real planning. real solutions. that’s our calling. · success by looking at quarterly...

M M B B 2 0 1 1 A n n u A l R e p o R t

Real Planning. Real Solutions. That’s Our Calling.

MMBB’s team approach to making financial security achievable.

T H E M I N I S T E R S A N D M I S S I O N A R I E S B E N E F I T B O A R D 2 0 1 1 A N N U A L R E P O R Ta2

The mission of The Ministers and Missionaries Benefit Board (MMBB) is to be

a ministry that places a high value on personalized service, providing superior

benefits and service with compassion, efficiency and justice, achieved through

partnerships with members, employers and world-class organizations.

MMBB provides retirement, life, disability and medical benefits for ordained and

lay staff of churches and institutions affiliated with The American Baptist Churches

USA. MMBB also supports independent churches, churches in congregationally

organized denominations and the organizations associated with them.

t A B l e o f c o n t e n t s

Report of the Executive Director ...............................................................1

MMBB Outreach .....................................................................................................3

MMBB Service ..........................................................................................................4

Benefit Plans ..............................................................................................................5

2011 Financials and Audit Report .............................................................9

Administration ......................................................................................................31

Officers and Board of Managers .............................................................32

Asset Managers, Investment Custodian and Counsel ...........33

R E A L P L A N N I N g . R E A L S O L U T I O N S . T H A T ’ S O U R C A L L I N g . 1

R e p o R t o f t h e e x e c u t i v e d i R e c t o R

Of course, that changed. We saw 500-point swings in the market in a single day. As of September 30 the Balanced Fund dropped to $37.08—a swing of 11.6% from the April high. By the end of the year, the Balanced Fund rebounded with a unit value of $38.47, a 3.1% drop from 2010. We were fortunate to eke out a small gain of $0.82 in payments to our retired members—and only because of the six-month average.

Try to run a business that relies on fees from assets under management in this kind of environment. And try to do financial modeling that projects realistic revenues to sustain our mission. That’s our challenge —and one we accept, though we might wish it could be different.

I begin here not to elicit sympathy, nor to offer excuses. I simply want to offer a backdrop against which to provide an update on our accomplishments. In volatile environments, many businesses hunker down. They fail to make needed investments and assume acceptable risk to move their businesses forward. Now, we at MMBB are not flush with cash, but we have been making sensible investments in our business, believing that if we fail to do so we will both miss an opportunity and fail to achieve our missional objectives.

Just 24 months ago we made the decision to change our business model. For over 50 years our emphasis had been focused on member satisfaction or loyalty. In 2010 we began a serious reallocation of our resources from satisfaction to growth and from members to employers.

This is an enormous task. The first challenge is cultural—how to change an organization deeply rooted in member service to one that reaches out to potential members with evangelical zeal. The second cultural challenge is building a staff devoted to growth from a staff that had been focused on service. The third challenge is creating an infrastructure to support the effort. By this I mean conducting market research, establishing a marketing strategy, developing outreach materials, placing advertisements and evaluating the results.

Despite the challenges—financial, cultural, personnel and infrastructure—our accomplishments have been nothing short of remarkable.

Aided in part by frequent all-staff meetings and educational sessions, we have changed the culture. Managers are seeking to integrate holistic, mission-focused messages into their regular department meetings. Cross-functional teams have been formed affirming the cultural message that we are all in this together. We have more to do, but the progress is evident everywhere.

A solid outreach team has been developed. Some who did not want to make the change chose to retire. In their places, we hired people committed to evangelistic outreach—and to “the better maintenance of the ministry.” We created a new position—national outreach manager—to lead teams of senior benefits consultants. Through personal coaching and group training, new skills have been taught and are being employed.

Who could ever have predicted that MMBB’s centennial year would be one

of the most challenging in recent history? It has been. We are a financial services

organization and, as such, we are subject to market pressures. Early in the year

the economy appeared to be in a sustainable recovery. The April unit value of the

Balanced Fund stood at $41.97, up 5.8% for the year.

T H E M I N I S T E R S A N D M I S S I O N A R I E S B E N E F I T B O A R D 2 0 1 1 A N N U A L R E P O R T2

R e p o R t o f t h e e x e c u t i v e d i R e c t o R

We created a cross-functional marketing team. The team engaged in market research, developed and implemented an advertising campaign and created outreach materials to assist the senior benefit consultants as they meet with new employers and members.

We put in place a new infrastructure to support the outreach effort, to improve our forecasting, to create and fill a pipeline of prospects and to build a revenue model that evaluates not only accounts but also the cash flow generated from those accounts. We introduced a new website that not only serves existing members but invites potential members to join us. If you haven’t already, take a look at the redesigned www.mmbb.org.

Positive changes have occurred in service as well. While growth is critical to MMBB’s sustainability, we cannot neglect our hallmark—exceptional service. Service excellence helps retain assets and opens doors to new markets.

To implement a new service strategy based in our New York offices, we integrated all service elements under one director, Matt Hoffman, and formed a service team that includes the directors of member, employer and consultative services. This newly formed team is exploring and implementing necessary changes so that MMBB will live up to its brand as a financial services organization.

Our efforts are achieving results. We know that there are three primary drivers that lead to excellence: treating all with respect, solving problems in a reasonable way, and investment performance.

To ensure that we maintain high levels of satisfaction as we implement this new consultative model, MMBB conducted a minisurvey to gauge member and employer sentiment.

The results were overwhelmingly positive. Of the remitting members who responded to the survey, 51% graded us excellent—that’s five on a scale of one to five—equal to the prior year’s results. Of the employers, 47% ranked us excellent—a 10% increase over 2010.

We are keeping a watchful eye on these drivers—respect, solving problems and investment performance—in order to ensure that our service to our members and employers continues to improve.

In addition to all of this, we produced a new retirement plan for our members in Puerto Rico and executed an outstanding centennial celebration in three venues for members, Board and staff.

In conclusion, 2011—MMBB’s centennial year—has been one of the most challenging in recent memory. Economic forces threatened to derail our best efforts to implement a business model that positions MMBB for the future while

remaining true to our missional call “to promote interest in the better maintenance of the ministry.”

But we did not succumb.

Working together, we invested in our mission and strategy. We aligned our people, systems and processes to meet our objectives. This we did with a sober realization that we are not acting for this moment alone. We do not gauge our success by looking at quarterly results—or even results year over year. We take the long view—and recognize that we are building a legacy that will endure for the generations of servants of Christ yet to come. I pray that we may be forever found faithful.

Sumner M. grant Executive Director

MMBB’s centennial year has been one of the most challenging in recent memory. in short, the progress we have made is nothing short of remarkable.


M M B B o u t R e A c h O U R S t R at e g y f O R g R O w t h

The last two years have brought great change to MMBB’s field operation. When I joined this very special organization in late March of 2010 as director of outreach, our field staff had just begun to switch from an emphasis on member retention to a single-minded focus on growth. My charge from the Board, Sumner grant (MMBB’s executive director) and our Management Team was very clear, “to promote interest in the better maintenance of the ministry” by generating sustainable revenue growth from new employers.

This required a hard reset in the way the field staff worked. They went from being regional representatives to senior benefit consultants. The new title reflects our new emphasis on evangelistic, consultative outreach and sales. We will work with all eligible new employers of churches of many denominations as well as other faith-based organizations to develop a benefit program that meets their commitment to support their staffs within their budgetary constraints.

As a financial services organization, MMBB is driven by our Christian values to make employee benefit solutions accessible to faith-based employers regardless of size and financial resources. Our consultative sales approach allows us to understand employer needs. We put together comprehensive benefits that can be applied in flexible ways. Real planning, real solutions—that’s our calling. That’s the business of our ministry.

MMBB offers more than a product, we offer solutions. Every employer has different structures, different employees, different needs and different challenges. That means every employer needs a different solution, not a cookie-cutter, one-size-fits-all product. We work with employers to identify needs and weak points in their current benefit programs to tailor-make solutions that fit.

My current team of nine senior benefit consultants around the country, reporting to two national outreach managers, has an unprecedented knowledge and understanding of the church market. Many on the team are ordained, many have Masters degrees and many are CeRtIfIeD fINaNCIaL

PLaNNeRS™. Collectively our expertise is in ministry, marketing and sales. Together we are designing relevant new strategies that underlie sales techniques, communications and new target business developments. Every department at MMBB

has embraced this passion for reaching out to strengthen faith-based employers and ensure the financial security of those working in the church world.

