Investment Policy

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Common Investment Funds (Funds) are the Missouri Baptist Foundation’s primary investment vehicles for endowment, restricted, and agency funds gifted to or entrusted to the Foundation for investment to benefit the mission and ministry efforts of Baptists in Missouri. The Funds were established to facilitate investment for entities exempt from federal income tax under §501 (c) (3) of the Internal Revenue Code of 1986, as amended, through asset pooling. Assets will be invested to benefit participating mission and ministry accounts. The Funds will be administered in a manner consistent with investment policies established by the Foundation’s Board of Trustees and in compliance with all applicable laws and regulations.

The Foundation’s Board of Trustees determines investment policies and implements those policies with the counsel of an investment management consultant and a network of investment managers. At least annually, the Board reviews policies and determines revisions. Investment managers are retained to invest the Funds’ assets in a manner consistent with the Board’s investment policies and guidelines.

In setting policies and objectives, the Foundation recognizes the important role investments play in Baptist institutions’ current and future operations. The Funds’ investment policies are designed to achieve investment returns within prudent risk levels. Strategies used to meet the Funds’ objectives include investment in financial securities and require time horizons sufficient to withstand normal volatility of the financial markets.

The Foundation is committed to asset management in a manner consistent with Christian moral and ethical principles. The Foundation directs investments away from certain companies and particular businesses whose principal business activities are inconsistent with this philosophy. In directing investments, the Foundation will act with ordinary business care and prudence. Assets received by the Foundation that do not conform to this philosophy will be disposed of as soon as practical.

Missouri Baptist Foundation Statement of Investment Policy, Objectives, and Guidelines

I. SCOPE OF THIS INVESTMENT POLICY

This statement reflects the investment policy, objectives, and guidelines of the Missouri Baptist Foundation (hereinafter sometimes “the Foundation”).

II. DEFINITIONS

1. “Board” shall mean the Board of Trustees of the Missouri Baptist Foundation.

2. “Committee” shall mean the Endowment Management Committee of the Board of Trustees of the Missouri Baptist Foundation.

3. “Investment Review Committee” shall mean a committee of Foundation employees appointed by the Board of Trustees that reports directly to the Board’s Endowment Management Committee.

4. “Common Investment Funds” shall mean the family of funds the Board of Trustees establishes from time to time to be offered to Investors.

5. “Fiduciary” shall mean any individual or group of individuals that exercises discretionary authority or control over fund management or any authority or control over management, disposition, or administration of the Funds assets.

6. “Foundation” shall mean the Missouri Baptist Foundation.

7. “Funds” shall mean financial assets placed with the Missouri Baptist Foundation for investment purposes.

8. “Investment Horizon” shall be the time period over which investment objectives, as set forth in this statement, are expected to be met.

9. “Investment Management Consultant” shall mean any individual or organization employed to provide advisory services, including advice on investment objectives and/or asset allocation, manager search, and performance monitoring.

10. “Investment Manager” shall mean any individual or group of individuals employed to manage the investments of all or part of the Funds assets.

11. Any investor exempt from federal income tax under 501(c) (3) of the IRC of 1986, as amended, can invest, including Baptist churches, institutions, agencies, commissions, foundations, associations, or other mission and ministry entities. Also included are charitable trusts and gift annuities with remainder benefit to Baptist entities.

12. “Securities” shall refer to the marketable investment securities defined as acceptable in this statement.

III. PURPOSE OF THIS INVESTMENT POLICY STATEMENT

This investment policy statement is set forth to:

1. Establish a clear understanding for all involved parties of the investment policy, objectives, and guidelines that govern Foundation investment activities.
2. Define and assign the responsibilities of all involved parties.
3. Guide all Foundation investment managers in Funds investment.
4. Establish a basis for evaluating investment results.
5. Manage the Funds according to a) Christian moral and ethical principles and b) prudent standards as established in common trust law.

IV. RESPONSIBILITIES & AUTHORITY

As a steward, the Missouri Baptist Foundation, under the direction and supervision of its Board of Trustees, is responsible for directing and monitoring Funds investment. In its stewardship role, the Foundation may retain and/or terminate relationships with various professional advisors. Responsibilities may be assigned to professional advisors, including, but not limited to:

1. Investment Management Consultant — The consultant may assist in establishing investment policy, objectives, and guidelines; selecting investment managers; reviewing managers over time; measuring and evaluating investment performance; and handling other tasks as appropriate.

