N-CSR/A 1 c53719_ncsr-a.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR/A

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES

Investment Company Act file number File No. 811-09301

TIAA-CREF INSTITUTIONAL MUTUAL FUNDS
(Exact name of Registrant as specified in charter)

730 Third Avenue, New York, New York 10017
(Address of principal executive offices) (Zip code)

Stewart P. Greene, Esq.
c/o TIAA-CREF
730 Third Avenue
New York, New York 10017-3206
(Name and address of agent for service)

Registrant's telephone number, including area code: 212-490-9000

Date of fiscal year end: September 30

Date of reporting period: September 30, 2007


Item 1. Reports to Stockholders.

Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of the TIAA-CREF Institutional Mututal Funds:

We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements of the Growth Equity Fund, Growth & Income Fund, International Equity Fund, Large-Cap Growth Fund, Large-Cap Value Fund, Mid-Cap Growth Fund, Mid-Cap Value Fund, Small-Cap Equity Fund, Large-Cap Growth Index Fund, Large-Cap Value Index Fund, Equity Index Fund, S&P 500 Index Fund, Mid-Cap Growth Index Fund, Mid-Cap Value Index Fund, Mid-Cap Blend Index Fund, Small-Cap Growth Index Fund, Small-Cap Value Index Fund, Small-Cap Blend Index Fund, International Equity Index Fund, Social Choice Equity Fund, Real Estate Securities Fund, Managed Allocation Fund II, Bond Fund, Bond Plus Fund II, Short-Term Bond Fund II, High-Yield Fund II, Tax-Exempt Bond Fund II, Inflation-Linked Bond Fund and Money Market Fund, (constituting the TIAA-CREF Institutional Mutual Funds, hereafter referred to as the “Funds”) at September 30, 2007, and for the year then ended and have issued our unqualified report thereon dated November 29, 2007 (which report and financial statements are included in Item 1 of this Certified Shareholder Report on Form N-CSR). Our audit included an audit of each of the Funds’ schedule of investments in securities (the “Schedules”) as of September 30, 2007 appearing in Item 6 of this Form N-CSR. These Schedules are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these Schedules based on our audits.

In our opinion, the Schedules referred to above, when read in conjunction with the financial statements of the Funds referred to above, present fairly, in all material respects, the information set forth therein.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
November 29, 2007

(FRONT COVER)

2007 ANNUAL REPORT

TIAA-CREF
INSTITUTIONAL MUTUAL FUNDS

INSTITUTIONAL, RETIREMENT AND RETAIL CLASSES

SEPTEMBER 30, 2007

Audited financial statements

Growth Equity

Growth & Income

International Equity

Large-Cap Growth

Large-Cap Value

Mid-Cap Growth

Mid-Cap Value

Small-Cap Equity

Large-Cap Growth Index

Large-Cap Value Index

Equity Index

S&P 500 Index

Mid-Cap Growth Index

Mid-Cap Value Index

Mid-Cap Blend Index

Small-Cap Growth Index

Small-Cap Value Index

Small-Cap Blend Index

International Equity Index

Social Choice Equity

Real Estate Securities

Managed Allocation II

Bond

Bond Plus II

Short-Term Bond II

High-Yield II

Tax-Exempt Bond II

Inflation-Linked Bond

Money Market

SIGN UP FOR ELECTRONIC DELIVERY AT
www.tiaa-cref.org



PERFORMANCE OVERVIEW AS OF SEPTEMBER 30, 2007

 

 

 

 

 

 

 

 

 

 

 

 

 

Average annual total return

 

 


Fund
Class (inception)

 

1 year

 

5 years

 

 

since
inception

 


EQUITIES

 

 

 

 

 

 

 

 

 

 

Growth Equity Fund

 

 

 

 

 

 

 

 

 

 

Institutional Class (7/1/99)*

 

 

25.24

%

 

14.24

%

 

–1.05

%


Growth & Income Fund

 

 

 

 

 

 

 

 

 

 

Institutional Class (7/1/99)*

 

 

26.84

 

 

16.81

 

 

3.51

 

Retirement Class (10/1/02)*

 

 

26.44

 

 

16.43

 

3.30

Retail Class (3/31/06)

 

 

26.67

 

 

16.87

 

3.54


International Equity Fund

 

 

 

 

 

 

 

 

 

 

Institutional Class (7/1/99)*

 

 

30.49

 

 

25.26

 

 

10.23

 

Retirement Class (10/1/02)*

 

 

30.16

 

 

24.49

 

9.82

Retail Class (3/31/06)

 

 

30.34

 

 

25.75

 

10.49


Large-Cap Growth Fund

 

 

 

 

 

 

 

 

 

 

Institutional Class (3/31/06)

 

 

24.97

 

 

 

 

13.52

 

Retirement Class (3/31/06)

 

 

24.67

 

 

 

 

13.26

 

Retail Class (3/31/06)

 

 

24.89

 

 

 

 

13.39

 


Large-Cap Value Fund

 

 

 

 

 

 

 

 

 

 

Institutional Class (10/1/02)*

 

 

15.71

 

 

 

 

18.24

 

Retirement Class (10/1/02)*

 

 

15.51

 

 

 

 

17.99

 

Retail Class (10/1/02)*

 

 

15.70

 

 

 

 

18.01

 


Mid-Cap Growth Fund

 

 

 

 

 

 

 

 

 

 

Institutional Class (10/1/02)*

 

 

25.76

 

 

 

 

20.37

 

Retirement Class (10/1/02)*

 

 

25.54

 

 

 

 

20.02

 

Retail Class (10/1/02)*

 

 

25.66

 

 

 

 

20.05

 


Mid-Cap Value Fund

 

 

 

 

 

 

 

 

 

 

Institutional Class (10/1/02)*

 

 

21.03

 

 

 

 

23.22

 

Retirement Class (10/1/02)*

 

 

20.70

 

 

 

 

22.84

 

Retail Class (10/1/02)*

 

 

20.87

 

 

 

 

22.91

 


Small-Cap Equity Fund

 

 

 

 

 

 

 

 

 

 

Institutional Class (10/1/02)*

 

 

7.43

 

 

 

 

17.65

 

Retirement Class (10/1/02)*

 

 

7.15

 

 

 

 

17.30

 

Retail Class (10/1/02)*

 

 

7.39

 

 

 

 

17.48

 


Large-Cap Growth Index Fund

 

 

 

 

 

 

 

 

 

 

Institutional Class (10/1/02)*

 

 

19.15

 

 

 

 

12.80

 

Retirement Class (10/1/02)*

 

 

18.91

 

 

 

 

12.45

 


Large-Cap Value Index Fund

 

 

 

 

 

 

 

 

 

 

Institutional Class (10/1/02)*

 

 

14.36

 

 

 

 

17.07

 

Retirement Class (10/1/02)*

 

 

14.17

 

 

 

 

16.71

 


Equity Index Fund

 

 

 

 

 

 

 

 

 

 

Institutional Class (7/1/99)*

 

 

16.49

 

 

16.06

 

 

3.65

 

Retirement Class (3/31/06)

 

 

16.29

 

 

16.01

 

3.62

Retail Class (3/31/06)

 

 

16.30

 

 

16.04

 

3.63


S&P 500 Index Fund

 

 

 

 

 

 

 

 

 

 

Institutional Class (10/1/02)*

 

 

16.35

 

 

 

 

14.41

 

Retirement Class (10/1/02)*

 

 

16.05

 

 

 

 

14.05

 


Mid-Cap Growth Index Fund

 

 

 

 

 

 

 

 

 

 

Institutional Class (10/1/02)*

 

 

20.88

 

 

 

 

19.66

 

Retirement Class (10/1/02)*

 

 

20.55

 

 

 

 

19.27

 


Mid-Cap Value Index Fund

 

 

 

 

 

 

 

 

 

 

Institutional Class (10/1/02)*

 

 

13.68

 

 

 

 

20.26

 

Retirement Class (10/1/02)*

 

 

13.41

 

 

 

 

19.91

 


Mid-Cap Blend Index Fund

 

 

 

 

 

 

 

 

 

 

Institutional Class (10/1/02)*

 

 

17.70

 

 

 

 

20.12

 

Retirement Class (10/1/02)*

 

 

17.44

 

 

 

 

19.76

 


Small-Cap Growth Index Fund

 

 

 

 

 

 

 

 

 

 

Institutional Class (10/1/02)*

 

 

18.92

 

 

 

 

18.23

 

Retirement Class (10/1/02)*

 

 

18.60

 

 

 

 

19.22

 


Small-Cap Value Index Fund

 

 

 

 

 

 

 

 

 

 

Institutional Class (10/1/02)*

 

 

6.14

 

 

 

 

18.17

 

Retirement Class (10/1/02)*

 

 

5.97

 

 

 

 

17.91

 


Small-Cap Blend Index Fund

 

 

 

 

 

 

 

 

 

 

Institutional Class (10/1/02)*

 

 

12.32

 

 

 

 

18.22

 

Retirement Class (10/1/02)*

 

 

12.15

 

 

 

 

17.93

 


International Equity Index Fund

 

 

 

 

 

 

 

 

 

 

Institutional Class (10/1/02)*

 

 

25.01

 

 

 

 

23.30

 

Retirement Class (10/1/02)*

 

 

24.75

 

 

 

 

22.91

 


Social Choice Equity Fund

 

 

 

 

 

 

 

 

 

 

Institutional Class (7/1/99)*

 

 

14.65

 

 

15.78

 

 

3.42

 

Retirement Class (10/1/02)*

 

 

14.36

 

 

15.36

 

3.19

Retail Class (3/31/06)

 

 

14.67

 

 

15.73

 

3.39


 

 

 

 

 

 

 

 

 

 

 

 

 

Average annual total return

 

 


Fund
Class (inception)

 

1 year

 

5 years

 

 

since
inception

 


Real Estate Securities Fund

 

 

 

 

 

 

 

 

 

 

Institutional Class (10/1/02)*

 

 

4.26

%

 

 

 

21.25

%

Retirement Class (10/1/02)*

 

 

4.11

 

 

 

 

21.09

 

Retail Class (10/1/02)*

 

 

4.26

 

 

 

 

21.10

 


EQUITIES AND FIXED INCOME

 

 

 

 

 

 

 

 

 

 

Managed Allocation Fund II

 

 

 

 

 

 

 

 

 

 

Institutional Class (3/31/06)

 

 

14.68

 

 

 

 

11.19

 

Retirement Class (3/31/06)

 

 

14.27

 

 

 

 

10.87

 

Retail Class (3/31/06)

 

 

14.47

 

 

 

 

11.14

 


FIXED INCOME

 

 

 

 

 

 

 

 

 

 

Bond Fund

 

 

 

 

 

 

 

 

 

 

Institutional Class (7/1/99)*

 

 

4.74

 

 

4.05

%

 

5.98

 

Retirement Class (3/31/06)

 

 

4.43

 

 

3.96

 

5.93

Retail Class (3/31/06)

 

 

4.68

 

 

3.99

 

5.94


Bond Plus Fund II

 

 

 

 

 

 

 

 

 

 

Institutional Class (3/31/06)

 

 

4.16

 

 

 

 

5.21

 

Retirement Class (3/31/06)

 

 

4.01

 

 

 

 

5.06

 

Retail Class (3/31/06)

 

 

4.09

 

 

 

 

5.12

 


Short-Term Bond Fund II

 

 

 

 

 

 

 

 

 

 

Institutional Class (3/31/06)

 

 

4.87

 

 

 

 

5.16

 

Retirement Class (3/31/06)

 

 

4.63

 

 

 

 

4.94

 

Retail Class (3/31/06)

 

 

4.86

 

 

 

 

5.09

 


High-Yield Fund II

 

 

 

 

 

 

 

 

 

 

Institutional Class (3/31/06)

 

 

7.66

 

 

 

 

7.00

 

Retirement Class (3/31/06)

 

 

7.61

 

 

 

 

6.75

 

Retail Class (3/31/06)

 

 

7.76

 

 

 

 

7.00

 


Tax-Exempt Bond Fund II

 

 

 

 

 

 

 

 

 

 

Institutional Class (3/31/06)

 

 

3.21

 

 

 

 

4.73

 

Retail Class (3/31/06)

 

 

3.16

 

 

 

 

4.64

 


Inflation-Linked Bond Fund

 

 

 

 

 

 

 

 

 

 

Institutional Class (10/1/02)*

 

 

4.51

 

 

 

 

5.22

 

Retirement Class (3/31/06)

 

 

4.29

 

 

 

 

5.20

Retail Class (10/1/02)*

 

 

4.35

 

 

 

 

5.08

 


MONEY MARKET FUND§

 

 

 

 

 

 

 

 

 

 

Institutional Class (7/1/99)*

 

 

5.37

 

 

3.01

 

 

3.58

 

Retirement Class (3/31/06)

 

 

5.12

 

 

2.94

 

3.53

Retail Class (3/31/06)

 

 

5.25

 

 

2.98

 

3.56

Net annualized yield

 

 

 

 

 

 

 

 

 

 

(7-day period ended 9/25/07)

 

 

 

 

 

current

 

 

effective

 

Money Market Fund§ – Institutional Class

 

 

 

 

 

5.22

%

 

5.35

%

Money Market Fund§ – Retirement Class

 

 

 

 

 

5.17

 

 

5.31

 

Money Market Fund§ – Retail Class

 

 

 

 

 

4.82

 

 

4.94

 



 

 

*

The performance shown is computed from the inception date of the class (the date on which the class became publicly available). Previously, performance for this class of the fund was computed from the net asset value per share on the day prior to the inception date.

 

 

The performance shown for the Retirement and Retail classes that is prior to their inception dates is based on the performance of the fund’s Institutional Class. The performance for these periods has not been restated to reflect the higher expenses of the Retirement and Retail classes. If those higher expenses had been reflected, the performance of these two classes shown for these periods would have been lower.

 

 

Shares held 60 calendar days or less may be subject to a redemption fee of 2%. Please see prospectus for details.

 

 

§

Investments in the TIAA-CREF Institutional Money Market Fund are neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The current yield more closely reflects current earnings than does the total return. We will attempt to maintain a stable net asset value of $1.00 per share for this fund, but it is possible to lose money by investing in the fund.

 

 


The returns quoted represent past performance, which is no guarantee of future results. Returns do not reflect the taxes that a shareholder may pay on fund distributions or on the redemption of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown above, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.



UNDERSTANDING YOUR REPORT FROM TIAA-CREF INSTITUTIONAL MUTUAL FUNDS

This report contains information about the holdings and investment performance of all three share classes of the TIAA-CREF Institutional Mutual Funds for the twelve-month period that ended on September 30, 2007. The report contains five main sections:

 

 

The performance overview on the inside front cover shows the funds’ returns in a variety of time periods.

 

 

The letter from Edward Grzybowski, the chief investment officer of Teachers Advisors, Inc., the funds’ investment adviser, explains how returns from the major asset classes differed during the twelve-month period.

 

 

The fund performance section compares each fund’s return with the returns of that fund’s benchmark index and peer group. This section also provides information about portfolio composition, risks and expenses.

 

 

The summary portfolios of investments list the industries or types of securities in which each fund had investments as of September 30, 2007, and the largest individual issues the fund held on that date.

 

 

The financial statements contain detailed information about the operations and financial condition of each fund.

As always, you should carefully consider the investment objectives, risks, charges and expenses of any fund before investing. For a prospectus that contains this and other important information, please visit our website at www.tiaa-cref.org, or call 800 897-9069 for the Institutional Class, 877 518-9161 for the Retirement Class or 800 223-1200 for the Retail Class. We urge you to read the prospectus carefully before investing.

CONTENTS

 

 

 

 

Real Estate Securities Fund

 

46

 

Managed Allocation Fund II

 

48

 

Bond Fund

 

50

 

Bond Plus Fund II

 

52

 

Short-Term Bond Fund II

 

54

 

High-Yield Fund II

 

56

 

Tax-Exempt Bond Fund II

 

58

 

Inflation-Linked Bond Fund

 

60

 

Money Market Fund

 

62

 

 

Summary portfolios of investments

64

 

 

 

 

 

Financial statements

 

 

 

Statements of assets and liabilities

126

 

Statements of operations

 

131

 

Statements of changes in net assets

136

 

Financial highlights

 

146

 

Notes to financial statements

 

175

 

 

 

 

 

Report of independent registered public

 

 

accounting firm

 

184

 

 

 

 

 

2007 special meeting

 

185

 

 

 

 

 

Management

 

186

 

 

 

 

Approval of investment management

 

 

agreements

 

189

 

 

 

 

 

Important tax information

 

196

 

 

 

 

How to reach us

Inside back cover

 

 

 

 

 



MORE INFORMATION FOR INVESTORS

PORTFOLIO LISTINGS

Securities and Exchange Commission (SEC) rules intended to provide investors with more meaningful information about fund performance allow investment companies to list the top holdings of each fund in their annual and semiannual reports instead of providing complete portfolio listings as they did previously. Companies continue to file complete listings with the SEC, and these will remain available to investors.

          You can obtain a complete list of the TIAA-CREF Institutional Mutual Funds’ holdings (called “TIAA-CREF Institutional Mutual Funds Statements of Investments”) as of the most recently completed fiscal quarter (currently for the period ended September 30, 2007) in the following ways:

 

 

by visiting the TIAA-CREF website at www.tiaa-cref.org; or

 

 

by calling TIAA-CREF at 800 842-2776 to request a copy, which will be provided free of charge.

You can also obtain a complete list of the TIAA-CREF Institutional Mutual Funds’ holdings as of the most recently completed fiscal quarter, and for prior quarter-ends, from the SEC. (Form N-CSR lists holdings as of March 31 or September 30; Form N-Q lists holdings as of December 31 or June 30.) Copies of these forms are available:

 

 

through the Electronic Data Gathering and Retrieval System (EDGAR) on the SEC’s website at www.sec.gov; or

 

 

at the SEC’s Public Reference Room. (Call 800 SEC-0330 for more information.)

PROXY VOTING

TIAA-CREF Institutional Mutual Funds’ ownership of stock gives it the right to vote on proxy issues of companies in which it invests. A description of our proxy voting policies and procedures can be found at our website at www.tiaa-cref.org or on the SEC website at www.sec.gov. You may also call us at 800 842-2776 to request a free copy. A report of how the funds voted during the most recently completed twelve-month period ended June 30 can be found at our website or on Form N-PX at www.sec.gov.

CONTACTING TIAA-CREF

There are three easy ways to contact us: by email, using the Contact Us link at the top of our homepage; by mail at TIAA-CREF, 730 Third Avenue, New York, NY 10017-3206; or by phone at 800 842-2776.

FUND MANAGEMENT

TIAA-CREF Institutional Mutual Funds are managed by the portfolio management teams of Teachers Advisors, Inc. The members of these teams are responsible for the day-to-day management of the funds.

 

 

2

2007 Annual Report § TIAA-CREF Institutional Mutual Funds



REPORT TO INVESTORS

(FHOTO OF EDWARD J. GRZYBOWSKI)
Edward J. Grzybowski
Chief Investment Officer
Teachers Advisors, Inc.

Despite several periods of heightened volatility, the world’s stock markets registered strong gains for the twelve-month period covered by this report. The Russell 3000® Index, which measures the broad U.S. market, rose 16.5%, while the MSCI EAFE® Index, which measures stock performance in 21 developed nations outside North America, climbed 24.9%.

International Equity Fund leads the way

The 29 TIAA-CREF Institutional Mutual Funds covered in this report fared well in a turbulent market. Eighteen of our 21 equity funds achieved double-digit gains, with returns in the Institutional Class ranging from 4.3% for the Real Estate Securities Fund to 30.5% for the International Equity Fund.

          Eight of our nine active equity funds outperformed their benchmark indexes, and seven of them outpaced similar mutual funds, according to Morningstar.

          The Managed Allocation Fund II topped both its benchmark and its Morningstar peers, while the Social Choice Equity Fund lagged its Morningstar group.

          Returns for our six fixed-income funds ranged from 3.2% to 7.7%. Five of the funds posted results better than those of their Morningstar peers.

Large-cap stocks set the pace

Corporate profits peaked in late 2006, helping the Russell 3000 gain 7.1% during the fourth quarter of 2006. Stocks lost ground in February 2007 but rebounded in the second quarter, with the Russell 3000 advancing another 7.1% during the first two quarters of 2007.

          At the same time, oil prices climbed, reaching $84 a barrel in mid-September and threatening to boost inflation and crimp U.S. economic growth.

          In this environment, large companies gained an advantage, because they are generally better able to withstand an economic downturn. Many, such as General Electric and Microsoft, earn a large portion of their profits abroad, where growth remained robust. Large-cap stocks, as measured by the Russell 1000®, advanced 16.9%, narrowly outperforming the Russell 3000. Mid caps returned 17.9% and small caps 12.3%.

          In the broader market, eleven of the twelve sectors of the Russell 3000 scored double-digit gains, with integrated oils, “other energy” and materials and processing gaining 43.7%, 42.1% and 36.5%, respectively. Other robust performance came from technology, which was up 23.2%, and producer durables, up 23.1%.

          Returns for the index as a whole were constrained by a 4% drop during the third quarter of 2007 in the financials sector, which made up more than one-fifth of the market cap of the index as of September 30, 2007. This decline trimmed the sector’s return for the twelve months to 2%.

          Foreign stocks benefited substantially from a stronger euro and pound. The 14.2% rise in the EAFE index—less than that of the Russell 3000—became 24.9% when converted to dollars.

          Rising uncertainty about the U.S. economy during the period helped to increase demand for U.S. Treasury securities, which lifted returns in the bond market. The Lehman Brothers U.S. Aggregate Index, which measures the performance of investment-grade bonds, returned 5.1%.

Diversifying your portfolio for consistent growth

In today’s financial marketplace, where more than half of the dollar value of the world’s stock markets lies overseas, opportunities are spread across national borders as well as across asset classes.

          Our goal at TIAA-CREF Institutional Mutual Funds is to provide investment choices that can be combined to create a diversified portfolio with the potential for consistent growth.

          While diversification cannot guarantee against loss, it helps to lower risk and often smoothes out returns over time. If you would like assistance in finding the mix of investments best suited to your financial needs, we invite you to visit our website or to call us.

 

 

/s/ Edward J. Grzybowski

 

Edward J. Grzybowski
Chief Investment Officer
Teachers Advisors, Inc.

 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

3



ABOUT THE FUNDS’ BENCHMARKS

EQUITY INDEXES

BROAD-MARKET INDEX

The Russell 3000® Index measures the performance of the stocks of the 3,000 largest publicly traded U.S. companies, based on market capitalization. The index measures the performance of about 98% of the total market capitalization of the publicly traded U.S. equity market.

LARGE-CAP INDEXES

The S&P 500® Index is a market-capitalization-weighted index of the stocks of 500 leading companies in major industries of the U.S. economy.

The MSCI EAFE® (Europe, Australasia and the Far East) Index measures the performance of the leading stocks in 21 developed countries outside North America.

The Russell 1000® Growth Index is a subset of the Russell 1000 Index, which measures the performance of the stocks of the 1,000 largest companies in the Russell 3000 Index, based on market capitalization. The Russell 1000 Growth Index measures the performance of those stocks of the Russell 1000 Index with higher price-to-book ratios and higher relative forecasted growth rates.

The Russell 1000 Value Index is a subset of the Russell 1000 Index, which measures the performance of the stocks of the 1,000 largest companies in the Russell 3000 Index, based on market capitalization. The Russell 1000 Value Index measures the performance of those stocks of the Russell 1000 Index with lower price-to-book ratios and lower relative forecasted growth rates.

MID-CAP INDEXES

The Russell Midcap® Index measures the performance of the stocks of the 800 smallest companies in the Russell 1000 Index, based on market capitalization.

The Russell Midcap Growth Index is a subset of the Russell Midcap Index, which measures the performance of the stocks of the 800 smallest companies in the Russell 1000 Index, based on market capitalization. The Russell Midcap Growth Index measures the performance of those stocks of the Russell Midcap Index with higher price-to-book ratios and higher relative forecasted growth rates.

The Russell Midcap Value Index is a subset of the Russell Midcap Index, which measures the performance of the stocks of the 800 smallest companies in the Russell 1000 Index, based on market capitalization. The Russell Midcap Value Index measures the performance of those stocks of the Russell Midcap Index with lower price-to-book ratios and lower relative forecasted growth rates.

SMALL-CAP INDEXES

The Russell 2000® Index measures the performance of the stocks of the 2,000 smallest companies in the Russell 3000 Index, based on market capitalization.

The Russell 2000 Growth Index is a subset of the Russell 2000 Index, which measures the performance of the stocks of the 2,000 smallest companies in the Russell 3000 Index, based on market capitalization. The Russell 2000 Growth Index measures the performance of those stocks of the Russell 2000 Index with higher price-to-book ratios and higher relative forecasted growth rates.

The Russell 2000 Value Index is a subset of the Russell 2000 Index, which measures the performance of the stocks of the 2,000 smallest companies in the Russell 3000 Index, based on market capitalization. The Russell 2000 Value Index measures the performance of those stocks of the Russell 2000 Index with lower price-to-book ratios and lower relative forecasted growth rates.

SPECIALTY EQUITY INDEX

The Dow Jones Wilshire Real Estate Securities Index measures the performance of publicly traded real estate securities such as real estate investment trusts and real estate operating companies.