Our market research confirms that the unique challenges confronting faith-based organizations will continue to offer opportunities for MMBB’s consultative services. As we join with employers and members in a lifetime partnership, we will continue to evaluate how best to reach all who are eligible. To do this, we launched a brand awareness advertising campaign in targeted print and online venues. We have also established a strategic awareness at aligned conferences and conventions

to spread the good news of what MMBB can provide. We continue to be open to relevant sponsorships and partnerships with like-minded ministries.

Will you help us grow our ministry? If you know of a church or church-related facility (e.g. camps, day care centers, publishing houses, hospitals, seminaries and colleges, or nursing and retirement homes) affiliated with a church, please email me at [email protected]. If the organization meets our eligibility guidelines, I will reach out to them immediately. Thanks in advance for your assistance in contributing leads for growth and for playing an integral part in the ongoing success of MMBB.

Thomas M. Huber Director of Outreach

our consultative sales approach allows us to understand employer needs. We put together comprehensive benefits that can be applied in flexible ways. Real planning, real solutions—that’s our calling. that’s the business of our ministry.


M M B B s e R v i c e M M B B C O N S U Ltat I v e S e R v I C e = C h R I S t I a N v a L U e S + f I N a N C I a L e x P e R t I S e

MMBB’s service—more precisely our consultative service —has long differentiated us from the competition. We provide one-on-one service to our employers and our members. We do this with compassion and Christian values because this is our ministry.

Our employers and members value this relationship. While the financial services industry as a whole suffered declines in customer satisfaction, according to the American Customer Satisfaction Index, MMBB saw increases in satisfaction from both our employers and members in 2011.

As the newly appointed director of service, I have been entrusted with guiding our service efforts through a time of great change. As MMBB becomes an organization focused on growth, the Service Team needs to do things differently – and better as well.

Leading this effort is the Service Team — Sumner grant, executive director; Frank O’Brien, director of employer service; Sara Day, director of member service; Perry Hopper, director of denominational relations and me. We are working together to expand the ability of our senior benefits specialists (SBS) to provide consultative services proactively. We’ve expanded the retirement planning strategy and enhanced training for the SBS. We are placing greater emphasis on working with our members and employers to answer the question that’s behind the question that prompted the contact.

In 2011, we planned an ambitious effort to expand our education and consultative services in 2012. We will promote a series of teleconferences on topics such as retirement planning, compensation and the annuity payout value. We will revise and upgrade the financial calculators on our website. We are also investigating ways to expand our services through strategic partnerships with world-class companies such as Vanguard.

Before coming to MMBB, I worked in wealth management at Merrill Lynch and was a vice president at JPMorgan Chase. These are traditional financial services organizations that offer a wide array of banking and investment services.

But what makes MMBB a financial services institution? If someone asked “What is MMBB Financial Services?” how would we answer?

To answer it, the MMBB Service Team collaborated with the MMBB Outreach Team. As we were putting our collective ideas together we decided to involve the entire MMBB staff. We asked each employee to write a single sentence that answered the question “What is MMBB Financial Services?”

Staff responded enthusiastically. We counted how many times staff used each noun, verb, adjective and adverb. To

demonstrate the results graphically, we used a “wordle.” A wordle is an Internet-based tool that generates “word clouds” from text. The clouds give greater prominence to words that appear more frequently in the source text. The more times a word is used, the larger the font of the word. We gradually whittled the wordle down from the top 50 words, to the top 20, and then the top 15.

The Management Team reviewed the wordle and, based on the input of our staff, developed a clear, concise explanation of what MMBB Financial Services does.

MMBB is a financial services organization, driven by our Christian values to provide accessible employee benefits solutions to faith-based employers.

We are proud of this core statement. Not only does it reinforce our commitment “to promote interest in the better maintenance of the ministry,” it also makes sure that all MMBB employees are communicating the same message to our employers and members.

As MMBB becomes a much more proactive organization, our consultative services continue to embrace our Christian values while providing financial services along with retirement, disability and life insurance benefits. In this way we will remain competitive and vital in our second century.

Matthew D. Hoffman Director of Service

As MMBB becomes a much more pro-active organization, our consultative services continue to embrace our christian values while providing financial services along with retirement, disability and life insurance benefits.


The challenges presented to MMBB benefits and services have been daunting. The impact the investment markets had on members in the accumulation phase of their careers as well as those receiving an annuity has been significant. We kept a watchful eye on all of our benefit plans and provisions to ensure continuity and regulatory compliance with new or modified government laws and regulations. And we supported our annuitants with income guarantees that provided a soft landing during the market downturn.

During 2011 MMBB continued to reposition itself to grow our employer, member and asset base as well as to enhance the products and services we provide. The benefit plans and programs discussed below both retain their value and are flexible in design, allowing MMBB to tailor our products to meet the unique needs of a wide range of faith-based employers. MMBB staff remains committed to answer questions about the plans and to assist employers and members with transaction processing.

An event that encompassed regulatory compliance, the flexibility of our plans and service and transaction processing was the successful implementation of

a retirement plan specifically for employers and members residing in the Commonwealth of Puerto Rico. MMBB incorporated the laws and regulations of both Puerto Rico and the United States in the design of the plan. We also recognized the opportunity this plan provided to improve ser-vice for employers and members in Puerto Rico. Through all of this activity, one constant was the flexible structure, programs and provisions within MMBB’s benefit plans.

The MMBB retirement plans are available to every employee of an eligible employer, whether ordained or lay, full-time or part-time. Any church that is congregational or independent in polity, including all Baptist churches and most evangelical and Pentecostal churches, is eligible to participate in MMBB’s benefit plans. Institutions related to these churches, such as schools, community development corporations, hospitals and nursing homes, are also eligible. Ordained individuals who qualify as “wandering ministers” under the Internal Revenue Service (IRS) code are also eligible to participate in our plans.

B e n e f i t p l A n s

MMBB’s 2011 centennial celebration brought considerable excitement,

challenge and change. Any organization that has been around for 100 years

has much to celebrate, but the difficult regulatory and economic environment

also brought significant challenges. In the midst of a difficult economy, MMBB

acutely felt the responsibility of our mission “to promote interest in the better

maintenance of the ministry.”


MMBB plans provide a variety of benefit options to meet the budgetary needs of both the church worker and the church.

Each plan, established under IRS Code Section 403(b)(9), offers:

• tax-deferred contributions;

• tax-deferred investment returns;

• a range of professionally managed investment choices;

• loan and withdrawal features; and

• variable annuity options upon retirement.

Each contribution to these plans buys accumulation units at a price that changes each day based on investment performance. MMBB retirement plans give church workers access to sophisticated investment vehicles that have demonstrated success in meeting the retirement needs of thousands of people over many years. Members who choose not to direct the allocation of their investment accounts are automatically placed in MMBB’s Balanced Fund.

Unlike commercial retirement plans, an IRS private letter ruling allows MMBB to designate the monthly annuity income for retired or disabled clergy as eligible for the housing allowance designation. This valuable tax exemption is variable up to the lesser of the fair rental value of the furnished home, plus utilities, or the actual annual housing expense.

At retirement, members convert part or all of their accounts to monthly income through establishing variable annuities. They purchase a fixed number of annuity units determined by the dollar amount converted, the current annuity unit price and the specifics of the annuity chosen (single-life or joint and survivorship annuity, 120-month guarantee and the member’s age at retirement). Each annuity also includes a guarantee to provide the annuitant with a soft landing in the event of a significant market downturn.

Benefits for Life

The Benefits for Life program (BFL), an employer-funded plan, is MMBB’s most comprehensive benefit program. The program includes three plans working in concert to increase the financial security of members and their families.

Employers pay Benefits for Life premiums equal to a percentage of employee compensation. Members invest the portion directed to their retirement account among the diverse range of MMBB investment choices. During a participant’s working years, BFL builds retirement assets for members.

BFL also offers disability income protection. Disability benefits include monthly disability income up to two-thirds of working income when combined with government benefits; child allowances; subsidized BFL premiums; and, if eligible, health insurance premiums.

