02-11616. New York State College Choice Tuition Savings Program Trust Fund, et al.; Notice of Application

May 3, 2002.

AGENCY:

Securities and Exchange Commission (“SEC” or “Commission”).

ACTION:

Notice of application under section 17(b) of the Investment Company Act of 1940 (the “Act”) requesting an exemption from section 17(a) of the Act.

Summary of the Application:

Applicants request an order to permit New York State College Choice Tuition Savings Program Trust Fund (the “Trust”) to purchase shares of certain series of TIAA-CREF Institutional Mutual Funds (“TIAA-CREF Funds”) in-kind.

Applicants:

The Trust and TIAA-CREF Funds.

Filing Date:

The application was filed on April 4, 2002.

Hearing or Notification of Hearing:

An order granting the application will be issued unless the SEC orders a hearing. Interested persons may request a hearing by writing to the SEC's Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the SEC by 5:30 p.m. on May 28, 2002, 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 SEC's Secretary.

Addresses:

Secretary, SEC, 450 Fifth Street, NW, Washington, DC 20549-0609. Applicants, 730 Third Avenue, New York, NY 10017.

For Further Information Contact:

Bruce R. MacNeil, Senior Counsel, at [phone], or Nadya B. Roytblat, Assistant Director, at [phone] (Office of Investment Company Regulation, Division of Investment Management).

Supplementary Information:

The following is a summary of the application. The complete application may be obtained for a fee at the SEC's Public Reference Branch, 450 Fifth Street, NW, Washington, DC 20549-0102 (telephone [phone]).

Applicants' Representations

1. The Trust was created by legislation enacted by New York and serves as a vehicle in which participant contributions from a qualified tuition program created pursuant to New York law and section 529 of the Internal Revenue Code of 1986, as amended (“New York Program”), are deposited into New York State College Choice Tuition LLC (the “LLC”). Applicants state that as a state instrumentality, the Trust is exempt from the Act pursuant to section 2(b). The LLC consists of age-based program series (“Program Series”) that invest in differing allocations in underlying portfolios of the LLC (the “Underlying Portfolios”). Applicants state that the LLC and the Underlying Portfolios are exempt from the Act pursuant to sections 3(c)(1) and 3(c)(7). Teachers Insurance and Annuity Association of America (“TIAA”) serves as the program administrator for the New York Program.

2. TIAA-CREF Funds is an open-end management investment company registered under the Act. TIAA-CREF Funds is comprised of multiple series, three of which are the Institutional Growth Equity, Institutional Bond and Institutional Money Market Funds (the “Affected Funds”). Advisors, an investment adviser registered under the Investment Advisers Act of 1940, and an indirect wholly owned subsidiary of TIAA, serves as investment adviser to the both the Affected Funds and the Underlying Portfolios.

3. Applicants state that subsequent to the establishment of the Trust, New York adopted legislation that would allow the New York Program greater flexibility in its investment options. Applicants propose to convert the New York Program to a simpler structure utilizing TIAA-CREF Funds, and forming new program series (“New Program Series”) at the Trust level rather than the LLC level (the “Reorganization”). Applicants state that the Reorganization should result in greater flexibility and reduced costs for the New York Program as the New Program Series will invest directly in the Affected Funds. The Reorganization will involve the purchase by the New Program Series of shares of the Affected Funds in-kind with portfolio securities received by the New Program Series from the Underlying Portfolios (“the In-Kind Purchase”). The Underlying Portfolios subsequently will be liquidated. Applicants state that each Affected Fund has investment objectives and policies substantially identical to those of the corresponding Underlying Portfolio. Applicants further state that the securities involved in the In-Kind Purchase will be valued in the same manner as they would be valued for purposes of computing the net asset values for the Affected Funds.

Applicants' Legal Analysis

1. Section 17(a) of the Act, in relevant part, prohibits an affiliated person of a registered investment company, or any affiliated person of such person, acting as principal, from selling to or purchasing from such investment company any security or other property. Section 2(a)(3) of the Act defines an “affiliated person” of another person to include (a) any person that directly or indirectly owns, controls, or holds with power to vote 5% or more of the outstanding voting securities of the other person; (b) any person 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held with power to vote by the other person; (c) any person directly or indirectly controlling, controlled by, or under common control with the other person; and (d) if the other person is an investment company, any investment adviser of that company.

2. Applicants state that the Underlying Portfolios and the Affected Funds may be deemed to be affiliated persons under section 2(a)(3) because they may be deemed to be under the common control of Advisors. The Trust, by controlling the Underlying Portfolios by virtue of its ownership in the Program Series, would be an affiliated person of an affiliated person of TIAA-CREF Funds. In addition, applicants state that the Trust owns more than 5% of the outstanding voting securities of another series of TIAA-CREF Funds and therefore the Trust could be deemed to be an affiliated person of an affiliated person of the Affected Funds. Therefore, applicants state that the In-Kind Purchase may be prohibited by section 17(a).

3. Section 17(b) of the Act provides that the Commission may exempt a transaction from the provisions of section 17(a) if the evidence establishes that the terms of the proposed transaction, including the consideration to be paid, are reasonable and fair and do not involve overreaching on the part of any person concerned, and that the proposed transaction is consistent with the policy of each registered investment company concerned and with the general purposes of the Act.

4. Applicants submit that the terms of the In-Kind Purchase satisfy the standards set forth in section 17(b). Applicants state that TIAA-CREF Fund's board of trustees, including a majority of the trustees who are not interested persons as defined in section 2(a)(19) of the Act, determined that the In-Kind Purchase would be in the best interests of each Affected Fund and would not dilute existing shareholder interests. Applicants also state that the In-Kind Purchase will comply with rule 17a-7(b) through (g) under the Act.

For the Commission, by the Division of Investment Management, under delegated authority.

Margaret H. McFarland,

Deputy Secretary.