NEW COVENANT FUNDS 485BPOS

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 26, 2007

Securities Act of 1933 File No. 333-64981
Investment Company Act of 1940 File No. 811-09025

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

PRE-EFFECTIVE AMENDMENT NO.

POST-EFFECTIVE AMENDMENT NO. 9

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

AMENDMENT NO. 11

NEW COVENANT FUNDS

(Exact Name of Registrant as Specified in Charter)

200 East Twelfth Street
Jeffersonville, Indiana 47130
(Address of Principal Executive Offices)

(877) 835-4531
(Registrant’s Telephone Number)

Robert E. Leech, President
New Covenant Funds
200 East Twelfth Street, Suite C
Jeffersonville, Indiana 47130
(Name and Address of Agent for Service)

Copies to
Patrick W.D. Turley, Esq.
Dechert LLP
1775 I Street, N.W.
Washington, DC 20006-2401

It is proposed that this filing will become effective:

þ		immediately upon filing pursuant to Paragraph (b)

o		on (date) pursuant to Paragraph (b);

o		60 days after filing pursuant to Paragraph (a) (1);

o		on (date) pursuant to Paragraph (a) (2);

o		75 days after filing pursuant to Paragraph (a) (2); or

o		on (date) pursuant to Paragraph (a) (2) of Rule 485

the funds

New Covenant Funds (the “Trust”) has been organized with participation from the Presbyterian Church (U.S.A.) Foundation (the “Foundation”) to facilitate responsible financial management of the investment and endowment assets of the Presbyterian Church (U.S.A.) and of charitable organizations that are part of or associated with the Presbyterian Church (U.S.A.). The Foundation is a charitable, religious organization that supports the mission of the Presbyterian Church (U.S.A.). The Trust may also serve the investment needs of certain other charitable or religious organizations, including organizations that are part of a religious denomination with which the Presbyterian Church (U.S.A.) has a relationship. The investment needs of other ecumenical and charitable organizations may also be met. Shares of the Trust’s four separate investment portfolios (the “Funds”) may also be purchased by individual investors other than religious or charitable organizations, including members of the Presbyterian Church (U.S.A.).

new covenant growth fund

Investment Objective - The GROWTH FUND’S investment objective is long-term capital appreciation. Dividend income, if any, will be incidental.

Principal Strategies - Under normal market conditions, at least 80% of the Fund’s assets will be invested in a diversified portfolio of common stocks of companies that the Fund’s portfolio managers believe have long-term growth potential.

The Fund makes investment decisions consistent with social-witness principles approved by the General Assembly of the Presbyterian Church (U.S.A.). Therefore, the Fund may choose to sell or not to purchase or retain investments otherwise consistent with its investment objective.

The Fund invests in common stocks and other equity securities of companies of all sizes, domestic and foreign. The Fund generally invests in larger companies, although it may purchase securities of companies of any size, including small companies. Up to 40% of the Fund’s assets may be invested in securities of foreign issuers in any country, and in developed or emerging markets. Foreign securities are selected on a stock-by-stock basis without regard to any defined allocation among countries or geographic regions. The Fund may also use put and call options and futures contracts.

The NCF Investment Department of New Covenant Trust Company, N.A. (the “Advisor”) seeks to enhance performance and reduce market risk by strategically allocating the Fund’s assets among multiple sub-advisors. The allocation is made based on the Advisor’s desire for balance among differing investment styles and philosophies offered by the sub-advisors.

In selecting stocks, both domestic and foreign, the portfolio managers search for stocks that are the best values based on fundamental and technical company research, cash-flow analyses and general company and economic conditions. This means that the portfolio managers believe that the stocks are reasonably priced and have above-average appreciation potential. The portfolio managers generally seek to manage risk by diversifying investments across companies, industries, countries and investment strategies.

On occasion, up to 20% of the Fund’s assets may be invested in bonds that are rated within the four highest credit rating categories assigned by independent rating agencies, or in unrated equivalents that may be considered by a sub-advisor to be investment grade, or in commercial paper within the two highest rating categories of independent rating agencies.

The remainder of the Fund’s assets may be held in cash or cash equivalents.

new covenant income fund

Investment Objective - The INCOME FUND’S investment objective is a high level of current income with preservation of capital.

Principal Strategies - Under normal market conditions, at least 80% of the Fund’s assets will be invested in a diversified portfolio of bonds and other debt obligations of varying maturities.

The Fund invests in corporate bonds. The Fund also invests in securities issued or guaranteed by the U.S. Government or one of its agencies and instrumentalities such as the Government National Mortgage Association, which are supported by the full faith and credit of the U.S. Government, and the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, which are supported by the right of the issuer to borrow from the U.S. Treasury. The Fund may also invest, to a lesser extent, in bonds of international corporations or foreign governments. In addition, the Fund invests in mortgage-backed and asset-backed securities. The Fund may also use put and call options and futures contracts.

At least 65% of the Fund’s assets will be invested in bonds that are rated within the four highest credit rating categories assigned by independent rating agencies, and the Fund will attempt to maintain an overall credit quality rating of AA or higher. The Fund may invest in unrated equivalents that may be considered to be investment grade. The Fund may invest up to 20% of its assets in bonds that are rated below investment grade.

Up to 20% of the Fund’s assets may be invested in commercial paper within the two highest rating categories of independent rating agencies. The Fund may also invest up to 40% of its assets in the fixed-income securities of foreign issuers in any country and in developed or emerging markets. Foreign securities are selected on an individual basis without regard to any defined allocation among countries or geographic regions.

The Fund’s average dollar-weighted maturity is expected to be approximately 9 years. The Fund may invest in securities of any maturity, but expects its average maturity to range from 4 years to 12 years and its average duration to be between 3 and 6 years. A bond’s duration indicates the time it will take an investor to recoup the investment. Duration measures all potential cash flows (principal, interest and reinvestment income) on an expected present-value basis to determine the “effective life” of a fixed-income security. Duration is sensitive to interest rates. For example, if interest rates rise 1%, a bond with a duration of 3 years will go down 3%. Maturity takes into account only the final principal payment to determine the risk of a particular bond.

Investments for the Fund, both foreign and domestic, are selected based on the following criteria:

- the use of interest-rate and yield-curve analyses. (Yield-curve analyses examine the level of interest rates at different bond maturities, and the shape of the curve as determined by Federal Reserve policy, inflation concerns and supply/demand conditions);

- the use of credit analyses, which indicate a security’s rating and potential for appreciation; and

- use of the above disciplines to invest in high-yield bonds and fixed-income securities issued by foreign and domestic governments and companies.

The remainder of the Fund’s assets may be held in cash or cash equivalents.

new covenant balanced growth fund

Investment Objective - The BALANCED GROWTH FUND’S investment objective is to produce capital appreciation with less risk than would be present in a portfolio of only common stocks.

Principal Strategies - To pursue its objective, the Fund invests primarily in shares of the GROWTH FUND and the INCOME FUND, with a majority of its assets generally invested in shares of the GROWTH FUND.

Between 45% and 75% of the Fund’s assets (with a “neutral” position of approximately 60%) are invested in shares of the GROWTH FUND, with the balance of its assets invested in shares of the INCOME FUND.

The Fund will periodically rebalance its investments in the GROWTH FUND and the INCOME FUND, within the limits described above. In implementing this rebalancing strategy, past and anticipated future performance of both the GROWTH FUND and the INCOME FUND are taken into account. The allocation of investments made in the GROWTH FUND and the INCOME FUND varies in response to market conditions, investment outlooks, and risk/reward characteristics of equity and fixed-income securities.

The GROWTH FUND invests in common stocks and other equity securities of companies of all sizes, domestic and foreign. The GROWTH FUND generally invests in larger companies, although it may purchase securities of companies of any size, including small companies. Up to 40% of the GROWTH FUND’s assets may be invested in securities of foreign issuers in any country, and in developed or emerging markets. Foreign securities are selected on a stock-by-stock basis without regard to any defined allocation among countries or geographic regions. The GROWTH FUND may also use put and call options and futures contracts.

On occasion, up to 20% of the GROWTH FUND’s assets may be invested in bonds that are rated within the four highest credit rating categories assigned by independent rating agencies, or in unrated equivalents that may be considered by a sub-advisor to be investment grade, or in commercial paper within the two highest rating categories of independent rating agencies. The remainder of the GROWTH FUND’s assets may be held in cash or cash equivalents.

See the description of the GROWTH FUND in this prospectus for further information.

The INCOME FUND invests in corporate bonds. The INCOME FUND also invests in securities issued or guaranteed by the U.S. Government or one of its agencies and instrumentalities such as the Government National Mortgage Association, which are supported by the full faith and credit of the U.S. Government, and the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, which are supported by the right of the issuer to borrow from the U.S. Treasury. The INCOME FUND may also invest, to a lesser extent, in bonds of international corporations or foreign governments. In addition, the INCOME FUND invests in mortgage-backed and asset-backed securities. The INCOME FUND may also use put and call options and futures contracts.

See the description of the INCOME FUND in this prospectus for further information.

The GROWTH FUND and the INCOME FUND, in which the BALANCED GROWTH FUND invests, make investment decisions consistent with social-witness principles approved by the General Assembly of the Presbyterian Church (U.S.A.). Therefore, the GROWTH FUND and the INCOME FUND may choose to sell or not to purchase or retain investments otherwise consistent with their investment objectives.

The remainder of the Fund’s assets may be held in cash or cash equivalents.

new covenant balanced income fund

Investment Objective - The BALANCED INCOME FUND’S investment objective is to produce current income and long-term growth of capital.

Between 50% and 75% of the Fund’s assets (with a “neutral” position of approximately 65%) are invested in shares of the INCOME FUND, with the balance of its assets invested in shares of the GROWTH FUND.

See the description of the INCOME FUND in this prospectus for further information.

See the description of the GROWTH FUND in this prospectus for further information.

The GROWTH FUND and the INCOME FUND, in which the BALANCED INCOME FUND invests, make investment decisions consistent with social-witness principles approved by the General Assembly of the Presbyterian Church (U.S.A.). Therefore, the GROWTH FUND and the INCOME FUND may choose to sell or not to purchase or retain investments otherwise consistent with their investment objectives.

The remainder of the Fund’s assets may be invested in cash or cash equivalents.

principal risks and investor suitability

GROWTH FUND

Principal Risks - The following are principal risks associated with the GROWTH FUND. A more complete description of these risks follows this section.


	-	Stock Market Risk
	-	Small Company Risk
	-	Foreign Securities Risk
	-	Emerging Markets Risk
	-	Interest Rate Risk
	-	Credit Risk
	-	Put and Call Option Risk
	-	Options and Futures Risk

Investor Suitability - The GROWTH FUND may be appropriate for investors who:


	-	prefer a fund that uses an appreciation-oriented strategy;
	-	can accept the risks of investing in a portfolio of common stocks;
	-	can tolerate performance that can vary substantially from year to year;
	-	have a long-term investment horizon.

The GROWTH FUND probably will not be suitable for you if you have a short-term investment horizon, are investing emergency reserve money, are seeking ordinary dividend and interest income, or find it difficult to deal with an investment that may fluctuate in value.

INCOME FUND

Principal Risks - The following are principal risks associated with the INCOME FUND. A more complete description of these risks follows this section.


	-	Interest Rate Risk
	-	Call Risk
	-	Credit Risk
	-	Prepayment Risk
	-	Put and Call Option Risk
	-	Foreign Securities Risk
	-	Options and Futures Risk
	-	Government Securities Risk

Investor Suitability - The INCOME FUND may be appropriate for investors who:


	-	prefer a bond fund that invests in both corporate and U.S. Government securities;
	-	desire income to complement a portfolio of more aggressive investments;
	-	can tolerate performance that may vary from year to year;
	-	prefer a relatively conservative investment for income.

The INCOME FUND probably will not be suitable for you if you have a short-term investment horizon, are investing emergency reserve money, or are seeking high growth or maximum investment return.

principal risks and investor suitability

BALANCED GROWTH FUND

Principal Risks - The following are principal risks associated with the BALANCED GROWTH FUND. A more complete description of these risks follows this section.


	-	Stock Market Risk
	-	Small Company Risk
	-	Foreign Securities Risk
	-	Emerging Markets Risk
	-	Interest Rate Risk
	-	Credit Risk
	-	Call Risk
	-	Prepayment Risk
	-	Options and Futures Risk
	-	Put and Call Option Risk
	-	Government Securities Risk
	-	Rebalancing Risk

Investor Suitability - The BALANCED GROWTH FUND may be appropriate for investors who:


	-	prefer a balanced investment program that allocates assets between growth and income portfolios, with an emphasis on growth;
	-	can tolerate the level of risk represented by the common stock portion of the portfolio allocation;
	-	can tolerate performance that will vary from year to year;
	-	have a longer-term investment horizon.

The BALANCED GROWTH FUND probably will not be suitable for you if you have a
short-term investment horizon, are investing emergency reserve money, desire only income or prefer to avoid an investment that may fluctuate in value.

PORTFOLIO HOLDINGS

A description of the Funds’ policies and procedures with respect to the disclosure of the Funds’ portfolio securities is available in the Funds’ Statement of Additional Information (“SAI”).

BALANCED INCOME FUND

Principal Risks - The following are principal risks associated with the BALANCED INCOME FUND. A more complete description of these risks follows this section.


	-	Interest Rate Risk
	-	Call Risk
	-	Credit Risk
	-	Put and Call Option Risk
	-	Prepayment Risk
	-	Foreign Securities Risk
	-	Emerging Markets Risk
	-	Options and Futures Risk
	-	Stock Market Risk
	-	Small Company Risk
	-	Government Securities Risk
	-	Rebalancing Risk

Investor Suitability - The BALANCED INCOME FUND may be appropriate for investors who:


	-	prefer a balanced investment program that allocates assets between growth and income portfolios, with an emphasis on income;
	-	prefer that half or more of the portfolio be income-producing securities;
	-	can tolerate performance that will vary from year to year;
	-	have a longer-term investment horizon.

The BALANCED INCOME FUND probably will not be suitable for you if you have a
short-term investment horizon, are investing emergency reserve money, require only growth or prefer to avoid an investment that may go up and down in value.

description of principal risks

All investments involve some type and level of risk. Risk is the possibility that you will lose money or not make any additional money by investing in the Funds. The Funds cannot be certain that they will achieve their investment objectives. An investment in any of the Funds is not a deposit with New Covenant Trust Company, N.A. and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Before you invest, please make sure that you have read and understand the risk factors that apply to the specific Fund in which you are investing.

For all Funds, there is the risk that the Fund will underperform other similar mutual funds that do not consider social-witness principles in their investing.

The following are the risks associated with an investment in the specified Funds.

Stock Market Risk — Growth Fund, Balanced Growth Fund, Balanced Income Fund: Prices of securities held by a Fund may fall due to various conditions or circumstances that may be unpredictable. Stock prices generally fall or stagnate when interest rates rise. Stock prices in general rise and fall as a result of investors’ perceptions of the market as a whole.

Small Company Risk — Growth Fund, Balanced Growth Fund, Balanced Income Fund: Small companies may have limited product lines, markets or financial resources. Their securities may trade less frequently and in more limited volume than securities of larger, more established companies. The prices of small-company stocks tend to rise and fall in value more than other stocks.

Foreign Securities Risk — All Funds: The performance of a Fund’s investments in non-U.S. companies and in companies operating internationally or in foreign countries will depend principally on economic conditions in their product markets, the securities markets where their securities are traded, and on currency exchange rates. These risks are present because of uncertainty in future exchange rates back into U.S. dollars, and possible political instability, which could affect foreign financial markets and local economies. There are also risks related to social and economic developments abroad, as well as risks resulting from the differences between the regulations to which U.S. and foreign issuers and markets are subject.

Emerging Markets Risk — Growth Fund, Balanced Growth Fund, Balanced Income Fund: Emerging-market securities bear all foreign securities risks discussed above. In addition, there are greater risks involved in investing in emerging markets than in developed foreign markets. Emerging-market countries may have less developed legal structures and political systems, and the small size of their securities markets and low trading volumes can make investments illiquid and more volatile than investments in developed countries.

Interest Rate Risk — All Funds: Prices for fixed-income securities will generally fall as a result of upward changes in interest rates. The market value of bonds generally declines when interest rates rise. This risk is greater for bonds with longer maturities.

description of principal risks

Credit Risk — All Funds: An issuer of a fixed-income security may default on a security by failing to pay interest or principal when due.

Call Risk — Income Fund, Balanced Growth Fund, Balanced Income Fund: Call risk exists when an issuer may exercise its rights to pay principal on a bond earlier than scheduled. This typically results when interest rates have declined, and the Fund will suffer from having to reinvest in lower-yielding bonds.

Prepayment Risk — Income Fund, Balanced Growth Fund, Balanced Income Fund: Prepayment risk applies when a Fund invests in mortgage-backed securities. Prepayment risk relates to mortgages being prepaid at a rate different than projected. The Fund may then be forced to invest the proceeds from prepaid mortgage-backed securities at lower prevailing rates when interest rates are falling, or prevented from investing at higher rates if prepayments are slow when interest rates are rising.

Options and Futures Risk — All Funds: The Funds may use futures and options on futures for hedging purposes only. The hedging strategy may not be successful if the portfolio manager is unable to accurately predict movements in the prices of individual securities held by the Funds or if the strategy does not correlate well with a Fund’s investments. The use of futures and options on futures may produce a loss for the Fund, even when used only for hedging purposes. The risks associated with options and futures include possible default by the other party to the transaction, illiquidity and the risk that the use of options and futures could result in losses greater than if they had not been used.

Put and Call Option Risk — All Funds: The value of call options tends to increase or decrease in the same direction as the price change of the securities underlying them, and the value of put options tends to increase or decrease in the opposite direction as the price change of the securities underlying them. However, because these options can be purchased for a fraction of the cost of the underlying securities, their price changes can be very large in relation to the amount invested in them. This means that options are volatile investments. As a result, options are riskier investments than the securities underlying them.

Government Securities Risk — Income Fund, Balanced Growth Fund, Balanced Income Fund: Certain securities issued by agencies and instrumentalities of the U.S. Government in which the Funds may invest are backed by the full faith and credit of the U.S. Government, but others are not insured or guaranteed by the U.S. Government and may be supported only by the issuer’s right to borrow from the U.S. Treasury, by the credit of the issuing agency, instrumentality or corporation, or by the U.S. Government in some other way.

Rebalancing Risk — Balanced Growth Fund, Balanced Income Fund: Rebalancing activities, while undertaken to maintain a Fund’s investment risk-to-reward ratio, may cause the Fund to underperform other funds with similar investment objectives. For the BALANCED GROWTH FUND, it is possible after rebalancing from equities into a greater percentage of fixed-income securities, that equities will outperform fixed-income investments. For the BALANCED INCOME FUND, it is possible that after rebalancing from fixed-income securities into a greater percentage of equity securities, that fixed-income securities will outperform equity investments. The performance of the BALANCED GROWTH FUND and the BALANCED INCOME FUND depends on the performance of the underlying funds in which they invest.

past performance

Although past performance of a Fund is no guarantee of how it will perform in the future, historical performance may give you some indication of the risks of investing in a Fund. Performance demonstrates how a Fund’s returns have varied over time. Set forth below is certain past performance information for the Funds which includes the past performance for four privately-managed investment pools that were previously managed by the Presbyterian Church (U.S.A.) Foundation (the predecessor investment entity to each Fund’s Advisor) through June 30, 1999, each of whose assets were transferred to its corresponding Fund on July 1, 1999 upon the establishment of the Funds. These private pools had investment objectives and policies in all material respects equivalent to those of the Funds and were managed subject to the same “manager of managers” investment style that is utilized by the Funds. These private pools were not subject to the requirements of the Investment Company Act of 1940 (the “1940 Act”) or the Internal Revenue Code of 1986 (the “Code”), the limitations of which might have adversely affected performance results. The prior performance depicted for the private pools has been restated to reflect the imposition of the total expenses of the Funds for their initial fiscal year rather than the actual expenses of the private pools.

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.

BAR CHARTS AND

PERFORMANCE TABLES

The following bar charts and performance tables provide some indication of the risks of investing in a Fund by showing changes in performance. Annual returns are shown for each of the past ten calendar years and average annual returns are compared with those of a broad measure of market performance. Both the bar charts and performance tables assume reinvestment of dividends and distributions. A Fund’s past performance (before and after taxes) is not necessarily an indication of how the Fund will perform in the future.

past performance

GROWTH FUND

Annual Total Returns - Calendar Year

Prior to July 1, 1999, performance was that of the predecessor Common Trust Fund.

During the ten-year period ending December 31, 2006:


Best Quarter	4th Quarter, 1998	17.71	%
Worst Quarter	3rd Quarter, 2002	–17.71	%

The year-to-date total return for the Growth Fund as of September 30, 2007 was 8.61%.

PERFORMANCE TABLE FOR THE GROWTH FUND (1)

Average Annual Total Returns as of December 31, 2006


	One Year			Five Years			Ten Years

Growth Fund Return Before Taxes		13.42	%		6.26	%		5.72	%

Growth Fund Return After Taxes on Distributions (2) (3)		13.29	%		6.17	%		N/A

Growth Fund Return After Taxes on Distributions and Sale of Fund Shares (2) (3)		8.88	%		5.39	%		N/A

S&P 500 Index (4)		15.80	%		6.19	%		8.42	%


(1)	The Growth Fund is managed in the same manner that the predecessor Common Trust Fund was managed.


(2)	Standard after-tax returns are not provided for the ten-year period as, prior to its conversion, the predecessor Common Trust Fund was not subject to the requirements of the 1940 Act and the Code and received different tax treatment than the Growth Fund.

(3)

The Fund’s after-tax returns are calculated using the highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Please note that actual after-tax returns depend on an investor’s tax situation and may differ from those shown. Also note that after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.


(4)	The S&P 500 Index is an unmanaged, capitalization weighted index that measures the performance of 500 large-capitalization stocks representing all major industries. The index does not reflect the deduction of fees or taxes associated with an investment in the Fund. Investors cannot invest directly in an index, although they may invest in the underlying securities.

past performance

INCOME FUND

Annual Total Returns - Calendar Year

Prior to July 1, 1999, performance was that of the predecessor Common Trust Fund.

During the ten-year period ending December 31, 2006:


Best Quarter	3rd Quarter, 2002	4.38	%
Worst Quarter	2nd Quarter, 2004	–2.48	%

The year-to-date total return for the Income Fund as of September 30, 2007 was 3.52%.

PERFORMANCE TABLE FOR THE INCOME FUND (1)

Average Annual Total Returns as of December 31, 2006


	One Year			Five Years			Ten Years

Income Fund Return Before Taxes		3.90	%		4.54	%		5.42	%

Income Fund Return After Taxes on Distributions (2) (3)		2.34	%		2.82	%		N/A

Income Fund Return After Taxes on Distributions and Sale of Fund Shares (2) (3)		2.53	%		2.87	%		N/A

Lehman Brothers Aggregate Bond Index (4)		4.33	%		5.06	%		6.24	%


(1)	The Income Fund is managed in the same manner that the predecessor Common Trust Fund was managed.


(2)	Standard after-tax returns are not provided for the ten-year period as, prior to its conversion, the predecessor Common Trust Fund was not subject to the requirements of the 1940 Act and the Code and received different tax treatment than the Income Fund.


(3)	The Fund’s after-tax returns are calculated using the highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Please note that actual after-tax returns depend on an investor’s tax situation and may differ from those shown. Also note that after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.

(4)	The Lehman Brothers Aggregate Bond Index is an unmanaged index generally representative of intermediate and long-term government and investment grade corporate debt securities and asset-backed securities. The index does not reflect the deduction of fees or taxes associated with an investment in the Fund. Investors cannot invest directly in an index, although they may invest in the underlying securities.

past performance

BALANCED GROWTH FUND

Annual Total Returns - Calendar Year

Prior to July 1, 1999, performance was that of the predecessor Common Trust Fund.

During the ten-year period ending December 31, 2006:


Best Quarter	4th Quarter, 1998	10.49	%
Worst Quarter	3rd Quarter, 2002	–8.97	%

The year-to-date total return for the Balanced Growth Fund as of September 30, 2007 was 6.82%.

PERFORMANCE TABLE FOR THE BALANCED GROWTH FUND (1)

Average Annual Total Returns as of December 31, 2006


	One Year			Five Years			Ten Years

Balanced Growth Fund Return Before Taxes		9.73	%		5.89	%		6.01	%

Balanced Growth Fund Return After Taxes on Distributions (2) (3)		9.38	%		5.28	%		N/A

Balanced Growth Fund Return After Taxes on Distributions and Sale of Fund Shares (2) (3)		6.76	%		4.74	%		N/A

Blended S&P 500/Aggregate Index (4)		11.11	%		5.98	%		7.88	%

S&P 500 Index (4)		15.80	%		6.19	%		8.42	%

Lehman Brothers Aggregate Bond Index (4)		4.33	%		5.06	%		6.24	%


(1)	The Balanced Growth Fund is managed in the same manner that the predecessor Common Trust Fund was managed.


(2)	Standard after-tax returns are not provided for the ten-year period as, prior to its conversion, the predecessor Common Trust Fund was not subject to the requirements of the 1940 Act and the Code and received different tax treatment than the Balanced Growth Fund.

(3)

(4)

The Blended S&P 500/Aggregate Index is a composite composed of 60% S&P 500 Index and 40% Lehman Brothers Aggregate Bond Index. The S&P 500 Index is an unmanaged, capitalization weighted index that measures the performance of 500 large-capitalization stocks representing all major industries. The Lehman Brothers Aggregate Bond Index is an unmanaged index generally representative of intermediate and long-term government and investment grade corporate debt securities and asset-backed securities. These indices do not reflect the deduction of fees or taxes associated with an investment in the Fund. Investors cannot invest directly in an index, although they may invest in the underlying securities.

past performance

BALANCED INCOME FUND

Annual Total Returns - Calendar Year

Prior to July 1, 1999, performance was that of the predecessor Common Trust Fund.

During the ten-year period ending December 31, 2006:


Best Quarter	2nd Quarter, 1997	7.10	%
Worst Quarter	3rd Quarter, 1998	–3.80	%

The year-to-date total return for the Balanced Income Fund as of September 30, 2007 was 5.43%.

PERFORMANCE TABLE FOR THE BALANCED INCOME FUND (1)

Average Annual Total Returns as of December 31, 2006


	One Year			Five Years			Ten Years

Balanced Income Fund Return Before Taxes		7.37	%		5.46	%		5.78	%

Balanced Income Fund Return After Taxes on Distributions (2) (3)		6.88	%		4.52	%		N/A

Balanced Income Fund Return After Taxes on Distributions and Sale of Fund Shares (2) (3)		5.40	%		4.17	%		N/A

Blended Aggregate/S&P 500 Index (4)		8.25	%		5.69	%		7.31	%

Lehman Brothers Aggregate Bond Index (4)		4.33	%		5.06	%		6.24	%

S&P 500 Index (4)		15.80	%		6.19	%		8.42	%


(1)	The Balanced Income Fund is managed in the same manner that the predecessor Common Trust Fund was managed.


(2)	Standard after-tax returns are not provided for the ten-year period as, prior to its conversion, the predecessor Common Trust Fund was not subject to the requirements of the 1940 Act and the Code and received different tax treatment than the Balanced Income Fund.

(3)

(4)

The Blended Aggregate/S&P 500 Index is a composite composed of 65% Lehman Brothers Aggregate Bond Index and 35% S&P 500 Index. The Lehman Brothers Aggregate Bond Index is an unmanaged index generally representative of intermediate and long-term government and investment grade corporate debt securities and asset-backed securities. The S&P 500 Index is an unmanaged, capitalization weighted index that measures the performance of 500 large-capitalization stocks representing all major industries. These indices do not reflect the deduction of fees or taxes associated with an investment in the Fund. Investors cannot invest directly in an index, although they may invest in the underlying securities.

fees and expenses of the funds

This section describes the fees and expenses that you may pay if you buy and hold shares of the Funds. Shareholder fees are costs charged directly to an investor. Annual fund operating expenses are deducted from the Funds’ assets every year, so they are paid indirectly by all investors. The Funds have no sales charge (load).

SHAREHOLDER FEES

- All Funds (fees paid directly from your investment)



Maximum Sales Load Imposed on Purchases			None

Maximum Deferred Sales Load			None

Maximum Sales Load on Reinvested Dividends			None

Redemption Fee			None

Exchange Fee			None

Maximum Account Fee			None

ANNUAL FUND OPERATING EXPENSES*

All Funds (expenses that are deducted from Fund assets)



					Acquired	Total Annual		Total Annual
					Fund	Operating		Operating
		Shareholder			Fees	Expenses	Fee	Expenses
	Management	Services	Distribution	Other	and	Before Fee	Waiver/Expense	After
Fund Name	Fees	Fees(1)	(12b-1) Fees	Expenses	Expenses(2)	Waiver(3)(4)	Reimbursement	Waiver



Growth Fund	0.99%	0.25%	None	0.10%	0.00%	1.34%	0.26%	1.08%(5)



Income Fund	0.75%	0.25%	None	0.09%	0.01%	1.10%	0.25%	0.85%



Balanced Growth Fund	None	0.25%	None	0.12%	0.98%	1.35%	0.25%	1.10%



Balanced Income Fund	None	0.25%	None	0.15%	0.93%	1.33%	0.25%	1.08%


*	The expense information in the table has been restated to reflect current fee and expense arrangements for the Funds. Information is presented as a percentage of net assets.


(1)	The Shareholder Services Fees paid by the Funds are charged on a shareholder account basis; therefore, the overall impact to a Fund may be less than 0.25%. During the most recent fiscal year, the cumulative impact to the Growth Fund, Income Fund, Balanced Growth Fund and Balanced Income Fund was 0.18%, 0.16%, 0.24% and 0.24% respectively.

(2)

Acquired Fund Fees and Expenses are those expenses incurred indirectly by the Funds as a result of investments in shares of one or more investment companies (referred to as “Acquired Funds”). With regard to the Balanced Growth Fund and the Balanced Income Fund, these expenses include the expenses of the underlying funds in which they invest, i.e., the Growth Fund and the Income Fund. Total Annual Operating Expenses for the Funds do not correlate to the ratio of expenses to average net assets shown in the Fund’s most recent annual report and the financial highlights contained in this prospectus because acquired fund fees and expenses are not required to be included in the Funds’ audited financial statements. Excluding the acquired fund fees and expenses, the Total Annual Operating Expenses for the Income Fund, the Balanced Growth Fund and the Balanced Income Fund were 0.84%, 0.12% and 0.15%, respectively.

(3)

The Advisor has entered into an expense limitation agreement with respect to both the Growth Fund and the Income Fund for the current fiscal year in which it has agreed to waive the investment advisory fees payable to it by each of the Growth Fund and the Income Fund to the extent of the Shareholder Services Fees paid by these Funds in order to limit the Total Annual Operating Expenses of these Funds.

(Footnotes continued on next page.)

fees and expenses of the funds

(Footnotes continued from previous page.)


(4)	The Advisor has entered into an expense limitation agreement with respect to both the Balanced Growth Fund and the Balanced Income Fund for the current fiscal year in which it has agreed to reimburse the Balanced Growth Fund and the Balanced Income Fund to the extent of the Shareholder Services Fees paid by these Funds in order to limit the Total Annual Operating Expenses of these Funds.

(5)

The Growth Fund participates in a commission recapture program with certain brokers under which the participating brokers refund a portion of the Growth Fund’s commissions to the Growth Fund in cash based on the amount of commissions paid to the broker by the Growth Fund for executing portfolio trades. At the direction of the Trust, the cash from the recaptured commissions is used to pay expenses of the Growth Fund. The expenses eligible to be paid with the recaptured commissions include administration fees, custody fees, audit fees, legal fees and printing fees, as directed by the Trust. Without this program, the Growth Fund’s Total Annual Operating Expenses After Waiver would have increased by 0.01% during the prior fiscal year.

Example

This example is designed so that you may compare the cost of investing in the Funds with the cost of investing in other mutual funds. The example assumes that:


	-	you invest $10,000 for the time periods indicated;
	-	you redeem all of your shares at the end of the time periods;
	-	your investment has a hypothetical 5% return each year;
	-	all distributions are reinvested; and
	-	each Fund’s operating expenses remain the same.

Because actual return and expenses will be different, the example is for comparison purposes only. Each Fund’s actual performance and expenses may be higher or lower. Based on the above assumptions, your costs for each Fund would be:



Fund Name	1 Year		3 Years		5 Years		10 Years



Growth Fund	$	110	$	399	$	709	$	1,590



Income Fund	$	87	$	325	$	582	$	1,318



Balanced Growth Fund	$	112	$	403	$	715	$	1,602



Balanced Income Fund	$	110	$	397	$	705	$	1,580

risk management

The GROWTH FUND and the INCOME FUND have a number of non-fundamental policies and procedures intended to reduce the risks borne by their investors. These policies and procedures should also reduce the risks borne by investors in the BALANCED FUNDS because they invest exclusively in shares of the GROWTH FUND and the INCOME FUND.


	-	Each Fund invests principally in U.S. issuers, but also may invest in geographically diverse foreign and international companies. This policy may reduce the effect on the Fund of adverse events affecting particular nations or regions. If a Fund holds a position in securities priced in non-U.S. currency, it may engage in hedging transactions to reduce currency risk.

