College Retirement Equities Fund

Notice of Annual Meeting – November 7, 2002

PARTICIPANT PROPOSAL IV

Because the fourth participant proposal concerns CREF's tobacco-related investments, participants in all CREF accounts, except the Social Choice Account, can vote on it. Since the proposal would affect participants in each of these accounts differently, the votes will be tallied separately for each account.

Dr. Eugene Feingold, 352 Hilldale Drive, Ann Arbor, MI 48105, owning 6641.879 accumulation units in the CREF Stock Account, 9032.319 accumulation units in the CREF Bond Account, and 2555.785 accumulation units in the CREF Global Equities Account, Thomas F. Hogan, M.D., 13400 E. Shea Boulevard, Scottsdale, AZ 85259, owning 8078.925 accumulation units in the CREF Money

Market Account and 997.683 accumulation units in the CREF Social Choice Account, Dr. Douglas C. Kelley, 910 Sunset Rd„ Ann Arbor, MI 48103, owning 7.691 annuity units in the CREF Stock Account, and C. Everett Koop, M.D., 3 Ivy Pointe Way, Hanover, NH 03755-1407, owning 23.775 annuity units in the CREF Stock Account, have given notice that they intend to present the following resolution at the annual meeting:

For both ethical and financial reasons, participants request CREF: 1) To announce that CREF will make no additional tobacco-related investments, and 2) To begin an orderly divestment of all tobacco investments.

Participants' Supporting Statement

The major cigarette companies spend over $9.57 billion each year (more than $26.2 million every day) to promote their products; many of their marketing efforts directly reach kids. Cigarette company spending to market their deadly products increased by more than 42 percent from 1998 to 2000 (final 2001 data are not yet available). Tobacco industry documents, and research on the effect of marketing to kids, reveal the intent and success of industry efforts to attract new smokers from the ranks of children.

Numerous internal tobacco industry documents, revealed in the various tobacco lawsuits, show that tobacco companies have perceived kids as young as 13 years of age as a key market, studied the smoking habits of kids, and developed products and marketing campaigns aimed at them. As an RJR Tobacco document put it, "Many manufacturers have 'studied' the 14-20 market in hopes of uncovering the 'secret' of the instant popularity some brands enjoy to the almost exclusion of others... Creating a 'fad' in this market can be a great bonanza."

Additional internal company quotes:

Philip Morris: "Today's teenager is tomorrow's potential regular customer, and the overwhelming majority of smokers first begin to smoke while still in their teens. . . The smoking patterns of teenagers are particularly important to Philip Morris."

R. J. Reynolds: "Evidence is now available to indicate that the 14-18 year old group is an increasing segment of the smoking population. RJR-T must soon establish a successful new brand in this market if our position in the industry is to be maintained in the longterm."

Brown &Williamson: "Kool's stake in the 16-25-year-old population segment is such that the value of this audience should be accurately weighted and reflected in current media programs... all magazines will be reviewed to see how efficiently they reach this group."

Lorillard Tobacco: "[T]he base of our business is the high school student."

U. S. Tobacco: "Cherry Skoal is for somebody who likes the taste of candy, if you know what I'm saying."

Cigarette companies now claim they have finally stopped intentionally marketing to kids or targeting youths in their research or promotional efforts. But they continue to advertise cigarettes in ways that reach vulnerable underage populations. One of countless examples:  a Massachusetts Department of Health study found that cigarette advertising in magazines with high youth readership actually increased by 33% AFTER the November, 1998 Master Tobacco Settlement Agreement.

Cigarette companies are addicted to underage smoking. Due in large part to cigarette company marketing, each day roughly 5,000 kids try smoking for the first time. Another 2,000 kids become regular daily smokers; a third of them will die many years prematurely, from their tobacco addiction.

Should TIAA-CREF financially co-sponsor the manufacture and promotion of such deadly products? If not, vote for orderly divestment.

Opposing Statement of the Board of Trustees

The Board of Trustees recommends a vote AGAINST the proposal and urges all participants to read carefully the following statement before easting their vote.

The trustees believe that each participant should have the choice of whether or not to invest in an account that uses non-financial criteria for its investment program. This decision should not be made for them by the Board of Trustees.

The CREF accounts represent the pension contributions of over two million individual participants, with each account designed to meet the long-term financial needs of this diverse constituency. The trustees understand that tobacco divestiture and other issues relating to socially responsible investing touch upon deeply held personal beliefs shared by many CREF participants. Out of respect for these beliefs, CREF created the Social Choice Account, a balanced account that applies a number of social screens to its investment portfolio, including one for tobacco. Given the availability of the Social Choice Account and the diverse nature of our participant base, the trustees have consistently declined to impose specific subjective social standards on the investment programs of the other CREF accounts, regardless of the merits of the social cause advocated.

The Trustees believe it is in participants' best financial interests to provide CREF's investment professionals with the broadest possible discretion to pursue each account's stated investment goals and strategies and take advantage of a broad range of potential investment opportunities. For most CREF accounts, the investment team pursues a strategy that seeks to maintain a risk and return profile similar to the account's benchmark. If we were to eliminate the stocks of an entire industry from each CREF account, we would increase the chances that investment performance would vary considerably from an account's benchmark in any given year.

We believe that participants should be free to decide, based on their individual consciences, whether or not they want specific subjective social criteria applied to their investment accounts. 

The board recommends a vote against the proposal.

Source: Information for participants, October 7, 2002, pp. 21-23