2. Investment Manager — The investment manager has discretion, subject to policy provisions, to purchase, sell, or retain specific securities to meet the Funds’ investment objectives. Managers will be held responsible to adhere to these guidelines and shall be accountable to achieve assigned objectives.

3. Custodian — The custodian will physically (or through agreement with a sub-custodian) maintain possession of securities owned by the Funds, collect dividend and interest payments, redeem maturing securities, and affect receipt and delivery following purchases and sales. The custodian may perform regular accounting of all assets owned, purchased, or sold, as well as move assets into and out of Funds accounts.

All expenses for such advisors must be customary and reasonable and will be borne by the Funds.

V. ASSIGNMENT OF RESPONSIBILITY

A. Responsibility of the Missouri Baptist Foundation Board of Trustees

The Board is responsible for the investment of the Funds assets. The Board shall discharge its duties solely in the interest of the Funds, with the care, skill, prudence, and diligence under prevailing circumstances that a prudent investor, acting in like capacity and familiar with such matters, would use to conduct an enterprise of like character and aims. The Board may delegate specific responsibilities to its Endowment Management Committee, which may delegate certain responsibilities to the Investment Review Committee. The Endowment Management Committee investment management responsibilities include:

1. Establishing and maintaining socially screened Common Investment Funds, which shall include, without limitation, MBF Cash Fund, MBF Bond Fund, MBF Stock Fund, and MBF Balanced Fund.

2. Reviewing a Disclosure Statement for each Common Investment Funds that contains investment objectives, permitted investments, asset allocations, and risk/reward profile for each such fund.

3. Prudently and diligently selecting and terminating relationships with qualified investment professionals, including investment manager(s), investment management consultant(s), and custodian(s), to manage the Common Investment Funds.

4. Developing and enacting proper control procedures: for example, replacing investment manager(s) due to fundamental change in investment management processes or failure to comply with established guidelines.

5. Reporting, at least annually, to the Foundation’s full Board of Trustees on the investment performance and financial condition of the Common Investment Funds.

The Investment Review Committee’s specific investment management responsibilities include:

1. Reviewing investment reports regarding investment managers.

2. Regularly evaluating the performance of the investment manager(s) to ensure adherence to policy guidelines and monitor investment objective progress.

3. Rebalance and reallocate Funds assets to investment managers of the Common Investment Funds and asset categories. Rebalancing shall be achieved first through fund contributions and withdrawals and second through inter-fund transfers.

4. Reporting, at least quarter-annually, to the Committee.

5. Conducting such other responsibilities as the Committee may assign.

B. Responsibility of the Investment Management Consultant(s)

The investment management consultant is a non-discretionary advisor to the Missouri Baptist Foundation. The consultant will offer advice concerning investment management of Funds assets consistent with the investment objectives, policies, guidelines, and constraints established in this statement. The investment consultant’s specific responsibilities include:

1. Assisting in investment policy development and periodic review.

2. Conducting investment manager searches at the Investment Review Committee or the Committee’s requests.

3. Providing “due diligence” or research of the investment manager(s).

4. Monitoring the investment manager(s)’ performance to provide the Investment Review Committee and the Committee the ability to determine progress toward investment objectives.

5. Communicating matters of policy, manager research, and manager performance to the Investment Review Committee and/or the Committee.

6. Reviewing investment history, historical capital markets performance and the contents of the investment policy statement to newly appointed Investment Review Committee and Committee members.

C. Responsibility of the Investment Manager(s)

Each investment manager will have discretion to make all investment decisions for the assets placed under its jurisdiction, while observing and operating within all policies, guidelines, constraints, and philosophies as outlined in this statement.

Investment manager(s)’ specific responsibilities include:

1. Exercising discretionary investment management, including decisions to buy, sell, or retain individual securities, and to alter asset allocation within the guidelines established in this statement.

2. Reporting, on a timely basis, quarterly investment performance results.

3. Communicating major changes to economic outlook, investment strategy, or other factors that affect implementation of investment process, or investment objective progress.

4. Informing the Investment Review Committee and the Committee regarding any qualitative change to investment manager organization. Examples include changes in portfolio management personnel, ownership structure, investment philosophy, etc.

5. Voting proxies, if and as requested by the Committee, on behalf of the Funds and communicating such voting records to the Committee on a timely basis.

D. Responsibility of the Custodian

The custodian shall:

1. Maintain possession of securities owned by the Funds.
2. Collect dividend and interest payments.
3. Redeem maturing securities.
4. Effect receipt and delivery following purchases and sales.
5. Perform regular accounting for all assets owned, purchased or sold by the Funds.