	-	When market conditions threatening a Fund’s ability to achieve its investment objective appear imminent, the Fund may take a temporary defensive position designed to reduce risk, even though such a temporary position would be inconsistent with the Fund’s customary strategies. For example, the GROWTH FUND may increase its bond and cash equivalent holdings and the INCOME FUND may increase its cash equivalent holdings.

	-	Within each Fund, each sub-advisor pursues the Fund’s objective through its own investment strategy. Since any investment strategy has its strengths and weaknesses, depending on market conditions, the use of multiple strategies should reduce the effect of changing market conditions on Fund performance.

other policies and risks

Each Fund’s investment objective is fundamental, which means that it may not be changed without a shareholder vote. All investment policies of each Fund that are not specifically identified as fundamental may be changed by the Board of Trustees without approval of Fund shareholders.

Each of the Fund’s portfolio securities and investment practices offers certain opportunities and carries various risks. Major investments and risk factors are outlined in the front of the Prospectus. Below are brief descriptions of other securities and practices, along with their risks, which apply to the GROWTH FUND and the INCOME FUND.

Social-Witness Principles: Since the Funds have made investing consistent with social-witness principles approved by the General Assembly of the Presbyterian Church (U.S.A.) one of their investment policies, they may choose not to make, or to divest, investments otherwise consistent with their individual investment objectives. This means that there is a risk that a Fund may underperform other similar mutual funds that do not consider social-witness principles in their investing.

Investment Techniques: To a limited extent, the GROWTH FUND and the INCOME FUND may engage in securities lending arrangements, repurchase agreement transactions, and may hold certain derivative securities, principally put and call options, for hedging purposes. The Funds pursue these activities to reduce volatility, lower costs, and to seek to marginally increase their investment returns, but these activities also marginally increase a Fund’s risks.

Put and Call Options: A call or put may be purchased only if, after the purchase, the value of all call and put options held by a Fund will not exceed 20% of the Fund’s total assets.

When-Issued Securities: A Fund may invest in securities prior to their date of issue. These securities could rise or fall in value by the time they are actually issued, which may be any time from a few days to over a year.

Repurchase Agreements: A Fund may buy securities with the understanding that the seller will buy them back with interest at a later date. If the seller is unable to honor its commitment to repurchase the securities, the Fund could lose money.

Mortgage-Backed Securities: These securities, which represent interests in pools of mortgages, may offer attractive yields but generally carry additional risks. The prices and yields of mortgage-related securities typically assume that the securities will be redeemed at a given time before maturity. When interest rates fall substantially, these securities usually are redeemed early because the underlying mortgages are often prepaid. The Fund would then have to reinvest the money at a lower rate.

Asset-Backed Securities: These securities represent interests in pools of debt such as credit-card accounts. The principal risks of asset-backed securities are that on the underlying obligations, payments may be made more slowly, and rates of default may be higher than expected. In addition, because some of these securities are new or complex, unanticipated problems may affect their value or liquidity.

Real Estate Investment Trusts (REITs): Equity REITs invest directly in real property, while mortgage REITs invest in mortgages on real property. REITs may be subject to certain risks associated with the direct ownership of real estate, including declines in the value of real estate, risks related to general and local economic conditions, overbuilding and increased competition, increases in property taxes, and variations in rental income. Equity REITs may be affected by changes in the value of the underlying property owned by the trusts, while mortgage REITs may be affected by the quality of credit extended. REITs may have limited financial resources, may trade less frequently and in limited volume and may be subject to more abrupt or erratic price movements than larger-company securities.

other policies and risks

Investment Grade Securities: There are four categories that are referred to as “investment grade.” These are the four highest credit ratings or categories as defined by Moody’s Investors Service, Inc. and Standard & Poor’s Corporation. Securities in the fourth investment grade are considered to have speculative characteristics.

Non-Investment Grade Securities: The INCOME FUND may invest in securities rated below investment grade. These securities, while generally offering higher yields than investment grade securities with similar maturities, involve greater risks, including the possibility of default or bankruptcy. They are regarded as speculative with respect to the issuer’s capacity to pay interest and to repay principal. The market values of these securities may be more sensitive to individual corporate developments and changes in economic conditions than higher-quality securities. In addition, lower-rated securities tend to be less marketable than higher-quality securities because the market for them may not be as broad or active. The lack of a liquid secondary market may have an adverse effect on market price and the Fund’s ability to sell particular securities rated below investment grade.

Illiquid Securities: Each Fund may invest up to 15% of its net assets in illiquid investments. An illiquid investment is a security or other position that cannot be disposed of quickly (generally within seven days) in the normal course of business at approximately its carrying value. The percentage limitation on these investments does not apply to certain restricted securities that are eligible for resale to qualified institutional purchasers.

Defensive Investing: A Fund may, from time to time, take a temporary defensive position that is inconsistent with its principal investment strategies in an attempt to respond to adverse market, economic, political or other conditions. When a Fund takes a temporary defensive position, it may not achieve its stated investment objective. A principal defensive investment position would be the purchase of cash equivalents.

Investments in other Investment Companies: The BALANCED GROWTH FUND and BALANCED INCOME FUND, by investing primarily in shares of the GROWTH FUND and the INCOME FUND, indirectly pay a portion of the operating expenses, management expenses and brokerage costs of such companies as well as their own operating expenses. Thus, shareholders of the BALANCED GROWTH FUND and BALANCED INCOME FUND may indirectly pay slightly higher total operating expenses and other costs than they would pay by owning shares of the underlying Funds directly. The GROWTH FUND and INCOME FUND may invest in shares of other investment companies, subject to certain provisions of federal securities laws. These Funds may invest in other investment companies for a variety of reasons such as, without limitation, to manage cash, to seek current income, to gain exposure to investments in particular sectors, industries or countries. To the extent that the Funds invest in other investment companies, the Funds will indirectly bear their proportionate share of any expenses (such as operating expenses and advisory fees) that may be paid by certain of the investment companies in which they invest.

management of the funds

The Advisor The NCF Investment Department of New Covenant Trust Company, N.A. (the “Advisor”), 200 East Twelfth Street, Jeffersonville, Indiana 47130, serves as the investment advisor to the Trust. The Advisor is a separate division of New Covenant Trust Company, N.A. responsible for the investment management of registered investment companies, such as the Trust.

The Advisor acts as a “manager of managers” for the Funds and selects and retains various sub-advisors (the “Sub-Advisors”) who manage portions of the assets of the GROWTH FUND and the INCOME FUND that are allocated to them by the Advisor. The Sub-Advisors employ portfolio managers to make the day-to-day investment decisions regarding each Fund’s portfolio holdings. The Advisor oversees the investment activities and performance of the Sub-Advisors and it maintains an investment committee that assists with this oversight process.

Under terms of the advisory agreements between the Advisor and the Trust, the Advisor is responsible for formulating each Fund’s investment program, subject to each Fund’s investment policies. The advisory fees paid to the Advisor by these Funds are used to pay the fees of the Sub-Advisors. The Advisor is not paid an advisory fee for the BALANCED FUNDS. For its services during the fiscal year ended June 30, 2007, the Advisor received, net of waivers, 0.81% and 0.59% of the average daily net assets of the GROWTH FUND and the INCOME FUND, respectively.

The Advisor is responsible for allocating the assets of the GROWTH FUND and the INCOME FUND among the Sub-Advisors, and for monitoring and evaluating the investment programs and performance of the Sub-Advisors. The Advisor is also responsible for periodically rebalancing the investments of the BALANCED FUNDS between the GROWTH FUND and the INCOME FUND. The Advisor also furnishes corporate offices, provides office space, services and equipment, and supervises all matters relating to the Funds’ investment activities. The fees paid to the Sub-Advisors are paid directly by the Advisor and are not a further expense of the Funds.

The Securities and Exchange Commission (the “SEC”) has granted the Trust an exemptive order that permits the Advisor, subject to the approval of the Board of Trustees, to engage and terminate Sub-Advisors without shareholder approval. In the event that there is a change in any of the Sub-Advisors to the Funds, shareholders will receive information about the change and about any new Sub-Advisors selected. While shareholders are not permitted to vote on the selection of new Sub-Advisors, they retain the right to vote on the continuation of the Advisor.

A discussion regarding the basis for the Trust’s Board of Trustees approving the continuation of the advisory contracts between the Trust and the Advisor and the Advisor and each Sub-Advisor is available in the Funds’ annual report to shareholders.

The Sub-Advisors Each Sub-Advisor is responsible for the selection and management of portfolio investments for its segment of a particular Fund on a day-to-day basis, in accordance with that Fund’s investment objective and policies and under the supervision of the Advisor. Allocation of assets to each Sub-Advisor is made at the discretion of the Advisor. The Sub-Advisors place purchase and sell orders for portfolio transactions in the Funds, subject to the general oversight of the Advisor.

management of the funds

The following organizations act as Sub-Advisors to the Funds:

Sub-Advisors for the Growth Fund

Capital Guardian Trust Company

Capital Guardian Trust Company (“Capital Guardian”), 333 South Hope Street, Los Angeles, California 90071, is a state chartered trust company, which was founded in 1968 and is a registered investment advisor. The parent company is Capital Group International, Inc., which itself is wholly-owned by The Capital Group Companies, Inc., an employee-owned organization. In its approach to international investing, Capital Guardian is an active manager that utilizes a bottom-up approach to managing assets. With a basic investment philosophy of seeking attractively priced securities that represent good long-term investment opportunities, Capital Guardian emphasizes fundamental research and relies upon its own financial analysis. As of August 31, 2007, Capital Guardian had approximately $165 billion of assets under management.

Capital Guardian uses a multiple portfolio manager team in managing the Growth Fund’s assets. Under this approach, the assets of the Growth Fund allocated to Capital Guardian are divided into segments managed by individual managers. Each manager decides how their respective segments will be invested, within the limits of the Growth Fund’s investment restrictions and those of Capital Guardian’s investment committee. Each manager has served as portfolio manager for a portion of the Fund’s assets allocated to Capital Guardian since 1999.

David I. Fisher is Chairman of the Board of Capital Guardian. He has been with Capital Guardian for over 37 years and has been a portfolio manager for at least the past 5 years.

Richard N. Havas is Senior Vice President of Capital International Research, Inc., an affiliate of Capital Guardian. He has been with Capital Guardian for over 20 years and has been a portfolio manager for at least the past 5 years.

Victor D. Kohn is President and Director of Capital International, Inc., an affiliate of Capital Guardian. He has been with Capital Guardian for over 21 years and has been a portfolio manager for at least the past 5 years.

Nancy J. Kyle is Vice Chairman of Capital Guardian. She has been with Capital Guardian for over 16 years and has been a portfolio manager for at least the past 5 years.

Lionel M. Sauvage is Director and Senior Vice President of Capital Guardian. He has been with Capital Guardian for over 19 years and has been a portfolio manager for at least the past 5 years.

Nilly Sikorsky is Chairman of Capital International S.A., an affiliate of Capital Guardian. She has been with Capital Guardian for over 44 years and has been a portfolio manager for at least the past 5 years.

Rudolf M. Staehelin is Senior Vice President of Capital International Research, Inc., an affiliate of Capital Guardian. He has been with Capital Guardian for over 25 years and has been a portfolio manager for at least the past 5 years.

The SAI provides additional information about each portfolio manager’s compensation, other accounts managed by the portfolio manager and the portfolio manager’s ownership of securities in the Funds, if any.

Mazama Capital Management, Inc.

Mazama Capital Management, Inc. (“Mazama”), founded in 1997 and located at One Southwest Columbia Street, Suite 1500, Portland, Oregon, is an Oregon corporation and is a registered investment advisor. Mazama utilizes a fundamental, bottom-up approach to security selection. In selecting securities for the Fund, Mazama performs a detailed analysis of company financials using a proprietary Price Performance Model. The Price Performance Model focuses on two main valuation components: estimates of a company’s return on equity versus the forward price-to-earnings ratio as a measure of a current value and on a company’s earnings growth versus the forward price-to-earnings ratio. Mazama also conducts ongoing discussions with company executives and key employees as well as visits to evaluate company operations first hand. Though

management of the funds

Mazama does not incorporate top-down analysis in its investment process, it does incorporate knowledge of broad economic themes and trends to provide a backdrop for its bottom-up research. As of August 31, 2007, Mazama had approximately $7.4 billion in assets under management.

Mazama’s Investment Team consists of four Portfolio Managers, four Sector Portfolio Managers and four Research Analysts, each of whom conducts research and plays an active role in portfolio decision making for the Fund. The Portfolio Managers oversee investment decision-making across all industry groups and sectors, while each Sector Portfolio Manager is responsible for one or more of the five primary sectors in the portfolio (Technology, Financial Services, Consumer Discretionary, Healthcare and Producer Durables). The additional Research Analysts support the primary Portfolio Managers and Sector Portfolio Managers in identifying investments for the Fund. Each member of the Investment Team utilizes the firm’s proprietary Price Performance Model to evaluate investments as part of the day-to-day management of the Fund.

The following are four of the members of the Investment Team with primary responsibility for the management of the Fund:

Ronald A. Sauer is CEO, Chief Investment Officer, Senior Portfolio Manager, and the founder of Mazama. Mr. Sauer has been its Chief Executive Officer and Senior Portfolio Manager since the founding of the firm in 1997. Prior to founding the firm, he was the President and Director of Research for Black and Company, Inc., which he joined in 1983. Mr. Sauer has overall responsibility for the management of the Investment Team, oversees the portfolio construction process, conducts research and participates in the security selection process for the Fund.

Stephen C. Brink, CFA, is Senior Vice President, Director of Research and Portfolio Manager. Mr. Brink is a co-founder of Mazama and has been a Portfolio Manager and Director of Research since the firm was founded in 1997. Prior to joining Mazama, he was the Chief Investment Officer for US Trust’s Pacific Northwest office since 1991, where he had been employed since 1984. Mr. Brink conducts research and supports Mr. Sauer in portfolio construction for the Fund. He also oversees research information flow and quality.

Gretchen Novak, CFA, is Portfolio Manager and Sector Portfolio Manager. Ms. Novak joined Mazama in 1999. Prior to joining the firm, she was an Equity Analyst with Cramer Rosenthal McGlynn, LLC in New York. Ms. Novak is responsible for researching small and mid cap growth consumer discretionary companies and participates in the security selection process for the Fund.

Joel Rubenstein serves as an Associate Portfolio Manager, supporting the overall management of the Fund. He has worked as an equity research analyst for Mazama for the last four years. Prior to joining Mazama, he was employed by Banc of America Securities as a senior equity research associate in the technology group. He also spent three years as a senior research analyst at Analysis Group, a leading provider of economic and business strategy consulting services.

Santa Barbara Asset Management, LLC

Santa Barbara Asset Management, LLC (“Santa Barbara”), located at 200 East Carrillo, Suite 300, Santa Barbara, California 93101, is a California corporation and is a registered investment advisor. Santa Barbara uses quantitative and qualitative screens to narrow a universe of approximately 5,000 companies to a more manageable level for further extensive due diligence and research. Specifically, Santa Barbara focuses on companies with above-average growth that is sustainable over long periods of time. Santa Barbara seeks to own

management of the funds

companies that have shown steady, consistent growth in revenues, earnings and cash flow that build equity valuation. As of August 31, 2007, Santa Barbara had approximately $5.0 billion in assets under management.

Michael G. Mayfield has been the portfolio manager for the assets of the Fund managed by Santa Barbara since 2005. Mr. Mayfield is the President and Chief Investment Officer of, and a portfolio manager for, Santa Barbara and has been an investment professional with the firm since 1995.

The SAI provides additional information about the portfolio manager’s compensation, other accounts managed by the portfolio manager and the portfolio manager’s ownership of securities in the Funds, if any.

Sound Shore Management, Inc.

Sound Shore Management, Inc. (“Sound Shore”), 8 Sound Shore Drive, Greenwich, Connecticut 06830, was founded in 1978 and is wholly-owned by its principals and manages investment accounts for large corporate pension plans, foundations and endowment funds. Sound Shore utilizes a consistent and disciplined value-oriented investment strategy when selecting portfolio holdings and generally seeks out stocks that have favorable value to price characteristics relative to their historic valuations. Pursuant to this value-oriented approach, Sound Shore generally selects securities based on its judgment of fundamental value. Factors deemed particularly relevant in determining fundamental value include corporate earnings performance and expectations, historic price and earnings relationships, balance sheet characteristics and perceived management skills. When Sound Shore determines that a portfolio holding has lost its perceived value relative to other similar investments and investment alternatives, the holding will be sold. As of August 31, 2007, Sound Shore had approximately $8.0 billion of assets under management.

Harry Burn, III, CFA and T. Gibbs Kane, Jr., CFA, co-owners and founders of Sound Shore, serve as co-managers with John P. DeGulis of that portion of the Fund’s assets that are allocated to Sound Shore. Mr. Burn, Mr. Kane and Mr. DeGulis share responsibility for the management of the Fund’s assets allocated to Sound Shore equally. Mr. Burn, Mr. Kane and Mr. DeGulis have been portfolio managers for the Fund’s assets allocated to Sound Shore since 2001. Mr. Burn is Chairman and Director of Sound Shore. He received his B.A. and M.B.A. from the University of Virginia. Mr. Kane is President and Director of Sound Shore. He received his B.S.E. from the University of Pennsylvania Wharton School. Mr. DeGulis received a B.A. from Northwestern University and his M.B.A. from Columbia Business School. Both Messrs. Burn and Kane have been with Sound Shore since its inception; Mr. DeGulis joined Sound Shore in 1996.

Wellington Management Company, LLP

Wellington Management Company, LLP (“Wellington Management”), 75 State Street, Boston, Massachusetts 02109, is a Massachusetts limited liability partnership that is owned by its 98 partners. The firm is one of America’s oldest and largest independent investment firms, tracing its origins to 1928. As of August 31, 2007, Wellington Management had investment management authority with respect to approximately $588 billion in assets.

For its equity investment management, Wellington Management conducts extensive research and analysis and utilizes its own teams of research analysts. Investment decisions are generally made on a bottom-up basis upon Wellington Management’s own proprietary research.

Mammen Chally, CFA, Vice President and Equity Portfolio Manager of Wellington Management, has served as portfolio manager for the large cap portion of the Fund since 2000. Mr. Chally

management of the funds

joined the firm as an investment professional in 1994.

James A. Rullo, CFA, Senior Vice President and Director of the Quantitative Investment Group of Wellington Management, has been involved in portfolio management and securities analysis for the large cap portion of the Fund since 2000. Mr. Rullo joined the firm as an investment professional in 1994.

Doris T. Dwyer, Vice President and Equity Portfolio Manager of Wellington Management, has served as portfolio manager for the small cap portion of the Fund since 2003. Ms. Dwyer joined the firm as an investment professional in 1998.

David J. Elliott, CFA, Vice President and Equity Portfolio Manager of Wellington Management, has been involved in portfolio management and securities analysis for the small cap portion of the Fund since 2003. Mr. Elliott joined the firm in 1995 and has been an investment professional since 1999.

Sub-Advisor for the Income Fund

Tattersall Advisory Group, Inc.

Tattersall Advisory Group, Inc. (“Tattersall”), a wholly-owned subsidiary of Wachovia Bank, Charlotte, North Carolina, is located at 6802 Paragon Place, Suite 200, Richmond, Virginia 23230. Tattersall Advisory Group is a registered investment advisor founded in 1997. Tattersall Advisory Group was formerly the fixed-income division of Lowe, Brockenbrough & Tattersall, Inc. The firm employs a traditional bond management style, using in-house interest-rate analysis, yield-curve analysis, and extensive sector valuation to identify attractive risk versus reward opportunities. The firm manages assets for corporate pension plans, corporate cash and insurance reserves, foundations, endowments, Taft-Hartley plans and public entities located throughout the country. As of August 31, 2007, Tattersall had approximately $48.9 billion of assets under management.

Tattersall incorporates a team approach to managing the Fund, under the direction of Robert Calhoun, the Chief Investment Officer. Mr. Calhoun has been with Tattersall and its predecessor firm since 1988. Mr. Calhoun began as a Research Analyst and later Managing Director of Research and was named Chief Investment Officer in 2001. The Fund benefits from the expertise of investment specialists in each area of the market: Government, Corporate, Mortgage-Backed (MBS) and Asset-Backed Securities (ABS). Key investment professionals include Parham Berhooz, Managing Director of Credit Research; Eric Harper, Senior Research Analyst; Todd Kuimjian, Senior MBS Portfolio Manager; and Mehmet Camurdan, Senior ABS Portfolio Manager. Sector specialists are responsible for research, trading and allocating opportunities within their area of expertise.

Mr. Berhooz joined Tattersall in 1996 as a Research Analyst and later was named Senior Credit Analyst. He was named Managing Director in 2004.

Mr. Harper joined Tattersall in 2000. Prior to joining Tattersall, Mr. Harper was an Assistant Vice President and Fixed Income Research Analyst for Thompson, Siegal & Walmsley, Inc. from 1995 to 2000.

Mr. Kuimjian joined Tattersall in 2001. Prior to joining Tattersall, Mr. Kuimjian served as Associate Director for affiliates of Evergreen Investments from 1994 to 2001.

Mr. Camurdan joined Tattersall in 1999 as a Senior Research Analyst and was named Senior Asset-Backed Securities Portfolio Manager in 2005.

The SAI provides additional information about the portfolio managers’ compensation, other accounts managed by the portfolio manager and the portfolio managers’ ownership of securities in the Funds, if any.

your investment

BUYING SHARES:

For Assistance

If you need assistance in opening a New Covenant Funds account, call to speak with a shareholder service representative at 877-835-4531. You may also visit www.NewCovenantFunds.com/contact_us.asp to email your question(s) to the Funds.

The Funds are also available through approved selling agents or brokers. If your broker does not offer the Funds, please contact the Funds directly, or have your broker contact the Funds.

Purchase Amounts:

All purchases must be in U.S. dollars. A fee will be charged for any checks that do not clear. Third-party checks, money orders, traveler’s checks and credit card convenience checks are not accepted. Bank starter checks will not be accepted for initial purchases.


MINIMUM INITIAL INVESTMENT FOR EACH FUND:	$	500
MINIMUM ADDITIONAL INVESTMENT FOR EACH FUND:	$	100

INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT

By Regular Mail

Initial Investment:


1.	Carefully read and complete the account application form (also available at www.NewCovenantFunds.com). Establishing your account privileges now saves you the inconvenience of having to add them later.

2.	Make check payable to New Covenant Funds and indicate the Fund in which you wish to invest.

3.	Mail to: New Covenant Funds, P.O. Box 182959, Columbus, OH 43218-2959.

Subsequent Investment:


1.	Fill out an investment slip attached to your account statement and write your account number on your check. Or, if unavailable,

2.	Include the following information on a piece of paper:


	-	New Covenant Funds/Fund name;


	-	Amount invested;


	-	Account name; and


	-	Account number.


	Include your account number on your check.


3.	Mail to: New Covenant Funds, P.O. Box 182959, Columbus, OH 43218-2959.

By Overnight Service

See instructions 1-2 above for subsequent investments.


3.	Send to: New Covenant Funds Attn: Shareholder Services 3435 Stelzer Road, Columbus, OH 43219.

Electronic Purchases

Your bank must participate in the Automated Clearing House (“ACH”) and must be a U.S. bank. Your bank may charge for this service.

Establish an electronic purchase option on your account application or call 877-835-4531. Your account can generally be set up for electronic purchases within 15 days.

Call 877-835-4531 to arrange a transfer from your bank account.

By Wire Transfer

To make an investment in the Fund or to add to an existing account by wire, call 877-835-4531.

Note: Your bank may charge a wire transfer fee.

By Automatic Investment


	-	With an initial investment, indicate on your application that you would like to participate in the Automatic Investment Plan and complete the appropriate section on the application.
	-	Subsequent investments will be drawn from your bank account and invested into the Fund(s) automatically.

your investment

By Exchange


	-	To request an exchange of shares into another New Covenant Fund, call 877-835-4531 or register for account access online at www.NewCovenantFunds.com. You may also exchange your shares into the New Covenant Treasury Money Market Fund, which is an unaffiliated, separately managed, money market mutual fund. This exchange privilege is offered as a convenience to you. For an exchange into the New Covenant Treasury Money Market Fund, you must first receive that Fund’s prospectus. The exchange privilege must also be selected on your account application form. New Covenant Funds Distributor, Inc. may receive certain fees in connection with assets invested in the New Covenant Treasury Money Market Fund for services that it provides to investors in the Fund.


	-	No fee or charge will apply for exchanges, but there may be a capital gain or loss. The exchange privilege is subject to amendment or termination at any time upon 60 days’ prior notice.

Purchase Price

You pay no sales charge to invest in any of the Funds. Shares of the Funds are sold at the net asset value per share (NAV) next determined after receipt of the order by the Funds’ transfer agent, Citi Fund Services Ohio, Inc. (the “Transfer Agent”). The NAV multiplied by the number of Fund shares you own equals the value of your investment.

Determination of NAV

The NAV for each Fund is calculated at the close of regular trading hours of the New York Stock Exchange, which is normally 4:00 p.m., Eastern time. Each Fund calculates its NAV by adding up the total value of the Fund’s investments and other assets, subtracting liabilities, and then dividing that figure by the number of the Fund’s outstanding shares. Each Fund’s investments are valued based on market value, or where market quotations are not readily available, on fair value as determined in good faith under procedures approved by the Trust’s Board of Trustees. Fair value determinations are required for securities whose value is affected by a significant event that will materially affect the value of a domestic or foreign security and which occurs subsequent to the time of the close of the principal market on which such domestic or foreign security trades but prior to the calculation of the Fund’s NAV. When a Fund uses fair value pricing, the values assigned to the Fund’s investments may not be the quoted or published prices of the investments on their primary markets or exchanges. Each Fund’s daily NAV is available at www.NewCovenantFunds.com.

Timing of Purchase Requests

All requests received by the Funds’ Transfer Agent before the close of the New York Stock Exchange will be executed the same day, at that day’s closing share price. Orders received after the close of the New York Stock Exchange will be executed the following business day, at that day’s closing share price. All investments must be in U.S. dollars. Shares will not be priced and are not available for purchase or sale on days when the New York Stock Exchange is closed. However, to the extent that a Fund’s investments are traded in markets that are open when the New York Stock Exchange is closed, the value of the Fund’s investments may change on days when shares cannot be purchased or redeemed. If the New York Stock Exchange closes early, the deadlines for purchase orders will be accelerated to the earlier closing time.

Stock Exchange Closings

The New York Stock Exchange is typically closed for trading on the following holidays: New Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day, as observed.

Rights Reserved by the Funds

The Funds reserve the right to:


	-	reject any purchase order;


	-	suspend the offering of shares;

your investment

- reject any exchange request;


	-	vary the initial and subsequent investment minimums;


	-	waive the minimum investment requirement for any investor;


	-	redeem shares in any account and return the proceeds to the shareholder.

The Funds will automatically redeem shares if a purchase check is returned for insufficient funds. The Funds reserve the right to reject any third party check. However, third party checks issued by the Presbyterian Church (U.S.A.) Foundation may be accepted. The Funds may change or discontinue the exchange privilege, or temporarily suspend this privilege during unusual market conditions. The Funds reserve the right, in their sole discretion, to redeem shares in any account and return the proceeds to the shareholder. The Funds also reserve the right to make a “redemption in kind” payment in portfolio securities rather than cash if the amount you are redeeming is large enough to affect fund operations. Large redemptions with respect to each shareholder are considered to be the greater of $250,000 or 1% of a Fund’s assets.

Third Party Investments

If you invest through a third party (rather than directly), the policies and fees may be different than those described here. Banks, brokers and financial advisers may charge transaction fees and set different minimum investments or limitations on buying or selling shares. You will not be charged fees if you purchase shares of the Funds through a registered representative of the Funds or the Funds directly.

Customer Identification

To help the Government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person that opens a new account, and to determine whether that person’s name appears on Government lists of known or suspected terrorists and terrorist organizations.

As a result, the Funds must obtain the following information for each person that opens a new account:


	-	Name;
	-	Date of birth (for individuals);
	-	Residential or business street address (although post office boxes are still permitted for mailing); and
	-	Social security number, taxpayer identification number, or other identifying number.

You may also be asked for a copy of your driver’s license, passport or other identifying document in order to verify your identity. In addition, it may be necessary to verify your identity by cross-referencing your identification information with a consumer report or other electronic database. Additional information may be required to open accounts for corporations and other entities. Federal law prohibits the Funds and other financial institutions from opening a new account unless they receive the minimum identifying information listed above. The Funds may close your account or take other appropriate action if they are unable to verify your identity within a reasonable time. If your account is closed for this reason, your shares will be redeemed at the NAV next calculated after the account is closed.

To the extent permitted by applicable law, the Trust reserves the right to place limits on transactions in your account until your identity is verified.

your investment

SELLING SHARES:

HOW TO SELL SHARES

By Mail


1.	Call 877-835-4531 to request redemption forms or write a letter of instruction indicating:


	-	your Fund and account number;


	-	amount you wish to redeem;


	-	address where your check should be sent; if your redemption request directs the check to an alternate address, a signature guarantee stamp is required; and


	-	account owner signature.


2.	Mail to: New Covenant Funds, Attn: Shareholder Services, P.O. Box 182959, Columbus, OH 43218-2959.

By Overnight Service


1.	See instruction 1 above.

2.	Send to New Covenant Funds, Attn: Shareholder Services, 3435 Stelzer Road, Columbus, OH 43219.

By Telephone (unless you have declined telephone sales privileges)

Call 877-835-4531 with instructions as to how you wish to receive your proceeds (mail, wire, electronic transfer). If reasonable procedures are followed, neither the Funds nor their Transfer Agent will be liable for any loss, cost or expense for acting upon telephone instructions believed to be genuine or for any unauthorized telephone transactions.

By Wire Transfer

You must indicate this option on your application. The Fund will charge a $9 wire transfer fee for each wire transfer request. Note: Your financial institution may also charge a separate fee.

Call 877-835-4531 to request a wire transfer. If you call by 4 p.m., Eastern time, your payment will normally be wired to your bank on the next business day.

Electronic Redemptions
Your bank must participate in the ACH and must be a U.S. bank.

By Exchange

To request an exchange of shares into another New Covenant Fund, call 877-835-4531 or register for online account access at www.NewCovenantFunds.com. You may also exchange your shares into the New Covenant Treasury Money Market Fund, which is an unaffiliated, separately managed, money market mutual fund. This exchange privilege is offered as a convenience to shareholders of New Covenant Funds.

Redemptions Within 10 Business Days of Purchase by Check

When you have made an investment by check, the proceeds of your redemption may be held up to 10 business days until the Transfer Agent is satisfied that the check has cleared.

Undeliverable Distribution Checks

For any shareholder who chooses to receive distributions in cash:

If distribution checks (1) are returned and marked as “undeliverable” or (2) remain uncashed for six months, your account will be changed automatically so that all future distributions are reinvested in your account. Checks that remain uncashed for six months will be canceled and the money reinvested in the appropriate Fund.

Timing of Sale Requests

All requests received in good order by the Funds’ Transfer Agent before the close of the New York Stock Exchange, typically 4:00 p.m., Eastern time, will be executed the same day at that day’s NAV. Requests received after the close of the New York Stock Exchange will be executed the following business day, at that day’s NAV. Redemption orders are executed only on days when the New York Stock Exchange is open for trading. If the New York Stock Exchange closes early, the deadline for redemption orders will be accelerated to the earlier closing time.

your investment

Selling Recently Purchased Shares

The proceeds from a redemption of recently purchased Fund shares that have been paid for by check may be delayed until there is a reasonable belief that your check has cleared. This may take up to 10 business days after we receive your check.

Signature Guarantees

The Funds require a medallion signature guarantee on any redemption over $100,000 (but may require additional documentation or a medallion signature guarantee on any redemption request to help protect against fraud), the redemption of corporate, partnership or fiduciary accounts, or for certain types of transfer requests or account registration changes. A medallion signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency, savings association, or other financial institution which is participating in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange Medallion Signature Program (NYSE MSP). Please call 877-835-4531 for information on obtaining a signature guarantee. A notarized signature is not sufficient.

Redemption Policies

Payment for redemptions of Fund shares is usually made within one business day, but not later than seven calendar days after receipt of your redemption request, unless the check used to purchase the shares has not yet cleared. The Trust may suspend the right of redemption or postpone the date of payment for more than seven days during any period when (1) trading on the New York Stock Exchange is restricted or the New York Stock Exchange is closed for other than customary weekends and holidays, (2) the SEC has by order permitted such suspension for the protection of the Funds’ shareholders, or (3) an emergency exists making disposal of portfolio securities or valuation of net assets not reasonably practicable. In addition to the foregoing, the Trust reserves the right to suspend payment of a request for redemption for a period of up to 10 business days after receipt of a redemption request in good order (a) when it is not reasonably practicable for the Funds to fairly determine the true holder of any Fund’s shares or (b) for the purpose of preserving the rights and interests of the true owner of the shares.

Other Documents

Additional documents may be required when shares are registered in the name of a corporation, partnership, association, agent, fiduciary, trust, estate or other organization. For further information, call the Funds’ Transfer Agent at 877-835-4531.