Term life insurance provided through the Death Benefit Plan is the third component of BFL. This plan pays survivors from one-and-a-half to five times the insured’s annual pay (up to an annual salary of $250,000), up to two years of health insurance premiums, if eligible, and a guaranteed minimum for surviving spouses.

In 2010 there were 14 deaths of preretired members, and MMBB paid $1,459,470 in lump-sum benefits to survivors.

In retirement, BFL provides:

• retirement benefits as described above; and

• a $4,000 benefit upon the death of a member who retired as a premium-paying BFL member with at least 15 years of membership.

In 2010 there were 99 deaths of retired members, totaling $390,999.99 in benefits.

B e n e f i t p l A n s


Tax-Deferred Annuity

The Tax-Deferred Annuity (TDA) is an employer-funded plan that:

• supplements employees’ other sources of retirement income;

• helps pastors who live in parsonages build assets for housing in retirement (sometimes called an “equity” allowance, subject to plan provisions);

• accumulates tax-deferred retirement savings; and

• says “thank you” for loyal service.

Some employers use TDA to encourage retirement savings by matching employee contributions to The Annuity Supplement (TAS). Unlike BFL, TDA does not include disability income protection and life insurance.

The Annuity Supplement

With The Annuity Supplement (TAS), an employee-funded plan, church workers can:

• increase their retirement security;

• reduce their taxable income;

• start or stop contributions at any time;

• change the amount they contribute as often as once a quarter; and

• save as little as $10 per month or as much as the IRS allows.

Pre-tax TAS contributions reduce current federal, state and local income taxes. They are also excluded from Social Security and Medicare taxes for ordained ministers. Pre-tax or after-tax contributions can be made through convenient payroll deductions.

Rollovers to MMBB

Before or after retirement, members with retirement accounts in multiple places can roll over qualified funds, tax-free, to a TAS account at MMBB. MMBB can accept assets from:

• traditional IRAs;

• 457(b) governmental plans; and

• 403(a), 403(b), 401(a) and 401(k) plans.

When members consolidate money with MMBB, they simplify their lives while diversifying their investments through the Balanced Fund—MMBB’s largest and most diversified fund—or by developing a customized portfolio by investing in MMBB’s other investment funds. Retired clergy may receive income from their rollover accounts tax-free to the extent it is eligible to be designated as a housing allowance.

Health Insurance

MMBB sponsors medical and dental insurance for contributing BFL and/or TDA members. We also sponsor medical coverage that supplements Medicare.

For more information about MMBB benefits and services, call a senior benefits specialist at 800.986.6222, send an email to [email protected] or visit www.mmbb.org.


2 0 1 1 f i n A n c i A l s A n d A u d i t R e p o R t

table of contents

Retired Ministers and Missionaries Offering ................................................................................10

Selected Data ......................................................................................................................................................11

Investment Review .........................................................................................................................................12

Investments Under Management ......................................................................................................13

Benefits Review ..................................................................................................................................................14

Independent Auditor’s Report ..............................................................................................................16


The Ministers and Missionaries Benefit Board of American Baptist Churches

R e t i R e d M i n i s t e R s A n d M i s s i o n A R i e s o f f e R i n g

Since 1935 American Baptists have contributed to special offerings received in their churches for retired American Baptist ministers and missionaries or their widowed spouses. The Retired Ministers and Missionaries Offering (RMMO) was established in 1977.

The ongoing theme of the RMMO is Remember With Love, give With gratitude. This year, we con-tinued with the special subtheme: RMMO Connects generations. Receipts for the 2011 offering totaled $1,240,987; a decrease of 3.69% when compared with the 2010 receipts of $1,288,585. Of this amount $573,052 was made available to meet immediate emergency and special financial needs. The bal-ance of the receipts was distributed by MMBB on behalf of American Baptists in the form of Thank You checks; 3,351 checks were distributed in 2011 ranging from $50.00 to $298.00. The average check was $199.32.

Since 1980, eligible retired ABC lay employees have received comparable Thank You checks from MMBB’s endowment funds. In 2011 a total of $99,288 was distributed to 693 recipients for this purpose.

RMMO Contributors

MMBB gratefully acknowledges the following persons who contributed $500 or more to the 2011 Retired Ministers and Missionaries Offering:

Herald R. Baughman

Leland M. Brimhall

Anita Culp

Walter G. and Norma J. Griffith

Anne E. Hardy

Westvale Baptist Church of Syracuse, New York



s e l e c t e d d At A

Selected Data The table below highlights the important aspects of MMBB’s operations. For comparison purposes, data have been provided for the prior year and for 2001.Dollar amounts in thousands except for accumulation unit value* and average compensation. Percent Percent Change Change 2011 2010 2001 2010–2011 2001–2011

Managing the Resources Market Value of Total Assets $ 2,228,363 $2,394,913 $2,047,741 (6.95%) 8.82%

Meeting the Obligations

ABC Retirement Plan Assets $ 1,726,883 $ 1,838,296 $ 1,655,960 (6.06%) 4.28% Benefits Paid $ 120,202 $ 117,357 $ 102,740 2.42% 17.00% Accounts Receiving Deposits** 5,338 5,496 5,361 (2.87%) (.43%) Annuities** 5,687 5,575 3,759 2.01% 51.29% Accumulation Unit Value* $ 38.47 $ 39.66 $ 24.10 (3.00%) 59.63%

Tax-Deferred Annuity Assets $ 34,220 $ 33,085 N/A 3.43% N/A Benefits Paid $ 1,426 $ 1,048 N/A 36.07% N/A Accounts Receiving Deposits** 1,842 1,834 N/A .44% N/A Annuities** 84 69 N/A 21.74% N/A

The Annuity Supplement Assets $ 195,539 $ 227,264 $ 117,505 (13.96%) 66.41% Benefits Paid $ 11,549 $ 12,854 $ 7,979 (10.15%) 44.74% Accounts Receiving Deposits** 1,969 1,922 1,938 2.45% 1.60% Annuities** 1,101 1,084 1,100 1.57% .09%

Deductible Employee Contribution Account Assets $ 1,463 $ 1,822 $ 2,700 (19.70%) (45.81%) Benefits Paid $ 122 $ 214 $ 243 (42.99%) (49.79%) Accounts ** 34 68 102 (50.00%) (66.67%)

MMBB Death Benefit Plan Reserve $ 29,102 $ 31,262 $ 22,400 (6.91%) 29.92% Benefits Paid $ 3,349 $ 1,893 $ 1,683 76.91% 98.99%

Assisting Ministers, Missionaries and Lay Employees Assistance to Ministers and Missionaries $ 4,049 $ 3,979 $ 7,177 1.76% (43.58%) Benefits Paid to Lay Employees $ 418 $ 581 $ 1,726 (28.06%) (75.78%)

Fund Balance of Legacy Funds $ 139,543 $ 156,130 $ 161,930 (10.62%) (13.83%)

Average Compensation/Ministers $ 53,625 $ 54,239 $ 41,698 (1.13%) 28.60%

Average Compensation/Lay $ 38,009 $ 41,875 $ 33,069 (9.23%) 14.94%

Parentheses indicate decrease. N/A indicates not applicable. * Balanced Fund. On October 1, 2005, the Balanced Fund was split 10-to-1. The per share values for prior years have been revised to reflect this change.** Restated using revised definitions.



i n v e s t M e n t R e v i e W

Investment Funds Performance

2011 was a roller-coaster ride for investors. The first quarter started off strongly with the U.S. stock market rising 6%. Then the second quarter was flat before dipping 15% in the third quarter. By year-end the stock market had surged 12% in the final quarter. The upshot: a slim 1% for stock market investors. Bonds, meanwhile, continued to be the safe haven and for the year 2011 pro-vided a return of over 7%. Contrasts were to be seen everywhere: emerg-ing markets stocks declined 18% while Treasury Inflation-Protected Securities (TIPS) rose 15%. Driving all of this volatility was uncertainty that the global recovery of the last few years would be threatened anew by the instability of the European debt crisis.

As a global investor MMBB participated in all of the above, garnering a good portion of the upside available while not being able to escape the downside. For members participating in MMBB’s Balanced and New Horizons funds, which are blends of many global asset classes, diversification paid off by limit-ing declines to about 3%.

Many good things happened during 2011:

• Thanks to the design of MMBB’s retirement plan annuitants experienced a small but positive increase to their annuity checks.

