Document ID: SEC-2011-0912-0001
Agency: sec
Document Type: Notice
Title: Applications: TIAA-CREF Funds, et al.
Posted Date: 2011-06-30T04:00Z

[Federal Register Volume 76, Number 126 (Thursday, June 30, 2011)]
[Notices]
[Pages 38432-38434]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-16403]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 29707; 812-13831]

TIAA-CREF Funds, et al.; Notice of Application

June 24, 2011.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under section 17(d) of the 
Investment Company Act of 1940 (``Act'') and rule 17d-1 under the Act.

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SUMMARY: Applicants request an order to permit certain registered open-
end investment companies in the same group of investment companies to 
enter into a special servicing agreement (``Special Servicing 
Agreement'').
    Applicants: TIAA-CREF Funds, on behalf of its series, Lifecycle 
2010 Fund, Lifecycle 2015 Fund, Lifecycle 2020 Fund, Lifecycle 2025 
Fund, Lifecycle 2030 Fund, Lifecycle 2035 Fund, Lifecycle 2040 Fund, 
Lifecycle 2045 Fund, Lifecycle 2050 Fund, Lifecycle 2055 Fund, 
Lifecycle Retirement Income Fund, Lifecycle Index 2010 Fund, Lifecycle 
Index 2015 Fund, Lifecycle Index 2020 Fund, Lifecycle Index 2025 Fund, 
Lifecycle Index 2030 Fund, Lifecycle Index 2035 Fund, Lifecycle Index 
2040 Fund, Lifecycle Index 2045 Fund, Lifecycle Index 2050 Fund, 
Lifecycle Index 2055 Fund, Lifecycle Index Retirement Income Fund, 
Managed Allocation Fund, Bond Fund, Bond Index Fund, Bond Plus Fund, 
Emerging Markets Equity Fund, Emerging Markets Equity Index Fund, 
Enhanced International Equity Index Fund, Enhanced Large-Cap Growth 
Index Fund, Enhanced Large-Cap Value Index Fund, Equity Index Fund, 
Growth & Income Fund, High-Yield Fund, Inflation-Linked Bond Fund, 
International Equity Fund, International Equity Index Fund, Large-Cap 
Growth Fund, Large-Cap Value Fund, Mid-Cap Growth Fund, Mid-Cap Value 
Fund, Money Market Fund, Real Estate Securities Fund, Short-Term Bond 
Fund, Small-Cap Equity Fund; Teachers Advisors, Inc. (``Advisors'') 
Teachers Personal Investors Services, Inc. (``TPIS'') and each existing 
or future registered open-end management investment company or series 
thereof that is part of the same ``group of investment companies'' as 
TIAA-CREF Funds (the ``Trust'') under Section 12(d)(1)(G)(ii) of the 
Act and (i) Is advised by Advisors or any entity controlling, 
controlled by, or under common control with Advisors or (ii) for which 
TPIS and any entity controlling, controlled by or under common control 
with TPIS serves as principal underwriter (such investment companies or 
series thereof, together with the Trust and its series, the 
``Funds'').\1\
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    \1\ All entities that currently intend to rely on the order have 
been named as applicants. Any other entity that relies on the order 
in the future will comply with the terms and conditions of the 
application.
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    Filing Dates: The application was filed on October 5, 2010, and 
amended on March 7, 2011. Applicants have agreed to file an amendment 
during the

[[Page 38433]]

notice period, the substance of which is reflected in this notice.
    Hearing or Notification of Hearing: An order granting the 
application will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on July 18, 2011, and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090; Applicants, 730 Third Avenue, 
New York, NY 10017-3206.

FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at 
(202) 551-6817, or Janet M. Grossnickle, Assistant Director, at (202) 
551-6821 (Division of Investment Management, Office of Investment 
Company Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's website by searching for the file number, or an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. Advisors is an investment adviser registered under the 
Investment Advisers Act of 1940. Advisors serves as investment adviser 
to the Funds. TPIS is registered as a broker-dealer under the 
Securities Exchange Act of 1934 and serves as distributor of the Funds.
    2. The Trust is a Delaware statutory trust registered under the Act 
as an open-end management investment company. The Trust currently 
offers 51 series, 23 of which are ``Top-Tier Funds'' \2\ and 22 of 
which are ``Underlying Funds.'' \3\ The Top-Tier Funds invest 
substantially all of their assets in the Underlying Funds.\4\ The Top-
Tier Funds and certain of the Underlying Funds currently offer multiple 
classes of shares in reliance on rule 18f-3 under the Act.
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    \2\ ``Top-Tier Funds'' refers to Lifecycle 2010 Fund, Lifecycle 
2015 Fund, Lifecycle 2020 Fund, Lifecycle 2025 Fund, Lifecycle 2030 
Fund, Lifecycle 2035 Fund, Lifecycle 2040 Fund, Lifecycle 2045 Fund, 
Lifecycle 2050 Fund, Lifecycle 2055 Fund, Lifecycle Retirement 
Income Fund, Lifecycle Index 2010 Fund, Lifecycle Index 2015 Fund, 
Lifecycle Index 2020 Fund, Lifecycle Index 2025 Fund, Lifecycle 
Index 2030 Fund, Lifecycle Index 2035 Fund, Lifecycle Index 2040 
Fund, Lifecycle Index 2045 Fund, Lifecycle Index 2050 Fund, 
Lifecycle Index 2055 Fund, Lifecycle Index Retirement Income Fund 
and Managed Allocation Fund and any other Fund that invests 
substantially all of its assets in the Underlying Funds (as defined 
below).
    \3\ ``Underlying Funds'' refers to Bond Fund, Bond Index Fund, 
Bond Plus Fund, Emerging Markets Equity Fund, Emerging Markets 
Equity Index Fund, Enhanced International Equity Index Fund, 
Enhanced Large-Cap Growth Index Fund, Enhanced Large-Cap Value Index 
Fund, Equity Index Fund, Growth & Income Fund, High-Yield Fund, 
Inflation-Linked Bond Fund, International Equity Fund, International 
Equity Index Fund, Large-Cap Growth Fund, Large-Cap Value Fund, Mid-
Cap Growth Fund, Mid-Cap Value Fund, Money Market Fund, Real Estate 
Securities Fund, Short-Term Bond Fund and Small-Cap Equity Fund.
    \4\ The Top-Tier Funds will not be Underlying Funds and no Top-
Tier Fund will invest in another Top-Tier Fund.
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    3. Advisors and the Trust propose to enter into a Special Servicing 
Agreement that would allow an Underlying Fund to bear the expenses of a 
Top-Tier Fund (other than investment management fees, rule 12b-1 fees 
and class-specific administrative service fees). Under the Special 
Servicing Agreement, each Underlying Fund will bear expenses of a Top-
Tier Fund in proportion to the estimated benefits to the Underlying 
Fund arising from the investment in the Underlying Fund by the Top-Tier 
Fund (``Underlying Fund Benefits'').
    4. Applicants state that the Underlying Fund Benefits are expected 
to result primarily from the incremental increase in assets resulting 
from investment in the Underlying Funds by the Top-Tier Funds and the 
large size of a Top-Tier Fund's holdings of shares in a shareholder 
account relative to the average size of the share balances held in 
other Underlying Fund shareholder accounts. A Top-Tier Fund's 
shareholder account will experience fewer shareholder transactions and 
greater predictability of transaction activity than other shareholder 
accounts. As a result, the shareholder servicing costs to any 
Underlying Fund for servicing one account registered to a Top-Tier Fund 
will be significantly less than the cost to that same Underlying Fund 
of servicing the same pool of assets contributed by a large group of 
shareholders owning relatively small accounts in one or more Underlying 
Funds. In addition, by reducing Top-Tier Fund expenses, the Special 
Servicing Agreement may lead to increased assets being invested in the 
Top-Tier Funds, which in turn would lead to increased assets being 
invested in the Underlying Funds. Further, increased assets could 
enable the Underlying Funds to control and reduce their expense ratios 
because their operating expenses will be spread over a larger asset 
base.
    5. No Fund will enter into a Special Servicing Agreement unless the 
Special Servicing Agreement: (a) Precisely describes the services 
provided to the Top-Tier Funds and the amount of expenses for services 
charged to the Top-Tier Fund that may be paid by an Underlying Fund 
(``Underlying Fund Payments''); (b) provides that no affiliated person 
of the Top-Tier Funds, or affiliated person of such person, will 
receive, directly or indirectly, any portion of the Underlying Fund 
Payments; (c) provides that the Underlying Fund Payments may not exceed 
the amount of actual expenses incurred by the Top-Tier Funds; (d) 
provides that no Underlying Fund will reimburse transfer agent expenses 
of a Top-Tier Fund, including out-of-pocket expenses and other 
expenses, at a rate in excess of the average per account transfer agent 
expenses of the Underlying Fund, including out-of-pocket and other 
expenses, expressed as a basis point charge (for purposes of 
calculating the Underlying Fund's average per account transfer agent 
expense, the Top-Tier Fund's investment in the Underlying Fund will be 
excluded); and (e) has been approved by the Fund's board of trustees 
(``Board''), including a majority of trustees who are not ``interested 
persons'' (within the meaning of section 2(a)(19) of the Act) 
(``Independent Trustees''), as being in the best interests of the Fund 
and its shareholders and not involving overreaching on the part of any 
person concerned.