EXCHANGE OR

TRANSFER OF SHARES

Exchange Privilege

You may exchange shares of one of the Funds for shares in another Fund at NAV without payment of any fee or charge. You can do this by contacting the Funds’ Transfer Agent, in writing or by telephone or by visiting the Funds’ web site at www.NewCovenantFunds.com. Shareholders who are not tax-exempt organizations should know that an exchange is considered a sale of shares of one Fund and the purchase of shares of another Fund. The exchange may result in a gain or loss for federal income tax purposes. If you wish to use the exchange privilege, you may elect the service on your account application or by a signature-guaranteed letter of instruction.

If the Funds’ Transfer Agent receives your exchange instructions in good order in writing, by telephone (call 877-835-4531) or through the Funds’ web site by the valuation time on any business day, your exchange will be processed on that day.

your investment

For an exchange request to be in good order, it must include:


	-	your name exactly as it appears on your account;


	-	your account number;


	-	the amount to be exchanged;


	-	the names of the Funds from which and to which the exchange is to be made.

Transfer of Ownership

You may transfer Fund shares or change the name or form in which your shares are registered by writing to the Funds’ Transfer Agent. Your letter of instruction must clearly identify the account number, name(s) and number of shares to be transferred, and provide a certified tax identification number by way of a completed new account application or W-9 form, and include the signature(s) of all registered owners. The signature(s) on the transfer instructions must be guaranteed.

Frequent Trading Policy

Frequent trading into and out of a Fund can have adverse consequences for that Fund and for long-term shareholders in the Fund. The Funds believe that frequent or excessive short-term trading activity by shareholders of a Fund may be detrimental to long-term shareholders because those activities may, among other things: (a) dilute the value of shares held by long-term shareholders; (b) cause the Funds to maintain larger cash positions than would otherwise be necessary; (c) increase brokerage commissions and related costs and expenses; and (d) incur additional tax liability. The Funds therefore discourage frequent purchases and redemptions by shareholders and they do not make any effort to accommodate this practice. To protect against such activity, the Board of Trustees has adopted policies and procedures that are intended to permit the Funds to curtail frequent or excessive short-term trading by shareholders, including monitoring and periodically reviewing shareholder trading activity to determine if there exists a pattern of excessive purchases and redemptions in a Fund’s shares among one or more shareholder accounts. At the present time the Funds do not impose limits on the frequency of purchases and redemptions, nor do they limit the number of exchanges into any of the Funds. The Funds reserve the right, however, to impose certain limitations at any time with respect to trading in shares of the Funds, including suspending or terminating trading privileges in Fund shares, for any investor whom the Funds believe has a history of abusive trading or whose trading, in the judgment of the Funds, has been or may be disruptive to the Funds.

SHAREHOLDER SERVICES

Telephone Information


	-	Your Account: If you have questions about the Funds or your account, including purchases, redemptions and distributions, call the Funds’ Transfer Agent toll-free at 877-835-4531, between 9:00 a.m. and 5:00 p.m., Eastern time, on business days.

Account Statements

The Funds provide you with these helpful services and information about your account:


	-	a statement after every transaction;
	-	an annual account statement reflecting all transactions for the year;
	-	tax information, which will be mailed by January 31 of each year, a copy of which will also be filed with the Internal Revenue Service for taxable investors; and
	-	financial statements with a summary of portfolio composition and performance that will be mailed at least twice a year.

Account statements are also available online. Sign up for E-delivery through the Account Access link at www.NewCovenantFunds.com to receive e-mail notification when quarterly statements, a new prospectus, semi-annual or annual fund report is available. The e-mails will provide you with a link to logon to your account via secure access to view your statement or other important information. You will continue to receive a paper copy of your statement in the mail unless you opt-out of paper delivery.

your investment

Internet

You may obtain access to account information by visiting the Funds’ web site at www.NewCovenantFunds.com. The web site provides share price and price change information for all the Funds and gives account balances and information on the most recent transactions and allows exchanges of shares.

Integrated Voice Response System

You may obtain access to account information by calling 877-835-4531. The system provides share price and price change information for all the Funds and gives account balances and information on the most recent transactions and allows exchanges of shares.

Account Minimum

You must keep at least $500 worth of shares in your account to keep the account open. If, after giving you 30 days’ prior written notice, your account value is still below $500, we may redeem your shares and send you a check for the redemption proceeds.

Telephone Transactions

To use telephone purchase, redemption and exchange privileges, you must have selected these services on your original account application or submitted a subsequent request in writing to add these services to your account. The Funds and the Transfer Agent reserve the right to refuse any telephone transaction when they are unable to confirm to their satisfaction that a caller is the account owner or a person preauthorized by the account owner. The Transfer Agent has established security procedures to prevent unauthorized account access. The telephone transaction privilege may be suspended, limited, modified or terminated at any time without prior notice by the Funds or the Transfer Agent. Neither the Trust nor any of its service providers will be liable for any loss or expense in acting upon telephone instructions that are reasonably believed to be genuine. (See section 8 of the application)

Automatic Investment Plan

Once an account has been opened with a minimum investment of $500, you can make additional purchases of shares of the Funds with the automatic withdrawal of monies from your bank account. Amounts may be withdrawn from your bank account on a monthly or quarterly basis in minimum amounts of $50. (See section 7 of the application)

Systematic Withdrawal Plan

Once you have established an account with $5,000 or more, you may automatically receive funds from your account on a monthly, quarterly or semi-annual basis (minimum of $50). To request a form to start the Systematic Withdrawal Plan, call 877-835-4531 or visit the Funds’ web site, www.NewCovenantFunds.com.

Householding Policy

One copy of each prospectus, annual and semi-annual report will be sent to all related accounts at a common address. Each document will be mailed to the registered address with the first line addressed to “New Covenant Fund Shareholder at.”

By adopting the householding policy, we are responding to shareholder requests and will reduce printing and mailing expenses. If you prefer to receive copies for each account, you must call us at 877-835-4531 during business hours (9:00 a.m. to 5:00 p.m., Eastern time). All requests will be processed within 30 days.

Sign up for E-delivery through the Account Access link at www.NewCovenantFunds.com to receive e-mail notification when quarterly statements, a new prospectus, semi-annual or annual Fund report is available. The e-mails will provide you with a link to logon to your account via secure access to view your statement or other important information. You will continue to receive a paper copy of your statement in the mail unless you opt-out of paper delivery.

your investment

Shareholder Services Agreements

The Trust is a party to certain Shareholder Services Agreements pursuant to which each Fund is authorized to make payments to certain entities, which may include investment advisors, banks, trust companies and other types of organizations (“Authorized Service Providers”), for providing administrative services with respect to shares of the Funds attributable to or held in the name of the Authorized Service Provider for its clients or other parties with whom it has a servicing relationship. Under the terms of each Shareholder Services Agreement, each Fund is authorized to pay an Authorized Service Provider (which may include affiliates of the Funds) a shareholder services fee at the rate of 0.25% on an annual basis of the average daily net asset value of the shares of the Fund attributable to or held in the name of the Authorized Service Provider for providing certain administrative services to Fund shareholders with whom the Authorized Service Provider has a servicing relationship. In connection with the implementation and operation of the Shareholder Services Agreements, the Advisor has agreed to waive the amount of the investment advisory fees payable to it by any Fund to the extent of the amount paid in fees by a Fund to any affiliated Authorized Service Provider and certain unaffiliated Authorized Service Providers under the Shareholder Services Agreements.

distributions and taxes

Distributions

The Funds pass along to your account your share of investment earnings in the form of dividends and distributions. Fund dividends are the net interest and dividends earned on investments after Fund expenses. The Funds will at least annually declare and pay dividends from their net investment income and distribute any net capital gains obtained through Fund investment transactions. Interest and dividend payments will normally be distributed as income dividends on a quarterly basis for each of the Funds.

Unless you elect otherwise on your application, all dividends and distributions paid by a Fund will be reinvested in additional shares of that Fund. They will be credited to your account in that Fund at the same NAV per share as would apply to cash purchases on the applicable dividend payment date. Unless you are a tax-exempt organization, all distributions a Fund pays to you will be taxable when paid, regardless of whether they are taken in cash or reinvested in shares of the Fund. To change your dividend election, you must notify the Funds’ Transfer Agent, in writing at least fifteen days prior to the applicable dividend record date.

Taxes

Each Fund intends to continue to qualify as a regulated investment company. This status exempts each Fund from paying federal income tax on the income or capital gains it distributes to its shareholders.

Unless you are a tax-exempt organization, your investment in the Funds will be subject to the following tax consequences:


	-	Dividends from net investment income and distributions from short-term capital gains are taxable as ordinary income (except as described below).
	-	Distributions from capital gains are taxable as capital gain, which may be taxed at different rates depending on the length of time the Fund held those assets.
	-	Dividends and distributions may also be subject to state and local taxes.
	-	Certain dividends paid to you in January will be taxable as if they had been paid the previous December.
	-	A redemption of your Fund shares, including exchanging shares, is a taxable event and any gain on the transaction may be subject to federal income tax.

Tax legislation enacted in May 2003 generally provides for a maximum tax rate for individual taxpayers of 15% on long-term gains and from certain qualifying dividends on corporate stock. These rate reductions do not apply to corporate taxpayers. The following are guidelines for how certain distributions by the Funds are generally taxed to individual taxpayers:


	-	Distributions of earnings from qualifying dividends and qualifying long-term capital gains will be taxed at a maximum rate of 15%.
	-	Note that distributions of earnings from dividends paid by certain “qualified foreign corporations” can also qualify for the lower tax rates on qualifying dividends.
	-	A shareholder will also have to satisfy a more than 60-day holding period with respect to any distributions of qualifying dividends in order to obtain the benefit of the lower tax rate.

distributions and taxes

Distributions and Taxes

Distributions of earnings from non-qualifying dividends, interest income, other types of ordinary income and short-term capital gains will be taxed at the ordinary income tax rate applicable to the taxpayer:


	-	Note that the 15% rate of tax applicable to certain dividends does not apply to dividends paid to foreign shareholders.

If you are subject to tax, after the end of each calendar year you will receive a statement (Form 1099) of the federal income tax status of each Fund’s dividends and other distributions paid to you during the year. You should keep all of your Fund statements for accurate tax-accounting purposes.

If you are subject to tax (are not a tax-exempt organization), and you purchase shares shortly before a record date for a dividend or distribution, a portion of your investment will be returned as a taxable distribution.

You must provide the Trust with your correct taxpayer identification number and certify that you are not subject to backup withholding. If you do not, the Trust is required by law to withhold 28% of your taxable distributions and redemptions.

You should consult your tax advisor concerning state or local taxation of such dividends, and the federal, state and local taxation of capital gains distributions.

financial highlights

The financial highlights tables are meant to help you understand each Fund’s financial performance for the last five fiscal years. Certain information reflects financial results for a single share of a Fund. The total returns shown in the tables represent the rate that you would have earned or lost on an investment in each Fund assuming reinvestment of all dividends and distributions. This information has been audited by Ernst & Young LLP whose report, along with the Trust’s financial statements, are included in the Annual Report to shareholders, which is available upon request at no charge.

NEW COVENANT FUNDS

For a Share outstanding throughout each period.


	Growth Fund
	For the		For the		For the		For the		For the
	Year Ended		Year Ended		Year Ended		Year Ended		Year Ended
	June 30, 2007		June 30, 2006		June 30, 2005		June 30, 2004		June 30, 2003
Net Asset Value, Beginning of Year		$32.76		$29.92		$28.07		$23.51		$24.13

INVESTMENT ACTIVITIES:
Net investment income		0.26		0.18		0.21		0.07		0.10
Net realized and unrealized gain/(loss) from investments and foreign currency transactions		6.17		2.86		1.85		4.58		(0.63)

Total from Investment Activities		6.43		3.04		2.06		4.65		(0.53)

DIVIDENDS:
Net investment income		(0.29)		(0.20)		(0.21)		(0.09)		(0.09)
Tax return of capital		—		—		—		—		—

Total Dividends		(0.29)		(0.20)		(0.21)		(0.09)		(0.09)

Change in net asset value per share		6.14		2.84		1.85		4.56		(0.62)

Net Asset Value, End of Year		$38.90		$32.76		$29.92		$28.07		$23.51

Total Return		19.68%		10.17%		7.38%		19.81%		(2.17%)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of year (in 000’s)		$1,033,536		$906,010		$878,583		$834,575		$708,885
Ratio of expenses to average net assets		1.08%		1.07%		1.11%		1.13%		1.13%
Ratio of net investment income to average net assets		0.73%		0.58%		0.75%		0.32%		0.47%
Ratio of expenses to average net assets (a)		1.28%		1.28%		1.36%		1.39%		1.13%
Portfolio turnover rate		65%		51%		76%		94%		63%

(a) Ratios excluding waivers and expenses paid indirectly.

financial highlights

NEW COVENANT FUNDS

For a Share outstanding throughout each period.


	Income Fund
	For the			For the			For the		For the		For the
	Year Ended			Year Ended			Year Ended		Year Ended		Year Ended
	June 30, 2007			June 30, 2006			June 30, 2005		June 30, 2004		June 30, 2003
Net Asset Value, Beginning of Year		$24.28			$25.56			$25.17		$26.62		$25.54

INVESTMENT ACTIVITIES:
Net investment income		1.12			1.00			0.94		0.96		1.00
Net realized and unrealized gain/(loss) from investments		0.25			(1.23)			0.55		(0.96)		1.42

Total from Investment Activities		1.37			(0.23)			1.49		—		2.42

DIVIDENDS:
Net investment income		(1.13)			(1.04)			(1.04)		(0.90)		(1.06)
Net realized gains		—			(0.01)			(0.06)		(0.44)		(0.28)
Tax return of capital		—	*		—	*		—		(0.11)		—

Total Dividends		(1.13)			(1.05)			(1.10)		(1.45)		(1.34)

Change in net asset value per share		0.24			(1.28)			0.39		(1.45)		1.08

Net Asset Value, End of Year		$24.52			$24.28			$25.56		$25.17		$26.62

Total Return		5.65%			(0.90%)			6.02%		0.00%		9.63%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of year (in 000’s)		$537,345			$526,359			$527,208		$524,025		$525,734
Ratio of expenses to average net assets		0.84%			0.84%			0.86%		0.86%		0.85%
Ratio of net investment income to average net assets		4.49%			4.04%			3.68%		3.70%		3.79%
Ratio of expenses to average net assets (a)		1.01%			1.01%			1.08%		1.11%		0.85%
Portfolio turnover rate		258%			263%			206%		242%		226%

* Less than $0.005.

(a) Ratios excluding waivers and expenses paid indirectly.

financial highlights

NEW COVENANT FUNDS

For a Share outstanding throughout each period.


	Balanced Growth Fund
	For the		For the			For the		For the		For the
	Year Ended		Year Ended			Year Ended		Year Ended		Year Ended
	June 30, 2007		June 30, 2006			June 30, 2005		June 30, 2004		June 30, 2003
Net Asset Value, Beginning of Year		$81.30		$78.20			$74.65		$67.88		$67.25

INVESTMENT ACTIVITIES:
Net investment income (a)		1.83		1.52			1.41		1.34		1.27
Net realized and unrealized gain/(loss) from investments (a)		9.56		3.10			3.54		6.73		0.71

Total from Investment Activities		11.39		4.62			4.95		8.07		1.98

DIVIDENDS:
Net investment income		(1.83)		(1.52)			(1.40)		(1.23)		(1.27)
Net realized gains		—		—			—		—		(0.08)
Tax return of capital		—		—	*		—		(0.07)		—

Total Dividends		(1.83)		(1.52)			(1.40)		(1.30)		(1.35)

Change in net asset value per share		9.56		3.10			3.55		6.77		0.63

Net Asset Value, End of Year		$90.86		$81.30			$78.20		$74.65		$67.88

Total Return		14.11%		5.93%			6.68%		11.95%		3.10%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of year (in 000’s)		$353,344		$312,077			$305,524		$302,446		$272,467
Ratio of expenses to average net assets		0.12%		0.12%			0.14%		0.15%		0.14%
Ratio of net investment income to average net assets		2.11%		1.85%			1.83%		1.52%		1.96%
Ratio of expenses to average net assets (b)		0.37%		0.38%			0.22%		0.15%		0.14%
Portfolio turnover rate		7%		10%			5%		12%		15%

* Less than $0.005.

(a) Includes income or gains/(losses) from affiliates.

(b) Ratios excluding waivers and expenses paid indirectly.

financial highlights

NEW COVENANT FUNDS

For a Share outstanding throughout each period.


	Balanced Income Fund
	For the			For the		For the		For the		For the
	Year Ended			Year Ended		Year Ended		Year Ended		Year Ended
	June 30, 2007			June 30, 2006		June 30, 2005		June 30, 2004		June 30, 2003
Net Asset Value, Beginning of Year		$18.99			$18.90		$18.24		$17.52		$17.10

INVESTMENT ACTIVITIES:
Net investment income (a)		0.59			0.52		0.48		0.53		0.52
Net realized and unrealized gain/(loss) from investments (a)		1.41			0.09		0.66		0.70		0.47

Total from Investment Activities		2.00			0.61		1.14		1.23		0.99

DIVIDENDS:
Net investment income		(0.59)			(0.52)		(0.48)		(0.48)		(0.52)
Net realized gains		—			—		—		—		(0.05)
Tax return of capital		—	*		—		—		(0.03)		—

Total Dividends		(0.59)			(0.52)		(0.48)		(0.51)		(0.57)

Change in net asset value per share		1.41			0.09		0.66		0.72		0.42

Net Asset Value, End of Year		$20.40			$18.99		$18.90		$18.24		$17.52

Total Return		10.65%			3.26%		6.32%		7.07%		6.00%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of year (in 000’s)		$121,855			$122,512		$124,809		$124,915		$122,576
Ratio of expenses to average net assets		0.15%			0.15%		0.17%		0.18%		0.16%
Ratio of net investment income to average net assets		2.95%			2.71%		2.58%		2.34%		3.08%
Ratio of expenses to average net assets (b)		0.40%			0.41%		0.25%		0.18%		0.16%
Portfolio turnover rate		7%			13%		6%		12%		18%

* Less than $0.005.

(a) Includes income or gains/(losses) from affiliates.

(b) Ratios excluding waivers and expenses paid indirectly.

an important notice concerning your privacy

At the New Covenant Funds (the “Funds”), we are committed to handling personal information responsibly. We recognize and respect the privacy expectations of those who purchase shares of the Funds and believe the confidentiality and security of personal financial information communicated to us is one of our fundamental responsibilities.

Our privacy policy applies only to Fund investors who have a direct customer relationship with us. If you own Fund shares through a relationship with a third-party broker, bank, investment advisor, or other financial service provider, that third party’s privacy policies may apply to you and our privacy policies may not.

Our privacy policy will continue to cover information we may collect about you at the time you apply to purchase shares of the Funds, during the time you hold shares and after your account is closed. Please note that we may amend this Notice at any time and will inform you of any changes to this Notice as required by law.

We Respect Your Privacy

We appreciate that you may have provided us with personal financial information. We strive to maintain the privacy of such information. This Notice describes what non-public personal information we collect about you, why we collect it, and when we may share it with others, including entities affiliated with us, such as the Presbyterian Foundation and the New Covenant Trust Company, N.A. (collectively “our affiliated companies”), as well as with those not affiliated with us. We hope this Notice will enable you to understand how we collect and share non-public personal information that we gather about you. Throughout this Notice, we refer to the non-public information that personally identifies you or your accounts as “personal information.”


1.	What Personal Information Do We Collect About You? To serve you better and manage your account, it often is important that we collect and maintain accurate information about you. We may obtain this information from forms you submit to us, from your dealings with us, from our Web sites, and from other sources.

For example:


	•	Account applications and other forms submitted by shareholders of the Funds;
	•	Correspondence, written or electronic, or telephone contacts with shareholders of, or consumers inquiring about, the Funds;
	•	Transaction history of shareholder accounts with the Funds; or
	•	Other sources in connection with making available Fund shares or other services.


2.	When Do We Disclose Personal Information We Collect About You?

To serve you better and manage your account, we may disclose personal information we collect about you to our affiliated companies and to non-affiliated third parties as set forth below.


a.	Information we disclose to our affiliated companies

In order to manage your account(s) effectively, including servicing and processing your transactions, to let you know about products and services offered by us and our affiliated companies, and as otherwise required or permitted by law, we may disclose personal information to our affiliated companies. Offers for products and services from our affiliated companies are developed under conditions designed to safeguard your personal information.


b.	Information we disclose to third parties

We do not disclose personal information that we collect about you to non-affiliated third parties, except to enable them to provide services on our behalf, to perform certain joint marketing and servicing agreements with other financial institutions, or as otherwise required or permitted by law. For example, some instances where we may disclose information about you to non-affiliated third parties include: for servicing and processing transactions, to offer our own products and services, to protect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When we share personal information with these companies, they generally are required to limit their use of personal information to the particular purpose for which it was shared and they generally are not allowed to share personal information with others except to fulfill that limited purpose.

THIS IS NOT A PART OF THE PROSPECTUS

an important notice concerning your privacy


3.	How Do We Protect the Security and Confidentiality of Personal Information We Collect About You? We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on our behalf may also receive personal information, and we require them to adhere to confidentiality standards with respect to such information.

4.	How Can You Limit the Sharing of Certain Types of Personal Information with Our Affiliated Companies? We respect your privacy and offer you choices as to whether we share with our affiliated companies personal information that we collected to determine your eligibility for products and services you request (“eligibility information”). Please note that, even if you direct us not to share eligibility information with our affiliated companies (“eligibility opt out”), we may still share personal information, including eligibility information, with those companies in circumstances excluded from the opt out under applicable law, such as to process transactions or to service your account. We may also share certain other types of personal information with our affiliated companies such as your name, address, telephone number, e-mail address and account number(s), and information about your transactions and experiences with us. If you wish to opt out, you may do so by:


	•	Calling us toll-free at 800-858-6127
	•	Writing to us at the following address: 200 East Twelfth Street Jeffersonville, IN 47130

Additionally, independent of your right to direct us not to share your eligibility information with our affiliated companies, you may limit our affiliates from marketing (“marketing opt out”) their products or services to you based on eligibility information that we share with them. This limitation does not apply in certain circumstances, such as if you currently do business with one of our affiliates or if you ask to receive information or offers from them. If you wish to limit such marketing offers, you may do so by:


	•	Calling us toll-free at 800-858-6127
	•	Writing to us at the following address: 200 East Twelfth Street Jeffersonville, IN 47130

If you choose to write to us for either eligibility opt out or marketing opt out, your written request should include your name, address, telephone number and account number(s) to which the opt out applies and should not be sent with any other correspondence. In order to process your request, we require that the request be provided by you directly and not through a third party. If you have previously notified us about your privacy preferences, it is not necessary to do so again unless you decide to change your preferences. Your opt-out preference will remain in effect with respect to this policy (as it may be amended) until you notify us otherwise in writing. If you have a joint account, your direction for us not to share this information with our affiliated companies will be applied to all account holders on that account.

Important Information for Residents of Vermont and California
If you are a resident of Vermont, you are automatically considered to have opted out of sharing with our affiliated companies. Additionally, if you are a resident of Vermont, we will only share your personal information pursuant to a joint marketing agreement as allowed by applicable law. If you are a California resident, you have additional rights to limit how we use your personal information. Please refer to the document entitled “Important Privacy Choices for Consumers.”

THIS IS NOT A PART OF THE PROSPECTUS

Important Privacy Choices for California Consumers

You have the right to control whether we share some of your personal information.

Please read the following information carefully before you make your choices below.

Your Rights

You have the following rights to restrict the sharing of personal and financial information with our affiliates (companies we own or control) and outside companies that we do business with. Nothing in this form prohibits the sharing of information necessary for us to follow the law, as permitted by law, or to give you the best service on your accounts with us. This includes sending you information about some other products or services.

Your Choices

Restrict Information Sharing With Companies We Own or Control (Affiliates): Unless you say “No,” we may share personal and financial information about you with our affiliated companies.

( ) NO, please do not share personal and financial information with your affiliated companies.

Restrict Information Sharing With Other Companies We Do Business With To Provide Financial Products And Services: Unless you say “No,” we may share personal and financial information about you with outside companies we contract with to provide financial products and services to you.

( ) NO, please do not share personal and financial information with outside companies you contract with to provide financial products and services.

Time Sensitive Reply

You may make your privacy choice(s) at any time. Your choice(s) marked here will remain unless you state otherwise. However, if we do not hear from you we may share some of your information with affiliated companies and other companies with whom we have contracts to provide products and services.

Name:

Account or Policy Number(s):

Signature:

To exercise your choices do one of the following:


(1)	Fill out, sign and send back this form to us (you may want to make a copy for your records);

(2)	Call this toll-free number 800-858-6127;

(3)	Reply electronically by contacting us through the following Internet option: www.NewCovenantFunds.com.

Important Notice for California Residents: The notice above is provided to you as required by a new California law that affords you certain rights regarding use of your personal information that, in some cases, are different from those described in our Privacy Notice. Please read it carefully. This law is now being challenged in court. In the event that the court strikes down the law, in whole or in part, and this impacts any section of the notice, the choices made under that section would be considered null and void. If this happens, we will notify you, by the same means this notice was sent, of the court’s decision.

THIS IS NOT A PART OF THE PROSPECTUS

HISTORY OF THE FUNDS

New Covenant Funds (the “Trust”) is a Delaware statutory trust organized pursuant to a Trust Instrument dated September 30, 1998. The Trust was organized to offer separate series of shares and currently offers four separate series: New Covenant Growth Fund (“Growth Fund”), New Covenant Income Fund (“Income Fund”), New Covenant Balanced Growth Fund (“Balanced Growth Fund”) and New Covenant Balanced Income Fund (“Balanced Income Fund”) (each, a “Fund” and collectively, the “Funds”). Currently, there is one class of shares issued by each Fund. The Board of Trustees may issue additional classes of shares or series at any time without prior approval of the shareholders. The Balanced Growth Fund and Balanced Income Fund may also be referred to as the “Balanced Funds.”

The Trust is classified as an open-end, management investment company. The Income Fund and the Growth Fund are diversified, which means that, with respect to 75% of its total assets, a Fund will not invest more than 5% of its assets in the securities of any single issuer. The Balanced Funds are diversified by virtue of the fact that the underlying Funds in which they invest (Growth Fund and Income Fund) are diversified.

DESCRIPTION OF INVESTMENTS AND RISKS

In addition to its objective and strategies, each of the Funds has the common objective of making investments consistent with social-witness principles adopted by the General Assembly of the Presbyterian Church (U.S.A). These principles may evolve over time and currently include, among others, certain limitations on investments in military contractors, distillers of alcoholic beverages, tobacco companies, gambling companies, manufacturers of gambling equipment and manufacturers of firearms. The Funds may choose to sell otherwise profitable investments in companies which have been identified as being in conflict with the established social-witness principles of the Presbyterian Church (U.S.A.). Beyond these principles, each Fund pursues different investment objectives and strategies. For purposes of determining which securities are eligible for investment by the Funds and those which are not eligible for investment, the Advisor maintains a Prohibited Security List which identifies those specific companies which may not be purchased by the Funds. This list contains those companies involved in the military and tobacco industries that are prohibited for investment in accordance with the policies that are set by the General Assembly of the Presbyterian Church (USA) and brought forth by the Mission Responsibility through Investment Committee Guidelines (the “MRTI Guidelines”). In addition to these companies involved in the military and tobacco industries which are prohibited for investment by the Funds pursuant to the MRTI Guidelines, the list also includes certain other companies that derive significant amounts of their revenue from the alcohol, gambling, tobacco and firearms industries. With respect to the criteria utilized by the Advisor in order to determine whether a company that is involved in the alcohol, gambling, tobacco or firearms industries will be included on the list, the Advisor includes those companies: (1) that derive greater than 50% of their 3 year average revenues from alcohol, gambling, tobacco or firearms, and (2) that have market capitalizations greater than $250 million in the case of domestic companies and greater than $750 million in the case of foreign companies. The Advisor relies on numerous sources of relevant market information and data for purposes of evaluating the criteria for inclusion on the Prohibited Security List and the Advisor consults closely with each of the sub-advisors regarding their reliance of the list in connection with their acquisition of portfolio securities for the Funds. The Prohibited Security List is updated at least annually by the Advisor.

NEW COVENANT GROWTH FUND

INVESTMENT OBJECTIVE

The Growth Fund’s investment objective is long-term capital appreciation. Dividend income, if any, will be incidental.

PRINCIPAL STRATEGIES

Under normal market conditions, at least 80% of the Fund’s assets will be invested in a diversified portfolio of common stocks of companies that the Fund’s portfolio managers believe have long-term growth potential.

NEW COVENANT INCOME FUND

INVESTMENT OBJECTIVE

The Income Fund’s investment objective is a high level of current income with preservation of capital.

PRINCIPAL STRATEGIES

Under normal market conditions, at least 80% of the Fund’s assets will be invested in a diversified portfolio of bonds and other debt obligations of varying maturities.

NEW COVENANT BALANCED GROWTH FUND

INVESTMENT OBJECTIVE

The Balanced Growth Fund’s investment objective is to produce capital appreciation with less risk than would be present in a portfolio of only common stocks.

PRINCIPAL STRATEGIES

To pursue its objective, the Fund invests primarily in shares of the Growth Fund and the Income Fund, with a majority of its assets generally invested in shares of the Growth Fund.

NEW COVENANT BALANCED INCOME FUND

INVESTMENT OBJECTIVE

The Balanced Income Fund’s investment objective is to produce current income and long-term growth of capital.

PRINCIPAL STRATEGIES

To pursue its objective, the Fund invests primarily in shares of the Growth Fund and the Income Fund, with a majority of its assets generally invested in shares of the Income Fund.

* * *

You should understand that all investments involve risk and there can be no guarantee against loss resulting from an investment in the Funds. Unless otherwise indicated, all percentage limitations governing the investments of the Funds apply only at the time of the transaction.

The following information should be read in conjunction with sections of the Funds’ Prospectus. The investment practices described below, which apply to the Growth Fund and the Income Fund, are not fundamental (unless otherwise indicated) and may be changed by the Board of Trustees without approval of the shareholders.

The NCF Investment Department of New Covenant Trust Company, N.A. (the “Advisor”) acts as a manager of managers for the Funds and selects and retains various sub-advisors. The sub-advisors employ portfolio managers to make the day-to-day investment decisions regarding portfolio holdings of the Funds.

FORWARD COMMITMENTS, WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS

The Growth Fund and the Income Fund may purchase or sell securities on a when-issued or delayed-delivery basis and make contracts to purchase or sell securities for a fixed price at a future date beyond customary settlement time. Debt securities are often issued on this basis. No income will accrue on securities purchased on a when-issued or delayed-delivery basis until the securities are delivered. The Funds will maintain cash and U.S. government securities or other liquid portfolio securities at least equal in value to commitments for when-issued securities. Securities purchased or sold on a when-issued, delayed-delivery or forward-commitment basis involve a risk of loss if the value of the security to be purchased declines prior to settlement date. Although the Funds would generally purchase securities on a when-issued, delayed-delivery or a forward-commitment basis with

the intention of acquiring the securities, the Funds may dispose of such securities prior to settlement if the portfolio manager deems it appropriate to do so.

The Funds may dispose of or renegotiate a when-issued or forward commitment. The Funds will normally realize a capital gain or loss in connection with these transactions. For purposes of determining the Income Fund’s average dollar-weighted maturity, the maturity of when-issued or forward-commitment securities will be calculated from the commitment date.

When the Funds purchase securities on a when-issued, delayed-delivery or forward-commitment basis, the Funds will maintain cash, U.S. government securities or other liquid portfolio securities having a value (determined daily) at least equal to the amount of the Funds’ purchase commitments. In the case of a forward-commitment to sell portfolio securities, the custodian will hold the portfolio securities in a segregated account while the commitment is outstanding. These procedures are designed to ensure that the Funds will maintain sufficient assets at all times to cover their obligations under when-issued purchases, forward-commitments and delayed-delivery transactions.

HIGH YIELD/HIGH RISK SECURITIES

The Income Fund may invest a limited amount of assets in debt securities that are rated below investment grade (hereinafter referred to as “lower-rated securities”) or that are unrated but deemed equivalent to those rated below investment grade by the portfolio managers. The lower the ratings of such debt securities, the greater their risks. These debt instruments generally offer a higher current yield than that available from higher-grade issues, and typically involve greater risk. The yields on high-yield/high-risk bonds will fluctuate over time. In general, prices of all bonds rise when interest rates fall and fall when interest rates rise. While less sensitive to changing interest rates than investment-grade debt, lower-rated securities are especially subject to adverse changes in general economic conditions and to changes in the financial condition of their issuers. During periods of economic downturn or rising interest rates, issuers of these instruments may experience financial stress that could adversely affect their ability to make payments of principal and interest, and increase the possibility of default.

Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may also decrease the values and liquidity of these securities, especially in a market characterized by only a small amount of trading and with relatively few participants. These factors can also limit a Fund’s ability to obtain accurate market quotations for these securities, making it more difficult to determine the Fund’s net asset value.

In cases where market quotations are not available, lower-rated securities are valued using guidelines established by the Board of Trustees. Perceived credit quality in this market can change suddenly and unexpectedly, and may not fully reflect the actual risk posed by a particular lower-rated or unrated security.

