-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JV24zf04tMieA2LbmNzV5qFfLacokELQuZ/wIRUX9G6rg9xBvgaj1sohG9qxVT2K z7gmd7zTgn8sEXWLfNMZyw== 0000950146-99-000722.txt : 19990403 0000950146-99-000722.hdr.sgml : 19990403 ACCESSION NUMBER: 0000950146-99-000722 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 18 FILED AS OF DATE: 19990401 EFFECTIVENESS DATE: 19990401 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TIAA SEPARATE ACCOUNT VA 1 CENTRAL INDEX KEY: 0000923524 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 033-79124 FILM NUMBER: 99585738 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-08520 FILM NUMBER: 99585739 BUSINESS ADDRESS: STREET 1: 730 THIRD AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 MAIL ADDRESS: STREET 2: 730 THIRD AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 485BPOS 1 N-3 TIAA SEPARATE ACCOUNT VA-1, P-E AMENDMENT 5 As filed with the Securities and Exchange Commission on April 1, 1999 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. 5 [X] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X] Amendment No. 8 [X] (Check appropriate box or boxes.) TIAA SEPARATE ACCOUNT VA-1 --------------------------- (Exact Name of Registrant) TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA ------------------------------------------------------- (Name of Insurance Company) 730 Third Avenue New York, New York 10017-3206 --------------------------------- (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: Peter C. Clapman, 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 this filing It is proposed that this filing will become effective (check appropriate box) |X| immediately upon filing pursuant to paragraph (b) |_| on (date) 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. CROSS REFERENCE SHEET --------------------- Showing Location of Information Required by Form N-3 in Part A (Prospectus) and Part B (Statement of Additional Information) of the Registration Statement PART A (PROSPECTUS)
Item of Form N-3 Part A (Prospectus) Caption - - ----------------- --------------------------- 1. Cover Page . . . . . . . . . . . . . . . . . . . . . . Cover Page 2. Definitions . . . . . . . . . . . . . . . . . . . . . Definitions 3. Synopsis . . . . . . . . . . . . . . . . . . . . . . . Summary 4. Condensed Financial Information . . . . . . . . . . . Condensed Financial Information; Performance Information 5. General Description of Registrant and Insurance Company . . . . . . . . . . . . . . . . Teachers Insurance and Annuity Association of America; The Separate Account; Investment Practices 6. Management . . . . . . . . . . . . . . . . . . . . . . Management and Investment Advisory Arrangements 7. Deductions and Expenses . . . . . . . . . . . . . . . The Contract (Charges) 8. General Description of Variable Annuity Contracts . . . . . . . . . . . . . . . . . . Adding, Closing, or Substituting Portfolios; The Contract; Voting Rights; General Matters 9. Annuity Period . . . . . . . . . . . . . . . . . . . . The Contract (The Annuity Period; Income Options) 10. Death Benefit. . . . . . . . . . . . . . . . . . . . . The Contract (Death Benefits) 11. Purchases and Contract Value . . . . . . . . . . . . . Valuation of Assets; The Contract (Remitting Premiums; Accumulation Units); Distribution of the Contracts 12. Redemptions . . . . . . . . . . . . . . . . . . . . . The Contract (Remitting Premiums; Cash Withdrawals; General Considerations for All Transfers and Cash Withdrawals) 13. Taxes . . . . . . . . . . . . . . . . . . . . . . . . The Contract (Tax Issues); Federal Income Taxes 14. Legal Proceedings . . . . . . . . . . . . . . . . . . Legal Proceedings 15. Table of Contents of the Statement of Additional Information . . . . . . . . . . . . . . . . Table of Contents for the Statement of Additional Information
PART B (STATEMENT OF ADDITIONAL INFORMATION)
Item of Form N-3 Part B (Statement of Additional Information) Caption - - ----------------- ---------------------------------------------------- 16. Cover Page . . . . . . . . . . . . . . . . . . . . Cover Page 17. Table of Contents . . . . . . . . . . . . . . . . . Table of Contents 18. General Information and History . . . . . . . . . . (Prospectus) Teachers Insurance and Annuity Association of America 19. Investment Objectives and Policies . . . . . . . . . Investment Restrictions; Investment Policies and Risk Considerations; Portfolio Turnover 20. Management . . . . . . . . . . . . . . . . . . . . . Management 21. Investment Advisory and Other Services . . . . . . Investment Advisory and Related Services 22. Brokerage Allocation . . . . . . . . . . . . . . . . Brokerage Allocation 23. Purchase and Pricing of Securities Being Offered . . . . . . . . . . . . . . . . . . . . . . Valuation of Assets; (Prospectus) The Contract (Transfers Between the Separate Account and the Fixed Account; General Considerations for All Transfer and Cash Withdrawals) 24. Underwriters . . . . . . . . . . . . . . . . . . . (Prospectus) Distribution of the Contracts 25. Calculation of Performance Data . . . . . . . . . . Performance Information 26. Annuity Payments . . . . . . . . . . . . . . . . . (Prospectus) The Contract (The Annuity Period; Income Options) 27. Financial Statements . . . . . . . . . . . . . . . . Financial Statements; (Prospectus) Condensed Financial Information
Prospectus Teachers Insurance and Annuity Association Individual Deferred Variable Annuities Funded Through TIAA Separate Account VA-1 April 1, 1999 Prospectus Dated April 1, 1999 Individual Deferred Variable Annuities Funded Through TIAA Separate Account VA-1 of Teachers Insurance and Annuity Association of America This prospectus tells you about an individual deferred variable annuity funded through TIAA Separate Account VA-1 of Teachers Insurance and Annuity Association of America (TIAA). Read it carefully before investing, and keep it for future reference. TIAA Separate Account VA-1 (the separate account) is a segregated investment account of TIAA. The separate account provides individual variable annuities for employees of non-profit or publicly supported colleges, universities, and other educational and research organizations and for other eligible persons. Its main purpose is to accumulate, invest, and then disburse funds for lifetime income or through other payment options. TIAA offers this variable annuity as part of the contract, which also has a fixed account. Whether the variable annuity is available to you is subject to approval by regulatory authorities in your state. As with all variable annuities, your accumulation can increase or decrease, depending on how well the underlying investments in the separate account do over time. TIAA doesn't guarantee the investment performance of the separate account, and you bear the entire investment risk. More information about the separate account and the variable component of the contract is on file with the Securities and Exchange Commission (SEC) in a "Statement of Additional Information" (SAI) dated April 1, 1999. You can get it by writing us at TIAA, 730 Third Avenue, New York, New York 10017-3206 (attention: Central Services), or by calling 1 800 842-2733, extension 5509. The SAI, as supplemented from time to time, is "incorporated by reference" into the prospectus; that means it's legally part of the prospectus. The SAI's table of contents is on the last page of this prospectus. The SEC maintains a Website (http://www.sec.gov) that contains the SAI, material incorporated by reference and other information regarding the separate account. These securities have not been approved or disapproved by the Securities and Exchange Commission nor has the commission passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. An investment in the contract is not a deposit of the TIAA-CREF Trust Company, FSB, and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. The date of this prospectus is April 1, 1999. 1 Table of contents 3 Definitions 5 Summary 8 Condensed financial information 9 Teachers Insurance and Annuity Association of America 10 The Separate Account 10 Adding, closing, or substituting portfolios 11 Investment practices 15 Performance information 15 Valuation of assets 15 Management and Investment Advisory Arrangements 16 The Contract 16 Eligible Purchasers of the Contract 16 Remitting Premiums 18 Accumulation Units 19 The Fixed Account 19 Transfers Between the Separate Account and the Fixed Account 20 Cash Withdrawals 20 General Considerations for All Transfers and Cash Withdrawals 20 Tax Issues 21 Charges 22 The Annuity Period 23 Income Options 24 Death Benefits 27 Timing of payments 27 Federal income taxes 31 Voting rights 31 General matters 33 Distribution of the contracts 33 Legal proceedings 34 Table of contents for Statement of Additional Information This prospectus outlines the terms under which the variable annuity issued by TIAA is available. It doesn't constitute an offering in any jurisdiction where such an offering can't lawfully be made. No dealer, salesman, or anyone else is authorized to give any information or to make any representation in connection with this offering other than those contained in this prospectus. If anyone does offer you such information or representations, you shouldn't rely on them. 2 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 if the annuitant dies. The annuity partner is also known as the second annuitant. Beneficiary Any person or institution named to receive benefits if you die during the accumulation period or if you die while any annuity income or death benefit payments remain due. You don't have to name the same beneficiary for each of these two situations. Business Day Any day the New York Stock Exchange (NYSE) is open for trading. A business day ends at 4 p.m. Eastern Time, or when trading closes on the NYSE, if earlier. Calendar Day Any day of the year. Calendar days end at the same time as business days. Contract The fixed and variable components of the individual, flexible premium, deferred annuity described in this prospectus. Contractowner The person (or persons) who controls all the rights and benefits under a contract. CREF The College Retirement Equities Fund, TIAA's companion organization. 3 Eligible Institution A public or private institution in the United States that is nonproprietary and nonprofit, and the main purpose of which is to offer instruction; conduct research; serve and support education or research; or perform ancillary functions for such institutions. 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 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 19). The contract is an individual deferred annuity that is available to any employee, trustee, or retired employee of an eligible institution, or his or her spouse (or surviving spouse) as well as certain other eligible persons (see "Eligible Purchasers of the Contract," page 16). The availability of the variable component of the contract is subject to applicable regulatory approval. The Separate Account TIAA Separate Account VA-1 is an open-end management investment company. Currently the separate account has only one investment portfolio, the Stock Index Account. Like any other portfolio that we might add in the future, the Stock Index Account is subject to the risks involved in professional investment management, including those resulting from general economic conditions. The value of your accumulation in any portfolio can fluctuate, and you bear the entire risk. Expenses Here's a summary of the direct and indirect expenses under the contract. Contractowner Transaction Expenses Deductions from premiums (as a percentage of premiums) None Charges for Transfers and Cash Withdrawals (as a percentage of transaction amount) Transfers to the fixed account None Cash withdrawals None Annual Expenses (as a percentage of average net assets) Investment Advisory Charge (after fee waiver) (1) .07% Mortality and Expense Risk Charge (current) (2) .10% Administrative Expense Charge .20% --- Total Annual Expenses (3) .37% (1) Although Teachers Advisors, Inc. (Advisors), the separate account's investment adviser, is entitled to an annual fee of 0.30% of the separate account's average daily net assets, it has voluntarily agreed to waive a portion of its fee. (2) TIAA reserves the right to increase the mortality and expense risk charge to a maximum of 1.00% per year. (3) If we imposed the full amount of the administrative expense, investment advisory, and mortality and expense risk charges, total annual expenses would be 1.50%. TIAA guarantees that total annual expenses will never exceed this level. 5 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 22). The table at the bottom of this page gives an example of the expenses you'd incur on a hypothetical investment of $1,000 over several periods. The table assumes a 5 percent annual return on assets. These tables are to help you understand the various expenses you would bear directly or indirectly as an owner of a contract. Remember that they don't represent actual past or future expenses or investment performance. Actual expenses may be higher or lower. For more information, see "Charges," page 21. "Free Look" Right Until the end of the period of time specified in the contract (the "free look" period), you can examine the contract and return it to TIAA for a refund. The time period will depend on the state in which you live. In states that permit it, we'll refund the accumulation value calculated on the date that you mailed or delivered the contract and the refund request to us. In states that don't allow us to refund accumulation value only, we'll refund the premiums you paid to the contract. If you live in a state that requires refund of premiums (see page 17) and we issued you a contract on or after November 1, 1994, your premiums and transfers allocated to the separate account during the "free look" period can't exceed $10,000. We will consider the contract returned on the date it's postmarked and properly addressed with postage pre-paid or, if it's not postmarked, on the day we receive it. We will send you the refund within seven (7) days after we get written notice of cancellation and the returned contract. We will cancel the contract as of the date of issue. Restrictions on Transfers and Cash Withdrawals Currently, you can transfer funds from the separate (variable) account to the fixed account as often as you like, but you can transfer from the fixed account to the separate account no more than once every 180 days. After you have been given three months' notice, we may limit the number of
- -------------------------------------------------------------------------------- Annual expense deductions from net assets 1 Year 3 Years 5 Years 10 Years - -------------------------------------------------------------------------------- If you withdraw your entire accumulation at the end of the applicable time period: $ 4 $12 $21 $47 - -------------------------------------------------------------------------------- If you annuitize at the end of the applicable time period: $ 4 $12 $21 $47 - -------------------------------------------------------------------------------- If you do not withdraw your entire accumulation: $ 4 $12 $21 $47 - --------------------------------------------------------------------------------
6 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 23, and "Federal Income Taxes," page 27. 7 Condensed financial information Below you'll find condensed audited financial information for the separate account for the periods presented. The audited financial statements for the separate account and TIAA are in the SAI, which is available free upon request. The table should be read in conjunction with the audited financial statements and related notes appearing in the SAI.
November 1, 1994 (date of initial Year Ended December 31, registration) ------------------------------------------------------- to December 31, 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
(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 (see Note 3 of the notes to financial statements). 8 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; there are also regional offices in Atlanta, Boston, Chicago, Dallas, Denver, Detroit, New York, Philadelphia, San Francisco, and Washington, D.C., and a telephone service center in Denver. TIAA's general account offers traditional annuities, which guarantee principal and a specified interest rate while providing the opportunity for additional dividends. TIAA also offers life, long-term disability, and long-term care insurance. TIAA has received the highest ratings from the leading independent insurance industry rating agencies: A++ (Superior) from A.M. Best Company, AAA from Duff & Phelps Credit Rating Company, Aaa from Moody's Investor's Service and AAA from Standard and Poor's. TIAA is the companion organization of the College Retirement Equities Fund (CREF), the first company in the United States to issue a variable annuity. CREF is a nonprofit membership corporation established in New York State in 1952. Together, TIAA and CREF form the principal retirement system for the nation's education and research communities and the largest retirement system in the world, based on assets under management. TIAA-CREF serves approximately 2.1 million people at about 8,800 institutions. As of December 31, 1998, TIAA's assets were approximately $102 billion; the combined assets for TIAA and CREF totalled approximately $248 billion (although CREF doesn't stand behind TIAA's guarantees). 9 The Separate Account Separate Account VA-1 was established on February 16, 1994, as a separate investment account of TIAA under New York law, by resolution of TIAA's Board of Trustees. The separate account is governed by a management committee. As an "open-end" diversified management investment company, the separate account has no limit on how many units of participation it can issue. The separate account is registered with the SEC under the Investment Company Act of 1940, as amended (the 1940 Act), though registration doesn't entail SEC supervision of its management and investment practices. As part of TIAA, the separate account is also subject to regulation by the State of New York Insurance Department (NYID) and the insurance departments of some other jurisdictions in which the contracts are offered (see the SAI). Although TIAA owns the assets of the separate account, the contract states that the separate account's income, investment gains, and investment losses are credited to or charged against the assets of the separate account without regard to TIAA's other income, gains, or losses. Under New York law, we cannot charge the separate account with liabilities incurred by any other TIAA separate account or other business activity TIAA may undertake. The contract accepts only after-tax dollars. In contrast, most of TIAA-CREF's other fixed and variable annuity products are part of employer retirement plans and accept premiums consisting primarily of before-tax dollars. Like earnings from other annuity products, earnings on accumulations in the separate account aren't taxed until withdrawn or paid as annuity income (see "Federal Income Taxes," page 27). ================================================================================ Adding, closing, or substituting portfolios The separate account currently consists of a single investment portfolio, but we can add new investment portfolios in the future. We don't guarantee that the separate account, or any investment portfolio added in the future, will always be available. We reserve the right, subject to any applicable law, to change the separate account and its investments. We can add or close portfolios, substitute one portfolio for another, or combine portfolios, subject to the requirements of applicable law. We can also make any changes to the separate account or to the contract required by applicable insurance law, the Internal Revenue Code, or the 1940 Act. TIAA can make some changes at its discretion, subject to NYID and SEC approval as required. The separate account can 10 (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 security's value. The separate account currently consists solely of the Stock Index Account. Changing the investment objective of the separate account won't require a vote by contractowners. The separate account can also change some of its investment policies (that is, the methods used to pursue the objective) without such approval. Of course, there's no guarantee that the separate account will meet its investment objective. The separate account's general perspective is long-term, and we avoid both extreme conservatism and high risk in investing. Advisors manages the separate account's assets (see "Management and Investment Advisory Arrangements" page 15). Personnel of Advisors, a subsidiary of TIAA, also manage assets of one or more CREF accounts on behalf of TIAA-CREF Investment Management, LLC, an investment adviser which is also a TIAA subsidiary. Personnel of Advisors also manage assets of other investment companies, including TIAA-CREF Life Funds and TIAA-CREF Mutual Funds. Ordinarily, investment decisions for the separate account will be made independently, but managers for the separate account may at times decide to buy or sell a particular security at the same time as for a CREF account or another investment company whose assets they may also be managing. If so, investment opportunities are allocated equitably, which can have an adverse effect on the size of the position the separate account buys or sells, as well as the price paid or received for it. Investment Objective The investment objective of the separate account is favorable long-term return from a diversified portfolio selected to track the 11 overall market for common stocks publicly traded in the U.S., as represented by a broad stock market index. Investment Mix The separate account attempts to track the U.S. stock market as a whole by investing substantially all of its assets in stocks included in the Russell 3000 Index (See "The Russell 3000 Index," below). The separate account doesn't try to match the Russell 3000 precisely by holding all 3,000 stocks. Rather, we use sampling to try to emulate the Index's overall investment characteristics. The portfolio won't be managed in the traditional sense of picking individual securities based on economic, financial, and market analysis. This means that a company can remain in the portfolio even if it performs poorly. We will, however, use proprietary quantitative scoring and trading techniques to attempt to slightly outperform the Russell 3000 Index. Using the Russell 3000 as the measure of the U.S. equity market isn't fundamental to the separate account's objective or investment policies, and the management committee can substitute other indices without contractowner approval. We'll notify you, however, before making any change in the target index. We expect that in periods when the overall U.S. stock market is rising, the separate account's unit value will also rise, while in market declines, the separate account's unit value will likewise decline. We don't expect to match the Index precisely. However, we expect the separate account to closely track the Index. To ensure this, a correlation coefficient will be calculated daily using the separate account's returns from the most recent 30 trading days and the Index's returns for the same period. We expect the correlation coefficient usually to be above 0.99 and in any case never to fall below 0.98. If it approaches 0.98, we'll rebalance the portfolio--a process which involves realigning portfolio weights and/or adding more stocks to the separate account. Since the Index's returns aren't reduced by operating or investment expenses, the separate account's ability to match the Index will be adversely affected by the costs of buying and selling stocks and other expenses. However, we expect expenses to be low compared to an actively managed stock portfolio. The Russell 3000 Index The Russell 3000 is an index of the 3,000 largest publicly traded U.S. corporations, based on the value of their outstanding stock. According to the Frank Russell Company, Russell 3000 companies account for about 98 percent of the total market capitalization of the publicly-traded U.S. equity market. The market capitalization of individual companies in the Russell 3000 ranged from $2 million to $345.8 billion, with an average of $4.2 billion as of December 31, 1998. 12 The Frank Russell Company includes stocks in the Index solely on their market capitalization and weights them by relative market value. The Frank Russell Company can change stocks and their weightings in the Index. We'll adjust the separate account's portfolio to reflect the changes as appropriate. We can also adjust the separate account's portfolio because of mergers and similar events. The separate account isn't promoted, endorsed, sponsored, or sold by, and isn't affiliated with, the Frank Russell Company. A stock's presence in the Russell 3000 doesn't mean that the Frank Russell Company believes that it's an attractive investment. The Frank Russell Company isn't responsible for any literature about the separate account and makes no representations or warranties about its content. The Russell 3000 is a trademark and service mark of the Frank Russell Company. Other Investments The separate account can also hold other investments whose return depends on stock market prices. These include stock index futures contracts, options (puts and calls) on futures contracts, and debt securities whose prices or interest rates are linked to the return of a recognized stock market index. The separate account can also make swap 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. 13 The separate account can also invest in newly developed financial instruments, such as equity swaps and equity-linked fixed-income securities, so long as these are consistent with its investment objective and regulatory requirements. For more information, see the SAI. Illiquid Securities The separate account can invest up to 10 percent of its assets in investments that may not be readily marketable. It may be difficult to sell these investments for their fair market value. Repurchase Agreements The separate account can use repurchase agreements to manage cash balances. In a repurchase agreement, we buy an underlying debt instrument on condition that the seller agrees to buy it back at a fixed time (usually a relatively short period) and price. The period from purchase to repurchase is usually no more than a week and never more than a year. Repurchase agreements may involve special risks. For more information, see the SAI. Firm Commitment Agreements The separate account can enter "firm commitment" agreements to buy securities at a fixed price or yield on a specified future 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. 14 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 32). ================================================================================ 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. ================================================================================ 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 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 15 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. Subject to regulatory approval, we offer the contracts to residents of all fifty states, the District of Columbia and the United States Virgin Islands. 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 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 71727 Chicago, IL 60694-1727 (The $250 minimum doesn't apply if application and payment of at least $25 is accompanied by an agreement for electronic funds transfer (EFT) or if you are using payroll deduction. We also reserve the right to temporarily waive the $250 minimum initial premium amount.) We will credit your initial premium within two business days after we receive all necessary information or the premium itself, whichever is later. If we don't have the necessary information within five business days, we'll contact you to explain the 16 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 95919 Chicago, IL 60694-5919 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) Certain Restrictions Except as described below, the contract doesn't restrict how large your premiums are or how often you send them, although we reserve the right to impose restrictions in the future. Unless your contract was issued before November 1, 1994, your total premiums and transfers to the separate account during the "free look" period can't exceed $10,000 if you live in any of the following states: 17 "Free Look" Jurisdiction Period (days) - ------------ ------------- Georgia 10 Idaho 20 Massachusetts 10 Nebraska 10 Nevada 10 North Carolina 30 South Carolina 31 Texas 30 Utah 10 Washington 10 West Virginia 10 Total premiums and transfers to the fixed account in any 12-month period could be limited to $300,000, so you should contact us if you want more than $300,000 to be credited to the fixed account during any such period (see "Contacting TIAA," page 32). 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 22). For amounts to be applied to begin death benefits, the unit value will be the one for the valuation day when we receive proof of death (see "Death Benefits," page 24). The value of the accumulation units will depend mainly on investment experience, though the unit value reflects expense deductions from assets (see "Charges," page 21). 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) 18 increased/decreased by realized and unrealized capital gains/losses, dividends, and investment income and decreased by expense and risk charges. B is the value of the separate account's net assets at the end of the prior day (including the net effect of transactions made during the prior day). The Fixed Account Premiums allocated and amounts transferred to the fixed account become part of the general account assets of TIAA, which support insurance and annuity obligations. The general account includes all the assets of TIAA, except those in the separate account or in any other TIAA separate investment account. Interests in the fixed account have not been registered under the Securities Act of 1933 (the 1933 Act), nor is the fixed account registered as an investment company under the 1940 Act. Neither the fixed account nor any interests therein are generally subject to the 1933 Act or 1940 Act. The SEC staff has told us that they haven't reviewed the information in this prospectus about the fixed account. You can allocate premiums to the fixed account or transfer from the separate account to the fixed account at any time. In contrast, you can transfer or take a cash withdrawal from the fixed account only once every 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 below, 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). 19 Cash Withdrawals You can withdraw some or all of your accumulation in the separate account as cash. Cash withdrawals must be for at least $1,000 (or your entire accumulation, if less). We reserve the right to cancel any contract where no premiums have been paid to either the separate account or the fixed account for three years and your total amount in the separate account and the fixed account falls below $250. Currently, there's no charge for cash withdrawals. If you withdraw your entire accumulation in the separate account and the fixed account, we'll cancel your contract and all of our obligations to you under the contract will end. General Considerations for All Transfers and Cash Withdrawals You can tell us how much you want to transfer or withdraw in dollars, accumulation units, or as a percentage of your accumulation. Transfers and cash withdrawals are effective at the end of the business day we receive your request and any required information and documentation. Transfers and cash withdrawals made at any time other than during a business day will be effective at the close of the next business day. You can also 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 our Inter/ACT Service 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. Tax Issues Make sure you understand the possible federal and other income tax consequences of transfers and cash withdrawals. Cash withdrawals are usually taxed at the rates for ordinary income--i.e., they are not treated as capital gains. They may subject you to early-distribution taxes or penalties as well. For details, see "Federal Income Taxes," page 27. 20 Charges Separate Account Charges Charges are deducted each valuation day from the assets of the separate account for various services required to manage investments, administer the separate account and the contracts, and to cover certain insurance risks borne by TIAA. We expect that expense deductions will be relatively low. Advisors, a wholly-owned subsidiary of TIAA, provides the investment management services. TIAA itself provides the administrative services for the separate account and the contracts. Investment Advisory Charge This charge is for investment advice, portfolio accounting, custodial, and similar services provided for by Advisors. The investment management agreement between Advisors and the separate account sets the investment advisory fee at 0.30 percent annually. Currently, Advisors has agreed to waive a portion of that fee, so that the daily deduction is equivalent to 0.07 percent of net assets annually. Administrative Expense Charge This charge is for administration and operations, such as allocating premiums and administering accumulations. The current daily deduction is equivalent to 0.20 percent of net assets annually. Mortality and Expense Risk Charge TIAA imposes a daily charge as compensation for bearing certain mortality and expense risks in connection with the contract. The current daily deduction is equal to 0.10 percent of net assets annually. Accumulations and annuity payments aren't affected by changes in actual mortality experience or by TIAA's actual expenses. 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. 21 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. (Annuity payments may be available from the separate account in the future.) 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 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. 22 Annuity Starting Date Generally you pick an annuity starting date (it has to be the first day of a month) when you first apply for a contract. If you don't, we'll tentatively assume the annuity starting date will be the latest permissible annuity starting date (i.e., the first day of the month of the annuitant's ninetieth birthday). You can change the annuity starting date at any time before annuity payments begin (see "Choices and Changes," page 31). In any case, the annuity starting date must be at least fourteen months after the date your contract is issued. For payments to begin on the annuity starting date, we must have received all information and documentation necessary for the income option you've picked. (For more information, contact TIAA--see page 32.) If we haven't received all the necessary information, we'll defer the annuity starting date until the first day of the month after the information has reached us, but not beyond the latest permissible annuity starting date. If, by the latest permissible annuity starting date, you haven't picked an income option or if we have not otherwise received all the necessary information, we will begin payments under a Single Life Annuity. Your first annuity check may be delayed while we process your choice of income options and calculate the amount of your initial payment. Income Options You may select from the several income options set forth in your contract (all from the fixed account) or any other annuity option available from TIAA at the time of selection. However, federal tax law might limit the options available to you. You may change your choice any time before payments begin, but once they have begun no change can be made. You have a number of different annuity options to choose among. The current options are: Single Life Annuity Pays income (usually monthly) as long as the annuitant lives. Remember: All payments end at the annuitant's death so that it would be possible, for example, for the contractowner to receive only one payment if the annuitant died less than a month after annuity payments started. If you die before the annuitant, your beneficiary becomes the contractowner. Single Life Annuity with a 10-, 15-, or 20-Year Guaranteed Period Pays income (usually monthly) as long as the annuitant lives or until the end of the guaranteed period, whichever is longer. If the annuitant dies before the period is up, payments continue for the remaining time. If you die while any payments remain due, your beneficiary becomes the contractowner. Payments for a Fixed Period Pays income (usually monthly) for a stipulated 23 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 accu- 24 mulation period (see "Choices and Changes," page 31). For more information on designating beneficiaries, contact TIAA or your legal advisor. If the annuitant dies during the accumulation period, you become the death benefit payee. Your accumulation will continue participating in the investment experience of the separate account up to and including the day when we receive proof of death. Ordinarily, we will transfer your separate account accumulation to the fixed account as of the day we receive proof of death. However, if the 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, 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 19). 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 32.) 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. 25 Methods of Payment TIAA limits the methods of payment for death benefits to those suitable under federal income tax law for annuity contracts. (For more information, see "Taxation of Annuities," page 28.) With methods offering periodic payments, benefits are usually monthly, but the death benefit payee can request to receive them quarterly, semiannually, or annually instead. Federal law may restrict the availability of certain methods to the death benefit payee; conversely, TIAA may offer additional methods in the future. At present, the methods of payment for TIAA death benefits are: Single-Sum Payment. The entire death benefit is paid at once (within seven days after we receive all necessary forms and documentation). When the beneficiary is an estate, the single-sum method is automatic, and TIAA reserves the right to pay death benefits only as a single sum to corporations, trustees, partnerships, guardians, or any beneficiary not a natural person. Single Life Annuity. Payable monthly for the life of the death benefit payee, with payments ending when he or she dies. Single Life Annuity with a 10-, 15-, or 20-Year Guaranteed Period. Payable monthly for the death benefit payee's lifetime or until the end of the period chosen, 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 31). Federal tax law says the guaranteed period selected can't exceed the death benefit payee's life expectancy. Payments for a Fixed Period. Payable over two to thirty years, as determined by you or your beneficiary. At the end of the selected period, payments stop. If the death benefit payee dies before the period is up, the remaining payments continue to the person named to receive them. Federal tax law says the fixed period selected can't exceed the death benefit payee's life expectancy. Interest Payments. We'll pay interest on the amount of the death benefit each month for two to thirty years. You (or your beneficiary, unless you specify otherwise) choose the period. The death benefit is payable at the end of the period chosen. If the death benefit payee dies before the interest payment period is up, the death benefit becomes payable immediately. For this interest-only method, the death benefit must be at least $5,000. The Single Life Annuity and the Single Life Annuity with a 10-, 15-, or 20-Year Guaranteed Period methods are available only if the death benefit payee is a natural person. Under any method (except the Interest Payments method) that would result in payments of less than $100 a month, we reserve the right to require a change in choice that will result in payments of $100 or more. You or your beneficiary can use more than one method of payment, but each has to meet the same $100 minimum-payment requirement. 26 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. ================================================================================ 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 27 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. 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 28 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. 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 591/2; (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, effec- 29 tive prior to the date of the change). You should consult a tax adviser with respect to legislative developments and their effect on the Contract. Transfers, Assignments, or Exchanges of a Contract Transferring contract ownership, designating an annuitant, payee, or other beneficiary who is not also the owner, or exchanging a contract can have other tax consequences that we don't discuss here. If you're thinking about any of those transactions, contact a tax advisor. Withholding Annuity distributions usually are subject to withholding for the recipient's federal income tax liability at rates that vary according to the type of distribution and the recipient's tax status. However, recipients can usually choose not to have tax withheld from distributions. Multiple Contracts In determining gross income, section 72(e) generally treats as one contract all TIAA and its affiliates non-qualified deferred annuity contracts issued after October 21, 1988 to the same owner during any calendar year. This could affect when income is taxable and how much might be subject to the 10 percent penalty tax (see above). It is possible, for instance, that if you take annuity payments from only one of the contracts, they could be taxed like individual withdrawals (see above). There might be other situations where Treasury concludes that it would be appropriate to treat two or more annuity contracts purchased by the same owner as if they were one contract. Consult a tax advisor before buying more than one annuity contract for the purpose of gaining a tax advantage. Possible Charge for TIAA's Taxes Currently we don't charge the separate account for any federal, state, or local taxes on it or its contracts (other than premium taxes--see page 22), but we reserve the right to charge the separate account or the contracts for any tax or other cost resulting from the tax laws that we believe should be attributed to them. Tax Advice What we tell you here about federal and other taxes isn't comprehensive and is for general information only. It doesn't cover every situation. Taxation varies depending on the circumstances, and state and local taxes may also be involved. For complete information on your personal tax situation, check with a qualified tax advisor. 30 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 16). Telephone and Internet Transactions You can use our Automated Telephone Service (ATS) or our Inter/ACT System 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 31 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 Inter/ACT are electronically recorded. To use the ATS, you need to call 1 800 842-2252 on a touch-tone phone. To use Inter/ACT, 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. Year 2000 Issues Like all financial and business organizations, the separate account and its service providers depend on the smooth functioning of computer systems to operate. The separate account's operations, including securities pricing, trading, and the servicing of contractowners, could be affected if these computer systems fail or incorrectly process or calculate date-related information on or after January 1, 2000. The separate account is dedicated to providing uninterrupted, high-quality service before, during, and after the Year 2000. To achieve this goal, the separate account, along with TIAA and Advisors, have developed and have been actively carrying out an extensive Year 2000 plan to remediate, test and certify all internal computer systems, and to verify, to the extent possible, that external service providers will be ready for the Year 2000. While we have taken steps we believe reasonably address the Year 2000 problem, we can't guarantee complete success or eliminate the possibility that interaction with outside computer systems could affect the separate account's operations. If the systems the separate account relies upon do fail or produce faulty data, there could be delays in properly processing transactions, or we may be unable temporarily to engage in normal business activities. Also, the separate account's performance could be affected if a systems failure at a company or governmental entity affects the price of securities the separate account owns. 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. 32 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, if the SEC allows, begin mailing only one copy of the separate account prospectus, prospectus supplements, annual and semi-annual reports, or any other required documents, to your household, even if more than one contractowner lives there. If you would prefer to continue receiving your own copy of any of these documents, you may call us toll-free at 1 800 842-2733, extension 5509, or write us. Signature Requirements For some transactions, we may require your signature to be notarized or guaranteed by a commercial bank or a member of a national securities exchange. Errors or Omissions We reserve the right to correct any errors or omissions on any form, report or statement that we send you. ================================================================================ Distribution of the contracts The contracts are offered continuously by Teachers Personal Investors Services, Inc. (TPIS) and, in some instances, TIAA-CREF Individual & Institutional Services, Inc. (Services), which are both registered with the SEC as broker-dealers, are members of the NASD and are direct or indirect subsidiaries of TIAA. TPIS may be considered the "principal underwriter" for interests in the contract. Anyone distributing the contract must be a registered representative of either TPIS or Services, whose main offices are both at 730 Third Avenue, New York, New York 10017-3206. No commissions are paid in connection with the distribution of the contracts. ================================================================================ Legal proceedings The assets of the separate account are not subject to any legal actions. Neither TIAA nor TPIS nor Advisors is involved in any legal action that we consider material to its obligations to the separate account. ================================================================================ 33 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" B-6 Securities Lending of Securities B-6 Repurchase Agreements B-6 Swap Transactions B-7 Segregated Accounts B-7 Other Investment Techniques and Opportunities B-7 Portfolio Turnover B-7 Valuation of Assets B-8 Equity Securities B-8 Money Market Instruments B-8 Options B-8 Investments for Which Market Quotations Are Not Readily Available B-8 Management B-9 Separate Account Management Committee and Officers B-9 Compensation of Managers B-9 Investment Advisory and Related Services B-10 Investment Advisory Services B-10 Administrative Services B-10 Advisors and TIAA B-10 Custody of Portfolio B-10 Auditors B-10 Brokerage Allocation B-11 Performance Information B-11 Total Return Information for the Separate Account B-11 Performance Comparisons B-12 Illustrating Compounding, Tax Deferral, and Expense Deductions B-12 Periodic Reports B-13 General Matters B-13 Assignment of Contracts B-13 Payment to an Estate, Guardian, Trustee, etc. B-13 Benefits Based on Incorrect Information B-13 Proof of Survival B-13 State Regulation B-13 Legal Matters B-13 Experts B-13 Additional Considerations B-13 Additional Information B-14 Financial Statements B-14
34 Individual Deferred Variable Annuities Funded Through TIAA SEPARATE ACCOUNT VA-1 of Teachers Insurance and Annuity Association of America STATEMENT OF ADDITIONAL INFORMATION April 1, 1999 This Statement of Additional Information is not a prospectus and should be read in connection with the current prospectus dated April 1, 1999 (the "Prospectus"), for the variable annuity that is the variable component of the contract. The Prospectus is available without charge upon written or oral request to: Teachers Insurance and Annuity Association of America, 730 Third Avenue, New York, New York 10017-3206, Attention: Central Services; telephone 1 800 842-2733, extension 5509. Terms used in the Prospectus are incorporated in this Statement. THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACTS. Table of Contents
Location of Additional Information in Prospectus, Item Page if applicable ---- ---- ------------- Investment Restrictions ............................. B-3 13 Investment Policies and Risk Considerations .................................... B-3 11-14 Options and Futures ............................... B-3 13-14 Firm Commitment Agreements and Purchase of "When-Issued" Securities ........................ B-6 14 Lending of Securities ............................. B-6 14 Repurchase Agreements ............................. B-6 14 Swap Transactions ................................. B-7 13-14 Segregated Accounts ............................... B-7 Other Investment Techniques and Opportunities ................................... B-7 Portfolio Turnover .................................. B-7 Valuation of Assets ................................. B-8 15 Equity Securities ................................. B-8 Money Market Instruments .......................... B-8 Options ........................................... B-8 Investments for Which Market Quotations are Not Readily Available ....................................... B-8 Management .......................................... B-9 15-16 Separate Account Management Committee and Officers .......................... B-9 15-16 Compensation of Managers .......................... B-9 Investment Advisory and Related Services .......................................... B-10 Investment Advisory Services ...................... B-10 15-16
Location of Additional Information in Prospectus, Item Page if applicable ---- ---- ------------- Administrative Services ............................ B-10 Advisors and TIAA .................................. B-10 Custody of Portfolio ............................... B-10 Auditors ........................................... B-10 Brokerage Allocation ................................. B-11 Performance Information .............................. B-11 15 Total Return Information for the Separate Account ................................. B-11 Performance Comparisons ............................ B-12 Illustrating Compounding, Tax Deferral, and Expense Deductions ....................................... B-12 Periodic Reports ..................................... B-13 General Matters ...................................... B-13 Assignment of Contracts ............................ B-13 Payment to an Estate, Guardian, Trustee, etc ..................................... B-13 Benefits Based on Incorrect Information ...................................... B-13 Proof of Survival .................................. B-13 State Regulation ..................................... B-13 10 Legal Matters ........................................ B-13 33 Experts .............................................. B-13 Additional Considerations ............................ B-13 Additional Information ............................... B-14 Financial Statements ................................. B-14 8
B-2 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 331/3% 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 B-3 loss" of profits if the underlying security appreciates above the aggregate value of the exercise price and the premium. The separate account may close out a position acquired through selling a call option by buying a call option on the same security with the same exercise price and expiration date as the call option which it had previously sold on that security. Depending on the premium for the call option purchased by the separate account, the separate account will realize a profit or loss on the transaction. A put option is a similar short-term contract that gives the purchaser of the option the right to sell the underlying security at a fixed exercise price at any time prior to the expiration of the option regardless of the market price of the security during the option period. As consideration for the put option the separate account, as purchaser, pays the seller a premium, which the seller retains whether or not the option is exercised. The seller of a put option has the obligation, upon the exercise of the option by the separate account, to purchase the underlying security at the exercise price at any time during the option period. The buying of a covered put contract limits the downside exposure for the investment in the underlying security to the combination of the exercise price less the premium paid. The risk of purchasing a put is that the market price of the underlying stock prevailing on the expiration date may be above the option's exercise price. In that case the option would expire worthless and the entire premium would be lost. The separate account may close out a position acquired through buying a put option by selling a put option on the same security with the same exercise price and expiration date as the put option which it had previously bought on the security. Depending on the premium of the put option sold by the separate account, the separate account would realize a profit or loss on the transaction. In addition to options (both calls and puts) on individual securities, there are also options on groups of securities, such as the Standard & Poor's 100 Index traded on the Chicago Board Options Exchange. There are also options on the futures of groups of securities such as the Standard & Poor's 500 Stock Index and the New York Stock Exchange Composite Index. The selling of such calls can be used in anticipation of, or in, a general market or market sector decline that may adversely affect the market value of the separate account's portfolio of securities. To the extent that the separate account's portfolio of securities changes in value in correlation with a given stock index, the sale of call options on the futures of that index would substantially reduce the risk to the portfolio of a market decline, and, by so doing, provides an alternative to the liquidation of securities positions in the portfolio with resultant transaction costs. A risk in all options, particularly the relatively new options on groups of securities and on the futures on groups of securities, is a possible lack of liquidity. This will be a major consideration before the separate account deals in any option. There is another risk in connection with selling a call option on a group of securities or on the futures of groups of securities. This arises because of the imperfect correlation between movements in the price of the call option on a particular group of securities and the price of the underlying securities held in the portfolio. Unlike a covered call on an individual security, where a large movement on the upside for the call option will be offset by a similar move on the underlying stock, a move in the price of a call option on a group of securities may not be offset by a similar move in the price of securities held due to the difference in the composition of the particular group and the portfolio itself. Futures. To the extent permitted by applicable regulatory authorities, the separate account may purchase and sell futures contracts on securities or other instruments, or on groups or indexes of securities or other instruments. The purpose of hedging techniques using financial futures is to protect the principal value of a fund against adverse changes in the market value of securities or instruments in its portfolio, and to obtain better returns on future investments than actually may be available at the future time. Since these are hedging techniques, the gains or losses on the futures contract normally will be offset by losses or gains respectively on the hedged investment. Futures contracts also may be offset prior to the future date by executing an opposite futures contract transaction. A futures contract on an investment is a binding contractual commitment which, if held to maturity, will result in an obligation to make or accept delivery, during a particular future month, of the securities or instrument underlying the contract. By purchasing a futures contract--assuming a "long" position--the separate account legally will obligate itself to accept the future delivery of the underlying security or instrument and pay the agreed price. By selling a futures contract--assuming a "short" position--it legally will obligate itself to make the future delivery of the security or instrument against payment of the agreed price. Positions taken in the futures markets are not normally held to maturity, but are instead liquidated through offsetting transactions which may result in a profit or a loss. While futures positions taken by the separate account usually will be liquidated in this manner, the separate account may instead make or take delivery of the underlying securities or instruments whenever it appears economically advantageous to the separate account to do so. A clearing corporation associated with the exchange on which futures are traded assumes responsibility for closing-out positions and guarantees that the sale and purchase obligations will be performed with regard to all positions that remain open at the termination of the contract. A stock index futures contract, unlike a contract on a specific security, does not provide for the physical delivery of securities, but merely provides for profits and losses resulting from changes in the market value of the contract to be credited or debited at the close of each trading day to the respective accounts of the parties to the contract. On the contract's expiration date, a final cash settlement occurs and the futures positions simply are closed out. Changes in the market value of a particular stock index futures contract reflect changes in the specified index of equity securities on which the future is based. B-4 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 which is returned to the separate account upon termination of the futures contract assuming all contractual obligations have been satisfied. Subsequent payments to and from the broker, called "variation margin," will be made on a daily basis as the price of the underlying stock index fluctuates making the long and short positions in the futures contract more or less valuable, a process known as "marking to the market." For example, when the separate account has purchased a stock index futures contract and the price of the underlying stock index has risen, that position will have increased in value, and the separate account will receive from the broker a variation margin payment equal to that increase in value. Conversely, where the separate account has purchased a stock index futures contract and the price of the underlying stock index has declined, the position would be less valuable and the separate account would be required to make a variation margin payment to the broker. At any time prior to expiration of the futures contract, the separate account may elect to close the position by taking an opposite position which will operate to terminate the separate account's position in the futures contract. A final determination of variation margin is then made, additional cash is required to be paid by or released to the separate account, and the separate account realizes a loss or a gain. All margin payments will be made to a custodian in the broker's name. There are several risks in connection with the use by the separate account of a futures contract as a hedging device. One risk arises because of the imperfect correlation between movements in the prices of the futures contracts and movements in the securities or instruments which 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 which are intended to correlate to the price movements of the portfolio securities or instruments sought to be hedged. It also is possible that, for example, if the separate account has hedged against the possibility of the decline in the market adversely affecting stocks held in its portfolio and stock prices increased instead, the separate account will lose part or all of the benefit of increased value of those stocks that it has hedged because it will have offsetting losses in its futures positions. In addition, in such situations, if the separate account has insufficient cash, it may have to sell securities or instruments to meet daily variation margin requirements. Such sales may be, but will not necessarily be, at increased prices which 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 which could distort the normal relationship between the index and futures markets. Second, the margin requirements in the futures market are less onerous than margin requirements in the securities market, and as a result the futures market may attract more speculators than the 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 Advisors still may not result in a successful hedging transaction over a very short time period. B-5 The separate account may also use futures contracts and options on futures contracts to manage its cash flow more effectively. To the extent that the separate account enters into non-hedging positions, it will do so only in accordance with certain CFTC exemptive provisions. Thus, pursuant to CFTC Rule 4.5, the aggregate initial margin and premiums required to establish non-hedging positions in commodity futures or commodity options contracts may not exceed 5% of the liquidation value of the separate account's portfolio, after taking into account unrealized profits and unrealized losses on any such contracts it has entered into (provided that the in-the-money amount of an option that is in-the-money when purchased may be excluded in computing such 5%). Options and futures transactions may increase the separate account's transaction costs and portfolio turnover rate and will be initiated only when consistent with its investment objectives. Firm Commitment Agreements and Purchase of "When-Issued" Securities The separate account can enter into firm commitment agreements for the purchase of securities on a specified future date. When the separate account enters into firm commitment agreements, liability for the purchase price--and the rights and risks of ownership of the securities--accrues to the separate account at the time it becomes obligated to purchase such securities, although delivery and payment occur at a later date. Accordingly, if the market price of the security should decline, the effect of the agreement would be to obligate the separate account to purchase the security at a price above the current market price on the date of delivery and payment. During the time the separate account is obligated to purchase such securities, it will be required to segregate assets (see "Segregated Accounts," page B-7). The separate account will not purchase securities on a "when issued" basis if, as a result, more than 15% of its net assets would be so invested. Lending of Securities Subject to investment restriction 8(a) on page B-3 (relating to loans of portfolio securities), the separate account may lend its securities to brokers and dealers that are not affiliated with TIAA, are registered with the SEC and are members of the NASD, and also to certain other financial institutions. All loans will be fully collateralized. In connection with the lending of its securities, the separate account will receive as collateral cash, securities issued or guaranteed by the United States Government (i.e., Treasury securities), or other collateral permitted by applicable law, which at all times while the loan is outstanding will be maintained in amounts equal to at least 102% of the current market value of the loaned securities, or such lesser percentage as may be permitted by the New York State Insurance Department (not to fall below 100% of the market value of the loaned securities), as reviewed daily. By lending its securities, the separate account will receive amounts equal to the interest or dividends paid on the securities loaned and in addition will expect to receive a portion of the income generated by the short-term investment of cash received as collateral or, alternatively, where securities or a letter of credit are used as collateral, a lending fee paid directly to the separate account by the borrower of the securities. Such loans will be terminable by the separate account at any time and will not be made to affiliates of TIAA. The separate account may terminate a loan of securities in order to regain record ownership of, and to exercise beneficial rights related to, the loaned securities, including but not necessarily limited to voting or subscription rights, and may, in the exercise of its fiduciary duties, terminate a loan in the event that a vote of holders of those securities is required on a material matter. The separate account may pay reasonable fees to persons unaffiliated with the separate account for services or for arranging such loans. Loans of securities will be made only to firms deemed creditworthy. As with any extension of credit, however, there are risks of delay in recovering the loaned securities, should the borrower of securities default, become the subject of bankruptcy proceedings, or otherwise be unable to fulfill its obligations or fail financially. Repurchase Agreements Repurchase agreements have the characteristics of loans by the separate account, and will be fully collateralized (either with physical securities or evidence of book entry transfer to the account of the custodian bank) at all times. During the term of the repurchase agreement, the separate account retains the security subject to the repurchase agreement as collateral securing the seller's repurchase obligation, continually monitors the market value of the security subject to the agreement, and requires the separate account's seller to deposit with the separate account additional collateral equal to any amount by which the market value of the security subject to the repurchase agreement falls below the resale amount provided under the repurchase agreement. The separate account will enter into repurchase agreements only with member banks of the Federal Reserve System, and with primary dealers in United States Government securities or their wholly-owned subsidiaries whose creditworthiness has been reviewed and found satisfactory by Advisors and who have, therefore, been determined to present minimal credit risk. Securities underlying repurchase agreements will be limited to certificates of deposit, commercial paper, bankers' acceptances, or obligations issued or guaranteed by the United States Government or its agencies or instrumentalities, in which the separate account may otherwise invest. If a seller of a repurchase agreement defaults and does not repurchase the security subject to the agreement, the separate 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. B-6 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 which 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. In 1998, the separate account adopted an enhanced index approach to investing which utilizes proprietary quantitative scoring and trading techniques to attempt to slightly outperform the Russell 300 Index (see page 12 of the Prospectus). This approach inherently involves trading volumes beyond the level necessary to maintain a typical stock index portfolio. As a result of the adoption of this approach, the portfolio turnover rate in 1998 for the separate account was 45.93% as compared to 2.39% in 1997 when such an approach was not in effect. B-7 Because a higher portfolio turnover rate will increase brokerage costs to the separate account, Advisors will carefully weigh the added costs of short-term investment against the gains anticipated from such transactions. 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 which 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 effecting the value of a domestic investment (as determined in our sole discretion) occur between the time when its price is determined and the time the separate account's net asset value is calculated. Money Market Instruments Money market instruments for which market quotations are readily available are valued based on the most recent bid price or the equivalent quoted yield for such securities (or those of comparable maturity, quality, and type). Values for money market instruments will be obtained either from one or more of the major market makers or from one or more of the financial information services for the securities to be valued. Options Portfolio investments underlying options are valued as described above. Stock options written by the separate account are valued at the last quoted sale price, or at the closing bid price if no sale is reported for the day of valuation as determined on the principal exchange on which the option is traded. The value of the separate account net assets will be increased or decreased by the difference between the premiums received on writing options and the costs of liquidating such positions measured by the closing price of the options on the date of valuation. For example, when the separate account writes a call option, the amount of the premium is included in the separate account's assets and an equal amount is included in its liabilities. The liability thereafter is adjusted to the current market value of the call. Thus, if the current market value of the call exceeds the premium received, the excess would be unrealized depreciation; conversely, if the premium exceeds the current market value, such excess would be unrealized appreciation. If a call expires or if the separate account enters into a closing purchase transaction it realizes a gain (or a loss if the cost of the transaction exceeds the premium received when the call was written) without regard to any unrealized appreciation or depreciation in the underlying securities, and the liability related to such call is extinguished. If a call is exercised, the separate account realizes a gain or loss from the sale of the underlying securities and the proceeds of the sale increased by the premium originally received. A premium paid on the purchase of a put will be deducted from the separate account's assets and an equal amount will be included as an investment and subsequently adjusted to the current market value of the put. For example, if the current market value of the put exceeds the premium paid, the excess would be unrealized appreciation; conversely, if the premium exceeds the current market value, such excess would be unrealized depreciation. Stock and bond index futures, and options thereon, which are traded on commodities exchanges, are valued at their last sale prices as of the close of such commodities exchanges. Investments for Which Market Quotations Are Not Readily Available Portfolio securities or other assets for which market quotations are not readily available will be valued at fair value as determined in good faith under the direction of the Management Committee (see "Management," below). B-8 Management Separate Account Management Committee and Officers The names of the members of the separate account Management Committee ("Managers") and certain officers of the separate account and information about their principal occupations during the past five years are shown below:
Position(s) Held with Name and Address* Age Registrant - ---------------------------------- ----- -------------------------- Laurence W. Franz 59 Manager Canisius College 2001 Main Street Buffalo, New York 14208 Jeanmarie C. Grisi 40 Manager Carnegie Corporation of New York 437 Madison Avenue New York, New York 10022 Richard M. Norman 54 Manager Rutgers University Old Queens Building, Room 101 Somerset-George Street New Brunswick, New Jersey 08903 Thomas G. Walsh** 57 Chairman of the Management Committee and President Richard L. Gibbs 52 Executive Vice President Peter C. Clapman 63 Senior Vice President, Secretary and Chief Counsel, Investments Richard J. Adamski 57 Vice President and Treasurer Principal Occupation(s) Name and Address* During Past 5 Years - ----------------- ------------------- Laurence W. Franz Vice President, Business and Finance, and Treasurer, Canisius Canisius College College 2001 Main Street Buffalo, New York 14208 Jeanmarie C. Grisi Treasurer, Carnegie Corporation of New York Carnegie Corporation of New York (a philanthropic grantmaking foundation) 437 Madison Avenue New York, New York 10022 Richard M. Norman Vice President for Administration and Rutgers University Associate Treasurer, Rutgers, The State Old Queens Building, Room 101 University of New Jersey Somerset-George Street New Brunswick, New Jersey 08903 Thomas G. Walsh** President, Teachers Personal Investors Services, Inc. ("TPIS"), since February 1994, and Executive Vice President, TIAA and CREF Richard L. Gibbs Executive Vice President, TIAA, CREF, TIAA-CREF Investment Management, LLC ("Investment Management") and TIAA-CREF Individual & Institutional Services, Inc. ("Services"), since 1993 Peter C. Clapman Senior Vice President and Chief Counsel, Investments, TIAA and CREF Richard J. Adamski Vice President and Treasurer, Investment Management and Services, since January 1992 and TPIS, since 1994, and Vice President and Treasurer, TIAA and CREF
* The address for all officers of the separate account is 730 Third Avenue, New York, New York 10017-3206. ** This Manager is or may be an "interested person" within the meaning of the Investment Company Act of 1940. Compensation of Managers Currently, Managers who are not active officers of TIAA each receive $5,000 per year, plus $1,000 for each meeting of the Management Committee attended for their services to both TIAA Separate Account VA-1 and TIAA-CREF Life Funds (the "Fund Complex"). Compensation is allocated between the companies in the Fund Complex based on assets. Managers who are active officers of TIAA do not receive any additional compensation for their services as Managers. The following table sets forth the compensation paid to the separate account's Managers for the year ended December 31, 1998. The compensation information reflected in the table for the year ended December 31, 1998 differs from the current compensation arrangements. B-9
(3) (2) Pension or Retirement (4) (1) Aggregate Compensa- Benefits Accrued As Estimated (5) Name of Person, tion From Separate Part of Separate Benefits Upon Total Compensation Position Account Account Expenses Retirement From Fund Complex** - --------------------- --------------------- ----------------------- --------------- --------------------- Laurence W. Franz, $ 6,728.50 $-0- $-0- $6,750 Manager Jeanmarie C. Grisi, $ -0-* $-0- $-0- $ -0- Manager Richard M. Norman, $ 6,728.50 $-0- $-0- $6,750 Manager
* Ms. Grisi declined to accept compensation for her services. ** For purposes of this information, the Fund Complex consists of TIAA Separate Account VA-1 and TIAA-CREF Life Funds. Investment Advisory and Related Services Investment Advisory Services Investment advisory services and related services for the separate account are provided by personnel of Teachers Advisors, Inc. ("Advisors"). Advisors is registered as an investment adviser under the Investment Advisers Act of 1940. Advisors manages the investment and reinvestment of the assets of the separate account, subject to the direction and control of the Management Committee of the separate account. The advisory personnel of Advisors perform all research, make recommendations, and place orders for the purchase and sale of securities. Advisors also provides for all portfolio accounting, custodial, and related services for the assets of the separate account. As described in the Prospectus, the investment management agreement between Advisors and the separate account provides for payment by the separate account of an investment advisory fee of 0.30% of assets annually. Currently, with Advisors waiving a portion of that fee, a daily deduction from the net assets of the separate account is made at an annual rate of 0.07% for expenses related to the management of the assets of the separate account. For the years ended December 31, 1998, 1997 and 1996, the separate account paid investment advisory fees of $454,592, $293,938 and $141,057, respectively. These fees reflect the waiver by Advisors of a portion of its investment advisory fee for the years ended December 31, 1998, 1997 and 1996 of $1,493,423, $965,646 and $426,181, respectively. 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, 1998, 1997 and 1996, administrative expenses incurred were $1,298,597, $839,672 and $378,136, 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 2.1 million people. As of December 31, 1998, TIAA's assets were approximately $102 billion; the combined assets for TIAA and CREF totalled approximately $248 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 Bankers Trust Company, 130 Liberty Street, New York, New York 10006. Auditors Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, serves as the separate account's independent auditors and, in that regard, provides general auditing services for the separate account. B-10 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 or any other investment account whose assets Advisors may be managing. In that event, allocation of the securities purchased or sold, as well as the expenses incurred in the transaction, will be made in an equitable manner. Domestic brokerage commissions are negotiated, as there are no standard rates. All brokerage firms provide the service of execution of the order made; some brokerage firms also provide research and statistical data, and research reports on particular companies and industries are customarily provided by brokerage firms to large investors. In negotiating commissions, consideration is given by Advisors to the quality of execution provided and to the use and value of the data. The valuation of such data may be judged with reference to a particular order or, alternatively, may be judged in terms of its value to the overall management of the separate account. The aggregate amount of brokerage commissions paid by the separate account during 1998, 1997 and 1996 was $257,121, $42,630 and $60,134, respectively. Advisors will place orders with brokers providing useful research and statistical data services if reasonable commissions can be negotiated for the total services furnished even though lower commissions may be available from brokers not providing such services. Advisors follows guidelines established by the Management Committee of the separate account for the placing of orders with brokers providing such services. In 1998, no brokerage commissions were paid by the separate account to such brokers as a result of such allocation. Research or services obtained for the separate account may be used by personnel of Advisors in managing other investment company accounts and other accounts, or the CREF accounts for Investment Management. In such circumstances, the expenses incurred will be allocated in an equitable manner consistent with the fiduciary obligations of personnel of Advisors to the separate account. During 1998, 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, 1998, are set forth below: A. Regular broker or dealer based on brokerage commission paid Jefferies & Co., Inc. (Parent-Jefferies Group, Inc.) $ 109,175 B. Regular broker or dealer based on entities acting as principal Chase Securities, Inc. (Parent-Chase Manhattan Corp.) $4,236,210 Dean Witter Reynolds, Inc. (Parent-Morgan Stanley, Dean Witter, & Co.) $2,843,905 Lehman Brothers Inc. (Parent-Lehman Brothers Holdings, Inc.) $ 665,344 Morgan (J.P.) Securities Inc. (Parent-Morgan (J.P.) & Co., Inc.) $ 872,019 Morgan Stanley & Co., Inc. (Parent-Morgan Stanley, Dean Witter, & Co.) $2,843,905 Nations Banc Capital Markets, Inc. (Parent-BankAmerica Corp) $6,667,562
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 = 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 B-11 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 one percent. Set forth below is the total return information for the separate account, which reflects all deductions made from the assets in the account, applied to a hypothetical investment of $1,000:
Average Annual Compound Rate of Cumulative Rate of Period Total Return Total Return - --------------------------------------------- ------------------ ------------------- 1 year (from January 1, 1998 to December 31, 1998) 23.84% 23.84% 4 years and 2 months (from November 1, 1994 date of SEC registration to December 31, 1998) 26.15% 163.27%
Performance Comparisons Performance information for the separate account may be compared, in advertisements, sales literature, and reports to contractowners 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 (i.e., yield) may differ from index to index. In addition, there can be no assurance that the separate account will continue its performance as compared to such indices. The separate account is not promoted, sponsored, endorsed, or sold by, nor affiliated with, Frank Russell Company. Frank Russell Company is not responsible for and has not reviewed the separate account literature or publications and makes no representation or warranty, express or implied, as to their accuracy, completeness, or otherwise. Frank Russell Company reserves the right, at any time and without notice, to change or terminate the Russell 3000 Index. Frank Russell Company has no obligation to take the needs of the separate account or its contractowners into consideration in determining the Index. Frank Russell Company's publication of the Russell 3000 Index in no way suggests or implies an opinion by Frank Russell Company as to the attractiveness or appropriateness of investment in any or all of the securities upon which the Index is based. Frank Russell Company makes no representation, warranty, or guarantee as to the accuracy, completeness or reliability of the Index or any data included in the Index. Frank Russell Company makes no representation or warranty regarding the use, or the results of use, of the Index or any securities comprising the Index. FRANK RUSSELL 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 B-12 hypothetical investment earning a specified rate of return. We would show how the total return, net of expenses, from an investment of the same dollar amount in funds with the same investment results but different expense deductions varies increasingly over time. In the alternative, we would show the difference in the dollar amount of total expense charges paid over time by an investor in two or more different funds that have the same annual total return but different asset-based expense charges. We may also compare the separate account's expense charges to those of other variable annuities and other investment products. Periodic Reports Prior to the time an entire accumulation has been withdrawn in cash or transferred to the fixed account a contractowner will be sent a statement each quarter which sets forth the following: (1) Premiums paid during the quarter; (2) the number and dollar value of accumulation units in the separate account credited to the contractowner during the quarter and in total; (3) cash withdrawals from the separate account during the quarter; and (4) any transfers between the separate account and the fixed account during the quarter. The separate account also will transmit to contractowners, at least semi-annually, reports showing the financial condition of the separate account and a schedule of investments held in the separate account in which they have accumulations. General Matters Assignment of Contracts You can assign the contract at any time. Payment to an Estate, Guardian, Trustee, etc. We reserve the right to pay in one sum the commuted value of any benefits due an estate, corporation, partnership, trustee or other entity not a natural person. Neither TIAA nor the separate account will be responsible for the conduct of any executor, trustee, guardian, or other third party to whom payment is made. Benefits Based on Incorrect Information If the amounts of benefits provided under a contract were based on information that is incorrect, benefits will be recalculated on the basis of the correct data. If any overpayments or underpayments have been made by the separate account, appropriate adjustments will be made. Proof of Survival We reserve the right to require satisfactory proof that anyone named to receive benefits under a contract is living on the date payment is due. If this proof is not received after a request in writing, the separate account will have the right to make reduced payments or to withhold payments entirely until such proof is received. State Regulation TIAA and the separate account are subject to regulation by the New York State Superintendent of Insurance ("Superintendent") as well as by the insurance regulatory authorities of certain other states and jurisdictions. TIAA and the separate account must file with the Superintendent both quarterly and annual statements on forms promulgated by the New York State Insurance Department. The separate account books and assets are subject to review and examination by the Superintendent and the Superintendent's agents at all times, and a full examination into the affairs of the separate account is made at least every five years. In addition, a full examination of the separate account's operations is usually conducted periodically by some other states. Legal Matters All matters of applicable state law pertaining to the contracts, including TIAA's right to issue the contracts, have been passed upon by Charles H. Stamm, Executive Vice President and General Counsel of TIAA. Legal matters relating to the federal securities laws have been passed upon by Sutherland, Asbill & Brennan LLP, Washington, D.C. Experts The financial statements of TIAA and the separate account included in this Statement of Additional Information have been audited by Ernst & Young LLP, independent auditors, as stated in their reports appearing herein (which report on the financial statements of TIAA expresses an opinion that such financial statements are presented in conformity with statutory accounting practices, a comprehensive basis of accounting as described in Note 2, and not in conformity with generally accepted accounting principles), and have been so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. Additional Considerations Over the past several years, TIAA and CREF have added many new investment vehicles to their line of products. The growing family of TIAA and CREF products is designed to provide additional investment options for those who want to diversify their holdings. Most experts recommend diversification as a good strategy for 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. 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. B-13 Investors who seek to counter the effects of inflation on their long-term investments should therefore consider investing in stocks. The Stock Index Account could be an appropriate investment for someone who is seeking to supplement his or her retirement income, to purchase a retirement home, finance an extended trip, or build a fund for philanthropic purposes. Of course, there is no guarantee that the investment objective of that or any other fund will be met. Before investing, you should consider whether your pension plan and social security payments will meet your retirement needs. You should look at your assets and liabilities to help determine whether you need to invest more money to help provide retirement income. You should consider how much time you have until retirement and the effect of inflation and taxes on your savings and investments. You should also keep in mind that experts say that people need 70% to 80% of their pre-retirement income to maintain the same standard of living after retirement. Before contributing to a contract, you should consider whether you have already reached your contribution limit on your TIAA-CREF basic Retirement Annuities, Supplemental Retirement Annuities, and other 403(b) savings plans. Consult your tax advisor to learn more about these limits. You should also consider what types of investments are best suited for you and your current needs. In particular, you should consider the tax treatment of a variable annuity as compared with a standard mutual fund product. With annuities, earnings generally grow tax-deferred and investors are provided the option of lifetime income upon retirement. However, annuities may have restrictions on withdrawals before age 591/2, 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. Additional Information A Registration Statement has been filed with the Securities and Exchange Commission, under the 1933 Act, with respect to the contracts discussed in the Prospectus and in this Statement of Additional Information. Not all of the information set forth in the Registration Statement, amendments, and exhibits thereto has been included in the Prospectus or this Statement of Additional Information. Statements contained herein concerning the contents of the contracts and other legal instruments are intended to be summaries. For a complete statement of the terms of these documents, reference should be made to the instruments filed with the Commission. Financial Statements The audited financial statements of the separate account and TIAA follow. The financial statements of TIAA should be distinguished from the financial statements of the separate account and should be considered only as bearing upon the ability of TIAA to meet its obligations under the contracts. They should not be considered as bearing on the investment performance of the assets held in the separate account. B-14 INDEX TO AUDITED FINANCIAL STATEMENTS DECEMBER 31, 1998
PAGE ---- TIAA SEPARATE ACCOUNT VA-1--STOCK INDEX ACCOUNT Report of Management Responsibility................................. B-16 Report of Independent Auditors...................................... B-17 AUDITED FINANCIAL STATEMENTS Statements of Assets and Liabilities........................... B-18 Statement of Operations........................................ B-19 Statement of Changes in Net Assets............................. B-20 Notes to Financial Statements....................................... B-21 Statement of Investments............................................ B-23 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA Chairman's Letter................................................... B-41 Report of Management Responsibility................................. B-42 Report of Independent Auditors...................................... B-43 STATUTORY-BASIS FINANCIAL STATEMENTS Balance Sheets................................................. B-44 Statements of Operations....................................... B-45 Statements of Changes in Contingency Reserves.................. B-46 Statements of Cash Flows....................................... B-47 Notes to Statutory-Basis Financial Statements....................... B-48
B-15 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 generally accepted accounting principles and have been presented fairly and objectively in accordance with such principles. Teachers Insurance and Annuity Association of America ("TIAA") has established and maintains a strong system of internal controls designed to provide reasonable assurance that assets are properly safeguarded and transactions are properly executed in accordance with management's authorization, and to carry out the ongoing responsibilities of management for reliable financial statements. In addition, TIAA's internal audit personnel provide a continuing review of the internal controls and operations of TIAA, including its separate account operations. The accompanying financial statements have been audited by the independent auditing firm of Ernst & Young LLP. The independent auditors' report, which appears on the following page, expresses an independent opinion on the fairness of presentation of these financial statements. The Audit Committee of the TIAA Board of Trustees, consisting of trustees who are not officers of TIAA, and the Management Committee of VA-1, the majority of which are not officers of TIAA, meet regularly with management, representatives of Ernst & Young LLP and internal audit personnel to review matters relating to financial reporting, internal controls and auditing. /s/ Thomas G. Walsh ------------------------------- President and Chief Executive Officer /s/ Richard L. Gibbs ------------------------------- Chief Financial Officer and Executive Vice President B-16 [Letterhead of ERNST & YOUNG LLP] 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, 1998, and the related statements of operations for the year then ended and of changes in net assets for each of the two years in the period then ended. These financial statements are the responsibility of VA-1's management. Our responsibility is to express an opinion on these financial statements based on our audits. The condensed financial information for the year ended December 31, 1996 and the periods prior thereto were audited by other auditors, whose report dated February 6, 1997 expressed an unqualified opinion on such condensed financial information. We conducted our audits in accordance with generally accepted auditing standards. 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 at December 31, 1998, by correspondence with the custodians 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, 1998, 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 generally accepted accounting principles. /s/ Ernst & Young LLP February 5, 1999 B-17 TIAA SEPARATE ACCOUNT VA-1 STOCK INDEX ACCOUNT STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998 (amounts in thousands, except per accumulation unit amount) ASSETS Investments, at cost ........................................... $ 514,100 Net unrealized appreciation of investments ..................... 242,057 --------- Investments, at value .......................................... 756,157 Cash ........................................................... 789 Dividends and interest receivable .............................. 871 Amounts due from General Account ............................... 593 Receivable from securities transactions ........................ 7,882 --------- TOTAL ASSETS 766,292 --------- LIABILITIES Payable for securities transactions ............................ 8,310 --------- TOTAL LIABILITIES 8,310 --------- NET ASSETS--Accumulation Fund ................................... $ 757,982 ========= NUMBER OF ACCUMULATION UNITS OUTSTANDING--Notes 5 and 6 ......... 11,145 ========= NET ASSET VALUE, PER ACCUMULATION UNIT--Note 5 .................. $ 68.01 =========
See notes to financial statements. B-18 TIAA SEPARATE ACCOUNT VA-1 STOCK INDEX ACCOUNT STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998 (amounts in thousands) INVESTMENT INCOME Income: Interest ..................................................... $ 130 Dividends .................................................... 9,662 -------- TOTAL INCOME 9,792 -------- Expenses--Note 3: Investment advisory charges .................................. 1,948 Administrative expenses ...................................... 1,299 Mortality and expense risk charges ........................... 649 -------- EXPENSES BEFORE WAIVER 3,896 Investment advisory charges waived--Note 3 ................... (1,494) -------- NET EXPENSES 2,402 -------- INVESTMENT INCOME--NET 7,390 -------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS--Note 4 Net realized gain on investments ............................. 31,091 Net change in unrealized appreciation on investments ......... 97,186 -------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 128,277 -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $135,667 ========
See notes to financial statements. B-19 TIAA SEPARATE ACCOUNT VA-1 STOCK INDEX ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS (amounts in thousands)
Years Ended December 31, --------------------------- 1998 1997 ------------ ------------ FROM OPERATIONS Investment income--net ....................................... $ 7,390 $ 5,695 Net realized gain on investments ............................. 31,091 7,108 Net change in unrealized appreciation on investments ......... 97,186 96,189 --------- --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 135,667 108,992 --------- --------- FROM CONTRACTOWNER TRANSACTIONS Premiums ..................................................... 135,735 154,463 Net contractowner transfers (to) from fixed account .......... (36,831) 9,216 Withdrawals .................................................. (16,442) (10,917) Death benefits ............................................... (3,878) (1,068) --------- --------- NET INCREASE IN NET ASSETS RESULTING FROM CONTRACTOWNER TRANSACTIONS 78,584 151,694 --------- --------- NET INCREASE IN NET ASSETS 214,251 260,686 NET ASSETS Beginning of year ............................................ 543,731 283,045 --------- --------- End of year .................................................. $ 757,982 $ 543,731 ========= =========
See notes to financial statements. B-20 TIAA SEPARATE ACCOUNT VA-1 STOCK INDEX ACCOUNT NOTES TO FINANCIAL STATEMENTS NOTE 1--ORGANIZATION TIAA Separate Account VA-1 ("VA-1") is a segregated investment account of Teachers Insurance and Annuity Association of America ("TIAA") and was organized on February 16, 1994 under the insurance laws of the State of New York for the purpose of issuing and funding variable annuity contracts. VA-1 was registered with the Securities and Exchange Commission ("Commission") effective November 1, 1994 as an open-end, diversified management investment company under the Investment Company Act of 1940. Currently, VA-1 consists of a single investment portfolio, the Stock Index Account (the "Account"), which invests in a diversified portfolio of equity securities selected to track the overall United States stock market. Teachers Advisors, Inc. ("Advisors"), an indirect subsidiary of TIAA, which is registered with the Commission as an investment adviser, provides investment advisory services for VA-1 pursuant to an Investment Management Agreement between TIAA, Advisors and VA-1. TIAA provides all administrative services for VA-1 pursuant to an Administrative Services Agreement with VA-1. The contracts are distributed primarily by Teachers Personal Investors Services, Inc. ("TPIS"), also an indirect subsidiary of TIAA, which is registered with the Commission as a broker-dealer and is a member of the National Association of Securities Dealers, Inc. NOTE 2--SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements may require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income, expenses and related disclosures. Actual results may differ from those estimates. The following is a summary of the significant accounting policies followed by the Account, which are in conformity with generally accepted accounting principles. Valuation of Investments: Securities listed or traded on any United States national securities exchange are valued at the last sales 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 sales price, or at the mean of the last bid and asked prices if no sale is reported. All other over-the-counter securities are valued at the mean of the last bid and asked prices. Short-term money market instruments are stated at market value. Portfolio securities for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of and in accordance with the responsibilities of the Management Committee of VA-1. Accounting for Investments: Securities transactions are accounted for as of the date the securities are purchased or sold (trade date). Interest income is recorded as earned and, for short-term money market instruments, includes accrual of discount and amortization of premium. Dividend income is recorded on the ex-dividend date. Realized gains and losses on security transactions are accounted for on the average cost basis. Federal Income Taxes: Based on provisions of the Internal Revenue Code, no federal income taxes are attributable to the net investment experience of the Account. NOTE 3--MANAGEMENT AGREEMENTS Daily charges are deducted from the net assets of the Account for services required to manage investments, administer the separate account and the contracts, and to cover certain insurance risks borne by TIAA. The Investment Management Agreement sets the investment advisory charge at an annual rate of 0.30% of the net assets of the Account. Currently, Advisors has agreed to waive a portion of such fee, so that the daily deduction is equivalent to an annual charge of 0.07% of the net assets of the Account. The Administrative Services Agreement sets the administrative expense charge at an annual rate of 0.20% of the net assets of the Account. TIAA also imposes a daily charge for bearing certain mortality and expense risks in connection with the contracts equivalent to an annual rate of 0.10% of the net assets of the Account. B-21 TIAA SEPARATE ACCOUNT VA-1 STOCK INDEX ACCOUNT NOTES TO FINANCIAL STATEMENTS NOTE 4--INVESTMENTS At December 31, 1998, the net unrealized appreciation on investments was $242,057,448, consisting of gross unrealized appreciation of $256,727,054 and gross unrealized depreciation of $14,669,606. Purchases and sales of securities, other than short-term money market instruments, for the year ended December 31, 1998, were $378,601,401 and $295,621,045, respectively. NOTE 5--CONDENSED FINANCIAL INFORMATION Selected condensed financial information for an Accumulation Unit of the Account is presented below.