• There were modest but steadily positive returns in the Stable Value Fund, which performed exactly as intended for members wishing to avoid the volatility of the capital markets.

• By year-end there were many positive signs occurring in the economy: un-employment was edging downward; after-tax corporate profits were up strongly on operating earnings that grew by 21%; and economists were be-coming more sanguine that the U.S. was not going to fall back into recession near-term.

We close 2011 by reiterating our message from a year ago: We can never predict what the future investment environment will bring, but we can com-mit to offering our members a range of investment options that are profes-sionally managed and diligently monitored. We continue to encourage our members to assess their own long-term investment and retirement goals and risk tolerance and to discuss them at any time with one of MMBB’s senior benefit specialists.

MMBB Investment Funds Performance January 1–December 31, 2011

MMBB Funds BenchmarksMoney Market Fund -0.01% Citigroup 30-Day Treasury Bill 0.05%Stable Value Fund 1.30% Merrill Lynch 90-Day T-bill Index 0.10%U.S. Bond Fund 7.04% Barclays Capital Aggregate Bond Index 7.84%New Horizons Fund -3.34% Hybrid Index* -3.40%Balanced Fund -3.01% Hybrid Index** -1.63%U.S. Blended Equity Fund -4.74% Dow Jones U.S. Total Stock Market Index 1.08%Social Awareness Fund -5.07% Standard & Poor’s 500 Index 2.11%U.S. Equity Index Fund .50% MSCI U.S. Broad Market Index 1.08% International Blended Equity Fund -10.93% MSCI EAFE Index -12.14%

* As of December 31, 2010, the Hybrid Index is comprised of 15% Russell 3000, 13% MSCI EAFE $ Net Dividends, 9% MSCI Emerging Markets $ Net Dividends, 24% HFRI Strategic, 4% ML 1-3 Yr Treasuries, 13% BC Aggregate, 5% BC US TIPS, 12% MSCI Word, 1% NCREIF ODCE Index, 2% NCREIF Timber Index, 1% DJ UBS Total Return Index and 1% ML 90-Day T-Bills.

** As of December 31, 2010, the Hybrid Index is comprised of 24.5% Russell 3000, 20% MSCI EAFE $ Net Dividends, 7.5% MSCI Emerging Markets $ Net Dividends, 13% HFRI Strategic, 6% ML 1-3 Yr Treasuries, 21% BC Aggregate and 8% BC US TIPS.


The Ministers and Missionaries Benefit Board of American Baptist Churches i n v e s t M e n t s u n d e R M A n A g e M e n t

Investments Under ManagementMarket Value of Assets for the Year Ended December 31Dollar amounts in thousands percentage Percentage Percentage of Market of Market of Market 2011 value 2010 Value 2001 Value Assets Cash and Cash Equivalents U.S. Cash and Cash Equivalents $ 98,427 4.45% $ 157,296 6.62% $ 79,635 3.95% Non-U.S. Cash and Cash Equivalents – 0.00% 4,700 0.20% 1,069 0.05% total cash and cash equivalents 98,427 4.45% 161,996 6.82% 80,704 4.00%

Debt Obligations U.S. Treasury Obligations & government Agency 276,146 12.49% 232,396 9.79% 2,797 0.14% Mortgage Related 97,152 4.39% 61,526 2.59% – 0.00% Asset-Backed 50,775 2.30% 27,304 1.15% – 0.00% Corporate Bonds 168,374 7.61% 283,589 11.94% 771,738 38.26% International Bonds 33,645 1.52% 22,843 0.96% 18,344 0.91% Other Bonds 34,698 1.57% – 0.00% – 0.00% total debt obligations 660,790 29.89% 627,658 26.43% 792,879 39.31%

Equities U.S. Common Stock 466,976 21.12% 529,843 22.31% 761,168 37.73% Non-U.S. Common Stock 493,396 22.31% 672,728 28.33% 130,977 6.49% Non-U.S. Preferred Stock – 0.00% – 0.00% 142 0.01% total equities 960,372 43.43% 1,202,571 50.65% 892,287 44.23%

Interest/Dividends Receivable 2,479 0.11% 2,267 0.10% 3,673 0.18% Pooled Funds 493,219 22.30% 501,000 21.10% 252,262 12.51% Receivables for Securities Transactions – 0.00% 2,000 0.08% 461 0.02% Forward Currency Contracts 135,973 6.15% – 0.00% 182,759 9.06% Securities Lending Collateral 95,000 4.30% 39,000 1.64% – 0.00%total Assets 2,446,260 110.63% 2,536,492 106.82% 2,205,025 109.31%

liabilities Securities Sold, But Not Yet Purchased – 0.00% 5,000 0.21% 344 0.02% Payables for Securities Transactions 1,175 0.05% 116,024 4.89% 145 0.01% Foreign Tax Dividend – 0.00% – 0.00% (7) 0.00% Forward Currency Contracts 134,642 6.09% – 0.00% 181,838 9.01% Management, Advisory and Services Fees 1,494 0.07% 2,000 0.08% 5,442 0.27% Investment Choices Liabilities 2,692 0.12% – 0.00% – 0.00% Securities Lending Liability 95,000 4.30% 39,000 1.64% – 0.00%total liabilities 235,003 10.63% 162,024 6.82% 187,762 9.31%net Assets $ 2,211,257 100.00% $ 2,374,468 100.00% $ 2,017,263 100.00%


The Ministers and Missionaries Benefit Board of American Baptist Churches B e n e f i t s R e v i e W

Annuity Unit Payout Value

When a member chooses to annuitize all or a portion of his or her re-tirement account(s), that portion is transferred to the Annuity Fund. The annuity unit price on the date of this transfer is the price at which the member purchases units and determines the number of units that the member is able to buy with his or her accumulated assets. Each year, the member’s number of annuity units and the annuity payout value de-termine the member’s annual annuity. The annuity unit payout value for 2012 is $73.23.

The annuity unit payout values for the last 10 years are shown on the graph to the right. Retired members experienced increases in their annuities in six of the last 10 years.

Legacy Funds (The Endowment)

On December 31, 2011, the value of MMBB’s legacy funds (the endow-ment) was $139,543,000.

Income generated by the endowment is used to fund services to Ameri-can Baptist plan members. Those services include benefits seminars, re-tirement and financial planning, ABC member publications and annual visits with eligible retired members. Endowment resources also support other costs of administrating the plans.

Resources from the endowment also provide benefits for American Bap-tist plan members over and above contractual plan benefits. These in-clude strategic premium assistance, educational grants, emergency finan-cial assistance and a subsidy to help eligible annuitants purchase medical coverage.

Legacy FundsDollar amounts in thousands 2011 2010 2001Balance, december 31 $139,543 $156,130 $161,930

Number of BeneficiariesAnnual grants 62 56 77Emergency Assistance 231 216 336gift 73 80 258Lay Employees Retirement Allowance 23 24 52Premium Aid, including Strategic Premium Assistance 15 15 123Lay Thank You Checks 693 677 530Medicare Supplement 1,306 1,383 3,304

$100

$80

$60

$40

$20

$0

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Annuity Payout Values 2002–2012


0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,291,328

$243,973

$51,614

$2,500,000

Cumulative BFL Bene�ts Paid to Members 1912-2011Dollar amounts in thousands

1912

1915

1918

1921

1924

1927

1930

1933

1936

1939

1942

1945

1948

1951

1954

1957

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

0

$50,000

$100,000

$150,000

$200,000

$250,000

Cumulative Noncontractual Bene�ts Paid by MMBB 1913–2011Dollar amounts in thousands

1912

1915

1918

1921

1924

1927

1930

1933

1936

1939

1942

1945

1948

1951

1954

1957

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

Cumulative Death Bene�ts Paid to Members 1912-2011Dollar amounts in thousands

1912

1915

1918

1921

1924

1927

1930

1933

1936

1939

1942

1945

1948

1951

1954

1957

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

The Ministers and Missionaries Benefit Board of American Baptist Churches B e n e f i t s R e v i e W



i n d e p e n d e n t A u d i t o R s ’ R e p o R t

to the Ministers and Missionaries Benefit Board of American Baptist churches new York, new York

We have audited the accompanying statements of net assets of The Ministers and Mis-sionaries Benefit Board of American Baptist Churches (“MMBB”) and of the American Baptist Churches Retirement Plans (collectively, the “Board”) as of December 31, 2011, and the re-lated statements of changes in net assets, and cash flows of MMBB for the year then ended. These financial statements are the responsibility of the Board’s management. Our responsi-bility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Board’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material re-spects, the financial position of The Ministers and Missionaries Benefit Board of American Baptist Churches and also of the American Baptist Churches Retirement Plans as of Decem-ber 31, 2011, and the changes in its net assets and cash flows of MMBB for the year then ended in conformity with accounting principles generally accepted in the United States of America.

