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TIAA-CREF Trust Company, FSB Buddy Bearman Senior Portfolio Manager Institutional Investment Services For Period Ending 12/31/11

TIAA-CREF Trust Company, FSB...TIAA-CREF Trust Company, FSB Buddy Bearman Senior Portfolio Manager Institutional Investment Services For Period Ending 12/31/11 2 Economic Review: Recession

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Page 1: TIAA-CREF Trust Company, FSB...TIAA-CREF Trust Company, FSB Buddy Bearman Senior Portfolio Manager Institutional Investment Services For Period Ending 12/31/11 2 Economic Review: Recession

TIAA-CREF Trust Company, FSB

Buddy BearmanSenior Portfolio ManagerInstitutional Investment Services

For Period Ending 12/31/11

Page 2: TIAA-CREF Trust Company, FSB...TIAA-CREF Trust Company, FSB Buddy Bearman Senior Portfolio Manager Institutional Investment Services For Period Ending 12/31/11 2 Economic Review: Recession

2

Economic Review: Recession Fears Receding• Real GDP grew at a 1.8% annual rate in 3Q11,

compared to 1.3% in the 2Q11. Personal consumption, capital investment, and exports were the primary contributors to growth in the third quarter, partly offset by lower inventory accumulation and weaker government spending.

• Labor markets slowly improving. Private non-farm payrolls increased in the third quarter, while the number of government jobs continued to contract. In November, the unemployment rate ticked down to 8.6%, and consumer confidence rebounded sharply. Retail sales improved in the final three months of 2011 and set records for the Thanksgiving weekend.

• US housing recovery remains uneven. Boosted by record low mortgage rates, existing home sales in November were up 12% year over year. Inventories continued to trend lower. Median home prices remain weak, falling 4% compared to a year ago, weighed down by tight credit standards and distressed property sales.

• Manufacturing activity expanded further in recent months, led by durable goods, including autos, aircraft and business equipment. In November, industrial production rose 4% compared to a year ago.

• Core inflation, excluding food and fuel costs, increased at a 2.2% annual rate in November. Headline inflation has eased in recent months due to falling energy prices. Wage pressures remain contained with average hourly earnings rising at a 1.6% rate in November.

Change in Payroll Employment (000s)

-1000

-800

-600

-400

-200

0

200

400

600

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Percent Change in Real GDP

-10-8-6-4-202468

10

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: Bureau of Labor Statistics

Page 3: TIAA-CREF Trust Company, FSB...TIAA-CREF Trust Company, FSB Buddy Bearman Senior Portfolio Manager Institutional Investment Services For Period Ending 12/31/11 2 Economic Review: Recession

3

Economic Outlook: Continued Sluggish Growth

• Real GDP is expected grow at a modest pace in the 1H12, supported by positive consumer spending, inventory rebuilding, and a gradual strengthening in capital investment. The key unknown for 2012 remains the status of the 2011 payroll tax cuts and extended unemployment benefits.

• Corporate profits rebounded strongly in 2010 and have been generally favorable through the 3Q11. Rising earnings and cash flows bode well for improved business spending and job growth.

• Consumer expenditures should be supported by easing gasoline prices, employment gains and tax cut extensions. Volatile energy costs, the expiration of Federal stimulus programs, and reductions in state and local budgets are potential constraints.

• Core inflation is expected to be relatively tame. The Federal Reserve and investors remain focused on the trend in inflation expectations.

• Key risks include flaring of the European sovereign debt crisis and possible Euro-zone recession, slowing growth in China, and fiscal restraint in the US.

Source: Bureau of Labor Statistics

(E981A)

Current BusinessCycle ( )

Average ofPostwar BusinessCycles(bars)

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

7

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

7

-4Q -3Q -2Q -1Q Quarter ContainingRecession End

+1Q +2Q +3Q +4Q +5Q +6Q +7Q +8Q +9Q +10Q

Real GDP (Annualized Quarterly Change) around Business Cycle Troughs

Copyright 2011 Ned Davis Research, Inc. Further distribution prohibited without prio. www.ndr.com/vend. For data vendor disclaimers refer to www.ndr.com/copyright.htmlSee NDR Disclaimer at

Line: Current Business Cycle

Bars: Average of Post War Business Cycles

Page 4: TIAA-CREF Trust Company, FSB...TIAA-CREF Trust Company, FSB Buddy Bearman Senior Portfolio Manager Institutional Investment Services For Period Ending 12/31/11 2 Economic Review: Recession

4

Equity MarketsReview and Outlook

Review of the Fourth Quarter and 2011• Following sharp declines in the third quarter, the US

equity market, as measured by the S&P 500 Index, rebounded 12% in the fourth quarter and finished up 2% for the year. Investors were encouraged by better US economic news, further progress by European leaders in resolving the sovereign debt crisis, and a coordinated effort by the ECB and Federal Reserve to boost liquidity for European banks.

