Rate of Return on Investments (net of expenses)

The rate of return for the investment options is shown as a percentage increase or decrease (if a negative number appears) for that period of time. Several different historical periods are provided; quarter to date, year to date, and 3-year and 5-year average annual returns. These annualized investment returns are stated net of operating expenses. Operating expenses are outlined in the next section.

The investment returns are total return percentages, which represent two categories of return for the investment options: income and capital appreciation. Income includes any interest paid by fixed income investments, distributions or dividends reinvested back into your account within the Plan. Capital Appreciation is represented by the change in the price per share of the investment option as a result of the underlying assets (stocks or bonds) changing in price or value.

The returns are measured as of the end of the most recent calendar quarter, which in this newsletter is 3/31/07. The “Quarter to Date” percentage would be the period from the beginning of this recent quarter until the end of the quarter (1/1/07 – 3/31/07). The “Year to Date” returns will always reflect what the return has been from the beginning of the current calendar year (which begins on January 1) until the stated (as of) date in the table. In the first quarter of every year, the “Quarter to Date” and “Year to Date” returns will be the same because they are covering the same 3-month period (in this example 1/1/07 through 3/31/07). The 3-year and 5-year average annualized returns represent what the option has averaged per year, going back to 3/31/04 and 3/31/02, respectively.

Operating Expenses

Operating expenses are a measure of the total costs associated with managing and operating the Plan’s investment options. These costs consist primarily of Management Fees (the cost to professionally manage the investments) and Other Expenses such as trading fees, legal fees, auditing fees and other operational expenses. The Total Expenses are the Management Fees and Other Expenses added together and expressed as a percentage of the total assets in the portfolio. An investor can multiply his or her balance in an investment option by this percentage to determine what the total dollar cost would be on an annual basis.

Participants are not billed directly for these expenses. They are deducted from the total assets within the investment option and are reflected in the investment returns. Remember, the returns are listed “net of fees,” meaning after the expenses have been deducted. For example, if an investment option lists a return of 6.25% (net of expenses) for the year and the total expenses were 1.25%, the investment return would have been 7.50%, if no expenses were deducted.

Level of Risk

There is a basic relationship that exists between risk and reward with all investments. Selecting investments with higher levels of risk can potentially lead to higher returns. The relationship doesn’t always hold true in the short-term, but it is considered more reliable over longer investing periods. The investment categories are listed in risk order, with the lowest risk options at the top and the highest risk options appearing towards the bottom of each of the three tables from the participating FSOs. The investment options are grouped into three general risk categories:

Low — In the low risk category, you will primarily find investment options geared toward income whose main holdings are concentrated in bonds and other debt securities. Income includes any interest paid monthly by fixed income options, distributions or dividends that are reinvested back into your account and appearing on your statement. The Fixed Accounts are considered the most conservative and listed at the top of this low risk category.

Medium — Options listed in the medium risk category have combined investment objectives of growth and income. They invest in a mixture of stocks and bonds, with the stocks providing growth potential and the bonds generating the income component within the mixture. These investment options are known as balanced funds, equity-income options, and asset allocation funds.

High — The high-risk options are geared for long-term growth and will invest primarily in common stocks. Each investment option will focus on different types of common stocks and different types of investment strategies. For example, some of the investment options will focus on stocks of large corporations and others may target smaller companies. In addition, there are different types of investment strategies or styles favored by the different investment managers.

Please speak with your FSO for more information and assistance with selecting the options that best match your investment objectives.

Investment Options (with benchmarks)

The names of all of the available investment options are listed under each of the three participating FSOs. Directly below the names of many of the options, appearing in a blue bar, is a benchmark — or index — for comparison purposes. A benchmark is a standard that allows investors to measure the relative performance of an investment option or investment manager. Typically, a broad market stock or bond index is used for this purpose.

There are dozens of indices that can be used to gauge the performance of any given investment option. When looking to evaluate performance, it’s important to compare an option against an appropriate benchmark or index. For example, the S&P 500 Index would be used to measure the performance of a fund that holds primarily large company stocks, the Russell 2000 Index would be used for funds that invest in small company stocks, and the Lehman Brothers Aggregate Bond Index would be used for comparisons with bond funds.

The benchmarks or indices do not have operating expenses listed next to them because you can't actually invest in an index. But there are some investment options called index funds that attempt to track an index as closely as possible. You have several index funds that you can invest in and each of the FSOs offers an S&P 500 Index Fund.