referred to as the "TIAA-CREF Funds"). Vice Chairman and Chief Investment Officer of TIAA. Member of Board of Managers and President of TIAA-CREF Investment Management, LLC ("Investment Management"). Director and President of Teachers Advisors, Inc. ("Advisors"). Director of TIAA-CREF Life Insurance Company ("TIAA-CREF Life"). ----------------------------------------------------------------------------------------------------------------------------- Herbert M. Allison, President and Indefinite term. Chairman, President 51 Forbes.com, Inc. Jr.(1) Chief Executive President and Chief and Chief Executive TIAA-CREF Officer Executive Officer Officer of TIAA. 730 Third Avenue since 2002. President and Chief New York, NY Executive Officer 10017-3206 of the TIAA-CREF Age: 59 Funds and TIAA. Formerly, President and Chief Executive Officer of Alliance for LifeLong Learning, Inc., 1999 - 2002. National Finance Chairman, Presidential Campaign of Senator John McCain, 1999-2000. President, Chief Operating Officer and Member of the Board of Directors of Merrill Lynch & Co., Inc., 1997-1999. ----------------------------------------------------------------------------------------------------------------------------- Richard J. Vice President Indefinite term. Vice Vice President and N/A N/A Adamski(1) and Treasurer President and Treasurer of the TIAA-CREF Treasurer since 1994. TIAA-CREF Funds and 730 Third Avenue TIAA. Vice New York, NY President and 10017-3206 Treasurer of Age: 61 Investment Management, Services, TPIS, Advisors, TIAA-CREF Life, and TIAA-CREF Tuition Financing, Inc. ("Tuition Financing"). ----------------------------------------------------------------------------------------------------------------------------- C. Victoria Executive Vice Indefinite term. Executive Vice N/A N/A Apter(1) President Executive Vice President of the TIAA-CREF President since 2001. TIAA-CREF Funds and 730 Third Avenue TIAA. Formerly, New York, NY Vice President, 10017-3206 Retirement Age: 60 Services, CREF and TIAA. ----------------------------------------------------------------------------------------------------------------------------- Scott C. Evans(1) Executive Vice Indefinite term. Executive Vice N/A N/A TIAA-CREF President Executive Vice President of the 730 Third Avenue President since 1998. TIAA-CREF Funds and New York, NY TIAA. Executive 10017-3206 Vice President of Age: 43 Investment Management and Advisors and Director of TIAA-CREF Life. -----------------------------------------------------------------------------------------------------------------------------
TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 9 INTERESTED MANAGERS AND OFFICERS (CONTINUED)
NUMBER OF PORTFOLIOS IN FUND POSITION(S) TERM OF OFFICE PRINCIPAL COMPLEX OTHER HELD WITH AND LENGTH OF OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS NAME, ADDRESS AND AGE FUND TIME SERVED DURING PAST 5 YEARS MANAGER HELD BY MANAGERS ----------------------------------------------------------------------------------------------------------------------------- Martin E. Galt, President Indefinite term. Executive Vice N/A N/A III(1) Executive Vice President and TIAA-CREF President since 2000. President, 730 Third Avenue TIAA-CREF New York, NY Investment 10017-3206 Products, TIAA and Age: 61 CREF. President of TIAA-CREF Mutual Funds, TIAA- CREF Institutional Mutual Funds, TIAA-CREF Life Funds and TIAA Separate Account VA-1. Formerly, Executive Vice President and President, Institutional Investments, Bank of America, and Principal Investment Officer, NationsBank. Director and President of Tuition Financing and TPIS and Director of TIAA-CREF Life and TIAA-CREF Trust Company. ----------------------------------------------------------------------------------------------------------------------------- Richard L. Gibbs(1) Executive Vice Indefinite term. Executive Vice N/A N/A TIAA-CREF President Executive Vice President of the 730 Third Avenue President since 1994. TIAA-CREF Funds and New York, NY TIAA. Executive 10017-3206 Vice President, Age: 56 Investment Management, Advisors and Tuition Financing and Director of TIAA-CREF Life and Tuition Financing. ----------------------------------------------------------------------------------------------------------------------------- Don W. Harrell(1) Executive Vice Indefinite term. Executive Vice N/A N/A TIAA-CREF President Executive Vice President of the 730 Third Avenue President since 1998. TIAA-CREF Funds and New York, NY TIAA. Director of 10017-3206 TIAA-CREF Life. Age: 65 ----------------------------------------------------------------------------------------------------------------------------- Ira J. Hoch(1) Executive Vice Indefinite term. Executive Vice N/A N/A TIAA-CREF President Executive Vice President of the 730 Third Avenue President since 2001. TIAA-CREF Funds and New York, NY TIAA. Formerly, 10017-3206 Vice President, Age: 53 Retirement Services, CREF and TIAA. ----------------------------------------------------------------------------------------------------------------------------- Matina S. Horner(1) Executive Vice Indefinite term. Executive Vice N/A N/A TIAA-CREF President Executive Vice President of the 730 Third Avenue President since 1998. TIAA-CREF Funds and New York, NY TIAA. Director of 10017-3206 TIAA-CREF Life. Age: 63 ----------------------------------------------------------------------------------------------------------------------------- E. Laverne Jones(1) Vice President Indefinite term. Vice Vice President and N/A N/A TIAA-CREF and Corporate President and Corporate Secretary 730 Third Avenue Secretary Corporate Secretary of the TIAA-CREF New York, NY since 2001. Funds and TIAA. 10017-3206 Age: 54 ----------------------------------------------------------------------------------------------------------------------------- Harry I. Executive Vice Indefinite term. Executive Vice N/A N/A Klaristenfeld(1) President and Executive Vice President and Chief TIAA-CREF Chief Actuary President and Chief Actuary of the 730 Third Avenue Actuary since 2001. TIAA-CREF Funds and New York, NY TIAA. Formerly, 10017-3206 Vice President and Age: 52 Chief Actuary, Retirement Services, CREF and TIAA. Executive Vice President and Chief Actuary of Services. ----------------------------------------------------------------------------------------------------------------------------- Frances Nolan(1) Executive Vice Indefinite term. Executive Vice N/A N/A TIAA-CREF President Executive Vice President of the 730 Third Avenue President since 2001. TIAA-CREF Funds and New York, NY TIAA. Formerly, 10017-3206 Vice President, Age: 45 Retirement Services, CREF and TIAA. ----------------------------------------------------------------------------------------------------------------------------- Bertram L. Scott(1) Executive Vice Indefinite term. Executive Vice N/A N/A TIAA-CREF President Executive Vice President of the 730 Third Avenue President since 2001. TIAA-CREF Funds and New York, NY TIAA and Chairman 10017-3206 of the Board, Age: 52 President and Chief Executive Officer of TIAA- CREF Life. Formerly, President and Chief Executive Officer, Horizon Mercy. ----------------------------------------------------------------------------------------------------------------------------- Deanne J. Executive Vice Indefinite term. Executive Vice N/A N/A Shallcross(1) President Executive Vice President of the TIAA-CREF President since 2001. TIAA-CREF Funds and 730 Third Avenue TIAA. Formerly, New York, NY Vice President, 10017-3206 Marketing, CREF and Age: 53 TIAA. Executive Vice President of Services. -----------------------------------------------------------------------------------------------------------------------------
B- 10 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 INTERESTED MANAGERS AND OFFICERS (CONTINUED)
NUMBER OF PORTFOLIOS IN FUND POSITION(S) TERM OF OFFICE PRINCIPAL COMPLEX OTHER HELD WITH AND LENGTH OF OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS NAME, ADDRESS AND AGE FUND TIME SERVED DURING PAST 5 YEARS MANAGER HELD BY MANAGERS ----------------------------------------------------------------------------------------------------------------------------- David A. Shunk(1) Executive Vice Indefinite term. Executive Vice N/A N/A TIAA-CREF President Executive Vice President of the 730 Third Avenue President since 2001. TIAA-CREF Funds and New York, NY TIAA. Formerly, 10017-3206 Vice President, Age: 56 Institutional & Individual Consulting Services, CREF and TIAA. President and Chief Executive Officer of Services and Director of TIAA-CREF Trust Company. ----------------------------------------------------------------------------------------------------------------------------- John A. Somers(1) Executive Vice Indefinite term. Executive Vice N/A N/A TIAA-CREF President Executive Vice President of the 730 Third Avenue President since 1998. TIAA-CREF Funds and New York, NY TIAA. Executive 10017-3206 Vice President of Age: 59 Investment Management and Advisors and Director of TIAA-CREF Life. ----------------------------------------------------------------------------------------------------------------------------- Charles H. Stamm(1) Executive Vice Indefinite term. Executive Vice N/A N/A TIAA-CREF President Executive Vice President and 730 Third Avenue President since 1994. General Counsel of New York, NY the TIAA-CREF Funds 10017-3206 and TIAA. Manager Age: 64 of Services. Director of TPIS, Advisors, TIAA-CREF Trust Company, Tuition Financing and TIAA-CREF Life. Member of Board of Managers of Investment Management. ----------------------------------------------------------------------------------------------------------------------------- Mary Ann Werner(1) Executive Vice Indefinite term. Executive Vice N/A N/A TIAA-CREF President Executive Vice President of TIAA- 730 Third Avenue President since 2001. CREF Funds and TIAA New York, NY and President, TIAA 10017-3206 Shared Services. Age: 57 Formerly, Vice President, CREF and TIAA. Executive Vice President of Services and Director of TIAA-CREF Life. ----------------------------------------------------------------------------------------------------------------------------- James A. Wolf(1) Executive Vice Indefinite term. Executive Vice N/A N/A TIAA-CREF President Executive Vice President of the 730 Third Avenue President since 2001. TIAA-CREF Funds and New York, NY TIAA and President, 10017-3206 TIAA Retirement Age: 57 Services. Formerly, Vice President, Retirement Services, CREF and TIAA. Manager of Services and Director of TIAA- CREF Life. -----------------------------------------------------------------------------------------------------------------------------
(1) The following individuals are "interested persons" under the Investment Company Act (the "Act") because they are officers of TIAA Separate Account VA-1: Mses. Apter, Horner, Jones, Nolan, Shallcross and Werner; and Messrs. Adamski, Allison, Evans, Galt, Gibbs, Harrell, Hoch, Klaristenfeld, Leibowitz, Scott, Shunk, Somers, Stamm and Wolf. EQUITY OWNERSHIP OF MANAGERS The following chart includes information relating to equity securities beneficially owned by TIAA Separate Account VA-1 Managers in the Separate Account and in all registered investment companies in the same "family of investment companies" as the Separate Account.(1) The Separate Account's family of investment companies includes TIAA Separate Account VA-1, CREF, TIAA-CREF Mutual Funds, TIAA-CREF Institutional Mutual Funds and TIAA-CREF Life Funds. DISINTERESTED MANAGERS
DOLLAR RANGE OF EQUITY SECURITIES IN NAME OF MANAGER SEPARATE ACCOUNT ------------------------------------------------------------ Martin J. Gruber None ------------------------------------------------------------ Nancy L. Jacob None ------------------------------------------------------------ Bevis Longstreth None ------------------------------------------------------------ Stephen A. Ross None ------------------------------------------------------------ Nestor V. Santiago None ------------------------------------------------------------ Maceo K. Sloan None ------------------------------------------------------------ Robert W. Vishny None AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES IN ALL REGISTERED INVESTMENT COMPANIES NAME OF MANAGER OVERSEEN BY MANAGER IN FAMILY OF INVESTMENT COMPANIES -------------------- ---------------------------------------------------------------------------------- Martin J. Gruber Over $100,000 ------------------------------------------------------------ Nancy L. Jacob Over $100,000 ------------------------------------------------------------ Bevis Longstreth Over $100,000 ------------------------------------------------------------ Stephen A. Ross Over $100,000 ------------------------------------------------------------ Nestor V. Santiago Over $100,000 ------------------------------------------------------------ Maceo K. Sloan $50,001 - $100,000 ------------------------------------------------------------ Robert W. Vishny $10,001 - $50,000
INTERESTED MANAGERS
DOLLAR RANGE OF EQUITY SECURITIES IN NAME OF MANAGER SEPARATE ACCOUNT ------------------------------------------------------------ Martin L. None Leibowitz AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES IN ALL REGISTERED INVESTMENT COMPANIES NAME OF MANAGER OVERSEEN BY MANAGER IN FAMILY OF INVESTMENT COMPANIES -------------------- ---------------------------------------------------------------------------------- Martin L. Over $100,000 Leibowitz
(1) Beneficial ownership information is as of December 31, 2002. TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 11 COMPENSATION OF MANAGERS The following table sets forth the compensation paid to the separate account's managers for the year ended December 31, 2002. DISINTERESTED MANAGERS
(3) PENSION OR (2) AGGREGATE RETIREMENT BENEFITS COMPENSATION ACCRUED AS PART OF (4) ESTIMATED (5) TOTAL FROM SEPARATE SEPARATE ACCOUNT BENEFITS UPON COMPENSATION FROM (1) NAME OF PERSON, POSITION ACCOUNT EXPENSES RETIREMENT FUND COMPLEX* ----------------------------------------------------------------------------------------------------- Martin J. Gruber $ 363 $191 $0 $66,500 ----------------------------------------------------------------------------------------------------- Nancy L. Jacob $ 314 $191 $0 $57,500 ----------------------------------------------------------------------------------------------------- Bevis Longstreth** $ 355 $191 $0 $65,000 ----------------------------------------------------------------------------------------------------- Stephen A. Ross** $ 456 $191 $0 $83,500 ----------------------------------------------------------------------------------------------------- Nestor V. Santiago** $ 330 $191 $0 $60,500 ----------------------------------------------------------------------------------------------------- Maceo K. Sloan $ 349 $191 $0 $64,000 ----------------------------------------------------------------------------------------------------- Robert W. Vishny $ 339 $191 $0 $62,000 -----------------------------------------------------------------------------------------------------
* 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. ** This compensation, or a portion of it, was not actually paid based on prior election of trustee to defer receipt of payment in accordance with the provisions of deferred compensation plan for non-officer trustees. Excluding this year's deferrals, a total of $2,028,278.58 earned across the fund complex has been deferred for prior years' service, including interest through year-end 2002, for all current trustees who had elected to defer their compensation. Managers who are active officers of TIAA do not receive any additional compensation for their services as managers. RESPONSIBILITIES OF THE MANAGEMENT COMMITTEE The Management Committee is responsible for overseeing the separate account's corporate policies and for adhering to fiduciary standards under the 1940 Act. Most significantly, the Management Committee is responsible for the initial approval and annual renewal of the separate account's investment management agreement with Teachers Advisors, Inc. ("Advisors"). In considering whether to initially approve the investment management agreement and renew the agreement annually thereafter, the Management Committee considered the investment management fee in light of a variety of factors, including (a) the capability of Advisors to provide the services required by the agreement; and (b) the reasonableness of the investment management fee and how this fee compared to fees paid by other similar variable annuities. As part of its consideration of the capability of Advisors to provide services to the separate account and its shareholders, the Management Committee reviewed the performance of the separate account. In considering the fee charged under the agreement, the Management Committee considered the gross investment management fee charged under the agreement and Advisors' current waiver of a portion of its fee for managing the separate account. In comparing the expense ratio of the separate account to other variable annuities, the Management Committee took into account that the expense ratio compared favorably to those of other variable annuities. BOARD COMMITTEES Every year the board appoints certain committees with specific responsibilities for aspects of TIAA Separate Account VA-1's operations. Included among these are: 1. An Audit Committee, consisting solely of independent Managers who are not officers of TIAA Separate Account VA-1, which audits and examines the records and affairs of TIAA Separate Account VA-1 as it deems necessary, using independent auditors or others. The Audit Committee has adopted a formal written charter that is available upon request. During 2002, the Audit Committee held six meetings. The current members of the Audit Committee are Mr. Sloan (chair), Dr. Gruber and Mr. Santiago. 2. A Finance Committee, which oversees the management of the TIAA Separate Account VA-1 investments subject to appropriate oversight by the full board of trustees. During 2002, the Finance Committee held four meetings. The current members of the Finance Committee are Mr. Leibowitz (chair), Dr. Gruber, Dr. Jacob, Mr. Longstreth, Dr. Ross, Mr. Santiago, Mr. Sloan and Dr. Vishny. 3. A Corporate Governance and Social Responsibility Committee, consisting solely of independent Managers who are not officers of TIAA Separate Account VA-1, which addresses all corporate social responsibility and corporate governance issues, including the voting of TIAA Separate Account VA-1's shares and the initiation of appropriate shareholder resolutions. During 2002, the Corporate Governance and Social Responsibility Committee held five meetings. The current members of the Corporate Governance and Social Responsibility Committee are Mr. Longstreth (chair), Mr. Santiago and Dr. Vishny. 4. An Executive Committee, which generally is vested with full board powers between board meetings on matters not specifically addressed by the full board. During 2002, the Executive Committee held five meetings. The current members of the Executive Committee are Mr. Leibowitz (chair), Dr. Gruber and Dr. Ross. 5. A Nominating and Personnel Committee, consisting solely of independent trustees who are not officers of TIAA Separate Account VA-1, which nominates certain officers of TIAA Separate Account VA-1 and the standing committees of the board, and recommends candidates for B- 12 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 election as trustees. During 2002, the Nominating and Personnel Committee held eight meetings. The current members of the Nominating and Personnel Committee are Dr. Ross (chair), Dr. Jacob and Dr. Vishny. 6. A Products and Services Committee, formed in November 2002, which reviews and oversees the design, development, improvement, and marketing of new and existing products and services. During 2002, the Products and Services Committee held no meetings. The current members of the Products and Services Committee are Mr. Leibowitz (chair), Dr. Gruber and Dr. Ross. Investors can recommend nominees by writing to the Secretary of TIAA Separate Account VA-1. The Secretary's address is 730 Third Avenue, New York, New York 10017-3206. 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, 2002, 2001, and 2000, the separate account paid investment advisory fees of $503,390, $607,889, and $739,618, respectively. These fees reflect the waiver by Advisors of a portion of its investment advisory fee for the years ended December 31, 2002, 2001, and 2000, of $1,653,731, $1,997,033, and $2,429,788, 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, 2002, 2001, and 2000, administrative expenses incurred were $1,437,993, $1,736,509, and $2,112,809, 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 2.5 million people. As of December 31, 2002, TIAA's assets were approximately $138.1 billion; the combined assets for TIAA and CREF totaled approximately $251.9 billion. TIAA holds all of the shares of TIAA-CREF Enterprises, Inc., which in turn holds all the shares of Advisors, and Teachers Personal Investors Services, Inc., the principal underwriter for the interests in the variable annuity contracts funded through the separate account. TIAA also holds all the shares of TIAA-CREF Investment Management, LLC ("Investment Management"). Investment Management provides investment advisory services to CREF, TIAA's companion organization. All of the foregoing are affiliates of the separate account and Advisors. CUSTODY OF PORTFOLIO The custodian for the assets of the separate account is Deutsche Bank Trust Company Americas, 130 Liberty Street, New York, New York 10006. AUDITORS Ernst & Young LLP, 5 Times Square, New York, New York 10036, 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. TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 13 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 2002, 2001, and 2000 was $24,491, $53,064, and $121,152, respectively. Advisors may place orders with brokers providing research and statistical data services even if lower commissions may be available from brokers not providing such services. When doing so, Advisors will determine in good faith that the commissions negotiated are reasonable in relation to the value of the brokerage and research provided by the broker viewed in terms of either that particular transaction or of the overall responsibilities of Advisors to the separate account or other clients. In reaching this determination, Advisors will not necessarily place a specific dollar value on the brokerage or research services provided nor determine what portion of the broker's compensation should be related to those services. The following table shows the aggregate amount of brokerage commissions paid to firms that provided research services in 2002. Note that the provision of research services was not necessarily a factor in the placement of all this business with these firms.
AGGREGATE $ AMOUNT OF COMMISSIONS PAID TO FIRMS THAT FUND PROVIDED RESEARCH SERVICES ------------------------------------------------------- Stock Index Account $ 2,846 -------------------------------------------------------
Research or services obtained for the separate account may be used by Advisors in managing other investment company accounts. The research or services obtained may also be used by Investment Management in managing CREF. Under each such circumstance, the expenses incurred will be allocated in an equitable manner consistent with Advisors' fiduciary duty to the separate account. During 2002, 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, 2002, are set forth below: A. REGULAR BROKER OR DEALER BASED ON BROKERAGE COMMISSION PAID Goldman Sachs & Co. (Parent-Goldman Sachs Group, Inc.)............ $1,107,851 Instinet Group, Inc. ........................... $ 12,648
B. REGULAR BROKER OR DEALER BASED ON ENTITIES ACTING AS PRINCIPAL Goldman Sachs & Co. (Parent-Goldman Sachs Group, Inc.)............ $1,107,851
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: P (1 + T)(n) = EV where: P = the hypothetical initial payment of $1,000 T = average annual total return n = number of years in the period EV = ending value of the hypothetical investment at the end of the 1-, 5- or 10- year period.
To derive the total return quotations from this formula, the percentage net change in the value of the $1,000 investment from the beginning of the period to the end of such period ("cumulative total return") is determined. Cumulative total returns simply reflect the change in value of an investment over a stated period. Since the accumulation unit value is a "total return" unit value that reflects the investment experience of the separate account and all expense deductions made against the assets of the separate account, the ending value, or EV, of the $1,000 hypothetical investment is determined by applying the percentage change in the accumulation unit value over the period to the hypothetical initial payment of $1,000 less the current deductions from premiums (0%). We then solve the equation for T to derive the average annual compounded rate of return for the separate account over the span of the period, and the resulting "total return" quotation is carried out to the nearest hundredth of 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 PERIOD TOTAL RETURN OF TOTAL RETURN ------------------------------------------------------------------ 1 year (from January 1, 2002 to December 31, 2002) (21.72)% (21.72)% ------------------------------------------------------------------ 5 years (from January 1, 1998 to December 31, 2002) (1.05)% (5.12)% ------------------------------------------------------------------ 8 years and 2 months (from November 1, 1994 date of SEC registration to December 31, 2002) 8.96% 101.70% ------------------------------------------------------------------
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 B- 14 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 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 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. Sutherland Asbill & Brennan LLP, Washington, D.C. has provided advice on certain matters relating to the federal securities laws. 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. TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 15 ADDITIONAL CONSIDERATIONS Over the past several years, TIAA and CREF have added many new investment vehicles to their line of products. The growing family of TIAA and CREF products is designed to provide additional investment options for those who want to diversify their holdings. Most experts recommend diversification as a good strategy for retirement 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 generally 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, variable life insurance, 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 adviser 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- 16 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 INDEX TO AUDITED FINANCIAL STATEMENTS DECEMBER 31, 2002
Page ---- TIAA SEPARATE ACCOUNT VA-1-STOCK INDEX ACCOUNT: Report of Management Responsibility.................. B-18 Report of the Audit Committee........................ B-19 AUDITED FINANCIAL STATEMENTS: Statement of Assets and Liabilities.................. B-20 Statement of Operations.............................. B-21 Statements of Changes in Net Assets.................. B-22 Notes to Financial Statements........................ B-23 Report of Independent Auditors....................... B-25 Statement of Investments............................. B-26 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA: Report of Management Responsibility.................. B-51 Report of the Audit Committee........................ B-52 Report of Independent Auditors....................... B-53 STATUTORY-BASIS FINANCIAL STATEMENTS: Balance Sheets....................................... B-54 Statements of Operations............................. B-55 Statements of Changes in Capital and Contingency Reserves............................................ B-56 Statements of Cash Flows............................. B-57 Notes to Statutory -- Basis Financial Statements..... B-58
TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 17 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 and disclosure 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, and the chief audit executive regularly reports to the Audit Committee of VA-1's Management Committee. The accompanying financial statements have been audited by the independent auditing firm of Ernst & Young LLP. To maintain auditor independence and avoid even the appearance of conflict of interest, it continues to be VA-1's policy that any management advisory or consulting services be obtained from a firm other than the external financial audit firm. The independent auditors' report, which follows the notes to financial statements, expresses an independent opinion on the fairness of presentation of these financial statements. The Audit Committee of VA-1's Management Committee, consisting entirely of members who are not officers of VA-1, meets regularly with management, representatives of Ernst & Young LLP and internal audit personnel to review matters relating to financial reporting, internal controls and auditing. In addition to the annual audit of the financial statements of VA-1 by the independent auditing firm, the New York State Insurance Department, other state insurance departments and the Securities and Exchange Commission perform periodic examinations of VA-1's operations. /s/ Martin E. Galt, III ----------------------------------------- Chairman, President and Chief Executive Officer /s/ Richard L. Gibbs ----------------------------------------- Executive Vice President and Principal Accounting Officer B- 18 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 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 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 disclosure 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 of VA-1. 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. As required by its charter, the Committee will evaluate rotation of the external financial audit firm whenever circumstances warrant, but in no event will the evaluation be later than between their fifth and tenth years of service. 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 and completeness 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 and completeness of the financial statements and related disclosures, and other significant matters, such as any significant changes in accounting policies, internal controls, 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. Maceo K. Sloan, Audit Committee Chair Martin J. Gruber, Audit Committee Member Nestor V. Santiago, Audit Committee Member February 19, 2003 TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 19 TIAA SEPARATE ACCOUNT VA-1 STATEMENT OF ASSETS AND LIABILITIES STOCK INDEX ACCOUNT -------------------------------------------------------------------------------- December 31, 2002 (amounts in thousands, except amount per accumulation unit) ASSETS Investments, at cost $701,609 Net unrealized depreciation of investments (62,372) ---------------------------------------------------------------------- Investments, at value (including securities loaned of $25,930) 639,237 Cash 1,781 Dividends and interest receivable 1,185 Receivable from securities transactions 12 Amounts due from TIAA General Account 92 ---------------------------------------------------------------------- TOTAL ASSETS 642,307 ---------------------------------------------------------------------- LIABILITIES Deposits for securities loaned -- Note 3 27,420 Payable for securities transactions 34 ---------------------------------------------------------------------- TOTAL LIABILITIES 27,454 ---------------------------------------------------------------------- NET ASSETS Accumulation Fund $614,853 ====================================================================== ACCUMULATION UNITS OUTSTANDING-Notes 4 and 5 11,801 ====================================================================== NET ASSET VALUE PER ACCUMULATION UNIT-Note 4 $52.10 ======================================================================
See Notes to Financial Statements B- 20 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 TIAA SEPARATE ACCOUNT VA-1 STATEMENT OF OPERATIONS STOCK INDEX ACCOUNT -------------------------------------------------------------------------------- Year Ended December 31, 2002 (amounts in thousands) INVESTMENT INCOME Income: Interest $ 310 Dividends 11,497 ----------------------------------------------------------------------- Total income 11,807 ----------------------------------------------------------------------- Expenses-Note 2: Investment advisory charges 2,157 Administrative expenses 1,438 Mortality and expense risk charges 719 Interest 4 ----------------------------------------------------------------------- Total expenses before waiver 4,318 Investment advisory charges waived (1,653) ----------------------------------------------------------------------- Net expenses 2,665 ----------------------------------------------------------------------- Investment income-net 9,142 ----------------------------------------------------------------------- REALIZED AND UNREALIZED LOSS ON INVESTMENTS-Note 3 Net realized loss on investments (17,955) Net change in unrealized depreciation on investments (173,393) ----------------------------------------------------------------------- Net realized and unrealized loss on investments (191,348) ----------------------------------------------------------------------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(182,206) =======================================================================
See Notes to Financial Statements TIAA SEPARATE ACCOUNT VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 21 TIAA SEPARATE ACCOUNT VA-1 STATEMENTS OF CHANGES IN NET ASSETS STOCK INDEX ACCOUNT -------------------------------------------------------------------------------- (amounts in thousands)
YEARS ENDED DECEMBER 31, 2002 2001 -------------------------------------------------------------------------------------- FROM OPERATIONS Investment income-net $ 9,142 $ 8,407 Net realized gain (loss) on investments (17,955) 3,651 Net change in unrealized depreciation on investments (173,393) (128,617) -------------------------------------------------------------------------------------- Net decrease in net assets resulting from operations (182,206) (116,559) -------------------------------------------------------------------------------------- FROM CONTRACTOWNER TRANSACTIONS Premiums 39,404 52,327 Net contractowner transfers to fixed account (53,439) (60,700) Withdrawals and death benefits (22,005) (33,157) -------------------------------------------------------------------------------------- Net decrease in net assets resulting from contractowner transactions (36,040) (41,530) -------------------------------------------------------------------------------------- Net decrease in net assets (218,246) (158,089) NET ASSETS Beginning of year 833,099 991,188 -------------------------------------------------------------------------------------- End of year $ 614,853 $ 833,099 ======================================================================================
See Notes to Financial Statements B- 22 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 TIAA SEPARATE ACCOUNT VA-1 STOCK INDEX ACCOUNT -------------------------------------------------------------------------------- Notes to Financial Statements NOTE 1. SIGNIFICANT ACCOUNTING POLICIES 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 is registered with the Securities and Exchange Commission 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. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States which may require the use of estimates made by management. Actual results may differ from those estimates. The following is a summary of the significant accounting policies consistently followed by the Account. 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. Portfolio securities may also be valued at fair value as determined in good faith under the direction of the Management Committee if events that have a significant effect on their value occur between the time their price is determined and the time the Account's net asset value is calculated. ACCOUNTING FOR INVESTMENTS: Securities transactions are accounted for as of the trade date. Interest income is recorded as earned and includes amortization of discounts and premiums. Dividend income is recorded on the ex-dividend date. Realized gains and losses on securities transactions are accounted for on the average cost basis. SECURITIES LENDING: The Account may lend portfolio securities to qualified institutions. Such loans are secured by collateral at least equal to 102% of the market value of the securities loaned. The Account continues to receive income on the securities loaned and receives additional income from the lending transaction. Additionally, any change in the market value of the securities loaned is recognized by the Account. Although each transaction is collateralized, the Account would bear the risk of delay in recovery of, or loss of rights in, the securities loaned should a borrower fail to return the securities in a timely manner. FEDERAL INCOME TAXES: Based on provisions of the Internal Revenue Code, no federal taxes are attributable to the net investment experience of the Account. NOTE 2. MANAGEMENT AGREEMENTS Teachers Advisors, Inc. ("Advisors"), a wholly-owned subsidiary of TIAA and a registered 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 a wholly-owned subsidiary of TIAA, which is a registered broker-dealer and a member of the National Association of Securities Dealers, Inc. The Investment Management Agreement sets the investment advisory charge at an annual rate of 0.30% of the net assets of the Account. 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 3. INVESTMENTS At December 31, 2002, the market value of securities loaned was $25,930,123 and cash collateral received was $27,419,653. At December 31, 2002, the net unrealized depreciation on investments was $62,371,807, consisting of gross unrealized appreciation of $100,900,896 and gross unrealized depreciation of $163,272,703. TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 23 TIAA SEPARATE ACCOUNT VA-1 STOCK INDEX ACCOUNT -------------------------------------------------------------------------------- Notes to Financial Statements -- (Concluded) Purchases and sales of securities, other than short-term money market instruments, for the year ended December 31, 2002, were $38,411,185 and $65,094,523, respectively. NOTE 4. CONDENSED FINANCIAL INFORMATION Selected condensed financial information for an Accumulation Unit of the Account is presented below.
