The Teacher Incentive Fund (TIF) supports projects that are designed to reform teacher and principal compensation. Initially, the Department of Education (the Department) made two rounds of awards, in 2006 and 2007, to a total of 34 grantees. The specific goals of TIF were to reward teachers and principals for improving student achievement, increase the number of effective teachers and principals in hard-to-staff schools, increase the number of effective teachers in hard-to-staff subjects, and sustain the project beyond the life of the grants. The specific requirements of the program have been refined in the third round of awards in 2010, although the goals of the program remain similar. This interim report describes the first two cohorts of TIF projects, examines their implementation experiences, and reports educators' perceptions of the projects and what they accomplished. The experience of the first two cohorts of TIF grantees underscored the technical, cultural, and contextual complexity of compensation reform. Projects were implemented by these grantees in varying local contexts with shifting leadership, policy, and reform agendas. Many grantees reported having to rebuild their data systems, build understanding and support from educators for the new system, and add new evaluation responsibilities to administrators or accomplished teachers. In addition, many grantees had to develop support systems that would allow educators to make the changes necessary to succeed under a new compensation system. Moreover, grantees had to confront traditional attitudes and beliefs about how educators should be judged and differentiated. This interim report is part of a five-year national implementation evaluation (running from 2008 to 2013) focused on the first two cohorts of TIF grantees. It is guided by a document review of proposals and reports, telephone interviews of key project staff, teachers, and principals from grantees, and site visits to 12 grantees. The final implementation report (expected October 2012) will include data from all previous data collection efforts, as well as surveys of teachers and principals from the 33 remaining TIF grantees, a second round of site visits to 12 grantees, an examination of payout data, and an analysis of the distribution of effective teachers in two states with multiple TIF grants and third-party evaluations. Appendices include: (1) Interview protocols; (2) Profile of TIF grantees; (3) Components of performance pay projects; (4) Payout awards; (5) Comparison of Project Requirements Across TIF Cohorts; and (6) Glossary of terms. (Contains 17 exhibits and 48 footnotes.)