1 DECEMBER 5, 2008 WEATHERING VOLATILE TIMES BRETT HAMMOND CHIEF INVESTMENT STRATEGIST

2 NEW HOME CONSTRUCTION SLOWS IN RESPONSE US PRIVATELY OWNED RESIDENTIAL HOUSING STARTS (IN THOUSANDS) Source: Global Insight

3 PRICE/EARNINGS RATIOS HAVE FALLEN SHARPLY P/E RATIOS WELL BELOW 20-YEAR HISTORICAL NORMS U.S. STOCKS WORLD STOCKS ex-U.S.

4 STOCK MARKETS ARE MORE VOLATILE IMPLIED VOLATITLITY OF S&P 500 COMPOSITE PRICE INDEX Note: Month end values extracted from daily data by TIAA-CREF Source: Data Stream, CBOE

5 LONG-TERM CORPORATE BOND SPREADS HAVE JUMPED MOODY’S AAA RATED CORPORATE BONDS OVER 10-YEAR TREASURY NOTES Note: In Basis Points, Month end values extracted from daily data by TIAA-CREF Source: Data Stream, FRB

6 AND SHORT-TERM SPREADS LIKEWISE

7 U.S. ANNUAL GDP GROWTH, 1930–2007 Sources: U.S. Bureau of Economic Analysis; TIAA-CREF EARLY YEARS OF THE GREAT DEPRESSION 1930– ESTIMATE: 1.3% 2009 OUTLOOK: -2% to -4%

8 EARNINGS GROWTH DECLINES FOR MOST WORKERS Growth in U.S. earnings for nearly all workers has lagged productivity growth and has also aggravated income inequality in recent years. Recessions tend to reduce incomes for nearly all workers for somewhere between three and seven years. Growth in mean real total money earnings, by educational group, 2000 through GROUPEMPLOYMENT SHAREEARNINGS GROWTH Some HS9.1%-3.2% HS Graduate28.9%-0.2 Some College27.9%-3.5% College Graduate22.0%-4.5% Masters8.8%-4.4% Ph.D.1.5%-0.8% MBA, JD, MD1.8%+5.9% Survey of Consumer Finance, United States Federal Reserve

9 Income inequality in the United States today has risen to levels not seen since the late 1920s.  Share of U.S. gross personal income accounted for by top 1% of earners (incomes above $382,600 in 2006—from IRS filings). –8.2% in 1980 –22.9% in 2006 “ Real compensation tends to parallel real productivity, and we have seen that for generations, but not now. It has veered off course for reasons I am not clear about.” –Alan Greenspan INCOME INEQUALITY INTENSIFIES

10 FINANCIAL CRISIS ORIGINS: YEARS IN THE MAKING  End of structural and geographic restrictions on financial services  Globalization of financial markets  Rise of risk management  Excess demand for financial assets  Rising asset prices, particularly housing

11 FINANCIAL CRISIS EMERGES  Residential market troubles appear and multiply  Mortgage defaults: the 3% problem  Credit markets come to a standstill  Economy begins to crumble  Corporate profit picture remains gloomy  Major repricing of risk around the globe

12 COLLEGE AND UNIVERSITY ENDOWMENTS

13 WHITHER COLLEGE AND UNIVERSITY ENDOWMENTS?

14 COLLEG AND UNIVERSITY ENDOWMENT ASSET ALLOCATION

15 IMPORTANT INFORMATION There are costs associated with annuities, including surrender fees, early withdrawal penalties and mortality risk expenses. Also, depending on the financial company you choose, the availability of specific types of annuities and annuity features may vary by state. So always read the prospectus before investing. For a more complete discussion of these and other risks, please consult the prospectus. You should consider the investment objectives, risks, charges and expenses carefully before investing. Please visit tiaa-cref.org for a current prospectus that contains this and other information. Please read the prospectus carefully before investing. This material must be preceded or accompanied by the prospectus for the TIAA Real Estate Account. This material has been prepared by and represents the views of Brett Hammond, and does not reflect the views of any TIAA-CREF affiliate. These views may change in response to changing economic and market conditions. Any projections included in this material are for market sectors or asset classes only, and do not reflect the experience of any product or service offered by TIAA-CREF. The material is for informational purposes only and should not be regarded as a recommendation or an offer to buy or sell any product or service. Diversification and rebalancing are techniques to help reduce risk. There is no guarantee that these techniques will protect against a loss of income. TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., members FINRA, distribute securities products. TIAA-CREF personnel, through the investment management area, provide investment advice and portfolio management services through the following entities: Teachers Advisors, Inc.; TIAA-CREF Investment Management, LLC; and Teachers Insurance and Annuity Association. TIAA-CREF Asset Management is a division of Teachers Advisors, Inc. Annuity products issued by TIAA (Teachers Insurance and Annuity Association), New York, NY. ©2008 Teachers Insurance and Annuity Association-College Retirement Equities Fund, New York, NY C43042 (0158)