Years Ended December 31, ---------------------------------------------------- 2002 2001 2000 1999 1998 -------- -------- -------- -------- -------- Per Accumulation Unit data: Investment income $ .965 $ .916 $ .966 $ .961 $ .908 Expenses .218 .253 .301 .270 .223 -------- -------- -------- -------- -------- Investment income-net .747 .663 .665 .691 .685 Net realized and unrealized gain (loss) on investments (15.200) (9.499) (7.024) 13.051 12.407 -------- -------- -------- -------- -------- Net increase (decrease) in Accumulation Unit Value (14.453) (8.836) (6.359) 13.742 13.092 Accumulation Unit Value: Beginning of year 66.556 75.392 81.751 68.009 54.917 -------- -------- -------- -------- -------- End of year $ 52.103 $ 66.556 $ 75.392 $ 81.751 $ 68.009 ======== ======== ======== ======== ======== Total return (21.72)% (11.72)% (7.78)% 20.21% 23.84% Ratio to Average Net Assets: Expenses (1) 0.37% 0.37% 0.37% 0.37% 0.37% Investment income-net 1.27% 0.97% 0.82% 0.95% 1.14% Portfolio turnover rate 5.33% 9.86% 20.68% 37.93% 45.93% Thousands of Accumulation Units outstanding at end of year 11,801 12,517 13,147 12,630 11,145
(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 2). NOTE 5. ACCUMULATION UNITS Changes in the number of Accumulation Units outstanding were as follows:
Years Ended December 31, ------------------------- 2002 2001 ----------- ----------- Accumulation Units: Credited for premiums 664,769 769,448 Cancelled for transfers and disbursements (1,381,252) (1,399,262) Outstanding: Beginning of year 12,517,257 13,147,071 ---------- ---------- End of year 11,800,774 12,517,257 ========== ==========
NOTE 6. LINE OF CREDIT The Account participates in a $2.25 billion unsecured revolving credit facility to be used for temporary purposes, including the funding of contractowner withdrawals. Certain affiliated accounts and mutual funds, each of which is 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 mutual funds. Interest associated with any borrowing under the facility is charged to the borrowing accounts and mutual funds at rates which are based on the Federal Funds Rate in effect during the time of the borrowing. During the year ended December 31, 2002, the Account borrowed under this facility. The average daily loan balance during the eleven day period for which the loan was outstanding amounted to $6.4 million and the weighted average interest rate was 2.13%. The related interest expense was $4,153. B- 24 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 [ERNST & YOUNG LOGO] ERNST & YOUNG LLP Phone: (212) 773-3000 5 Times Square www.ey.com New York, NY 10036
-------------------------------------------------------------------------------- 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, including the statement of investments, of the Stock Index Account of TIAA Separate Account VA-1 ("VA-1") as of December 31, 2002, and the related statement of operations for the year then ended, and the statement 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. 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, 2002 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, 2002, 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 7, 2003 TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 25 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
PRINCIPAL VALUE (000) --------- ----------- CORPORATE BONDS--0.00% CONSUMER CYCLICAL--0.00% Ugly Duckling Corp (Sub Corp) $ 1,950 12.000%, 10/23/03..................... $ 2 -------- TOTAL CONSUMER CYCLICAL 2 -------- FINANCIAL SERVICES--0.00% National Health Investors, Inc 10,000 9.000%, 01/01/06...................... 10 -------- TOTAL FINANCIAL SERVICES 10 -------- TOTAL CORPORATE BONDS (Cost $13) 12 -------- SHARES ------ PREFERRED STOCK--0.02% BASIC INDUSTRIES--0.02% 2,280 Sealed Air Corp....................... 97 -------- TOTAL BASIC INDUSTRIES 97 -------- TECHNOLOGY--0.00% 503 * Superior Trust I Series A........... 0 -------- TOTAL TECHNOLOGY 0 -------- TOTAL PREFERRED STOCK (Cost $123) 97 -------- COMMON STOCK--99.35% AEROSPACE AND DEFENSE--1.20% 1,761 AAR Corp.............................. 9 2,221 * Alliant Techsystems, Inc............ 138 1,802 * Armor Holdings, Inc................. 25 1,354 * Aviall, Inc......................... 11 53,930 Boeing Co............................. 1,779 1,158 * DRS Technologies, Inc............... 36 496 * Ducommun, Inc....................... 8 482 * Dynamics Research Corp.............. 7 825 Engineered Support Systems, Inc....... 30 12,216 General Dynamics Corp................. 970 6,531 Goodrich Corp......................... 120 785 Heico Corp............................ 8 859 * Herley Industries, Inc.............. 15 1,700 * Hexcel Corp......................... 5 504 * Integrated Defense Technology, Inc................................. 7 1,612 Kaman Corp (Class A).................. 18 4,192 * L-3 Communications Holdings, Inc.... 188 700 * Ladish Co, Inc...................... 6 25,226 Lockheed Martin Corp.................. 1,457 1,100 * Moog, Inc (Class A)................. 34 10,476 Northrop Grumman Corp................. 1,016 3,100 e* Orbital Sciences Corp.............. 13 8,057 PerkinElmer, Inc...................... 66 3,544 Precision Castparts Corp.............. 86 26,870 Raytheon Co........................... 826 4,091 e* Remec, Inc......................... 16 12,362 Rockwell Collins, Inc................. 288 333 * Sequa Corp (Class A)................ 13 2,183 * Teledyne Technologies, Inc.......... 34 4,849 * Titan Corp.......................... 50 952 * Triumph Group, Inc.................. 30 1,518 * United Defense Industries, Inc...... 35 1,256 * Viasat, Inc......................... 14 -------- TOTAL AEROSPACE AND DEFENSE 7,358 --------
SHARES VALUE (000) ------ ----------- BASIC INDUSTRIES--4.07% 676 * Aaon, Inc........................... $ 12 175 * AEP Industries, Inc................. 2 15,426 Air Products & Chemicals, Inc......... 659 3,953 * Airgas, Inc......................... 68 6,870 * AK Steel Holding Corp............... 55 1,703 Albany International Corp (Class A)... 35 1,874 Albemarle Corp........................ 53 57,159 Alcoa, Inc............................ 1,302 246 Alico, Inc............................ 7 5,801 Allegheny Technologies, Inc........... 36 1,482 Amcol International Corp.............. 9 4,150 * American Standard Cos, Inc.......... 295 330 American Woodmark Corp................ 16 266 Ameron International Corp............. 15 793 * Applied Films Corp.................. 16 2,487 Aptargroup, Inc....................... 78 1,500 Arch Chemicals, Inc................... 27 3,254 Arch Coal, Inc........................ 70 310 * Avatar Holdings, Inc................ 7 6,649 Avery Dennison Corp................... 406 3,904 Ball Corp............................. 200 3,400 Bemis Co.............................. 169 5,538 Black & Decker Corp................... 238 3,441 Boise Cascade Corp.................... 87 3,583 Bowater, Inc.......................... 150 1,200 * Brush Engineered Materials, Inc..... 7 1,676 * Buckeye Technologies, Inc........... 10 878 Building Materials Holding Corp....... 13 302 * BWAY Corp........................... 6 4,244 Cabot Corp............................ 113 1,600 e* Cabot Microelectronics Corp........ 76 2,400 Calgon Carbon Corp.................... 12 1,518 Cambrex Corp.......................... 46 1,600 * Caraustar Industries, Inc........... 15 2,100 Carlisle Cos, Inc..................... 87 1,463 Carpenter Technology Corp............. 18 400 Centex Construction Products, Inc..... 14 4,249 Centex Corp........................... 213 851 Century Aluminum Co................... 6 3,600 * Champion Enterprises, Inc........... 10 700 Chemed Corp........................... 25 1,008 Chesapeake Corp....................... 18 1,687 Clarcor, Inc.......................... 54 6,349 e* Clayton Homes, Inc................. 77 741 * Cleveland-Cliffs, Inc............... 15 1,421 * Collins & Aikman Corp............... 6 2,724 * Comfort Systems U.S.A., Inc......... 9 1,736 Commercial Metals Co.................. 28 1,518 Consol Energy, Inc.................... 26 7,909 Crompton Corp......................... 47 9,061 * Crown Cork & Seal Co, Inc........... 72 2,754 * Cytec Industries, Inc............... 75 7,911 D.R. Horton, Inc...................... 137 742 Deltic Timber Corp.................... 20 1,255 * Dionex Corp......................... 37 147 * Dominion Homes, Inc................. 2 61,253 Dow Chemical Co....................... 1,819 376 * Drew Industries, Inc................ 6 67,411 Du Pont (E.I.) de Nemours & Co........ 2,858 3,300 e* Earthshell Corp.................... 2 5,265 Eastman Chemical Co................... 194 8,788 Ecolab, Inc........................... 435
See Notes to Financial Statements B- 26 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- BASIC INDUSTRIES--(CONTINUED) 1,450 ElkCorp............................... $ 25 1,050 * EMCOR Group, Inc.................... 56 960 * Encore Wire Corp.................... 9 934 * Energy Conversion Devices, Inc...... 9 8,835 Engelhard Corp........................ 197 2,332 Ferro Corp............................ 57 2,500 e* Fleetwood Enterprises, Inc......... 20 1,417 Florida Rock Industries, Inc.......... 54 5,522 Fluor Corp............................ 155 1,933 * FMC Corp............................ 53 1,550 * Foamex International, Inc........... 5 5,068 e* Freeport-McMoran Copper & Gold, Inc (Class A)........................... 85 1,978 Georgia Gulf Corp..................... 46 15,610 Georgia-Pacific Corp.................. 252 558 Gibraltar Steel Corp.................. 11 770 Glatfelter............................ 10 2,325 Granite Construction, Inc............. 36 2,618 Great Lakes Chemical Corp............. 63 900 Greif Brothers Corp (Class A)......... 21 1,937 H.B. Fuller Co........................ 50 5,382 * Hecla Mining Co..................... 27 5,544 * Hercules, Inc....................... 49 977 * Hovnanian Enterprises, Inc (Class A).................................. 31 7,495 IMC Global, Inc....................... 80 856 * Imco Recycling, Inc................. 7 1,632 * Insituform Technologies, Inc (Class A).................................. 28 2,100 * Integrated Electrical Services, Inc................................. 8 32,595 International Paper Co................ 1,140 932 * International Specialty Products, Inc................................. 10 404 Interpool, Inc........................ 6 3,295 * Jacobs Engineering Group, Inc....... 117 828 * Jarden Corp......................... 20 3,024 KB Home............................... 130 35,202 Kimberly-Clark Corp................... 1,671 3,600 Lennar Corp........................... 186 3,073 Lennox International, Inc............. 39 361 e* Liquidmetal Technologies........... 4 2,054 * Lone Star Technologies, Inc......... 31 3,700 * Longview Fibre Co................... 27 7,100 * Louisiana-Pacific Corp.............. 57 1,035 LSI Industries, Inc................... 14 3,500 Lubrizol Corp......................... 107 1,091 * Lydall, Inc......................... 12 8,064 Lyondell Chemical Co.................. 102 862 M/I Schottenstein Homes, Inc.......... 24 1,604 MacDermid, Inc........................ 37 31,730 Masco Corp............................ 668 4,517 Massey Energy Co...................... 44 734 * Material Sciences Corp.............. 9 1,508 * Mattson Technology, Inc............. 4 1,392 MDC Holdings, Inc..................... 53 13,555 MeadWestvaco Corp..................... 335 4,530 Millennium Chemicals, Inc............. 43 1,370 Minerals Technologies, Inc............ 59 933 * Mobile Mini, Inc.................... 15 640 * Modtech Holdings, Inc............... 6 17,729 Monsanto Co........................... 341 1,924 * Mueller Industries, Inc............. 52 1,321 * NCI Building Systems, Inc........... 29 23,091 Newmont Mining Corp................... 670 664 NL Industries, Inc.................... 11 600 * Nortek Holdings, Inc................ 27
SHARES VALUE (000) ------ ----------- 414 * Northwest Pipe Co................... $ 7 1,100 * NS Group, Inc....................... 7 5,309 Nucor Corp............................ 219 320 e* NVR, Inc........................... 104 730 Octel Corp............................ 12 3,420 Olin Corp............................. 53 1,900 e OM Group, Inc....................... 13 2,700 * Omnova Solutions, Inc............... 11 1,889 * Oregon Steel Mills, Inc............. 8 772 * Osmonics, Inc....................... 13 7,603 * Owens-Illinois, Inc................. 111 3,866 * Packaging Corp Of America........... 71 10,887 * Pactiv Corp......................... 238 1,250 * Palm Harbor Homes, Inc.............. 22 1,582 Peabody Energy Corp................... 46 549 Penford Corp.......................... 8 800 Penn Engineering & Manufacturing Corp................................ 9 574 Penn Virginia Corp.................... 21 1,019 * Penwest Pharmaceuticals Co.......... 11 5,322 e* Phelps Dodge Corp.................. 168 12,620 Plum Creek Timber Co, Inc............. 298 5,611 PolyOne Corp.......................... 22 1,124 Pope & Talbot, Inc.................... 16 1,966 Potlatch Corp......................... 47 11,460 PPG Industries, Inc................... 575 11,063 Praxair, Inc.......................... 639 3,425 Pulte Homes, Inc...................... 164 564 Quaker Chemical Corp.................. 13 1,000 Quanex Corp........................... 34 1,900 Rayonier, Inc......................... 86 1,717 Reliance Steel & Aluminum Co.......... 36 708 Roanoke Electric Steel Corp........... 7 810 Rock-Tenn Co (Class A)................ 11 10,696 Rohm & Haas Co........................ 347 900 Royal Gold, Inc....................... 22 7,331 RPM International, Inc................ 112 1,496 * RTI International Metals, Inc....... 15 1,661 Ryerson Tull, Inc..................... 10 1,960 Ryland Group, Inc..................... 65 293 Schnitzer Steel Industries, Inc (Class A).................................. 6 2,068 Schulman (A.), Inc.................... 38 2,576 * Sealed Air Corp..................... 96 2,975 e* Shaw Group, Inc.................... 49 8,869 Sherwin-Williams Co................... 251 5,002 e Sigma-Aldrich Corp.................. 244 711 * Silgan Holdings, Inc................ 18 852 * Simpson Manufacturing Co, Inc....... 28 442 Skyline Corp.......................... 13 11,838 e* Smurfit-Stone Container Corp....... 182 4,037 Snap-On, Inc.......................... 113 7,559 Solutia, Inc.......................... 27 6,587 Sonoco Products Co.................... 151 1,033 Southern Peru Copper Corp............. 15 1,060 Spartech Corp......................... 22 2,279 Standard-Pacific Corp................. 56 4,636 Stanley Works......................... 160 2,295 * Steel Dynamics, Inc................. 28 3,103 * Stillwater Mining Co................ 17 3,005 Temple-Inland, Inc.................... 135 2,806 * Terra Industries, Inc............... 4 1,500 Texas Industries, Inc................. 36 3,215 e* Toll Brothers, Inc................. 65 1,864 Tredegar Corp......................... 28
See Notes to Financial Statements TIAA SEPARATE ACCOUNT VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 27 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- BASIC INDUSTRIES--(CONTINUED) 91 Tremont Corp.......................... $ 3 400 * Trex Co, Inc........................ 14 1,227 * U.S. Concrete, Inc.................. 7 6,885 United States Steel Corp.............. 90 979 Universal Forest Products, Inc........ 21 1,027 * URS Corp............................ 15 5,847 USEC, Inc............................. 35 2,700 b,e* USG Corp......................... 23 3,402 Valspar Corp.......................... 150 1,229 Watsco, Inc........................... 20 2,670 Wausau-Mosinee Paper Corp............. 30 497 * WCI Communities, Inc................ 5 1,100 WD-40 Co.............................. 29 2,293 Wellman, Inc.......................... 31 942 West Pharmaceutical Services, Inc..... 23 14,786 Weyerhaeuser Co....................... 728 356 * William Lyon Homes, Inc............. 8 4,742 e Worthington Industries, Inc......... 72 4,714 * WR Grace & Co....................... 9 2,700 York International Corp............... 69 -------- TOTAL BASIC INDUSTRIES................ 24,999 -------- CONSUMER CYCLICAL--10.85% 384 e* 1-800 Contacts, Inc................ 11 2,874 * 99 Cents Only Stores................ 77 1,037 Aaron Rents, Inc...................... 23 5,833 * Abercrombie & Fitch Co (Class A).... 119 1,430 * Acacia Research-Acacia Technologies........................ 3 4,414 e* Acclaim Entertainment, Inc......... 3 664 * Acme Communication, Inc............. 5 1,100 Action Performance Cos, Inc........... 21 1,014 * Advance Auto Parts.................. 50 833 Advanced Marketing Services, Inc...... 12 899 * Aeropostale, Inc.................... 10 1,013 * AFC Enterprises, Inc................ 21 545 * Aftermarket Technology Corp......... 8 142 * Alexander's, Inc.................... 9 2,825 * Alliance Gaming Corp................ 48 1,362 * AMC Entertainment, Inc.............. 12 715 e* Amerco, Inc........................ 3 1,900 * American Axle & Manufacturing Holdings, Inc....................... 44 3,834 * American Eagle Outfitters, Inc...... 53 709 * Ameristar Casinos, Inc.............. 10 620 Angelica Corp......................... 13 3,066 * AnnTaylor Stores Corp............... 63 290,613 * AOL Time Warner, Inc................ 3,807 2,068 Apogee Enterprises, Inc............... 19 3,918 Applebee's International, Inc......... 91 1,100 Arctic Cat, Inc....................... 18 97 * Arden Group, Inc (Class A).......... 6 1,792 * Argosy Gaming Co.................... 34 4,699 ArvinMeritor, Inc..................... 78 300 * Ascent Media Group, Inc............. 0 6,789 Autoliv, Inc.......................... 142 2,464 * Aztar Corp.......................... 35 2,000 e* Bally Total Fitness Holding Corp... 14 700 Bandag, Inc........................... 27 751 Barnes Group, Inc..................... 15 745 Bassett Furniture Industries, Inc..... 11 465 * Beasley Broadcast Group, Inc (Class A).................................. 6 300 * Bebe Stores, Inc.................... 4 19,830 * Bed Bath & Beyond, Inc.............. 685 6,092 Belo Corp (Class A)................... 130
SHARES VALUE (000) ------ ----------- 338 * Benihana, Inc (Class A)............. $ 5 8,000 * Big Lots, Inc....................... 106 574 Blair Corp............................ 13 2,126 Blockbuster, Inc (Class A)............ 26 2,400 Bob Evans Farms, Inc.................. 56 2,130 * Boca Resorts, Inc (Class A)......... 23 1,800 BorgWarner, Inc....................... 91 2,400 Bowne & Co, Inc....................... 29 2,248 * Boyd Gaming Corp.................... 32 1,291 * Boyds Collection Ltd................ 9 6,702 * Brinker International, Inc.......... 216 610 * Brookstone, Inc..................... 9 1,264 Brown Shoe Co, Inc.................... 30 6,082 Brunswick Corp........................ 121 1,092 e* Buca, Inc.......................... 9 500 * Buckle, Inc......................... 9 1,286 Burlington Coat Factory Warehouse Corp................................ 23 610 Bush Industries, Inc (Class A)........ 3 9,381 e* Cablevision Systems Corp (Class A).................................. 157 186 * Cache, Inc.......................... 3 1,020 * California Pizza Kitchen, Inc....... 26 4,691 Callaway Golf Co...................... 62 159 * Carmike Cinemas, Inc................ 3 674 Cascade Corp.......................... 11 2,656 * Catalina Marketing Corp............. 49 1,052 Cato Corp (Class A)................... 23 3,640 CBRL Group, Inc....................... 110 1,783 * CEC Entertainment, Inc.............. 55 1,029 * Central Garden & Pet Co............. 19 900 * Championship Auto Racing Teams, Inc................................. 3 596 * Champps Entertainment, Inc.......... 6 542 * Charlotte Russe Holding, Inc........ 6 7,700 * Charming Shoppes, Inc............... 32 9,073 e* Charter Communications, Inc (Class A).................................. 11 532 * Checkers Drive-In Restaurant........ 3 342 * Cherokee, Inc....................... 5 758 e* Chicago Pizza & Brewery, Inc....... 5 4,804 * Chico's FAS, Inc.................... 91 824 e* Children's Place Retail Stores, Inc................................. 9 1,590 * Choice Hotels International, Inc.... 36 1,662 * Christopher & Banks Corp............ 34 433 Churchill Downs, Inc.................. 17 3,658 * CKE Restaurants, Inc................ 16 2,858 Claire's Stores, Inc.................. 63 34,893 * Clear Channel Communications, Inc... 1,301 6,078 * Coach, Inc.......................... 200 1,035 Coachmen Industries, Inc.............. 16 300 * Coldwater Creek, Inc................ 6 720 * Cole National Corp.................. 8 904 * Columbia Sportswear Co.............. 40 86,501 * Comcast Corp........................ 2,039 63,897 * Comcast Corp Special................ 1,443 4,500 Cooper Tire & Rubber Co............... 69 4,822 * Copart, Inc......................... 57 14,022 * Cox Communications, Inc (Class A)... 398 2,400 * Cox Radio, Inc (Class A)............ 55 500 CPI Corp.............................. 7 601 e* Cross Media Marketing Corp......... 0 1,802 * Crown Media Holdings, Inc (Class A).................................. 4 200 * CSS Industries, Inc................. 7 434 * Culp, Inc........................... 4 2,129 * Cumulus Media, Inc (Class A)........ 32
See Notes to Financial Statements B- 28 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- CONSUMER CYCLICAL--(CONTINUED) 10,224 Dana Corp............................. $ 120 11,718 Darden Restaurants, Inc............... 240 790 * Dave & Buster's, Inc................ 7 38,061 Delphi Corp........................... 306 794 * Department 56, Inc.................. 10 963 e* DHB Industries, Inc................ 2 4,851 Dillard's, Inc (Class A).............. 77 19,165 Dollar General Corp................... 229 1,736 * Dollar Thrifty Automotive Group, Inc................................. 37 7,780 * Dollar Tree Stores, Inc............. 191 2,613 Donaldson Co, Inc..................... 94 700 Dover Downs Gaming & Entertainment, Inc................................. 6 1,000 Dover Motorsport, Inc................. 5 3,382 Dow Jones & Co, Inc................... 146 2,000 * Dress Barn, Inc..................... 27 1,000 * Dura Automotive Systems, Inc........ 10 19,764 Eastman Kodak Co...................... 693 16,586 * EchoStar Communications Corp (Class A).................................. 369 908 * Elizabeth Arden, Inc................ 13 2,497 * Emmis Communications Corp (Class A).................................. 52 2,405 * Entercom Communications Corp........ 113 3,129 * Entravision Communications Corp (Class A)........................... 31 2,800 Equity Inns, Inc...................... 17 258 * Escalade, Inc....................... 5 860 e* EUniverse, Inc..................... 5 4,994 * Extended Stay America, Inc.......... 74 1,500 e Factset Research Systems, Inc....... 42 10,890 Family Dollar Stores, Inc............. 340 13,681 * Federated Department Stores, Inc.... 393 1,352 * Finish Line, Inc (Class A).......... 14 354 Fisher Communications, Inc............ 19 554 Florida East Coast Industries, Inc (Class B)........................... 12 9,506 * Foot Locker, Inc.................... 100 1,400 e* Footstar, Inc...................... 10 122,517 e Ford Motor Co....................... 1,139 1,593 Forest City Enterprises, Inc (Class A).................................. 53 1,445 * Fossil, Inc......................... 29 8,785 * Fox Entertainment Group, Inc (Class A).................................. 228 1,557 Fred's, Inc........................... 40 1,193 Friedman's, Inc (Class A)............. 10 1,405 G & K Services, Inc (Class A)......... 50 18,015 Gannett Co, Inc....................... 1,293 41,809 Gap, Inc.............................. 649 1,554 * Gaylord Entertainment Co............ 32 16,190 * Gemstar-TV Guide International, Inc................................. 53 2,274 GenCorp, Inc.......................... 18 37,909 General Motors Corp................... 1,397 62,788 * General Motors Corp (Class H)....... 672 1,554 * Genesco, Inc........................ 29 5,139 * Gentex Corp......................... 163 11,846 Genuine Parts Co...................... 365 9,852 Goodyear Tire & Rubber Co............. 67 1,138 * Goody's Family Clothing, Inc........ 5 3,219 Graco, Inc............................ 92 674 Gray Television, Inc (Class A)........ 8 52 Grey Global Group, Inc................ 32 1,297 * Group 1 Automotive, Inc............. 31 1,332 e* GSI Commerce, Inc.................. 5 540 * Guess?, Inc......................... 2 982 * Guitar Center, Inc.................. 16 844 * Gulfmark Offshore, Inc.............. 12 1,721 * Gymboree Corp....................... 27
SHARES VALUE (000) ------ ----------- 1,144 Hancock Fabrics, Inc.................. $ 17 1,800 * Handleman Co........................ 21 20,433 Harley-Davidson, Inc.................. 944 1,773 Harman International Industries, Inc................................. 105 7,808 * Harrah's Entertainment, Inc......... 309 2,663 * Harris Interactive, Inc............. 8 4,122 Harte-Hanks, Inc...................... 77 1,232 Haverty Furniture Cos, Inc............ 17 1,228 * Hearst-Argyle Television, Inc....... 30 498 * Hibbett Sporting Goods, Inc......... 12 22,518 Hilton Hotels Corp.................... 286 4,081 * Hispanic Broadcasting Corp.......... 84 3,730 Hollinger International, Inc.......... 38 700 * Hollywood Casino Corp (Class A)..... 9 3,398 * Hollywood Entertainment Corp........ 51 2,236 e* Hot Topic, Inc..................... 51 1,008 * iDine Rewards Network, Inc.......... 11 1,384 * IHOP Corp........................... 33 700 * IMPCO Technologies, Inc............. 3 734 * Information Holdings, Inc........... 11 2,972 * Insight Communications Co, Inc...... 37 2,541 * Interactive Data Corp............... 35 1,548 Intermet Corp......................... 7 6,087 * International Game Technology....... 462 1,882 International Speedway Corp (Class A).................................. 70 25,852 Interpublic Group Of Cos, Inc......... 364 1,786 * Intertan, Inc....................... 13 1,142 * Isle Of Capri Casinos, Inc.......... 15 18,144 J.C. Penney Co, Inc................... 417 2,556 * Jack In The Box, Inc................ 44 1,657 * Jakks Pacific, Inc.................. 22 1,030 e* Jo-Ann Stores, Inc (Class A)....... 24 5,980 Johnson Controls, Inc................. 479 264 * Johnson Outdoors, Inc (Class A)..... 3 8,160 * Jones Apparel Group, Inc............ 289 1,919 * Journal Register Co................. 34 1,314 * K2, Inc............................. 12 1,700 Kellwood Co........................... 44 500 * Kenneth Cole Productions, Inc (Class A).................................. 10 739 * Keystone Automotive Industries, Inc................................. 11 2,436 Kimball International, Inc (Class B).................................. 35 1,369 * Kirby Corp.......................... 37 5,719 Knight Ridder, Inc.................... 362 19,677 * Kohl's Corp......................... 1,101 2,801 * Krispy Kreme Doughnuts, Inc......... 95 1,551 * Kroll, Inc.......................... 30 915 K-Swiss, Inc (Class A)................ 20 5,102 * Lamar Advertising Co................ 172 1,378 Landry's Restaurants, Inc............. 29 1,208 LaSalle Hotel Properties.............. 17 3,552 La-Z-Boy, Inc......................... 85 4,499 * Lear Corp........................... 150 3,000 Lee Enterprises, Inc.................. 101 13,371 Leggett & Platt, Inc.................. 300 1,100 Libbey, Inc........................... 29 182,324 * Liberty Media Corp (Class A)........ 1,630 28,816 Limited Brands, Inc................... 401 1,227 * Lin TV Corp (Class A)............... 30 2,407 * Linens 'n Things, Inc............... 54 7,265 Liz Claiborne, Inc.................... 215 791 * Lodgenet Entertainment Corp......... 8 1,175 Lone Star Steakhouse & Saloon, Inc.... 23 1,800 * Luby's, Inc......................... 5
See Notes to Financial Statements TIAA SEPARATE ACCOUNT VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 29 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- CONSUMER CYCLICAL--(CONTINUED) 2,817 * Mandalay Resort Group............... $ 86 1,242 Marcus Corp........................... 18 474 Marine Products Corp.................. 5 13,035 Marriott International, Inc (Class A).................................. 428 600 e* Martha Stewart Living Omnimedia, Inc (Class A)....................... 6 4,500 * Mascotech, Inc (Escrow)............. 0 986 * Maxwell Shoe Co, Inc (Class A)...... 11 19,421 e May Department Stores Co............ 446 5,338 Maytag Corp........................... 152 1,222 McClatchy Co (Class A)................ 69 85,871 McDonald's Corp....................... 1,381 13,149 McGraw-Hill Cos, Inc.................. 795 918 Media General, Inc (Class A).......... 55 3,855 * Mediacom Communications Corp........ 34 778 e* Medis Technologies Ltd............. 4 2,269 * Men's Wearhouse, Inc................ 39 2,846 Meredith Corp......................... 117 1,315 * Metro One Telecommunications, Inc... 8 3,154 * Metro-Goldwyn-Mayer, Inc............ 41 4,588 * MGM Mirage.......................... 151 4,573 * Michaels Stores, Inc................ 143 1,115 * Micros Systems, Inc................. 25 643 * Midas, Inc.......................... 4 1,980 e* Midway Games, Inc.................. 8 2,000 Modine Manufacturing Co............... 35 3,500 * Mohawk Industries, Inc.............. 199 1,720 * Monaco Coach Corp................... 28 230 * Monarch Casino & Resort, Inc........ 3 388 * Monro Muffler Brake, Inc............ 7 352 * Mossimo, Inc........................ 2 145 * Mothers Work, Inc................... 5 1,042 * Movie Gallery, Inc.................. 14 2,007 * MSC Industrial Direct Co (Class A).................................. 36 1,437 * MTR Gaming Group, Inc............... 11 736 e* Multimedia Games, Inc.............. 20 1,428 Myers Industries, Inc................. 15 300 National Presto Industries, Inc....... 9 1,819 * Nautica Enterprises, Inc............ 20 2,137 e* Nautilus Group, Inc................ 29 1,830 e* Neiman Marcus Group, Inc (Class A).................................. 56 723 * Neiman Marcus Group, Inc (Class B).................................. 20 100 * Netratings, Inc..................... 1 9,201 New York Times Co (Class A)........... 421 4,958 Nike, Inc (Class B)................... 220 6,514 Nordstrom, Inc........................ 124 1,900 * Oakley, Inc......................... 20 1,120 * O'Charley's, Inc.................... 23 12,672 Omnicom Group, Inc.................... 819 2,761 * O'Reilly Automotive, Inc............ 70 739 Oshkosh B'gosh, Inc (Class A)......... 21 1,007 Oshkosh Truck Corp.................... 62 4,119 Outback Steakhouse, Inc............... 142 437 Oxford Industries, Inc................ 11 1,119 e* P.F. Chang's China Bistro, Inc..... 41 3,166 * Pacific Sunwear Of California, Inc................................. 56 2,069 * PanAmSat Corp....................... 30 1,488 * Panera Bread Co (Class A)........... 52 875 e* Papa John's International, Inc..... 24 18,755 * Park Place Entertainment Corp....... 158 600 e* Parkervision, Inc.................. 5 1,546 * Payless Shoesource, Inc............. 80 1,866 * Penn National Gaming, Inc........... 30
SHARES VALUE (000) ------ ----------- 1,074 * Penton Media, Inc................... $ 1 2,973 * Performance Food Group Co........... 101 1,700 Phillips-Van Heusen Corp.............. 20 6,500 Pier 1 Imports, Inc................... 123 1,730 * Pinnacle Entertainment, Inc......... 12 4,100 * Pinnacle Systems, Inc............... 56 1,258 * Pixar, Inc.......................... 67 1,112 * PLATO Learning, Inc................. 7 945 e* Playboy Enterprises, Inc (Class B).................................. 10 1,600 e Polaris Industries, Inc............. 94 2,209 * Polo Ralph Lauren Corp.............. 48 2,200 * Presstek, Inc....................... 10 300 * Pricesmart, Inc..................... 7 3,200 * Prime Hospitality Corp.............. 26 9,402 * Primedia, Inc....................... 19 1,000 * Private Media Group, Inc............ 3 639 Pulitzer, Inc......................... 29 860 * Quaker Fabric Corp.................. 6 1,403 * Quiksilver, Inc..................... 37 610 * Racing Champions Ertl Corp.......... 8 3,960 * Radio One, Inc (Class A)............ 58 820 * Radio One, Inc (Class D)............ 12 1,420 * Rare Hospitality International, Inc................................. 39 2,992 * Raytech Corp........................ 17 6,850 Reader's Digest Association, Inc (Class A)........................... 103 3,360 * Reebok International Ltd............ 99 1,299 Regal Entertainment Group (Class A)... 28 1,300 * Regent Communications, Inc.......... 8 3,015 Regis Corp............................ 78 1,863 * Rent-A-Center, Inc.................. 93 1,353 * Resources Connection, Inc........... 31 605 * Rex Stores Corp..................... 6 430 Riviana Foods, Inc.................... 12 5,396 Ross Stores, Inc...................... 229 4,500 Ruby Tuesday, Inc..................... 78 1,702 Russell Corp.......................... 28 3,096 * Ryan's Family Steak Houses, Inc..... 35 1,057 * Saga Communications, Inc (Class A).................................. 20 8,317 * Saks, Inc........................... 98 695 * Salem Communications Corp (Class A).................................. 17 460 e* Salton, Inc........................ 4 600 Schawk, Inc........................... 6 2,073 * Scholastic Corp..................... 75 2,308 * Scientific Games Corp (Class A)..... 17 1,306 * Scotts Co (Class A)................. 64 1,238 e* SCP Pool Corp...................... 36 2,002 Scripps (E.W.) Co (Class A)........... 154 19,192 Sears Roebuck & Co.................... 460 517 * Shoe Carnival, Inc.................. 7 2,069 * ShopKo Stores, Inc.................. 26 1,230 e* Shuffle Master, Inc................ 24 2,214 * Sinclair Broadcast Group, Inc (Class A).................................. 26 4,700 e* Sirius Satellite Radio, Inc........ 3 6,211 * Six Flags, Inc...................... 35 1,197 Smith (A.O.) Corp..................... 32 1,793 * Sonic Automotive, Inc............... 27 2,516 * Sonic Corp.......................... 52 3,230 * Sotheby's Holdings, Inc (Class A)... 29 2,599 * Spanish Broadcasting System, Inc (Class A)........................... 19 649 Spartan Motors, Inc................... 7 1,000 Speedway Motorsports, Inc............. 26 1,755 e* Sports Resorts International, Inc................................. 10 1,437 * Stage Stores, Inc................... 30
See Notes to Financial Statements B- 30 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- CONSUMER CYCLICAL--(CONTINUED) 500 Standard Motor Products, Inc.......... $ 7 389 * Stanley Furniture Co, Inc........... 9 26,220 e* Starbucks Corp..................... 534 13,596 Starwood Hotels & Resorts Worldwide, Inc................................. 323 2,498 * Station Casinos, Inc................ 44 2,167 Steelcase, Inc (Class A).............. 24 1,757 * Stein Mart, Inc..................... 11 600 * Steven Madden Ltd................... 11 700 * Stoneridge, Inc..................... 8 2,696 Stride Rite Corp...................... 19 1,400 Sturm Ruger & Co, Inc................. 13 1,431 Superior Industries International, Inc................................. 59 2,200 * Sylvan Learning Systems, Inc........ 36 1,800 Talbots, Inc.......................... 50 400 Tanger Factory Outlet Centers, Inc.... 12 61,487 Target Corp........................... 1,845 1,219 * TBC Corp............................ 15 2,719 * Tenneco Automotive, Inc............. 11 3,430 * The Cheesecake Factory, Inc......... 124 2,355 * The Sports Authority, Inc........... 16 1,400 * The Steak n Shake Co................ 14 576 * Thomas Nelson, Inc.................. 6 1,100 Thor Industries, Inc.................. 38 2,833 e* THQ, Inc........................... 38 7,623 Tiffany & Co.......................... 182 1,268 * Timberland Co (Class A)............. 45 36,478 TJX Cos, Inc.......................... 712 2,439 * Too, Inc............................ 57 2,585 * Topps Co, Inc....................... 22 3,113 * Tower Automotive, Inc............... 14 13,166 Tribune Co............................ 599 269 * Tropical Sportswear International Corp................................ 2 12,046 * U.S.A. Interactive, Inc............. 275 3,511 * Unifi, Inc.......................... 18 5,408 * UnitedGlobalcom, Inc (Class A)...... 13 1,000 * Universal Electronics, Inc.......... 10 10,478 e* Univision Communications, Inc (Class A)........................... 257 533 * Urban Outfitters, Inc............... 13 582 * Vail Resorts, Inc................... 9 3,432 * Valassis Communications, Inc........ 101 1,056 * Vans, Inc........................... 6 2,249 * Vastera, Inc........................ 13 5,742 VF Corp............................... 207 7,400 * Viacom, Inc (Class A)............... 302 98,378 * Viacom, Inc (Class B)............... 4,010 9,045 Visteon Corp.......................... 63 1,600 * Wabash National Corp................ 13 184,840 Wal-Mart Stores, Inc.................. 9,336 138,333 Walt Disney Co........................ 2,256 176 Washington Post Co (Class B).......... 130 7,405 Wendy's International, Inc............ 200 744 * West Marine, Inc.................... 10 2,600 e* Westpoint Stevens, Inc............. 2 5,301 * Westwood One, Inc................... 198 1,813 * Wet Seal, Inc (Class A)............. 20 4,323 Whirlpool Corp........................ 226 3,300 Wiley (John) & Sons, Inc (Class A).... 79 6,132 * Williams-Sonoma, Inc................ 166 700 * Wilsons The Leather Experts, Inc.... 4 867 Winnebago Industries, Inc............. 34 1,562 * WMS Industries, Inc................. 23 2,882 Wolverine World Wide, Inc............. 44
