Statement on Market Volatility and Recent Events in the Financial Services Sector

Many investors remain concerned about developments in the financial services industry and the continuing turmoil in the broader financial markets.

The following statement provides TIAA-CREF's perspective on these events and explains their effect on the recent performance of our portfolios. It also highlights the strength and stability of TIAA-CREF and how we seek to mitigate problems caused by the kind of market volatility that has prevailed in recent months.

Weathering Volatile Times: TIAA-CREF's Key Advantages
TIAA-CREF's combination of stability, strength and strategy offers important advantages for our participants and client institutions.

• Stability: While TIAA-CREF is closely monitoring developments on Wall Street, our investment philosophy continues to seek competitive returns over the long term, which is well suited to a retirement plan that seeks to deliver lifetime income to individuals.
• Strength: The nation's leading independent insurance rating agencies have all affirmed the highest possible insurance financial strength ratings for TIAA.¹ In fact, TIAA is one of just three U.S. life insurance companies to receive the highest ratings from all four major rating agencies.
• Strategy: Even in turbulent times, clients can be well served by sticking with their long-term investment game plan and diversifying their holdings across a variety of asset classes.² To that end, TIAA-CREF is here to help clients with personalized, objective advice.

Effects of Financial Services Holdings on TIAA-CREF Portfolios
An important part of TIAA-CREF's investment approach, which seeks consistent growth for long-term investors, is to recognize that unexpected events do occur and to position the portfolios we manage in such a way that seeks to minimize the effects of problems at any single company or within any one sector.

While some TIAA-CREF mutual funds and variable annuity accounts have been adversely affected by exposure to equity and fixed-income holdings of specific financial companies, the impact of these holdings has generally been limited as a percentage of overall portfolio assets. Thus, the recent performance of our portfolios reflects both the decline in the financial services industry and the broader downturn in the stock and bond markets.

For current performance of our variable annuity accounts and Retirement Class mutual funds, click here. For financial reports, including schedules of investments that list all portfolio holdings for the accounts and funds as of September 30, 2008, click here.

 
Effects of Credit Exposures in TIAA-CREF Fixed-Income Portfolios
Most TIAA-CREF fixed-income variable annuity accounts and fixed-income mutual funds invest in broadly diversified portfolios that include corporate and government bonds, government agency securities, mortgage-backed securities, commercial mortgage-backed securities, asset-backed securities and other types of fixed-income assets.

(The exceptions to this broad diversification include the CREF Inflation-Linked Bond Account, TIAA-CREF Inflation-Linked Bond Fund and TIAA-CREF Inflation-Linked Bond Life Fund, which invest substantially all of their assets in U.S. Treasury Inflation-Protected Securities, or TIPS. In addition, the TIAA-CREF Tax-Exempt Bond Fund invests in municipal securities, while the TIAA-CREF High-Yield Fund invests primarily in lower-rated, higher-yielding fixed-income securities.)

As a result of the continuing financial crisis, which has disrupted the credit markets and led to deteriorating economic conditions in the United States and abroad, the credit quality of various types of fixed-income investments has become a focus of concern for many investors. While TIAA-CREF's fixed-income variable annuity accounts and fixed-income mutual funds have some exposure to these types of securities, our commitment to portfolio diversification, fundamental credit analysis and risk management has helped mitigate the negative effects of holdings of any single type or issuer.

Given the current environment, however, TIAA-CREF's fixed-income portfolios have not been immune to the broad market decline that has affected the performance of virtually all classes of fixed-income securities.

For current performance of our variable annuity accounts and Retirement Class mutual funds, click here. For financial reports, including schedules of investments that list all portfolio holdings for the accounts and funds as of September 30, 2008, click here.

Perspective on Current Volatility in the Financial Services Sector
During the fourth quarter of 2008, regulators and policymakers continued dramatic efforts to calm the turmoil in the financial services sector and in the broader markets. The U.S. Congress passed a modified financial services rescue package, while the finance ministers of developed foreign nations coordinated a set of short-term interest-rate cuts. The federal government also unveiled a $250 billion plan to take ownership positions in large and small U.S. banks and, almost immediately, became the largest single shareholder in 12 of the nation's leading banks. The Treasury is also expected to take partial ownership of a wide range of regional and local banks. Further plans were started to purchase distressed asset-backed securities in order to get them off the balance sheets of financial institutions. Plans were also made to modify distressed individual mortgages in order to give relief to homeowners.

In these extraordinary times, the focus should be on public policy as much as on trends in financial fundamentals. The economy and the markets are anticipating additional steps by the U.S. government in the form of capital injections, mortgage workouts and moratoriums, monetary policy, fiscal stimulus and regulatory reform. In a world where international financial flows have increased dramatically, investors should also keep an eye on public policies around the globe, including the potential for additional coordinated actions among nations.

The right strategy for institutions as well as individuals is to reexamine the tried and true tenets of investing. These include having a long-term plan with a diversified portfolio of stock, bond, real estate and money market investments, complemented by a "guaranteed" asset such as a fixed annuity, if available; carefully reviewing and rebalancing portfolios as needed to ensure that asset allocations stay on track; emphasizing low-cost, style-consistent investment products with a long investment horizon; and considering the creation of a retirement income "floor" that combines Social Security with a low-cost, guaranteed annuity that will never be depleted. With these simple precepts, investors can position themselves to limit the damage from market turmoil and take advantage of any future market upturns.

Current and future portfolio holdings are subject to risk.

All TIAA-CREF investment products are subject to market risk and other risk factors.

Annuity account options are available through contracts issued by TIAA or CREF. These contracts are designed for retirement or other long-term goals, and offer a variety of income options, including lifetime income. Payments from the variable annuity accounts [and mutual funds] are not guaranteed and will rise or fall based on investment performance. Mutual funds do not offer the range of income options available through annuities.

Certain securities may not be suitable for all investors.