• International equities, as measured by the MSCI EAFE Index, advanced 4% in the past quarter, held back by a falling Euro. For the year, international developed and emerging markets significantly underperformed US equities, dropping 12% and 18% respectively.

• For most of 2011, US large cap stocks were the leaders, with small and mid caps declining more than the broad averages. Investors generally favored non-cyclical sectors, including consumer staples, health care, and utilities at the expense of financials, energy, industrials, and technology.

Outlook• Barring risk factors outlined previously, corporate

profits should continue rise in the year ahead, but at a slower pace than in 2011.

• Based on year end 2011 prices, the median price/earnings ratio for the S&P 500 was 15.8x trailing 12 month earnings, below the long term median P/E of approximately 16.5x.

(DAVIS100)

Monthly Data 3/31/1964 - 12/31/2011 (Log Scale)

Price Moveof:

37.2% to Overvalued (+1SD) = S&P 500 Level of 1725.57

4.0% to Median Fair Value = S&P 500 Level of 1308.03

-29.2% to Undervalued (-1SD) = S&P 500 Level of 890.50

12/31/2011 = 1257.60708398

116 137 162 192 226 268 316 374 442 523 618 730 863

102012061426

708398

116 137 162 192 226 268 316 374 442 523 618 730 863

102012061426

12/31/2011 = 15.8

Very Overvalued

Overvalued

Bargains

47.8-Year Median = 16.4

Med

ian

+1 S

D

+2 S

D

+3 S

D

-1 S

D

-2 S

D

6 8

101214161820222426283032

6 8

101214161820222426283032

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Standard & Poor's 500 Stock Index

S&P 500 Median Price/Earnings Ratio (NDR Calculation) with Historical MedianCopyright 2012 Ned Davis Research, Inc. Further distribution prohibited without prior pe

. www.ndr.com/vendo. For data vendor disclaimers refer to www.ndr.com/copyright.htmlSee NDR Disclaimer at

Page 5: TIAA-CREF Trust Company, FSB...TIAA-CREF Trust Company, FSB Buddy Bearman Senior Portfolio Manager Institutional Investment Services For Period Ending 12/31/11 2 Economic Review: Recession

5

Fixed Income MarketsReview and OutlookReview of the Fourth Quarter and 2011• Ten year US Treasury yields were flat in the fourth

quarter, ending the year at 1.89% compared to 3.36% at the start of 2011. Despite a ratings downgrade, Treasuries were favored by bond investors for most of the past year in part due to their safe haven status as the debt crisis in Europe intensified and global economic activity moderated.

• Returns for high grade and high yield corporate bonds lagged those for comparable maturity Treasuries in the past year as spreads widened meaningfully. In the fourth quarter, improved investor confidence resulted in outperformance of corporate bonds relative to Treasuries.

Outlook• We expect the low yield environment for US

Treasuries to persist given expectations for modest economic growth, contained inflation, and the Federal Reserve’s commitment to maintain an accommodative policy through 2013. In this environment, we believe corporate bonds offer attractive risk/reward characteristics relative to Treasuries, supported by solid company fundamentals, cash rich balance sheets, and investor preference for yield.

• Risks to the outlook include accelerating economic activity, a sharp increase in energy prices, and uncertain developments in Europe.

Daily Data 1/04/2007 - 1/03/2012

(B165C)

BarclaysHighYield ( ) BarclaysInv.Grade ( ) 10-Year Treasury ( )

3 6 9

12151821

3 6 9

12151821

Barclays Capital High Yield Corporate Credit / 10-Year Treasury 1/03/2012 = 413.4%

200 300 400 500 600 700 800 900

10001100

200 300 400 500 600 700 800 900

10001100

Barclays Capital Investment Grade U.S Corporate Credit / 10-Year Treasury 1/03/2012 = 193.0%

150 180 210 240 270 300 330 360

150 180 210 240 270 300 330 360

Barclays Capital High Yield / Barclays Capital Investment Grade 1/03/2012 = 214.2%