SHARES VALUE (000) ------ ----------- 600 Woodward Governor Co.................. $ 26 717 * World Wrestling Federation Entertainment, Inc.................. 6 3,608 e* XM Satellite Radio Holdings, Inc... 10 26,510 * Yahoo!, Inc......................... 433 1,003 * Young Broadcasting, Inc (Class A)... 13 20,153 * Yum! Brands, Inc.................... 488 2,294 * Zale Corp........................... 73 1,300 * Zenith Electronics Corp............. 0 2,400 * Zomax, Inc.......................... 10 -------- TOTAL CONSUMER CYCLICAL............... 66,739 -------- CONSUMER NON-CYCLICAL--10.39% 877 * 1-800-Flowers.com, Inc (Class A).... 5 1,696 * 7-Eleven, Inc....................... 13 872 * AC Moore Arts & Crafts, Inc......... 11 2,414 Alberto-Culver Co (Class B)........... 122 25,719 Albertson's, Inc...................... 573 12,914 e* Amazon.Com, Inc.................... 244 4,531 * American Greetings Corp (Class A)... 72 1,106 e* American Italian Pasta Co (Class A).................................. 40 59,471 Anheuser-Busch Cos, Inc............... 2,878 1,164 * Applica, Inc........................ 6 2,166 * Aramark Corp (Class B).............. 51 38,704 Archer Daniels Midland Co............. 480 553 * Asbury Automotive Group, Inc........ 5 900 * Aurora Foods, Inc................... 1 13,682 * Autonation, Inc..................... 172 4,854 * Autozone, Inc....................... 343 16,002 Avon Products, Inc.................... 862 3,004 * Barnes & Noble, Inc................. 54 17,471 * Best Buy Co, Inc.................... 422 4,983 * BJ's Wholesale Club, Inc............ 91 2,239 Blyth, Inc............................ 60 5,623 * Borders Group, Inc.................. 91 700 * Boston Beer Co, Inc (Class A)....... 10 208 Bridgford Foods Corp.................. 2 2,314 Brown-Forman Corp (Class B)........... 151 39 * Bruno's Supermarkets, Inc........... 0 2,500 e* Cadiz, Inc......................... 1 15,285 Campbell Soup Co...................... 359 7,018 * Carmax, Inc......................... 125 2,822 Casey's General Stores, Inc........... 34 4,002 * CDW Computer Centers, Inc........... 175 2,584 * Chiquita Brands International, Inc................................. 34 2,493 Church & Dwight Co, Inc............... 76 14,461 Circuit City Stores, Inc (Circuit City Group).............................. 107 11,442 Clorox Co............................. 472 63 Coca-Cola Bottling Co Consolidated.... 4 137,703 Coca-Cola Co.......................... 6,034 15,888 Coca-Cola Enterprises, Inc............ 345 37,093 Colgate-Palmolive Co.................. 1,945 36,288 e Conagra Foods, Inc.................. 908 5,033 * Constellation Brands, Inc (Class A).................................. 119 1,894 Coors (Adolph) Co (Class B)........... 116 2,328 Corn Products International, Inc...... 70 1,370 e* Cost Plus, Inc..................... 39 30,694 * Costco Wholesale Corp............... 861 26,568 CVS Corp.............................. 663 6,122 * Dean Foods Co....................... 227 299 * DEL Laboratories, Inc............... 6 12,588 * Del Monte Foods Co.................. 97 2,443 Delta & Pine Land Co.................. 50 6,530 Dial Corp............................. 133
See Notes to Financial Statements TIAA SEPARATE ACCOUNT VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 31 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- CONSUMER NON-CYCLICAL--(CONTINUED) 3,045 DIMON, Inc............................ $ 18 2,921 Dole Food Co.......................... 95 1,240 Dreyer's Grand Ice Cream, Inc......... 88 1,873 * Drugstore.Com, Inc.................. 4 1,510 * Duane Reade, Inc.................... 26 10,163 * eBay, Inc........................... 689 700 * Electronics Boutique Holdings Corp................................ 11 6,302 * Energizer Holdings, Inc............. 176 7,158 Estee Lauder Cos (Class A)............ 189 2,243 Ethan Allen Interiors, Inc............ 77 544 e* Expedia, Inc (Class A)............. 36 115 * Expedia, Inc Wts 02/04/09........... 4 900 * Factory 2-U Stores, Inc............. 3 1,198 * FAO, Inc............................ 1 65 Farmer Brothers Co.................... 20 3,981 Fastenal Co........................... 149 383 * Finlay Enterprises, Inc............. 5 2,762 e Fleming Cos, Inc.................... 18 1,589 Flowers Foods, Inc.................... 31 1,297 * FTI Consulting, Inc................. 52 3,459 * Furniture Brands International, Inc................................. 82 394 * Gaiam, Inc.......................... 4 747 * Galyans Trading Co, Inc............. 7 1,300 e* Gamestop Corp...................... 13 452 * Gart Sports Co...................... 9 24,741 General Mills, Inc.................... 1,162 71,716 e Gillette Co......................... 2,177 1,203 * Great Atlantic & Pacific Tea Co, Inc................................. 10 226 * Green Mountain Coffee, Inc.......... 3 23,778 H.J. Heinz Co......................... 782 1,696 * Hain Celestial Group, Inc........... 26 9,648 Hasbro, Inc........................... 111 5,200 Herman Miller, Inc.................... 96 6,372 Hershey Foods Corp.................... 430 159,404 Home Depot, Inc....................... 3,819 469 * Horizon Organic Holding Corp........ 8 5,077 Hormel Foods Corp..................... 118 1,700 Hughes Supply, Inc.................... 46 700 Ingles Markets, Inc (Class A)......... 8 2,951 * Insight Enterprises, Inc............ 25 236 Inter Parfums, Inc.................... 2 3,257 Interface, Inc (Class A).............. 10 4,926 International Flavors & Fragrances, Inc................................. 173 1,137 * International Multifoods Corp....... 24 2,936 Interstate Bakeries Corp.............. 45 400 * J & J Snack Foods Corp.............. 14 3,016 J.M. Smucker Co....................... 120 1,216 * Jill (J.) Group, Inc................ 17 16,699 Kellogg Co............................ 572 19,037 Kraft Foods, Inc (Class A)............ 741 53,902 * Kroger Co........................... 833 1,933 Lancaster Colony Corp................. 76 1,746 Lance, Inc............................ 21 561 * Lithia Motors, Inc (Class A)........ 9 1,876 Loews Corp (Carolina Group)........... 38 2,200 Longs Drug Stores Corp................ 46 52,728 Lowe's Cos............................ 1,977 525 * MarineMax, Inc...................... 6 1,224 * Marvel Enterprises, Inc............. 11 29,631 Mattel, Inc........................... 567 9,489 McCormick & Co, Inc (Non-Vote)........ 220 1,011 * Monterey Pasta Co................... 4
SHARES VALUE (000) ------ ----------- 589 Movado Group, Inc..................... $ 11 785 Nash Finch Co......................... 6 259 * National Beverage Corp.............. 4 847 Nature's Sunshine Products, Inc....... 8 2,946 * NBTY, Inc........................... 52 397 e* NetFlix, Inc....................... 4 18,120 Newell Rubbermaid, Inc................ 550 3,183 Nu Skin Enterprises, Inc (Class A).... 38 20,901 * Office Depot, Inc................... 308 8,289 * OfficeMax, Inc...................... 41 1,039 Oneida Ltd............................ 11 216 * Overstock.com, Inc.................. 3 425 * Party City Corp..................... 5 2,206 * Pathmark Stores, Inc................ 11 400 * PC Connection, Inc.................. 2 624 * Peets Coffee & Tea, Inc............. 9 768 * Penn Traffic Co..................... 3 3,435 Pep Boys-Manny Moe & Jack............. 40 11,947 Pepsi Bottling Group, Inc............. 307 5,901 PepsiAmericas Inc..................... 79 120,002 PepsiCo, Inc.......................... 5,066 4,300 * Perrigo Co.......................... 52 1,043 * Petco Animal Supplies, Inc.......... 24 8,132 * Petsmart, Inc....................... 139 145,149 Philip Morris Cos, Inc................ 5,883 1,099 Pilgrim's Pride Corp (Class B)........ 9 1,900 * Playtex Products, Inc............... 19 9,098 e* Priceline.com, Inc................. 15 1,157 * Princeton Review, Inc............... 6 88,173 Procter & Gamble Co................... 7,578 6,290 R.J. Reynolds Tobacco Holdings, Inc... 265 11,917 RadioShack Corp....................... 223 2,156 * Ralcorp Holdings, Inc............... 54 1,285 * Restoration Hardware, Inc........... 6 615 e* Revlon, Inc (Class A).............. 2 27,940 * Rite Aid Corp....................... 68 669 * Robert Mondavi Corp (Class A)....... 21 2,200 Ruddick Corp.......................... 30 700 Russ Berrie & Co, Inc................. 24 31,097 * Safeway, Inc........................ 726 52,984 Sara Lee Corp......................... 1,193 1,040 Schweitzer-Mauduit International, Inc................................. 25 26 Seaboard Corp......................... 6 993 * Seminis, Inc (Class A).............. 3 3,076 Sensient Technologies Corp............ 69 508 * Sharper Image Corp.................. 9 1,100 * Skechers U.S.A., Inc (Class A)...... 9 900 * Smart & Final, Inc.................. 5 7,580 * Smithfield Foods, Inc............... 150 2,500 * Stamps.com, Inc..................... 12 803 Standard Commercial Corp.............. 15 31,769 * Staples, Inc........................ 581 298 * Steinway Musical Instruments, Inc... 5 500 Stepan Co............................. 13 2,382 * The Bombay Co, Inc.................. 12 1,000 Thomas Industries, Inc................ 26 2,331 * Ticketmaster (Class B).............. 49 1,726 Tootsie Roll Industries, Inc.......... 53 13,415 * Toys "R" Us, Inc.................... 134 980 * Tractor Supply Co................... 37 1,215 * Trans World Entertainment Corp...... 4 955 * Triarc Cos, Inc..................... 25 700 * Tuesday Morning Corp................ 12
See Notes to Financial Statements B- 32 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- CONSUMER NON-CYCLICAL--(CONTINUED) 3,650 Tupperware Corp....................... $ 55 1,389 * Tweeter Home Entertainment Group, Inc................................. 8 15,485 Tyson Foods, Inc (Class A)............ 174 1,214 * United Auto Group, Inc.............. 15 1,291 * United Natural Foods, Inc........... 33 1,760 Universal Corp........................ 65 11,469 UST, Inc.............................. 383 1,504 * Valuevision International, Inc (Class A)........................... 23 1,357 Vector Group Ltd...................... 16 624 * Virbac Corp......................... 4 69,086 Walgreen Co........................... 2,017 765 * Water Pik Technologies, Inc......... 6 1,705 * Weight Watchers International, Inc................................. 78 779 Weis Markets, Inc..................... 24 805 * Whitehall Jewellers, Inc............ 8 3,539 * Whole Foods Market, Inc............. 187 1,385 * Wild Oats Markets, Inc.............. 14 4,470 Winn-Dixie Stores, Inc................ 68 10,965 Wrigley (Wm.) Jr Co................... 602 1,948 * Yankee Candle Co, Inc............... 31 -------- TOTAL CONSUMER NON-CYCLICAL........... 63,873 -------- ENERGY--5.65% 997 * 3TEC Energy Corp.................... 14 4,764 Amerada Hess Corp..................... 262 16,823 Anadarko Petroleum Corp............... 806 9,360 Apache Corp........................... 533 4,796 Ashland, Inc.......................... 137 673 * Atwood Oceanics, Inc................ 20 22,875 Baker Hughes, Inc..................... 736 1,300 Berry Petroleum Co (Class A).......... 22 10,660 * BJ Services Co...................... 344 13,660 Burlington Resources, Inc............. 583 2,023 Cabot Oil & Gas Corp (Class A)........ 50 2,644 * Cal Dive International, Inc......... 62 662 CARBO Ceramics, Inc................... 22 9,900 Chesapeake Energy Corp................ 77 72,458 ChevronTexaco Corp.................... 4,817 2,899 * Cimarex Energy Co................... 52 1,600 * Comstock Resources, Inc............. 15 45,664 ConocoPhillips........................ 2,210 3,197 * Cooper Cameron Corp................. 159 1,411 * Denbury Resources, Inc.............. 16 9,789 Devon Energy Corp..................... 449 3,682 Diamond Offshore Drilling, Inc........ 80 463 * Dril-Quip, Inc...................... 8 111 * Encore Acquisition Co............... 2 1,380 * Energy Partners Ltd................. 15 9,849 ENSCO International, Inc.............. 290 7,954 EOG Resources, Inc.................... 318 1,332 * Evergreen Resources, Inc............ 60 1,120 e* Exploration Co Of Delaware, Inc.... 3 460,107 Exxon Mobil Corp...................... 16,076 2,084 * Forest Oil Corp..................... 57 14 * Forest Oil Corp Wts 02/15/04........ 0 14 * Forest Oil Corp Wts 02/15/05........ 0 1,879 Frontier Oil Corp..................... 32 293 Getty Realty Corp..................... 6 4,627 * Global Industries Ltd............... 19 6,404 * Grant Prideco, Inc.................. 75 12,038 * Grey Wolf, Inc...................... 48 546 * Gulf Island Fabrication, Inc........ 9 29,579 Halliburton Co........................ 553
SHARES VALUE (000) ------ ----------- 3,495 * Hanover Compressor Co............... $ 32 2,496 * Harvest Natural Resources, Inc...... 16 3,449 Helmerich & Payne, Inc................ 96 689 Holly Corp............................ 15 1,000 * Horizon Offshore, Inc............... 5 700 * Houston Exploration Co.............. 21 835 * Hydril Co........................... 20 3,300 * Input/Output, Inc................... 14 6,840 Kerr-McGee Corp....................... 303 6,598 * Key Energy Services, Inc............ 59 400 Lufkin Industries, Inc................ 9 3,412 * Magnum Hunter Resources, Inc........ 20 572 * Magnum Hunter Resources, Inc Wts 03/21/05............................ 0 20,900 Marathon Oil Corp..................... 445 2,707 * Maverick Tube Corp.................. 35 3,066 e* Meridian Resource Corp............. 3 4,882 Murphy Oil Corp....................... 209 5,494 * National-Oilwell, Inc............... 120 3,059 * Newfield Exploration Co............. 110 3,939 Noble Energy, Inc..................... 148 1,100 * Nuevo Energy Co..................... 12 25,496 Occidental Petroleum Corp............. 725 12,100 Ocean Energy, Inc..................... 242 1,600 * Oceaneering International, Inc...... 40 5,591 * Parker Drilling Co.................. 12 1,750 Patina Oil & Gas Corp................. 55 4,874 * Patterson-UTI Energy, Inc........... 147 181 * Petroleum Helicopters (Vote)........ 5 7,882 * Pioneer Natural Resources Co........ 199 1,700 * Plains Exploration & Production Co.................................. 17 1,700 * Plains Resources, Inc............... 20 3,508 Pogo Producing Co..................... 131 1,296 * Premcor, Inc........................ 29 7,574 * Pride International, Inc............ 113 650 * Prima Energy Corp................... 15 3,492 * Range Resources Corp................ 19 1,242 * Remington Oil & Gas Corp............ 20 6,462 Rowan Cos, Inc........................ 147 700 RPC, Inc.............................. 8 1,146 * Seacor Smit, Inc.................... 51 6,952 * Smith International, Inc............ 227 1,366 * Spinnaker Exploration Co............ 30 2,000 St. Mary Land & Exploration Co........ 50 1,545 * Stone Energy Corp................... 52 4,632 Sunoco, Inc........................... 154 3,300 * Superior Energy Services, Inc....... 27 1,700 * Swift Energy Co..................... 16 4,106 * Tesoro Petroleum Corp............... 19 3,563 Tidewater, Inc........................ 111 2,400 * Tom Brown, Inc...................... 60 486 * Total Fina Elf S.A. Wts 08/05/03.... 12 1,143 * Transmontaigne, Inc................. 5 1,583 * Trico Marine Services, Inc.......... 5 2,600 * Unit Corp........................... 48 1,098 * Universal Compression Holdings, Inc................................. 21 17,697 e Unocal Corp......................... 541 6,895 Valero Energy Corp.................... 255 5,420 * Varco International, Inc............ 94 2,260 * Veritas DGC, Inc.................... 18 3,500 Vintage Petroleum, Inc................ 37 1,153 * Westport Resources Corp............. 24 1,475 * W-H Energy Services, Inc............ 22
See Notes to Financial Statements TIAA SEPARATE ACCOUNT VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 33 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- ENERGY--(CONTINUED) 637 World Fuel Services Corp.............. $ 13 8,036 XTO Energy, Inc....................... 198 -------- TOTAL ENERGY.......................... 34,763 -------- FINANCIAL SERVICES--21.37% 1,016 1st Source Corp....................... 17 2,299 21st Century Insurance Group.......... 29 5,529 A.G. Edwards, Inc..................... 182 711 ABC Bancorp........................... 9 1,151 Acadia Realty Trust................... 9 1,625 Advanta Corp (Class A)................ 15 1,500 * Affiliated Managers Group, Inc...... 75 35,040 Aflac, Inc............................ 1,055 700 Alabama National Bancorp.............. 30 1,137 Alexandria Real Estate Equities, Inc................................. 48 2,573 Alfa Corp............................. 31 407 * Alleghany Corp...................... 72 850 Allegiant Bancorp, Inc................ 15 7,495 e Allied Capital Corp................. 164 3,675 * Allmerica Financial Corp............ 37 47,879 Allstate Corp......................... 1,771 5,726 AMB Property Corp..................... 157 5,665 Ambac Financial Group, Inc............ 319 1,700 Amcore Financial, Inc................. 37 2,583 e American Capital Strategies Ltd..... 56 80,035 e American Express Co................. 2,829 2,172 American Financial Group, Inc......... 50 1,675 American Financial Holdings, Inc...... 50 470 American Home Mortgage Holdings, Inc................................. 5 155,854 American International Group, Inc..... 9,016 419 American National Bankshares, Inc..... 11 693 American National Insurance Co........ 57 652 * American Physicians Capital, Inc.... 12 7,450 e* AmeriCredit Corp................... 58 6,620 * Ameritrade Holding Corp............. 37 2,774 e AmerUs Group Co..................... 78 1,041 AMLI Residential Properties Trust..... 22 24,654 AmSouth Bancorp....................... 473 1,467 Anchor Bancorp Wisconsin, Inc......... 30 5,903 Annaly Mortgage Management, Inc....... 111 2,904 e Anthracite Capital, Inc............. 32 878 Anworth Mortgage Asset Corp........... 11 17,057 AON Corp.............................. 322 5,261 Apartment Investment & Management Co (Class A)........................... 197 2,102 Apex Mortgage Capital, Inc............ 14 11,972 Archstone-Smith Trust................. 282 4,002 Arden Realty, Inc..................... 89 1,552 e Argonaut Group, Inc................. 23 488 Arrow Financial Corp.................. 15 5,173 Associated Banc-Corp.................. 176 1,181 Associated Estates Realty Corp........ 8 5,826 Astoria Financial Corp................ 158 4,103 AvalonBay Communities, Inc............ 161 500 Baldwin & Lyons, Inc (Class B)........ 12 939 Banc Corp............................. 7 283 Bancfirst Corp........................ 13 5,600 Bancorpsouth, Inc..................... 109 817 Bank Mutual Corp...................... 19 104,432 Bank Of America Corp.................. 7,265 1,000 Bank Of Granite Corp.................. 18 4,703 Bank Of Hawaii Corp................... 143 49,222 Bank Of New York Co, Inc.............. 1,179 319 Bank Of The Ozarks, Inc............... 7
SHARES VALUE (000) ------ ----------- 79,683 Bank One Corp......................... $ 2,912 2,677 BankAtlantic Bancorp, Inc (Class A)... 25 10,078 Banknorth Group, Inc.................. 228 1,281 * Bankunited Financial Corp (Class A).................................. 21 777 Banner Corp........................... 15 4,537 * Bay View Capital Corp............... 26 32,316 BB&T Corp............................. 1,195 6,393 Bear Stearns Cos, Inc................. 380 828 * Beazer Homes U.S.A., Inc............ 50 996 Bedford Property Investors, Inc....... 26 2,616 Berkley (W.R.) Corp................... 104 449 Berkshire Hills Bancorp, Inc.......... 11 420 * BKF Capital Group, Inc.............. 7 1,130 * Blackrock, Inc...................... 45 779 * BOK Financial Corp.................. 25 1,020 Boston Private Financial Holdings, Inc................................. 20 4,558 Boston Properties, Inc................ 168 283 Bostonfed Bancorp, Inc................ 8 1,400 Boykin Lodging Co..................... 13 1,933 Brandywine Realty Trust............... 42 3,159 BRE Properties, Inc (Class A)......... 99 1,727 Brookline Bancorp, Inc................ 21 3,354 Brown & Brown, Inc.................... 108 267 Bryn Mawr Bank Corp................... 10 700 BSB Bancorp, Inc...................... 15 249 California First National Bancorp..... 3 580 Camden National Corp.................. 14 2,491 Camden Property Trust................. 82 1,459 Capital Automotive REIT............... 35 400 Capital City Bank Group, Inc.......... 16 14,053 Capital One Financial Corp............ 418 554 Capitol Bancorp Ltd................... 13 1,624 Capitol Federal Financial............. 47 650 Capstead Mortgage Corp................ 16 3,615 CarrAmerica Realty Corp............... 91 897 Cascade Bancorp....................... 12 1,600 Cash America International, Inc....... 15 5,643 * Catellus Development Corp........... 112 1,069 Cathay Bancorp, Inc................... 41 239 CB Bancshares, Inc.................... 10 1,507 CBL & Associates Properties, Inc...... 60 630 CCBT Financial Cos, Inc............... 16 882 * CCC Information Services Group, Inc................................. 16 758 Center Trust, Inc..................... 6 1,600 Centerpoint Properties Corp........... 91 538 * Central Coast Bancorp............... 11 229 Century Bancorp, Inc (Class A)........ 6 1,366 * Ceres Group, Inc.................... 3 1,044 CFS Bancorp, Inc...................... 15 73,913 Charles Schwab Corp................... 802 285 Charter Financial Corp................ 9 2,500 Charter Municipal Mortgage Acceptance Co.................................. 43 15,783 Charter One Financial, Inc............ 453 1,594 Chateau Communities, Inc.............. 37 1,889 Chelsea Property Group, Inc........... 63 1,562 Chemical Financial Corp............... 50 2,066 Chittenden Corp....................... 53 5,808 * ChoicePoint, Inc.................... 229 11,003 Chubb Corp............................ 574 9,390 Cincinnati Financial Corp............. 353 354,069 Citigroup, Inc........................ 12,460 3,400 * Citigroup, Inc (Litigation Warrants)........................... 4
See Notes to Financial Statements B- 34 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- FINANCIAL SERVICES--(CONTINUED) 3,061 Citizens Banking Corp................. $ 76 651 Citizens First Bancorp, Inc........... 14 1,725 * Citizens, Inc....................... 13 550 City Bank............................. 14 1,237 City Holding Co....................... 35 2,782 City National Corp.................... 122 1,019 * Clark/Bardes, Inc................... 20 1,704 * CNA Financial Corp.................. 44 1,100 CNA Surety Corp....................... 9 300 Coastal Bancorp, Inc.................. 10 598 Coastal Financial Corp................ 8 450 CoBiz, Inc............................ 7 8,230 Colonial Bancgroup, Inc............... 98 1,022 Colonial Properties Trust............. 35 416 Columbia Bancorp...................... 9 1,009 * Columbia Banking System, Inc........ 13 12,137 e Comerica, Inc....................... 525 4,000 Commerce Bancorp, Inc................. 173 4,230 Commerce Bancshares, Inc.............. 166 1,766 Commerce Group, Inc................... 66 3,124 Commercial Federal Corp............... 73 2,721 Commercial Net Lease Realty, Inc...... 42 605 Commonwealth Bancorp, Inc............. 28 818 Community Bank System, Inc............ 26 535 Community Banks, Inc.................. 15 2,770 Community First Bankshares, Inc....... 73 905 Community Trust Bancorp, Inc.......... 23 8,752 Compass Bancshares, Inc............... 274 1,233 * CompuCredit Corp.................... 9 823 Connecticut Bancshares, Inc........... 32 3,454 Cornerstone Realty Income Trust, Inc................................. 27 1,105 Corporate Office Properties Trust..... 16 516 Correctional Properties Trust......... 11 2,017 * Corrections Corp Of America......... 35 585 Corus Bankshares, Inc................. 26 7,094 Countrywide Financial Corp............ 366 2,543 Cousins Properties, Inc............... 63 1,000 CPB, Inc.............................. 27 2,076 Crawford & Co (Class B)............... 10 962 * Credit Acceptance Corp.............. 6 400 * Crescent Operating, Inc............. 0 5,712 Crescent Real Estate Equities Co...... 95 1,548 Crown American Realty Trust........... 14 1,500 * CSK Auto Corp....................... 17 3,532 Cullen/Frost Bankers, Inc............. 115 220 Curtiss-Wright Corp (Class B)......... 14 1,875 CVB Financial Corp.................... 48 952 Delphi Financial Group, Inc (Class A).................................. 36 3,835 Developers Diversified Realty Corp.... 84 1,606 Dime Community Bancshares............. 31 3,950 Doral Financial Corp.................. 113 1,439 Downey Financial Corp................. 56 9,396 Duke Realty Corp...................... 239 19,479 * E*trade Group, Inc.................. 95 1,700 East West Bancorp, Inc................ 61 1,077 Eastgroup Properties, Inc............. 27 4,054 Eaton Vance Corp...................... 115 1,000 * Electro Rent Corp................... 12 168 EMC Insurance Group, Inc.............. 3 1,200 Entertainment Properties Trust........ 28 28,132 Equity Office Properties Trust........ 703 411 e Equity One, Inc..................... 5
SHARES VALUE (000) ------ ----------- 18,683 Equity Residential.................... $ 459 1,554 Erie Indemnity Co (Class A)........... 56 1,037 Essex Property Trust, Inc............. 53 1,026 * Euronet Worldwide, Inc.............. 8 700 F & M Bancorp......................... 22 67,598 Fannie Mae............................ 4,349 447 Farmers Capital Bank Corp............. 15 881 FBL Financial Group, Inc (Class A).... 17 1,117 FBR Asset Investment Corp............. 38 591 e* Federal Agricultural Mortgage Corp (Class C)........................... 18 2,521 Federal Realty Investment Trust....... 71 5,631 Federated Investors, Inc (Class B).... 143 3,200 FelCor Lodging Trust, Inc............. 37 1,153 Fidelity Bankshares, Inc.............. 21 6,603 Fidelity National Financial, Inc...... 217 34,622 Fifth Third Bancorp................... 2,027 781 * Financial Federal Corp.............. 20 563 Financial Industries Corp............. 8 559 Financial Institutions, Inc........... 16 4,830 First American Corp................... 107 480 First Bancorp (North Carolina)........ 11 2,338 First Bancorp (Puerto Rico)........... 53 56 * First Banks America, Inc............ 2 600 First Busey Corp (Class A)............ 14 2,100 First Charter Corp.................... 38 436 First Citizens Bancshares, Inc (Class A).................................. 42 4,100 First Commonwealth Financial Corp..... 47 351 First Community Bancorp............... 12 646 First Community Bancshares, Inc....... 20 382 First Defiance Financial Corp......... 7 468 First Essex Bancorp, Inc.............. 16 1,238 First Federal Capital Corp............ 24 2,593 First Financial Bancorp............... 43 875 First Financial Bankshares, Inc....... 33 500 First Financial Corp (Indiana)........ 24 1,000 First Financial Holdings, Inc......... 25 800 First Indiana Corp.................... 15 1,043 First Merchants Corp.................. 24 3,362 First Midwest Bancorp, Inc............ 90 550 First National Corp................... 13 672 First Niagara Financial Group, Inc.... 18 310 First Oak Brook Bancshares, Inc....... 10 987 First Place Financial Corp............ 16 743 * First Republic Bank................. 15 1,744 First Sentinel Bancorp, Inc........... 25 203 First South Bancorp, Inc.............. 7 297 First State Bancorp................... 7 8,646 First Tennessee National Corp......... 311 4,923 First Virginia Banks, Inc............. 183 399 Firstfed America Bancorp, Inc......... 10 1,200 * FirstFed Financial Corp............. 35 5,818 FirstMerit Corp....................... 126 665 Flagstar Bancorp, Inc................. 14 70,684 FleetBoston Financial Corp............ 1,718 737 Flushing Financial Corp............... 12 2,950 FNB Corp.............................. 81 419 FNB Corp (Virginia)................... 10 632 e* FPIC Insurance Group, Inc.......... 4 195 Franklin Financial Corp............... 4 11,557 Franklin Resources, Inc............... 394 46,963 Freddie Mac........................... 2,773 4,200 e Fremont General Corp................ 19 1,142 * Friedman, Billings, Ramsey Group, Inc................................. 11
See Notes to Financial Statements TIAA SEPARATE ACCOUNT VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 35 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- FINANCIAL SERVICES--(CONTINUED) 1,064 Frontier Financial Corp............... $ 27 7,128 Fulton Financial Corp................. 126 448 * Gabelli Asset Management, Inc (Class A).................................. 13 1,800 Gables Residential Trust.............. 45 5,900 Gallagher (Arthur J.) & Co............ 173 3,386 * Gartner, Inc (Class A).............. 31 2,624 * Gartner, Inc (Class B).............. 25 582 GBC Bancorp........................... 11 4,276 e General Growth Properties, Inc...... 222 724 German American Bancorp............... 11 1,113 Glacier Bancorp, Inc.................. 26 638 Gladstone Capital Corp................ 11 1,119 Glenborough Realty Trust, Inc......... 20 1,900 Glimcher Realty Trust................. 34 2,100 Gold Banc Corp, Inc................... 21 8,460 Golden West Financial Corp............ 608 16,268 Goldman Sachs Group, Inc.............. 1,108 372 Granite State Bankshares, Inc......... 16 500 Great American Financial Resources, Inc................................. 9 946 Great Lakes REIT, Inc................. 16 416 Great Southern Bancorp, Inc........... 15 3,269 e Greater Bay Bancorp................. 57 5,778 Greenpoint Financial Corp............. 261 957 Hancock Holding Co.................... 43 628 * Hanmi Financial Corp................ 11 1,557 Harbor Florida Bancshares, Inc........ 35 2,039 Harleysville Group, Inc............... 54 1,322 Harleysville National Corp............ 35 16,715 Hartford Financial Services Group, Inc................................. 759 422 * Hawthorne Financial Corp............ 12 4,239 HCC Insurance Holdings, Inc........... 104 3,889 Health Care Property Investors, Inc... 149 2,773 Health Care REIT, Inc................. 75 2,800 Healthcare Realty Trust, Inc.......... 82 1,295 Heritage Property Investment Trust.... 32 11,048 Hibernia Corp (Class A)............... 213 3,647 Highwoods Properties, Inc............. 81 2,000 Hilb, Rogal & Hamilton Co............. 82 1,856 Home Properties Of New York, Inc...... 64 5,561 e* Homestore, Inc..................... 5 3,932 Hooper Holmes, Inc.................... 24 2,579 Horace Mann Educators Corp............ 40 4,303 Hospitality Properties Trust.......... 151 16,213 * Host Marriott Corp.................. 143 30,814 e Household International, Inc........ 857 8,761 HRPT Properties Trust................. 72 5,161 Hudson City Bancorp, Inc.............. 96 1,120 Hudson River Bancorp, Inc............. 28 3,093 Hudson United Bancorp................. 96 772 Humboldt Bancorp...................... 8 16,776 Huntington Bancshares, Inc............ 314 409 IberiaBank Corp....................... 16 2,838 IMPAC Mortgage Holdings, Inc.......... 33 3,530 Independence Community Bank Corp...... 90 235 * Independence Holding Co............. 5 896 Independent Bank Corp (Massachusetts)..................... 20 926 * Independent Bank Corp (Michigan).... 28 3,878 * IndyMac Bancorp, Inc................ 72 1,794 Innkeepers U.S.A. Trust............... 14 1,401 * Insignia Financial Group, Inc....... 10 2,990 e Instinet Group, Inc................. 13 715 * Insurance Auto Auctions, Inc........ 12
SHARES VALUE (000) ------ ----------- 1,112 Integra Bank Corp..................... $ 20 616 Interchange Financial Services Corp... 10 1,533 International Bancshares Corp......... 60 3,414 * Investment Technology Group, Inc.... 76 4,437 e Investors Financial Services Corp... 122 1,711 Investors Real Estate Trust........... 17 2,416 IRT Property Co....................... 29 934 Irwin Financial Corp.................. 15 3,168 iStar Financial, Inc.................. 89 332 * Itla Capital Corp................... 11 3,070 * ITT Educational Services, Inc....... 72 135,051 JP Morgan Chase & Co.................. 3,241 2,559 JDN Realty Corp....................... 28 1,265 Jefferies Group, Inc.................. 53 10,174 Jefferson-Pilot Corp.................. 388 19,954 John Hancock Financial Services, Inc................................. 557 1,526 John Nuveen Co (Class A).............. 39 2,179 * Jones Lang LaSalle, Inc............. 34 314 Kansas City Life Insurance Co......... 12 28,770 KeyCorp............................... 723 842 Keystone Property Trust............... 14 1,702 Kilroy Realty Corp.................... 39 6,225 Kimco Realty Corp..................... 191 6,166 * Knight Trading Group, Inc........... 30 1,322 Koger Equity, Inc..................... 21 1,326 Kramont Realty Trust.................. 19 9,899 * La Quinta Corp...................... 44 3,265 e* LaBranche & Co, Inc................ 87 845 Lakeland Bancorp, Inc................. 15 367 Lakeland Financial Corp............... 9 1,329 Landamerica Financial Group, Inc...... 47 89 Leeds Federal Bankshares, Inc......... 3 4,342 e Legg Mason, Inc..................... 211 16,572 Lehman Brothers Holdings, Inc......... 883 473 e* LendingTree, Inc................... 6 2,488 Leucadia National Corp................ 93 1,681 Lexington Corporate Properties Trust............................... 27 1,200 Liberty Corp.......................... 47 12,585 Lincoln National Corp................. 397 1,600 LNR Property Corp..................... 57 1,388 * Local Financial Corp................ 20 608 LSB Bancshares, Inc................... 10 1,014 LTC Properties, Inc................... 7 5,343 M & T Bank Corp....................... 424 480 Macatawa Bank Corp.................... 10 2,347 Macerich Co........................... 72 2,868 Mack-Cali Realty Corp................. 87 1,342 MAF Bancorp, Inc...................... 46 700 Main Street Banks, Inc................ 13 422 MainSource Financial Group, Inc....... 10 925 Manufactured Home Communities, Inc.... 27 600 * Markel Corp......................... 123 36,994 Marsh & McLennan Cos, Inc............. 1,709 14,906 Marshall & Ilsley Corp................ 408 274 MASSBANK Corp......................... 8 813 MB Financial, Inc..................... 28 10,056 e MBIA, Inc........................... 441 71,697 MBNA Corp............................. 1,364 1,454 MCG Capital Corp...................... 16 76 * MEEMIC Holdings, Inc................ 2 29,788 Mellon Financial Corp................. 778 4,786 Mercantile Bankshares Corp............ 185 287 Merchants Bancshares, Inc............. 6