FIXED-INCOME INDEXES

The Lehman Brothers U.S. Aggregate Index measures the performance of the U.S. investment-grade, fixed-rate bond market, including government and credit securities, agency mortgage pass-through securities, asset-backed securities and commercial mortgage-backed securities.

The Lehman Brothers U.S. Government/Credit (1–5 Year) Index measures the performance primarily of U.S. Treasury and agency securities, and corporate bonds with 1–5 year maturities.

The Merrill Lynch BB/B Cash Pay Issuer Constrained Index measures the performance of bond securities that pay interest in cash and have a credit rating of BB or B. Merrill Lynch uses a composite of Fitch Ratings, Moody’s and Standard & Poor’s credit ratings in selecting bonds for this index. These ratings measure the risk that the bond issuer will fail to pay interest or to repay principal in full. The index is weighted by market capitalization, so that larger bond issues have a greater effect on the index’s return. However, the representation of any single bond issuer is restricted to a maximum of 2% of the index.

The Lehman Brothers 10-Year Municipal Bond Index measures the performance of long-term, tax-exempt bonds. These bonds must have a minimum credit rating of Baa3/BBB-/BBB+ and an outstanding par value of at least $7 million, and be issued as part of a transaction of at least $75 million.

The Lehman Brothers U.S. Treasury Inflation-Protected Securities (TIPS) Index measures the performance of fixed-income securities with fixed-rate coupon payments that adjust for inflation as measured by the Consumer Price Index for All Urban Consumers (CPI-U).

You cannot invest directly in any index.

Russell 1000, Russell 2000, Russell 3000 and Russell Midcap are trademarks and service marks of the Frank Russell Company. TIAA-CREF products are not promoted or sponsored by, or affiliated with, the Frank Russell Company. EAFE is a trademark of Morgan Stanley Capital International, Inc. S&P 500 is a registered trademark and a service mark of the McGraw-Hill Companies, Inc.

 

 

4

2007 Annual Report § TIAA-CREF Institutional Mutual Funds



SPECIAL TERMS

Agency securities are bonds issued by U.S. government entities such as Fannie Mae.

Asset-backed securities are bonds backed by loans or by the outstanding amounts owed to a bank, credit card company or other lender.

Benchmarks (benchmark indexes) are groups of securities, such as the Russell 3000® Index or S&P 500® Index, whose performance can be used as a standard by which to judge the performance of a fund.

Commercial paper refers to the short-term debt obligations issued to investors by banks, corporations and other borrowers. Maturities range from 1 to 270 days.

Emerging markets are nations with relatively low per capita income levels and above-average economic growth rates or prospects for growth.

Expense ratio is the amount that investors pay for the management of a mutual fund. The amount is expressed as a percentage of the fund’s average net assets. Expense ratios do not include front-end or back-end sales charges, if any, or trading costs. See “Total return.”

Market capitalization is the total value of a company’s outstanding stock, calculated by multiplying the number of outstanding shares by the current market price per share.

Maturity date is the date on which the principal amount of a note, bond or other debt instrument becomes due or payable.

Mortgage-backed securities are bonds that represent an interest in a pool of mortgages usually issued by Ginnie Mae, Fannie Mae or other federal entities.

Overweight holding is a security that forms a larger percentage of a fund, in terms of market capitalization, than that security’s percentage of the benchmark.

Peer groups are groupings of mutual funds with similar objectives whose performance can be compared with that of an individual mutual fund with a similar objective.

P/E ratio (price/earnings) is calculated by dividing the market value of a portfolio’s assets by its earnings per share over a twelve-month period.

Portfolio turnover rate is calculated by dividing the market value of securities bought and sold during a given period by the average value of the fund’s assets during that period.

Relative performance is the return of a fund in relation to that of its benchmark.

Securities is a general name for stocks (also known as “equities”), bonds (also known as “fixed-income securities”) or other investments.

Standard deviation measures how much the returns of a stock or a group of stocks vary from their mean return.

Total return is the amount an investment provides to investors after expenses are deducted. Total return is expressed as a percentage. It includes any interest or dividends, as well as any change in the market value of the investment.

Underweight holding is a security that forms a smaller percentage of a fund, in terms of market capitalization, than that security’s percentage of the benchmark.

IMPORTANT INFORMATION ABOUT EXPENSES

The expenses paid by shareholders of a mutual fund fall into two categories. For the TIAA-CREF Institutional Mutual Funds, these expenses are as follows:

 

 

Transaction costs. Although shareholders do not incur sales charges (loads) on purchases, on reinvested dividends or on other distributions, they may incur redemption fees on certain transactions in some funds. Please see the prospectus for details.

 

 

Ongoing costs. All shareholders incur these costs, which include management fees and other fund expenses.

 

 

The examples that appear on the performance pages are intended to help you understand your ongoing costs (in dollars) of investing in each fund. The examples are also designed to help you compare these costs with the ongoing costs of investing in other mutual funds.

          The examples assume $1,000 was invested on April 1, 2007, and held for six months until September 30, 2007.

Actual expenses

The first line in each table uses the fund’s actual expenses and its actual rate of return. You may use the information in this line, together with the amount you invested at the beginning of the period, to estimate the expenses that you paid over the six-month period.

          Simply divide your fund value by $1,000 (for example, an $8,600 fund value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses paid” to estimate the expenses you paid during the six-month period. Some funds have a contractual fee waiver and/or reimbursement. Had these not been in effect, fund expenses would have been higher.

Hypothetical example for comparison purposes

The second line in the table shows hypothetical fund values and hypothetical expenses based on the fund’s actual expense ratio for the six-month period and an assumed annual rate of return of 5% before expenses—which is not the fund’s actual return.

          Do not use the hypothetical fund values and hypothetical expenses to estimate the actual expenses you paid for the period. Instead, you can use this information to compare the ongoing costs of investing in an individual fund with the ongoing costs of other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

5



GROWTH EQUITY FUND  LARGE-CAP GROWTH STOCKS

INVESTMENT OBJECTIVE

The fund seeks a favorable long-term total return, mainly through capital appreciation, primarily from equity securities.

INVESTMENT RISKS

In addition to the risks of any equity investment—market risk and company risk—the fund is subject to special risks, including growth investing risks, style risk, large-cap risk, reorganization risk and foreign investment risks. For a detailed discussion of risk, please see the prospectus.

 

 

FUND PROFILE

 



 

Ticker symbol

 

Institutional Class

TIEQX

Fund net assets

$327.74 million

Number of holdings

76

Portfolio turnover rate

218%

Weighted median market capitalization

$37.0 billion

P/E ratio (weighted 12-month trailing average)

27.8

Dividend yield

0.82%



 

 

PORTFOLIO COMPOSITION

 


 

% of portfolio investments


Manufacturing & materials

33.8

Consumer products & services

30.7

Technology

18.8

Financial

10.6

Energy

5.1

Transportation

1.0



Totala

100.0

 

 

a        Excludes $16.38 million of securities lending collateral

 

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The Growth Equity Fund returned 25.24% for the Institutional Class, compared with the 19.35% gain of its benchmark, the Russell 1000® Growth Index, and the 20.57% average return of the fund’s peer group, the Morningstar Large Growth category.

Large-cap growth stocks outperform the broader market

During the twelve-month period, the large-cap growth category surpassed the 16.52% return of the broad U.S. equity market, as measured by the Russell 3000® Index.

          After trailing the Russell 3000 during the fourth quarter of 2006 and the first quarter of 2007, the Russell 1000 Growth Index climbed 11.35% during the second half of the reporting period—nearly four percentage points more than the 7.40% rise in the broader Russell index.

          For the twelve months, large-cap growth outpaced the 18.94% return of small-cap growth stocks but lagged the 21.22% gain of mid-cap growth issues.

          For the ten years ended September 30, 2007, the Russell 1000 Growth Index posted an average annual gain of 4.06%, while the Russell 3000 posted an average annual return of 6.82%.

Broad-based sector gains drive the benchmark’s rise

For the period, all twelve sectors of the Russell 1000 Growth Index posted positive returns, with eleven recording double-digit gains. (The lowest-performing sector, autos and transportation, came close, rising 9.2%.)

          The three largest sectors—technology, consumer discretionary and health care—rose 24.6%, 11.1% and 11.6%, respectively. Together these three sectors

 

 

 

 

 

 

 

 

 

 

 

PERFORMANCE AS OF SEPTEMBER 30, 2007












 

 

Average annual compound
rates of total return

 

 


Growth Equity Fund

 

1 year

 

5 years

 

since
inception

 









Institutional Class (inception: 7/1/1999)*

 

 

25.24

%

 

14.24

%

 

–1.05

%

Russell 1000 Growth Index

 

 

19.35

 

 

13.83

 

 

–0.61

 

Morningstar Large Growth

 

 

20.57

 

 

14.08

 

 

1.43

 













 

 

*

This class of the fund began investment operations prior to its inception date (the date on which the class became publicly available). The performance shown is computed from the inception date of the class. Previously, performance for this class of the fund was computed from the net asset value per share on the day prior to the inception date.

 

 

For a description of the fund’s benchmark, please see page 4.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect the taxes that a shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

6

2007 Annual Report § TIAA-CREF Institutional Mutual Funds



made up nearly three-fifths of the benchmark in terms of market capitalization as of September 30, 2007.

          The top-performing sector, materials and processing, soared 47.1%, followed by “other energy” and integrated oils, up 46.3% and 39.6%, respectively. Although these three sectors together constituted less than one-tenth of the benchmark’s market capitalization at the end of the period, the combined effect of their outsized gains contributed significantly to the benchmark’s overall return.

Stock choices propel the fund above the benchmark

The fund outpaced its benchmark by nearly six percentage points on the strength of numerous favorable stock selections. Successful overweights included Apple and agricultural giant Monsanto, which soared 99.3% and 81.1%, respectively. The fund’s return was also buoyed by positions in well-performing nonbenchmark stocks such as BlackBerry manufacturer Research in Motion; the French company Alstom, which supplies equipment for power generation and rail transportation; and Japan’s Nintendo. An underweight in Wal-Mart, whose stock price fell about 10% in the period, also helped returns.

          These contributions were partly offset by overweights in stocks that did not perform as anticipated, such as fiber-optics company Corning, video game maker Electronic Arts and Omnicom, a large advertising and public relations holding company. Also detracting slightly from returns was an underweight position in IBM.

          On September 30, 2007, foreign securities made up 6.45% of the fund’s total portfolio investments. Many of these securities were held as American Depositary Receipts, which are receipts for shares of a foreign stock traded on a U.S. exchange.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception July 1,1999)

(LINE GRAPH)

An investment of $10,000 in this fund on July 1,1999, would be worth $9,165 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark and peer group during the same period.

EXPENSE EXAMPLE

 

 

 

 

 

 

 

 

 

 

Six months ended September 30, 2007











 

Growth
Equity Fund

 

Starting
fund
value
(4/1/07)

 

Ending
fund
value
(9/30/07)

 

Expenses
paid*
(4/1/07–
9/30/07)








Actual return

 

 

 

 

 

 

 

 

 

Institutional Class

 

$

1,000.00

 

$

1,166.70

 

 

$ 0.76

 

5% annual

 

 

 

 

 

 

 

 

 

hypothetical return

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

1,000.00

 

 

1,024.36

 

0.71












 

 

*

“Expenses paid” is based on the fund’s actual expense ratio for the most recent fiscal half year, multiplied by the average fund value over the six-month period, multiplied by 183/365. There were 183 days in the six months ended September 30, 2007. The fund’s annualized six-month expense ratio for that period is 0.14% for the Institutional Class. The expense ratio of this fund reflects a contractual agreement by the fund’s adviser to reimburse the fund for certain expenses through April 30, 2008. Without this reimbursement, the fund’s expenses would have been higher.

 

 

“Ending fund value” for the hypothetical example would be $1,025.07 before expenses. The table shows the value after the subtraction of expenses in order to be comparable with the ending fund value shown for the fund’s actual return.

For more information about this expense example, please see page 5.

 

HOLDINGS BY COMPANY SIZE


 

% of portfolio investments


Over $15 billion

82.69

$4 billion–$15 billion

16.49

Under $4 billion

0.82



Total

100.00


 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

7



GROWTH & INCOME FUND  DIVIDEND-PAYING STOCKS

INVESTMENT OBJECTIVE

The fund seeks a favorable long-term total return through both capital appreciation and investment income, primarily from income-producing equity securities.

INVESTMENT RISKS

In addition to the risks of any equity investment—market risk and company risk—the fund is subject to special risks, including growth investing risks, style risk, large-cap risk and foreign investment risks. For a detailed discussion of risk, please see the prospectus.

 

 

FUND PROFILE

 



 

Ticker symbol

 

Institutional Class

TIGRX

Retirement Class

TRGIX

Retail Class

TIIRX

Fund net assets

$945.23 million

Number of holdings

136

Portfolio turnover rate

84%

Weighted median market capitalization

$66.4 billion

P/E ratio (weighted 12-month trailing average)

19.2

Dividend yield

1.64%



 

 

PORTFOLIO COMPOSITION

 



 

 

% of portfolio investments



Manufacturing & materials

27.7

Consumer products & services

21.9

Financial

19.4

Technology

18.8

Energy

9.0

Utilities

2.8

Transportation

0.3

Short-term investmentsa

0.1



Total

100.0

 

 

a         Excludes $129.55 million of securities lending collateral

 

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The Growth & Income Fund returned 26.84% for the Institutional Class, compared with the 16.44% gain of its benchmark, the S&P 500® Index, and the 16.48% average return of the fund’s peer group, the Morningstar Large Blend category. The table below shows returns for all share classes of the fund.

S&P 500 Index performs in line with the broader market

For the twelve months, the large-cap stocks of the S&P 500 Index posted solid gains that were on a par with the 16.52% advance of the broad U.S. stock market, as measured by the Russell 3000® Index.

          After lagging the Russell 3000 by more than a percentage point in the first six months of the period, 7.38% to 8.49%, the S&P 500 saw its relative performance improve. In the second half of the period, the positions of the two indexes were reversed: the S&P 500 topped the Russell 3000 by more than a percentage point, 8.44% to 7.40%. The lower return of the Russell 3000 for those six months was due in part to the underperformance of small-cap stocks, which are not part of the S&P 500.

          For the ten years ended September 30, 2007, the disparity between large-cap gains and those of the broad U.S. market was narrow: the S&P 500 Index had an average annual return of 6.57%, versus 6.82% for the Russell 3000.

Widespread gains are tempered by weak financial stocks

For the period, all ten of the S&P 500’s industry sectors had positive returns, with seven scoring double-digit gains. However, the benchmark’s largest sector, financials, was up only 1.7%. This sector made up nearly one-fifth of the

 

 

 

 

 

 

 

 

 

 

 

PERFORMANCE AS OF SEPTEMBER 30, 2007





 

 

 

Average annual compound
rates of total return

 

 

 



Growth & Income Fund

 

1 year

 

5 years

 

since
inception

 









Institutional Class (inception: 7/1/1999)*

 

 

26.84

%

 

16.81

%

 

3.51

%

S&P 500 Index

 

 

16.44

 

 

15.44

 

 

2.87

 

Morningstar Large Blend

 

 

16.48

 

 

14.72

 

 

3.64

 












Retirement Class (inception: 10/1/2002)*

 

 

26.44

 

 

16.43

 

3.30












Retail Class (inception: 3/31/2006)

 

 

26.67

 

 

16.87

 

3.54













 

 

*

The performance shown is computed from the inception date of the class (the date on which the class became publicly available). Previously, performance for this class of the fund was computed from the net asset value per share on the day prior to the inception date.

 

 

For a description of the fund’s benchmark, please see page 4.

 

 

The performance shown for the Retirement and Retail classes that is prior to their inception dates is based on the performance of the fund’s Institutional Class. The performance for these periods has not been restated to reflect the higher expenses of the Retirement and Retail classes. If those higher expenses had been reflected, the performance of these two classes shown for these periods would have been lower.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect the taxes that an Institutional or Retail Class shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

8

2007 Annual Report §  TIAA-CREF Institutional Mutual Funds



S&P 500’s market capitalization on September 30, 2007, so its weakness curtailed the benchmark’s overall rise.

          The next two largest sectors, information technology and energy, soared 23.3% and 43.1%, respectively. Together these sectors constituted more than one-quarter of the benchmark’s market capitalization at the end of the period.

Stock selections power the fund’s strong outperformance

The fund beat its benchmark by more than ten percentage points on the strength of numerous favorable stock selections, including several nonbenchmark holdings that delivered strong returns. Among these were First Solar, a maker of large-scale, grid-connected solar power plants; Mosaic, one of the world’s largest fertilizer producers; and Cameron International, which provides equipment and services to the oil and gas industries. Two foreign stocks—the French company Alstom, which supplies equipment for power generation and rail transportation, and Japan’s Nintendo—also boosted the fund’s return.

          The positive effects of these results were partly offset by other stock decisions, such as the exclusion of well-performing Chevron, ConocoPhillips and Amazon.com. An overweight in student loan provider Sallie Mae and an underweight in oil and gas services company National Oilwell Varco also trimmed returns slightly.

          On September 30, 2007, foreign securities made up 7.08% of the fund’s total portfolio investments. Many of these securities were held as American Depositary Receipts, which are receipts for shares of a foreign stock traded on a U.S. exchange.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception July 1, 1999)

(LINE GRAPH)

An investment of $10,000 in this fund on July 1, 1999, would have grown to $13,291 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark and peer group during the same period.

EXPENSE EXAMPLE

 

 

 

 

 

 

 

 

 

 

Six months ended September 30, 2007











 

Growth &
Income Fund

 

Starting
fund
value
(4/1/07)

 

Ending
fund
value
(9/30/07)

 

Expenses
paid*
(4/1/07–
9/30/07)








Actual return

 

 

 

 

 

 

 

 

 

Institutional Class

 

$

1,000.00

 

$

1,147.20

 

 

$ 0.70

Retirement Class

 

 

1,000.00

 

 

1,145.30

 

 

2.04

Retail Class

 

 

1,000.00

 

 

1,145.60

 

 

1.29

 

5% annual

 

 

 

 

 

 

 

 

 

hypothetical return

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

1,000.00

 

 

1,024.41

 

0.66

Retirement Class

 

 

1,000.00

 

 

1,023.15

 

1.92

Retail Class

 

 

1,000.00

 

 

1,023.85

 

1.22












 

 

*

“Expenses paid” is based on the fund’s actual expense ratio for the most recent fiscal half year, multiplied by the average fund value over the six-month period, multiplied by 183/365. There were 183 days in the six months ended September 30, 2007. The fund’s annualized six-month expense ratio for that period is 0.13% for the Institutional Class, 0.38% for the Retirement Class and 0.24% for the Retail Class. The expense ratios of all three share classes reflect voluntary and contractual agreements by the fund’s adviser to waive some of its fees and to reimburse the fund for certain expenses. The contractual waiver and reimbursement continue through April 30, 2008, and the voluntary reimbursement may be discontinued at any time. Without the waiver and reimbursements, the expenses of all three share classes would have been higher.

 

 

“Ending fund value” for the hypothetical example would be $1,025.07 before expenses. The table shows the value after the subtraction of expenses in order to be comparable with the ending fund value shown for the fund’s actual return.

For more information about this expense example, please see page 5.

 

 

HOLDINGS BY COMPANY SIZE



 

 

% of portfolio investments



Over $15 billion

81.66

$4 billion–$15 billion

11.66

Under $4 billion

6.68



Total

100.00


 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

9



INTERNATIONAL EQUITY FUND  FOREIGN STOCKS

INVESTMENT OBJECTIVE

The fund seeks a favorable long-term total return, mainly through capital appreciation, primarily from equity securities of foreign issuers.

INVESTMENT RISKS

In addition to the risks of any equity investment—market risk and company risk—the fund is subject to special risks, including foreign investment risks and small-cap risk. For a detailed discussion of risk, please see the prospectus.

 

 

FUND PROFILE

 



 

Ticker symbol

 

Institutional Class

TIIEX

Retirement Class

TRERX

Retail Class

TIERX

Fund net assets

$2.55 billion

Number of holdings

103

Portfolio turnover rate

179%

Weighted median market capitalization

$29.8 billion

P/E ratio (weighted 12-month trailing average)

18.0

Dividend yield

1.67%



 

 

PORTFOLIO COMPOSITION

 



 

% of portfolio investments


Manufacturing & materials

48.3

Consumer products & services

19.2

Financial

17.8

Energy

4.3

Transportation

3.8

Technology

3.8

Utilities

2.8



Totala

100.0

a         Excludes $197.37 million of securities lending collateral

PERFORMANCE NOTE

The fund’s returns were affected by a misallocation of income and net capital gains among its share classes. If this misallocation had not occurred, the 1-year return would have been 30.04% for the Retirement Class. Shareholders who owned Retirement Class shares on or before May 25, 2006, and who were affected by this misallocation by more than $10, were made whole through direct payments by Teachers Advisors, Inc. For more information, please call 800 927-3059.

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The International Equity Fund returned 30.49% for the Institutional Class, compared with the 24.86% gain of its benchmark, the MSCI EAFE® Index, and the 26.18% average return of the fund’s peer group, the Morningstar Foreign Large Blend category. The table below shows returns for all share classes of the fund.

Foreign stocks maintain substantial lead over U.S. shares

Helped by a stronger euro and British pound, the EAFE index, which tracks stocks in 21 developed nations outside North America, posted a return that was more than eight percentage points greater than the 16.52% gain of the Russell 3000® Index, which measures the broad U.S. stock market.

          The EAFE got off to a fast start with a 10.35% rise in the fourth quarter of 2006, beating the 7.12% rise of the Russell 3000 by more than three percentage points. In each of the three quarters that followed, the EAFE’s margin of outperformance was narrower. A global stock market sell-off in late February 2007 trimmed foreign stock gains, as did a worldwide decline in equity markets during the summer months. The EAFE dropped more than 3% over the course of July and August but staged a strong recovery in September.

A weaker dollar amplifies foreign stock performance

For the period, the EAFE’s relative advantage over the Russell 3000 was due entirely to the continued weakening of the dollar, which plunged in value against the euro and the pound. A weaker dollar increases foreign stock gains for U.S. investors. In terms of local currencies, the EAFE rose 14.21%—less than the 16.52% gain of the Russell 3000. The dollar’s weakness boosted the EAFE’s return by more than ten percentage points, to 24.86% in dollars.

 

 

 

 

 

 

 

 

 

 

 

PERFORMANCE AS OF SEPTEMBER 30, 2007





 

 

 

Average annual compound
rates of total return

 

 

 


International Equity Fund

 

1 year

 

5 years

 

since
inception

 









Institutional Class (inception: 7/1/1999)*

 

 

30.49

%

 

25.26

%

 

10.23

%

MSCI EAFE Index

 

 

24.86

 

 

23.54

 

 

7.92

 

Morningstar Foreign Large Blend

 

 

26.18

 

 

22.08

 

 

7.13

 












Retirement Class (inception: 10/1/2002)*

 

 

30.16

 

 

24.49

 

9.82












Retail Class (inception: 3/31/2006)

 

 

30.34

 

 

25.75

 

10.49













 

 

*

The performance shown is computed from the inception date of the class (the date on which the class became publicly available). Previously, performance for this class of the fund was computed from the net asset value per share on the day prior to the inception date.

 

 

For a description of the fund’s benchmark, please see page 4.

 

 

The performance shown for the Retirement and Retail classes that is prior to their inception dates is based on the performance of the fund’s Institutional Class. The performance for these periods has not been restated to reflect the higher expenses of the Retirement and Retail classes. If those higher expenses had been reflected, the performance of these two classes shown for these periods would have been lower.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect any applicable redemption fees, or taxes that an Institutional or Retail Class shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

10

2007 Annual Report § TIAA-CREF Institutional Mutual Funds



          The benchmark’s European segment advanced 27.51% in dollar terms, propelled by German, French and British stocks, which surged 47.15%, 24.24% and 22.42%, respectively. The Pacific segment rose 19.17% in dollars. Japanese stocks—the largest component of this segment in terms of market capitalization—returned 7.07% in dollars, muting the outsized gain of 55.13% recorded by the benchmark’s other Pacific stocks.

Individual stock selections lift the fund well above the benchmark

The fund significantly outperformed its benchmark because of successful stock selections. Among the holdings that contributed the most were overweights in German drug maker Bayer and Italian auto maker Fiat. Other successful holdings included three nonbenchmark stocks: German steel company Kloeckner, which made acquisitions in Europe and the United States during the period; China Coal Energy, whose share price climbed steadily after the company’s IPO was issued in December 2006; and Russian mining company MMC Norilsk Nickel. Norilsk was held as an American Depositary Receipt, a receipt for shares of a foreign stock traded on a U.S. exchange.

          The positive effects of these holdings were partly offset by overweight positions in underperforming stocks that included Japan’s Sumitomo Osaka Cement, French retailing giant Carrefour and Swiss employment agency Adecco. Also detracting from the fund’s return were the exclusion of Finnish mobile phone manufacturer Nokia and underweights that included British wireless provider Vodafone and Australian mining company BHP Billiton.

          As of September 30, 2007, stocks of companies in emerging markets, which are not included in the benchmark, made up approximately 3% of the fund’s total portfolio investments.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception July 1, 1999)

(LINE GRAPH)

An investment of $10,000 in this fund on July 1, 1999, would have grown to $22,341 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark and peer group during the same period.