Years Ended December 31, October 3, 1994 ------------------------------------------------------------- (date established) to 1998 1997 1996 1995 December 31, 1994 (1) ------------- ------------- ------------- ------------- ---------------------- Per Accumulation Unit Data: Investment income .................... $ .908 $ .847 $ .807 $ .745 $ .206 Expenses ............................. .223 .182 .150 .170 .034 -------- -------- -------- -------- -------- Investment income--net ............... .685 .665 .657 .575 .172 Net realized and unrealized gain on investments ..................... 12.407 12.429 6.755 8.565 .099 -------- -------- -------- -------- -------- Net increase in Accumulation Unit Value ............. 13.092 13.094 7.412 9.140 .271 Accumulation Unit Value: Beginning of period ................. 54.917 41.823 34.411 25.271 25.000 -------- -------- -------- -------- -------- End of period ....................... $ 68.009 $ 54.917 $ 41.823 $ 34.411 $ 25.271 ======== ======== ======== ======== ======== Total return .......................... 23.84% 31.31% 21.54% 36.17% 1.08% Ratios to Average Net Assets: Expenses (2) ......................... 0.37% 0.37% 0.40% 0.55% 0.13% Investment income--net ............... 1.14% 1.36% 1.74% 1.87% 0.68% 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
(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 Account's expense ratio for the periods listed would have been higher (see Note 3). NOTE 6--ACCUMULATION UNITS Changes in the number of Accumulation Units outstanding were as follows:
Years Ended December 31, ---------------------------- 1998 1997 -------------- ----------- Accumulation Units: Credited for premiums .......................... 2,250,490 3,195,114 Cancelled for transfers and disbursements ...... (1,006,137) (61,762) Outstanding: Beginning of year ............................. 9,901,048 6,767,696 ---------- --------- End of year ................................... 11,145,401 9,901,048 ========== =========
B-22 TIAA SEPARATE ACCOUNT VA-1 STATEMENT OF INVESTMENTS--STOCK INDEX ACCOUNT DECEMBER 31, 1998 SUMMARY BY INDUSTRY (000)
VALUE % ---------------- ---------- BONDS CORPORATE BONDS AUTOMOTIVE DEALERS AND SERVICE STATIONS $ 2 0.00% -------- ------ TOTAL CORPORATE BONDS (Cost $3) .................................. 2 0.00 -------- ------ TOTAL BONDS (Cost $3) .................................. 2 0.00 -------- ------ PREFERRED STOCK HOLDING AND OTHER INVESTMENT OFFICES ....... 16 0.00 INSTRUMENTS AND RELATED PRODUCTS ........... 0 0.00 INSURANCE CARRIERS ......................... 30 0.00 RUBBER AND MISCELLANEOUS PLASTIC PRODUCTS .................................. 118 0.02 -------- ------ TOTAL PREFERRED STOCK (Cost $150) ................................ 164 0.02 -------- ------ COMMON STOCK AGRICULTURAL PRODUCTION--CROPS ............. 167 0.02 AGRICULTURAL SERVICES ...................... 27 0.00 AMUSEMENT AND RECREATION SERVICES .......... 604 0.08 APPAREL AND ACCESSORY STORES ............... 4,237 0.56 APPAREL AND OTHER TEXTILE PRODUCTS ......... 967 0.13 AUTO REPAIR, SERVICES AND PARKING .......... 487 0.06 AUTOMOTIVE DEALERS AND SERVICE STATIONS 547 0.07 BUILDING MATERIALS AND GARDEN SUPPLIES ..... 8,005 1.06 BUSINESS SERVICES .......................... 54,605 7.20 CHEMICALS AND ALLIED PRODUCTS .............. 98,730 13.02 COAL MINING ................................ 14 0.00 COMMUNICATIONS ............................. 81,710 10.78 DEPOSITORY INSTITUTIONS .................... 63,472 8.37 EATING AND DRINKING PLACES ................. 6,565 0.87 EDUCATIONAL SERVICES ....................... 351 0.05 ELECTRIC, GAS, AND SANITARY SERVICES ....... 32,377 4.27 ELECTRONIC AND OTHER ELECTRIC EQUIPMENT 58,357 7.70 ENGINEERING AND MANAGEMENT SERVICES ........ 1,776 0.23 FABRICATED METAL PRODUCTS .................. 6,763 0.89 FOOD AND KINDRED PRODUCTS .................. 30,807 4.06 FOOD STORES ................................ 5,375 0.71 FORESTRY ................................... 5 0.00 FURNITURE AND FIXTURES ..................... 1,065 0.14 FURNITURE AND HOMEFURNISHINGS STORES ....... 2,004 0.26 GENERAL BUILDING CONTRACTORS ............... 707 0.09 GENERAL MERCHANDISE STORES ................. 16,782 2.21 HEALTH SERVICES ............................ 4,384 0.58 HEAVY CONSTRUCTION, EXCEPT BUILDING ........ 183 0.02 HOLDING AND OTHER INVESTMENT OFFICES ....... 8,130 1.07 HOTELS AND OTHER LODGING PLACES ............ 1,203 0.16 INDUSTRIAL MACHINERY AND EQUIPMENT ......... 56,355 7.43
VALUE % ---------------- ---------- INSTRUMENTS AND RELATED PRODUCTS ........... $ 16,029 2.11% INSURANCE AGENTS, BROKERS AND SERVICE ...... 741 0.10 INSURANCE CARRIERS ......................... 37,125 4.90 LEATHER AND LEATHER PRODUCTS ............... 46 0.01 LEGAL SERVICES ............................. 7 0.00 LOCAL AND INTERURBAN PASSENGER TRANSIT 63 0.01 LUMBER AND WOOD PRODUCTS ................... 1,283 0.17 METAL MINING ............................... 937 0.12 MISCELLANEOUS MANUFACTURING INDUSTRIES ................................ 533 0.07 MISCELLANEOUS RETAIL ....................... 7,867 1.04 MOTION PICTURES ............................ 4,704 0.62 NONDEPOSITORY INSTITUTIONS ................. 17,266 2.28 NONMETALLIC MINERALS, EXCEPT FUELS ......... 357 0.05 OIL AND GAS EXTRACTION ..................... 3,968 0.53 PAPER AND ALLIED PRODUCTS .................. 6,819 0.90 PERSONAL SERVICES .......................... 1,713 0.23 PETROLEUM AND COAL PRODUCTS ................ 31,599 4.17 PRIMARY METAL INDUSTRIES ................... 2,655 0.35 PRINTING AND PUBLISHING .................... 11,052 1.46 RAILROAD TRANSPORTATION .................... 3,344 0.44 REAL ESTATE ................................ 231 0.03 RUBBER AND MISCELLANEOUS PLASTIC PRODUCTS .................................. 4,068 0.54 SECURITY AND COMMODITY BROKERS ............. 7,919 1.05 SOCIAL SERVICES ............................ 24 0.00 SPECIAL TRADE CONTRACTORS .................. 88 0.01 STONE, CLAY, AND GLASS PRODUCTS ............ 993 0.13 TEXTILE MILL PRODUCTS ...................... 541 0.07 TOBACCO PRODUCTS ........................... 9,357 1.23 TRANSPORTATION BY AIR ...................... 3,991 0.53 TRANSPORTATION EQUIPMENT ................... 23,046 3.04 TRANSPORTATION SERVICES .................... 948 0.13 TRUCKING AND WAREHOUSING ................... 661 0.09 WATER TRANSPORTATION ....................... 417 0.06 WHOLESALE TRADE-DURABLE GOODS .............. 1,557 0.21 WHOLESALE TRADE-NONDURABLE GOODS ........... 4,882 0.65 -------- ------ TOTAL COMMON STOCK (Cost $511,548) ............................ 753,592 99.42 -------- ------ SHORT TERM INVESTMENT U.S. GOVERNMENT AGENCY ..................... 2,399 0.32 -------- ------ TOTAL SHORT TERM INVESTMENT (Cost $2,399) .............................. 2,399 0.32 -------- ------ TOTAL PORTFOLIO (Cost $514,100) ............................ 756,157 99.76 OTHER ASSETS & LIABILITIES, NET ............. 1,825 0.24 -------- ------ NET ASSETS .................................. $757,982 100.00% ======== ======
B-23 TIAA SEPARATE ACCOUNT VA-1 STATEMENT OF INVESTMENTS--STOCK INDEX ACCOUNT DECEMBER 31, 1998
VALUE PRINCIPAL (000) - --------- -------- BONDS--0.00% CORPORATE BONDS--0.00% AUTOMOTIVE DEALERS AND SERVICE STATIONS--0.00% $ 1,950 o SD UGLY DUCKLING CORP (SUB DEB) 12.000%, 10/23/03 ................................ $ 2 -------- TOTAL CORPORATE BONDS (Cost $3) ....................................... 2 -------- TOTAL BONDS (Cost $3) ....................................... 2 -------- SHARES - ------ PREFERRED STOCK--0.02% HOLDING AND OTHER INVESTMENT OFFICES--0.00% 445 APARTMENT INVESTMENT & MANAGEMENT CO SERIES E ......................................... 16 -------- INSTRUMENTS AND RELATED PRODUCTS--0.00% 3,500 o SD FRESENIUS MEDICAL CARE (CLASS D) .............. 0 -------- INSURANCE CARRIERS--0.00% 389 AETNA, INC SERIES C .............................. 30 -------- RUBBER AND MISCELLANEOUS PLASTIC PRODUCTS--0.02% 2,280 SEALED AIR CORP (CLASS A) ........................ 118 -------- TOTAL PREFERRED STOCK (Cost $150) ...................................... 164 -------- COMMON STOCK--99.42% AGRICULTURAL PRODUCTION--CROPS--0.02% 6,200 PIONEER-HI-BRED INTERNATIONAL, INC ............... 167 -------- AGRICULTURAL SERVICES--0.00% 3,600 o SD CADIZ, INC .................................... 27 -------- AMUSEMENT AND RECREATION SERVICES--0.08% 1,200 o SD AMERICAN SKIING CO ............................ 9 7,200 o SD AMF BOWLING, INC .............................. 37 1,200 o SD ANCHOR GAMING CO .............................. 68 700 o SD BALLY TOTAL FITNESS HOLDINGS CORP ............. 17 3,000 o SD BOYD GAMING CORP .............................. 10 1,100 CHURCHILL DOWNS, INC ............................. 36 900 o SD FAMILY GOLF CENTERS, INC ...................... 18 2,800 o SD FLORIDA PANTHERS HOLDINGS, INC ................ 26 6,500 o SD GRAND CASINOS, INC ............................ 52 16,100 o SD HARRAH'S ENTERTAINMENT, INC ................... 253 1,300 o SD HOLLYWOOD PARK, INC ........................... 11 100 o SD INTERNATIONAL SPEEDWAY CORP (CLASS A ) ........ 4 50 o SD PLAYERS INTERNATIONAL, INC .................... 0 600 o SD RIO HOTEL & CASINO, INC ....................... 10 900 o SD SPEEDWAY MOTORSPORTS, INC ..................... 26 900 o SD WESTWOOD ONE, INC ............................. 27 -------- 604 -------- APPAREL AND ACCESSORY STORES--0.56% 8,482 o SD ABERCROMBIE & FITCH CO (CLASS A) .............. 600 2,100 o SD AMERICAN EAGLE OUTFITTERS, INC ................ 140 3,000 o SD ANN TAYLOR STORES CORP ........................ 118 600 o SD BUCKLE, INC ................................... 14 20 BURLINGTON COAT FACTORY WAREHOUSE CORP ........... 0 2,800 CATO CORP (CLASS A) .............................. 28 2,100 o SD CHILDRENS PLACE RETAIL STORES ................. 53 1,000 o SD FINISH LINE, INC (CLASS A) .................... 8 36,475 GAP, INC ......................................... 2,052 2,000 o SD GYMBOREE CORP ................................. 13 250 o SD JUST FOR FEET, INC ............................ 4 50 o SD MENS WAREHOUSE, INC ........................... 2 7,900 ROSS STORES, INC ................................. 311
VALUE SHARES (000) - ------ --------- 1,600 o SD STEIN MART, INC ................................... $ 11 29,100 TJX COS, INC ......................................... 844 1,300 o SD WET SEAL, INC (CLASS A) ........................... 39 -------- 4,237 -------- APPAREL AND OTHER TEXTILE PRODUCTS--0.13% 600 AUTHENTIC FITNESS CORP ............................... 11 2,200 o SD DONNA KARAN INTERNATIONAL, INC .................... 17 10,000 o SD FRUIT OF THE LOOM, INC (CLASS A) .................. 138 4,400 o SD HARTMARX CORP ..................................... 25 14,400 o SD JONES APPAREL GROUP, INC .......................... 318 3,500 KELLWOOD CO .......................................... 88 4,800 o SD NAUTICA ENTERPRISES, INC .......................... 72 1,700 PHILLIPS VAN HEUSEN CORP ............................. 12 400 PILLOWTEX CORP ....................................... 11 1,700 o SD QUIKSILVER, INC ................................... 51 300 VF CORP .............................................. 14 8,300 WARNACO GROUP, INC (CLASS A) ......................... 210 -------- 967 -------- AUTO REPAIR, SERVICES AND PARKING--0.06% 4,600 o SD AVIS RENT A CAR, INC .............................. 111 50 CENTRAL PARKING CORP ................................. 2 1,400 o SD DOLLAR THRIFTY AUTOMOTIVE GROUP, INC .............. 18 200 HERTZ CORP (CLASS A) ................................. 9 2,633 MIDAS, INC ........................................... 82 8,250 ROLLINS TRUCK LEASING CORP ........................... 122 5,500 RYDER SYSTEM, INC .................................... 143 -------- 487 -------- AUTOMOTIVE DEALERS AND SERVICE STATIONS--0.07% 12,000 o SD AUTOZONE, INC ..................................... 395 900 o SD COPART, INC ....................................... 29 3,100 o SD CSK AUTO CORP ..................................... 83 800 o SD DISCOUNT AUTO PARTS, INC .......................... 18 500 o SD GROUP 1 AUTOMOTIVE, INC ........................... 13 900 o SD WEST MARINE, INC .................................. 9 -------- 547 -------- BUILDING MATERIALS AND GARDEN SUPPLIES--1.06% 3,800 o SD EAGLE HARDWARE & GARDEN, INC ...................... 124 105,300 HOME DEPOT, INC ...................................... 6,443 28,100 LOWES COS, INC ....................................... 1,438 -------- 8,005 -------- BUSINESS SERVICES--7.20% 1,100 AARON RENTS, INC ..................................... 17 1,000 o SD ABACUS DIRECT CORP ................................ 46 600 o SD ABR INFORMATION SERVICES, INC ..................... 12 6,900 o SD ACCLAIM ENTERTAINMENT, INC ........................ 85 600 o SD ACKERLEY GROUP, INC ............................... 11 9,633 o SD ACNEILSEN CORP .................................... 272 5,060 o SD ACXIOM CORP ....................................... 157 10,700 ADOBE SYSTEMS, INC ................................... 500 3,600 o SD ADVO, INC ......................................... 95 4,400 o SD AFFILIATED COMPUTER SERVICES, INC (CLASS A) ....... 198 2,400 o SD ALTERNATIVE RESOURCES CORP ........................ 26 33,400 AMERICA ONLINE, INC .................................. 5,344 7,150 o SD AMERICAN MANAGEMENT SYSTEMS, INC .................. 286 400 ANALYSTS INTERNATIONAL CORP .......................... 8 600 o SD ANSWERTHINK CONSULTING GROUP ...................... 16 1,000 o SD APAC TELESERVICES, INC ............................ 4 8,880 o SD ASCEND COMMUNICATIONS, INC ........................ 584 1,700 o SD ASPECT DEVELOPMENT, INC ........................... 75 6,800 AUTODESK, INC ........................................ 290
B-24
VALUE SHARES (000) - ------ --------- BUSINESS SERVICES--(Continued) 15,800 AUTOMATIC DATA PROCESSING, INC ......................... $ 1,267 4,700 o SD AVANT CORP ........................................ 75 600 o SD AXENT TECHNOLOGIES, INC ........................... 18 1,220 o SD AZTEC TECHNOLOGY PARTNERS, INC .................... 4 100 o SD BARRA, INC ........................................ 2 6,900 o SD BMC SOFTWARE, INC ................................. 307 800 o SD BORG-WARNER SECURITY CORP ......................... 15 40 o SD BRC HOLDINGS, INC ................................. 1 6,300 o SD BUILDING ONE SERVICE .............................. 132 1,300 o SD CADENCE DESIGN SYSTEMS, INC ....................... 39 500 o SD CAMBRIDGE TECHNOLOGY PARTNERS, INC ................ 11 1,700 o SD CARIBINER INTERNATIONAL, INC ...................... 16 300 o SD CATALINA MARKETING CORP ........................... 21 200 o SD CENTURY BUSINESS SERVICES, INC .................... 3 3,000 o SD CERIDIAN CORP ..................................... 209 4,300 o SD CERNER CORP ....................................... 115 2,900 o SD CHECKFREE HOLDINGS CORP ........................... 68 1,300 CHEMED CORP .......................................... 44 2,400 o SD CHOICEPOINT, INC .................................. 155 500 o SD CIBER, INC ........................................ 14 100 o SD CITRIX SYSTEMS, INC ............................... 10 1,800 o SD CMGI, INC ......................................... 192 1,000 o SD COMDISCO, INC ..................................... 17 36,800 COMPUTER ASSOCIATES INTERNATIONAL, INC ............... 1,569 4,850 o SD COMPUTER HORIZONS CORP ............................ 129 6,096 o SD COMPUTER SCIENCES CORP ............................ 393 2,200 COMPUTER TASK GROUP, INC ............................. 60 15,800 o SD COMPUWARE CORP .................................... 1,234 1,800 o SD CONCORD COMMUNICATIONS, INC ....................... 102 1,800 o SD COTELLIGENT, INC .................................. 38 4,300 o SD CSG SYSTEMS INTERNATIONAL, INC .................... 340 5,860 o SD CYBERGUARD CORP ................................... 12 800 o SD DATA DIMENSIONS, INC .............................. 7 400 o SD DATA PROCESSING RESOURCES CORP .................... 12 1,000 o SD DATASTREAM SYSTEMS, INC ........................... 12 500 o SD DBT ONLINE, INC ................................... 12 2,000 o SD DOCUMENTUM, INC ................................... 107 2,200 o SD DOUBLECLICK, INC .................................. 100 186 o SD DST SYSTEMS, INC .................................. 11 26,600 ELECTRONIC DATA SYSTEMS CORP ......................... 1,337 8,500 o SD ELECTRONICS FOR IMAGING, INC ...................... 342 5,500 o SD EMPLOYEE SOLUTIONS, INC ........................... 14 1,200 o SD ENGINEERING ANIMATION, INC ........................ 65 300 o SD ENVOY CORP ........................................ 17 9,300 EQUIFAX, INC ......................................... 318 300 o SD EXCITE, INC ....................................... 13 700 o SD FACTSET RESEARCH SYSTEMS, INC ..................... 43 1,500 FAIR ISSAC & CO, INC ................................. 69 1,100 o SD FILENET CORP ...................................... 13 42,506 FIRST DATA CORP ...................................... 1,347 50 o SD FISERV, INC ....................................... 3 500 o SD FORE SYSTEMS, INC ................................. 9 3,460 o SD FORTE SOFTWARE, INC ............................... 20 1,000 o SD GENESYS TELECOMMUNICATIONS LABORATORIES, INC. ... 22 1,400 o SD GEOTEL COMMUNICATIONS CORP ........................ 52 800 GERBER SCIENTIFIC, INC ............................... 19 1,100 o SD GETTY IMAGES, INC ................................. 19 2,200 o SD GT INTERACTIVE SOFTWARE CORP ...................... 11 43,225 HBO & CO ............................................. 1,240 2,000 o SD HEALTH MANAGEMENT SYSTEMS, INC .................... 16 2,200 o SD HNC SOFTWARE ...................................... 89 30 o SD HYPERION SOLUTIONS CORP ........................... 1 5,930 o SD IMATION CORP ...................................... 104 1,900 o SD IMRGLOBAL CORP .................................... 56
VALUE SHARES (000) - ------ --------- 8,000 IMS HEALTH, INC ...................................... $ 604 2,700 o SD INDUS INTERNATIONAL, INC .......................... 19 2,000 o SD INDUSTRI-MATEMATIK INTERNATIONAL CORP ............. 10 25,200 o SD INFORMIX CORP ..................................... 249 1,100 o SD INFOUSA, INC (CLASS A) ............................ 5 1,500 o SD INFOUSA, INC (CLASS B) ............................ 8 1,500 o SD INPRISE CORP ...................................... 8 450 o SD INSPIRE INSURANCE SOLUTIONS, INC .................. 8 3,000 o SD INTERGRAPH CORP ................................... 17 3,100 o SD INTERNATIONAL NETWORK SERVICES .................... 206 1,900 o SD INTERNATIONAL TELECOMMUNICATIONS .................. 28 2,100 INTERPOOL, INC ....................................... 35 4,502 INTERPUBLIC GROUP OF COS, INC ........................ 359 6,200 o SD J.D. EDWARDS & CO ................................. 176 200 JACK HENRY & ASSOCIATES, INC ......................... 10 1,200 o SD JDA SOFTWARE GROUP, INC ........................... 12 7,300 o SD KEANE, INC ........................................ 292 2,300 KELLY SERVICES, INC (CLASS A) ........................ 73 1,600 o SD LABOR READY, INC .................................. 32 150 o SD LAMAR ADVERTISING CO (CLASS A) .................... 6 10,180 o SD LEARNING CO, INC .................................. 264 900 o SD LEASING SOLUTIONS, INC ............................ 4 3,400 o SD MACROMEDIA, INC ................................... 115 13,300 MANPOWER, INC ........................................ 335 1,000 o SD MANUGISTICS GROUP, INC ............................ 13 2,200 o SD MAPICS, INC ....................................... 36 1,800 o SD MASTECH CORP ...................................... 52 700 MCGRATH RENTCORP ..................................... 15 3,800 o SD MEDQUIST, INC ..................................... 150 9,300 o SD MENTOR GRAPHICS CORP .............................. 79 1,900 o SD MERCURY INTERACTIVE CORP .......................... 120 4,750 o SD METAMOR WORLDWIDE, INC ............................ 119 800 o SD METRO INFORMATION SERVICES, INC ................... 24 660 o SD MICRO FOCUS GROUP PLC ADR ......................... 6 1,100 o SD MICROMUSE, INC .................................... 21 120,529 o SD MICROSOFT CORP .................................... 16,716 300 o SD MINDSPRING ENTERPRISES, INC ....................... 18 883 o SD MODIS PROFESSIONAL SERVICES ....................... 13 1,300 NATIONAL DATA CORP ................................... 63 700 o SD NCO GROUP, INC .................................... 32 7,300 o SD NETMANAGE, INC .................................... 13 13 o SD NETSCAPE COMMUNICATIONS CORP ...................... 1 2,200 o SD NETWORK APPLIANCE, INC ............................ 99 500 o SD NETWORK SOLUTIONS, INC (CLASS A) .................. 65 3,199 o SD NETWORKS ASSOCIATES, INC .......................... 212 9,200 NIELSEN MEDIA RESEARCH ............................... 166 600 NORRELL CORP ......................................... 9 100 o SD NOVA CORP (GEORGIA) ............................... 3 4,200 o SD NOVACARE EMPLOYEE SERVICES, INC ................... 23 37,900 o SD NOVELL, INC ....................................... 687 1,600 o SD OBJECTIVE SYSTEMS INTEGRATORS, INC ................ 7 9,814 OLSTEN CORP .......................................... 72 11,000 OMNICOM GROUP, INC ................................... 638 500 o SD ON ASSIGNMENT, INC ................................ 17 59,275 o SD ORACLE CORP ....................................... 2,556 32,210 o SD PARAMETRIC TECHNOLOGY CORP ........................ 523 17,300 PAYCHEX, INC ......................................... 890 2,600 o SD PAYMENTECH, INC ................................... 48 1,700 o SD PEGASUS SYSTEMS, INC .............................. 61 700 o SD PEGASYSTEMS, INC .................................. 3 200 o SD PEOPLESOFT, INC ................................... 4 400 o SD PEREGRINE SYSTEMS, INC ............................ 19 2,600 o SD PERSONNEL GROUP OF AMERICA, INC ................... 46 4,200 #o SD PHYSICIAN COMPUTER NETWORK, INC ................... 0 13,000 o SD PLATINUM TECHNOLOGY, INC .......................... 249 6,000 o SD POLICY MANAGEMENT SYSTEMS CORP .................... 303
B-25
VALUE SHARES (000) - ------ --------- BUSINESS SERVICES--(Continued) 2,750 o SD PROGRESS SOFTWARE CORP ............................ $ 93 900 o SD PROJECT SOFTWARE & DEVELOPMENT, INC ............... 30 800 o SD QRS CORP .......................................... 38 2,200 o SD QUADRAMED CORP .................................... 45 8,383 o SD RATIONAL SOFTWARE CORP ............................ 222 100 o SD REALNETWORKS, INC ................................. 4 1,300 o SD REMEDY CORP ....................................... 18 2,700 o SD RENT WAY, INC ..................................... 66 1,900 o SD RENTERS CHOICE, INC ............................... 60 14,700 o SD ROBERT HALF INTERNATIONAL, INC .................... 657 2,000 ROLLINS, INC ......................................... 35 5,100 o SD ROMAC INTERNATIONAL, INC .......................... 113 4,400 o SD SABRE GROUP HOLDINGS, INC ......................... 196 2,000 o SD SAFETY-KLEEN CORP ................................. 28 200 o SD SAPIENT CORP ...................................... 11 2,100 SEI INVESTMENT CO .................................... 209 1,100 SHARED MEDICAL SYSTEMS CORP .......................... 55 9,292 o SD SIEBEL SYSTEMS, INC ............................... 315 4,700 o SD SITEL CORP ........................................ 11 7,700 o SD SNYDER COMMUNICATIONS, INC ........................ 260 700 o SD SOFTWARE AG. SYSTEMS, INC ......................... 13 2,300 o SD STAFFMARK, INC .................................... 51 10,800 o SD STERLING SOFTWARE, INC ............................ 292 5,100 o SD STRUCTURAL DYNAMICS RESEARCH CORP ................. 101 21,200 o SD SUN MICROSYSTEMS, INC ............................. 1,815 7,500 o SD SYBASE, INC ....................................... 56 2,600 o SD SYKES ENTERPRISES, INC ............................ 79 800 o SD SYNTEL, INC ....................................... 9 4,500 o SD SYSTEMSOFT CORP ................................... 1 3,000 o SD TCSI CORP ......................................... 6 75 o SD TECHNOLOGY SOLUTIONS CO ........................... 1 2,000 o SD TELETECH HOLDINGS, INC ............................ 21 2,000 o SD TMP WORLDWIDE, INC ................................ 84 6,000 TRUE NORTH COMMUNICATIONS, INC ....................... 161 4,570 o SD UNITED RENTALS, INC ............................... 151 10,000 o SD USWEB CORP ........................................ 264 6,000 o SD VALASSIS COMMUNICATIONS, INC ...................... 310 800 o SD VANSTAR CORP ...................................... 7 4,300 o SD VANTIVE CORP ...................................... 34 500 o SD VERISIGN, INC ..................................... 30 75 o SD VERITAS SOFTWARE CORP ............................. 4 1,200 o SD VIASOFT, INC ...................................... 8 1,300 o SD VINCAM GROUP, INC ................................. 23 300 o SD VOLT INFORMATION SCIENCES, INC .................... 7 3,800 o SD WANG LABORATORIES, INC ............................ 105 2,500 o SD WEST TELESERVICES CORP ............................ 24 1,150 o SD WIND RIVER SYSTEMS, INC ........................... 54 4,800 o SD YAHOO, INC ........................................ 1,137 2,700 o SD YOUNG & RUBICAM, INC .............................. 87 -------- 54,605 -------- CHEMICALS AND ALLIED PRODUCTS--13.02% 108,900 ABBOTT LABORATORIES CO ............................... 5,336 3,400 o SD ADVANCED TISSUE SCIENCE CO ........................ 9 25,100 AIR PRODUCTS & CHEMICALS, INC ........................ 1,004 2,500 ALBEMARLE CORP ....................................... 59 5,700 ALBERTO CULVER CO (CLASS B) .......................... 152 995 o SD ALLERGAN SPECIALTY THERAPEUTICS, INC (CLASS A) .... 9 6,900 ALLERGAN, INC ........................................ 447 2,300 o SD ALLIANCE PHARMACEUTICAL CORP ...................... 8 2,400 ALPHARMA, INC (CLASS A) .............................. 85 81,700 AMERICAN HOME PRODUCTS CORP .......................... 4,601 20,720 o SD AMGEN, INC ........................................ 2,167 10,200 o SD AMYLIN PHARMACEUTICALS, INC ....................... 5 1,200 o SD APHTON CORP ....................................... 15 100 o SD AVIRON, INC ....................................... 3
VALUE SHARES (000) - ------ --------- 8,300 AVON PRODUCTS, INC ................................... $ 367 2,100 o SD AXYS PHARMACEUTICALS, INC ......................... 12 1,400 o SD BARR LABORATORIES, INC ............................ 67 2,000 o SD BIO-TECHNOLOGY GENERAL CORP ....................... 14 9,400 o SD BIOGEN, INC ....................................... 780 1,300 BLOCK DRUG, INC (CLASS A) ............................ 56 65,700 BRISTOL MYERS SQUIBB CO .............................. 8,791 400 CAMBREX CORP ......................................... 10 1,300 o SD CARBIDE/GRAPHITE GROUP, INC ....................... 19 3,700 CARTER WALLACE, INC .................................. 73 1,000 o SD CELL GENESYS, INC ................................. 6 300 o SD CENTOCOR, INC ..................................... 14 2,600 o SD CEPHALON, INC ..................................... 23 1,500 o SD CHATTEM, INC ...................................... 72 340 o SD CHIRON CORP ....................................... 9 6,200 CLOROX CO ............................................ 724 16,000 COLGATE PALMOLIVE CO ................................. 1,486 4,600 o SD COLUMBIA LABORATORIES, INC ........................ 14 200 o SD COR THERAPEUTICS, INC ............................. 3 1,500 o SD COULTER PHARMACEUTICAL, INC ....................... 45 800 o SD CREATIVE BIOMOLECULES, INC ........................ 3 60 o SD CRESCENDO PHARMACEUTICALS CORP .................... 1 12,300 o SD CROMPTON & KNOWLES CORP ........................... 254 3,100 DEXTER CORP .......................................... 97 1,700 DIAGNOSTIC PRODUCTS CORP ............................. 53 600 DIAL CORP ............................................ 17 10,900 DOW CHEMICAL CO ...................................... 991 69,669 DU PONT (E.I.) DE NEMOURS & CO ....................... 3,697 2,500 ECOLAB, INC .......................................... 90 500 o SD EMISPHERE TECHNOLOGIES, INC ....................... 8 6,150 FERRO CORP ........................................... 160 4,600 o SD FMC CORP .......................................... 258 1,500 o SD FUISZ TECHNOLOGIES LTD ............................ 19 11 FULLER (H.B.) CO ..................................... 1 11,900 o SD GENSIA SICOR, INC ................................. 54 160 o SD GENZYME CORP (TISSUE REPAIR DIVISION) ............. 0 86 o SD GENZYME-MOLECULAR ONCOLOGY ........................ 0 3,300 GEON CO .............................................. 76 4,300 GEORGIA GULF CORP .................................... 69 200 o SD GILEAD SCIENCES, INC .............................. 8 12,400 o SD GRACE W.R. & CO ................................... 195 2,400 o SD GUILFORD PHARMACEUTICALS, INC ..................... 34 7,550 HANNA (M.A.) CO ...................................... 93 16,300 HERCULES, INC ........................................ 446 3,700 o SD HUMAN GENOME SCIENCES, INC ........................ 132 51 ICN PHARMACEUTICALS, INC ............................. 1 5,900 o SD ICOS CORP ......................................... 176 2,900 o SD IDEC PHARMACEUTICALS CORP ......................... 136 1,680 IMC GLOBAL, INC ...................................... 36 666 o SD IMC GLOBAL, INC WTS 12/22/00 ...................... 0 700 o SD IMCLONE SYSTEMS, INC .............................. 6 3,800 o SD IMMUNE RESPONSE CORP .............................. 41 2,900 o SD IMMUNEX CORP ...................................... 365 2,100 o SD INTERNATIONAL SPECIALTY PRODUCTS, INC ............. 28 3,000 o SD INTERNEURON PHARMACEUTICALS, INC .................. 10 4,000 o SD ISIS PHARMACEUTICALS, INC ......................... 52 16,000 o SD IVAX CORP ......................................... 199 88,302 JOHNSON & JOHNSON CO ................................. 7,406 100 JONES PHARMACEUTICAL, INC ............................ 4 2,200 o SD KV PHARMACEUTICAL CO (CLASS B) .................... 46 5,900 LAUDER (ESTEE) CO (CLASS A) .......................... 504 3,400 LAWTER INTERNATIONAL, INC ............................ 40 1,500 LEARONAL, INC ........................................ 51 63,292 LILLY (ELI) & CO ..................................... 5,625 3,700 LILLY INDUSTRIES, INC (CLASS A) ...................... 74 6,400 o SD LIPOSOME CO, INC .................................. 99
B-26
VALUE SHARES (000) - ------ --------- CHEMICALS AND ALLIED PRODUCTS--(Continued) 9,200 LUBRIZOL CORP ........................................ $ 236 800 o SD MACROCHEM CORP (DELAWARE) ......................... 7 12,000 MALLINCKRODT, INC .................................... 370 5,300 o SD MATRIX PHARMACEUTICALS, INC ....................... 14 700 o SD MCWHORTER TECHNOLOGIES, INC ....................... 16 3,100 o SD MEDICIS PHARMACEUTICAL CORP (CLASS A) ............. 185 3,900 o SD MEDIMMUNE, INC .................................... 388 77,700 MERCK & CO, INC ...................................... 11,475 13,100 MILLENNIUM CHEMICAL, INC ............................. 260 2,500 o SD MILLENNIUM PHARMACEUTICALS, INC ................... 65 500 MINERALS TECHNOLOGIES, INC ........................... 20 1,400 o SD MIRAVANT MEDICAL TECHNOLOGY ....................... 18 3,100 MISSISSIPPI CHEMICAL CORP ............................ 43 33,800 MONSANTO CO .......................................... 1,606 20,100 MORTON INTERNATIONAL, INC ............................ 492 21,300 MYLAN LABORATORIES, INC .............................. 671 1,800 o SD NABI, INC ......................................... 5 6,700 NALCO CHEMICAL CORP .................................. 208 2,800 NATURES SUNSHINE PRODUCTS, INC ....................... 43 1,000 o SD NEOPROBE CORP ..................................... 1 1,700 o SD NEUROGEN CORP ..................................... 30 3,400 o SD NEXSTAR PHARMACEUTICALS, INC ...................... 31 875 o SD OCTEL CORP ........................................ 12 7,600 OLIN CORP ............................................ 215 25 o SD ORGANOGENESIS, INC ................................ 0 9,100 o SD PERRIGO CO ........................................ 80 84,500 PFIZER, INC .......................................... 10,599 27,680 PHARMACIA & UPJOHN, INC .............................. 1,567 1,100 o SD PHARMACYCLICS, INC ................................ 28 11,800 PPG INDUSTRIES, INC .................................. 687 22,000 PRAXAIR, INC ......................................... 776 93,400 PROCTER & GAMBLE CO .................................. 8,529 3,100 o SD PROTEIN DESIGN LABORATORIES, INC .................. 72 2,200 o SD REGENERON PHARMACEUTICALS, INC .................... 16 1,100 o SD REVLON, INC (CLASS A) ............................. 18 4,400 o SD ROBERTS PHARMACEUTICAL CORP ....................... 96 18,700 ROHM & HAAS CO ....................................... 563 31 RPM, INC ............................................. 0 100,000 SCHERING-PLOUGH CORP ................................. 5,525 5,800 SCHULMAN (A.), INC ................................... 132 700 o SD SEQUUS PHARMACEUTICALS, INC ....................... 14 8,500 SHERWIN-WILLIAMS CO .................................. 250 7,400 SIGMA ALDRICH CORP ................................... 217 1,100 STEPAN CO ............................................ 29 400 o SD SUGEN, INC ........................................ 6 500 o SD TECHNE CORP ....................................... 11 4,200 o SD THERAGENICS CORP .................................. 71 1,200 o SD THERMOLASE CORP ................................... 5 2,800 o SD TRIANGLE PHARMACEUTICALS, INC ..................... 38 600 o SD TWINLAB CORP ...................................... 8 1,500 o SD U.S. BIOSCIENCE, INC .............................. 11 600 o SD U.S.A. DETERGENTS, INC ............................ 4 400 UNION CARBIDE CORP ................................... 17 2,000 o SD VICAL, INC ........................................ 28 58,800 WARNER-LAMBERT CO .................................... 4,421 4,700 o SD WATSON PHARMACEUTICALS, INC ....................... 296 600 WELLMAN, INC ......................................... 6 6,000 o SD ZILA, INC ......................................... 59 -------- 98,730 -------- COAL MINING--0.00% 800 ARCH COAL, INC ....................................... 14 -------- COMMUNICATIONS--10.78% 700 o SD @ ENTERTAINMENT, INC .............................. 5 3,100 o SD ADELPHIA COMMUNICATIONS CORP (CLASS A) ............ 142 38,000 o SD AIRTOUCH COMMUNICATIONS, INC ...................... 2,741
VALUE SHARES (000) - ------ --------- 100 o SD ALCATEL S.A. ADR .................................. $ 2 5,400 ALIANT COMMUNICATIONS, INC ........................... 221 17,546 ALLTEL CORP .......................................... 1,049 71,000 AMERITECH CORP ....................................... 4,500 4,600 o SD ARCH COMMUNICATIONS GROUP, INC .................... 7 4,922 o SD ASCENT ENTERTAINMENT GROUP, INC ................... 36 1,200 o SD ASSOCIATED GROUP, INC (CLASS A) ................... 52 123,071 AT & T CORP .......................................... 9,261 111,210 BELL ATLANTIC CORP ................................... 5,894 140,000 BELLSOUTH CORP ....................................... 6,983 14,700 o SD CABLEVISION SYSTEMS CORP (CLASS A) ................ 738 5,200 o SD CAPSTAR BROADCASTING CORP (CLASS A) ............... 119 45,106 CBS CORP ............................................. 1,477 2,300 o SD CD RADIO, INC ..................................... 79 150 o SD CELLULAR COMMUNICATIONS INTERNATIONAL, INC ........ 10 1,100 o SD CELLULAR COMMUNICATIONS OF PUERTO RICO ............ 20 2,500 o SD CENTENNIAL CELLULAR CORP (CLASS A) ................ 103 300 o SD CENTURY COMMUNICATIONS CORP (CLASS A) ............. 10 4,050 CENTURY TELEPHONE ENTERPRISES, INC ................... 273 48 o SD CHRIS CRAFT INDUSTRIES, INC ....................... 2 17,900 CINCINNATI BELL, INC ................................. 677 5,240 o SD CLEAR CHANNEL COMMUNICATIONS, INC ................. 286 25,389 COMCAST CORP (CLASS A) SPECIAL ....................... 1,490 200 COMSAT CORP SERIES 1 ................................. 7 1,400 o SD COX RADIO, INC (CLASS A) .......................... 59 1,200 o SD EMMIS COMMUNICATIONS (CLASS A) .................... 52 2,100 o SD EXODUS COMMUNICATIONS, INC ........................ 135 600 FRONTIER CORP ........................................ 20 154 GAYLORD ENTERTAINMENT CO ............................. 5 5,900 o SD GENERAL COMMUNICATION (CLASS A) ................... 24 200 o SD GLOBAL TELESYSTEMS GROUP, INC ..................... 11 70,600 GTE CORP ............................................. 4,589 9,100 o SD HEARST-ARGYLE TELEVISION, INC ..................... 300 6,400 o SD HEFTEL BROADCASTING CORP (CLASS A) ................ 315 3,300 o SD HIGHWAYMASTER COMMUNICATIONS, INC ................. 4 7,400 o SD ICG COMMUNICATIONS, INC ........................... 159 1,800 o SD IDT CORP .......................................... 28 200 o SD IXC COMMUNICATIONS, INC ........................... 7 1,400 o SD JACOR COMMUNICATIONS, INC WTS 09/18/01 ............ 11 2,000 o SD JONES INTERCABLE, INC (CLASS A) ................... 71 2,550 o SD LEAP WIRELESS INTERNATIONAL, INC .................. 18 28,000 o SD LEVEL 3 COMMUNICATIONS, INC ....................... 1,208 14,100 o SD LIBERTY MEDIA GROUP (CLASS A) ..................... 649 85,482 LUCENT TECHNOLOGIES, INC ............................. 9,403 118,983 o SD MCI WORLDCOM, INC ................................. 8,537 2,300 o SD MCLEODUSA, INC (CLASS A) .......................... 72 32,700 o SD MEDIA ONE GROUP, INC .............................. 1,537 1,500 o SD METROCALL, INC .................................... 7 8,700 o SD NEXTLINK COMMUNICATIONS, INC ...................... 247 1,000 NORTH PITTSBURGH SYSTEMS, INC ........................ 13 6,800 o SD NTL, INC .......................................... 384 5,000 o SD PAGEMART WIRELESS, INC (CLASS A) .................. 28 13,900 o SD PAGING NETWORK, INC ............................... 65 69 o SD PANAMSAT CORP ..................................... 3 700 o SD PEGASUS COMMUNICATIONS CORP ....................... 18 1,000 o SD POWERTEL, INC ..................................... 14 5,600 o SD PREMIERE TECHNOLOGIES, INC ........................ 41 323 o SD QWEST COMMUNICATIONS INTERNATIONAL , INC .......... 16 1,000 o SD RCN CORP .......................................... 18 130,196 SBC COMMUNICATIONS, INC .............................. 6,982 9,400 o SD SKYTEL COMMUNICATIONS, INC ........................ 208 2,400 o SD SMARTALK TELESERVICES, INC ........................ 6 18,600 SPRINT CORP (FON GROUP) .............................. 1,565 28,950 o SD SPRINT CORP (PCS GROUP) ........................... 669 3,000 TCA CABLE TV, INC .................................... 107 12,380 o SD TCI SATELLITE ENTERTAINMENT (CLASS A) ............. 18
B-27
VALUE SHARES (000) - ------ --------- COMMUNICATIONS--(Continued) 28,766 o SD TELE-COMMUNICATIONS, INC (CLASS A) ................ $ 1,591 42,468 o SD TELECOM-TCI VENTURES GROUP (CLASS A) .............. 1,001 4,602 o SD TELEGLOBE, INC (U.S.A.) ........................... 166 78 TELEPHONE & DATA SYSTEMS, INC ........................ 4 5,800 o SD U.S. SATELLITE BROADCASTING, INC (CLASS A) ........ 80 39,711 U.S. WEST, INC ....................................... 2,566 8,150 o SD U.S.A. NETWORKS, INC .............................. 270 6,800 o SD UNITED INTERNATIONAL HOLDINGS, INC ................ 131 500 UNITED TELEVISION, INC ............................... 58 3,500 o SD UNIVISION COMMUNICATIONS, INC ..................... 127 600 o SD USN COMMUNICATIONS, INC ........................... 0 3,700 o SD VIACOM, INC (CLASS A) ............................. 272 18,300 o SD VIACOM, INC (CLASS B) ............................. 1,354 12,700 o SD WESTERN WIRELESS CORP (CLASS A) ................... 279 100 o SD YOUNG BROADCASTING, INC (CLASS A) ................. 4 -------- 81,710 -------- DEPOSITORY INSTITUTIONS--8.37% 500 ALABAMA NATIONAL BANCORP ............................. 13 6,675 AMSOUTH BANCORP ...................................... 305 2,800 ANCHOR BANCORP WISCONSIN, INC ........................ 67 10,540 ASSOCIATED BANC-CORP ................................. 360 8,845 ASTORIA FINANCIAL CORP ............................... 405 1,000 BANCFIRST OHIO CORP .................................. 30 7,500 BANCORPSOUTH, INC .................................... 135 3,600 BANCWEST CORP ........................................ 173 41,900 BANK OF NEW YORK CO, INC ............................. 1,686 86,533 BANK ONE CORP ........................................ 4,419 4,700 BANK UNITED CORP (CLASS A) ........................... 184 110,895 BANKAMERICA CORP ..................................... 6,668 800 BANKATLANTIC BANCORP, INC (CLASS B) .................. 6 19,670 BANKBOSTON CORP ...................................... 766 5,445 BANKERS TRUST CORP ................................... 465 2,500 BANKNORTH GROUP, INC ................................. 94 15,448 BB&T CORP ............................................ 623 300 o SD BOK FINANCIAL CORP ................................ 14 1,900 BRENTON BANKS, INC ................................... 32 700 BROOKLINE BANCORP, INC ............................... 8 600 BSB BANCORP, INC ..................................... 20 1,500 BT FINANCIAL CORP .................................... 41 800 CATHAY BANCORP, INC .................................. 33 3,200 CCB FINANCIAL CORP ................................... 182 1,500 o SD CENTENNIAL BANCORP ................................ 28 100 CENTURA BANKS, INC ................................... 7 8,422 CHARTER ONE FINANCIAL, INC ........................... 234 62,240 CHASE MANHATTAN CORP ................................. 4,236 500 CHEMICAL FINANCIAL CORP .............................. 17 2,400 CHITTENDEN CORP ...................................... 77 500 CITY HOLDINGS CO ..................................... 16 4,900 CITY NATIONAL CORP ................................... 204 15,500 COMERICA, INC ........................................ 1,057 3,238 COMMERCE BANCSHARES, INC ............................. 138 50 COMMERCIAL FEDERAL CORP .............................. 1 700 COMMUNITY BANK SYSTEM, INC ........................... 21 1,500 COMMUNITY FIRST BANKSHARES, INC ...................... 32 1,400 COMMUNITY TRUST BANCORP, INC ......................... 33 11,600 COMPASS BANCSHARES, INC .............................. 442 362 o SD CONCORD EFS, INC .................................. 15 1,100 CORUS BANKSHARES, INC ................................ 35 2,461 CRESTAR FINANCIAL CORP ............................... 177 4,400 CULLEN FROST BANKERS, INC ............................ 241 700 D & N FINANCIAL CORP ................................. 17 18,900 DIME BANCORP, INC .................................... 500 2,000 DIME COMMUNITY BANCORP, INC .......................... 41 3,130 DOWNEY FINANCIAL CORP ................................ 80 1,500 F & M BANCORP, INC (WISCONSIN) ....................... 45
VALUE SHARES (000) - ------ --------- 1,000 F & M NATIONAL CORP .................................. $ 30 2,000 F.N.B. CORP .......................................... 57 600 FARMERS CAPITAL BANK CORP ............................ 23 12,250 FIFTH THIRD BANCORP .................................. 874 15,532 FIRST AMERICAN CORP .................................. 689 4,100 FIRST BANCORP (PUERTO RICO) .......................... 124 1,700 FIRST CHARTER CORP ................................... 29 500 FIRST COMMERCE BANCSHARES, INC ....................... 14 101 o SD FIRST FINANCIAL BANCORP ........................... 3 1,500 FIRST INDIANA CORP ................................... 30 200 FIRST LIBERTY FINANCIAL CORP ......................... 4 300 o SD FIRST REPUBLIC BANK ............................... 8 3,200 FIRST SECURITY CORP .................................. 75 400 FIRST SENTINEL BANCORP, INC .......................... 3 16,000 FIRST TENNESSEE NATIONAL CORP ........................ 609 67,313 FIRST UNION CORP ..................................... 4,093 200 FIRST VIRGINIA BANKS, INC ............................ 9 1,900 FIRST WASHINGTON BANCORP, INC ........................ 46 300 FIRST WESTERN BANCORP, INC ........................... 10 9,440 FIRSTAR CORP ......................................... 880 2,200 FIRSTMERIT CORP ...................................... 59 900 FLAGSTAR BANCORP, INC ................................ 24 46,834 FLEET FINANCIAL GROUP, INC ........................... 2,093 300 o SD FRONTIER FINANCIAL CORP ........................... 14 10,527 FULTON FINANCIAL CORP ................................ 237 1,600 GBC BANCORP .......................................... 41 3,400 o SD GOLDEN STATE BANCORP, INC WTS 01/01/01 ............ 16 3,800 GOLDEN WEST FINANCIAL CORP ........................... 348 1,500 GRAND PREMIER FINANCIAL, INC ......................... 18 13,100 GREENPOINT FINANCIAL CORP ............................ 460 1,200 o SD HAMILTON BANCORP, INC ............................. 32 1,500 HANCOCK HOLDINGS CO .................................. 68 1,200 HARRIS FINANCIAL, INC ................................ 16 25,822 HIBERNIA CORP (CLASS A) .............................. 449 800 HORIZON BANCORP, INC ................................. 27 6,402 HUBCO, INC ........................................... 193 16,430 HUNTINGTON BANCSHARES, INC ........................... 494 600 INDEPENDENCE COMMUNITY BANK CORP ..................... 10 450 INTERWEST BANCORP, INC ............................... 10 1,900 IRWIN FINANCIAL CORP ................................. 52 1,100 JSB FINANCIAL, INC ................................... 60 42,160 KEYCORP .............................................. 1,349 6,150 KEYSTONE FINANCIAL, INC .............................. 228 98 M & T BANK CORP ...................................... 51 75 MAF BANCORP, INC ..................................... 2 5,759 MARSHALL & ILSLEY CORP ............................... 337 59,155 MBNA CORP ............................................ 1,475 12,100 MELLON BANK CORP ..................................... 832 12,791 MERCANTILE BANCORP, INC .............................. 590 11,955 MERCANTILE BANKSHARES CORP ........................... 460 300 MERCHANTS NEW YORK BANCORP, INC ...................... 11 600 MID-AMERICA BANCORP .................................. 16 8,300 MORGAN (J.P.) & CO, INC .............................. 872 2,500 NATIONAL BANCORP OF ALASKA, INC ...................... 84 26,624 NATIONAL CITY CORP ................................... 1,930 19,048 NORTH FORK BANCORP, INC .............................. 456 2,200 NORTHERN TRUST CORP .................................. 192 1,000 OCEAN FINANCIAL CORP ................................. 17 5,991 OLD KENT FINANCIAL CORP .............................. 279 4,067 OLD NATIONAL BANCORP ................................. 227 5,293 ONE VALLEY BANCORP, INC .............................. 174 2,300 PACIFIC CAPITAL BANCORP .............................. 59 13,100 PACIFIC CENTURY FINANCIAL CORP ....................... 319 6,000 PEOPLES BANCORP, INC ................................. 65 68 PEOPLES HERITAGE FINANCIAL GROUP, INC ................ 1 1,700 o SD PFF BANCORP, INC .................................. 27
B-28
VALUE SHARES (000) - ------ --------- DEPOSITORY INSTITUTIONS--(Continued) 27,050 PNC BANK CORP ........................................ $ 1,464 1,190 POPULAR, INC ......................................... 40 1,000 PROVIDENT BANKSHARES CORP ............................ 25 13,900 PROVIDIAN FINANCIAL CORP ............................. 1,043 950 QUEENS COUNTY BANCORP, INC ........................... 28 10,758 REGIONS FINANCIAL CORP ............................... 434 600 RELIANCE BANCORP, INC ................................ 17 3,200 REPUBLIC BANCORP, INC ................................ 44 4,500 REPUBLIC NEW YORK CORP ............................... 205 1,300 REPUBLIC SECURITY FINANCIAL CORP ..................... 16 3,300 RICHMOND COUNTY FINANCIAL CORP ....................... 53 3,200 RIGGS NATIONAL CORP .................................. 65 7,100 ROSLYN BANCORP, INC .................................. 153 800 SANDY SPRING BANCORP, INC ............................ 24 3,100 o SD SILICON VALLEY BANCSHARES ......................... 53 13,150 SOUTHTRUST CORP ...................................... 486 300 o SD SOUTHWEST BANCORP OF TEXAS, INC ................... 5 1,340 SOVEREIGN BANCORP, INC ............................... 19 75 ST. PAUL BANCORP, INC ................................ 2 5,600 STATE STREET CORP .................................... 390 100 STATEN ISLAND BANCORP, INC ........................... 2 2,800 STERLING BANCSHARES, INC ............................. 42 500 STERLING FINANCIAL CORP .............................. 21 19,567 SUMMIT BANCORP ....................................... 855 17,300 SUNTRUST BANKS, INC .................................. 1,323 50 SUSQUEHANNA BANCSHARES, INC .......................... 1 200 SYNOVUS FINANCIAL CORP ............................... 5 9,400 TCF FINANCIAL CORP ................................... 227 800 TEXAS REGIONAL BANCSHARES, INC (CLASS A) ............. 20 700 TR FINANCIAL CORP .................................... 28 2,100 TRUST CO OF NEW JERSEY ............................... 51 7,600 TRUSTMARK CORP ....................................... 172 43,336 U.S. BANCORP ......................................... 1,538 3,100 U.S. TRUST CORP ...................................... 236 10,959 UNION PLANTERS CORP .................................. 497 5,400 UNIONBANCAL CORP ..................................... 184 6,500 UST CORP ............................................. 153 8,198 VALLEY NATIONAL BANCORP .............................. 231 9,836 WACHOVIA CORP ........................................ 860 6,993 WASHINGTON FEDERAL, INC .............................. 187 29,708 WASHINGTON MUTUAL, INC ............................... 1,134 700 WASHINGTON TRUST BANCORP, INC ........................ 15 101,440 WELLS FARGO CO ....................................... 4,051 300 WESBANCO, INC ........................................ 9 1,500 WEST COAST BANCORP (OREGON) .......................... 32 300 WESTAMERICA BANCORP .................................. 11 2,900 WESTERN BANCORP ...................................... 85 1,000 WESTERNBANK PUERTO RICO .............................. 16 3,000 WHITNEY HOLDINGS CORP ................................ 113 -------- 63,472 -------- EATING AND DRINKING PLACES--0.87% 2,700 APPLEBEES INTERNATIONAL, INC ......................... 56 2,100 AVADO BRANDS, INC .................................... 17 6,200 BOB EVANS FARMS, INC ................................. 162 8,300 Xo SD BOSTON CHICKEN, INC ............................... 3 11,000 o SD BRINKER INTERNATIONAL, INC ........................ 318 6,800 o SD BUFFETS, INC ...................................... 81 2,900 o SD CEC ENTERTAINMENT, INC ............................ 80 3,403 CKE RESTAURANTS, INC ................................. 100 100 CRACKER BARREL OLD COUNTRY STORE, INC ................ 2 22,700 DARDEN RESTAURANTS, INC .............................. 409 2,100 o SD DAVE & BUSTERS, INC ............................... 48 5,600 o SD FOODMAKER, INC .................................... 124 27,000 HOST MARRIOTT CORP (NEW) ............................. 373 3,060 o SD HOST MARRIOTT SERVICES CORP ....................... 32
VALUE SHARES (000) - ------ --------- 1,200 o SD IHOP CORP NEW ..................................... $ 48 1,400 o SD LANDRYS SEAFOOD RESTAURANTS, INC .................. 11 1,800 o SD LONE STAR STEAKHOUSE & SALOON, INC ................ 17 3,000 LUBYS CAFETERIA, INC ................................. 46 4,200 MARRIOTT INTERNATIONAL (CLASS A) ..................... 122 45,300 MCDONALD'S CORP ...................................... 3,471 666 MORRISON HEALTH CARE, INC ............................ 13 3,400 o SD PAPA JOHNS INTERNATIONAL, INC ..................... 150 1,900 o SD PLANET HOLLYWOOD, INC (CLASS A) ................... 4 50 o SD RAINFOREST CAFE, INC .............................. 0 700 o SD RARE HOSPITALITY INTERNATIONAL, INC ............... 10 5,200 RUBY TUESDAY, INC .................................... 111 6,300 o SD RYANS FAMILY STEAK HOUSES, INC .................... 78 2,100 o SD SODEXHO MARRIOTT SERVICES, INC .................... 58 3,200 o SD SONIC CORP ........................................ 80 10,740 o SD TRICON GLOBAL RESTAURANTS, INC .................... 538 60 o SD U.S. FOODSERVICE, INC ............................. 3 -------- 6,565 -------- EDUCATIONAL SERVICES--0.05% 5,100 o SD DEVRY, INC ........................................ 156 800 o SD LEARNING TREE INTERNATIONAL, INC .................. 7 6,150 o SD SYLVAN LEARNING SYSTEMS, INC ...................... 188 -------- 351 -------- ELECTRIC, GAS, AND SANITARY SERVICES--4.27% 9,500 AGL RESOURCES, INC ................................... 219 19,000 ALLEGHENY ENERGY, INC ................................ 656 15,900 o SD ALLIED WASTE INDUSTRIES, INC ...................... 376 17,760 AMEREN CORP .......................................... 758 20,900 AMERICAN ELECTRIC POWER CO, INC ...................... 984 500 AMERICAN STATES WATER CO ............................. 14 300 AMERICAN WATER WORKS CO, INC ......................... 10 8,000 o SD AQUA ALLIANCE, INC ................................ 17 4,900 ATMOS ENERGY CORP .................................... 158 22,100 BALTIMORE GAS & ELECTRIC CO .......................... 682 7,900 BEC ENERGY ........................................... 325 16,300 BROWNING FERRIS INDUSTRIES, INC ...................... 464 6,600 o SD CALENERGY, INC .................................... 229 600 o SD CALPINE CORP ...................................... 15 3,100 CAROLINA POWER & LIGHT CO ............................ 146 700 o SD CASELLA WASTE SYSTEMS, INC (CLASS A) .............. 26 27,300 CENTRAL & SOUTH WEST CORP ............................ 749 2,800 CENTRAL HUDSON GAS & ELECTRIC CORP ................... 125 100 CILCORP, INC ......................................... 6 21,100 CINERGY CORP ......................................... 725 80 o SD CITIZENS UTILITIES CO (CLASS B) ................... 1 26 CMP GROUP, INC ....................................... 0 17,800 COASTAL CORP ......................................... 622 12,200 COLUMBIA ENERGY GROUP ................................ 705 300 COMMONWEALTH ENERGY SYSTEM CO ........................ 12 16,225 CONECTIV, INC ........................................ 398 537 CONECTIV, INC (CLASS A) .............................. 21 600 CONNECTICUT ENERGY CORP .............................. 18 13,500 CONSOLIDATED EDISON CO OF N.Y., INC .................. 714 13,300 CONSOLIDATED NATURAL GAS CO .......................... 718 600 CTG RESOURCES, INC ................................... 16 5,900 DOMINION RESOURCES, INC .............................. 276 200 DQE, INC ............................................. 9 18,400 DTE ENERGY CO ........................................ 789 19,033 DUKE ENERGY CORP ..................................... 1,219 5,600 DYNEGY, INC .......................................... 61 3,700 EASTERN ENTERPRISES CO ............................... 162 300 o SD EASTERN ENVIRONMENTAL SERVICES, INC ............... 9 27,500 EDISON INTERNATIONAL CO .............................. 767 5,402 EL PASO ENERGY CORP .................................. 188 3,300 ENERGEN CORP ......................................... 64 15,661 ENRON CORP ........................................... 894
B-29
VALUE SHARES (000) - ------ --------- ELECTRIC, GAS, AND SANITARY SERVICES--(Continued) 5,300 ENTERGY CORP ......................................... $ 165 200 ETOWN CORP ........................................... 9 27,402 FIRSTENERGY CORP ..................................... 892 5,200 FLORIDA PROGRESS CORP ................................ 233 8,400 FPL GROUP, INC ....................................... 518 17,100 GPU, INC ............................................. 756 5,200 HAWAIIAN ELECTRIC INDUSTRIES, INC .................... 209 17,903 HOUSTON INDUSTRIES, INC .............................. 575 6,100 IDACORP, INC ......................................... 221 4,933 INDIANA ENERGY, INC .................................. 121 12,250 INTERSTATE ENERGY CORP ............................... 395 10,000 KANSAS CITY POWER & LIGHT CO ......................... 296 2,300 LACLEDE GAS CO ....................................... 62 12,600 MCN ENERGY GROUP, INC ................................ 240 6,100 Xo SD MOLTEN METAL TECHNOLOGY, INC ...................... 0 200 MONTANA POWER CO ..................................... 11 6,400 NATIONAL FUEL GAS CO ................................. 289 8,500 NEVADA POWER CO ...................................... 221 385 NEW CENTURY ENERGIES, INC ............................ 19 100 o SD NEWPARK RESOURCES, INC ............................ 1 7,800 NICOR, INC ........................................... 330 5,100 o SD NORTHEAST UTILITIES CO ............................ 82 23,300 NORTHERN STATES POWER CO ............................. 647 150 NORTHWEST NATURAL GAS CO ............................. 4 2,400 NORTHWESTERN CORP .................................... 63 300 NUI CORP ............................................. 8 8,100 OGDEN CORP ........................................... 203 12,300 OGE ENERGY CORP ...................................... 357 2,233 ONEOK, INC ........................................... 81 2,800 ORANGE & ROCKLAND UTILITY, INC ....................... 160 200 OTTER TAIL POWER CO .................................. 8 2,900 PACIFICORP ........................................... 61 11,500 PECO ENERGY CO ....................................... 479 5,700 PEOPLES ENERGY CORP .................................. 227 27,429 PG&E CORP ............................................ 864 97 PIEDMONT NATURAL GAS CO, INC ......................... 4 1,300 PINNACLE WEST CAPITAL CORP ........................... 55 18,800 POTOMAC ELECTRIC POWER CO ............................ 495 23,394 PP&L RESOURCES, INC .................................. 652 15,900 PUBLIC SERVICE ENTERPRISE GROUP, INC ................. 636 7,778 PUGET SOUND ENERGY, INC .............................. 217 13,800 QUESTAR CORP ......................................... 267 3,586 o SD REPUBLIC INDUSTRIES, INC .......................... 53 6,300 ROCHESTER GAS & ELECTRIC CORP ........................ 197 4,200 SCANA CORP ........................................... 135 29,918 SEMPRA ENERGY ........................................ 759 2,200 SIERRA PACIFIC RESOURCES ............................. 84 700 SONAT, INC ........................................... 19 700 SOUTH JERSEY INDUSTRIES, INC ......................... 18 34,700 SOUTHERN CO .......................................... 1,008 17,367 TEXAS UTILITIES CO ................................... 811 1,700 TNP ENTERPRISES, INC ................................. 64 5,437 UGI CORP ............................................. 129 13,200 UNICOM CORP .......................................... 509 900 o SD UNISOURCE ENERGY CORP HOLDINGS CO ................. 12 400 UNITED ILLUMINATING CO ............................... 21 8,956 UTILICORP UNITED, INC ................................ 329 4,400 WASHINGTON GAS LIGHT CO .............................. 119 9,300 WASHINGTON WATER POWER CO ............................ 179 36,342 WASTE MANAGEMENT, INC ................................ 1,694 1,700 WESTERN GAS RESOURCES, INC ........................... 10 17,129 WILLIAMS COS, INC .................................... 534 5,700 WISCONSIN ENERGY CORP ................................ 179 400 WPS RESOURCES CORP ................................... 14 700 YANKEE ENERGY SYSTEMS, INC ........................... 20 -------- 32,377 --------
VALUE SHARES (000) - ------ --------- ELECTRONIC AND OTHER ELECTRIC EQUIPMENT--7.70% 300 o SD AAVID THERMAL TECHNOLOGIES, INC ................... $ 5 3,000 o SD ACTEL CORP ........................................ 60 500 o SD ADTRAN, INC ....................................... 9 1,000 o SD ADVANCED FIBRE COMMUNICATIONS ..................... 11 800 o SD ADVANCED LIGHTING TECHNOLOGIES, INC ............... 8 14,900 o SD ADVANCED MICRO DEVICES, INC ....................... 431 1,200 AEROQUIP-VICKERS, INC ................................ 36 8 ALLEGHENY TELEDYNE, INC .............................. 0 1,600 o SD ALLEN TELECOM, INC ................................ 11 5,500 o SD ALTERA CORP ....................................... 335 13,300 o SD AMERICAN POWER CONVERSION CORP .................... 644 12,560 AMP, INC ............................................. 654 900 o SD ANADIGICS, INC .................................... 10 11,075 o SD ANDREW CORP ....................................... 183 600 o SD ANTEC CORP ........................................ 12 800 o SD APPLIED MAGNETICS CORP ............................ 5 200 o SD APPLIED MICRO CIRCUITS CORP ....................... 7 200 o SD ARTESYN TECHNOLOGIES, INC ......................... 3 400 o SD ASPECT TELECOMMUNICATIONS CORP .................... 7 16,300 o SD ATMEL CORP ........................................ 250 466 BALDOR ELECTRIC CO ................................... 9 1,000 o SD BENCHMARK ELECTRONICS, INC ........................ 37 2,300 BMC INDUSTRIES, INC .................................. 14 500 o SD BROADCOM CORP (CLASS A) ........................... 60 150 o SD BURR BROWN CORP ................................... 4 2,000 C&D TECHNOLOGIES, INC ................................ 55 4,600 o SD CELLNET DATA SYSTEMS, INC ......................... 23 1,000 o SD COMMSCOPE, INC .................................... 17 7,275 o SD COMVERSE TECHNOLOGY, INC .......................... 517 1,235 COOPER INDUSTRIES, INC ............................... 59 1,800 CTS CORP ............................................. 78 14,000 o SD CYPRESS SEMICONDUCTOR CORP ........................ 116 2,800 o SD DIGITAL MICROWAVE CORP ............................ 19 700 o SD DII GROUP, INC .................................... 16 23,600 EMERSON ELECTRIC CO .................................. 1,428 1,900 o SD ESS TECHNOLOGY .................................... 10 700 o SD EXCEL SWITCHING CORP .............................. 27 400 EXIDE CORP ........................................... 7 3,900 o SD GENERAL DATACOMM INDUSTRIES, INC .................. 9 224,000 GENERAL ELECTRIC CO .................................. 22,862 200 o SD GENERAL INSTRUMENT CORP ........................... 7 3,425 o SD GENERAL SEMICONDUCTOR, INC ........................ 28 17,200 Xo SD GEOTEK COMMUNICATIONS, INC ........................ 0 25 o SD GLENAYRE TECHNOLOGIES, INC ........................ 0 2,200 o SD HADCO CORP ........................................ 77 35 HARMAN INTERNATIONAL INDUSTRIES, INC ................. 1 200 HARRIS CORP .......................................... 7 1,060 HUBBELL, INC (CLASS B) ............................... 40 400 o SD INTEGRATED DEVICE TECHNOLOGY, INC ................. 2 115,500 INTEL CORP ........................................... 13,694 500 INTER-TEL, INC ....................................... 12 6,700 o SD INTERDIGITAL COMMUNICATIONS CORP .................. 31 1,400 o SD ITI TECHNOLOGIES, INC ............................. 43 2,400 o SD ITRON, INC ........................................ 17 3,400 o SD JABIL CIRCUIT, INC ................................ 254 100 o SD KEMET CORP ........................................ 1 7,400 o SD KOMAG, INC ........................................ 77 500 KUHLMAN CORP ......................................... 19 900 o SD L-3 COMMUNICATIONS HOLDINGS, INC .................. 42 3,700 o SD LATTICE SEMICONDUCTOR CORP ........................ 170 175 o SD LEVEL ONE COMMUNICATIONS, INC ..................... 6 4,300 LINEAR TECHNOLOGY CO ................................. 385 1,300 o SD MAGNETEK, INC ..................................... 15 7,700 MAYTAG CO ............................................ 479 1,900 o SD MEMC ELECTRONIC MATERIALS, INC .................... 16
B-30
VALUE SHARES (000) - ------ --------- ELECTRONIC & OTHER ELECTRIC EQUIPMENT--(Continued) 5,625 o SD MICROCHIP TECHNOLOGY, INC ......................... $ 208 6,800 o SD MICRON TECHNOLOGY, INC ............................ 344 5,000 o SD MMC NETWORKS, INC ................................. 66 11,237 MOLEX, INC ........................................... 428 900 o SD MOOG, INC (CLASS A) ............................... 35 46,500 MOTOROLA, INC ........................................ 2,839 2,400 o SD MRV COMMUNICATIONS, INC ........................... 15 1,100 NATIONAL PRESTO INDUSTRIES, INC ...................... 47 26,102 o SD NATIONAL SEMICONDUCTOR CORP ....................... 352 6,800 NATIONAL SERVICE INDUSTRIES, INC ..................... 258 2,500 o SD NEOMAGIC CORP ..................................... 55 100 o SD OAK INDUSTRIES, INC ............................... 4 2,700 o SD OAK TECHNOLOGY, INC ............................... 9 2,800 o SD P-COM, INC ........................................ 11 900 PARK ELECTROCHEMICAL CORP ............................ 26 2,700 PITTWAY CORP (CLASS A) ............................... 89 2,700 o SD PLANTRONICS, INC .................................. 232 2,400 o SD PLEXUS CORP ....................................... 81 1,300 o SD PMC-SIERRA, INC ................................... 82 2,500 o SD POLYCOM, INC ...................................... 56 900 o SD PREMISYS COMMUNICATIONS, INC ...................... 8 10,400 o SD QUALCOMM, INC ..................................... 539 13,000 RAYCHEM CORP ......................................... 420 4,100 o SD RAYOVAC CORP ...................................... 109 7,000 o SD READ RITE CORP .................................... 103 700 o SD RECOTON CORP ...................................... 13 9,500 o SD RELTEC CORP ....................................... 211 3,300 o SD REMEC, INC ........................................ 59 2,200 o SD S3, INC ........................................... 16 6,800 o SD SANMINA CORP ...................................... 425 2,000 o SD SAWTEK, INC ....................................... 35 8,500 o SD SCI SYSTEMS, INC .................................. 491 1,800 o SD SCM MICROSYSTEMS, INC ............................. 128 2,000 o SD SEMTECH CORP ...................................... 72 7,900 o SD SENSORMATIC ELECTRONICS CORP ...................... 55 4,200 o SD SMART MODULAR TECHNOLOGIES, INC ................... 117 11,400 o SD SOLECTRON CORP .................................... 1,059 13,600 SUNBEAM CORP ......................................... 95 2,000 TECHNITROL, INC ...................................... 64 5,700 o SD TEKELEC ........................................... 94 1,100 TELEFLEX, INC ........................................ 50 17,200 o SD TELLABS, INC ...................................... 1,179 30,700 TEXAS INSTRUMENTS, INC ............................... 2,627 9,499 THOMAS & BETTS CORP .................................. 411 1,900 THOMAS INDUSTRIES, INC ............................... 37 6,300 o SD UCAR INTERNATIONAL, INC ........................... 112 100 o SD UNIPHASE CORP ..................................... 7 1,800 o SD VICOR CORP ........................................ 16 1,300 o SD VISHAY INTERTECHNOLOGY, INC ....................... 19 12,000 o SD VITESSE SEMICONDUCTOR CORP ........................ 548 2,000 o SD VLSI TECHNOLOGY, INC .............................. 22 3,500 o SD WESTELL TECHNOLOGIES, INC (CLASS A) ............... 17 5,900 o SD XILINX, INC ....................................... 384 5,600 o SD XYLAN CORP ........................................ 98 1,300 Xo SD ZENITH ELECTRONICS CORP ........................... 0 1,000 o SD ZOLTEK COS, INC ................................... 9 -------- 58,357 -------- ENGINEERING AND MANAGEMENT SERVICES--0.23% 900 o SD AHL SERVICES, INC ................................. 28 200 BLOUNT INTERNATIONAL, INC ............................ 5 7,900 o SD CATALYTICA, INC ................................... 142 600 o SD DATA TRANSMISSION NETWORK CORP .................... 17 1,100 o SD DIAMOND TECH PARTNERS, INC (CLASS A) .............. 21 11,200 DUN & BRADSTREET CORP ................................ 354 1,800 o SD F.Y.I., INC ....................................... 58