See Notes to Financial Statements B- 36 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- FINANCIAL SERVICES--(CONTINUED) 1,767 Mercury General Corp.................. $ 66 2,874 Meristar Hospitality Corp............. 19 522 * Meritage Corp....................... 18 58,286 Merrill Lynch & Co, Inc............... 2,212 20,064 MetLife, Inc.......................... 543 2,453 e Metris Cos, Inc..................... 6 2,501 MFA Mortgage Investments, Inc......... 21 22 * MFN Financial Corp Series B Wts 03/23/03............................ 0 22 * MFN Financial Corp Series C Wts 03/23/04............................ 0 6,240 MGIC Investment Corp.................. 258 1,066 Mid Atlantic Realty Trust............. 19 1,033 Mid-America Apartment Communities, Inc................................. 25 578 Midland Co............................ 11 1,600 Mid-State Bancshares.................. 26 600 Midwest Banc Holdings, Inc............ 11 1,573 Mills Corp............................ 46 1,041 Mission West Properties, Inc.......... 10 3,063 MONY Group, Inc....................... 73 74,717 Morgan Stanley........................ 2,983 286 Nara Bancorp, Inc..................... 6 219 NASB Financial, Inc................... 5 41,535 National City Corp.................... 1,135 13,992 National Commerce Financial Corp...... 334 800 National Health Investors, Inc........ 13 426 National Health Realty, Inc........... 6 1,300 National Penn Bancshares, Inc......... 35 154 * National Western Life Insurance Co (Class A)........................... 15 1,425 Nationwide Financial Services, Inc (Class A)........................... 41 3,536 Nationwide Health Properties, Inc..... 53 290 * Navigators Group, Inc............... 7 514 NBC Capital Corp...................... 13 2,152 NBT Bancorp, Inc...................... 37 2,450 * NetBank, Inc........................ 24 3,825 Neuberger Berman, Inc................. 128 1,008 e New Century Financial Corp.......... 26 6,656 New Plan Excel Realty Trust........... 127 7,324 New York Community Bancorp, Inc....... 212 11,199 North Fork Bancorp, Inc............... 378 13,327 Northern Trust Corp................... 467 792 Northwest Bancorp, Inc................ 12 749 e Novastar Financial, Inc............. 23 103 * NYMAGIC, Inc........................ 2 786 OceanFirst Financial Corp............. 18 2,600 * Ocwen Financial Corp................ 7 1,205 Odyssey Re Holdings Corp.............. 21 3,460 * Ohio Casualty Corp.................. 45 4,222 Old National Bancorp.................. 103 8,133 Old Republic International Corp....... 228 532 Old Second Bancorp, Inc............... 20 593 Omega Financial Corp.................. 21 880 Oriental Financial Group, Inc......... 22 2,433 Pacific Capital Bancorp............... 62 1,500 * Pacific Gulf Properties Liquid Trust............................... 3 1,050 Pacific Northwest Bancorp............. 26 763 * Pacific Union Bank.................. 9 2,297 Pan Pacific Retail Properties, Inc.... 84 768 Park National Corp.................... 76 344 Parkvale Financial Corp............... 8 556 Parkway Properties, Inc............... 20 474 Partners Trust Financial Group, Inc... 8 430 Peapack Gladstone Financial Corp...... 15 381 Pennfed Financial Services, Inc....... 10
SHARES VALUE (000) ------ ----------- 500 Pennrock Financial Services Corp...... $ 14 1,015 Pennsylvania Real Estate Investment Trust............................... 26 1,741 People's Bank......................... 44 567 Peoples Bancorp, Inc.................. 15 342 Peoples Holding Co.................... 14 775 PFF Bancorp, Inc...................... 24 1,212 * Philadelphia Consolidated Holding Corp................................ 43 6,916 e* Phoenix Cos, Inc................... 53 591 * Pico Holdings, Inc.................. 8 1,146 e PMA Capital Corp (Class A).......... 16 6,100 PMI Group, Inc........................ 183 19,204 PNC Financial Services Group, Inc..... 805 9,322 Popular, Inc.......................... 315 394 Port Financial Corp................... 18 2,418 Post Properties, Inc.................. 58 2,166 Prentiss Properties Trust............. 61 1,502 Presidential Life Corp................ 15 1,328 * Price Legacy Corp................... 4 20,441 Principal Financial Group............. 616 263 PrivateBancorp, Inc................... 10 1,540 * ProAssurance Corp................... 32 13,045 Progressive Corp...................... 647 10,532 Prologis.............................. 265 800 Prosperity Bancshares, Inc............ 15 4,643 Protective Life Corp.................. 128 200 Provident Bancorp, Inc................ 6 1,701 Provident Bankshares Corp............. 39 2,926 e Provident Financial Group, Inc...... 76 18,118 * Providian Financial Corp............ 118 39,565 Prudential Financial, Inc............. 1,256 673 PS Business Parks, Inc................ 21 6,747 Public Storage, Inc................... 218 125 * Quaker City Bancorp, Inc............ 4 1,016 R & G Financial Corp (Class B)........ 24 6,168 Radian Group, Inc..................... 229 1,127 RAIT Investment Trust................. 24 585 Ramco-Gershenson Properties........... 12 2,664 Raymond James Financial, Inc.......... 79 2,300 Realty Income Corp.................... 81 3,829 e Reckson Associates Realty Corp...... 81 719 Redwood Trust, Inc.................... 20 1,699 Regency Centers Corp.................. 55 15,598 Regions Financial Corp................ 520 1,178 Reinsurance Group Of America, Inc..... 32 3,705 Republic Bancorp, Inc................. 44 506 Republic Bancorp, Inc (Class A) (Kentucky).......................... 6 1,126 Resource America, Inc (Class A)....... 10 1,900 RFS Hotel Investors, Inc.............. 21 997 Riggs National Corp................... 15 910 RLI Corp.............................. 25 5,020 Roslyn Bancorp, Inc................... 91 4,394 Rouse Co.............................. 139 87 Royal Bancshares Of Pennsylvania (Class A)........................... 2 1,811 S & T Bancorp, Inc.................... 45 403 S.Y. Bancorp, Inc..................... 15 8,716 Safeco Corp........................... 302 1,000 Sandy Spring Bancorp, Inc............. 32 550 Santander Bancorp..................... 7 800 Saul Centers, Inc..................... 19 2,022 * Saxon Capital, Inc.................. 25 855 Seacoast Banking Corp Of Florida...... 16 1,744 Seacoast Financial Services Corp...... 35 637 Second Bancorp, Inc................... 17
See Notes to Financial Statements TIAA SEPARATE ACCOUNT VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 37 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- FINANCIAL SERVICES--(CONTINUED) 5,241 SEI Investments Co.................... $ 142 1,800 Selective Insurance Group, Inc........ 45 2,683 Senior Housing Properties Trust....... 28 3,287 * Silicon Valley Bancshares........... 60 533 Simmons First National Corp (Class A).................................. 20 8,887 Simon Property Group, Inc............. 303 829 Sizeler Property Investors............ 8 5,174 Sky Financial Group, Inc.............. 103 1,800 SL Green Realty Corp.................. 57 10,003 SLM Corp.............................. 1,039 5,340 * SoundView Technology Group, Inc..... 8 2,781 South Financial Group, Inc............ 57 23,563 SouthTrust Corp....................... 586 370 Southwest Bancorp, Inc................ 10 1,929 * Southwest Bancorp Of Texas, Inc..... 56 17,951 Sovereign Bancorp, Inc................ 252 902 Sovran Self Storage, Inc.............. 26 548 St. Francis Capital Corp.............. 13 2,155 St. Joe Co............................ 65 14,311 St. Paul Cos, Inc..................... 487 1,965 Stancorp Financial Group, Inc......... 96 913 State Auto Financial Corp............. 14 527 State Bancorp, Inc.................... 9 22,003 State Street Corp..................... 858 3,870 Staten Island Bancorp, Inc............ 78 762 Sterling Bancorp...................... 20 2,600 Sterling Bancshares, Inc.............. 32 1,139 Sterling Financial Corp (Pennsylvania)...................... 27 837 * Sterling Financial Corp (Spokane)... 16 1,214 * Stewart Information Services Corp... 26 15,347 e* Stilwell Financial, Inc............ 201 200 Student Loan Corp..................... 20 868 Suffolk Bancorp....................... 27 378 Summit Bancshares, Inc................ 7 1,547 Summit Properties, Inc................ 28 460 * Sun Bancorp, Inc (New Jersey)....... 6 355 Sun Bancorp, Inc (Pennsylvania)....... 6 1,069 Sun Communities, Inc.................. 39 16,833 SunTrust Banks, Inc................... 958 502 Superior Financial Corp............... 9 2,750 Susquehanna Bancshares, Inc........... 57 1,151 SWS Group, Inc........................ 16 20,061 Synovus Financial Corp................ 389 1,597 * Syntroleum Corp..................... 3 7,182 T Rowe Price Group, Inc............... 196 2,112 Taubman Centers, Inc.................. 34 5,193 TCF Financial Corp.................... 227 1,579 Texas Regional Bancshares, Inc (Class A).................................. 56 2,795 Thornburg Mortgage, Inc............... 56 534 Tompkins Trustco, Inc................. 24 8,243 Torchmark Corp........................ 301 1,037 Town & Country Trust.................. 22 2,118 * Trammell Crow Co.................... 19 1,424 Transatlantic Holdings, Inc........... 95 205 * Transcontinental Realty Investors, Inc................................. 4 33,731 * Travelers Property Casualty Corp (Class A)........................... 494 31,359 * Travelers Property Casualty Corp (Class B)........................... 459 558 * Triad Guaranty, Inc................. 21 363 Trico Bancshares...................... 9 6,274 Trizec Properties, Inc................ 59 630 Troy Financial Corp................... 17 1,300 Trust Co Of New Jersey................ 36
SHARES VALUE (000) ------ ----------- 5,202 Trustco Bank Corp NY.................. $ 56 3,002 Trustmark Corp........................ 71 129,744 U.S. Bancorp.......................... 2,753 1,311 e U.S. Restaurant Properties, Inc..... 18 960 U.S.B. Holding Co, Inc................ 17 1,306 UCBH Holdings, Inc.................... 55 2,600 * UICI................................ 40 1,144 UMB Financial Corp.................... 44 1,661 Umpqua Holdings Corp.................. 30 543 Union Bankshares Corp................. 15 13,740 Union Planters Corp................... 387 3,451 UnionBanCal Corp...................... 136 2,534 United Bankshares, Inc................ 74 1,194 United Community Banks, Inc........... 29 2,251 United Community Financial Corp....... 19 7,525 United Dominion Realty Trust, Inc..... 123 518 United Fire & Casualty Co............. 17 1,123 United National Bancorp............... 26 3,755 * United Rentals, Inc................. 40 3,133 Unitrin, Inc.......................... 92 1,679 * Universal American Financial Corp... 10 795 Universal Health Realty Income Trust............................... 21 1,587 Unizan Financial Corp................. 31 16,474 UnumProvident Corp.................... 289 891 Urstadt Biddle Properties, Inc (Class A).................................. 10 6,524 Valley National Bancorp............... 172 98 Value Line, Inc....................... 4 2,590 Vesta Insurance Group, Inc............ 7 524 Virginia Financial Group, Inc......... 16 4,860 Vornado Realty Trust.................. 181 2,893 W Holding Co, Inc..................... 47 92,842 Wachovia Corp......................... 3,383 5,015 Waddell & Reed Financial, Inc (Class A).................................. 99 263 Warwick Community Bancorp............. 7 4,415 Washington Federal, Inc............... 110 66,147 Washington Mutual, Inc................ 2,284 2,550 Washington Real Estate Investment Trust............................... 65 881 Washington Trust Bancorp, Inc......... 17 2,723 e Waypoint Financial Corp............. 48 3,348 Webster Financial Corp................ 117 3,094 Weingarten Realty Investors........... 114 116,069 e Wells Fargo & Co.................... 5,440 383 * Wellsford Real Properties, Inc...... 6 1,533 Wesbanco, Inc......................... 36 110 Wesco Financial Corp.................. 34 1,194 West Coast Bancorp.................... 18 2,316 Westamerica Bancorp................... 93 845 Westcorp.............................. 18 358 Westfield Financial, Inc.............. 6 497 * WFS Financial, Inc.................. 10 2,764 Whitney Holding Corp.................. 92 349 Willow Grove Bancorp, Inc............. 5 4,525 Wilmington Trust Corp................. 143 1,215 Winston Hotels, Inc................... 9 971 Wintrust Financial Corp............... 30 832 * World Acceptance Corp............... 6 620 WSFS Financial Corp................... 20 10,971 * Wyndham International, Inc (Class A).................................. 3 425 Yardville National Bancorp............ 7 655 Zenith National Insurance Corp........ 15 6,285 Zions Bancorp......................... 247 -------- TOTAL FINANCIAL SERVICES.............. 131,372 --------
See Notes to Financial Statements B- 38 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- HEALTH CARE--15.23% 790 * aaiPharma, Inc...................... $ 11 105,874 Abbott Laboratories................... 4,235 5,644 * Abgenix, Inc........................ 42 934 e* Abiomed, Inc....................... 3 798 e* Acacia Research-CombiMatrix........ 3 3,033 * Accredo Health, Inc................. 107 2,249 * Adolor Corp......................... 31 2,148 * Advanced Medical Optics, Inc........ 26 490 * Advanced Neuromodulation Systems, Inc................................. 17 5,103 * AdvancePCS.......................... 113 333 * Advisory Board Co/The............... 10 9,881 Aetna, Inc............................ 406 3,426 e* Affymetrix, Inc.................... 78 1,464 e* Aksys Ltd.......................... 8 1,019 * Alaris Medical, Inc................. 6 1,500 * Albany Molecular Research, Inc...... 22 2,872 * Alderwoods Group Inc................ 14 1,305 * Alexion Pharmaceuticals, Inc........ 18 2,347 e* Align Technology, Inc.............. 6 4,010 * Alkermes, Inc....................... 25 9,067 Allergan, Inc......................... 522 839 * Alliance Imaging, Inc............... 4 1,653 e* Allos Therapeutics, Inc............ 12 1,800 * Allscripts Healthcare Solutions, Inc................................. 4 2,124 Alpharma, Inc (Class A)............... 25 770 e* American Healthways, Inc........... 13 444 * American Medical Security Group, Inc................................. 6 1,417 * American Medical Systems Holdings, Inc................................. 23 648 e* American Pharmaceutical Partners, Inc................................. 12 692 * AMERIGROUP Corp..................... 21 2,013 * Ameripath, Inc...................... 43 7,051 AmerisourceBergen Corp................ 383 80,177 * Amgen, Inc.......................... 3,876 1,006 * AMN Healthcare Services, Inc........ 17 1,426 * Amsurg Corp......................... 29 4,216 e* Amylin Pharmaceuticals, Inc........ 68 4,337 * Andrx Corp.......................... 64 9,626 * Anthem, Inc......................... 605 1,368 e* Antigenics, Inc.................... 14 1,100 e* Aphton Corp........................ 4 6,925 * Apogent Technologies, Inc........... 144 14,452 Applera Corp (Applied Biosystems Group).............................. 253 4,841 * Applera Corp (Celera Genomics Group).............................. 46 1,186 * Applied Molecular Evolution......... 2 2,861 * Apria Healthcare Group, Inc......... 64 1,293 * Arena Pharmaceuticals, Inc.......... 8 2,100 * Ariad Pharmaceuticals, Inc.......... 5 1,404 * Arqule, Inc......................... 4 1,345 * Array Biopharma, Inc................ 7 672 Arrow International, Inc.............. 27 1,500 * Arthrocare Corp..................... 15 1,793 * Atherogenics, Inc................... 13 1,405 * Atrix Laboratories, Inc............. 22 1,400 e* Avigen, Inc........................ 8 3,584 Bard (C.R.), Inc...................... 208 1,892 * Barr Laboratories, Inc.............. 123 3,395 e Bausch & Lomb, Inc.................. 122 40,579 Baxter International, Inc............. 1,136 3,985 Beckman Coulter, Inc.................. 118 17,400 Becton Dickinson & Co................. 534 872 * Benthley Pharmaceuticals, Inc....... 7 7,127 * Beverly Enterprises, Inc............ 20
SHARES VALUE (000) ------ ----------- 10,070 * Biogen, Inc......................... $ 403 2,608 * BioMarin Pharmaceutical, Inc........ 18 18,144 Biomet, Inc........................... 520 1,100 e* Biopure Corp....................... 4 1,200 * Bio-Rad Laboratories, Inc (Class A).................................. 46 246 * Bioreliance Corp.................... 6 842 e* Biosite, Inc....................... 29 4,200 * Bio-Technology General Corp......... 13 600 * Bone Care International, Inc........ 6 21,344 * Boston Scientific Corp.............. 908 595 * Bradley Pharmaceuticals, Inc........ 8 131,475 Bristol-Myers Squibb Co............... 3,044 1,024 e* Britesmile, Inc.................... 0 810 * Bruker Daltonics, Inc............... 4 1,580 * Caliper Technologies Corp........... 5 479 * Cantel Medical Corp................. 6 3,947 * Cardiac Science, Inc................ 9 30,675 Cardinal Health, Inc.................. 1,816 2,300 * Cardiodynamics International Corp... 7 15,256 * Caremark Rx, Inc.................... 248 5,250 e* Celgene Corp....................... 113 2,366 * Cell Genesys, Inc................... 26 2,500 e* Cell Therapeutics, Inc............. 18 360 * Centene Corp........................ 12 3,123 * Cephalon, Inc....................... 152 1,643 * Cepheid, Inc........................ 8 1,892 e* Cerner Corp........................ 59 938 * Cerus Corp.......................... 20 3,001 * Charles River Laboratories International, Inc.................. 115 744 * Chattem, Inc........................ 15 6,303 e* Chiron Corp........................ 237 844 * Cholestech Corp..................... 6 8,756 Cigna Corp............................ 360 1,020 * Cima Labs, Inc...................... 25 383 * Ciphergen Biosystems, Inc........... 1 400 * Closure Medical Corp................ 4 600 * Cobalt Corp......................... 8 2,100 * Coherent, Inc....................... 42 1,800 * Columbia Laboratories, Inc.......... 6 3,492 * Community Health Systems, Inc....... 72 216 * Computer Programs & Systems, Inc.... 5 928 * Conceptus, Inc...................... 11 1,940 * Conmed Corp......................... 38 2,200 * Connetics Corp...................... 26 2,130 Cooper Cos, Inc....................... 53 2,816 e* Corixa Corp........................ 18 500 * Corvel Corp......................... 18 4,280 * Covance, Inc........................ 105 2,539 * Coventry Health Care, Inc........... 74 2,321 e* Cross County, Inc.................. 32 1,100 e* CryoLife, Inc...................... 8 1,951 * Cubist Pharmaceuticals, Inc......... 16 2,974 * CuraGen Corp........................ 14 740 * Curative Health Services, Inc....... 13 1,836 * CV Therapeutics, Inc................ 33 1,543 * Cyberonics, Inc..................... 28 8,521 * Cytyc Corp.......................... 87 924 D&K Healthcare Resources, Inc......... 9 800 Datascope Corp........................ 20 3,980 * DaVita, Inc......................... 98 2,608 * Decode Genetics, Inc................ 5 491 * Deltagen, Inc....................... 0 2,400 * Dendrite International, Inc......... 18
See Notes to Financial Statements TIAA SEPARATE ACCOUNT VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 39 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- HEALTH CARE--(CONTINUED) 4,700 Dentsply International, Inc........... $ 175 1,474 Diagnostic Products Corp.............. 57 611 * Dianon Systems, Inc................. 29 900 * Digene Corp......................... 10 1,218 * Discovery Partners International, Inc................................. 3 1,742 * Diversa Corp........................ 16 527 * DJ Orthopedics, Inc................. 2 1,775 * Durect Corp......................... 4 897 * DVI, Inc............................ 7 400 e* Dynacq International, Inc.......... 6 2,488 * Eclipsys Corp....................... 13 4,090 * Edwards Lifesciences Corp........... 104 518 * Embrex, Inc......................... 6 1,307 * Endo Pharmaceuticals Holdings, Inc................................. 10 991 * Endocardial Solutions, Inc.......... 3 1,301 e* Endocare, Inc...................... 4 1,692 * Enzo Biochem, Inc................... 24 3,094 * Enzon, Inc.......................... 52 707 * Eon Labs, Inc....................... 13 899 * EPIX Medical, Inc................... 6 583 e* eResearch Technology, Inc.......... 10 2,105 * Esperion Therapeutics, Inc.......... 15 821 * Exact Sciences Corp................. 9 3,246 * Exelixis, Inc....................... 26 4,246 e* Express Scripts, Inc (Class A)..... 204 6,878 * First Health Group Corp............. 167 1,433 * First Horizon Pharmaceutical........ 11 3,770 * Fisher Scientific International, Inc................................. 113 10,908 * Forest Laboratories, Inc............ 1,071 1,900 * Gene Logic, Inc..................... 12 724 * Genencor International, Inc......... 7 14,974 * Genentech, Inc...................... 497 2,013 * Genesis Health Ventures, Inc........ 31 2,758 e* Genta, Inc......................... 21 2,514 * Genzyme Corp (Biosurgery Division)........................... 6 13,261 * Genzyme Corp (General Division)..... 392 1,600 * Geron Corp.......................... 6 11,705 * Gilead Sciences, Inc................ 398 20,710 * Guidant Corp........................ 639 1,753 * Guilford Pharmaceuticals, Inc....... 7 1,342 * Haemonetics Corp.................... 29 1,390 * Hanger Orthopedic Group, Inc........ 18 1,155 * Harvard Bioscience, Inc............. 4 33,293 HCA, Inc.............................. 1,382 16,370 Health Management Associates, Inc (Class A)........................... 293 7,373 * Health Net, Inc..................... 195 667 * Healthcare Services Group........... 9 900 * HealthExtras, Inc................... 4 27,033 * Healthsouth Corp.................... 114 571 * HealthTronics Surgical Services, Inc................................. 5 2,750 * Henry Schein, Inc................... 124 3,517 Hillenbrand Industries, Inc........... 170 1,387 * Hologic, Inc........................ 17 8,274 * Human Genome Sciences, Inc.......... 73 11,485 * Humana, Inc......................... 115 5,951 ICN Pharmaceuticals, Inc.............. 65 3,632 * ICOS Corp........................... 85 701 * ICU Medical, Inc.................... 26 7,649 e* IDEC Pharmaceuticals Corp.......... 254 2,212 * Idexx Laboratories, Inc............. 74 1,200 * IDX Systems Corp.................... 20 1,060 e* Igen International, Inc............ 45
SHARES VALUE (000) ------ ----------- 2,300 * Ilex Oncology, Inc.................. $ 16 1,706 * Illumina, Inc....................... 6 2,736 * I-many, Inc......................... 4 3,514 e* ImClone Systems, Inc............... 37 675 * Immucor, Inc........................ 14 2,900 * Immunogen, Inc...................... 9 2,700 * Immunomedics, Inc................... 12 1,114 * Impath, Inc......................... 22 1,855 * Impax Laboratories, Inc............. 7 19,625 IMS Health, Inc....................... 314 859 * Inamed Corp......................... 26 4,807 * Incyte Genomics, Inc................ 22 2,819 * Indevus Pharmaceuticals, Inc........ 6 3,974 * Inhale Therapeutic Systems, Inc..... 32 1,332 * Integra LifeSciences Holding........ 24 2,100 * Integrated Silicon Solution, Inc.... 9 1,694 e* InterMune, Inc..................... 43 1,240 * Interpore International............. 8 2,235 * Intuitive Surgical, Inc............. 14 1,790 Invacare Corp......................... 60 478 e* Inverness Medical Innovations, Inc................................. 6 3,641 * Invitrogen Corp..................... 114 3,357 e* Isis Pharmaceuticals, Inc.......... 22 10,434 * IVAX Corp........................... 127 204,307 Johnson & Johnson..................... 10,973 709 * Kendle International, Inc........... 6 520 * Kensey Nash Corp.................... 10 813 * Kindred Healthcare, Inc............. 15 16,832 * King Pharmaceuticals, Inc........... 289 400 * Kos Pharmaceuticals, Inc............ 8 1,236 * Kosan Biosciences, Inc.............. 8 1,478 * KV Pharmaceutical Co (Class A)...... 34 433 * Kyphon, Inc......................... 4 2,580 * La Jolla Pharmaceutical Co.......... 17 381 * LabOne, Inc......................... 7 9,765 * Laboratory Corp Of America Holdings............................ 227 584 Landauer, Inc......................... 20 267 * Lannett Co, Inc..................... 4 2,441 * Lexicon Genetics, Inc............... 12 718 * Lifecore Biomedical, Inc............ 6 2,695 * LifePoint Hospitals, Inc............ 81 3,138 e* Ligand Pharmaceuticals, Inc (Class B).................................. 17 65,369 Lilly (Eli) & Co...................... 4,151 7,330 * Lincare Holdings, Inc............... 232 1,206 e* Luminex Corp....................... 5 6,895 * Manor Care, Inc..................... 128 1,217 e* Martek Biosciences Corp............ 31 445 * Matria Healthcare, Inc.............. 4 1,221 * MAXIMUS, Inc........................ 32 2,143 * Maxygen, Inc........................ 16 18,500 McKesson Corp......................... 500 5,013 * Medarex, Inc........................ 20 457 * Medcath Corp........................ 5 534 e* Med-Design Corp.................... 4 562 * Medical Staffing Network Holdings, Inc................................. 9 1,529 e* Medicines Co....................... 24 2,127 * Medicis Pharmaceutical Corp (Class A).................................. 106 16,962 * Medimmune, Inc...................... 461 753 * MedQuist, Inc....................... 15 599 * MedSource Technologies, Inc......... 4 82,413 Medtronic, Inc........................ 3,758 1,319 Mentor Corp........................... 51 153,693 Merck & Co, Inc....................... 8,701
See Notes to Financial Statements B- 40 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- HEALTH CARE--(CONTINUED) 243 * Meridian Medical Technologies, Inc................................. $ 11 826 * Merit Medical Systems, Inc.......... 16 1,800 * MGI Pharma, Inc..................... 13 3,231 * Mid Atlantic Medical Services, Inc................................. 105 19,396 * Millennium Pharmaceuticals, Inc..... 154 3,300 * Millipore Corp...................... 112 1,650 * MIM Corp............................ 10 1,101 * Molecular Devices Corp.............. 18 1,125 * Mright Medical Group, Inc........... 20 2,855 * Mykrolis Corp....................... 21 8,522 Mylan Laboratories, Inc............... 297 1,780 * Myriad Genetics, Inc................ 26 2,800 * Nabi Biopharmaceuticals............. 17 1,723 * Napro Biotherapeutics, Inc.......... 1 568 e* Nastech Pharmaceutical Co.......... 5 600 * National Healthcare Corp............ 11 538 e* Neoforma, Inc...................... 6 827 e* Neopharm, Inc...................... 8 800 * Neose Technologies, Inc............. 7 1,900 * Neurocrine Biosciences, Inc......... 87 932 * Neurogen Corp....................... 3 17,000 b* Neuromedical Systems, Inc.......... 2 1,495 * Noven Pharmaceuticals, Inc.......... 14 1,858 * NPS Pharmaceuticals, Inc............ 47 1,200 * Ocular Sciences, Inc................ 19 854 * Odyssey HealthCare, Inc............. 30 1,157 * Omega Healthcare Investors, Inc..... 4 5,566 Omnicare, Inc......................... 133 1,045 * Omnicell, Inc....................... 3 1,520 * On Assignment, Inc.................. 13 854 * Onyx Pharmaceuticals, Inc........... 5 859 * Option Care, Inc.................... 7 1,876 * OraSure Technologies, Inc........... 10 3,260 e* Orthodontic Centers Of America, Inc................................. 36 2,298 * Orthologic Corp..................... 8 2,512 * OSI Pharmaceuticals, Inc............ 41 2,300 Owens & Minor, Inc.................... 38 6,037 * Oxford Health Plans, Inc............ 220 2,427 * Pacificare Health Systems, Inc...... 68 1,200 * Pain Therapeutics, Inc.............. 3 7,766 Pall Corp............................. 130 1,703 * Parexel International Corp.......... 19 3,400 * Patterson Dental Co................. 149 552 * PDI, Inc............................ 6 1,564 * Pediatrix Medical Group, Inc........ 63 6,873 e* Peregrine Pharmaceuticals, Inc..... 5 2,266 * Per-Se Technologies, Inc............ 20 423,720 Pfizer, Inc........................... 12,953 3,216 * Pharmaceutical Product Development, Inc................................. 94 1,304 * Pharmaceutical Resources, Inc....... 39 87,705 Pharmacia Corp........................ 3,666 1,600 * Pharmacopeia, Inc................... 14 6,600 b* Physicians Resource Group, Inc..... 0 669 e* PolyMedica Corp.................... 21 1,227 * Possis Medical, Inc................. 22 1,425 * Pozen, Inc.......................... 7 752 * PracticeWorks, Inc.................. 6 3,663 * Praecis Pharmaceuticals, Inc........ 12 905 * Prime Medical Services, Inc......... 8 84 f* Priority Healthcare Corp (Class A).................................. 2 1,641 * Priority Healthcare Corp (Class B).................................. 38 6,300 * ProcureNet, Inc..................... 1
SHARES VALUE (000) ------ ----------- 583 * Progenics Pharmaceuticals........... $ 4 6,191 * Protein Design Labs, Inc............ 53 3,350 * Province Healthcare Co.............. 33 329 * Proxymed, Inc....................... 3 4,800 * PSS World Medical, Inc.............. 33 553 * QMed, Inc........................... 3 1,954 * Quadramed Corp...................... 5 5,085 e* Quest Diagnostics, Inc............. 289 1,846 * Quidel Corp......................... 6 8,246 * Quintiles Transnational Corp........ 100 1,505 * Quovadx, Inc........................ 4 1,373 * Radiologix, Inc..................... 3 2,361 e* Regeneron Pharmaceuticals, Inc..... 44 1,200 * RehabCare Group, Inc................ 23 3,399 * Renal Care Group, Inc............... 108 1,110 * Res-Care, Inc....................... 4 2,139 * Resmed, Inc......................... 65 2,100 * Respironics, Inc.................... 64 1,868 * Ribapharm, Inc...................... 12 1,896 * Rigel Pharmaceuticals, Inc.......... 2 719 * Rita Medical Systems, Inc........... 4 1,282 * Salix Pharmaceuticals Ltd........... 9 1,158 * Sangamo Biosciences, Inc............ 3 1,792 * Sangstat Medical Corp............... 20 99,461 Schering-Plough Corp.................. 2,208 3,197 e* Scios, Inc......................... 104 1,282 * Seattle Genetics, Inc............... 4 1,248 e* Select Medical Corp................ 17 4,980 * Sepracor, Inc....................... 48 2,670 * Sequenom, Inc....................... 5 1,524 * Serologicals Corp................... 17 20,100 * Service Corp International.......... 67 5,277 * SICOR, Inc.......................... 84 1,748 * Sierra Health Services, Inc......... 21 1,567 * Sola International, Inc............. 20 781 * Sonic Innovations, Inc.............. 3 733 * SonoSite, Inc....................... 10 366 e* Specialty Laboratories, Inc........ 4 11,932 * St. Jude Medical, Inc............... 474 2,308 * Stericycle, Inc..................... 75 4,798 * Steris Corp......................... 116 7,000 * Stewart Enterprises, Inc (Class A).................................. 39 9,068 e Stryker Corp........................ 609 1,300 e* Sunrise Assisted Living, Inc....... 32 2,113 e* SuperGen, Inc...................... 8 900 * SurModics, Inc...................... 26 2,566 * Sybron Dental Specialties, Inc...... 38 1,235 * Syncor International Corp........... 34 1,732 * Tanox, Inc.......................... 16 2,800 * Techne Corp......................... 80 1,856 * Telik, Inc.......................... 22 32,994 * Tenet Healthcare Corp............... 541 3,200 * Texas Biotechnology Corp............ 4 2,000 * Theragenics Corp.................... 8 1,595 * Therasense, Inc..................... 13 3,489 * Thoratec Corp....................... 27 2,015 * Transkaryotic Therapies, Inc........ 20 4,949 * Triad Hospitals, Inc................ 148 2,318 * Triangle Pharmaceuticals, Inc....... 14 953 e* Trimeris, Inc...................... 41 1,583 * TriPath Imaging, Inc................ 4 2,753 * Tularik, Inc........................ 21 4,973 * U.S. Oncology, Inc.................. 43
See Notes to Financial Statements TIAA SEPARATE ACCOUNT VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 41 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- HEALTH CARE--(CONTINUED) 623 * U.S. Physical Therapy, Inc.......... $ 7 1,341 * Unilab Corp......................... 25 1,089 * United Surgical Partners International, Inc.................. 17 1,125 e* United Therapeutics Corp........... 19 18,435 UnitedHealth Group, Inc............... 1,539 3,348 * Universal Health Services, Inc (Class B)........................... 151 959 * Urologix, Inc....................... 3 4,606 * Varian Medical Systems, Inc......... 228 2,033 * Varian, Inc......................... 58 1,285 * VCA Antech, Inc..................... 19 800 * Ventana Medical Systems, Inc........ 18 4,287 Ventas, Inc........................... 49 1,397 e* Versicor, Inc...................... 15 4,981 * Vertex Pharmaceuticals, Inc......... 79 1,897 * Viasys Healthcare, Inc.............. 28 1,500 * Vical, Inc.......................... 5 3,466 * Visx, Inc........................... 33 400 Vital Signs, Inc...................... 12 2,569 * VitalWorks, Inc..................... 10 2,366 * Vivus, Inc.......................... 9 8,959 * Waters Corp......................... 195 6,848 * Watson Pharmaceuticals, Inc......... 194 1,445 * Watson Wyatt & Co Holdings.......... 31 19,602 * WebMD Corp.......................... 168 9,857 * Wellpoint Health Networks, Inc...... 701 1,118 * Women First Healthcare, Inc......... 5 89,992 Wyeth................................. 3,366 1,200 X-Rite, Inc........................... 8 311 * Young Innovations, Inc.............. 7 13,136 * Zimmer Holdings, Inc................ 545 600 * Zoll Medical Corp................... 21 718 * Zymogenetics, Inc................... 7 -------- TOTAL HEALTH CARE..................... 93,651 -------- OTHER--2.17% 684 * 4Kids Entertainment, Inc............ 15 2,600 ABM Industries, Inc................... 40 591 b,e* Actrade Financial Technologies Ltd................................. 0 3,000 Acuity Brands, Inc.................... 41 1,377 e* Administaff, Inc................... 8 1,359 * Advo, Inc........................... 45 2,871 Alexander & Baldwin, Inc.............. 74 400 * Ambassadors Group, Inc.............. 5 8,085 * Apollo Group, Inc (Class A)......... 356 1,040 * Apollo Group, Inc (University Of Phoenix Online)..................... 37 1,700 Banta Corp............................ 53 1,110 * Bell Microproducts, Inc............. 6 1,224 Brady Corp (Class A).................. 41 785 * Bright Horizons Family Solutions, Inc................................. 22 3,132 * Career Education Corp............... 125 900 * CDI Corp............................ 24 73,484 * Cendant Corp........................ 770 1,250 Central Parking Corp.................. 24 5,700 * Century Business Services, Inc...... 15 529 * Charles River Associates, Inc....... 7 8,036 Cintas Corp........................... 368 2,624 * Corinthian Colleges, Inc............ 99 942 * Cornell Cos, Inc.................... 8 2,561 * Corporate Executive Board Co........ 82 938 * CoStar Group, Inc................... 17 264 Courier Corp.......................... 12 3,558 Crane Co.............................. 71 489 Curtiss-Wright Corp................... 31