EXPENSE EXAMPLE

 

 

 

 

 

 

 

 

 

 

 

Six months ended September 30, 2007








 

 

International
Equity Fund

 

Starting
fund
value
(4/1/07)

 

Ending
fund
value
(9/30/07)

 

Expenses
paid*
(4/1/07–
9/30/07)

 








 

Actual return

 

 

 

 

 

 

 

 

 

 

Institutional Class

 

$

1,000.00

 

$

1,095.80

 

 

$ 3.04

 

Retirement Class

 

 

1,000.00

 

 

1,094.30

 

 

4.40

 

Retail Class

 

 

1,000.00

 

 

1,095.10

 

 

3.93

 

 

5% annual

 

 

 

 

 

 

 

 

 

 

hypothetical return

 

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

1,000.00

 

 

1,022.13

 

2.94

 

Retirement Class

 

 

1,000.00

 

 

1,020.82

 

4.25

 

Retail Class

 

 

1,000.00

 

 

1,021.27

 

3.80

 











 


 

 

*

“Expenses paid” is based on the fund’s actual expense ratio for the most recent fiscal half year, multiplied by the average fund value over the six-month period, multiplied by 183/365. There were 183 days in the six months ended September 30, 2007. The fund’s annualized six-month expense ratio for that period is 0.58% for the Institutional Class, 0.84% for the Retirement Class and 0.75% for the Retail Class. The expense ratios of all three share classes reflect a contractual agreement by the fund’s adviser to reimburse the fund for certain expenses through April 30, 2008. Without this reimbursement, the expenses of all three share classes would have been higher.

 

 

“Ending fund value” for the hypothetical example would be $1,025.07 before expenses. The table shows the value after the subtraction of expenses in order to be comparable with the ending fund value shown for the fund’s actual return.

The expenses shown above do not reflect the 2% redemption fee that may apply to certain transactions. Please see the prospectus for details about this fee, which became effective on October 16, 2007.

For more information about this expense example, please see page 5.

 

 

HOLDINGS BY COMPANY SIZE



 

 

% of portfolio investments



Over $15 billion

64.14

$4 billion–$15 billion

21.54

Under $4 billion

14.32



Total

100.00


 

 

TIAA-CREF Institutional Mutual Funds §  2007 Annual Report

11



LARGE-CAP GROWTH FUND  GROWTH STOCKS OF LARGER U.S. COMPANIES

INVESTMENT OBJECTIVE

The fund seeks a favorable long-term return, mainly through capital appreciation, primarily from equity securities.

INVESTMENT RISKS

In addition to the risks of any equity investment—market risk and company risk—the fund is subject to special risks, including large-cap risk, growth investing risks, style risk, reorganization risk and foreign investment risks. For a detailed discussion of risk, please see the prospectus.

 

 

FUND PROFILE

 



 

Ticker symbol

 

Institutional Class

TILGX

Retirement Class

TILRX

Retail Class

TIRTX

Fund net assets

$637.34 million

Number of holdings

75

Portfolio turnover rate

189%

Weighted median market capitalization

$37.0 billion

P/E ratio (weighted 12-month trailing average)

27.8

Dividend yield

0.82%



 

 

PORTFOLIO COMPOSITION

 



 

 

% of portfolio investments



Manufacturing & materials

34.0

Consumer products & services

31.0

Technology

18.9

Financial

9.9

Energy

5.2

Transportation

1.0



Totala

100.0

 

 

a         Excludes $24.12 million of securities lending collateral

 

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The Large-Cap Growth Fund returned 24.97% for the Institutional Class, compared with the 19.35% gain of its benchmark, the Russell 1000® Growth Index, and the 20.57% average return of the fund’s peer group, the Morningstar Large Growth category. The table below shows returns for all share classes of the fund.

Large-cap growth stocks outperform the broader market

During the twelve-month period, the large-cap growth category surpassed the 16.52% return of the broad U.S. equity market, as measured by the Russell 3000® Index.

          After trailing the Russell 3000 during the fourth quarter of 2006 and the first quarter of 2007, the Russell 1000 Growth Index climbed 11.35% during the second half of the reporting period—nearly four percentage points more than the 7.40% rise in the broader Russell index.

          For the twelve months, large-cap growth outpaced the 18.94% return of small-cap growth stocks but lagged the 21.22% gain of mid-cap growth issues.

          For the ten years ended September 30, 2007, the Russell 1000 Growth Index posted an average annual gain of 4.06%, while the Russell 3000 posted an average annual return of 6.82%.

Broad-based sector gains drive the benchmark’s rise

For the period, all twelve sectors of the Russell 1000 Growth Index posted positive returns, with eleven recording double-digit gains. (The lowest-performing sector, autos and transportation, came close, rising 9.2%.)

          The three largest sectors—technology, consumer discretionary and health care—rose 24.6%, 11.1% and 11.6%, respectively. Together these three sectors

 

 

 

 

 

 

 

 

PERFORMANCE AS OF SEPTEMBER 30, 2007





 

 

 

Average annual compound
rates of total return

 

 


Large-Cap Growth Fund

 

1 year

 

since inception

 







Institutional Class (inception: 3/31/2006)

 

 

24.97

%

 

13.52

%

Retirement Class (inception: 3/31/2006)

 

 

24.67

 

 

13.26

 

Retail Class (inception: 3/31/2006)

 

 

24.89

 

 

13.39

 

Russell 1000 Growth Index*

 

 

19.35

 

 

12.42

 

Morningstar Large Growth

 

 

20.57

 

 

11.52

 










 

 

*

For a description of the fund’s benchmark, please see page 4.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect the taxes that an Institutional or Retail Class shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

12

2007 Annual Report §  TIAA-CREF Institutional Mutual Funds



made up nearly three-fifths of the benchmark in terms of market capitalization as of September 30, 2007.

          The top-performing sector, materials and processing, soared 47.1%, followed by “other energy” and integrated oils, up 46.3% and 39.6%, respectively. Although these three sectors together constituted less than one-tenth of the benchmark’s market capitalization at the end of the period, the combined effect of their outsized gains contributed significantly to the benchmark’s overall return.

Stock choices propel the fund above the benchmark

The fund outpaced its benchmark by nearly six percentage points on the strength of numerous favorable stock selections. Successful overweights included Apple and agricultural giant Monsanto, which soared 99.3% and 81.1%, respectively, for the twelve months.

          The fund’s return was also buoyed by positions in well-performing nonbenchmark stocks such as BlackBerry manufacturer Research in Motion; the French company Alstom, which supplies equipment for power generation and rail transportation; and Japan’s Nintendo. An underweight in Wal-Mart, whose stock price fell about 10% in the period, also helped returns.

          These contributions were partly offset by overweights in stocks that did not perform as anticipated, such as fiber-optics company Corning, video game maker Electronic Arts and Omnicom, a large advertising and public relations holding company. Also detracting slightly from returns was an underweight in IBM.

          On September 30, 2007, foreign securities made up 6.51% of the fund’s total portfolio investments. Many of these securities were held as American Depositary Receipts, which are receipts for shares of a foreign stock traded on a U.S. exchange.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception March 31, 2006)

(LINE GRAPH)

An investment of $10,000 in this fund on March 31, 2006, would have grown to $12,097 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark and peer group during the same period.

EXPENSE EXAMPLE

 

 

 

 

 

 

 

 

 

 

Six months ended September 30, 2007








 

Large-Cap
Growth Fund

 

Starting
fund
value
(4/1/07)

 

Ending
fund
value
(9/30/07)

 

Expenses
paid*
(4/1/07–
9/30/07)








Actual return

 

 

 

 

 

 

 

 

 

Institutional Class

 

$

1,000.00

 

$

1,164.40

 

 

$ 0.70

Retirement Class

 

 

1,000.00

 

 

1,163.90

 

 

2.06

Retail Class

 

 

1,000.00

 

 

1,164.70

 

 

1.14

 

5% annual

 

 

 

 

 

 

 

 

 

hypothetical return

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

1,000.00

 

 

1,024.41

 

0.66

Retirement Class

 

 

1,000.00

 

 

1,023.15

 

1.92

Retail Class

 

 

1,000.00

 

 

1,024.01

 

1.06












 

 

*

“Expenses paid” is based on the fund’s actual expense ratio for the most recent fiscal half year, multiplied by the average fund value over the six-month period, multiplied by 183/365. There were 183 days in the six months ended September 30, 2007. The fund’s annualized six-month expense ratio for that period is 0.13% for the Institutional Class, 0.38% for the Retirement Class and 0.21% for the Retail Class. The expense ratios of all three share classes reflect voluntary and contractual agreements by the fund’s adviser to waive some of its fees and to reimburse the fund for certain expenses. The contractual waiver and reimbursement continue through April 30, 2008, and the voluntary reimbursement may be discontinued at any time. Without the waiver and reimbursements, the expenses of all three share classes would have been higher.

 

 

“Ending fund value” for the hypothetical example would be $1,025.07 before expenses. The table shows the value after the subtraction of expenses in order to be comparable with the ending fund value shown for the fund’s actual return.

For more information about this expense example, please see page 5.

 

 

HOLDINGS BY COMPANY SIZE



 

 

% of portfolio investments



Over $15 billion

83.40

$4 billion–$15 billion

15.77

Under $4 billion

0.83



Total

100.00


 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

13



LARGE-CAP VALUE FUND  VALUE STOCKS OF LARGER COMPANIES

INVESTMENT OBJECTIVE

The fund seeks a favorable long-term total return, mainly through capital appreciation, primarily from equity securities of large domestic companies.

INVESTMENT RISKS

In addition to the risks of any equity investment—market risk and company risk—the fund is subject to special risks, including large-cap risk, value investing risks, style risk and foreign investment risks. For a detailed discussion of risk, please see the prospectus.

 

 

 

 

FUND PROFILE

 

 

 





Ticker symbol

 

 

 

Institutional Class

 

 

TRLIX

Retirement Class

 

 

TRLCX

Retail Class

 

 

TCLCX

Fund net assets

 

 

$1.10 billion

Number of holdings

 

 

183

Portfolio turnover rate

 

 

136%

Weighted median market capitalization

 

 

$42.3 billion

P/E ratio (weighted 12-month trailing average)

 

 

15.6

Dividend yield

 

 

2.13%






 

 

 

 

 

PORTFOLIO COMPOSITION


 

% of portfolio investments


Financial

 

 

30.2

Manufacturing & materials

 

 

18.5

Consumer products & services

 

 

17.0

Technology

 

 

15.4

Energy

 

 

11.9

Utilities

 

 

4.9

Transportation

 

 

1.8

Short-term investmentsa

 

 

0.3






Total

 

 

100.0


 

 

a

Excludes $67.18 million of securities lending collateral

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The Large-Cap Value Fund returned 15.71% for the Institutional Class, compared with the 14.45% gain of its benchmark, the Russell 1000® Value Index, and the 14.44% average return of the fund’s peer group, the Morningstar Large Value category. The table below shows returns for all share classes of the fund.

Large-cap value stocks fall behind the broader market

During the twelve-month period, large-cap value stocks lagged the 16.52% return of the broad U.S. equity market, as measured by the Russell 3000® Index. The large-cap value category had outperformed the Russell 3000 in each of the three preceding twelve-month periods.

          The Russell 1000 Value Index led the broader Russell index during the fourth quarter of 2006 but trailed it during each of the first three quarters of 2007. For the twelve months, large-cap value performed better than both mid-cap and small-cap value stocks, which gained 13.75% and 6.09%, respectively.

          For the ten years ended September 30, 2007, the Russell 1000 Value Index posted an average annual gain of 8.80%—nearly two percentage points higher than the 6.82% average annual return of the Russell 3000.

Weakness in financial stocks limits the benchmark’s rise

For the period, eleven of the twelve sectors of the Russell 1000 Value Index posted positive returns, with ten recording double-digit gains. The largest sector, financials, fell 0.1%. This sector made up more than one-third of the benchmark’s market capitalization as of September 30, 2007, and its negative return was the main reason large-cap value underperformed large-cap growth and the overall equity market.

 

 

 

 

 

 

 

 

PERFORMANCE AS OF SEPTEMBER 30, 2007

 

 

 

 

 

 

 


 

 

 

Average annual compound
rates of total return

 

 



Large-Cap Value Fund

 

1 year

 

since inception

 







Institutional Class (inception: 10/1/2002)*

 

 

15.71

%

 

18.24

%

Retirement Class (inception: 10/1/2002)*

 

 

15.51

 

 

17.99

 

Retail Class (inception: 10/1/2002)*

 

 

15.70

 

 

18.01

 

Russell 1000 Value Index

 

 

14.45

 

 

17.22

 

Morningstar Large Value

 

 

14.44

 

 

15.39

 










 

 

*

This class of the fund began investment operations prior to its inception date (the date on which the class became publicly available). The performance shown is computed from the inception date of the class. Previously, performance for this class of the fund was computed from the net asset value per share on the day prior to the inception date.

 

 

For a description of the fund’s benchmark, please see page 4.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect the taxes that an Institutional or Retail Class shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

 

14

2007 Annual Report § TIAA-CREF Institutional Mutual Funds

 



          The next two largest sectors, utilities and integrated oils, helped compensate for the weak return of financial stocks by gaining 23.4% and 44.1%, respectively. Together these two sectors constituted nearly one-quarter of the benchmark in terms of market capitalization at the end of the period. The fourth- and fifth-largest sectors, consumer discretionary and health care, advanced 10.7% and 4.7%, respectively.

Favorable stock selections drive the fund’s outperformance

The fund topped its benchmark thanks to numerous successful stock selections. Among the nonbenchmark holdings that boosted the fund’s performance were two companies based in France: Alstom, a supplier of equipment for power generation and rail transportation, and Accor, which operates hotels in more than 90 countries. Brazilian oil company Petroleo Brasileiro also contributed to the fund’s return. This stock was held as an American Depositary Receipt (ADR), a receipt for shares of a foreign stock traded on a U.S. exchange. Other advantageous holdings included overweights in RadioShack and industrial conglomerate Honeywell International, and an underweight in Bank of America.

          These contributions were partly offset by holdings that did not perform as anticipated, including underweights in ExxonMobil and ConocoPhillips, an overweight in credit risk manager Radian Group and positions in nonbenchmark stocks HealthSouth and Accredited Home Lenders.

          On September 30, 2007, foreign securities made up 8.76% of the fund’s total portfolio investments. Many of these securities were held as ADRs.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception October 1, 2002)

(LINE GRAPH)

An investment of $10,000 in this fund on October 1, 2002, would have grown to $23,113 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark and peer group during the same period.

EXPENSE EXAMPLE

Six months ended September 30, 2007

 

 

 

 

 

 

 

 

 

 











 

 

 

 

 

 

 

 

 

 

Large-Cap
Value Fund

 

Starting
fund
value
(4/1/07)

 

Ending
fund
value
(9/30/07)

 

Expenses
paid*
(4/1/07–
9/30/07)








Actual return

 

 

 

 

 

 

 

 

 

Institutional Class

 

$

1,000.00

 

$

1,038.40

 

 

$ 2.55

Retirement Class

 

 

1,000.00

 

 

1,037.90

 

 

3.72

Retail Class

 

 

1,000.00

 

 

1,038.80

 

 

2.80

 

 

 

 

 

 

 

 

 

 

5% annual

 

 

 

 

 

 

 

 

 

hypothetical return

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

1,000.00

 

 

1,022.54

 

2.53

Retirement Class

 

 

1,000.00

 

 

1,021.37

 

3.70

Retail Class

 

 

1,000.00

 

 

1,022.29

 

2.78












 

 

*

“Expenses paid” is based on the fund’s actual expense ratio for the most recent fiscal half year, multiplied by the average fund value over the six-month period, multiplied by 183/365. There were 183 days in the six months ended September 30, 2007. The fund’s annualized six-month expense ratio for that period is 0.50% for the Institutional Class, 0.73% for the Retirement Class and 0.55% for the Retail Class. The expense ratios of all three share classes reflect a contractual agreement to reimburse the fund for certain expenses through April 30, 2008. Without this reimbursement, the expenses of all three share classes would have been higher.

 

 

“Ending fund value” for the hypothetical example would be $1,025.07 before expenses. The table shows the value after the subtraction of expenses in order to be comparable with the ending fund value shown for the fund’s actual return.

For more information about this expense example, please see page 5.

 

 

HOLDINGS BY COMPANY SIZE

 



 

 

% of portfolio investments



Over $15 billion

67.55

$4 billion–$15 billion

19.91

Under $4 billion

12.54



Total

100.00


 

 

 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

15



MID-CAP GROWTH FUND  GROWTH STOCKS OF MEDIUM-SIZED COMPANIES

INVESTMENT OBJECTIVE

The fund seeks a favorable long-term total return, mainly through capital appreciation, primarily from equity securities of medium-sized domestic companies.

INVESTMENT RISKS

In addition to the risks of any equity investment—market risk and company risk—the fund is subject to special risks, including mid-cap risk, growth investing risks, style risk and foreign investment risks. For a detailed discussion of risk, please see the prospectus.

 

 

FUND PROFILE

 



 

 

Ticker symbol

 

Institutional Class

TRPWX

Retirement Class

TRGMX

Retail Class

TCMGX

Fund net assets

$449.90 million

Number of holdings

108

Portfolio turnover rate

127%

Weighted median market capitalization

$8.9 billion

P/E ratio (weighted 12-month trailing average)

32.1

Dividend yield

0.57%




 

 

PORTFOLIO COMPOSITION

 



 

 

 

% of portfolio investments



Consumer products & services

32.2

Manufacturing & materials

27.2

Technology

17.3

Financial

10.4

Energy

7.8

Utilities

3.3

Transportation

1.8



Totala

100.0


 

 

a

Excludes $123.62 million of securities lending collateral

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The Mid-Cap Growth Fund returned 25.76% for the Institutional Class, compared with the 21.22% gain of its benchmark, the Russell Midcap® Growth Index, and the 24.64% average return of the fund’s peer group, the Morningstar Mid-Cap Growth category. The table below shows returns for all share classes of the fund.

Mid-cap growth stocks top the broader market

During the twelve-month period, the mid-cap growth category posted a gain that was more than four percentage points greater than the 16.52% return of the broad U.S. equity market, as measured by the Russell 3000® Index.

          The Russell Midcap Growth Index trailed the Russell 3000 during the fourth quarter of 2006 but then outperformed the broader index in each of the first three quarters of 2007. For the twelve months, mid-cap growth outpaced both the 19.35% return of large-cap growth stocks and the 18.94% return of small-cap growth issues.

          For the ten years ended September 30, 2007, the Russell Midcap Growth Index posted an average annual gain of 7.47%—higher than the 6.82% average annual return of the Russell 3000 Index.

Exceptional sector gains fuel the benchmark’s rise

During the period, all eleven industry sectors of the Russell Midcap Growth Index posted positive returns, including ten that recorded double-digit gains. (The Russell Midcap Growth Index normally consists of twelve industry sectors, but during the latest twelve-month period it did not include any stocks in the integrated oils sector.) The top performers, the “other energy” and materials

 

 

 

 

 

 

 

 

PERFORMANCE AS OF SEPTEMBER 30, 2007

 

 

 

 

 

 

 







 

 

 

 

 

 

 

 

Average annual compound
rates of total return

 

 


Mid-Cap Growth Fund

 

1 year

 

since inception

 







Institutional Class (inception: 10/1/2002)*

 

 

25.76

%

 

20.37

%

Retirement Class (inception: 10/1/2002)*

 

 

25.54

 

 

20.02

 

Retail Class (inception: 10/1/2002)*

 

 

25.66

 

 

20.05

 

Russell Midcap Growth Index

 

 

21.22

 

 

19.86

 

Morningstar Mid-Cap Growth

 

 

24.64

 

 

17.29

 










 

 

*

This class of the fund began investment operations prior to its inception date (the date on which the class became publicly available). The performance shown is computed from the inception date of the class. Previously, performance for this class of the fund was computed from the net asset value per share on the day prior to the inception date.

 

 

For a description of the fund’s benchmark, please see page 4.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect the taxes that an Institutional or Retail Class shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

 

16

2007 Annual Report § TIAA-CREF Institutional Mutual Funds

 



and processing sectors, soared 47% and 46.1%, respectively. These two sectors constituted 16% of the benchmark in terms of market capitalization on September 30, 2007.

          Three of the benchmark’s four largest sectors—health care, technology and consumer discretionary—also contributed significantly to the index’s strong showing by advancing 19.1%, 18.8% and 14.2%, respectively. As a group, these sectors made up half of the benchmark’s market capitalization at the end of the period.

Superior stock selections drive the fund’s outperformance

The fund easily outpaced its benchmark because of numerous successful stock selections. Among the largest contributors to the fund’s outperformance were out-of-benchmark holdings in transportation company Genco Shipping and Trading, restaurant chain Chipotle Mexican Grill and Chinese solar cells maker JA Solar Holdings. Also aiding returns was an overweight position, relative to the benchmark, in construction company Jacobs Engineering Group.

          These positive contributions were partly offset by several positions that did not perform as anticipated, including out-of-benchmark holdings in real estate investment trust iStar Financial and communications equipment provider Polycom.

          On September 30, 2007, foreign securities made up 6.14% of the fund’s total portfolio investments. Many of these securities were held as American Depositary Receipts, which are receipts for shares of a foreign stock traded on a U.S. exchange.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception October 1, 2002)

(LINE GRAPH)

An investment of $10,000 in this fund on October 1, 2002, would have grown to $25,265 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark and peer group during the same period.

EXPENSE EXAMPLE

Six months ended September 30, 2007

 

 

 

 

 

 

 

 

 

 








 

 

 

 

 

 

 

Mid-Cap
Growth Fund

 

Starting
fund
value
(4/1/07)

 

Ending
fund
value
(9/30/07)

 

Expenses
paid*
(4/1/07–
9/30/07)








Actual return

 

 

 

 

 

 

 

 

 

Institutional Class

 

$

1,000.00

 

$

1,132.00

 

 

$ 2.93

Retirement Class

 

 

1,000.00

 

 

1,131.00

 

 

4.16

Retail Class

 

 

1,000.00

 

 

1,131.50

 

 

3.73

 

 

 

 

 

 

 

 

 

 

5% annual

 

 

 

 

 

 

 

 

 

hypothetical return

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

1,000.00

 

 

1,022.29

 

2.78

Retirement Class

 

 

1,000.00

 

 

1,021.12

 

3.95

Retail Class

 

 

1,000.00

 

 

1,021.53

 

3.54












 

 

*

“Expenses paid” is based on the fund’s actual expense ratio for the most recent fiscal half year, multiplied by the average fund value over the six-month period, multiplied by 183/365. There were 183 days in the six months ended September 30, 2007. The fund’s annualized six-month expense ratio for that period is 0.55% for the Institutional Class, 0.78% for the Retirement Class and 0.70% for the Retail Class. The expense ratios of all three share classes reflect voluntary and contractual agreements by the fund’s adviser to reimburse the fund for certain expenses. The contractual reimbursement continues through April 30, 2008, and the voluntary reimbursement may be discontinued at any time. Without these reimbursements, the expenses of all three share classes would have been higher.

 

 

“Ending fund value” for the hypothetical example would be $1,025.07 before expenses. The table shows the value after the subtraction of expenses in order to be comparable with the ending fund value shown for the fund’s actual return.

For more information about this expense example, please see page 5.

HOLDINGS BY COMPANY SIZE

 

 



 

 

 

% of portfolio investments



Over $15 billion

23.55

$4 billion–$15 billion

51.80

Under $4 billion

24.65



Total

100.00


 

 

 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

17



MID-CAP VALUE FUND  VALUE STOCKS OF MEDIUM-SIZED COMPANIES

INVESTMENT OBJECTIVE

The fund seeks a favorable long-term total return, mainly through capital appreciation, primarily from equity securities of medium-sized domestic companies.

INVESTMENT RISKS

In addition to the risks of any equity investment—market risk and company risk—the fund is subject to special risks, including mid-cap risk, value investing risks, style risk and foreign investment risks. For a detailed discussion of risk, please see the prospectus.

FUND PROFILE

 

 



 

 

Ticker symbol

 

Institutional Class

TIMVX

Retirement Class

TRVRX

Retail Class

TCMVX

Fund net assets

$857.57 million

Number of holdings

209

Portfolio turnover rate

90%

Weighted median market capitalization

$8.1 billion

P/E ratio (weighted 12-month trailing average)

19.1

Dividend yield

1.68%




PORTFOLIO COMPOSITION

 

 



 

 

% of portfolio investments



Manufacturing & materials

26.0

Financial

24.2

Consumer products & services

23.1

Utilities

14.2

Technology

6.0

Energy

3.3

Transportation

3.2



Totala

100.0


 

 

a

Excludes $92.09 million of securities lending collateral

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The Mid-Cap Value Fund returned 21.03% for the Institutional Class, compared with the 13.75% gain of its benchmark, the Russell Midcap® Value Index, and the 14.76% average return of the fund’s peer group, the Morningstar Mid-Cap Value category. The table below shows returns for all share classes of the fund.

Third-quarter decline dents the category’s gain

For the twelve-month period, mid-cap value stocks trailed the 16.52% return of the broad U.S. equity market, as measured by the Russell 3000® Index.

          The Russell Midcap Value Index outperformed the overall market in the fourth quarter of 2006 and the first quarter of 2007, but lagged during the rest of the reporting period. This underperformance included a 3.55% loss in the third quarter of 2007, when the Russell 3000 gained 1.55%. For the twelve months, mid-cap value trailed the 14.45% advance of large-cap value but outperformed the 6.09% return of small-cap value stocks.