VARIABLE AND FLOATING RATE INSTRUMENTS

With respect to variable and floating-rate instruments that may be acquired by the Income Fund, the portfolio managers will consider the earning power, cash flows and other liquidity ratios of the issuers and guarantors of such instruments and, if the instruments are subject to demand features, will monitor their financial status to meet payment on demand. Where necessary to ensure that a variable or floating-rate instrument meets the Fund’s quality requirements, the issuer’s obligation to pay the principal of the instrument will be backed by an unconditional bank letter or line of credit, guarantee or commitment to lend.

FUTURES CONTRACTS

The Funds may each enter into financial futures contracts. Such contracts may either be based on indexes of particular groups or varieties of securities (“Index Futures Contracts”), or be for the purchase or sale of debt obligations (“Debt Futures Contracts”). Such futures contracts are traded on exchanges licensed and regulated by the Commodity Futures Trading Commission. The Funds enter into futures contracts to gain a degree of protection against anticipated changes in interest rates that would otherwise have an adverse effect upon the economic interests of the Funds. However, the costs of and possible losses from futures transactions will reduce a Fund’s yield from interest on its holdings of debt securities. Income from futures transactions constitutes taxable gain.

For the Funds, the custodian places cash, U.S. government securities or other liquid portfolio securities into a segregated account in an amount equal to the value of the total assets committed to the consummation of futures positions. If the value of the securities placed in the segregated account declines, additional cash or securities are required to be placed in the account on a

daily basis so that the value of the account equals the amount of the Funds’ commitments with respect to such contracts. Alternatively, the Funds may cover such positions by purchasing offsetting positions, or covering such positions partly with cash, U.S. government securities or other liquid portfolio securities, and partly with offsetting positions.

A Debt Futures Contract is a binding contractual commitment that, if held to maturity, requires the Fund to make or accept delivery, during a particular month, of obligations having a standardized face value and rate of return. By purchasing a Debt Futures Contract, the Fund legally obligates itself to accept delivery of the underlying security and to pay the agreed price; by selling a Debt Futures Contract it legally obligates itself to make delivery of the security against payment of the agreed price. However, positions taken in the futures markets are normally not held to maturity. Instead they are liquidated through offsetting transactions which may result in a profit or loss. While Debt Futures Contract positions taken by the Fund are usually liquidated in this manner, the Fund may instead make or take delivery of the underlying securities whenever it appears economically advantageous.

A clearing corporation, associated with the exchange on which futures contracts are traded, assumes responsibility for close-outs of such contracts and guarantees that the sale or purchase, if still open, is performed on the settlement date.

By entering into futures contracts, the Funds seek to establish with more certainty than would otherwise be possible the effective rate of return on its portfolio securities. The Funds may, for example, take a “short” position in the futures market by selling a Debt Futures Contract for future delivery of securities held by the Fund in order to hedge against an anticipated rise in interest rates that would adversely affect the value of such securities. Or it might sell an Index Futures Contract based on a group of securities whose price trends show a significant correlation with those of securities held by a Fund. When hedging of this character is successful, any depreciation in the value of portfolio securities is substantially offset by appreciation in the value of the futures position. On other occasions the Fund may take a “long” position by purchasing futures contracts. This is done when a Fund is not fully invested or expects to receive substantial proceeds from the sale of portfolio securities or of Fund shares, and anticipates the future purchase of particular securities but expects the rate of return then available in the securities markets to be less favorable than rates that are currently available in the futures markets. The Funds expect that, in the normal course, securities will be purchased upon termination of a long futures position, but under unusual market conditions, a long futures position may be terminated without a corresponding purchase of securities.

Debt Futures Contracts currently involve only taxable obligations and do not encompass municipal securities. The value of Debt Futures Contracts on taxable securities, as well as Index Futures Contracts, may not vary in direct proportion with the value of the Fund’s securities, limiting the ability of the Fund to hedge effectively against interest-rate risk.

The investment restriction concerning futures contracts does not specify the types of index-based futures contracts into which the Fund may enter because it is impossible to foresee what particular indexes may be developed and traded or may prove useful to the Fund in implementing its overall risk-management strategies. For example, price trends for a particular index-based futures contract may show a significant correlation with price trends in the securities held by the Fund, even though the securities comprising the index are not necessarily identical to those held by the Fund. In any event, the Fund would not enter into a particular index-based futures contract unless the portfolio managers determined that such a correlation existed.

Index Futures Contracts and Debt Futures Contracts currently are traded actively on the Chicago Board of Trade and the International Monetary Market at the Chicago Mercantile Exchange.

SEGREGATED ACCOUNTS

The Funds may be required to segregate assets (such as cash, U.S. government securities and other liquid portfolio securities) or otherwise provide coverage consistent with applicable regulatory policies. This would be in respect to each Fund’s permissible obligations under the call and put options it writes, the forward foreign currency exchange contracts it enters into and the futures contracts it enters into.

OPTIONS ON FUTURES CONTRACTS

To attempt to gain additional protection against the effects of interest-rate fluctuations, the Funds may purchase and write (sell) put and call options on futures contracts that are traded on a U.S. exchange or board of trade and enter into related closing transactions. There can be no assurance that such closing transactions will be available at all times. In return for the premium paid, such an option gives the purchaser the right to assume a position in a futures contract at any time during the option period

for a specified exercise price.

The Funds may purchase put options on futures contracts in lieu of, and for the same purpose as, sale of a futures contract. It also may purchase such put options in order to hedge a long position in the underlying futures contract.

The purchase of call options on futures contracts is intended to serve the same purpose as actual purchase of the futures contracts. The Funds may purchase call options on futures contracts in anticipation of a market advance when it is not fully invested.

The Funds may write (sell) a call option and a futures contract in order to hedge against a decline in the price of the index or debt securities underlying the futures contract. If the price of the futures contract at expiration is below the exercise price, the Funds would retain the option premium, which would offset, in part, any decline in the value of its portfolio securities.

The writing (selling) of put options on futures contracts is similar to purchase of the futures contracts, except that, if market price declines, the Fund would pay more than the current market price for the underlying securities or index units. The net cost to the Fund would be reduced, however, by the premium received on sale of the puts, less any transaction costs.

COVERED CALL OPTIONS

The Funds may write (sell) covered call options on their portfolio securities in an attempt to enhance investment performance. No more than 20% of a Fund’s net assets may be subject to covered options.

When the Funds write (sell) a covered call option, it gives the purchaser of the option the right to buy the underlying security at the price specified in the option (the “exercise price”) at any time during the option period, generally ranging up to nine months. If the option expires unexercised, the Fund will realize gain to the extent of the amount received for the option (the “premium”) less any commission paid. If the option is exercised, a decision over which the Fund has no control, the Fund must sell the underlying security to the option holder at the exercise price. By writing a covered option, the Fund forgoes, in exchange for the premium less the commission (“net premium”), the opportunity to profit during the option period from an increase in the market value of the underlying security above the exercise price.

When the Funds sell an option, an amount equal to the net premium received by the Fund is included in the liability section of the Fund’s Statement of Assets and Liabilities as a deferred credit. The amount of the deferred credit will be subsequently marked-to-market to reflect the current market value of the option written. The current market value of a traded option is the last sale price or, in the absence of a sale, the mean between the closing bid and asked price. If an option expires on its stipulated expiration date or if the Fund enters into a closing purchase transaction (i.e., the Fund terminates its obligation as the writer of the option by purchasing a call option on the same security with the same exercise price and expiration date as the option previously written), the Fund will realize a gain (or loss if the cost of a closing purchase transaction exceeds the net premium received when the option was sold) and the deferred credit related to such option will be eliminated. If an option is exercised, the Fund will realize a long-term or short-term gain or loss from the sale of the underlying security, and proceeds of the sale will be increased by the net premium originally received. The writing of covered options may be deemed to involve pledge of the securities against which the option is being written. Securities against which options are written will be segregated on the books of the Fund’s custodian.

RISKS OF FUTURES AND OPTIONS INVESTMENTS

A Fund will incur brokerage fees in connection with its futures and options transactions, and it will be required to segregate funds for the benefit of brokers as margin to guarantee performance of its futures and options contracts. In addition, while such contracts will be entered into to reduce certain risks, trading in these contracts entails certain other risks. Thus, while a Fund may benefit from the use of futures contracts and related options, unanticipated changes in interest rates may result in a poorer overall performance for that Fund than if it had not entered into any such contracts. Additionally, the skills required to invest successfully in futures and options may differ from skills required for managing other assets in a Fund’s portfolio.

The Funds may engage in over-the-counter options transactions with broker-dealers who make markets in these options. The portfolio managers will consider risk factors such as their creditworthiness when determining a broker-dealer with which to engage in options transactions. The ability to terminate over-the-counter option positions is more limited than with exchange-traded option positions because the predominant market is the issuing broker rather than an exchange, and may involve the risk that broker-dealers participating in such transactions will not fulfill their obligations. Certain over-the-counter options may be deemed to be illiquid securities and may not be readily marketable. The portfolio managers will monitor the creditworthiness of

dealers with which the Funds enter into such options transactions under the general supervision of the Trust’s Board of Trustees.

PURCHASING CALL OPTIONS

The Funds may purchase call options to the extent that call option coverage by a Fund does not constitute more than 20% of the Fund’s total assets. When a Fund purchases a call option, in return for a premium paid by the Fund to the writer of the option, the Fund obtains the right to buy the security underlying the option at a specified exercise price at any time during the term of the option. The writer of the call option, who receives the premium upon writing the option, has the obligation, upon exercise of the option, to deliver the underlying security against payment of the exercise price. The advantage of purchasing call options is that the Funds may alter portfolio characteristics and modify portfolio maturities without incurring the cost associated with those transactions. The Funds may, following purchase of a call option, liquidate its position by effecting a closing sale transaction. This is accomplished by selling an option of the same series as the option previously purchased. The Funds will realize a profit from a closing sale transaction if the price received on the transaction is more than the premium paid (less any commissions) to purchase the original call option; the Funds will realize a loss from a closing sale transaction if the price received on the transaction is less than the premium paid (less any commissions) to purchase the original call option.

Although the Funds will generally purchase only those call options for which there appears to be an active secondary market, there is no assurance that a liquid secondary market on an exchange will exist for any particular option, or at any particular time, and for some options no secondary market on an exchange may exist. In such event, it may not be possible to effect closing transactions in particular options, with the result that the Fund would have to exercise its options in order to realize any profit and would incur brokerage commissions upon the exercise of such options and upon the subsequent disposition of the underlying securities acquired through exercise of such options. Further, unless the price of the underlying security changes sufficiently, a call option purchased by the Funds may expire without any value to the Funds, in which event the Funds would realize a capital loss that would be characterized as short-term unless the option was held for more than one year.

PURCHASING PUT OPTIONS

No more than 20% of a Fund’s total assets may be subject to put options. Each Fund will, at all times during which it holds a put option, own the security covered by such option. The purchase of the put on substantially identical securities held will constitute a short sale for tax purposes, the effect of which is to create short-term capital gain on the sale of the security and to suspend running of its holding period (and treat it as commencing on the date of the closing of the short sale) or that of a security acquired to cover the same if, at the time the put was acquired, the security had not been held for more than one year.

A put option purchased by a Fund gives it the right to sell one of its securities for an agreed-upon price up to an agreed-upon date. The Funds may purchase put options in order to protect against a decline in the market value of the underlying security below the exercise price less the premium paid for the option (“protective puts”). The ability to purchase put options will allow the Funds to protect unrealized gains in an appreciated security in their portfolios without actually selling the security. If the security does not drop in value, the Funds will lose the value of the premium paid. A Fund may sell a put option which it has previously purchased prior to sale of the securities underlying such option. Such sale will result in a net gain or loss depending upon whether the amount received on the sale is more or less than the premium and other transaction costs paid on the put option which is sold.

The Funds may sell a put option purchased on individual portfolio securities. Additionally, the Funds may enter into closing sale transactions. A closing sale transaction is one in which a Fund, when it is the holder of an outstanding option, liquidates its position by selling an option of the same series as the option previously purchased.

WRITING PUT OPTIONS

The Funds may also write put options on a secured basis, which means that a Fund will maintain, in a segregated account with its custodian, cash or U.S. government securities in an amount not less than the exercise price of the option at all times during the option period. The amount of cash or U.S. government securities held in the segregated account will be adjusted on a daily basis to reflect changes in the market value of the securities covered by the put options written by the Funds. Secured put options will generally be written in circumstances where the portfolio managers wish to purchase the underlying security for a Fund’s portfolio at a price lower than the current market price of the security. In such event, the Fund would write a secured put option at an exercise price which, reduced by the premium received on the option, reflects the lower price it is willing to pay. With regard to the writing of put options, a Fund will limit the aggregate value of the obligations underlying such put options to 20% of its total net assets.

Following the writing of a put option, the Funds may wish to terminate the obligation to buy the security underlying the option by effecting a closing purchase transaction. This is accomplished by buying an option of the same series as the option previously written. A Fund may not, however, effect such a closing transaction after it has been notified of the exercise of the option.

LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

A Fund will not engage in transactions in futures contracts or related options for speculation but only as a hedge against changes resulting from market conditions in the values of debt securities held in its portfolio or which it intends to purchase and where the transactions are appropriate to the reduction of the Fund’s risks. The Trustees have adopted policies (which are not fundamental and may be modified by the Trustees without a shareholder vote) that, immediately after the purchase for a Fund of a futures contract or a related option, the value of the aggregate initial margin deposits with respect to all futures contracts (both for receipt and delivery), and premiums paid on related options entered into on behalf of the Fund, will not exceed 5% of the fair market value of the Fund’s total assets. Additionally, the value of the aggregate premiums paid for all put and call options held by a Fund will not exceed 20% of its net assets. Futures contracts and put options written (sold) by a Fund will be offset by assets of the Fund held in a segregated account in an amount sufficient to satisfy obligations under such contracts and options.

FOREIGN SECURITIES

The Funds may invest up to 40% of their total assets in foreign securities. The Funds may invest without limit in U.S. dollar denominated foreign securities. The Income Fund may invest up to 40% of its assets in foreign bonds denominated in foreign currencies. No more than 20% of a Fund’s total assets will be represented by a given foreign currency.

Investors should recognize that investing in foreign securities involves certain special considerations, including those set forth below, which are not typically associated with investing in U.S. securities and that may favorably or unfavorably affect the Funds’ performance. As foreign companies are not generally subject to uniform accounting, auditing and financial reporting standards, practices and requirements comparable to those applicable to domestic companies, there may be less publicly available information about a foreign company than about a domestic company. Many foreign securities markets, while growing in volume of trading activity, have substantially less volume than the U.S. market, and securities of some foreign issuers are less liquid and more volatile than securities of domestic issuers. Similarly, volume and liquidity in most foreign bond markets is less than in the U.S. and, at times, volatility of price can be greater than in the U.S. Fixed commissions on some foreign securities exchanges and bid-to-asked spreads in foreign bond markets are generally higher than commissions and bid-to-asked spreads in U.S. markets, although the Funds will endeavor to achieve the most favorable net results on their portfolio transactions. There is generally less government supervision and regulation of securities exchanges, brokers and listed companies than in the U.S. It may be more difficult for the Funds’ agents to keep currently informed about corporate actions that may affect the prices of portfolio securities. Communications between the U.S. and foreign countries may be less reliable than within the U.S., thus increasing the risk of delayed settlements of portfolio transactions or loss of certificates for portfolio securities. Payment for securities without delivery may be required in certain foreign markets. In addition, with respect to certain foreign countries, there is the possibility of expropriation or confiscatory taxation, political or social instability, or diplomatic developments that could affect U.S. investments in those countries. Investments in foreign securities may also entail certain risks such as possible currency blockages or transfer restrictions, and the difficulty of enforcing rights in other countries. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position. Further, to the extent investments in foreign securities involve currencies of foreign countries, the Funds may be affected favorably or unfavorably by changes in currency rates and in exchange-control regulations, and may incur costs in connection with conversion between currencies.

Investments in companies domiciled in developing countries may be subject to potentially greater risks than investments in developed countries. The possibility of revolution and the dependence on foreign economic assistance may be greater in these countries than in developed countries. Each Fund seeks to mitigate the risks associated with these considerations through diversification and active professional management.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

A Fund may enter into forward foreign currency exchange contracts in connection with its investments in foreign securities. A forward foreign currency exchange contract (“forward contract”) involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the

time of the contract. These contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. A forward contract generally has no deposit requirement, and no commissions are charged at any stage for trades.

The maturity date of a forward contract may be any fixed number of days from the date of the contract agreed upon by the parties, rather than a predetermined date in a given month, and forward contracts may be in any amount agreed upon by the parties rather than predetermined amounts. Also, forward contracts are traded directly between banks or currency dealers so that no intermediary is required. A forward contract generally requires no margin or other deposit. Closing transactions with respect to forward contracts are effected with the currency trader who is a party to the original forward contract.

The Funds may enter into foreign contracts in several circumstances. First, when a Fund enters into a contract for the purchase or sale of a security denominated in a foreign currency, or when a Fund anticipates the receipt in a foreign currency of interest and dividend payments on a security it holds, the Fund may desire to “lock in” the U.S. dollar price of the security or the U.S. dollar equivalent of such interest and dividend payments, as the case may be. By entering into a forward contract for the purchase or sale, for a fixed amount of U.S. dollars, of the amount of foreign currency involved in the underlying transaction, the Fund will attempt to protect itself against a possible loss resulting from an adverse change in the relationship between the U.S. dollar and the applicable foreign currency during the period between the date on which the security is purchased or sold, or on which the dividend payment is declared, and the date on which such payments are made or received.

The Funds’ activities involving forward contracts may be limited by the requirements of Subchapter M of the Internal Revenue Code for qualification as a regulated investment company.

REPURCHASE AGREEMENTS

The Funds may enter into repurchase agreements with any member bank of the Federal Reserve System and any broker-dealer that is recognized as a reporting government securities dealer, whose creditworthiness has been determined by the Advisor or Sub-Advisor. A repurchase agreement, which provides a means for the Funds to earn income on monies for periods as short as overnight, is an arrangement under which the purchaser (i.e., the Fund) acquires a security (“Obligation”) and the seller agrees, at the time of sale, to repurchase the Obligation at a specified time and price. The repurchase price may be higher than the purchase price, the difference being income to the Fund, or the purchase and repurchase prices may be the same, with interest at a stated rate due to the Fund at the time of repurchase. In either case, the income to the Fund is unrelated to the interest rate on the Obligation itself. For purposes of the Investment Company Act of 1940, as amended (the “1940 Act”), a repurchase agreement is deemed to be a loan to the seller of the Obligation and is therefore covered by the Funds’ investment restrictions applicable to loans. Each repurchase agreement entered into by a Fund requires that if the market value of the Obligation becomes less than the repurchase price (including interest), the Fund will direct the seller of the Obligation, on a daily basis, to deliver additional securities so that the market value of all securities subject to the repurchase agreement will equal or exceed the repurchase price. In the event a Fund is unsuccessful in seeking to enforce the contractual obligation to deliver additional securities, and the seller defaults on its obligation to repurchase, the Fund bears the risk of any drop in market value of the Obligation(s). In the event that bankruptcy or insolvency proceedings were commenced with respect to a bank or broker-dealer before its repurchase of the Obligation, the Fund might encounter delay and incur costs before being able to sell the security. Delays may involve loss of interest or decline in price of the Obligation. In the case of repurchase agreements, it is not clear whether a court would consider a repurchase agreement as being owned by the particular Fund or as being collateral for a loan by the Fund. If a court were to characterize the transaction as a loan and the Fund had not perfected a security interest in the Obligation, the Funds could be required to return the Obligation to the bank’s estate and be treated as an unsecured creditor. As an unsecured creditor, a Fund would be at risk of losing some or all of the principal and income involved in that transaction. The portfolio managers seek to minimize the risk of loss through repurchase agreements by analyzing the creditworthiness of the obligor, in this case the seller of the Obligations.

Securities subject to a repurchase agreement are held in a segregated account and the amount of such securities is adjusted on a daily basis so as to provide a market value at least equal to the repurchase price. The Funds may not invest more than 15% of their net assets in repurchase agreements maturing in more than seven days.

REVERSE REPURCHASE AGREEMENTS

Each Fund may obtain funds for temporary defensive purposes by entering into reverse repurchase agreements with banks and broker-dealers. Reverse repurchase agreements involve sales by a Fund of portfolio assets concurrently with an agreement by that

Fund to repurchase the same assets at a later date at a fixed price. During the reverse repurchase agreement period, the Fund continues to receive principal and interest payments on these securities. During the time a reverse repurchase agreement is outstanding, the Fund will maintain a segregated custodial account consisting of cash, U.S. government securities or other liquid portfolio securities having a value at least equal to the repurchase price, plus accrued interest, subject to the agreement. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Fund may decline below the price of the securities the Fund is obligated to repurchase. Reverse repurchase agreements are considered borrowings by the Fund, and as such are subject to the investment limitations discussed in the section entitled “Borrowing.”

SECURITIES LENDING

To increase return on portfolio securities, the Growth Fund and the Income Fund may lend their portfolio securities on a short-term basis to banks, broker-dealers and other institutional investors pursuant to agreements requiring that the loans be continuously secured by collateral equal at all times in value to at least the market value of the securities loaned. Collateral will consist of U.S. government securities, cash equivalents or irrevocable letters of credit. The Funds will not lend portfolio securities in excess of one-third of the value of their respective total assets, including collateral received from such loans. There may be risks of delay in receiving additional collateral or in recovering the securities loaned or even a loss of rights in the collateral should the borrower of the securities fail financially. In determining whether to lend securities, the Funds consider all relevant factors and circumstances, including creditworthiness of the borrower. Although voting rights of the loaned securities may pass to the borrower, if a material event affecting the investment in the loaned securities is to occur, the applicable Fund must terminate the loan and vote the securities. Alternatively, the Fund may enter into an arrangement that ensures that it can vote the proxy even while the borrower continues to hold the securities.

SECURITIES OF OTHER INVESTMENT COMPANIES

The Balanced Funds invest primarily in shares of the Growth Fund and the Income Fund. The Balanced Funds believe that this diversification offers the opportunity to benefit from a variety of investment approaches and strategies employed by experienced investment professionals. The Growth Fund and the Income Fund have adopted a policy by which they may invest in securities issued by other investment companies within the limitations of the 1940 Act, which permits them to acquire securities of registered open-end investment companies except pursuant to Section 12(d)(1)(F) and Section 12(d)(1)(G) under the 1940 Act. As a shareholder of another investment company, the Funds would bear along with other shareholders their pro rata portion of the investment company’s expenses, including advisory fees.

MORTGAGE-BACKED SECURITIES AND MORTGAGE PASS-THROUGH SECURITIES

The Income Fund may invest in mortgage-backed securities, which are interests in pools of mortgage loans, including mortgage loans made by savings and loan institutions, mortgage banks, commercial banks and others. The Fund also invests in mortgage-backed securities guaranteed primarily by the Government National Mortgage Association (“GNMA”). Pools of mortgage loans are assembled as securities for sale to investors by various governmental, government-related and private organizations as further described below. The Fund may also invest in debt securities that are secured with collateral consisting of mortgage-backed securities (see “Collateralized Mortgage Obligations”), and in other types of mortgage-related securities.

A decline in interest rates may lead to a faster rate of repayment of the underlying mortgages, and expose the Fund to a lower rate of return upon reinvestment. To the extent that such mortgage-backed securities are held by the Fund, the prepayment right will tend to limit to some degree the increase in net asset value of the Fund because the value of the mortgage-backed securities held by the Fund may not appreciate as rapidly as the price of non-callable debt securities.

When interest rates rise, mortgage prepayment rates decline, thus lengthening the life of a mortgage-related security and increasing the price volatility of that security, affecting the price volatility of the Fund’s shares.

Interests in pools of mortgage-backed securities differ from other forms of debt securities, which normally provide for periodic payment of interest in fixed amounts, with principal payments at maturity or specified call dates. Instead, these securities provide a monthly payment that consists of both interest and principal payments. In effect, these payments are a “pass-through” of the monthly payments made by the individual borrowers on their mortgage loans, net of any fees paid to the issuer or guarantor of such securities. Additional payments are caused by repayments of principal resulting from sale of the underlying property, refinancing or foreclosure, net of fees or costs which may be incurred. Some mortgage-related securities (such as securities issued by the GNMA) are described as “modified pass-through.” These securities entitle the holder to receive all interest and principal

payments owed on the mortgage pool, net of certain fees, at scheduled payment dates regardless of whether or not the mortgagor actually makes the payment.

The principal governmental guarantor of mortgage-related securities is the GNMA. GNMA is a wholly-owned U.S. government corporation within the Department of Housing and Urban Development. GNMA is authorized to guarantee, with the full faith and credit of the U.S. government, timely payment of principal and interest on securities issued by institutions approved by GNMA (such as savings and loan institutions, commercial banks and mortgage bankers) and backed by pools of FHA-insured or VA-guaranteed mortgages. These guarantees, however, do not apply to the market value or yield of mortgage-backed securities or to the value of the Fund’s shares. Also, GNMA securities often are purchased at a premium over the maturity value of the underlying mortgages. This premium is not guaranteed and will be lost if prepayment occurs.

Government-related guarantors (i.e., not backed by the full faith and credit of the U.S. government) include the Federal National Mortgage Association (“FNMA”) and the Federal Home Loan Mortgage Corporation (“FHLMC”). FNMA is a government-sponsored corporation owned entirely by private stockholders. It is subject to general regulation by the Secretary of Housing and Urban Development. FNMA purchases conventional (i.e., not insured or guaranteed by any government agency) mortgages from a list of approved seller/servicers, which include state and federally-chartered savings and loan associations, mutual savings banks, commercial banks and credit unions and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to timely payment of principal and interest by FNMA but are not backed by the full faith and credit of the U.S. government.

FHLMC is a corporate instrumentality of the U.S. government and was created by Congress in 1970 for the purpose of increasing the availability of mortgage credit for residential housing. FHLMC stock is owned by twelve Federal Home Loan Banks. FHLMC issues Participation Certificates (“PCs”), which represent interests in conventional mortgages from FHLMC’s national portfolio. FHLMC guarantees the timely payment of interest and ultimate collection of principal, but PCs are not backed by the full faith and credit of the U.S. government.

Commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers also create pass-through pools of conventional mortgage loans. Such issuers may, in addition, be the originators and/or servicers of the underlying mortgage loans as well as the guarantors of the mortgage-related securities. Pools created by such non-governmental issuers generally offer a higher rate of interest than government and government-related pools because there are no direct or indirect government or agency guarantees of payments. However, timely payment of interest and principal of these pools may be supported by various forms of insurance or guarantees, including individual loan, title, pool and hazard insurance and letters of credit. The insurance and guarantees are issued by governmental entities, private insurers and the mortgage poolers. Such insurance and guarantees and the creditworthiness of the issuers thereof will be considered in determining whether a mortgage-related security meets the Fund’s investment quality standards. There can be no assurance that the private insurers or guarantors can meet their obligations under the insurance policies or guarantee arrangements. The Fund may buy mortgage-related securities without insurance or guarantees, if through an examination of the loan experience and practices of the originators/servicers and poolers, the portfolio managers determine that they meet the Fund’s quality standards. Although the market for such securities is becoming increasingly liquid, securities issued by certain private organizations may not be readily marketable.

COLLATERALIZED MORTGAGE OBLIGATIONS (“CMOS”)

The Income Fund may invest in CMOs, which are hybrids between mortgage-backed bonds and mortgage pass-through securities. Similar to a bond, interest and prepaid principal are paid, in most cases, semiannually. CMOs may be collateralized by whole mortgage loans, but are more typically collateralized by portfolios of mortgage pass-through securities guaranteed by GNMA, FHLMC, or FNMA, and their income streams.

CMOs are structured into multiple classes, each bearing a different stated maturity. Actual maturity and average life will depend upon the prepayment experience of the collateral. CMOs provide for a modified form of call protection through a de facto breakdown of the underlying pool of mortgages according to how quickly the loans are repaid. Monthly payment of principal received from the pool of underlying mortgages, including prepayments, is first returned to investors holding the shortest maturity class. Investors holding the longer maturity classes receive principal only after the first class has been retired. An investor is partially guarded against a sooner-than-desired return of principal because of the sequential payments.

In a typical CMO transaction, a corporation issues multiple series, (e.g., A, B, C, Z) of CMO bonds (“Bonds”). Proceeds of the Bond offering are used to purchase mortgages or mortgage pass-through certificates (“Collateral”). The Collateral is pledged to a

third party trustee as security for the Bonds. Principal and interest payments from the Collateral are used to pay principal on the Bonds in the order A, B, C, Z. The Series A, B, and C Bonds all bear current interest. Interest on the Series Z Bond is accrued and added to principal and a like amount is paid as principal on the Series A, B, or C Bonds currently being paid off. When the Series A, B, and C Bonds are paid in full, interest and principal on the Series Z Bond begins to be paid currently. With some CMOs, the issuer serves as a conduit to allow loan originators (primarily builders or savings and loan associations) to borrow against their loan portfolios.

OTHER ASSET-BACKED SECURITIES

The Income Fund may also invest in other asset-backed securities. The securitization techniques used to develop mortgage-backed securities are now being applied to a broad range of assets. Through the use of trusts and special-purpose corporations, various types of assets, including automobile loans, computer leases and credit-card receivables, are being securitized in pass-through structures similar to the mortgage pass-through structures described above or in a structure similar to the CMO structure. The Income Fund may invest in these and other types of asset-backed securities that may be developed in the future. In general, the collateral supporting these securities is of shorter maturity than mortgage loans and is less likely to experience substantial prepayments with interest-rate fluctuations.

Several types of asset-backed securities have already been offered to investors, including Certificates of Automobile Receivables (“CARS^sm “). CARS^sm represent undivided fractional interests in a trust whose assets consist of a pool of motor vehicle retail installment-sales contracts and security interests in the vehicles securing the contracts. Payments of principal and interest on CARS^sm are passed through monthly to certificate holders, and are guaranteed up to certain amounts and for a certain time period by a letter of credit issued by a financial institution unaffiliated with the trustee or originator of the trust. An investor’s return on CARS^sm may be affected by early prepayment of principal on the underlying vehicle sales contracts. If the letter of credit is exhausted, the trust may be prevented from realizing the full amount due on a sales contract because of state law requirements and restrictions relating to foreclosure sales of vehicles and the obtaining of deficiency judgments following such sales or because of depreciation, damage or loss of a vehicle, the application of federal and state bankruptcy and insolvency laws, or other factors. As a result, certificate holders may experience delays in payments or losses if the letter of credit is exhausted.

Asset-backed securities present certain risks that are not presented by mortgage-backed securities. Primarily, these securities may not have the benefit of any security interest in the related assets. Credit-card receivables are generally unsecured and the debtors are entitled to the protection of a number of state and federal consumer credit laws, many of which give such debtors the right to set off certain amounts owed on the credit cards, thereby reducing the balance due. There is the possibility that recoveries on repossessed collateral may not, in some cases, be available to support payments on these securities.

Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. To lessen the effect of failures by obligors on underlying assets to make payments, the securities may contain elements of credit support which fall into two categories: (i) liquidity protection, and (ii) protection against losses resulting from ultimate default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances, generally by the entity administering the pool of assets, to ensure that the receipt of payments on the underlying pool occurs in a timely fashion. Protection against losses results from payment of the insurance obligations on at least a portion of the assets in the pool. This protection may be provided through guarantees, policies or letters of credit obtained by the issuer or sponsor from third parties, through various means of structuring the transaction or through a combination of such approaches. The Fund will not pay any additional or separate fees for credit support. The degree of credit support provided for each issue is generally based on historical information reflecting the level of credit risk associated with the underlying assets. Delinquency or loss in excess of that anticipated or failure of the credit support could adversely affect the return on an investment in such a security.

The Fund may also invest in residual interests in asset-backed securities. In the case of asset-backed securities issued in a pass-through structure, the cash flow generated by the underlying assets is applied to make required payments on the securities and to pay related administrative expenses. The residual in an asset-backed security pass-through structure represents the interest in any excess cash flow remaining after making the foregoing payments. The amount of residual cash flow resulting from a particular issue of asset-backed securities will depend on, among other things, characteristics of the underlying assets, coupon rates on the securities, prevailing interest rates, administrative expenses and actual prepayment experience on the underlying assets. Asset-backed security residuals not registered under the Securities Act of 1933, as amended (the “Securities Act”), may be subject to certain restrictions on transferability. In addition, there may be no liquid market for such securities.

The availability of asset-backed securities may be affected by legislative or regulatory developments. It is possible that such developments may require the Fund to dispose of any existing holdings of such securities.

ZERO COUPON SECURITIES

The Income Fund may invest in zero coupon securities, which pay no cash income and are sold at substantial discounts from their value at maturity. When held to maturity, their entire income, which consists of accretion of discount, comes from the difference between the issue price and their value at maturity. Zero coupon securities are subject to greater market-value fluctuations from changing interest rates than debt obligations of comparable maturities which make current distributions of interest (cash). Zero coupon securities which are convertible into common stock offer the opportunity for capital appreciation as increases (or decreases) in market value of such securities closely follow movements in the market value of the underlying common stock. Zero coupon convertible securities generally are expected to be less volatile than the underlying common stocks, as they usually are issued with maturities of 15 years or less and are issued with options and/or redemption features, exercisable by the holder of the obligation, entitling the holder to redeem the obligation and receive a defined cash payment.