140 160 180 200 220 240 260 280 300

140 160 180 200 220 240 260 280 300

M M J S N J 2008

M M J S N J 2009

M M J S N J 2010

M M J S N J 2011

M M J S N J 2012

Corporate Yield Ratios

Copyright 2012 Ned Davis Research, Inc. Further distribution prohibited without prior per. www.ndr.com/vendo. For data vendor disclaimers refer to www.ndr.com/copyright.htmlSee NDR Disclaimer at

Page 6: TIAA-CREF Trust Company, FSB...TIAA-CREF Trust Company, FSB Buddy Bearman Senior Portfolio Manager Institutional Investment Services For Period Ending 12/31/11 2 Economic Review: Recession

6

Capital Markets ReviewPeriod Ending December 30, 2011

Equity Markets One Month Three Months One Year S&P 500 Index 1.02% 11.82% 2.11% Dow Jones Industrial Average 1.58% 12.75% 8.36% NASDAQ Composite Index -0.58% 7.86% -1.80% Russell Midcap -0.12% 12.31% -1.56% Russell 2000 (Small Cap) 0.66% 15.48% -4.17% MSCI EAFE - Net -0.95% 3.33% -12.14% MSCI Emerging Markets - Net -1.21% 4.42% -18.42%

Fixed Income Markets One Month Three Months One Year Barclays Aggregate Index 1.10% 1.12% 7.86% Barclays Treasury Index 0.95% 0.91% 9.79% Barclays Corporate Index 1.93% 1.78% 7.51% Aaa Rated Securities 0.81% 0.85% 7.66% Aa Rated Securities 1.38% 1.05% 7.55% A Rated Securities 2.08% 1.73% 8.16% Baa Rated Securities 2.23% 2.76% 9.36% BofAML MBS (Fixed Rate) Index 0.70% 0.85% 6.14% BofAML High Yield Index 2.49% 6.17% 4.50%

Page 7: TIAA-CREF Trust Company, FSB...TIAA-CREF Trust Company, FSB Buddy Bearman Senior Portfolio Manager Institutional Investment Services For Period Ending 12/31/11 2 Economic Review: Recession

7

ASSET ALLOCATION REVIEWComposite Total Fund Summary – Values as of December 31, 2011

Totals by Asset Class

1%

34%

65%

Cash

Bonds

Stocks

Total by Account

20%

23%55%

1%1%

Fixed Fund

Equity Fund

Growth Fund

Income & Growth

Balanced Fund

Asset Class Fixed Fund Equity Fund Growth Fund Income & Growth Balanced Fund TOTALS % of TotalCash 269,539 2,710 4,428 29,776 14,073 320,526 0.79%Bonds 7,709,676 - 5,697,422 289,720 133,688 13,830,506 34.25%Stocks - 9,373,944 16,481,971 241,655 135,564 26,233,135 64.96%TOTAL 7,979,215 9,376,654 22,183,821 561,151 283,325 40,384,167 100.00%% of Total 19.76% 23.22% 54.93% 1.39% 0.70% 100.00%

Page 8: TIAA-CREF Trust Company, FSB...TIAA-CREF Trust Company, FSB Buddy Bearman Senior Portfolio Manager Institutional Investment Services For Period Ending 12/31/11 2 Economic Review: Recession

8

PERFORMANCE REVIEWComposite - Data as of December 31, 2011

Page 9: TIAA-CREF Trust Company, FSB...TIAA-CREF Trust Company, FSB Buddy Bearman Senior Portfolio Manager Institutional Investment Services For Period Ending 12/31/11 2 Economic Review: Recession

9

ACCOUNT REVIEWFixed Income Fund - Data as of December 31, 2011

DIT of Newark - Fixed Income as of December 31, 2011 Market Value

Percent of Portfolio

Cash Equivalents $ 269,539 3.4%TIAA-CREF Bond Fund $ 4,490,429 56.3%Pimco High Yield Fund $ 772,677 9.7%Vanguard S/T Govt Fixed Inc $ 2,446,570 30.7%Total Market Value Per Account $ 7,979,215 100.0%

DIT of Newark - Fixed Income

3%

56%

10%

31%

Cash Equivalents

TIAA-CREF Bond Fund

Pimco High Yield Fund

Vanguard S/T Govt Fixed Inc

Page 10: TIAA-CREF Trust Company, FSB...TIAA-CREF Trust Company, FSB Buddy Bearman Senior Portfolio Manager Institutional Investment Services For Period Ending 12/31/11 2 Economic Review: Recession

10

PERFORMANCE REVIEWFixed Fund - Data as of December 31, 2011

Page 11: TIAA-CREF Trust Company, FSB...TIAA-CREF Trust Company, FSB Buddy Bearman Senior Portfolio Manager Institutional Investment Services For Period Ending 12/31/11 2 Economic Review: Recession