          For the ten years ended September 30, 2007, the Russell Midcap Value Index posted an average annual gain of 11.31%—a remarkable performance compared with the 6.82% average annual return of the Russell 3000 during the same period.

Weakness in financial stocks weighs on the benchmark

For the twelve-month period, eleven of the twelve industry sectors of the Russell Midcap Value Index posted positive returns, with nine generating double-digit gains. However, the benchmark’s largest sector, financials, which made up almost one-third of the index in terms of market capitalization at the end of the period, returned a lackluster 1.2% that caused the mid-cap value category to underperform the broader market. Numerous financial stocks in the index were adversely

 

 

 

 

 

 

 

 

PERFORMANCE AS OF SEPTEMBER 30, 2007

 

 

 

 

 

 

 









 

 

 

Average annual compound
rates of total return

 

 



Mid-Cap Value Fund

 

1 year

 

since inception

 







Institutional Class (inception: 10/1/2002)*

 

 

21.03

%

 

23.22

%

Retirement Class (inception: 10/1/2002)*

 

 

20.70

 

 

22.84

 

Retail Class (inception: 10/1/2002)*

 

 

20.87

 

 

22.91

 

Russell Midcap Value Index

 

 

13.75

 

 

20.39

 

Morningstar Mid-Cap Value

 

 

14.76

 

 

17.51

 










 

 

*

This class of the fund began investment operations prior to its inception date (the date on which the class became publicly available). The performance shown is computed from the inception date of the class. Previously, performance for this class of the fund was computed from the net asset value per share on the day prior to the inception date.

 

 

For a description of the fund’s benchmark, please see page 4.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect the taxes that an Institutional or Retail Class shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

 

18

2007 Annual Report § TIAA-CREF Institutional Mutual Funds

 



affected by escalating problems in the subprime mortgage industry and by the general slowdown in the domestic housing market.

          Outsized gains from the materials and processing and utilities sectors, which rose 38.7% and 18.5%, respectively, and which together made up one-quarter of the index, provided the largest contributions to the benchmark’s return.

          The top-performing sectors, integrated oils and “other energy,” soared 54.6% and 43.5%, respectively. However, these two sectors constituted a small percentage of the benchmark’s total market capitalization as of September 30, 2007, so their combined effect was limited.

Successful stock selections lift the fund above the benchmark

The fund outpaced its benchmark by more than seven percentage points largely because of several out-of-benchmark positions in stocks that posted strong gains. These included metal products manufacturer Precision Castparts, U.K.-based mining company Anglo American and French construction conglomerate Bouygues.

          Theses contributions were partly offset by several positions that did not perform as anticipated. The largest detractor from relative performance was an overweight position in credit risk manager Radian Group. Out-of-benchmark holdings in Accredited Home Lenders and utility Northwestern Corporation also reduced returns slightly.

          On September 30, 2007, foreign securities made up 10.08% of the fund’s total portfolio investments. Many of these securities were held as American Depositary Receipts, which are receipts for shares of a foreign stock traded on a U.S. exchange.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception October 1, 2002)

(LINE GRAPH)

An investment of $10,000 in this fund on October 1, 2002, would have grown to $28,404 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark and peer group during the same period.

EXPENSE EXAMPLE

 

 

 

 

 

 

 

 

 

 

Six months ended September 30, 2007

 

 

 

 

 

 

 

 

 











 

Mid-Cap
Value Fund

 

Starting
fund
value
(4/1/07)

 

Ending
fund
value
(9/30/07)

 

Expenses
paid*
(4/1/07–
9/30/07)








Actual return

 

 

 

 

 

 

Institutional Class

 

$

1,000.00

 

$

1,050.60

 

 

$ 2.72

Retirement Class

 

 

1,000.00

 

 

1,049.30

 

 

4.00

Retail Class

 

 

1,000.00

 

 

1,049.80

 

 

3.23

 

 

 

 

 

 

 

 

 

 

5% annual

 

 

 

 

 

 

 

 

 

hypothetical return

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

1,000.00

 

 

1,022.39

 

2.68

Retirement Class

 

 

1,000.00

 

 

1,021.12

 

3.95

Retail Class

 

 

1,000.00

 

 

1,021.88

 

3.19












 

 

*

“Expenses paid” is based on the fund’s actual expense ratio for the most recent fiscal half year, multiplied by the average fund value over the six-month period, multiplied by 183/365. There were 183 days in the six months ended September 30, 2007. The fund’s annualized six-month expense ratio for that period is 0.53% for the Institutional Class, 0.78% for the Retirement Class and 0.63% for the Retail Class. The expense ratios of all three share classes reflect a contractual agreement by the fund’s adviser to reimburse the fund for certain expenses through April 30, 2008. Without this reimbursement, the expenses of all three share classes would have been higher.

 

 

“Ending fund value” for the hypothetical example would be $1,025.07 before expenses. The table shows the value after the subtraction of expenses in order to be comparable with the ending fund value shown for the fund’s actual return.

For more information about this expense example, please see page 5.

HOLDINGS BY COMPANY SIZE

 

 



 

 

 

% of portfolio investments



Over $15 billion

25.39

$4 billion–$15 billion

44.72

Under $4 billion

29.89



Total

100.00


 

 

 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

19



SMALL-CAP EQUITY FUND  STOCKS OF SMALLER COMPANIES

INVESTMENT OBJECTIVE

The fund seeks a favorable long-term total return, mainly through capital appreciation, primarily from equity securities of smaller domestic companies.

INVESTMENT RISKS

In addition to the risks of any equity investment—market risk and company risk—the fund is subject to small-cap risk. For a detailed discussion of risk, please see the prospectus.

 

 

FUND PROFILE

 



 

 

Ticker symbol

 

Institutional Class

TISEX

Retirement Class

TRSEX

Retail Class

TCSEX

Fund net assets

$517.15 million

Number of holdings

608

Portfolio turnover rate

127%

Weighted median market capitalization

$1.1 billion

P/E ratio (weighted 12-month trailing average)

18.5

Dividend yield

0.96%



 

 

PORTFOLIO COMPOSITION

 



 

 

 

% of portfolio investments



Consumer products & services

32.6

Manufacturing & materials

25.8

Financial

19.1

Technology

11.3

Utilities

4.2

Energy

3.5

Transportation

1.4

Short-term investments

2.1



Totala

100.0


 

 

a

Excludes $143.29 million of securities lending collateral. Approximately $10.72 million of investments are serving as collateral for S&P 500 futures and thus are restricted from being sold.

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The Small-Cap Equity Fund returned 7.43% for the Institutional Class, compared with the 12.34% gain of its benchmark, the Russell 2000® Index, and the 13.61% average return of the fund’s peer group, the Morningstar Small Blend category. The table below shows returns for all share classes of the fund.

Small caps post double-digit gains but lag the market

During the twelve-month period, the small-cap category trailed the broad U.S. equity market, as measured by the 16.52% return of the Russell 3000® Index.

          For the first six months of the period, the small-cap Russell 2000 Index gained 11.02%, outpacing the 8.49% advance of the Russell 3000. In the second quarter of 2007, however, small caps trailed the overall market by more than one percentage point, and they lost 3.09% in the third quarter, when the Russell 3000 gained 1.55%.

          Within the small-cap category, investors showed a clear preference for growth stocks during the twelve-month period. The Russell 2000 Growth Index rose 18.94%, while its value counterpart gained 6.09%.

          For the ten years ended September 30, 2007, the Russell 2000 Index registered an average annual gain of 7.22%, ahead of the 6.82% average annual return of the Russell 3000 Index.

Losses in the financial sector limit the benchmark’s return

For the period, ten of the twelve industry sectors of the Russell 2000 Index produced positive results, and eight posted double-digit gains.

          Small caps trailed the broader market primarily because financials, the benchmark’s largest sector, declined 3.8%. Comprising more than one-fifth of the index’s market capitalization on September 30, 2007, this sector was hard hit by investor

 

 

 

 

 

 

 

 

PERFORMANCE AS OF SEPTEMBER 30, 2007

 

 

 







 

 

 

Average annual compound
rates of total return

 

 


Small-Cap Equity Fund

 

1 year

 

since inception

 







Institutional Class (inception: 10/1/2002)*

 

 

7.43

%

 

17.65

%

Retirement Class (inception: 10/1/2002)*

 

 

7.15

 

 

17.30

 

Retail Class (inception: 10/1/2002)*

 

 

7.39

 

 

17.48

 

Russell 2000 Index

 

 

12.34

 

 

18.37

 

Morningstar Small Blend

 

 

13.61

 

 

17.83

 










 

 

*

This class of the fund began investment operations prior to its inception date (the date on which the class became publicly available). The performance shown is computed from the inception date of the class. Previously, performance for this class of the fund was computed from the net asset value per share on the day prior to the inception date.

 

 

For a description of the fund’s benchmark, please see page 4.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect any applicable redemption fees, or taxes that an Institutional or Retail Class shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

 

20

2007 Annual Report § TIAA-CREF Institutional Mutual Funds

 



fears that declining housing prices and mounting defaults within the subprime credit markets would seriously affect small-cap institutions, which generally are less able to weather challenging conditions than large-cap companies.

          Contributing most to the benchmark’s return was the 30.6% surge in the materials and processing sector, which made up nearly one-tenth of the index. The next three largest contributors—technology, health care and consumer discretionary—rose 19%, 18.3% and 7%, respectively. The weakest performer was the tiny integrated oils sector, which fell 15.8%.

Disappointing stock choices and hedge-fund sell-offs limit the fund’s return

The fund trailed the Russell 2000 Index partly because of numerous individual stock selections that failed to perform as anticipated. Chief among these were overweight positions, relative to the benchmark, in The Pantry, an independent chain of convenience stores, and in two financial companies, PFF Bancorp and Ocwen Financial.

          During the third quarter of 2007, several hedge funds that were quantitatively managed sold their holdings in a number of poorly performing stocks, which drove down the prices of these stocks even further. The Small-Cap Equity Fund, which uses similar quantitative techniques, was hurt by this sell-off because it was overweight in some of these stocks.

          These detractors from relative performance were partly offset by overweight holdings in several well-performing stocks. These included agricultural chemicals firm CF Industries, real estate developer Amrep and Anixter International, a provider of products and services for communications networks.

          The fund continued to use proprietary mathematical models to select small-cap stocks that appeared to be attractively priced.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception October 1, 2002)

(LINE GRAPH)

An investment of $10,000 in this fund on October 1, 2002, would have grown to $22,541 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark and peer group during the same period.

EXPENSE EXAMPLE

Six months ended September 30, 2007

 

 

 

 

 

 

 

 

 

 








 

 

 

 

 

 

 

Small-Cap
Equity Fund

 

Starting
fund
value
(4/1/07)

 

Ending
fund
value
(9/30/07)

 

Expenses
paid*
(4/1/07–
9/30/07)








Actual return

 

 

 

 

 

 

Institutional Class

 

$

1,000.00

 

$

968.60

 

 

$ 2.71

Retirement Class

 

 

1,000.00

 

 

967.60

 

 

3.84

Retail Class

 

 

1,000.00

 

 

968.70

 

 

3.40

 

 

 

 

 

 

 

 

 

 

5% annual

 

 

 

 

 

 

 

 

 

hypothetical return

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

1,000.00

 

 

1,022.29

 

2.78

Retirement Class

 

 

1,000.00

 

 

1,021.12

 

3.95

Retail Class

 

 

1,000.00

 

 

1,021.58

 

3.49












 

 

*

“Expenses paid” is based on the fund’s actual expense ratio for the most recent fiscal half year, multiplied by the average fund value over the six-month period, multiplied by 183/365. There were 183 days in the six months ended September 30, 2007. The fund’s annualized six-month expense ratio for that period is 0.55% for the Institutional Class, 0.78% for the Retirement Class and 0.69% for the Retail Class. The expense ratios of all three share classes reflect a contractual agreement by the fund’s adviser to reimburse the fund for certain expenses through April 30, 2008. Without this reimbursement, the expenses of all three share classes would have been higher.

 

 

“Ending fund value” for the hypothetical example would be $1,025.07 before expenses. The table shows the value after the subtraction of expenses in order to be comparable with the ending fund value shown for the fund’s actual return.

The expenses shown above do not reflect the 2% redemption fee that may apply to certain transactions. Please see the prospectus for details about this fee, which became effective on October 16, 2007.

For more information about this expense example, please see page 5.

 

 

HOLDINGS BY COMPANY SIZE

 



 

 

 

% of portfolio investments



$4 billion–$15 billion

1.78

Under $4 billion

98.22



Total

100.00


 

 

 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

21



LARGE-CAP GROWTH INDEX FUND  GROWTH STOCKS OF LARGER U.S. COMPANIES

INVESTMENT OBJECTIVE

The fund seeks a favorable long-term total return, mainly through capital appreciation, by investing primarily in a portfolio of equity securities of large domestic growth companies based on a market index.

INVESTMENT RISKS

In addition to the risks of any equity investment—market risk and company risk—the fund is subject to special risks, including large-cap risk, growth investing risks, style risk and index risk. For a detailed discussion of risk, please see the prospectus.

 

 

FUND PROFILE

 



Ticker symbol

 

Institutional Class

TILIX

Retirement Class

TRIRX

Fund net assets

$360.53 million

Portfolio turnover rate

53%



 

 

BENCHMARK PROFILE

 



Number of holdings

698

Weighted median market capitalization

$38.2 billion

P/E ratio (weighted 12-month trailing average)

21.6

Dividend yield

1.07%



 

 

PORTFOLIO COMPOSITION

 



 

% of portfolio investments


Consumer products & services

31.7

Manufacturing & materials

27.2

Technology

18.9

Financial

10.3

Energy

7.2

Transportation

2.5

Utilities

2.0

Short-term investments

0.2



Totala

100.0


 

 

a

Excludes $29.13 million of securities lending collateral. Approximately $0.86 million of investments are serving as collateral for S&P 500 futures and thus are restricted from being sold.

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The Large-Cap Growth Index Fund returned 19.15% for the Institutional Class, compared with the 19.35% gain of its benchmark, the Russell 1000® Growth Index, and the 20.57% average return of the fund’s peer group, the Morningstar Large Growth category. The table below shows returns for all share classes of the fund.

Large-cap growth stocks outperform the broader market

During the twelve-month period, the large-cap growth category surpassed the 16.52% return of the broad U.S. equity market, as measured by the Russell 3000® Index.

          After trailing the Russell 3000 during the fourth quarter of 2006 and the first quarter of 2007, the Russell 1000 Growth Index climbed 11.35% during the second half of the reporting period—nearly four percentage points more than the 7.40% rise in the broader Russell index.

          For the twelve months, large-cap growth outpaced the 18.94% return of small-cap growth stocks but lagged the 21.22% gain of mid-cap growth issues.

          For the ten years ended September 30, 2007, the Russell 1000 Growth Index posted an average annual gain of 4.06%, while the Russell 3000 posted an average annual return of 6.82%.

Broad-based sector gains drive the benchmark’s rise

For the period, all twelve sectors of the Russell 1000 Growth Index posted positive returns, with eleven recording double-digit gains. (The lowest-performing sector, autos and transportation, came close, rising 9.2%.)

 

 

 

 

 

 

 

 

PERFORMANCE AS OF SEPTEMBER 30, 2007

 

 

 

 

 

 

 









 

 

 

 

Average annual compound
rates of total return

 

 


Large-Cap Growth Index Fund

 

1 year

 

since inception

 







Institutional Class (inception: 10/1/2002)*

 

 

19.15

%

 

12.80

%

Retirement Class (inception: 10/1/2002)*

 

 

18.91

 

 

12.45

 

Russell 1000 Growth Index

 

 

19.35

 

 

12.97

 

Morningstar Large Growth

 

 

20.57

 

 

13.37

 










 

 

*

This class of the fund began investment operations prior to its inception date (the date on which the class became publicly available). The performance shown is computed from the inception date of the class. Previously, performance for this class of the fund was computed from the net asset value per share on the day prior to the inception date.

 

 

For a description of the fund’s benchmark, please see page 4.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect the taxes that an Institutional Class shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

22

2007 Annual Report § TIAA-CREF Institutional Mutual Funds




          The three largest sectors—technology, consumer discretionary and health care—rose 24.6%, 11.1% and 11.6%, respectively. Together these three sectors made up nearly three-fifths of the benchmark in terms of market capitalization as of September 30, 2007.

          The top-performing sector, materials and processing, soared 47.1%, followed by “other energy” and integrated oils, up 46.3% and 39.6%, respectively. Although these three sectors together constituted less than one-tenth of the benchmark’s market capitalization at the end of the period, the combined effect of their outsized gains contributed significantly to the benchmark’s overall return during the period.

The benchmark’s largest stocks produce impressive results

Gains for the benchmark’s five largest companies, all of them in the technology sector, ranged from solid to spectacular. In descending order according to their relative weightings in the benchmark based on capitalization size, these stocks performed as follows: Microsoft, 9%; Cisco Systems, 41.1%; Intel, 27%; Hewlett-Packard, 39.4%; and Apple, 99.3%.

          For the period, the fund’s return was comparable to that of its benchmark, minus the effects of expenses and of some cash holdings for liquidity. The fund had a risk profile similar to that of its benchmark.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception October 1, 2002)

(LINE GRAPH)

An investment of $10,000 in this fund on October 1, 2002, would have grown to $18,264 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark and peer group during the same period.

EXPENSE EXAMPLE

 

 

 

 

 

 

 

 

 

 

Six months ended September 30, 2007

 

 

 

 

 

 

 

 

 











 

 

 

 

Starting

 

 

Ending

 

 

Expenses

Large-Cap

 

 

fund

 

 

fund

 

 

paid*

Growth

 

 

value

 

 

value

 

 

(4/1/07–

Index Fund

 

 

(4/1/07)

 

 

(9/30/07)

 

 

9/30/07)











Actual return

 

 

 

 

 

 

 

 

 

Institutional Class

 

$

1,000.00

 

$

1,112.20

 

 

$ 0.42

Retirement Class

 

 

1,000.00

 

 

1,110.60

 

 

1.74

 

 

 

 

 

 

 

 

 

 

5% annual

 

 

 

 

 

 

 

 

 

hypothetical return

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

1,000.00

 

 

1,024.66

 

0.41

Retirement Class

 

 

1,000.00

 

 

1,023.40

 

1.67












 

 

*

“Expenses paid” is based on the fund’s actual expense ratio for the most recent fiscal half year, multiplied by the average fund value over the six-month period, multiplied by 183/365. There were 183 days in the six months ended September 30, 2007. The fund’s annualized six-month expense ratio for that period is 0.08% for the Institutional Class and 0.33% for the Retirement Class. The expense ratios of the Institutional and Retirement classes reflect voluntary and contractual agreements by the fund’s adviser to reimburse the fund for certain expenses. The contractual reimbursement continues through April 30, 2010, and the voluntary reimbursement may be discontinued at any time. Without these reimbursements, the expenses of these share classes would have been higher.

 

 

“Ending fund value” for the hypothetical example would be $1,025.07 before expenses. The table shows the value after the subtraction of expenses in order to be comparable with the ending fund value shown for the fund’s actual return.

For more information about this expense example, please see page 5.

 

 

HOLDINGS BY COMPANY SIZE

 



 

% of portfolio investments



Over $15 billion

72.00

$4 billion–$15 billion

22.45

Under $4 billion

5.55



Total

100.00


 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

23




 

LARGE-CAP VALUE INDEX FUND  VALUE STOCKS OF LARGER U.S. COMPANIES

INVESTMENT OBJECTIVE

The fund seeks a favorable long-term total return, mainly through capital appreciation, by investing primarily in a portfolio of equity securities of large domestic value companies based on a market index.

INVESTMENT RISKS

In addition to the risks of any equity investment—market risk and company risk—the fund is subject to special risks, including large-cap risk, value investing risks, style risk and index risk. For a detailed discussion of risk, please see the prospectus.

 

 

FUND PROFILE

 



Ticker symbol

 

Institutional Class

TILVX

Retirement Class

TRCVX

Fund net assets

$465.45 million

Portfolio turnover rate

60%



 

 

BENCHMARK PROFILE

 



Number of holdings

621

Weighted median market capitalization

$55.0 billion

P/E ratio (weighted 12-month trailing average)

14.6

Dividend yield

2.46%



 

 

PORTFOLIO COMPOSITION

 



 

% of portfolio investments


Financial

34.4

Manufacturing & materials

16.7

Technology

14.6

Energy

13.6

Consumer products & services

12.2

Utilities

6.1

Transportation

1.3

Short-term investments

1.1



Totala

100.0


 

 

a

Excludes $21.77 million of securities lending collateral. Approximately $5.52 million of investments are serving as collateral for S&P 500 futures and thus are restricted from being sold.

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The Large-Cap Value Index Fund returned 14.36% for the Institutional Class, compared with the 14.45% gain of its benchmark, the Russell 1000® Value Index, and the 14.44% average return of the fund’s peer group, the Morningstar Large Value category. The table below shows returns for all share classes of the fund.

Large-cap value stocks fall behind the broader market

During the twelve-month period, large-cap value stocks lagged the 16.52% return of the broad U.S. equity market, as measured by the Russell 3000® Index. The large-cap value category had outperformed the Russell 3000 in each of the three preceding twelve-month periods.

          The Russell 1000 Value Index led the broader Russell index during the fourth quarter of 2006 but trailed it during each of the first three quarters of 2007. For the twelve months, large-cap value performed better than both mid-cap and small-cap value stocks, which gained 13.75% and 6.09%, respectively.

          For the ten years ended September 30, 2007, the Russell 1000 Value Index posted an average annual gain of 8.80%—nearly two percentage points higher than the 6.82% average annual return of the Russell 3000.

Weakness in financial stocks limits the benchmark’s rise

For the period, eleven of the twelve sectors of the Russell 1000 Value Index posted positive returns, with ten recording double-digit gains. The largest sector, financials, fell 0.1%. This sector made up more than one-third of the

 

 

 

 

 

 

 

 

PERFORMANCE AS OF SEPTEMBER 30, 2007

 

 

 

 

 

 

 









 

 

 

 

Average annual compound
rates of total return

 

 


Large-Cap Value Index Fund

 

1 year

 

since inception

 







Institutional Class (inception: 10/1/2002)*

 

 

14.36

%

 

17.07

%

Retirement Class (inception: 10/1/2002)*

 

 

14.17

 

 

16.71

 

Russell 1000 Value Index

 

 

14.45

 

 

17.22

 

Morningstar Large Value

 

 

14.44

 

 

15.39

 










 

 

*

This class of the fund began investment operations prior to its inception date (the date on which the class became publicly available). The performance shown is computed from the inception date of the class. Previously, performance for this class of the fund was computed from the net asset value per share on the day prior to the inception date.

 

 

For a description of the fund’s benchmark, please see page 4.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect the taxes that an Institutional Class shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

24

2007 Annual Report § TIAA-CREF Institutional Mutual Funds




benchmark’s market capitalization as of September 30, 2007, and its negative return was the main reason large-cap value underperformed large-cap growth and the overall equity market.

          The next two largest sectors, utilities and integrated oils, helped compensate for the weak return of financial stocks by gaining 23.4% and 44.1%, respectively. Together these two sectors constituted nearly one-quarter of the benchmark in terms of market capitalization at the end of the period. The fourth- and fifth-largest sectors, consumer discretionary and health care, advanced 10.7% and 4.7%, respectively.

Returns for the benchmark’s largest stocks vary widely

The benchmark’s five largest companies posted mixed results, generally reflecting the performance of their respective industry sectors. In descending order according to their relative weightings in the benchmark based on capitalization size, these stocks performed as follows: ExxonMobil, 39.6%; General Electric, 20.2%; AT&T, 35.8%; Citigroup, –2.6%; and Bank of America, –1.8%.

          For the period, the fund’s return was comparable to that of its benchmark, minus the effects of expenses and of some cash holdings for liquidity. The fund had a risk profile similar to that of its benchmark.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception October 1, 2002)

(LINE GRAPH)

An investment of $10,000 in this fund on October 1, 2002, would have grown to $21,986 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark and peer group during the same period.

EXPENSE EXAMPLE

 

 

 

 

 

 

 

 

 

 

Six months ended September 30, 2007

 

 

 

 

 

 

 

 

 











 

 

 

Starting

 

 

Ending

 

 

Expenses

 

 

 

fund

 

 

fund

 

 

paid*

Large-Cap Value

 

 

value

 

 

value

 

 

(4/1/07–

Index Fund

 

 

(4/1/07)

 

 

(9/30/07)

 

 

9/30/07)











Actual return

 

 

 

 

 

 

 

 

 

Institutional Class

 

$

1,000.00

 

$

1,047.10

 

 

$ 0.41

Retirement Class

 

 

1,000.00

 

 

1,046.00

 

 

1.53

 

 

 

 

 

 

 

 

 

 

5% annual

 

 

 

 

 

 

 

 

 

hypothetical return

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

1,000.00

 

 

1,024.66

 

0.41

Retirement Class

 

 

1,000.00

 

 

1,023.55

 

1.52












 

 

*

“Expenses paid” is based on the fund’s actual expense ratio for the most recent fiscal half year, multiplied by the average fund value over the six-month period, multiplied by 183/365. There were 183 days in the six months ended September 30, 2007. The fund’s annualized six-month expense ratio for that period is 0.08% for the Institutional Class and 0.30% for the Retirement Class. The expense ratios of the Institutional and Retirement classes reflect a contractual agreement by the fund’s adviser to reimburse the fund for certain expenses through April 30, 2010. Without this reimbursement, the expenses of these share classes would have been higher.