VALUE SHARES (000) - ------ --------- 400 o SD INCYTE PHARMACEUTICALS, INC ....................... $ 15 3,600 o SD JACOBS ENGINEERING GROUP, INC ..................... 147 1,000 o SD MAXIMUS, INC ...................................... 37 4,800 o SD MEDAPHIS CORP ..................................... 16 1,300 o SD META GROUP, INC ................................... 39 1,800 o SD METZLER GROUP, INC ................................ 88 17,000 o SD NEUROMEDICAL SYSTEMS, INC ......................... 4 600 o SD NFO WORLDWIDE, INC ................................ 7 700 o SD PHARMACEUTICAL PRODUCT DEVELOPMENT ................ 21 400 o SD PROFIT RECOVERY GROUP INTERNATIONAL ............... 15 9,600 o SD QUINTILES TRANSNATIONAL CORP ...................... 512 200 SERVICEMASTER CO ..................................... 4 2,700 o SD STAFF LEASING, INC ................................ 31 400 STONE & WEBSTER, INC ................................. 13 600 TEJON RANCH CO ....................................... 12 75 o SD TETRA TECH, INC ................................... 2 2,000 o SD URS CORP .......................................... 47 400 o SD WACKENHUT CORRECTIONS CORP ........................ 11 4,700 o SD WHITTMAN HART, INC ................................ 130 -------- 1,776 -------- FABRICATED METAL PRODUCTS--0.89% 1,300 o SD AMERICAN SAFETY RAZOR CO .......................... 16 610 BALL CORP ............................................ 28 2,000 BARNES GROUP, INC .................................... 58 500 CHART INDUSTRIES, INC ................................ 4 1,600 o SD COLEMAN CO, INC ................................... 15 3,700 CRANE CO ............................................. 112 1,000 CROWN CORK & SEAL CO, INC ............................ 31 82,578 GILLETTE CO .......................................... 3,990 35,700 MASCO CORP ........................................... 1,026 2,500 o SD MILLER INDUSTRIES, INC ............................ 11 200 o SD NCI BUILDING SYSTEMS, INC ......................... 6 300 o SD NORTEK, INC ....................................... 8 18,050 PARKER-HANNIFIN CORP ................................. 591 300 PRIMEX TECHNOLOGIES, INC ............................. 13 9,000 ROCKWELL INTERNATIONAL CORP .......................... 437 3,900 o SD ROHN INDUSTRIES, INC .............................. 13 600 o SD SIMPSON MANUFACTURING CO, INC ..................... 22 2,500 SNAP-ON, INC ......................................... 87 200 o SD SPS TECHNOLOGIES, INC ............................. 11 2,700 STRUM, RUGER & CO, INC ............................... 32 7,500 o SD TOWER AUTOMOTIVE, INC ............................. 187 1,600 VALMONT INDUSTRIES ................................... 22 2,600 WATTS INDUSTRIES, INC (CLASS A) ...................... 43 -------- 6,763 -------- FOOD AND KINDRED PRODUCTS--4.06% 1,400 o SD AGRIBRANDS INTERNATIONAL, INC ..................... 42 2,500 o SD AMERICAN ITALIAN PASTA CO (CLASS A) ............... 66 34,800 ANHEUSER BUSCH COS, INC .............................. 2,284 59,564 ARCHER DANIELS MIDLAND CO ............................ 1,024 1,000 o SD BERINGER WINE ESTATES HOLDINGS, INC (CLASS B) ..... 45 22,400 BESTFOODS, INC ....................................... 1,193 2,400 o SD BOSTON BEER CO, INC (CLASS A) ..................... 20 8,300 CAMPBELL SOUP CO ..................................... 457 2,300 o SD CANANDAIGUA BRANDS, INC (CLASS A) ................. 133 1,000 CHIQUITA BRANDS INTERNATIONAL, INC ................... 10 153,300 COCA COLA CO ......................................... 10,252 25,100 COCA COLA ENTERPRISES, INC ........................... 897 35,200 CONAGRA, INC ......................................... 1,109 400 COORS (ADOLPH) CO (CLASS B) .......................... 23 5,975 CORN PRODUCTS INTERNATIONAL, INC ..................... 181 6,500 DEAN FOODS CO ........................................ 265 7,700 DOLE FOOD, INC ....................................... 231 400 DREYERS GRAND ICE CREAM, INC ......................... 6 7,016 EARTHGRAINS CO ....................................... 217 100 FARMER BROTHERS CO ................................... 21
B-31
VALUE SHARES (000) - ------ --------- FOOD AND KINDRED PRODUCTS--(Continued) 750 FLOWERS INDUSTRIES, INC .............................. $ 18 14,607 GENERAL MILLS, INC ................................... 1,136 24,500 HEINZ (H.J.) CO ...................................... 1,387 317 HERSHEY FOODS CORP ................................... 20 7,200 HORMEL FOODS CORP .................................... 236 13,500 IBP, INC ............................................. 393 200 IMPERIAL HOLLY CORP .................................. 2 4,000 o SD INTERNATIONAL HOME FOODS, INC ..................... 68 6,900 INTERSTATE BAKERIES CORP ............................. 182 3,100 o SD KEEBLER FOODS CO .................................. 117 3,800 KELLOGG CO ........................................... 130 5,950 LANCASTER COLONY CORP ................................ 191 300 LANCE, INC ........................................... 6 200 MCCORMICK & CO, INC (NON-VOTE) ....................... 7 2,200 MICHAEL FOODS, INC ................................... 66 1,700 NABISCO HOLDINGS CORP (CLASS A) ...................... 71 89,500 PEPSICO, INC ......................................... 3,664 8,900 QUAKER OATS CO ....................................... 530 400 o SD RALCORP HOLDINGS, INC ............................. 7 28,300 RALSTON PURINA CO .................................... 916 800 RIVIANA FOODS, INC ................................... 20 15,601 RJR NABISCO HOLDINGS CORP ............................ 463 1,200 o SD ROBERT MONDAVI CORP (CLASS A) ..................... 49 56,000 SARA LEE CORP ........................................ 1,579 5,400 o SD SMITHFIELD FOODS, INC ............................. 183 4,400 SMUCKER (J.M.) CO (CLASS A) .......................... 109 2,700 o SD SUIZA FOODS CORP .................................. 138 3,866 TOOTSIE ROLL INDUSTRIES, INC ......................... 151 1,200 o SD TRIARC COS, INC ................................... 19 8,600 UNIVERSAL FOODS CORP ................................. 236 4,180 o SD VLASIC FOODS INTERNATIONAL, INC ................... 100 300 WHITMAN CORP ......................................... 8 200 WORTHINGTON FOODS, INC ............................... 4 1,401 WRIGLEY (WM) JR CO ................................... 125 -------- 30,807 -------- FOOD STORES--0.71% 17,500 ALBERTSONS, INC ...................................... 1,115 8,700 AMERICAN STORES CO ................................... 321 39 Xo SD BRUNOS, INC ....................................... 0 54,500 FOOD LION, INC (CLASS B) ............................. 548 2,800 GREAT ATLANTIC & PACIFIC TEA CO, INC ................. 83 16,800 o SD KROGER CO ......................................... 1,016 37,404 o SD SAFEWAY, INC ...................................... 2,279 7,000 o SD SOUTHLAND CORP .................................... 13 -------- 5,375 -------- FORESTRY--0.00% 200 GEORGIA-PACIFIC CORP (TIMBER GROUP) .................. 5 -------- FURNITURE AND FIXTURES--0.14% 900 BASSETT FURNITURE INDUSTRIES, INC .................... 22 8,300 HON INDUSTRIES, INC .................................. 199 5,800 KIMBALL INTERNATIONAL, INC (CLASS B) ................. 110 2,400 o SD KNOLL, INC ........................................ 71 12,100 MILLER (HERMAN), INC ................................. 325 2,000 STEELCASE, INC ....................................... 33 16,350 U.S. INDUSTRIES, INC ................................. 305 -------- 1,065 -------- FURNITURE AND HOMEFURNISHINGS STORES--0.26% 16,000 o SD BED BATH & BEYOND, INC ............................ 546 3,500 o SD BEST BUY, INC ..................................... 215 1,200 o SD CDNOW, INC ........................................ 22 300 CIRCUIT CITY STORES-CIRCUIT CITY GROUP ............... 15 15,700 o SD COMPUSA, INC ...................................... 205 1,100 HAVERTY FURNITURE COS, INC ........................... 23 1,100 o SD LINENS N THINGS, INC .............................. 44
VALUE SHARES (000) - ------ --------- 5,700 o SD MUSICLAND STORES CORP ............................. $ 85 300 o SD N2K, INC .......................................... 4 15,400 PIER 1 IMPORTS, INC .................................. 149 15,700 TANDY CORP ........................................... 647 2,550 o SD TRANS WORLD ENTERTAINMENT CORP .................... 49 -------- 2,004 -------- GENERAL BUILDING CONTRACTORS--0.09% 9,900 CENTEX CORP .......................................... 446 600 o SD CROSSMAN COMMUNITIES, INC ......................... 17 200 HILLENBRAND INDUSTRIES, INC .......................... 11 800 KAUFMAN & BROAD HOME CORP ............................ 23 5,000 LENNAR CORP .......................................... 126 1,500 o SD NVR, INC .......................................... 72 200 PULTE CORP ........................................... 6 200 RYLAND GROUP, INC .................................... 6 -------- 707 -------- GENERAL MERCHANDISE STORES--2.21% 3,700 o SD AMES DEPARTMENT STORES, INC ....................... 100 800 o SD BJS WHOLESALE CLUB, INC ........................... 37 2,400 Xo SD CALDOR CORP ....................................... 1 8,800 CASEYS GENERAL STORES, INC ........................... 115 800 o SD COST PLUS, INC .................................... 25 9,100 o SD COSTCO COS, INC ................................... 657 22,300 DAYTON HUDSON CORP ................................... 1,210 1,200 DILLARDS, INC (CLASS A) .............................. 34 8,550 o SD DOLLAR TREE STORES, INC ........................... 374 1,700 FAMILY DOLLAR STORES, INC ............................ 37 22,370 o SD FEDERATED DEPARTMENT STORES, INC .................. 974 5,204 o SD FRED MEYER, INC ................................... 314 59,600 o SD K MART CORP ....................................... 913 3,500 o SD KOHLS CORP ........................................ 215 9,400 MAY DEPARTMENT STORES CO ............................. 568 4,600 o SD NEIMAN-MARCUS GROUP, INC .......................... 115 18,045 PENNEY (J.C.) CO, INC ................................ 846 22,800 o SD SAKS, INC ......................................... 720 32,900 SEARS ROEBUCK & CO ................................... 1,398 900 o SD SERVICE MERCHANDISE, INC .......................... 0 4,200 o SD SHOPKO STORES, INC ................................ 140 98,100 WAL-MART STORES, INC ................................. 7,989 -------- 16,782 -------- HEALTH SERVICES--0.58% 1,100 o SD ADVANCE PARADIGM, INC ............................. 39 1,800 o SD AMERICAN HOMEPATIENT, INC ......................... 3 4,600 o SD AMERICAN ONCOLOGY RESOURCES, INC .................. 67 6,900 o SD APRIA HEALTHCARE GROUP, INC ....................... 62 1,800 o SD BEVERLY ENTERPRISES, INC .......................... 12 1,600 o SD CAREMATRIX CORP ................................... 49 1,700 o SD CENTENNIAL HEALTHCARE CORP ........................ 26 3,850 o SD CLINTRIALS, INC ................................... 15 27,138 COLUMBIA/HCA HEALTHCARE CORP ......................... 672 600 o SD CONCENTRA MANAGED CARE, INC ....................... 6 2,000 o SD CURATIVE HEALTH SERVICES, INC ..................... 67 1,800 o SD ENZO BIOCHEMICAL, INC ............................. 19 400 o SD EXPRESS SCRIPTS, INC .............................. 27 1,400 Xo SD FPA MEDICAL MANAGEMENT, INC ....................... 0 31,717 o SD HEALTH MANAGEMENT ASSOCIATES, INC (CLASS A) NEW ....................................... 686 31,660 o SD HEALTHSOUTH CORP .................................. 489 77 o SD INTEGRATED HEALTH SERVICES, INC ................... 1 13,752 o SD LABORATORY CORP OF AMERICA HOLDINGS ............... 19 260 o SD LABORATORY CORP OF AMERICA HOLDINGS WTS 04/28/00 ........................................ 0 2,463 o SD LCA-VISION, INC ................................... 3 6,900 o SD LINCARE HOLDINGS, INC ............................. 280 100 o SD LTC HEALTHCARE, INC ............................... 0
B-32
VALUE SHARES (000) - ------ --------- HEALTH SERVICES--(Continued) 2,400 o SD MAGELLAN HEALTH SERVICES, INC ..................... $ 20 10,130 o SD MARINER POST-ACUTE NETWORK, INC ................... 46 32,374 o SD MEDPARTNERS, INC .................................. 170 3,500 o SD NOVACARE, INC ..................................... 9 2,500 o SD PEDIATRIX MEDICAL GROUP, INC ...................... 150 12,800 o SD PHYCOR, INC ....................................... 87 4,600 o SD PHYSICIAN RELIANCE NETWORK, INC ................... 60 6,600 o SD PHYSICIANS RESOURCE GROUP, INC .................... 0 1,400 o SD PROVINCE HEALTHCARE CO ............................ 50 62 o SD QUEST DIAGNOSTICS, INC ............................ 1 50 o SD QUORUM HEALTH GROUP, INC .......................... 1 6,650 o SD RENAL CARE GROUP, INC ............................. 192 1,700 o SD SUN HEALTHCARE GROUP, INC ......................... 11 35,425 o SD TENET HEALTHCARE CORP ............................. 930 69 o SD TOTAL RENAL CARE HOLDINGS, INC .................... 2 2,200 o SD UNITED PAYORS & UNITED PROVIDERS, INC ............. 63 200 o SD UNIVERSAL HEALTH SERVICES, INC .................... 10 8,941 o SD VENCOR, INC ....................................... 40 -------- 4,384 -------- HEAVY CONSTRUCTION, EXCEPT BUILDING--0.02% 300 FLUOR CORP ........................................... 13 6,600 FOSTER WHEELER CORP .................................. 87 450 GRANITE CONSTRUCTION, INC ............................ 15 3,500 o SD INSITUFORM TECHNOLOGIES, INC (CLASS A) ............ 51 1,700 o SD MORRSION KNUDSEN CORP ............................. 17 -------- 183 -------- HOLDING AND OTHER INVESTMENT OFFICES--1.07% 1,600 ALEXANDRIA REAL ESTATE EQUITIES, INC ................. 50 12,100 AMB PROPERTY CORP .................................... 266 800 AMERICAN HEALTH PROPERTIES, INC ...................... 17 2,000 AMLI RESIDENTIAL PROPERTIES TRUST .................... 45 15,472 ARCHSTONE COMMUNITIES TRUST .......................... 313 2,100 BEDFORD PROPERTY INVESTORS, INC ...................... 35 300 BERKSHIRE REALTY CO, INC ............................. 3 70 BRADLEY REAL ESTATE, INC ............................. 1 3,000 CAPITAL AUTOMOTIVE REIT .............................. 45 8,539 CAPSTEAD MORTGAGE CORP ............................... 35 3,700 CBL & ASSOCIATES PROPERTIES, INC ..................... 96 300 CCA PRISON REALTY TRUST .............................. 6 2,900 CENTERPOINT PROPERTIES CORP .......................... 98 3,700 CHATEAU PROPERTIES, INC .............................. 108 300 CHELSEA GCA REALTY, INC .............................. 11 1,300 o SD COAST FEDERAL LITIGATION CONTINGENT RTS ........... 9 1,000 COMMERCIAL NET LEASE REALTY, INC ..................... 13 10,200 CORNERSTONE PROPERTIES, INC .......................... 159 3,044 COUSINS PROPERTIES, INC .............................. 98 400 o SD CRESECENT OPERATING, INC .......................... 2 3,000 CROWN AMERICAN REALTY TRUST .......................... 23 9,600 DEVELOPERS DIVERSIFIED REALTY CORP ................... 170 13,283 DUKE REALTY INVESTMENTS, INC ......................... 309 1,979 DYNEX CAPITAL, INC ................................... 9 900 EASTGROUP PROPERTIES, INC ............................ 17 2,300 ENTERTAINMENT PROPERTIES TRUST ....................... 39 33,050 EQUITY OFFICE PROPERTIES TRUST ....................... 793 8,178 EQUITY RESIDENTIAL PROPERTIES TRUST CO ............... 331 1,500 ESSEX PROPERTY TRUST, INC ............................ 45 6,000 FEDERAL REALTY INVESTMENT TRUST ...................... 142 4,166 FRANCHISE FINANCE CORP OF AMERICA .................... 100 6,000 GENERAL GROWTH PROPERTIES, INC ....................... 227 500 HEALTH CARE PROPERTY INVESTORS, INC .................. 15 600 HIGHWOODS PROPERTIES, INC ............................ 15 2,600 o SD HOME PROPERTIES OF NEW YORK, INC .................. 67 100 o SD IMPAC MORTGAGE HOLDINGS, INC ...................... 0 5,700 IMPERIAL CREDIT COMMERCIAL MORTGAGE INVESTMENT CORP ...................................... 53 445 INDYMAC MORTGAGE HOLDINGS, INC ....................... 5
VALUE SHARES (000) - ------ --------- 4,200 IRT PROPERTY CO ...................................... $ 42 5,000 JDN REALTY CORP ...................................... 108 2,100 JP REALTY, INC ....................................... 41 6,800 KIMCO REALTY CORP .................................... 270 7,800 LIBERTY PROPERTY TRUST CO ............................ 192 1,000 LTC PROPERTIES, INC .................................. 17 4,200 MACERICH CO (THE) .................................... 108 400 MACK-CALI REALTY CORP ................................ 12 99 MEDITRUST CORP PAIRED ................................ 1 5,200 MERIDIAN INDUSTRIAL TRUST, INC ....................... 122 7,500 MERISTAR HOSPITALITY CORP ............................ 139 285 o SD MERRY LAND PROPERTIES, INC ........................ 1 2,200 MGI PROPERTIES, INC .................................. 61 3,100 MID-AMERICA APARTMENT COMMUNITIES, INC ............... 70 1,200 NATIONAL GOLF PROPERTIES, INC ........................ 35 3,200 NATIONAL HEALTH INVESTORS, INC ....................... 79 10,421 NEW PLAN EXCEL REALTY TRUST .......................... 231 2,100 PACIFIC GULF PROPERTIES, INC ......................... 42 1,837 PATRIOT AMERICAN HOSPITALITY, INC .................... 11 800 o SD PEC ISRAEL ECONOMIC CORP .......................... 23 3,600 POST PROPERTIES, INC ................................. 138 6,800 PRIME RETAIL, INC .................................... 67 11,590 PROLOGIS TRUST ....................................... 240 12,300 PUBLIC STORAGE, INC .................................. 333 4,300 REALTY INCOME CORP ................................... 107 6,600 RECKSON ASSOCIATES REALTY CORP ....................... 146 1,000 REDWOOD TRUST, INC ................................... 14 2,200 REGENCY REALTY CORP .................................. 49 500 RFS HOTEL INVESTORS, INC ............................. 6 1,000 SAUL CENTERS, INC .................................... 16 4,500 SHURGARD STORAGE CENTERS, INC ........................ 116 500 SL GREEN REALTY CORP ................................. 11 2,000 o SD SOVRAN SELF STORAGE, INC .......................... 50 600 SPIEKER PROPERTIES, INC .............................. 21 3,300 STARWOOD FINANCIAL TRUST ............................. 198 2,800 STORAGE U.S.A., INC .................................. 90 600 o SD SUMMIT PROPERTIES, INC ............................ 10 2,400 SUN COMMUNITIES, INC ................................. 84 6,500 TAUBMAN CENTERS, INC ................................. 89 1,500 o SD THORNBURG MORTGAGE ASSET CORP ..................... 11 2,500 TOWN & COUNTRY TRUST ................................. 40 796 UNITED DOMINION REALTY TRUST, INC .................... 8 1,500 URBAN SHOPPING CENTERS, INC .......................... 49 8,941 o SD VENTAS, INC ....................................... 109 9,800 VORNADO REALTY TRUST ................................. 331 2,100 o SD WALDEN RESIDENTIAL PROPERTIES, INC ................ 43 6,000 WASHINGTON REAL ESTATE INVESTMENT TRUST .............. 112 4,100 WEINGARTEN REALTY INVESTORS, INC ..................... 183 1,000 WESTERN INVESTMENT REAL ESTATE TRUST ................. 12 4,200 WESTFIELD AMERICA, INC ............................... 72 -------- 8,130 -------- HOTELS AND OTHER LODGING PLACES--0.16% 6,600 o SD AZTAR CORP ........................................ 33 1,350 o SD BRISTOL HOTELS & RESORTS, INC ..................... 8 37,338 o SD CENDANT CORP ...................................... 712 6,100 o SD CHOICE HOTELS INTERNATIONAL, INC .................. 83 1,300 o SD CIRCUS CIRCUS ENTERPRISES, INC .................... 15 2,700 o SD CRESTLINE CAPITAL CORP ............................ 39 11,700 o SD EXTENDED STAY AMERICA, INC ........................ 123 3,800 o SD MARCUS CORP ....................................... 62 1,900 o SD MERISTAR HOTELS & RESORTS, INC .................... 5 1,200 o SD PRIMADONNA RESORTS, INC ........................... 11 768 o SD PROMUS HOTEL CORP ................................. 25 3,500 o SD RED ROOF INNS, INC ................................ 59 4,000 o SD SUNBURST HOSPITALITY CORP ......................... 17 2,800 o SD TRUMP HOTEL & CASINO RESORT, INC .................. 11 -------- 1,203 --------
B-33
VALUE SHARES (000) - ------ --------- INDUSTRIAL MACHINERY AND EQUIPMENT--7.43% 32,242 o SD 3COM CORP ......................................... $ 1,445 16,400 o SD ADAPTEC, INC ...................................... 288 9,800 AGCO CORP ............................................ 77 400 o SD AMERICAN STANDARD COS, INC ........................ 14 18,300 o SD APPLE COMPUTER, INC ............................... 749 33,100 o SD APPLIED MATERIALS, INC ............................ 1,413 500 APPLIED POWER, INC (CLASS A) ......................... 19 1,200 o SD ASTEC INDUSTRIES, INC ............................. 67 1,600 o SD AUSPEX SYSTEMS, INC ............................... 7 12,715 BAKER HUGHES, INC .................................... 225 100 o SD BANCTEC, INC ...................................... 1 2,300 o SD BELL & HOWELL CO .................................. 87 11,000 BLACK & DECKER CORP .................................. 617 16,100 BRUNSWICK CORP ....................................... 398 5,600 o SD C-CUBE MICROSYSTEMS, INC .......................... 152 2,200 o SD CABLETRON SYSTEMS, INC ............................ 18 4,800 CASE CORP ............................................ 105 15,600 CATERPILLAR, INC ..................................... 718 11,000 o SD CIRRUS LOGIC, INC ................................. 108 108,725 o SD CISCO SYSTEMS, INC ................................ 10,091 8,000 o SD COLTEC INDUSTRIES, INC ............................ 156 1,500 COLUMBUS MCKINNON CORP ............................... 27 110,484 COMPAQ COMPUTER CORP ................................. 4,633 9,000 o SD COPYTELE, INC ..................................... 12 5,600 CUMMINS ENGINE CO, INC ............................... 199 4,500 DEERE & CO ........................................... 149 77,293 o SD DELL COMPUTER CORP ................................ 5,657 1,400 o SD DETROIT DIESEL CORP ............................... 29 700 o SD DIALOGIC CORP ..................................... 14 5,900 o SD DIAMOND MULTIMEDIA SYSTEMS, INC ................... 38 11,450 DIEBOLD, INC ......................................... 409 300 o SD DIGI INTERNATIONAL, INC ........................... 3 200 DONALDSON CO, INC .................................... 4 4,400 DOVER CORP ........................................... 161 38,000 o SD EMC CORP .......................................... 3,230 2,900 o SD ESTERLINE CORP .................................... 63 2,100 o SD FEDDERS CORP ...................................... 12 6,400 FLOWSERVE CORP ....................................... 106 900 GRACO, INC ........................................... 27 400 HARDINGE, INC ........................................ 7 200 HARNISCHFEGER INDUSTRIES, INC ........................ 2 53,800 HEWLETT-PACKARD CO ................................... 3,675 8,300 HUSSMANN INTERNATIONAL, INC .......................... 161 1,200 o SD HYPERCOM CORP ..................................... 12 50 IDEX CORP ............................................ 1 400 o SD IN FOCUS SYSTEMS, INC ............................. 4 12,050 INGERSOLL-RAND CO .................................... 566 60,200 INTERNATIONAL BUSINESS MACHINES CORP ................. 11,122 600 o SD IONICS, INC ....................................... 18 900 JLG INDUSTRIES, INC .................................. 14 268 KENNAMETAL, INC ...................................... 6 600 o SD KULICHE & SOFFA INDUSTRIES, INC ................... 11 1,000 o SD LAM RESEARCH CORP ................................. 18 5,300 o SD LEXMARK INTERNATIONAL GROUP (CLASS A) ............. 533 600 LINCOLN ELECTRIC HOLDINGS CO ......................... 13 300 LINDSAY MANUFACTURING CO ............................. 4 50 MANITOWOC, INC ....................................... 2 500 o SD MICROS SYSTEMS, INC ............................... 16 6,400 MILACRON, INC ........................................ 123 27,700 MINNESOTA MINING & MANUFACTURING CO .................. 1,970 1,000 NACCO INDUSTRIES, INC (CLASS A) ...................... 92 50 o SD NATIONAL INSTRUMENTS CORP ......................... 2 100 NORDSON CORP ......................................... 5 5,600 o SD NOVELLUS SYSTEMS, INC ............................. 277 20,400 PALL CORP ............................................ 516
VALUE SHARES (000) - ------ --------- 5,875 o SD PAXAR CORP ........................................ $ 53 1,500 PENTAIR, INC ......................................... 60 12,500 PITNEY BOWES, INC .................................... 826 2,000 o SD PRESSTEK, INC ..................................... 14 2,700 ROPER INDUSTRIES, INC ................................ 55 29,348 o SD SEAGATE TECHNOLOGY, INC ........................... 888 7,100 o SD SEQUENT COMPUTER SYSTEMS, INC ..................... 86 3,800 o SD SHIVA CORP ........................................ 21 10,900 o SD SILICON GRAPHICS, INC ............................. 140 1,400 o SD SILICON VALLEY GROUP, INC ......................... 18 50 o SD SLI, INC .......................................... 1 1,800 o SD SPECIALTY EQUIPMENT COS, INC ...................... 49 800 o SD SPEEDFAM INTERNATIONAL, INC ....................... 14 1,500 o SD SPLASH TECHNOLOGY HOLDINGS, INC ................... 11 200 STANDEX INTERNATIONAL CORP ........................... 5 500 STARRETT (L.S.) CO (CLASS A) ......................... 17 16,800 o SD STORAGE TECHNOLOGY CORP ........................... 597 6,600 SYMBOL TECHNOLOGIES, INC ............................. 422 2,800 TECUMSEH PRODUCTS CO (CLASS A) ....................... 131 1,600 TENNANT CO ........................................... 64 22,500 TENNECO, INC ......................................... 766 2,500 o SD TEREX CORP ........................................ 71 8,329 TIMKEN CO ............................................ 157 232 TYCO INTERNATIONAL LTD ............................... 18 17,510 o SD U.S. FILTER CORP .................................. 401 9,208 o SD UNISYS CORP ....................................... 317 500 o SD UNOVA, INC ........................................ 9 1,300 o SD VARCO INTERNATIONAL, INC .......................... 10 3,300 o SD VISUAL NETWORKS, INC .............................. 124 600 o SD XIRCOM, INC ....................................... 20 6,800 YORK INTERNATIONAL CORP .............................. 278 500 o SD ZEBRA TECHNOLOGY CORP ............................. 14 -------- 56,355 -------- INSTRUMENTS AND RELATED PRODUCTS--2.11% 3,400 o SD ADAC LABORATORIES, INC ............................ 68 300 o SD AFFYMETRIX, INC ................................... 7 2,600 o SD ALARIS MEDICAL, INC ............................... 15 400 o SD ANALOGIC CORP ..................................... 15 1,900 ARROW INTERNATIONAL, INC ............................. 60 6,500 o SD ARTERIAL VASCULAR ENGINEERING, INC ................ 341 3,800 o SD AVID TECHNOLOGIES, INC ............................ 89 700 o SD BACOU U.S.A., INC ................................. 15 3,100 BAUSCH & LOMB, INC ................................... 186 13,500 BAXTER INTERNATIONAL, INC ............................ 868 4,300 BECKMAN COULTER, INC ................................. 233 8,100 BECTON DICKINSON & CO ................................ 346 3,700 o SD BOSTON SCIENTIFIC CORP ............................ 99 9,300 o SD CHYRON CORP ....................................... 17 700 o SD CLOSURE MEDICAL CORP .............................. 21 1,600 o SD COHERENT, INC ..................................... 20 1,100 o SD COLE NATIONAL CORP (CLASS A) ...................... 19 1,200 o SD CONMED CORP ....................................... 40 800 o SD CREDENCE SYSTEMS CORP ............................. 15 900 o SD CYMER, INC ........................................ 13 2,400 o SD CYTYC CORP ........................................ 62 7,100 DENTSPLY INTERNATIONAL, INC .......................... 183 1,100 o SD DIONEX CORP ....................................... 40 850 o SD DYNATECH CORP ..................................... 2 27,000 EASTMAN KODAK CO ..................................... 1,944 300 o SD FOSSIL, INC ....................................... 9 3,800 o SD GENRAD, INC ....................................... 60 13,612 GUIDANT CORP ......................................... 1,501 800 o SD HAEMONETICS CORP .................................. 18 3,000 o SD HANGER ORTHOPEDIC GROUP, INC ...................... 68 13,500 HONEYWELL, INC ....................................... 1,017 7,900 o SD IMATRON, INC ...................................... 11
B-34
VALUE SHARES (000) - ------ --------- INSTRUMENTS AND RELATED PRODUCTS--(Continued) 3,000 INVACARE CORP ........................................ $ 72 6,900 JOHNSON CONTROLS, INC ................................ 407 2,200 o SD MAXXIM MEDICAL, INC ............................... 65 36,240 MEDTRONIC, INC ....................................... 2,691 1,200 MENTOR CORP .......................................... 28 6,300 o SD METTLER-TOLEDO INTERNATIONAL, INC ................. 177 200 o SD MINE SAFETY APPLIANCE CO .......................... 14 700 MOVADO GROUP, INC .................................... 19 1,300 o SD NOVOSTE CORP ...................................... 37 1,000 o SD OCULAR SCIENCES, INC .............................. 27 2,300 o SD OEC MEDICAL SYSTEMS, INC .......................... 72 300 o SD PERCLOSE, INC ..................................... 10 300 o SD PINNACLE SYSTEMS, INC ............................. 11 5,300 POLAROID CORP ........................................ 99 4,018 RAYTHEON CO (CLASS A) ................................ 208 11,400 RAYTHEON CO (CLASS B) ................................ 607 2,400 o SD RESMED, INC ....................................... 109 1,100 o SD SABRATEK CORP ..................................... 18 1,000 o SD SCOTT TECHNOLOGIES, INC ........................... 17 200 o SD SEPRACOR, INC ..................................... 18 2,700 o SD SOFAMOR DANEK GROUP, INC .......................... 329 1,033 o SD SONOSITE, INC ..................................... 11 14,088 o SD ST. JUDE MEDICAL, INC ............................. 390 11,400 o SD STERIS CORP ....................................... 324 350 o SD SUMMIT TECHNOLOGY, INC ............................ 2 2,800 o SD SUNRISE MEDICAL, INC .............................. 35 200 o SD SYBRON INTERNATIONAL CORP ......................... 5 7,750 TEKTRONIX, INC ....................................... 233 700 o SD THERMEDICS, INC ................................... 8 300 o SD THERMO CARDIOSYSTEMS, INC ......................... 3 75 o SD THERMO ELECTRON CORP .............................. 1 1,125 o SD THERMO INSTRUMENT SYSTEMS, INC .................... 17 1,100 o SD THERMOQUEST CORP .................................. 14 1,200 o SD THERMOTREX CORP ................................... 10 2,000 o SD TRIMBLE NAVIGATION LTD ............................ 15 300 o SD VEECO INSTRUMENTS, INC ............................ 16 600 o SD VENTANA MEDICAL SYSTEMS, INC ...................... 13 2,200 o SD VISX, INC ......................................... 192 2,200 o SD VIVUS, INC ........................................ 6 1,800 o SD WESLEY JESSEN VISIONCARE, INC ..................... 50 2,200 X RITE, INC .......................................... 17 18,900 XEROX CORP ........................................... 2,230 -------- 16,029 -------- INSURANCE AGENTS, BROKERS AND SERVICE--0.10% 1,900 BALDWIN & LYONS, INC (CLASS B) ....................... 47 200 BLANCH (E.W.) HOLDINGS, INC .......................... 9 100 o SD FIRST HEALTH GROUP CORP ........................... 2 2,000 HILB, ROGAL & HAMILTON CO ............................ 40 11,000 MARSH & MCLENNAN COS, INC ............................ 643 -------- 741 -------- INSURANCE CARRIERS--4.90% 600 20TH CENTURY INDUSTRIES .............................. 14 7,267 AETNA, INC ........................................... 571 26,600 AFLAC, INC ........................................... 1,170 700 o SD ALLEGHANY CORP (DELAWARE) ......................... 132 61,556 ALLSTATE CORP ........................................ 2,378 6,500 AMBAC FINANCIAL GROUP, INC ........................... 391 400 AMERICAN BANKERS INSURANCE GROUP, INC ................ 19 2,300 AMERICAN FINANCIAL GROUP, INC ........................ 101 12,140 AMERICAN GENERAL CORP ................................ 947 74,475 AMERICAN INTERNATIONAL GROUP, INC .................... 7,196 1,100 AMERICAN MEDICAL SECURITY GROUP ...................... 16 200 AMERICAN NATIONAL INSURANCE CO ....................... 17 3,800 o SD AMERIN CORP ....................................... 90 6,050 AON CORP ............................................. 335
VALUE SHARES (000) - ------ --------- 3,200 ARM FINANCIAL GROUP, INC (CLASS A) ................... $ 71 350 BERKLEY (W.R.) CORP .................................. 12 15 o SD BERKSHIRE HATHAWAY, INC (CLASS A) ................. 1,050 22 o SD BERKSHIRE HATHAWAY, INC (CLASS B) ................. 52 1,100 CHARTWELL RE CORP .................................... 26 200 CHICAGO TITLE CORP ................................... 9 5,200 CHUBB CORP ........................................... 337 18,300 CIGNA CORP ........................................... 1,415 15,188 CINCINNATI FINANCIAL CORP ............................ 556 146,763 CITIGROUP, INC ....................................... 7,265 3,700 CMAC INVESTMENT CORP ................................. 170 17,813 CONSECO, INC ......................................... 544 3,400 ENHANCE FINANCIAL SERVICES GROUP, INC ................ 102 9,500 EQUITABLE COS, INC ................................... 550 7,600 EVEREST REINSURANCE HOLDINGS, INC .................... 296 300 EXECUTIVE RISK, INC .................................. 16 4,900 FBL FINANCIAL GROUP, INC (CLASS A) ................... 119 3,300 FIDELITY NATIONAL FINANCIAL, INC ..................... 101 3,200 FINANCIAL SECURITY ASSURANCE HOLDINGS LTD ............ 174 8,650 FIRST AMERICAN FINANCIAL CORP ........................ 278 2,900 FOREMOST CORP OF AMERICA ............................. 61 9,200 FREMONT GENERAL CORP ................................. 228 1,100 HARLEYSVILLE GROUP, INC .............................. 28 8,300 HARTFORD FINANCIAL SERVICES GROUP, INC ............... 455 4,200 HARTFORD LIFE, INC (CLASS A) ......................... 245 520 o SD HIGHLANDS INSURANCE GROUP, INC .................... 7 1,600 o SD HUMANA, INC ....................................... 29 12,150 JEFFERSON-PILOT CORP ................................. 911 500 o SD KANSAS CITY LIFE INSURANCE CO ................... 41 2,500 LANDAMERICA FINANCIAL GROUP, INC ..................... 140 1,700 LIBERTY CORP ......................................... 84 400 LIBERTY FINANCIAL COS, INC ........................... 11 2,300 LIFE U.S.A. HOLDINGS, INC ............................ 30 3,100 LINCOLN NATIONAL CORP ................................ 254 8,600 LOEWS CORP ........................................... 845 1,600 o SD MAXICARE HEALTH PLANS, INC ........................ 9 1,141 MBIA, INC ............................................ 75 400 MERCURY GENERAL CORP ................................. 18 16,500 MGIC INVESTMENT CORP ................................. 657 700 o SD MID ATLANTIC MEDICAL SERVICES, INC ................ 7 100 NATIONWIDE FINANCIAL SERVICES, INC (CLASS A) ......... 5 13,500 o SD OXFORD HEALTH PLANS, INC .......................... 201 512 o SD PACIFICARE HEALTH SYSTEMS, INC (CLASS A) .......... 37 6,052 o SD PACIFICARE HEALTH SYSTEMS, INC (CLASS B) .......... 481 500 o SD PENN TREATY AMERICAN CORP ......................... 13 4,100 PENNCORP FINANCIAL GROUP, INC ........................ 4 3,500 PMI GROUP, INC ....................................... 173 3,700 PRESIDENTIAL LIFE CORP ............................... 74 5,000 PROGRESSIVE CORP ..................................... 847 2,500 PROTECTIVE LIFE CORP ................................. 100 3,950 REINSURANCE GROUP OF AMERICA, INC .................... 277 8,200 RELIANCE GROUP HOLDINGS, INC ......................... 106 13,611 RELIASTAR FINANCIAL CORP ............................. 628 1,300 o SD RISK CAPITAL HOLDINGS, INC ........................ 28 1,300 RLI CORP ............................................. 43 1,900 SAFECO CORP .......................................... 82 500 SCPIE HOLDINGS, INC .................................. 15 4,700 SELECTIVE INSURANCE GROUP, INC ....................... 95 450 o SD SIERRA HEALTH SERVICES, INC ....................... 9 4,822 ST. PAUL COS, INC .................................... 168 1,000 STEWART INFORMATION SERVICES CORP .................... 58 9,883 SUNAMERICA, INC ...................................... 802 6,300 TIG HOLDINGS, INC .................................... 98 8,200 TORCHMARK CORP ....................................... 290 900 TRANSAMERICA CORP .................................... 104 6,700 TRAVELERS PROPERTY CASUALTY CORP ..................... 208
B-35
VALUE SHARES (000) - ------ --------- INSURANCE CARRIERS--(Continued) 1,600 TRENWICK GROUP, INC .................................. $ 52 1,600 o SD TRIAD GUARANTY, INC ............................... 35 500 o SD TRIGON HEALTHCARE, INC ............................ 19 100 UNITED FIRE & CASULTY CO ............................. 3 18,300 UNITED HEALTHCARE CORP ............................... 788 1,800 UNITED WISCONSIN SERVICES, INC ....................... 16 10,200 UNUM CORP ............................................ 595 1,100 VESTA INSURANCE GROUP, INC ........................... 7 100 o SD WELLPOINT HEALTH NETWORKS, INC .................... 9 -------- 37,125 -------- LEATHER AND LEATHER PRODUCTS--0.01% 800 o SD NINE WEST GROUP, INC .............................. 12 679 o SD SAMSONITE CORP .................................... 4 1,800 STRIDE RITE CORP ..................................... 16 300 o SD TIMBERLAND CO ..................................... 14 25 WOLVERINE WORLD WIDE, INC ............................ 0 -------- 46 -------- LEGAL SERVICES--0.00% 200 o SD PREPAID LEGAL SERVICES, INC ....................... 7 -------- LOCAL AND INTERURBAN PASSENGER TRANSIT--0.01% 7,100 o SD GREYHOUND LINES, INC .............................. 42 1,900 o SD RURAL/METRO CORP .................................. 21 -------- 63 -------- LUMBER AND WOOD PRODUCTS--0.17% 800 o SD AMERICAN HOMESTAR CORP ............................ 12 1,200 CAVALIER HOMES, INC .................................. 14 16,507 CLAYTON HOMES, INC ................................... 228 542 DELTIC TIMBER CORP ................................... 11 11,000 GEORGIA-PACIFIC CORP (PACKAGING GROUP) ............... 644 450 o SD PALM HARBOR HOMES, INC ............................ 11 1,000 SKYLINE CORP ......................................... 33 1,500 UNIVERSAL FOREST PRODUCTS, INC ....................... 30 5,900 WEYERHAEUSER CO ...................................... 300 -------- 1,283 -------- METAL MINING--0.12% 1,800 CLEVELAND CLIFFS, INC ................................ 73 3,000 o SD COEUR DALENE MINES CORP ........................... 14 15,700 CYPRUS AMAX MINERALS CO .............................. 157 25,963 FREEPORT-MCMORAN COPPER & GOLD, INC (CLASS B) ........ 271 400 o SD GETCHELL GOLD CORP ................................ 11 6,700 o SD HECLA MINING CO ................................... 24 8,804 o SD KINROSS GOLD CORP ................................. 20 10,900 NEWMONT MINING CORP .................................. 197 4,100 SOUTHERN PERU COPPER CORP ............................ 39 3,200 o SD STILLWATER MINING CO .............................. 131 -------- 937 -------- MISCELLANEOUS MANUFACTURING INDUSTRIES--0.07% 5,250 o SD BLYTH INDUSTRIES, INC ............................. 164 2,600 BRADY CORP (CLASS A) ................................. 70 600 o SD HEXCEL CORP ....................................... 5 100 INTERNATIONAL GAME TECHNOLOGY CO ..................... 2 6,300 JOSTENS, INC ......................................... 165 1,300 K2, INC .............................................. 13 900 o SD LYDALL, INC ....................................... 11 3,093 MATTEL, INC .......................................... 71 400 RUSS BERRIE & CO, INC ................................ 9 200 o SD STEINWAY MUSICAL INSTRUMENTS, INC ................. 5 2,400 o SD WMS INDUSTRIES, INC ............................... 18 -------- 533 -------- MISCELLANEOUS RETAIL--1.04% 1,000 o SD AMAZON.COM, INC ................................... 321 700 o SD BARNETT, INC ...................................... 10 700 BLAIR CORP ........................................... 16
VALUE SHARES (000) - ------ --------- 10,200 o SD BORDERS GROUP, INC ................................ $ 254 500 CASH AMERICA INTERNATIONAL, INC ...................... 8 1,100 o SD CDW COMPUTER CENTERS, INC ......................... 106 1,000 o SD COLDWATER CREEK, INC .............................. 14 25,642 CVS CORP ............................................. 1,410 1,000 o SD GARDEN RIDGE CORP ................................. 9 2,200 o SD GLOBAL DIRECTMAIL CORP ............................ 51 2,200 o SD INSIGHT ENTERPRISES, INC .......................... 112 500 o SD LANDS END, INC .................................... 13 4,200 o SD MICHAELS STORES, INC .............................. 76 200 o SD MICRO WAREHOUSE, INC .............................. 7 17,300 o SD OFFICE DEPOT, INC ................................. 639 50 o SD OFFICEMAX, INC .................................... 1 14,600 OMNICARE, INC ........................................ 507 600 o SD PARTY CITY CORP ................................... 9 3,500 o SD PETCO ANIMAL SUPPLIES, INC ........................ 35 9,820 RITE AID CORP ........................................ 487 27,675 o SD STAPLES, INC ...................................... 1,209 2,250 o SD THE SPORTS AUTHORITY, INC ......................... 12 1,087 o SD TOYS R US, INC .................................... 18 4,625 o SD U.S. OFFICE PRODUCTS CO ........................... 18 39,800 WALGREEN CO .......................................... 2,331 6,000 o SD ZALE CORP ......................................... 194 -------- 7,867 -------- MOTION PICTURES--0.62% 1,000 o SD AMC ENTERTAINMENT, INC ............................ 21 150,234 DISNEY (WALT) CO ..................................... 4,507 4,800 o SD HOLLYWOOD ENTERTAINMENT CORP ...................... 131 700 o SD KING WORLD PRODUCTIONS, INC ....................... 21 100 o SD PIXAR, INC ........................................ 4 2,700 o SD SPELLING ENTERTAINMENT GROUP, INC ................. 20 -------- 4,704 -------- NONDEPOSITORY INSTITUTIONS--2.28% 1,500 AAMES FINANCIAL CORP ................................. 5 1,125 ADVANTA CORP (CLASS A) ............................... 15 34,000 AMERICAN EXPRESS CO .................................. 3,477 9,900 o SD AMERICREDIT CORP .................................. 137 1,600 o SD AMRESCO, INC ...................................... 14 2,300 o SD ARCADIA FINANCIAL LTD ............................. 8 44,116 ASSOCIATES FIRST CAPITAL CORP ........................ 1,869 6,200 CAPITAL ONE FINANCIAL CORP ........................... 713 400 CHARTER MUNICIPAL MORTGAGE ACCEPTANCE ................ 5 2,100 Xo SD CITYSCAPE FINANCIAL CORP .......................... 0 1,300 CONNING CORP ......................................... 27 1,100 o SD CONTIFINANCIAL CORP ............................... 8 3,200 COUNTRYWIDE CREDIT INDUSTRIES, INC ................... 161 100 o SD CREDIT ACCEPTANCE CORP ............................ 1 5,100 DORAL FINANCIAL CORP ................................. 113 74,800 FEDERAL NATIONAL MORTGAGE ASSOCIATION ................ 5,535 1,500 o SD FINANCIAL FEDERAL CORP ............................ 37 3,400 FINOVA GROUP, INC .................................... 183 4,500 o SD FIRSTPLUS FINANCIAL GROUP, INC .................... 12 1,700 o SD FRANCHISE MORTGAGE ACCEPTANCE CO .................. 13 51,400 FREDDIE MAC .......................................... 3,312 800 FUND AMERICAN ENTERPRISES HOLDINGS, INC .............. 112 400 o SD HEALTHCARE FINANCIAL PARTNERS, INC ................ 16 22,736 HOUSEHOLD INTERNATIONAL, INC ......................... 901 1,000 o SD IMC MORTGAGE CO ................................... 0 6,700 o SD LEUCADIA NATIONAL CORP ............................ 211 2,000 o SD LONG BEACH FINANCIAL CORP ......................... 15 6,450 Xo SD MERCURY FINANCE CO ................................ 0 3,219 METRIS COS, INC ...................................... 162 3,325 o SD OMEGA WORLDWIDE, INC .............................. 15 300 RESOURCE AMERICA, INC (CLASS A) ...................... 3 100 SIRROM CAPITAL CORP .................................. 0
B-36
VALUE SHARES (000) - ------ --------- NONDEPOSITORY INSTITUTIONS--(Continued) 3,350 SLM HOLDINGS CORP .................................... $ 161 2,500 o SD UNICAPITAL CORP ................................... 18 2,200 UNITED COS FINANCIAL CORP ............................ 7 -------- 17,266 -------- NONMETALLIC MINERALS, EXCEPT FUELS--0.05% 2,400 AMCOL INTERNATIONAL CORP ............................. 24 300 CALMAT CO ............................................ 9 4,779 MARTIN MARIETTA MATERIALS, INC ....................... 297 425 POTASH CORP OF SASKATCHEWAN, INC ..................... 27 -------- 357 -------- OIL AND GAS EXTRACTION--0.53% 10,300 APACHE CORP .......................................... 261 800 o SD ATWOOD OCEANICS, INC .............................. 14 900 o SD BELCO OIL & GAS CORP .............................. 5 2,800 o SD BENTON OIL & GAS CO ............................... 8 600 o SD BROWN (TOM), INC .................................. 6 2,849 BURLINGTON RESOURCES, INC ............................ 102 1,200 CABOT OIL & GAS CORP (CLASS A) ....................... 18 2,900 CHESAPEAKE ENERGY CORP ............................... 3 6,425 CROSS TIMBERS OIL CO ................................. 48 7,700 DIAMOND OFFSHORE DRILLING, INC ....................... 182 2,849 o SD EEX CORP .......................................... 20 24,100 ENSCO INTERNATIONAL, INC ............................. 258 1,400 o SD FORCENERGY GAS EXPLORATION, INC ................... 4 5,700 o SD FOREST OIL CORP ................................... 48 700 o SD FRIEDE GOLDMAN INTERNATIONAL, INC ................. 8 900 o SD GLOBAL MARINE, INC ................................ 8 11,800 o SD GREY WOLF, INC .................................... 10 33,632 HALLIBURTON CO ....................................... 996 3,500 o SD HANOVER COMPRESSOR CO ............................. 90 100 o SD HARKEN ENERGY CORP ................................ 0 500 o SD HOUSTON EXPLORATION CO ............................ 10 2,000 KCS ENERGY, INC ...................................... 6 7,700 KERR-MCGEE CORP ...................................... 295 263 o SD MCMORAN EXPLORATION CO ............................ 4 1,200 o SD NABORS INDUSTRIES, INC ............................ 16 400 o SD NEWFIELD EXPLORATION CO ........................... 8 2,600 o SD NUEVO ENERGY CO ................................... 30 1,200 OCCIDENTAL PETROLEUM CORP ............................ 20 1,500 o SD OCEAN ENERGY, INC ................................. 9 3,400 o SD OCEANEERING INTERNATIONAL, INC .................... 51 400 o SD ORYX ENERGY CO .................................... 5 9,000 o SD PARKER DRILLING CO ................................ 29 1,900 o SD PATTERSON ENERGY, INC ............................. 8 16,200 PIONEER NATURAL RESOURCES CO ......................... 142 300 o SD POOL ENERGY SERVICES CO ........................... 3 100 o SD PRIDE INTERNATIONAL, INC .......................... 1 1,500 o SD RANGE RESOURCES CORP .............................. 5 10,400 o SD ROWAN COS, INC .................................... 104 800 o SD SANTA FE ENERGY RESOURCES, INC .................... 6 16 SCHLUMBERGER LTD ..................................... 1 3,600 o SD SEITEL, INC ....................................... 45 1,700 ST. MARY LAND & EXPLORATION CO ....................... 31 2,100 o SD STONE ENERGY CORP ................................. 60 1,330 o SD SWIFT ENERGY CO ................................... 10 2,000 o SD SYNTROLEUM CORP ................................... 12 4,300 o SD TITAN EXPLORATION, INC ............................ 28 3,700 o SD TRANSMONTAIGNE, INC ............................... 56 11,800 TRANSOCEAN OFFSHORE, INC ............................. 316 2,600 o SD TRANSTEXAS GAS CORP ............................... 7 7,200 o SD TUBOSCOPE, INC .................................... 59 41,414 UNION PACIFIC RESOURCES GROUP, INC ................... 375 2,800 VASTAR RESOURCES, INC ................................ 121 330 o SD WEATHERFORD INTERNATIONAL ......................... 6 -------- 3,968 --------
VALUE SHARES (000) - ------ --------- PAPER AND ALLIED PRODUCTS--0.90% 1,500 o SD ACX TECHNOLOGIES, INC ............................. $ 20 5,000 o SD AMERICAN PAD & PAPER CO ........................... 8 200 AVERY DENNISON CORP .................................. 9 8,700 BOISE CASCADE CORP ................................... 270 16,100 CHAMPION INTERNATIONAL CORP .......................... 652 500 CHESAPEAKE CORP ...................................... 18 3,960 o SD CROWN VANTAGE, INC ................................ 9 4,300 o SD EARTHSHELL CORP ................................... 51 24,725 FORT JAMES CORP ...................................... 989 7,700 o SD GAYLORD CONTAINER CO .............................. 47 4,100 GLATFELTER (P.H.) CO ................................. 51 300 GREIF BROTHERS CORP (CLASS A) ........................ 9 16,547 INTERNATIONAL PAPER CO ............................... 742 3,000 o SD IVEX PACKAGING CORP ............................... 70 41,000 KIMBERLY CLARK CORP .................................. 2,235 600 LONGVIEW FIBRE CO .................................... 7 700 o SD PLAYTEX PRODUCTS, INC ............................. 11 400 REPUBLIC GROUP, INC .................................. 8 1,800 ROCK-TENN CO (CLASS A) ............................... 30 340 SCHWEITZER-MAUDUIT INTERNATIONAL, INC ................ 5 53 o SD SMURFIT-STONE CONTAINER CORP ...................... 1 11,131 SONOCO PRODUCTS CO ................................... 330 3,700 ST. JOE CORP ......................................... 87 1,800 TEMPLE-INLAND, INC ................................... 107 9,900 UNION CAMP CORP ...................................... 668 9,100 WAUSAU-MOSINEE PAPER CORP ............................ 161 6,700 WILLAMETTE INDUSTRIES, INC ........................... 224 -------- 6,819 -------- PERSONAL SERVICES--0.23% 13,600 BLOCK (H&R), INC ..................................... 612 10,700 CINTAS CORP .......................................... 754 2,000 o SD COINMACH LAUNDRY CORP ............................. 26 600 CPI CORP ............................................. 16 100 o SD EQUITY CORP INTERNATIONAL ......................... 3 7,800 SERVICE CORP INTERNATIONAL ........................... 297 200 UNIFIRST CORP ........................................ 5 -------- 1,713 -------- PETROLEUM AND COAL PRODUCTS--4.17% 58,024 AMOCO CORP ........................................... 3,423 11,400 ASHLAND, INC ......................................... 551 16,200 ATLANTIC RICHFIELD CO ................................ 1,057 46,600 CHEVRON CORP ......................................... 3,865 400 ELCOR CORP ........................................... 13 167,600 EXXON CORP ........................................... 12,256 55,000 MOBIL CORP ........................................... 4,792 2,400 MURPHY OIL CORP ...................................... 99 8,000 PENNZENERGY CO ....................................... 131 12,840 o SD PENNZOIL-QUAKER STATE CO .......................... 190 600 o SD PETROFINA S.A. WTS 08/02/03 ....................... 5 23,000 PHILLIPS PETROLEUM CO ................................ 980 13,800 SUNOCO, INC .......................................... 498 43,116 TEXACO, INC .......................................... 2,280 25,348 TOSCO CORP ........................................... 656 14,926 ULTRAMAR DIAMOND SHAMROCK CORP ....................... 362 4,245 UNOCAL CORP .......................................... 124 8,200 USX-MARATHON GROUP, INC .............................. 247 2,500 VALERO ENERGY CORP ................................... 53 600 WD-40 CO ............................................. 17 -------- 31,599 -------- PRIMARY METAL INDUSTRIES--0.35% 700 o SD AFC CABLE SYSTEMS, INC ............................ 24 7,240 ALUMINUM CO OF AMERICA ............................... 540 5,100 ASARCO, INC .......................................... 77 4,150 o SD CABLE DESIGN TECHNOLOGIES CO ...................... 77 2,700 CARPENTER TECHNOLOGY CORP ............................ 92
B-37
VALUE SHARES (000) - ------ --------- PRIMARY METAL INDUSTRIES--(Continued) 100 o SD CITATION CORP ..................................... $ 1 500 o SD CURTISS WRIGHT CORP ............................... 19 1,300 o SD ENCORE WIRE CORP .................................. 12 12,250 ENGELHARD CORP ....................................... 239 87 o SD ESSEX INTERNATIONAL, INC .......................... 3 900 GENERAL CABLE CORP ................................... 18 2,200 IMCO RECYCLING, INC .................................. 34 261 INLAND STEEL INDUSTRIES, INC ......................... 4 1,900 o SD KAISER ALUMINUN CORP .............................. 9 1,800 o SD LONE STAR TECHNOLOGIES, INC ....................... 18 9,800 LTV CORP ............................................. 57 200 MATTHEWS INTERNATIONAL CORP (CLASS A) ................ 6 300 o SD MAXXAM, INC ....................................... 17 5,900 o SD MUELLER INDUSTRIES, INC ........................... 120 1,500 NATIONAL STEEL CORP (CLASS B) ........................ 11 11,200 NUCOR CORP ........................................... 484 100 PRECISION CAST PARTS CORP ............................ 4 2,300 QUANEX CORP .......................................... 52 3,000 REYNOLDS METALS CO ................................... 158 1,100 o SD RTI INTERNATIONAL METALS .......................... 15 5,000 o SD STEEL DYNAMICS, INC ............................... 59 2,000 TITANIUM METALS CORP ................................. 17 14,800 USX-US STEEL GROUP, INC .............................. 340 1,700 o SD WHX CORP .......................................... 17 10,500 WORTHINGTON INDUSTRIES, INC .......................... 131 -------- 2,655 -------- PRINTING AND PUBLISHING--1.46% 1,800 AMERICAN BUSINESS PRODUCTS, INC ...................... 42 10,800 AMERICAN GREETINGS CORP (CLASS A) .................... 443 700 o SD APPLIED GRAPHICS TECHNOLOGIES, INC ................ 12 9,900 BELO (A.H.) CORP SERIES A ............................ 197 400 o SD BIG FLOWER HOLDINGS, INC .......................... 9 3,400 CENTRAL NEWSPAPERS, INC (CLASS A) .................... 243 500 o SD CONSOLIDATED GRAPHICS, INC ........................ 34 1,000 o SD CSS INDUSTRIES, INC ............................... 30 600 o SD DAY RUNNER, INC ................................... 9 13,100 DELUXE CORP .......................................... 479 8,300 DOW JONES & CO, INC .................................. 399 2,900 o SD FRANKLIN COVEY CO ................................. 49 24,500 GANNETT CO, INC ...................................... 1,580 300 o SD GIBSON GREETINGS, INC ............................. 4 5,200 HARLAND (JOHN H.) CO ................................. 82 100 HOLLINGER INTERNATIONAL, INC ......................... 1 5,600 KNIGHT-RIDDER, INC ................................... 286 7,500 LEE ENTERPRISES, INC ................................. 236 2,900 Xo SD MARVEL ENTERTAINMENT GROUP, INC ................... 0 2,900 MCGRAW HILL COS, INC ................................. 295 425 MEDIA GENERAL, INC (CLASS A) ......................... 23 800 MEREDITH CORP ........................................ 30 7,800 NEW YORK TIMES CO (CLASS A) .......................... 271 82 NEWS CORP LTD ........................................ 2 600 PENTON MEDIA, INC .................................... 12 2,900 o SD PETERSEN COS, INC (CLASS A) ....................... 98 24,300 o SD PRIMEDIA, INC ..................................... 286 560 R.H. DONNELLEY CORP .................................. 8 700 READER'S DIGEST ASSOCIATION, INC (CLASS A) (NON-VOTE) ........................................... 18 12,700 REYNOLDS & REYNOLDS CO (CLASS A) ..................... 291 200 o SD SCHOLASTIC CORP ................................... 11 1,300 SCRIPPS (E.W.) CO (CLASS A) .......................... 65 60,718 TIME WARNER, INC ..................................... 3,768 12,200 TRIBUNE CO ........................................... 805 6,500 WALLACE COMPUTER SERVICES, INC ....................... 171 900 WASHINGTON POST CO (CLASS B) ......................... 520 900 WILEY (JOHN) & SONS, INC (CLASS A) ................... 43
VALUE SHARES (000) - ------ --------- 813 o SD WORKFLOW MANAGEMENT, INC .......................... $ 5 6,400 o SD WORLD COLOR PRESS, INC ............................ 195 -------- 11,052 -------- RAILROAD TRANSPORTATION--0.44% 42,720 BURLINGTON NORTHERN SANTA FE CORP .................... 1,442 50 CANADIAN NATIONAL RAILWAY CO ......................... 3 6,300 CSX CORP ............................................. 261 1,800 FLORIDA EAST COAST INDUSTRIES, INC ................... 63 1,500 KANSAS CITY SOUTHERN INDUSTRIES, INC ................. 74 14,300 NORFOLK SOUTHERN CORP ................................ 453 22,882 UNION PACIFIC CORP ................................... 1,031 1,000 o SD WISCONSIN CENTRAL TRANSIT CORP .................... 17 -------- 3,344 -------- REAL ESTATE--0.03% 2,666 o SD CASTLE & COOKE, INC ............................... 39 1,000 o SD CATELLUS DEVELOPMENT CORP ......................... 14 300 o SD CB RICHARD ELLIS SERVICES GROUP, INC .............. 5 40 o SD ECHELON INTERNATIONAL CORP ........................ 1 300 o SD FAIRFIELD COMMUNITIES, INC ........................ 3 2,000 o SD GRUBB & ELLIS CO .................................. 16 1,933 o SD INSIGNIA FINANCIAL GROUP, INC ..................... 23 100 o SD LASALLE PARTNERS, INC ............................. 3 4,800 LNR PROPERTY CORP .................................... 96 2,064 o SD RECKSON SERVICES INDUSTRIES, INC .................. 9 1,000 STEWART ENTERPRISES, INC (CLASS A) ................... 22 -------- 231 -------- RUBBER AND MISCELLANEOUS PLASTIC PRODUCTS--0.54% 5,100 APTARGROUP, INC ...................................... 143 1,600 ARMSTRONG WORLD INDUSTRIES, INC ...................... 97 5,400 FIRST BRANDS CORP .................................... 213 3,000 FURON CO ............................................. 51 12,250 GOODRICH (B.F.) CO ................................... 439 7,600 GOODYEAR TIRE & RUBBER CO ............................ 383 15,900 ILLINOIS TOOL WORKS, INC ............................. 922 200 MYERS INDUSTRIES, INC ................................ 6 14,800 NIKE, INC (CLASS B) .................................. 600 8,500 PREMARK INTERNATIONAL, INC ........................... 294 7,300 o SD SAFESKIN CORP ..................................... 176 772 o SD SEALED AIR CORP ................................... 39 19,160 SOLUTIA, INC ......................................... 429 1,400 SPARTECH CORP ........................................ 31 100 o SD SYNETIC, INC ...................................... 4 3,000 TREDEGAR INDUSTRIES, INC ............................. 68 8,100 TUPPERWARE CORP ...................................... 133 1,800 WYNNS INTERNATIONAL, INC ............................. 40 -------- 4,068 -------- SECURITY AND COMMODITY BROKERS--1.05% 2,900 o SD AFFILIATED MANAGERS GROUP, INC .................... 87 400 o SD AMERITRADE HOLDINGS CORP (CLASS A) ................ 13 5,500 BEAR STEARNS COS, INC ................................ 206 100 DUFF & PHELPS CREDIT RATING CO ....................... 5 1,100 o SD E TRADE GROUP, INC ................................ 51 4,800 EATON VANCE CORP ..................................... 100 15,450 EDWARDS (A.G.), INC .................................. 576 2,100 EVEREN CAPITAL CORP .................................. 48 1,800 FEDERATED INVESTMENTS, INC ........................... 33 3,200 FRANKLIN RESOURCES, INC .............................. 102 2,100 FREEDOM SECURITIES CORP .............................. 32 3,900 o SD FRIEDMAN, BILLINGS, RAMSEY GROUP, INC ............. 25 600 o SD HAMBRECHT & QUIST GROUP ........................... 14 2,200 JEFFERIES GROUP, INC ................................. 109 1,000 JOHN NUVEEN CO (CLASS A) ............................. 37 1,600 LEGG MASON, INC ...................................... 51 15,100 LEHMAN BROTHERS HOLDINGS, INC ........................ 665 16,100 MERRILL LYNCH & CO, INC .............................. 1,075
B-38
VALUE SHARES (000) - ------ --------- SECURITY AND COMMODITY BROKERS--(Continued) 40,055 MORGAN STANLEY, DEAN WITTER, & CO .................... $ 2,844 200 PAINE WEBBER GROUP, INC .............................. 8 6,000 PHOENIX INVESTMENT PARTNERS LTD ...................... 51 5,850 RAYMOND JAMES FINANCIAL CORP ......................... 124 28,600 SCHWAB (CHARLES) CORP ................................ 1,607 1,700 SOUTHWEST SECURITIES GROUP, INC ...................... 34 700 UNITED ASSET MANAGEMENT CORP ......................... 18 157 WADDELL & REED FINANCIAL, INC (CLASS B) .............. 4 -------- 7,919 -------- SOCIAL SERVICES--0.00% 1,700 o SD CAPITAL SENIOR LIVING CORP ........................ 24 -------- SPECIAL TRADE CONTRACTORS--0.01% 3,500 APOGEE ENTERPRISES, INC .............................. 39 4,000 o SD GROUP MAINTENANCE AMERICA CORP .................... 49 -------- 88 -------- STONE, CLAY, AND GLASS PRODUCTS--0.13% 7,400 CORNING, INC ......................................... 333 4,800 o SD DAL-TILE INTERNATIONAL, INC ....................... 50 2,700 o SD DEPARTMENT 56, INC ................................ 101 2 LAFARGE CORP ......................................... 0 300 LIBBEY, INC .......................................... 9 1,700 NEWELL COS, INC ...................................... 70 9,000 OWENS CORNING CO ..................................... 319 800 o SD OWENS ILLINOIS, INC ............................... 25 500 PUERTO RICAN CEMENT CO, INC .......................... 17 220 SOUTHDOWN, INC ....................................... 13 1,100 USG CORP ............................................. 56 -------- 993 -------- TEXTILE MILL PRODUCTS--0.07% 2,981 ALBANY INTERNATIONAL CORP (CLASS A) NEW .............. 56 800 o SD COLLINS & AIKMAN CORP ............................. 4 200 o SD DAN RIVER, INC (CLASS A) .......................... 2 800 o SD GUILFORD MILLS, INC ............................... 13 5,100 o SD MOHAWK INDUSTRIES, INC ............................ 215 2,700 o SD POLYMER GROUP, INC ................................ 27 500 ST. JOHN KNITS, INC .................................. 13 6,700 o SD WESTPOINT STEVENS, INC ............................ 211 -------- 541 -------- TOBACCO PRODUCTS--1.23% 7,200 FORTUNE BRANDS, INC .................................. 228 1,600 o SD GENERAL CIGAR HOLDINGS, INC (CLASS A) ............. 14 169,000 PHILIP MORRIS COS, INC ............................... 9,042 2,100 UST, INC ............................................. 73 -------- 9,357 -------- TRANSPORTATION BY AIR--0.53% 7,000 AIRBORNE FREIGHT CORP ................................ 252 2,500 o SD AIRTRAN HOLDINGS, INC ............................. 7 500 o SD ALASKA AIR GROUP, INC ............................. 22 17,300 o SD AMR CORP .......................................... 1,027 1,500 o SD ATLAS AIR, INC .................................... 73 300 o SD AVIALL, INC ....................................... 4 87 COMAIR HOLDINGS, INC ................................. 3 400 o SD CONTINENTAL AIRLINES, INC (CLASS B) ............... 13 15,700 DELTA AIRLINES, INC .................................. 816 8,920 o SD FDX CORP .......................................... 794 1,000 o SD MESA AIR GROUP, INC ............................... 8 400 o SD MIDWEST EXPRESS HOLDINGS, INC ..................... 11 3,500 o SD OFFSHORE LOGISTICS, INC ........................... 42 1,800 PITTSTON BAX GROUP ................................... 20 12,901 SOUTHWEST AIRLINES CO ................................ 289 9,500 o SD TRANS WORLD AIRLINES, INC ......................... 46 10,500 o SD U.S. AIRWAYS GROUP, INC ........................... 546 300 o SD UAL CORP .......................................... 18 -------- 3,991 --------
VALUE SHARES (000) - ------ --------- TRANSPORTATION EQUIPMENT--3.04% 300 o SD AFTERMARKET TECHNOLOGY CORP ....................... $ 2 29,300 ALLIED SIGNAL, INC ................................... 1,298 4,200 ARCTIC CAT, INC ...................................... 43 16,684 AUTOLIV, INC ......................................... 620 1,500 o SD AVONDALE INDUSTRIES, INC .......................... 44 4,500 o SD BE AEROSPACE, INC ................................. 95 71,554 BOEING CO ............................................ 2,334 3,600 BORG-WARNER AUTOMOTIVE, INC .......................... 201 900 o SD BREED TECHNOLOGIES, INC ........................... 7 2,200 COACHMEN INDUSTRIES, INC ............................. 58 6,000 CORDANT TECHNOLOGIES, INC ............................ 225 20,024 DANA CORP ............................................ 818 8,300 DANAHER CORP ......................................... 451 2,200 o SD DELCO REMY INTERNATIONAL , INC (CLASS A) .......... 22 9,800 EATON CORP ........................................... 693 70,400 FORD MOTOR CO ........................................ 4,132 5,700 GENCORP, INC ......................................... 142 5,800 GENERAL DYNAMICS CORP ................................ 340 49,226 GENERAL MOTORS CORP .................................. 3,523 500 o SD GENTEX CORP ....................................... 10 11,400 o SD GULFSTREAM AEROSPACE CORP ......................... 607 17,300 HARLEY DAVIDSON, INC ................................. 820 200 o SD HAYES LEMMERZ INTERNATIONAL, INC .................. 6 1,900 o SD KELLSTROM INDUSTRIES, INC ......................... 55 7,296 LOCKHEED MARTIN CORP ................................. 618 6,200 MASCOTECH, INC ....................................... 106 11,166 MERITOR AUTOMOTIVE, INC .............................. 237 1,300 o SD MONACO COACH CORP ................................. 34 100 o SD MOTIVEPOWER INDUSTRIES, INC ....................... 3 300 o SD NATIONAL R.V. HOLDINGS, INC ....................... 8 11,000 o SD NAVISTAR INTERNATIONAL CORP ....................... 314 5,877 NORTHROP GRUMMAN CORP ................................ 430 1,100 OEA, INC ............................................. 13 11,400 PACCAR, INC .......................................... 469 3,400 POLARIS INDUSTRIES, INC .............................. 133 3,100 REGAL-BELOIT CORP .................................... 71 2,100 SMITH (A.O.) CORP .................................... 52 103 o SD SPX CORP .......................................... 7 1,000 STANDARD MOTOR PRODUCTS, INC (CLASS A) ............... 24 700 STANDARD PRODUCTS CO ................................. 14 1,900 o SD STONERIDGE, INC ................................... 43 9,100 SUNDSTRAND CORP ...................................... 472 3,400 SUPERIOR INDUSTRIES INTERNATIONAL, INC ............... 95 8,700 TEXTRON, INC ......................................... 661 300 THOR INDUSTRIES, INC ................................. 8 7,200 TRINITY INDUSTRIES, INC .............................. 277 2,000 o SD TRIUMPH GROUP, INC ................................ 64 3,100 TRW, INC ............................................. 174 18,700 UNITED TECHNOLOGIES CORP ............................. 2,034 2,750 VARLEN CORP .......................................... 63 700 o SD WALBRO CORP ....................................... 4 2,700 WESTINGHOUSE AIR BRAKE CO ............................ 66 400 WINNEBAGO INDUSTRIES, INC ............................ 6 -------- 23,046 -------- TRANSPORTATION SERVICES--0.13% 25 AIR EXPRESS INTERNATIONAL CORP ....................... 1 6,800 C.H. ROBINSON WORLDWIDE, INC ......................... 176 900 o SD FRITZ COS, INC .................................... 10 10,500 GALILEO INTERNATIONAL, INC ........................... 457 7,900 GATX CORP ............................................ 299 610 o SD NAVIGANT INTERNATIONAL, INC ....................... 5 -------- 948 --------
B-39
VALUE SHARES (000) - ------ --------- TRUCKING AND WAREHOUSING--0.09% 2,500 o SD AMERICAN FREIGHTWAYS CORP ......................... $ 29 2,200 ARNOLD INDUSTRIES, INC ............................... 35 800 CNF TRANSPORTATION, INC .............................. 30 4,350 o SD CONSOLIDATED FREIGHTWAYS CORP ..................... 69 1,000 o SD COVENANT TRANSPORT, INC (CLASS A) ................. 18 800 o SD DISPATCH MANAGEMENT SERVICES CORP ................. 3 1,100 o SD HEARTLAND EXPRESS, INC ............................ 19 300 HUNT (J.B.) TRANSPORT SERVICES, INC .................. 7 100 o SD IRON MOUNTAIN, INC ................................ 4 1,500 o SD LANDSTAR SYSTEM, INC .............................. 61 400 o SD M.S. CARRIERS, INC ................................ 13 1,200 o SD PIERCE LEAHY CORP ................................. 31 2,200 ROADWAY EXPRESS, INC ................................. 32 3,950 o SD SWIFT TRANSPORTATION CO, INC ...................... 111 4,300 USFREIGHTWAYS CORP ................................... 125 50 WERNER ENTERPRISES, INC .............................. 1 3,800 o SD YELLOW CORP ....................................... 73 -------- 661 -------- WATER TRANSPORTATION--0.06% 6,000 ALEXANDER & BALDWIN, INC ............................. 140 500 o SD KIRBY CORP ........................................ 10 950 o SD MARINE TRANSPORT CORP ............................. 2 6,100 o SD OMI CORP (NEW) .................................... 20 1,400 OVERSEAS SHIPHOLDING GROUP, INC ...................... 22 9,600 TIDEWATER, INC ....................................... 223 -------- 417 -------- WHOLESALE TRADE-DURABLE GOODS--0.21% 2,300 o SD ACTION PERFORMANCE COS, INC ....................... 81 1,500 o SD ANICOM, INC ....................................... 14 1,000 o SD ANIXTER INTERNATIONAL, INC ........................ 20 14,700 o SD ARROW ELECTRONICS, INC ............................ 392 100 o SD AVIATION SALES CO ................................. 4 50 o SD BRIGHTPOINT, INC .................................. 1 1,200 CASTLE (A.M.) & CO ................................... 18 4,300 o SD CHS ELECTRONICS, INC .............................. 73 800 COMMERCIAL METALS CO ................................. 22 6,000 o SD FISHER SCIENTIFIC INTERNATIONAL, INC .............. 120 450 GENUINE PARTS CO ..................................... 15 4,300 o SD HANDLEMAN CO ...................................... 60 20,700 IKON OFFICE SOLUTIONS, INC ........................... 177 1,000 LAWSON PRODUCTS, INC ................................. 23 6,600 o SD MERISEL, INC ...................................... 16 3,400 OWENS & MINOR, INC ................................... 54 50 o SD PATTERSON DENTAL CO ............................... 2 1,500 o SD POMEROY COMPUTER RESOURCES, INC ................... 34 300 RELIANCE STEEL & ALUMINUM CO ......................... 8 8,500 o SD TECH DATA CORP .................................... 342 200 o SD VWR SCIENTIFIC PRODUCTS CORP ...................... 3 220 WESCO FINANCIAL CORP ................................. 78 -------- 1,557 --------