New York, New York March 27, 2012



A M e R i c A n B A p t i s t c h u R c h e s R e t i R e M e n t p l A n s f i n A n c i A l s tAt e M e n t s

Statement of Net AssetsAs of December 31, 2011 (in thousands)

Assets Cash and Cash Equivalents $ 1,264 Receivables 10,039 Investments Under Management 1,940,277 Due From MMBB 7,956total Assets $ 1,959,536

liabilities Accounts Payable and Accrued Expenses $ 1,431 1,431

net Assets Retirement Plans 1,726,883 Tax-Deferred Annuity 34,220 The Annuity Supplement 195,539 Deductible Employee Contribution Account 1,463Total Net Assets 1,958,105total liabilities and net Assets $ 1,959,536See Notes to Financial Statements.

Statement of Changes in Net AssetsFor the year ended December 31, 2011 (in thousands) Deductible The Employee Retirement Tax-Deferred Annuity Contribution Plans Annuity Supplement Account TotalAdditions (Reductions) Premiums $ 29,914 $ 4,837 $ 13,134 $ – $ 47,885 Net Unrealized Losses on Investments (359,853) (1,197) (9,022) (91) (370,163) Net Realized gains on Investments 324,398 395 5,818 55 330,666 Received From MMBB 1,424 – – – 1,424 total Additions (Reductions) (4,117) 4,035 9,930 (36) 9,812

deductions Benefits 120,202 1,426 11,549 122 133,299 Investment Management Fees 16,783 324 1,764 16 18,887 Unrelated Business Income Tax (Refund) (11) – (1) – (12)total deductions 136,974 1,750 13,312 138 152,174

Change in Net Assets Before Transfer of Net Assets (141,091) 2,285 (3,382) (174) (142,362) Transfer of Net Assets 29,678 (1,150) (28,343) (185) –net Assets, Beginning of Year 1,838,296 33,085 227,264 1,822 2,100,467 net Assets, end of Year $ 1,726,883 $ 34,220 $ 195,539 $ 1,463 $ 1,958,105 See Notes to Financial Statements.



M i n i s t e R s A n d M i s s i o n A R i e s B e n e f i t B o A R d f i n A n c i A l s t At e M e n t s

Statement of Net AssetsAs of December 31, 2011 (in thousands)

Assets Cash and Cash Equivalents $ 5,251 Receivables 4,014 Investments Under Management 271,180 Investment In Limited Partnership 4,972 Other Assets 2,825 Mortgages Receivable 7,767 Securities Lending Collateral 95,282 Fixed Assets, Net 4,672total Assets $ 395,963

liabilities Accounts Payable and Accrued Expenses $ 5,156 Due to Retirement Plans 7,956 Retired Ministers and Missionaries Offering 437 Securities Lending Payable 95,282 Mortgage Payable 3,952 Accrued Postretirement Benefits 12,922total liabilities 125,705

net Assets (deficit)Unrestricted: Legacy Funds 136,595 general Fund – Death Benefit Plan 29,102 Special Benefits Fund 105,986 Medical Plan (4,399)Total Unrestricted Net Assets 267,284 Temporarily Restricted Net Assets 2,786 Permanently Restricted Net Assets 188 Total Net Assets 270,258 total liabilities and net Assets $ 395,963 See Notes to Financial Statements.

Statement of Cash FlowsYear ended December 31, 2011 (in thousands)

cash flows from operating ActivitiesChange in Net Assets $ (24,188)Adjustments to Reconcile Change in Net Assets to Net Cash Used in Operating Activities: Depreciation and Amortization 773 Net Unrealized Losses on Investments 11,697 Net Realized gains on Investments (5,745) Increase in Additional Postretirement

Benefits Obligation 3,145 (Increase) Decrease in Assets: Receivables 80 Other Assets (335) Mortgages Receivable 42 Increase in Liabilities: Accounts Payable and Accrued Expenses 84 Due to Retirement Plans 418 Accrued Postretirement Benefits 704 net cash used in operating Activities (13,325)

cash flows from investing Activities: Purchases of Fixed Assets (686) Proceeds From Sale of Investments 67,766 Purchases of Investments (53,705) net cash provided by investing Activities 13,375

cash flows from financing Activities: Principal Payments of Mortgage Payable (404) net cash used in financing Activities (404)

Net Decrease in Cash and Cash Equivalents (354)Cash and Cash Equivalents, Beginning of Year 5,605Cash and Cash Equivalents, End of Year $ 5,251supplemental disclosure of cash flow information: Cash Paid for Interest $ 292See Notes to Financial Statements.



M i n i s t e R s A n d M i s s i o n A R i e s B e n e f i t B o A R d f i n A n c i A l s t At e M e n t s

Statement of Changes in Net Assets For the year ended December 31, 2011 (in thousands) Legacy General Death Special Medical Funds Fund Benefit Plan Benefits Fund Plan TotalAdditions (Reductions) Premiums $ – $ 2,428 $ 1,895 $ 3,159 $ 18,838 $ 26,320 Contributions 494 1,179 – – – 1,673 Kewa Rental 1,439 – – – – 1,439 Income From Investments 305 4 – – 1 310 Net Unrealized gains (Losses) on Investments (6,858) 75 (1,170) (3,744) – (11,697) Net Realized gains (Losses) on Investments 3,435 (112) 737 1,685 – 5,745total Additions (Reductions) (1,185) 3,574 1,462 1,100 18,839 23,790 deductions Assistance for Ministers, Preretired – 1,527 – – – 1,527 Assistance for Ministers, Retired – 2,522 – – – 2,522 Assistance for Lay Employees – 418 – – – 418 Professional Fees, Medical Plan – – – – 1,922 1,922 Claims Expense, Medical Plan – – – – 15,918 15,918 Benefits 850 – 3,349 4,200 – 8,399 Investment Management Fees 639 47 273 1,056 – 2,015 Unrelated Business Income Tax (Refund) (1) – – (1) – (2) Administrative Expenses 1,097 7,758 – 640 100 9,595 Depreciation and Amortization 773 – – – – 773 Interest Expense 146 – – 146 – 292 Payments to the Retirement Plans – – – 1,425 – 1,425 Legacies and Annuity Agreements 29 – – – – 29 total deductions 3,533 12,272 3,622 7,466 17,940 44,833 Change in Net Assets Before Increase in Additional Postretirement Benefits Obligation (4,718) (8,698) (2,160) (6,366) 899 (21,043) Increase in Additional Postretirement Benefits Obligation (3,145) – – – – (3,145) change in net Assets (7,863) (8,698) (2,160) (6,366) 899 (24,188) Net Assets (Deficit), Beginning of Year 156,130 – 31,262 112,352 (5,298) 294,446 Transfers, Net (8,698) 8,698 – – – –net Assets (deficit), end of Year $ 139,569 $ – $ 29,102 $ 105,986 ($4,399) $ 270,258* See Notes to Financial Statements.* Total net assets at year end consists of Unrestricted $267,284, Temporarily Restricted $2,786, and Permanently Restricted $188.



n o t e s t o f i n A n c i A l s t At e M e n t s

1. General

OrganizationThe Ministers and Missionaries Benefit Board of American Baptist Churches (“MMBB”) and the American Baptist Churches Retirement Plans (collective-ly, the “Board”) provide retirement, death, disability and other benefits for ordained ministers, commissioned missionaries and lay employees of churches and organizations related to the American Baptist Churches through the administration of retirement and other benefit plans.