 

 

“Ending fund value” for the hypothetical example would be $1,025.07 before expenses. The table shows the value after the subtraction of expenses in order to be comparable with the ending fund value shown for the fund’s actual return.

For more information about this expense example, please see page 5.

 

 

HOLDINGS BY COMPANY SIZE

 



 

 

% of portfolio investments



Over $15 billion

74.61

$4 billion–$15 billion

19.05

Under $4 billion

6.34



Total

100.00


 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

25



EQUITY INDEX FUND  U.S. STOCKS

INVESTMENT OBJECTIVE

The fund seeks a favorable long-term total return, mainly from capital appreciation, by investing primarily in a portfolio of equity securities selected to track the overall U.S. equity markets based on a market index.

INVESTMENT RISKS

In addition to the risks of any equity investment—market risk and company risk—the fund is subject to special risks, including index risk and small-cap risk. For a detailed discussion of risk, please see the prospectus.

 

 

FUND PROFILE

 



Ticker symbol

 

Institutional Class

TIEIX

Retirement Class

TIQRX

Retail Class

TINRX

Fund net assets

$1.29 billion

Portfolio turnover rate

16%



 

 

BENCHMARK PROFILE

 



Number of holdings

2,921

Weighted median market capitalization

$36.5 billion

P/E ratio (weighted 12-month trailing average)

17.9

Dividend yield

1.70%



 

 

PORTFOLIO COMPOSITION

 



 

% of portfolio investments


Consumer products & services

23.3

Manufacturing & materials

22.9

Financial

20.8

Technology

16.6

Energy

10.1

Utilities

4.1

Transportation

2.0

Short-term investments

0.2



Totala

100.0


 

 

a

Excludes $89.71 million of securities lending collateral. Approximately $5.95 million of investments are serving as collateral for S&P 500 futures and thus are restricted from being sold.

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The Equity Index Fund returned 16.49% for the Institutional Class, compared with the 16.52% gain of its benchmark, the Russell 3000® Index, and the 16.48% average return of the fund’s peer group, the Morningstar Large Blend category. The table below shows returns for all share classes of the fund.

U.S. stocks rise, but a weaker dollar gives foreign shares the edge

For the twelve months, the broad U.S. stock market posted strong returns. Stocks of all three market-capitalization sizes and both investment styles, growth and value, participated in the double-digit advance of the Russell 3000 Index.

          However, U.S. issues underperformed foreign stocks, as measured by the MSCI EAFE® Index. For the period, the EAFE’s 24.86% gain in dollar terms was more than eight percentage points higher than the return of the Russell 3000. All of the EAFE’s relative advantage was due to the continued weakening of the dollar versus many other currencies. (A weaker dollar amplifies foreign stock gains for U.S. investors.) In terms of local currencies, the EAFE rose 14.21%—less than the 16.52% gain of the Russell 3000.

          For the ten years ended September 30, 2007, the average annual return of the Russell 3000 was 6.82%, versus 7.97%, in dollars, for the EAFE.

Stellar gains in most sectors make up for lagging financial stocks

During the period, all twelve industry sectors of the Russell 3000 Index produced positive returns, including eleven that recorded double-digit gains. Only the largest sector, financials, failed to reach double digits. This sector, which made up more than one-fifth of the benchmark in terms of market capitalization on September 30, 2007, returned just 2%.

 

 

 

 

 

 

 

 

 

 

 

PERFORMANCE AS OF SEPTEMBER 30, 2007

 

 

 

 

 

 

 

 

 

 












 

 

 

 

Average annual compound
rates of total return

 

 



Equity Index Fund

 

1 year

 

5 years

 

since
inception

 









Institutional Class (inception: 7/1/1999)*

 

 

16.49

%

 

16.06

%

 

3.65

%

Russell 3000 Index

 

 

16.52

 

 

16.17

 

 

3.79

 

Morningstar Large Blend

 

 

16.48

 

 

14.72

 

 

3.64

 












Retirement Class (inception: 3/31/2006)

 

 

16.29

 

 

16.01

 

3.62












Retail Class (inception: 3/31/2006)

 

 

16.30

 

 

16.04

 

3.63













 

 

*

This class of the fund began investment operations prior to its inception date (the date on which the class became publicly available). The performance shown is computed from the inception date of the class. Previously, performance for this class of the fund was computed from the net asset value per share on the day prior to the inception date.

 

 

For a description of the fund’s benchmark, please see page 4.

 

 

The performance shown for the Retirement and Retail classes that is prior to their inception date is based on the performance of the fund’s Institutional Class. The performance for these periods has not been restated to reflect the higher expenses of the Retirement and Retail classes. If those higher expenses had been reflected, the performance of these two classes shown for these periods would have been lower.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect the taxes that an Institutional or Retail Class shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

26

2007 Annual Report § TIAA-CREF Institutional Mutual Funds




          The next two largest sectors, consumer discretionary and technology, advanced 10.4% and 23.2%, respectively. Together these two sectors constituted more than one-quarter of the benchmark. Health care and utilities, the fourth-and fifth-largest sectors, rose 10.2% and 20.8%, respectively.

          The best-performing sectors were integrated oils and “other energy,” which soared 43.7% and 42.1%, respectively. While these sectors made up less than one-tenth of the benchmark’s market capitalization at the end of the period, their outsized gains contributed significantly to the benchmark’s overall return.

          For the twelve months, growth stocks topped value shares by more than six percentage points—19.31% to 13.73%. The mid-cap category advanced 17.87%, beating both the 16.90% gain of large caps and the 12.34% rise of small caps. (Investment-style and capitalization-size returns are based on the Russell indexes.)

Returns for the benchmark’s largest stocks vary sharply

With financial stocks suffering from subprime mortgage problems and energy stocks benefiting from rising oil prices, the benchmark’s five largest companies posted widely divergent results. In descending order according to capitalization size, these stocks performed as follows: ExxonMobil, 39.6%; General Electric, 20.2%; AT&T, 35.8%; Microsoft, 9%; and Citigroup –2.6%.

          For the period, the fund’s return was comparable to that of its benchmark, minus the effects of expenses and of some cash holdings for liquidity. The fund had a risk profile similar to that of its benchmark.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception July 1, 1999)

(LINE GRPAH)

An investment of $10,000 in this fund on July 1, 1999, would have grown to $13,439 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark and peer group during the same period.

EXPENSE EXAMPLE

 

 

 

 

 

 

 

 

 

 

Six months ended September 30, 2007

 

 

 

 

 

 

 

 

 











 

 

 

Starting

 

 

Ending

 

 

Expenses

 

 

 

fund

 

 

fund

 

 

paid*

Equity

 

 

value

 

 

value

 

 

(4/1/07–

Index Fund

 

 

(4/1/07)

 

 

(9/30/07)

 

 

9/30/07)











Actual return

 

 

 

 

 

 

 

 

 

Institutional Class

 

$

1,000.00

 

$

1,074.00

 

 

$ 0.41

Retirement Class

 

 

1,000.00

 

 

1,072.90

 

 

1.71

Retail Class

 

 

1,000.00

 

 

1,072.90

 

 

1.14

 

 

 

 

 

 

 

 

 

 

5% annual

 

 

 

 

 

 

 

 

 

hypothetical return

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

1,000.00

 

 

1,024.66

 

0.41

Retirement Class

 

 

1,000.00

 

 

1,023.40

 

1.67

Retail Class

 

 

1,000.00

 

 

1,023.96

 

1.11












 

 

*

“Expenses paid” is based on the fund’s actual expense ratio for the most recent fiscal half year, multiplied by the average fund value over the six-month period, multiplied by 183/365. There were 183 days in the six months ended September 30, 2007. The fund’s annualized six-month expense ratio for that period is 0.08% for the Institutional Class, 0.33% for the Retirement Class and 0.22% for the Retail Class. The expense ratios of all three share classes reflect a contractual agreement by the fund’s adviser to reimburse the fund for certain expenses through April 30, 2010. Without this reimbursement, the expenses of all three share classes would have been higher.

 

 

“Ending fund value” for the hypothetical example would be $1,025.07 before expenses. The table shows the value after the subtraction of expenses in order to be comparable with the ending fund value shown for the fund’s actual return.

For more information about this expense example, please see page 5.

 

 

HOLDINGS BY COMPANY SIZE

 


 

% of portfolio investments


Over $15 billion

68.79

$4 billion–$15 billion

17.65

Under $4 billion

13.56



Total

100.00


 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

27




 

 

S&P 500 INDEX FUND  STOCKS OF LARGER U.S. COMPANIES

INVESTMENT OBJECTIVE

The fund seeks a favorable long-term total return, mainly through capital appreciation, by investing primarily in a portfolio of equity securities of large domestic companies selected to track U.S. equity markets based on a market index.

INVESTMENT RISKS

In addition to the risks of any equity investment—market risk and company risk—the fund is subject to special risks, including large-cap risk and index risk. For a detailed discussion of risk, please see the prospectus.

 

 

FUND PROFILE

 



Ticker symbol

 

Institutional Class

TISPX

Retirement Class

TRSPX

Fund net assets

$1.17 billion

Portfolio turnover rate

18%



 

 

BENCHMARK PROFILE

 



Number of holdings

500

Weighted median market capitalization

$59.2 billion

P/E ratio (weighted 12-month trailing average)

17.0

Dividend yield

1.85%



 

 

PORTFOLIO COMPOSITION

 



 

% of portfolio investments


Financial

23.2

Manufacturing & materials

21.9

Consumer products & services

20.5

Technology

16.8

Energy

10.6

Utilities

3.6

Transportation

1.9

Short-term investments

1.5



Totala

100.0


 

 

a

Excludes $9.14 million of securities lending collateral. Approximately $18.92 million of investments are serving as collateral for S&P 500 futures and thus are restricted from being sold.

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The S&P 500 Index Fund returned 16.35% for the Institutional Class, compared with the 16.44% gain of its benchmark, the S&P 500® Index, and the 16.48% average return of the fund’s peer group, the Morningstar Large Blend category. The table below shows returns for all share classes of the fund.

The S&P 500 Index performs in line with the broader market

For the twelve months, the large-cap stocks of the S&P 500 Index posted solid gains that were on a par with the 16.52% advance of the broad U.S. stock market, as measured by the Russell 3000® Index.

          After lagging the Russell 3000 by more than a percentage point in the first six months of the period, 7.38% to 8.49%, the S&P 500 saw its relative performance improve. In the second half of the period, the positions of the two indexes were reversed: the S&P 500 topped the Russell 3000 by more than a percentage point, 8.44% to 7.40%. The lower return of the Russell 3000 for those six months was due in part to the underperformance of small-cap stocks, which are not part of the S&P 500.

          For the ten years ended September 30, 2007, the disparity between large-cap gains and those of the broad U.S. market was narrow: the S&P 500 Index had an average annual return of 6.57%, versus 6.82% for the Russell 3000. In addition, the volatility of large-cap stocks was similar to that of the broad market: the standard deviation of the S&P 500 was 14.75, while that of the Russell 3000 was 14.86. (Standard deviation is a widely used measure of how much the returns of a stock or a group of stocks vary from their mean return, over a given period of time.)

 

 

 

 

 

 

 

 

PERFORMANCE AS OF SEPTEMBER 30, 2007

 

 

 





 

 

 

 

Average annual compound
rates of total return

 

 


S&P 500 Index Fund

 

1 year

 

since inception

 







Institutional Class (inception: 10/1/2002)*

 

 

16.35

%

 

14.41

%

Retirement Class (inception: 10/1/2002)*

 

 

16.05

 

 

14.05

 

S&P 500 Index

 

 

16.44

 

 

14.55

 

Morningstar Large Blend

 

 

16.48

 

 

13.99

 










 

 

*

This class of the fund began investment operations prior to its inception date (the date on which the class became publicly available). The performance shown is computed from the inception date of the class. Previously, performance for this class of the fund was computed from the net asset value per share on the day prior to the inception date.

 

 

For a description of the fund’s benchmark, please see page 4.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect the taxes that an Institutional Class shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

28

2007 Annual Report § TIAA-CREF Institutional Mutual Funds




Widespread gains are tempered by weak financial stocks

For the period, all ten of the S&P 500’s industry sectors had positive returns, and seven scored double-digit gains. However, the benchmark’s largest sector, financials, was up only 1.7%. This sector made up nearly one-fifth of the S&P 500’s market capitalization on September 30, 2007, so its weakness curtailed the benchmark’s overall rise.

          The next two largest sectors, information technology and energy, soared 23.3% and 43.1%, respectively. Together these sectors constituted more than one-quarter of the benchmark’s market capitalization at the end of the period. Health care and industrials, the fourth- and fifth-largest sectors, rose 8.7% and 24.4%, respectively.

Returns for the benchmark’s largest stocks vary sharply

With financial stocks suffering from subprime mortgage problems and energy stocks benefiting from rising oil prices, the benchmark’s five largest companies posted widely divergent results. In descending order according to capitalization size, these stocks performed as follows: ExxonMobil, 39.6%; General Electric, 20.2%; AT&T, 35.8%; Microsoft, 9%; and Citigroup –2.6%.

          For the period, the fund’s return was comparable to that of its benchmark, minus the effects of expenses and of some cash holdings for liquidity. The fund had a risk profile similar to that of its benchmark.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception October 1, 2002)

(LINE GRAPH)

An investment of $10,000 in this fund on October 1, 2002, would have grown to $19,600 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark and peer group during the same period.

EXPENSE EXAMPLE

 

 

 

 

 

 

 

 

 

 

Six months ended September 30, 2007

 

 

 

 

 

 

 

 

 











 

 

 

Starting

 

 

Ending

 

 

Expenses

 

 

 

fund

 

 

fund

 

 

paid*

S&P 500

 

 

value

 

 

value

 

 

(4/1/07–

Index Fund

 

 

(4/1/07)

 

 

(9/30/07)

 

 

9/30/07)











Actual return

 

 

 

 

 

 

 

 

 

Institutional Class

 

$

1,000.00

 

$

1,084.10

 

 

$ 0.36

Retirement Class

 

 

1,000.00

 

 

1,082.50

 

 

1.67

 

 

 

 

 

 

 

 

 

 

5% annual

 

 

 

 

 

 

 

 

 

hypothetical return

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

1,000.00

 

 

1,024.72

 

0.35

Retirement Class

 

 

1,000.00

 

 

1,023.45

 

1.62












 

 

*

“Expenses paid” is based on the fund’s actual expense ratio for the most recent fiscal half year, multiplied by the average fund value over the six-month period, multiplied by 183/365. There were 183 days in the six months ended September 30, 2007. The fund’s annualized six-month expense ratio for that period is 0.07% for the Institutional Class and 0.32% for the Retirement Class. The expense ratios of the Institutional and Retirement classes reflect a contractual agreement by the fund’s adviser to reimburse the fund for certain expenses through April 30, 2010. Without this reimbursement, the expenses of these share classes would have been higher.

 

 

“Ending fund value” for the hypothetical example would be $1,025.07 before expenses. The table shows the value after the subtraction of expenses in order to be comparable with the ending fund value shown for the fund’s actual return.

For more information about this expense example, please see page 5.

 

 

HOLDINGS BY COMPANY SIZE


 

% of portfolio investments


Over $15 billion

85.22

$4 billion–$15 billion

13.65

Under $4 billion

1.13



Total

100.00


 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

29



 

 

MID-CAP GROWTH INDEX FUND  GROWTH STOCKS OF MEDIUM-SIZED U.S. COMPANIES

INVESTMENT OBJECTIVE

The fund seeks a favorable long-term return, mainly through capital appreciation, by investing primarily in a portfolio of equity securities of medium-sized domestic growth companies based on a market index.

INVESTMENT RISKS

In addition to the risks of any equity investment—market risk and company risk—the fund is subject to special risks, including mid-cap risk, growth investing risks, style risk and index risk. For a detailed discussion of risk, please see the prospectus.

 

 

 

FUND PROFILE

 

 




 

Ticker symbol

 

 

Institutional Class

 

TIMGX

Retirement Class

 

TRMGX

Fund net assets

 

$72.88 million

Portfolio turnover rate

 

70%




 

 

 

BENCHMARK PROFILE

 

 




 

Number of holdings

 

555

Weighted median market capitalization

 

$8.5 billion

P/E ratio (weighted 12-month trailing average)

 

23.4

Dividend yield

 

0.77%




 

 

 

PORTFOLIO COMPOSITION

 

 




 

 

% of portfolio investments




Consumer products & services

 

32.4

Manufacturing & materials

 

24.2

Technology

 

14.9

Financial

 

13.4

Energy

 

7.4

Utilities

 

3.8

Transportation

 

2.2

Short-term investments

 

1.7




Totala

 

100.0


 

 

a

Excludes $3.06 million of securities lending collateral. Approximately $1.29 million of investments are serving as collateral for S&P 500 futures and thus are restricted from being sold.

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The Mid-Cap Growth Index Fund returned 20.88% for the Institutional Class, compared with the 21.22% gain of its benchmark, the Russell Midcap® Growth Index, and the 24.64% average return of the fund’s peer group, the Morningstar Mid-Cap Growth category. The table below shows returns for all share classes of the fund.

Mid-cap growth stocks top the broader market

During the twelve-month period, the mid-cap growth category posted a gain that was more than four percentage points greater than the 16.52% return of the broad U.S. equity market, as measured by the Russell 3000® Index.

          The Russell Midcap Growth Index trailed the Russell 3000 during the fourth quarter of 2006 but then outperformed the broader index in each of the first three quarters of 2007. For the twelve months, mid-cap growth outpaced both the 19.35% return of large-cap growth stocks and the 18.94% return of small-cap growth issues.

          For the ten years ended September 30, 2007, the Russell Midcap Growth Index posted an average annual gain of 7.47%—higher than the 6.82% average annual return of the Russell 3000 Index.

Exceptional sector gains fuel the benchmark’s rise

During the period, all eleven industry sectors of the Russell Midcap Growth Index posted positive returns, including ten that recorded double-digit gains. (The Russell Midcap Growth Index normally consists of twelve industry sectors, but during the latest twelve-month period it did not include any stocks in the

 

 

 

 

 

 

 

 

PERFORMANCE AS OF SEPTEMBER 30, 2007

 

 

 

 

 

 

 









 

 

 

 

 

 

 

 

 

 

Average annual compound
rates of total return

 

 



Mid-Cap Growth Index Fund

 

1 year

 

since inception

 







Institutional Class (inception: 10/1/2002)*

 

 

20.88

%

 

19.66

%

Retirement Class (inception: 10/1/2002)*

 

 

20.55

 

 

19.27

 

Russell Midcap Growth Index

 

 

21.22

 

 

19.86

 

Morningstar Mid-Cap Growth

 

 

24.64

 

 

17.29

 










 

 

*

This class of the fund began investment operations prior to its inception date (the date on which the class became publicly available). The performance shown is computed from the inception date of the class. Previously, performance for this class of the fund was computed from the net asset value per share on the day prior to the inception date.

 

 

For a description of the fund’s benchmark, please see page 4.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect the taxes that an Institutional Class shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

30

2007 Annual Report § TIAA-CREF Institutional Mutual Funds




integrated oils sector.) The top performers, the “other energy” and materials and processing sectors, soared 47% and 46.1%, respectively. These two sectors constituted 16% of the benchmark in terms of market capitalization on September 30, 2007.

          Three of the benchmark’s four largest sectors—health care, technology and consumer discretionary—also contributed significantly to the index’s strong showing by advancing 19.1%, 18.8% and 14.2%, respectively. As a group, these sectors made up half of the benchmark’s market capitalization at the end of the period.

Largest stocks in the benchmark surge

Of the benchmark’s five largest issues, in terms of market capitalization, oil and gas drilling equipment provider National Oilwell Varco performed best during the twelve-month period with a 147% return. Returns for the others were as follows: metal products manufacturer Precision Castparts, 135.5%; computer graphics company Nvidia, 83.8%; oil and gas drilling equipment provider Weatherford International, 61.5%; and drug manufacturer Allergan, 13.5%.

          For the period, the fund’s return was comparable to that of its benchmark, minus the effects of expenses and of some cash holdings for liquidity. The fund had a risk profile similar to that of its benchmark.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception October 1, 2002)

(LINE GRAPH)

An investment of $10,000 in this fund on October 1, 2002, would have grown to $24,529 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark and peer group during the same period.

 

 

 

 

 

 

 

 

 

 

EXPENSE EXAMPLE

 

 

 

 

 

 

 

 

 

 

Six months ended September 30, 2007

 

 

 

 

 

 

 

 

 











 

Mid-Cap Growth
Index Fund

 

Starting
fund
value
(4/1/07)

 

Ending
fund
value
(9/30/07)

 

Expenses
paid*
(4/1/07–
9/30/07)








Actual return

 

 

 

 

 

 

 

 

 

Institutional Class

 

$

1,000.00

 

$

1,089.10

 

 

$ 0.42

Retirement Class

 

 

1,000.00

 

 

1,086.80

 

 

1.72

 

5% annual
hypothetical return

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

1,000.00

 

 

1,024.66

 

0.41

Retirement Class

 

 

1,000.00

 

 

1,023.40

 

1.67












 

 

*

“Expenses paid” is based on the fund’s actual expense ratio for the most recent fiscal half year, multiplied by the average fund value over the six-month period, multiplied by 183/365. There were 183 days in the six months ended September 30, 2007. The fund’s annualized six-month expense ratio for that period is 0.08% for the Institutional Class and 0.33% for the Retirement Class. The expense ratios of the Institutional and Retirement classes reflect a contractual agreement by the fund’s adviser to reimburse the fund for certain expenses through April 30, 2010. Without this reimbursement, the expenses of these share classes would have been higher.

 

 

“Ending fund value” for the hypothetical example would be $1,025.07 before expenses. The table shows the value after the subtraction of expenses in order to be comparable with the ending fund value shown for the fund’s actual return.

For more information about this expense example, please see page 5.

 

 

HOLDINGS BY COMPANY SIZE

 



 

 

% of portfolio investments



Over $15 billion

16.22

$4 billion–$15 billion

63.42

Under $4 billion

20.36



Total

100.00


 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

31



MID-CAP VALUE INDEX FUND  VALUE STOCKS OF MEDIUM-SIZED U.S. COMPANIES

INVESTMENT OBJECTIVE

The fund seeks a favorable long-term total return, mainly through capital appreciation, by investing primarily in a portfolio of equity securities of medium-sized domestic value companies based on a market index.

INVESTMENT RISKS

In addition to the risks of any equity investment—market risk and company risk—the fund is subject to special risks, including mid-cap risk, value investing risks, style risk and index risk. For a detailed discussion of risk, please see the prospectus.

 

 

FUND PROFILE

 



 

Ticker symbol

 

Institutional Class

TMVIX

Retirement Class

TRVUX

Fund net assets

$186.16 million

Portfolio turnover rate

58%



 

 

BENCHMARK PROFILE

 



 

Number of holdings

487

Weighted median market capitalization

$8.0 billion

P/E ratio (weighted 12-month trailing average)

17.6

Dividend yield

2.04%



 

 

PORTFOLIO COMPOSITION

 



 

 

 

% of portfolio investments



Financial

32.5

Consumer products & services

19.5

Manufacturing & materials

16.6

Utilities

13.5

Technology

8.2

Energy

5.5

Transportation

3.2

Short-term investments

1.0



Totala

100.0


 

 

a

Excludes $35.61 million of securities lending collateral. Approximately $1.95 million of investments are serving as collateral for S&P 500 futures and thus are restricted from being sold.

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The Mid-Cap Value Index Fund returned 13.68% for the Institutional Class, compared with the 13.75% gain of its benchmark, the Russell Midcap® Value Index, and the 14.76% average return of the fund’s peer group, the Morningstar Mid-Cap Value category. The table below shows returns for all share classes of the fund.

Third-quarter decline dents the category’s gain

For the twelve-month period, mid-cap value stocks trailed the 16.52% return of the broad U.S. equity market, as measured by the Russell 3000® Index.

          The Russell Midcap Value Index outperformed the overall market in the fourth quarter of 2006 and the first quarter of 2007, but lagged during the rest of the reporting period. This underperformance included a 3.55% loss in the third quarter of 2007, when the Russell 3000 gained 1.55%. For the twelve months, mid-cap value trailed the 14.45% advance of large-cap value but outperformed the 6.09% return of small-cap value stocks.

          For the ten years ended September 30, 2007, the Russell Midcap Value Index posted an average annual gain of 11.31%—a remarkable performance compared with the 6.82% average annual return of the Russell 3000 during the same period.