VALUE SHARES (000) - ------ --------- WHOLESALE TRADE-NONDURABLE GOODS--0.65% 7,700 o SD AIRGAS, INC ....................................... $ 69 300 o SD AMERISOURCE HEALTH CORP (CLASS A) ................. 20 900 o SD BARNETT RESOURCES CORP ............................ 22 16,550 BERGEN BRUNSWIG CORP (CLASS A) ....................... 577 63 BINDLEY WESTERN INDUSTRIES, INC ...................... 3 700 o SD BOISE CASCADE OFFICE PRODUCTS CORP ................ 9 18,264 CARDINAL HEALTH, INC ................................. 1,386 600 o SD DAISYTEK INTERNATIONAL CORP ....................... 11 200 DIMON, INC ........................................... 1 21 FLEMING COS, INC ..................................... 0 33 HERBALIFE INTERNATIONAL, INC (CLASS A) ............... 0 1,566 HERBALIFE INTERNATIONAL, INC (CLASS B) ............... 18 300 HUNT CORP ............................................ 3 2,800 INTERNATIONAL MULTIFOODS CORP ........................ 72 800 o SD KENNETH COLE PRODUCTIONS, INC ..................... 15 10,400 MCKESSON CORP NEW .................................... 822 5,500 o SD NATIONAL-OILWELL, INC ............................. 62 1,600 o SD NU SKIN ENTERPRISES, INC (CLASS A) ................ 38 1,100 o SD PERFORMANCE FOOD GROUP CO ......................... 31 3,549 o SD PHARMERICA, INC ................................... 21 1,800 o SD PRIORITY HEALTHCARE CORP (CLASS B) ................ 93 678 o SD SCHOOL SPECIALTY, INC ............................. 14 20,400 SUPERVALU, INC ....................................... 571 22,000 SYSCO CORP ........................................... 582 1,900 TERRA INDUSTRIES, INC ................................ 12 500 o SD U.S.A. FLORAL PRODUCTS, INC ....................... 6 10,750 UNISOURCE WORLDWIDE, INC ............................. 78 6,000 o SD UNITED STATIONERS, INC ............................ 156 5,400 o SD UNIVERSAL CORP .................................... 190 -------- 4,882 -------- TOTAL COMMON STOCK (Cost $511,548) ........................................ 753,592 -------- PRINCIPAL - ------------- SHORT TERM INVESTMENT--0.32% U.S. GOVERNMENT AGENCY--0.32% $2,400,000 FEDERAL HOME LOAN MORTGAGE CORP 4.250% 1/4/99 .................................. 2,399 -------- TOTAL SHORT TERM INVESTMENT (Cost $2,399) .................................. 2,399 -------- TOTAL PORTFOLIO (Cost $514,100) ................................ $756,157 ========
- -------------------- o Non-income producing X In bankruptcy # Restricted Securities--Investment in securities not registered under the Securities Act of 1933 or not publicly traded in foreign markets. At December 31, 1998, the value of these securities amounted to $131 or 0.00% of net assets. Additional information on each restricted security is as follows:
ACQUISITION ACQUISITION SECURITY DATE COST - --------------------- ------------- ------------ Physician Computer Network, Inc 06/04/96 $28,018 =======
B-40 CHAIRMAN'S LETTER To the Policyholders of Teachers Insurance and Annuity Association of America: We are pleased to provide you with the accompanying audited statutory-basis financial statements of Teachers Insurance and Annuity Association of America ("TIAA") for the year-ended December 31, 1998. We continue to manage TIAA in a prudent manner with the goal of maximizing our long-term performance within reasonable risk parameters for the long-term benefit of our policyholders. As you review these statements, it is also important to note that TIAA continues to maintain the highest possible financial strength ratings from each of the four nationally recognized independent rating organizations. The report of management responsibility, on the following page, demonstrates our ongoing commitment to conduct TIAA's activities in a well-controlled management environment. Additionally, the accompanying audit report indicates an unqualified opinion regarding TIAA's statutory-basis financial statements from the independent auditing firm of Ernst & Young LLP. These statements have been prepared consistently in accordance with statutory accounting practices, a comprehensive basis of accounting comprised of accounting practices prescribed or permitted by the New York State Insurance Department ("Department"). There is also a reference in the auditors' report to generally accepted accounting principles ("GAAP"); this reference to GAAP is required by the auditors' professional standards. GAAP is an overall accounting methodology that, while similar in many respects to statutory accounting practices, is a separate basis of accounting. Statutory accounting is generally more conservative than GAAP, and these statutory-basis financial statements are not intended to be in conformity with GAAP. Statutory accounting is the only basis of accounting recognized by the Department for regulatory purposes, and it is the only basis of accounting used by the Department in measuring the financial condition and results of operations of an insurance company. It is also the basis for determining insurance company solvency under the New York Insurance Law. While we could prepare a separate set of GAAP financial statements, there is no legal requirement for us to do so. Additionally, TIAA does not believe at this time that it would be a worthwhile expenditure to maintain another separate set of financial records, particularly since it would provide little added value for our policyholders. Accordingly, we believe that it is prudent for us to continue to manage and report on the operations of TIAA under the conservative statutory accounting methodology that we have always utilized. /s/ John H. Biggs ------------------------------ Chairman, President and Chief Executive Officer B-41 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 control 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 control and operations of TIAA, and the internal Auditor regularly reports to the Audit Committee of the TIAA Board of Trustees. The accompanying statutory-basis financial statements of TIAA have been audited by the independent auditing firm of Ernst & Young LLP. The independent auditors' report, which appears on the following page, expresses an independent opinion on the fairness of presentation of these statutory 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 control and auditing. In addition to the annual audit of the TIAA financial statements, the New York State Insurance Department and other state insurance departments regularly examine the financial statements of TIAA as part of their periodic corporate examinations. /s/ John H. Biggs ------------------------------ Chairman, President and Chief Executive Officer /s/ Richard L. Gibbs ------------------------------ Executive Vice President and Principal Accounting Officer B-42 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, 1998 and 1997, and the related statutory-basis statements of operations, changes in contingency reserves, and cash flows for the years then ended. 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. TIAA's financial statements for the year ended December 31, 1996 were audited by other auditors whose report, dated March 11, 1997, expressed an adverse opinion as to their conformity with generally accepted accounting principles, because the financial statements were presented in accordance with statutory accounting practices prescribed or permitted by the New York State Insurance Department, and an unqualified opinion as to their conformity with such statutory accounting practices. We conducted our audits in accordance with generally accepted auditing standards. 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 prepares its financial statements in conformity with statutory accounting practices, which practices differ from generally accepted accounting principles. The differences between such statutory accounting practices and generally accepted accounting principles and the effects on the accompanying financial statements are described in Note 2. In our opinion, because of the effects of the matter described in the preceding paragraph, the 1998 and 1997 statutory-basis financial statements referred to above do not present fairly, in conformity with generally accepted accounting principles, the financial position of TIAA at December 31, 1998 and 1997, or the results of its operations or its cash flows for the years then ended. However, in our opinion, the 1998 and 1997 statutory-basis financial statements referred to above present fairly, in all material respects, the financial position of TIAA at December 31, 1998 and 1997, and the results of its operations and its cash flows for the years then ended in conformity with statutory accounting practices prescribed or permitted by the New York State Insurance Department. /s/ Ernst & Young LLP March 10, 1999 Ernst & Young LLP is a member of Ernst & Young International, Ltd. B-43 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA STATUTORY-BASIS BALANCE SHEETS (amounts in thousands)
December 31, ---------------------------------- 1998 1997 ------------ ----------- ASSETS Bonds ................................................. $ 69,067,549 $63,469,596 Mortgages ............................................. 20,248,446 18,901,926 Real estate ........................................... 6,099,403 6,434,359 Stocks ................................................ 1,257,044 965,295 Other long-term investments ........................... 1,513,274 1,018,052 Cash and short-term investments ....................... 511,966 178,852 Investment income due and accrued ..................... 1,181,140 1,230,046 Separate account assets ............................... 1,965,047 1,340,154 Other assets .......................................... 372,369 257,038 ------------- ------------ Total Assets $102,216,238 $93,795,318 ============= ============ LIABILITIES, CAPITAL AND CONTINGENCY RESERVES Policy and contract reserves .......................... $ 87,772,711 $81,149,016 Dividends declared for the following year ............. 1,923,463 1,778,732 Asset Valuation Reserve ............................... 2,454,123 2,338,643 Interest Maintenance Reserve .......................... 936,641 781,272 Separate account liabilities .......................... 1,965,047 1,265,447 Other liabilities ..................................... 841,044 705,633 ------------- ------------ Total Liabilities 95,893,029 88,018,743 ------------- ------------ Capital: 2,500 shares of $1,000 par value common stock issued and outstanding ............................... 2,500 2,500 ------------- ------------ Contingency reserves: For group life insurance .............................. 11,013 9,846 For investment losses, annuity and insurance mortality, and other risks ...................................... 6,309,696 5,764,229 ------------- ------------ Total Contingency Reserves 6,320,709 5,774,075 ------------- ------------ Total Capital and Contingency Reserves 6,323,209 5,776,575 ------------- ------------ TOTAL LIABILITIES, CAPITAL AND CONTINGENCY RESERVES $102,216,238 $93,795,318 ============= ============
See notes to statutory-basis financial statements. B-44 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA STATUTORY-BASIS STATEMENTS OF OPERATIONS (amounts in thousands)
For the Years Ended December 31, -------------------------------------------------- 1998 1997 1996 ----------- ----------- ----------- INCOME Insurance and annuity premiums and deposits .......... $ 2,957,870 $ 2,844,792 $ 2,781,827 Transfers from CREF, net ............................. 1,274,152 686,373 366,920 Annuity dividend additions ........................... 2,427,685 2,284,029 2,131,890 Net investment income ................................ 7,446,656 6,902,123 6,525,529 Supplementary contract considerations ................ 297,074 227,936 203,770 ------------- ------------ ------------ TOTAL INCOME $14,403,437 $12,945,253 $12,009,936 ============= ============ ============ DISTRIBUTION OF INCOME Policy and contract benefits ......................... $ 2,413,220 $ 2,138,424 $ 1,916,597 Dividends ............................................ 3,844,313 3,617,551 3,399,581 Increase in policy and contract reserves ............. 6,636,704 5,234,590 5,097,213 Operating expenses ................................... 327,085 272,584 249,000 Transfers to separate accounts, net .................. 487,976 543,891 395,686 Federal income taxes ................................. (11,854) 24,194 13,154 Other, net ........................................... (4,639) 307 1,112 Increase in contingency reserves ..................... 710,632 1,113,712 937,593 ------------- ------------ ------------ TOTAL DISTRIBUTION OF INCOME $14,403,437 $12,945,253 $12,009,936 ============= ============ ============
See notes to statutory-basis financial statements. B-45 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA STATUTORY-BASIS STATEMENTS OF CHANGES IN CONTINGENCY RESERVES (amounts in thousands)
For the Years Ended December 31, ------------------------------------------------ 1998 1997 1996 ---------- ---------- ---------- CHANGES IN CONTINGENCY RESERVES From operations .............................................. $ 710,632 $1,113,712 $ 937,593 Net realized capital gains on investments .................... 394,727 249,412 163,950 Net unrealized capital gains (losses) on investments ......... (171,049) (2,482) 30,452 Transfers to the Interest Maintenance Reserve ................ (264,997) (136,512) (167,086) Transfers from (to) the Asset Valuation Reserve: Required formula contributions .............................. (297,442) (205,450) (246,181) Net capital (gains) losses absorbed ......................... 181,961 (117,961) (27,872) Adjustment down to maximum .................................. -- 119,690 -- Decrease (increase) in non-admitted assets, other than investments. ..................................... (17,829) 1,200 (4,764) Change in valuation basis of policy reserves ................. 8,671 (4,657) -- Other, net ................................................... 1,960 8,918 8,433 ----------- ----------- ----------- NET CHANGE IN CONTINGENCY RESERVES 546,634 1,025,870 694,525 CONTINGENCY RESERVES AT BEGINNING OF YEAR 5,774,075 4,748,205 4,053,680 ----------- ----------- ----------- CONTINGENCY RESERVES AT END OF YEAR $6,320,709 $5,774,075 $4,748,205 =========== =========== ===========
See notes to statutory-basis financial statements. B-46 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA STATUTORY-BASIS STATEMENTS OF CASH FLOWS (amounts in thousands)
For the Years Ended December 31, ------------------------------------------------- 1998 1997 1996 ----------- ----------- ----------- CASH PROVIDED By operating activities: Insurance and annuity premiums, deposits and considerations ...................... $ 3,254,238 $ 3,053,452 $ 2,973,899 Transfers from CREF, net .......................... 1,274,152 686,373 366,920 Annuity dividend additions ........................ 2,427,685 2,284,029 2,131,890 Investment income, net ............................ 7,338,368 6,777,023 6,485,403 ------------ ------------ ------------ Total Receipts 14,294,443 12,800,877 11,958,112 ------------ ------------ ------------ Policy and contract benefits ...................... 2,410,824 2,143,927 2,084,122 Dividends ......................................... 3,699,582 3,475,557 3,251,329 Operating expenses ................................ 311,460 269,041 247,251 Federal income taxes .............................. 506 27,277 14,985 Transfers to separate accounts, net ............... 486,945 543,933 396,239 Separate account seed money redemptions ........... (76,666) (37,915) (7,387) Other, net ........................................ 494 (46,076) 48,215 ------------ ------------ ------------ Total Disbursements 6,833,145 6,375,744 6,034,754 ------------ ------------ ------------ Cash Provided by Operating Activities 7,461,298 6,425,133 5,923,358 ------------ ------------ ------------ By investing activities: Sales and redemptions of bonds and stocks ......... 9,781,071 4,716,915 4,480,206 Repayment of mortgage principal ................... 2,129,896 3,773,723 3,481,965 Sales of real estate .............................. 834,298 1,030,385 834,010 Other, net ........................................ 279,097 258,489 276,394 ------------ ------------ ------------ Cash Provided by Investing Activities 13,024,362 9,779,512 9,072,575 ------------ ------------ ------------ TOTAL CASH PROVIDED 20,485,660 16,204,645 14,995,933 ------------ ------------ ------------ DISBURSEMENTS FOR NEW INVESTMENTS Investments acquired: Bonds and stocks .................................. 15,298,648 12,711,227 11,577,235 Mortgages ......................................... 3,704,940 3,152,563 2,761,897 Real estate ....................................... 351,109 310,159 488,543 Other, net ........................................ 797,849 466,926 266,227 ------------ ------------ ------------ TOTAL DISBURSEMENTS FOR NEW INVESTMENTS 20,152,546 16,640,875 15,093,902 ------------ ------------ ------------ INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS 333,114 (436,230) (97,969) CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF YEAR 178,852 615,082 713,051 ------------ ------------ ------------ CASH AND SHORT-TERM INVESTMENTS AT END OF YEAR $ 511,966 $ 178,852 $ 615,082 ============ ============ ============
See notes to statutory-basis financial statements. B-47 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS December 31, 1998 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. TIAA was formed by the Carnegie Foundation for the Advancement of Teaching for the express purpose of aiding and strengthening nonprofit educational and research organizations by providing retirement and insurance benefits for their faculties and other staff members, and by counseling these organizations and their employees on benefit plans and other measures of economic security. All of the outstanding common stock of TIAA is collectively held by the TIAA Board of Overseers, a nonprofit corporation created solely for the purpose of holding the stock of TIAA. NOTE 2--SIGNIFICANT ACCOUNTING POLICIES TIAA's statutory-basis financial statements have been prepared on the basis of statutory accounting practices prescribed or permitted by the New York State Insurance Department ("Department"), a comprehensive basis of accounting that differs from generally accepted accounting principles ("GAAP"). (Refer to the separate sections, entitled "Permitted Statutory Accounting Practices" and "Generally Accepted Accounting Principles", within this note.) The preparation of TIAA's financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Actual results could differ from those estimates. The following is a summary of the significant accounting policies consistently followed by TIAA. Valuation of Investments: Bonds and short-term investments (debt securities with maturities of one year or less at the time of acquisition) not in default are generally stated at amortized cost; medium to highest quality preferred stocks at cost; common stocks at market value; and all other bond, short-term and preferred stock investments at the lower of amortized cost or market value. For loan-backed bonds and structured securities, amortized cost is determined using actual and anticipated cash flows under the prospective method for interest-only securities and under the retrospective method for all other securities. Anticipated prepayments are based on life-to-date prepayment speeds, using historical cash flows, and internal estimates. Mortgages are stated at amortized cost, and directly-owned real estate at depreciated cost (net of encumbrances). Investments in wholly-owned subsidiaries, real estate limited partnerships and securities limited partnerships are stated at TIAA's equity in the net admitted assets of the underlying entities. Policy loans are stated at outstanding principal amounts. Separate account assets are generally stated at market value. Seed money investments in the TIAA-CREF Mutual Funds and in new accounts established by College Retirement Equities Fund ("CREF"), a companion organization, are stated at market value. All investments are stated net of any permanent impairments, which are determined on an individual asset basis. Depreciation is generally computed over a 40 year period on the constant yield method for properties acquired prior to 1991, and on the straight-line method for properties acquired thereafter. Accounting for Investments: Investment transactions are accounted for as of the date the investments are purchased or sold (trade date) for publicly traded common stocks and as of the date the investment transactions are settled (settlement date) for all other investments. Realized capital gains and losses on investment transactions are accounted for under the specific identification method. Foreign Currency Transactions and Translation: Investments denominated in foreign currencies and foreign currency contracts are valued in U.S. dollars, based on exchange rates at the end of the period. Investment transactions in foreign currencies are recorded at the exchange rates prevailing on the respective transaction dates. All other asset and liability accounts that are denominated in foreign currencies are adjusted to reflect exchange rates at the end of the period. Realized and unrealized gains and losses due to foreign exchange transactions, and those due to translation adjustments, are not separately reported and are reflected in realized and unrealized capital gains and losses, respectively. Securities Lending: TIAA has a securities lending program whereby it loans securities to qualified brokers in exchange for cash collateral, generally at least equal to 102% of the market value of the securities loaned. When securities are loaned, TIAA receives additional income on the collateral and continues to receive income on the securities loaned. The collateral liability is netted against the balance sheet caption, "Cash and short-term investments". TIAA may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should a borrower of securities fail to return the securities in a timely manner. B-48 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued) NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--(Continued) 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 swap contracts are entered into directly with a counterparty and TIAA is exposed to the risk of default of such counterparty, although TIAA does not anticipate non-performance by any of its counterparties. The maximum potential loss from such risk is equal to the change in the value of the foreign currency swap during the term of the contract. In order to minimize the risk associated with potential counterparty default, TIAA monitors the credit quality of its counterparties. Foreign Currency Forward Contracts: TIAA enters into foreign currency forward contracts to exchange fixed amounts of foreign currency at specified future dates and at specified rates (in U.S. dollars) to hedge against currency risks on investments denominated in foreign currencies. Changes in the value of the contracts related to foreign currency exchange rates are recognized at the end of the period as unrealized gains or losses. Forward contracts incorporate one swap transaction which results in the exchange of TIAA's fixed foreign currency cash flow into a fixed amount of U.S. dollar cash flow. A foreign exchange premium (discount) is recorded at the time the contract is opened, and it is calculated based on the difference between the forward exchange rate and the spot rate. TIAA amortizes the foreign exchange premium (discount) into investment income over the life of the forward contract, or at the settlement date if the forward contract is less than a year. TIAA is subject to counterparty credit risk upon entering into foreign currency forward contracts and monitors that risk, as discussed above for foreign currency swap contracts. Interest Rate Swap Contracts: TIAA enters into interest rate swap contracts to hedge against the effect of interest rate fluctuations on certain variable interest rate bonds. These contracts allow TIAA to lock in a fixed interest rate and to transfer the risk of higher or lower interest rates. TIAA also enters into interest rate swap contracts to exchange the cash flows on certain fixed interest rate bonds into variable interest rate cash flows in connection with certain interest sensitive products. Payments received and payments made under interest rate swap contracts are reflected in net investment income. Interest rate swap contracts subject TIAA to credit risk should the counterparties not perform according to the terms of the contracts. However, the maximum potential loss from such credit risk is much smaller than the par value of the related notes, and TIAA does not anticipate non-performance by any of its counterparties. In order to minimize the risk associated with potential counterparty default, TIAA monitors the credit quality of its counterparties. Swap Options: TIAA writes (sells) swap options on selected bonds to hedge against the effect of interest rate fluctuations as part of TIAA's asset and liability management program. Swap options give the holder the right, but not the obligation, to enter into an interest rate swap contract with TIAA where TIAA would pay a fixed interest rate and would receive a variable interest rate on a specified notional amount. When a swap option is written, the premium received is recorded as a liability. Because the swap options expire within one year of their inception date, the premium is recognized as investment income at the earlier of the exercise date or the expiration of the swap option. TIAA would be exposed to counterparty credit risk upon entering into an interest rate swap contract and monitors that risk, as discussed above. Interest Rate Cap Contracts: TIAA purchases interest rate cap contracts to hedge against the risk of a rising interest rate environment as part of TIAA's asset and liability management program. Under the terms of the interest rate cap contracts, the selling entity makes payments to TIAA on a specified notional amount if an agreed-upon index exceeds a predetermined strike rate. Such payments received under interest rate cap contracts are recognized as investment income. When an interest rate cap contract is purchased, the premium paid is recorded as an asset, and the premium is amortized into investment expense from the date of purchase of the cap to the maturity of the hedged item or program. Upon expiration of the cap, any unamortized premium will be treated as a loss subject to the Interest Maintenance Reserve ("IMR"). TIAA would be subject to counterparty credit risk if the index exceeds the predetermined strike rate, causing a payment to be payable to TIAA. In order to minimize the risk associated with potential counterparty default, TIAA monitors the credit quality of its counterparties. B-49 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued) NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--(Continued) 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 $466,107,000 and $436,405,000 at December 31, 1998 and 1997, respectively. Income on bonds in default is not accrued and, therefore, is not included in the non-admitted totals. Certain non-investment assets, such as furniture and fixtures and various receivables, are also designated as non-admitted assets. Such non-admitted assets approximated $195,987,000 at December 31, 1998 and $178,158,000 at December 31, 1997. 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 permitted or approved by the Department. Reserves are stated at the present value of all future guaranteed benefits in accordance with standard actuarial formulas. The reserves established utilize assumptions for interest (at an average rate of approximately 3%), mortality and other risks insured. Such reserves establish a sufficient provision for all contractual benefits guaranteed under policy and contract provisions. Dividends Declared for the Following Year: Dividends on insurance policies and pension annuity contracts in the payout phase are generally declared by the TIAA Board of Trustees ("Board") in November of each year, and such dividends are credited to policyholders in the following calendar year. Dividends on pension annuity contracts in the accumulation phase are generally declared by the Board in February of each year and such dividends on the various existing vintages of pension annuity contracts in the accumulation phase are credited to policyholders during the ensuing twelve month period beginning March 1. Asset Valuation Reserve: The Asset Valuation Reserve ("AVR"), which covers all invested asset classes, is an explicit liability reserve required by the National Association of Insurance Commissioners ("NAIC") and is intended to provide for potential future credit and equity losses. Reserve components of the AVR are maintained for bonds, stocks, mortgages, real estate and other invested assets. Realized and unrealized credit and equity capital gains and losses, net of capital gains taxes, are credited to or charged against the related components of the AVR. Formula calculations determine the required contribution amounts for each component, and insurance companies may also make voluntary contributions to any component; however, the resulting ending balance can not exceed the computed maximum reserve for that component. Any computed excess amounts are eliminated through transfers to other components or adjustments down to the maximum reserve amounts. Contributions and adjustments to the AVR are reported as transfers to or from contingency reserves. Interest Maintenance Reserve: The Interest Maintenance Reserve ("IMR") is a liability reserve required by the NAIC which accumulates realized capital gains and losses resulting from interest rate fluctuations. Such capital gains and losses are amortized out of the IMR, under the grouped method of amortization, as an adjustment to net investment income over the remaining lives of the assets sold. Contingency Reserves: By charter, TIAA operates without profit to the corporation or its sole shareholder, the TIAA Board of Overseers. As a result, all contingency reserves are held solely to provide benefits in accordance with TIAA's charter purpose. Income and Expenses: Premiums, investment income and expenses are reported as earned/incurred. Federal Income Taxes: TIAA is a nonprofit educational organization and, through December 31, 1997, was exempt from federal income taxation under the Internal Revenue Code ("Code"). Any non-pension related income, however, was subject to federal income taxation as unrelated business income. The federal income tax provisions included in the accompanying statements of operations are based on taxes actually paid or anticipated to be paid with the tax return filings. 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. Effective for 1998, TIAA will file a consolidated federal income tax return with its qualifying subsidiary affiliates. The tax sharing agreement will follow the current reimbursement method, whereby members of the consolidated group will generally be reimbursed for their losses on a pro-rata basis by other members of the group to the extent that they have taxable income, subject to limitations imposed under the Code. The approximate twelve million dollar federal income tax recoverable for 1998 that is reflected in the accompanying statement B-50 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued) NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--(Concluded) of operations is the amount that is receivable from certain of TIAA's subsidiaries which generated taxable income, under such tax sharing agreement. TIAA has not yet prepared or filed its 1998 federal income tax return. In conjunction with this initial federal income tax return filing, TIAA currently expects to report a significant net tax loss for 1998, due primarily to required increases in policy and contract reserves computed for tax reporting purposes in accordance with the requirements of the Code. Such reserve increases will reverse over time, thereby increasing TIAA's taxable income in future years. Under the Code, any tax loss carryforwards will expire after twenty years, if not previously used. Permitted Statutory Accounting Practices: Statutory accounting practices prescribed by the Department include accounting requirements contained in New York State Insurance Laws and Regulations as well as in NAIC publications. Permitted statutory accounting practices encompass all accounting practices which are allowed by the Department but which are not prescribed. The Department permits TIAA to follow certain reporting and disclosure conventions reflected in these statutory-basis financial statements. Such reporting and disclosure conventions include the following: (i) classification of real estate subsidiaries and real estate limited partnerships in the "Real estate" caption in the accompanying balance sheets, (ii) the netting of securities lending collateral against the "Cash and short-term investments" caption in the accompanying balance sheets, (iii) the preceding federal income taxes disclosure, and (iv) the recognition of permanent impairments of individual assets. Generally Accepted Accounting Principles: The Financial Accounting Standards Board ("FASB") requires that financial statements that are intended to be in conformity with GAAP should follow all applicable authoritative accounting pronouncements. As a result, TIAA cannot refer to financial statements prepared in accordance with statutory accounting practices as having been prepared in accordance with GAAP. The differences between generally accepted accounting principles and statutory accounting practices would have a material effect on TIAA's financial statements, and the primary differences can be summarized as follows. Under GAAP: - - The AVR is eliminated and valuation allowances are established as contra assets based on asset-specific analyses rather than the formula-based AVR being reflected as a liability reserve; - - The IMR is eliminated and realized gains and losses resulting from interest rate fluctuations are reported as a component of net income rather than being accumulated in and subsequently amortized out of the IMR; - - Dividends on insurance policies and annuity contracts are accrued as the necessary earnings emerge from operations rather than being accrued in the year when they are declared; - - The "non-admitted" asset designation is not utilized; - - Policy acquisition costs are deferred and amortized over the lives of the policies issued rather than being charged to operations as incurred; - - Policy and contract reserves are based on estimates of expected mortality and interest rather than being based on statutory mortality and interest requirements; - - Investments in wholly-owned subsidiaries are consolidated in the parent's financial statements rather than being carried at the parent's equity in the net assets of the subsidiaries; - - Long-term bond investments considered to be "available for sale" are carried at fair value rather than at amortized cost; - - Deferred tax assets and liabilities are determined based on the differences between the financial statement amounts and the tax bases of assets and liabilities rather than not being recognized. Management believes that the effects of these differences would increase TIAA's total capital if GAAP were implemented. Reclassifications: Certain amounts in the 1997 financial statements have been reclassified to conform with the 1998 presentation. B-51 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued) NOTE 3--INVESTMENTS Securities Investments: At December 31, 1998 and 1997, 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, 1998 - ------------------------------------------ U.S. Treasury securities and obligations of U.S. government agencies and corporations ............... $ 23,269,573 $ 8,137,457 $ (618,292) $ 30,788,738 Debt securities issued by foreign governments ............................. 1,670,480,048 278,650,027 (13,102,912) 1,936,027,163 Corporate securities ..................... 34,143,277,454 2,758,241,791 (90,974,189) 36,810,545,056 Mortgage-backed securities ............... 20,309,833,989 1,143,783,128 (62,707,409) 21,390,909,708 Asset-backed securities .................. 12,920,687,576 463,968,128 (210,450,588) 13,174,205,116 --------------- -------------- -------------- --------------- $69,067,548,640 $4,652,780,531 $ (377,853,390) $73,342,475,781 =============== ============== ============== =============== December 31, 1997 - ------------------------------------------ U.S. Treasury securities and obligations of U.S. government agencies and corporations ............... $ 765,179,973 $ 187,633,872 $ 952,813,845 Debt securities issued by foreign governments ............................. 1,591,333,014 258,518,816 $ (23,329,983) 1,826,521,847 Corporate securities ..................... 31,671,902,704 2,564,486,392 (78,849,935) 34,157,539,161 Mortgage-backed securities ............... 19,667,177,051 1,069,124,042 (107,193,640) 20,629,107,453 Asset-backed securities .................. 9,774,003,292 350,882,825 (50,168,914) 10,074,717,203 --------------- -------------- -------------- --------------- $63,469,596,034 $4,430,645,947 $ (259,542,472) $67,640,699,509 =============== ============== ============== ===============
At December 31, 1998 and 1997, approximately 94.5% and 94.6%, respectively, of the long-term bond portfolio was comprised of investment grade securities. At December 31, 1998, outstanding forward commitments for future long-term bond and equity investments approximated $3,106,923,000. Of this, $2,473,692,000 is scheduled for disbursement in 1999, $174,580,000 in 2000, $155,377,000 in 2001 and $303,274,000 in later years. The funding of bond commitments is contingent upon the continued favorable financial performance of the potential borrowers. Debt securities amounting to approximately $2,587,000 and $2,749,000 at December 31, 1998 and 1997, respectively, were on deposit with governmental authorities or trustees, as required by law. The carrying values and estimated market values of long-term bond investments at December 31, 1998, by contractual maturity, are shown below:
Estimated Carrying Value Market Value ------------------ ----------------- December 31, 1998 - --------------------------------------------------------- Due in one year or less ................................. $ 625,974,908 $ 634,407,454 Due after one year through five years ................... 7,178,956,866 7,534,037,459 Due after five years through ten years .................. 11,242,906,773 11,898,171,146 Due after ten years ..................................... 16,789,188,528 18,710,744,898 --------------- --------------- Subtotal .............................. 35,837,027,075 38,777,360,957 --------------- --------------- Mortgage-backed securities .............................. 20,309,833,989 21,390,909,708 Asset-backed securities ................................. 12,920,687,576 13,174,205,116 --------------- --------------- Total ................................. $69,067,548,640 $73,342,475,781 =============== ===============
B-52 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued) NOTE 3--INVESTMENTS--(Continued) Bonds not due at a single maturity date have been included in the preceding table based on the year of final maturity. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations, although prepayment premiums may be applicable. At December 31, 1998 and 1997, the carrying values of long-term bond investments were diversified by industry classification as follows:
1998 1997 ---------- ---------- Mortgage-backed securities ................... 29.4% 31.0% Asset-backed securities ...................... 18.7 15.4 Manufacturing ................................ 11.6 11.9 Public utilities ............................. 9.7 11.1 Finance and financial services ............... 9.2 9.0 Communications ............................... 3.8 3.8 Retail and wholesale trade ................... 3.7 3.8 Oil and gas .................................. 3.7 3.4 Government ................................... 3.1 4.3 Other ........................................ 7.1 6.3 ----- ----- Total ....................... 100.0% 100.0% ===== =====
The approximate carrying values and market values of debt securities loaned, and the cash collateral received in connection therewith, were as follows:
Carrying Value Market Value Cash Collateral ---------------- ----------------- ---------------- December 31, 1998 .......... $1,687,699,000 $1,803,100,000 $1,844,563,000 December 31, 1997 .......... 1,634,267,000 1,742,556,000 1,790,560,000
At December 31, 1998 and 1997, TIAA had interest rate swap contracts outstanding with a total notional value of $451,366,000 and $267,755,000, respectively. At December 31, 1998 and 1997, TIAA had foreign currency swap contracts outstanding with a total notional value of approximately $654,242,000 and $485,274,000, respectively. The unrealized gains (losses) on foreign currency swap contracts outstanding at year-end were approximately $(6,511,000), $25,864,000 and $1,367,000 at December 31, 1998, 1997 and 1996, respectively. At December 31, 1998 and 1997, TIAA had foreign currency forward contracts outstanding with a total notional value of approximately $179,820,000 and $2,274,000, respectively, and the unamortized value of the premiums was approximately $621,000 and $29,000, respectively. The unrealized gains on the forward contracts outstanding at year-end were approximately $1,143,000 and $65,000 at December 31, 1998 and 1997, respectively. At December 31, 1998, TIAA had no swap options outstanding. At December 31, 1997, TIAA had swap options outstanding with a total notional value of $170,700,000 and the unamortized value of the premiums was approximately $677,000. The interest rate swap contracts created from the exercise of swap options are reflected in the aggregate totals for the interest rate swap contracts disclosed in the related paragraph above. At December 31, 1998 and 1997, TIAA had interest rate cap contracts outstanding with a total notional value of $110,270,000 and $5,978,970,000, respectively, and the unamortized value of the premiums was approximately $669,000 and $37,758,000, respectively. Mortgage Loan and Real Estate Investments: TIAA makes mortgage loans, principally collateralized by commercial real estate, and direct investments in 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 collectability of mortgage loans and the realizability of real estate investments. This system is utilized to identify and quantify any permanent impairments in value. The range of coupon rates for mortgage loans issued during 1998 was from 6.00% to 8.45%. At December 31, 1998 and 1997, TIAA's mortgage portfolio included loans totaling approximately $308,570,000 and $341,662,000, respectively, which were collateralized by real estate with prior liens not held by TIAA. B-53 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued) NOTE 3--INVESTMENTS--(Continued) At December 31, 1998 and 1997, the carrying values of mortgage loan investments were diversified by property type and geographic region as follows:
1998 1997 ---------- ---------- Property Type - ------------- Office building .................... 39.2% 40.0% Shopping centers ................... 31.6 30.7 Mixed-use projects ................. 11.1 10.2 Apartments ......................... 6.6 6.9 Industrial buildings ............... 6.0 5.6 Hotel .............................. 3.5 4.3 Other .............................. 2.0 2.3 ----- ----- Total ............... 100.0% 100.0% ===== ===== Geographic Region - ----------------- Pacific ............................ 22.3% 25.4% South Atlantic ..................... 18.7 18.3 East North Central ................. 12.4 11.1 Middle Atlantic .................... 11.7 12.4 New England ........................ 9.6 9.9 West North Central ................. 9.0 8.1 West South Central ................. 7.5 6.8 Mountain ........................... 7.2 6.3 East South Central ................. 1.6 1.7 ----- ----- Total ............... 100.0% 100.0% ===== =====
At December 31, 1998 and 1997, approximately 17% and 20%, respectively, of the mortgage portfolio was invested in California and is included in the Pacific region shown above. At December 31, 1998, the contractual maturity schedule of mortgage loans is shown below:
Carrying Value ----------------- Due in one year or less .............................. $ 692,373,552 Due after one year through five years ................ 3,754,946,379 Due after five years through ten years ............... 11,382,817,297 Due after ten years .................................. 4,418,308,604 --------------- Total ......................... $20,248,445,832 ===============
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, 1998, outstanding forward commitments for future mortgage loan investments approximated $2,190,631,000, including commitments under litigation. Of this, $2,136,631,000 is scheduled for disbursement in 1999, $54,000,000 in 2000. The funding of mortgage loan commitments is contingent upon the underlying properties meeting specified requirements, including construction, leasing and occupancy. At December 31, 1998, 1997 and 1996, the aggregate carrying values of mortgages with restructured or modified terms, as defined by generally accepted accounting principles, were approximately $44,153,000, $552,070,000 and $621,056,000, respectively. For the years ended December 31, 1998, 1997 and 1996, the investment income earned on such mortgages was approximately $7,381,000, $39,945,000 and $43,408,000, respectively, which would have been approximately $5,030,000, $56,034,000 and $68,371,000, 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. B-54 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued) NOTE 3--INVESTMENTS--(Concluded) At December 31, 1998 and 1997, the carrying values of real estate investments were diversified by property type and geographic region as follows:
1998 1997 ---------- ---------- Property Type - ------------- Office buildings ..................................................... 64.3% 61.6% Shopping centers ..................................................... 17.2 17.8 Mixed-use projects ................................................... 4.8 7.9 Income-producing land underlying improved real estate. ............... 4.2 3.3 Industrial buildings. ................................................ 2.9 3.0 Land held for future development. .................................... 2.6 1.9 Apartments ........................................................... 0.3 0.3 Other ................................................................ 3.7 4.2 ----- ----- Total .............................. 100.0% 100.0% ===== ===== Geographic Region - ----------------- South Atlantic ...................................................... 22.6% 26.4% East North Central ................................................... 18.5 18.8 Pacific .............................................................. 17.1 14.4 West North Central ................................................... 12.9 13.9 Middle Atlantic ...................................................... 11.0 11.9 West South Central ................................................... 7.5 7.0 Mountain ............................................................ 3.3 2.8 New England ......................................................... 1.3 1.5 East South Central ................................................... 0.8 0.8 Other. ............................................................... 5.0 2.5 ----- ----- Total .............................. 100.0% 100.0% ===== =====
At December 31, 1998 and 1997, approximately 12% and 11%, respectively, of the real estate portfolio was invested in both California and Florida. California is included in the Pacific region shown above, and Florida is included in the South Atlantic region shown above. At December 31, 1998, outstanding forward commitments for future real estate investments approximated $263,468,000. Under these commitments, it is estimated that $242,903,000 will be disbursed in 1999 and $20,565,000 in later years. The funding of real estate investment commitments is contingent upon the properties meeting specified requirements, including construction, leasing and occupancy. Depreciation expense on real estate investments for the years ended December 31, 1998, 1997 and 1996, was approximately $176,237,000, $147,494,000 and $135,982,000, respectively; the amount of accumulated depreciation at December 31, 1998 and 1997 was approximately $674,541,000 and $440,659,000, respectively. Asset Valuation Reserves: The AVR balances at December 31, 1998 and 1997 were comprised of the following asset-specific reserves:
1998 1997 ----------------- ----------------- Bonds and preferred stocks ............... $ 560,477,946 $ 545,863,951 Mortgages. ............................... 1,117,503,060 975,041,395 Real estate .............................. 689,550,807 756,720,622 Common stocks ............................ 48,573,376 27,266,124 Other invested assets .................... 38,018,128 33,750,538 -------------- -------------- Total ................ $2,454,123,317 $2,338,642,630 ============== ==============
B-55 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued) NOTE 4--INVESTMENT INCOME AND CAPITAL GAINS AND LOSSES Net Investment Income: For the years ended December 31, 1998, 1997 and 1996, the components of net investment income were as follows:
1998 1997 1996 ----------------- ----------------- ----------------- Gross investment income: Bonds ........................................... $5,441,796,398 $4,919,147,802 $4,397,330,653 Mortgages ....................................... 1,569,281,835 1,561,650,688 1,704,612,536 Real estate (net of property expenses, taxes and depreciation) .............................. 275,402,304 282,710,437 349,550,153 Stocks .......................................... 82,871,728 45,018,729 14,512,747 Other long-term investments ..................... 46,399,969 49,877,245 16,299,166 Cash and short-term investments ................. 59,637,401 81,908,105 64,600,106 Other ........................................... 4,430,354 1,863,273 30,748,262 -------------- -------------- -------------- Total ........................ 7,479,819,989 6,942,176,279 6,577,653,623 Less investment expenses ........................ (142,791,775) (124,382,062) (111,487,052) -------------- -------------- -------------- Net investment income before amortization of net IMR gains ................... 7,337,028,214 6,817,794,217 6,466,166,571 Plus amortization of net IMR gains ............... 109,627,953 84,329,279 59,362,364 -------------- -------------- -------------- Net investment income. ........................... $7,446,656,167 $6,902,123,496 $6,525,528,935 ============== ============== ==============
Participation income received on securities, mortgages and real estate included in the above table was approximately $12,512,000, $20,894,000 and $21,121,000 in 1998, 1997 and 1996, respectively. The net earned rates of investment income on total invested assets (computed as net investment income before amortization of net IMR gains divided by mean invested assets) were 7.95%, 7.99% and 8.17% in 1998, 1997 and 1996, respectively. Future rental income expected to be received during the next five years under existing real estate leases in effect as of December 31, 1998 is approximately $547,703,000 in 1999, $472,791,000 in 2000, $389,192,000 in 2001, $306,191,000 in 2002 and $60,172,000 in 2003. Realized Capital Gains and Losses: For the years ended December 31, 1998, 1997 and 1996, the net realized capital gains (losses) on sales, redemptions and writedowns of investments were as follows:
1998 1997 1996 --------------- ---------------- ----------------- Bonds ......................................... $ 398,363,008 $ 99,205,212 $ 83,521,853 Mortgages ..................................... (50,492,383) (18,206,968) (120,569,347) Real estate ................................... 76,983,899 172,463,239 62,836,567 Stocks ........................................ 15,778,492 651,273 123,374,256 Other long-term investments ................... (49,832,409) (2,552,791) 27,068,040 Cash and short-term investments ............... 3,926,077 (121,752) (13,797,036) Other ......................................... -- -- 14,400 -------------- -------------- -------------- Total realized gains (losses) before capital gains tax ............................ 394,726,684 251,438,213 162,448,733 Capital gains (tax) benefit. .................. -- (2,026,003) 1,501,742 -------------- -------------- -------------- Total ................... $ 394,726,684 $ 249,412,210 $ 163,950,475 ============== ============== ==============
B-56 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued) NOTE 4--INVESTMENT INCOME AND CAPITAL GAINS AND LOSSES--(Concluded) Writedowns of investments resulting from permanent impairments and mortgage foreclosures, reflected in the preceding table as realized capital losses, were as follows:
1998 1997 1996 ------------- ------------- --------------- Permanent impairments: Bonds .............................. $ 9,345,164 $ 1,499,190 $ 3,292,468 Mortgages ......................... 23,344,175 38,855,209 106,869,780 Real estate ........................ 4,468,490 20,797,149 20,000,001 ----------- ----------- ------------ Total ................ $37,157,829 $61,151,548 $130,162,249 =========== =========== ============ Mortgage foreclosures ............... $63,907,494 $31,579,934 $ 43,025,114 =========== =========== ============
Proceeds from sales and redemptions of long-term bond investments during 1998, 1997 and 1996 were approximately $9,445,709,000, $4,652,635,000 and $4,329,771,000, respectively. Gross gains of approximately $422,231,000, $111,635,000 and $133,807,000 and gross losses of approximately $14,523,000, $10,931,000 and $45,397,000 were realized on these sales and redemptions during 1998, 1997 and 1996, respectively. Unrealized Capital Gains and Losses: For the years ended December 31, 1998, 1997 and 1996, the net changes in unrealized capital gains (losses) on investments, resulting in a net increase (decrease) in the valuation of investments, were as follows:
1998 1997 1996 ----------------- ----------------- ---------------- Bonds ......................................... $ (48,352,549) $ (68,528,047) $ 3,982,108 Mortgages .................................... (6,500,000) 1,232,724 2,393,812 Real estate ................................... (8,435,351) 14,315,196 20,766,890 Stocks ....................................... (31,866,148) 30,350,946 (26,004,886) Other long-term investments .................. 19,347,901 20,169,489 10,306,026 Cash and short-term investments ............... -- (21,987) 8,605 Other ......................................... (95,242,707) _ 18,999,590 --------------- --------------- ------------- Total ...................... $ (171,048,854) $ (2,481,679) $ 30,452,145 =============== =============== =============
B-57 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued) NOTE 5--DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value amounts of financial instruments presented in the following tables have been determined by TIAA using market information available as of December 31, 1998 and 1997 and appropriate valuation methodologies. However, considerable judgment is necessarily required to interpret market data in developing the estimates of fair value for financial instruments for which there are no available market value quotations. The estimates presented are not necessarily indicative of the amounts TIAA could have realized in a market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
Notional Carrying Estimated Value Value Fair Value ---------------- ------------------ ------------------ December 31, 1998 Assets Bonds ................................. $69,067,548,640 $73,342,475,781 Mortgages. ............................ 20,248,445,832 21,556,575,796 Common stocks ......................... 240,209,436 240,209,436 Preferred stocks ...................... 1,016,834,232 1,020,529,083 Cash and short-term investments ....... 511,966,433 511,966,433 Policy loans .......................... 317,939,719 317,939,719 Seed money investments ................ 383,288,422 383,288,422 Liabilities Teachers Personal Annuity-Fixed Account. ............................. 1,089,268,569 1,089,268,569 Other financial instruments ............ Foreign currency swap contracts ....... $ 654,241,992 18,569,714 4,938,964 Foreign currency forward contracts..... 179,820,224 1,764,608 1,929,656 Interest rate swap contracts .......... 451,365,681 -- 16,874,273 Interest rate cap contracts. .......... 110,270,000 668,710 114,699 Stock warrants ........................ -- 8,987,029 December 31, 1997 Assets Bonds ................................. $63,469,596,034 $67,640,699,509 Mortgages ............................. 18,901,926,005 20,197,917,668 Common stocks ......................... 81,903,321 81,903,321 Preferred stocks ...................... 883,392,062 912,783,530 Cash and short-term investments ....... 178,851,723 178,851,723 Policy loans .......................... 245,941,298 245,941,298 Seed money investments ................ 304,563,735 304,563,735 Liabilities Teachers Personal Annuity-Fixed Account .............................. 867,671,667 867,671,667 Other financial instruments Foreign currency swap contracts ....... $ 485,274,391 25,012,137 8,717,339 Foreign currency forward contracts..... 2,273,584 94,430 89,302 Interest rate swap contracts .......... 267,755,000 -- 13,599,458 Swap options ......................... 170,700,000 (676,870) (839,432) Interest rate cap contracts. .......... 5,978,970,000 37,757,743 642,577 Stock warrants ........................ -- 5,795,468
B-58 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued) NOTE 5--DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS--(Concluded) 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. The aggregate carrying values and estimated fair values of publicly traded and privately placed bonds at December 31, 1998 and 1997 are as follows:
1998 1997 --------------------------------------- --------------------------------------- Carrying Estimated Carrying Estimated Value Fair Value Value Fair Value ------------------ ------------------ ------------------ ------------------ Publicly traded bonds ................ $41,212,863,245 $43,921,621,760 $37,479,723,007 $40,216,394,144 Privately placed bonds ............... 27,854,685,395 29,420,854,021 25,989,873,027 27,424,305,365 --------------- --------------- --------------- --------------- Total .................... $69,067,548,640 $73,342,475,781 $63,469,596,034 $67,640,699,509 =============== =============== =============== ===============
Mortgages: The fair values of mortgages 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. 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 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 exchange relationships, and such values are reviewed for reasonableness with estimates from TIAA's counterparties. Interest Rate Swap Contracts: The fair values of interest rate swap contracts, which are used for hedging purposes, are the estimated net gains that TIAA would record if the interest rate swaps were liquidated at year-end. The swap agreements have no carrying value. The fair values of interest rate swap contracts are estimated internally based on anticipated interest rates and estimated future cash flows, and such values are reviewed for reasonableness with estimates from TIAA's counterparties. Swap Options: The fair values of swap options, which are used for hedging purposes, are the estimated amounts that TIAA would receive/(pay) if the swap options were liquidated at year-end. The fair values of the swap options are estimated by external parties, including TIAA's counterparties, and such values are reviewed internally for reasonableness based on anticipated interest rates and estimated future cash flows. Interest Rate Cap Contracts: The fair values of interest rate cap contracts, which are used for hedging purposes, are the estimated amounts that TIAA would receive if the interest rate cap contracts were liquidated at year-end. The fair values of the interest rate cap contracts are estimated by external parties, including TIAA's counterparties, and such values are reviewed internally for reasonableness based on anticipated interest rates and estimated future cash flows. Stock Warrants: The fair values of stock warrants represent the excess, if any, of the market values of the related stocks over the exercise prices associated with the stock warrants. The stock warrants have no carrying value. Commitments to Extend Credit or Purchase Investments: TIAA does not charge commitment fees on these agreements, and the related interest rates reflect market levels at the time of the commitments. 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. B-59 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued) NOTE 6--MANAGEMENT AGREEMENTS All services necessary for the operation of CREF are provided, at cost, by two subsidiaries of TIAA, TIAA-CREF Investment Management, LLC ("Investment Management") and TIAA-CREF Individual & Institutional Services, Inc. ("Services"), which provide investment advisory, administrative and distribution services for CREF. Such services are provided in accordance with an Investment Management Services Agreement between CREF and Investment Management, and in accordance with a Principal Underwriting and Administrative Services Agreement between CREF and Services. Investment Management is registered with the Securities and Exchange Commission ("Commission") as an investment adviser; Services is registered with the Commission as a broker-dealer and is a member of the National Association of Securities Dealers, Inc. ("NASD"). Investment Management and Services receive management fee payments from each CREF account on a daily basis according to formulas 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 $474,611,000, $340,898,000 and $274,447,000 in 1998, 1997 and 1996, respectively, are not included in the statements of operations and had no effect on TIAA's operations. Beginning in 1998, TIAA provides guarantees for the CREF Accounts for certain mortality and expense risks pursuant to an Immediate Annuity Purchase Rate Guarantee Agreement. NOTE 7--PENSION PLAN AND POSTRETIREMENT BENEFITS TIAA maintains a qualified, noncontributory defined contribution pension plan covering substantially all employees. All pension plan liabilities are fully funded through individually-owned 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 $22,640,000, $20,862,000 and $20,808,000 in 1998, 1997 and 1996, respectively. 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 $31,672,000 as of January 1, 1998 and $26,233,000 as of January 1, 1997. The postretirement benefit obligation for non-vested employees was $25,823,000 as of January 1, 1998 and $20,857,000 as of January 1, 1997. The cost of such benefits reflected in the accompanying statements of operations was approximately $3,008,000, $3,398,000 and $3,022,000 for 1998, 1997 and 1996, respectively. The discount rate used in determining the postretirement benefit obligations was 7.0% per year and the medical care cost trend rate was 9.0% per year in 1998, decreasing by 1% in each future year, to an ultimate rate of 6% per year in 2001. TIAA also maintains a deferred compensation plan for non-employee trustees and members of the TIAA Board of Overseers. Prior to January 2, 1998, this plan provided each eligible trustee or member with a single-sum payment upon leaving the board equal to 50% of the annual stipend then in effect multiplied by years of service, up to a maximum of 20 years. Effective January 2, 1998, the plan provides a total award each year equal to 50% of the basic annual stipend. Each award is invested in company-owned annuity contracts. Payout of accumulations in the company-owned contracts is normally made as a lump sum following the trustee's or member's separation from the Board. NOTE 8--UNCONSOLIDATED SUBSIDIARIES AND OTHER AFFILIATES TIAA's unconsolidated subsidiaries and affiliates primarily consist of TIAA-CREF Enterprises, Inc. ("Enterprises") and wholly-owned investment subsidiaries, which are primarily involved in real estate investment activities. The carrying value of TIAA's investments in unconsolidated subsidiaries and affiliates totaled approximately $5,564,491,000 and $3,971,101,000 at December 31, 1998 and 1997, respectively. TIAA's investment in Enterprises is included in the other long-term investments caption on the accompanying balance sheets and totaled approximately $285,528,000 and $94,514,000 at December 31, 1998 and 1997, respectively. At December 31, 1998 and 1997, the carrying values of TIAA's investments in real estate subsidiaries and other affiliates were approximately $4,643,100,000 and $3,423,910,000, respectively. B-60 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued) NOTE 8--UNCONSOLIDATED SUBSIDIARIES AND OTHER AFFILIATES (Concluded) Total assets, liabilities and gross rental income of real estate subsidiaries, at December 31, 1998, 1997 and 1996 and for the years then ended, were approximately as follows:
1998 1997 1996 ----------------- ----------------- ----------------- Assets ....................... $5,723,222,000 $4,387,482,000 $5,149,487,000 Liabilities .................. 724,361,000 792,142,000 933,678,000 Gross rental income .......... 783,261,000 688,963,000 760,704,000
Earnings of approximately $161,885,000, $156,648,000 and $238,313,000 in 1998, 1997 and 1996, respectively, primarily from real estate subsidiaries are included in net investment income in the accompanying statements of operations. Some of the real estate subsidiaries referred to above are partners in joint ventures. At December 31, 1998 and 1997, the carrying values of TIAA real estate subsidiaries that are partners in joint ventures were approximately $1,147,216,000 and $1,382,378,000, respectively. Joint venture total assets, liabilities and gross rental income, at December 31, 1998, 1997 and 1996 and for the years then ended, were approximately as follows:
1998 1997 1996 ----------------- ----------------- ----------------- Assets ....................... $1,709,297,000 $2,075,352,000 $3,099,467,000 Liabilities .................. 556,823,000 997,969,000 1,116,222,000 Gross rental income .......... 274,106,000 377,919,000 484,657,000
The subsidiaries' equity share in these total assets, liabilities and gross rental income were approximately as follows:
1998 1997 1996 ----------------- ----------------- ----------------- Assets ....................... $1,701,668,000 $1,960,400,000 $2,981,156,000 Liabilities .................. 554,451,000 577,826,000 778,312,000 Gross rental income .......... 270,208,000 349,770,000 455,196,000
Net income earned by the subsidiaries from joint venture investments was approximately $16,123,000, $56,362,000 and $130,887,000 in 1998, 1997 and 1996, respectively. Some of the real estate joint ventures have loans from TIAA. At December 31, 1998 and 1997, the unpaid principal of such loans was approximately $529,504,000 and $437,932,000, respectively. NOTE 9--ANNUITY RESERVES At December 31, 1998 and 1997, TIAA's general account annuity reserves are summarized as follows:
1998 1997 ----------------------------- ------------------------------ Amount Percent Amount Percent ----------------- --------- ----------------- ---------- Subject to discretionary withdrawal: At book value without adjustment ......... $ 9,066,466,368 10.4% $ 7,856,442,214 9.8% At market value ......................... -- -- -- -- Not subject to discretionary withdrawal .............................. 77,797,831,264 89.6 72,437,186,123 90.2 ---------------- ----- ---------------- ----- Total annuity reserves ................... 86,864,297,632 100.0% 80,293,628,337 100.0% ===== ===== Reconciliation to total policy and contract reserves shown on the balance sheet: Reserves on other life policies and contracts ........................ 377,741,433 348,411,715 Reserves on accident and health policies ............................. 530,672,352 506,976,271 ---------------- ---------------- Total policy and contract reserves ....... $87,772,711,417 $81,149,016,323 ================ ================