Applicants' Legal Analysis

    1. Section 17(d) of the Act and rule 17d-1 under the Act provide 
that an affiliated person of, or a principal underwriter for, a 
registered investment company, or an affiliate of such person or 
principal underwriter, acting as principal, shall not participate in, 
or effect any transaction in connection with, any joint enterprise or 
other joint arrangement in which the registered investment company is a 
participant unless the Commission has issued an order approving the 
arrangement. Advisors, as investment adviser, is an affiliated person 
of each of the Underlying Funds and Top-Tier Funds, which in turn could 
be deemed to be under common control of Advisors and therefore 
affiliated persons of each other. The Top-Tier Funds and the

[[Page 38434]]

Underlying Funds also may be affiliated persons by virtue of a Top-Tier 
Fund's ownership of more than 5% of the outstanding voting securities 
of an Underlying Fund. Consequently, the Special Servicing Agreement 
could be deemed to be a joint transaction among the Top-Tier Funds, the 
Underlying Funds and Advisors.
    2. Rule 17d-1 under the Act provides that, in passing upon a joint 
arrangement under the rule, the Commission will consider whether 
participation of the investment company in the joint enterprise or 
joint arrangement on the basis proposed is consistent with the 
provisions, policies, and purposes of the Act and the extent to which 
the participation is on a basis different from or less advantageous 
than that of other participants.
    3. Applicants request an order under section 17(d) and rule 17d-1 
to permit the proposed expense sharing arrangements. Applicants state 
that participation by the Top-Tier Funds, the Underlying Funds and 
Advisors in the proposed expense sharing arrangements is consistent 
with the provisions, policies and purposes of the Act, and that the 
terms of the Special Servicing Agreement and the conditions set forth 
below will ensure that no participant will participate on a basis less 
advantageous than that of other participants.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. No Fund will enter into a Special Servicing Agreement unless the 
Special Servicing Agreement: (a) Precisely describes the services 
provided to the Top-Tier Funds and the Underlying Fund Payments; (b) 
provides that no affiliated person of the Top-Tier Funds, or affiliated 
person of such person, will receive, directly or indirectly, any 
portion of the Underlying Fund Payments; (c) provides that the 
Underlying Fund Payments may not exceed the amount of actual expenses 
incurred by the Top-Tier Funds; (d) provides that no Underlying Fund 
will reimburse transfer agent expenses of a Top-Tier Fund, including 
out-of-pocket expenses and other expenses, at a rate in excess of the 
average per account transfer agent expenses of the Underlying Fund, 
including out-of-pocket expenses and other expenses, expressed as a 
basis point charge (for purposes of calculating the Underlying Fund's 
average per account transfer agent expense, the Top-Tier Fund's 
investment in the Underlying Fund will be excluded); and (e) has been 
approved by the Fund's Board, including a majority of the Independent 
Trustees, as being in the best interests of the Fund and its 
shareholders and not involving overreaching on the part of any person 
concerned.
    2. In approving a Special Servicing Agreement, the Board of an 
