Balanced Social Values Plus Fund Improvements

Manager Change

The General Board staff has conducted a review of the investment management of the Balanced Social Values Plus Fund (BSVPF) and has decided to make a change that is intended to improve the consistency of the fund’s performance compared to its benchmark and reduce the fund’s expenses. Beginning October 1, 2007, Northern Trust Global Investments (NTGI) will replace Brown Capital Management as the equity manager of the fund.

Brown’s growth style of investing has produced performance that has varied noticeably from the broader stock market. Additionally, the fund has a higher-than-average expense ratio compared with other funds offered by the General Board, and the current manager’s active management fee is the largest component. General Board staff evaluated several options before deciding to engage the services of NTGI as the equity manager. The equity component will be invested by NTGI in an index fund based on the widely recognized Domini 400 Social Index^SM. By switching from active management to investing in an index fund, the fund’s expense ratio will fall from 0.73% to 0.35%. In addition, the structure of the Domini 400 index aligns with the enhanced socially responsible investing element of BSVPF.

Information about the Domini 400 index

The index was created by KLD Research &Analytics, a leading provider of corporate social research products and services. KLD began tracking the index in May 1990 and has since continuously monitored the index’s performance. NTGI will seek to approximate the risk and the return of the Domini 400.

The Domini 400 is composed of 400 U.S. corporations that pass multiple, broad-based social screens. In creating the index, KLD applies exclusionary screens and positive screens. The exclusionary screens align with social screens of The United Methodist Church—restricting investments in alcohol, tobacco, gambling, pornography or weapons. KLD also evaluates companies’ records in areas such as the environment, diversity, employee relations, human rights and product quality and safety. KLD attempts to exclude companies with negative records in these areas and include companies with positive social records.

Additional changes to the Balanced Social Values Plus Fund The benchmark for the fund will be composed as follows:

• 60% Domini 400 Social Index^SM,
• 30% Lehman Mortgaged Backed Securities Index, and
• 10% Merrill Lynch Treasury 90-day Treasury Index.

The fixed-income component will continue to be invested in bonds backed by affordable-housing developments that help to provide shelter to low- and moderate-income individuals and families.