Zero coupon securities include securities issued directly by the U.S. Treasury, and U.S. Treasury bonds or notes and their unmatured interest coupons and receipts for their underlying principal (“coupons”) that have been separated by their holder, typically a custodian bank or investment brokerage firm. A holder will separate the interest coupons from the underlying principal (the “corpus”) of the U.S. Treasury security. A number of securities firms and banks have stripped the interest coupons and receipts and then resold them in custodial receipt programs with a number of different names, including “Treasury Income Growth Receipts” (TIGRS^tm) and Certificate of Accrual on Treasuries (CATS^tm). The underlying U.S. Treasury bonds and notes themselves are held in book-entry form at the Federal Reserve Bank or, in the case of bearer securities (i.e., unregistered securities which are owned ostensibly by the bearer or holder thereof), in trust on behalf of the owners thereof. Counsel to the underwriters of these certificates or other evidences of ownership of the U.S. Treasury securities have stated that, for federal tax and securities purposes, in their opinion purchasers of such certificates, such as the Fund, most likely will be deemed the beneficial holder of the underlying U.S. government securities. The Fund understands that the staff of the Securities and Exchange Commission (the “SEC”) no longer considers such privately stripped obligations to be U.S. government securities, as defined in the 1940 Act; therefore, the Fund intends to adhere to this staff position and will not treat such privately stripped obligations to be U.S. government securities for the purpose of determining if the Fund is “diversified” under the 1940 Act.

The U.S. Treasury has facilitated transfers of ownership of zero coupon securities by accounting separately for the beneficial ownership of particular interest coupon and corpus payments on Treasury securities through the Federal Reserve book-entry record-keeping system. The Federal Reserve program as established by the Treasury Department is known as “STRIPS” or “Separate Trading of Registered Interest and Principal of Securities.” Under the STRIPS program, the Fund will be able to have its beneficial ownership of zero coupon securities recorded directly in the book-entry record-keeping system in lieu of having to hold certificates or other evidences of ownership of the underlying U.S. Treasury securities.

When U.S. Treasury obligations have been stripped of their unmatured interest coupons by the holder, the principal is sold at a deep discount because the buyer receives only the right to receive a future fixed payment on the security and does not receive any rights to periodic interest (cash) payments. Once stripped or separated, the principal and coupons may be sold separately. Typically, the coupons are sold separately or grouped with other coupons with like maturity dates and sold bundled in such form. Purchasers of stripped obligations acquire, in effect, discount obligations that are economically identical to the zero coupon securities that the Treasury sells itself.

RESETS

The interest rates paid on the Adjustable Rate Mortgages (“ARMs”) and CMOs in which the Income Fund may invest generally are readjusted at intervals of one year or less to an increment over some predetermined interest-rate index. There are three main categories of indexes: those based on U.S. Treasury securities; those derived from a calculated measure such as a cost-of-funds index; or a moving average of mortgage rates.

CAPS AND FLOORS

The underlying mortgages which collateralize the ARMs and CMOs in which the Income Fund invests will frequently have caps and floors that limit the maximum amount by which the loan rate to the residential borrower may change up or down (1) per reset or adjustment interval and (2) over the life of the loan. Some residential mortgage loans restrict periodic adjustments by limiting changes in the borrower’s monthly principal and interest payments rather than by limiting interest-rate changes. These payment caps may result in negative amortization.

STRIPPED MORTGAGE-BACKED SECURITIES

The Income Fund may also invest in stripped mortgage-backed securities, which are derivative multi-class mortgage securities. The stripped mortgage-backed securities in which the Fund may invest will only be issued or guaranteed by the U.S. government, its agencies or instrumentalities. Stripped mortgage-backed securities have greater market volatility than other types of mortgage securities in which the Fund may invest.

Stripped mortgage-backed securities are usually structured with two classes that receive different proportions of the interest and principal distributions on a pool of mortgage assets. A common type of stripped mortgage-backed security will have one class receiving some of the interest and most of the principal from the mortgage assets, while the other class will receive most of the interest and the remainder of the principal. In the most extreme case, one class will receive all of the interest (the interest-only or “IO” class), while the other class will receive all of the principal (the principal-only or “PO” class). The yield to maturity on an IO class is extremely sensitive not only to changes in prevailing interest rates but also to the rate of principal payments (including prepayments) on the related underlying mortgage assets. A rapid rate of principal payments may have a material adverse effect on the yield to maturity of any such IOs held by the Fund. If the underlying mortgage assets experience greater than anticipated prepayments of principal, the Fund may fail to recoup fully its initial investment in these IO securities even if the securities are rated in the highest rating categories, AAA or Aaa, by S&P or Moody’s, respectively.

Stripped mortgage-backed securities are purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers. The staff of the SEC has indicated that it views such securities as illiquid. The Fund’s investment in stripped mortgage securities will be treated as illiquid and will, together with any other illiquid investments, not exceed 15% of the Fund’s net assets.

RISKS OF MORTGAGE-BACKED SECURITIES

Mortgage-backed securities differ from conventional bonds in that principal is paid back over the life of the mortgage security rather than at maturity. As a result, the holder of mortgage-backed securities (i.e., the Income Fund) receives monthly scheduled payments of principal and interest, and may receive unscheduled principal payments representing prepayments on the underlying mortgages. When the holder reinvests the payments and any unscheduled prepayments of principal it receives, it may receive a rate of interest that is lower than the rate on the existing mortgage securities. For this reason, mortgage-backed securities may be less effective than other types of U.S. government securities as a means of “locking in” long-term interest rates.

A decline in interest rates may lead to a faster rate of repayment of the underlying mortgages and expose the Fund to a lower rate of return upon reinvestment. To the extent that such mortgage-backed securities are held by the Fund, the prepayment right of mortgagors may decrease or limit the increase in net asset value of the Fund because the value of the mortgage-backed securities held by the Fund may decline more than, or may not appreciate as much as, the price of noncallable debt securities. To the extent market interest rates increase beyond the applicable cap or maximum rate on a mortgage security, the market value of the mortgage-backed security would likely decline to the same extent as a conventional fixed-rate security.

In addition, to the extent mortgage-backed securities are purchased at a premium, mortgage foreclosures and unscheduled principal prepayments may result in some loss of the holder’s principal investment to the extent of the premium paid. On the other hand, if mortgage-backed securities are purchased at a discount, both a scheduled payment of principal and an unscheduled prepayment of principal will increase current and total returns and will accelerate the recognition of income that, when distributed to taxable shareholders, will be taxable as ordinary income.

The Fund may also invest in pass-through certificates issued by non-governmental issuers. Pools of conventional residential mortgage loans created by such issuers generally offer a higher rate of interest than government and government-related pools because there are no direct or indirect government guarantees of payment. Timely payment of interest and principal of these pools is, however, generally supported by various forms of insurance or guarantees, including individual loan, title, pool and hazard insurance. The insurance and guarantees are issued by government entities, private insurance and the mortgage poolers. Such insurance and guarantees and the creditworthiness of the issuers thereof will be considered in determining whether a mortgage-related security meets the Fund’s quality standards. The Fund may buy mortgage-related securities without insurance or guarantees if, through an examination of the loan experience and practices of the poolers, the portfolio managers determine that the securities meet the Fund’s quality standards.

With respect to pass-through mortgage pools issued by non-governmental issuers, there can be no assurance that the private insurers associated with such securities can meet their obligations under the policies. Although the market for such non-governmental issued or guaranteed mortgage securities is becoming increasingly liquid, securities issued by certain private organizations may not be readily marketable. The purchase of such securities is subject to the Fund’s limit with respect to investment in illiquid securities.

OTHER MORTGAGE-BACKED SECURITIES

The portfolio managers expect that governmental, government-related or private entities may create mortgage loan pools and other mortgage-related securities offering mortgage pass-through and mortgage-collateralized investments in addition to those described above. The mortgages underlying these securities may include alternative mortgage instruments, that is, mortgage instruments the principal or interest payments of which may vary or the terms to maturity of which may differ from customary long-term fixed-rate mortgages. As new types of mortgage-related securities are developed and offered to investors, the portfolio managers will, consistent with the Income Fund’s investment objective, policies and quality standards, consider making investments in such new types of mortgage-related securities. The Fund will not invest in any new types of mortgage-related securities without prior disclosure to shareholders of the Fund.

RULE 144A SECURITIES

The Funds may purchase securities which are not registered under the Securities Act, but which can be sold to “qualified institutional buyers” in accordance with Rule 144A under the Securities Act. In some cases, such securities are classified as “illiquid securities,” however, any such security will not be considered illiquid so long as it is determined by the Advisor or Sub-Advisor, under guidelines approved by the Board of Trustees, that an adequate trading market exists for that security. This investment practice could have the effect of increasing the level of illiquidity in the Fund during any period that qualified institutional buyers become uninterested in purchasing these restricted securities.

ILLIQUID SECURITIES

The Funds will not invest more than 15% of the value of their net assets in securities that are illiquid because of restrictions on transferability or other reasons. Repurchase agreements with deemed maturities in excess of seven days and securities that are not registered under the Securities Act, but that may be purchased by institutional buyers pursuant to Rule 144A are subject to this 15% limit (unless such securities are variable-amount master-demand notes with maturities of nine months or less or unless the Board determines that a liquid trading market exists).

CONVERTIBLE SECURITIES

Common stock occupies the most junior position in a company’s capital structure. Convertible securities entitle the holder to exchange those securities for a specified number of shares of common stock, usually of the same company, at specified prices within a certain period of time and to receive interest or dividends until the holder elects to convert. The provisions of any convertible security determine its ranking in a company’s capital structure. In the case of subordinated convertible debentures, the holder’s claims on assets and earnings are subordinated to the claims of other creditors, but are senior to the claims of preferred and common shareholders. In the case of preferred stock and convertible preferred stock, the holder’s claims on assets and earnings are subordinated to the claims of all creditors but are senior to the claims of common shareholders.

SWAPS

To help enhance the value of its portfolio or manage its exposure to different types of investments, the Income Fund may enter into interest-rate, currency and mortgage-swap agreements and may purchase and sell interest-rate “caps,” “floors” and “collars”. The potential loss from investing in swap agreements is much greater than the amount initially invested. This would protect the Fund from a decline in the value of the underlying security due to rising rates, but would also limit its ability to benefit from falling interest rates. The Fund will enter into interest-rate swaps only on a net basis (i.e., the two payment streams will be netted out, with the Fund receiving or paying as the case may be, only the net amount of the two payments). The net amount of the excess, if any, of the Fund’s obligations over its entitlements with respect to each interest-rate swap will be accrued on a daily basis and an amount of cash or liquid portfolio securities having an aggregate value at least equal to the accrued excess will be maintained in a segregated account by the Fund’s custodian bank. Interest-rate swaps do not involve the delivery of securities or other underlying assets or principal. Thus, if the other party to an interest-rate swap defaults, the Fund’s risk of loss consists of the

net amount of interest payments that the Fund is contractually entitled to receive.

In a cap or floor, one party agrees, usually in return for a fee, to make payments under particular circumstances. For example, the purchaser of an interest-rate cap has the right to receive payments to the extent a specified interest-rate exceeds an agreed-upon level; the purchaser of an interest-rate floor has the right to receive payments to the extent a specified interest-rate falls below an agreed-upon level. A collar entitles the purchaser to receive payments to the extent a specified interest rate falls outside an agreed-upon range.

Swap agreements may involve leverage and may be highly volatile; depending on how they are used, they may have a considerable impact on a Fund’s performance. Swap agreements involve risks depending upon the other party’s creditworthiness and ability to perform, as judged by the portfolio managers, as well as the Fund’s ability to terminate its swap agreements or reduce its exposure through offsetting transactions.

REAL ESTATE INVESTMENT TRUSTS (REITs)

Each Fund may invest up to 10% of its net assets in real estate investment trusts (“REITs”). Equity REITs invest directly in real property while mortgage REITs invest in mortgages on real property. REITs may be subject to certain risks associated with the direct ownership of real estate, including declines in the value of real estate, risks related to general and local economic conditions, overbuilding and increased competition, increases in property taxes and operating expenses, and variations in rental income. Generally, increases in interest rates will decrease the value of high-yielding securities and increase the costs of obtaining financing, which could decrease the value of a REIT’s investments. In addition, equity REITs may be affected by changes in the value of the underlying property owned by the REITs, while mortgage REITs may be affected by the quality of credit extended. Equity and mortgage REITs are dependent upon management skill, and are subject to the risks of financing projects. REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidation.

BORROWING

Each Fund has a fundamental policy that it may not borrow money, except that it may (1) borrow money from banks for temporary or emergency purposes and not for leveraging or investments and (2) enter into reverse repurchase agreements for any purpose, so long as the aggregate amount of borrowings and reverse repurchase agreements does not exceed one-third of the Fund’s total assets less liabilities (other than borrowings). No Fund will purchase securities while borrowings in excess of 5% of its total assets are outstanding.

OTHER INVESTMENTS

Subject to prior disclosure to shareholders, the Board of Trustees may, in the future, authorize the Income Fund to invest in securities other than those listed here and in the Prospectus, provided that such investment would be consistent with the Fund’s investment objective and that it would not violate any fundamental investment policies or restrictions applicable to the Fund.

TEMPORARY DEFENSIVE PURPOSES

For temporary defensive purposes, the Funds may invest without limit in high-quality money-market securities. The Funds may also, for temporary defensive purposes, invest in shares of no-load, open-end money-market mutual funds.

INVESTMENT RESTRICTIONS

FUNDAMENTAL INVESTMENT RESTRICTIONS

The following investment restrictions are considered fundamental, which means that they may only be changed by the vote of a majority of a Fund’s outstanding shares, which as used herein and in the Prospectus, means the lesser of: (1) 67% of a Fund’s outstanding shares present at a meeting, if the holders of more than 50% of the outstanding shares are present in person or by proxy, or (2) more than 50% of a Fund’s outstanding shares. The percentage restrictions described below are applicable only at the time of investment and require no action by the Funds as a result of subsequent changes in value of the investments or the size of the Fund.

RESTRICTIONS APPLICABLE TO ALL FUNDS:

The Funds may not:

1. Purchase securities which would cause more than 25% of the value of the Fund’s total assets at the time of such purchase to be invested in the securities of one or more issuers conducting their principal activities in the same industry. For purposes of this limitation, U.S. government securities are not considered members of any industry.

2. Borrow money or issue senior securities as defined in the 1940 Act except that (a) the Funds may borrow money in an amount not exceeding one-third of the Fund’s total assets at the time of such borrowings, and (b) the Fund may issue multiple classes of shares. The purchase or sale of futures contracts and related options shall not be considered to involve the borrowing of money or the issuance of shares of senior securities.

3. With respect to 75% of the Fund’s total assets, purchase securities of any one issuer (other than securities issued or guaranteed by the U.S. government and its instrumentalities) if, as a result, (a) more than 5% of the Fund’s total assets would be invested in the securities of that issuer, or (b) the Fund would hold more than 10% of the outstanding voting securities of that issuer. This restriction shall not apply to shares of the Balanced Funds.

4. Make loans or lend securities, if as a result thereof, more than 50% of the Fund’s total assets would be subject to all such loans. For purposes of this limitation debt instruments and repurchase agreements shall not be treated as loans.

5. Purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the Funds from investing in REITs, securities or other instruments backed by real estate, including mortgage loans, or securities of companies that engage in real estate business or invest or deal in real estate or interests therein).

6. Underwrite securities issued by any other person, except to the extent that the purchase of securities and later disposition of such securities in accordance with the Funds’ investment program may be deemed an underwriting.

7. Purchase or sell commodities except that the Fund may enter into futures contracts and related options, forward investing contracts and other similar instruments.

The Funds have adopted the following non-fundamental restrictions. These non-fundamental restrictions may be changed by the Board of Trustees, without shareholder approval, in compliance with applicable law and regulatory policy.

1. The Funds shall not invest in companies for purposes of exercising control or management.

2. The Funds shall not purchase securities on margin, except that the Funds may obtain such short-term credits as are necessary for the clearance of transactions and provided that margin payments in connection with futures contracts and options shall not constitute purchasing securities on margin.

3. The Funds shall not sell securities short, unless they own or have the right to obtain securities equivalent in kind and amount to the securities sold short, and provided that transactions in futures contracts and options are not deemed to constitute selling short.

4. The Funds shall not purchase any security while borrowings representing more than 5% of the Fund’s total assets are outstanding (investment in repurchase agreements will not be considered to be loans for purposes of this restriction).

5. The Funds will invest no more than 15% of the value of their net assets in illiquid securities, including repurchase agreements with remaining maturities in excess of seven days, time deposits with maturities in excess of seven days and other securities which are not readily marketable.

MANAGEMENT OF THE FUNDS

THE BOARD OF TRUSTEES & OFFICERS

The operations of each Fund are under the direction of the Board of Trustees. The Board establishes each Fund’s policies and oversees and reviews the management of each Fund. The Board meets regularly to review the activities of the officers, who are

responsible for the day-to-day operations of the Funds. The Board also reviews the various services provided by the Advisor to ensure that each Fund’s general investment policies and programs are being carried out and administrative services are being provided to the Funds in a satisfactory manner.

The Trustees, including those Trustees who are not “interested persons” of the Trust (as defined in the 1940 Act) (“Independent Trustees”), and the executive officers of the Trust and their principal occupations during the past five years are set forth below. Unless otherwise stated, the address of each Trustee and officer is c/o the Advisor, 200 East Twelfth Street, Jeffersonville, IN 47130.

Number of

Portfolios in

Fund

Other

Position(s)

Complex

Trusteeships/Dir

Held With

Length of

Principal Occupation(s)

Overseen by

ectorships Held by

Name and Age

Trust

Time Served*

During Past 5 Years

Trustee

INDEPENDENT TRUSTEES

F. Kenneth Bateman
Age: 67

Trustee and Chairman of the Board

Since Inception

Attorney, Gerber & Bateman, P.A. (law firm) (1999 to present); Attorney, Potter, Mills & Bateman, P.A. (law firm) (1997 to 1999)

None

Gail C. Duree
Age: 61

Trustee

Since Inception

Independent Financial Consultant, Montview Boulevard Presbyterian Church, Treasurer (1994 to present); Women’s Foundation of Colorado (1995 to present); Alpha Gamma Delta Foundation Board (philanthropic organization) (2005 to present)

None

Cynthia S. Gooch
Age: 75

Trustee

Since Inception

Retired from Edward Jones (investment firm); Trustee, Presbyterian Church (U.S.A.) Foundation (1997 to 2002)

None

Donald B. Register
Age: 70

Trustee

Since Inception

Retired; Pastor, Sixth-Grace Presbyterian Church, Chicago, IL (1998 to 2005)

None

Alison John
Age: 51

Trustee

Since February 2007

Pastor, First Presbyterian Church, Brookline, MA (1999 to present)

None

William C. Lauderbach
Age: 64

Trustee

Since August 2005

Executive Vice President and Senior Investment Officer, Chemical Bank, Midland, Michigan (1985 to present)

None

INTERESTED TRUSTEES

Robert E. Leech**
Age: 62

Trustee

Since May 2005

President and Chief Executive Officer of the Presbyterian Church (U.S.A.) Foundation (2000 to present)

None

Samuel W. McNairy***
Age: 65

Trustee

Since August 2005

Retired; Deloitte & Touche LLP (audit, tax, consulting, and financial advisory services firm) (1964 to 2001; retired as partner in 2001); Trustee, Presbyterian Church (U.S.A.) Foundation (2005 to present)

None


*		Each Trustee shall hold office for life or until his or her successor is elected and qualified or until the Trust terminates.

**		Mr. Leech is deemed to be an “Interested Trustee” due to his status as an officer of the Trust and an affiliated person of the Funds’ investment advisor.

***		Mr. McNairy is deemed to be an “Interested Trustee” due to his status as an affiliated person of the Funds’ investment advisor.


	Position (s)
	Held With	Length of
Name and Age	Trust	Time Served*	Principal Occupation(s) During Past 5 Years
EXECUTIVE OFFICERS
George W. Rue III	Vice President	Since August 2005	Senior Vice President and Chief Investment
Age: 43			Officer, Presbyterian Church (U.S.A.)
			Foundation and New Covenant Trust Company,
			N.A. (2004 to present); Relationship
			Manager/Product Manager, INVESCO-National
			Asset Management (2001 to 2004);
			Relationship Manager, National Asset
			Management (2000 to 2001); Vice President,
			Portfolio Manager, National City Bank of
			Kentucky (1995 to 2000)

Anita J. Clemons	Vice President	Since August 2003	Vice President and Investment Officer, New
Age: 53			Covenant Trust Company, N.A. (2000 to
			present)

Harry Harper	Chief Compliance	Since August 2004	Chief Compliance Officer, New Covenant
Age: 63	Officer, Anti-Money		Trust Company, N.A. (2002 to present);
	Laundering		Anti-Money Laundering Compliance Officer
	Compliance Officer		of the New Covenant Funds and the New
			Covenant Trust Company, N.A. (2002 to
			present);Chief Compliance Officer,
			Allegheny Financial Group (2000 to 2002)

Martin R. Dean	Treasurer	Since October 2005	Vice President of Fund Administration,
3435 Stelzer Rd			Citi Fund Services (1994 to present)
Suite 1000 Columbus, OH 43219 Age: 43

Peter Kronberg	Secretary	Since February 2007	Counsel, Citi Fund Services (January
3435 Stelzer Rd			2007-present); Director and Counsel,
Suite 1000			Investors Bank & Trust (June 2005-December
Columbus, OH 43219			2006); Prior to 2005 contract attorney to
Age: 51			various firms in the financial services
			industry and law firms providing services
			to the financial services sector


*		Each officer serves until his or her successor shall have been elected and qualified or until his or her earlier resignation.

**		The Trust’s Chief Compliance Officer (“CCO”) is also an employee of the Advisor. The Funds reimburse the Advisor for a portion of the CCO’s annual compensation paid by the Advisor.

BOARD COMMITTEES

The Board has an Audit Committee, a Valuation Committee, and a Nominating and Corporate Governance Committee, each of which is comprised solely of the Independent Trustees, currently Mr. Bateman, Ms. Duree, Ms. Gooch, Mr. Lauderbach, the Mr. Donald B. Register, and Ms. John. The Audit Committee makes recommendations to the Board of Trustees with respect to the engagement of independent auditors and reviews with the independent auditors the plan and results of the audit engagement and matters having a material effect on the Trust’s financial operations. The Audit Committee held three meetings during the Trust’s last fiscal year.

The Nominating and Corporate Governance Committee is responsible for the selection and nomination of candidates to serve as Trustees. The Nominating and Corporate Governance Committee does not have a stated policy for considering nominees recommended by shareholders. The Nominating and Corporate Governance Committee met one time during the Trust’s last fiscal year.

The Valuation Committee is responsible for overseeing the valuation of the portfolio securities held by the Funds through the Advisor’s implementation of the Trust’s procedures with respect to valuation of portfolio securities. The Valuation Committee met four times during the Trust’s last fiscal year.

PROXY VOTING POLICY

The Advisor shall consider only those factors that relate to the shareholder’s investment including how its vote will economically and socially responsibly impact and affect the value of the client’s investment, mindful that, after conducting an appropriate cost-benefit analysis, not voting at all on a presented proposal may be in the best interest of the client.

Proxy votes generally will be cast in favor of proposals that:

1) maintain or strengthen the shared interests of shareholders and management;

2) increase shareholder value;

3) maintain or increase shareholder influence over the issuer’s board of directors and management;

4) maintain or increase the rights of shareholders;

5) are consistent with the socially responsible policies of the Presbyterian Church (U.S.A.); and

6) maintain or enhance the integrity and oversight of the corporation and its public reporting.

Proxy votes generally will be cast against proposals having the opposite effect. From time-to-time, the Advisor will abstain or provide a “No” vote in situations where the Advisor determines that the matter is too costly to research thoroughly.

In exercising its voting discretion, the Advisor and its employees shall avoid any direct or indirect conflict of interest raised by such voting decision. The Advisor will notify the Trustees if any substantive aspect or foreseeable result of the subject matter to be voted upon raises an actual or potential conflict of interest to the Advisor or any affiliate of the Advisor.

Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (i) without charge, upon request, by calling 877-835-4531; (ii) on the Funds’ web site at http://www.NewCovenantFunds.com; and (iii) on the SEC’s web site at http://www.sec.gov.

SECURITY AND OTHER INTERESTS

No officer or employee of the Advisor receives any compensation from the Funds for serving as an officer or Trustee of the Trust. The Funds do not compensate the officers or Trustees of the Trust for the services they provide to the Funds.¹ The Funds do reimburse officers and Trustees of the Trust for expenses incurred in providing their services to the Trust.

As of October 1, 2007, the Trustees and officers of the Trust individually and as a group owned beneficially less than 1% of the outstanding shares of any Fund. The following table sets forth the dollar range of equity securities beneficially owned by each Trustee in the Funds as of December 31, 2006.


¹		The Trust’s Chief Compliance Officer (“CCO”) is also an employee of the Advisor. The Funds reimburse the Advisor for a portion of the CCO’s annual compensation paid by the Advisor.

Aggregate Dollar Range of Equity

Dollar Range of

Securities in All Registered

Equity Securities

Investment Companies Overseen

in the Growth

in the Income

in the Balanced

by the Trustee within the Family

Trustees

Fund

Growth Fund

Income Fund

of Investment Companies

Independent Trustees

F. Kenneth Bateman

Over $100,000-

None

Over $100,000

Gail C. Duree

1-$10,000

10,001-$50,000

]

Cynthia S. Gooch

None

1-$10,000

None

1-$10,000

Donald B. Register

None

Alison John*

None

William C. Lauderbach

10,001-$50,000

None

10,001-$50,000

Interested Trustees

Robert E. Leech

10,001-$50,000

None

10,001-$50,000

Samuel W. McNairy

10,001-$50,000

None

10,001-$50,000


*		Ms. John became a Trustee of the Trust on February 26, 2007. As of February 22, 2007, Ms. John owned no shares of the Trust.

The Advisor, which operates as a “manager of managers,” and the Trust have obtained an exemptive order from the SEC that permits the Advisor, with the approval of the Trust’s Board of Trustees, to retain unaffiliated Sub-Advisors for a Fund without submitting the Sub-Advisory Agreements to a vote of the Fund’s shareholders. A shareholder vote would be required to approve any change to a Sub-advisory Agreement if such change would result in the overall management and advisory fees payable by a Fund that have been approved by the shareholders of the Fund. The Trust will notify shareholders in the event of any change in the identity of the Sub-Advisors for a Fund. Subject to Board review, the Advisor allocates and, when appropriate, reallocates the Funds’ assets among Sub-Advisors, monitors and evaluates Sub-Advisor performance, and oversees Sub-Advisor compliance with the Funds’ investment objectives, policies and restrictions. The Advisor has ultimate responsibility for the investment performance of the Funds due to its responsibility to oversee Sub-Advisors and recommend their hiring, termination and replacement.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

Control persons (those owning more than 25% of the voting securities, which can effect the control on the voting securities of other security holders) have been marked below with an asterisk. Principal holders are those persons who own greater than 5% of a Fund’s voting securities. As of October 3, 2007, the following persons owned beneficially or of record, the following percentage of each Fund’s voting securities:


NAME AND ADDRESS	PERCENTAGE OF FUND’S VOTING SECURITIES
NEW COVENANT GROWTH FUND:

NATIONAL FINANCIAL SERVICES, LLC		62.34	%
200 LIBERTY ST ONE FINANCIAL CENTER NEW YORK, NY 10281

NEW COVENANT BALANCED GROWTH		21.56	%
200 EAST TWELFTH ST JEFFERSONVILLE, IN 47130-3854

NEW COVENANT INCOME FUND:

NATIONAL FINANCIAL SERVICES, LLC		49.68	%
200 LIBERTY ST ONE FINANCIAL CENTER NEW YORK, NY 10281

NEW COVENANT BALANCED GROWTH		24.35	%
200 EAST TWELFTH ST JEFFERSONVILLE, IN 47130-3854

NEW COVENANT BALANCED INCOME		13.53	%
200 EAST TWELFTH ST JEFFERSONVILLE, IN 47130-3854

INVESTMENT ADVISORY AND OTHER SERVICES

THE INVESTMENT ADVISOR

To assist the Trustees and officers in carrying out their duties and responsibilities, the Trust has employed the NCF Investment Department of New Covenant Trust Company, N.A. (the “Advisor”) as the Funds’ investment advisor. New Covenant Trust Company, N.A. is a subsidiary of the Presbyterian Church (U.S.A.) Foundation, which for many years administered an investment program for institutions prior to creating the Trust Company and sponsoring the Funds.

The Advisor is a separate division of New Covenant Trust Company, N.A. and is registered as an investment advisor with the SEC. Prior to May 14, 2001, New Covenant Trust Company, N.A. served as investment advisor to the Funds. As of May 14, 2001, New Covenant Trust Company, N.A. assigned the Investment Advisory Agreement for the Funds to the Advisor.

The Trust and the Advisor have entered into an Investment Advisory Agreement with respect to each Fund that is renewable annually by the Board of Trustees or by votes of a majority of each Fund’s outstanding voting securities. The Agreements will continue in effect from year to year only if such continuance is approved annually by either the Board of Trustees or by a vote of a majority of the outstanding voting securities of the respective Fund, and in either case by the vote of a majority of the Trustees who are not parties to the Agreements or “interested persons” of any party to the Agreements, voting in person at a meeting called for the purpose of voting on such approvals. The Agreements may be terminated at any time without penalty by the Board of

Trustees, by votes of the shareholders or by the Advisor, upon sixty days written notice. The Agreements terminate automatically if assigned.

For providing investment advisory services and assuming certain Fund expenses, the Growth Fund pays the Advisor a monthly fee at the annual rate of 0.99% of the value of the Growth Fund’s average daily net assets and the Income Fund pays the Advisor a monthly fee at the annual rate of 0.75% of the value of the Income Fund’s average daily net assets. The advisory fees received by the Advisor are used to pay the fees of the Sub-Advisors. The Advisor does not receive advisory fees for the Balanced Funds.

During the fiscal years ended June 30, 2005, 2006 and 2007, the Advisor received the following fees from the Funds for its services (net of waivers or reimbursements, as described below):


	2005^*		2006^*		2007^*

New Covenant Growth Fund	$	6,437,112	$	7,341,259	$	7,821,156
New Covenant Income Fund	$	2,807,052	$	3,161,773	$	3,169,362
New Covenant Balanced Growth Fund	$	0	$	0	$	0
New Covenant Balanced Income Fund	$	0	$	0	$	0


^*		During the fiscal years ended June 30, 2005, 2006, and 2007, the Advisor waived a portion of its advisory fee in an amount equivalent to the shareholder services fees paid by the Growth Fund and Income Fund. These amounts totaled $1,897,421 and $1,167,293 in 2005, $1,625,344 and $865,232 in 2006, and $1,740,400 and $868,393 in 2007 for the Growth Fund and Income Fund, respectively. The Advisor also reimbursed the Balanced Growth Fund and Balanced Income Fund in an amount equivalent to the shareholder services fees paid by the Balanced Growth Fund and Balanced Income Fund.

Investment Advisory Services: The Advisor provides a continuous investment program for each of the Funds in accordance with each Fund’s investment objectives, policies, and restrictions as stated in such Fund’s Prospectus and Statement of Additional Information and all amendments or supplements thereto, and resolutions of the Trust’s Board of Trustees as may be adopted from time to time. The Advisor further agrees that it:

(a) will supervise and direct each Fund’s investments and shall have the discretion to determine from time to time what investments, securities, commodities or financial futures contracts will be purchased, retained, sold or lent by the Funds and what portion of the assets will be invested in cash;

(b) for purposes of managing the Funds the Advisor may appoint one or more Sub-Advisors (as provided in the section below) to which it may delegate all of any portion of the responsibilities granted to it herein; and

(c) will conform with all applicable Rules and Regulations of the SEC as they pertain to the registration of the Trust and, in addition, will conduct its activities under this Agreement in accordance with any applicable regulations of any governmental authority pertaining to the investment advisory activities of the Advisor.

In addition to managing the investments, the Advisor also makes recommendations with respect to other aspects and affairs of the Funds. The Advisor also furnishes the Funds with certain administrative services, office space and equipment. All other expenses incurred in the operation of the Funds are borne by the respective Funds.

THE SUB-ADVISORS

The Advisor has entered into sub-advisory agreements with each sub-advisor to assist in the selection and management of each Fund’s investment securities. In this regard, the Trust has received from the SEC an exemptive order that permits the Advisor to engage and terminate Sub-Advisors without shareholder approval. It is the responsibility of the Sub-Advisors, under the direction of the Advisor, to make day-to-day investment decisions for the Funds. The Sub-Advisors also place purchase and sell orders for portfolio transactions of the Funds consistent with social-witness principles adopted by the General Assembly of the Presbyterian Church (U.S.A.) and in accordance with each Fund’s investment objective and policies.