Weakness in financial stocks weighs on the benchmark

For the twelve-month period, eleven of the twelve industry sectors of the Russell Midcap Value Index posted positive returns, with nine generating double-digit gains. However, the benchmark’s largest sector, financials, which made up almost

 

 

 

 

 

 

 

 

PERFORMANCE AS OF SEPTEMBER 30, 2007

 

 

 

 

 

 

 









 

 

 

 

 

 

 

 

 

 

Average annual compound
rates of total return

 

 



Mid-Cap Value Index Fund

 

1 year

 

since inception

 







Institutional Class (inception: 10/1/2002)*

 

 

13.68

%

 

20.26

%

Retirement Class (inception: 10/1/2002)*

 

 

13.41

 

 

19.91

 

Russell Midcap Value Index

 

 

13.75

 

 

20.39

 

Morningstar Mid-Cap Value

 

 

14.76

 

 

17.51

 










 

 

*

This class of the fund began investment operations prior to its inception date (the date on which the class became publicly available). The performance shown is computed from the inception date of the class. Previously, performance for this class of the fund was computed from the net asset value per share on the day prior to the inception date.

 

 

For a description of the fund’s benchmark, please see page 4.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect the taxes that an Institutional Class shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

32

2007 Annual Report § TIAA-CREF Institutional Mutual Funds




one-third of the index in terms of market capitalization on September 30, 2007, returned a lackluster 1.2% that caused the mid-cap value category to underperform the broader market. Numerous financial stocks in the index were adversely affected by escalating problems in the subprime mortgage industry and by the general slowdown in the domestic housing market.

          Outsized gains from the materials and processing and utilities sectors, which rose 38.7% and 18.5%, respectively, and which together made up one-quarter of the index, provided the largest contributions to the benchmark’s return.

          The top-performing sectors, integrated oils and “other energy,” soared 54.6% and 43.5%, respectively. However, these two sectors constituted a small percentage of the benchmark’s total market capitalization at the end of the period, so their combined effect was limited.

Largest stocks post uneven performance

During the reporting period, oil and gas refining firm Hess climbed 61.5%, making it the star performer among the benchmark’s five largest issues, in terms of market capitalization. The remaining four stocks had widely divergent returns: utility companies Edison International, American Electric Power and PG&E rose 33.2%, 29.2% and 17%, respectively, while Ford gained a modest 4%.

          For the period, the fund’s return was comparable to that of its benchmark, minus the effects of expenses and of some cash holdings for liquidity. The fund had a risk profile similar to that of its benchmark.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception October 1, 2002)

(LINE GRAPH)

An investment of $10,000 in this fund on October 1, 2002, would have grown to $25,158 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark and peer group during the same period.

 

 

 

 

 

 

 

 

 

 

EXPENSE EXAMPLE

 

 

 

 

 

 

 

 

 

 

Six months ended September 30, 2007

 

 

 

 

 

 

 

 

 











 

Mid-Cap Value
Index Fund

 

Starting
fund
value
(4/1/07)

 

Ending
fund
value
(9/30/07)

 

Expenses
paid*
(4/1/07–
9/30/07)








Actual return

 

 

 

 

 

 

 

 

 

Institutional Class

 

$

1,000.00

 

$

1,000.60

 

 

$ 0.40

Retirement Class

 

 

1,000.00

 

 

999.40

 

 

1.65

 

5% annual
hypothetical return

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

1,000.00

 

 

1,024.66

 

0.41

Retirement Class

 

 

1,000.00

 

 

1,023.40

 

1.67












 

 

*

“Expenses paid” is based on the fund’s actual expense ratio for the most recent fiscal half year, multiplied by the average fund value over the six-month period, multiplied by 183/365. There were 183 days in the six months ended September 30, 2007. The fund’s annualized six-month expense ratio for that period is 0.08% for the Institutional Class and 0.33% for the Retirement Class. The expense ratios of the Institutional and Retirement classes reflect a contractual agreement by the fund’s adviser to reimburse the fund for certain expenses through April 30, 2010. Without this reimbursement, the expenses of these share classes would have been higher.

 

 

“Ending fund value” for the hypothetical example would be $1,025.07 before expenses. The table shows the value after the subtraction of expenses in order to be comparable with the ending fund value shown for the fund’s actual return.

For more information about this expense example, please see page 5.

 

 

HOLDINGS BY COMPANY SIZE

 



 

 

% of portfolio investments



Over $15 billion

14.72

$4 billion–$15 billion

58.58

Under $4 billion

26.70



Total

100.00


 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

33




 

 

MID-CAP BLEND INDEX FUND   GROWTH AND VALUE STOCKS OF MEDIUM-SIZED U.S. COMPANIES

INVESTMENT OBJECTIVE

The fund seeks a favorable long-term total return, mainly through capital appreciation, by investing primarily in a very broad portfolio of equity securities of medium-sized domestic companies based on a market index.

INVESTMENT RISKS

In addition to the risks of any equity investment—market risk and company risk—the fund is subject to special risks, including mid-cap risk and index risk. For a detailed discussion of risk, please see the prospectus.

 

 

 

FUND PROFILE

 

 




 

Ticker symbol

 

 

Institutional Class

 

TRBDX

Retirement Class

 

TRMBX

Fund net assets

 

$196.06 million

Portfolio turnover rate

 

53%




 

 

 

BENCHMARK PROFILE

 

 




 

Number of holdings

 

805

Weighted median market capitalization

 

$8.2 billion

P/E ratio (weighted 12-month trailing average)

 

20.5

Dividend yield

 

1.32%




 

 

 

PORTFOLIO COMPOSITION

 

 




 

 

 

% of portfolio investments




Consumer products & services

 

27.4

Manufacturing & materials

 

21.4

Financial

 

20.7

Technology

 

12.2

Utilities

 

8.0

Energy

 

6.7

Transportation

 

2.7

Short-term investments

 

0.9




Totala

 

100.0


 

 

a

Excludes $42.97 million of securities lending collateral. Approximately $1.96 million of investments are serving as collateral for S&P 500 futures and thus are restricted from being sold.

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The Mid-Cap Blend Index Fund returned 17.70% for the Institutional Class, compared with the 17.87% gain of its benchmark, the Russell Midcap® Index, and the 17.61% average return of the fund’s peer group, the Morningstar Mid-Cap Blend category. The table below shows returns for all share classes of the fund.

Mid-cap category outpaces the broader market

During the twelve-month period, the mid-cap category outperformed the 16.52% return of the broad U.S. equity market, as measured by the Russell 3000® Index. The Russell Midcap Index led the overall market during the fourth quarter of 2006 and the first quarter of 2007. In the second and third quarters, mid-cap stocks underperformed.

          Among mid-cap stocks, growth fared much better than value during the twelve months. The Russell Midcap Growth Index climbed 21.22%, while its value counterpart gained 13.75%.

          For the ten years ended September 30, 2007, the Russell Midcap Index posted an average annual gain of 10.43%—well ahead of the 6.82% average annual return of the Russell 3000 Index during the same period.

Strong sector gains boost the benchmark’s return

During the period, all twelve industry sectors of the Russell Midcap Index registered positive returns, with eleven recording double-digit gains. Among the benchmark’s largest sectors, the top performers were technology, which climbed 18.9%, utilities, which advanced 17.8%, and consumer discretionary, which rose 13.1%. These three sectors made up almost 38% of the index in terms of market capitalization on September 30, 2007.

 

 

 

 

 

 

 

 

PERFORMANCE AS OF SEPTEMBER 30, 2007

 

 

 

 

 

 

 









 

 

 

 

 

 

 

 

 

 

Average annual compound
rates of total return

 

 



Mid-Cap Blend Index Fund

 

1 year

 

since inception

 







Institutional Class (inception: 10/1/2002)*

 

 

17.70

%

 

20.12

%

Retirement Class (inception: 10/1/2002)*

 

 

17.44

 

 

19.76

 

Russell Midcap Index

 

 

17.87

 

 

20.31

 

Morningstar Mid-Cap Blend

 

 

17.61

 

 

17.69

 










 

 

*

This class of the fund began investment operations prior to its inception date (the date on which the class became publicly available). The performance shown is computed from the inception date of the class. Previously, performance for this class of the fund was computed from the net asset value per share on the day prior to the inception date.

 

 

For a description of the fund’s benchmark, please see page 4.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect the taxes that an Institutional Class shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

34

2007 Annual Report § TIAA-CREF Institutional Mutual Funds




          The “other energy” and materials and processing sectors rose 46.5% and 42.7%, respectively, and also contributed substantially to the benchmark’s overall return. Together these sectors made up almost 15% of the index in terms of market capitalization at the end of the period.

          The largest sector, financials, which constituted more than one-fifth of the benchmark, posted a modest 4.8% return for the twelve months. The best-performing sector, integrated oils, soared 54.6% but had a limited effect on the overall return since it made up only a small percentage of the total index.

The benchmark’s largest stocks post impressive gains

Over the twelve-month period, all of the benchmark’s five largest issues, in terms of market capitalization, posted extraordinary returns. Oil and gas drilling equipment provider National Oilwell Varco performed best with a 147% return. Returns for the others were as follows: metal products manufacturer Precision Castparts, 135.5%; oil and gas drilling equipment provider Weatherford International, 61.5%; diversified chemical manufacturer Air Products & Chemicals, 48%; and natural gas producer Williams Companies, 44.1%.

          For the period, the fund’s return was comparable to that of its benchmark, minus the effects of expenses and of some cash holdings for liquidity. The fund had a risk profile similar to that of its benchmark.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception October 1, 2002)

(LINE GRAPH)

An investment of $10,000 in this fund on October 1, 2002, would have grown to $25,013 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark and peer group during the same period.

 

 

 

 

 

 

 

 

 

 

EXPENSE EXAMPLE

 

 

 

 

 

 

 

 

 

 

Six months ended September 30, 2007

 

 

 

 

 

 

 

 

 











 

Mid-Cap Blend
Index Fund

 

Starting
fund
value
(4/1/07)

 

Ending
fund
value
(9/30/07)

 

Expenses
paid*
(4/1/07–
9/30/07)








Actual return

 

 

 

 

 

 

 

 

 

Institutional Class

 

$

1,000.00

 

$

1,048.50

 

 

$ 0.41

Retirement Class

 

 

1,000.00

 

 

1,047.60

 

 

1.69

 

5% annual
hypothetical return

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

1,000.00

 

 

1,024.66

 

0.41

Retirement Class

 

 

1,000.00

 

 

1,023.40

 

1.67












 

 

*

“Expenses paid” is based on the fund’s actual expense ratio for the most recent fiscal half year, multiplied by the average fund value over the six-month period, multiplied by 183/365. There were 183 days in the six months ended September 30, 2007. The fund’s annualized six-month expense ratio for that period is 0.08% for the Institutional Class and 0.33% for the Retirement Class. The expense ratios of the Institutional and Retirement classes reflect a contractual agreement by the fund’s adviser to reimburse the fund for certain expenses through April 30, 2010. Without this reimbursement, the expenses of these share classes would have been higher.

 

 

“Ending fund value” for the hypothetical example would be $1,025.07 before expenses. The table shows the value after the subtraction of expenses in order to be comparable with the ending fund value shown for the fund’s actual return.

For more information about this expense example, please see page 5.

 

 

HOLDINGS BY COMPANY SIZE

 



 

 

% of portfolio investments



Over $15 billion

15.80

$4 billion–$15 billion

62.16

Under $4 billion

22.04



Total

100.00


 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

35




 

 

SMALL-CAP GROWTH INDEX FUND   GROWTH STOCKS OF SMALLER U.S. COMPANIES

INVESTMENT OBJECTIVE

The fund seeks a favorable long-term total return, mainly through capital appreciation, by investing primarily in a portfolio of equity securities of smaller domestic growth companies based on a market index.

INVESTMENT RISKS

In addition to the risks of any equity investment—market risk and company risk—the fund is subject to special risks, including small-cap risk, growth investing risks, style risk and index risk. For a detailed discussion of risk, please see the prospectus.

 

 

 

FUND PROFILE

 

 




 

Ticker symbol

 

 

Institutional Class

 

TISGX

Retirement Class

 

TRCGX

Fund net assets

 

$134.67 million

Portfolio turnover rate

 

64%




 

 

 

 

 

 

BENCHMARK PROFILE

 

 




 

 

 

Number of holdings

 

1,229

Weighted median market capitalization

 

$1.3 billion

P/E ratio (weighted 12-month trailing average)

 

34.9

Dividend yield

 

0.54%




 

 

 

 

 

 

PORTFOLIO COMPOSITION

 

 




 

 

 

% of portfolio investments




Consumer products & services

 

37.8

Manufacturing & materials

 

32.0

Technology

 

12.0

Financial

 

10.0

Energy

 

4.4

Transportation

 

1.8

Utilities

 

1.2

Short-term investments

 

0.8




Totala

 

100.0


 

 

a

Excludes $37.81 million of securities lending collateral. Approximately $1.17 million of investments are serving as collateral for S&P 500 futures and thus are restricted from being sold.

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The Small-Cap Growth Index Fund returned 18.92% for the Institutional Class, compared with the 18.94% gain of its benchmark, the Russell 2000® Growth Index, and the 20.32% average return of the fund’s peer group, the Morningstar Small Growth category. The table below shows returns for all share classes of the fund.

Small-cap growth stocks outpace the broader market

For the twelve-month period, the small-cap growth category led the broad U.S. equity market, as measured by the 16.52% return of the Russell 3000® Index.

          Small-cap growth stocks got off to a strong start in the fourth quarter of 2006: the Russell 2000 Growth Index jumped 8.77%, well ahead of the 7.12% gain of the Russell 3000. The category continued to outpace the overall market during the first two quarters of 2007 but underperformed in the third quarter. For the twelve months, small-cap growth stocks trailed the 21.22% return of their mid-cap counterparts and the 19.35% return of large-cap growth issues.

           For the ten years ended September 30, 2007, the Russell 2000 Growth Index registered an average annual gain of 3.65%, lagging the 6.82% average annual return of the Russell 3000 Index.

Three largest sectors fuel the benchmark’s rise

For the twelve-month period, eleven of the twelve industry sectors of the Russell 2000 Growth Index scored positive returns, and eight posted double-digit gains. The index benefited most from the robust performance of its three largest sectors, measured in terms of market capitalization on

 

 

 

 

 

 

 

 

PERFORMANCE AS OF SEPTEMBER 30, 2007

 

 

 

 

 

 

 









 

 

 

 

 

 

 

 

 

 

Average annual compound
rates of total return

 

 



Small-Cap Growth Index Fund

 

1 year

 

since inception

 







Institutional Class (inception: 10/1/2002)*

 

 

18.92

%

 

18.23

%

Retirement Class (inception: 10/1/2002)*

 

 

18.60

 

 

19.22

Russell 2000 Growth Index

 

 

18.94

 

 

18.38

 

Morningstar Small Growth

 

 

20.32

 

 

17.35

 










 

 

*

This class of the fund began investment operations prior to its inception date (the date on which the class became publicly available). The performance shown is computed from the inception date of the class. Previously, performance for this class of the fund was computed from the net asset value per share on the day prior to the inception date.

 

 

The since-inception return for this share class reflects the correction of a transaction processing error in October 2005. The since-inception return also reflects a similar correction in June 2004. These corrections resulted in gains, which increased the fund’s total return for this share class.

 

 

For a description of the fund’s benchmark, please see page 4.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect any applicable redemption fees, or taxes that an Institutional Class shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

36

2007 Annual Report § TIAA-CREF Institutional Mutual Funds




September 30, 2007. The consumer discretionary sector rose 12.9%; health care advanced 18.8%; and technology gained 24.8%. Together, these sectors made up nearly 60% of the index.

          Materials and processing, up 30%, was the benchmark’s star performer for the period. The “other energy” sector advanced an impressive 25.3%.

          Trimming the index’s return was the financial sector, which rose a modest 5.8% and made up about one-tenth of the index. Integrated oils was the only sector to drop; it slid 17.7%.

The benchmark’s largest issues score triple-digit gains

Of the five largest stocks in the Russell 2000 Growth Index, the top three posted stratospheric returns for the period. In order of capitalization size, Flir Systems, a maker of thermal imaging and broadcast cameras, soared 103.9%; Chipotle Mexican Grill skyrocketed 116.2%; and Priceline.com, an online travel service, climbed an astounding 142.8%. Rounding out the list, Hologic, a maker of diagnostic and medical imaging systems, advanced 40.3%, while Kyphon, a manufacturer of therapeutic spinal devices, jumped 76.9%.

          For the period, the fund’s return was comparable to that of its benchmark, minus the effects of expenses and of some cash holdings for liquidity. The fund had a risk profile similar to that of its benchmark.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception October 1, 2002)

(LINE GRAPH)

An investment of $10,000 in this fund on October 1, 2002, would have grown to $23,103 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark and peer group during the same period.

 

 

 

 

 

 

 

 

 

 

EXPENSE EXAMPLE

 

 

 

 

 

 

 

 

 

 

Six months ended September 30, 2007

 

 

 

 

 

 

 

 

 











 

Small-Cap Growth Index Fund

 

Starting
fund
value
(4/1/07)

 

Ending
fund
value
(9/30/07)

 

Expenses
paid*
(4/1/07–
9/30/07)











Actual return

 

 

 

 

 

 

 

 

 

Institutional Class

 

$

1,000.00

 

$

1,067.30

 

 

$ 0.41

Retirement Class

 

 

1,000.00

 

 

1,066.20

 

 

1.70

 

5% annual
hypothetical return

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

1,000.00

 

 

1,024.66

 

0.41

Retirement Class

 

 

1,000.00

 

 

1,023.40

 

1.67












 

 

*

“Expenses paid” is based on the fund’s actual expense ratio for the most recent fiscal half year, multiplied by the average fund value over the six-month period, multiplied by 183/365. There were 183 days in the six months ended September 30, 2007. The fund’s annualized six-month expense ratio for that period is 0.08% for the Institutional Class and 0.33% for the Retirement Class. The expense ratios of the Institutional and Retirement classes reflect a contractual agreement by the fund’s adviser to reimburse the fund for certain expenses through April 30, 2010. Without this reimbursement, the expenses of these share classes would have been higher.

 

 

“Ending fund value” for the hypothetical example would be $1,025.07 before expenses. The table shows the value after the subtraction of expenses in order to be comparable with the ending fund value shown for the fund’s actual return.

The expenses shown above do not reflect the 2% redemption fee that may apply to certain transactions. Please see the prospectus for details about this fee, which became effective on October 16, 2007.

For more information about this expense example, please see page 5.

 

 

HOLDINGS BY COMPANY SIZE

 



 

 

% of portfolio investments



Over $15 billion

0.12

$4 billion–$15 billion

0.06

Under $4 billion

99.82



Total

100.00


 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

37




 

 

SMALL-CAP VALUE INDEX FUND   VALUE STOCKS OF SMALLER U.S. COMPANIES

INVESTMENT OBJECTIVE

The fund seeks a favorable long-term total return, mainly through capital appreciation, by investing primarily in a portfolio of equity securities of smaller domestic value companies based on a market index.

INVESTMENT RISKS

In addition to the risks of any equity investment—market risk and company risk—the fund is subject to special risks, including small-cap risk, value investing risks, style risk and index risk. For a detailed discussion of risk, please see the prospectus.

 

 

FUND PROFILE

 



 

Ticker symbol

 

Institutional Class

TISVX

Retirement Class

TRSVX

Fund net assets

$152.76 million

Portfolio turnover rate

53%



 

 

BENCHMARK PROFILE

 



 

Number of holdings

1,264

Weighted median market capitalization

$1.1 billion

P/E ratio (weighted 12-month trailing average)

19.1

Dividend yield

1.87%



 

 

PORTFOLIO COMPOSITION

 



 

 

% of portfolio investments



Financial

34.8

Consumer products & services

23.8

Manufacturing & materials

20.3

Technology

8.7

Utilities

5.7

Energy

3.8

Transportation

2.7

Short-term investments

0.2



Totala

100.0


 

 

a

Excludes $43.75 million of securities lending collateral

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The Small-Cap Value Index Fund returned 6.14% for the Institutional Class, compared with the 6.09% gain of its benchmark, the Russell 2000® Value Index, and the 9.12% average return of the fund’s peer group, the Morningstar Small Value category. The table below shows returns for all share classes of the fund.

Third-quarter losses trim gains of small-cap value

For the twelve-month period, small-cap value stocks trailed the broad U.S. equity market, as measured by the 16.52% return of the Russell 3000® Index.

          The Russell 2000 Value Index led the overall market during the fourth quarter of 2006 and the first quarter of 2007 but lagged the broader market in the second quarter. In the third quarter, the small-cap value category posted a loss of 6.26%, while the Russell 3000 gained 1.55%. For the twelve months, small-cap value stocks trailed the 13.75% return of their mid-cap counterparts and the 14.45% return of large-cap value issues.

           For the ten years ended September 30, 2007, the Russell 2000 Value Index registered an average annual gain of 10.07%—well ahead of the 6.82% average annual return of the Russell 3000 Index.

Financial stocks limit the benchmark’s rise

For the period, nine of the twelve industry sectors of the Russell 2000 Value Index moved upward, and six scored double-digit gains.

          The benchmark failed to keep pace with its large- and mid-cap counterparts mainly because its largest sector, financials, fell 6.6%. Comprising more than one-third of the index’s market capitalization on September 30, 2007, this sector

 

 

 

 

 

 

 

 

PERFORMANCE AS OF SEPTEMBER 30, 2007

 

 

 

 

 

 

 









 

 

 

 

 

 

 

 

 

 

Average annual compound
rates of total return

 

 



Small-Cap Value Index Fund

 

1 year

 

since inception

 







 

 

 

 

 

 

 

 

Institutional Class (inception: 10/1/2002)*

 

 

6.14

%

 

18.17

%

Retirement Class (inception: 10/1/2002)*

 

 

5.97

 

 

17.91

 

Russell 2000 Value Index

 

 

6.09

 

 

18.27

 

Morningstar Small Value

 

 

9.12

 

 

17.04

 










 

 

*

This class of the fund began investment operations prior to its inception date (the date on which the class became publicly available). The performance shown is computed from the inception date of the class. Previously, performance for this class of the fund was computed from the net asset value per share on the day prior to the inception date.

 

 

For a description of the fund’s benchmark, please see page 4.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect any applicable redemption fees, or taxes that an Institutional Class shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

38

2007 Annual Report § TIAA-CREF Institutional Mutual Funds




was hard hit by investor fears that declining housing prices and mounting defaults within the subprime credit markets would seriously affect small-cap institutions, which generally are less able to weather challenging conditions than large-cap companies. A 1.5% decline in consumer discretionary, the index’s second-largest sector, and a 4.5% loss in integrated oils also dampened the benchmark’s return.

           A 31.6% surge in the materials and processing sector, which represented about one-tenth of the benchmark, along with a 30.5% jump in consumer staples, more than offset the drag that financial and consumer discretionary stocks had on small-cap value performance. The top performing sector was the miscellaneous “other” sector, which soared 46.6% but had minimal effect on the benchmark’s performance because of its small size.

Gains of largest stocks range from solid to stellar

Among the benchmark’s top five issues in terms of market capitalization, agricultural chemicals firm CF Industries led with a meteoric 340.1% rise. The other four all posted gains of double digits: 48% for AptarGroup, a maker of dispensers for consumer products; 45.6% for Exterran Holdings, a provider of equipment for the oil and gas industry; 19.7% for Realty Income, a real estate investment trust; and 11.1% for Aspen Insurance.

          For the twelve months, the fund outperformed the Russell 2000 Value Index, despite the effects of expenses and of some cash holdings for liquidity. The fund had a risk profile similar to that of its benchmark.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception October 1, 2002)

(LINE GRAPH)

An investment of $10,000 in this fund on October 1, 2002, would have grown to $23,047 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark and peer group during the same period.

 

 

 

 

 

 

 

 

 

 

EXPENSE EXAMPLE

 

 

 

 

 

 

 

 

 

 

Six months ended September 30, 2007

 

 

 

 

 

 

 

 

 











 

Small-Cap Value Index Fund

 

Starting
fund
value
(4/1/07)

 

Ending
fund
value
(9/30/07)

 

Expenses
paid*
(4/1/07–
9/30/07)








Actual return

 

 

 

 

 

 

 

 

 

Institutional Class

 

$

1,000.00

 

$

959.90

 

 

$ 0.39

Retirement Class

 

 

1,000.00

 

 

959.10

 

 

1.62

 

5% annual
hypothetical return

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

1,000.00

 

 

1,024.66

 

0.41

Retirement Class

 

 

1,000.00

 

 

1,023.40

 

1.67












 

 

*

“Expenses paid” is based on the fund’s actual expense ratio for the most recent fiscal half year, multiplied by the average fund value over the six-month period, multiplied by 183/365. There were 183 days in the six months ended September 30, 2007. The fund’s annualized six-month expense ratio for that period is 0.08% for the Institutional Class and 0.33% for the Retirement Class. The expense ratios of the Institutional and Retirement classes reflect a contractual agreement by the fund’s adviser to reimburse the fund for certain expenses through April 30, 2010. Without this reimbursement, the expenses of these share classes would have been higher.

 

 

“Ending fund value” for the hypothetical example would be $1,025.07 before expenses. The table shows the value after the subtraction of expenses in order to be comparable with the ending fund value shown for the fund’s actual return.

The expenses shown above do not reflect the 2% redemption fee that may apply to certain transactions. Please see the prospectus for details about this fee, which became effective on October 16, 2007.

For more information about this expense example, please see page 5.

 

 

HOLDINGS BY COMPANY SIZE

 



 

 

% of portfolio investments



$4 billion–$15 billion

1.30

Under $4 billion

98.70



Total

100.00


 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

39



SMALL-CAP BLEND INDEX FUND  GROWTH AND VALUE STOCKS OF SMALLER U.S. COMPANIES

INVESTMENT OBJECTIVE

The fund seeks a favorable long-term total return, mainly through capital appreciation, by investing primarily in a portfolio of equity securities of smaller domestic companies based on a market index.