VI. GENERAL INVESTMENT PRINCIPLES

1. Investments shall be made solely in the interest of the beneficiaries of the Funds and in compliance with Christian moral and ethical principles.
2. The Funds shall be invested and managed as a prudent investor would, by considering the Funds’ purposes, terms, distribution requirements, and other circumstances. In satisfying this standard, the Foundation shall exercise reasonable care, skill, and caution. Investment and management decisions respecting individual assets and courses of action must be evaluated, not in isolation but in the context of the Funds’ portfolios as a whole and as a part of an overall investment strategy, with risk and return objectives reasonably suited to the Funds.
3. Funds investment shall be so diversified as to minimize the risk of loss, unless under the circumstances, it is clearly prudent not to do so.
4. The Foundation may employ one or more investment managers of varying styles and philosophies to attain the Funds’ objectives.
5. Cash is to be employed productively at all times, by investment in short-term cash equivalents to provide safety, liquidity, and return.

VII. GOAL OF COMMON INVESTMENT FUNDS

The Foundation’s goal in establishing the Common Investment Funds is to offer choices to enable investors to meet their own investment objectives. Each Common Investment Fund has primary objectives, as follows:

MBF Cash Fund: Liquidity and stability of nominal principal plus modest income.
MBF Bond Fund: High current income and preservation of nominal principal, but with limited protection against inflation.
MBF Stock Fund: Long-term growth of capital, but with relatively low current income and high volatility.
MBF Balanced Fund: Long-term preservation of purchasing power plus reasonable current income.

VIII. SOCIAL RESPONSIBILITY

Following the biblical mandate for responsible stewardship, the Missouri Baptist Foundation makes conscious investment decisions that consider Christian moral and ethical principles. Investment objectives for the Funds must be pursued with consideration for the moral and ethical implications of investing. The Foundation intends to encourage corporations that promote the common good and to avoid companies whose principal business activities are inconsistent with Christian moral and ethical principles of Missouri Baptists.

Investments shall be avoided in companies whose principal business activities are inconsistent with this philosophy. These activities include promotion of gambling; production of alcoholic beverages or tobacco; production, sale, or promotion of pornography; abortion and fetal tissue research resulting from abortions.

IX. INVESTMENT OBJECTIVES

The Foundation’s investment strategy emphasizes total return, that is, the aggregate return from capital appreciation and dividend and interest income. Investment management’s primary objective shall be to achieve a balanced return of current income and modest growth of principal consistent with preservation of the purchasing power of such assets and the specific objectives of each Fund.

Each investment manager’s goal, over the long-term investment horizon, shall be to:

1. Exceed the market index or blended market index the Committee selects to correspond most closely to investment management style.

2. Display an overall level of risk in the portfolio consistent with the risk associated with the specified benchmark. Risk will be measured by the standard deviation of quarterly returns.

Specific investment goals and constraints shall be given to each investment manager to supplement this statement.

X. LIQUIDITY

To minimize the possibility of loss due to forced security sale, the Foundation will periodically provide an estimate of expected net cash flow. The Foundation will notify the investment management consultant in a timely manner to allow sufficient time to build necessary liquid reserves.

XI. MARKETABILITY OF ASSETS

The Foundation requires that all Funds’ assets be invested in liquid securities, defined as securities of such quality and size as can be bought and sold quickly and efficiently with minimal impact on market price.

XII. INVESTMENT GUIDELINES

A. Allowable Assets

1.Cash Equivalents

Treasury Bills
Money Market Funds
Commercial Paper
Banker’s Acceptances
Repurchase Agreements
Insured Certificates of Deposit

2. Fixed Income Securities

U.S. Government and Agency Securities
Corporate Notes and Bonds
Mortgage Backed Bonds
Preferred Stock
Fixed Income Securities of Foreign Governments and Corporations
Collateralized Mortgage Obligations
Asset-Backed Obligations
Mutual Funds

3. Equity Securities

Common Stocks
Convertible Notes and Bonds
Convertible Preferred Stocks
American Depository Receipts (ADRs) of Non-U.S. Companies
Stocks of Non-U.S. Companies (Ordinary Shares)
Mutual Funds
Real Estate Investment Trusts (REIT’s) (fully securitized and held as a part of a professionally managed diversified portfolio)

B. Stock Exchanges

To ensure marketability and liquidity, Investment Managers will execute equity transactions through the New York Stock Exchange, American Stock Exchange, and NASDAQ over-the-counter market. In the event an investment manager determines a benefit or a need to execute transactions in exchanges other than those listed in this statement, the Committee’s written approval is required.