B-61 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Continued) NOTE 10--SEPARATE ACCOUNTS TIAA currently has two separate accounts. The Separate Account VA-1 ("VA-1") is a segregated investment account and was organized on February 16, 1994 under the insurance laws of the State of New York for the purpose of issuing and funding variable annuity contracts. VA-1 was registered with the Commission effective November 1, 1994 as an open-end, diversified management investment company under the Investment Company Act of 1940. Currently, VA-1 consists of a single investment portfolio, the Stock Index Account ("SIA"), which invests in a diversified portfolio of equity securities selected to track the overall United States stock market. SIA was established on October 3, 1994 with a $25,000,000 seed money investment by TIAA. TIAA purchased 1,000,000 Accumulation Units of SIA and such units shared in the pro rata investment experience of SIA and were subject to the same valuation procedures and expense deductions as all other Accumulation Units in SIA. On November 14, 1994, TIAA began to offer Accumulation Units of SIA to participants other than TIAA. TIAA redeemed all of its SIA units by the end of 1996. The TIAA Real Estate Account ("REA") is a segregated investment account and was organized on February 22, 1995 under the insurance laws of the State of New York for the purpose of funding variable annuity contracts. REA was registered with the Commission under the Securities Act of 1933 effective October 2, 1995. REA's target is to invest between 70% and 95% of its assets directly in real estate or in real estate-related investments, with the remainder of its assets invested in publicly-traded securities to maintain adequate liquidity. REA was established on July 3, 1995 with a $100,000,000 seed money investment by TIAA. TIAA purchased 1,000,000 Accumulation Units of REA and such units shared in the pro rata investment experience of REA and were subject to the same valuation procedures and expense deductions as all other Accumulation Units in REA. On October 2, 1995, TIAA began to offer Accumulation Units of REA to participants other than TIAA. At December 31, 1997, the number of units retained by TIAA in REA was 610,864, with a total value of approximately $74,706,520. TIAA redeemed all of its REA units by the end of 1998. The balance sheet captions for separate account assets and liabilities (which include participant account values) are stated at market value. The separate accounts' operating results are reflected in the changes to these assets and liabilities. Total separate account premiums were approximately $226,984,000, $206,808,000 and $153,919,000 in 1998, 1997 and 1996, respectively. Total separate account net transfers from other accounts were approximately $300,737,000, $360,391,000 and $249,836,000 in 1998, 1997 and 1996, respectively. Annuities offered through VA-1 include a nominal guaranteed minimum death benefit. For the REA, TIAA guarantees that actual mortality experience will not reduce payments once they have begun. TIAA makes no further guarantees to policyholders on any of its separate accounts. Both accounts offer full or partial withdrawal at market value with no surrender charge. NOTE 11--MUTUAL FUNDS On July 17, 1997, TIAA made a $250,000,000 seed money investment to launch the TIAA-CREF Mutual Funds ("the Funds"), a Delaware business trust that was organized on January 13, 1997 and is registered with the Commission under the Investment Company Act of 1940 as an open-end management investment company. The Funds consist of six series (each referred to as a "Fund"), each of which commenced operations on July 17, 1997. TIAA invested $48,000,000 in the Money Market Fund; $32,000,000 in the Bond Plus Fund; $38,000,000 in the Growth & Income Fund; $38,000,000 in the Growth Equity Fund; $44,000,000 in the International Equity Fund; and $50,000,000 in the Managed Allocation Fund. Shortly after being seeded, the Managed Allocation Fund invested its seed money and its earnings to date in the other Funds. On September 2, 1997, the Funds began to publicly offer their shares, without a sales load, through their distributor, TPIS. Advisors provides investment management services for the Funds and is also responsible for providing, or obtaining at its own expense, the services reasonably necessary for the ordinary operation of the Funds. TIAA's original seed money investment in the Funds, plus reinvested dividends and undistributed earnings, totaled approximately $303,017,000 and $252,327,000 at December 31, 1998 and 1997, respectively, and such amounts are reflected in the "Other long-term investments" caption in the accompanying balance sheets. NOTE 12--CONTINGENCIES It is the opinion of management that any liabilities which might arise from litigation, state guaranty fund assessments, and other matters, over and above amounts already provided for in the financial statements, are not considered material in relation to TIAA's financial position or the results of its operations. B-62 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(Concluded) NOTE 13--YEAR 2000 (UNAUDITED) Like all other financial service organizations, TIAA could be adversely affected if the computer systems that it uses and those used by its major service providers do not properly process and calculate date-related information on or after January 1, 2000. TIAA has taken steps that management believes are prudent and reasonably designed to address the Year 2000 issue. TIAA has developed, and is executing, an extensive Year 2000 remediation and certification plan that addresses its critical computer systems, as well as the interfaces with its important external vendors and service providers. TIAA has also developed contingency plans intended to minimize the impact that unexpected systems failures (internal and external) may have on its operations. Management has periodically apprised the TIAA Board of Trustees regarding these plans and the progress of efforts to deal with the Year 2000 issue. Although there can be no absolute assurance that these steps will be sufficient to address all aspects of the Year 2000 issue, management does not anticipate that the Year 2000 issue will have a significant adverse impact on TIAA's business operations. B-63 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...........................................................8
The following Financial Statements for TIAA Separate Account VA-1 (the "Registrant") and Teachers Insurance and Annuity Association of America ("TIAA") are included with Part B (the Statement of Additional Information) of this Registration Statement:
Page ---- (1) The Registrant--Stock Index Account Report of Management Responsibility.........................................................B-16 Report of Independent Auditors..............................................................B-17 Audited Financial Statements: Statement of Assets and Liabilities.......................................................B-18 Statement of Operations...................................................................B-19 Statements of Changes in Net Assets.......................................................B-20 Notes to Financial Statements...............................................................B-21 Statement of Investments....................................................................B-23 (2) TIAA Chairman's Letter...........................................................................B-41 Report of Management Responsibility.........................................................B-42 Report of Independent Auditors..............................................................B-43 Audited Financial Statements: Balance Sheets ...........................................................................B-44 Statements of Operations..................................................................B-45 Statements of Changes in Contingency Reserves.............................................B-46 Statements of Cash Flows..................................................................B-47 Notes to Financial Statements...............................................................B-48
(b) Exhibits (1) Resolution of the Board of Trustees of TIAA establishing the Registrant 1/ (2) Rules and Regulations of the Registrant 2/ (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/ C-1 (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) 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) Financial Data Schedule* - ----------------- * Filed herewith. 1/ Filed herewith electronically (previously filed in the initial Registration Statement on Form N-3 dated May 18, 1994 (File No. 33-79124)). 2/ Filed herewith electronically (previously filed in Pre-Effective Amendment No. 1 to Form N-3 dated October 7, 1994 (File No. 33-79124)). 3/ Filed herewith electronically (previously filed in Pre-Effective Amendment No. 2 to Form N-3 dated October 18, 1994 (File No. 33-79124)). 4/ Previously filed in Post-Effective Amendment No. 2 to Form N-3 dated March 26, 1996 (File No. 33-79124) and incorporated herein by reference. 5/ Previously filed in Post-Effective Amendment No. 4 to Form N-3 dated March 27, 1998 (File No. 33-79124) and incorporated herein by reference. C-2 Item 29. Directors and Officers of the Insurance Company
Positions and Positions and Offices with Offices with Name and Principal Business Address Insurance Company Registrant - ----------------------------------- ----------------- ---------- David Alexander Trustee President Emeritus Pomona College Summer Hall, 330 College Way Claremont, California 91711-6305 Marcus Alexis Trustee Board of Trustees Professor of Economics and Professor of Management and Strategy J. L. Kellogg Graduate School of Management Northwestern University Leverone Hall 2001 Sheridan Road Evanston, Illinois 60208-2001 John H. Biggs Trustee, Chairman, TIAA-CREF President and Chief 730 Third Avenue Executive Officer New York, New York 10017-3206 Willard T. Carleton Trustee Karl L. Eller Professor of Finance College of Business and Public Administration University of Arizona McClelland Hall Tucson, Arizona 85721 Robert C. Clark Trustee Dean and Royall Professor of Law Harvard Law School Harvard University Griswold 200 Cambridge, Massachusetts 02138 Estelle A. Fishbein Trustee Vice President and General Counsel The Johns Hopkins University 113 Garland Hall Baltimore, Maryland 21218 Frederick R. Ford Trustee Executive Vice President and Treasurer Emeritus Purdue University 1032 Hovde Hall of Administration West Lafayette, Indiana 47907-1032
C-3
Positions and Positions and Offices with Offices with Name and Principal Business Address Insurance Company Registrant - ----------------------------------- ----------------- ---------- Martin J. Gruber Trustee Nomura Professor of Finance Leonard N. Stern School of Business New York University Management Education Center 44 West 4th Street, Suite 9-190 New York, New York 10012-1126 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 Dorothy Ann Kelly, O.S.U. Trustee Chancellor Office of the Chancellor College of New Rochelle New Rochelle, New York 10805 Martin L. Leibowitz Trustee, Vice TIAA-CREF Chairman and Chief 730 Third Avenue Investment Officer New York, New York 10017-3206 Robert M. O'Neil Trustee Director The Thomas Jefferson Center for the Protection of Free Expression 400 Peter Jefferson Place Charlottesville, Virginia 22911-8691 Leonard S. Simon Trustee Vice Chairman Charter One Financial Inc. 235 East Main Street Rochester, New York 14604 Ronald L. Thompson Trustee Chairman and Chief Executive Officer Midwest Stamping Co. 513 Napoleon Road, P.O. Box 488 Bowling Green, Ohio 43402 Paul R. Tregurtha Trustee Chairman and Chief Executive Mormac Marine Group, Inc. Three Landmark Square Stamford, Connecticut 06901
C-4
Positions and Positions and Offices with Offices with Name and Principal Business Address Insurance Company Registrant - ----------------------------------- ----------------- ---------- William H. Waltrip Trustee Chairman Technology Solutions 1261 Pequot Avenue Southport, CT 06490 Rosalie J. Wolf Trustee Treasurer and Chief Investment Officer The Rockefeller Foundation 420 Fifth Avenue New York, New York 10018-2702 Richard J. Adamski Vice President Vice President TIAA-CREF and Treasurer and Treasurer 730 Third Avenue New York, New York 10017-3206 Jonah J. Applebaum Senior Counsel TIAA-CREF 730 Third Avenue New York, New York 10017-3206 Anthony V. Betro Director, Director, TIAA-CREF Investment Investment 730 Third Avenue Accounting Accounting New York, New York 10017-3206 Laura M. Bramson Senior Counsel Assistant TIAA-CREF Secretary 730 Third Avenue and Senior Counsel New York, New York 10017-3206 Jeffrey A. Casale Assistant TIAA-CREF Insurance 730 Third Avenue Premium Officer New York, New York 10017-3206 Gary Chinery Associate Associate TIAA-CREF Treasurer Treasurer 730 Third Avenue New York, New York 10017-3206 Peter C. Clapman Senior Vice Senior Vice TIAA-CREF President President, 730 Third Avenue and Chief Counsel, Secretary and New York, New York 10017-3206 Investments Chief Counsel, Investments Madeleine d'Ambrosio Vice President TIAA-CREF 730 Third Avenue New York, New York 10017-3206
C-5
Positions and Positions and Offices with Offices with Name and Principal Business Address Insurance Company Registrant - ----------------------------------- ----------------- ---------- Douglas Dial Senior Managing Senior Managing TIAA-CREF Director Director 730 Third Avenue New York, New York 10017-3206 Scott Evans Executive Vice Executive Vice TIAA-CREF President President 730 Third Avenue New York, New York 10017-3206 Eric E. Fisher Senior Managing Senior Managing TIAA-CREF Director Director 730 Third Avenue New York, New York 10017-3206 Dennis D. Foley Vice President, Vice President, TIAA-CREF Annuity and Mutual Annuity and Mutual 730 Third Avenue Funds Funds New York, New York 10017-3206 Richard L. Gibbs Executive Executive TIAA-CREF Vice President Vice President 730 Third Avenue New York, New York 10017-3206 David Grunbaum Vice President, Vice President, TIAA-CREF General General 730 Third Avenue Accounting and Accounting and New York, New York 10017-3206 Payment Payment Services Services Don Harrell Executive Executive Vice TIAA-CREF Vice President President 730 Third Avenue New York, New York 10017-3206 Matina Horner Executive Executive Vice TIAA-CREF Vice President President 730 Third Avenue New York, New York 10017-3206 Laverne E. Jones Vice President and TIAA-CREF Corporate Secretary 730 Third Avenue New York, New York 10017-3206 Michael Kahn Second Vice TIAA-CREF President 730 Third Avenue New York, New York 10017-3206 Roseanne Lipman Klein Vice President and TIAA-CREF Chief Counsel, Tax 730 Third Avenue New York, New York 10017-3206
C-6
Positions and Positions and Offices with Offices with Name and Principal Business Address Insurance Company Registrant - ----------------------------------- ----------------- ---------- Kirk Kozero Officer, Marketing TIAA-CREF Manager 730 Third Avenue New York, New York 10017-3206 Seema Luthra Director, Insurance TIAA-CREF Planning and Service 730 Third Avenue Center New York, New York 10017-3206 Henry Liedtka Second Vice TIAA-CREF President 730 Third Avenue New York, New York 10017-3206 John J. McCormack, Jr. Executive Vice Executive Vice TIAA-CREF President President 730 Third Avenue New York, New York 10017-3206 Gerald K. McCullough Vice President and Vice President and TIAA-CREF Chief Accountant, Chief Accountant, 730 Third Avenue Investment Investment New York, New York 10017-3206 Accounting Accounting and Reporting and Reporting John J. McGovern Vice President TIAA-CREF 730 Third Avenue New York, New York 10017-3206 Maureen Milet Second Vice Second Vice TIAA-CREF President and President and 730 Third Avenue Director Director New York, New York 10017-3206 Carolyn C. Mitchell Second Vice TIAA-CREF President 730 Third Avenue New York, New York 10017-3206 Frances Nolan Vice President TIAA-CREF 730 Third Avenue New York, New York 10017-3206 John A. Putney, Jr. Executive TIAA-CREF Vice President 730 Third Avenue New York, New York 10017-3206 Jeanne Ray Vice President and TIAA-CREF Chief Counsel, 730 Third Avenue Insurance New York, New York 10017-3206
C-7
Positions and Positions and Offices with Offices with Name and Principal Business Address Insurance Company Registrant - ----------------------------------- ----------------- ---------- David Rubel Actuary Actuary TIAA-CREF 730 Third Avenue New York, New York 10017-3206 Larry H. Rubin Vice President, Vice President TIAA-CREF Insurance Actuarial Insurance 730 Third Avenue Actuarial New York, New York 10017-3206 Rita Santos Manager, Quality TIAA-CREF Assurance and 730 Third Avenue Training New York, New York 10017-3206 Richard Schlefer Assistant Assistant TIAA-CREF Vice President Vice President 730 Third Avenue New York, New York 10017-3206 Mark L. Serlen Senior Counsel Assistant TIAA-CREF Secretary and 730 Third Avenue Senior Counsel New York, New York 10017-3206 David Shunk Executive Vice Executive Vice TIAA-CREF President President 730 Third Avenue New York, New York 10017-3206 John Somers Executive Vice Executive Vice TIAA-CREF President President 730 Third Avenue New York, New York 10017-3206 Lisa Snow Vice President, Vice President, TIAA-CREF Chief Counsel and Chief Counsel and 730 Third Avenue Assistant Assistant New York, New York 10017-3206 Secretary, Secretary, Corporate Law Corporate Law Charles H. Stamm Executive Executive TIAA-CREF Vice President Vice President 730 Third Avenue and General New York, New York 10017-3206 Counsel Steven I. Traum Director-- TIAA-CREF Portfolio 730 Third Avenue Management New York, New York 10017-3206 Kathleen D. VanNoy Director, Insurance TIAA-CREF Services Compliance 730 Third Avenue New York, New York 10017-3206
C-8
Positions and Positions and Offices with Offices with Name and Principal Business Address Insurance Company Registrant - ----------------------------------- ----------------- ---------- Bruce Wallach Vice President and Vice President and TIAA-CREF Corporate Actuary Corporate Actuary 730 Third Avenue New York, New York 10017-3206 Thomas G. Walsh Executive Chairman of the TIAA-CREF Vice President Management 730 Third Avenue Committee and New York, New York 10017-3206 President Steven Weisbart Vice President, Vice President, TIAA-CREF Corporate Corporate 730 Third Avenue Publications Publications New York, New York 10017-3206 John Wesley Product Manager, TIAA-CREF Research and 730 Third Avenue Development Officer New York, New York 10017-3206 Leonard B. Zimmerman Vice President Vice President TIAA-CREF and Chief and Chief Actuary, 730 Third Avenue Actuary, Insurance Insurance Services New York, New York 10017-3206 Services
C-9 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: AIC Properties, Inc. BT Properties, Inc. College Credit Trust DAN Properties, Inc. ETC Repackaging, Inc. Illinois Teachers Properties, Inc. JV California Two, Inc. JV California Three, Inc. JV Florida One, Inc. JV Florida Four, Inc. JV Georgia One, Inc. JV Maryland One, Inc. JV Michigan One, Inc. JV Michigan Two, Inc. JV Michigan Three, Inc. JV Minnesota One, Inc. JV North Carolina One, Inc. JWL Properties, Inc. Liberty Place Retail, Inc. Light Street Partners, LLP Macallister Holdings, Inc. Minnesota Teachers Realty Corp. MN Properties, Inc. M.O.A. Enterprises, Inc. ND Properties, Inc. OWP Hawaii, LLC Savannah Teachers Properties, Inc. T114 Properties, Inc. T-Investment Properties Corp. T-Land Corp. T-Las Colinas Towers Corp. TCT Holdings, Inc. Teachers Advisors, Inc. Teachers Boca Properties II, Inc. Teachers Pennsylvania Realty, Inc. Teachers Personal Investors Services, Inc. Teachers Properties, Inc. Teachers REA, LLC Teachers REA II, Inc. Teachers REA II, LLC Teachers REA III, LLC Teachers Realty Corporation TEO-NP, LLC Tethys Slu, Inc. TIAA Realty, Inc. TIAA Timberlands I, LLC TIAA-CREF Enterprises, Inc. TIAA-CREF Individual & Institutional Services, Inc. TIAA-CREF Investment Management, LLC TIAA-CREF Life Insurance Company TIAA-CREF Tuition Financing, Inc. TIAA-CREF Trust Company, FSB TIAA-Fund Equities, Inc. TPI Housing, Inc. Washington Teachers Properties II, Inc. WRC Properties, Inc. 730 Properties, Inc. 730 Cal Hotel Properties I, Inc. 730 Cal Hotel Properties II, Inc. 730 Penn. Hotel Properties I, Inc. C-10 (1) All subsidiaries are Delaware corporations except as follows: D) Pennsylvania non-stock, non-profit corporations: Liberty Place Retail, Inc. Teachers Pennsylvania Realty, Inc. Teachers Realty Corporation E) Minnesota Teachers Realty Corporation is a Minnesota corporation. F) College Credit Trust, a New York Trust.` G) TIAA-CREF Life Insurance Company is a New York corporation. H) TIAA-CREF Trust Company, FSB is a Federal Savings Bank. (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 TIAA-CREF Trust Company, FSB. C) Macallister Holdings, Inc. owns 100% of T-Investment Properties Corp. and T-Land Corp. D) Teachers Properties, Inc. owns 100% of TPI Housing, Inc. E) 730 Properties, Inc. owns 100% of the stock of 730 Cal Hotel Properties I, Inc., 730 Cal Hotel Properties II, Inc. and 730 Penn. Hotel Properties I, Inc. (3) All subsidiaries have as their sole purpose the ownership of investments which could, pursuant to New York State Insurance Law, be owned by TIAA itself, except the following: A) Teachers Advisors, Inc., which provides investment advice for the Registrant and others. B) Teachers Personal Investors Services, Inc., which provides broker-dealer services for the Registrant and others. C) TIAA-CREF Investment Management, LLC, which provides investment advice for College Retirement Equities Fund. D) TIAA-CREF Individual & Institutional Services, Inc., which provides broker-dealer and administrative services for College Retirement Equities Fund. E) TCT Holdings, Inc., which is a unitary thrift holding company, was formed for the sole purpose of holding stock of a federal chartered savings bank. F) TIAA-CREF Life Insurance Company, which is a subsidiary life insurance company of TIAA, is licensed under the State of New York to market certain life insurance products not currently offered by TIAA. G) TIAA-CREF Trust Company, FSB which is a federal chartered savings bank. H) ETC Repackaging, Inc. which was formed to hold securities investments. C-11 I) TIAA-CREF Tuition Financing, Inc. which was formed to administer tuition assistance plans. Item 31. Number of Contractowners As of February 23, 1999, 20,973 contractowners have allocated premiums to the Separate Account (Stock Index Account). 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 C-12 is registered as an investment adviser under the Investment Advisers Act of 1940, as amended. The business and other connections of Advisors' officers are listed in Schedules A and D of Form ADV as currently on file with the Commission (File No. 801-46887), the text of which is hereby incorporated by reference. Item 34. Principal Underwriters (a) Teachers Personal Investors Service, Inc. ("TPIS"), acts as principal underwriter for TIAA-CREF Mutual Funds 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 C-13 communication affixed to or included in the Prospectus that the applicant can remove to send for a Statement of Additional Information. (d) The Registrant undertakes to deliver any Statement of Additional Information and any financial statements required to be made available under Form N-3 promptly upon written or oral request. (e) TIAA represents that the fees and charges deducted under the Contracts, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by TIAA. C-14 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 1st day of April, 1999. TIAA SEPARATE ACCOUNT VA-1 By: /s/ Thomas G. Walsh ------------------- Thomas G. Walsh 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/ Thomas G. Walsh Chairman of the Management 4/1/99 - ------------------- Committee and President Thomas G. Walsh (Principal Executive and Financial Officer) /s/ Richard L. Gibbs Executive Vice President 4/1/99 - -------------------- (Principal Accounting Officer) Richard L. Gibbs
C-15
Signature Title Date - --------- ----- ---- /s/ Laurence W. Franz Manager 4/1/99 - --------------------- Laurence W. Franz /s/ Jeanmarie C. Grisi Manager 4/1/99 - ---------------------- Jeanmarie C. Grisi /s/ Richard M. Norman Manager 4/1/99 - --------------------- Richard M. Norman
C-16 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 1st day of April, 1999. TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA By:/s/ Peter C. Clapman -------------------------- Peter C. Clapman Senior Vice President and Chief Counsel, Investments As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- /s/ John H. Biggs Chairman of the Board, 4/1/99 - ----------------- President, and Chief John H. Biggs Executive Officer (Principal Executive and Financial Officer) /s/ Martin L. Leibowitz Vice Chairman, Chief 4/1/99 - ----------------------- Investment Officer, and Martin L. Leibowitz Trustee (Principal Investment Officer) /s/ Richard L. Gibbs Executive Vice President 4/1/99 - -------------------- (Principal Accounting Officer) Richard L. Gibbs
C-17
Signature of Trustee Date Signature of Trustee Date - -------------------- ---- -------------------- ---- /s/ David Alexander 4/1/99 /s/ Dorothy Ann Kelly 4/1/99 - ------------------ ------------------------- David Alexander Dorothy Ann Kelly, O.S.U. /s/ Marcus Alexis 4/1/99 /s/ Robert M. O'Neil 4/1/99 - ------------------------- ----------------------- Marcus Alexis Robert M. O'Neil /s/ Willard T. Carleton 4/1/99 /s/ Leonard S. Simon 4/1/99 - ------------------------- ----------------------- Willard T. Carleton Leonard S. Simon /s/ Robert C. Clark 4/1/99 /s/ Ronald L. Thompson 4/1/99 - ------------------------- ----------------------- Robert C. Clark Ronald L. Thompson - ------------------- ----------------- Estelle A. Fishbein Paul R. Tregurtha /s/ Frederick R. Ford 4/1/99 /s/ William H. Waltrip 4/1/99 - --------------------- --------------------- Frederick R. Ford William H. Waltrip /s/ Martin J. Gruber 4/1/99 /s/ Rosalie J. Wolf 4/1/99 - -------------------- ------------------- Martin J. Gruber Rosalie J. Wolf /s/ Ruth Simms Hamilton 4/1/99 - ----------------------- Ruth Simms Hamilton
C-18 Exhibit Index
Exhibit Number Description of Exhibit - ------ ---------------------- 1 Resolution of the Board of Trustees of TIAA establishing the Registrant 2 Rules and Regulations of the Registrant 3 Custodial Services Agreement between TIAA and Bankers Trust Company 4 Investment Management Agreement by and among TIAA, the Registrant, and Teachers Advisors, Inc. 5 Distribution Agreement by and among TIAA, the Registrant, and Teachers Personal Investors Services, Inc. dated September 15, 1994 6(A) Form of Teachers Personal Annuity Contract (effective November 1, 1994) 6(B) Form of Endorsement to Teachers Personal Annuity Contract (in force prior to November 1, 1994) 7 Form of Application for Teachers Personal Annuity Contract 8(A) Charter of TIAA, as amended 8(B) Bylaws of TIAA, as amended 11 Administrative Services Agreement by and between TIAA and the Registrant dated September 15, 1994 12(A) Opinion and Consent of Charles H. Stamm, Esquire 12(B) Consent of Sutherland, Asbill & Brennan LLP 13 Consent of Ernst & Young LLP 15 Seed Money Agreement by and between TIAA and the Registrant 16 Schedules for Computation of Performance Quotations 17 Financial Data Schedule
C-19 EX-99.1 2 TIAA BOARD OF TRUSTEES RESOLUTIONS Exhibit 1 5/94 1. Approval of Registration Statement Mr. Clapman Resolved: That the Registration Statement on Form N-3 for the Contracts, which describes the Contracts and the Separate Account, annexed to the official minutes as an Exhibit and made a part thereof, filed in the office of the Corporate Secretary, be and hereby is approved, and that any executive officer of TIAA will be and each of them hereby is authorized in the name and on behalf of TIAA to take such further action with respect thereto, including the making of any changes prior to filing, the filing of amendments to such Registration Statement thereafter, and the filing of any applications for exemption or other relief necessary in connection therewith, that such executive officer may deem appropriate. EX-99.2 3 RULES AND REGS. OF TIAA SEPARATE ACCOUNT VA-1 Exhibit 2 RULES AND REGULATIONS of TIAA Separate Account VA-1 Amended as of July 25, 1994 RULES AND REGULATIONS of TIAA Separate Account VA-1 Article I - GENERAL............................................................1 Section 1.01 -- Name.....................................................1 Section 1.02 -- Office...................................................1 Section 1.03 -- Purpose..................................................1 Section 1.04 -- Status under the Act.....................................2 Article II - UNITS OF BENEFICIAL INTEREST......................................3 Section 2.01 -- General..................................................3 Section 2.02 -- Segregation of Assets among Subaccounts..................4 Section 2.03 -- Insulation between Subaccounts...........................5 Section 2.04 -- Liquidation Preferences among Subaccounts................6 Article III - CONTRACTOWNERS...................................................7 Section 3.01 -- Definition...............................................7 Section 3.02 -- Voting Rights and Meetings...............................7 Section 3.03 -- Place of Meetings........................................8 Section 3.04 -- Fixing of Record Date....................................8 Section 3.05 -- Notice of Meetings.......................................9 Section 3.06 -- Proxies.................................................10 Section 3.07 -- Quorum..................................................11 Section 3.08 -- Proper Matters for Action by Contractowners..........................................13 Section 3.09 -- Number of Votes Sufficient to Take or Authorize Action........................................14 Section 3.10 -- Dollar-Weighted Voting..................................16 Section 3.11 -- Order of Business and Presiding Officer.................16 Section 3.12 -- Action without a Meeting................................17 Article IV - MANAGEMENT COMMITTEE.............................................17 Section 4.01 -- General.................................................17 Section 4.02 -- Composition.............................................18 Section 4.03 -- Term of Office..........................................19 Section 4.04 -- Election of Managers by the Contractowners..........................................19 Section 4.05 -- Regular Meetings........................................19 i Section 4.06 -- Special Meetings........................................20 Section 4.07 -- Notice of Meetings......................................20 Section 4.08 -- Quorum..................................................21 Section 4.09 -- Action Without a Meeting................................22 Section 4.10 -- Meeting by Conference Telephone.........................22 Section 4.11 -- Chairman................................................23 Section 4.12 -- Removal of Managers.....................................23 Section 4.13 -- Resignation of Managers.................................25 Section 4.14 -- Vacancies and Newly Created Managerships ...........................................25 Section 4.15 -- Powers and Duties of the Committee......................27 Section 4.16 -- Executive Committee and Other Subcommittees.............30 Article V - OFFICERS..........................................................32 Section 5.01 -- Selection...............................................32 Section 5.02 -- Term of Office..........................................32 Section 5.03 -- Powers and Duties.......................................33 Article VI - INVESTMENT POLICIES..............................................33 Article VII - CUSTODY OF ASSETS...............................................34 Article VIII - VALUATION OF ASSETS............................................35 Section 8.01 -- General.................................................35 Section 8.02 -- Suspension of Determination of Value....................36 Section 8.03 -- Computation of Net Assets...............................36 Section 8.04 -- The Separate Account's Assets...........................36 Section 8.05 -- Valuation of Assets.....................................37 Section 8.06 -- The Separate Account's Liabilities......................37 Section 8.07 -- Determination Binding...................................38 Article IX - REMUNERATION.....................................................39 Article X- INDEMNIFICATION....................................................40 Section 10.01 -- Persons Indemnified....................................40 Section 10.02 -- Disabling Conduct......................................41 Section 10.03 -- Determination..........................................41 Section 10.04 -- Expenses Prior to Determination........................43 Section 10.05 -- Provisions Not Exclusive...............................44 Section 10.06 -- General................................................44 Article XI - FISCAL YEAR......................................................45 ii Article XII - REPORTS.........................................................45 Article XIII - AMENDMENTS.....................................................45 iii RULES AND REGULATIONS of TIAA Separate Account VA-1 Amended as of July 25, 1994 Article I GENERAL Section 1.01 -- Name. The name of this separate account shall be TIAA Separate Account VA-1 (the "Separate Account"). The name of the Separate Account has been selected by and belongs to Teachers Insurance and Annuity Association of America (the "Company"). Section 1.02 -- Office. The principal office of the Separate Account shall be at 730 Third Avenue, New York, New York 10017-3206. Section 1.03 -- Purpose. (a) The Separate Account is a separate account of the Company established by a resolution of the Board of Trustees of the Company on February 16, 1994, - 1 - pursuant to the provisions of Section 4240 of the New York Insurance Law. Its purpose is to provide a segregated investment account in which assets are set aside, separate and apart from the other assets of the Company, and held for the benefit of owners of, and persons entitled to payment under, variable annuity contracts and other agreements (collectively the "Contracts") which are funded through the Separate Account and issued by the Company. The value of a Contract varies in accordance with the investment results of the Separate Account. (b) As provided in the Contracts, the assets of the Separate Account, other than those which the Company is entitled to withdraw from time to time under applicable state law, shall be held and applied to meet the obligations (including expenses) of, and to provide benefits under, the Contracts. The management of the assets of the Separate Account will be in accordance with applicable state law and in a manner as may be required to comply with the requirements of the Investment Company Act of 1940, as amended (the "Act"), and the rules and regulations of the Securities and Exchange Commission ("SEC") thereunder. Section 1.04 -- Status under the Act. (a) The Account may be registered as an open-end management investment company under the Act. Such registration may be terminated, however, if - 2 - and to the extent permitted by law; or the Separate Account may be reorganized and registered as a unit investment trust under the Act, in each case with the approval (if required by the Act) of the Contractowners, as provided in Article III of these Rules and Regulations. (b) Any question of interpretation of any term or provisions of these Rules and Regulations having a counterpart in or otherwise derived from a term or provision of the Act shall be resolved by reference to the corresponding term or provision of the Act and to any definition thereof in the Act or to judicial interpretations thereof, if any, or, in the absence of any controlling judicial decisions, to rules, regulations, or orders of the SEC validly issued pursuant to the Act. Article II UNITS OF BENEFICIAL INTEREST Section 2.01 -- General. (a) Interests in the Separate Account shall take the form of units of beneficial interest ("Units"). Each Unit shall be valued in the manner described in Article VIII of these Rules and Regulations. All - 3 - Units represent an equal proportionate interest in the net assets of the Separate Account (subject to the liabilities of the Separate Account), and each Unit in the Separate Account shall be equal to each other Unit in the Separate Account, except as provided in paragraph (c) of this Section 2.01 in the event of creation of Subaccounts. (b) The Management Committee, as described in Section 4.01 of these Rules and Regulations, shall have the authority to establish two or more Subaccounts within the Separate Account, each issuing its own Units with a distinct value. Each Subaccount will have its own investment objective and policies. Any reference in these Rules and Regulations to the Separate Account shall also refer to any Subaccount thereof where the context so requires. (c) Within each Subaccount, all Units represent an equal proportionate interest in the net assets of that Subaccount (subject to the liabilities of that Subaccount), and each Unit in a particular Subaccount shall be equal to each other Unit in that Subaccount. Section 2.02 -- Segregation of Assets among Subaccounts. All net purchase payments received by the Separate - 4 - Account in exchange for the crediting of Units in a particular Subaccount, together with all assets in which such net purchase payments are invested and reinvested, all income, earnings, profits, and proceeds thereof, including any proceeds derived from the sale, exchange, or liquidation of such assets, and any funds or payments derived from the reinvestment of such proceeds, shall constitute the assets of that Subaccount, in contrast to other Subaccounts (subject only to the rights of creditors of that Subaccount). The Management Committee shall determine the allocation of the assets of the Separate Account to a given Subaccount. Section 2.03 -- Insulation between Subaccounts. The assets of a particular Subaccount shall be charged only with the liabilities of the Separate Account in respect of that Subaccount and only with all expenses, costs, charges, and reserves attributable to that Subaccount. No Subaccount shall be charged with the liabilities of the Separate Account arising from any other Subaccount or with the expenses, costs, charges, and reserves attributable to any other Subaccount. Such liabilities, expenses, costs, charges, and reserves, together with any liabilities allocated to that Subaccount, in contrast to other - 5 - Subaccounts, shall constitute the liabilities of that Subaccount. The Management Committee shall determine the allocation of the liabilities of the Separate Account to a given Subaccount. Section 2.04 -- Liquidation Preferences among Subaccounts. (a) In the event of any liquidation, dissolution, or winding up (whether voluntary or involuntary) of the Company or of the Separate Account, the Contractowners whose Contracts are credited with Units in a particular Subaccount shall be entitled to receive an amount equal to the aggregate accumulated values of their Contracts in that Subaccount before any distribution of assets allocated to the Subaccount is made to any other Contractowners. (b) If, upon any such liquidation, dissolution, or winding up, the net asset value allocated to a particular Subaccount is insufficient to permit payment to Contractowners of the full amount of the aggregate accumulated values of all Contracts credited with Units in that Subaccount, then the net asset value allocated to that Subaccount shall be paid to such Contractowners in proportion to the relative accumulated values attributable to the Contracts of each such Contractowner. If, upon any such liquidation, dissolution, or winding up, the net - 6 - asset value allocated to any Subaccount exceeds the aggregate accumulated values of all Contracts credited with Units in that Subaccount, the excess shall be paid to the Company. Article III CONTRACTOWNERS Section 3.01 -- Definition. For purposes of these Rules and Regulations, the Contractowner shall be the person identified on TIAA's records as the owner of the Contract. Where the context so requires, "Contractowner" shall also include the person who, as contributor of initial capital of the Separate Account, holds Units in the Separate Account. Section 3.02 -- Voting Rights and Meetings. (a) Contractowners are entitled to vote their Units in the Separate Account that fund the outstanding Contracts. (b) The Separate Account is not required to hold an annual meeting of Contractowners in any year in which the election of members of the Management Committee by the Contractowners is not required by the Act. - 7 - (c) Meetings of Contractowners may be called by a majority of the members of the Management Committee then holding office, including a majority of the members of the Management Committee who are not "interested persons" of the Separate Account or of the Company as that term is defined in the Act. Business transacted at any meeting of Contractowners shall be limited to the purposes stated in the notice of meeting. Section 3.03 -- Place of Meetings. Meetings of Contractowners shall be held at the principal office of the Separate Account or at any other place within the United States as shall be designated from time to time by the Management Committee and stated in the notice of meeting or in a duly executed waiver of notice thereof. Section 3.04 -- Fixing of Record Date. The Management Committee shall fix in advance a date as a record date for the determination of the Contractowners entitled to notice of or to vote at any meeting of Contractowners or any adjournment thereof, provided that such record date shall be not more than fifty (50) nor less than ten (10) days before the date of such meeting of Contractowners. Only such Contractowners as shall be owners of - 8 - record on the record date so fixed shall be entitled to notice of such meeting or adjournment and shall be entitled to vote thereat. For purposes of determining the Contractowners entitled to notice of or to vote at any meeting of Contractowners, the person shown in the records of the Company as the "owner" of such contract shall be regarded as the Contractowner. Section 3.05 -- Notice of Meetings. (a) The Management Committee shall cause notice of the place, the date and hour, and the purpose or purposes of each meeting of Contractowners to be mailed not more than fifty (50) nor less than ten (10) days before the date of the meeting, to each Contractowner entitled to vote at such meeting, at his or her address as it appears in the records of the Company at the time of such mailing. Unless an adjournment is for more than thirty (30) days or a new record date is fixed, notice of adjournment of a meeting of Contractowners to another time or place need not be given if such time and place are announced at such meeting. (b) No notice of the place, the date and hour, or the purpose or purposes of any meeting of Contractowners need be given to any Contractowner who attends in person or is represented by proxy or to any Contractowner who, in a writing - 9 - executed and filed with the records of the meeting, either before or after the holding thereof, waives such notice. Waivers of notice need not state the purpose or purposes of such meeting. Section 3.06 -- Proxies. (a) A Contractowner entitled to vote on a matter may vote either in person or by proxy duly executed in writing by the Contractowner or his duly authorized attorney-in-fact. A proxy for any meeting shall be valid for any adjournment of such meeting, but no proxy shall be valid after eleven (11) months from its date of execution, unless otherwise provided in the proxy. The Company will furnish to the Contractowner (or mail in accordance with his or her instructions) proxy materials necessary to permit the Contractowner to cast votes, and each Contractowner entitled to vote on a matter will receive a statement of the number of votes, including fractional votes, attributable to his or her beneficial interest in the net asset value of each Subaccount affected by such matter and stating his or her right to vote with respect to such beneficial interest. (b) At all meetings of Contractowners, all questions relating to the qualification of Contractowners, the validity of - 10 - proxies, and the acceptance or rejection of votes shall be decided by the presiding officer of the meeting. Section 3.07 -- Quorum. (a) In general, the presence in person or by proxy of the holders of ten percent (10%) of the votes entitled to be cast at a meeting of Contractowners shall constitute a quorum for the transaction of business at any such meeting, except as otherwise provided by law or these Rules and Regulations. Notwithstanding the foregoing and except as otherwise required by applicable law or these Rules and Regulations, where the holders of Units in any Subaccount are entitled or required to vote as a distinct class (an "individual class") or where the holders of Units in any two or more (but not all) Subaccounts are entitled or required to vote as a distinct class (a "combined class"), the presence in person or by proxy of the holders of ten percent (10%) of the votes of such individual class or combined class, as the case may be, entitled to be cast at any meeting shall constitute a quorum for the transaction of business via such a vote. (b) If the vote of "a majority of the outstanding voting securities," as that term is used in the Act, is required for any action to be taken on any matter brought before the - 11 - meeting, the presence in person or by proxy of the holders of fifty percent (50%) of all votes entitled to be cast at a meeting of Contractowners shall constitute a quorum for the transaction of business via such a vote. (c) If a quorum with respect to the Separate Account, an individual class, or a combined class, as the case may be, is not present in person or by proxy at any meeting of Contractowners, the holders of a majority of the votes of the Separate Account, such individual class, or such combined class, as the case may be, present in person or by proxy and entitled to vote at such meeting may, without further notice, adjourn the same from time to time as to the Separate Account, such individual class, or such combined class, as the case may be, until a requisite quorum for such meeting shall be present. The absence from any meeting of the holders of the requisite number of votes of the Separate Account, any individual class, or any combined class, as the case may be, that may be required by applicable law or these Rules and Regulations for action upon any given matter shall not prevent action at such meeting upon any other matter or matters that may properly come before the meeting if there shall be present thereat, in person or by proxy, holders - 12 - of the number of votes required for action in respect of such other matter or matters. Section 3.08 -- Proper Matters for Action by Contractowners. Subject to applicable law, the Contractowners shall have authority, at any meeting, to: (a) elect members of the Management Committee and fill vacancies therein when such action is required under applicable law or requested by the Management Committee; (b) remove any member of the Management Committee or any officer elected or appointed by the Management Committee; (c) ratify the selection of an independent public accountant for the Separate Account, and terminate the employment of that independent public accountant; (d) approve the adoption, amendment, termination, or, in the absence of approval by the Management Committee, continuance of an agreement providing investment advisory services to the Separate Account; - 13 - (e) authorize changes, proposed by the Management Committee, in the fundamental investment policies of the Separate Account or any Subaccount; and (f) approve any acts, transactions, or other agreements that may be submitted to a vote of Contractowners by the Management Committee. Action with respect to at least the matters referred to in paragraphs (a), (c), and (d) of this Section 3.08 will be taken at the first meeting of Contractowners or of such other persons entitled to vote with respect to the Separate Account. Section 3.09 -- Number of Votes Sufficient to Take or Authorize Action. (a) Except as otherwise specifically provided in these Rules and Regulations or as required by the provisions of the Act, all matters shall be decided by a vote of the majority of the votes validly cast. (b) Matters required, by applicable law or as otherwise determined by the Management Committee, to be approved by "a majority of the outstanding voting securities" of the Separate Account shall require the vote of the lesser of: (1) sixty-seven percent (67%) or more of the outstanding voting securities of the Separate Account present at a meeting of - 14 - Contractowners if more than fifty percent (50%) of the outstanding voting securities of the Separate Account are present or represented by proxy; or (2) more than fifty percent (50%) of the outstanding voting securities of the Separate Account. (c) Any matter required to be approved, by the provisions of the Act or otherwise, by "a majority of the outstanding voting securities" shall not be deemed to have been effectively acted upon unless approved by "a majority of the outstanding voting securities" of: (1) each Subaccount affected by such matter, where the holders of Units in that Subaccount are entitled or required to vote as an individual class; (2) any two or more (but not all) Subaccounts affected by such matter, where the holders of Units in these Subaccounts are entitled or required to vote as a combined class; or (3) the Separate Account, where no Subaccount is deemed to be affected by such matter. For purposes of this Article III, a Subaccount will be deemed to be "affected by such matter" unless (1) the interests of each Subaccount are identical or (2) the matter does not affect any interest of such Subaccount. Notwithstanding the foregoing, the submission to the Contractowners of (1) the selection of an independent public accountant, (2) a contract with a principal underwriter, and (3) nominees for election as - 15 - members of the Management Committee shall be exempt from the individual-class or combined-class Subaccount voting requirement. Section 3.10 -- Dollar-Weighted Voting. At all meetings of Contractowners, every Contractowner entitled to vote on a matter submitted for approval shall have one vote for each dollar of his or her beneficial interest in the net asset value of the Separate Account, or, in the case of individual-class or combined-class Subaccount voting, one vote for each dollar of his or her beneficial interest in the net asset value of each Subaccount affected by such matter. Fractional votes shall be counted. Section 3.11 -- Order of Business and Presiding Officer. The order of business at meetings of Contractowners shall be determined by the presiding officer to accomplish the purpose or purposes of the meeting. At all meetings of Contractowners: (1) the Chairman of the Management Committee, or such other person as may be designated by the Management Committee, shall be the presiding officer; and (2) the Secretary of the Separate Account, if any, or such other person as may be designated by the Management Committee or, in their absence, the - 16 - appointee of the presiding officer of the meeting, shall act as secretary of the meeting. Section 3.12 -- Action without a Meeting. Any action to be taken by Contractowners may be taken without a meeting or prior notice if (1) all Contractowners entitled to vote on the matter consent to the action in writing, (2) all Contractowners entitled to notice of the meeting, but not entitled to vote at it, sign a written waiver of any right to dissent, and (3) such consents and waivers are filed with the records of the meetings of Contractowners. Such consent shall be treated for all purposes as a vote at the meeting. Article IV MANAGEMENT COMMITTEE Section 4.01 -- General. The business and affairs of the Separate Account shall be managed by its Management Committee (the "Committee"), which may exercise all of the powers of the Separate Account, except those that are conferred upon or reserved to the Contractowners by the Act or the rules - 17 - promulgated thereunder or by these Rules and Regulations. Hereinafter, the members of the Committee may be referred to as the "Managers." Section 4.02 -- Composition. The Committee shall consist of at least two (2) but not more than fifteen (15) members. At the inception of the Separate Account, the Committee shall consist of two (2) members, including a Chairman, as appointed by the appropriate officers of the Company. Thereafter, the number of memberships constituting the Committee ("Managerships") may be increased or decreased from time to time, within the maximum and minimum stated in this Section 4.02, by a majority of the total number of members which the Committee would have if there were no vacancies thereon, and the tenure in office of a Manager shall not be affected by any decrease in the number of Managerships so made by the Committee. A majority of the members of the Committee shall be persons who are not officers, employees, or other interested persons of the Separate Account or of the Company. Members of the Committee need not be Contractowners. - 18 - Section 4.03 -- Term of Office. Each member of the Committee shall hold office until the earliest of the following: (1) a successor is duly elected and qualified; (2) his or her death; or (3) his or her resignation or removal in the manner provided for in these Rules and Regulations. Section 4.04 -- Election of Managers by the Contractowners. The persons initially appointed to the Committee shall serve until an initial meeting at which the Company, as the sole person having a beneficial interest in the Separate Account at its inception, shall have the right to elect a Committee or until their successors are duly elected and qualified. Thereafter, except as otherwise provided by law or these Rules and Regulations, the Managers shall be elected at any meeting of Contractowners called for such purpose. At each meeting of Contractowners for the election of Managers, the Managers shall be elected by a plurality of the votes validly cast at such election. Section 4.05 -- Regular Meetings. Regular meetings of the Committee shall be held at such times and places as the Committee from time to time may determine. Notice of such - 19 - regular meetings need not be given, provided that notice of any change in the time or place of such meetings shall be promptly sent (in the manner provided for notice of special meetings) to each Manager not present at the meeting at which such change was made. Section 4.06 -- Special Meetings. Special meetings of the Committee shall be held, whenever called by the Chairman of the Committee or a majority of the Managers then holding office, at the time and place specified in the respective notices or waivers of notice of such meetings. Section 4.07 -- Notice of Meetings. Except with respect to a Manager present at the time the meeting was called, notice of meetings, stating the place and the date and hour, shall be given to each Manager orally (in person or by telephone) or sent by facsimile, telegraph, or mail, or left at his or her residence or usual place of business, not less than one (1) day before the date of the meeting. If mailed, such notice shall be deemed to be given four (4) business days after being deposited in the United States mail, addressed to the Manager at his or her residence or regular place of business with postage thereon - 20 - prepaid. Such notice may be given by the Secretary, if any, or by the person or persons calling the meeting. Unless required by applicable law or otherwise determined by resolution of the Committee in accordance with these Rules and Regulations, notices need not state the business to be transacted at or the purpose of any meeting, and no notice need be given to any Manager who is present in person at the meeting or to any Manager who, before or after the meeting, signs a waiver of notice which is filed with the records of the meeting. Waivers of notice need not state the purpose or purposes of such meeting. Section 4.08 -- Quorum. At all meetings of the Committee, a majority of the members of the Committee then holding office shall constitute a quorum for the transaction of business, and the action of a majority of the Managers present at any meeting at which a quorum is present shall be the action of the Committee, unless the concurrence of a greater proportion is required for such action by the Act, other applicable law, or these Rules and Regulations. A quorum shall be present at the time any vote or other action is taken. If a quorum shall not be present at any meeting of the Committee, the Managers present may, by a majority vote, adjourn the meeting from time to time, - 21 - without notice other than announcement at the meeting, until a quorum shall be present. Section 4.09 -- Action Without a Meeting. Any action required or permitted to be taken at any meeting of the Committee or of any subcommittee thereof may be taken without a meeting, if a written consent to such action is signed by each member of the Committee or of such subcommittee, as the case may be, and such written consent is filed with the minutes of proceedings of the Committee or subcommittee. Section 4.10 -- Meeting by Conference Telephone. Members of the Committee or any subcommittee thereof may participate in a meeting by means of conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting except with respect to (1) any meeting to consider the entry into or renewal of any contract or agreement whereby any person agrees to serve as investment adviser or principal underwriter of the Separate Account, (2) any meeting to select an independent public accountant for the preparation or audit of any - 22 - of the Separate Account's financial statements, or (3) any meeting to consider another item of business for which the Act requires Managers to meet in person. Section 4.11 -- Chairman. (a) At the inception of the Separate Account, the appropriate officers of the Company shall appoint the Chairman from among the initial members of the Committee. Thereafter, whenever a vacancy in the office of Chairman shall occur for any reason, the Committee shall elect one of its members to act as Chairman and to hold such office until a successor is elected and qualified. The Committee may, by vote of a majority of the Managers then holding office, remove the Chairman from such office. (b) The Chairman, when present, shall preside at all meetings of the Committee or of the Contractowners. The Chairman may sign contracts or other instruments that the Committee has authorized to be executed, including, but not limited to, any application for an order of the SEC. Section 4.12 -- Removal of Managers. (a) Any member of the Committee may be removed for cause at any time by a vote of at least a majority of the number of members of the Committee - 23 - prior to such removal, specifying the date upon which such removal shall become effective. (b) Any member of the Committee may be removed with or without cause by the vote of the Contractowners entitled to vote more than fifty percent (50%) of the votes entitled to be cast on the matter at any meeting called for such purpose. (c) A meeting of Contractowners will be called for the purpose of voting on the removal of a member or members of the Committee when so requested in writing by Contractowners of record who hold not less than ten percent (10%) of the outstanding Units in the Separate Account. (d) Whenever ten (10) or more Contractowners of record who have been such for at least six (6) months preceding the date of application, and who in the aggregate hold Units constituting at least one percent (1%) or $25,000, if less, of the outstanding Units in the Separate Account, shall apply to the Committee in writing, stating that they wish to communicate with other Contractowners with a view to obtaining signatures to a request for a meeting to consider removal of a member of the Committee and accompanied by a form of communication and request that they wish to transmit, the Committee shall, within five (5) business days after receipt of such application, inform such applicants as - 24 - to the approximate cost of mailing to the Contractowners of record the proposed communication and form of request. Upon the written request of such applicants, accompanied by a tender of the material to be mailed and of the reasonable expenses of mailing, the Committee shall, with reasonable promptness, mail such material to all Contractowners of record at their addresses as recorded on the books of the Separate Account. Notwithstanding the foregoing, the Committee may decline to mail such material on the basis of and in accordance with the procedures set forth in the last two paragraphs of Section 16(c) of the Act. Section 4.13 -- Resignation of Managers. Any Manager may resign at any time by mailing or delivering his or her resignation in writing to the Chairman of the Committee or to a meeting of the Committee. Any such resignation shall take effect at the time specified in the writing or, if not specified, upon acceptance thereof by the Committee. Section 4.14 -- Vacancies and Newly Created Managerships. (a) Any vacancy occurring on the Committee by - 25 - reason of removal, resignation, or any cause other than an increase in the number of Managerships may be filled by the vote of a majority of the remaining members of the Committee, notwithstanding that the number of such remaining members may not constitute a quorum. Any vacancy occurring by reason of an increase in the number of Managerships may be filled by the vote of a majority of the total number of Managerships constituting the Committee prior to such increase. An individual who, pursuant to action by the Committee, fills a vacancy on the Committee shall hold office until his or her successor is duly elected and qualified. (b) The Committee may not elect any Manager to fill any vacancy as provided herein unless, immediately after filling any such vacancy, at least two-thirds (2/3) of the Managers then holding office shall have been elected either by the Company as the initial holder of Units in the Separate Account or by the Contractowners at a meeting thereof. If, at any time after the initial meeting of holders of beneficial interests in the Separate Account, less than a majority of the Managers holding office at that time were so elected either by the Company or by the Contractowners, a meeting of Contractowners shall be called forthwith and shall be held, as promptly as possible and in any - 26 - event within sixty (60) days unless the SEC shall by order extend such period, for the purpose of electing Managers to fill any existing vacancies in the Committee. Section 4.15 -- Powers and Duties of the Committee. The Committee shall have the following powers, responsibilities, and duties: (a) to select annually, by the vote of a majority of those Managers who are not "interested persons" of the Separate Account within the meaning of the Act, an independent public accountant for the Separate Account, whose selection shall be submitted to the Contractowners for ratification or rejection to the extent required by applicable law; (b) to enter into an agreement or agreements for investment advisory services with one or more investment advisers, which agreement(s) shall be approved by the vote of a majority of those Managers who are neither parties to such agreement(s) nor "interested persons" of any such party within the meaning of the Act and shall be submitted to the Contractowners for approval or rejection as required by applicable law; - 27 - (c) to enter into an underwriting agreement or agreements with one or more principal underwriters for the Separate Account, which agreement(s) shall be approved by the vote of a majority of those Managers who are neither parties to such agreement(s) nor "interested persons" of any such party within the meaning of the Act; (d) to consider annually the terms of any agreement or agreements of the nature contemplated by paragraphs (b) or (c) of this Section 4.15 and to approve amendments thereto or a continuance or termination thereof, which amendments, continuance, or termination shall also be approved by the vote of a majority of those Managers who are neither parties to such agreement(s) nor "interested persons" of any such party within the meaning of the Act, subject to any action by the Contractowners required by applicable law; (e) to enter into an agreement or agreements for administrative services and/or custody of the assets of the Separate Account, if deemed appropriate; (f) to take such action as may be necessary or appropriate with respect to the registration and qualification of - 28 - the Separate Account and of the variable annuity contracts under the Act, the Securities Act of 1933, and any applicable state securities and insurance laws; (g) to recommend or make any changes in the fundamental investment policies of the Separate Account or in the status or classification of the Separate Account under the Act as contemplated by Section 1.04 of these Rules and Regulations, and to submit the same to the Contractowners for approval or rejection, to the extent required by applicable law; (h) to adopt and amend from time to time any investment policies or restrictions, of the Separate Account or any Subaccount, not deemed fundamental; (i) to add new Subaccounts to the Separate Account or eliminate existing Subaccounts, as the Committee deems appropriate; (j) to review regularly the investment of the assets of the Separate Account or any Subaccount and to ascertain that they are being managed in accordance with the investment policies and restrictions of the Separate Account or any Subaccount; - 29 - (k) to determine the value of the net assets of the Separate Account and in particular to determine, in good faith, the fair value of all assets of the Separate Account for which market quotations are not readily available; (l) to enter into any other agreements, or authorize the entrance into the same, on behalf of the Separate Account, and to take any and all actions necessary or proper in connection with the operation and management of the Separate Account and the assets thereof; and (m) at TIAA's request, to transfer the assets of the Separate Account to, or merge the Separate Account with, another separate account that may or may not be affiliated with the Company, or to take any such similar action as shall be consistent with applicable legal requirements, in each case with the approval (if required by the Act) of the Contractowners. Section 4.16 -- Executive Committee and Other Subcommittees. (a) The Committee may appoint, by resolution adopted by a majority of the total number of members which the Committee would have if there were no vacancies on the Committee, - 30 - which majority shall include a majority of the Managers who are not "interested persons" of the Separate Account or the Company within the meaning of the Act, two or more of its members to constitute an Executive Committee, which shall have and may exercise any and all powers of the Committee in the management of the business and affairs of the Separate Account between meetings of the Committee, except that such Executive Committee shall not have the power to amend any provision of these Rules and Regulations, the power to approve the selections or agreements provided in paragraphs (a), (b), (c), (d), (e), or (m) of Section 4.15 of this Article IV, or any other power prohibited by law. (b) The Committee may establish, from time to time and by vote of a majority of the Managers then holding office, other subcommittees of its members and may designate the number (not less than two) of Managers comprising any such subcommittee and the functions to be performed by each such subcommittee. (c) Each Executive Committee or other subcommittee member shall hold office until his or her successor shall be duly elected and qualified, or until he or she sooner dies, resigns, or becomes disqualified. - 31 - Article V OFFICERS Section 5.01 -- Selection. The Separate Account may have a President and such other officers as the Committee, in its discretion, may determine, each of whom may or may not be a member of the Committee. At the inception of the Separate Account, the appropriate officers of the Company may appoint the President and such other officers of the Separate Account as they shall determine. Thereafter, any such officers of the Separate Account shall be appointed by the Committee, which may also fill any vacancy that may occur in such office. The Committee may also, in its discretion, appoint agents and employees, who shall have such authority and perform such duties as the Committee or the Executive Committee thereof, if any, may determine. Section 5.02 -- Term of Office. The term of office of all officers of the Separate Account shall be until their respective successors are duly appointed and qualified. Any such officer may be removed from office at any time by the vote of a majority of the Managers then holding office upon a finding that removal is in the best interest of the Separate Account. - 32 - Section 5.03 -- Powers and Duties. (a) The officers of the Separate Account shall have such powers and duties as generally pertain to their respective offices as well as such powers and duties as may from time to time be conferred by the Committee or its Executive Committee, if any. (b) The Secretary of the Separate Account, if any, shall have the power to keep and certify the minutes of the meetings of Contractowners and the meetings of the Committee or committees thereof and shall have such other powers and perform such other duties as the Committee may prescribe. If at any time there is no Secretary of the Separate Account, the Committee may designate an individual to serve as secretary of any such meeting, for the purpose of keeping and certifying the minutes thereof. Article VI INVESTMENT POLICIES The investment policies and restrictions applicable to the management of the Separate Account's assets shall be adopted by the Committee and set forth in the registration statement of - 33 - the Separate Account under the Act and the 1933 Act and in accordance with applicable state and federal laws. Article VII CUSTODY OF ASSETS All cash and securities owned by the Separate Account shall be held by a bank or trust company of good standing, having a capital surplus and undivided profits aggregating not less than $2,000,000, provided such a bank or trust company can be found ready and willing to act. Upon the resignation or inability to serve of any such bank or trust company the Separate Account shall (1) use its best efforts to obtain a qualified successor, (2) require the cash and securities of the Separate Account held by such bank or trust company to be delivered directly to the successor, and (3) in the event that no qualified successor can be found, submit to the Contractowners (before permitting delivery of such cash and securities to anyone other than a qualified successor) the question whether the Separate Account shall be dissolved and liquidated or shall function without a qualified bank or trust company to hold such cash and securities. - 34 - Upon such resignation or inability to serve, such bank or trust company may deliver any assets of the Separate Account held by it to a qualified bank or trust company selected by it, such assets to be held subject to the terms of the agreement which governed such retiring bank or trust company, pending action by the Separate Account as set forth in this Article VII. Nothing herein contained, however, shall prevent the termination of any agreement between the Separate Account and any such bank or trust company by the Separate Account at the discretion of the Committee, and any such agreement shall be terminated upon the affirmative vote of the holders of a majority of all the votes attributable to the Units in the Separate Account at the time outstanding and entitled to vote. Article VIII VALUATION OF ASSETS Section 8.01 -- General. The Committee shall have the power and duty to determine the value of the net assets of the Separate Account. The Committee may establish a subcommittee, appoint one or more agents, or enter into other arrangements with - 35 - third parties to assist it in the determination of the value of some