The MMBB Balanced Fund seeks to provide "one-stop shopping" for members who seek long-term growth of capital that keeps pace with or exceeds the rate of inflation over time without risking the entire value of their account in the equity markets. There is no guarantee that these objectives will be met.

The Balanced Fund blends U.S. and international stocks with some bond market exposure. A portion is also invested using a tactical asset allocation strategy.

• Click here for more on our equity (stock) investments
• Click here for more on our bond investments
• Click here for more on our tactical investments

Usually, these various investments do not always rise and fall at the same time and to the same degree. Combining them in a single portfolio over extended periods of time raises the probability that the investor can experience medium-range volatility with corresponding returns. The net return of an investment in The Balanced Fund will be the result of these markets' performance plus the extent to which the fund's managers outperform the broader market minus investment and administration expenses.

Opportunities

The Balanced Fund combines a passive investment strategy (similar to the U.S. Equity Index Fund) with an active investment strategy (similar to the U.S. Blended Equity and International Blended Equity Funds). This gives investors as broad an exposure as possible to the styles that exist in MMBB's other equity options. As one style outperforms the others, the Balanced Fund investor will receive at least part of that benefit. The majority of the fund is allocated to equities, both U.S. and international.

Because bonds (fixed income) usually have return patterns that are different to stocks, and very often opposite to stocks, the bond component of the Balanced Fund tends to have a stabilizing affect on the entire portfolio. This can be particularly valuable when equities are in decline.

The Balanced Fund also invests in hedge funds. Hedge funds, over time, tend to produce returns that are higher than bonds and less volatile than stocks. Because hedge funds do not tend to move in lock-step with either stocks or bonds they act to further diversify the portfolio as a whole.

Risks

All securities investments risk the loss of capital. Although the combination of stocks, bonds and hedge funds in the Balanced Fund creates a very well diversified fund that should cushion shocks in any one of those areas, the return of this fund could still be negative.

Like MMBB's equity-only investment options, the portion of the Balanced Fund that is allocated to stocks (equities) can decline in value. Among the reasons stocks can lose value include declines in the overall stock markets and reasons related to the profitability, or perceived profitability, of the companies that issue stocks.

That portion of the Balanced Fund that is allocated to bonds (fixed income) will be subject to risks of the bond market. Most commonly these include losses from rising interest rates and the risk that issuers of bonds may not be able to meet their interest and principal payments.

This fund allocates a portion of its assets to a tactical asset allocation strategy. This strategy is designated to have the flexibility to shift among equities, bonds or other asset classes. In the aggregate, then, this portion of the overall portfolio can increase the fund's exposure to equities and bonds beyond that indicated above.

Part of the way that this fund invests in equities is via hedge funds. Hedge funds are generally less regulated than other types of investment vehicles. They may leverage investment positions to magnify investment returns, both positive and negative. Although MMBB engages managers believed capable and responsible, it is still possible for hedge funds to lose value and harm that portion of the portfolio.

Values for certain investments are not available on a daily basis and/or available only on a lagged basis. This has two implications for a person who is buying or selling units of the Balanced Fund units on any given day. If the non-daily valued investments have declined in value since they were last valued, a person purchasing units of the Balanced Fund could be purchasing them at a slightly higher price than if the actual value were known at the end of each business day. Conversely, if the non-daily valued investments have increased, a seller may redeem units of the Balanced Fund at a lower price--and thus realize less profit--than if the actual value were known at the end of each business day.

If you are uncomfortable with the risks associated with the Balanced Fund, you may want to consider another MMBB investment option.

Fund Performance

To offer historical perspective on the long-term risk and return of this investment option in comparison to MMBB's other investment options, see the diagram below. It summarizes risk and return for more than ten years, and encompasses both rising and falling stock market periods as well as both economic expansions and recessions.

• The horizontal placement of the fund indicates the volatilityof the investment option, one measure of risk. Volatility of returns can be mathematically measured and attracts a lot of attention among investors because the higher the volatility the more the value of your investment tends to rise and fall. If you decide to exit the investment when it is declining, the value of your investment may be less than you expected. The further to the right, the more the value of the fund is likely to fluctuate; the further to the left, the more stable, or reliable, the return of the option, historically.
• The vertical placement of the fund indicates the average return the investment option generated over the last 10+ years. The higher up on the diagram, the greater the return, the lower down, the more modest the return, on average, per year.

In reading this graph, please note the following:

• The data in the chart is periodically updated. As a result, the plot points may change.
• Past experience is no guarantee of future returns. This chart is just one tool to assist you in comparing one option to another.
• Returns can be negative as well as positive, especially in the short term.

			TOTAL RETURN AS OF SEPTEMBER 9, 2010
FUND	Price		1 Day	Year to Date	1 Year	3 Years	5 Years	Since Inception*
Balanced Fund	$36.48		0.08%	2.02%	8.77%	-1.65%	3.02%	3.25%
			*The inception date is February 1, 2000.

While it is valuable to view investment performance over long-term time horizons, looking at shorter time periods can give one insight as to how returns may fluctuate from over shorter time periods. The table below displays calendar year returns.

From time to time MMBB contracts with one or more external managers to execute the investment strategy for The Balanced Fund. Recently the roster for this investment option included:

ABS
American Century Investment Management
Artisan
Capital International
Clifton Group
Dodge & Cox
Dreyfus
Federal Street Partners
Fisher, Francis, Trees and Watts
GMO, LLC
LSV
Mellon Capital Management
Mondrian Investment Group
Morgan Stanley
OFI
Omega
Trust Company of the West
Vanguard
Wellington
Western Asset Management
Westfield

For the year 2010 total expenses are estimated at 1.05%. Returns shown are net of all expenses.

* “Morgan Stanley” is a registered trademark of Morgan Stanley Dean Witter & Co. “MSCI” and “EAFE” are registered trademarks of Morgan Stanley Capital International Inc.