Retirement PlansThe American Baptist Churches Retirement Plans (the “Retirement Plans”) are a qualified pension trust exempt from federal income tax. The Retire-ment Plans include the 1965, 1976 and 1980 Retirement Plans, Tax-De-ferred Annuity, The Annuity Supplement and the Deductible Employee Contribution Account. The plans are composed of accumulation and annuity units and the assets are held in a trust. Premiums are used to purchase accumulation units based on the unit value as of the day on which premiums are received. A premium equal to a percentage of the member’s compensation is paid by employers into the Retirement Plan Accumulation Fund. Employers and plan members may contribute ad-ditional premiums to the Tax-Deferred Annuity and The Annuity Supple-ment, subject to certain limitations, to increase these retirement benefits. At retirement, accumulation units held are converted to annuity units us-ing actuarial tables. Annuitants receive payments based upon the num-ber of annuity units held and the annuity unit payout value as determined annually. The American Baptist Churches Retirement Plans, Tax-Deferred Annuity, The Annuity Supplement and the Deductible Employee Contri-bution Account (together, the “Plans”) are Internal Revenue Code 403(b)(9) exempt retirement programs maintained by The Ministers and Mis-sionaries Benefit Board of American Baptist Churches.

The Plans and/or any account maintained by the Board to manage or hold assets of the Plans, and any interest in such Plans or account (in-cluding any funds maintained by the Board) are not subject to the reg-istrations, regulation or reporting provisions of the Investment Company Act of 1940, the Securities Act of 1933, the Securities Exchange Act of 1934, Title 15 of the United States Code or state securities laws. Therefore, participants and beneficiaries under the Plans will not be afforded the protections of those provisions. The Board’s employees also participate in the Retirement Plans. MMBB makes contributions on behalf of employ-ees equal to 13% of each individual employee’s compensation. In 2011 MMBB’s contribution was approximately $908,705.

MMBBMMBB, a not-for-profit religious organization exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code, is composed of the Legacy Funds, general Fund, Death Benefit Plan, Special Benefits Fund and the Medical Plan. The Legacy Funds are administered in accordance with the terms of the donors. Contributions that are limited by donor-imposed stipulations that neither expire by passage of time nor can be removed by actions of the Board are classified as permanently restricted.

Restrictions that either expire by passage of time or can be fulfilled by ac-tions of the Board are classified as temporarily restricted. All other contri-butions are deemed unrestricted, which are available for general use. Dis-bursements for operating costs as well as assistance to ministers and lay employees are paid out of the general Fund. A premium equal to 1% of the member’s compensation is received by the general Fund for assistance to American Baptist ministers, missionaries and lay employees. The Death Benefit Plan provides group term life insurance for preretired members during their working careers and for retired members. Premiums of 3/4 of 1% of compensation are paid by the employers on behalf of the members. The Special Benefits Fund provides disability and other benefits to qualify-ing Plan members. Premiums equal to 1 1/4% of compensation are paid by the employers on behalf of the members. The associated investment income earned on these contributions is available for services provided by the Board as well as benefit payments. Income is also available for op-erating expenses of the Retirement Plans, the Death Benefit Plan and the Special Benefits Fund.

2. Summary of Significant Accounting Policies

Fund AccountingIn order to ensure observance of limitations and restrictions placed on the use of resources available, the accounts of the Board are maintained in ac-cordance with the principles of fund accounting. Under these principles, resources are classified into funds according to their nature and purposes. Separate accounts are maintained for each fund; however, in the accom-panying financial statements, funds that have similar characteristics have been combined into fund groups. Accordingly, all financial transactions have been recorded and reported by fund group. As of February 18, 2011, the annuity funds of American Baptist Churches and all affiliate entities were consolidated into one annuity reserve. Transfers from Tax Deferred Annuity, The Annuity Supplement, and Deductible Employee Contribu-tion Account annuity funds to the Consolidated Annuity Fund totaled $29.7 million. going forward, there will be recurring net assets transfers each year from Retirement Plans, Tax Deferred Annuity, The Annuity Sup-plement and Deductible Employee Contribution Account into the Con-solidated Annuity Fund. The transfers represent conversion of members’ pre-retired account values into annuitized values.

Management EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the report-ed amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses recognized during the reporting period. Actual results could differ from these estimates.




Investments Under ManagementThe Investment Committee of the Board of Managers (the “Committee”) has general supervision of the Board’s investments. The investment ob-jective of the Board is to achieve a maximum total rate of return for its investments, taking into consideration the safety of principal, potential for market appreciation and income. The Committee has selected profes-sional managers to select and monitor the assets comprising Investments Under Management. Pursuant to management agreements, the Board pays each of its investment managers a management fee based on the net assets under their management. The Board also pays certain manag-ers an incentive fee based on the performance of the assets under man-agement. MMBB charges an administrative fee of up to an annualized 50 basis points (0.5%). The fee applies to all funds under Board management other than the Legacy Funds. This fee is charged in addition to the invest-ment management fee that applies to each fund. Currently, the Board has implemented a 50-basis-point fee that is assessed pro-rata daily across all funds, which means that for every $100 under management, the ad-ministrative fee equals $0.50 each year. For the year ended December 31, 2011 MMBB charged an administrative fee to the funds of approximately $11 million. Subject to investment policies and guidelines prescribed by the Committee, the investment managers are given authority to invest in a broad range of securities, including, but not limited to, equity securities of U.S. and foreign companies, debt securities of the U.S. government and its agencies, debt securities of other U.S. and non-U.S. issuers, investment funds, commercial paper and other types of investments. The Committee has amended these investment policies and guidelines to allow certain investment managers to have the flexibility of directing a portion of In-vestments Under Management in financial forwards, futures and option contracts and similar investments for the purpose of adjusting the degree of risk in the Board’s portfolio. The Board pays unrelated business income tax on income arising from its debt-financed investments. The Board has requested and received from the Commodity Futures Trading Commis-sion a “no-action” letter, which effectively exempts the Board from certain “commodity pool operator” registration requirements of the Commodity Exchange Act and the regulations promulgated thereunder. The “no ac-tion” letter also relieves the Board from the operation criteria of Regulation 4.5 thereby permitting investment of a portion of its assets in financial futures, options and similar investments without complying with such operation criteria. The use of such investments must be consistent with the Committee’s investment policies and guidelines.

Securities and Portfolio ValuationFinancial instruments are carried at fair value. Finanacial Accounting Stan-dards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 820-10, “Fair Value Measurements and Disclosures”, defines fair value, establishes a framework for measuring fair value and expands the disclosures about fair value measurements. ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an or-derly transaction between market participants at the measurement date in a principal or most advantageous market. Fair value is a market-based measurement that is determined based on inputs, which refer broadly to assumptions that market participants use in pricing assets or liabilities.

These inputs can be readily observable, market corroborated, or unob-servable. ASC 820-10 establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value in three broad levels. The standard requires that assets and liabilities be classified in their entirety based on the level of input that is significant to the fair value measurement. Assessing the significance of a particular input may require judgment considering factors specific to the asset or liability, and may affect the valuation of the asset or liability and its placement within the fair value hierarchy. The Board classifies fair value balances based on the fair value hierarchy defined by ASC 820-10 as follows:

Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities. An active market for the asset or liability is a market in which transactions for the asset or liability occur with suf-ficient frequency and volume to provide pricing information on an ongo-ing basis. Valuation adjustments and block discounts are not applied to Level 1 instruments.

Level 2 – Valuations based on quoted prices in markets that are not ac-tive or for which all significant inputs are observable, either directly or indirectly.

Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

A description of the valuation techniques applied to the Board’s major categories of assets and liabilities measured at fair value are as follows:

Equities: For its investments with asset managers that hold public com-mon and preferred stocks, the Board has position-level transparency into individual holdings. Open forward currency contracts are valued based upon forward rates available from reputable established sources. These investments are priced by the Board’s custodian using a nationally recog-nized pricing service based on observable market data and are classified as Level 1.

Fixed Income: The Board also has investments with several fixed income managers and the Board’s custodian prices these investments using a nationally recognized pricing service. The Board’s fixed income invest-ments include US treasury securities, corporate bonds, high-yield bonds, municipal bonds, asset-backed securities and collateralized securities. In the normal trading of fixed income securities, pricing is determined using relevant market information, benchmark curves, benchmarking of simi-lar securities, sector groupings and matrix pricing, these investments are classified as Level 2. U.S. Treasury securities are valued using quoted mar-ket prices and are categorized as Level I of the fair value hierarchy.




