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Objective

Reflects performance of the broad U.S. bond market.

Strategy

The U.S. Bond Fund invests in intermediate-term bonds that mirror the Barclays Capital Aggregate Bond Index, a widely-recognized benchmark of U.S. intermediate-term bond performance. Although the fund seeks to mirror the index, its results will be somewhat lower due to investment and administrative expenses.

Because of the passive style of this fund, the manager does not make decisions as to which bonds are likely to perform better or worse than others. Rather, the fund is broadly representative of the U.S. bond market, holding bonds issued by the U.S. Treasury, U.S. corporations and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities—all with maturities of more than 1 year. The fund invests by “sampling” the index, meaning that it holds a broadly-diversified collection of securities that, in the aggregate, approximates the full index in terms of key risk factors and other characteristics.

All of the fund’s investments will be selected through the sampling process, and at least 80% of the fund’s assets will be invested in bonds held in the index. The fund maintains a dollar-weighted average maturity consistent with that of the index, generally in the five- to ten-year range. The net return will be the result of general intermediate fixed-income market performance, less investment and administration expenses.

The U. S. Bond Fund is one of the less volatile choices along MMBB’s spectrum of investment options. Over time it is expected to produce somewhat higher returns than the MMBB Money Market Fund and Stable Value Fund while exhibiting far less volatility than any of the equity market funds.

This fund should experience attractive investment returns in a declining interest rate environment.

All securities investments risk the loss of capital. An investment in the fund could lose money over short or even long periods.

One of the main risks with this fund is interest rate risk, the chance that bond prices overall will decline because of rising interest rates. Because this fund is a passively managed index fund returns will reflect the returns of the broad bond market. When the bond market rises, this fund will rise in tandem. Likewise, when the bond market declines (due to rising interest rates or other factors) this fund will decline as well. Investors can expect to receive returns of the general bond market, less applicable expenses. Although the bond market is perceived by many to be a more conservative type of investment—and historically, it has been less volatile—that does not mean that one cannot lose value in this fund.

Although all bonds in this fund are considered to be “investment grade,” this fund does carry credit risk—the chance that a bond issuer will fail to pay interest and principal in a timely manner, or that negative perceptions of the issuer’s ability to make such payments will cause the price of that bond to decline.

In addition, this fund carries some “call” risk. This refers to the chance that during periods of falling interest rates, issuers of callable bonds may call (repay) securities with higher interest rates before their maturity dates. The fund would then lose any price appreciation above the bond’s call price and would be forced to reinvest the unanticipated proceeds at lower interest rates, resulting in a decline in the fund’s income. For mortgage-backed securities, this risk is known as “prepayment risk.” Call/prepayment risk should be low for the fund because it invests mainly in securities that are not callable.

Because this fund is an index fund, it has index sampling risk, which is the chance that the securities selected for the fund, in the aggregate, will not provide investment performance matching that of the fund’s target index. Index sampling risk for the fund should be low.

*If you are uncomfortable with the risks associated with the U.S. Bond Fund, you may want to consider another MMBB investment option.*

The performance of the U.S. Bond Fund for varying lengths of time is summarized below. The longer the time period, the more likely it encompasses varying economic and market conditions.

TOTAL RETURN AS OF February 28, 2017
1-Mo YTD 1-Yr 3-Yrs 5-Yrs 8-Yrs 10-Yrs
U.S. Bond Fund 0.61% 0.88% 1.45% 1.92% 1.52% 3.49% 3.70%
Barclays US Aggregate Bond Index 0.67% 0.86% 2.12% 2.64% 2.24% 4.19% 4.28%

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 over shorter time periods. The table below displays calendar year returns.

CALENDAR YEAR RETURNS
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
U.S. Bond 3.72% 6.62% 5.31% 5.60% 5.83% 7.04% 3.52% -2.76% -5.27% -0.28%
Barclays US Agg Bond 4.33% 6.97% 5.24% 5.93% 6.54% 7.83% 4.21% -2.02% -5.97% 0.55%

Past performance is no guarantee of future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Performance is for the stated time period only; performance through the current date may be lower or higher than displayed above due to market fluctuations, manager performance or other reasons.

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

Vanguard

Annual Expenses (As of December 31, 2016)

Fund Expenses — Year 2016
Investment Management Fees0.08%
MMBB Administrative Charge0.50%
Other Expenses0.13%
Sales Charge (Load) on PurchasesNone
Deferred Sales Charge (Load)None
Short-term or Other Redemption FeeNone
Distribution, or 12b-1, FeeNone
Dealer Commission (percent of offering price)None
Low Balance Account Service FeeNone
Total Annual Operating Expenses0.71%