SHARES VALUE (000) ------ ----------- 1,294 * Daisytek International Corp......... $ 10 4,016 * DeVry, Inc.......................... 67 13,800 e Dover Corp.......................... 402 5,144 * Dun & Bradstreet Corp............... 177 1,668 * Education Management Corp........... 63 1,171 Ennis Business Forms, Inc............. 14 859 * ESCO Technologies, Inc.............. 32 3,466 * Exult, Inc.......................... 11 912 * Fidelity National Information Solutions, Inc...................... 16 1,307 * First Consulting Group, Inc......... 8 2,700 First Industrial Realty Trust, Inc.... 76 1,000 * Forrester Research, Inc............. 16 10,213 Fortune Brands, Inc................... 475 428 * General Binding Corp................ 4 1,525 Gentiva Health Services, Inc.......... 13 2,138 * Getty Images, Inc................... 65 3,923 * GTECH Holdings Corp................. 109 12,491 H & R Block, Inc...................... 502 726 * Hall Kinion & Associates, Inc....... 4 2,000 Harland (John H.) Co.................. 44 1,400 * Heidrick & Struggles International, Inc................................. 21 4,042 HON Industries, Inc................... 114 55,168 Honeywell International, Inc.......... 1,324 675 * Hotels.Com (Class A)................ 37 200 * ICT Group, Inc...................... 2 1,967 * infoUSA, Inc........................ 10 832 e* Invision Technologies, Inc......... 22 1,141 * Itron, Inc.......................... 22 6,133 ITT Industries, Inc................... 372 1,200 Kelly Services, Inc (Class A)......... 30 2,700 * Korn/Ferry International............ 20 2,950 * Labor Ready, Inc.................... 19 5,200 Liberty Property Trust................ 166 287 * Lifeline Systems, Inc............... 6 9,060 Loews Corp............................ 403 5,174 Manpower, Inc......................... 165 1,977 Matthews International Corp (Class A).................................. 44 658 McGrath RentCorp...................... 15 667 * Memberworks, Inc.................... 12 8,867 Moody's Corp.......................... 366 6,683 * MPS Group, Inc...................... 37 1,833 * MSC.Software Corp................... 14 2,900 * Navigant Consulting, Inc............ 17 1,346 * NCO Group, Inc...................... 21 800 New England Business Services, Inc.... 20 1,365 * Offshore Logistics, Inc............. 30 3,340 Pentair, Inc.......................... 115 3,721 Pittston Brink's Group................ 69 911 e* Pre-Paid Legal Services, Inc....... 24 973 * ProQuest Co......................... 19 853 e* Protection One, Inc................ 2 1,871 * R.H. Donnelley Corp................. 55 7,167 R.R. Donnelley & Sons Co.............. 156 394 * Remedytemp, Inc (Class A)........... 6 1,839 * Rent-Way, Inc....................... 6 1,160 * Right Management Consultants, Inc... 15 840 * RMH Teleservices, Inc............... 9 10,615 * Robert Half International, Inc...... 171 1,081 Rollins, Inc.......................... 28 1,104 * School Specialty, Inc............... 22 20,732 Servicemaster Co...................... 230 4,207 * Spherion Corp....................... 28
See Notes to Financial Statements B- 42 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- OTHER--(CONTINUED) 5,366 e* SPX Corp........................... $ 201 1,179 Standard Register Co.................. 21 800 Standex International Corp............ 19 746 * Startek, Inc........................ 21 529 Strayer Education, Inc................ 30 9,074 Supervalu, Inc........................ 150 1,600 * Symyx Technologies, Inc............. 20 44,779 Sysco Corp............................ 1,334 835 Talx Corp............................. 11 500 * Tejon Ranch Co...................... 15 2,389 Teleflex, Inc......................... 102 2,768 * TeleTech Holdings, Inc.............. 20 8,002 Textron, Inc.......................... 344 5,657 * TMP Worldwide, Inc.................. 64 5,281 * U.S. Industries, Inc................ 14 587 Unifirst Corp......................... 12 2,061 * United Stationers, Inc.............. 59 32,096 United Technologies Corp.............. 1,988 6,076 Viad Corp............................. 136 600 * Wackenhut Corrections Corp.......... 7 2,013 Walter Industries, Inc................ 22 -------- TOTAL OTHER........................... 13,358 -------- PRODUCER DURABLES--5.15% 26,406 3M Co................................. 3,256 2,289 * Active Power, Inc................... 4 659 * Actuant Corp........................ 31 5,183 * AGCO Corp........................... 115 446 Alamo Group, Inc...................... 5 9,158 * Allied Waste Industries, Inc........ 92 1,100 American States Water Co.............. 25 3,483 American Water Works Co, Inc.......... 158 2,278 Ametek, Inc........................... 88 1,381 Applied Industrial Technologies, Inc................................. 26 1,200 * Astec Industries, Inc............... 12 400 * August Technology Corp.............. 2 2,164 Baldor Electric Co.................... 43 1,478 Briggs & Stratton Corp................ 63 2,384 * Brooks-PRI Automation, Inc.......... 27 1,000 California Water Service Group........ 24 5,543 * Capstone Turbine Corp............... 5 1,195 * Casella Waste Systems, Inc (Class A).................................. 11 23,320 Caterpillar, Inc...................... 1,066 714 CIRCOR International, Inc............. 11 1,567 * Coinstar, Inc....................... 35 881 * Columbus Mckinnon Corp.............. 3 734 * Consolidated Graphics, Inc.......... 16 2,403 Cummins, Inc.......................... 68 1,000 * Cuno, Inc........................... 33 7,543 e Danaher Corp........................ 496 16,152 Deere & Co............................ 741 3,450 * Dycom Industries, Inc............... 46 4,751 Eaton Corp............................ 371 28,412 Emerson Electric Co................... 1,445 3,059 Federal Signal Corp................... 59 956 * Flow International Corp............. 2 3,277 * Flowserve Corp...................... 48 3,959 * FMC Technologies, Inc............... 81 462 Franklin Electric Co, Inc............. 22 2,400 e* FuelCell Energy, Inc............... 16 1,072 * Gardner Denver, Inc................. 22 2,986 GATX Corp............................. 68 674,361 General Electric Co................... 16,421
SHARES VALUE (000) ------ ----------- 870 * Genlyte Group, Inc.................. $ 27 1,604 * Global Power Equipment Group, Inc... 8 539 Gorman-Rupp Co........................ 13 1,629 * Graphic Packaging International Corp................................ 9 2,800 Harsco Corp........................... 89 1,781 * Headwaters, Inc..................... 28 3,320 Hubbell, Inc (Class B)................ 117 1,893 IDEX Corp............................. 62 14,937 Illinois Tool Works, Inc.............. 969 1,291 * Imagistics International, Inc....... 26 1,262 * Ionics, Inc......................... 29 3,200 JLG Industries, Inc................... 24 3,106 * Joy Global, Inc..................... 35 993 * Kadant, Inc......................... 15 1,979 Kaydon Corp........................... 42 2,312 Kennametal, Inc....................... 80 2,194 Lafarge North America, Inc............ 72 300 Lawson Products, Inc.................. 9 2,211 Lincoln Electric Holdings, Inc........ 51 700 Lindsay Manufacturing Co.............. 15 1,409 * Littelfuse, Inc..................... 24 3,185 e* Magna Entertainment Corp (Class A).................................. 20 1,400 * Magnetek, Inc....................... 6 1,635 Manitowoc Co, Inc..................... 42 3,352 Martin Marietta Materials, Inc........ 103 1,150 Milacron, Inc......................... 7 565 Mine Safety Appliances Co............. 18 413 Nacco Industries, Inc (Class A)....... 18 1,975 * National Instruments Corp........... 64 3,724 * Navistar International Corp......... 91 5,171 * Newpark Resources, Inc.............. 22 1,000 NN, Inc............................... 10 1,603 Nordson Corp.......................... 40 7,439 Paccar, Inc........................... 343 7,979 Parker Hannifin Corp.................. 368 4,039 Philadelphia Suburban Corp............ 83 1,200 e* Photon Dynamics, Inc............... 27 16,289 Pitney Bowes, Inc..................... 532 1,182 e* Plug Power, Inc.................... 5 3,890 * Power-One, Inc...................... 22 2,028 * Quanta Services, Inc................ 7 2,306 * Rayovac Corp........................ 31 1,663 Regal-Beloit Corp..................... 34 10,488 * Republic Services, Inc.............. 220 400 Richardson Electronics Ltd............ 3 600 Robbins & Myers, Inc.................. 11 11,258 Rockwell Automation, Inc.............. 233 1,996 Roper Industries, Inc................. 73 744 Sauer-Danfoss, Inc.................... 6 149 SJW Corp.............................. 12 884 * SPS Technologies, Inc............... 21 469 Starrett (L.S.) Co (Class A).......... 8 2,032 Stewart & Stevenson Services, Inc..... 29 255 * Strattec Security Corp.............. 12 1,000 Tecumseh Products Co (Class A)........ 44 600 Tennant Co............................ 20 2,860 * Terex Corp.......................... 32 3,591 * Tetra Tech, Inc..................... 44 940 * Tetra Technologies, Inc............. 20 2,968 * Thomas & Betts Corp................. 50 3,453 Timken Co............................. 66 800 Toro Co............................... 51
See Notes to Financial Statements TIAA SEPARATE ACCOUNT VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 43 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- PRODUCER DURABLES--(CONTINUED) 571 e* TRC Cos, Inc....................... $ 7 800 * Trikon Technologies, Inc............ 4 2,420 Trinity Industries, Inc............... 46 2,995 * UNOVA, Inc.......................... 18 1,512 Valhi, Inc............................ 13 1,000 Valmont Industries, Inc............... 19 6,476 Vulcan Materials Co................... 243 5,309 W.W. Grainger, Inc.................... 274 2,466 Wabtec Corp........................... 35 1,892 * Waste Connections, Inc.............. 73 39,009 Waste Management, Inc................. 894 1,100 Watts Industries, Inc (Class A)....... 17 48,942 e* Xerox Corp......................... 394 -------- TOTAL PRODUCER DURABLES............... 31,686 -------- TECHNOLOGY--14.99% 24,542 * 3Com Corp........................... 114 900 * 3D Systems Corp..................... 7 1,556 * Actel Corp.......................... 25 1,924 e* Acterna Corp....................... 0 2,904 * Activision, Inc..................... 42 3,042 * Actuate Corp........................ 5 5,409 * Acxiom Corp......................... 83 7,709 * Adaptec, Inc........................ 44 54,729 * ADC Telecommunications, Inc......... 114 700 * ADE Corp............................ 4 16,167 Adobe Systems, Inc.................... 403 1,423 * Adtran, Inc......................... 47 4,600 * Advanced Digital Information Corp... 31 1,193 * Advanced Energy Industries, Inc..... 15 5,641 * Advanced Fibre Communications, Inc................................. 94 23,508 * Advanced Micro Devices, Inc......... 152 395 * Advanced Power Technology, Inc...... 1 2,172 * Advent Software, Inc................ 30 4,300 * Aeroflex, Inc....................... 30 2,600 * Aether Systems, Inc................. 10 6,576 * Affiliated Computer Services, Inc (Class A)........................... 346 46,506 * Agere Systems, Inc (Class A)........ 67 67,048 * Agere Systems, Inc (Class B)........ 94 2,666 * Agile Software Corp................. 21 31,522 * Agilent Technologies, Inc........... 566 6,963 e* Akamai Technologies, Inc........... 12 4,208 * Alliance Data Systems Corp.......... 75 1,895 * Alliance Semiconductor Corp......... 7 2,156 * Alloy, Inc.......................... 24 26,142 * Altera Corp......................... 323 360 * Altiris, Inc........................ 6 2,722 * American Management Systems, Inc.... 33 11,405 * American Power Conversion Corp...... 173 1,600 * American Superconductor Corp........ 5 6,298 e* Amkor Technology, Inc.............. 30 1,398 * Amphenol Corp (Class A)............. 53 2,400 * Anadigics, Inc...................... 6 24,778 * Analog Devices, Inc................. 591 477 Analogic Corp......................... 24 1,600 * Anaren Microwave, Inc............... 14 5,887 * Andrew Corp......................... 61 2,198 * Anixter International, Inc.......... 51 3,349 * Answerthink, Inc.................... 8 1,047 * Ansys, Inc.......................... 21 1,079 * Anteon International Corp........... 26 1,700 * APAC Customer Services, Inc......... 4 24,131 * Apple Computer, Inc................. 346
SHARES VALUE (000) ------ ----------- 110,766 * Applied Materials, Inc.............. $ 1,443 20,650 * Applied Micro Circuits Corp......... 76 2,100 * Arbitron, Inc....................... 70 19,021 * Ariba, Inc.......................... 47 4,429 * Arris Group, Inc.................... 16 6,892 * Arrow Electronics, Inc.............. 88 2,137 * Artesyn Technologies, Inc........... 8 900 * Artisan Components, Inc............. 14 18,184 * Ascential Software Corp............. 44 1,946 e* Asiainfo Holdings, Inc............. 12 4,000 * Aspect Communications Corp.......... 11 2,555 e* Aspen Technology, Inc.............. 7 1,322 e* AstroPower, Inc.................... 11 2,600 * Asyst Technologies, Inc............. 19 1,509 * At Road, Inc........................ 6 27,984 * Atmel Corp.......................... 62 1,950 * ATMI, Inc........................... 36 1,206 * Audiovox Corp (Class A)............. 12 7,958 Autodesk, Inc......................... 114 41,851 Automatic Data Processing, Inc........ 1,643 4,177 * Avanex Corp......................... 4 26,003 e* Avaya, Inc......................... 64 2,497 * Avenue A, Inc....................... 7 1,792 * Avid Technology, Inc................ 41 7,746 * Avnet, Inc.......................... 84 2,798 * Avocent Corp........................ 62 3,822 AVX Corp.............................. 37 7,081 * Axcelis Technologies, Inc........... 40 1,500 * AXT, Inc............................ 3 1,052 * Barra, Inc.......................... 32 24,846 * BEA Systems, Inc.................... 285 9,758 * BearingPoint, Inc................... 67 786 BEI Technologies, Inc................. 9 674 Bel Fuse, Inc (Class B)............... 14 1,712 Belden, Inc........................... 26 1,637 * Benchmark Electronics, Inc.......... 47 7,662 * Bisys Group, Inc.................... 122 1,400 Black Box Corp........................ 63 16,680 * BMC Software, Inc................... 285 4,105 * Borland Software Corp............... 50 924 * Boston Communications Group......... 12 13,313 * Broadcom Corp (Class A)............. 200 16,002 * Brocade Communications Systems, Inc................................. 66 1,800 C&D Technologies, Inc................. 32 3,175 * Cable Design Technologies Corp...... 19 1,796 * CACI International, Inc (Class A)... 64 18,038 * Cadence Design Systems, Inc......... 213 700 * Caminus Corp........................ 2 1,340 * Carreker Corp....................... 6 300 * Catapult Communications Corp........ 4 2,266 * C-COR.net Corp...................... 8 1,843 * Centillium Communications, Inc...... 4 10,128 e* Ceridian Corp...................... 146 4,279 * Certegy, Inc........................ 105 4,200 * Checkfree Corp...................... 67 2,315 * Checkpoint Systems, Inc............. 24 3,036 * ChipPAC, Inc........................ 11 2,100 * Chordiant Software, Inc............. 3 3,700 * Ciber, Inc.......................... 19 27,122 * CIENA Corp.......................... 139 5,224 * Cirrus Logic, Inc................... 15 496,394 * Cisco Systems, Inc.................. 6,503
See Notes to Financial Statements B- 44 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- TECHNOLOGY--(CONTINUED) 12,523 * Citrix Systems, Inc................. $ 154 524 * ClearOne Communications, Inc........ 2 8,299 * CNET Networks, Inc.................. 22 2,394 * Cognex Corp......................... 44 500 e* Cognizant Technology Solutions Corp................................ 36 1,500 Cohu, Inc............................. 22 3,800 * CommScope, Inc...................... 30 1,641 * Compucom Systems, Inc............... 9 30,933 Computer Associates International, Inc................................. 418 2,259 * Computer Horizons Corp.............. 7 2,075 * Computer Network Technology Corp.... 15 10,977 * Computer Sciences Corp.............. 378 22,875 * Compuware Corp...................... 110 200 Compx International, Inc.............. 2 12,818 * Comverse Technology, Inc............ 128 1,700 * Concord Camera Corp................. 9 1,145 * Concord Communications, Inc......... 10 34,705 * Concord EFS, Inc.................... 546 4,500 * Concurrent Computer Corp............ 13 18,598 * Conexant Systems, Inc............... 30 11,750 * Convergys Corp...................... 178 573 * CoorsTek, Inc....................... 15 72,733 e* Corning, Inc....................... 241 1,384 * Covansys Corp....................... 5 2,947 e* Cray, Inc.......................... 23 4,346 * Credence Systems Corp............... 41 5,099 e* Cree, Inc.......................... 83 3,793 * CSG Systems International, Inc...... 52 2,100 CTS Corp.............................. 16 1,000 Cubic Corp............................ 18 2,443 e* Cymer, Inc......................... 79 8,434 * Cypress Semiconductor Corp.......... 48 1,000 * Daktronics, Inc..................... 13 1,300 * Datastream Systems, Inc............. 8 3,000 e* DDI Corp........................... 1 2,278 * dELiA*s Corp (Class A).............. 1 153,383 * Dell Computer Corp.................. 4,101 4,378 Deluxe Corp........................... 184 1,448 * DiamondCluster International, Inc (Class A)........................... 5 4,872 Diebold, Inc.......................... 201 703 * Digimarc Corp....................... 8 2,000 * Digital Insight Corp................ 17 1,928 * Digital River, Inc.................. 23 600 * Digitas, Inc........................ 2 567 * DocuCorp International, Inc......... 4 2,800 * Documentum, Inc..................... 44 8,500 * DoubleClick, Inc.................... 48 607 * Drexler Technology Corp............. 8 1,939 * DSP Group, Inc...................... 31 8,119 * DST Systems, Inc.................... 289 859 * Dupont Photomasks, Inc.............. 20 4,538 * E.piphany, Inc...................... 19 8,828 * Earthlink, Inc...................... 48 1,800 e* Echelon Corp....................... 20 1,002 EDO Corp.............................. 21 3,401 * eFunds Corp......................... 31 2,000 * Electro Scientific Industries, Inc................................. 40 1,600 * Electroglas, Inc.................... 2 8,181 * Electronic Arts, Inc................ 407 32,527 Electronic Data Systems Corp.......... 599 3,700 * Electronics For Imaging, Inc........ 60 900 * Embarcadero Technologies, Inc....... 5
SHARES VALUE (000) ------ ----------- 150,200 * EMC Corp............................ $ 922 1,702 * Emcore Corp......................... 4 756 * EMS Technologies, Inc............... 12 5,723 * Emulex Corp......................... 106 3,302 * Entegris, Inc....................... 34 11,627 * Enterasys Networks, Inc............. 18 3,500 * Entrust, Inc........................ 12 737 * EPIQ Systems, Inc................... 11 9,810 Equifax, Inc.......................... 227 1,565 * eSpeed, Inc (Class A)............... 27 2,200 * ESS Technology, Inc................. 14 1,492 * Esterline Technologies Corp......... 26 2,800 * Exar Corp........................... 35 600 * Excel Technology, Inc............... 11 7,347 * Extreme Networks, Inc............... 24 1,594 e* F5 Networks, Inc................... 17 3,504 Fair, Isaac & Co, Inc................. 150 7,879 * Fairchild Semiconductor International, Inc (Class A)........ 84 2,479 e* FalconStor Software, Inc........... 10 1,709 * FEI Co.............................. 26 2,523 * Filenet Corp........................ 31 9,210 e* Finisar Corp....................... 9 51,655 First Data Corp....................... 1,829 13,012 * Fiserv, Inc......................... 442 1,071 * Flir Systems, Inc................... 52 6,278 * Foundry Networks, Inc............... 44 2,724 e* Freemarkets, Inc................... 18 2,000 * FSI International, Inc.............. 9 12,739 * Gateway, Inc........................ 40 2,400 General Cable Corp.................... 9 2,198 e* Genesis Microchip, Inc............. 29 500 * Global Imaging Systems, Inc......... 9 2,524 Global Payments, Inc.................. 81 8,569 * GlobespanVirata, Inc................ 38 4,100 * GrafTech International Ltd.......... 24 2,046 * Griffon Corp........................ 28 3,033 e* Handspring, Inc.................... 3 4,036 * Harmonic, Inc....................... 9 4,175 Harris Corp........................... 110 1,700 Helix Technology Corp................. 19 4,697 Henry (Jack) & Associates, Inc........ 57 183,561 Hewlett-Packard Co.................... 3,187 1,800 * Hutchinson Technology, Inc.......... 37 2,432 * Hypercom Corp....................... 9 2,230 * Hyperion Solutions Corp............. 57 20,390 e* i2 Technologies, Inc............... 23 3,289 * Identix, Inc........................ 17 1,449 * iGate Corp.......................... 4 700 * Ii-Vi, Inc.......................... 11 9,909 IKON Office Solutions, Inc............ 71 2,423 * Imation Corp........................ 85 900 * Inet Technologies, Inc.............. 5 2,671 * InFocus Corp........................ 16 403 * Infogrames, Inc..................... 1 4,516 * Infonet Services Corp (Class B)..... 9 4,284 * Informatica Corp.................... 25 1,989 * Information Resources, Inc.......... 3 461 * Inforte Corp........................ 4 5,682 * Ingram Micro, Inc (Class A)......... 70 9,219 * Inktomi Corp........................ 15 600 * Inrange Technologies Corp (Class B).................................. 1 692 * Integral Systems, Inc............... 14
See Notes to Financial Statements TIAA SEPARATE ACCOUNT VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 45 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- TECHNOLOGY--(CONTINUED) 3,402 * Integrated Circuit Systems, Inc..... $ 62 7,233 * Integrated Device Technology, Inc... 61 453,593 Intel Corp............................ 7,062 900 * Intercept, Inc...................... 15 3,915 * Interdigital Communications Corp.... 57 3,200 * Intergraph Corp..................... 57 8,760 * Interland, Inc...................... 11 991 * Intermagnetics General Corp......... 19 116,157 International Business Machines Corp................................ 9,002 4,451 * International Rectifier Corp........ 82 2,744 e* Internet Security Systems, Inc..... 50 8,141 * Intersil Corp (Class A)............. 113 1,400 Inter-Tel, Inc........................ 29 5,317 * Intertrust Technologies Corp........ 22 7,538 * Interwoven, Inc..................... 20 1,058 * Intrado, Inc........................ 11 12,897 * Intuit, Inc......................... 605 3,555 * Iomega Corp......................... 28 4,245 * Iron Mountain, Inc.................. 140 1,367 * ITXC Corp........................... 3 1,548 * Ixia................................ 6 700 * IXYS Corp........................... 5 6,865 * J.D. Edwards & Co................... 77 359 e* j2 Global Communications, Inc...... 7 10,680 * Jabil Circuit, Inc.................. 191 1,953 * JDA Software Group, Inc............. 19 83,158 e* JDS Uniphase Corp.................. 205 19,963 * Juniper Networks, Inc............... 136 4,227 * Keane, Inc.......................... 38 600 Keithley Instruments, Inc............. 8 6,007 * Kemet Corp.......................... 53 1,731 * Keynote Systems, Inc................ 13 1,396 * Kforce, Inc......................... 6 12,834 e* KLA-Tencor Corp.................... 454 4,991 * Kopin Corp.......................... 20 1,368 * Kronos, Inc......................... 51 3,600 * Kulicke & Soffa Industries, Inc..... 21 8,892 * Lam Research Corp................... 96 6,194 * Lattice Semiconductor Corp.......... 54 1,010 * Lawson Software, Inc................ 6 753 * Learning Tree International, Inc.... 10 517 * LeCroy Corp......................... 6 6,268 * Legato Systems, Inc................. 32 2,300 * Lexar Media, Inc.................... 14 8,794 e* Lexmark International, Inc......... 532 7,622 * Liberate Technologies............... 11 2,034 * Lightbridge, Inc.................... 13 21,460 Linear Technology Corp................ 552 4,921 * Looksmart Ltd....................... 12 25,435 * LSI Logic Corp...................... 147 3,416 * LTX Corp............................ 21 235,713 e* Lucent Technologies, Inc........... 297 4,000 * Macromedia, Inc..................... 43 3,052 * Macrovision Corp.................... 49 1,332 * Magma Design Automation, Inc........ 13 2,621 * Mail-Well, Inc...................... 7 1,369 e* Manhattan Associates, Inc.......... 32 519 * Mantech International Corp (Class A).................................. 10 1,100 e* Manufacturers Services Ltd......... 6 4,273 e* Manugistics Group, Inc............. 10 1,033 * MAPICS, Inc......................... 7 1,100 * Mapinfo Corp........................ 6
SHARES VALUE (000) ------ ----------- 1,446 * Mastec, Inc......................... $ 4 3,375 * Matrixone, Inc...................... 15 21,950 Maxim Integrated Products, Inc........ 725 14,340 * Maxtor Corp......................... 73 4,553 * McData Corp (Class A)............... 32 1,400 * MCSi, Inc........................... 7 1,462 * MEMC Electronic Materials, Inc...... 11 4,700 * Mentor Graphics Corp................ 37 1,540 * Mercury Computer Systems, Inc....... 47 5,343 * Mercury Interactive Corp............ 158 940 * Merix Corp.......................... 8 1,900 * MetaSolv, Inc....................... 3 2,500 Methode Electronics, Inc (Class A).... 27 2,475 * Mettler-Toledo International, Inc... 79 4,564 * Micrel, Inc......................... 41 13,549 Microchip Technology, Inc............. 331 5,400 * Micromuse, Inc...................... 21 37,075 e* Micron Technology, Inc............. 361 2,114 * Microsemi Corp...................... 13 303,824 * Microsoft Corp...................... 15,708 3,137 e* Microtune, Inc..................... 10 2,110 e* MIPS Technologies, Inc (Class A)... 6 582 * MIPS Technologies, Inc (Class B).... 2 1,655 e* MKS Instruments, Inc............... 27 8,875 Molex, Inc............................ 204 1,289 * Monolithic System Technology, Inc... 16 153,363 Motorola, Inc......................... 1,327 1,100 * MRO Software, Inc................... 13 5,858 * MRV Communications, Inc............. 6 1,508 MTS Systems Corp...................... 15 500 * Nanometrics, Inc.................... 2 360 * Nassda Corp......................... 4 500 * National Processing, Inc............ 8 12,371 * National Semiconductor Corp......... 186 872 * Navigant International, Inc......... 11 4,200 * NCP Litigation Trust................ 0 5,670 * NCR Corp............................ 135 2,331 NDCHealth Corp........................ 46 1,200 * Net2Phone, Inc...................... 5 1,742 e* Netegrity, Inc..................... 6 2,845 * NETIQ Corp.......................... 35 746 * Netro Corp.......................... 2 1,000 * Netscout Systems, Inc............... 4 722 * NetScreen Technologies, Inc......... 12 20,473 e* Network Appliance, Inc............. 205 10,639 * Network Associates, Inc............. 171 4,791 * New Focus, Inc...................... 18 2,716 * Newport Corp........................ 34 1,500 e* Next Level Communications, Inc..... 1 1,732 * NIC, Inc............................ 2 1,000 * Novadigm, Inc....................... 2 24,705 * Novell, Inc......................... 83 10,195 * Novellus Systems, Inc............... 286 1,400 * Nu Horizons Electronics Corp........ 8 1,939 * Nuance Communications, Inc.......... 5 1,360 * Numerical Technologies, Inc......... 5 9,004 e* Nvidia Corp........................ 104 1,700 e* NYFIX, Inc......................... 8 4,021 * Oak Technology, Inc................. 11 1,426 * Omnivision Technologies, Inc........ 19 2,400 * ON Semiconductor Corp............... 3 2,900 * Onyx Software Corp.................. 4 12,637 * Openwave Systems, Inc............... 25
See Notes to Financial Statements B- 46 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- TECHNOLOGY--(CONTINUED) 8,470 * Oplink Communications, Inc.......... $ 7 600 * Opnet Technologies, Inc............. 5 279,387 * Oracle Corp......................... 3,017 482 * OSI Systems, Inc.................... 8 547 * Overland Storage, Inc............... 8 3,572 * Overture Services, Inc.............. 98 1,600 * Packeteer, Inc...................... 11 2,088 * Palm, Inc........................... 33 1,975 * Paradyne Networks, Inc.............. 3 17,964 * Parametric Technology Corp.......... 45 1,250 Park Electrochemical Corp............. 24 2,314 * Paxar Corp.......................... 34 2,900 * Paxson Communications Corp.......... 6 22,077 Paychex, Inc.......................... 616 1,347 * PC-Tel, Inc......................... 9 860 * PDF Solutions, Inc.................. 6 603 * PEC Solutions, Inc.................. 18 1,800 * Pegasus Solutions, Inc.............. 18 438 * Pegasystems, Inc.................... 2 18,709 * Peoplesoft, Inc..................... 342 1,447 * Pericom Semiconductor Corp.......... 12 4,935 * Perot Systems Corp (Class A)........ 53 1,700 * Phoenix Technologies Ltd............ 10 1,900 * Photronics, Inc..................... 26 2,158 Pioneer-Standard Electronics, Inc..... 20 2,318 * Pixelworks, Inc..................... 13 904 * Planar Systems, Inc................. 19 2,717 * Plantronics, Inc.................... 41 3,100 * Plexus Corp......................... 27 1,200 * PLX Technology, Inc................. 5 11,397 e* PMC-Sierra, Inc.................... 63 7,006 * Polycom, Inc........................ 67 700 * Pomeroy Computer Resources, Inc..... 8 7,300 * Portal Software, Inc................ 6 458 * Powell Industries, Inc.............. 8 1,813 * Power Integrations, Inc............. 31 4,709 * Powerwave Technologies, Inc......... 25 2,566 e* PRG-Schultz International, Inc..... 23 1,500 * Probusiness Services, Inc........... 15 2,252 * Progress Software Corp.............. 29 1,742 * Proton Energy Systems............... 5 8,578 e* Proxim Corp (Class A).............. 7 3,398 * PTEK Holdings, Inc.................. 15 6,107 * QLogic Corp......................... 211 1,050 * QRS Corp............................ 7 52,017 * Qualcomm, Inc....................... 1,893 9,635 * Quantum Corp........................ 26 2,634 * Quest Software, Inc................. 27 449 Quixote Corp.......................... 8 1,238 * Radiant Systems, Inc................ 12 1,200 * Radisys Corp........................ 10 1,700 * Rainbow Technologies, Inc........... 12 3,114 * Raindance Communications, Inc....... 10 6,100 * Rambus, Inc......................... 41 12,375 * Rational Software Corp.............. 129 8,725 * Read-Rite Corp...................... 3 6,483 * RealNetworks, Inc................... 25 8,148 * Red Hat, Inc........................ 48 9,518 e* Redback Networks, Inc.............. 8 2,049 * Register.com, Inc................... 9 781 e* Renaissance Learning, Inc.......... 15 700 e* Research Frontiers, Inc............ 6
SHARES VALUE (000) ------ ----------- 3,716 * Retek, Inc.......................... $ 10 4,460 Reynolds & Reynolds Co (Class A)...... 114 9,806 * RF Micro Devices, Inc............... 72 8,816 * Riverstone Networks, Inc............ 19 1,100 * Rogers Corp......................... 24 1,418 * Roxio, Inc.......................... 7 3,307 * RSA Security, Inc................... 20 688 * Rudolph Technologies, Inc........... 13 5,099 * S1 Corp............................. 23 9,000 * Safeguard Scientifics, Inc.......... 12 982 * Sanchez Computer Associates, Inc.... 3 4,157 e* Sandisk Corp....................... 84 36,035 * Sanmina-SCI Corp.................... 162 5,900 * Sapient Corp........................ 12 1,000 * SBS Technologies, Inc............... 9 3,746 e* Scansoft, Inc...................... 19 349 * Scansource, Inc..................... 17 10,710 Scientific-Atlanta, Inc............... 127 1,124 * SCM Microsystems, Inc............... 5 1,500 * Seachange International, Inc........ 9 16,448 * Seagate Technology -Escrow.......... 0 2,100 * Secure Computing Corp............... 13 3,749 * Seebeyond Technology Corp........... 9 1,100 * Semitool, Inc....................... 7 4,307 * Semtech Corp........................ 47 1,206 * Serena Software, Inc................ 19 26,862 * Siebel Systems, Inc................. 201 13,958 * Silicon Graphics, Inc............... 16 4,000 * Silicon Image, Inc.................. 24 1,654 e* Silicon Laboratories, Inc.......... 32 5,900 * Silicon Storage Technology, Inc..... 24 500 * Siliconix, Inc...................... 12 517 * Simpletech, Inc..................... 2 1,800 * Sipex Corp.......................... 7 3,700 * Sitel Corp.......................... 4 56,649 e* Solectron Corp..................... 201 2,000 * Somera Communications, Inc.......... 5 6,172 e* SONICblue, Inc..................... 3 3,546 * SonicWALL, Inc...................... 13 12,965 * Sonus Networks, Inc................. 13 1,062 * Sourcecorp.......................... 20 1,100 * Spectralink Corp.................... 8 1,766 * SpeechWorks International, Inc...... 5 900 * SPSS, Inc........................... 13 362 * SRA International, Inc (Class A).... 10 566 * SS&C Technologies, Inc.............. 6 1,100 * Standard Microsystems Corp.......... 21 7,239 * Storage Technology Corp............. 155 4,277 * StorageNetworks, Inc................ 5 6,000 * Stratex Networks, Inc............... 13 462 * Stratos Lightwave, Inc.............. 2 220,432 * Sun Microsystems, Inc............... 686 19,170 * Sungard Data Systems, Inc........... 452 179 * Suntron Corp........................ 1 745 * Supertex, Inc....................... 11 4,191 e* Surebeam Corp (Class A)............ 17 6,382 * Sybase, Inc......................... 86 11,448 * Sycamore Networks, Inc.............. 33 1,700 * Sykes Enterprises, Inc.............. 6 9,846 e* Symantec Corp...................... 398 15,819 Symbol Technologies, Inc.............. 130 360 * Synaptics, Inc...................... 3 5,120 * Synopsys, Inc....................... 236
See Notes to Financial Statements TIAA SEPARATE ACCOUNT VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 47 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- TECHNOLOGY--(CONTINUED) 1,200 * Synplicity, Inc..................... $ 5 403 * Syntel, Inc......................... 8 358 Sypris Solutions, Inc................. 4 2,200 * Systems & Computer Technology Corp................................ 19 2,600 e* Take-Two Interactive Software, Inc................................. 61 3,456 * Tech Data Corp...................... 93 2,506 Technitrol, Inc....................... 40 3,400 * Tekelec............................. 36 5,828 * Tektronix, Inc...................... 106 28,264 * Tellabs, Inc........................ 205 5,597 e* Tellium, Inc....................... 4 12,633 e* Teradyne, Inc...................... 164 4,400 e* Terayon Communication Systems, Inc................................. 9 117,677 e Texas Instruments, Inc.............. 1,766 1,558 * Therma-Wave, Inc.................... 2 11,709 * Thermo Electron Corp................ 236 1,600 * Three-Five Systems, Inc............. 10 5,754 * TIBCO Software, Inc................. 36 1,039 * Tier Technologies, Inc (Class B).... 17 1,300 e* Tivo, Inc.......................... 7 1,000 * Tollgrade Communications, Inc....... 12 2,517 e Total System Services, Inc.......... 34 7,500 * Touch America Holdings, Inc......... 3 2,287 * Transaction Systems Architects, Inc (Class A)........................... 15 7,764 * Transmeta Corp...................... 9 1,800 * Trimble Navigation Ltd.............. 22 526 * Tripos, Inc......................... 4 9,492 * Triquint Semiconductor, Inc......... 40 2,119 * Trizetto Group, Inc................. 13 1,025 * TTM Technologies, Inc............... 3 2,000 * Turnstone Systems, Inc.............. 5 2,317 * Tyler Technologies, Inc............. 10 640 * Ulticom, Inc........................ 5 791 * Ultimate Electronics, Inc........... 8 1,608 * Ultratech Stepper, Inc.............. 16 22,177 * Unisys Corp......................... 220 688 United Industrial Corp................ 11 1,496 * United Online, Inc.................. 24 1,200 e* Universal Display Corp............. 9 4,272 * Utstarcom, Inc...................... 85 4,946 * Valueclick, Inc..................... 14 2,211 * Varian Semiconductor Equipment Associates, Inc..................... 53 1,820 * Veeco Instruments, Inc.............. 21 325 * Verint Systems, Inc................. 7 15,283 * VeriSign, Inc....................... 123 27,846 * Veritas Software Corp............... 435 1,614 * Verity, Inc......................... 22 1,471 * Vicor Corp.......................... 12 2,700 e* Viewpoint Corp..................... 5 16,948 * Vignette Corp....................... 21 739 * Virage Logic Corp................... 7 382 Virco Manufacturing Corp.............. 4 10,980 * Vishay Intertechnology, Inc......... 123 14,636 e* Vitesse Semiconductor Corp......... 32 5,100 * Vitria Technology, Inc.............. 4 572 * Volt Information Sciences, Inc...... 10 2,566 Wallace Computer Services, Inc........ 55 1,600 * WatchGuard Technologies, Inc........ 10 1,666 e* WebEx Communications, Inc.......... 25 3,244 * webMethods, Inc..................... 27 1,479 * Websense, Inc....................... 32 1,000 * WESCO International, Inc............ 5
