Update Regarding Recent REIT Performance and Potential for Sub-Prime Mortgage Crisis to Impact REIT Returns

As the impact of sub-prime mortgage defaults and the related housing market downturn has become increasingly widespread during recent months, investors have become concerned about the potential for residential mortgage and housing problems to affect commercial real estate markets and related securities, including real estate investment trusts (REITs).  

REIT returns have trended sharply negative in recent weeks (down 13.68% in the fourth quarter of 2007 and down 7.65% on a year-to-date basis through January 4, 2008, as measured by the Dow Jones Wilshire Real Estate Securities Index), and much of this recent downturn in performance is likely related to investor concerns over the potential for problems in residential real estate markets to spill over to commercial real estate markets.  To address these concerns, we would like to provide clients with information regarding the relationship between residential and commercial real estate markets, in addition to information regarding recent performance of REIT markets and the TIAA-CREF Real Estate Securities Fund.

Direct and Indirect Effects of Residential Mortgage and Housing Markets on REITs
Although market disruptions caused by increasing levels of sub-prime mortgage defaults primarily impact residential real estate markets and holders of residential mortgage debt (including a large number of banks and financial institutions), such problems in residential real estate markets have to some extent affected commercial real estate markets as well.  Specifically with regard to REITs, the impact of residential mortgage defaults has most directly impacted the performance of mortgage REITs, a type of REIT that purchases residential and other mortgage debt obligations . Other types of REITs have indirectly been affected by residential mortgage defaults through tightening lending standards that have been increasingly applied to both residential and commercial properties, restricting access to capital and reducing market liquidity.  Within some regions, increasing numbers of foreclosed homes and condominiums have been converted to rental properties, causing an oversupply of rental units in certain geographic markets, potentially decreasing rental rates and adversely impacting the returns of REITs specializing in the management of apartment properties. As residential mortgage and housing market problems have broader economic impacts on consumer spending, employment, and growth in corporate earnings, other types of REITs, such as retail and office REITs may be negatively impacted as well.

As mentioned above, REIT returns have trended sharply negative in recent weeks, and REITs are currently trading at a 24% discount relative to the value of underlying real estate holdings (source: Green Street Advisors – Real Estate Securities Monthly as of 12/31/07).  This discount reflects a forward-looking expectation by REIT investors that the value of commercial real estate prices will likely decline.  Much of this expectation is based on fears of a possible recession that may result in part from weakness in residential mortgage and housing markets.  Despite expectations being applied, commercial real estate fundamentals, such as occupancy levels, lease and rental growth rates, and investor demand for properties remain relatively stable.

Update on Recent Performance of TIAA-CREF Real Estate Securities Fund
Consistent with the broader decline realized by REIT markets during recent weeks and on a year-to-date basis, the TIAA-CREF Real Estate Securities Fund has realized negative returns during the fourth quarter of 2007 and year-to-date through January 4th.  Due to favorable security selection and effective portfolio management, the TIAA-CREF Real Estate Securities Fund realized returns in excess of the benchmark Dow Jones Real Estate Securities Index during 2007 and has realized returns approximately equal to those of the benchmark on a year-to-date basis through January 4th. 

TIAA-CREF Real Estate Securities Fund Sub-Prime Exposure
The TIAA-CREF Real Estate Securities Fund invests in a diversified REIT portfolio, which includes holdings in all major REIT market segments, including office, retail, industrial, and apartment REIT sectors. While the Real Estate Securities Fund has indirect exposure to residential mortgage and housing markets as described above, the Fund has relatively limited direct sub-prime mortgage or other residential mortgage-related exposure.

Specifically with regard to sub-prime mortgage exposure, the TIAA-CREF Real Estate Securities Fund:

• Does not directly hold any sub-prime mortgages, CDOs*, mortgage-backed or SIV**-issued debt;
• Has limited holdings of mortgage REITs, representing less than 0.5% of portfolio assets;
• Has limited holdings of specialty finance firms, representing less than 0.5% of portfolio assets.

TIAA-CREF's real estate investment team remains watchful of developing conditions within commercial real estate markets and will continue to seek to realize competitive returns while closely managing and monitoring potential risk exposures.

The Dow Jones Wilshire Real Estate Securities Index referenced above is a market-weighted index that includes equity real estate investment trusts (REITs) and real estate operating companies. To be included in the index, a company must be both an equity owner and operator of commercial and/or residential real estate.  Mortgage REITs, health care REITS, net-lease REITs, real estate finance companies, mortgage brokers and bankers, commercial and residential real estate brokers, home builders, large landowners and subdividers of unimproved land, hybrid REITs and timber REITs, as well as companies that have more than 25% of their assets in direct mortgage investments, are excluded. A company must have a minimum total market capitalization of $200 million at the time of its inclusion, and at least 75% of the company's total revenue must be generated from owning and operating real estate assets.

Average Annual Total Returns as of 12/31/07

The inception date for Institutional Real Estate Securities Fund Retirement Class is 10/1/02.

The performance data quoted represents past performance and is no guarantee
of future results. Your returns and the principal value of your investments will
fluctuate so that your shares [accumulation units], when redeemed, may be
worth more or less than their original cost. Current performance may be lower
or higher than the performance quoted above. For performance current to the
most recent month-end, visit the TIAA-CREF Website at www.tiaa-cref.org, or
call 877 518-9161.

The gross expense and net charge of the fund is 0.81%.

This report speaks only as of the date of this report. TIAA-CREF does not undertake any obligation to update or publicly release any revisions to forward-looking statements to reflect events, circumstances or changes in expectations after the date of this report.