I. Investment Policy
A. Purpose of the Foundation
The purpose of the United Methodist Foundation of the Detroit Annual Conference (hereinafter called 'The Foundation") is threefold:
1. To assist local churches in obtaining planned and deferred gifts,
2. To assist local churches in setting up and marketing local church endowment funds, and
3. To supervise money market fund, fixed income fund, and common stock fund investment pools.
Within this mandate from the 1990 Annual Conference, the primary
fiduciary responsibility of the Foundation shall be to obtain professional
investment management services for a variety of funds entrusted to the
Foundation's care by both the local churches and the Detroit Annual
Conference.
All the funds so managed will be assets owned by the Foundation itself,
assets of Detroit Annual Conference churches or assets of the Detroit Annual
Conference. There shall be no non-Methodist Church entities or individual
investors in the Foundation's investment pools.
The Foundation's Investment Committee shall oversee the investment
management of all funds administered by the Foundation. The Foundation will not undertake to be the guarantor of fixed payment
gift vehicles.
B. Standard of Care
Definition
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All persons involved in the management of Foundation assets shall use the
care, skill, prudence and diligence under the circumstances then prevailing
that a prudent person acting in a like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and with like
aims.
C. Book of Discipline
D. Liquidity
E. Stability and Preservation of Capital
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To the degree consistent with specific rate of return objectives, and
relative to appropriate benchmark indices, all funds shall be invested to
maintain a high level of stability and security by minimizing risk and
volatility.
F. Supervision
1. At least annually, the Investment Committee will maintain and
review with the Foundation Commission the following:
This statement of Investment Policy, the Guidelines for the
Investment Manager, and the Performance Objectives;
The fees and expenses related to the operation of the Funds;
Records relating to the performance of the investment manager
or managers hired, and the Investment Committee will at that time
recommend specifically continuation or replacement of the investment
manager.
2. The Investment Committee will review investment results of the
Funds and the application of investment policies by the manager or
managers at frequent intervals during the year, and report the results
of such review to the Foundation Commission.
G. Conflicts of Interest
H. Application of Investment Policies
In considering the investment affairs of the Foundation, the intention of
the Foundation Commission is that the aforementioned Investment Policies,
Guidelines to the Investment Manager, and Performance Objectives shall be
applied subsequent to the date of adoption of any investment policy.
Investments held at the time of the adoption of any investment policy shall
be liquidated only if otherwise deemed prudent and not solely to comply with
such policies, unless a specific date or time frame indicating otherwise is
incorporated in the adopted policy.
II. Performance Objectives
Following is a statement of the Performance Objective that The Foundation
seeks for funds it manages:
A. The Stock Fund
Generally, The Stock Fund's most important investment objective is to
exhibit investment performance characteristics, in terms of growth and
variability, not greatly dissimilar to the S&P 500 "Subset
Index" as hereinafter defined
Specifically:
B. The Fixed Income Fund
- to obtain investment performance results that exceed, net of fees,
the return available on the Lehman Intermediate Bond Index.
- to obtain investment performance results that place the Fund's
return in the top quartile of comparable fixed income funds over a five
year period of time.
C. The Money Market Fund
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III. Guidelines for the Investment Manager
Following are the guidelines offered by The Foundation's Investment
Committee to the Investment Manager.
A. Investment Restrictions Pertaining to the Fixed Income and Stock Funds
1. Fixed income securities may be held only if such securities are
issued by the U.S. Treasury or an agency of the U.S. Government, or are
corporate bonds rated A3, A- or better by Moody's or Standard and Poor's
respectively. Convertible securities will be considered as equity
securities.
2. Short-term securities may be held only if such securities are
issued by the U.S. Treasury, or an agency of the U.S. Government, or are
commercial paper rated P-1 by Moody's, A-1 by Standard and Poor's or are
certificates of deposit of U.S. banks which have or whose holding
companies have a Standard and Poor's rating of A+ or better.
3. No direct investment shall be made in foreign currency denominated
securities, including American Depository Receipts, except as follows:
- Investments may be made in common stocks, bonds and American
Depository Receipts of those foreign securities listed on the New York,
American or NASDAQ exchanges.
- Investment in a foreign securities pooled fund operated by a
U.S.-based money manager also is permitted provided that all
transactions are in dollars.
4. Investments shall not be made in commodities, real estate (except
real estate investment trusts, where appropriate), commodity contracts,
oil, gas, mineral leases, mineral rights or royalty contracts.
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5. Margin transactions, short sales, options, puts, calls, straddles
and/or spreads shall not be used.
6. Investments shall not be made in the securities of an issuer
which, together with any predecessor, has been in operation for less
than three years.
7. Investment pools shall not be made in securities for which market
quotations are not readily available.
8. Investments shall not be made in securities for the purpose of
exercising control of management.
9. Investments shall not knowingly be made in securities of companieswhich derive 5% or more of revenue from the following activities:
alcoholic beverages, tobacco or gambling.
10. Investments shall not knowingly be made in voting securities of
companies which derive more than 15% of revenue from military contracts
including both domestic and foreign customers. In the case of non-voting
securities, the limit shall be 5% of revenue.
11. Investments shall not knowingly be made in companies which derive
more than 3% of revenue from nuclear weapons contracts.
12. Investments shall not be made if such investments will result in
income that would require the filing of federal, state or local tax
returns.
13. The use of derivative securities or financial futures generally
is prohibited unless specifically approved by the Committee.
14. None of the aforementioned restrictions shall preclude the
acceptance of gifts involving assets which such restrictions otherwise
prohibit from direct investment. Assets of such a nature will be
divested in a reasonable and timely manner.
15. Mutual Fund and pooled Investment FundsThe use of such funds alters the interpretation of the investment
policies and restrictions as follows: The rules covering weighting
limits on the securities of a single issuer are waived; the rules
governing liquidity and quality are not waived; the rules governing
social issues are not waived and will be applied to the holdings of each
fund as though each holding was a separate company, and relative in size
to the holdings respective total Stock or Fixed Fund.
B. Asset Allocation for the Stock Fund
1. No more than 10% of Stock Fund assets are to be invested in the
securities of any one issuer, except for securities of the U.S.
Government or its agencies.
2. No more than 20% of the market value of the equity assets are to
be in the equity issues of companies in any one industry.
3. If any of the above percentages are exceeded due to changes in
market values, divestiture is required in a timely manner unless
otherwise determined by the Investment Committee.
Last Revision Date: December 3, 1999
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