Hedge Fund of Funds: The Board invests with several funds of hedge funds managers. For these investments, the Board has access to under-lying managers but not to the individual positions of each manager. A significant amount of the Board’s investments consists of long/short eq-uity managers, which invest in liquid, publicly traded securities. The fair value of these investments is determined by each manager using either an in-house valuation team or a third-party administrative service. As part of its due diligence process, the Board has surveyed each manager and reviewed their valuation policies and the controls surrounding the valu-ation process in accordance with ASC 820-10. The financial statements of the investees are audited annually by independent auditors. In accor-dance with Accounting Standards Update (“ASU”) No. 2009-12, “Invest-ments in Certain Entities That Calculate Net Asset Value Per Share”, a por-tion of the Board’s investments in hedge funds has been classified as Level 2 and the remainder as Level 3.

Private Equity: Private equity comprises approximately 2.5% of the Board’s investments and consists of investments in infrastructure, energy, sec-ondary equity, timber and commingled funds. These investments are long-term investments, which require a commitment of capital for sev-eral years and do not have readily observable fair values. The fair value of these investments is determined by each manager using either an in-house valuation team or a third-party administrative service. As part of its due diligence process, the Board surveyed each manager and reviewed their valuation policies and controls surrounding the valuation process in accordance with ASC 820-10. The financial statements of the investees are audited annually by independent auditors. These assets are classified as Level 3 because the Board does not have either quoted prices or readily observable market comparable prices as of the valuation date.

Futures Contracts: The Board invests in futures contracts to maintain its exposure to asset classes in accordance with the targets through its overlay investment manager. The Board does not use futures contracts to hedge its risk exposure. Its investment in futures contracts consists of domestic and international equity index futures, treasury index futures and corporate fixed income futures. The contracts are liquid instruments, usually with a 90-day settlement period, and their prices are observable daily on a nationally recognized exchange. Upon entering into a contract, the Board deposits and maintains as collateral an initial margin balance as may be required. During the period the futures contract is open, changes in the value of the contract are recognized on a daily basis to reflect the fair value at the end of each day’s trading. Variation margin payments are received or made, depending upon whether unrealized gains or losses are incurred. When the contracts are closed, the Board realizes a gain or loss equal to the difference between the proceeds from the closing transaction and the basis in the contracts. Cash collateral on deposit with brokers relating to these contracts was $48,685 as of December 31, 2011.

As part of its due diligence process, the Board surveyed its overlay man-ager, which achieves the futures exposure for the Board, and reviewed its valuation policy and controls surrounding the valuation process in accor-dance with ASC 820-10. These investments are classified as Level 1.

Purchases and sales of securities are reflected on a trade date basis. gains or losses on sales of securities are based on the average cost of each individual security sold. Unrealized gains and losses are determined by comparison of cost determined by the average cost method with the fair value and are included in the Statement of Changes in Net Assets. Dividend income is recorded on the ex-dividend date. Interest from other investments is recorded as earned.

At December 31, 2011, the Board determined that the unrealized loss positions on all of the securities were temporary in nature. Positive evidence considered by the Board in reaching the conclusion that the unrealized loss for equity secu-rities is not other-than-temporary consisted of: (a) the ability and intent to retain the investment for a sufficient amount of time to allow an anticipated recovery in value, and (b) determining that the changes in market value were reasonable in relation to overall fluctuations in market conditions. The Board considered the following evidence in reaching the conclusion that the unrealized loss on fixed income instruments was not other-than-temporary: (a) whether or not it intended to sell its investments before the full recovery of cost basis and (b) whether or not it will be required to sell its investments before the full recovery of cost basis. The Board did not record any impairment charges for 2011. Net loss resulting from foreign investment transactions and the translation of for-eign denominated investments amounted to approximately $2.41 million for MMBB and for the Retirement Plans for the year ended December 31, 2011.

Foreign CurrencyThe Board has investments in several international equity funds. Invest-ment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the date of valuation. Purchases and sales of investment securities, and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Board does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.

Securities Sold, Not Yet PurchasedInvestments Under Management and securities sold, not yet purchased, are carried at fair value. Securities that are not readily marketable are car-ried at estimated fair value as determined by the individual investment manager. Fair value is based on the recorded sales price on the last busi-ness day of the year or, in the absence of a reported sale, on the bid price for investments and the ask price for securities sold, not yet purchased. The fair value of investments traded in foreign currencies is determined at the exchange rate on the last business day of the year.




Total Return AllocationEffective June 1, 1986, a “total return allocation” was adopted for spending from the Legacy Funds. The transfer of investment yield from the Legacy Funds to the general Funds is based on the average fair value of the Lega-cy Funds’ pro-rata share of Investments Under Management. For the year ended December 31, 2011, the target spending rate for the general Fund was set at 5.0% pursuant to this policy. The actual spending rate for this time period was 5.3%.

Cash EquivalentsThe Board considers all investments with an original maturity of three months or less to be cash equivalents. The Board maintains most of its cash balances at one major financial institution. At times, the amounts on deposit at this institution exceeded the $250,000 insured limit by the Federal Deposit Insurance Corporation (“FDIC”). All of the noninterest bearing cash balances were fully insured at December 31, 2011, due to a temporary federal program in effect from December 31, 2010, through December 31, 2012. Under the program, there is no limit to the amount of insurance for eligible accounts. Beginning 2013, insurance coverage will revert to $250,000 per depositor at each financial institution, and the Board’s noninterest-bearing cash balances may again exceed federally insured limits. The funds maintained with brokers are insured up to $100,000 by the Securities Investment Protection Corporation (“SIPC”) .

Brokerage AgreementsThe individual investment managers employed by the Board have prime bro-kerage agreements with various brokerage firms to carry their accounts as customers. The brokers or individual managers have custody of the Board’s in-dividual securities and, from time to time, cash balances, which may be due to these brokers. These securities and/or cash positions serve as collateral for any amounts due to the brokers. The securities and/or cash positions also serve as collateral for potential defaults of the Board.

Mortgages ReceivableMortgages receivable represent amounts from employees for the purchase of their personal residences and are secured by the related properties. Mortgages receivable are reported at carrying value.

Kewa, Inc.The Board’s financial statements include the net assets and results of operations of Kewa, Inc., a wholly owned subsidiary that owns an apartment building in New York City.

Fixed AssetsFixed assets are stated at cost, less accumulated depreciation. The Board calculates depreciation and amortization on fixed assets on a straight-line basis over the estimated lives of the assets. For the year ended December 31, 2011, depreciation and amortization was approximately $773,000.

Estimated Useful Lives (in years)Leasehold Improvements 10–20 Furnishings 10 Equipment and Computer Software 3-5 Buildings 25–30

At December 31, 2011, Fixed Assets, Net Comprised (in thousands) Leasehold Improvements $ 5,487 Furnishings 1,590Equipment and Computer Software 12,154Buildings 5,358 24,589less: Accumulated depreciation and Amortization (19,917) $ 4,672

Payment of BenefitsBenefits are recorded when paid.

Net Asset ClassificationsFASB ASC 958-205, “Endowments of Not-for-Profit Organizations: Net As-set Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act (“UPMIFA”), and Enhanced Disclosures for all Endowment Funds”, is intended to improve the quality and consistency of financial reporting of endowments held by not-for-profit organizations. This statement provides guidance on classifying the net assets (equity) associated with donor-restricted endowment funds held by organizations that are subject to an enacted version of UPMIFA, which serves as a model act for states to modernize their laws governing donor-restricted endowment funds. On September 17, 2010, New York State enacted the New York Prudent Management of Institutional Funds Act (“NYPMIFA”). This law, which is a modified version of UPMIFA, makes significant changes to the rules governing how New York not-for-profit organizations may manage, invest and spend their endowment funds. The new law is designed to allow organizations to manage more easily the fluctuations in the value of their endowments and to afford them greater access to funds needed to support their programs and services in difficult financial times. The law imposes a requirement on organizations to act prudently when spending endowment assets while allowing the organizations to appropriate endowment funds, including the principal, taking into account the uses, benefits, purposes and duration for which the fund was established. NYPMIFA applies to New York not-for-profit, ed-ucation and religious corporations, associations organized and operated exclusively for charitable purposes, and certain trusts.