or all of the securities in the Separate Account and to make the actual calculations pursuant to directions of the Committee. The data and information considered in implementing the valuation methods adopted by the Committee will be retained for inspection by the Separate Account's independent auditors. Section 8.02 -- Suspension of Determination of Value. The Committee may declare a suspension of the determination of the value of the net assets of the Separate Account to the extent permitted by the Act. Section 8.03 -- Computation of Net Assets. The value of the net assets of the Separate Account as of any particular time shall be the value of the assets of the Separate Account less its liabilities. Section 8.04 -- The Separate Account's Assets. The Separate Account's assets shall be deemed to include: (a) all cash on hand or on deposit, including any interest accrued thereon, (b) all bills and demand notes and accounts receivable, (c) all securities owned by or on behalf of the Separate Account, - 36 - (d) all stock and cash dividends and cash distributions payable but not yet received on behalf of the Separate Account (when the valuation of the underlying security is being determined ex-dividend), (e) all interest accrued on any interest-bearing securities owned on behalf of the Separate Account (except accrued interest included in the valuation of the underlying security), and (f) all other property of every kind and nature, including prepaid expenses. Section 8.05 -- Valuation of Assets. The value of the Separate Accounts' assets will be determined in accordance with the Act and rules and regulations, releases and orders of the SEC from time to time in effect thereunder. A valuation committee, if established, or any agents appointed by the Committee, will have the duty and responsibility to continuously review the appropriateness of any valuation method established by the Committee and to inform the Committee whenever they determine that any method is no longer appropriate. Section 8.06 -- The Separate Account's Liabilities. The Separate Account's liabilities will be deemed to include (a) all bills and accounts payable, (b) all administrative or other - 37 - expenses accrued which are chargeable to the Separate Account, (c) all contractual obligations for the payment of money or property, (d) all reserves authorized or approved by the Committee for taxes or contingencies, and (e) all other liabilities of whatsoever kind and nature. Section 8.07 -- Determination Binding. Any determination made in good faith and, so far as accounting matters are involved, in accordance with generally accepted accounting principles, by or pursuant to the direction of the Committee, as to the amount of the assets, debts, obligations, or liabilities of the Separate Account, as to the amount of any reserves, liabilities, or expenses set up and the propriety thereof, as to the time of or purpose for creating such reserves, liabilities, or expenses, as to the use, alteration, or cancellation of any reserves, liabilities, or expenses (whether or not any debt, obligation, or liability for which such reserves, liabilities, or expenses shall have been created, shall have been paid or discharged, or shall be then or thereafter required to be paid or discharged), as to the price or closing bid or asked price of any security owned or held by the Separate Account, as to the market value of any security or fair value of - 38 - any other asset of the Separate Account, as to the estimated expense to the Separate Account in connection with purchases of assets, as to the ability to liquidate securities in an orderly fashion, as to the number of Units in the Separate Account outstanding, or as to any other matters relating to the sale, purchase, and/or other acquisition or disposition of securities or Units in the Separate Account, shall be final, conclusive, and binding. The foregoing sentence shall not be construed to protect any member of the Committee or officer or agent of the Separate Account against any liability to the Separate Account or the Contractowners to which such person would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his office or agency; nor shall the foregoing sentence be construed as a waiver of compliance with any provision of the Act or with any rule, regulation, or order promulgated thereunder. Article IX REMUNERATION - 39 - Managers may receive such compensation for their services as may be fixed from time to time by appropriate officers of the Company, and in addition may be reimbursed for reasonable expenses incurred in connection with the discharge of their duties and responsibilities, including but not limited to attendance at regular or special meetings of the Committee or of any committees thereof. No such remuneration may be paid to any person who is also an officer, trustee, or employee of the Company. Article X INDEMNIFICATION Section 10.01 -- Persons Indemnified. In the manner and to the full extent permitted by law, the Account shall indemnify each of the members of its Committee and officers 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 - 40 - 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 Committee member or such an officer, including the advancement of expenses prior to the final disposition of the claim, action, suit or proceeding. Section 10.02 -- Disabling Conduct. "Disabling conduct" means willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of office. Section 10.03 -- Determination. (a) Whether any such liability or expense arose out of disabling conduct shall be determined: (1) by a final decision on the merits (including, but not limited to, a dismissal for insufficient evidence of any disabling conduct) by a court or other body before whom the proceeding was brought, that the person to be indemnified was not liable by reason of disabling conduct; or (2) in the absence of such a decision, a reasonable determination, based upon a review of the facts, that such person was not liable by reason of - 41 - disabling conduct, (A) by the vote of a majority of a quorum of Managers who are neither "interested persons" of the Separate Account within the meaning of the Act nor parties to the action, suit, or proceeding in question or another action, suit, or proceeding on the same or similar grounds ("disinterested, non-party Managers"), (B) by independent legal counsel in a written opinion if such quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Managers of the Separate Account so directs, (C) by majority vote of the Contractowners, or (D) by any other reasonable and fair means not inconsistent with any of the above. (b) The termination of any action, suit, or proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that any liability or expense arose by reason of disabling conduct, or that such person did not act in good faith and in the reasonable belief that such action was in the best interests of the Separate Account, or, with respect to any criminal action or proceeding, that such person had reasonable cause to believe that the conduct was unlawful. - 42 - Section 10.04 -- Expenses Prior to Determination. (a) Any liabilities or expenses of the type described in Section 10.01 of this Article X may be paid by the Separate Account in advance of the final disposition of the claim, action, suit, or proceeding, as authorized by the Committee in the specific case, (1) upon receipt of an undertaking by or on behalf of the Manager or officer to repay the advance unless it shall be ultimately determined that such person is entitled to indemnification and (2) provided that (A) the indemnitee shall provide security for that undertaking, (B) the Separate Account shall be insured against losses arising by reason of any lawful advances, or (C) a majority of a quorum of disinterested, non-party Managers of the Separate Account, or an independent legal counsel in a written opinion, shall determine, based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the indemnitee ultimately will be found entitled to indemnification. (b) A determination pursuant to item (2)(C) of paragraph (a) of this Section 10.04 shall not prevent the recovery from any member of the Committee or officer of any amount advanced to such person as indemnification if such member of the Committee or officer is subsequently determined not to be - 43 - entitled to indemnification; nor shall a determination pursuant to said subparagraph prevent the payment of indemnification if such member of the Committee or officer is subsequently found to be entitled to indemnification. Section 10.05 -- Provisions Not Exclusive. The indemnification provided by this Article X shall not be deemed exclusive of any rights to which those seeking indemnification may be entitled under any law, agreement (including agreements of the nature contemplated by Section 4.15 of these Rules and Regulations), vote of Contractowners, or otherwise. Section 10.06 -- General. (a) No indemnification provided by this Article X shall be inconsistent with the Act or the Securities Act of 1933. (b) Any indemnification provided by this Article X shall continue as to a person who has ceased to be a member of the Committee or an officer of the Separate Account and shall inure to the benefit of the heirs, executors, and administrators of such person. - 44 - Article XI FISCAL YEAR The fiscal year for the Separate Account, unless otherwise ordered by the Committee, shall be the calendar year. Article XII REPORTS The Company shall transmit or file, or cause to be transmitted or filed, such reports, including financial reports, as may be required to be transmitted to each Contractowner or to be filed with governmental agencies pursuant to the Act, the applicable securities and insurance laws of the various states, and the rules and regulations thereunder. Article XIII AMENDMENTS - 45 - These Rules and Regulations may be altered, amended, or repealed, and new Rules and Regulations may be adopted, by a majority vote of the Committee, except that such alteration, amendment, or repeal, and such adoption of new Rules and Regulations, shall be effected in another manner to the extent required by the Act or any other applicable law. * * * * * ADOPTED as of ______________, 1994, pursuant to authorization of the Board of Trustees of the Company. TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA By______________________________________ - 46 - RESOLVED, that the Rules and Regulations of TIAA Separate Account VA-1 presented to this meeting be, and hereby are, adopted as the Rules and Regulations of the Separate Account and that a copy of such Rules and Regulations be filed herewith for the purpose of identification. EX-99.3 4 CUSTODIAL SERVICES AGREEMENT Exhibit 3 CUSTODIAL SERVICES AGREEMENT FOR DOMESTIC ASSETS AGREEMENT dated as of September 19, 1994 between BANKERS TRUST COMPANY ("Bank") and TEACHERS INSURANCE AND ANNUITY ASSOCIATION ("TIAA") on behalf of each investment portfolio of the TIAA Separate Account VA-1 listed on Exhibit A attached hereto, as such Exhibit may be amended from time to time (each such investment portfolio being referred to herein as a "Variable Account"). WHEREAS, the parties desire to arrange for the custody of certain assets of TIAA, specifically those of each Variable Account, by the Bank; NOW THEREFORE, in consideration of the mutual agreement made herein, the Bank and TIAA agree as follows: 1. Establishment of Accounts a. Bank agrees to open and maintain custodial account(s) ("Custody Account(s)") on behalf of the Variable Account, or such other TIAA portfolios or accounts ("TIAA Accounts") as the parties may from time to time agree to include within the scope of this Agreement, for any and all securities or other property acceptable to Bank received by Bank for the account of each Variable Account. b. Bank also hereby agrees to establish and maintain one or more deposit accounts ("Deposit Accounts") for all cash (including cash proceeds from the sale of such securities and similar investments and cash monies hereinafter termed "Cash") received by Bank for the Variable Account. Such Custody and Deposit Accounts will be in the name of the Variable Account or in the name of Bank or Bank's branches, on behalf of the Variable Account. It is hereby agreed that all securities, Cash, or other property now or hereinafter held by Bank hereunder are held for the Variable Account and are to be maintained and disposed of by Bank only for the Variable Account in accordance with the terms and conditions set forth in this Agreement. 2. Location of Assets a. Securities, cash and other property are permitted to be held by (1) Bank at any of its offices wherever located; and (2) domestic securities depositories ("Securities Depositories") selected by Bank with the approval of TIAA on behalf of the Variable Account. b. Such entities described in (2) above shall be deemed to be Sub-Custodians of Bank, and all securities, Cash and other property held by such entities shall, unless otherwise specifically agreed to in writing by Bank and TIAA, be considered for all purposes of this agreement as being held directly by Bank and subject to the terms of this Agreement. c. For purposes of this Agreement, a Securities Depository shall mean a system for the handling of securities of any particular class or series of any particular issuer deposited - 2 - therein which may be treated as a part of a fungible bulk and may be transferred by bookkeeping entry without physical delivery of such securities. With respect to a Securities Depository, such entity shall be a clearing agency registered with the Securities and Exchange Commission ("Commission") under Section 17A of the Securities Exchange Act of 1934 ("Exchange Act"), which acts as a securities depository, or the book-entry system authorized by the U.S. Department of the Treasury and certain federal agencies in accordance with applicable Federal Reserve Board and Commission rules and regulations. 3. Bank's Duties a. Bank will be responsible for the safekeeping, handling, servicing and disposition of all securities, cash or other property of the Variable Account held by it hereunder including, without limitation, any and all of the Variable Account's Cash held by or received by Bank in the name of the Variable Account or Bank's name. b. Bank agrees to be liable and to indemnify and hold TIAA harmless for any and all liability for loss or damage to TIAA with respect to any such securities, Cash and other property, if such liability, loss or damage results from any negligence, misfeasance or misconduct on the part of Bank, its officers or employees, its branches or its affiliates. Bank shall have no liability for any losses or damages occasioned by delay in receipt of notice by Bank of any payment, redemption, proceeding or other transaction regarding, or of any rights exercisable by the Variable - 3 - Account in connection with any securities, Cash or other property with respect to which Bank has agreed to take action. Notwithstanding anything in this Agreement to the contrary, Bank shall not be liable for any indirect, consequential, or special damages, or for any loss resulting from, or caused by, or resulting from the inability or failure of a local clearing and settlement system to settle transactions for reasons beyond the control of Bank. c. Notwithstanding the foregoing, Bank further agrees that it will at all times give the securities or other property of a similar character held by it hereunder the same care as it gives its own property. d. It is understood and agreed that Bank is not under any duty to supervise the investment of, or to advise or make any recommendation to TIAA with respect to, the purchase or sale of any securities or other property. e. In connection with Bank's responsibilities hereunder, it has advised TIAA that it currently has in force, for its own protection, Bankers Blanket Bond Insurance, and it is Bank's present intention to continue to maintain such insurance in substantially the same form and amount. TIAA understands that such policies would apply to certain losses under this agreement. Bank agrees to give TIAA written notice of any reduction in the amount, or material change in the form of such insurance, at least once a year upon request. - 4 - f. Bank shall have responsibility as a bailee for hire under the law of the State of New York with respect to any Sub-Custodian of Bank. Without limiting the generality of the foregoing, Bank will hold TIAA harmless from and indemnify it against any loss that occurs as a result of the negligence, misfeasance or misconduct of Bank, its officers or employees, and any Sub-Custodian of Bank other than a Securities Depository. 4. Receipt and Disbursement of Cash a. Bank shall open and maintain separate Deposit Accounts for the Variable Account, in the name of the Variable Account, subject only to actions by Bank acting pursuant to the terms of this Agreement. Bank shall hold in such accounts, subject to the provisions hereof, all Cash received by it from or for the Variable Account. Cash held by Bank hereunder shall be subject to withdrawal and deposit by Bank from time to time on behalf of the Variable Account for the purpose of consummating the purchases or sales of designated securities upon Bank's receipt of express directions in the form of Authorized Instructions in accordance with the provisions of Section 19. b. Directions to withdraw Cash shall also include, but are not limited to: (1) the debiting or crediting of deposit accounts of the Variable Account held by Bank, pursuant to this Agreement as of settlement date or such other date as specified in such instructions; - 5 - (2) the purchase of securities, options on securities, futures contracts, options on futures contracts, or other property for the Variable Account but only (i) upon the delivery of such securities or other property or evidence of title for such options on securities, futures contracts or options on futures contracts to Bank, registered in the name of TIAA or of the nominee of Bank referred to in Section 10 hereof or in proper form for transfer; (ii) in the case of repurchase agreements for securities entered into between TIAA on behalf of the Variable Account and the Bank, or another bank, or a broker-dealer which is a member of the National Association of Securities Dealers ("NASD") against delivery of the securities either in certificate form or through an entry crediting Bank's account at the Federal Reserve Bank with such securities or against delivery of the receipt evidencing purchase by the Variable Account of securities owned by Bank, another bank, or a broker-dealer along with written evidence of the agreement by Bank, another bank, or a broker-dealer, to repurchase such securities from the Variable Account; or (iii) in the case of a purchase effected through a Securities Depository in accordance with the provisions of Section 7 hereof. (3) the payment of interest, taxes (if any), management or supervisory fees or operating expenses including, without limitation thereto, fees for legal, accounting and auditing services, if any; - 6 - (4) payments in connection with the conversion, exchange or surrender of securities owned or subscribed to by the Variable Account held by or to be delivered to Bank; or (5) other corporate purposes. c. Bank is hereby authorized to endorse and collect all checks, drafts or other orders for the payment of money received by it for the accounts of TIAA. 5. Holding Securities Bank shall hold in separate Custody Accounts for the Variable Account, and physically segregated at all times from those of any other persons, firms or corporations, or any other of TIAA's Accounts, pursuant to the provisions hereof, all securities and other property to be held by it for the Variable Account, except those held in a Securities Depository as described in Section 7 of this Agreement. All such securities are to be held or disposed of by Bank for, and subject at all times to the instructions of, TIAA pursuant to the terms of this Agreement. Bank shall have no power or authority to assign, hypothecate, pledge or otherwise dispose of any such securities and investments, except pursuant to the Authorized Instructions of TIAA on behalf of the Variable Account and only through authorized instructions as set forth in Section 19 of this Agreement. 6. Receipt and Delivery of Securities From time to time TIAA on behalf of the Variable Account will instruct Bank to receive or deliver securities through Authorized - 7 - Instructions as set forth in Section 19. Such instructions may be continuing if agreed to by the parties. a. In accordance with this Agreement, notwithstanding such instructions that relate to settlement date entries, Bank agrees to receive such securities against payment or exchange as directed in any Authorized Instructions and debit cash held in a Deposit Account on behalf of the Variable Account only against satisfactory delivery of securities. b. In accordance with this Agreement, notwithstanding instructions that relate to settlement date entries, Bank agrees to transfer, exchange, or deliver securities held by it hereunder including, but not limited to, the following: (1) for sales of such securities for the Variable Account upon receipt by Bank of payment therefor; (2) when such securities are called, redeemed or retired or otherwise become payable; (3) for examination by any broker selling any securities located in the U.S. in accordance with "U.S. street delivery" custom, provided that in any such case, Bank shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may result from Bank's negligence, misfeasance, or misconduct; - 8 - (4) in exchange for or upon conversion into other securities alone or other securities and cash whether pursuant to any plan or merger, consolidation, reorganization, recapitalization or readjustment, or otherwise; (5) upon conversion of such securities pursuant to their terms into other securities; (6) upon exercise of subscription, purchase or other similar rights represented by such securities; (7) for the purpose of exchanging interim receipts or temporary securities for definitive securities; (8) upon receipt of payment in connection with any repurchase agreement related to such securities entered into by the Variable Account; (9) for delivery in connection with any loans of securities made by the Variable Account, in accordance with the provisions of Section 11 herein; (10) for other purely ministerial exchanges; or (11) for other corporate purposes. As to any deliveries made by you pursuant to Items (2), (4), (5), (6), (7) and (10), securities or cash receivable in exchange therefor shall be deliverable to Bank. c. Actual delivery of securities is to be made by Bank on the contractual settlement date only upon express instructions to such effect, provided that: (1) the securities are on deposit in a Custody Account for the Variable Account; and - 9 - (2) the delivery instructions are received by Bank in timely fashion. d. In addition, Bank will withdraw and deliver securities "Free of Payment" as directed in any such written instructions as set forth in paragraph b of Section 19 herein, provided, however, that under no circumstances are any securities to be withdrawn and delivered by Bank to any individual; such delivery is to be made only to another custodial or other account in the name of TIAA or the Variable Account or for TIAA's benefit. e. Notwithstanding any provision of this Agreement to the contrary, including but not limited to sections 6a, 6b, 6f and 7c, settlement and payment for securities received for the account of the Variable Account and delivery of securities maintained for the account of the Variable Account may be effected in accordance with the customary established securities trading or securities processing practices and procedures in the jurisdiction or market in which the transaction occurs, including, without limitation, delivering securities to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) against a receipt with the expectation of receiving later payment for such securities from such purchaser or dealer. f. Except as specifically otherwise stated in this Agreement, in any and every case where payment for purchase of securities for the account of the Variable Account is made by the Bank in advance of receipt of the securities purchased in the absence of specific written instructions from TIAA on behalf of the - 10 - Variable Account to so pay in advance, Bank shall be liable for any loss to TIAA for such securities to the same extent as if the securities had been received by Bank. g. Bank shall promptly furnish the Variable Account with advice or notices of any receipts or deliveries of securities. h. Bank will not be responsible for any act or omission, or for the insolvency of any broker or agent selected by Bank to effect a transaction for the account of the Variable Account; provided, however, Bank is not negligent in the selection of such broker or agent. 7. Deposit of Variable Account Assets in a Securities Depository Bank may deposit and maintain securities owned by the Variable Account in a Securities Depository subject to the following provisions: a. Bank may keep the Variable Account's securities in a Securities Depository provided that such securities are represented in an account of Bank ("Bank's Account") in a Securities Depository which shall not include any assets of Bank other than assets held as a fiduciary, custodian or otherwise for customers; b. The records of Bank will identify those securities of the Variable Account held in a Securities Depository as being held in book-entry on behalf of the Variable Account; c. Bank shall pay for securities purchased for the account of the Variable Account upon (i) receipt of advice from the Securities Depository that such securities have been transferred to Bank's Account, and (ii) the making of an entry on the records of - 11 - Bank to reflect such payment and transfer for the account of the Variable Account. Bank shall transfer securities sold for the account of the Variable Account upon (i) receipt of advice from the Securities Depository that payment for such securities has been transferred to Bank's Account, and (ii) the making of an entry on the records of Bank to reflect such transfer and payment for the account of the Variable Account. d. Anything to the contrary in this Agreement notwithstanding, the Bank shall be liable to TIAA for the benefit of the Variable Account for any loss or damage to the Variable Account resulting from the use of Securities Depositories by reason of any negligence, misfeasance or misconduct of the Bank or any of its agents or of any of its or their employees or from failure of the Bank or any such agent to enforce effectively such rights as it may have against the Securities Depository; at the election of TIAA, on behalf of the Variable Account, it shall be entitled to be subrogated to the rights of the Bank with respect to any claim against the Securities Depository which the Bank may have relating to the assets of the Variable Account, if the Bank (i) refuses to enforce such claim, (ii) takes no action with respect to such claim within 60 days after the loss resulting in such claim is discovered by Bank, or (iii) becomes insolvent, or the equivalent to an insolvency proceeding is commenced against the Bank. 8. Segregated Account Bank shall upon receipt of Authorized Instructions from TIAA on behalf of the Variable Account establish and maintain a - 12 - segregated account or accounts for and on behalf of the Variable Account, into which account or accounts may be transferred Cash and/or securities, including securities maintained by Bank in a Securities Depository pursuant to Section 7 hereof: (a) in accordance with the provisions of any agreement among TIAA on behalf of the Variable Account, Bank and a broker-dealer registered under the Exchange Act and a member of the NASD (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or the Commodity Futures Trading Commission or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Variable Account; (b) for purposes of segregating cash or government securities in connection with options purchased, sold or written by the Variable Account or commodity futures contracts or options thereon purchased or sold by the Variable Account; (c) for the purposes of compliance by the Variable Account with the procedures required by Investment Company Act Release No. 10666, or any subsequent release or releases of the Commission relating to the maintenance of segregated accounts by registered investment companies; and (d) for other corporate purposes, but only upon receipt of Authorized Instructions from TIAA on behalf of the Variable Account. TIAA on behalf of the Variable Account shall be solely responsible for negotiating the terms of any agreement with a broker-dealer or other party pursuant to this section. - 13 - 9. Income and Principal a. Income on securities and cash held by Bank hereunder will be credited automatically to a Deposit Account or Custody Account upon receipt and in accordance with local market practices. Principal received in connection with securities which mature or are redeemed shall be credited to a Deposit Account or a Custody Account on the date such principal is received. All collections of income or principal paid or distributed with respect to any securities, Cash or other property shall be made at the risk of the Variable Account, provided however, that Bank takes reasonable steps to collect such income or principal and there is no negligence, misfeasance or misconduct on the part of Bank. b. Unless instructed otherwise, collections of income in foreign currency are to be converted into United States dollars, and in effecting such conversion Bank may use such methods or agencies as it may see fit including its own facilities at prevailing rates. All risk and expense incident to such collection of income regardless of the particular currency or currencies involved is for the account of the Variable Account, and Bank shall have no responsibility for fluctuations in exchange rates affecting such conversion. c. Unless and until Bank receives written instructions to the contrary, it shall: - 14 - (1) present for payment all coupons and other income items held by it for the account of the Variable Account which call for payment upon presentation and hold the cash received by it upon such payment for the appropriate account; (2) collect interest and cash dividends received, with notice to TIAA, for the Variable Account; (3) hold for the Variable Account all stock dividends, rights and similar securities issued with respect to any securities held by Bank hereunder, and with respect to stock dividends, it is hereby authorized to sell any fractional interest and credit the Deposit Account with the proceeds thereof; and (4) with respect to any dividend reinvestment plan in which the Variable Account participates, and as to which Bank has been so notified, it agrees to acquire and hold hereunder the appropriate number of shares issuable under such plan in lieu of the cash dividend, except that fractional shares may be sold in the case of shares physically held, unless the Bank receives appropriate instructions from TIAA to do otherwise. d. Any dividends or interest automatically credited to the Deposit Accounts which are not subsequently collected by Bank from the corporation or other issuer making such payment will be reimbursed to Bank and Bank may debit the Deposit Accounts for this purpose. 10. Registration Securities which are eligible for deposit in Securities Depositories may be maintained in Bank's Account with such - 15 - Depositories. Subject to the aforesaid provision, Bank will register all securities (except such as are in bearer form) in the name of its nominee or the nominee of the Securities Depository, unless alternate registration instructions are furnished by TIAA. Bank will retain and have available at all times for inspection by regulatory authorities evidence that its nominee is registered as required by the laws and regulations of the United States and the State of New York, as appropriate. All such agents shall be appointed in conformance with Section 20. TIAA on behalf of the Variable Account agrees to hold such nominee and Bank harmless from any liability as a holder of record of such securities and TIAA will have the same responsibility as if the securities were registered in the name of the Variable Account. The foregoing shall not relieve Bank of its responsibilities or liabilities hereunder. 11. Provisions Relating to Securities Lending a. From time to time TIAA on behalf of the Variable Account shall direct Bank by Authorized Instructions to lend securities held by Bank in its Custodial Account to borrowers ("Borrowers"). Such securities shall be termed the "Loaned Securities". This Section shall apply to and shall be controlling solely with respect to such Loaned Securities and lending services relating thereto. Loaned Securities which are returned by the Borrower to Bank shall upon receipt thereof constitute securities and property held by Bank to which the other provisions of this Agreement shall be applicable unless otherwise provided herein. - 16 - b. From time to time TIAA on behalf of the Variable Account will provide Bank with Authorized Instructions regarding the delivery or return of Loaned Securities. In this connection, Bank is authorized and directed, all in accordance with such instructions to promptly: (1) Deliver the Loaned Securities to the Borrower for the Variable Account, against receipt by Bank of collateral in respect of such Loaned Securities (the "Collateral"), in the form and amount specified in such instructions. Bank shall promptly place the specified Collateral in a Deposit or Custody Account and promptly notify TIAA on behalf of the Variable Account of such transaction. (2) Receive Loaned Securities being returned by Borrower in the form and amount specified in the Authorized Instructions. Upon satisfactory delivery of such Loaned Securities, Bank shall debit the defined Collateral from TIAA's Deposit Account in accordance with such instructions and pay or redeliver the specified Collateral to Borrower and promptly notify TIAA on behalf of the Variable Account of such transaction. (3) Release to Borrower any excess Collateral or receive Collateral from Borrower as specified in instructions issued by TIAA on behalf of the Variable Account. Bank shall promptly transmit the specified Collateral to be released, or accept delivery and transmit Collateral received to a Deposit Account, as the case may be, and notify TIAA on behalf of the Variable Account of such transmittal or receipt. Bank shall debit - 17 - or credit the defined Collateral from the Deposit Account, as appropriate. c. Where Bank has received Authorized Instructions from TIAA indicating that TIAA has previously received adequate Collateral covering contemplated loans, Bank is authorized to deliver Loaned Securities "Free of Payment" upon express direction from TIAA with respect to designated Loaned Securities. A list of authorized Borrowers who are eligible to receive such Loaned Securities Free of Payment will be signed by any two Authorized Officers, with the title of Chairman, President, Executive Vice President and Treasurer, or by any one of these officers together with any TIAA officers with the title of Senior Vice President or Vice President, in accordance with paragraph b. of Section 19. d. TIAA on behalf of the Variable Account shall also provide Bank with written instructions regarding Loaned Securities for which TIAA has previously received adequate Collateral and their delivery "Free of Payment" to designated Borrowers in accordance with paragraph c. hereof or the return of Loaned Securities. Bank shall be authorized, in accordance with such written instructions, to: (1) Deliver the Loaned Securities, "Free of Payment" to the listed Borrower, and (2) Receive Loaned Securities specified in such instructions. Bank shall promptly advise TIAA on behalf of the Variable Account of the completion of any such specified transaction. - 18 - e. Bank agrees to receive from the Borrower any income, dividends, and/or distributions made by the issuer with respect to the Loaned Securities, and to credit the Deposit Account or Custody Account when such amounts and properties are received from the Borrower in accordance with the provisions of Section 9. f. Bank shall be responsible for the Collateral and Loaned Securities in its possession and for the handling and servicing of such property in accordance with written instructions. Bank is hereby designated to acquire possession of Collateral on behalf of the Variable Account and to act as bailee or financial intermediary (as defined in the Uniform Commercial Code of the State of New York, as amended the "UCC"), as the case may be, to enable TIAA on behalf of the Variable Account to perfect and maintain perfection of a security interest in such Collateral, pursuant to the provisions of the UCC or other applicable laws, as amended from time to time. It is understood that Bank shall not be responsible for obtaining or perfecting TIAA's security interest in the Collateral other than possessing and handling the Collateral in accordance with the preceding sentence and the instructions of TIAA regarding delivery and receipt, and shall not be responsible to advise TIAA of the steps necessary to obtain or perfect such interest or for effecting any statutory filing, unless mutually agreed upon at such time. Under no circumstances and in no event shall Bank have or be charged with any responsibility or liability for (i) the credit worthiness or continued credit worthiness of any Borrower, (ii) the adequacy or value of any Collateral in - 19 - connection with any loan of securities, (iii) the failure of the Borrower to pay any income, dividend and/or distribution made by the issuer on the Loaned Securities, or (iv) any act taken by it in accordance with the direction of the Variable Account, or omitted by it in the absence of such direction. g. Bank shall report as assets of its Custody Account property which is Loaned Securities that have previously been delivered to Borrowers and hence are not in Bank's possession. Bank shall have no responsibility or liability whatsoever with respect to such Loaned Securities and shall perform no services with respect thereto, except as specifically set forth herein. h. Bank shall provide to TIAA a Report of Assets Held which shall include all Loaned Securities (whether or not such securities are in the possession of Borrowers) designated in such report to indicate that the same is reported on a memorandum entry basis or on such other basis as shall be mutually agreed upon. Bank shall also provide to TIAA all information and data specified in paragraphs a., b., c. and f. of Section 14, and such further information concerning the Loaned Securities and Collateral as TIAA shall reasonably request, so that TIAA may properly account for and segregate such property. Bank shall furnish TIAA with all such other reports and information as TIAA shall reasonably request. Bank shall furnish TIAA with all reports and information pursuant to this Amendment within a reasonable time after request therefor. 12. Voting and Other Action No person may vote (other than pursuant to Authorized Instructions) any securities held by Bank hereunder. Bank will - 20 - promptly transmit to TIAA, or direct to be transmitted to TIAA, all notices, proxies and proxy soliciting materials with respect to securities held by it hereunder, which proxies will be executed by the registered holder thereof if registered otherwise than in the name of TIAA or the Variable Account, but without indicating the manner in which such proxies are to be voted. Bank will promptly transmit to TIAA all written information (including, without limitation, pendency of calls and maturities of securities and expirations of rights in connection therewith) received by it from the issuers of securities or other property held by it hereunder. With respect to tender or exchange offers, Bank will promptly transmit to TIAA all written information received by it from issuers of the securities or other property whose tender or exchange is sought and from the party (or its agents) making the tender or exchange offer. 13. Fees and Expenses Bank will be compensated for the services rendered under this Agreement and reimbursed for out-of-pocket expenses through arrangements negotiated between TIAA on behalf of the Variable Account and Bank from time to time. Bank will also be compensated for reasonable counsel fees incurred in the performance of its duties hereunder, provided, however, that Bank gives TIAA written notice in advance of the incurrence of such fees. TIAA acknowledges its responsibility as a principal for all of its obligations to Bank arising under or in connection with this Agreement. - 21 - 14. Records, Affidavits and Reports With respect to the securities and other property held by Bank hereunder, Bank agrees: a. To maintain records sufficient to verify information TIAA is required to report in Schedule D of the Annual Statement Blank of the Insurance Department of the State of New York ("Insurance Department") as amended from time to time, which records will consist of a list of such securities showing a complete description of each issue, including the number of shares and par value of securities so held at the end of such month and such other information as may be agreed to by Bank and required by such report or any other report required by the Insurance Department; b. To maintain records regarding transactions and related activities described in Sections 4, 5, 6, 7, 8, 9, 10 and 11 sufficient to verify the accuracy of regular monthly and other reports and income received on such securities and other property; c. To maintain records sufficient to verify information relating to Cash held by Bank; d. To create, maintain and preserve all reports and records relating to Bank's activities and obligations listed in Exhibit B attached hereto, as such Exhibit may be amended from time to time under this Agreement as provided for in this Section in such manner as will meet the requirements of the 1940 Act, including Section 31 thereof and Rules 31a-1 and 31a-2 and the Bank agrees that such reports and records are the property of the - 22 - Variable Account and will be surrendered to the Variable Account promptly upon request; e. To permit examination of such books and records as provided for in this Section at any time or from time to time during business hours as provided for in Section 16 by representatives or designees of the Commission, and to promptly furnish to the Commission or its designees true, correct, complete and current hard copy of any or all or any part of such books and records; f. To furnish the Variable Account with the appropriate affidavit(s) in such form acceptable to Bank as may be submitted to Bank by TIAA on behalf of the Variable Account from time to time which is acceptable to the Insurance Department or any other state or federal governmental agency having jurisdiction over TIAA, in order for the securities and other property referred to in such affidavit(s) to be recognized as admitted assets of TIAA and in order for TIAA to comply with any other requirements of such Department or agencies; g. To furnish upon request the Variable Account with any report obtained by Bank on a Securities Depository's system of internal accounting control; and to furnish upon request, the Variable Account with such reports on Bank's system of internal accounting control as TIAA on behalf of the Variable Account may reasonably require; h. To furnish all such other reports and information as shall be reasonably requested by TIAA on behalf of the Variable - 23 - Account relating to all property held by Bank on the Variable Account's behalf pursuant to the terms of this Agreement; and i. That all such information, records, reports, and affidavits maintained or held by Bank pursuant to this Section remain the property of Variable Account and copies of all such information which are reasonably available will be surrendered to Variable Account within a reasonable time after request therefor. j. The specific records, reports and affidavits required in a. through i. above shall be set forth in a separate document which may be modified from time to time by agreement of the parties to this Agreement. 15. Reconciliation of Statements or Advice TIAA agrees that it will reconcile statements and advice sent by mail or electronic media and that all such statements and advice will be considered final sixty days from the date of dispatch unless TIAA has notified Bank orally or in writing regarding any questions, problems or objections. 16. Access a. During the course of Bank's regular banking hours, any duly authorized officer, employee or agent of TIAA, any independent accountants selected by TIAA, any member of the Insurance Department, and any representative or designee of the Commission or other governmental agencies having jurisdiction over TIAA, shall be entitled to examine, on Bank's premises, securities and records of all securities, Cash and other property held by Bank, its branches, or other entities hereunder and its books and records pertaining to its actions under this Agreement, but only - 24 - upon furnishing Bank with one day notice of such examination signed by a duly authorized officer of TIAA. Bank's books and records used in connection with TIAA's indirect participation in a depository or other entities, to the extent that they relate to depository, custodial or other services rendered to TIAA by Bank, pursuant to this Agreement, shall at all times during Bank's regular business hours be open to inspection by duly authorized employees or agents of TIAA, or governmental agencies having jurisdiction over TIAA, but only upon furnishing Bank with one day's notice to that effect as specified in the preceding sentence. b. Upon receiving a request from TIAA, Bank agrees that it will to the extent consistent with its Agreement with each Subcustodian take such steps as are within its power to enable any of the aforementioned officers, accountants, employees, agents and members of TIAA, the Insurance Department, the Commission or other governmental agencies having jurisdiction over TIAA, to inspect and examine securities and other property of TIAA and books and records of such property not located on Bank's premises, which property and records are held on TIAA's behalf by its branches or other entities pursuant to this Agreement. 17. Exemption from Income Tax a. TIAA is exempt from the payment of United States income tax. Documentation evidencing TIAA's tax exempt status has heretofore been furnished by TIAA to the Bank. Bank is hereby authorized and empowered as TIAA's agent to sign in its name any certificate of ownership or other certificate which is or may be - 25 - required by any regulations of the Internal Revenue Service, the laws of any state, or other authority of the United States. b. To enable Bank properly to execute the certificate described in a. above, TIAA hereby certifies that TIAA is a corporation duly organized and existing under the laws of the State of New York, having its principal place of business in the City of New York. TIAA's Employer Identification No. is 13-1624203. 18. Amendments No amendment or change to this Agreement shall be authorized by TIAA on behalf of the Variable Account without the written consent signed by an officer with the title of either Chairman or President and any officer with the title of Executive Vice President or Treasurer and accepted in writing by any Vice President or Managing Director of Bank. 19. Authorization a. Except as otherwise provided for in this Agreement, written instructions by TIAA hereunder shall be signed by any two of its Authorized Officers specified in a separate list for this purpose which will be furnished to Bank from time to time signed by the Treasurer or any Associate Treasurer or Assistant Treasurer and by the Secretary or any Assistant Secretary as certified under the corporate seal of TIAA. Such instructions are referred to herein as "Authorized Instructions". Upon receipt of written instructions pursuant to paragraph b., below accompanied by a detailed description of procedures approved by such instructions, Authorized Instructions may include communications effected directly between electro-mechanical or electronic devices provided that TIAA and - 26 - Bank are satisfied that such procedures afford adequate safeguards for the Variable Account's assets. Such satisfaction shall be evidenced when TIAA has given instructions and Bank has acted upon such instructions given by such device. b. As provided for in Sections 11.c. and 19.a. herein or in connection with the delivery of securities or other property "Free of Payment," written instructions shall be acted upon only if received in writing manually signed by any two of such Authorized Officers with the title Chairman, President, Executive Vice President, or Treasurer, or by any one of those officers together with any TIAA officer with the title Senior Vice President or Vice President. c. Bank shall not be liable for any action taken in good faith upon Authorized Instructions or upon written instructions pursuant to b., above, and may rely on such documents that it in good faith believes to be validly executed. Bank may assume, in the absence of written notice to the contrary from TIAA, that the authority of each person designated an Authorized Officer pursuant to this section has not been revoked. 20. Appointment of Agents The Bank may at any time or times in its discretion appoint (and may at any time remove) any other bank or trust company which is itself qualified under the 1940 Act, as amended, to act as a custodian, as its agent to carry out such of the provisions of this Agreement as the Bank may from time to time direct; provided, however, that the appointment of any agent shall not relieve the Bank of its responsibilities or liabilities hereunder. - 27 - 21. Notices a. Confirmations and advices of all types relating to the securities, cash or other property held by Bank hereunder will be provided to the particular divisions of TIAA on behalf of the Variable Account indicated in a separate listing which the treasurer will furnish to Bank from time to time. b. Written notices hereunder shall be hand-delivered, delivered by overnight courier or mailed first class, addressed, if to Bank, at 16 Wall Street New York, New York 10015, or if to TIAA, at 730 Third Avenue, New York, New York 10017, Attention: Treasurer. Written notice of (i) termination of this Agreement, (ii) termination of Bank's participation in DTC or any other securities depository, (iii) changes in Bank's designation of any of its branches or Sub-Custodians having custody of any of the Variable Account's assets under this Agreement, or (iv) changes in Bank's insurance coverage, shall be sent by hand or overnight courier; provided, however, that any such notice pursuant hereto shall not constitute approval by TIAA of any such termination, change or designation nor shall such notice relieve Bank of its responsibilities hereunder. c. Any notice so addressed, delivered or mailed shall be deemed to be given upon receipt by the other party. 22. Termination or Assignment This Agreement may be terminated by either party on sixty days' written notice sent by certified mail. Upon any termination of this Agreement, upon appointment of a successor to Bank or if a - 28 - vote of the participants of TIAA to dissolve or to function without a custodian of its cash, securities or other property has occurred, Bank shall deliver Cash, securities or other property to a bank or trust company selected by TIAA on behalf of the Variable Account having an aggregate capital, surplus and undivided profits, as shown by its last published report of not less than twenty-five million dollars ($25,000,000) as a custodian for TIAA to be held under a custodial agreement with that institution; provided, however, that Bank shall not be required to make any such delivery or payment until full payment shall have been made by TIAA on behalf of the Variable Account of all liabilities constituting a charge on or against the properties then held by Bank or on or against it, and until full payment shall have been made to Bank of all fees, compensation, costs and expenses, subject to the provisions of Section 13 of this Agreement. This Agreement may not be assigned by Bank without the consent of TIAA, authorized or approved by a resolution of TIAA's trustees. 23. Effect of Headings The Section headings herein are for convenience only and shall not affect the construction thereof. - 29 - 24. Governing Law This Agreement shall be governed by and construed in accordance with the law of the State of New York. IN WITNESS WHEREOF, the undersigned have signed this Agreement as of the date first written above. TEACHERS INSURANCE AND ANNUITY ASSOCIATION, ON BEHALF OF EACH VARIABLE ACCOUNT LISTED ON EXHIBIT A BY: /s/ Thomas W. Jones ----------------------------- Thomas W. Jones President BY: /s/ Richard J. Adamski ----------------------------- Richard J. Adamski Vice President and Treasurer BANKERS TRUST COMPANY BY: /s/ Edward F. Lynch ----------------------------- Edward F. Lynch, V.P. BY: /s/ Diane I. Wiley ----------------------------- Diane I. Wiley, V.P. - 30 - EXHIBIT A Investment portfolios of TIAA Separate Account VA-1 included within this Agreement (the Variable Accounts): 1. Stock Index Fund - 31 - EXHIBIT B Information and records the bank will provide, maintain, and preserve for each investment portfolio of the TIAA Separate Account VA-1 for which you may be appointed custodian, and to provide such information to TIAA, and/or the appropriate regulatory authorities: INFORMATION AND RECORD REQUIREMENT FREQUENCY OF DELIVERY 1. Statement of Holdings a. Daily, Monthly 2. Securities in lien position b. Monthly 3. Location of securities c. Monthly 4. Securities out for transfer d. Upon request 5. Actual securities settlement date e. Upon request 6. Certification number (if applicable) f. Upon request - 32 - EX-99.4 5 INVESTMENT MANAGEMENT AGREEMENT Exhibit 4 INVESTMENT MANAGEMENT AGREEMENT FOR TIAA SEPARATE ACCOUNT VA-1 This Agreement made this 15th day of September, 1994, by and among: Teachers Insurance and Annuity Association of America ("TIAA"), a non-profit New York insurance company; TIAA Separate Account VA-1 (the "Separate Account"), a separate account of TIAA established pursuant to the New York State Insurance Law; and Teachers Advisors, Inc. ("Advisors") a Delaware corporation. WITNESSETH; WHEREAS, TIAA has established the Separate Account to segregate assets funding the variable benefits provided by the Teachers Personal Annuity, an individual, flexible premium, deferred annuity, as well as by other contracts that may be offered by TIAA in the future; and WHEREAS, the Separate Account is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "Act"), and currently consists of a single investment portfolio (known as the Stock Index Account), and may consist of additional investment portfolios in the future (collectively, with the Stock Index Account, referred to herein as "Portfolios"); and -1- WHEREAS, the assets of the Separate Account are and will be owned by TIAA, its successors and assigns, although held separately from the other assets of TIAA; WHEREAS, Advisors will be engaged principally in the business of rendering investment management services and is registered as an investment advisor under the Investment Advisors Act of 1940; WHEREAS, the Separate Account desires to retain Advisors to render investment management services to the Separate Account in the manner and on the terms set forth herein; WHEREAS, the Management Committee of the Separate Account (the "Management Committee") believes that Advisors' expertise and business contacts are and will be of material benefit to the Separate Account in employing and supervising any sub-advisor of a Portfolio ("Sub-Advisors"), in the event that one or more Sub-Advisors are so employed in the future; and WHEREAS, Advisors is willing to provide investment management services to the Separate Account in the manner and on the terms set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, TIAA, the Separate Account, and Advisors hereby agree as follows: 1. DUTIES OF ADVISORS. TIAA and the Separate Account hereby employ Advisors to act as the investment manager for the Separate Account. Advisors hereby agrees, subject to the -2- supervision of the Management Committee, for the period and on the terms and conditions set forth in this Agreement: to act as the investment manager for the Separate Account and to manage the investment and reinvestment of the assets of each Portfolio of the Separate Account for the period and on the terms and conditions set forth in this Agreement. In taking any action hereunder, Advisors shall always be subject to, and shall follow at all times (i) any restriction of the Separate Account's Rules and Regulations, as amended from time to time, (ii) the applicable provisions of the Act and the rules thereunder, (iii) the statements relating to each Portfolio's investment objectives, policies, and restrictions as the same are set forth in the registration statement for the Separate Account and the variable contracts then currently effective under the Securities Act of 1933 (the "Registration Statement"), and (iv) any other provisions of state and federal law applicable to Advisors in connection with its duties hereunder, including any applicable provisions imposed by state insurance regulations or by the Internal Revenue Code of 1986, as amended, and regulations thereunder. (a) INVESTMENT MANAGEMENT SERVICES. In performing the duties stated in paragraph 1 above, Advisors will regularly provide each Portfolio of the Separate Account with such investment research, advice, and management as the Management Committee or officers of the Separate Account may from time to time consider necessary for the proper management of each Portfolio. Advisors will furnish continuously an investment program and will conduct a -3- continuous program of evaluation of assets in each Portfolio. In this connection, Advisors will determine which securities or other investments shall be purchased, sold, or exchanged and what portion of the assets of each Portfolio shall be held in the various securities or other investments in which the Portfolio may invest. Should the Management Committee at any time, however, make any definite determination as to investment policy for a Portfolio and notify, in writing, Advisors thereof, Advisors shall be bound by such determination for the period, if any, specified in such notice or until similarly notified that such determination has been revoked. In addition, Advisors will determine the value of each Portfolio's assets and liabilities and will provide the Separate Account with such valuations and with all statistical information with respect to investments of each Portfolio and such periodic and special reports and information as the Management Committee of officers of the Separate Account may reasonably request. Advisors shall take, on behalf of each Portfolio, all actions which it deems necessary to implement the investment objectives, policies, and restrictions of the Portfolio, determined as provided above, and in particular shall place orders for the purchase or sale of securities and other investments for the Portfolio with brokers or dealers selected by Advisors. (b) SUB-CONTRACTING. Notwithstanding any other provision hereof, Advisors, with the approval of the owners of contracts with interests in the Separate Account to the extent required by applicable law and the Management Committee, may -4- contract with one or more Sub-Advisors to perform any of the investment management services required of Advisors; provided, however, that the compensation of such Sub-Advisors will be the sole responsibility of Advisors and the duties and responsibilities of such Sub-Advisors shall be as set forth in a written agreement. TIAA shall provide Advisors, at Advisors' expense, the staff, facilities, and services necessary to meet Advisors' obligations hereunder. TIAA's providing of staff, facilities, and services for such purpose shall in no way diminish any obligation or liability of Advisors hereunder. Advisors shall exercise reasonable care in recommending, monitoring, and supervising the performance of such Sub-Advisors and any other sub-contractors serving pursuant to this paragraph 1(b), but Advisors shall not otherwise be liable or legally responsible for the conduct of any Sub-Advisors. In this connection, it shall be a particular responsibility of Advisors to evaluate the investment performance of Sub-Advisors and that of potential Sub-Advisors, and Advisors shall supply the Management Committee with such statistical and research data bearing on each Portfolio's performance and that of any Sub-Advisors and potential Sub-Advisors as the Management Committee and Advisors deem necessary. It shall also be a particular responsibility of Advisors to supervise and monitor (i) the practices of any Sub-Advisors in placing orders and selecting brokers and dealers to effect portfolio transactions, and (ii) the services provided by such brokers and dealers. -5- 2. (a) PURCHASE AND SALE OF ASSETS. Nothing in this Agreement shall preclude the combining of orders for the sale or purchase of securities or other investments by two or more Portfolios of the Separate Account or by the Separate Account and other separate accounts or other accounts (collectively, "accounts") managed by Advisors, provided that Advisors does not favor any account over any other account and provided further that any purchase or sale orders executed contemporaneously shall be allocated in a manner that Advisors deems to be equitable to all accounts involved and, under normal circumstances, such transactions will be (i) done on a pro rata basis substantially in proportion to the amounts ordered by each account, (ii) entered into only if, in Advisors' opinion, the trade is likely to produce a benefit for the Portfolio involved, and (iii) is at a price which is approximately the same for all parties involved. Neither Advisors, nor any of its directors, officers, or personnel, nor any person, firm, or corporation controlling, controlled by, or under common control with it shall act as a principal or receive any commission as agent in connection with the purchase or sale of assets for a Portfolio, except as may be permitted under applicable law. (b) BROKERAGE FEES. In placing orders for the purchase or sale of securities or other investments for a portfolio, in the name of a Portfolio or its nominees, Advisors shall use its best efforts to obtain for the Portfolio the most favorable price and best execution available, considering all of the circumstances, and -6- shall maintain records adequate to demonstrate compliance with this requirement. Notwithstanding the foregoing, however, Advisors may, to the extent authorized by Section 28(e) of the Securities Exchange Act of 1934, cause the Separate Account to pay a broker or dealer that provides research or other brokerage services to Advisors and the Separate Account with respect to the Portfolio an amount of commission for effecting a portfolio transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if Advisors determines in good faith that such amount of commission is reasonable in relationship to the value of such services, viewed in terms of that particular transaction or Advisors's overall responsibilities to the Portfolio or its other advisory clients. To the extent authorized by such Section 28(e) and the Management Committee, Advisors shall not be deemed to have acted unlawfully or to have breached any duty created by this Agreement or otherwise solely by reason of such action. 3. COMPENSATION OF ADVISORS. Except as hereinafter provided, for the services rendered and expenses assumed by Advisors while this Agreement is in effect, the Separate Account shall pay to Advisors on each Valuation Day (as that term is defined in the Registration Statement), a fee based on an annual rate of thirty one-hundredths of one percent (0.30%) of the net assets of the Stock Index Account. -7- The fees payable to Advisors by the Separate Account hereunder shall be reduced by any tender solicitation fees or similar payments received by Advisors, or any affiliated person of Advisors, in connection with the tender of investments of a Portfolio (less any direct expenses incurred by Advisors, or any affiliated person of Advisors, in connection with obtaining such fees or payments). Advisors shall use its best efforts to recapture all available tender offer solicitation fees and similar payments in connection with tenders of the securities or other investments of a Portfolio, provided, however, that Advisors shall not be required to register as a broker-dealer for this purpose. Advisors shall advise the Management Committee of any fees or payments of whatever type that it may be possible for Advisors to receive in connection with the purchase or sale of securities or other investments for a Portfolio. 4. NON-EXCLUSIVITY. TIAA and the Separate Account agree that the services to be provided by Advisors hereunder are not to be deemed exclusive and Advisors is free to act as investment manager to other investment companies and as fiduciary for other managed accounts affiliated with TIAA. Advisors shall, for all purposes herein, be deemed to be an independent contractor and shall, unless otherwise provided or authorized, have no authority to act for or represent TIAA or the Separate Account in any way or otherwise be deemed an agent of TIAA or the Separate Account other than in furtherance of its duties and responsibilities as set forth -8- in this Agreement, which shall be deemed to include the voting of proxies for shares held by a Portfolio at Advisors' discretion on behalf of the Separate Account. 5. BOOKS AND RECORDS. Advisors will maintain all books and records required for the Separate Account with respect to each Portfolio's investments, to the extent not maintained by the custodian or any Sub-Advisors. Advisors agrees that all books and records which it maintains for the Separate Account are the Separate Account's property,and, in the event of termination of this Agreement for any reason, Advisors agrees promptly to return to the Separate Account, free from any claim or retention of rights by Advisors, all records relating to the Separate Account. Advisors also agrees, upon request of the Separate Account, promptly to surrender such books and records to the Separate Account or, at the Separate Account's expense, to make copies thereof available to the Separate Account or to make such books and records available for inspection by representatives of regulatory authorities or other persons reasonably designated by the Separate Account. Advisors further agrees to maintain, prepare, and preserve such books and records in accordance with the Act and rules thereunder, including but not limited to, Rules 31a-1 and 31a-2. Advisors will use records or information obtained under this Agreement only for the purposes contemplated hereby, and will not disclose such records or information in any manner other than -9- as expressly authorized by the Management Committee or officers of the Separate Account, or unless disclosure is expressly required by applicable federal or state regulatory authorities or by this Agreement. Advisors shall supply all information requested by any insurance regulatory authorities to determine whether all insurance laws and regulations are being complied with. 6. LIABILITY. Advisors will not be liable for any error of judgment or mistake of law or for any loss suffered by a Portfolio in connection with any investment policy established by the Separate Account for the purchase, sale, or redemption of any securities or other investments at the direction of the Management Committee. Nothing herein contained shall be construed to protect Advisors against any liability resulting from the willful misfeasance, bad faith, or gross negligence of Advisors in the performance of its obligations and duties or from reckless disregard of its obligations and duties under this Agreement or by virtue of violation of any applicable law. 7. (a) EXPENSES OF THE SEPARATE ACCOUNT. As between the Separate Account and Advisors, the following expenses shall be borne exclusively by the Separate Account: (i) brokerage commissions and transfer taxes and any similar fees and charges incurred in connection with the acquisition, disposition, lending, or borrowing of Portfolio securities or other investments; -10- (ii) any and all other state, federal, local, or foreign governmental fees and taxes (including any insurance, transfer, franchise, or income taxes) payable by the Separate Account, and all corporate or filing fees payable by the Separate Account to any governmental entity or agency; and (iii) interest and any other cost related to borrowings by the Separate Account. (b) EXPENSES OF ADVISORS. Except as provided in paragraph 7(a) above, Advisors shall be responsible for all expenses related to management of the investment of the assets of each Portfolio, which expenses shall include, not be limited to: (i) the cost of obtaining quotes necessary for valuing the assets and related liabilities for each Portfolio; (ii) the cost of obtaining quotes necessary for valuing the assets and related liabilities for each Portfolio; (iii) the charges and expenses of the custodian(s) for the Portfolios; (iv) the charges and expenses of outside legal counsel retained with respect to the Separate Account's investment-related activity; and (v) the costs and expenses of any Sub-Advisor or other sub-contractor retained by Advisors pursuant to paragraph 1(b) of this Agreement. -11- 8. DURATION AND TERMINATION OF THE AGREEMENT. (a) This Agreement shall become effective with respect to the Stock Index Account as of the date first written above. It shall become effective as to any subsequently created Portfolio when it has been approved by the Management Committee (including a majority of members thereof who are neither parties to this Agreement nor interested persons of any such party) cast in person at a meeting called for the purpose of voting on such approval specifically for such Portfolio. "Subsequently created Portfolio" means a Portfolio created subsequent to the initial effective date of this Agreement. (b) This Agreement shall continue in effect with respect to the Stock Index Account for two years from the date of execution and thereafter from year to year, but only so long as such continuance is specifically approved at least annually by (i) the Management Committee, or by the vote of a majority of the outstanding shares of the Portfolio, and (ii) a vote of a majority of those members of the Management Committee who are neither parties to this Agreement nor interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval. As to each subsequently created Portfolio, this Agreement shall continue in effect with respect to that Portfolio for two years and thereafter from year to year, but only so long as such continuance is specifically approved at least annually in the manner described in (i) and (ii) above. -12- (c) This Agreement may be terminated with respect to a Portfolio, without the payment of any penalty, by the Management Committee or by vote of a majority of the outstanding shares of the Portfolio on sixty days' written notice to Advisors, or by Advisors on sixty days' written notice to the Separate Account. This Agreement shall automatically terminate in the event of its assignment. 