The Advisor pays each Sub-Advisor a quarterly fee for their services in managing assets of the Funds. Such fees are based on the annual rates noted below. The Advisor pays the Sub-Advisors’ fees directly from its own advisory fees. The Sub-Advisory fees are based on the assets of a Fund to which a Sub-Advisor is responsible for making investment decisions. The Advisor allocates the portion of each Fund’s assets for which a Sub-Advisor will make investment decisions. Reallocations may be made at any time at the Advisor’s discretion.


		Annual Sub-Advisory Fee as a
Name of Current Sub-Advisor	Fund Name	Percentage of Assets Managed
Capital Guardian Trust Company *	Growth Fund	0.750% of the first $25 million;
		0.600% of the next $25 million;
		0.475% of the next $200 million; and
		0.425% on assets over $250 million
		(less 10% eleemosynary discount)
Mazama Capital Management, Inc	Growth Fund	0.85% on the first $20 million in
		assets; and 0.75% on all assets over
		$20 million
Santa Barbara Asset Management, LLC	Growth Fund	0.50% of the assets
Sound Shore Management, Inc.	Growth Fund	0.75% of the first $10 million and
		0.50% on assets over $10 million
Tattersall Advisory Group, Inc.	Income Fund	0.15% of the first $135 million;
		0.10% of the next $140 million and
		0.08% of assets over $275 million.
Wellington Management Company, LLP	Growth Fund	0.25% of the first $100 million;
		0.20% of the next $400 million and
		0.175% of assets over $500 million


*		Effective July 1, 2007. Prior to this date the fees were as follows: 0.800% of the first $25 million in assets; 0.650% of the next $25 million in assets; 0.525% of the next $200 million in assets; 0.475% over $250 million in assets (less 10% eleemosynary discount).

During the fiscal years ended June 30, 2005, 2006 and 2007, the Sub-Advisors received the following as compensation for their services:


	2005		2006		2007
Capital Guardian Trust Company	$	540,358	$	695,733	$	726,340
Mazama Capital Management, Inc.	$	127,933	$	324,232	$	333,840
Santa Barbara Asset Management, LLC	$	175,302	$	399,526	$	417,005
Sound Shore Management, Inc.	$	573,260	$	634,013	$	694,722
Seneca Capital Management*	$	301,870		N/A		N/A
Tattersall Advisory Group, Inc.	$	547,024	$	551,775	$	553,359
Wellington Management Company, LLP	$	1,104,145	$	1,115,459	$	1,185,690.66]


*		Seneca Capital Management was terminated on January 1, 2005 as sub-advisor to the New Covenant Growth Fund.

Continuance of the Sub-Advisory Agreements must be specifically approved at least annually (i) by vote of the Trustees or by vote of the shareholders of the Funds, and (ii) by vote of a majority of the Trustees who are not parties to the Sub-Advisory Agreements or “interested persons” of any party thereto, cast in person at a meeting called for the purpose of voting on such approval. Each Sub-Advisory Agreement will terminate if assigned, and is terminable at any time without penalty by the Sub-Advisor or by the Trustees of the Trust, or by a majority of the outstanding shares of the applicable Funds on 60 days’ written notice to the Advisor and the Sub-Advisor.

EXPENSES

Each Fund pays all expenses not assumed by the Advisor, including, but not limited to: Trustees’ expenses; audit fees; legal fees; interest expenses; brokerage commissions; registration and notification of shares for sale with the SEC and with various state securities commissions; taxes; cost of insurance; fees of the Funds’ administrator, custodian, fund accountant, transfer agent or other service providers; costs of obtaining quotations of portfolio securities; and the pricing of Fund shares.

CODE OF ETHICS

The Trust and the Advisor, jointly, each Sub-Advisor, and New Covenant Funds Distributor, Inc., separately, have adopted Codes of Ethics designed to prevent affiliated persons of the Trust, the Advisor, each Sub-Advisor and New Covenant Funds Distributor, Inc. from engaging in deceptive, manipulative or fraudulent activities in connection with securities held or to be acquired by the Funds. Each Code of Ethics permits personnel subject to that code to, under certain circumstances, invest in securities, including securities that may be purchased or held by a Fund. These Codes of Ethics are available to the public through the SEC.

OTHER SERVICE PROVIDERS

DISTRIBUTOR

New Covenant Funds Distributor, Inc. (an affiliate of New Covenant Trust Company, N.A.) serves as the principal underwriter (the “Distributor”) for the Trust pursuant to a Distribution Agreement. The Agreement is effective as of February 22, 2006 for an initial two-year term and is renewable annually thereafter. The Agreement is terminable without penalty on 60 days’ written notice, by the Trust’s Board of Trustees, by vote of a majority of the outstanding voting securities of the Trust, or by the Distributor. The Agreement will also terminate automatically in the event of its assignment. Currently, the Funds do not pay any fees to the Distributor. The Distributor’s business address is 200 East Twelfth Street, Jeffersonville Indiana 47130.

TRANSFER AGENT

Citi Fund Services Ohio, Inc. (“Citi,” formerly known as BISYS Fund Services Ohio, Inc.) provides transfer agency services for the Funds. As part of these services, Citi processes shareholder transactions and provides shareholder information services, compliance reporting, and anti-money laundering services. Citi maintains the Trust’s records in connection with the services it provides. Citi’s business address is 3435 Stelzer Road, Columbus, Ohio 43219.

ADMINISTRATION AGREEMENT AND FUND ACCOUNTING AGREEMENT

Citi provides fund accounting and administrative services to the Funds. The Trust has a Fund Accounting Agreement and an Administration Agreement (together, the “Service Agreements”) with Citi. Under the Service Agreements, Citi provides fund accounting and administrative services to the Funds. The services include the day-to-day administration of matters necessary to each Fund’s operations, maintenance of records and the books of the Trust, preparation of reports, assistance with compliance monitoring of the Funds’ activities, calculation of each Fund’s net asset value in accordance with the provisions of the Funds’ current Prospectus, and certain supplemental services in connection with Trust’s obligations under the Sarbanes-Oxley Act of 2002. Under the terms of the Fund Accounting Agreement, Citi is entitled to a fee computed at an annual rate of 0.03% of the Trust’s average daily net assets for the first $500,000,000 0.0225% for the next $500,000,001 to $5,000,000,000 and 0.01% for amounts over $5,000,000,000. Under the Administration Agreement, effective April 1, 2007, Citi is entitled to a fee computed at an annual rate of 0.01% of the Trust’s average daily net assets. For the period ending April 22, 2005 through April 1, 2007, the fee was computed at an annual rate of 0.02% of the Trust’s average daily net assets, with an annual waiver of $280,000.

For the fiscal years ended June 30, 2005, 2006 and 2007, the Funds paid Citi the following fees for administrative and accounting services (net of waivers, as described below):


	2005^*		2006^*		2007^*

New Covenant Growth Fund	$	401,085	$	331,856	$	359,781
New Covenant Income Fund	$	241,202	$	186,341	$	206,408
New Covenant Balanced Growth Fund	$	130,737	$	96,491	$	109,958
New Covenant Balanced Income Fund	$	54,358	$	39,412	$	41,614


*		During the fiscal years ended June 30, 2005, 2006 and 2007, the Administrator contractually waived a portion of its administration fee. Amounts waived for 2005 totaled $25,454, $15,538, $9,043 and $3,631, for 2006 totaled $134,950, $80,016, $46,154 and $18,674, and for 2007 totaled $104,513, $59,272, $36,343 and $13,546 for the Growth Fund, Income Fund, Balanced Growth Fund and Balanced Income Fund, respectively.

SHAREHOLDER SERVICES AGREEMENTS

The Trust is a party to certain Shareholder Services Agreements pursuant to which the Funds are authorized to make payments to certain entities which may include investment advisers, banks, trust companies and other types of organizations (“Authorized Service Providers”) for providing administrative services with respect to shares of the Funds attributable to or held in the name of the Authorized Service Provider for its clients or other parties with whom they have a servicing relationship. Under the terms of each Shareholder Services Agreement, a Fund is authorized to pay an Authorized Service Provider (which include affiliates of the Funds) a shareholder services fee at the rate of 0.25% on an annual basis of the average daily net asset value of the shares of the Fund attributable to or held in the name of the Authorized Service Provider for providing certain administrative services to Fund shareholders with whom the Authorized Service Provider has a servicing relationship. Among the types of shareholder services that may be compensated under the Agreements are: (1) answering customer inquiries of a general nature regarding the Funds; (2) responding to customer inquiries and requests regarding statements of additional information, reports, notices, proxies and proxy statements, and other Fund documents; (3) delivering prospectuses and annual and semi-annual reports to beneficial owners of Fund shares; (4) assisting the Trust in establishing and maintaining shareholder accounts and records; and (5) assisting customers in changing account options, account designations, and account addresses, and providing such other shareholder administrative services as may be reasonably requested. During the fiscal year ended June 30, 2007, the Growth Fund, Income Fund, Balanced Growth Fund and Balanced Income Fund made payments pursuant to such Shareholder Services Agreements of $1,756,405, $,853,046, $811,403 and $300,060, respectively, a substantial majority of which payments were made to an affiliate of the Advisor. In connection with the implementation and operation of the Shareholder Services Agreements, the Advisor has agreed to waive the amount of the investment advisory fees payable to it by any Fund to the extent of the amount paid in fees by a Fund to any Authorized Service Provider under the Shareholder Services Agreements.

CUSTODIAN SERVICES

JPMorgan Chase Bank N.A. (“JPMorgan”), 270 Park Avenue, New York, NY 10017-2070, serves as custodian for the Funds pursuant to a Custodian Agreement. As custodian, JPMorgan holds or arranges for the holding of all portfolio securities and other assets of the Funds.

Prior to May 17, 2005, State Street Bank & Trust Co., 1776 Heritage Drive, North Quincy, MA 02171, served as custodian for the Funds.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The independent registered public accounting firm of Ernst & Young LLP (“E&Y”), 1100 Huntington Center, 41 S. High Street, Columbus, OH 43215, has been designated as independent registered public accounting firm for each Fund.

LEGAL COUNSEL

Dechert LLP, 1775 I Street, N.W., Washington, DC 20006, serves as legal counsel for the Trust.

BROKERAGE

The Advisor and Sub-Advisors, in effecting the purchases and sales of portfolio securities for the account of the Funds, will seek execution of trades either, (1) at the most favorable and competitive rate of commission charged by any broker, dealer or member of an exchange, or (2) at a higher rate of commission charged, if reasonable in relation to brokerage and research services provided to the Trust or the Advisor or Sub-Advisor by such member, broker or dealer. Such services may include, but are not limited to, information as to the availability of securities for purchase or sale and statistical or factual information or opinions pertaining to investments. The Advisor or Sub-Advisors may use research and services provided to it by brokers and dealers in servicing all its clients. Fund orders may be placed with an affiliated broker-dealer. Portfolio orders will be placed with an affiliated broker-dealer only where the price being charged and the services being provided compare favorably with those charged

to the Funds by non-affiliated broker-dealers. Over-the-counter transactions are usually placed with a principal market-maker unless a better net security price is obtainable elsewhere. The Advisor and the Sub-Advisors may also consider the selection of those brokers that provide brokerage/service arrangements to the Funds such as commission recapture programs pursuant to which the broker agrees to pay for certain services provided to the Funds. The Funds are currently parties to such brokerage/service arrangements with certain brokers.

With respect to brokerage transactions for the Growth Fund for the fiscal period ended June 30, 2007, the Sub-Advisors for the Growth Fund purchased and sold securities for a total transaction amount of $43,460,417 through brokers that provided research services to the Sub-Advisors and the Funds and paid $37,837 in commissions to such brokers.

The aggregate dollar amounts of brokerage commissions paid by the Funds were as follows:

Commissions Paid


	For the fiscal year ended June 30:
Fund Name	2005		2006		2007

Growth Fund	$	1,379,778	$	931,687	$	1,008,001
Income Fund	$	9,576	$	15,770	$	7,602
Balanced Growth Fund	$	0	$	0	$	0
Balanced Income Fund	$	0	$	0	$	0

GENERAL INFORMATION

SHARES OF BENEFICIAL INTEREST

The Trust Instrument authorizes the issuance of an unlimited number of shares for each of the Funds, and each share has a par value of $0.001 per share. There are no conversions or preemptive rights in connection with any shares of the Funds, nor are there cumulative voting rights with respect to the shares of any of the Funds. Each of a Fund’s shares has equal voting rights. Each issued and outstanding share of a Fund is entitled to participate equally in dividends and distributions declared by such Fund and in the net assets of such Fund upon liquidation or dissolution remaining after satisfaction of outstanding liabilities.

All issued and outstanding shares of each Fund will be fully paid and non-assessable and will be redeemable at net asset value per share. The interests of shareholders in the Funds will not be evidenced by a certificate or certificates representing shares of a Fund.

The Board of Trustees has authority, without necessity of a shareholder vote, to create any number of new series or classes. The Trustees have authorized one class of shares to be issued currently.

As of the year ended June 30, 2007, the New Covenant Growth Fund and New Covenant Income Fund held investments in securities of their broker dealers as follows:


	Approximate Aggregate Value of Issuer’s Securities Owned by
Fund	the Fund as of fiscal year end June 30, 2007	Name of Broker or Dealer
New Covenant Growth Fund	$ 452,683	CS First Boston Corp.
	1,187,058	Deutsche Bank AG
	16,927,639	Goldman Sachs & Co.
	6,818,368	Morgan Stanley
	28,883,592	Citigroup
	18,961,341	Lehman Brothers, Inc.
	2,279,234	Bear Stearns Cos., Inc.
	18,435,979	Bank of America Corp.
	230,380	Barclays PLC


	Approximate Aggregate Value of Issuer’s Securities Owned by
Fund	the Fund as of fiscal year end June 30, 2007	Name of Broker or Dealer
New Covenant Income Fund	$ 2,259,640	Goldman Sachs & Co.
	13,529,480	CS First Boston Corp.
	15,025,582	Morgan Stanley
	5,455,401	Lehman Brothers, Inc.
	1,975,648	Citigroup
	19,621,101	Bank of America Corp

PURCHASES, REDEMPTIONS, AND PRICING OF SHARES

NET ASSET VALUE

Shares of each Fund are purchased at net asset value. The net asset value per share of each Fund is calculated by adding the value of securities and other assets of that Fund, subtracting liabilities and dividing by the number of its outstanding shares. Each Fund’s share price will be determined at the close of regular trading hours of the New York Stock Exchange, normally 4:00 p.m., Eastern Time. Orders received by the transfer agent after 4:00 p.m., will be confirmed at the next business day’s price.

VALUATION

Each Fund’s securities are valued based on market value or, where market quotations are not readily available, based on fair value as determined in good faith by the Trust’s Board of Trustees. Certain securities may be valued by an independent pricing service approved by the Board of Trustees.

Equity securities which are traded in the over-the-counter market only, but which are not included in the NASDAQ National Market System, will be valued at the mean between the last preceding bid and asked prices. Valuations may also be obtained from pricing services when such prices are believed to reflect fair market value. Securities with a remaining maturity of sixty days or less are valued at amortized cost, which approximates market value. Short-term notes are valued at cost. Corporate bonds, municipal bonds, receivables and portfolio securities not currently quoted as indicated above, and other assets will be valued at fair value as determined in good faith under procedures adopted by the Board of Trustees.

The Funds translate prices for investments quoted in foreign currencies into U.S. dollars at current exchange rates. As a result, changes in the value of those currencies in relation to the U.S. dollar may affect the Funds’ NAVs. Because foreign markets may be open at different times than the New York Stock Exchange, the value of the Funds’ shares may change on days when shareholders are not able to buy or sell shares. If events materially affecting the values of the Funds’ foreign investments occur between the close of foreign markets and the close of regular trading on the New York Stock Exchange, these investments will be valued at their fair value.

REDEMPTIONS IN KIND

The Trust reserves the right to pay redemptions in kind with portfolio securities in lieu of cash. In accordance with its election pursuant to Rule 18f-1 under the 1940 Act, the Trust may limit the amount of redemption proceeds paid in cash with respect to each shareholder during any ninety-day period to the lesser of (i) $250,000 or (ii) 1% of the net asset value of the Fund at the beginning of such period. In the case of requests for redemptions in excess of such amount, the Board of Trustees reserves the right to make payments in whole or in part in securities or other assets in case of an emergency, or any time a cash distribution would impair the liquidity of the Funds to the detriment of the existing shareholders. If the recipient later sold such securities, a brokerage charge might be incurred.

SUSPENSION OF REDEMPTIONS

The right of redemption may be suspended or the date of payment postponed during (a) any period when the New York Stock Exchange is closed (other than customary weekend and holiday closings) or trading on the New York Stock Exchange is restricted, (b) any period in which an emergency exists as determined by the SEC so that disposal of a Fund’s investments or determination of its net asset value is not reasonably practicable, or (c) such other periods as the SEC by order may permit to protect the Funds’ shareholders.

EXCHANGE OF SHARES

An exchange is effected by redemption of shares of one Fund and the issuance of shares of another Fund, and only with delivery

of the current Prospectus of the Fund being acquired. With respect to an exchange among the Funds, a capital gain or loss for Federal income tax purposes will be realized upon the exchange, depending upon the cost, other basis of the shares redeemed, and your tax status. The exchange privilege is not designed for use in connection with short-term trading or market-timing strategies. The exchange privilege may be terminated or suspended or its terms changed at any time, subject to 60 days’ prior notice.

TELEPHONE INSTRUCTIONS

Neither the Trust nor any of its service providers will be liable for any loss or expense in acting upon telephone instructions that are reasonably believed to be genuine. In attempting to confirm that telephone instructions are genuine, the Funds will use procedures that are considered reasonable. You assume the risk to the full extent of their accounts that telephone requests may be unauthorized. To the extent that the Trust fails to use reasonable procedures to verify the genuineness of telephone instructions, it and/or its service contractors may be liable for any such instructions that prove to be fraudulent or unauthorized. All telephone conversations with Citi as transfer agent will be recorded.

AUTOMATIC INVESTING

You may authorize automatic investing through automatic withdrawals from your bank account on a regular basis. Minimum investments must be for at least $50.

SYSTEMATIC WITHDRAWAL PLAN

If you purchase or already own $5,000 or more of any Fund’s shares, valued at the net asset value, and you wish to receive periodic payments from your account(s) you may establish a Systematic Withdrawal Plan by completing an application provided for this purpose. If you participate in this plan, you will receive monthly, quarterly or annual checks in the amount designated. The minimum withdrawal is $50. The amount of withdrawal may be changed at any time. Dividends and capital gain distributions on a Fund’s shares in the Plan are automatically reinvested in additional shares at net asset value. Payments are made from proceeds derived from the redemption of Fund shares you own. With respect to the Funds, the redemption of shares may result in a gain or loss that is reportable, if you are a taxable entity.

Redemptions required for payments may reduce or use up your investment, depending upon the size and frequency of withdrawal payments and market fluctuations. Accordingly, Plan payments cannot be considered as yield or income on the investment.

Citi, as agent for the shareholder, may charge for services rendered beyond those normally assumed by the Funds. No such charge is currently assessed, but such a charge may be instituted by Citi upon notice in writing to shareholders. This Plan may be terminated at any time without penalty upon written notice by the shareholder, by the Funds, or by Citi.

INTEGRATED VOICE RESPONSE (IVR) SYSTEM

You can obtain toll-free access to account information, as well as certain transactions, by calling 877-835-4531. IVR provides share price, price change, account balances and history (i.e., last transaction, latest dividend distribution, redemptions by check during the last three months); and allows sales or exchanges of Fund shares.

TAXATION OF THE FUNDS

Set forth below is a discussion of certain U.S. federal income tax issues concerning the Funds and the purchase, ownership, and disposition of Fund shares. This discussion does not purport to be complete or to deal with all aspects of federal income taxation that may be relevant to shareholders in light of their particular circumstances. This discussion is based upon present provisions of the Internal Revenue Code of 1986, as amended (the “Code”), the regulations promulgated thereunder, and judicial and administrative ruling authorities, all of which are subject to change, which change may be retroactive. Prospective investors should consult their own tax advisors with regard to the federal tax consequences of the purchase, ownership, or disposition of Fund shares, as well as the tax consequences arising under the laws of any state, foreign country, or other taxing jurisdiction. Unless otherwise noted, references to “the Fund” apply to each of the four Funds discussed herein.

TAX STATUS OF THE FUNDS

Each Fund intends to continue to be taxed as a regulated investment company under Subchapter M of the Code. Accordingly, each Fund must, among other things, (a) derive in each taxable year at least 90% of its gross income from dividends, interest, payments with respect to certain securities loans, and gains from the sale or other disposition of stock, securities or foreign currencies, or other income derived with respect to its business of investing in such stock, securities or currencies; and (b) diversify its holdings so that, at the end of each fiscal quarter, (i) at least 50% of the value of each Fund’s total assets is represented by cash and cash items, U.S. government securities, the securities of other regulated investment companies and other securities, with such other securities limited, in respect of any one issuer, to an amount not greater than 5% of the value of the Fund’s total assets and 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of its total assets is invested in the securities of any one issuer (other than U.S. government securities and the securities of other regulated investment companies).

As a regulated investment company, the Fund generally is not subject to U.S. federal income tax on income and gains that it distributes to shareholders, if at least 90% of the Fund’s investment company taxable income (which includes, among other items, dividends, interest and the excess of any net short-term capital gains over net long-term capital losses) for the taxable year is distributed. Each Fund intends to distribute substantially all of such income.

Amounts not distributed on a timely basis in accordance with a calendar year distribution requirement are subject to a nondeductible 4% excise tax at the Fund level. To avoid the tax, each Fund must distribute during each calendar year an amount equal to the sum of (1) at least 98% of its ordinary income (not taking into account any capital gains or losses) for the calendar year, (2) at least 98% of its capital gains in excess of its capital losses (adjusted for certain ordinary losses) for a one-year period generally ending on October 31 of the calendar year, and (3) all ordinary income and capital gains for previous years that were not distributed during such years. To avoid application of the excise tax, each Fund intends to make distributions in accordance with the calendar year distribution requirement.

A distribution will be treated as paid on December 31 of a calendar year if it is declared by the Fund in October, November or December of that year with a record date in such a month and paid by the Fund during January of the following year. Such distributions will be taxable to shareholders in the calendar year in which the distributions are declared, rather than the calendar year in which the distributions are received.

FUND INVESTMENTS

MARKET DISCOUNT. If the Fund purchases a debt security at a price lower than the stated redemption price of such debt security, the excess of the stated redemption price over the purchase price is “market discount.” If the amount of market discount is more than a de minimus amount, a portion of such market discount must be included as ordinary income (not capital gain) by the Fund in each taxable year in which the Fund owns an interest in such debt security and receives a principal payment on it. In particular, the Fund will be required to allocate that principal payment first to the portion of the market discount on the debt security that has accrued but has not previously been included in income. In general, the amount of market discount that must be included for each period is equal to the lesser of (i) the amount of market discount accruing during such period (plus any accrued market discount for prior periods not previously taken into account) or (ii) the amount of the principal payment with respect to such period. Generally, market discount accrues on a daily basis for each day the debt security is held by the Fund at a constant rate over the time remaining to the debt security’s maturity or, at the election of the Fund, at a constant yield to maturity which takes into account the semi-annual compounding of interest. Gain realized on the disposition of a market discount obligation must be recognized as ordinary interest income (not capital gain) to the extent of the “accrued market discount.”

ORIGINAL ISSUE DISCOUNT. Certain debt securities acquired by the Fund may be treated as debt securities that were originally issued at a discount. Very generally, original issue discount is defined as the difference between the price at which a security was issued and its stated redemption price at maturity. Although no cash income on account of such discount is actually received by the Fund, original issue discount that accrues on a debt security in a given year generally is treated for federal income tax purposes as interest and, therefore, such income would be subject to the distribution requirements applicable to regulated investment companies. Some debt securities may be purchased by the Fund at a discount that exceeds the original issue discount on such debt securities, if any. This additional discount represents market discount for federal income tax purposes (see above).

OPTIONS, FUTURES AND FORWARD CONTRACTS. Any regulated futures contracts and certain options (namely, non-equity options and dealer equity options) in which the Fund may invest may be “section 1256 contracts.” Gains (or losses) on these contracts generally are considered to be 60% long-term and 40% short-term capital gains or losses. Also section 1256 contracts held by the Fund at the end of each taxable year (and on certain other dates prescribed in the Code) are “marked to

market,” with the result that unrealized gains or losses are treated as though they were realized.

Transactions in options, futures and forward contracts undertaken by the Fund may result in “straddles” for federal income tax purposes. The straddle rules may affect the character of gains (or losses) realized by the Fund, and losses realized by the Fund on positions that are part of a straddle may be deferred under the straddle rules, rather than being taken into account in calculating the taxable income for the taxable year in which the losses are realized. In addition, certain carrying charges (including interest expense) associated with positions in a straddle may be required to be capitalized rather than deducted currently. Certain elections that the Fund may make with respect to its straddle positions may also affect the amount, character and timing of the recognition of gains or losses from the affected positions.

Because only a few regulations implementing the straddle rules have been promulgated, the consequences of such transactions to the Fund are not entirely clear. The straddle rules may increase the amount of short-term capital gain realized by the Fund, which is taxed as ordinary income when distributed to taxable shareholders. Because application of the straddle rules may affect the character of gains or losses, defer losses and/or accelerate the recognition of gains or losses from the affected straddle positions, the amount which must be distributed to shareholders as ordinary income or long-term capital gain may be increased or decreased substantially as compared to a fund that did not engage in such transactions.

CONSTRUCTIVE SALES. Under certain circumstances, the Fund may recognize gain from a constructive sale of an “appreciated financial position” it holds if it enters into a short sale, forward contract or other transaction that substantially reduces the risk of loss with respect to the appreciated position. In that event, the Fund would be treated as if it had sold and immediately repurchased the property and would be taxed on any gain (but not loss) from the constructive sale. The character of gain from a constructive sale would depend upon the Fund’s holding period in the property. Loss from a constructive sale would be recognized when the property was subsequently disposed of, and its character would depend on the Fund’s holding period and the application of various loss deferral provisions of the Code. Constructive sale treatment does not apply to transactions closed in the 90-day period ending with the 30th day after the close of the taxable year, if certain conditions are met.

SECTION 988 GAINS OR LOSSES. Gains or losses attributable to fluctuations in exchange rates which occur between the time the Fund accrues income or other receivables or accrues expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such receivables or pays such liabilities generally are treated as ordinary income or ordinary loss. Similarly, on disposition of some investments, including debt securities and certain forward contracts denominated in a foreign currency, gains or losses attributable to fluctuations in the value of the foreign currency between the acquisition and disposition of the position also are treated as ordinary gain or loss. These gains and losses, referred to under the Code as “section 988” gains or losses, increase or decrease the amount of the Fund’s investment company taxable income available to be distributed to its shareholders as ordinary income. If section 988 losses exceed other investment company taxable income during a taxable year, the Fund would not be able to make any ordinary dividend distributions, or distributions made before the losses were realized would be re-characterized as a return of capital to shareholders, rather than as an ordinary dividend, reducing each shareholder’s basis in Fund shares.

PASSIVE FOREIGN INVESTMENT COMPANIES. The Fund may invest in shares of foreign corporations that may be classified under the Code as passive foreign investment companies (“PFICs”). In general, a foreign corporation is classified as a PFIC if at least one-half of its assets constitute investment-type assets, or 75% or more of its gross income is investment-type income. If the Fund receives a so-called “excess distribution” with respect to PFIC stock, the Fund itself may be subject to a tax on a portion of the excess distribution, whether or not the corresponding income is distributed by the Fund to shareholders. In general, under the PFIC rules, an excess distribution is treated as having been realized ratably over the period during which the Fund held the PFIC shares. The Fund will itself be subject to tax on the portion, if any, of an excess distribution that is so allocated to prior Fund taxable years and an interest factor will be added to the tax, as if the tax had been payable in such prior taxable years. Certain distributions from a PFIC as well as gain from the sale of PFIC shares are treated as excess distributions. Excess distributions are characterized as ordinary income even though, absent application of the PFIC rules, certain excess distributions might have been classified as capital gain.

The Fund may be eligible to elect alternative tax treatment with respect to PFIC shares. Under an election that currently is available in some circumstances, the Fund would be required to include in its gross income its share of the earnings of a PFIC on a current basis, regardless of whether distributions were received from the PFIC in a given year. If this election were made, the special rules, discussed above, relating to the taxation of excess distributions would not apply. In addition, another election would involve marking to market the Fund’s PFIC shares at the end of each taxable year, with the result that unrealized gains would be treated as though they were realized and reported as ordinary income. Any mark-to-market losses and any loss from an actual

disposition of PFIC shares would be deductible as ordinary losses to the extent of any net mark-to-market gains included in income in prior years.

DISTRIBUTIONS

Distributions of investment company taxable income are taxable to a U.S. shareholder as ordinary income, whether paid in cash or shares. Dividends paid by the Fund to a corporate shareholder, to the extent such dividends are attributable to dividends received by the Fund from U.S. corporations, may, subject to limitation, be eligible for the dividends received deduction. However, the alternative minimum tax applicable to corporations may reduce the value of the dividends received deduction.

Currently effective tax legislation generally provides for a maximum tax rate for individual taxpayers of 15% on long-term capital gains and on certain qualifying dividends on corporate stock. The rate reductions do not apply to corporate taxpayers. The Funds will be able to separately designate distributions of any qualifying long-term capital gains or qualifying dividends earned by the Funds that would be eligible for the lower maximum rate. A shareholder would also have to satisfy a more than 60-day holding period with respect to any distributions of qualifying dividends in order to obtain the benefit of the lower rate. Distributions from Funds investing in bonds and any other debt instruments will not generally qualify for the lower rates. Note that distributions of earnings from dividends paid by “qualified foreign corporations” can also qualify for the lower tax rates on qualifying dividends. Qualified foreign corporations are corporations incorporated in a U.S. possession, corporations whose stock is readily tradable on an established securities market in the U.S., and corporations eligible for the benefits of a comprehensive income tax treaty with the United States which satisfy certain other requirements. Foreign personal holding companies, foreign investment companies, and passive foreign investment company are not treated as “qualified foreign corporations.”

The excess of net long-term capital gains over the short-term capital losses realized and distributed by the Fund, whether paid in cash or reinvested in Fund shares, will generally be taxable to you as long-term gain, regardless of how long a shareholder has held Fund shares. Net capital gains from assets held for one year or less will be taxed as ordinary income.

You will be notified annually as to the U.S. federal tax status of distributions, and shareholders receiving distributions in the form of newly issued shares will receive a report as to the net asset value of the shares received.

If the net asset value of shares is reduced below your cost as a result of a distribution by the Fund, such distribution generally will be taxable even though it represents a return of invested capital. You should be careful to consider the tax implications of buying shares of the Fund just prior to a distribution. The price of shares purchased at this time will include the amount of the forthcoming distribution, but the distribution will generally be taxable to you.

DISPOSITIONS

Upon a redemption, sale or exchange of shares of the Fund, you will realize a taxable gain or loss depending upon your basis in the shares. A gain or loss will be treated as capital gain or loss if the shares are capital assets in your hands, and the rate of tax will depend upon the shareholder’s holding period for the shares. Any loss realized on a redemption, sale or exchange will be disallowed to the extent the shares disposed of are replaced (including through reinvestment of dividends) within a period of 61 days, beginning 30 days before and ending 30 days after the shares are disposed of. In such a case the basis of the shares acquired will be adjusted to reflect the disallowed loss. If you hold Fund shares for six months or less and during that period receive a distribution taxable to you as long-term capital gain, any loss realized on the sale of such shares during such six-month period would be a long-term loss to the extent of such distribution.

BACKUP WITHHOLDING

The Fund generally will be required to withhold federal income tax at a current rate of 28% (“backup withholding”) from dividends paid, capital gain distributions, and redemption proceeds to you if (1) you fail to furnish the Fund with your correct taxpayer identification number or social security number, (2) the IRS notifies you or the Fund that you have failed to report properly certain interest and dividend income to the IRS and to respond to notices to that effect, (3) when required to do so, you fail to certify that you are not subject to backup withholding, or (4) you fail to certify that you are a U.S. resident, including a resident alien. Any amounts withheld may be credited against your federal income tax liability.

OTHER TAXATION

Distributions may be subject to additional state, local and foreign taxes, depending on your particular situation. Non-U.S. shareholders may be subject to U.S. tax rules that differ significantly from those summarized above, including the likelihood that ordinary income dividends to them would be subject to withholding of U.S. tax at a rate of 28% (or a lower treaty rate, if applicable).