SHARES VALUE (000) ------ ----------- 13,200 e* Western Digital Corp............... $ 84 1,260 * White Electronic Designs Corp....... 10 1,507 * Wilson Greatbatch Technologies, Inc................................. 44 4,910 * Wind River Systems, Inc............. 20 1,700 * Wireless Facilities, Inc............ 10 1,000 * Witness Systems, Inc................ 3 800 Woodhead Industries, Inc.............. 9 1,429 * Xicor, Inc.......................... 5 22,757 * Xilinx, Inc......................... 469 1,570 * Zebra Technologies Corp (Class A)... 90 1,950 * Zoran Corp.......................... 27 1,200 * Zygo Corp........................... 8 -------- TOTAL TECHNOLOGY 92,141 -------- TRANSPORTATION--1.32% 3,500 Airborne, Inc......................... 52 4,500 * Airtran Holdings, Inc............... 18 1,734 * Alaska Air Group, Inc............... 38 10,953 * AMR Corp............................ 72 1,500 * Arkansas Best Corp.................. 39 2,900 * Atlantic Coast Airlines Holdings, Inc................................. 35 1,200 * Atlas Air Worldwide Holdings, Inc... 2 2,566 * BE Aerospace, Inc................... 9 25,978 Burlington Northern Santa Fe Corp..... 676 4,624 C.H. Robinson Worldwide, Inc.......... 144 3,058 CNF, Inc.............................. 102 4,581 e* Continental Airlines, Inc (Class B).................................. 33 424 * Covenant Transport, Inc (Class A)... 8 14,370 CSX Corp.............................. 407 8,490 Delta Air Lines, Inc.................. 103 2,500 * EGL, Inc............................ 36 6,494 Expeditors International Of Washington, Inc..................... 212 2,161 * ExpressJet Holdings, Inc............ 22 20,236 FedEx Corp............................ 1,097 1,040 Florida East Coast Industries, Inc (Class A)........................... 24 826 * Forward Air Corp.................... 16 2,150 * Frontier Airlines, Inc.............. 15 835 * Genesee & Wyoming, Inc (Class A).... 17 2,145 * Heartland Express, Inc.............. 49 1,500 e* Hunt (J.B.) Transport Services, Inc................................. 44 631 e* JetBlue Airways Corp............... 17 4,150 * Kansas City Southern Industries, Inc................................. 50 1,689 * Knight Transportation, Inc.......... 35 914 * Landstar System, Inc................ 53 2,151 * Mesa Air Group, Inc................. 9 600 * Mesaba Holdings, Inc................ 4 841 * Midwest Express Holdings, Inc....... 4 26,343 Norfolk Southern Corp................. 527 3,871 * Northwest Airlines Corp............. 28 1,962 Overseas Shipholding Group, Inc....... 35 221 * P.A.M. Transportation Services...... 6 2,021 * RailAmerica, Inc.................... 14 777 Roadway Corp.......................... 29 3,884 Ryder System, Inc..................... 87 9,902 * Sabre Holdings Corp................. 179 900 * SCS Transportation, Inc............. 9 2,270 Shurgard Storage Centers, Inc (Class A).................................. 71 3,616 Skywest, Inc.......................... 47 52,362 Southwest Airlines Co................. 728 4,341 * Swift Transportation Co, Inc........ 87 400 * U.S. Xpress Enterprises, Inc (Class A).................................. 4 4,000 b,e* UAL Corp......................... 6 17,043 Union Pacific Corp.................... 1,020
See Notes to Financial Statements B- 48 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- TRANSPORTATION--(CONTINUED) 26,366 United Parcel Service, Inc (Class B).................................. $ 1,663 1,835 USFreightways Corp.................... 53 2,733 Werner Enterprises, Inc............... 59 1,800 * Yellow Corp......................... 45 -------- TOTAL TRANSPORTATION 8,139 -------- UTILITIES--6.96% 29,552 * AES Corp............................ 89 3,864 AGL Resources, Inc.................... 94 1,700 * AirGate PCS, Inc.................... 1 5,002 * Alamosa Holdings, Inc............... 3 473 * Alaska Communications Systems Group, Inc................................. 1 8,638 Allegheny Energy, Inc................. 65 7,370 e* Allegiance Telecom, Inc............ 5 1,866 * Allen Telecom, Inc.................. 18 5,279 Allete, Inc........................... 120 6,301 Alliant Energy Corp................... 104 21,031 Alltel Corp........................... 1,073 9,893 Ameren Corp........................... 411 21,907 American Electric Power Co, Inc....... 599 11,629 e* American Tower Corp (Class A)...... 41 10,655 Aquila, Inc........................... 19 51,500 AT&T Corp............................. 1,345 151,239 e* AT&T Wireless Services, Inc........ 855 2,945 Atmos Energy Corp..................... 69 3,500 Avista Corp........................... 40 127,161 BellSouth Corp........................ 3,290 1,900 Black Hills Corp...................... 50 13,787 * Broadwing, Inc...................... 49 24,314 e* Calpine Corp....................... 79 800 Cascade Natural Gas Corp.............. 16 600 * Centennial Communications Corp...... 2 18,443 Centerpoint Energy, Inc............... 157 846 Central Vermont Public Service Corp... 15 9,623 CenturyTel, Inc....................... 283 1,183 CH Energy Group, Inc.................. 55 11,513 Cinergy Corp.......................... 388 19,501 * Citizens Communications Co.......... 206 2,970 Cleco Corp............................ 42 8,642 CMS Energy Corp....................... 82 782 * Commonwealth Telephone Enterprises, Inc................................. 28 556 Connecticut Water Service, Inc........ 14 14,457 Consolidated Edison, Inc.............. 619 11,249 e Constellation Energy Group, Inc..... 313 14,725 * Crown Castle International Corp..... 55 1,200 CT Communications, Inc................ 14 20,713 Dominion Resources, Inc............... 1,137 8,774 DPL, Inc.............................. 135 4,100 DQE, Inc.............................. 62 11,008 DTE Energy Co......................... 511 60,347 Duke Energy Corp...................... 1,179 19,348 e Dynegy, Inc (Class A)............... 23 22,377 * Edison International................ 265 36,664 El Paso Corp.......................... 255 3,388 * El Paso Electric Co................. 37 1,602 Empire District Electric Co........... 29 2,318 Energen Corp.......................... 67 10,024 Energy East Corp...................... 221 302 EnergySouth, Inc...................... 9 15,150 Entergy Corp.......................... 691 4,406 Equitable Resources, Inc.............. 154 21,885 Exelon Corp........................... 1,155 18,879 FirstEnergy Corp...................... 622
SHARES VALUE (000) ------ ----------- 11,968 e FPL Group, Inc...................... $ 720 3,022 * General Communication, Inc (Class A).................................. 20 17,200 b* Geotek Communications, Inc......... 0 824 * Golden Telecom, Inc................. 10 4,358 Great Plains Energy, Inc.............. 100 2,600 Hawaiian Electric Industries, Inc..... 114 1,000 Hickory Tech Corp..................... 10 2,558 Idacorp, Inc.......................... 64 1,797 * IDT Corp............................ 31 1,600 * IDT Corp (Class B).................. 25 9,633 KeySpan Corp.......................... 339 6,243 Kinder Morgan, Inc.................... 264 1,400 Laclede Group, Inc.................... 34 22,157 e* Level 3 Communications, Inc........ 109 2,341 e* McLeod USA, Inc (Class A).......... 2 39,967 e* McLeod USA, Inc (Escrow)........... 0 4,900 MDU Resources Group, Inc.............. 126 1,200 MGE Energy, Inc....................... 32 555 Middlesex Water Co.................... 12 27,643 e* Mirant Corp........................ 52 659 * NATCO Group, Inc (Class A).......... 4 4,958 National Fuel Gas Co.................. 103 1,850 New Jersey Resources Corp............. 58 45,483 e* Nextel Communications, Inc (Class A).................................. 525 4,867 * Nextel Partners, Inc (Class A)...... 30 3,050 Nicor, Inc............................ 104 14,928 NiSource, Inc......................... 299 2,809 * NiSource, Inc (Sails)............... 6 1,100 North Pittsburgh Systems, Inc......... 15 8,977 Northeast Utilities................... 136 1,750 Northwest Natural Gas Co.............. 47 2,000 e Northwestern Corp................... 10 3,639 NSTAR................................. 162 1,000 NUI Corp.............................. 17 5,321 OGE Energy Corp....................... 94 494 * Oil States International, Inc....... 6 3,790 Oneok, Inc............................ 73 1,700 Otter Tail Corp....................... 46 2,462 Peoples Energy Corp................... 95 6,881 Pepco Holdings, Inc................... 133 1,637 * Petroquest Energy, Inc.............. 7 26,464 * PG&E Corp........................... 368 2,182 Piedmont Natural Gas Co, Inc.......... 77 5,318 Pinnacle West Capital Corp............ 181 2,620 PNM Resources, Inc.................... 62 10,070 PPL Corp.............................. 349 3,500 * Price Communications Corp........... 48 15,362 Progress Energy, Inc.................. 666 5,000 * Progress Energy, Inc (Cvo).......... 2 14,150 Public Service Enterprise Group, Inc................................. 454 6,054 Puget Energy, Inc..................... 133 5,255 Questar Corp.......................... 146 650 * Quicksilver Resources, Inc.......... 15 91,798 * Qwest Communications International, Inc................................. 459 4,225 e* RCN Corp........................... 2 18,132 e* Reliant Resources, Inc............. 58 226,593 SBC Communications, Inc............... 6,143 7,241 SCANA Corp............................ 224 1,200 SEMCO Energy, Inc..................... 7 12,297 Sempra Energy......................... 291 234 Shenandoah Telecom Co................. 11 7,400 Sierra Pacific Resources.............. 48
See Notes to Financial Statements TIAA SEPARATE ACCOUNT VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 49 Statement of Investments - STOCK INDEX FUND - December 31, 2002 --------------------------------------------------------------------------------
SHARES VALUE (000) ------ ----------- UTILITIES--(CONTINUED) 9,741 e* Skyworks Solutions, Inc............ $ 84 800 South Jersey Industries, Inc.......... 26 47,634 Southern Co........................... 1,352 2,899 * Southern Union Co................... 48 2,332 Southwest Gas Corp.................... 55 699 Southwest Water Co.................... 9 1,900 * Southwestern Energy Co.............. 22 60,225 Sprint Corp (FON Group)............... 872 48,982 * Sprint Corp (PCS Group)............. 215 956 SureWest Communications............... 36 1,652 * Talk America Holdings, Inc.......... 9 10,202 e TECO Energy, Inc.................... 158 3,587 Telephone & Data Systems, Inc......... 169 3,067 * Time Warner Telecom, Inc (Class A).................................. 6 1,400 * Triton PCS Holdings, Inc (Class A).................................. 6 18,311 TXU Corp.............................. 342 1,194 * U.S. Cellular Corp.................. 30 5,231 * U.S. Unwired, Inc (Class A)......... 3 3,977 e* Ubiquitel, Inc..................... 2 1,912 UGI Corp.............................. 71 892 UIL Holdings Corp..................... 31 2,061 Unisource Energy Corp................. 36 341 Unitil Corp........................... 8 4,660 Vectren Corp.......................... 107 184,758 Verizon Communications, Inc........... 7,159 1,307 *West Corp............................ 22 4,029 Westar Energy, Inc.................... 40 1,277 Western Gas Resources, Inc............ 47 3,838 e* Western Wireless Corp (Class A).... 20 3,300 WGL Holdings, Inc..................... 79 32,856 Williams Cos, Inc..................... 89 8,000 Wisconsin Energy Corp................. 202 2,180 WPS Resources Corp.................... 85 26,792 b,e* Xcel Energy, Inc................. 295 -------- TOTAL UTILITIES 42,774 -------- TOTAL COMMON STOCK (Cost $673,193) 610,853 --------
SHARES VALUE (000) ------ ----------- TIAA-CREF MUTUAL FUND--0.08% 72,144 TIAA-CREF Institutional Equity Index Fund................................ $ 500 -------- TOTAL TIAA-CREF MUTUAL FUND (Cost $505)......................... 500 -------- PRINCIPAL VALUE (000) --------- ----------- SHORT TERM INVESTMENTS--4.52% U.S. GOVERNMENT AND AGENCY DISCOUNT NOTES--4.52% Federal National Mortgage Association (FNMA) $ 8,300,000 1.260%, 01/07/03.................... 8,298 9,100,000 1.275%, 01/15/03.................... 9,095 10,400,000 1.250%, 02/19/03.................... 10,382 -------- TOTAL U.S. GOVERNMENT AND AGENCY DISCOUNT NOTES 27,775 -------- TOTAL SHORT TERM INVESTMENTS (Cost $27,775) 27,775 -------- TOTAL PORTFOLIO--103.97% (Cost $701,609) 639,237 OTHER ASSETS & LIABILITIES, NET--(3.97)% (24,384) -------- NET ASSETS--100% $614,853 ========
------------ * Non-income producing b In bankruptcy e All or a portion of these securities are out on loan. f Restricted securities-Investment in securities not registered under the Securities Act of 1933 or not publicly traded in foreign markets. At December 31, 2002, the value of these securities amounted to $1,949 or 0.00% of net assets. ADDITIONAL INFORMATION ON EACH RESTRICTED SECURITY IS AS FOLLOWS:
SECURITY ACQUISITION DATE ACQUISITION COST -------- ---------------- ---------------- Priority Healthcare Corp (Class A) 01/04/99 $1,148
For ease of presentation, we have grouped a number of industry classification categories together in the Statement of Investments. Note that the Account uses more specific industry categories in following its investment limitations on industry concentration. See Notes to Financial Statements B- 50 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 [TIAA CREF 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 and disclosure 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 independent auditing firm of Ernst & Young LLP has audited the accompanying statutory-basis financial statements of TIAA. To maintain auditor independence and avoid even the appearance of conflict of interest, it continues to be TIAA's policy that any management advisory or consulting services be obtained from a firm other than the external financial audit firm. The independent auditors' report 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/ Herbert M. Allison, Jr ----------------------------------------- Chairman, President and Chief Executive Officer /S/ Richard L. Gibbs ----------------------------------------- Executive Vice President and Principal Accounting Officer TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 51 [TIAA CREF 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. Management has the primary responsibility for TIAA's financial statements, development and maintenance of a strong system of internal controls and disclosure 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 has direct responsibility for the appointment, compensation and oversight of the independent auditing firm. As required by its charter, the Committee will evaluate rotation of the external financial audit firm whenever circumstances warrant, but in no event will the evaluation be later than between their fifth and tenth years of service. 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 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 Leonard S. Simon, Audit Committee Member Rosalie J. Wolf, Audit Committee Member B- 52 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 [ERNST & YOUNG LOGO] ERNST & YOUNG LLP Phone: (212) 773-3000 5 Times Square www.ey.com New York, NY 10036
-------------------------------------------------------------------------------- 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, 2002 and 2001, and the related statutory-basis statements of operations, changes in capital and contingency reserves, and cash flows for the three years ended December 31, 2002. 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 are described in Note 2. The effects on the financial statements of these variances are not reasonably determinable but are presumed to be material. 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, 2002 and 2001, or the results of its operations or its cash flows for the three years ended December 31, 2002. However, in our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of TIAA at December 31, 2002 and 2001, and the results of its operations and its cash flows for each of the three years ended December 31, 2002 in conformity with accounting practices prescribed or permitted by the New York State Insurance Department. As discussed in Note 2 to the financial statements, in 2001 TIAA changed various accounting policies to be in accordance with the revised National Association of Insurance Commissioners' Accounting Practices and Procedures Manual, as adopted by the New York State Insurance Department. Also, as discussed in Note 2 to the financial statements, in 2002 TIAA began to admit deferred federal income tax assets in accordance with the Statement of Statutory Accounting Principles Number 10. /s/ ERNST & YOUNG LLP April 23, 2003 A Member Practice of Ernst & Young Global TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 53 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA STATUTORY -- BASIS BALANCE SHEETS -------------------------------------------------------------------------------- (amounts in thousands)*
DECEMBER 31, 2002 2001 ----------------------------------------------------------------------------------------- ASSETS Bonds $ 96,870,101 $ 87,013,371 Mortgages 23,968,793 22,815,136 Real Estate 5,643,825 5,180,411 Stocks 2,184,326 2,245,072 Other long-term investments 3,789,471 3,264,552 Cash and short-term investments 1,787,873 2,892,904 Investment income due and accrued 1,420,194 1,339,451 Separate account assets 4,357,873 4,228,544 Deferred federal income tax asset 836,682 -- Other assets 971,313 673,657 ----------------------------------------------------------------------------------------- TOTAL ASSETS $141,830,451 $129,653,098 ========================================================================================= LIABILITIES, CAPITAL AND CONTINGENCY RESERVES Policy and contract reserves $116,913,443 $107,363,466 Dividends declared for the following year 2,460,410 2,364,877 Asset Valuation Reserve 2,263,133 2,619,461 Interest Maintenance Reserve 410,580 308,168 Separate account liabilities 4,357,873 4,228,544 Securities lending collateral 3,973,109 2,619,761 Other liabilities 2,165,212 1,497,738 ----------------------------------------------------------------------------------------- TOTAL LIABILITIES 132,543,760 121,002,015 ----------------------------------------------------------------------------------------- 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 investment losses, annuity and insurance mortality, and other risks 9,283,641 8,648,033 ----------------------------------------------------------------------------------------- TOTAL CAPITAL AND CONTINGENCY RESERVES 9,286,691 8,651,083 ----------------------------------------------------------------------------------------- TOTAL LIABILITIES, CAPITAL AND CONTINGENCY RESERVES $141,830,451 $129,653,098 =========================================================================================
* Except number of shares and par value amount See notes to statutory -- basis financial statements B- 54 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA STATUTORY -- BASIS STATEMENTS OF OPERATIONS -------------------------------------------------------------------------------- (amounts in thousands)
FOR THE YEARS ENDED DECEMBER 31, 2002 2001 2000 ----------------------------------------------------------------------------------------------------- INCOME Insurance and annuity premiums and other considerations $ 4,744,018 $ 3,878,895 $ 3,594,805 Transfers from CREF, net 2,166,726 1,402,316 572,211 Annuity dividend additions 3,244,248 3,059,734 2,728,562 Net investment income 9,324,726 8,819,579 8,556,537 ----------------------------------------------------------------------------------------------------- TOTAL INCOME $19,479,718 $17,160,524 $15,452,115 ===================================================================================================== DISTRIBUTION OF INCOME Policy and contract benefits $ 3,396,516 $ 3,065,338 $ 2,976,305 Dividends to policyholders 4,928,434 4,766,809 4,315,895 Increase in policy and contract reserves 9,495,679 7,463,548 5,991,167 Operating expenses 469,952 412,789 356,975 Transfers to separate accounts, net 309,186 615,228 527,255 Other, net 56,633 20,499 (18,442) Federal income tax expense/(benefit) (20,855) 26,784 24,048 Increase in contingency reserves from operations 844,173 789,529 1,278,912 ----------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTION OF INCOME $19,479,718 $17,160,524 $15,452,115 ===================================================================================================== NET INCOME/(LOSS) Increase in contingency reserves from operations $ 844,173 $ 789,529 $ 1,278,912 Net realized capital (losses), net of capital gains taxes and after transfers to the Interest Maintenance Reserve (1,816,327) (204,291) (56,916) ----------------------------------------------------------------------------------------------------- NET INCOME/(LOSS) $ (972,154) $ 585,238 $ 1,221,996 =====================================================================================================
See notes to statutory -- basis financial statements TIAA SEPARATE ACCOUNT VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 55 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, 2002 2001 2000 --------------------------------------------------------------------------------------------------- CHANGES IN CAPITAL AND CONTINGENCY RESERVES Net Income/(Loss) $ (972,154) $ 585,238 $1,221,996 Net unrealized capital gains/(losses) on investments 350,449 (574,266) 123,349 Transfers (to)/from the Asset Valuation Reserve 356,328 251,073 (232,754) Cumulative effect of change in accounting principles: Deferred federal income tax asset 4,111,351 -- -- Other -- 375,325 -- Decrease/(increase) in non-admitted assets: Deferred federal income tax asset (3,274,669) -- Other 69,318 (59,749) (40,614) Change in contingency reserves as a result of reinsurance 62,739 -- -- Other, net (67,754) (23,943) -- --------------------------------------------------------------------------------------------------- NET CHANGE IN CAPITAL AND CONTINGENCY RESERVES 635,608 553,678 1,071,977 CAPITAL AND CONTINGENCY RESERVES AT BEGINNING OF YEAR 8,651,083 8,097,405 7,025,428 --------------------------------------------------------------------------------------------------- CAPITAL AND CONTINGENCY RESERVES AT END OF YEAR $ 9,286,691 $8,651,083 $8,097,405 ===================================================================================================
See notes to statutory -- basis financial statements B- 56 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA STATUTORY -- BASIS STATEMENTS OF CASH FLOWS -------------------------------------------------------------------------------- (amounts in thousands)
FOR THE YEARS ENDED DECEMBER 31, 2002 2001 2000 ----------------------------------------------------------------------------------------------------- CASH PROVIDED By operating activities: Insurance and annuity premiums and other considerations $ 4,766,860 $ 3,881,155 $ 3,510,073 Transfers from CREF, net 2,168,251 1,402,316 572,211 Annuity dividend additions 3,278,135 3,059,734 2,728,562 Net investment income 9,072,530 8,629,197 8,378,040 ----------------------------------------------------------------------------------------------------- TOTAL RECEIPTS 19,285,776 16,972,402 15,188,886 Policy and contract benefits 3,406,551 3,065,118 2,879,903 Dividends 4,895,768 4,599,385 4,158,047 Operating expenses 467,250 414,953 353,859 Federal income tax expense/(benefit) (6,556) 4,819 2,168 Transfers to separate accounts, net 304,993 615,980 526,334 Other, net 951,559 (248,545) (102,795) ----------------------------------------------------------------------------------------------------- TOTAL DISBURSEMENTS 10,019,565 8,451,710 7,817,516 ----------------------------------------------------------------------------------------------------- CASH PROVIDED BY OPERATING ACTIVITIES 9,266,211 8,520,692 7,371,370 ----------------------------------------------------------------------------------------------------- By investing activities: Sales and redemptions of bonds and stocks 23,992,886 16,188,968 10,427,498 Sales and repayments of mortgage principal 2,137,510 2,941,103 2,894,511 Sales of real estate 1,272,931 1,216,527 708,838 Other, net 3,074,354 632,560 691,453 ----------------------------------------------------------------------------------------------------- CASH PROVIDED BY INVESTING ACTIVITIES 30,477,681 20,979,158 14,722,300 ----------------------------------------------------------------------------------------------------- TOTAL CASH PROVIDED 39,743,892 29,499,850 22,093,670 ----------------------------------------------------------------------------------------------------- DISBURSEMENTS FOR NEW INVESTMENTS Investments acquired: Bonds and stocks 34,510,180 23,415,372 16,082,049 Mortgages 3,503,415 3,920,058 3,508,065 Real estate 1,417,058 1,143,375 978,864 Other, net 1,418,270 705,364 1,738,448 ----------------------------------------------------------------------------------------------------- TOTAL DISBURSEMENTS FOR NEW INVESTMENTS 40,848,923 29,184,169 22,307,426 ----------------------------------------------------------------------------------------------------- INCREASE/(DECREASE) IN CASH AND SHORT-TERM INVESTMENTS (1,105,031) 315,681 (213,756) CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF YEAR 2,892,904 2,577,223 2,790,979 ----------------------------------------------------------------------------------------------------- CASH AND SHORT-TERM INVESTMENTS AT END OF YEAR $ 1,787,873 $ 2,892,904 $ 2,577,223 =====================================================================================================
See notes to statutory -- basis financial statements. TIAA Separate Account VA-1 STATEMENT OF ADDITIONAL INFORMATION B- 57 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 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. By charter, TIAA operates without profit to the corporation or its sole shareholder, the TIAA Board of Overseers. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES CHANGES IN ACCOUNTING PRINCIPLES: 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 section titled "Accounting Principles Generally Accepted in the United States" within this note.) Accounting changes adopted to conform to the provisions of the National Association of Insurance Commissioners' ("NAIC"), Accounting Practices and Procedures Manual, ("NAIC SAP"), as adopted by the Department, are reported as changes in accounting principles. The cumulative effect of a change in accounting principles is reported as an adjustment to contingency reserves in the period of the changes in accounting principles. The cumulative effect is the difference between the amount of capital and contingency reserves at the effective date of the change and the amount of capital and contingency reserves that would have been reported at that date if the new accounting principles had been applied retroactively for all prior periods. As a result of these changes, TIAA reported changes in accounting principles as adjustments that increased contingency reserves by approximately $836,700 and $375,300 as of December 31, 2002 and January 1, 2001, respectively, as follows:
As of: As of: December 31, 2002 January 1, 2001 ----------------- --------------- Adjustment to the Interest Maintenance Reserve $ -- $ 895,068 Mortgage and Real Estate Impairments -- (276,685) Adjustment to Accumulated Depreciation -- (217,377) Group Disability Reserves -- (22,313) Adjustment to Sundry Receivables -- (3,368) Deferred Federal Income Tax Asset 4,111,351 -- Deferred Federal Income Tax Asset -- non-admitted (3,274,669) -- ----------- --------- Total Contingency Reserves Adjustment: $ 836,682 $ 375,325 =========== =========
DEFERRED FEDERAL INCOME TAX: On July 2, 2002, the New York State Legislature passed a bill allowing New York domiciled insurance companies to admit deferred federal income tax, ("DFIT"), assets for purposes of their statutory financial statements for years ending on or after December 31, 2002 in accordance with Statement of Statutory Accounting Principles No. 10, Income Taxes. The bill was signed by the Governor of the State of New York on September 24, 2002. Consequently, TIAA admitted a DFIT asset in the amount of approximately $836,700, which increased contingency reserves at December 31, 2002 by the same amount. ADJUSTMENT TO INTEREST MAINTENANCE RESERVE: Prior to 2001, TIAA recorded prepayment premiums received from borrowers in connection with early repayments on bond and mortgage loan investments as realized capital gains that were credited to the Interest Maintenance Reserve, ("IMR"). As a result of changes required by NAIC SAP, prepayment premiums received subsequent to January 1, 2001 have been recorded as investment income. The adjustment to the IMR reflected in the table above represents the release to TIAA's contingency reserves of the portion of the IMR balance at January 1, 2001 that represented unamortized realized capital gains that were related to prepayment premiums received prior to 2001. MORTGAGE AND REAL ESTATE IMPAIRMENTS: Prior to 2001, TIAA evaluated its real estate and mortgage investments on a case-by-case basis to identify potential impairments consistent with policies established by an internal monitoring committee. The committee performed an adequacy test of TIAA's investment-related reserves by considering the mortgage and B- 58 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 -- (Continued) real estate-related balances contained within the Asset Valuation Reserve, ("AVR"), when determining the need to establish other, specific reserves for temporary impairments. When impairments considered to be other than temporary were identified, the committee had such amounts written off as permanent reductions in the carrying values of the assets and treated such amounts as realized capital losses that were charged against the AVR. Effective January 1, 2001, NAIC SAP established specific requirements for the establishment of valuation allowances for temporary impairments in the value of mortgage and real estate investments in addition to the investment-related reserves contained in the AVR. Additionally, a "held for sale" category for real estate investments was introduced that requires such investments to be carried at the lower of fair value or depreciated cost (i.e., carrying value). TIAA's internal monitoring committee has modified its policies for identifying and determining impairments to comply with the new requirements under NAIC SAP. TIAA identifies real estate assets to be evaluated for impairment based on estimated fair values that are determined annually for the entire real estate portfolio, and also identifies "held for sale" real estate. The real estate-related adjustments required to implement the new standards under NAIC SAP at January 1, 2001 totaled approximately $198,300 and are reflected in the above table. TIAA identifies mortgages to be evaluated for impairment based on the expected collectibility of principal and interest according to the contractual terms of each mortgage loan. If collectibility is not considered to be probable, the mortgage is considered to be impaired. The mortgage-related adjustments required to implement the new standards under NAIC SAP at January 1, 2001 totaled approximately $78,400 and are reflected in the above table. ACCUMULATED DEPRECIATION: Prior to January 1, 2001, TIAA utilized the sinking fund method of depreciation for real estate investments acquired between January 1, 1980 and December 31, 1990. NAIC SAP requires that all real estate be depreciated using the straight-line method. The adjustment to accumulated depreciation reflected in the previous table represents the cumulative impact of converting the affected real estate assets to the straight-line method of depreciation. This real estate-related adjustment totaled approximately $206,800. In addition, depreciation periods for EDP equipment and software were shortened to three years, resulting in an adjustment of approximately $10,600. RESERVE ADJUSTMENTS: Group disability reserve adjustments are discussed in Note 13. RECONCILIATIONS OF NET INCOME AND CONTINGENCY RESERVES: Subsequent to the filing of its New York SAP financial statements, TIAA made certain revisions, primarily relating to the estimates of other than temporary impairments for invested assets. Reconciliations of TIAA's net income and contingency reserves between the New York SAP as originally filed and these Audited Financial Statements are shown below:
Contingency Net Loss Reserves --------- ----------- New York SAP -- as filed $(136,821) $9,668,539 Adjustments to Invested Asset Valuations (334,898) (334,898) Reclassification -- Unrealized to Realized Capital Losses (450,435) -- Adjustments to Policy Reserves and Other Liabilities (50,000) (50,000) --------- ---------- Audited Financial Statements $(972,154) $9,283,641 ========= ==========
TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 59 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 -- (Continued) Reconciliations of TIAA's net income and contingency reserves between NAIC SAP and accounting practices prescribed or permitted by the Department are shown below:
2002 2001 ----------- ----------- Net Income/(Loss), New York Basis (972,154) 585,238 New York Prescribed Practices: Additional Reserves for: Term Conversions 6,429 315 Deferred and Payout Annuities 614,093 622,444 ----------- ----------- Net Income, NAIC SAP $ (351,632) $ 1,207,997 =========== =========== Contingency Reserves, New York Basis 9,283,641 8,648,033 New York Prescribed Practices: Additional Reserves for: Term Conversions 6,744 315 Deferred and Payout Annuities 1,236,537 622,444 Deferred Federal Income Tax Asset -- 858,366 ----------- ----------- Contingency Reserves, NAIC SAP $10,526,922 $10,129,708 =========== ===========