9. DEFINITIONS. The terms "assignment", "interested person" and "majority of the outstanding shares", when used in this Agreement, shall have the respective meanings specified under the Act and rules thereunder. 10. FURTHER ACTIONS. Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof. 11. GOVERNING LAW. The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of New York, as at the time in effect, and the applicable provisions of the Act and rules thereunder or other federal laws and regulations which may be applicable. To the extent that the applicable law of the State of New York, or any of the provisions herein, conflict with the applicable provisions of the Act and rules thereunder or other federal laws and regulations which may be applicable, the latter shall control. -13- 12. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall be deemed one instrument. 13. NOTICES. All notices and other communications provided for hereunder shall be in writing and shall be delivered by hand or mailed first class, postage prepaid, addressed as follows: (a) If to TIAA - Teachers Insurance and Annuity Association of America 730 Third Avenue New York, New York 10017-3206 Attention: Thomas G. Walsh (b) If to the Separate Account - TIAA Separate Account VA-1 730 Third Avenue New York, New York 10017-3206 Attention: Thomas W. Jones (c) If to Advisors - Teachers Advisors, Inc. 730 Third Avenue New York, New York 10017-3206 Attention: James S. Martin or to such other address as TIAA, the Separate Account, or Advisors shall designate by written notice to the other. -14- 14. Miscellaneous. Captions in this Agreement are included for convenience or reference only and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect. IN WITNESS WHEREOF, TIAA, the Separate Account, and Advisors, have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers on the day and year first above written. TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA By: /s/ Thomas G. Walsh Attest: /s/ Lisa Snow --------------------------- ------------------------ Title: Executive Vice President Title: Assistant Secretary TIAA SEPARATE ACCOUNT VA-1 By: /s/ Thomas W. Jones Attest: /s/ Lisa Snow -------------------------- ------------------------ Title: President Title: Assistant Secretary TEACHERS ADVISORS, INC. By: /s/ James S. Martin Attest: /s/ Lisa Snow --------------------------- ------------------------ Title: President Title: Assistant Secretary -15- EX-99.5 6 DISTRIBUTION AGREEMENT Exhibit 5 DISTRIBUTION AGREEMENT FOR THE CONTRACTS FUNDED BY TIAA SEPARATE ACCOUNT VA-1 THIS AGREEMENT made this 15th day of September, 1994, by and among: Teachers Insurance and Annuity Association of America ("TIAA"), a non-profit New York insurance corporation; TIAA Separate Account VA-1 (the "Separate Account"), a separate account of TIAA established pursuant to the New York State Insurance Law; and Teachers Personal Investors Services, Inc. ("TPIS"), a Delaware corporation. WITNESSETH: WHEREAS, TIAA has established the Separate Account to segregate assets funding the variable benefits provided by the Teachers Personal Annuity, an individual, flexible premium, deferred annuity (the "Contracts"), as well as by other contracts that may be offered by TIAA in the future; and WHEREAS, the Separate Account is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and currently consists of a single investment portfolio (known as the Stock Index Account), and may consist of additional investment portfolios in the future -1- (collectively, with the Stock Index Account, referred to herein as "Portfolios"); and WHEREAS, TPIS will be engaged principally in the business of distributing the Contracts and possibly other variable insurance products or investment company shares, and is registered as a broker-dealer under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and will become a member of the National Association of Securities Dealers, Inc.("NASD"); and WHEREAS, TIAA and the Separate Account have registered the Contracts under the Securities Act of 1933, as amended (the "1933 Act"), and desires to retain TPIS to distribute the Contracts and TPIS is willing to distribute the Contracts in the manner and on the terms set forth herein; and WHEREAS, TIAA is willing to compensate TPIS for the services to be provided in the manner and on the terms set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, TIAA, the Separate Account, and TPIS hereby agree as follows: 1. DISTRIBUTION OF THE CONTRACTS. (a) TIAA and the Separate Account hereby grant to TPIS the exclusive right, subject to the requirements of the 1933 Act, -2- the 1934 Act, and the 1940 Act, and the terms set forth herein, to distribute the Contracts during the term of this Agreement. TPIS agrees to use its best efforts to distribute the Contracts, and to advise owners of Contracts in connection therewith. (b) To the extent necessary to offer the Contracts, TPIS shall be duly registered or otherwise qualified under the securities laws of any state or other jurisdiction in which such Contracts may lawfully be sold and in which TPIS is licensed or otherwise authorized to sell the Contracts. TPIS shall be responsible for the training, supervision and control of its registered representatives for the purpose of the NASD Rules and Fair Practice and federal and state securities law requirements applicable in connection with the offering and sale of the Contracts. In this connection, TPIS shall retain written supervisory procedures in compliance with Section 27 of the NASD Rules of Fair Practice. (c) TPIS agrees to offer the Contracts for sale in accordance with the then-current prospectus and statement of additional information ("SAI") therefor filed with the Securities and Exchange Commission (the "Commission"). (d) TIAA shall furnish TPIS with copies of all prospectuses, SAIs, financial statements and other documents which TPIS reasonably requires for use in connection with the distribution of the Contracts. TPIS will be entitled to rely on all documentation and information furnished to it by TIAA's or the Separate Account's management. -3- (e) It is understood that no payments made under the Contracts shall be paid or remitted to TPIS. 2. BOOKS AND RECORDS (a) TIAA, the Separate Account, and TPIS shall cause to be maintained and preserved all required books of account and related financial records as are required by the 1934 Act, the NASD and any other applicable laws and regulations. All the books and records maintained by TIAA (on behalf of TPIS) in connection with the offer and sale of the Contracts shall be maintained and preserved in conformity with the requirements of Rules 17a-3 and 17a-4 under the 1934 Act or the corresponding provisions of any future federal securities laws or regulations, to the extent that such requirements are applicable to the variable annuity operations. All such books and records shall be maintained and held by TIAA on behalf of and as agent for TPIS, whose property they are and shall remain. Such books and records shall be at all times subject to inspection by the Commission in accordance with Section 17(a) of the 1934 Act. (b) TPIS shall have the responsibility for maintaining the records of sales representatives licensed, registered and otherwise qualified to sell the Contracts. 3. REPORTS. TPIS shall cause TIAA and/or the Separate Account to be furnished with such reports as either or both may reasonably request for the purpose of meeting reporting and -4- recordkeeping requirements under the insurance laws of the State of New York and any other applicable states or jurisdictions. 4. STAFF, FACILITIES, AND SERVICES. TIAA shall provide TPIS, at TPIS's expense, the staff, facilities, and services necessary to meet TPIS's obligations hereunder in connection with the distribution of the Contracts. TIAA's providing of staff, facilities, and services for such purpose shall in no way diminish any obligation or liability of TPIS hereunder. 5. COMPENSATION AND EXPENSES. (a) In consideration of the services performed by TPIS hereunder, TIAA shall compensate TPIS monthly. The amount of this compensation shall be based on the premiums (which shall include amounts from investment vehicles of companies other than TIAA) received by TIAA and allocated to the Separate Account under the Contracts. The current rate of compensation is shown on Schedule A, attached herewith. (b) The Separate Account shall not be liable to TPIS (or TIAA) for any expenses incurred for services related to the distribution of the Contracts (except to the extent that amounts arising from the mortality and expense risk charge paid to TIAA are deemed to cover such distribution expenses). TPIS shall be responsible for all expenses relating to the distribution of the Contracts, including but not limited to: -5- (i) the costs and expenses of providing the necessary facilities, personnel, office equipment and supplies, telephone service, and other utility service necessary to carry out its obligations hereunder; (ii) charges and expenses of outside legal counsel retained with respect to activities related to the distribution of the Contracts; (iii) the costs and expenses of underwriting and issuance of the Contracts; (iv) the costs and expenses of printing definitive prospectuses and statements of additional information and any supplements thereto for prospective purchasers; (v) expenses incurred in connection with TPIS's registration as a broker or dealer or in the registration or qualification of its officers, directors or representatives under federal and state securities laws; (vi) the costs of promotional, sales and advertising materials; and (vii) any other expenses incurred by TPIS or its representatives in connection with performing the obligations of TPIS under this Agreement. 6. NON-EXCLUSIVITY. TIAA and the Separate Account agree that the services to be provided by TPIS hereunder are not to be deemed exclusive and TPIS is free to act as distributor of other variable insurance products or investment company shares issued by -6- TIAA or any entity affiliated therewith. TPIS shall, for all purposes herein, be deemed to be an independent contractor and shall, unless otherwise provided or authorized, have no authority to act for or represent TIAA or the Separate Account in any way or otherwise be deemed an agent of TIAA or the Separate Account other than in furtherance of its duties and responsibilities as set forth in this Agreement. 7. LIABILITY. TPIS will not be liable for any error of judgment or mistake of law or for any loss suffered by the Separate Account in connection with the matters to which this Agreement relates. Nothing herein contained shall be construed to protect TPIS against any liability resulting from the willful misfeasance, bad faith, or gross negligence of TPIS in the performance of its obligations and duties or from reckless disregard of its obligations and duties under this Agreement or by virtue of violation of any applicable law. 8. REGULATION. (a) This Agreement shall be subject to the provisions of the 1940 Act, the 1934 Act and the rules, regulations and rulings thereunder, and of the NASD, as in effect from time to time, including such exemptions and other relief as the Commission, its staff, or the NASD may grant, and the terms hereof shall be interpreted and construed in accordance therewith. Without limiting the generality of the foregoing, the term "assigned" shall -7- not include any transactions exempted from Section 15(b)(2) of the 1940 Act. (b) TPIS shall submit to all regulatory and administrative bodies having jurisdiction over the present and future operations of the Separate Account, any information, reports or other material which any such body by reason of this Agreement may request or require pursuant to applicable law or regulations. Without limiting the generality of the foregoing, TPIS shall furnish the SEC, the State of New York Secretary of State and/or the Superintendent of Insurance with any information or reports which the SEC, the Secretary of State and/or the Superintendent of Insurance may request in order to ascertain whether the operations of the Separate Account are being conducted in a manner consistent with applicable laws or regulations. 9. INVESTIGATION AND PROCEEDINGS. (a) TIAA, the Separate Account, and TPIS agree to cooperate fully in any insurance or securities regulatory inspection, inquiry, investigation, or proceeding or any judicial proceeding with respect to TIAA, the Separate Account, or TPIS, their affiliates and their representatives to the extent that such inspection, inquiry, investigation or proceeding is in connection with the Contracts distributed under this Agreement. (b) In the case of a customer complaint, TIAA, the Separate Account, and TPIS will cooperate in investigating such complaint and shall arrive at a mutually satisfactory response. -8- 10. DURATION AND TERMINATION OF THE AGREEMENT. (a) This Agreement shall become effective with respect to the Contracts as of the date first written above. It shall become effective as to any subsequently offered contract when it has been approved by the Management Committee (including a majority of members thereof who are not parties to this Agreement not interested persons of any such parties) specifically for such contract. "Subsequently offered contract" means a contract issued and funded by the Separate Account subsequent to the initial effective date of this Agreement. (b) This Agreement shall continue in effect for two years from the date of its execution and thereafter from year to year, but only so long as such continuance is specifically approved at least annually by (i) the Management Committee, or by the vote of a majority of the outstanding shares of the Separate Account, and (ii) a vote of a majority of those members of the Management Committee who are not parties to this Agreement nor interested persons of any such parties, cast in person at a meeting called for the purpose of voting on such approval. As to each subsequently created Portfolio, this Agreement shall continue in effect with respect to that Portfolio so long as such continuance is specifically approved at least annually in the manner described in (i) and (ii) above. (c) This Agreement may be terminated, without the payment of any penalty, by TIAA, the Separate Account, or TPIS on -9- sixty days' written notice to the other parties. This Agreement shall automatically terminate in the event of its assignment. (d) Upon termination of this agreement, all authorizations, rights and obligations shall cease except the obligation to settle accounts hereunder and the agreements contained in paragraph 9 hereunder. 11. DEFINITIONS. The term "assignment", "interested person" and "majority of the outstanding shares", when used in this Agreement, shall have the respective meanings specified under the 1940 Act and rules thereunder. 12. FURTHER ACTIONS. Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof. 13. GOVERNING LAW. The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of New York, as at the time in effect, and the applicable provisions of the 1940 Act and rules thereunder or other federal laws and regulations which may be applicable. To the extent that the applicable law of the State of New York, or any of the provisions herein, conflict with the applicable provisions of the 1940 Act and rules thereunder or other federal laws and regulations which may be applicable, the latter shall control. -10- 14. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall be deemed one instrument. 15. NOTICES. All notices and other communications provided for hereunder shall be in writing and shall be delivered by hand or mailed first class, postage prepaid, addressed as follows: (a) If to TIAA - Teachers Insurance and Annuity Association of America 730 Third Avenue New York, new York 10017-3206 Attention: Thomas G. Walsh (b) If to the Separate Account - TIAA Separate Account VA-1 730 Third Avenue New York, new York 10017-3206 Attention: Thomas w. Jones (c) If to TPIS - Teachers Personal Investors Services, Inc. 730 Third Avenue New York, new York 10017-3206 Attention: Ronald P. McPhee or to such other address as TIAA, the Separate Account, or TPIS shall designate by written notice to the others. -11- 16. MISCELLANEOUS. Captions in this Agreement are included for convenience or reference only and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect. IN WITNESS WHEREOF, TIAA, the Separate Account, and TPIS, have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers on the day and year first above written. TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA By: /s/ Thomas G. Walsh Attest: /s/ Lisa Snow --------------------------- --------------------------- Title: Executive Vice President Title: Assistant Secretary TIAA SEPARATE ACCOUNT VA-1 By: /s/ Thomas W. Jones Attest: /s/ Lisa Snow --------------------------- -------------------------- Title: President Title: Assistant Secretary TEACHERS PERSONAL INVESTORS SERVICES, INC. By: /s/ Ronald P. McPhee Attest: /s/ Lisa Snow --------------------------- -------------------------- Title: Senior Vice President Title: Assistant Secretary -12- SCHEDULE A to Distribution Agreement for the Contracts Funded By TIAA Separate Account VA-1 The amount payable monthly by TIAA to TPIS in consideration of the services performed by TPIS under this Agreement is seventy-five hundredths of one percent (0.75%) of the premiums (as that term is used in paragraph 5(a) of this Agreement) received by TIAA and allocated to the Separate Account under the Contracts during each month. EX-99.6(A) 7 FORM OF TEACHERS PERSONAL ANNUITY CONTRACT 730 Third Avenue, New York, N.Y. 10017 Telephone: 800-842-2733 TEACHERS PERSONAL ANNUITY CONTRACT Annuity Date of Starting Date of Contract Issue Date Birth Number mo day yr mo day yr mo day yr --------------------------------------------------------------- [0-800135-6 10-01-1994 12-01-2018] Annuitant [John J. Jones 12-20-1952] Owner [Jane J. Doe 11-15-1950] --------------------------------------------------------------- This is a contract between you, the Owner, and TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA ("TIAA"). This page refers briefly to some of the features of this Contract. The next pages set forth in detail the rights and obligations of both TIAA and you under the Contract. PLEASE READ YOUR CONTRACT. IT IS IMPORTANT. GENERAL DESCRIPTION This is a flexible premium deferred annuity contract. You may allocate any future Premiums to the Fixed Account and/or to Investment Accounts. Your Contract Accumulation (the value of your Contract) is the sum of your Fixed Account Accumulation and your Investment Account Accumulations. Accumulations in the Fixed Account are credited with a guaranteed interest rate, and may also be credited with Additional Interest. Accumulations in Investment Accounts are variable, are not guaranteed, and may increase or decrease depending on investment results. TIAA will pay the Income Benefit provided under this Contract to you, the Owner. The Income Benefit is based on the life of the Annuitant named above, who may be the Owner or another person. If you or the Annuitant die before the Income Benefit begins, TIAA will pay the Death Benefit provided in this Contract. Income and Death Benefits are based on your Contract Accumulation and the Rate Schedule or Schedules under which Premiums are credited to this Contract. You may choose to withdraw all or a part of your Contract Accumulation on or before the day Income Benefits begin. This contract does not provide for loans. 10 Day Right to Examine Your Contract. You have 10 days from the day you receive this Contract to examine it and to cancel it if you decide not to keep it. To cancel this contract, return it to us at the address shown above. TIAA will refund all premiums paid to this contract. The Contract will be void as of the date of issue and no benefits will be provided. If you have any questions you may contact us at the address or phone number above. Nonqualified Flexible Premium Deferred Annuity Fixed and Variable Accumulations Teachers insurance and annuity association Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- New Jersey Chairman and Chief Executive Officer Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- INDEX OF IMPORTANT TERMS AND PROVISIONS Section ------- Accumulation Contract...........................................25 Fixed Account......................................26 Investment Account.................................28 Accumulation Unit Number.............................................31 Definition.........................................29 Additional Interest.........................................27 Annuitant - Definition.......................................1 Annuity Starting Date Change of..........................................36 Definition..........................................2 Assignment - Rights Subject to..............................53 Beneficiary Definition..........................................3 Naming.............................................56 Benefits Based on Incorrect Age.............................60 Business Day.................................................4 Claims of Creditors Protection Against.................................54 Contract - Consists of......................................19 Correspondence with Us......................................64 Death Benefit Amount of Payments.................................41 Death Benefit Payee - Definition....................6 Definition..........................................5 Guaranteed Minimum.................................43 Methods of Payment.................................44 Naming Your Beneficiary............................56 Payment of (Availability)..........................39 Starting Payment...................................42 Transfer to Fixed Account..........................40 Distributions Required on Death of Owner After the Annuity Starting Date....................38 Before the Annuity Starting Date...................45 Elections and Changes - Procedure...........................49 Fixed Account................................................7 General Account..............................................8 Income Benefit Amount of Payments.................................34 Automatic Election.................................37 Definition..........................................9 Options............................................37 Two-Life Annuity Options...........................37 Payment of.........................................33 Starting Payments..................................35 Section ------- Investment Account Addition or Deletion...............................21 Description........................................10 Investment Company Act of 1940..............................58 Lapse or Forfeiture - Protection Against.................................20 Laws and Regulations - Compliance with....................................62 Loans - Not available.......................................52 Lump-sum Benefit and Transfers Availability.......................................46 Definition.........................................11 Effective Date.....................................48 From the Fixed Account.............................47 Net Investment Factor.......................................30 Non-Forfeiture of Benefits..................................55 Owner - Definition..........................................12 Payment to an Estate, Trustee, etc..........................50 Premiums Allocation.........................................23 Limits on..........................................22 Taxes..............................................24 Proof of Survival...........................................61 Rate Schedule...............................................66 Change of .........................................65 Definition.........................................13 Report of Accumulation......................................51 Right to Amend..............................................63 Second Annuitant - Definition...............................14 Separate Account Charge.............................................32 Description........................................15 Insulation of......................................57 Service of Process upon TIAA................................59 Surrender Charge Amount of .........................................66 Definition.........................................16 Transfer....................................................17 Valuation Day...............................................18 - ------------------------------------------------------------------------------- Page 2 1291.1-NJ Ed. 9-94 TIAA PA Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- Annuity Date of Starting Date of Contract Issue Date Birth Number mo day yr mo day yr mo day yr --------------------------------------------------------------- [0-800135-6 10-01-1994 12-01-2018] Annuitant [John J. Jones 12-20-1952] Owner [Jane J. Doe 11-15-1950] --------------------------------------------------------------- Annuitant's Social Security Number: 111-11-1111 Owner's Social Security Number: ###-##-#### This Contract was made and delivered in New Jersey. The validity and effect of the Contract are governed by the laws there in force. Your initial Premium has been allocated to the Accounts shown below. All future Premiums will be allocated to these Accounts as shown unless you change your allocation instructions as described in Section 23. Fixed Account: 30% Stock Index Account: 70% The following Investment Account is available as of the Date of Issue: Stock Index Account: This Account maintains a broadly diversified portfolio consisting primarily of common stocks selected to track the overall U.S. stock market. As of the date of issue, the Stock Index Account's Separate Account Charge is 0.37% per year of the Account's net assets. As described in Section 32, after we have given you three months' written notice, an Investment Account's Separate Account Charge may be changed, but it will not exceed 1.5% per year of the Account's net assets. During the first 10 days following the Date of Issue, the total Premiums and Transfers you may allocate to the Investment Accounts is limited to $10,000. Any amount in excess of $10,000 must be allocated to the Fixed Account. - ------------------------------------------------------------------------------- 1291.1-NJ Page 3 TIAA PA Ed. 9-94 Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- This page has been left blank intentionally. - ------------------------------------------------------------------------------- Page 4 1291.1-NJ Ed. 9-94 TIAA PA Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- PART A: TERMS USED IN THIS CONTRACT 1. The Annuitant is the natural person whose life is used in determining the Income Benefit to be paid. The Annuitant is named on Page 3 of this Contract, and may not be changed, except as provided in Section 39. 2. The Annuity Starting Date shown on Page 3 is the date the Income Benefit is scheduled to begin. You may change the date as explained in Section 36. 3. Beneficiary. Beneficiaries are persons you name, in a form satisfactory to TIAA, to: A) receive the Death Benefit as Death Benefit Payee(s) if you die before the Annuity Starting Date while the Annuitant is alive; or B) become the Owner if you die on or after the Annuity Starting Date. At any time you may name, change, add or delete Beneficiaries, by written notice to TIAA as explained in Section 49. 4. A Business Day is any day that the New York Stock Exchange is open for trading. A Business Day ends at 4:00 p.m. Eastern time, or when trading closes on the New York Stock Exchange, if earlier. 5. The Death Benefit is the value of your Contract Accumulation, or if greater, the sum of all Premiums credited to this Contract less any Lump-sum Benefits paid and less any Surrender Charges on Lump-sum Benefits or Transfers from the Fixed Account. It will be paid to the Death Benefit Payee under one of the Methods of Payment set forth in Part E, if you or the Annuitant dies before the Annuity Starting Date. 6. The Death Benefit Payee will receive the Death Benefit if you or the Annuitant dies before the Annuity Starting Date. If you die, your Beneficiary will be the Death Benefit Payee. If the Annuitant dies and you are not the Annuitant, you will be the Death Benefit Payee. Where the Owner and the Annuitant have died and there is not sufficient evidence that they have died other than simultaneously, then the Beneficiary is the Death Benefit Payee, unless you have provided otherwise. 7. Fixed Account. All Premiums and Transfers credited to the Fixed Account become part of TIAA's General Account. 8. The General Account consists of all of TIAA's assets other than those in separate accounts. 9. The Income Benefit is the periodic amount payable under one of the options set forth in Part D. The first payment will be payable as of the Annuity Starting Date. 10. An Investment Account is a subaccount of the Separate Account. The Investment Account(s) available as of the Date of Issue are shown on Page 3. TIAA may add or delete Investment Accounts as described in Section 21. - ------------------------------------------------------------------------------- 1291.1-NJ Page 5 TIAA PA Ed. 9-94 Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- 11. A Lump-sum Benefit is a withdrawal in a single sum of all or part of your Contract Accumulation. The provisions concerning Lump-sum Benefits are set forth in Part F. 12. You are the Owner. During your lifetime, you may, subject to the rights of any assignee and to the extent permitted by law, exercise every right given by this Contract without the consent of any other person. The Owner may be changed as explained in Section 49. The name of the Owner as of the Date of Issue is shown on Page 3. 13. The Rate Schedule or Schedules set forth: A) the guaranteed annuity purchase rates to be used in determining Income and Death Benefit payments made from the General Account; and B) any Surrender Charge to be assessed against Lump-Sum Benefits or Transfers from your Fixed Account Accumulation. A Rate Schedule applies to Contract Accumulations arising from Premiums credited while the Rate Schedule is in effect. The minimum Income or Death Benefit, paid as an annuity, is equal to your Contract Accumulation multiplied by the guaranteed annuity purchase rate calculated on the basis specified in the Rate Schedule. The Rate Schedule effective as of the Date of Issue is in Section 66. After we have given you three months' written notice, and to the extent permitted by law, TIAA may change the Rate Schedule applicable to future Premiums as described in Section 65. Any change in the Rate Schedule will not affect the amount of benefits arising from Premiums credited prior to the change. 14. You name a Second Annuitant if you choose an Income Benefit under a Two-Life Annuity Option, as explained in Section 37. Under a Two-Life Annuity Option the lives of the Annuitant and the Second Annuitant are used in determining the Income Benefit. 15. Separate Account. All Premiums and Transfers credited to an Investment Account become part of the Separate Account. The Separate Account is designated as "VA-1" and was established by TIAA in accordance with New York law to provide benefits from this Contract and other similar contracts. The assets and liabilities of Separate Account VA-1 are segregated from the assets and liabilities of the General Account. 16. A Surrender Charge is a charge assessed against a Lump-sum Benefit payment from the Fixed Account or a Transfer from the Fixed Account. No Surrender Charge will be assessed against the part of your Fixed Account Accumulation arising from Premiums credited while your Contract's original Rate Schedule is in effect. If a Surrender Charge is included in a future Rate Schedule, it will apply only to the part of your Fixed Account Accumulation arising from Premiums paid while such Rate Schedule is in effect. No Surrender Charge will ever be assessed against an Investment Account Accumulation. 17. You may Transfer some or all of your Contract Accumulation between the Fixed Account and the available Investment Accounts. The provisions concerning Transfers, including restrictions, are set forth in Part F. - ------------------------------------------------------------------------------- Page 6 1291.1-NJ Ed. 9-94 TIAA PA Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- 18. A Valuation Day is any day that the New York Stock Exchange 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 a TIAA Investment Account are principally traded. Valuation Days that aren't Business Days end at 4:00 p.m. Eastern time. PART B: CONTRACT AND PREMIUMS 19. The Contract. This document is the entire contract between you and TIAA. We have issued it in return for your completed application and the first Premium. Any endorsement to or amendment of this Contract, waiver of any of its provisions, or change in Rate Schedule will be valid only if in writing and signed by an executive officer or a registrar of TIAA. All Premiums and benefits are payable at TIAA's home office in New York, NY. 20. Protection Against Lapse or Forfeiture. While your Contract Accumulation is at least $2,000, your rights under the Contract will not lapse after the first Premium has been paid. No additional Premiums are required. You own this Contract. If no Premiums have been paid for three years, and your Accumulation is less than $2,000, we may pay you your Contract Accumulation and terminate this Contract. 21. Addition or Deletion of an Investment Account. TIAA may, as permitted by applicable law, add or delete Investment Accounts within the Separate Account. If you have Accumulation Units in an Investment Account that is deleted, you must Transfer them to another Investment Account or to the Fixed Account. 22. Premiums. Premiums for this Contract may be paid in any amount not less than $100 each. TIAA may limit total Premiums and Transfers allocated to the Fixed Account to $300,000 in any twelve-month period. TIAA may stop accepting Premiums under this Contract after you have been given three months' written notice. Otherwise, TIAA will accept Premiums at any time before the Annuity Starting Date or the prior death of you or the Annuitant. If TIAA stops accepting Premiums under this Contract, we will accept premiums under a new TIAA deferred annuity 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. Your initial Premium will be credited to your Contract within two Business Days of the Business Day on which it is received by TIAA at its home office in New York, NY. Each subsequent Premium will be credited to your Contract as of the Business Day on which it is received by TIAA at its home office in New York, NY. 23. Allocation of Premiums. You allocate Premiums among the Fixed Account and the available Investment Accounts. Premiums allocated to the Fixed Account increase your Fixed Account Accumulation. Premiums allocated to an Investment Account purchase Accumulation Units in that Account. Your allocation instructions as of the Date of Issue are shown on Page 3, and may be changed at any time for future Premiums. Your Premiums are allocated according to the most recent valid instructions TIAA has received from you in a form acceptable to TIAA. 24. Premium Taxes. State and local government premium tax, if applicable, will be deducted from your Contract Accumulation when incurred by TIAA. TIAA may deduct these taxes when the - ------------------------------------------------------------------------------- 1291.1-NJ Page 7 TIAA PA Ed. 9-94 Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- Premium is received by TIAA or when annuity income or death benefit payments commence. If no amount for Premium Tax was deducted, but Premium Tax is later determined to be due, TIAA will reduce your Contract Accumulation by the amount of tax which is determined to be due by TIAA. PART C: ACCUMULATIONS 25. Your Contract Accumulation is equal to the sum of your Fixed Account Accumulation and your Investment Account Accumulations. Your Fixed Account Accumulation is guaranteed by TIAA's General Account and will earn interest at a guaranteed effective annual rate of 3%. Investment Account Accumulations are not guaranteed, and you bear the investment risk of your Investment Account Accumulations. 26. Your Fixed Account Accumulation is equal to: A) all Premiums allocated to your Fixed Account Accumulation; plus B) all Transfers credited to your Fixed Account Accumulation; plus C) interest credited to your Fixed Account Accumulation at a guaranteed effective annual rate of 3%; plus D) any Additional Interest in excess of the guaranteed 3% interest credited to your Fixed Account Accumulation; less E) any Premium Taxes incurred by TIAA for your Fixed Account Accumulation; less F) the amount of any Lump-sum Benefits paid, or Transfers from your Fixed Account Accumulation; less G) any Surrender Charge assessed for Lump-sum Benefits or Transfers from your Fixed Account Accumulation. 27. TIAA may credit Additional Interest to your Fixed Account Accumulation. TIAA does not guarantee that there will be Additional Interest. Additional Interest, if any, will be credited under a schedule of Additional Interest rates declared by TIAA. For a Fixed Account Accumulation in force as of the effective date of such a schedule, the Additional Interest rates will not be decreased for a period of twelve months following the schedule's effective date. For Premiums or Transfers credited to the Fixed Account during the twelve-month period described in the preceding sentence, TIAA may declare Additional Interest at higher or lower rates which remain in effect only through the end of such twelve-month period. Thereafter, any Additional Interest rates declared for such Premiums and Transfers will remain in effect for periods of twelve months or more. The Fixed Account under this Contract will be interpreted and administered by TIAA to comply with Securities and Exchange Commission (SEC) Rule 151, including the preamble to that Rule (SEC Release No. 33-6645). TIAA does not expect to pay or credit Additional Interest after Income or Death Benefits begin under this Contract. 28. An Investment Account Accumulation (the value of your share of an Investment Account) is equal to the number of your Accumulation Units multiplied by the value of one Accumulation Unit in that Investment Account. - ------------------------------------------------------------------------------- Page 8 1291.1-NJ Ed. 9-94 TIAA PA Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- 29. Accumulation Unit. Each Investment Account maintains a separate Accumulation Unit. The value of each Investment Account's Accumulation Unit is calculated at the close of each Valuation Day. The value of an Investment Account's Accumulation Unit is equal to the previous day's value multiplied by the Account's Net Investment Factor. 30. The Net Investment Factor for an Investment Account equals (A) divided by (B), as follows: (A) equals the value of the Investment 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 Investment Account's net assets at the end of the prior day (including the net effect of transactions made during the prior day). 31. Number of Accumulation Units. The number of your Accumulation Units in an Investment Account will be increased by: A) any Premiums allocated to that Investment Account; and B) any Transfers to that Investment Account; and will be decreased by: C) any Premium Taxes incurred by TIAA for your Investment Account Accumulation; D) any Lump-sum Benefits paid from that Investment Account; and E) any Transfers from that Investment Account to the Fixed Account or another Investment Account. The increase or decrease in the number of your Accumulation Units on any Valuation Day is equal to the net dollar value of all transactions divided by the value of the Investment Account's Accumulation Unit as of the end of the Valuation Day. 32. Separate Account Charge. Each Investment Account has a Separate Account Charge for mortality and expense risk, administration, and investment advisory services. After three months' written notice to you, TIAA, at its discretion, may increase or decrease any Investment Account's Separate Account Charge. The Separate Account Charge for any Investment Account is guaranteed not to exceed 1.5% per year of net assets. Each Investment Account's Separate Account Charge as of the Date of Issue is shown on Page 3. PART D: INCOME BENEFIT 33. Payment of the Income Benefit. Your Contract Accumulation can be used to provide an Income Benefit guaranteed by TIAA's General Account. No Income Benefit is available from the Separate Account. The Income Benefit will be paid to you, the Owner. If you die while any Income Benefit payments remain due, the Beneficiary will become the Owner. The new Owner will receive the Income Benefit and may name or change the Beneficiary as described in Section 56. - ------------------------------------------------------------------------------- 1291.1-NJ Page 9 TIAA PA Ed. 9-94 Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- 34. The Amount of the Income Benefit as of the Annuity Starting Date will be determined by: A) the amount of your Contract Accumulation; B) the Rate Schedule or Schedules under which Premiums were credited to your Contract and the Rate Schedule or Schedules under which any Additional Interest was credited to your Fixed Account Accumulation; C) the Income Option you choose; D) the Annuitant's age, if you choose an Income Option that pays a lifetime income; and E) the Second Annuitant's age, if you choose one of the Two-Life Annuity Options. If the Income Benefit would be less than $100 a month, TIAA will have the right to change to quarterly, semi-annual or annual payments, whichever will result in payments of $100 or more and the shortest interval between payments. 35. Starting the Income Benefit. Payment of the Income Benefit to you will begin as of the Annuity Starting Date you have chosen, if you and the Annuitant are then living and: A) you have chosen one of the Income Options set forth in Section 37; and B) if you have chosen an Income Option that pays a lifetime income, we have received due proof of the Annuitant's age; and C) if you have chosen a Two-Life Annuity Option, we have received due proof of the Second Annuitant's age. If the requirements of this section have not been completed by the Annuity Starting Date you have chosen, the Annuity Starting Date will be deferred to the first of the month after these requirements have been completed. The Annuity Starting Date may not be deferred beyond the first of the month following the Annuitant's eighty-fifth birthday. 36. Changing the Annuity Starting Date. You may change the Annuity Starting Date at any time on or before the day the Income Benefit begins, by written notice to TIAA as explained in Section 49. You may change the Annuity Starting Date to the first of any month following the date of the change, but not to a month: A) earlier than fourteen months after the Date of Issue shown on Page 3; or B) later than the Annuitant's eighty-fifth birthday. If you have not chosen an Annuity Starting Date prior to the first of the month following the Annuitant's eighty-fifth birthday, you will be deemed to have chosen that date. 37. Income Options are the ways in which you may have the Income Benefit paid. Any time before the Annuity Starting Date you may choose one of the Options listed below. Any choice or change of such choice must be made by written notice to TIAA as explained in Section 49. You may change your choice at any time before payments begin, but once they have begun no change can be made. Each of the Income Options listed below is payable from TIAA's General Account. No Income Option is payable from any Investment Account. The Income Options from which you may choose are listed below. In addition to providing an income during the lifetime of the Annuitant or for a fixed period, some Options provide that payments will - ------------------------------------------------------------------------------- Page 10 1291.1-NJ Ed. 9-94 TIAA PA Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- continue for the lifetime of a Second Annuitant, and some provide that payments will continue in any event during a guaranteed period. The Income Options are described as monthly payments, but you may choose quarterly, semi-annual, or annual payments. You may not elect an Option which would not be treated as an annuity under federal tax law. The periodic amount paid depends on which of these Options you choose: Single Life Annuity. A payment will be made each month as long as the Annuitant lives. All payments will cease at the Annuitant's death. This Option provides no benefits for anyone after the Annuitant's death. Single Life Annuity with a 10-, 15- or 20-Year Guaranteed Period. A payment will be made each month as long as the Annuitant lives. If the Annuitant dies before the end of the guaranteed period you have chosen, the monthly payments will continue to the end of that period. Payments for a Fixed Period. A payment will be made each month for a fixed period of not less than two nor more than thirty years, as chosen. If the Annuitant dies before the end of the period chosen, the monthly payments will continue to the end of that period. At the end of the period chosen payments will stop. Two-Life Annuity Options. Under each of the following Options a payment will be made each month for as long as either the Annuitant or the Second Annuitant is alive. After payments begin, you cannot change your choice of Second Annuitant. If you choose a guaranteed period, payments will continue to the end of that period even if the Annuitant and Second Annuitant die before the end of that period. If you do not choose a guaranteed period, all payments will cease at the death of the last survivor of the Annuitant and Second Annuitant. Full Benefit While Either the Annuitant or the Second Annuitant is Alive, with or without a 10-, 15- or 20-Year Guaranteed Period. The full monthly income will continue as long as either the Annuitant or the Second Annuitant is alive. If you choose a guaranteed period and the Annuitant and the Second Annuitant both die before the end of the period chosen, the full monthly income will continue to the end of that period. Two-thirds Benefit After the Death of Either the Annuitant or the Second Annuitant, with or without a 10-, 15- or 20-Year Guaranteed Period. At the death of either the Annuitant or the Second Annuitant, monthly payments equal to two-thirds of the amount that would have been paid if both had lived will continue for the life of the survivor. If you choose a guaranteed period and the Annuitant and the Second Annuitant both die before the end of the period chosen, monthly payments equal to two-thirds of the amount that would have been paid if both had lived will continue to the end of that period. Half Benefit After the Death of the Annuitant, with or without a 10-, 15- or 20- Year Guaranteed Period. The full monthly income will continue as long as the Annuitant is alive. If the Second Annuitant survives the Annuitant, monthly payments equal to one-half the amount that would have been paid if the Annuitant had lived will continue for the life of the Second Annuitant. If you choose a guaranteed period and the - ------------------------------------------------------------------------------- 1291.1-NJ Page 11 TIAA PA Ed. 9-94 Your Teachers Personal Annuity Contract =------------------------------------------------------------------------------ Annuitant and the Second Annuitant both die before the end of the period chosen, monthly payments equal to one-half the amount that would have been paid if the Annuitant had lived will continue to the end of that period. Automatic Election Provision. If, on the Annuity Starting Date determined in accordance with Sections 35 and 36, you have not chosen an Income Option, you will be deemed to have chosen a "Single Life Annuity with a 10-Year Guaranteed Period," or a shorter period if required to meet federal tax law. 38. Distribution Requirements upon the Death of the Owner. If you die on or after the Annuity Starting Date, any Income Benefit remaining due must be distributed at least as rapidly as under the Income Option on which Income Benefit Payments were being made. PART E: DEATH BENEFIT 39. Availability. If you or the Annuitant dies before the Annuity Starting Date, the Death Benefit will be payable when due proof of the death is received by TIAA. If you die and your spouse is the sole Death Benefit Payee, he or she may choose to become the Owner and continue the Contract, or may choose payment of the Death Benefit. If your spouse does not make a choice, he or she will automatically become the Owner of the Contract on the 60th day after we receive due proof of your death. If you were also the Annuitant, your spouse upon becoming the Owner, will also become the Annuitant. 40. Transfer to the Fixed Account. All amounts held in Investment Accounts will be Transferred to the Fixed Account as of the date we receive due proof of the death. If your spouse is the sole Death Benefit Payee and elects to become the Owner at the time due proof of your death is provided, no such Transfer will be made. 41. The Amount of the Death Benefit will be determined as of the date we receive due proof of the death of you or the Annuitant by: A) the amount of your Contract Accumulation, or if greater, the sum of all Premiums credited to your Contract less any Lump-sum Benefits paid and less any Surrender Charges on Lump-sum Benefits or Transfers from the Fixed Account; B) the Rate Schedule or Schedules under which Premiums were credited to your Contract and the Rate Schedule or Schedules under which any Additional Interest was credited to your Fixed Account Accumulation; C) the Method of Payment chosen for the Death Benefit; and D) if the Method chosen pays a lifetime income, the age of the Death Benefit Payee. - ------------------------------------------------------------------------------- Page 12 1291.1-NJ Ed. 9-94 TIAA PA Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- 42. Payment of the Death Benefit. Payment of the Death Benefit may begin after we have received: A) due proof of the death of you or the Annuitant; B) the choice of a Method of Payment as provided in Section 44; and C) due proof of the Death Benefit Payee's age if the Method of Payment chosen pays a lifetime income. Payment of the Death Benefit must begin no later than the first of the month following the 60th day after we receive due proof of the death of you or the Annuitant. If no Method of Payment is chosen, TIAA will pay the Death Benefit as annual Payments for a Fixed Period ending in the twelve-month period preceding the fifth anniversary of the date of the death. 43. Guaranteed Minimum Death Benefit. The Death Benefit will be the greater of your Contract Accumulation and the sum of all Premiums credited less any Lump-sum Benefits paid and less any Surrender Charges imposed on Lump-sum Benefits or Transfers from the Fixed Account. As of the date TIAA receives due proof of death of you or the Annuitant, your Fixed Account Accumulation will be increased by the amount, if any, by which the sum of all Premiums credited to your Contract (less any Lump-sum Benefits paid and less any Surrender Charges imposed on Lump-sum Benefits or Transfers from the Fixed Account) exceeds your Contract Accumulation. 44. Methods of Payment. TIAA will pay the Death Benefit to the Death Benefit Payee under one of the Methods of Payment set forth below. You may choose or change the Method of Payment at any time before payments begin. If your Beneficiary is the Death Benefit Payee, he or she may change the Method chosen by you, unless you specify otherwise. If you do not choose a Method, your Beneficiary will make the choice if he or she becomes entitled to payments. Any choice of Method or change of such choice must be made by written notice to TIAA, as explained in Section 49. Once payment of the Death Benefit has begun, the choice may not be changed. Methods providing a lifetime income may be elected only if the Death Benefit Payee is a natural person. A fixed or guaranteed period may not exceed the Death Benefit Payee's life expectancy. The Methods of Payment are described as monthly payments, but the Death Benefit Payee may choose quarterly, semi-annual or annual payments. Each of the Methods of Payment listed below is payable from TIAA's General Account. No Method of Payment is payable from any Investment Account. Single-sum Payment. The Death Benefit will be paid to the Death Benefit Payee in one sum. Single Life Annuity. A payment will be made to the Death Benefit Payee each month for life. All payments will cease at his or her death. This Method provides no benefits for anyone after the death of the Death Benefit Payee. Single Life Annuity with a 10-, 15- or 20-Year Guaranteed Period. A payment will be made to the Death Benefit Payee each month for life. If he or she dies before the end of the guaranteed period chosen, the monthly payments will continue to the end of that period. Payments for a Fixed Period. A payment will be made to the Death Benefit Payee each month for a fixed period of not less than two nor more than thirty years, as chosen. If the - ------------------------------------------------------------------------------- 1291.1-NJ Page 13 TIAA PA Ed. 9-94 Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- Death Benefit Payee dies before the end of the period chosen, the monthly payments will continue to the end of that period. At the end of the period chosen payments will stop. Interest Payments. A payment of interest on the Death Benefit will be made each month for a chosen period of not less than two nor more than thirty years. At the end of the period chosen, TIAA will pay the Death Benefit. If the Death Benefit Payee dies while any part of the Death Benefit is held by TIAA, that amount will become payable in a single sum. The value of the Death Benefit placed under this Method must be at least $5,000. If any Method chosen, except "Interest Payments", would result in payments of less than $100 a month, TIAA will have the right to require a change in choice that will result in payments of not less than $100 a month. 45. Distribution Requirements upon the Death of the Owner. If you die before the Annuity Starting Date, TIAA will pay the Death Benefit in accordance with the requirements of Section 72(s) of the Internal Revenue Code of 1986, as amended. The Death Benefit must be distributed within five years of the death of the Owner. However, if your Beneficiary is a natural person and payments begin within one year of your death, and within 60 days of the date we receive due proof of your death, the distribution may be made over the lifetime of your Beneficiary or over a period not to exceed your Beneficiary's life expectancy. If the Owner is not a natural person, the death of the Annuitant is treated as the death of the Owner for these distribution requirements. PART F: LUMP-SUM BENEFITS AND TRANSFERS 46. Availability. You may choose a Lump-sum Benefit or Transfer from an Account before the Annuity Starting Date. Lump-sum Benefits or Transfers from an Account's Accumulation must be at least $1,000 or for the entire Account Accumulation. Only one Lump-sum Benefit or Transfer from the Fixed Account may be made in any 180-day period. After we have given you three months' written notice, we may limit Transfers from each Investment Account to no more than one Transfer in any 90-day period. TIAA may limit to $300,000 the total Premiums and Transfers credited to your Fixed Account Accumulation in any twelve-month period. Any request to receive a Lump-sum Benefit must be made by written notice to TIAA as explained in Section 49. If your entire Contract Accumulation is withdrawn, all obligations of TIAA to you under the Contract are fulfilled. Any request to Transfer Accumulations must be in a form acceptable to TIAA. 47. Lump-sum Benefits and Transfers from the Fixed Account. Any part of your Fixed Account Accumulation paid as a Lump-sum Benefit or Transferred to an Investment Account will be reduced by the Surrender Charge (if any) specified in the applicable Rate Schedule or Schedules. When different Rate Schedules apply to different parts of your Fixed Account Accumulation, the parts accumulated under the earliest applicable Rate Schedules will be reduced first. No Surrender Charge will be assessed against any Lump-sum Benefit paid or Transfer from your Fixed Account Accumulation arising from Premiums credited while your Contract's original Rate Schedule is in effect. TIAA may include a Surrender Charge in a future Rate Schedule, as described in Section 65. If a Surrender Charge is included in a future Rate Schedule, it will apply - ------------------------------------------------------------------------------- Page 14 1291.1-NJ Ed. 9-94 TIAA PA Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- only to the part of your Fixed Account Accumulation that arose from Premiums paid under that Rate Schedule. 48. Effective Date. A Lump-sum Benefit payment or Transfer will be effective, and all values determined as of the Business Day we receive your request, unless you choose to defer the effective date to a future day acceptable to TIAA. TIAA is required by law to reserve the right to defer payment of a Lump-sum Benefit from the Fixed Account for up to six months. Also, TIAA reserves the right to delay a Transfer from the Fixed Account for up to six months. If we defer payment of a Lump-sum Benefit or a Transfer from the Fixed Account for ten or more working days, we will credit interest at the total rate then applicable to the "Interest Payments" Method of paying Death Benefits, but not less than 3%. If at any time applicable state law requires a higher rate of interest, such rate will be credited. Payment of a Lump- sum Benefit or a Transfer from an Investment Account may be delayed to the extent permitted or required under the Federal Investment Company Act of 1940, or any other applicable federal or state law. PART G: GENERAL PROVISIONS 49. Procedure for Elections and Changes. Any assignment, ownership, beneficiary or benefit payment arrangement under this Contract is subject to TIAA's acceptance. An election or change must be made, in accordance with the terms of your Contract, by written notice satisfactory to TIAA. No such notice will take effect unless it is received by TIAA at its home office in New York, NY. Any notice of change in Owner, Beneficiary or other person named to receive payments will take effect as of the date it was signed, whether or not the signer is living at the time we receive it. Any other notice will take effect as of the date it is received. Any action taken by TIAA in good faith before receiving the notice will not subject TIAA to liability even though our acts were contrary to what was stated in the notice. 50. Payment to an Estate, Guardian, Trustee, etc. TIAA will not be responsible for the acts of or any omission by any executor, trustee, guardian or other third party to whom payment is made. 51. Reports. At least once each year until the Annuity Starting Date, we will mail you a report for the calendar year just ended. It will provide a statement of the investments held in the Separate Account, and it will show the value of your Contract Accumulation, the Death Benefit, your Fixed Account Accumulation, and for each Investment Account Accumulation, the value of your Accumulation, the number of your Accumulation Units, and the value of one Accumulation Unit. 52. No Loans. This Contract does not provide for loans. 53. Assignment. You may assign this Contract. We assume no responsibility for the validity of any such assignment, nor will we be charged with notice of any assignment unless it is in writing and has been received by us. The rights of the Owner, Annuitant, any Second Annuitant, any Beneficiary and any other person to receive benefits under this Contract will be subject to the terms of any assignment. You should consult your tax advisor before making any assignment of your Contract. - ------------------------------------------------------------------------------- 1291.1-NJ Page 15 TIAA PA Ed. 9-94 Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- 54. Protection Against Claims of Creditors. The benefits and rights accruing to you or any other person under this Contract are exempt from the claims of creditors or legal process to the fullest extent permitted by law. 55. Non-Forfeiture of Benefits. Amounts payable under this Contract will not be less than the minimum required as of the Date of Issue by any applicable statute of the state or other jurisdiction in which this Contract was delivered. 56. Naming Your Beneficiary. Beneficiaries are persons you name, in a form satisfactory to TIAA as explained in Section 49, to: A) receive the Death Benefit (as Death Benefit Payees) if you die before the Annuity Starting Date while the Annuitant is alive; or B) become the Owner if you die on or after the Annuity Starting Date while Income Benefit payments remain due. At any time you may change, add or delete Beneficiaries by written notice to TIAA, as explained in Section 49. You may designate different classes of Beneficiaries, such as primary and contingent. These classes set the priority of payment or ownership. If any Primary Beneficiary is alive at the time of your death, the Primary Beveficiary(ies) will receive the Death Benefit or become the Owner(s). If a class contains more than one person, the then-living person(s) in the class will receive the Death Benefit or become Owners in equal shares, unless you provide otherwise. For example, if you die before the Annuity Starting Date, and you named your spouse as primary Beneficiary and "children" as contingent Beneficiaries, your spouse would receive the Death Benefit if he or she survived you. But if your spouse did not survive you, then your surviving children would receive the Death Benefit in equal shares. The terms "children" or "my children" may be used to name a class of Beneficiaries, either primary or contingent. Unless you specify otherwise, the terms "children" or "my children" will mean all children born of your marriage or marriages, and any children legally adopted by you. The term "children" also has the same inclusive meaning when used to name as Beneficiaries the children of your spouse, child, brother or sister. If you die before the Annuity Starting Date and if you named your estate as Beneficiary, none of the Beneficiaries you named is alive at the time of your death, or you never named a Beneficiary, the Death Benefit will be paid to your estate in one sum. If you die on or after the Annuity Starting Date and if none of the Beneficiaries you named is alive at the time of your death, or you never named a Beneficiary, the Annuitant will become the Owner. If the Annuitant is not alive, the Second Annuitant (if any) will become the Owner. If no Beneficiary or Annuitant is alive, the present value of any Income Benefit remaining due will be paid to your estate in one sum. 57. Insulation of Separate Account. TIAA owns the assets in Separate Account VA-1. To the extent permitted by law, the assets of the Separate Account will not be charged with liabilities arising out of any other business TIAA may conduct. All income, gains and losses, whether or not realized, of an Investment Account of the Separate Account will be credited to or charged against only that Investment Account without regard to TIAA's other income, gains or losses. - ------------------------------------------------------------------------------- Page 16 1291.1-NJ Ed. 9-94 TIAA PA Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- 58. Investment Company Act of 1940. The Separate Account is operated as a registered management investment company under the Investment Company Act of 1940. TIAA may operate the Separate Account as a unit-investment trust, or any other form permitted under the Act. Also, TIAA may deregister the Separate Account under the Act, subject to compliance with applicable law. 59. Service of Process upon TIAA. We will accept service of process in any action or suit against us on this Contract in any court of competent jurisdiction in the United States, Puerto Rico or Canada provided such process is properly made. We will also accept such process sent to us by registered mail if the plaintiff is a resident of the state, district or territory, in which the action or suit is brought. This section does not waive any of our rights, including the right to remove such action or suit to another court. 60. Benefits Based on Incorrect Age. If the amount of benefits is determined by data as to a person's age that is incorrect, benefits will be recalculated on the basis of the correct age. Any amounts underpaid by TIAA on the basis of the incorrect data will be paid at the time the correction is made. Any amounts overpaid by TIAA on the basis of the incorrect data will be charged against the payments due after the correction is made. Any underpayments paid or overpayments charged will include compound interest at the effective rate of 6% per year. 61. Proof of Survival. For any benefit that requires the Owner, Annuitant, any Second Annuitant, any Beneficiary and/or any other person named to receive benefits be alive on the date any benefit payment is due under the terms of this Contract, TIAA may require satisfactory proof that such person or persons are alive. If this proof is not received after requested in writing, TIAA will have the right to make reduced payments or to withhold payments entirely until such proof is received. Under a Single-Life Annuity Option, you must return any overpayment made because we have not been notified of the Annuitant's death. If under a Two-Life Annuity Option TIAA has overpaid benefits because of a death of which we were not notified, subsequent payments will be reduced or withheld until the amount of the overpayment has been recovered. 62. Compliance with Laws and Regulations. TIAA will administer the Contract to comply with all applicable laws and regulations pertaining to annuities and the terms and conditions of the Contract. TIAA will withhold and forward to tax authorities any amounts required by law. 63. Right to Amend. TIAA reserves the right to change this Contract from time to time in order to comply with applicable federal and state laws on annuities. If we make such a change, we will do so for all contracts written on this form and delivered in the same state this Contract was delivered. When required by law, TIAA will obtain the approval of any appropriate regulatory authority to such amendment. 64. Correspondence and Requests for Benefits. No notice, application, form, premium payment or request for benefits will be deemed to be received by us unless it is received at our home office in New York, NY. All Premiums and benefits are payable at our home office in New York, NY. Any questions about your Contract or inquiries about our services should be directed to us at our home office address: TIAA, 730 Third Avenue, New York, NY 10017-3206. - ------------------------------------------------------------------------------- 1291.1-NJ Page 17 TIAA PA Ed. 9-94 Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- 65. Change of Rate Schedule. We may, from time to time, substitute a new Rate Schedule for the one in Section 66. A change in the Rate Schedule will be made only after we have given you three months' written notice of the change. Any change in the Surrender Charge will comply with the applicable state nonforfeiture law, if any. A new Rate Schedule will apply only to benefits arising from any Premiums credited while such Rate Schedule is in effect. Any change in the Rate Schedule will not affect the amount of benefits arising from Premiums credited prior to the change. Any new Rate Schedule will specify: A) the guaranteed annuity purchase rates used for determining Income and Death Benefit payments made from the General Account; and B) the Surrender Charge, if any, on Lump-sum Benefits and Transfers from your Fixed Account Accumulation. - ------------------------------------------------------------------------------- Page 18 1291.1-NJ Ed. 9-94 TIAA PA Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- 66. Rate Schedule. All Income and Death Benefits are payable from TIAA's General Account. TIAA may pay Income or Death Benefits that are higher than the benefit amounts guaranteed by this Rate Schedule. Once Income or Death Benefit payments have begun, TIAA does not expect to modify the benefit payments. The guaranteed annuity purchase rates applicable to the portion of your Contract Accumulation arising from all Premiums credited under this Rate Schedule (whether allocated to the Fixed Account or an Investment Account) and any Additional Interest credited to the Fixed Account under this Rate Schedule will be computed on this basis: (1) a deduction for any Premium Taxes incurred by TIAA for your Contract when annuity payments commence; (2) interest at an effective annual rate of 2.5%; and (3) mortality according to the 1983 Table a-D (TIAA Merged Gender Mod C).