C. Guidelines for Fixed Income Investments and Cash Equivalents

1. Funds’ assets may be invested only in investment grade bonds rated BAA or better by Moody’s or an equivalent rating by a nationally recognized rating agency.

2. Funds’ assets may be invested only in commercial paper rated A1/P1 or better.

3. Fixed income portfolio duration shall not exceed the duration of the Lehman Brothers Intermediate Government Credit Index by more than one year.

4. Money Market Funds selected shall contain securities whose credit rating, at the absolute minimum, would be investment grade by Standard and Poors, and/or Moody’s.

5. Repurchase Agreements shall be fully collateralized with instruments of the quality cited.

6. Investment in foreign bonds not denominated in US dollars may be held in an amount not to exceed 5% of the market value of the asset class.

D. Prohibited Investment Instruments

Prohibited investments include, but are not limited to:

1. Commodities and Futures Contracts
2. Private Placements
3. Options
4. Limited Partnerships
5. Venture Capital Investments
6. Initiating Direct Real Estate Investment
7. Guaranteed Investment Contracts (GIC’s)
8. Derivative Securities other than those listed

E. Restricted Transactions

Restricted transactions include, but are not limited to:

1. Short Selling – prohibited
2. Margin Transactions – subject to approval of the Foundation’s Board of Trustees

F. Asset Allocation Guidelines

The following Common Investment Funds maintained by the Foundation have their own asset allocation, as follows:

MBF Cash Fund: 100% in Cash Equivalents, as outlined

MBF Bond Fund: 100% in Fixed Income Securities, as outlined

MBF Stock Fund: 100% in Equity Securities, as outlined

Domestic Large Cap 54% ± 3% (re-balanced quarterly, as needed)
Domestic Small Cap 23% ± 3% (re-balanced quarterly, as needed)
International 23% ± 3% (re-balanced quarterly, as needed)

MBF Balanced Fund:

Bond Fund (see above) 35% ± 10% (re-balanced quarterly, as needed)
Stock Fund (see above) 65% ± 10% (re-balanced quarterly, as needed)

G. Diversification for Investment Managers

To achieve a prudent level of portfolio diversification, at no time should the initial position in the securities of any one company exceed 5% and the value of the securities of any one company shall not exceed 10% due to appreciation in its initial position. At no time should more than 20% of any investment manager’s portfolio be invested in any one economic sector or 150% of the economic sector weighting of the benchmark index, whichever is greater.

XIII. SELECTION OF INVESTMENT MANAGERS

The Foundation’s selection of investment manager(s) is based on prudent due diligence procedures. A qualifying investment manager must be a registered investment advisor under the Investment Advisors Act of 1940, or a bank or insurance company. The Missouri Baptist Foundation requires that each investment manager provide, in writing, acknowledgment of fiduciary responsibility to the Funds.

XIV. INVESTMENT MANAGER PERFORMANCE REVIEW AND EVALUATION

Performance reports shall be compiled quarterly and communicated to the Investment Review Committee for review. The investment performance of each Common Investment Fund, as well as asset class components, will be measured against commonly accepted performance benchmarks. Consideration shall be given to the extent to which investment results are consistent with investment objectives, goals, and guidelines as set forth in this statement. The Board intends to evaluate the portfolio(s) over at least a three-year period, but reserves the right to terminate a manager for any reason at any time, including:

1. Investment performance significantly less than anticipated given the discipline employed and the risk parameters established or unacceptable justification of poor results.

2. Failure to adhere to any aspect of this statement of investment policy, including communication and reporting requirements.

3. Significant qualitative changes to the investment manager organization.

Investment managers shall be reviewed regularly regarding performance, personnel, strategy, research capabilities, organizational and business matters, and other qualitative factors that may impact their ability to achieve desired investment results.

XV. INVESTMENT POLICY REVIEW

To ensure continued relevance of the guidelines, objectives, financial status and capital markets expectations as established in this statement of investment policy, the Board may review the investment policy periodically and recommend such amendments as may be required to keep the policy current and effective. This investment policy and any amendments hereto shall be approved by the Board of Trustees of the Foundation.

Approved May 8, 2001, by the Board of Trustees of the Missouri Baptist Foundation