11

ACCOUNT REVIEWEquity Fund - Data as of December 31, 2011

DIT of Newark - Equity Fund as of December 31, 2011 Market Value

Percent of Portfolio

Cash Equivalents $ 2,710 0.0%DFA US MicroCap Portfolio $ 947,191 10.1%DFA US S/C Value Portfolio $ 654,317 7.0%DFA Emerging Markets Portfolio $ 340,057 3.6%DFA International Smal Co $ 429,460 4.6%T. Rowe Price Real Estate Fund $ 582,849 6.2%TIAA-CREF Inst. S&P 500 Index $ 4,207,414 44.9%TIAA-CREF Small-Cap Equity Fund $ 662,054 7.1%ING Global Real Estate $ 562,540 6.0%Harbor International Fund $ 509,863 5.4%Vanguard International Value Fund $ 478,199 5.1%Total Market Value Per Account $ 9,376,654 100.0%

DIT of Newark - Equity Fund

0% 10%

7%

4%

5%

6%

45%

7%

6%

5%5% Cash Equivalents

DFA US MicroCap Portfolio

DFA US S/C Value Portfolio

DFA Emerging Markets Portfolio

DFA International Smal Co

T. Rowe Price Real Estate Fund

TIAA-CREF Inst. S&P 500 Index

TIAA-CREF Small-Cap Equity Fund

ING Global Real Estate

Harbor International Fund

Vanguard International Value Fund

Page 12: TIAA-CREF Trust Company, FSB...TIAA-CREF Trust Company, FSB Buddy Bearman Senior Portfolio Manager Institutional Investment Services For Period Ending 12/31/11 2 Economic Review: Recession

12

PERFORMANCE REVIEWEquity Fund - Data as of December 31, 2011

Page 13: TIAA-CREF Trust Company, FSB...TIAA-CREF Trust Company, FSB Buddy Bearman Senior Portfolio Manager Institutional Investment Services For Period Ending 12/31/11 2 Economic Review: Recession

13

ACCOUNT REVIEWGrowth Fund - Data as of December 31, 2011

DIT of Newark - Growth Fund as of December 31, 2011 Market Value

Percent of Portfolio

Cash Equivalents $ 4,428 0.0%DFA US MicroCap Portfolio $ 1,790,354 8.1%DFA US S/C Value Portfolio $ 1,136,647 5.1%DFA Emerging Markets Portfolio $ 399,923 1.8%DFA International Smal Co $ 800,118 3.6%T. Rowe Price Real Estate Fund $ 965,352 4.4%TIAA-CREF Inst. S&P 500 Index $ 7,799,489 35.2%TIAA-CREF Small-Cap Equity Fund $ 1,116,021 5.0%ING Global Real Estate $ 893,365 4.0%Harbor International Fund $ 852,823 3.8%Vanguard International Value Fund $ 727,880 3.3%TIAA-CREF Bond Fund $ 2,791,734 12.6%Pimco High Yield Fund $ 1,607,841 7.2%Vanguard S/T Govt Fixed Inc $ 1,297,847 5.9%Total Market Value Per Account $ 22,183,821 100.0%

DIT of Newark - Growth Fund

0% 8%

5%2%

4%

4%

35%5%

4%

4%

3%

13%

7%6%

Cash Equivalents

DFA US MicroCap Portfolio

DFA US S/C Value Portfolio

DFA Emerging Markets Portfolio

DFA International Smal Co

T. Rowe Price Real Estate Fund

TIAA-CREF Inst. S&P 500 Index

TIAA-CREF Small-Cap Equity Fund

ING Global Real Estate

Harbor International Fund

Vanguard International Value Fund

TIAA-CREF Bond Fund

Pimco High Yield Fund

Vanguard S/T Govt Fixed Inc

Page 14: TIAA-CREF Trust Company, FSB...TIAA-CREF Trust Company, FSB Buddy Bearman Senior Portfolio Manager Institutional Investment Services For Period Ending 12/31/11 2 Economic Review: Recession

14

PERFORMANCE REVIEWGrowth Fund - Data as of December 31, 2011

Page 15: TIAA-CREF Trust Company, FSB...TIAA-CREF Trust Company, FSB Buddy Bearman Senior Portfolio Manager Institutional Investment Services For Period Ending 12/31/11 2 Economic Review: Recession