INVESTMENT RISKS

In addition to the risks of any equity investment—market risk and company risk—the fund is subject to special risks, including small-cap risk and index risk. For a detailed discussion of risk, please see the prospectus.

 

 

FUND PROFILE

 



 

 

Ticker symbol

 

Institutional Class

TISBX

Retirement Class

TRBIX

Fund net assets

$234.00 million

Portfolio turnover rate

69%




 

 

BENCHMARK PROFILE

 



 

 

Number of holdings

1,910

Weighted median market capitalization

$1.2 billion

P/E ratio (weighted 12-month trailing average)

25.1

Dividend yield

1.18%




 

 

PORTFOLIO COMPOSITION

 



 

 

 

% of portfolio investments



Consumer products & services

29.9

Manufacturing & materials

25.4

Financial

22.8

Technology

10.0

Energy

3.9

Utilities

3.2

Transportation

2.1

Short-term investments

2.7



Totala

100.0


 

 

a

Excludes $65.65 million of securities lending collateral. Approximately $6.57 million of investments are serving as collateral for S&P 500 futures and thus are restricted from being sold.

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The Small-Cap Blend Index Fund returned 12.32% for the Institutional Class, compared with the 12.34% gain of its benchmark, the Russell 2000® Index, and the 13.61% average return of the fund’s peer group, the Morningstar Small Blend category. The table below shows returns for all share classes of the fund.

Small caps post double-digit gains but lag the market

During the twelve-month period, the small-cap category trailed the broad U.S. equity market, as measured by the 16.52% return of the Russell 3000® Index.

          For the first six months of the period, the small-cap Russell 2000 Index gained 11.02%, outpacing the 8.49% advance of the Russell 3000. In the second quarter of 2007, however, small caps trailed the overall market by more than one percentage point, and they lost 3.09% in the third quarter, when the Russell 3000 gained 1.55%.

          Within the small-cap category, investors showed a clear preference for growth stocks during the twelve-month period. The Russell 2000 Growth Index rose 18.94%, while its value counterpart gained 6.09%.

          For the ten years ended September 30, 2007, the Russell 2000 Index registered an average annual gain of 7.22%, ahead of the 6.82% average annual return of the Russell 3000 Index.

Losses in the financial sector limit the benchmark’s return

For the period, ten of the twelve industry sectors of the Russell 2000 Index produced positive results, and eight posted double-digit gains.

 

PERFORMANCE AS OF SEPTEMBER 30, 2007



 

 

 

 

 

 

 

 

 

 

Average annual compound
rates of total return

 

 

 



Small-Cap Blend Index Fund

 

 

1 year

 

 

since inception

 









Institutional Class (inception: 10/1/2002)*

 

 

12.32

%

 

18.22

%

Retirement Class (inception: 10/1/2002)*

 

 

12.15

 

 

17.93

 

Russell 2000 Index

 

 

12.34

 

 

18.37

 

Morningstar Small Blend

 

 

13.61

 

 

17.83

 










 

 

*

This class of the fund began investment operations prior to its inception date (the date on which the class became publicly available). The performance shown is computed from the inception date of the class. Previously, performance for this class of the fund was computed from the net asset value per share on the day prior to the inception date.

 

 

For a description of the fund’s benchmark, please see page 4.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect any applicable redemption fees, or taxes that an Institutional Class shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

40

2007 Annual Report § TIAA-CREF Institutional Mutual Funds



          Small caps trailed the broader market primarily because financials, the benchmark’s largest sector, declined 3.8%. Comprising more than one-fifth of the index’s market capitalization on September 30, 2007, this sector was hard hit by investor fears that declining housing prices and mounting defaults within the subprime credit markets would seriously affect small-cap institutions, which generally are less able to weather challenging conditions than large-cap companies.

          Contributing most to the benchmark’s return was the 30.6% surge in the materials and processing sector, which made up nearly one-tenth of the index. The next three largest contributors—technology, health care and consumer discretionary—rose 19%, 18.3% and 7%, respectively. The weakest performer was the tiny integrated oils sector, which fell 15.8%.

The benchmark’s largest stocks provide triple-digit gains

All five of the benchmark’s largest stocks in terms of market capitalization scored exceptional results for the period, and four achieved triple-digit gains. Agricultural chemicals firm CF Industries soared 340.1%, followed by online travel service Priceline.com, which climbed 142.8%, and Chipotle Mexican Grill, which jumped 116.2%. Additional outsized results included the 103.9% gain of Flir Systems, a maker of thermal imaging and broadcast cameras, and the 45.6% return of Exterran Holdings, a provider of equipment for the oil and gas industry.

          For the twelve months, the fund’s return was comparable to that of its benchmark, minus the effects of expenses and of some cash holdings for liquidity. The fund had a risk profile similar to that of its benchmark.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception October 1, 2002)

(LINE GRAPH)

An investment of $10,000 in this fund on October 1, 2002, would have grown to $23,096 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark and peer group during the same period.

EXPENSE EXAMPLE

 

Six months ended September 30, 2007



 

 

 

 

 

 

 

 

 

 

Small-Cap Blend Index Fund

 

Starting
fund
value
(4/1/07)

 

Ending
fund
value
(9/30/07)

 

Expenses
paid*

(4/1/07–
9/30/07)








Actual return

 

 

 

 

 

 

 

 

 

Institutional Class

 

$

1,000.00

 

$

1,012.10

 

 

$ 0.40

Retirement Class

 

 

1,000.00

 

 

1,012.00

 

 

1.66

 

 

 

 

 

 

 

 

 

 

5% annual hypothetical return

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

1,000.00

 

 

1,024.66

 

0.41

Retirement Class

 

 

1,000.00

 

 

1,023.40

 

1.67












 

 

*

“Expenses paid” is based on the fund’s actual expense ratio for the most recent fiscal half year, multiplied by the average fund value over the six-month period, multiplied by 183/365. There were 183 days in the six months ended September 30, 2007. The fund’s annualized six-month expense ratio for that period is 0.08% for the Institutional Class and 0.33% for the Retirement Class. The expense ratios of the Institutional and Retirement classes reflect a contractual agreement by the fund’s adviser to reimburse the fund for certain expenses through April 30, 2010. Without this reimbursement, the expenses of these share classes would have been higher.

 

 

“Ending fund value” for the hypothetical example would be $1,025.07 before expenses. The table shows the value after the subtraction of expenses in order to be comparable with the ending fund value shown for the fund’s actual return.

The expenses shown above do not reflect the 2% redemption fee that may apply to certain transactions. Please see the prospectus for details about this fee, which became effective on October 16, 2007.

For more information about this expense example, please see page 5.

 

 

HOLDINGS BY COMPANY SIZE

 



 

 

 

% of portfolio investments



Over $15 billion

0.06

$4 billion–$15 billion

3.63

Under $4 billion

96.31



Total

100.00


 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

41



INTERNATIONAL EQUITY INDEX FUND  FOREIGN STOCKS

INVESTMENT OBJECTIVE

The fund seeks a favorable long-term total return, mainly through capital appreciation, by investing primarily in a portfolio of foreign equity securities based on a market index.

INVESTMENT RISKS

In addition to the risks of any equity investment—market risk and company risk—the fund is subject to special risks, including foreign investment risks, index risk and small-cap risk. For a detailed discussion of risk, please see the prospectus.

 

 

FUND PROFILE

 



 

 

Ticker symbol

 

Institutional Class

TCIEX

Retirement Class

TRIEX

Fund net assets

$794.14 million

Portfolio turnover rate

46%



 

 

BENCHMARK PROFILE

 



 

 

Number of holdings

1,139

Weighted median market capitalization

$44.8 billion

P/E ratio (weighted 12-month trailing average)

14.6

Dividend yield

2.64%




 

 

PORTFOLIO COMPOSITION

 



 

 

 

% of portfolio investments



Financial

29.7

Manufacturing & materials

28.9

Consumer products & services

15.9

Technology

11.4

Energy

7.0

Utilities

4.6

Transportation

2.0

Short-term investmentsa

0.5



Total

100.0


 

 

a

Excludes $28.62 million of securities lending collateral

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The International Equity Index Fund returned 25.01% for the Institutional Class, compared with the 24.86% gain of its benchmark, the MSCI EAFE® Index, and the 26.18% average return of the fund’s peer group, the Morningstar Foreign Large Blend category. The table below shows returns for all share classes of the fund.

Foreign stocks maintain substantial lead over U.S. shares

Helped by a stronger euro and British pound, the EAFE index, which tracks stocks in 21 developed nations outside North America, posted a return that was more than eight percentage points greater than the 16.52% gain of the Russell 3000® Index, which measures the broad U.S. stock market.

          The EAFE got off to a fast start with a 10.35% rise in the fourth quarter of 2006, beating the 7.12% rise of the Russell 3000 by more than three percentage points. In each of the three quarters that followed, the EAFE’s margin of outperformance was narrower. A global stock market sell-off in late February 2007 trimmed foreign stock gains, as did a worldwide decline in equity markets during the summer months. The EAFE dropped more than 3% over the course of July and August but staged a strong recovery in September.

          The EAFE’s long-term performance also surpassed that of the Russell 3000. For the ten years ended September 30, 2007, the average annual return of the EAFE index was 7.97%, versus 6.82% for the Russell 3000.

A weaker dollar amplifies foreign stock performance

For the period, the EAFE’s relative advantage over the Russell 3000 was due entirely to the continued weakening of the dollar, which plunged in value

 

PERFORMANCE AS OF SEPTEMBER 30, 2007



 

 

 

 

 

 

 

 

 

 

Average annual compound
rates of total return

 

 



International Equity Index Fund

 

1 year

 

since inception

 







Institutional Class (inception: 10/1/2002)*

 

 

25.01

%

 

23.30

%

Retirement Class (inception: 10/1/2002)*

 

 

24.75

 

 

22.91

 

MSCI EAFE Index

 

 

24.86

 

 

23.52

 

Morningstar Foreign Large Blend

 

 

26.18

 

 

21.93

 










 

 

*

This class of the fund began investment operations prior to its inception date (the date on which the class became publicly available). The performance shown is computed from the inception date of the class. Previously, performance for this class of the fund was computed from the net asset value per share on the day prior to the inception date.

 

 

For a description of the fund’s benchmark, please see page 4.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect any applicable redemption fees, or taxes that an Institutional Class shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

42

2007 Annual Report § TIAA-CREF Institutional Mutual Funds



against the euro and the British pound. A weaker dollar increases foreign stock gains (and cushions losses) for U.S. investors.

          In fact, foreign stocks actually lagged domestic issues during the twelve months before accounting for currency exchange rates. In terms of local currencies, the EAFE rose 14.21%. The dollar’s weakness boosted this return by more than ten percentage points, to 24.86% in dollars.

Europe’s largest markets fuel the benchmark’s gain

European stocks, which made up nearly 70% of the EAFE’s market capitalization on September 30, 2007, climbed 27.51% in dollar terms. Of the benchmark’s three largest European components, German stocks led the way, soaring 47.15% in dollars. French and British stocks followed, rising 24.24% and 22.42%, respectively, in dollars. Together these three components made up more than 40% of the EAFE in terms of market capitalization at the end of the period.

          The benchmark’s Pacific segment rose 19.17% in dollar terms. Japanese stocks, the largest component of the Pacific segment and about one-fifth of the EAFE’s total market capitalization on September 30, 2007, returned a modest 7.07% in dollars. Pacific markets outside of Japan posted an outsized gain of 55.13% in dollar terms, but these markets constituted only one-tenth of the benchmark’s market capitalization at the end of the period.

          For the period, the fund’s return and risk profile were similar to those of its benchmark.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception October 1, 2002)

(LINE GRAPH)

An investment of $10,000 in this fund on October 1, 2002, would have grown to $28,501 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark and peer group during the same period.

EXPENSE EXAMPLE

 

Six months ended September 30, 2007



 

 

 

 

 

 

 

 

 

 

International
Equity
Index Fund

 

Starting
fund
value
(4/1/07)

 

Ending
fund
value
(9/30/07)

 

Expenses
paid*
(4/1/07–
9/30/07)








Actual return

 

 

 

 

 

 

 

 

 

Institutional Class

 

$

1,000.00

 

$

1,087.90

 

 

$ 0.78

Retirement Class

 

 

1,000.00

 

 

1,087.00

 

 

1.77

 

 

 

 

 

 

 

 

 

 

5% annual
hypothetical return

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

1,000.00

 

 

1,024.31

 

0.76

Retirement Class

 

 

1,000.00

 

 

1,023.35

 

1.72









 

 

*

“Expenses paid” is based on the fund’s actual expense ratio for the most recent fiscal half year, multiplied by the average fund value over the six-month period, multiplied by 183/365. There were 183 days in the six months ended September 30, 2007. The fund’s annualized six-month expense ratio for that period is 0.15% for the Institutional Class and 0.34% for the Retirement Class. The expense ratios of the Institutional and Retirement classes reflect a contractual agreement by the fund’s adviser to reimburse the fund for certain expenses through April 30, 2010. Without this reimbursement, the expenses of these share classes would have been higher.

 

 

“Ending fund value” for the hypothetical example would be $1,025.07 before expenses. The table shows the value after the subtraction of expenses in order to be comparable with the ending fund value shown for the fund’s actual return.

The expenses shown above do not reflect the 2% redemption fee that may apply to certain transactions. Please see the prospectus for details about this fee, which became effective on October 16, 2007.

For more information about this expense example, please see page 5.

 

 

HOLDINGS BY COMPANY SIZE

 



 

 

 

% of portfolio investments



Over $15 billion

76.17

$4 billion–$15 billion

19.14

Under $4 billion

4.69



Total

100.00


 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

43



SOCIAL CHOICE EQUITY FUND  SOCIALLY SCREENED STOCKS

INVESTMENT OBJECTIVE

The fund seeks a favorable long-term total return that reflects the investment performance of the overall U.S. stock market while giving special consideration to certain social criteria.

INVESTMENT RISKS

In addition to the risks of any equity investment—market risk and company risk—the fund is subject to special risks, including the risk of socially screened investing, index risk and foreign investment risks. For a detailed discussion of risk, please see the prospectus.

 

 

FUND PROFILE

 



Ticker symbol

 

Institutional Class

TISCX

Retirement Class

TRSCX

Retail Class

TICRX

Fund net assets

$505.92 million

Number of holdings

1,043

Portfolio turnover rate

30%

Weighted median market capitalization

$27.8 billion

P/E ratio (weighted 12-month trailing average)

17.8

Dividend yield

1.72%




 

 

PORTFOLIO COMPOSITION

 



 

 

 

% of portfolio investments



Manufacturing & materials

24.7

Consumer products & services

22.1

Financial

21.8

Technology

15.7

Energy

7.1

Utilities

5.1

Transportation

2.2

Short-term investments

1.3



Total

100.0

PERFORMANCE NOTE

The fund’s returns were affected by a misallocation of income and net capital gains among its share classes. If this misallocation had not occurred, the 1-year and 5-year returns would have been 14.48% and 15.73%, respectively, for the Institutional Class, and the 1-year return would have been 14.73% for the Retail Class. Teachers Advisors, Inc. made a cash infusion into the fund in August 2006 to remedy this misallocation. For more information, please call 800 927-3059.

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The Social Choice Equity Fund returned 14.65% for the Institutional Class, compared with the 16.52% gain of its benchmark, the Russell 3000® Index, and the 16.48% average return of the fund’s peer group, the Morningstar Large Blend category. The table below shows returns for all share classes of the fund. Neither the benchmark nor the Morningstar category screens investments according to social criteria, as the fund does.

Exclusion of major stocks lowers the fund’s return

The Social Choice Equity Fund invests in those stocks within the Russell 3000 Index that pass two kinds of social screens. First, companies are excluded that derive revenues from alcohol, tobacco, gambling, weapons production, firearms or nuclear power. The remaining companies are then evaluated using qualitative criteria, such as environmental, social and governance practices.

          Because of its social screens, the fund did not invest in several stocks that were sizable components of the benchmark in terms of market capitalization. The exclusion of these stocks produced mixed results during the period, but the net effect was to lower the fund’s return, compared with the return of its benchmark.

          The fund failed to keep pace with the Russell 3000 mainly because it avoided the stocks of three huge oil companies: ExxonMobil, Chevron and ConocoPhillips. Integrated oils was the benchmark’s top-performing sector for the twelve months. ExxonMobil, the largest component of the index on September 30, 2007, rose 39.6% for the period, while ConocoPhillips and Chevron climbed 52.4% and 49.3%, respectively. The fund also suffered from the absence of General Electric, the benchmark’s second-largest stock.

 

PERFORMANCE AS OF SEPTEMBER 30, 2007



 

 

 

 

 

 

 

 

 

 

 

 

 

Average annual compound
rates of total return

 

 

 



Social Choice Equity Fund

 

1 year

 

5 years

 

since
inception

 









Institutional Class (inception: 7/1/1999)*

 

 

14.65

%

 

15.78

%

 

3.42

%

Russell 3000 Index

 

 

16.52

 

 

16.17

 

 

3.79

 

Morningstar Large Blend

 

 

16.48

 

 

14.72

 

 

3.64

 












Retirement Class (inception: 10/1/2002)*

 

 

14.36

 

 

15.36

 

 

3.19












Retail Class (inception: 3/31/2006)

 

 

14.67

 

 

15.73

 

 

3.39













 

 

*

The performance shown is computed from the inception date of the class (the date on which the class became publicly available). Previously, performance for this class of the fund was computed from the net asset value per share on the day prior to the inception date.

 

 

For a description of the fund’s benchmark, please see page 4.

 

 

The performance shown for the Retirement and Retail classes that is prior to their inception dates is based on the performance of the fund’s Institutional Class. The performance for these periods has not been restated to reflect the higher expenses of the Retirement and Retail classes. If those higher expenses had been reflected, the performance of these two classes shown for these periods would have been lower.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect the taxes that an Institutional or Retail Class shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

44

2007 Annual Report § TIAA-CREF Institutional Mutual Funds



          Performance versus the index benefited, however, from the exclusion of other stocks, including drug company Pfizer, which fell 10%, and Wal-Mart, which declined 10.8%. Avoiding two financial stocks—Citigroup and JPMorgan Chase—also proved advantageous. Hurt by investor concerns about falling housing prices and mounting defaults within the subprime lending markets, the financial sector was the benchmark’s worst performer during the period; it returned just 2%.

Strategies help limit the fund’s risk

Because the fund’s social screens prevent it from investing in some of the stocks within the Russell 3000, the fund’s managers use quantitative techniques to ensure that the risk characteristics of the portfolio resemble those of the index. One method is to overweight or underweight certain stocks relative to each one’s percentage of capitalization within the benchmark.

          During the twelve months, the fund’s relative performance was helped by overweight positions in IBM, McDonald’s, AT&T and agricultural equipment maker Deere & Company.

          However, other overweight holdings failed to perform as anticipated and reduced the relative return slightly. These included five financial organizations: Wachovia, Merrill Lynch, National City, Washington Mutual and home mortgage provider Freddie Mac.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception July 1, 1999)

(LINE GRAPH)

An investment of $10,000 in this fund on July 1, 1999, would have grown to $13,197 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark and peer group during the same period.

EXPENSE EXAMPLE

 

Six months ended September 30, 2007



 

 

 

 

 

 

 

 

 

 

Social Choice Equity Fund

 

Starting
fund
value
(4/1/07)

 

Ending
fund
value
(9/30/07)

 

Expenses
paid*
(4/1/07–
9/30/07)








Actual return

 

 

 

 

 

 

 

 

 

Institutional Class

 

$

1,000.00

 

$

1,060.60

 

 

$ 1.03

Retirement Class

 

 

1,000.00

 

 

1,059.10

 

 

2.32

Retail Class

 

 

1,000.00

 

 

1,060.70

 

 

1.08

 

 

 

 

 

 

 

 

 

 

5% annual hypothetical return

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

1,000.00

 

 

1,024.06

 

1.01

Retirement Class

 

 

1,000.00

 

 

1,022.79

 

2.28

Retail Class

 

 

1,000.00

 

 

1,024.01

 

1.06












 

 

*

“Expenses paid” is based on the fund’s actual expense ratio for the most recent fiscal half year, multiplied by the average fund value over the six-month period, multiplied by 183/365. There were 183 days in the six months ended September 30, 2007. The fund’s annualized six-month expense ratio for that period is 0.20% for the Institutional Class, 0.45% for the Retirement Class and 0.21% for the Retail Class. The expense ratios of all three share classes reflect voluntary and contractual agreements by the fund’s adviser to reimburse the fund for certain expenses. The contractual reimbursement continues through April 30, 2008, and the voluntary reimbursement may be discontinued at any time. Without these reimbursements, the expenses of all three share classes would have been higher.

 

 

“Ending fund value” for the hypothetical example would be $1,025.07 before expenses. The table shows the value after the subtraction of expenses in order to be comparable with the ending fund value shown for the fund’s actual return.

For more information about this expense example, please see page 5.

 

 

HOLDINGS BY COMPANY SIZE

 



 

 

 

% of portfolio investments



Over $15 billion

67.24

$4 billion–$15 billion

20.83

Under $4 billion

11.93



Total

100.00


 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

45



REAL ESTATE SECURITIES FUND  REAL ESTATE SECURITIES

INVESTMENT OBJECTIVE

The fund seeks to obtain a favorable long-term total return through both capital appreciation and current income, by investing primarily in equity and fixed-income securities of companies principally engaged in or related to the real estate industry.

INVESTMENT RISKS

In addition to the risks of any equity investment—market risk and company risk—the fund is subject to special risks, including real estate investing risks, real estate securities risk, small-cap risk, foreign investment risks, interest-rate risk and income volatility risk. For a detailed discussion of risk, please see the prospectus.

 

 

FUND PROFILE

 



 

 

Ticker symbol

 

Institutional Class

TIREX

Retirement Class

TRRSX

Retail Class

TCREX

Fund net assets

$618.77 million

Number of holdings

48

Portfolio turnover rate

116%

Weighted median market capitalization

$6.9 billion

P/E ratio (weighted 12-month trailing average)

35.5

Dividend yield

3.21%




 

 

PORTFOLIO COMPOSITION

 



 

 

 

% of portfolio investments



Retail REITs

28.5

Residential REITs

16.2

Office REITs

15.5

Specialized REITs

11.5

Industrial REITs

10.8

Diversified REITs

7.3

Hotels, Restaurants and Leisure

4.8

Real Estate Management and Development

3.3

Multiline Retail

0.5

Office Electronics

0.4

Mortgage REITs

0.4

Short-term investmentsa

0.8



Total

100.0


 

 

a

Excludes $3.05 million of securities lending collateral

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The Real Estate Securities Fund returned 4.26% for the Institutional Class, compared with the 3.79% gain of its benchmark, the Dow Jones Wilshire Real Estate Securities Index, and the 6.74% average return of the fund’s peer group, the Morningstar Specialty Real Estate category. The table below shows returns for all share classes of the fund.

REITs continue to soar, then stumble

Real estate investment trusts (REITs) maintained their strength at the start of the period covered by this report; the benchmark rose 9.07% during the fourth quarter of 2006 and added another 9.12% in January 2007. However, the REIT market then posted losses for each of the next six months before rebounding with healthy gains of 5.86% and 3.96%, respectively, in August and September.

          Some market participants believed that The Blackstone Group’s acquisition of Equity Office Properties, the nation’s largest office landlord, in early February 2007 marked the top of the market. This provided a good reason for some investors to take profits after REITs’ meteoric rise: through September 2006, they had posted gains of more than 20% in each of the previous four years.

Despite recent declines, REITs post exceptional long-term gains

For the twelve-month period, REITs substantially underperformed the 16.52% return of the broad U.S. stock market, as measured by the Russell 3000® Index, and failed to keep pace with the 5.14% return of investment-grade bonds, as measured by the Lehman Brothers U.S. Aggregate Index.

 

PERFORMANCE AS OF SEPTEMBER 30, 2007



 

 

 

 

 

 

 

 

 

 

Average annual compound
rates of total return

 

 

 



Real Estate Securities Fund

 

 

1 year

 

 

since inception

 









Institutional Class (inception: 10/1/2002)*

 

 

4.26

%

 

21.25

%

Retirement Class (inception: 10/1/2002)*

 

 

4.11

 

 

21.09

 

Retail Class (inception: 10/1/2002)*

 

 

4.26

 

 

21.10

 

Dow Jones Wilshire
Real Estate Securities Index

 

 

3.79

 

 

22.52

 

Morningstar Specialty Real Estate

 

 

6.74

 

 

21.30

 










 

 

*

This class of the fund began investment operations prior to its inception date (the date on which the class became publicly available). The performance shown is computed from the inception date of the class. Previously, performance for this class of the fund was computed from the net asset value per share on the day prior to the inception date.

 

 

For a description of the fund’s benchmark, please see page 4. For periods prior to July 1, 2007, the performance shown above and in the graph reflects the full market capitalization weighted version of the index, which was terminated by Dow Jones Wilshire on June 30, 2007. As of July 1, 2007, performance reflects the float adjusted market capitalization version of the index, which is based on the shares of stock that are unrestricted and available for trading.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect the taxes that an Institutional or Retail Class shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

46

2007 Annual Report § TIAA-CREF Institutional Mutual Funds



          In the longer term, however, REITs performed well: for the five years ended September 30, 2007, they posted an average annual return of 22.48%—more than six percentage points greater than the 16.17% return of the Russell 3000 and more than five times the 4.13% return of the Lehman index.