ACCOUNTING POLICIES: 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 followed by TIAA: INVESTMENTS: Investment transactions are accounted for as of the date the investments are purchased or sold (trade date). Realized capital gains and losses on investment transactions are accounted for under the specific identification method. A realized loss is recorded when an impairment is considered to be other than temporary. An impairment in an investment is considered to have occurred if an event or change in circumstance indicates that the carrying value of the asset may not be recoverable. When an impairment has been determined to have occurred, the investment is valued at fair value. Management considers all available evidence to evaluate the fair value of its investments. Unless evidence exists to support the assertion that a decline in fair value below carrying value is temporary, a writedown accounted for as a realized loss is recorded. VALUATION OF INVESTMENTS: BONDS AND SHORT-TERM 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 (net of any other than temporary impairments) and all other bonds and short-term investments at the lower of amortized cost (net of any other than temporary impairments) or market value. LOAN-BACKED BONDS AND STRUCTURED SECURITIES: Loan-backed bonds and structured securities not in default are stated at amortized cost (net of any other than temporary impairments). The retrospective adjustment method is used to value all loan-backed and structured securities except for interest only securities or securities that have recognized losses, which are valued using the prospective method. Estimated future cash flows and expected payment periods are used in calculating amortization for loan-backed and structured securities. Loan-backed and structured securities in default are valued at the lower of amortized cost (net of any other than temporary impairments) or undiscounted estimated future cash flows. MORTGAGES: Mortgages are stated at amortized cost (net of any other than temporary impairments) except that purchase money mortgages are stated at the lower of amortized cost (net of any other than temporary impairments) or ninety percent of appraised value. REAL ESTATE: Investments in real estate are carried at depreciated cost (net of any other than temporary impairments). Real estate held for sale is carried at the lower of depreciated cost (net of any other than temporary impairments) or fair value less encumbrances and estimated costs to sell. TIAA utilizes the straight-line method of depreciation on real estate. Depreciation is generally computed over a forty year period. B- 60 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 -- (Continued) WHOLLY-OWNED SUBSIDIARIES, REAL ESTATE LIMITED PARTNERSHIPS AND SECURITIES LIMITED PARTNERSHIPS: Investments in wholly-owned subsidiaries, real estate limited partnerships, securities limited partnerships, and limited liability companies are stated at TIAA's equity in the net admitted assets of the underlying entities. POLICY LOANS AND SEPARATE ACCOUNT ASSETS: Policy loans are stated at outstanding principal amounts. Separate account assets are stated at market value. SEED MONEY INVESTMENTS: Seed money investments in the TIAA-CREF Mutual Funds, TIAA-CREF Institutional Mutual Funds and TIAA-CREF Life Funds, which are included in Other Assets in the accompanying balance sheets, are stated at market value. 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. 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 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 but are collectively reflected in realized and unrealized capital gains and losses, respectively. DERIVATIVE INSTRUMENTS: TIAA has filed a Derivatives Use Plan with the Department. This plan details TIAA's derivative policy objectives, strategies and controls and any restrictions placed on various derivative types. The plan also specifies the procedures and systems that TIAA has established to evaluate, monitor and report on the derivative portfolio in terms of valuation, effectiveness and counterparty credit quality. TIAA uses derivative instruments for hedging and asset replication purposes. TIAA enters into derivatives directly with counterparties of high credit quality (i.e., rated AA or better at the date of a transaction) and monitors counterparty credit quality on an ongoing basis. TIAA's counterparty credit risk is limited to the net positive fair value of its derivative positions, unless otherwise described below. FOREIGN CURRENCY SWAP CONTRACTS: TIAA enters into foreign currency swap contracts to exchange fixed and variable amounts of foreign currency at specified future dates and at specified rates (in U.S. dollars) to hedge against currency risks on investments denominated in foreign currencies. Changes in the value of the contracts related to foreign currency exchange rates are recognized at the end of the period as unrealized gains or losses. Foreign currency swap contracts incorporate a series of swap transactions which result in the exchange of TIAA's fixed and variable foreign currency cash flows into fixed amounts of U.S. dollar cash flows. FOREIGN CURRENCY 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. A forward contract incorporates a swap transaction, which exchanges TIAA's fixed foreign currency cash flows into a fixed amount of U.S. dollar cash flows at a future date. A foreign exchange premium/(discount) is recorded at the time a contract is opened, 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. 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. Generally, no cash is exchanged at the outset of the contract and no principal payments are made by either party. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by one counterparty at each due date. Net payments received and net payments made under interest rate swap contracts are reflected in net investment income. TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 61 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 -- (Continued) SWAP OPTIONS: TIAA writes or (sells) swap options on selected bonds as an income generation tool. The income generated by the sale of swap options is used to purchase interest rate cap contracts (see below). 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 has no counterparty credit risk associated with swap options written unless the option is exercised and an interest rate swap contract is subsequently formed. 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 for certain interest sensitive products. 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. Interest rate cap contracts are carried at fair market value. CREDIT DEFAULT SWAP CONTRACTS: As part of a strategy to replicate investment grade corporate bonds in conjunction with US Treasury securities, TIAA writes or (sells) credit default swaps to earn a premium by issuing insurance to the buyer of default protection. The carrying value of credit default swaps represents the unamortized premium received for selling the default protection, which premium is amortized into investment income over the life of the swap. Under the terms of the credit default swap contracts, TIAA synthetically assumes the credit risk of a referenced asset and has the obligation to reimburse the default protection buyer for the loss in market value if the reference asset defaults, declares bankruptcy or experiences some other, specified negative credit event. TIAA has no counterparty credit risk with the buyer. TIAA also purchases credit default swaps to hedge against unexpected credit events on selective investments in the TIAA portfolio. The credit default swaps outstanding at December 31, 2002 had no carrying value. 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 $155,310 and $492,200 at December 31, 2002 and 2001, 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 the deferred federal income tax asset, furniture and fixtures and various receivables, are also designated as non-admitted assets. Such non-admitted assets approximated $3,431,500 at December 31, 2002 and $324,100 at December 31, 2001. The change in the non- admitted portion of the deferred federal income tax asset represents $3,274,669 of the December 31, 2002 amount. Changes in such non-admitted assets are charged or credited directly to contingency reserves. POLICY AND CONTRACT RESERVES: TIAA offers a range of group and individual retirement annuities and group and individual life and other insurance products. Policy and contract reserves for such products are determined in accordance with standard valuation methods approved by the Department and are computed in accordance with standard actuarial formulae. The reserves established utilize assumptions for interest (at rates ranging from 1.5% to 6.8% and averaging approximately 3.0%), 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 AVR, which covers all invested asset classes, is an explicit liability reserve required by NAIC SAP 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, other invested assets and derivatives. 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 cannot exceed the computed maximum reserve for that component. For the year ended December 31, 2002, a voluntary contribution of $276,291 was made to the AVR. Any computed excess amounts are eliminated through transfers to other components or adjustments down B- 62 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 -- (Continued) to the maximum reserve amounts. Contributions and adjustments to the AVR are reported as transfers to or from contingency reserves. INTEREST MAINTENANCE RESERVE: The IMR is a liability reserve required by NAIC SAP which accumulates realized capital gains and losses on sales of securities 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. 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 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 formula-based AVR is eliminated 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, morbidity, persistency and interest rather than being based on statutory mortality, morbidity 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; - Under GAAP, state taxes are included in the computation of deferred taxes, a deferred tax asset is recorded for the amount of gross deferred tax assets expected to be realized in future years, and a valuation allowance is established for deferred tax assets not realizable, rather than being limited by quantitative limitations under NAIC SAP; - For purposes of calculating the postretirement benefit obligation, active participants not currently eligible would also be included; - Derivatives are generally valued at fair value rather than being accounted for in a manner consistent with the hedged item. Management believes that the effects of these differences would increase TIAA's total contingency reserves if GAAP were implemented. RECLASSIFICATIONS: Certain amounts in the 2001 and 2000 financial statements have been reclassified to conform with the 2002 presentation. TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 63 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 -- (Continued) NOTE 3. INVESTMENTS SECURITIES INVESTMENTS: At December 31, 2002 and 2001, 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, 2002 U.S. Government $ 1,784,970 $ 80,198 $ (5,886) $ 1,859,282 All Other Governments 626,243 55,509 (5,556) 676,196 States, Territories & Possessions 928,921 211,385 (5) 1,140,301 Political Subdivisions of States, Territories & Possessions 18,266 4,474 -- 22,740 Special Rev. & Special Assessment, Non-guaranteed Agencies & Govt 15,081,937 1,309,246 (37,720) 16,353,463 Public Utilities 5,611,179 328,898 (136,197) 5,803,880 Industrial & Miscellaneous 72,818,585 4,665,981 (1,358,404) 76,126,162 ----------- ---------- ----------- ------------ Total $96,870,101 $6,655,691 $(1,543,768) $101,982,024 =========== ========== =========== ============
GROSS GROSS CARRYING UNREALIZED UNREALIZED ESTIMATED VALUE GAINS LOSSES MARKET VALUE ----------- ---------- ----------- ------------ DECEMBER 31, 2001 U.S. Government $ 2,184,796 $ 22,835 $ (40,801) $ 2,166,830 All Other Governments 731,135 52,354 (24,314) 759,175 States, Territories & Possessions 947,180 125,793 (25) 1,072,948 Political Subdivisions of States, Territories & Possessions 18,242 3,188 -- 21,430 Special Rev. & Special Assessment, Non-guaranteed Agencies & Govt 10,340,721 571,518 (56,744) 10,855,495 Public Utilities 5,731,512 203,242 (81,143) 5,853,611 Industrial & Miscellaneous 67,059,785 2,382,000 (1,632,348) 67,809,437 ----------- ---------- ----------- ----------- Total $87,013,371 $3,360,930 $(1,835,375) $88,538,926 =========== ========== =========== ===========
At December 31, 2002 and 2001, approximately 89.8% and 91.9%, respectively, of the long-term bond portfolio was comprised of investment grade securities. At December 31, 2002, outstanding forward commitments for future long-term bond and equity investments approximated $2,501,000. Of this, approximately $1,561,000 is scheduled for disbursement in 2003, $350,500 in 2004 and $589,500 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 $6,400 at both December 31, 2002 and 2001 were on deposit with governmental authorities or trustees, as required by law. B- 64 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 -- (Continued) The carrying values and estimated market values of long-term bond investments at December 31, 2002, by contractual maturity, are shown below:
CARRYING ESTIMATED VALUE MARKET VALUE ----------- ------------ Due in one year or less $ 2,320,059 $ 2,344,990 Due after one year through five years 9,479,070 9,967,120 Due after five years through ten years 18,120,724 19,106,485 Due after ten years 20,624,722 21,845,198 ----------- ------------ Subtotal 50,544,575 53,263,793 Mortgage-backed securities 24,285,058 25,916,624 Asset-backed securities 11,780,863 11,670,012 Commercial mortgage-backed securities 10,259,605 11,131,595 ----------- ------------ Total $96,870,101 $101,982,024 =========== ============
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. Long-term bond investments in or near default included in the preceding table, totaled $992,200 and are categorized, based on contractual maturity, as follows: $7,900 due in one year or less, $187,700 due after one year through five years, $341,300 due after five years through ten years, $361,500 due after ten years and $93,800 of asset-backed securities. At December 31, 2002 and 2001, the carrying values of long-term bond investments were diversified by industry classification as follows:
2002 2001 ----- ----- Mortgage-backed securities 25.1% 25.8% Asset-backed securities 12.2 12.3 Manufacturing 11.8 11.5 Commercial mortgage-backed securities 10.6 9.9 Finance and financial services 10.1 9.4 Public utilities 6.8 7.2 Communications 4.8 5.1 Oil and gas 3.6 3.5 Retail and wholesale trade 2.9 3.0 Government 2.7 3.1 Real estate investment trusts 2.3 2.2 Other 7.1 7.0 ----- ----- Total 100.0% 100.0% ===== =====
The carrying values and estimated market values of debt securities loaned, and the cash collateral received in connection therewith, were as follows:
CARRYING MARKET CASH VALUE VALUE COLLATERAL ---------- ---------- ---------- December 31, 2002 $3,563,954 $3,846,254 $3,973,109 December 31, 2001 $2,417,634 $2,527,176 $2,619,761
At December 31, 2002 and 2001, TIAA had interest rate swap contracts outstanding with a total notional value of approximately $681,400 and $565,900, respectively. At December 31, 2002 and 2001, TIAA had foreign currency swap contracts outstanding with a total notional value of approximately $1,725,300 and $1,421,600, respectively. The net change in unrealized gains/(losses) on foreign currency swap TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 65 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 -- (Continued) contracts outstanding were approximately ($132,100), $41,100, and $57,200 for the years ended December 31, 2002, 2001 and 2000, respectively. At December 31, 2002 and 2001, TIAA had foreign currency forward contracts outstanding with a total notional value of approximately $391,700 and $234,700, respectively, and the unamortized value of the premiums was approximately $600 and $3,400, respectively. The net change in unrealized gains/(losses) on the forward contracts outstanding were approximately ($30,100), $4,600, and $5,700 for the years ended December 31, 2002, 2001 and 2000, respectively. At December 31, 2002, TIAA had swap options outstanding with a total notional value of $198,600, and the unamortized value of the premiums was $1,200. 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, 2002 and 2001, TIAA had interest rate cap contracts outstanding with a total notional value of approximately $149,500 and $75,700, respectively, and the unamortized value of the premiums was approximately $800 and $500, respectively. At December 31, 2002 and 2001, TIAA had credit default swap contracts outstanding with a total notional value of approximately $143,400 and $130,000, 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 impairments in value. The coupon rates for mortgage loans issued during 2002 ranged from 5.4% to 9.0%. At December 31, 2002 and 2001, the carrying values of mortgage loan investments were diversified by property type and geographic region as follows:
2002 2001 ----- ----- PROPERTY TYPE Office Buildings 42.4% 42.0% Shopping centers 25.8 25.4 Industrial buildings 10.8 10.2 Mixed-use projects 7.7 8.2 Apartments 6.8 6.7 Hotel 4.9 5.1 Other 1.6 2.4 ----- ----- Total 100.0% 100.0% ===== =====
2002 2001 ----- ----- GEOGRAPHIC REGION Pacific 25.7% 24.5% South Atlantic 21.9 22.5 North Central 17.8 18.6 Middle Atlantic 10.9 10.8 South Central 9.1 8.3 Mountain 7.3 7.2 New England 6.6 6.9 Other 0.7 1.2 ----- ----- Total 100.0% 100.0% ===== =====
B- 66 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 -- (Continued) At December 31, 2002 and 2001, approximately 19.2% and 18.7% of the mortgage portfolio was invested in California and is included in the Pacific region shown above. At December 31, 2002, the contractual maturity schedule of mortgage loans is shown below:
CARRYING VALUE -------------- Due in one year or less $ 665,313 Due after one year through five years 7,968,015 Due after five years through ten years 12,884,212 Due after ten years 2,451,253 ----------- Total $23,968,793 ===========
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, 2002, outstanding forward commitments for future mortgage loan investments approximated $1,192,200. Of this, approximately $1,045,700 is scheduled for disbursement in 2003 and $146,500 in later years. The funding of mortgage loan commitments is generally contingent upon the underlying properties meeting specified requirements, including construction, leasing and occupancy. At December 31, 2002 and 2001, the aggregate carrying values of mortgages with restructured or modified terms were approximately $347,000 and $370,900, respectively. For the years ended December 31, 2002, 2001 and 2000, the investment income earned on such mortgages was approximately $26,300, $29,800, and $44,000, respectively, which would have been approximately $36,600, $38,200, and $63,000, 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. Approximately $406,900 and $179,000 of the mortgage total on the balance sheet at December 31, 2002 and 2001, respectively represent amounts due from related parties that are collateralized by real estate owned by TIAA investment subsidiaries and affiliates. 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 impairments in value. At December 31, 2002 and 2001, the real estate investments of $5,643,800 and $5,180,400, respectively are net of third party mortgage encumbrances, which totaled approximately $967,000 and $633,100, respectively. TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 67 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 -- (Continued) At December 31, 2002 and 2001, the carrying values of real estate investments were diversified by property type and geographic region as follows:
2002 2001 ----- ----- PROPERTY TYPE Office buildings 68.7% 73.9% Mixed-use projects 7.2 3.2 Shopping centers 7.0 8.4 Industrial buildings 4.6 2.8 Income-producing land underlying improved real estate 2.4 2.7 Land held for future development 1.8 2.0 Apartments 1.0 0.0 Other 7.3 7.0 ----- ----- Total 100.0% 100.0% ===== =====
2002 2001 ----- ----- GEOGRAPHIC REGION South Atlantic 36.5% 33.0% North Central 16.5 22.7 Pacific 12.1 12.9 South Central 9.4 8.0 Middle Atlantic 5.4 5.4 Mountain 2.8 3.2 New England 0.9 1.0 Other 16.4 13.8 ----- ----- Total 100.0% 100.0% ===== =====
At December 31, 2002 and 2001, approximately 14.6% and 13.0% of the real estate portfolio was invested in Florida and approximately 8.7% and 7.2% was invested in Texas. Florida is included in the South Atlantic region and Texas is included in the South Central region. At December 31, 2002, outstanding obligations for future real estate investments approximated $170,300. Pursuant to these obligations, it is estimated that approximately $123,100 will be disbursed in 2003 and $47,200 in later years. The funding of real estate investment obligations is contingent upon the properties meeting specified requirements, including construction, leasing and occupancy. Depreciation expense on real estate investments for the years ended December 31, 2002, 2001 and 2000, was approximately $151,000, $157,500, and $164,800, respectively; the amount of accumulated depreciation at December 31, 2002 and 2001 was approximately $1,081,900 and $1,139,400, respectively. INVESTMENT SUBSIDIARIES AND AFFILIATES: TIAA's investment subsidiaries and affiliates, which are created for legal or other business reasons, are primarily involved in real estate and securities investment activities for TIAA. At December 31, 2002 and 2001, the carrying values of TIAA's equity interests in investment subsidiaries and affiliates, were approximately B- 68 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 -- (Continued) $3,643,700 and $4,175,400, respectively. TIAA's share of total assets, liabilities and net income of investment subsidiaries and affiliates at December 31, 2002 and 2001, and for the years then ended, were approximately as follows:
2002 2001 ---------- ---------- Assets $5,467,608 $4,924,503 Liabilities 2,191,671 1,155,321 Non-admitted assets/other adjustments 367,788 406,209 ---------- ---------- Carrying value $3,643,725 $4,175,391 ========== ========== Net income $ 303,881 $ 224,246
The carrying values shown above are reflected in the Bonds, Mortgages, Real Estate, Stock, and Other Long-Term Investments captions in the accompanying balance sheet. The carrying values shown above do not include investment subsidiaries and affiliates that held an interest in securitizations that are disclosed in Note 5. As of December 31, 2002 and 2001, the net amount due from investment subsidiaries and affiliates was $62,200 and $57,100, respectively. NOTE 4. INVESTMENT INCOME AND CAPITAL GAINS AND LOSSES NET INVESTMENT INCOME: For the years ended December 31, 2002, 2001 and 2000, the components of net investment income, were as follows:
2002 2001 2000 ---------- ---------- ---------- GROSS INVESTMENT INCOME: Bonds $6,957,865 $6,555,484 $6,158,291 Mortgages 1,791,517 1,791,063 1,664,705 Real estate (net of property expense, taxes and depreciation) 417,904 312,221 523,965 Stocks 147,820 123,062 101,520 Other long-term investments 83,158 97,335 138,414 Cash and short-term investments 22,100 47,625 32,816 Other 5,043 12,686 (650) ---------- ---------- ---------- Total 9,425,407 8,939,476 8,619,061 Less investment expenses 187,935 185,335 215,773 ---------- ---------- ---------- Net investment income before amortization of net IMR gains 9,237,472 8,754,141 8,403,288 Plus amortization of net IMR gains 87,254 65,438 153,249 ---------- ---------- ---------- Net investment income $9,324,726 $8,819,579 $8,556,537 ========== ========== ==========
Future rental income expected to be received during the next five years under existing real estate leases in effect as of December 31, 2002 is approximately $545,300 in 2003, $503,800 in 2004, $424,300, in 2005, $341,200 in 2006, and $286,400 in 2007. 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 7.57%, 7.69%, and 7.91% in 2002, 2001 and 2000, respectively. TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 69 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 -- (Continued) REALIZED CAPITAL GAINS AND LOSSES: For the years ended December 31, 2002, 2001 and 2000, the net realized capital gains/(losses) on sales, redemptions and writedowns of investments were as follows:
2002 2001 2000 ----------- --------- -------- Bonds $(1,130,208) $(173,653) $ 67,169 Mortgages (144,886) (31,806) (18,621) Real estate 52,076 64,557 (14,420) Stocks 16,838 64,677 29,163 Other long-term investments (421,168) 22,686 40,798 Cash and short-term investments 687 (1,043) 860 ----------- --------- -------- Total $(1,626,661) $ (54,582) $104,949 =========== ========= ========
Writedowns of investments resulting from impairments, which are considered to be other than temporary, and from mortgage foreclosures, reflected in the preceding table as realized capital (losses), were as follows:
2002 2001 2000 ----------- --------- --------- Other than temporary impairments: Bonds $(1,196,548) $(246,641) $ -- Mortgages (107,989) (25,882) (63,467) Real estate (18,367) -- (50,000) Stocks (86,595) -- -- Other long-term investments (429,326) (19,693) -- ----------- --------- --------- Total $(1,838,825) $(292,216) $(113,467) =========== ========= ========= Mortgage foreclosures $ -- $ -- $ (214) =========== ========= =========
Proceeds from sales and redemptions of long-term bond investments during 2002, 2001 and 2000 were approximately $22,142,400, $15,334,400, and $10,199,200, respectively. Gross gains of approximately $361,000, $234,600, and $187,100, and gross losses, excluding impairments considered to be other than temporary, of approximately $294,700, $161,600, and $120,000 were realized on these sales and redemptions during 2002, 2001 and 2000, respectively. UNREALIZED CAPITAL GAINS AND LOSSES: For the years ended December 31, 2002, 2001 and 2000, the net changes in unrealized capital gains/(losses) on investments, resulting in a net increase/(decrease) in the valuation of investments, were as follows:
2002 2001 2000 --------- --------- -------- Bonds $ 446,892 $(229,205) $(54,132) Mortgages 54,436 17,375 (70,888) Real Estate 96,166 29,638 (2,771) Stocks (108,912) 55,602 75,817 Other long-term investments (138,133) (447,676) 175,323 --------- --------- -------- Total $ 350,449 $(574,266) $123,349 ========= ========= ========
NOTE 5. SECURITIZATIONS When TIAA sells bonds and mortgage loans in a securitization transaction, it may retain interest-only strips, one or more subordinated tranches, equity interest, or servicing rights, all of which are retained interests in the securitized receivables. TIAA's ownership of the related retained interests in securitization transactions may be held directly by TIAA or indirectly through an investment subsidiary. The retained interests are associated with a Special Purpose Entity/Qualified Special Purpose Entities, ("SPE/QSPEs"), which are trusts or other legal entities that were formed for the sole purpose of acquiring and owning the underlying receivable assets and issuing the related debt and equity (i.e., the securitization transaction). The debt and equity issued by the SPE/QSPEs formed for the securitization transactions described below are non-recourse to TIAA. Investors in the securitizations have no recourse to TIAA's other assets if the loans that were securitized fail to pay when due. Gain or loss on a securitization transaction, 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 B- 70 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 -- (Continued) 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 2002, TIAA entered into two securitization transactions in which it sold bonds with a total principal balance of approximately $776,200 and recognized a gain of approximately $20,000. TIAA retained subordinated interests with a fair value of approximately $81,000 at the time the transactions closed. During 2001, TIAA entered into a securitization transaction in which it sold bonds with a total principal balance of approximately $1,500,000 and recognized a loss of approximately $5,800. TIAA retained subordinated interests with a fair value of approximately $870,000 at the time the transaction closed. The table below summarizes cash flows received from securitization trusts:
FOR THE YEARS ENDED DECEMBER 31, ------------------- 2002 2001 -------- -------- Proceeds from new securitizations $690,598 $601,984 Asset Management fees and Servicing fees: Received by TIAA 2,155 3,156 Received by TIAA's affiliates 1,778 -- Other cash flows received on retained interests 111,404 97,865
The following table summarizes TIAA's retained interests in securitized financial assets on December 31, 2002:
Sensitivity Analysis of Fair Value Assumptions Type of ----------------------------------- Issue Collateral Carrying Value Fair Value 10% Adverse 20% Adverse ----- ---------- -------------- ---------- ---------------- ---------------- 2002 Bonds $ 75,855 $ 78,223 $ (1,902) $ (3,832) 2001 Bonds 832,874 927,060 (34,502) (44,049) 2000 Bonds 130,268 138,807 (11,177) (21,122) 1999 Mortgages 408,673 448,606 (5,140) (10,223)
The fair values of the retained interests on December 31, 2002 were determined using either independent pricing services or analysts employed by TIAA. The key assumptions applied discount rates based upon the current yield curve, spreads, and expected cash flows specific to the type of interest retained for each securitization. The sensitivity analysis includes an adverse change in each assumption used to determine fair value. At December 31, 2002 and 2001, the carrying values of TIAA's investments in subsidiaries that held an interest in these securitizations were approximately $605,700 and $634,700, respectively. Total assets and liabilities of these TIAA subsidiaries were as follows:
2002 2001 ---------- ---------- Assets $1,108,623 $1,144,571 Liabilities 502,902 507,955 Non-admitted assets/other adjustments -- (1,933) ---------- ---------- Carrying value $ 605,721 $ 634,683 ========== ==========
TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 71 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 -- (Continued) The following table presents quantitative information about principal balances, delinquencies and net credit losses for total loans owned or managed by TIAA:
PRINCIPAL AMOUNT OF LOANS 60 DAYS OR MORE TOTAL PRINCIPAL AMOUNT OF LOANS PAST DUE NET CREDIT LOSS ------------------------------- --------------------- --------------------- AT DECEMBER 31, AT DECEMBER 31, ------------------------------------------------------- --------------------- TYPE OF LOAN 2002 2001 2002 2001 2002 2001 ------------ -------------- -------------- ---------- -------- ---------- -------- Bonds $102,298,471 $ 90,554,720 $1,036,626 $397,471 $1,199,226 $246,641 Mortgages 24,639,366 23,477,201 82,780 12,190 107,989 25,882 ------------ ------------ ---------- -------- ---------- -------- TOTAL LOANS MANAGED OR SECURITIZED 126,937,837 114,031,921 $1,119,406 $409,661 $1,307,215 $272,523 ========== ======== ========== ======== Less: Loans securitized 2,900,464 2,339,714 ------------ ------------ LOANS HELD IN PORTFOLIO $124,037,373 $111,692,207 ============ ============
NOTE 6. 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, 2002 and 2001, 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 B- 72 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 -- (Continued) of the amounts TIAA could have realized in a market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
ESTIMATED DECEMBER 31, 2002 NOTIONAL VALUE CARRYING VALUE FAIR VALUE ----------------- -------------- -------------- ------------ Assets Bonds $96,870,101 $101,982,024 Mortgages 23,968,793 26,675,433 Common Stocks 1,158,914 1,158,914 Preferred Stocks 1,025,412 1,043,444 Cash and short-term investments 1,787,873 1,787,873 Policy loans 495,251 495,251 Seed money investments 837,392 837,392 Liabilities Teachers Personal Annuity-Fixed Account 2,044,779 2,044,779 Other Financial Instruments Foreign currency swap contracts $1,725,263 (49,504) 18,935 Foreign currency forward swaps 391,654 (29,578) (25,711) Interest rate swap contracts 681,355 618 23,290 Swap options 198,600 (1,151) (6,627) Interest rate cap contracts 149,450 570 570 Credit default swap contracts 143,417 -- (3,171)
ESTIMATED DECEMBER 31, 2001 NOTIONAL VALUE CARRYING VALUE FAIR VALUE ----------------- -------------- -------------- ----------- Assets Bonds $87,013,371 $88,538,926 Mortgages 22,815,136 23,981,263 Common Stocks 1,225,461 1,225,461 Preferred Stocks 1,019,611 1,023,314 Cash and short-term investments 2,892,904 2,892,904 Policy loans 507,418 507,418 Seed money investments 325,569 325,569 Liabilities Teachers Personal Annuity-Fixed Account 1,739,230 1,739,230 Other Financial Instruments Foreign currency swap contracts $1,421,613 121,374 143,112 Foreign currency forward swaps 234,686 8,006 10,531 Interest rate swap contracts 565,855 -- (659) Swap options -- -- -- Interest rate cap contracts 75,650 474 70 Credit default swap contracts 130,000 -- (1,550)
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. TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 73 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 -- (Continued) The aggregate carrying values and estimated fair values of publicly traded and privately placed bonds at December 31, 2002 and 2001 are as follows:
2002 2001 -------------------------- ------------------------- CARRYING ESTIMATED CARRYING ESTIMATED VALUE FAIR VALUE VALUE FAIR VALUE ----------- ------------ ----------- ----------- Publicly traded bonds $65,453,501 $ 69,510,316 $55,673,764 $56,904,176 Privately placed bonds 31,416,600 32,471,708 31,339,607 31,634,750 ----------- ------------ ----------- ----------- Total $96,870,101 $101,982,024 $87,013,371 $88,538,926 =========== ============ =========== ===========
MORTGAGES: The fair values of mortgages are generally determined with the assistance of an independent pricing service utilizing a discounted cash flow methodology based on coupon rates, maturity provisions and assigned credit ratings. COMMON STOCKS, CASH AND SHORT-TERM INVESTMENTS, POLICY LOANS, AND SEED MONEY INVESTMENTS: The carrying values are reasonable estimates of their fair values. PREFERRED STOCKS: The fair values of preferred stocks are determined using quoted market prices or valuations from the NAIC. TEACHERS PERSONAL ANNUITY -- FIXED ACCOUNT: The carrying values of the liabilities are reasonable estimates of their fair values. 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 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 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. CREDIT DEFAULT SWAP CONTRACTS: The fair values of credit default swap contracts, which are used for asset replication purposes, are the estimated amounts that TIAA would receive/(pay) if the credit default swap contracts were liquidated at year-end. The fair value of credit default swap contracts for hedging purposes represents the net present value of the expected differences between the future premium payments and the market credit spreads reflecting the default risk of the underlying asset. The fair values of credit default swap contracts are estimated by external parties, including TIAA's counterparties, and such values are reviewed internally for reasonableness based on anticipated interest rates, estimated future cash flows, and anticipated credit market conditions. 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. B- 74 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 -- (Continued) COMMITMENTS TO EXTEND CREDIT OR PURCHASE INVESTMENTS: TIAA generally does not charge commitment fees on these agreements, and the related interest rates reflect market levels at the time of the commitments. INSURANCE AND ANNUITY CONTRACTS: TIAA's insurance and annuity contracts, other than the Teachers Personal Annuity -- Fixed Account disclosed above, entail mortality risks and are, therefore, exempt from the fair value disclosure requirements related to financial instruments. NOTE 7. OPERATING SUBSIDIARIES TIAA's operating subsidiaries primarily consist of TIAA-CREF Enterprises, Inc., ("Enterprises") and TIAA Financial Services, LLC, ("TFS"), which are wholly-owned subsidiaries of TIAA. Enterprises consists of TIAA-CREF Life Insurance Company, Inc., ("TIAA-CREF Life"), Teachers Advisors, Inc., ("Advisors"), Teachers Personal Investors Services, ("TPIS"), TIAA-CREF Trust Company, FSB, ("Trust Company"), TIAA-CREF Tuition Financing, Inc., ("TFI"), and TCT Holdings, Inc., ("TCT"), which are wholly-owned subsidiaries of Enterprises. TFS consists of TIAA Global Markets, Inc., ("TGM"), TIAA Advisory Services, LLC, ("TAS"), and TIAA Realty Capital Management, LLC, ("TRCM"). At December 31, 2002 and 2001, the carrying values of TIAA's equity interests in unconsolidated subsidiaries, were approximately $377,800 and $214,200, respectively. Total assets, liabilities and net/(loss) of operating subsidiaries at December 31, 2002 and 2001, and for the years then ended, were approximately as follows:
2002 2001 ---------- ---------- Assets $3,240,453 $1,011,447 Liabilities 2,876,479 792,235 Non-admitted assets/other adjustments 13,863 (5,041) ---------- ---------- Carrying value $ 377,837 $ 214,171 ========== ========== Net /(loss) $ (51,858) $ (59,625) ========== ==========