15

ACCOUNT REVIEWIncome & Growth Fund - Data as of December 31, 2011

DIT of Newark - Income & Growth Fund as of December 31, 2011 Market Value

Percent of Portfolio

Cash Equivalents $ 29,776 5.3%DFA US MicroCap Portfolio $ 20,322 3.6%DFA US S/C Value Portfolio $ 14,878 2.7%DFA Emerging Markets Portfolio $ 10,285 1.8%DFA International Smal Co $ 8,714 1.6%T. Rowe Price Real Estate Fund $ 15,088 2.7%TIAA-CREF Inst. S&P 500 Index $ 119,281 21.3%TIAA-CREF Small-Cap Equity Fund $ 12,915 2.3%ING Global Real Estate $ 12,872 2.3%Harbor International Fund $ 14,006 2.5%Vanguard International Value Fund $ 13,293 2.4%TIAA-CREF Bond Fund $ 160,392 28.6%Pimco High Yield Fund $ 53,525 9.5%Vanguard S/T Govt Fixed Inc $ 75,803 13.5%Total Market Value Per Account $ 561,151 100.0%

DIT of Newark - Income & Growth Fund

5%4%

21%

28%

10%

14%

2%3%

2%3%

2%2%

2%2%

Cash Equivalents

DFA US MicroCap PortfolioDFA US S/C Value Portfolio

DFA Emerging Markets PortfolioDFA International Smal Co

T. Rowe Price Real Estate FundTIAA-CREF Inst. S&P 500 Index

TIAA-CREF Small-Cap Equity FundING Global Real Estate

Harbor International FundVanguard International Value Fund

TIAA-CREF Bond FundPimco High Yield Fund

Vanguard S/T Govt Fixed Inc

Page 16: TIAA-CREF Trust Company, FSB...TIAA-CREF Trust Company, FSB Buddy Bearman Senior Portfolio Manager Institutional Investment Services For Period Ending 12/31/11 2 Economic Review: Recession

16

PERFORMANCE REVIEWIncome & Growth Fund - Data as of December 31, 2011

Page 17: TIAA-CREF Trust Company, FSB...TIAA-CREF Trust Company, FSB Buddy Bearman Senior Portfolio Manager Institutional Investment Services For Period Ending 12/31/11 2 Economic Review: Recession

17

ACCOUNT REVIEWBalanced Fund - Data as of December 31, 2011

DIT of Newark - Balanced Fund as of December 31, 2011

DIT of Newark - Balanced Fund

Percent of Portfolio

Cash Equivalents $ 14,073 5.0%DFA US MicroCap Portfolio $ 12,169 4.3%DFA US S/C Value Portfolio $ 9,365 3.3%DFA Emerging Markets Portfolio $ 4,354 1.5%DFA International Smal Co $ 5,364 1.9%T. Rowe Price Real Estate Fund $ 7,904 2.8%TIAA-CREF Inst. S&P 500 Index $ 66,764 23.6%TIAA-CREF Small-Cap Equity Fund $ 8,939 3.2%ING Global Real Estate $ 7,239 2.6%Harbor International Fund $ 7,143 2.5%Vanguard International Value Fund $ 6,323 2.2%TIAA-CREF Bond Fund $ 71,181 25.1%Pimco High Yield Fund $ 29,504 10.4%Vanguard S/T Govt Fixed Inc $ 33,003 11.6%Total Market Value Per Account $ 283,325 100.0%

DIT of Newark - Balanced Fund

5%4% 3%

2%

2%

3%

24%

3%3%3%2%

24%

10%

12%

Cash Equivalents

DFA US MicroCap Portfolio

DFA US S/C Value Portfolio

DFA Emerging Markets Portfolio

DFA International Smal Co

T. Rowe Price Real Estate Fund

TIAA-CREF Inst. S&P 500 Index

TIAA-CREF Small-Cap Equity Fund

ING Global Real Estate

Harbor International Fund

Vanguard International Value Fund

TIAA-CREF Bond Fund

Pimco High Yield Fund

Vanguard S/T Govt Fixed Inc

Page 18: TIAA-CREF Trust Company, FSB...TIAA-CREF Trust Company, FSB Buddy Bearman Senior Portfolio Manager Institutional Investment Services For Period Ending 12/31/11 2 Economic Review: Recession

18

PERFORMANCE REVIEWBalanced Fund - Data as of December 31, 2011

Page 19: TIAA-CREF Trust Company, FSB...TIAA-CREF Trust Company, FSB Buddy Bearman Senior Portfolio Manager Institutional Investment Services For Period Ending 12/31/11 2 Economic Review: Recession

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