Individual stock choices lift the fund’s return

The fund outperformed its benchmark because of numerous successful stock selections. The largest contribution to relative performance came from an overweight position, relative to the benchmark, in Hilton Hotels, which was acquired by The Blackstone Group in July 2007 at a share price 40% higher than the previous day’s closing price. The fund achieved a similar advantage with an overweight holding in Sunterra Corporation, which was also acquired during the period.

          Another sizable positive contribution came from a position in the China Properties Group, an initial public offering that began trading on the Hong Kong exchange on February 23, 2007.

          The positive effects of these holdings were partly offset by a number of positions that did not perform as anticipated. These included an underweight position, relative to the benchmark, in Equity Office Properties, and a position taken by the fund’s previous management team in Peoples Choice Financial, a subprime mortgage company that sought bankruptcy protection in March 2007; this position was eliminated during the period.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception October 1, 2002)

(LINE GRAPH)

An investment of $10,000 in this fund on October 1, 2002, would have grown to $26,207 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark and peer group during the same period.

EXPENSE EXAMPLE

 

Six months ended September 30, 2007



 

 

 

 

 

 

 

 

 

 

Real Estate Securities Fund

 

Starting
fund
value
(4/1/07)

 

Ending
fund
value
(9/30/07)

 

Expenses
paid*
(4/1/07–
9/30/07)








Actual return

 

 

 

 

 

 

 

 

 

Institutional Class

 

$

1,000.00

 

$

915.70

 

 

$ 2.63

Retirement Class

 

 

1,000.00

 

 

916.30

 

 

3.83

Retail Class

 

 

1,000.00

 

 

916.70

 

 

3.11

 

 

 

 

 

 

 

 

 

 

5% annual hypothetical return

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

1,000.00

 

 

1,022.29

 

2.78

Retirement Class

 

 

1,000.00

 

 

1,021.02

 

4.05

Retail Class

 

 

1,000.00

 

 

1,021.78

 

3.29












 

 

*

“Expenses paid” is based on the fund’s actual expense ratio for the most recent fiscal half year, multiplied by the average fund value over the six-month period, multiplied by 183/365. There were 183 days in the six months ended September 30, 2007. The fund’s annualized six-month expense ratio for that period is 0.55% for the Institutional Class, 0.80% for the Retirement Class and 0.65% for the Retail Class. The expense ratios of all three share classes reflect a contractual agreement by the fund’s adviser to reimburse the fund for certain expenses through April 30, 2008. Without this reimbursement, the expenses of all three share classes would have been higher.

 

 

“Ending fund value” for the hypothetical example would be $1,025.07 before expenses. The table shows the value after the subtraction of expenses in order to be comparable with the ending fund value shown for the fund’s actual return.

For more information about this expense example, please see page 5.

 

 

HOLDINGS BY COMPANY SIZE

 



 

 

 

% of portfolio investments



Over $15 billion

19.88

$4 billion–$15 billion

50.22

Under $4 billion

29.90



Total

100.00


 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

47



MANAGED ALLOCATION FUND II  STOCKS AND BONDS

INVESTMENT OBJECTIVE

The fund seeks favorable returns that reflect the broad investment performance of the financial markets through capital appreciation and investment income.

INVESTMENT RISKS

The fund shares the risks associated with the types of securities held by each of the underlying funds in which it invests, including market risk, company risk, foreign investment risks, interest-rate risk, credit risk, call risk, prepayment risk and extension risk. For a detailed discussion of risk, please see the prospectus.

 

 

FUND PROFILE

 


 

Ticker symbol

 

Institutional Class

TIMIX

Retirement Class

TITRX

Retail Class

TIMRX

Fund net assets

$641.90 million

Portfolio turnover rate

13%



 

 

PORTFOLIO COMPOSITION

 


 

 

Fund

% of portfolio investments



Bond Plus Fund II

35.4

Large-Cap Growth Fund

24.8

Large-Cap Value Fund

23.3

International Equity Fund

12.3

Small-Cap Equity Fund

4.2



Total

100.0

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The Managed Allocation Fund II returned 14.68% for the Institutional Class, compared with the 13.09% gain of its benchmark, the Managed Allocation Composite Index, and the 12.89% average return of the fund’s peer group, the Morningstar Moderate Allocation category. The table below shows returns for all share classes of the fund.

Markets post solid gains despite a rocky road

For the period, the U.S. stock market, as measured by the Russell 3000® Index, rose 16.52%. Much of this gain occurred in the fourth quarter of 2006, when stocks climbed 7.12%, as short-term interest rates remained steady and oil prices fell. However, oil prices began to rise in the third quarter of 2007. In addition, problems within the U.S. subprime mortgage sector increasingly troubled both the world’s stock markets and the credit markets. To help stabilize the situation, the Federal Reserve trimmed the federal funds rate one half of a percentage point in September. (The federal funds rate is the interest rate U.S. commercial banks charge one another for overnight loans.) The markets stabilized, and U.S. stocks ended the first three quarters of 2007 up 8.77%.

          Internationally, U.S. investors benefited from a dollar that continued to weaken against other major currencies. The MSCI EAFE® Index, which tracks stocks in 21 developed nations outside North America, climbed 24.86% in dollar terms but only 14.21% in terms of local currencies. Although international stocks were affected by many of the same conditions as the U.S. equity and fixed-income markets, the EAFE’s dollar-denominated return topped that of the Russell 3000 in all four quarters of the period.

 

 

 

 

 

 

 

 

PERFORMANCE AS OF SEPTEMBER 30, 2007


 

 

 

 

 

 

 

 

 

 

Average annual compound
rates of total return

 

 



Managed Allocation Fund II

 

1 year

 

since inception

 







Institutional Class (inception: 3/31/2006)

 

 

14.68

%

 

11.19

%

Retirement Class (inception: 3/31/2006)

 

 

14.27

 

 

10.87

 

Retail Class (inception: 3/31/2006)

 

 

14.47

 

 

11.14

 









Managed Allocation Composite Index*

 

 

13.09

 

 

11.00

 









 

 

 

 

 

 

 

 

Benchmark components (percentage of composite index):

 

 

 

 

 

 

 

 

Russell 3000 Index (48%)

 

 

16.52

 

 

12.61

 

Lehman Brothers

 

 

 

 

 

 

 

U.S. Aggregate Index (40%)

 

 

5.14

 

 

5.94

 

MSCI EAFE Index (12%)

 

 

24.86

 

 

19.51

 









Morningstar Moderate Allocation

 

 

12.89

 

 

10.11

 










 

 

*

For a description of the fund’s benchmark, please see page 4.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect the taxes that an Institutional or Retail Class shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

48

2007 Annual Report § TIAA-CREF Institutional Mutual Funds



          As measured by the Lehman Brothers U.S. Aggregate Index, the broad investment-grade bond market gained 5.14% for the twelve months. Bonds dropped 0.52% in the second quarter of 2007 amid rising inflation and dimming hopes of a rate cut. However, they rose 2.84% in the third quarter after the Fed acted. For the twelve-month period, lower-rated, high-yield bonds rose 7.39%, while short-term bonds returned 5.67%.

Stock components propel the fund above its benchmark

The Managed Allocation Fund II topped its composite index for the period because three of its four underlying stock components, representing 60% of the fund’s portfolio on September 30, 2007, outperformed their respective benchmark indexes. The International Equity Fund surged 30.49%, more than five percentage points higher than its benchmark. The fund’s largest equity component, the Large-Cap Growth Fund, soared 24.97%, also beating its benchmark by over five percentage points. Only the Small-Cap Equity Fund trailed its index.

          These contributions were partly offset by the relative performance of the fund’s largest component, the Bond Plus Fund II, which lagged its benchmark.

          During the period, the Managed Allocation Fund II maintained a target allocation ratio of 60% equity securities to 40% fixed-income investments. The weightings of the fund’s composite benchmark also remained fixed.

          On September 30, 2007, the fund’s portfolio composition, shown on the facing page, differed slightly from its target allocation ratio and composite benchmark weightings, as it did at other times during the period, because of fluctuations in the market values of the securities in which the component funds invested.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception March 31, 2006)

(LINE GRAPH)

An investment of $10,000 in this fund on March 31, 2006, would have grown to $11,726 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark components and peer group during the same period.

EXPENSE EXAMPLE

 

 

 

 

 

 

 

 

 

 

 

Six months ended September 30, 2007


 

 

 

 

 

 

 

 

Managed Allocation Fund II

 

Institutional
Class

 

Retirement
Class

 

Retail
Class

 









Actual return

 

 

 

 

 

 

 

 

 

 

Starting fund

 

 

 

 

 

 

 

 

 

 

value (4/1/07)

 

$

1,000.00

 

$

1,000.00

 

$

1,000.00

 

Ending fund

 

 

 

 

 

 

 

 

 

 

value (9/30/07)

 

 

1,062.00

 

 

1,060.30

 

 

1,060.40

 

Expenses paid*

 

 

 

 

 

 

 

 

 

 

(4/1/07–9/30/07)

 

 

0.00

 

 

1.29

 

 

0.00

 

Effective expenses paid

 

 

 

 

 

 

 

 

 

 

(4/1/07–9/30/07)

 

 

1.75

 

 

3.04

 

 

1.75

 

 

 

 

 

 

 

 

 

 

 

 

5% annual

 

 

 

 

 

 

 

 

 

 

hypothetical return

 

 

 

 

 

 

 

 

 

 

Starting fund

 

 

 

 

 

 

 

 

 

 

value (4/1/07)

 

$

1,000.00

 

$

1,000.00

 

$

1,000.00

 

Ending fund

 

 

 

 

 

 

 

 

 

 

value (9/30/07)

 

 

1,023.35

 

1,022.08

 

1,023.35

Expenses paid*

 

 

 

 

 

 

 

 

 

 

(4/1/07–9/30/07)

 

 

0.00

 

 

1.27

 

 

0.00

 

Effective expenses paid

 

 

 

 

 

 

 

 

 

 

(4/1/07–9/30/07)

 

 

1.72

 

 

2.99

 

 

1.72

 













 

 

*

“Expenses paid” shows the fund’s own expense ratio for the most recent fiscal half year, multiplied by the average fund value, multiplied by 183/365. There were 183 days in the six months ended September 30, 2007. The fund’s annualized six-month pro rata expense ratios for that period were 0.00% for the Institutional Class, 0.25% for the Retirement Class and 0.00% for the Retail Class. These expense ratios reflect a contractual agreement by the fund’s adviser to reimburse the fund for its direct expenses (except for the Retirement Class service fee) through April 30, 2008. Without this reimbursement, the fund’s expenses would have been higher.

 

 

“Effective expenses paid” shows the fund’s own expense ratio plus its pro rata share of its underlying funds’ expenses (which the fund bears through its investment in the underlying funds) for the most recent fiscal half year. For that period, the annualized, weighted, average expense ratio of the underlying funds for the Institutional Class was 0.34%; that of the underlying funds for the Retirement Class was 0.59%; and that of the underlying funds for the Retail Class was 0.34%.

 

 

“Ending fund value” for the hypothetical example would be $1,025.07 before expenses. The table shows the value after the subtraction of expenses in order to be comparable with the ending fund value shown for the fund’s actual return.

For more information about this expense example, please see page 5.

 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

49



BOND FUND  INTERMEDIATE-TERM BONDS

INVESTMENT OBJECTIVE

The Fund seeks as favorable a long-term total return through income as is consistent with preserving capital, primarily from investment-grade, fixed-income securities.

INVESTMENT RISKS

In addition to the risks of any fixed-income investment—income volatility risk, credit risk, call risk, interest-rate risk, prepayment risk and extension risk—the fund is subject to special risks, including index risk and foreign investment risks. For a detailed discussion of risk, please see the prospectus.

 

 

FUND PROFILE

 



 

 

Ticker symbol

 

Institutional Class

TIBDX

Retirement Class

TIDRX

Retail Class

TIORX

Fund net assets

$1.63 billion

Number of issues

610

Portfolio turnover rate

189%

Average quality

Aa1

Option-adjusted duration

4.50 years

Average coupon

5.35%

Average yield to maturity

5.41%

Average maturity

6.69 years



 

 

PORTFOLIO COMPOSITION

 



 

 

 

% of portfolio investments



Mortgage-backed securities and commercial mortgage-backed securities

34.8

U.S. Treasury securities

17.1

Corporate bonds

15.2

Asset-backed securities

13.4

U.S. agency securities

8.1

Foreign government and corporate bonds denominated in U.S. dollars

5.8

Short-term investmentsa

5.6



Total

100.0


 

 

a

Excludes $15.56 million of securities lending collateral

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The Bond Fund returned 4.74% for the Institutional Class, compared with the 5.14% gain of its benchmark, the Lehman Brothers U.S. Aggregate Index, and the 4.24% average return of the fund’s peer group, the Morningstar Intermediate-Term Bond category. The table below shows returns for all share classes of the fund.

The Fed’s rate cut calms turbulent markets and boosts bond returns

During the first half of the reporting period, the economy grew at a moderate pace. Despite volatile oil prices, year-over-year inflation remained largely in check, and gross domestic product (GDP) rose at an annual rate of 2.5% during the fourth quarter of 2006 and 0.6% during the first quarter of 2007. With investors believing that the Federal Reserve would take no imminent action on interest rates, the broad bond market posted modest returns: 2.76% for the six-month period.

          The situation reversed, however, in the second quarter of 2007, as inflation spiked and GDP jumped 3.8%. Fearing a rate hike that would depress bond returns, investors sought higher performance elsewhere. Bond prices fell, and the Lehman index dropped 0.52%.

          The Federal Reserve had kept the federal funds rate at 5.25% since June 2006. (The federal funds rate is the interest rate U.S. commercial banks charge one another for overnight loans.) However, concerns about falling housing prices and mounting defaults within the subprime lending markets came to a head in August 2007 and rocked the financial markets.

          In an effort to limit the effects of this turmoil on the broader economy, the Fed lowered the rate to 4.75% on September 18, 2007. Bonds rallied and produced a third-quarter return of 2.84%.

 

 

 

 

 

 

 

 

 

 

 

PERFORMANCE AS OF SEPTEMBER 30, 2007

 

 

 





 

 

 

 

 

 

Average annual compound
rates of total return

 

 



Bond Fund

 

1 year

 

5 years

 

since
inception

 









Institutional Class (inception: 7/1/1999)*

 

 

4.74

%

 

4.05

%

 

5.98

%

Lehman Brothers U.S. Aggregate Index

 

 

5.14

 

 

4.13

 

 

6.02

 

Morningstar Intermediate-Term Bond

 

 

4.24

 

 

4.08

 

 

5.31

 












Retirement Class (inception: 3/31/2006)

 

 

4.43

 

 

3.96

 

5.93












Retail Class (inception: 3/31/2006)

 

 

4.68

 

 

3.99

 

5.94













 

 

*

This class of the fund began investment operations prior to its inception date (the date on which the class became publicly available). The performance shown is computed from the inception date of the class. Previously, performance for this class of the fund was computed from the net asset value per share on the day prior to the inception date.

 

 

For a description of the fund’s benchmark, please see page 4.

 

 

The performance shown for the Retirement and Retail classes that is prior to their inception date is based on the performance of the fund’s Institutional Class. The performance for these periods has not been restated to reflect the higher expenses of the Retirement and Retail classes. If those higher expenses had been reflected, the performance of these two classes shown for these periods would have been lower.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect the taxes that an Institutional or Retail Class shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

50

2007 Annual Report § TIAA-CREF Institutional Mutual Funds



Treasuries outpace other fixed-income securities

As concerns about credit and liquidity rose during June, July and August, bond investors flocked to the safety of U.S. Treasury notes; as a result, they were the top performers for the twelve months. As Treasury prices climbed, their yields fell. The 10-year Treasury yield dropped from 4.63% at the beginning of the period to 4.59% on September 30, 2007. The yield of the 2-year Treasury note followed suit, declining from 4.69% to 3.99%.

Sector weightings limit the fund’s return

Although the fund’s sector weightings varied frequently during the period, relative to the Lehman index, the net result was that the fund was underweighted in U.S. Treasuries and overweighted in mortgage- and asset-backed securities and corporate bonds, returns from which lagged Treasuries. The fund maintained its strategy of investing in high-quality securities—and avoiding riskier, higher-yielding bonds—but these traditionally “safe harbor” investments did not provide the usual level of protection within the extremely tumultuous environment of the third quarter because of investors’ prevailing preference for the even greater security of Treasuries.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception July 1,1999)

(LINE GRAPH)

An investment of $10,000 in this fund on July 1, 1999, would have grown to $16,149 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark and peer group during the same period.

EXPENSE EXAMPLE

 

 

 

 

 

 

 

 

 

 

Six months ended September 30, 2007

 

 

 

 

 

 

 

 

 











 

 

 

 

 

 

 

 

 

 

Bond Fund

 

Starting
fund
value
(4/1/07)

 

Ending
fund
value
(9/30/07)

 

Expenses
paid*
(4/1/07–
9/30/07)








Actual return

 

 

 

 

 

 

 

 

 

Institutional Class

 

$

1,000.00

 

$

1,020.90

 

 

$ 1.62

Retirement Class

 

 

1,000.00

 

 

1,019.30

 

 

2.98

Retail Class

 

 

1,000.00

 

 

1,021.10

 

 

2.12

 

 

 

 

 

 

 

 

 

 

5% annual

 

 

 

 

 

 

 

 

 

hypothetical return

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

1,000.00

 

 

1,023.45

 

1.62

Retirement Class

 

 

1,000.00

 

 

1,022.08

 

2.99

Retail Class

 

 

1,000.00

 

 

1,022.94

 

2.13












 

 

*

“Expenses paid” is based on the fund’s actual expense ratio for the most recent fiscal half year, multiplied by the average fund value over the six-month period, multiplied by 183/365. There were 183 days in the six months ended September 30, 2007. The fund’s annualized six-month expense ratio for that period is 0.32% for the Institutional Class, 0.59% for the Retirement Class and 0.42% for the Retail Class. The expense ratios of all three share classes reflect a contractual agreement by the fund’s adviser to reimburse the fund for certain expenses through April 30, 2008. Without this reimbursement, the expenses of all three share classes would have been higher.

 

 

“Ending fund value” for the hypothetical example would be $1,025.07 before expenses. The table shows the value after the subtraction of expenses in order to be comparable with the ending fund value shown for the fund’s actual return.

For more information about this expense example, please see page 5.

 

 

TIAA-CREF Institutional Mutual Funds § 2007 Annual Report

51



BOND PLUS FUND II  INTERMEDIATE-TERM BONDS

INVESTMENT OBJECTIVE

The fund seeks a favorable long-term return, primarily through high current income consistent with preserving capital.

INVESTMENT RISKS

In addition to the risks of any fixed-income investment—income volatility risk, credit risk, call risk, interest-rate risk, prepayment risk and extension risk—the fund is subject to special risks, including company risk, foreign investment risks, index risk and illiquid security risk. For a detailed discussion of risk, please see the prospectus.

 

 

FUND PROFILE

 



 

 

Ticker symbol

 

Institutional Class

TIBFX

Retirement Class

TCBRX

Retail Class

TCBPX

Fund net assets

$555.89 million

Number of issues

590

Portfolio turnover rate

137%

Average quality

Aa1

Option-adjusted duration

4.49 years

Average coupon

5.58%

Average yield to maturity

5.70%

Average maturity

6.90 years



 

 

PORTFOLIO COMPOSITION

 



 

 

 

% of portfolio investments



Mortgage-backed securities and commercial mortgage-backed securities

40.0

Corporate bonds

21.7

Asset-backed securities

15.9

Foreign government and corporate bonds denominated in U.S. dollars

7.9

U.S. Treasury securities

5.6

U.S. agency securities

2.7

High-Yield Fund II

0.7

Preferred stock

0.1

Short-term investmentsa

5.4



Total

100.0


 

 

a

Excludes $5.96 million of securities lending collateral

PERFORMANCE IN THE TWELVE MONTHS ENDED SEPTEMBER 30, 2007

The Bond Plus Fund II returned 4.16% for the Institutional Class, compared with the 5.14% gain of its benchmark, the Lehman Brothers U.S. Aggregate Index, and the 4.24% average return of the fund’s peer group, the Morningstar Intermediate-Term Bond category. The table below shows returns for all share classes of the fund.

The Fed’s rate cut calms turbulent markets and boosts bond returns

During the first half of the reporting period, the economy grew at a moderate pace. Despite volatile oil prices, year-over-year inflation remained largely in check, and gross domestic product (GDP) rose at an annual rate of 2.5% during the fourth quarter of 2006 and 0.6% during the first quarter of 2007. With investors believing that the Federal Reserve would take no imminent action on interest rates, the broad bond market posted modest returns: 2.76% for the six-month period.

          The situation reversed, however, in the second quarter of 2007, as inflation spiked and GDP jumped 3.8%. Fearing a rate hike that would depress bond returns, investors sought higher performance elsewhere. Bond prices fell, and the Lehman index dropped 0.52%.

          The Federal Reserve had kept the federal funds rate at 5.25% since June 2006. (The federal funds rate is the interest rate U.S. commercial banks charge one another for overnight loans.) However, concerns about falling housing prices and mounting defaults within the subprime lending markets came to a head in August 2007 and rocked the financial markets.

          In an effort to limit the effects of this turmoil on the broader economy, the Fed lowered the rate to 4.75% on September 18, 2007. Bonds rallied and produced a third-quarter return of 2.84%.

 

 

 

 

 

 

 

 

PERFORMANCE AS OF SEPTEMBER 30, 2007

 

 

 





 

 

 

 

 

 

Average annual compound
rates of total return

 

 



Bond Plus Fund II

 

1 year

 

since inception

 







Institutional Class (inception: 3/31/2006)

 

 

4.16

%

 

5.21

%

Retirement Class (inception: 3/31/2006)

 

 

4.01

 

 

5.06

 

Retail Class (inception: 3/31/2006)

 

 

4.09

 

 

5.12

 

Lehman Brothers U.S. Aggregate Index*

 

 

5.14

 

 

5.94

 

Morningstar Intermediate-Term Bond

 

 

4.24

 

 

5.09

 










 

 

*

For a description of the fund’s benchmark, please see page 4.

The returns above and in the graph show past performance, which is no guarantee of future results, and do not reflect the taxes that an Institutional or Retail Class shareholder would pay on fund distributions or the sale of fund shares. Returns and the principal value of your investment will fluctuate. Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your shares. For current performance information, including performance to the most recent month-end, please visit www.tiaa-cref.org.

 

 

52

2007 Annual Report § TIAA-CREF Institutional Mutual Funds



Treasuries outpace other fixed-income securities

As concerns about credit and liquidity rose during June, July and August, bond investors flocked to the safety of U.S. Treasury notes; as a result, they were the top performers for the twelve months. As Treasury prices climbed, their yields fell. The 10-year Treasury yield dropped from 4.63% at the beginning of the period to 4.59% on September 30, 2007. The yield of the 2-year Treasury note followed suit, declining from 4.69% to 3.99%.

Sector weightings limit the fund’s return

Although the fund’s sector weightings varied frequently during the period, relative to the Lehman index, the net result was that the fund was underweighted in U.S. Treasuries and overweighted in mortgage- and asset-backed securities and corporate bonds, returns from which lagged Treasuries. The fund maintained its strategy of investing primarily in high-quality securities, but these traditionally “safe harbor” investments did not provide the usual level of protection within the extremely tumultuous environment of the third quarter because of investors’ prevailing preference for the even greater security of Treasuries.

          The fund was also hurt by a small position in riskier, higher-yielding securities and by an investment in two issues of Washington Mutual, which did not perform as anticipated. The fund sold these two holdings in July.

$10,000 INVESTED AT FUND’S INCEPTION

Institutional Class (inception March 31, 2006)

(LINE GRAPH)

An investment of $10,000 in this fund on March 31, 2006, would have grown to $10,793 as of September 30, 2007, including reinvestment of dividends and distributions. For the purpose of comparison, the graph also shows the change in the values of the fund’s benchmark and peer group during the same period.

EXPENSE EXAMPLE

 

 

 

 

 

 

 

 

 

 

Six months ended September 30, 2007

 

 

 

 

 

 








 

 

 

 

 

 

 

Bond Plus Fund II

 

Starting
fund
value
(4/1/07)

 

Ending
fund
value
(9/30/07)

 

Expenses
paid*
(4/1/07–
9/30/07)








Actual return

 

 

 

 

 

 

 

 

 

Institutional Class

 

$

1,000.00

 

$

1,014.90

 

 

$ 1.76

Retirement Class

 

 

1,000.00

 

 

1,015.00

 

 

2.77

Retail Class

 

 

1,000.00

 

 

1,014.70

 

 

2.07

 

 

 

 

 

 

 

 

 

 

5% annual

 

 

 

 

 

 

 

 

 

hypothetical return

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

1,000.00

 

 

1,023.30

 

1.77

Retirement Class

 

 

1,000.00

 

 

1,022.29

 

2.78

Retail Class

 

 

1,000.00

 

 

1,022.99

 

2.08












 

 

*

“Expense