DISCLOSURE OF FUND PORTFOLIO HOLDINGS

The Board of Trustees has adopted policies and procedures for the public and nonpublic disclosure of the Funds’ portfolio securities. A complete list of each Fund’s portfolio holdings is made publicly available on a quarterly basis through filings made with the SEC on forms N-CSR and N-Q. As a general matter, in order to protect the confidentiality of the Funds’ portfolio holdings, no information concerning the portfolio holdings of the Funds may be disclosed to any unaffiliated third party except: (1) to service providers that require such information in the course of performing their duties (such as the Funds’ custodian, fund accountants, investment advisor, administrator, independent registered public accounting firm, attorneys, officers and trustees and each of their respective affiliates and advisors) and are subject to a duty of confidentiality; or (2) pursuant to certain enumerated exceptions that serve a legitimate business purpose. These exceptions include: (1) disclosure of portfolio holdings only after such information has been publicly disclosed, and (2) to third-party vendors, such as Morningstar Inc. and Lipper, Inc. and other financial intermediaries that: (a) agree to not distribute the portfolio holdings or results or the analysis to third parties, other departments or persons who are likely to use the information for the purposes of purchasing or selling the Funds before the portfolio holdings or results of the analysis become publicly available; and (b) sign a written confidentiality agreement. The confidentiality agreement must provide, among other things, that the recipient of the portfolio holdings information agrees to limit access to the portfolio information to its employees (and agents) who, on a need to know basis, are (1) authorized to have access to the portfolio holdings information and (2) subject to confidentiality obligations, including duties not to trade on non-public information, no less restrictive that the confidentiality obligations contained in the confidentiality agreement. Only the Trust’s President may authorize disclosure of any of the Funds’ portfolio holdings. The Trust’s President monitors requests for the disclosure of portfolio holdings and is responsible for bringing to the attention of the Board of Trustees for resolution any request that represents a conflict of interest between the Funds’ shareholders and the Funds’ investment advisor, sub-advisors, principal underwriter or any affiliates of those entities.

Neither the Funds nor the Advisor may enter into any arrangement providing for the disclosure of non-public portfolio holding information for the receipt of compensation or benefit of any kind. Any exceptions to the policies and procedures may only be made by the consent of a majority of the Board of Trustees upon a determination that such disclosure serves a legitimate business purpose and is in the best interests of the Funds. Any amendments to these policies and procedures must be approved and adopted by the Board of Trustees. The Board may, on a case-by-case basis, impose additional restrictions on the dissemination of portfolio holdings information beyond those found in the policies and procedures, as necessary.

CALCULATION OF PERFORMANCE DATA

Current yield and total return may be quoted in advertisements, shareholder reports or other communications to shareholders. Yield is the ratio of income per share derived from a Fund’s investments to a current maximum offering price expressed in terms of percent. The yield is quoted on the basis of earnings after expenses have been deducted. Total return is the total of all income and capital gains paid to shareholders, assuming reinvestment of all distributions, plus (or minus) the change in the value of the original investment, expressed as a percentage of the purchase price. Occasionally, a Fund may include its distribution rate in advertisements. The distribution rate is the amount of distributions per share made by a Fund over a 12-month period divided by the current maximum offering price.

The SEC rules require the use of standardized performance quotations or, alternatively, that every non-standardized performance quotation furnished by a Fund be accompanied by certain standardized performance information computed as required by the SEC. Current yield and total return quotations used by a Fund are based on the standardized methods of computing performance mandated by the SEC. An explanation of those and other methods used by a Fund to compute or express performance follows.

TOTAL RETURN

As the following formula indicates, the average annual total return is determined by multiplying a hypothetical initial purchase order of $1,000 by the average annual compound rate of return (including capital appreciation/depreciation and dividends and distributions paid and reinvested) for the stated period less any fees charged to all shareholder accounts and analyzing the result. The calculation assumes the maximum sales load is deducted from the initial $1,000 purchase order and that all dividends and

distributions are reinvested at the public offering price on the reinvestment dates during the period. The quotation assumes the account was completely redeemed at the end of each one, five and ten-year period and assumes the deduction of all applicable charges and fees. According to the SEC formula:

P(1+T)ⁿ = ERV


Where:	P	=	a hypothetical initial payment of $1,000.
	T	=	average annual total return.
	n	=	number of years.
	ERV	=	ending redeemable value of a hypothetical $1,000 payment made at the beginning of the 1, 5 or 10-year periods, determined at the end of the 1, 5 or 10-year periods (or fractional portion thereof).

Regardless of the method used, past performance is not necessarily indicative of future results, but is an indication of the return to shareholders only for the limited historical period used.

The Funds compute their average annual total return after taxes on distributions by determining the average annual compounded rates of return during specified periods that equate the initial amount invested to the ending redeemable value of such investment after taxes on fund distributions but not after taxes on redemptions. This is done by dividing the ending redeemable value after taxes on Fund distributions of a hypothetical $1,000 initial payment by $1,000 and raising the quotient to a power equal to one divided by the number of years (or fractional portion thereof) covered by the computation and subtracting one from the result. This calculation can be expressed as follows:

P(1+T) ⁿ = ATVD_D


Where:	P	=	a hypothetical initial payment of $1,000
	n	=	number of years
	T	=	average annual total return.
	ATVD_D	=	ending value of a hypothetical $1,000 payment made at the beginning of the 1-, 5-, or 10-year periods at the end of such periods after taxes on fund distributions but not after taxes on redemption

The Funds compute their average annual total return after taxes on distributions and redemptions by determining the average annual compounded rates of return during specified periods that equate the initial amount invested to the ending redeemable value of such investment after taxes on fund distributions and redemptions. This is done by dividing the ending redeemable value after taxes on Fund distributions and redemptions of a hypothetical $1,000 initial payment by $1,000 and raising the quotient to a power equal to one divided by the number of years (or fractional portion thereof) covered by the computation and subtracting one from the result. This calculation can be expressed as follows:

P(1 + T) ⁿ= ATV_DR


Where:	P	=	a hypothetical initial payment of $1,000
	n	=	number of years
	T	=	average annual total return.
	ATV_DR	=	ending value of a hypothetical $1,000 payment made at the beginning of the 1-, 5-, or 10-year periods at the end of such periods, after taxes on fund distributions and redemption

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.

30-DAY YIELD CALCULATIONS

The Income Fund may calculate a 30-day yield by dividing the net investment income per share (as described below) earned by the Fund during a 30-day (or one month) period by the maximum offering price per share on the last day of the period. The result is then annualized on a semi-annual basis by adding one to the quotient, raising the sum to the power of six, subtracting one from the result and then doubling the difference. The Fund’s net investment income per share earned during the period is based on the average daily number of shares outstanding during the period entitled to receive dividends and includes dividends and interest earned during the period minus expenses accrued for the period, net of reimbursements. This calculation can be expressed as follows:


Where:	a	=	dividends and interest earned during the period.
	b	=	expenses accrued for the period (net of reimbursements).
	c	=	the average daily number of shares outstanding during the period that were entitled to receive dividends.
	d	=	maximum offering price per share on the last day of the period.

For the purpose of determining net investment income earned during the period (variable “a” in the formula), dividend income on equity securities held by the Fund is recognized by accruing 1/360 of the stated dividend rate of the security each day that the security is in the Fund. Except as noted below, interest earned on any debt obligations held by the Fund is calculated by computing the yield to maturity of each obligation held by the Fund based on the market value of the obligation (including actual accrued interest) at the close of business on the last business day of the month, the purchase price (plus actual accrued interest) and dividing the result by 360 and multiplying the quotient by the market value of the obligation (including actual accrued interest) in order to determine the interest income on the obligation for each day of the subsequent month that the obligation is held by the Fund. For purposes of this calculation, it is assumed that each month contains thirty days. The date on which the obligation reasonably may be expected to be called for, or if none, the maturity date. With respect to debt obligations purchased at a discount or premium, the formula generally calls for amortization of the discount premium. The amortization schedule will be adjusted monthly to reflect changes in the market values of such debt obligations.

Expenses accrued for the period (variable “b” in the formula) include all recurring fees charged by the Fund to all shareholder accounts in proportion to the length of the base period and the Fund’s mean (or median) account size. Undeclared earned income

will be subtracted from the offering price per capital share (variable “d” in the formula).

With regard to mortgage or other receivables-backed obligations which are expected to be subject to monthly payments of principal and interest (“pay-downs”): (i) gain or loss attributable to actual monthly pay-downs are accounted for as an increase or decrease to interest income during the period; and (ii) the Fund may elect either (a) to amortize the discount and premium on the remaining security, based on the cost of the security, to the weighted average maturity date, if such information is available, or to the remaining term of the security, if any, if the weighted average date is not available or (b) not to amortize discount or premium on the remaining security.

COMPARING PERFORMANCE

Performance information for the Funds may be compared, in reports and promotional literature, to indexes including, but not limited to: (i) the Standard & Poor’s 500 Composite Stock Price Index, the Dow Jones Industrial Average, or other appropriate unmanaged domestic or foreign indexes of performance of various types of investments so that investors may compare a Fund’s results with those of indexes widely regarded by investors as representative of the securities markets in general; (ii) other groups of mutual funds tracked by Lipper Inc., a widely-used independent research firm which ranks mutual funds by overall performance, investment objectives and assets, or tracked by other services, companies, publications, or persons who rank mutual funds on overall performance or other criteria; (iii) the Consumer Price Index (a measure of inflation) to assess the real rate of return from an investment in a Fund; and (iv) products managed by a universe of money managers with similar performance objectives. Unmanaged indexes may assume the reinvestment of dividends but generally do not reflect deductions or administrative and management costs and expenses.

FINANCIAL STATEMENTS

The audited financial statements and financial highlights of the Funds for the fiscal year ended June 30, 2007, as set forth in the Trust’s annual report to shareholders, including the notes thereto and the reports of Ernst & Young LLP thereon, are incorporated herein by reference.

APPENDIX A — DESCRIPTION OF SECURITIES RATINGS

SHORT-TERM CREDIT RATINGS

A Standard & Poor’s short-term issue credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation having an original maturity of no more than 365 days. The following summarizes the rating categories used by Standard & Poor’s for short-term issues:

“A-1” — Obligations are rated in the highest category and indicate that the obligor’s capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor’s capacity to meet its financial commitment on these obligations is extremely strong.

“A-2” — Obligations are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor’s capacity to meet its financial commitment on the obligation is satisfactory.

“A-3” — Obligations exhibit adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

“B” — Obligations have significant speculative characteristics. The obligor currently has the capacity to meet its financial commitment on the obligation. However, it faces major ongoing uncertainties which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.

“C” — Obligations are currently vulnerable to nonpayment and are dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation.

“D” — Obligations are in payment default. The “D” rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor’s believes that such payments will be made during such grace period. The “D” rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

Local Currency and Foreign Currency Risks — Country risk considerations are a standard part of Standard & Poor’s analysis for credit ratings on any issuer or issue. Currency of repayment is a key factor in this analysis. An obligor’s capacity to repay foreign currency obligations may be lower than its capacity to repay obligations in its local currency due to the sovereign government’s own relatively lower capacity to repay external versus domestic debt. These sovereign risk considerations are incorporated in the debt ratings assigned to specific issues. Foreign currency issuer ratings are also distinguished from local currency issuer ratings to identify those instances where sovereign risks make them different for the same issuer.

Moody’s short-term ratings are opinions of the ability of issuers to honor senior financial obligations and contracts. These obligations have an original maturity not exceeding one year, unless explicitly noted. The following summarizes the rating categories used by Moody’s for short-term obligations:

“Prime-1” — Issuers (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidenced by many of the following characteristics: leading market positions in well-established industries; high rates of return on funds employed; conservative capitalization structure with moderate reliance on debt and ample asset protection; broad margins in earnings coverage of fixed financial charges and high internal cash generation; and well-established access to a range of financial markets and assured sources of alternate liquidity.

“Prime-2” — Issuers (or supporting institutions) have a strong ability to repay senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation than is the case for Prime-1 securities. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.

A-1

“Prime-3” — Issuers (or supporting institutions) have an acceptable ability for repayment of senior short-term debt obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt-protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained.

“Not Prime” — Issuers do not fall within any of the Prime rating categories.

Fitch short-term ratings apply to time horizons of less than 12 months for most obligations, or up to three years for U.S. public finance securities, and thus place greater emphasis on the liquidity necessary to meet financial commitments in a timely manner. The following summarizes the rating categories used by Fitch for short-term obligations:

“F1” — Securities possess the highest credit quality. This designation indicates the strongest capacity for timely payment of financial commitments and may have an added “+” to denote any exceptionally strong credit feature.

“F2” — Securities possess good credit quality. This designation indicates a satisfactory capacity for timely payment of financial commitments, but the margin of safety is not as great as in the case of the higher ratings.

“F3” — Securities possess fair credit quality. This designation indicates that the capacity for timely payment of financial commitments is adequate; however, near-term adverse changes could result in a reduction to non-investment grade.

“B” — Securities possess speculative credit quality. This designation indicates minimal capacity for timely payment of financial commitments, plus vulnerability to near-term adverse changes in financial and economic conditions.

“C” — Securities possess high default risk. Default is a real possibility. This designation indicates a capacity for meeting financial commitments which is solely reliant upon a sustained, favorable business and economic environment.

“D” — Securities are in actual or imminent payment default.

LONG-TERM CREDIT RATINGS

The following summarizes the ratings used by Standard & Poor’s for long-term issues:

“AAA” — An obligation rated “AAA” has the highest rating assigned by Standard & Poor’s. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.

“AA” — An obligation rated “AA” differs from the highest rated obligations only in small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong.

“A” — An obligation rated “A” is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong.

“BBB” — An obligation rated “BBB” exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

Obligations rated “BB,” “B,” “CCC,” “CC” and “C” are regarded as having significant speculative characteristics. “BB” indicates the least degree of speculation and “C” the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.

“BB” — An obligation rated “BB” is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.

A-2

“B” — An obligation rated “B” is more vulnerable to nonpayment than obligations rated “BB,” but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation.

“CCC” — An obligation rated “CCC” is currently vulnerable to nonpayment and is dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.

“CC” — An obligation rated “CC” is currently highly vulnerable to nonpayment.

“C” — A subordinated debt obligation rated “C” is currently highly vulnerable to nonpayment. The “C” rating may be used to cover a situation where a bankruptcy petition has been filed or similar action taken, but payments on this obligation are being continued.

“D” — An obligation rated “D” is in payment default. The “D” rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor’s believes that such payment will be made during such grace period. The “D” rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

- PLUS (+) OR MINUS (-) — The ratings from “AA” through “CCC” may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.

The following summarizes the ratings used by Moody’s for long-term debt:

“Aaa” — Bonds are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as “gilt edged.” Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.

“Aa” — Bonds are judged to be of high quality by all standards. Together with the “Aaa” group they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in “Aaa” securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than the “Aaa” securities.

“A” — Bonds possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.

“Baa” — Bonds are considered as medium-grade obligations, (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.

“Ba” — Bonds are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.

“B” — Bonds generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.

“Caa” — Bonds are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.

“Ca” — Bonds represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.

A-3

“C” — Bonds are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.

Note: Moody’s applies numerical modifiers 1, 2, and 3 in each generic rating classification from “Aa” through “Caa.” The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category.

The following summarizes the ratings used by Fitch for long-term issues:

“AAA” — Securities considered to be investment grade and of the highest credit quality. These ratings denote the lowest expectation of credit risk and are assigned only in case of exceptionally strong capacity for timely payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.

“AA” — Securities considered to be investment grade and of very high credit quality. These ratings denote a very low expectation of credit risk and indicate very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.

“A” — Securities considered to be investment grade and of high credit quality. These ratings denote a low expectation of credit risk. The capacity for timely payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings.

“BBB” — Securities considered to be investment grade and of good credit quality. These ratings denote that there is currently a low expectation of credit risk. The capacity for timely payment of financial commitments is considered adequate, but adverse changes in circumstances and in economic conditions are more likely to impair this capacity. This is the lowest investment grade category.

“BB” — Securities considered to be speculative. These ratings indicate that there is a possibility of credit risk developing, particularly as the result of adverse economic change over time; however, business or financial alternatives may be available to allow financial commitments to be met. Securities rated in this category are not investment grade.

“B” — Securities considered to be highly speculative. These ratings indicate that significant credit risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is contingent upon a sustained, favorable business and economic environment.

“CCC,” “CC” and “C” — Securities have high default risk. Default is a real possibility, and capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic developments. “CC” ratings indicate that default of some kind appears probable, and “C” ratings signal imminent default.

“DDD,” “DD” and “D” — Securities are in default. The ratings of obligations in these categories are based on their prospects for achieving partial or full recovery in a reorganization or liquidation of the obligor. While expected recovery values are highly speculative and cannot be estimated with any precision, the following serve as general guidelines. “DDD” obligations have the highest potential for recovery, around 90%-100% of outstanding amounts and accrued interest. “DD” indicates potential recoveries in the range of 50%-90%, and “D” the lowest recovery potential, i.e., below 50%.

Entities rated in this category have defaulted on some or all of their obligations. Entities rated “DDD” have the highest prospect for resumption of performance or continued operation with or without a formal reorganization process. Entities rated “DD” and “D” are generally undergoing a formal reorganization or liquidation process; those rated “DD” are likely to satisfy a higher portion of their outstanding obligations, while entities rated “D” have a poor prospect for repaying all obligations.

PLUS (+) or MINUS (-) may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the “AAA” long-term rating category or to categories below “CCC”.

A-4

NOTES TO SHORT-TERM AND LONG-TERM CREDIT RATINGS

STANDARD & POOR’S

CREDITWATCH: CreditWatch highlights the potential direction of a short- or long-term rating. It focuses on identifiable events and short-term trends that cause ratings to be placed under special surveillance by Standard & Poor’s analytical staff. These may include mergers, recapitalizations, voter referendums, regulatory action, or anticipated operating developments. Ratings appear on CreditWatch when such an event or a deviation from an expected trend occurs and additional information is necessary to evaluate the current rating. A listing, however, does not mean a rating change is inevitable, and whenever possible, a range of alternative ratings will be shown. CreditWatch is not intended to include all ratings under review, and rating changes may occur without the ratings having first appeared on CreditWatch. The “positive” designation means that a rating may be raised; “negative” means a rating may be lowered; and “developing” means that a rating may be raised, lowered or affirmed.

RATING OUTLOOK: A Standard & Poor’s Rating Outlook assesses the potential direction of a long-term credit rating over the intermediate to longer term. In determining a Rating Outlook, consideration is given to any changes in the economic and/or fundamental business conditions. An Outlook is not necessarily a precursor of a rating change or future CreditWatch action.

— Positive means that a rating may be raised.

— Negative means that a rating may be lowered.

— Stable means that a rating is not likely to change.

— Developing means a rating may be raised or lowered.

— N.M. means not meaningful.

MOODY’S

WATCHLIST: Watchlists list the names of credits whose ratings have a likelihood of changing. These names are actively under review because of developing trends or events which, in Moody’s opinion, warrant a more extensive examination. Inclusion on this Watchlist is made solely at the discretion of Moody’s Investors Services, and not all borrowers with ratings presently under review for possible downgrade or upgrade are included on any one Watchlist. In certain cases, names may be removed from this Watchlist without a change in rating.

FITCH

WITHDRAWN: A rating is withdrawn when Fitch deems the amount of information available to be inadequate for rating purposes, or when an obligation matures, is called, or refinanced.

RATING WATCH: Ratings are placed on Rating Watch to notify investors that there is a reasonable probability of a rating change and the likely direction of such change. These are designated as “Positive”, indicating a potential upgrade, “Negative”, for a potential downgrade, or “Evolving”, if ratings may be raised, lowered or maintained. Rating Watch is typically resolved over a relatively short period.

RATING OUTLOOK: A Rating Outlook indicates the direction a rating is likely to move over a one to two-year period. Outlooks may be positive, stable or negative. A positive or negative Rating Outlooks does not imply a rating change is inevitable. Similarly, companies whose outlooks are “stable” could be upgraded or downgraded before an outlook moves to a positive or negative if circumstances warrant such an action. Occasionally, Fitch may be unable to identify the fundamental trend. In these cases, the Rating Outlook may be described as evolving.

A-5

MUNICIPAL NOTE RATINGS

A Standard & Poor’s note rating reflects the liquidity factors and market access risks unique to notes due in three years or less. The following summarizes the ratings used by Standard & Poor’s for municipal notes:

“SP-1” — The issuers of these municipal notes exhibit a strong capacity to pay principal and interest. Those issues determined to possess a very strong capacity to pay debt service are given a plus (+) designation.

“SP-2” — The issuers of these municipal notes exhibit a satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.

“SP-3” — The issuers of these municipal notes exhibit speculative capacity to pay principal and interest.

In municipal debt issuance, there are three rating categories for short-term obligations that are considered investment grade. These ratings are designated Moody’s Investment Grade (“MIG”) and are divided into three levels — MIG 1 through MIG 3. In the case of variable rate demand obligations, a two-component rating is assigned. The first element represents Moody’s evaluation of the degree of risk associated with scheduled principal and interest payments. The second element represents Moody’s evaluation of the degree of risk associated with the demand feature, using the MIG rating scale. The short-term rating assigned to the demand feature is designated as VMIG. MIG ratings expire at note maturity. By contrast, VMIG ratings expirations will be a function of each issue’s specific structural or credit features. The following summarizes the ratings by Moody’s for these short-term obligations:

“MIG-1”/“VMIG-1” — This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support or demonstrated broad-based access to the market for refinancing.

“MIG-2”/“VMIG-2” — This designation denotes strong credit quality. Margins of protection are ample although not as large as in the preceding group.

“MIG-3”/“VMIG-3” — This designation denotes acceptable credit quality. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established.

“SG” — This designation denotes speculative-grade credit quality. Debt instruments in this category lack sufficient margins of protection.

Fitch uses the same ratings for municipal securities as described above for other short-term credit ratings.

ABOUT CREDIT RATINGS

A Standard & Poor’s issue credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation. The issue credit rating is not a recommendation to purchase, sell or hold a financial obligation. Credit ratings may be changed, suspended or withdrawn.

Moody’s credit ratings must be construed solely as statements of opinion and not recommendations to purchase, sell or hold any securities.

Fitch credit ratings are an opinion on the ability of an entity or of a securities issue to meet financial commitments on a timely basis. Fitch credit ratings are used by investors as indications of the likelihood of getting their money back in accordance with the terms on which they invested. However, Fitch credit ratings are not recommendations to buy, sell or hold any security. Ratings may be changed or withdrawn.

A-6

APPENDIX B — PORTFOLIO MANAGER INFORMATION

Capital Guardian Trust Company

Portfolio Managers

Capital Guardian Trust Company (“Capital Guardian”) uses a multiple portfolio manager system in managing the fund’s assets. Under this approach, the portfolio of a fund is divided into segments managed by individual managers. Each manager’s role is to decide how their respective segment will be invested by selecting securities within the limits provided by the fund’s objectives and policies. Capital Guardian’s investment committee oversees this process. In addition, Capital Guardian’s investment analysts also may make investment decisions with respect to a portion of a fund’s portfolio. Certain portfolio managers may also have investment analyst responsibilities with respect to specific research coverage.

David I. Fisher is Chairman of the Board of Capital Guardian. He has been with Capital Guardian for over 37 years and has been a portfolio manager for at least the past 5 years.

Richard N. Havas is Senior Vice President of Capital International Research, Inc., an affiliate of Capital Guardian. He has been with Capital Guardian for over 20 years and has been a portfolio manager for at least the past 5 years.

Victor D. Kohn is President and Director of Capital International, Inc., an affiliate of Capital Guardian. He has been with Capital Guardian for over 21 years and has been a portfolio manager for at least the past 5 years.

Nancy J. Kyle is Vice Chairman of Capital Guardian. She has been with Capital Guardian for over 16 years and has been a portfolio manager for at least the past 5 years.

Lionel M. Sauvage is Director and Senior Vice President of Capital Guardian. He has been with Capital Guardian for over 19 years and has been a portfolio manager for at least the past 5 years.

Nilly Sikorsky is Chairman of Capital International S.A., an affiliate of Capital Guardian. She has been with Capital Guardian for over 44 years and has been a portfolio manager for at least the past 5 years.

Rudolf M. Staehelin is Senior Vice President of Capital International Research, Inc., an affiliate of Capital Guardian. He has been with Capital Guardian for over 25 years and has been a portfolio manager for at least the past 5 years.

Dollar Range of Investment in the Funds

Based on the information available for the time period ending June 30, 2007, the Capital Guardian portfolio managers of the portion of the assets of the New Covenant Growth Fund allocated to Capital Guardian did not own any shares of the Funds.

Portfolio Manager Compensation

At Capital Guardian, Portfolio Managers and investment analysts are paid competitive fix salaries. In addition, they receive bonuses based on their individual portfolio results and also may participate in profit-sharing plans. The relative mix of compensation represented by bonuses, salary and profit sharing will vary depending on the individual’s portfolio results, contributions to the organization and other factors. In order to encourage a long-term focus, bonuses based on investment results are calculated by comparing pretax total returns over a four-year period to relevant benchmarks. For portfolio managers, benchmarks include both measures of the marketplaces in which the relevant fund invests and measures of the results of comparable mutual funds or consultant universe measures of comparable institutional accounts. For investment analysts, benchmarks include both relevant market measures and appropriate industry indexes reflecting their areas of expertise. The benchmarks used to measure performance of the portfolio managers for the New Covenant Growth Fund include, as applicable, an adjusted MSCI EAFE Index, an adjusted Lipper International Index, an adjusted MSCI Europe Index, a customized index based on the median results with respect to Europe from Callan

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Associates, Evaluation Associates and Frank Russell, an adjusted MSCI Japan Index and a customized index based on the median results with respect to Japan from InterSEC.

Other Managed Accounts

Capital Guardian

Fee based accounts

Portfolio Manager

The number of accounts and the total assets in the accounts managed by each portfolio manager with respect to which the advisory fee is based on the performance of the account


	Registered Investment				Other Pooled
	Companies¹				Investment Vehicles²				Other Accounts^{3, 4}
			Total Assets				Total Assets				Total Assets
	Number of Accounts		(in billions)		Number of Accounts		(in billions)		Number of Accounts		(in billions)
Fisher, David		1		1.16		0		—		9		5.06
Havas, Richard		1		1.16		0		—		8		3.11
Kohn, Victor		0		—		0		—		0		—
Kyle, Nancy		1		1.16		0		—		5		2.54
Sauvage, Lionel		1		1.16		0		—		23		12.07
Sikorsky, Nilly		1		1.16		0		—		46		25.90
Staehelin, Rudolf		1		1.16		0		—		21		12.82


¹		Assets noted represent the total net assets of registered investment companies and are not indicative of the total assets managed by the individual which will be a substantially lower amount.

²		Assets noted represent the total net assets of other pooled investment vehicles and are not indicative of the total assets managed by the individual which will be a substantially lower amount.

³		Assets noted represent the total net assets of other accounts and are not indicative of the total assets managed by the individual which will be a substantially lower amount.

⁴		Reflects other professionally managed accounts held at Capital Guardian or companies affiliated with Capital Guardian. Personal brokerage accounts of portfolio manager and their families are not reflected.

(a) DESCRIPTION OF ANY MATERIAL CONFLICTS

Capital Guardian has adopted policies and procedures that address potential conflicts of interest that may arise between a portfolio manager’s management of the fund and his or her management of other funds and accounts, such as conflicts relating to the allocation of investment opportunities, personal investing activities, portfolio manager compensation and proxy voting of portfolio securities. While there is no guarantee that such policies and procedures will be effective in all cases, Capital Guardian believes that all issues relating to potential material conflicts of interest involving this portfolio and its other managed accounts have been addressed.

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(b) COMPENSATION

At Capital Guardian, portfolio managers and investment analysts are paid competitive salaries. In addition, they may receive bonuses based on their individual portfolio results and also may participate in profit-sharing plans. The relative mix of compensation represented by bonuses, salary and profit sharing will vary depending on the individual’s portfolio results, contributions to the organization and other factors. In order to encourage a long-term focus, bonuses tied to investment results are calculated by comparing pretax total returns to relevant benchmarks over both the most recent year and a four-year rolling average with the greater weight placed on the four-year rolling average. For portfolio managers, benchmarks include both measures of the marketplaces in which the relevant fund invests and measures of the results of comparable mutual funds or consultant universe measures of comparable institutional accounts. For investment analysts, benchmarks include both relevant market measures and appropriate industry indexes reflecting their areas of expertise.

The benchmarks used to measure performance of the portfolio managers for the New Covenant Growth Fund include, as applicable, the MSCI All Country World Index ex U.S.A., with gross dividends, an adjusted MSCI EAFE Index, the MSCI EM Index, with net dividends, an adjusted Lipper International Index and a customized index based on information provided by various third party consultants.

Mazama Capital Management, Inc.

Portfolio Managers

Mazama’s Investment Team consists of four Portfolio Managers, four Sector Portfolio Managers and four Research Analysts, each of whom conducts research and plays an active role in portfolio decision making for the Funds. The Portfolio Managers oversee investment decision making across all industry groups and sectors, while each Sector Portfolio Manager is responsible for one or more of the five primary sectors in the portfolio (Technology, Financial Services, Consumer Discretionary, Healthcare and Producer Durables). The additional Research Analysts support the primary Portfolio Managers and Sector Portfolio Managers in identifying investments for the Funds. Each member of the Investment Team utilizes the firm’s proprietary Price Performance Model (“PPM”) to evaluate investments as part of the day-to –day management of the Fund.

The following are the members of the Investment Team with primary responsibility for the management of the portion of the assets of the New Covenant Growth Fund allocated to Mazama.

Ronald A. Sauer
CEO, Chief Investment Officer, Senior Portfolio Manager

Mr. Sauer is the founder of Mazama Capital Management, Inc. and has been its Chief Executive Officer and Senior Portfolio Manager since the founding of the firm in 1997. Prior to founding the firm, he was the President and Director of Research for Black and Company, Inc., which he joined in 1983. Mr. Sauer has overall responsibility for the management of the Investment Team, oversees the portfolio construction process, conducts research and participates in the security selection process for the Fund.

Stephen C. Brink, CFA
Senior Vice President, Portfolio Manager, Director of Research

Mr. Brink is a co-founder of Mazama Capital Management, Inc. and has been a Portfolio Manager and Director of Research since the firm was founded in 1997. Prior to joining Mazama, he was the Chief Investment Officer for US Trust’s Pacific Northwest office since 1991, where he had been employed since 1984. Mr. Brink oversees the portfolio construction process, conducts research and participates in the security selection process for the Fund. He also oversees research information flow and quality.

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Gretchen Novak, CFA
Associate Portfolio Manager
Sector Portfolio Manager

Ms. Novak joined Mazama Capital Management, Inc. in 1999. Prior to joining the firm, she was an Equity Analyst with Cramer Rosenthal McGlynn, LLC in New York. Ms. Novak is responsible for researching small & mid cap growth consumer discretionary and consumer staple companies and participates in the security selection process for the Fund. She also serves as an Associate Portfolio Manager, supporting Mr. Sauer and Mr. Brink in the overall management of the Fund.

Joel Rubenstein
Associate Portfolio Manager
Investment Experience

Mr. Rubenstein, who joined Mazama in 2003, serves as an associate Portfolio Manager supporting the overall management of the Fund. He has worked as an equity research analyst for Mazama for the last four years. Prior to joining Mazama, he was employed by Banc of America Securities as a senior equity research associate in the technology group. He also spent three years as a senior research analyst at Analysis Group, a leading provider of economic and business strategy consulting service. Mr. Rubenstein earned a MBA in finance and a Bachelor of Arts degree in Economics from UCLA.

Dollar Range of Investment in the Funds

Based on the information available for the time period ending June 30, 2007, the Mazama portfolio managers of the portion of the assets of the New Covenant Growth Fund allocated to Mazama did not own any shares of the Fund.

Portfolio Manager Compensation

Mazama’s compensation structure is designed to attract and retain highly skilled investment professionals. The compensation is structured to maximize performance and keep the interests of each member of our portfolio management team aligned with those of our clients.

The incentive compensation structure keeps each member of the team focused on the relative performance of each strategy versus its respective benchmark. Each Portfolio Manager and Research Analyst receives a base salary representing 20-30% of cash compensation and a performance based incentive representing 70-80% of cash compensation. Performance based incentive compensation is base on: i) the portfolio management fees received by Mazama for all accounts under management; and ii) achieving specific annual excess return targets. The Investment Team does not distinguish between different accounts within each investment style/strategy with respect to compensation. Cash compensation increases as assets under management increase, whether by appreciation or by attracting new clients, both of which are accomplished by achieving higher than average excess returns. Excess returns are measured as the difference between our portfolio returns and the returns of the benchmark for the portion of the Funds managed by Mazama (i.e. Russell 2000 Growth Index, Russell 2500 Growth Index, Russell Mid Cap Growth Index or Russell 3000 Growth Index).

Equity based incentives have been a significant part of Mazama’s compensation plan since the firm’s inception. In total, our Investment Team represents over 70% of the equity of the firm on a fully diluted basis. Every member of the Investment Team is either a direct equity owner or an option holder or both.

Other Managed Accounts

None

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Conflicts of Interest

As every member of the Investment Team has day-to-day management responsibilities with respect to more than one account and more than one investment strategy, actual or apparent conflicts may arise.

The compensation paid to Mazama for managing the Fund is based on a percentage of assets under management rather than a share of the gains. As described above, members of the Investment Team, as equity owners and by receiving a share of portfolio management fees, benefit from Mazama’s revenues and profitability. Conflicts of interest can arise to the extent that larger client accounts generate more fees and potentially larger profits for Mazama compared to small accounts. One or more accounts may also pay fees based on a percentage of assets that can increase and decrease based on performance against a benchmark index. Despite these differences Mazama believes that its trade allocation and other compliance procedures effectively address any related conflicts of interest. Otherwise, no member of the Investment Team is compensated in a way that would add to those conflicts of interest by creating an incentive to favor particular accounts over other accounts.