============================================================================================================================== Guaranteed Annual Amount of Single Life Annuity with 10-Year Guaranteed Period provided by $10,000 from your Contract Accumulation (after any applicable Premium Taxes have been deducted). One-twelfth of the amount shown is payable each month. ============================================================================================================================== Age When Annual Amount Age When Annual Amount Age When Annual Amount Payments of Monthly Payments of Monthly Payments of Monthly Begin Benefit Payments Begin Benefit Payments Begin Benefit Payments ============================================================================================================================== 40 347.66 57 430.30 74 611.75 41 351.03 58 437.32 75 628.00 42 354.55 59 444.66 76 645.01 43 358.22 60 452.35 77 662.79 44 362.05 61 460.40 78 681.32 45 366.04 62 468.84 79 700.62 46 370.22 63 477.70 80 720.65 47 374.58 64 487.00 81 741.38 48 379.13 65 496.79 82 762.74 49 383.89 66 507.09 83 784.65 50 388.85 67 517.93 84 807.00 51 394.04 68 529.36 85 829.66 52 399.45 69 541.39 53 405.10 70 554.07 54 411.00 71 567.43 55 417.16 72 581.48 56 423.59 73 596.25 =============================================================================================================================== "Age When Payments Begin" means that the Annuitant has reached the age shown, but has not passed that birthday by as much as one month. All ages used in computing benefits are calculated in completed years and months. Guaranteed payments provided at ages other than those shown and under other annuity forms are computed on the basis stated in this Rate Schedule. For a Contract Accumulation other than $10,000, payments will be proportionate. =============================================================================================================================== If a larger payment would result from the interest rate and mortality table TIAA uses for computing the amount of any nonqualified individual single premium immediate annuity being offered when the payments start, that mortality and interest basis will be used. - --------------------------------------------------------------------------------------------------------------------------------
1291.1-NJ Page 19 TIAA PA Ed. 9-94 Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- No Surrender Charge will be assessed against Lump-sum Benefit payments or Transfers from the part of your Fixed Account Accumulation arising from Premiums credited while this Rate Schedule is in effect. - ------------------------------------------------------------------------------- Page 20 1291.1-NJ Ed. 9-94 TIAA PA EX-99.6(B) 8 FORM OF ENDORSEMENT TO CONTRACT TEACHERS INSURANCE AND ANNUITY ASSOCIATION 730 Third Avenue, New York, New York 10017-3206 Telephone: 800-842-2733 Endorsement to Your Teachers Personal Annuity Contract Effective Date: November 14, 1994 This endorsement changes your Teachers Personal Annuity Contract and becomes part of that Contract. You retain all rights provided under your original Contract. Please read this endorsement, and then attach it to your Contract. The purpose of this endorsement is to give you the option to accumulate funds in Investment Accounts of a TIAA separate account. One Investment Account, the Stock Index Account, is available as of the effective date of this endorsement. The Stock Index Account maintains a broadly diversified portfolio consisting primarily of common stocks selected to track the overall U.S. stock market. As of the effective date of this endorsement, the Stock Index Account's Separate Account Charge is 0.55% per year of the Account's net assets. This charge is guaranteed not to exceed 1.50% per year. As of the effective date of this endorsement, your Accumulation is renamed your Fixed Account Accumulation. Your Contract will now have two types of Accumulations, the Fixed Account Accumulation and Investment Account Accumulations. Your Contract Accumulation (the value of your Contract) will now equal the sum of your Fixed Account Accumulation and your Investment Account Accumulations. Unless otherwise specified in this endorsement, all references to Accumulation are hereby replaced with Contract Accumulation. The first and third paragraph of the General Description on page one of your Contract are replaced by the following: The Income Benefit is paid to the Annuitant, unless you choose to receive all Income Benefit payments. When you are ready for the Income Benefit to begin, you choose the Income Option you want from among those described in your Contract. Accumulations in the Fixed Account are credited with a guaranteed interest rate, and may also be credited with Additional Interest. Accumulations in Investment Accounts are variable, are not guaranteed, and may increase or decrease depending on investment results. Income and Death Benefits are based on your Contract Accumulation and the Rate Schedule or Schedules under which Premiums are credited to your Contract. You may allocate any future Premiums to the Fixed Account and/or to Investment Accounts. Your future Premiums will be allocated to the Fixed Account, unless you change your Premium Allocation instructions, as described on page E4 of this endorsement. You may Transfer funds between the Fixed Account and the Investment Accounts and/or withdraw all or a part of your Contract Accumulation. Only one Lump-sum Benefit payment or Transfer from the Fixed Account may be made in any 180-day period. This endorsement follows the structure and organization of your original contract. Specimen Chairman and Chief Executive Officer [GRAPHIC OMITTED] - ------------------------------------------------------------------------------- 1291.1A Table of Contents on Next Page Page E1 TIAA PA Ed. 9-94 Endorsement to Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- TABLE OF CONTENTS for Endorsement Page PART A: TERMS USED IN YOUR CONTRACT Accumulation E3 Additional Interest E3 Death Benefit E3 Rate Schedule E3 Surrender Charge E3 Fixed Account E4 General Account E4 Separate Account E4 Investment Account E4 Transfer E4 Business Day E4 Valuation Day E4 PART B: CONTRACT AND PREMIUMS Allocation of Premiums E4 Part B-2: ACCUMULATIONS Contract Accumulation E5 Fixed Account Accumulation E5 Investment Account Accumulation E5 Accumulation Unit E5 Net Investment Factor E5 Number of Accumulation Units E6 Separate Account Charge E6 Page PART C: INCOME BENEFITS Income Options E6 Amount of the Income Benefit E7 PART D: DEATH BENEFIT Transfer to the Fixed Account E7 Amount of the Death Benefit E7 Guaranteed Minimum Death Benefit E8 PART E: LUMP-SUM BENEFITS AND TRANSFERS Availability E8 Lump-sum Benefits and Transfers from the Fixed Account E8 Effective Date E9 Part F: GENERAL PROVISIONS Reports E9 Insulation of Separate Account E9 Investment Company Act of 1940 E9 Change of Rate Schedule E10 Rate Schedule E11 - ------------------------------------------------------------------------------- Page E2 1291.1A Ed. 9-94 TIAA PA Endorsement to Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- PART A: TERMS USED IN YOUR CONTRACT The term Accumulation in Section 1 of your Contract is renamed Fixed Account Accumulation and is further described in Part B-2 of this endorsement. The term Additional Amounts in Section 2 is renamed Additional Interest. Section 7 (Death Benefit) is replaced with: The Death Benefit is the value of your Contract Accumulation, or if greater, the sum of all Premiums credited to this Contract less any Lump-sum Benefits paid (and less any Surrender Charges on Lump-sum Benefits or Transfers from the Fixed Account). It will be paid to the Death Benefit Payee under one of the Methods of Payment set forth in Part D of your Contract, if you or the Annuitant dies before the Annuity Starting Date. For Premiums allocated to the Fixed Account (including your Accumulation as of the effective date of this endorsement), the guarantees in your Contract's original Rate Schedule remain in effect. Part F of this endorsement contains a restatement and expansion of the Rate Schedule. Section 13 (Rate Schedule) is replaced with: The Rate Schedule or Schedules set forth: A) the guaranteed annuity purchase rates to be used in determining Income and Death Benefit payments made from the General Account; and B) any Surrender Charge to be assessed against Lump-sum Benefits or Transfers from your Fixed Account Accumulation. A Rate Schedule applies to Contract Accumulations arising from Premiums credited while the Rate Schedule is in effect. The minimum Income or Death Benefit, paid as an annuity, is equal to your Contract Accumulation multiplied by the guaranteed annuity purchase rate calculated on the basis specified in the Rate Schedule. After we have given you three months' written notice, and to the extent permitted by law, TIAA may change the Rate Schedule applicable to future Premiums as described in Part F of this endorsement. Any change in the Rate Schedule will not affect the amount of benefits arising from Premiums credited prior to the change. Section 14 (Surrender Charge) is replaced with: A Surrender Charge is a charge assessed against a Lump-sum Benefit payment from the Fixed Account or a Transfer from the Fixed Account. No Surrender Charge will be assessed against the part of your Fixed Account Accumulation arising from Premiums credited while your Contract's original Rate Schedule is in effect. If a Surrender Charge is included in a future Rate Schedule, it will apply only to the part of your Fixed Account Accumulation arising from Premiums paid while such Rate Schedule is in effect. No Surrender Charge will ever be assessed against an Investment Account Accumulation. - ------------------------------------------------------------------------------- 1291.1A Page E3 TIAA PA Ed. 9-94 Endorsement to Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- The following terms are added: Fixed Account. All Premiums and Transfers credited to the Fixed Account become part of TIAA's General Account. The General Account consists of all of TIAA's assets other than those in separate accounts. Separate Account. All Premiums and Transfers credited to an Investment Account become part of the Separate Account. The Separate Account is designated as "VA-1" and was established by TIAA in accordance with New York law to provide benefits from this Contract and other similar contracts. The assets and liabilities of Separate Account VA-1 are segregated from the assets and liabilities of the General Account. An Investment Account is a subaccount of the Separate Account. TIAA may add or delete Investment Accounts as described in Part F of this endorsement. You may Transfer some or all of your Contract Accumulation between the Fixed Account and the available Investment Accounts. The provisions concerning Transfers, including restrictions, are set forth in Part E of this endorsement. A Business Day is any day that the New York Stock Exchange is open for trading. A Business Day ends at 4:00 p.m. Eastern time, or when trading closes on the New York Stock Exchange, if earlier. A Valuation Day is any day Business Day, 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 a TIAA Investment Account are principally traded. Valuation Days that aren't Business Days end at 4:00 p.m. Eastern time. PART B: CONTRACT AND PREMIUMS The following provision is added: Allocation of Premiums. You allocate Premiums among the Fixed Account and the available Investment Accounts. Premiums allocated to the Fixed Account increase your Fixed Account Accumulation. Premiums allocated to an Investment Account purchase Accumulation Units in that Account. As of the effective date of this endorsement, your Premiums are allocated to the Fixed Account only. You may change this allocation at any time. Your Premiums are allocated according to the most recent valid instructions TIAA has received from you in a form acceptable to TIAA. - ------------------------------------------------------------------------------- Page E4 1291.1A Ed. 9-94 TIAA PA Endorsement to Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- Part B-2 is added to your Contract: PART B-2: ACCUMULATIONS Section 1 (Accumulation) is replaced with the following two provisions: Your Contract Accumulation is equal to the sum of your Fixed Account Accumulation and your Investment Account Accumulations. Your Fixed Account Accumulation is guaranteed by TIAA's General Account and will earn interest at a guaranteed effective annual rate of 3%. Investment Account Accumulations are not guaranteed, and you bear the investment risk of your Investment Account Accumulations. Your Fixed Account Accumulation is equal to: A) all Premiums allocated to your Fixed Account Accumulation; plus B) all Transfers credited to your Fixed Account Accumulation; plus C) interest credited to your Fixed Account Accumulation at a guaranteed effective annual rate of 3%; plus D)ab any Additional Interest in excess of the guaranteed 3% interest credited to your Fixed Account Accumulation; less E) any Premium Taxes incurred by TIAA for your Fixed Account Accumulation; less F) the amount of any Lump-sum Benefits paid or Transfers from your Fixed Account Accumulation; less G)ab any Surrender Charge assessed for Lump-sum Benefits or Transfers from your Fixed Account Accumulation. The following provisions are added: An Investment Account Accumulation (the value of your share of an Investment Account) is equal to the number of your Accumulation Units multiplied by the value of one Accumulation Unit in that Investment Account. Accumulation Unit. Each Investment Account maintains a separate Accumulation Unit. The value of each Investment Account's Accumulation Unit is calculated at the close of each Valuation Day. The value of an Investment Account's Accumulation Unit is equal to the previous day's value multiplied by the Account's Net Investment Factor. The Net Investment Factor for an Investment Account equals (A) divided by (B), as follows: (A) equals the value of the Investment 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 Investment Account's net assets at the end of the prior day (including the net effect of transactions made during the prior day). - ------------------------------------------------------------------------------- 1291.1A Page E5 TIAA PA Ed. 9-94 Endorsement to Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- Number of Accumulation Units. The number of your Accumulation Units in an Investment Account will be increased by: A) any Premiums allocated to that Investment Account; and B) any Transfers to that Investment Account; and will be decreased by: C) any Premium Taxes incurred by TIAA for your Investment Account Accumulation; D) any Lump-sum Benefits paid from that Investment Account; and E) any Transfers from that Investment Account to the Fixed Account or another Investment Account. The increase or decrease in the number of your Accumulation Units on any Valuation Day is equal to the net dollar value of all transactions divided by the value of the Investment Account's Accumulation Unit as of the end of the Valuation Day. Separate Account Charge. Each Investment Account has a Separate Account Charge for mortality and expense risk, administration, and investment advisory services. After three months' written notice to you, TIAA, at its discretion, may increase or decrease any Investment Account's Separate Account Charge. The Separate Account Charge for any Investment Account is guaranteed not to exceed 1.5% per year of net assets. The Separate Account Charge as of the effective date of this endorsement is shown on page 1. PART C: INCOME BENEFIT The following sentence is added to Section 21 (Income Options): Your Contract Accumulation can be used to provide an Income Benefit payable from and guaranteed by TIAA's General Account. No Income Benefit is available from the Separate Account. - ------------------------------------------------------------------------------- Page E6 1291.1A Ed. 9-94 TIAA PA Endorsement to Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- Section 23 (The Amount of the Income Benefit) is replaced with: The Amount of the Income Benefit as of the Annuity Starting Date will be determined by: A) the amount of your Contract Accumulation; B) the Rate Schedule or Schedules under which Premiums were credited to your Contract and the Rate Schedule or Schedules under which any Additional Interest was credited to your Fixed Account Accumulation; C) the Income Option you choose; D) the Annuitant's age, if you choose an Income Option that pays a lifetime income; and E)ab the Second Annuitant's age, if you choose one of the Survivor Annuity Options. If the Income Benefit would be less than $100 a month, TIAA will have the right to change to quarterly, semi-annual or annual payments, whichever will result in payments of $100 or more and the shortest interval between payments. PART D: DEATH BENEFIT The following provision is added: Transfer to the Fixed Account. All amounts held in Investment Accounts will be Transferred to the Fixed Account as of the date we receive due proof of the death. If your spouse is the Death Benefit Payee and elects to become the Owner at the time due proof of your death is provided, no such Transfer will be made. Section 26 (Amount of the Death Benefit) is replaced with: The Amount of the Death Benefit will be determined as of the date we receive due proof of the death of you or the Annuitant by: A) the amount of your Contract Accumulation, or if greater, the sum of all Premiums credited to your Contract less any Lump-sum Benefits paid and less any Surrender Charges on Lump-sum Benefits or Transfers from the Fixed Account; B) the Rate Schedule or Schedules under which Premiums were credited to your Contract and the Rate Schedule or Schedules under which any Additional Interest was credited to your Fixed Account Accumulation; C) the Method of Payment chosen for the Death Benefit; and D) if the Method chosen pays a lifetime income, the age of the Death Benefit Payee. - ------------------------------------------------------------------------------- 1291.1A Page E7 TIAA PA Ed. 9-94 Endorsement to Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- The following provision is added: Guaranteed Minimum Death Benefit. The Death Benefit will be the greater of (i) your Contract Accumulation or (ii) the sum of all Premiums credited less any Lump-sum Benefits paid and less any Surrender Charges on Lump-sum Benefits or Transfers from the Fixed Account. As of the date TIAA receives due proof of death of you or the Annuitant, your Fixed Account Accumulation will be increased by the amount, if any, by which the sum of all Premiums credited to your Contract (less any Lump-sum Benefits paid and less any Surrender Charges on Lump-sum Benefits or Transfers from the Fixed Account) exceeds your Contract Accumulation. The title of Part E is changed as follows: PART E: LUMP-SUM BENEFITS AND TRANSFERS Section 31 (Availability of Lump-sum Benefit) is replaced with: Availability. You may choose a Lump-sum Benefit or Transfer from an Account before the Annuity Starting Date. Lump-sum Benefits or Transfers from an Account's Accumulation must be at least $1,000 or for the entire Account Accumulation. Only one Lump-sum Benefit or Transfer from the Fixed Account may be made in any 180-day period. After we have given you three months' written notice, we may limit Transfers from each Investment Account to no more than one Transfer in any 90-day period. TIAA may limit to $300,000 the combined Premiums and Transfers credited to your Fixed Account Accumulation in any twelve-month period. Any request to receive a Lump-sum Benefit must be made by written notice to TIAA as explained in Section 39 of your Contract. If your entire Contract Accumulation is withdrawn, all obligations of TIAA to you under the Contract are fulfilled. Any request to Transfer Accumulations must be in a form acceptable to TIAA. Section 32 (Payment of the Lump-sum Benefit) is replaced with the following two provisions: Lump-sum Benefits and Transfers from the Fixed Account. Any part of your Fixed Account Accumulation paid as a Lump-sum Benefit or Transferred to an Investment Account will be reduced by the Surrender Charge (if any) specified in the applicable Rate Schedule or Schedules. When different Rate Schedules apply to different parts of your Fixed Account Accumulation, the parts accumulated under the earliest applicable Rate Schedules will be reduced first. No Surrender Charge will be assessed against any Lump-sum Benefit paid or Transfer from your Fixed Account Accumulation arising from Premiums credited while your Contract's original Rate Schedule is in effect. TIAA may include a Surrender Charge in a future Rate Schedule, as described in Part F of this endorsement. If a Surrender Charge is included in a future Rate Schedule, it will apply only to the part of your Fixed Account Accumulation that arose from Premiums paid under that Rate Schedule. - ------------------------------------------------------------------------------- Page E8 1291.1A Ed. 9-94 TIAA PA Endorsement to Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- Effective Date. A Lump-sum Benefit payment or Transfer will be effective, and all values determined as of the Business Day we receive your request, unless you choose to defer the effective date to a future day acceptable to TIAA. TIAA is required by law to reserve the right to defer payment of a Lump-sum Benefit from the Fixed Account for up to six months. Also, TIAA reserves the right to delay a Transfer from the Fixed Account for up to six months. If we defer payment of a Lump-sum Benefit or a Transfer from the Fixed Account for ten or more working days, we will credit interest at the total rate then applicable to the "Interest Payments" Method of paying Death Benefits, but not less than 3%. If at any time applicable state law requires a higher rate of interest, such rate will be credited. Payment of a Lump-sum Benefit or a Transfer from an Investment Account may be delayed to the extent permitted or required under the Federal Investment Company Act of 1940, or any other applicable federal or state law. PART F: GENERAL PROVISIONS Section 33 (Report of Accumulation) is replaced with: Reports. At least once each year until the Annuity Starting Date, we will mail you a report for the calendar year just ended. It will provide a statement of the investments held in the Separate Account, and it will show the value of your Contract Accumulation, the Death Benefit, your Fixed Account Accumulation, and for each Investment Account Accumulation, the value of your Accumulation, the number of your Accumulation Units, and the value of one Accumulation Unit. The following provisions are added: Insulation of Separate Account. TIAA owns the assets in Separate Account VA-1. To the extent permitted by law, the assets of the Separate Account will not be charged with liabilities arising out of any other business TIAA may conduct. All income, gains and losses, whether or not realized, of an Investment Account of the Separate Account will be credited to or charged against only that Investment Account without regard to TIAA's other income, gains or losses. Addition or Deletion of an Investment Account. TIAA may, as permitted by applicable law, add or delete Investment Accounts within the Separate Account. If you have Accumulation Units in an Investment Account that is deleted, you must Transfer them to another Investment Account or to the Fixed Account. Investment Company Act of 1940. The Separate Account is operated as a registered management investment company under the Investment Company Act of 1940. TIAA may operate the Separate Account as a unit-investment trust, or any other form permitted under the Act. Also, TIAA may deregister the Separate Account under the Act, subject to compliance with applicable law. - ------------------------------------------------------------------------------- 1291.1A Page E9 TIAA PA Ed. 9-94 Endorsement to Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- Section 46 (Change of Rate Schedule) is replaced with: Change of Rate Schedule. We may, from time to time, substitute a new Rate Schedule for the one currently in effect. A change in the Rate Schedule will be made only after we have given you three months' written notice of the change. Any change in the Surrender Charge will comply with the applicable state nonforfeiture law, if any. A new Rate Schedule will apply only to benefits arising from any Premiums credited while such Rate Schedule is in effect. Any change in the Rate Schedule will not affect the amount of benefits arising from Premiums credited prior to the change. Any new Rate Schedule will specify: A) the guaranteed annuity purchase rates used for determining Income and Death Benefit payments made from the General Account; and B) the Surrender Charge, if any, on Lump-sum Benefits and Transfers from your Fixed Account Accumulation. Premiums allocated to and Transfers to the Fixed Account (including your Accumulation as of the effective date of this endorsement) continue to receive the same guarantees specified by the Rate Schedule in your original Contract. The deduction for expenses and contingencies has been eliminated. No charge for expenses and contingencies will be assessed under this Contract. The guarantee that 3% interest will be credited to your Fixed Account Accumulation until you begin receiving Income Benefits or until you or the Annuitant dies no longer appears in the Rate Schedule. This guarantee is included in the definition of the Fixed Account Accumulation in Part B of this endorsement. The Rate Schedule has been modified to include a table illustrating guaranteed minimum Income and Death Benefits based on $10,000 of your Contract Accumulation at the time payment of the benefit begins. Premiums allocated to the Fixed Account receive the same Income Benefit guarantees as under your original Contract. Section 47 (Rate Schedule) is replaced with the following two pages: - ------------------------------------------------------------------------------- Page E10 1291.1A Ed. 9-94 TIAA PA Endorsement to Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- Rate Schedule. All Income and Death Benefits are payable from TIAA's General Account. TIAA may pay Income or Death Benefits that are higher than the benefit amounts guaranteed by this Rate Schedule. Once Income or Death Benefit payments have begun, TIAA does not expect to modify the benefit payments. The guaranteed annuity purchase rates applicable to the portion of your Contract Accumulation arising from all Premiums credited under this Rate Schedule (whether allocated to the Fixed Account or an Investment Account) and any Additional Interest credited to the Fixed Account under this Rate Schedule will be computed on this basis: (1) a deduction for any Premium Taxes incurred by TIAA for your Contract when ann uity payments commence; (2) interest at an effective annual rate of 2.5%; and (3 mortality according to the 1983 Table a-D (TIAA Merged Gender Mod C).
====================================================================================================================== Guaranteed Annual Amount of Single Life Annuity with 10-Year Guaranteed Period Provided by $10,000 from your Contract Accumulation (after any applicable Premium Taxes have been deducted). One-twelfth of the amount shown is payable each month. ====================================================================================================================== Age When Annual Amount Age When Annual Amount Age When Annual Amount Payments of Monthly Payments of Monthly Payments of Monthly Begin Benefit Payments Begin Benefit Payments Begin Benefit Payments ====================================================================================================================== 40 347.66 57 430.30 74 611.75 41 351.03 58 437.32 75 628.00 42 354.55 59 444.66 76 645.01 43 358.22 60 452.35 77 662.79 44 362.05 61 460.40 78 681.32 45 366.04 62 468.84 79 700.62 46 370.22 63 477.70 80 720.65 47 374.58 64 487.00 81 741.38 48 379.13 65 496.79 82 762.74 49 383.89 66 507.09 83 784.65 50 388.85 67 517.93 84 807.00 51 394.04 68 529.36 85 829.66 52 399.45 69 541.39 86 852.47 53 405.10 70 554.07 87 875.25 54 411.00 71 567.43 88 897.82 55 417.16 72 581.48 89 919.95 56 423.59 73 596.25 90 941.45 ====================================================================================================================== "Age When Payments Begin" means that the Annuitant has reached the age shown, but has not passed that birthday by as much as one month. All ages used in computing benefits are calculated in completed years and months. Guaranteed payments provided at ages other than those shown and under other annuity forms are computed on the basis stated in this Rate Schedule. For a Contract Accumulation other than $10,000, payments will be proportionate. ======================================================================================================================
If a larger payment would result from the interest rate and mortality table TIAA uses for computing the amount of any nonqualified individual single premium immediate annuity being offered when the payments start, that mortality and interest basis will be used. No Surrender Charge will be assessed against Lump-sum Benefit payments or Transfers from the part of your Fixed Account Accumulation arising from Premiums credited while this Rate Schedule is in effect. - ------------------------------------------------------------------------------- 1291.1A Page E11 TIAA PA Ed. 9-94 Endorsement to Your Teachers Personal Annuity Contract - ------------------------------------------------------------------------------- The table shown below is a restatement of the table in your original Contract's Rate Schedule. The table corrects two typographical errors in your Contract's Rate Schedule: The "Annuity Beginning at" columns headings have been corrected to refer to ages 65, 70, and 75; and the rate for $100 credited at age 51 for an annuity beginning at age 75 has been corrected. The errors in your original Contract's Rate Schedule understated your benefit guarantees.
=================================================================================================================================== Guaranteed Income Benefit Provided by a Premium Allocated to the Fixed Account Guaranteed Annual Amount of Single Life Annuity with a 10-year Guaranteed Period Provided by $100 (net of any reduction for any applicable Premium Taxes) One-twelfth of the amount shown is payable each month =================================================================================================================================== Age Age Age Attained Attained Attained When Annuity Beginning at When Annuity Beginning at When Annuity Beginning at $100 is Age 65 Age 70 Age 75 $100 is Age 65 Age 70 Age 75 $100 is Age 65 Age 70 Age 75 credited credited credited =================================================================================================================================== 35 $12.06 $15.59 $20.49 52 $7.29 $9.43 $12.39 69 $5.71 $7.50 36 11.70 15.13 19.89 53 7.08 9.15 12.03 70 5.54 7.28 37 11.36 14.69 19.30 54 6.88 8.89 11.68 71 7.07 38 11.03 14.27 18.75 55 6.67 8.63 11.34 72 6.86 39 10.71 13.85 18.20 56 6.48 8.38 11.01 73 6.66 40 10.40 13.45 17.67 57 6.29 8.13 10.69 74 6.47 41 10.09 13.05 17.15 58 6.11 7.90 10.37 75 6.28 42 9.80 12.67 16.65 59 5.93 7.67 10.07 43 9.52 12.31 16.17 60 5.76 7.44 9.78 44 9.24 11.95 15.70 61 5.59 7.23 9.50 45 8.97 11.60 15.24 62 5.43 7.01 9.22 46 8.71 11.26 14.80 63 5.27 6.81 8.95 47 8.46 10.93 14.36 64 5.12 6.62 8.69 48 8.21 10.62 13.95 65 4.97 6.42 8.43 49 7.97 10.31 13.54 66 6.23 8.19 50 7.74 10.01 13.14 67 6.05 7.95 51 7.51 9.71 12.76 68 5.87 7.72 ==================================================================================================================================== "Age Attained" means that the Annuitant has reached the age shown but has not passed that birthday by as much as one month. All ages used in computing benefits are calculated in completed years and months. Monthly payments for ages other than those shown, and under other income methods, are computed on the basis stated in the applicable Rate Schedule at the time the Premium is credited. For amounts other than $100, payments will be proportionate. ====================================================================================================================================
- ------------------------------------------------------------------------------- Page E12 1291.1A Ed. 9-94 TIAA PA EX-99.7 9 APPLICATION FOR TEACHERS PERSONAL ANNUITY CONTRACT [TIAA logo] Application for Teachers Personal Annuity Contract N Please print in INK and provide all information requested. - -------------------------------------------------------------------------------- 1. Annuitant Last Name________________________ First__________ Middle____ Information [ ]Mr. [ ]Mrs. [ ]Ms. [ ]Other____ Sex: [ ]M [ ]F Date of Birth: Mo._____ Day_____ Yr._____ Soc. Sec. #__________ Home Tel.__________ Bus. Tel:_________ Employer_______________________ Status: [ ]Active [ ]Retired Do you own any insurance or Annuity contracts issued by TIAA-CREF? [ ]Yes [ ]No Home Address: Street _______________________________________ City _____________________ State _______ Zip Code __________ - -------------------------------------------------------------------------------- 2. Owner Last Name________________________ First__________ Middle____ Information [ ]Mr. [ ]Mrs. [ ]Ms. [ ]Other____ (Complete only Sex: [ ]M [ ]F Date of Birth: Mo._____ Day_____ Yr._____ if the Annuitant Soc. Sec. #__________ Home Tel.__________ Bus. Tel:_________ is not to be Employer_______________________ Status: [ ]Active [ ]Retired the Owner.) Relationship of Owner to Annuitant__________________________ Do you own any insurance or Annuity contracts issued by TIAA-CREF? [ ]Yes [ ]No Home Address: Street _______________________________________ City _____________________ State _______ Zip Code __________ - -------------------------------------------------------------------------------- 3. Existing Will this annuity contract replace an existing life Contracts insurance or annuity contract from another company? [ ]Yes [ ]No From what company? ____________________________ Contract number ____________________________________________ - -------------------------------------------------------------------------------- 4. Annuity The first day of (Month) ______________ (Year)_____________, Starting Date or at the Annuitant's age ______________ - -------------------------------------------------------------------------------- 5. Your Name(s) and Address(es) Relationship to Owner Date of Birth Social Security # Designation of Primary Beneficiary(ies) of Beneficiary (Very Important) [stamp] APPROVED STATE OF NEW YORK NOV 30 1992 /s/ [illegible] SUPERINTENDENT OF INSURANCE -------------------------------------------------------------------------------------------- Name(s) and Address(es) Relationship to Owner Date of Birth Social Security # of Contingent Beneficiary(ies)
- -------------------------------------------------------------------------------- 6. Initial Premium The amount of premium paid with this application is $______________________. - -------------------------------------------------------------------------------- The Annuitant, if other than the Owner, consents to this application for an annuity based on his or her life. The Owner has all rights to the benefits provided by the annuity contract. Unless the Owner has assigned or irrevocably transferred rights under the contract, the Owner may exercise every right given by the contract without the consent of any other person. If the Annuitant dies before income benefit payments begin, the Owner will receive the death benefit. If the Owner dies before income benefit payments begin, the Beneficiary will receive the death benefit. The annuity applied for will not take effect unless and until, during the lifetimes of the proposed Owner and Annuitant, TIAA has received the initial premium and TIAA has approved this application. ---------------------------------------- ------------------ Signature of Annuitant Date ---------------------------------------- ------------------ Signature of Owner Date (if other than the Annuitant) 1291.APP.01 ED 10/92 EX-99.8(A) 10 CHARTER OF TIAA (AS AMENDED) Exhibit 8(a) CHARTER OF TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA Originally Filed March 4, 1918 As Amended October 31, 1997 ARTICLE ONE This corporation shall be named "Teachers Insurance and Annuity Association of America." ARTICLE TWO The place where the corporation is to be located and have its principal office for the transaction of business is the City of New York, State of New York. ARTICLE THREE The corporation shall have power to do any and all kinds of business specified in paragraphs 1, 2 and 3 of Section 46 of the Insurance Law of the State of New York, being Chapter 882 of the Laws of 1939, as amended, and any amendments to such paragraphs or provisions in substitution therefor which may be hereafter adopted, provided the corporation is qualified under such amendments to do such kinds of business, together with any other kind or kinds of business to the extent necessarily or properly incidental to the kinds of insurance business which the corporation is so authorized to do. The corporation shall also have the general rights, powers and privileges of a corporation, as the same now or hereafter are declared by the applicable laws of the State of New York and any and all other rights, powers and privileges now or hereafter granted by the Insurance Law of the State of New York or any other law or laws of the State of New York to life insurance companies having power to do the kinds of business hereinabove referred to. The corporation shall transact its business exclusively on a non-mutual basis and shall issue only nonparticipating policies. ARTICLE FOUR The corporate powers of the corporation shall be vested in and exercised by a board of trustees, and by such officers and agents as the board of trustees may from time to time elect or appoint. ARTICLE FIVE Section 1. The board of trustees shall consist of four classes of trustees, each class to consist of four trustees, and the trustees of one class shall be elected at the annual election in each year, each to serve for a term of four years. The term of office of each trustee so elected shall commence at the close of the meeting of the board of trustees next succeeding such election, and shall continue until a successor shall take office. A majority of trustees shall be citizens and residents of the United States, and not less than three trustees shall be residents of the State of New - 1 - York. A trustee need not be a stockholder. The number of trustees shall in no case be less than the minimum number of incorporators required to organize a life insurance corporation. Section 2. The annual meeting of stockholders for the election of trustees shall be held each year in the month of November on a date and at an hour specified by notice mailed at least thirty days in advance. Any vacancy in the board of trustees occurring in an interval between the annual meetings of stockholders may be filled for the unexpired portion of such trustee's term by the board of trustees in such manner as the bylaws of the corporation may provide. Section 3. The board of trustees shall have power to adopt bylaws providing for the appointment of an executive committee, not less than three in number, to exercise all the powers of the trustees in the intervals between meetings of the board of trustees, and prescribing such other rules and regulations, not inconsistent with law or this charter, for the conduct of the affairs of the corporation as may be deemed expedient, and such bylaws may be amended or repealed by them at pleasure. The board of trustees shall also have all other powers usually vested in boards of directors of life insurance companies not inconsistent with law or this charter, and may at any time accept or exercise any and all additional powers and privileges which may be conferred upon this corporation, or upon life insurance companies in general. One-third of the trustees shall constitute a quorum at all meetings of the board. ARTICLE SIX The board of trustees, at each annual meeting, shall elect the executive officers of the corporation as provided in the bylaws. Other officers may be elected or appointed as provided in the bylaws. One person may hold more than one office, except that no person shall be both president and secretary. The chairman and the president shall be members of the board of trustees, but no other officer need be a trustee. ARTICLE SEVEN The capital of the corporation shall be Two Million Five Hundred Thousand Dollars ($2,500,000) which shall be divided into two thousand five hundred (2,500) shares of One Thousand Dollars ($1,000) each. ARTICLE EIGHT The purpose of the corporation is to aid and strengthen nonproprietary and nonprofit-making colleges, universities and other institutions engaged primarily in education or research by providing annuities, life insurance, and sickness and accident benefits suited to the needs of such institutions and of the teachers and other persons employed by them on terms as advantageous to the holders and beneficiaries of such contracts and policies as shall be practicable, and by counselling such institutions and their employees concerning pension plans or other measures of security, all without profit to the corporation or its stockholders. The corporation may receive gifts and bequests to aid it in performing such services. ARTICLE NINE The fiscal year of the corporation shall commence on the first day of January and shall end on the thirty-first day of December. - 2 - EX-99.8(B) 11 BYLAWS OF TIAA (AS AMENDED) Exhibit 8(b) BYLAWS OF TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA As Amended January 1, 1998 ARTICLE ONE Stockholders Section 1. Annual Meeting. The annual meeting of stockholders for the election of trustees and for the transaction of such other business as may properly come before the meeting shall be held in the month of November each year at the office of the Association in the City of New York on a day and at an hour specified by notice mailed at least thirty days in advance. The notice shall be in writing and shall be signed by the chairman, or the president, or a vice president, or the secretary. Special meetings of the stockholders may be held at the said office of the Association whenever called by the chairman, or by the president, or by order of the board of trustees, or by the holders of at least one-third of the outstanding shares of stock of the Association, or may be held subject to the provisions of the emergency bylaws of the Association. Section 2. Notice. It shall be the duty of the secretary not less than ten nor more than forty days prior to the date of each meeting of the stockholders to cause a notice of the meeting to be mailed to each stockholder. Section 3. Voting. At all meetings of stockholders each stockholder shall be entitled to one vote upon each share of stock owned by him of record on the books of the Association ten days before the meeting. Stockholders may vote in person or by proxy appointed in writing. Section 4. Quorum. The presence in person or by proxy of the holders of a majority of the shares in the Association shall be necessary to constitute a quorum at any meeting of stockholders. Section 5. Telephonic Participation. At all meetings of stockholders or any committee thereof, stockholders may participate by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. ARTICLE TWO Trustees Section 1. General Management. The general management of the property, business and affairs of the Association shall be vested in the board of trustees provided by the charter. A - 1 - trustee need not be a stockholder. At least one-third of such trustees must be persons who are not officers or employees of the Association or any entity controlling, controlled by, or under common control with the Association and who are not beneficial owners of a controlling interest in the voting stock of the Association or any such entity. At least one such person must be included in the quorum for the transaction of business at any meeting of the trustees. Section 2. Quorum. One-third of the trustees shall constitute a quorum at all meetings of the board. If less than a quorum shall be present at any meeting, a majority of those present may adjourn the meeting from time to time until a quorum shall attend. In case of a vacancy among the trustees of any class through death, resignation or other cause, a successor to hold office for the unexpired portion of the term may be elected at any meeting of the board at which a quorum shall be present. Such successors shall not take office nor exercise the duties thereof until ten days after written notice of their election shall have been filed in the office of the Superintendent of Insurance of the State of New York. Section 3. Annual Meeting. There shall be a meeting of the board of trustees in the month of November each year on a day and at an hour specified in a notice mailed at least ten days and not more than twenty days in advance. This shall be known as the annual meeting of the board of trustees. At this meeting the board shall elect officers, appoint committees and transact such other business as shall properly come before the meeting. Section 4. Other Meetings. Stated meetings of the board of trustees shall be held on such dates as the board by standing resolution may fix. No notice of such stated meetings need be given. Special meetings of the board may be called by order of the chairman, the president, or the executive committee by notice mailed at least one week prior to the date of such meeting, and any business may be transacted at the meeting. Section 5. Telephonic Participation. At all meetings of the board of trustees or any committee thereof, trustees may participate by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. Section 6. Action Without a Meeting. Where time is of the essence, but not in lieu of a regularly scheduled meeting of the board of trustees or committee thereof, any action required or permitted to be taken by the board, or any committee thereof, may be taken without a meeting if all members of the board or the committee consent in writing to the adoption of a resolution authorizing the action. The resolution and the written consents thereto by the members of the board or committee shall be filed with the minutes of the proceedings of the board or committee. Section 7. Trustees' Compensation and Expenses. A trustee may be paid an annual stipend and fees and such other compensation or emolument in any amount first authorized by the board in accordance with Section 1 of Article Five hereof, including, but not limited to, a deferred compensation benefit, for meetings of the board that he/she attends and for services that he/she renders on or for committees or subcommittees of the board; and each trustee shall be reimbursed for transportation and other expenses incurred by him/her in serving the Association. - 2 - Section 8. Chairman. The chairman, and in his absence the president, shall preside at all meetings of the board. ARTICLE THREE Officers Section 1. Election. At each annual meeting the board of trustees shall elect the executive officers of the corporation including a chairman, a president, one or more vice presidents, and such other executive officers as they may determine. Each such executive officer shall hold office until the close of the next annual meeting of the board or, if earlier, until his retirement, death, resignation or removal. The board may appoint other officers and agents, assign titles to them and determine their duties; such officers and agents shall hold office during the pleasure of the board of trustees. It may appoint persons to act temporarily in place of any officers of the Association who may be absent, incapacitated, or for any other reason unable to act or may delegate such authority to the chief executive officer. Section 2. Removal of Officers. Any officer elected by the board of trustees may be removed by the affirmative votes of a majority of all the trustees holding office. Any other officer may be removed by the affirmative votes of a majority of all members of the executive committee holding office. Section 3. Removal of Other Employees. All other agents and employees shall hold their positions at the pleasure of the executive committee or of such executive officer as the executive committee may clothe with the powers of engaging and dismissing. Section 4. Qualifications. The chairman and the president shall be members of the board of trustees, but none of the other officers need be a trustee. One person may hold more than one office, except that no person shall be both president and secretary. Section 5. Chief Executive Officer. The board of trustees shall designate either the chairman or the president as chief executive officer. Subject to the control of the board of trustees and the provisions of these bylaws, the chief executive officer shall be charged with the management of the affairs of the Association, and shall perform such duties as are not specifically delegated to other officers of the Association. He shall be ex officio a member of all standing committees except the nominating and personnel committee, audit committee and the committee on reimbursement agreements with CREF. He shall report from time to time to the board of trustees on the affairs of the Association. Section 6. Chairman. The chairman, when present, shall preside at all meetings of the stockholders and of the board. He shall be ex officio chairman of the executive committee. He may appoint trustee committees, except those appointed by the board of trustees, and may appoint members to fill vacancies on trustee committees appointed by the board when such occur between meetings of the trustees. If the chairman is not the chief executive officer, he shall, in addition to the foregoing, perform such functions as are delegated to him by the chief executive officer. In the absence of both the chairman and the president, the chair of the nominating and personnel committee shall preside at all meetings of the stockholders and of the board. - 3 - Section 7. President. The president, in the event of the absence or disability of the chairman, shall perform the duties of the chairman. If the president is not the chief executive officer, he shall assist the chief executive officer in his duties and shall perform such functions as are delegated to him by the chief executive officer. Section 8. Absence or Disability of Chief Executive Officer. In the absence or disability of the chief executive officer, the president, if he is not the chief executive officer, or the chairman, if he is not the chief executive officer, or if neither is available, a vice president so designated by the executive committee or chief executive officer shall perform the duties of the chief executive officer, unless the board of trustees otherwise provides and subject to the provisions of the emergency bylaws of the Association. Section 9. Secretary. The secretary shall give all required notices of meetings of the board of trustees, and shall attend and act as secretary at all meetings of the board and of the executive committee and keep the records thereof. He shall keep the seal of the corporation, and shall perform all duties incident to the office of secretary and such other duties as from time to time may be assigned to him by the board of trustees, the executive committee, or the chief executive officer. Section 10. Other Officers. The chief executive officer shall determine the duties of the executive officers other than the chairman, president, and secretary and of all officers other than executive officers, and he may assign titles to and determine the duties of non-officers. ARTICLE FOUR Committees Section 1. Appointment. At each annual meeting of the board of trustees, the board shall appoint an executive committee, an investment committee, a nominating and personnel committee, an audit committee, a committee on reimbursement agreements with CREF, a committee on products and services, and a committee on corporate governance and social responsibility, each member of which shall hold office until the close of the next annual meeting of the board and until a successor shall be appointed or until the member shall cease to be a trustee except that for the audit committee, the board may specify a different period of membership. The board of trustees, the executive committee, or the chairman may appoint such other trustee committees and subcommittees as may from time to time be found necessary or convenient for the proper conduct of the business of the Association, and designate their duties. Not less than one third of the members of each trustee committee shall be persons who are not officers or employees of the Association or of any entity controlling, controlled by, or under common control with the Association and who are not beneficial owners of a controlling interest in the voting stock of the Association or any such entity, except for the nominating and personnel committee and the audit committee, each of which will be comprised solely of such persons. Further, at least one such person must be included in the quorum for the transaction of business at any meeting of any of the committees. Section 2. Executive Committee. The executive committee shall consist of eight trustees including the chairman and the president, but not more than three members shall be officers or salaried employees of the Association. Three members shall constitute a quorum, among whom only one salaried officer may be counted for that purpose. The executive committee shall meet - 4 - in regular meeting as it may from time to time determine, and in special meeting whenever called by the chairman, and shall be vested with full powers of the board of trustees during intervals between the meetings of the board in all cases in which specific instructions shall not have been given by the board of trustees and, in particular, said committee: (a) shall have general supervision of the contracts issued by the Association, and of all matters relating to the selection of risks, the determination of premium rates, and of any other questions of detail in the conduct of the business which may be referred to the executive committee by resolutions of the board of trustees. (b) shall review and oversee the design, development, improvement, and marketing of new and existing products and services. (c) shall review the specifications for and oversee the implementation stages of new technology-based services and computer programs at participating institutions. (d) shall have supervision of the rules and methods for recording the vouchers, accounts, receipts and disbursements of the Association. (e) shall, in the event of an acute emergency, as defined by Article Seven-A--Insurance, of the New York State Defense Emergency Act, (Section 9177, Unconsolidated Laws of New York) and any amendments thereof, be responsible for the emergency management of the Association as provided in the emergency bylaws of the Association. Section 3. Investment Committee. The investment committee shall consist of at least thirteen members, including the chief executive officer, and such additional trustees, if any, as the board of trustees or the executive committee may appoint. A majority, but not less than three, of the members shall constitute a quorum, among whom only one salaried officer of the Association may be counted for that purpose. Not more than three members shall be officers or salaried employees of the Association. (a) subject to review by the board of trustees the investment committee shall determine the investment policies of the Association. (b) The investment committee shall supervise the investment of the funds of the Association. No loan or investment other than policy loans shall be made or disposed of without authorization or approval by the investment committee. Section 4. Nominating and Personnel Committee. The nominating and personnel committee shall consist of five trustees who are not officers or salaried employees of the Association and whose terms do not expire in the year following their appointment. Three members shall constitute a quorum. In the year following their appointment the committee shall nominate executive officers and the standing committees for the annual meeting of the board of trustees, shall designate the principal officers of the Association, shall recommend to the board of trustees the annual compensation of the principal officers and of any salaried employee if the level of compensation to be paid to such employee is equal to, or greater than, the compensation received or to be received by any principal officer, nominate trustees to fill interim vacancies and, if requested by the TIAA Board of Overseers, shall recommend the names of persons for election as trustees at the annual meeting of the stockholders. In addition, - 5 - the committee shall approve the titles and base salaries of all appointed officers and the base salaries of executive officers, other than those designated as principal officers or those officers to be paid on an equal or greater level of compensation with principal officers, and shall recommend the provisions of any incentive salary compensation program(s) and determine the amounts of any incentive salary payments for those officers included in any incentive salary plan. Section 5. Audit Committee. The audit committee shall consist of four trustees. The committee shall itself, or through public accountants or otherwise, make such audits and examinations of the records and affairs of the Association as it may deem necessary. The committee shall review the reimbursement agreements among TIAA, CREF, TIAA-CREF Individual & Institutional Services, Inc., and TIAA-CREF Investment Management, Inc., and make recommendations regarding them to the board of trustees. A majority, but not less than three, of the members shall constitute a quorum. Section 6. Committee on corporate Governance and Social Responsibility. The committee on corporate governance and social responsibility shall consist of not less than five trustees and such additional trustees as the board of trustees may appoint. No such trustee shall be an officer or salaried employee of TIAA. A committee quorum shall consist of a majority of the members. The committee is responsible for addressing all corporate social responsibility and corporate governance issues including the voting of TIAA shares and the initiation of appropriate shareholder resolutions. In addition, the committee will develop and recommend specific corporate policy in these areas for consideration by the TIAA board of trustees. Section 7. Reports. Within a reasonable time after their meetings, all such committees and subcommittees shall report their transactions to each trustee. ARTICLE FIVE Salaries, Compensation and Pensions to Trustees, Officers and Employees Section 1. Salaries and Pensions. The Association shall not pay any salary, compensation or emolument in any amount to any officer, deemed by a committee or committees of the board to be a principal officer pursuant to subsection (b) of Section 1202 of the Insurance Law of the State of New York, or to any salaried employee of the Association if the level of compensation to be paid to such employee is equal to, or greater than, the compensation received by any of its principal officers, or to any trustee thereof, unless such payment be first authorized by a vote of the board of trustees of the Association. The Association shall not make any agreement with any of its officers or salaried employees whereby it agrees that for any services rendered or to be rendered he shall receive any salary, compensation or emolument that will extend beyond a period of thirty-six months from the date of such agreement, except as specifically permitted by the Insurance Law of the State of New York. No principal officer or employee of the class described in the first sentence of this section, who is paid a salary for his services shall receive any other compensation, bonus or emolument from the Association, directly or indirectly, except in accordance with a plan recommended by a committee of the board pursuant to subsection(b) of Section 1202 of the Insurance Law of the State of New York and approved - 6 - by the board of trustees. The Association shall not grant any pension to any officer or trustee, or to any member of his family after his death, except that the Association may pursuant to the terms of a retirement plan and other appropriate staff benefit plans adopted by the board provide for any person who is or has been a salaried officer or employee, a pension payable at the time of retirement by reason of age or disability and also life insurance, health insurance and disability benefits. Section 2. Prohibitions. No trustee or officer of the Association shall receive, in addition to fixed salary or compensation, any money or valuable thing, either directly or indirectly, or through any substantial interest in any other corporation or business unit, for negotiating, procuring, recommending or aiding in any purchase or sale of property, or loan, made by the Association or any affiliate or subsidiary thereof, nor be pecuniarily interested either as principal, coprincipal, agent or beneficiary, either directly or indirectly, or through any substantial interest in any other corporation or business unit, in any such purchase, sale or loan; provided that nothing herein contained shall prevent the Association from making a loan upon a policy held therein by the borrower not in excess of the net reserve value thereof. ARTICLE SIX Indemnification of Trustees, Officers and Employees The Association shall indemnify, in the manner and to the full extent permitted by law, each person made or threatened to be made a party to any action, suit or proceeding, whether or not by or in the right of the Association, and whether civil, criminal, administrative, investigative or otherwise, by reason of the fact that he or his testator or intestate is or was a trustee, officer or employee of the Association or, while a trustee, officer or employee of the Association, served any other corporation or organization of any type or kind, domestic or foreign, in any capacity at the request of the Association. To the full extent permitted by law such indemnification shall include judgments, fines, amounts paid in settlement, and expenses, including attorneys' fees. No payment of indemnification, advance or allowance under the foregoing provisions shall be made unless a notice shall have been filed with the Superintendent of Insurance of the State of New York not less than thirty days prior to such payment specifying the persons to be paid, the amounts to be paid, the manner in which payment is authorized and the nature and status, at the time of such notice, of the litigation or threatened litigation. ARTICLE SEVEN Execution of Instruments The board of trustees or the executive committee shall designate who is authorized to execute certificates of stock, proxies, powers of attorney, deeds, leases, releases of mortgages, satisfaction pieces, checks, drafts, contracts for insurance or annuity and instruments relating thereto, and all other contracts and instruments in writing necessary for the Association in the management of its affairs, and to attach the Association's seal thereto; and may further authorize the extent to which such execution may be done by facsimile signature. - 7 - ARTICLE EIGHT Disbursements No disbursements of $100 or more shall be made unless the same be evidenced by a voucher signed by or on behalf of the person, firm or corporation receiving the money and correctly describing the consideration for the payment, and if the same be for services and disbursements, setting forth the services rendered and an itemized statement of the disbursements made, and if it be in connection with any matter pending before any legislative or public body, or before any department or officer of any government, correctly describing in addition the nature of the matter and of the interest of such corporation therein, or if such voucher cannot be obtained, by an affidavit stating the reasons therefor and setting forth the particulars above mentioned. ARTICLE NINE Corporate Seal The seal of the Association shall be circular in form and shall contain the words Teachers Insurance and Annuity Association of America, New York, Corporate Seal, 1918," which seal shall be kept in the custody of the secretary of the Association and be affixed to all instruments requiring such corporate seal. ARTICLE TEN Amendments Article One of these bylaws can be amended or repealed only by the affirmative vote of the holders of a majority of the outstanding shares of the capital stock of the Association, such vote being cast at a meeting held upon notice stating that such meeting is to vote upon a proposed amendment or repeal of such bylaw. Any other bylaw may be amended or repealed at any meeting of the board of trustees provided notice of the proposed amendment or repeal shall have been mailed to each trustee at least one week and not more than two weeks prior to the date of such meeting. - 8 - EX-99.11 12 ADMINISTRATIVE SERVICES AGREEMENT Exhibit 11 ADMINISTRATIVE SERVICES AGREEMENT FOR TIAA SEPARATE ACCOUNT VA-1 THIS AGREEMENT made this 15th day of September, 1994, by and between: Teachers Insurance and Annuity Association of America ("TIAA"), a nonprofit New York insurance corporation; and TIAA Separate Account VA-1 (the "Separate Account"), a separate account of TIAA established pursuant to the New York State Insurance Law. WITNESSETH: WHEREAS, TIAA has established the Separate Account to segregate assets funding the variable benefits provided by the Teachers Personal Annuity, an individual, flexible premium, deferred annuity, as well as by other contracts that may be offered by TIAA in the future; and WHEREAS, the Separate Account is registered as an open-end management investment company under the Investment Company Act of 1940 as amended (the "Act"), and currently consists of a single investment portfolio (known as the Stock Index Account), and may consist of additional investment portfolios in the future (collectively, with the Stock Index Account, referred to herein as "Portfolios"); and -1- WHEREAS, the assets of the Separate Account are held separately from the other assets of TIAA; and WHEREAS, the Management Committee of the Separate Account (the "Management Committee") desires to retain TIAA to render administrative services to the Separate Account in the manner and on the terms set forth herein; and WHEREAS, TIAA is willing to provide administrative services to the Separate Account in the manner and on the terms set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, TIAA and the Separate Account hereby agree as follows: 1. ADMINISTRATIVE SERVICES. Subject to the direction and control of the Management Committee, TIAA shall perform administrative services for the Separate Account and the portion of any annuity contracts issued by TIAA that are funded by the Separate Account (the "Contracts"). In this connection, TIAA agrees to perform administrative functions including, but not limited to: a. Compute the daily net asset value of each Portfolio, and maintain the general ledge and other accounting records; -2- b. Schedule, plan agendas for, and conduct meetings of the Management Committee and holders of units of beneficial interest in the Separate Account ("Contract Owners")' c. Recommend independent accountants, counsel, and others providing services required with respect to the Separate Account; d. Coordinate, supervise, and/or direct the Separate Account's independent accountants and counsel on a day- to-day basis; e. Prepare and distribute all required proxy statements, reports, and other communications with Contract Owners; f. Prepare and file reports and other required filings with the Securities and Exchange Commission ("SEC"), the National Association of Securities Dealers, Inc., and state "blue sky" authorities, and generally monitor compliance with all federal and state securities and insurance laws and the Internal Revenue Code of 1986, as amended; g. Provide persons to perform such professional, administrative, and clerical functions as are necessary in connection with Contract Owner relations, reports, premium collections, withdrawal and transfer requests, and Contract Owner account adjustments, including the receipt, handling, and coordination of Contract Owner complaints, other than functions performed pursuant to any agreements between the Separate Account and its principal underwriter; -3- h. Provide clerical, secretarial, accounting, and bookkeeping services, data processing services, office supplies, and stationery; i. Provide adequate office space and related services (including telephone and other utility service) necessary for each Portfolio's operations; j. Maintain initial and ongoing organizational records not otherwise maintained by the Separate Account's custodian(s), principal underwriter, or investment manager; and k. Assist, generally, in all aspects of the Separate Account's operations. Nothing herein shall be construed to restrict the Separate Account's right, at its own expense, to hire its employees or to contract for services to be performed by third parties. 2. ISSUANCE OF UNITS. TIAA shall issue and record the issuance of units of beneficial interest ("Units") in a Portfolio upon the receipt, directly or indirectly, of orders therefor. TIAA shall compute the number of Unites issuable in the case of an order for a dollar amount of Units at the net asset value per Unit for the Portfolio, as described in the then-current registration statement(s) for the Contracts (the "Registration Statement"). TIAA will take reasonable steps to -4- ensure that the custodian receives all payments due the Separate Account in consideration of the issuance of Units. 3. WITHDRAWALS AND TRANSFERS. TIAA shall process each order for the withdrawal or transfer of Units at the net asset value per Unit of the Portfolio, as described in the Registration Statement. Where withdrawal or transfer of a dollar amount is requested, TIAA shall calculate the number of Units to be redeemed so as to provide the Contract Owner with the dollar value identified in the withdrawal or transfer request. And, TIAA shall make the required amount of funds available to the Contract Owner. Officers of the Separate Account shall cause TIAA to make such funds available not more than seven days after receipt of the withdrawal or transfer request, or within such other time period as is consistent with the requirements of the federal securities laws or other applicable laws. 4. BOOKS AND RECORDS. TIAA will maintain all general accounting records required for the Separate Account, to the extent not maintained by the custodian or the investment manager. TIAA agrees that all books and records which it maintains for the Separate Account are the Separate Account's property, and, in the event of termination of this Agreement for any reason, TIAA agrees promptly to return to the Separate Account, free from any claim or retention of rights by TIAA, all records relating to the Separate Account. TIAA also agrees, upon request of the Separate -5- Account, promptly to surrender such books and records to the Separate Account or, at the Separate Account's expense, to make copies thereof available to the Separate Account or to make such books and records available for inspection by representatives of regulatory authorities or other persons reasonably designated by the Separate Account. TIAA further agrees to maintain, prepare, and preserve such books and records in accordance with the Act and rules thereunder, including but not limited to, Rules 31a-1 and 31a-2. The records maintained for the Separate Account hereunder by TIAA shall include records showing, for each Contract Owner's account, the following: (i) name, address, and tax identifying number; (ii) number of Units held in each Portfolio; (iii) historical information regarding the account of each Contract Owner, including the date, Portfolio, and price for all transactions; (iv) any stop or restraining order placed against the account; (v) any correspondence relating to the current maintenance of the account; (vi) any other information required in order for TIAA to perform the calculations contemplated or required by this Agreement; and (vii) such other records as the Management Committee may from time to time reasonably request. 5. EXPENSES. TIAA shall be responsible for all expenses related to performing administrative services for the -6- Separate Account and with respect to the Contracts, which expenses shall include, but not be limited to: i) all expenses, incidental and otherwise, associated with preparing and filing with appropriate state, federal, local, or foreign governments or agencies all tax returns, including the expenses associated with any mailings to the Contract Owners with respect to such returns; ii) fees and expenses incurred in the registration or qualification (and maintaining said registration or qualification) of the Separate Account and Units therein under federal or state securities laws, if deemed applicable, including all fees and expenses incurred in connection with the preparation and filing of each Registration Statement (including each pre-effective and post-effective amendment thereto), each Prospectus (including any preliminary and each definitive Prospectus and any supplement thereto), and each Statement of Additional Information; iii) fees and expenses incurred in the registration, qualification, or approval (and maintaining said registration, qualification, or approval) of the Contracts for offer and sale under the securities or insurance laws of any state; -7- iv) registration and filing fees for the contracts payable to the SEC and any state; v) costs and expenses of the preparation, servicing and administration of the Contracts; vi) compensation paid to members of the Management Committee who are not "interested persons" of the Separate Account within the meaning of the Act, and travel expenses paid to all members of the Management Committee; vii) any extraordinary or non-recurring expenses (such as legal claims and liabilities, and litigation costs and indemnification related thereto); viii) costs of printing and distributing, to current Contract Owners, Contract Owner reports, proxy statements, Prospectuses and Statements of Additional Information, and any stickers and supplements thereto, and otherwise communicating with Contract Owners; ix) costs and all incidental expenses associated with conducting meetings of Contract Owners should they be held; -8- x) the cost of the fidelity bond required by Rule 17g-1 of the Act, any other fidelity bond covering the Separate Account, and any errors and omissions insurance or other liability insurance covering the Separate Account and/or its officers, members of the Management Committee, and its personnel; and xi) the charges and expenses of the independent accountants and outside legal counsel retained with respect to the Separate Account other than for matters related to its investment activities, the charges and expenses of any independent proxy solicitation firm retained by the Separate Account to solicit votes from Contract Owners with respect to Units, and the charges and expenses of any trade association fees. 6. COMPENSATION OF TIAA. For the services to be rendered, the facilities furnished, and the expenses assumed by TIAA pursuant to this Agreement, the Separate Account shall pay to TIAA on each Valuation Day (as that term is defined in the Registration Statement), a fee based on an annual rate of twenty one-hundredths of one percent (0.20%) of the net assets of each Portfolio. 7. LIABILITY OF TIAA. TIAA will not be liable for any error of judgment or mistake of law or for any loss suffered -9- by the Separate Account in connection with the matters to which this Agreement relates. Nothing herein contained shall be construed to protect TIAA against any liability resulting from the willful misfeasance, bad faith, or gross negligence of TIAA in the performance of its obligations and duties or from reckless disregard of its obligations and duties under this Agreement or by virtue of violation of any applicable law. 8. DURATION AND TERMINATION OF THE AGREEMENT. This Agreement shall become effective as of the date first written above, and shall continue in effect unless terminated by either party on not less than 90 days prior written notice to the other party. 9. FURTHER ACTIONS. Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof. 10. GOVERNING LAW. The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of New York, as at the time in effect, and the applicable provisions of the Act and rules thereunder or other federal laws and regulations which may be applicable. To the extent that the applicable law of the State of New York, or any of the provisions herein, conflict with the applicable provisions -10- of the Act and rules thereunder or other federal laws and regulations which may be applicable, the latter shall control 11. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall be deemed one instrument. 12. NOTICES. All notices and other communications provided for hereunder shall be delivered by hand or mailed first class, postage prepaid, addressed as follows: a. If to TIAA - Teachers Insurance and Annuity Association of America 730 Third Avenue New York, New York 10017-3206 Attention: Thomas G. Walsh b. If to the Separate Account VA-1 - TIAA Separate Account VA-1 730 Third Avenue New York, New York 10017-3206 Attention: Thomas W. Jones or to such other address as TIAA or the Separate Account shall designate by written notices to the other. 13. MISCELLANEOUS. Captions in this Agreement are included for convenience or reference only and in no way define -11- or limit any of the provisions hereof or otherwise affect their construction or effect. IN WITNESS WHEREOF, TIAA and the Separate Account have cause this Agreement to be executed in their names and on their behalf by and through their duly authorized officers on the day and year first above written. TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA By: /s/ Thomas G. Walsh Attest: /s/ Lisa Snow --------------------------- ----------------------- Title: Executive Vice President Title: Assistant Secretary TIAA SEPARATE ACCOUNT VA-1 By: /s/ Thomas W. Jones Attest: /s/ Lisa Snow ---------------------- ------------------------- Title: President Title: Assistant Secretary -12- EX-12.(A) 13 OPINION AND CONSENT OF CHARLES H. STAMM, ESQUIRE Exhibit 12(A)--Opinion and Consent of Charles H. Stamm EXHIBIT 12(A) [Letterhead of Teachers Insurance and Annuity Association and Charles H. Stamm] March 31, 1999 The Management Committee TIAA Separate Account VA-1 730 Third Avenue New York, New York 10017-3206 Dear Committee Members: This opinion is furnished in connection with the filing by TIAA Separate Account VA-1 (the "Separate Account") of Post-Effective Amendment No. 5 to the Registration Statement (File Nos. 33-79124 and 811-8520) of Form N-3 under the Securities Act of 1933 for certain individual variable annuity contracts (the "Contracts") offered and funded by the Separate Account. The Registration Statement covers an indefinite amount of securities in the form of interests in the Contracts. I have examined the Charter, Bylaws and other corporate records of Teachers Insurance and Annuity Association of America ("TIAA"), the Rules and Regulations and other organizational records of the Separate Account, and the relevant statutes and regulations of the State of New York. On the basis of such examination, it is my opinion that: 1. TIAA is a nonprofit life insurance company duly organized and validly existing under the laws of the State of New York. 2. The Separate Account is a "separate account" of TIAA within the meaning of Section 4240 of the New York Insurance Law, duly established by a resolution of TIAA's Board of Trustees and validly existing under the laws of the State of New York. 3. To the extent New York State law governs, the Contracts have been duly authorized by TIAA and, when issued as contemplated by the Registration Statement, will constitute legal, validly issued and binding obligations of TIAA enforceable in accordance with their terms. I hereby consent to the use of this opinion as an exhibit to the Registration Statement, and to the reference to my name under the heading "Legal Matters" in the Statement of Additional Information. Sincerely, /s/ Charles H. Stamm -------------------- Executive Vice President and General Counsel EX-12.(B) 14 CONSENT OF SUTHERLAND, ET. AL. Exhibit 12(B)--Consent of Sutherland, et al. EXHIBIT 12(B) March 30, 1999 The Management Committee TIAA Separate Account VA-1 730 Third Avenue New York, New York 10017-3206 Re: Registration of Individual Deferred Variable Annuity Contracts (Registration Nos. 33-79124 and 811-8520) Ladies and Gentlemen: We hereby consent to the reference to our name under the caption "Legal Matters" in the Statement of Additional Information filed as a part of Post-Effective Amendment No. 5 to the above-captioned registration statement on Form N-3. In giving this consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933. Sincerely, SUTHERLAND, ASBILL & BRENNAN LLP By:/s/ Steven B. Boehm ---------------------- EX-99.13 15 CONSENT OF ERNST & YOUNG LLP CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the captions "Auditors" and "Experts" and to the use of our report dated February 5, 1999 on the Stock Index Account of TIAA Separate Account VA-1 included in this Registration Statement on Form N-3 (No. 33-79124) of TIAA Separate Account VA-1. We also consent to the use of our report on Teachers Insurance and Annuity Association of America ("TIAA") dated March 10, 1999 included in this Registration Statement. Such report expresses our opinion that TIAA's 1998 and 1997 statutory-basis financial statements present fairly, in all material respects, the financial position of TIAA at December 31, 1998 and December 31, 1997, respectively, and the results of its operations and its cash flows for the year then ended in conformity with statutory accounting practices prescribed or permitted by the New York State Insurance Department and not in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP ERNST & YOUNG LLP New York, New York March 29, 1999 EX-99.15 16 SEED MONEY AGREEMENT Exhibit 15 SEED MONEY AGREEMENT SEED MONEY AGREEMENT (the "Agreement") made this _____ day of __________, 19___ by and between Teachers Insurance and Annuity Association of America ("TIAA"), a nonprofit corporation existing under the laws of the State of New York, and TIAA Separate Account VA-1 ("VA-1"), a segregated investment account of TIAA. 1. TIAA hereby agrees to invest in VA-1 the sum of $25,000,000 on October 3 or as soon thereafter as practicable. 2. In consideration for such investment and without deduction of any charges, VA-1 shall credit TIAA with 1,000,000 accumulation units, each valued at $25.00, of which TIAA shall be the owner. Such accumulation units will share pro rata in the investment performance of VA-1 and shall be subject to the same valuation procedures and the same periodic deductions as are other accumulation units in VA-1. 3. TIAA represents that the accumulation units acquired under this Agreement are being, and will be, acquired for investment (and not with a view to distribution or resale to the public) and can be disposed of only be redemption. 4. Accumulation units acquired under this Agreement will be held by TIAA for its own account until redeemed by TIAA. Amounts will be redeemed at prices equal to the respective net asset value of accumulation units of VA-1 next determined after VA-1 receives TIAA's proper notice of redemption. 5. TIAA may purchase, and VA-1 may issue, additional accumulation units as the parties may agree. 6. This Agreement will be construed and enforced in accordance with and governed by the provisions of the Investment Company Act of 1940 and the laws of the State of New York. TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA By -------------------------- Title: -------------------------- TIAA SEPARATE ACCOUNT VA-1 By -------------------------- Title: -------------------------- EX-16 17 SCHED. FOR COMPUTATION OF PERFORMANCE QUOTATIONS Exhibit 16--Schedules for Computation EXHIBIT 16 Schedule of Computation Total Return Information for the TIAA Separate Account VA-1 Stock Index Account
January 1, 1998 60 months (From November 1, 1994 to Commencement of operations to December 31, 1998 December 31, 1998) ----------------- ------------------ Hypothetical initial payment of $1,000 (P) $1,000 $1,000 Accumulation unit value: At start of period (A) $54.9165 $25.8318 At end of period (B) $68.0085 $68.0085 Ending value of hypothetical investment (EV) = P x (B/A) $1,238.40 $2,632.74 Cumulative rate of total return = {(EV/P) - 1} x 100 23.84% 163.27% Number of years in period (n) 1 4.17 Net change factor (1 + T) = EV/P 1.2384 2.6327 Average annual compound rate of total return (T) 23.84% 26.15%
C-24 EX-27 18 FDS
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. ALL AMOUNTS ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS. 0000923524 TIAA SEPARATE ACCOUNT VA-1 1,000 YEAR DEC-31-1998 DEC-31-1998 514,100 756,157 9,346 0 789 766,292 8,310 0 0 8,310 0 0 11,145 9,901 0 0 0 0 0 757,982 9,662 130 0 (2,402) 7,390 31,091 97,186 135,667 0 0 0 0 2,250 (1,006) 0 214,251 0 0 0 0 1,948 0 3,896 649,646 54.917 .685 12.407 0 0 0 68.009 .370 0 0
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