As of December 31, 2001, TIAA had an Adjustable Rate Payment-in-Kind Note Receivable from Enterprises in the principal amount plus accrued interest of $148,800. On August 1, 2002, TIAA made a capital contribution to Enterprises, and Enterprises simultaneously repaid the outstanding balance of the note (including accrued interest) of $197,800. TIAA had a revolving line of credit extended to TGM, with an outstanding principal amount plus accrued interest of $66,500 at December 31, 2002. TIAA had a net amount due from operating subsidiaries of $81,700 and $28,200, as of December 31, 2002 and 2001, respectively. NOTE 8. 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 Securities and Exchange Commission, ("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. Other than the guarantees disclosed in Note 16, TIAA does not make any guarantees to policyholders on its separate accounts. Both accounts offer full or partial withdrawal at market value with no surrender charges. The assets and liabilities of these accounts (which represent participant account values) are generally carried at market value (directly held real estate is carried at appraised value). TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 75 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 -- (Continued) NOTE 9. MUTUAL FUNDS As of December 31, 2002 and 2001, TIAA's investment in the affiliated mutual funds described below was approximately $837,400 and $325,600, respectively. This amount is reported in the caption "other long term investments" in the accompanying balance sheet. Shares of the mutual funds are distributed by TPIS and investment advisory services are provided by Advisors. TIAA-CREF Mutual Funds, ("the Retail Funds"), consist of eleven investment funds which are offered to the general public. As of December 31, 2002, the Retail Funds had approximately $2,800,000 in net assets. TIAA-CREF Institutional Mutual Funds, ("the Institutional Funds"), a family of twenty-three funds, are currently used primarily as investment vehicles for the TFI tuition savings business and the Trust Company. As of December 31, 2002, the Institutional Funds had approximately $3,900,000 in net assets. TIAA-CREF Life Funds, ("the Life Funds"), a family of eight funds, are utilized by TIAA-CREF Life as funding vehicles for its variable annuity and variable insurance products. As of December 31, 2002, the Life Funds had approximately $297,700 in net assets. NOTE 10. 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 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 $568,300, $555,100, and $561,400 in 2002, 2001 and 2000, respectively, are not included in the statements of operations and had no effect on TIAA's operations. Advisors provides investment advisory services for VA-1 in accordance with an Investment Management Agreement between TIAA, Advisors and VA-1. TIAA provides all administrative services for VA-1 in accordance with an Administrative Services Agreement with VA-1. TPIS distributes contracts for VA-1. TIAA provides administrative services to the Trust Company, under an Administrative Services Agreement. Expense charges for administrative services provided by TIAA to the Trust Company are billed quarterly. All services necessary for the operation of REA are provided, at cost, by TIAA and Services. TIAA provides investment management services for REA. Distribution and administrative services are provided in accordance with a Distribution and Administrative Services Agreement between REA and Services. TIAA and Services receive management fee payments from REA on a daily basis according to formulas established each year with the objective of keeping the management fees as close as possible to REA's actual expenses. Any differences between actual expenses and daily charges are adjusted quarterly. All services necessary for the operation of the New York State College Choice Tuition Savings Program are provided by TIAA in accordance with a Management Agreement between TIAA, the Comptroller of the State of New York and the New York Higher Education Services Corporation. TPIS distributes contracts for the Tuition Savings Program in accordance with a Distribution Agreement between TIAA and TPIS. TIAA provides investment services for TIAA-CREF Life, in accordance with an Investment Management Agreement between TIAA and TIAA-CREF Life. Administrative services for TIAA-CREF Life are provided by TIAA in accordance with an Administrative Services Agreement between TIAA and TIAA-CREF Life. B- 76 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 -- (Continued) NOTE 11. FEDERAL INCOME TAXES TIAA is a non-profit organization, and through December 31, 1997, was exempt from federal income taxation under the Internal Revenue Code, ("Code"). Any non-pension 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. The components of TIAA's net deferred tax asset were as follows:
2002 ---------- Gross deferred tax assets $4,115,184 Gross deferred tax liabilities 3,833 Deferred tax assets non-admitted 3,274,669 Change in non-admitted deferred tax assets $3,274,669
TIAA's gross deferred tax assets were primarily attributable to differences between tax basis and statutory basis reserves, the provision for policyholder dividends payable in the following year, and net operating loss carryforwards. Gross deferred tax liabilities were primarily due to investment income due and accrued. TIAA had no deferred tax liabilities that have not been recognized. The components of TIAA's income taxes incurred and the change in deferred tax assets and liabilities were as follows:
FOR THE YEAR ENDED DECEMBER 31, 2002 ------------------ Current tax/(benefit) $(20,885) Change in deferred tax assets 840,515 Change in deferred tax liabilities 3,833 -------- Net change in deferred taxes $836,682
TIAA was subject to the domestic federal statutory rate of 35%. TIAA's effective federal tax rate was (2.5%) for 2002, 3.3% for 2001 and 1.8% for 2000. The lower effective rate was attributable to differences between statutory income and taxable income, as is illustrated below:
FOR THE YEARS ENDED DECEMBER 31, --------------------------------- 2002 2001 2000 -------- --------- ---------- Net gain from operations 823,318 $ 816,314 $1,302,960 Statutory rate 35% 35% 35% -------- --------- ---------- Tax at statutory rate $288,161 $ 285,710 $ 456,036 Market discount deferred (63,876) (41,877) (28,067) Dividends from subsidiaries (49,675) (18,749) (112,167) Prepayment premiums & mortgage writedowns (57,234) (17,422) (3,500) Amortization of interest maintenance reserve (30,539) (22,903) (53,637) Differences between tax & statutory reserves (19,332) 23,565 30,820 Net income from partnerships (16,325) 14,308 (9,996) Adjustment to policyholder dividend liability 10,827 58,468 54,758 Alternative minimum tax -- 18,114 19,822 Effect of tax law change on prior year's tax (18,114) -- -- Other adjustments (18,847) 35,232 15,238 Net operating loss carryforward utilized (45,901) (307,662) (345,259) -------- --------- ---------- Federal income tax expense/(benefit) $(20,855) $ 26,784 $ 24,048 ======== ========= ==========
TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 77 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 -- (Continued) TIAA reported a tax loss for 2001, and expects to report a tax loss for 2002 as a result of net operating losses attributable to required increases in policy and contract reserves. These reserve increases will reverse over time, thereby increasing TIAA's taxable income in future years. As of December 31, 2002, TIAA had operating loss carryforwards of $4,000,000, as follows:
YEAR INCURRED OPERATING LOSS YEAR OF EXPIRATION ------------- -------------- ------------------ 1998 $3,985,275 2013 1999 38,827 2014
TIAA did not incur federal income taxes in the current or preceding years that are available for recoupment in the event of future net losses Beginning with 1998, TIAA has filed a consolidated federal income tax return with its subsidiary affiliates. The consolidated group has entered into a tax sharing agreement that follows the current reimbursement method, whereby members of the 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. Amounts due from the subsidiaries for federal income taxes were $2,700 and $3,300 at December 31, 2002 and 2001, respectively. NOTE 12. 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 $35,100, $31,000, and $25,500 in 2002, 2001 and 2000, 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 $44,900 at December 31, 2002. The postretirement benefit obligation for non-vested employees was approximately $49,700 at December 31, 2002. The unrecognized transition obligation was $7,800 and $8,600 at December 31, 2002 and 2001, respectively. The cost of such benefits reflected in the accompanying statements of operations was approximately $3,300, $3,300, and $2,900 for 2002, 2001 and 2000, respectively. The discount rate used in determining the postretirement benefit obligations was 6.75% per year and the medical care cost trend rate was 9.0% per year in 2002, decreasing by 0.5%-1.0% in each future year, to an ultimate rate of 5.0% per year in 2008. As the plan is not pre-funded, the value of plan assets is zero. The accrued postretirement benefit liability was $39,500 and $35,000 as of December 31, 2002 and 2001, respectively. The medical care cost trend rate assumption has a significant effect on the amounts reported. To illustrate, increasing the assumed medical care cost trend rates by one percentage point in each year would increase the postretirement benefit obligation as of December 31, 2002 by approximately $7,000 and the eligibility cost and interest cost components of net periodic postretirement benefit expense for 2002 by approximately $1,100. TIAA also maintains a non-qualified deferred compensation plan for non-employee trustees and members of the TIAA Board of Overseers. The plan provides an award equal to 50% of the annual stipend 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. B- 78 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 -- (Continued) NOTE 13. POLICY AND CONTRACT RESERVES At December 31, 2002 and 2001, TIAA's general account annuity reserves are summarized as follows:
2002 2001 ----------------------- ----------------------- AMOUNT PERCENT AMOUNT PERCENT ------------ ------- ------------ ------- Subject to discretionary withdrawal: At book value without adjustment $ 18,104,197 15.6% $ 13,914,090 13.1% At market value -- -- -- -- Not subject to discretionary withdrawal 98,202,616 84.4 92,243,761 86.9 ------------ ----- ------------ ----- Total annuity reserves 116,306,813 100.0% 106,157,851 100.0% ===== ===== Reconciliation to total policy & contract reserves shown on the balance sheet: Reserves on other life policies & contracts 405,404 445,385 Reserves on accident & health policies 201,226 760,230 ------------ ------------ Total policy and contract reserves $116,913,443 $107,363,466 ============ ============
As of December 31, 2002, the reserve to cover premium deficiencies in certain group disability insurance blocks of business was approximately $1,900 on a gross basis. The reserve to cover future claims settlement expenses for the group disability business was approximately $23,000 on a gross basis. However, both of these reserves have been completely reinsured, and are therefore $0 on a net basis at December 31, 2002. TIAA continues to hold the additional long-term care insurance reserves in the amount of $10,000 that were established in accordance with regulatory actuarial asset and reserve adequacy requirements on December 31, 2001. On December 31, 2002, additional reserves in the amount of approximately $800 were established to cover premium deficiencies in the individual major medical block of business. On January 1, 2001, in accordance with statutory accounting requirements, additional reserves in the amount of approximately $22,300 were established to cover premium deficiencies in certain group disability insurance blocks of business. At December 31, 2001, the reserve was approximately $10,000. In addition, at December 31, 2001, additional reserves amounting to approximately $22,000 were established to cover future claims settlement expenses for the group disability insurance business, and additional long-term care insurance reserves in the amount of $10,000 were established in accordance with regulatory actuarial asset and reserve adequacy requirements. NOTE 14. REINSURANCE TIAA entered into an indemnity reinsurance agreement dated October 1, 2002 with Standard Insurance Company, ("Standard"), to reinsure on a 100% coinsurance basis all the liabilities associated with its group life and group disability blocks of business. The agreement was approved by the Department on September 30, 2002. At closing Standard paid TIAA $75,000 as a ceding commission, and TIAA transferred cash equal to the liabilities of $723,100 to Standard. The ceding commission was recorded as an increase in surplus, net of direct expenses of $8,100 associated with the transaction pursuant to SSAP #61 -- Life, Deposit-Type and Accident and Health Reinsurance, SSAP #24 -- Discontinued Operations and Extraordinary Items, and Appendix 791 -- Life and Health Reinsurance Agreements. The net ceding commission of $66,900 will be amortized into income in subsequent periods. NOTE 15. COMMERCIAL PAPER/LIQUIDITY FACILITY TIAA began issuing commercial paper in May 1999 under a maximum authorized program of $2,000,000. TIAA had outstanding obligations at December 31, 2002 and 2001 of $100,600 and $0, respectively. Interest expense totaled approximately $26, $0, and $50,500 during 2002, 2001 and 2000, respectively. The interest rate on outstanding obligations was 1.35%. TIAA maintains a short-term revolving credit liquidity facility of approximately $1,000,000 to support the commercial paper program. This liquidity facility has not been utilized. TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 79 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 -- (Continued) NOTE 16. CONTINGENCIES AND GUARANTEES SUBSIDIARY AND AFFILIATE GUARANTEES: TIAA guarantees the debt obligations of TGM. TGM aggregate debt obligations to third parties as of December 31, 2002 was $1,011,800. The carrying value of TGM's total assets at December 31, 2002, that can be used to satisfy TGM's obligations was $1,181,200. TIAA has a financial support agreement with TIAA-CREF Life. Under this agreement, TIAA will provide support so that TIAA-CREF Life will have the greater of capital and surplus of $250,000 or the amount of capital and surplus necessary to maintain TIAA-CREF Life's capital and surplus at a level not less than 150% of the NAIC Risk Based Capital model or such other amount as necessary to maintain TIAA-CREF Life's financial strength rating, at least the same as TIAA's ratings at all times. This agreement is not an evidence of indebtedness or an obligation or liability of TIAA and does not provide any creditor of TIAA-CREF Life with recourse to TIAA. TIAA made a $10,000 additional capital contribution to TIAA-CREF Life during 2002 pursuant to this agreement. TIAA-CREF Life maintains a $100,000 unsecured credit facility arrangement with TIAA, a portion of which is on a committed basis. As of December 31, 2002, $30,000 of this facility was maintained on a committed basis for which TIAA-CREF Life paid a commitment fee of 3 bps. In 2002, there were two drawdowns totaling $8,600 that were repaid by December 31, 2002. TIAA also provides guarantees to the CREF accounts, for which it is compensated, for certain mortality and expense risks pursuant to an Immediate Annuity Purchase Rate Guarantee Agreement. TIAA provides a $1,000,000 uncommitted line of credit to CREF, TIAA-CREF Mutual Funds and TIAA-CREF Institutional Mutual Funds. Loans under this revolving credit facility have a maximum of 60 days and are made solely at the discretion of TIAA to fund shareholder redemption requests or other temporary or emergency needs of the Funds. It is the intent of TIAA and the Funds to use this facility as a supplemental liquidity facility, which would only be used after the Funds have exhausted the availability of its current $2,250,000, committed credit facility that it maintains with a group of banks. SEPARATE ACCOUNT GUARANTEES: TIAA provides mortality and expense guarantees to the VA-1, for which it is compensated. TIAA guarantees that at death, the total death benefit payable from the fixed and variable accounts will be at least a return of total premiums paid less any previous withdrawals. TIAA also guarantees that expense charges to VA-1 participants will never rise above the maximum amount stipulated in the contract. TIAA provides mortality, expense and liquidity guarantees to the REA, and is compensated for these guarantees. TIAA guarantees that once REA participants begin receiving lifetime annuity income benefits, monthly payments will never be reduced as a result of adverse mortality experience. TIAA also guarantees that expense charges to REA participants will never rise above the maximum amount stipulated in the contract. TIAA provides REA with a liquidity guarantee to ensure it has funds available to meet participant transfer or cash withdrawal requests. If REA cannot fund participant requests, TIAA's general account will fund them by purchasing Accumulation Units. TIAA guarantees that participants will be able to redeem their Accumulation Units at their then current daily net asset value. OTHER CONTINGENCIES AND GUARANTEES: Pursuant to a forward sale agreement with Lehman Brothers International, in connection with a future securitization transaction, TIAA is obligated to bear the pricing risk of the underlying warehoused securities and associated hedges entered into by Lehman Brothers, in the event that the proposed securitization transaction fails to close. TIAA also is entitled to earn the difference between the financing rate and the interest accrued on the warehoused securities during the warehousing period, known as the carry. TIAA anticipates that the transaction will close in early 2003. At December 31, 2002, the potential net loss on the related securities and hedges was $6,100 and $5,100, respectively. TIAA was also entitled to a warehouse carry amount of $2,200 as of December 31, 2002. TIAA replicates investment grade corporate bonds in conjunction with US Treasury securities by writing credit default swaps to earn a premium by issuing insurance to the buyer of default protection. The fair value of credit default swaps at December 31, 2002 was ($4,100). In the ordinary conduct of certain of its investment activities, TIAA provides standard indemnities covering a variety of potential exposures. For instance, TIAA provides indemnifications in connection with site access agreements relating to due diligence review for real estate acquisitions; and TIAA provides indemnification to underwriters in connection with the issuance of securities by or on behalf of TIAA, or its subsidiaries. It is the opinion of TIAA's management that such indemnities do not materially affect TIAA's financial position, results of operations or liquidity. B- 80 STATEMENT OF ADDITIONAL INFORMATION -- TIAA Separate Account VA-1 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA -------------------------------------------------------------------------------- Notes to Statutory -- Basis Financial Statements (amounts in thousands) DECEMBER 31, 2002 -- (Continued) Subsequent to filing its annual statement with the Department, TIAA recorded an additional liability of $35,000 for the aggregate amount of various contingencies, which is reflected in these financial statements. It is the opinion of management that any liabilities which might arise from litigation, state guaranty fund assessments, tax 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. Unless specifically stated, TIAA is unable to determine the maximum potential future payments under the above stated guarantees and indemnifications. NOTE 17. SUBSEQUENT EVENTS In January 2003, TGM issued $1,250,000 of senior notes due in 2006-2008. This debt is rated AAA by Standard & Poor's Rating Services, Aaa by Moody's Investors Services, Inc., and AAA by Fitch Ratings, and is guaranteed by TIAA. TIAA Separate Account VA-1 -- STATEMENT OF ADDITIONAL INFORMATION B- 81 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...................................................................... 7
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-18 Report of the Audit Committee......................................................................... B-19 Audited Financial Statements: Statement of Assets and Liabilities.............................................................. B-20 Statement of Operations.......................................................................... B-21 Statements of Changes in Net Assets.............................................................. B-22 Notes to Financial Statements.................................................................... B-23 Report of Independent Auditors................................................................... B-25 Statement of Investments......................................................................... B-26 (2) TIAA Report of Management Responsibility................................................................... B-51 Report of the Audit Committee......................................................................... B-52 Report of Independent Auditors........................................................................ B-53 Statutory-Basis Financial Statements: Balance Sheets................................................................................... B-54 Statements of Operations......................................................................... B-55 Statements of Changes in Capital and Contingency Reserves........................................ B-56 Statements of Cash Flows......................................................................... B-57 Notes to Statutory-Basis Financial Statements.................................................... B-58
(b) Exhibits (1) Resolution of the Board of Trustees of TIAA establishing the Registrant (1) (2) (A) Rules and Regulations of the Registrant (2) (B) Amendment to the Rules and Regulations of the Registrant, adopted as of October 8, 2001. (9) (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* (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) (A) Registrant's Policy Statement on Personal Trading (7) (B) TIAA Investments Policy Statement on Personal Trading * (C) CREF Investments and Non-Investment Access Persons Policy Statement on Personal Investing * ------------ * 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)). (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. C-2 (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. (8) Previously filed in Post-effective Amendment No. 7 to Form N-3 dated March 29, 2001 (File No. 33-79124) and incorporated herein by reference. (9) Previously filed in Post-effective Amendment No. 8 to Form N-3 dated April 1, 2002 (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 --------------------------------------------------------------------------------------------------------------------------- Martin E. Galt, III Executive Vice President Executive Vice President TIAA-CREF and President 730 Third Avenue TIAA-CREF Investment New York, New York 10017-3206 Products Herbert M. Allison, Jr. Trustee, Chairman, President President and Chief TIAA-CREF and Chief Executive Officer Executive Officer 730 Third Avenue New York, New York 10017-3206 Elizabeth E. Bailey Trustee John C. Hower Professor of Public Policy and Management The Wharton School University of Pennsylvania Suite 3100 Steinberg-Dietrich Hall Philadelphia, Pennsylvania 19104-6372 Willard T. Carleton Trustee Donald R. Diamond Professor of Finance Emeritus College of Business and Public Administration University of Arizona 4915 Camino Antonio Tucson, Arizona 85718-6005 Robert C. Clark Trustee Dean and Royall Professor of Law Harvard Law School Harvard University Griswold 200 Cambridge, Massachusetts 02138
C-3
POSITIONS AND OFFICES POSITIONS AND OFFICES NAME AND PRINCIPAL BUSINESS ADDRESS WITH INSURANCE COMPANY WITH REGISTRANT --------------------------------------------------------------------------------------------------------------------------- Estelle A. Fishbein Trustee Vice President and General Counsel The Johns Hopkins University 113 Garland Hall Baltimore, Maryland 21218 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 Marjorie Fine Knowles Trustee Professor of Law Georgia State University College of Law P.O. Box 4037 Atlanta, Georgia 30302-4037 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. 95 Hupi Road P.O. Box 538 Monterey, Massachusetts 01245 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. and Moran Transportation Company, Inc.; Vice Chairman, Interlake Steamship Company One Landmark Square, Suite 710 Stamford, Connecticut 06901-2608
C-4
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 Offit Hall Capital Management L.L.C. 65 East 55th Street, 29th Floor New York, New York 10022 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 Scott Budde Director, TIAA-CREF Equity Portfolio 730 Third Avenue Analysis 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 Drew J. Collins Senior Managing TIAA-CREF Director 730 Third Avenue New York, New York 10017-3206 Matthew Daitch Actuary Assistant Actuary TIAA-CREF 730 Third Avenue New York, New York 10017-3206 Paul L. Davis Senior Managing Senior Managing TIAA-CREF Director, Quantitative Director 730 Third Avenue Investments New York, New York 10017-3206
C-5
POSITIONS AND OFFICES POSITIONS AND OFFICES NAME AND PRINCIPAL BUSINESS ADDRESS WITH INSURANCE COMPANY WITH REGISTRANT --------------------------------------------------------------------------------------------------------------------------- Hans L. 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 President TIAA-CREF President, CREF 730 Third Avenue Investments New York, New York 10017-3206 James G. Fleischmann Senior Managing TIAA-CREF Director 730 Third Avenue 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 Chief 730 Third Avenue and Planning Financial Officer New York, New York 10017-3206 Stewart P. Greene Chief Counsel and Chief Counsel and TIAA-CREF Assistant Secretary Assistant Secretary 730 Third Avenue New York, New York 10017-3206 Linda C. Guyden Vice President and TIAA-CREF Auditor 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, Financial 730 Third Avenue Operations and Facilities 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 Abby L. Ingber Senior Counsel and Senior Counsel and TIAA-CREF Assistant Secretary Assistant Secretary 730 Third Avenue
C-6
POSITIONS AND OFFICES POSITIONS AND OFFICES NAME AND PRINCIPAL BUSINESS ADDRESS WITH INSURANCE COMPANY WITH REGISTRANT --------------------------------------------------------------------------------------------------------------------------- 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 President TIAA-CREF and Chief Actuary 730 Third Avenue New York, New York 10017-3206 Edward J. Leahy Director, Corporate Tax Assistant Secretary TIAA-CREF 730 Third Avenue New York, New York 10017-3206 Thomas K. Lynch Second Vice President, Second Vice President TIAA-CREF Investment Reporting 730 Third Avenue New York, New York 10017-3206 Sachie Makishi Managing Director TIAA-CREF 730 Third Avenue New York, New York 10017-3206 Carlton Martin Managing Director TIAA-CREF 730 Third Avenue New York, New York 10017-3206 Gerald K. McCullough Vice President and Controller Vice President TIAA-CREF 730 Third Avenue New York, New York 10017-3206 Frances Nolan Executive Vice TIAA-CREF President, Retirement 730 Third Avenue Services Administration New York, New York 10017-3206 Susan Pestrichello Vice President, TIAA-CREF CREF Investment Acounting 730 Third Avenue New York, New York 10017-3206 Bertram L. Scott Executive Vice President and TIAA-CREF President, TIAA Life Insurance 730 Third Avenue Company New York, New York 10017-3206
C-7
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 Christopher F. Semenuk Managing Director TIAA-CREF 730 Third Avenue 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 J. Shallcross Executive Vice Executive Vice President TIAA-CREF President, TIAA-CREF 730 Third Avenue Marketing New York, New York 10017-3206 David A. Shunk Executive Vice TIAA-CREF President, Consulting 730 Third Avenue Services New York, New York 10017-3206 Lisa Snow Vice President and Chief Vice President and TIAA-CREF Counsel, Corporate Chief Counsel, 730 Third Avenue Law Corporate Law and New York, New York 10017-3206 Secretary Robert J. Sohr Second Vice President TIAA-CREF and Director, Securities 730 Third Avenue Lending/Corporate New York, New York 10017-3206 Governance John A. Somers Executive Vice Executive Vice President TIAA-CREF President, TIAA 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 and Managing Director TIAA-CREF Vice President, Money 730 Third Avenue Market/ Inflation Linked New York, New York 10017-3206 Bonds Susan E. Ulick Senior Managing TIAA-CREF Director 730 Third Avenue
C-8
POSITIONS AND OFFICES POSITIONS AND OFFICES NAME AND PRINCIPAL BUSINESS ADDRESS WITH INSURANCE COMPANY WITH REGISTRANT New York, New York 10017-3206 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 Nancy Wadelton Managing Director TIAA-CREF 730 Third Avenue 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 Mary Ann Werner Executive Vice President Executive Vice President TIAA-CREF and President, TIAA 730 Third Avenue 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 A. Wolf Executive Vice President TIAA-CREF and President, TIAA 730 Third Avenue Retirement Services New York, New York 10017-3206 Willard T. Wolff Managing Director TIAA-CREF 730 Third Avenue New York, New York 10017-3206
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: Bethesda ARC, LLC JV Minnesota One, Inc. BT Properties, Inc. JV North Carolina One, Inc. College Credit Trust JWL Properties, Inc. DAN Properties, Inc. Liberty Place Retail, Inc. ETC Repackaging, Inc. Liberty Place Retail II, Inc. Illinois Teachers Properties, LLC Light St. Partners, LLP JV Florida One, Inc. M.O.A. Enterprises, Inc. JV Florida Four, Inc. MOA Investors I, Inc. JV Georgia One, Inc. NCDC Funding, LLC
C-9 ND Properties, Inc. 730 Texas Forest Holdings, Inc. Savannah Teachers Properties, Inc. 485 Properties, LLC T114 Properties, Inc. 2 LPPA, LLC T-Investment Properties Corp. T-Land Corp. TCT Holdings, Inc. Teachers Advisors, Inc. Teachers Boca Properties II, Inc. Teachers Boca Properties III, Inc. Teachers Concourse, LLC Teachers Mayflower, LLC Teachers Michigan Properties, Inc. Teachers Pennsylvania Realty, Inc. Teachers Personal Investors Services, Inc. Teachers Properties, Inc. Teachers REA, LLC Teachers REA II, LLC Teachers REA III, LLC Teachers REA IV, LLC Teachers Realty Corporation Teachers West, LLC Ten Westport I, LLC TEO-NP, LLC Three Trails Town Center, LLC TIAA Advisory Services, LLC TIAA Bay Isle Key II, LLC TIAA Bay Isle Key II Member, LLC TIAA CMBS I, LLC TIAA Diamond Investor, LLC TIAA European Funding Trust TIAA Financial Services, LLC TIAA Florida Mall, LLC TIAA Franklin Square, LLC TIAA Global Markets, Inc. TIAA Lakepointe, LLC TIAA Miami International Mall, LLC TIAA Realty, Inc. TIAA Realty Capital Management, LLC TIAA Retail Commercial, LLC TIAA SF One, LLC TIAA The Reserve II, LLC TIAA The Reserve II Member, LLC TIAA Tri-State, LLC TIAA Timberlands I, LLC TIAA Timberlands II, LLC TIAA West Town Mall, LLC TIAA-CREF Enterprises, Inc. TIAA-CREF Individual & Institutional Services, Inc. TIAA-CREF Investment Management, LLC TIAA-CREF Life Insurance Company TIAA-CREF Trust Company, FSB TIAA-CREF Tuition Financing, Inc. TIAA-Fund Equities, Inc. Twenty West Port I, LLC Washington Teachers Properties II, Inc. WRC Properties, Inc.
C-10 Subsidiaries of Teachers Properties, Inc.: Rouse-Teachers Holding Company, a Nevada Corporation Rouse-Teachers Land Holdings, Inc., a Maryland Corporation TPI Housing, Inc., a Delaware Corporation 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) Light St. Partners, LLP, a Maryland Limited Liability Partnership (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) TCT Holdings, Inc. owns 100% of the stock of TIAA-CREF Trust Company, FSB . C) Teachers Properties, Inc. owns 100% of the stock of TPI Housing, Inc. and 95% of the stock of Rouse-Teachers Holding Company. Rouse-Teachers Holding Company owns 100% of the stock of Rouse-Teachers Land Holdings, Inc. D) ND Properties, Inc. wholly or partially owns stock of the following foreign entities: IMOR, S.A., a Portuguese corporation, ND Falkirk, Ltd., a UK entity, SAS La Defense, societe par action simplifee, SAS Iena, societe par action simplifee, and SAS Roosevelt, societe par action simplifee, all French entities, Salhouse Road Sprowston No. 1 Limited and Salhouse Road Sprowston No. 2 Limited, both UK entities, TIAA Lux 1, Societe a responsabilite limitee, TIAA Lux 2, Societe a responsabilite limitee, and TIAA Lux 3, Societe a responsabilite limitee, all Luxemborg entities. (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. C-11 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 February 28, 2003, there were 31,842 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. 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. C-12 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 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-13 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 April, 2003. TIAA SEPARATE ACCOUNT VA-1 By: /s/ Martin E. Galt, III --------------------------- Martin E. Galt, III Executive Vice 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 Executive Vice President (Principal April 29, 2003 -------------------------- Executive Officer) Martin E. Galt, III /s/ Richard L. Gibbs Executive Vice President and Chief April 29, 2003 -------------------------- Financial Officer (Principal Financial and Richard L. Gibbs Accounting Officer)
C-14
SIGNATURE OF TRUSTEE DATE SIGNATURE OF TRUSTEE DATE -------------------- ---- -------------------- ---- /s/ Martin J. Gruber 4/29/03 /s/ Nestor V. Santiago 4/29/03 -------------------- ---------------------- Martin J. Gruber Nestor V. Santiago /s/ Nancy L. Jacob 4/29/03 /s/ Maceo K. Sloan 4/29/03 ------------------- -------------------- Nancy L. Jacob Maceo K. Sloan /s/ Bevis Longstreth 4/29/03 -------------------- -------------------- Bevis Longstreth Robert W. Vishny ____________________ /s/ Martin L.Leibowitz 4/29/03 Stephen A. Ross ---------------------- Martin L. Leibowitz
C-15 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 April, 2003. 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/ Herbert M. Allison, Jr. Chairman, President, and Chief April 29, 2003 --------------------------- Executive Officer (Principal Executive and Herbert M. Allison, Jr. Financial Officer) /s/ Martin L. Leibowitz Vice Chairman and Chief Investment Officer April 29, 2003 --------------------------- (Principal Investment Officer) Martin L. Leibowitz /s/ Richard L. Gibbs Executive Vice President (Principal Accounting April 29, 2003 --------------------------- Officer) Richard L. Gibbs
C-16
SIGNATURE OF MANAGER DATE SIGNATURE OF MANAGER DATE -------------------- ---- -------------------- ---- /s/ Elizabeth E. Bailey 4/29/03 /s/ Robert M. O'Neil 4/29/03 ------------------------- ---------------------- Elizabeth E. Bailey Robert M. O'Neil /s/ Willard T. Carleton 4/29/03 /s/ Leonard S. Simon 4/29/03 ------------------------- ---------------------- Willard T. Carleton Leonard S. Simon /s/ Robert C. Clark 4/29/03 /s/ Ronald L. Thompson 4/29/03 ------------------------- ---------------------- Robert C. Clark Ronald L. Thompson /s/ Paul R. Tregurtha 4/29/03 ________________________ --------------------- Estelle A. Fishbein Paul R. Tregurtha /s/ Ruth Simms Hamilton 4/29/03 /s/ William H. Waltrip 4/29/03 ------------------------- ---------------------- Ruth Simms Hamilton William H. Waltrip /s/ Marjorie Fine Knowles 4/29/03 /s/ Roaslie J. Wolf 4/29/03 ------------------------- ------------------- Marjorie Fine Knowles Rosalie J. Wolf
C-17 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------ ---------------------- 8(A) Charter of TIAA, as amended 8(B) Bylaws 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 Schedule of Computation of Performance Information 17(B) TIAA Investments Policy Statement on Personal Trading 17(C) CREF Investments and Non-Investment Access Persons Policy Statement on Personal Investing
C-18