Underlying Fund will consider, without limitation: (a) The reasons for 
the Underlying Fund's entering into the Special Servicing Agreement; 
(b) information quantifying the Underlying Fund Benefits; (c) the 
extent to which investors in the Top-Tier Fund could have purchased 
shares of the Underlying Fund; (d) the extent to which an investment in 
the Top-Tier Fund represents or would represent a consolidation of 
accounts in the Underlying Funds, through exchanges or otherwise, or a 
reduction in the rate of increase in the number of accounts in the 
Underlying Funds; (e) the extent to which the expense ratio of the 
Underlying Fund was reduced following investment in the Underlying Fund 
by the Top-Tier Fund and the reasonably foreseeable effects of the 
investment by the Top-Tier Fund on the Underlying Fund's expense ratio; 
(f) the reasonably foreseeable effects of participation in the Special 
Servicing Agreement on the Underlying Fund's expense ratio; and (g) any 
conflicts of interest that Advisors, any affiliated person of Advisors, 
or any other affiliated person of the Underlying Fund may have relating 
to the Underlying Fund's participation in the Special Servicing 
Agreement.
    3. Prior to approving a Special Servicing Agreement on behalf of an 
Underlying Fund, the Board of the Underlying Fund, including a majority 
of the Independent Trustees, will determine that: (a) The Underlying 
Fund Payments under the Special Servicing Agreement are expenses that 
the Underlying Fund would have incurred if the shareholders of the Top-
Tier Fund had instead purchased shares of the Underlying Fund through 
the same broker-dealer or other financial intermediary; (b) the amount 
of the Underlying Fund Payments is less than the amount of Underlying 
Fund Benefits; and (c) by entering into the Special Servicing 
Agreement, the Underlying Fund is not engaging, directly or indirectly, 
in financing any activity which is primarily intended to result in the 
sale of shares issued by the Underlying Fund.
    4. In approving a Special Servicing Agreement, the Board of a Fund 
will request and evaluate, and Advisors will furnish, such information 
as may reasonably be necessary to evaluate the terms of the Special 
Servicing Agreement and the factors set forth in condition 2 above, and 
make the determinations set forth in conditions 1 and 3 above.
    5. Approval by the Fund's Board, including a majority of the 
Independent Trustees, in accordance with conditions 1 through 4 above, 
will be required at least annually after the Fund's entering into a 
Special Servicing Agreement and prior to any material amendment to a 
Special Servicing Agreement.
    6. To the extent Underlying Fund Payments are treated, in whole or 
in part, as a class expense of an Underlying Fund, or are used to pay a 
class-based expense of a Top-Tier Fund, conditions 1 through 5 above 
must be met with respect to each class of a Fund as well as the Fund as 
a whole.
    7. Each Fund will maintain and preserve the Board's findings and 
determinations set forth in conditions 1 and 3 above, and the 
information and considerations on which they were based, for the 
duration of the Special Servicing Agreement, and for a period not less 
than six years thereafter, the first two years in an easily accessible 
place.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-16403 Filed 6-29-11; 8:45 am]
BILLING CODE 8011-01-P