Execution and research services provided by brokers may not always be utilized in connection with the Fund(s) or with other client accounts that may have paid the commission or a portion of the commission to the broker providing the services. Mazama allocates brokerage commissions for these services in a manner that it believes is fair and equitable and consistent with its fiduciary obligations to each of its clients.

If a member of the Investment Team identifies a limited investment opportunity that may be suitable for more than just the Fund or another client account, the Fund may not be able to take full advantage of that opportunity. To mitigate this conflict of interest, Mazama aggregates orders for the Fund with orders from each of its other client accounts participating in the same strategy in order to ensure that clients are treated fairly and equitably over time and consistent with its fiduciary obligations to each of its clients.

Mazama has adopted policies and procedures to address and prevent the above conflicts of interest; however there is no guarantee that such procedures will detect each and every situation in which a conflict arises.

Santa Barbara Asset Management, LLC

Portfolio Manager

Michael G. Mayfield.

Mr. Mayfield is the President and Chief Investment Officer of, and a portfolio manager for, Santa Barbara Asset Management, LLC and has been an investment professional with the firm since 1995.

Dollar Range of Investment in the Funds

Based on the information available for the time period ending June 30, 2007, Mr. Mayfield did not own any shares of the Funds.

Portfolio Manager Compensation

Santa Barbara Asset Management, LLC’s (SBAM) investment professionals enjoy a three part compensation structure. First, each professional is paid an annual fixed salary that is reviewed each year. These salaries are set in accordance with each professional’s experience and role within the firm. Second, each investment professional sitting on the investment committee is paid an annual bonus based upon the performance of his or her investment ideas. Each professional’s recommendations are tracked over a three year rolling period, whether or not those ideas are voted into SBAM’s model portfolio. Lastly, each investment professional, along with each SBAM employee, is eligible to receive an annual bonus. These bonuses are discretionary and are set by the firm’s CEO.

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Other Managed Accounts

Mr. Mayfield is also portfolio manager for assets totaling $ 900 million in 302 separate accounts managed by SBAM, none of which are performanced based. Mr. Mayfield does not manage the assets of any other registered investment companies or pooled investment vehicles.

Conflicts of Interest

Conflicts of interest are resolved on an ad-hoc basis.

Sound Shore Management, Inc.

Portfolio Managers

Harry Burn, III — Chairman and Director of Sound Shore Management, Inc. He has been with the SBAM since 1978 and has served as portfolio manager since then. He received his B.A. and M.B.A. from the University of Virginia.

T. Gibbs Kane, Jr. — President and Director of Sound Shore Management, Inc. He has been with the SBAM since 1978 and has served as portfolio manager since then. He received his B.S.E. from the University of Pennsylvania Wharton School.

John P. DeGulis — He has been with Sound Shore Management, Inc. since January 1996 and has served as a portfolio manager since 2003. He received a B.A. in Economics from Northwestern University, and his M.B.A. from Columbia Business School.

Dollar Range of Investments in the Funds

Based on the information available as of June 30, 2007, the Sound Shore portfolio managers of the portion of the assets of the New Covenant Growth Fund allocated to Sound Shore did not own any shares of the Funds.

Description of Compensation

Messrs. Burn, Kane, and DeGulis, like all employees of Sound Shore Management, Inc., receive a fixed cash salary, a cash contribution to SBAM’s profit sharing plan, and an annual cash bonus. Bonuses and contributions to the profit sharing plan are not based on the performance of the Fund or any other account, but are paid each year out of a pool comprised of the excess of aggregate revenues from all sources, less aggregate expenses.

Other Managed Accounts

Harry Burn, III, T. Gibbs Kane, Jr. and John P. DeGulis acted as portfolio managers for two other mutual funds with a combined value of $ 2.9 billion at August 31, 2007. The portfolio managers do not service any other pooled investment vehicles.

They also acted as portfolio managers for 53 other accounts with a market value of $5.0 billion.

Description of Material Conflicts

Based on the approach Sound Shore takes in managing client assets, Sound Shore does not anticipate conflicts of interest between the Fund’s investments and those of other accounts managed by Sound Shore.

Tattersall Advisory Group, Inc.

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Portfolio Managers

Robert A. Calhoun, CFA
Executive Managing Director
Chief Investment Officer

Mr. Calhoun is an Executive Managing Director and Chief Investment Officer of Tattersall Advisory Group. He joined Tattersall in 1988, serving first as a Research Analyst and later as Managing Director of Research. He was appointed Chief Investment Officer in 2000 and named Executive Managing Director in 2003.

As Chief Investment Officer, he heads the team responsible for developing the firm’s overall investment strategy and oversees portfolio management activity, research, trading and investment risk management. He also serves as Chair of the Investment Policy Committee.

Mr. Calhoun has been working in the investment management field since 1988. He received a BS in finance from the University of Virginia (1988). Bob has been awarded the Chartered Financial Analyst (CFA) designation by the CFA Institute and is a member of the Richmond Society of Financial Analysts.

Parham M. Behrooz, CFA
Managing Director of Credit Research
Head Credit Portfolio Manager

Mr. Behrooz is a Managing Director and Head Credit Portfolio Manager for Tattersall Advisory Group. He joined Tattersall in 1996, serving first as a Research Analyst and later as a Senior Credit Analyst, prior to being named Head of Credit Research in 2000. He was named Managing Director in 2004. As Head Credit Portfolio Manager, he is responsible for directing investment activity within the corporate sector, including oversight of research, trading and portfolio management. He assists in the development of overall research strategy and is a member of the Investment Policy Committee.

Mr. Behrooz has been working in the investment management field since 1996. He received a BS in finance from the University of Virginia (1996). Parham has been awarded the Chartered Financial Analyst (CFA) designation by the CFA Institute and is a member of the Richmond Society of Financial Analysts.

Eric R. Harper, CFA
Director
Senior Research Analyst

Mr. Harper is a Director and Senior Research Analyst for Tattersall Advisory Group. He is responsible for research and trading within the corporate sector, in particular analyzing, tracking and recommending credits for the utility, insurance and REIT sub-sectors. His duties also include portfolio management, and he is a member of the Investment Policy Committee. Prior to joining Tattersall in 2000, he was an Assistant Vice President and Fixed Income Research Analyst for Thompson, Siegel & Walmsley, Inc. (1995-2000).

Eric has been working in the investment management field since 1995. He received a BS in finance from the University of Virginia (1995). He has been awarded the Chartered Financial Analyst (CFA) designation by the CFA Institute and is a member of the Richmond Society of Financial Analysts.

Todd C. Kuimjian, CFA, CPA
Director
Senior MBS Portfolio Manager

Mr. Kuimjian is a Director and Senior MBS Portfolio Manager for Tattersall Advisory Group. He is responsible for research and trading activity within the mortgage sector, as well as portfolio management. In addition, he is a member of the Investment Policy Committee. Prior to joining Tattersall in 2001, Todd served as an Associate Director for Evergreen affiliates FCG and Mentor Investment Group (1994-2001).

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Mr. Kuimjian has been working in the investment management field since 1994. He received a BS in accounting from Virginia Polytechnic Institute and State University (Virginia Tech) (1993). He has been awarded the Chartered Financial Analyst (CFA) designation by the CFA Institute and is a member of the Richmond Society of Financial Analysts. Todd received his Certified Public Accountant license from the State of Virginia (1997).

Mehmet Camurdan, CFA
Associate Director
Senior ABS Portfolio Manager

Mr. Camudan is an Associate Director and Senior ABS Portfolio Manager for Tattersall Advisory Group. He joined Tattersall in 1999, serving first as a Senior Research Analyst prior to being named Senior ABS Portfolio Manager in 2005. He is responsible for overall research activity and trading within the asset-backed sector, as well as portfolio management.

Mr. Camudan has been working in the investment management field since 1999. He received a BS from Bogazici University, Turkey (1993) and a PhD in applied mathematics from the University of Virginia (1999). Mehmet has been awarded the Chartered Financial Analyst (CFA) designation by the CFA Institute.

Dollar Range of Investments in the Fund

Based on the information available for the period ended June 30, 2007, the Tattersall portfolio managers managing the assets of the New Covenant Income Fund did not own any shares of the Funds.

Compensation

For portfolio managers, research analysts and traders, compensation is composed of a fixed base salary and a performance-based annual bonus. The incentive program has an investment performance component and a subjective individual component. The assessment of investment performance is based on the investment performance of the fund or fund composites and is measured on a relative basis versus the performance over the same time period of a competitive index or universe of external managers with similar characteristics. Investment performance is measured considering performance over one, three and five year periods, weighted 25%, 50% and 25%, respectively. For subjective performance, assessments include performance against pre-determined objectives as well as discretionary judgments.

Other investment professionals and support staff participate in the incentive program as well with investment performance, specific job functions and personal objectives weighted appropriately for each role.

Objectives are set in several categories including teamwork, participation in various assignments, leadership, and development of staff. In addition, top performers and/or employees in key positions may be recommended to receive annual Wachovia stock awards (non-qualified stock options or restricted stock).

Other Managed Accounts

Tattersall Advisory Group employs a team approach to managing assets, and as such each member of the research team actively participates in the management of all client relationships. The portfolio managers associated with the New Covenant Funds manage investment relationships totaling $12.2 billion, none of which are performance based.

Description of Material Conflicts

The team of investment professionals at Tattersall Advisory Group manages multiple portfolios for multiple clients. These accounts may include separate accounts (assets managed on behalf of institutions such as pension funds, insurance companies and foundations), mutual funds and other commingled vehicles. The Investment Professionals manage portfolios of a substantially similar investment style, which limits the potential for conflicts across portfolios of the multiple clients. However, some portfolios may have investment

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objectives, time horizons, tax considerations and risk profiles that are somewhat different from those of the Fund. Based on these differences, it is possible that the Investment Professionals may purchase or sell securities for one portfolio and not another portfolio, and the performance of securities purchased for the Fund may vary from the performance of securities purchased for other portfolios. The Investment Professionals make investment decisions for the Fund based on the investment objectives, policies, practices, benchmarks, cash flows, tax and other relevant investment considerations applicable to that portfolio.

In addition, Tattersall Advisory Group has adopted and implemented policies and procedures, including brokerage and trade allocation policies and procedures that it believes address the conflicts associated with managing multiple accounts for multiple clients. Tattersall Advisory Group monitors a variety of areas, including compliance with primary fund guidelines, and compliance with the firm’s Code of Ethics.

Wellington Management Company, LLP

Portfolio Managers

Mammen Chally, CFA, Vice President and Equity Portfolio Manager of Wellington Management, has served as portfolio manager for the large cap portion of the Fund since 2000. Mr. Chally joined the firm as an investment professional in 1994.

James A. Rullo, CFA, Senior Vice President and Director of the Quantitative Investment Group of Wellington Management, has been involved in portfolio management and securities analysis for the large cap portion of the Fund since 2000. Mr. Rullo joined the firm as an investment professional in 1994.

Doris T. Dwyer, Vice President and Equity Portfolio Manager of Wellington Management, has served as portfolio manager for the small cap portion of the Fund since 2003. Ms. Dwyer joined the firm as an investment professional in 1998.

David J. Elliott, CFA, Vice President and Equity Portfolio Manager of Wellington Management, has been involved in portfolio management and securities analysis for the small cap portion of the Fund since 2003. Mr. Elliott joined the firm in 1995 and has been an investment professional since 1999.

Dollar Range of Investments in the Fund

Based on the information available for the time period ending June 30, 2007, the Wellington Management portfolio managers of the portion of the assets of the New Covenant Growth Fund allocated to Wellington Management did not own any shares of the Funds.

Description of Compensation

The Fund pays Wellington Management a fee based on the assets under management of the Fund as set forth in the Subadvisory Agreement between Wellington Management and New Covenant Trust Company, N.A. on behalf of the Fund. Wellington Management pays its investment professionals out of its total revenues and other resources, including the advisory fees earned with respect to the Fund. The following information relates to the fiscal year ended June 30, 2007.

Wellington Management’s compensation structure is designed to attract and retain high-caliber investment professionals necessary to deliver high quality investment management services to its clients. Wellington Management’s compensation of the investment professionals primarily responsible for the day-to-day management of the Fund (“Investment Professionals”) includes a base salary and incentive components. The base salary for each Investment Professional who is a partner of Wellington Management is determined by the Managing Partners of the firm. A partner’s base salary is generally a fixed amount that may change as a result of an annual review. The base salary for all other Investment Professionals is determined by the Investment Professional’s experience and performance in their role as an Investment Professional. Base salaries for employees are reviewed annually and may be adjusted based on the recommendation of the Investment

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Professional’s business manager, using guidelines established by Wellington Management’s Compensation Committee, which has final oversight responsibility for base salaries for employees of the firm. Each Investment Professional is eligible to receive an incentive payment based on the revenues earned by Wellington Management from the Fund managed by that Investment Professional and generally each other portfolio managed by such Investment Professional. Each Investment Professional’s incentive payment relating to the Fund is linked to the gross pre-tax performance of the portion of the Fund managed by the Investment Professional compared to the Russell 1000 Index over one and three year periods, with an emphasis on three year results. Wellington Management applies similar incentive compensation structures (although the benchmarks or peer groups, time periods and rates may differ) to other portfolios managed by the Investment Professionals, including portfolios with performance fees. Portfolio-based incentives across all portfolios managed by an Investment Professional can, and typically do, represent a significant portion of an Investment Professional’s overall compensation; incentive compensation varies significantly by individual and can vary significantly from year to year. The Investment Professionals may also be eligible for bonus payments based on their overall contribution to Wellington Management’s business operations. Senior management at Wellington Management may reward individuals as it deems appropriate based on factors other than portfolio performance. Each partner of Wellington Management is also eligible to participate in a partner-funded tax qualified retirement plan, the contributions to which are made pursuant to an actuarial formula, as a partner of the firm. Mr. Rullo is a partner of the firm.

Other Managed Accounts


	Registered Investment				Other Pooled Investment
	Companies				Vehicles				Other Accounts
											Total
											Assets
	Number of		Total Assets		Number of		Total Assets		Number of		(in
Portfolio Manager	Accounts		(in Millions)*		Accounts		(in Millions)*		Accounts		Millions)*
Chally, Mammen		5		4,104.2		10		933.7		19		7,514.4
Accounts where advisory fee is based on performance (subset of above):		0		0.0		0		0.0		2		847.8

Dwyer, Doris T.		7		2,352.6		7		402.5		11		2,687.9
Accounts where advisory fee is based on performance (subset of above):		0		0.0		0		0.0		2		337.3

Elliot, David J.		3		1,454.3		8		426.1		0		2,658.6
Accounts where advisory fee is based on performance (subset of above):		0		0.0		0		0.0		2		337.3

Rullo, James A.		3		2,729.2		12		1306.8		27		13,024.8
Accounts where advisory fee is based on performance (subset of above):		0		0.0		0		0.0		5		6,129.0


*		Assets are rounded to the nearest one hundred thousand dollars.

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Description of Material Conflicts

Individual investment professionals at Wellington Management manage multiple portfolios for multiple clients. These portfolios may include mutual funds, separate accounts (assets managed on behalf of institutions such as pension funds, insurance companies, foundations, or separately managed account programs sponsored by financial intermediaries), bank common trust accounts, and hedge funds. The Investment Professionals generally manage portfolios in several different investment styles. These portfolios may have investment objectives, strategies, time horizons, tax considerations and risk profiles that differ from those of the Fund. The Investment Professionals make investment decisions for each portfolio including the Fund, based on the investment objectives, policies, practices, benchmarks, cash flows, tax and other relevant investment considerations applicable to that portfolio. Consequently, the Investment Professionals may purchase or sell securities, including IPOs, for one portfolio and not another portfolio, and the performance of securities purchased for one portfolio may vary from the performance of securities purchased for other portfolios. Alternatively, these portfolios may be managed in a similar fashion to the Fund and thus the portfolios may have similar, and in some cases nearly identical, objectives, strategies, and/or holdings to that of the portion of the Fund managed by Wellington.

The Investment Professionals or other investment professionals at Wellington Management may place transactions on behalf of other portfolios that are directly or indirectly contrary to investment decisions made on behalf of the Fund, or make investment decisions that are similar to those made for the Fund, both of which have the potential to adversely impact the Fund depending on market conditions. For example, the Investment Professionals may purchase a security in one portfolio while appropriately selling that same security in another portfolio. Similarly, an Investment Professional may purchase the same security for the Fund and one or more other portfolios at or about the same time, and in those instances the other portfolios will have access to their respective holdings prior to the public disclosure of the Fund’s holdings. In addition, some of these portfolios have fee structures, including performance fees, which are or have the potential to be higher, in some cases significantly higher, than the fees paid by the Fund to Wellington Management. Because incentive payments paid by Wellington Management to the Investment Professionals are tied to revenues earned by Wellington Management, and where noted, to the performance achieved by the manager in each account, the incentives associated with any given portfolio may be significantly higher or lower than those associated with other portfolios managed by a given Investment Professional. Finally, the Investment Professionals may hold shares or investments in the other pooled investment vehicles and/or other accounts identified above.

Wellington Management’s goal is to meet its fiduciary obligation to treat all clients fairly and provide high quality investment services to all of its clients. Wellington Management has adopted and implemented policies and procedures, including brokerage and trade allocation policies and procedures, which it believes address the conflicts associated with managing multiple accounts for multiple clients. In addition, Wellington Management monitors a variety of areas, including compliance with primary account guidelines, the allocation of IPOs, and compliance with the firm’s Code of Ethics, and places additional investment restrictions on Investment Professionals who manage hedge funds and certain other accounts. Furthermore, senior investment and business personnel at Wellington Management periodically review the performance of Wellington Management’s Investment Professionals. Although Wellington Management does not track the time an Investment Professional spends on a single portfolio, Wellington Management does periodically assess whether an Investment Professional has adequate time and resources to effectively manage the Investment Professional’s various client mandates.

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PART C — OTHER INFORMATION

ITEM 23. EXHIBITS:

(a) Trust Instrument filed with Registrant’s initial Registration Statement on September 30, 1998 and incorporated herein by reference.

(a)(i) Certificate of Trust filed with Registrant’s initial Registration Statement on September 30, 1998 and incorporated herein by reference.

(b) By-Laws filed with Registrant’s initial Registration Statement on September 30, 1998 and incorporated herein by reference.

(d) (i) Amended and Restated Investment Advisory Agreement between Registrant and NCF Investment Department of New Covenant Trust Company, N.A. filed with Post-Effective Amendment No. 2 to the Trust’s Registration Statement on October 3, 2001 and incorporated herein by reference.

(d)(ii) Amended and Restated Sub-Advisory Agreement between NCF Investment Department of New Covenant Trust Company, N.A. and Capital Guardian Trust Company filed with Post-Effective Amendment No. 2 to the Trust’s Registration Statement on October 3, 2001 and incorporated herein by reference.

(d) (iii) Amendment to Amended and Restated Sub-Advisory Agreement dated May 14, 2001, as amended between NCF Investment Department of New Covenant Trust Company, N.A. and Capital Guardian Trust Company dated June 15, 2007 filed herewith.

(d) (iv) Sub-Advisory Agreement between NCF Investment Department of New Covenant Trust Company, N.A. and Sound Shore Management, Inc. filed with Post-Effective Amendment No. 2 to the Trust’s Registration Statement on October 3, 2001 and incorporated herein by reference.

(d) (v) Amended and Restated Sub-Advisory Agreement between NCF Investment Department of New Covenant Trust Company, N.A. and Tattersall Advisory Group filed with Post-Effective Amendment No. 2 to the Trust’s Registration Statement on October 3, 2001 and incorporated herein by reference.

(d) (vi) Amended and Restated Sub-Advisory Agreement between NCF Investment Department of New Covenant Trust Company, N.A. and Wellington Management Company, LLP filed with Post-Effective Amendment No. 2 to the Trust’s Registration Statement on October 3, 2001 and incorporated herein by reference.

(d) (vii) Assumption Agreement between New Covenant Trust Company, N.A. and NCF Investment Department of New Covenant Trust Company filed with Post-Effective Amendment No. 2 to the Trust’s Registration Statement on October 3, 2001 and incorporated herein by reference.

(d) (viii) Sub-Advisory Agreement between NCF Investment Department of New Covenant Trust Company, N.A. and Santa Barbara Asset Management, Inc. filed with Post-Effective Amendment No. 6 to the Trust’s Registration Statement on September 2, 2005 and incorporated herein by reference.

(d) (ix) Sub-Advisory Agreement between NCF Investment Department of New Covenant Trust Company, N.A. and Mazama Capital Management, Inc. filed with Post-Effective Amendment No. 6 to the Trust’s Registration Statement on September 2, 2005 and incorporated herein by reference.

(e) Distribution Agreement between Registrant and New Covenant Funds Distributors, Inc., dated February 22, 2006 filed herewith.

(f) Not applicable.

(g)(i) Global Custody Agreement between Registrant and JPMorgan Chase Bank, N.A. dated March 17, 2005 filed herewith.

(g)(ii) Rider to Global Custody Agreement Cash Trade Execution Product effective May 17, 2005 filed herewith.

(h)(i) Fund Accounting Agreement between Registrant and BISYS Fund Services Ohio, Inc. filed with Post-Effective Amendment No. 5 to the Trust’s Registration Statement on November 1, 2004 and incorporated herein by reference.

(h)(ii) Amendment to Fund Accounting Agreement between Registrant and BISYS Fund Services Ohio, Inc. dated February 26, 2007 filed herewith.

(h)(iii) Administration Agreement between Registrant and BISYS Fund Services Ohio, Inc. filed with Post-Effective Amendment No. 5 to the Trust’s Registration Statement on November 1, 2004 and incorporated herein by reference.

(h)(iv) Amendment to Administration Agreement between Registrant and BISYS Fund Services Ohio, Inc. dated February 28, 2007 filed herewith.

(h)(v) Transfer Agency Agreement between Registrant and BISYS Fund Services Ohio, Inc. filed with Post-Effective Amendment No. 5 to the Trust’s Registration Statement on November 1, 2004 and incorporated herein by reference.

(h)(vi) Amendment to Transfer Agency Agreement between Registrant and BISYS Fund Services Ohio, Inc dated February 28, 2007 filed herewith.

(h) (vii) Expense Limitation Agreement between Registrant and NCF Investment Department of New Covenant Trust Company, N.A. dated June 30, 2007 with respect to the Growth Fund and Income Fund filed herewith.

(h) (viii) Expense Limitation Agreement between Registrant and NCF Investment Department of New Covenant Trust Company, N.A. dated June 30, 2007 with respect to the Balanced Growth Fund and Balance Income Fund filed herewith.

(i) Legal Opinion filed with Pre-Effective Amendment No. 2 to the Registration Statement No. 333-64981 on June 30, 1999 and incorporated herein by reference.

(j) Consent of Independent Registered Public Accounting Firm filed herewith.

(k) Not applicable.

(l) Initial Capital Agreements filed with Pre-Effective Amendment No. 2 to Registration Statement No. 333-64981 on June 30, 1999 and incorporated herein by reference.

(m) Not applicable.

(n) Not applicable.

(o) Powers of Attorney for Gail S. Duree, Donald B. Register, William Lauderbach dated October 12, 2007, for Cynthia S. Gooch dated October 16, 2007, for F. Kenneth Bateman, dated October 11, 2007, for Samuel W. McNairy dated October 14, 2007 and for Alison M. John dated October 15, 2007 filed herewith.

(p) (i) Code of Ethics for NCF Investment Department of New Covenant Trust Company, N.A. and New Covenant Funds, as amended, filed with Post-Effective Amendment No. 5 to the Trust’s Registration Statement on November 1, 2005 and incorporated herein by reference.

(p) (ii) Code of Ethics for Capital Guardian Trust Company dated December 2006 filed herewith.

(p) (iii) Code of Ethics for Sound Shore Management, Inc. filed with Post-Effective Amendment No. 2 to the Trust’s Registration Statement on October 3, 2001 and incorporated herein by reference.

(p) (iv) Code of Ethics for Tattersall Advisory Group, Inc., as amended, filed with Post-Effective Amendment No. 5 to the Trust’s Registration Statement on November 1, 2004 and incorporated herein by reference.

(p) (v) Code of Ethics for Wellington Management Company, LLP filed with Post-Effective Amendment No. 5 to the Trust’s Registration Statement on November 1, 2004 and incorporated herein by reference.

(p) (vi) Code of Ethics for Mazama Capital Management Inc., dated February 2, 2007 filed herewith.

(p)(vii) Code of Ethics for Nuveen Investments Inc., dated November 16, 2006 filed herewith.

(p) (viii) Code of Ethics for Santa Barbara Asset Management, Inc., filed with Post-Effective Amendment No. 7 to the Trust’s Registration Statement on October 31, 2005 and incorporated herein by reference.

(p) (ix) Supplement to Code of Ethics for Santa Barbara Asset Management dated November 15, 2006 filed herewith.

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

None.

ITEM 25. INDEMNIFICATION.

Reference is made to Article IX of the Registrant’s Trust Instrument filed with Pre-Effective Amendment No. 2 to Registration Statement No. 333-64981 on June 30, 1999 and incorporated herein by reference.

The Trust Instrument limits the liabilities of a Trustee to that of gross negligence and in the event a Trustee is sued for his or her activities concerning the Trust, the Trust will indemnify that Trustee to the fullest extent permitted by law, except if a Trustee engages in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office.

The Registrant has purchased Errors and Omissions insurance with Directors and Officers liability coverage.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

NCF Investment Department of New Covenant Trust Company, N.A. (the “Adviser”), is the investment adviser for the Registrant. The Adviser is a separate division of New Covenant Trust Company, N.A., which is a federally chartered national trust bank. During the last two fiscal years, no director or officer of the Adviser has engaged in any other business, profession, vocation or employment of a substantial nature other than that of the business of investment management and, through affiliates, investment banking.

Capital Guardian Trust Company is a Sub-Adviser for the Growth Fund. During the last two fiscal years, no director or officer of Capital Guardian Trust Company, , has engaged in any other business, profession, vocation or employment of a substantial nature other than that of the business of investment management and, through affiliates, investment banking.

Mazama Capital Management, Inc. is a Sub-Adviser for the Growth Fund. During the last two fiscal years, no director or officer of Mazama Capital Management, Inc., has engaged in any other business, profession, vocation or employment of a substantial nature other than that of the business of investment management and, through affiliates,

investment banking.

Santa Barbara Capital Management is a Sub-Adviser for the Growth Fund. During the last two fiscal years, no director or officer of Santa Barbara Asset Management, has engaged in any other business, profession, vocation or employment of a substantial nature other than that of the business of investment management and, through affiliates, investment banking.

Sound Shore Management, Inc. is a Sub-Adviser for the Growth Fund. During the last two fiscal years, no director or officer of Sound Shore Management, Inc., has engaged in any other business, profession, vocation or employment of a substantial nature other than that of the business of investment management and, through affiliates, investment banking.

Tattersall Advisory Group is a Sub-Adviser for the Income Fund. During the last two fiscal years, no director or officer of Tattersall Advisory Group, has engaged in any other business, profession, vocation or employment of a substantial nature other than that of the business of investment management and, through affiliates, investment banking.

Wellington Management Company, LLP is Sub Adviser for the Growth Fund. The principal business address of Wellington Management Company, LLP is 75 State Street, Boston, Massachusetts 02109. Wellington Management Company, LLP is an investment adviser registered under the Investment Advisers Act of 1940. During the last two fiscal years, no partner of Wellington Management Company, LLP, the Fund’s investment sub-adviser, has engaged in any other business, profession, vocation or employment of a substantial nature other than that of the business of investment management.

ITEM 27. PRINCIPAL UNDERWRITER

(a) New Covenant Funds Distributor, Inc. (the “Distributor”) acts as principal underwriter.

New Covenant Funds Distributor, Inc. is registered with the Securities and Exchange Commission as a broker-dealer and is a member of the National Association of Securities Dealers. New Covenant Funds Distributor, Inc. is located at 200 East Twelfth Street, Jeffersonville Indiana 47130.

(b) The following is a list of the executive officers, directors, and partners of New Covenant Funds Distributor, Inc.:


President:		William R. Precious
VP:		Anita J. Clemons
Scty:		Laura C. Plumley

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.



All records described in Section 31(a) of the 1940 Act and the Rules 17 CFR 270.31a-1 to 31a-3 promulgated thereunder, are maintained by the Registrant’s investment adviser, NCF Investment Department of New Covenant Trust Company, N.A., except for those maintained by the Registrant’s Custodian, JPMorgan Chase Bank, N.A., 270 Park Avenue, New York, NY 10017-2070, the Registrant’s Administrator, Transfer Agent and Accounting Agent, Citi Fund Services Ohio, Inc., 3435 Stelzer Road, Columbus, Ohio 43219.

ITEM 29. MANAGEMENT SERVICES.

Not Applicable.

ITEM 30. UNDERTAKINGS.

None.


		PAGE
History of the Funds		1

Description of Investments and Risks		1

Investment Restrictions		16

Management of the Funds		17

Investment Advisory and Other Services		22

Brokerage		26

General Information		27

Taxation of the Funds		29

Calculation of Performance Data		33

Financial Statements		36

Appendix A — Description of Securities Ratings		A-1

Appendix B — Portfolio Manager Information as of June 30, 2007		B-1


THE FUNDS			3
Concise fund-by-fund descriptions are provided on the following pages. Each description provides the specific Fund’s objective, strategies, risks, suitability and performance. Before investing, make sure that the Fund’s objective matches your own.

A DESCRIPTION OF EACH FUND
New Covenant Growth Fund			4
New Covenant Income Fund			5
New Covenant Balanced Growth Fund			6
New Covenant Balanced Income Fund			7

PRINCIPAL RISKS AND INVESTOR SUITABILITY			8
DESCRIPTION OF PRINCIPAL RISKS			10

PAST PERFORMANCE			12
Bar Charts and Performance Tables			12

FEES AND EXPENSES OF THE FUNDS
Shareholder Fees			17
Annual Fund Operating Expenses			17
Example			18

RISK MANAGEMENT			19
OTHER POLICIES AND RISKS			20

MANAGEMENT OF THE FUNDS
The Advisor			22
The Sub-Advisors			22

YOUR INVESTMENT
Buying Shares			27
Selling Shares			30
Exchange or Transfer of Shares			31
Shareholder Services			32

DISTRIBUTIONS AND TAXES			35
FINANCIAL HIGHLIGHTS			37
ADDITIONAL INFORMATION			Outside Back Cover


SIGNATURE	TITLE	DATE
/s/ F. Kenneth Bateman F. Kenneth Bateman, Jr.*	Trustee, Chairman	October 26, 2007
/s/ Gail C. Duree Gail C. Duree*	Trustee	October 26, 2007
/s/ Cynthia S. Gooch Cynthia S. Gooch*	Trustee	October 26, 2007
/s/ Donald B. Register Donald B. Register*	Trustee	October 26, 2007


Item #		Description

(d)(iii)		Amendment to Amended and Restated Sub-Advisory Agreement dated May 14, 2001, as amended between NCF Investment Department of New Covenant Trust Company, N.A. and Capital Guardian Trust Company dated June 15, 2007.


(e)		Distribution Agreement between Registrant and New Covenant Funds Distributors, Inc., dated February 22, 2006.

(g)(i)		Global Custody Agreement between Registrant and JPMorgan Chase Bank, N.A. dated March 17, 2005.

(g)(ii)		Rider to Global Custody Agreement Cash Trade Execution Product effective dated March 17, 2005.

(h)(ii)		Amendment to Fund Accounting Agreement between Registrant and BISYS Fund Services Ohio, Inc. dated February 26, 2007.

(h)(iv)		Amendment to Administration Agreement between Registrant and BISYS Fund Services May 17, 2005. Services Ohio, Inc. dated February 28, 2007.

(h)(vi)		Amendment to Transfer Agency Agreement between Registrant and BISYS Fund Services May 17, 2005. Services Ohio, Inc. dated February 28, 2007.


Item #		Description

(h)(vii)		Expense Limitation Agreement between Registrant and NCF Investment Department of New Covenant Trust Company, N.A. dated June 30, 2007 with respect to the Growth Fund and Income Fund.

(h)(viii)		Expense Limitation Agreement between Registrant and NCF Investment Department of New Covenant Trust Company, N.A. dated June 30, 2007 with respect to the Balanced Growth Fund and Balance Income Fund.

(j)		Consent of Independent Registered Public Accounting Firm filed herewith.

(o)		Powers of Attorney for Gail S. Duree, Donald B. Register, William Lauderbach dated October 12, 2007, for Cynthia S. Gooch dated October 16, 2007, for F. Kenneth Bateman, dated October 11, 2007, for Samuel W. McNairy dated October 14, 2007 and for Alison M. John dated October 15, 2007.

(p)(ii)		Code of Ethics for Capital Guardian Trust Company dated December 2006.

(p)(vi)		Code of Ethics for Mazama Capital Management Inc., dated February 2, 2007.

(p)(vii)		Code of Ethics for Nuveen Investments Inc., dated November 16, 2006.

(p)(ix)		Supplement to Code of Ethics for Santa Barbara Asset Management dated November 15, 2006.