Accounting for Uncertainty in Income TaxesUnder ASC 740-10, “Income Taxes,” an organization must recognize the tax benefit associated with tax positions taken for tax return purposes when it is more likely than not that the position will not be sustained upon ex-amination by a taxing authority. The Board does not believe there are any material uncertain tax positions taken, or to be taken, for the tax year end-ed December 31, 2011, and accordingly, they have not recognized any liability for unrecognized tax benefits under ASC 740-10. The Board filed Internal Revenue Service Form 990-T tax returns, as required, and all other applicable returns in jurisdictions where it is required. For the year ended December 31, 2011, there were no interest or penalties recorded or in-cluded in the financial statements. As of December 31, 2011, the years still subject to examination by a taxing authority are 2008 through 2010.

Recently Issued Accounting PronouncementsIn January 2010, the FASB issued ASU No. 2010-06, which was adapted into ASC 820-10, “Fair Value Measurements and Disclosures”. This ASU re-quire some new disclosures and clarifies some existing disclosure require-ments about fair value measurement. The Board adopted the disclosure requirements for purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements on January 1, 2011. The adoption of this disclosure requirement did not have a material im-pact on its financial statements.

In May 2011, the FASB issued ASU No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. gAAP and IFRS”. This ASU generally aligns the principles for fair value measurements and the related disclo-sures under U.S. generally Accepted Accounting Principles (“U.S. gAAP”) and International Financial Reporting Standards (“IFRS”). ASU 2011-04 changes certain fair value measurements. The amendment is effective on a prospective basis for interim and annual reporting periods beginning after December 15, 2011, and early adoption is not permitted. The Board does not expect the implementation of ASU No. 2011-04 to have a mate-rial impact on its financial statements.

3 . Investments Under Management Dollar amounts in millionsAt December 31, 2011, the cost basis and fair value of Investments Un-der Management were $1,114 and $2,211, respectively. The fair value of Investments Under Management consists of $1,940 for ABC Retirement Plans and $271 for MMBB. The following table presents the level within the fair value hierarchy at which the Board’s financial assets and financial liabilities are measured on a recurring basis at December 31, 2011. These assets are presented on a desegregated basis by class, determined by the nature and risk associated with the investment:

Quoted prices in active Significant Significant markets for observable unobservable identical assets inputs inputs

Level 1 Level 2 Level 3 TotalAssets U.S Cash & Cash Equivalents $ 57 $ – $ – $ 57Non-U.S. Cash & Cash Equivalents 41 – – 41Equity: Domestic Small/Mid Cap 55 – – 55 Domestic Large Cap 250 – – 250 Domestic All Cap 162 – – 162 International Developed

Small/Mid Cap 63 – – 63 International Developed

All Cap 410 – – 410 Emerging Markets 159 – – 159Fixed Income: U.S. Treasury 93 – – 93 U.S. government Agency 40 – – 40 Mortgage-Related – 97 – 97 Asset-Backed – 51 – 51 Investment grade Corporate – 168 – 168 Distressed Corporate – 10 – 10 High Yield Corporate – 24 – 24 Inflation-Linked – 53 – 53 Bank Loans – 91 – 91 International Developed – 20 – 20 Emerging Markets – 14 – 14Hedge Fund of Funds: Long/Short Equity – 359 – 359 Multi-Strategy – 34 – 34 Event-Driven – – 37 37 Commodities – 9 – 9Private Equity – – 54 54Securities Lending Collateral 95 – – 95total Assets $ 1,425 $ 930 $ 91 $ 2,446 liabilities Equity $ 137 $ – $ – $ 137Securities Lending Liability 95 – – 95Payable for Securities Transactions and Management Advisory and Service Fees 3 – – 3total $235 – – $ 235




The following table for December 31, 2011, sets forth a summary of the Board’s investments with a reported NAV:

(in Millions) Unfunded Redemption Investment Fair Value Commitments Redemption Frequency Notice PeriodEquity Long/Short Funds (a) $359 – Monthly to Quarterly 45-65 DaysEvent Driven Funds (b) $37 $1 No Redemptions Allowed ; 3 Year Lock-Up Then Annual Redemption Allowed 180 DaysMulti-Strategy Funds (c) $34 – Monthly 14 DaysForestry Funds (d) $10 – No Redemptions Allowed N/AInfrastructure (e) $28 $9 No Redemptions Allowed N/AReal Estate Funds (f ) $5 – No Redemptions Allowed N/APrivate Equity Funds (g) $4 $13 No Redemptions Allowed N/ASecondary Equity Funds (h) $6 $6 No Redemptions Allowed N/AEnergy Funds (i) $1 $5 No Redemptions Allowed N/ACommodities (j) $9 $3 Monthly In 25% increments 30 Daystotal $493 $37

Assets liabilities net Realized net change in long short fair value fair value gains/losses unrealized gains/losses exposure exposureForward Currency Contracts $137 $(137) $1 $(.7) $80 $(52)Futures Contracts $6 $(3) $2 $4 $27 $(8)

The Board had no financial assets or financial liabilities that were measured at fair value on a nonrecurring basis for the year ended December 31, 2011. In addition, there were no transfers between levels during the year ended December 31, 2011.

The fair value of forward currency and futures contracts are included in Investments Under Management on the statement of net assets. The fol-lowing table sets forth the fair value of the forward currency contracts held within a commingled fund and futures contracts held with an overlay man-ager as of December 31, 2011, and lists the net realized gain/(loss) and net change in unrealized gain/(loss), as included in the statement of changes in net assets for the period from January 1, 2011 to December 31, 2011.

The below notional amounts are presented as of December 31, 2011 and are indicative of the volume of activity during the period from January 1, 2011 to December 31, 2011.

have an aggregate fair value of $402 million and are primarly invested in long/short equity strategies. The remaining balance of $91 million for investments measured at NAV is classified as Level 3. All activity into and out of these investments are conducted on the basis of net asset value per share.

The table listed below provides a reconciliation of the beginning and ending net balances for assets and liabilities measured at fair value and classified as Level 3 in the fair value hierarchy.

Hedge Fund Private (in Millions) of Funds Equity TotalBeginning Balance $ 33 $ 50 $ 83Total gains or Losses : Realized gain/(Loss) – (1) (1) Unrealized gain/(Loss) on Assets Sold – (1) (1) Unrealized gain/(Loss) on Assets Held – 6 6Purchases 6 9 15Sales (2) (9) (11)Transfers In/(Out) of Level 3 – – –ending Balance $ 37 $ 54 $ 91

In accordance with ASU No. 2009-12, the Board expanded its disclosures to include the category, fair value, redemption frequency and redemp-tion notice period for those assets whose fair value is estimated using the NAV per share or its equivalent for which the fair value is not readily de-terminable, as of December 31, 2011. Hedge fund of funds investments classified as Level 2 investments in accordance with ASU No. 2009-12




(f ) This class includes an investment in a private equity fund focused on real estate investments. The fund’s strategy is focused on creating a diversified portfolio of office, industrial, retail and multi-family properties in primary mar-kets located in the United States. The fund is expected to wind down its opera-tions and liquidated all investments in 2018. In the interim, invested capital cannot be redeemed. Instead, distributions will be received as the underlying investments are liquidated. The fair value of investments in this class has been estimated using the net asset value per share of the investments and all trans-actions into and out of the fund are conducted on the basis of the NAV.

(g) This class includes investments in diversified private equity fund of funds. Investments may be dispersed across geographical regions, as well as economic and industrial sectors. For example, the underlying fund managers may invest in a dedicated India strategy, an early information technology ven-ture and healthcare, both domestically and abroad. The funds are expected to wind down their activities and liquidate all investments between 2022 and 2028. In the interim, invested capital cannot be redeemed. Instead, distribu-tions will be received as the underlying investments are liquidated. The fair value of investments in this class has been estimated using the net asset value per share of the investments and all transactions into and out of the fund are conducted on the basis of the NAV.

(h) This class includes an investment in a private equity fund focused on secondary equity investments. The focus of the fund is directed at acquiring private equity investments of organizations facing liquidity issues and look-ing to sell off their stakes. Investments of the fund are dispersed across the United States, Asia and Europe, with 80% of the investments located in the United States. Additionally, the types of private equity within the fund include corporate finance and venture capital. Commitments by vintage year range from 1999-2007. The fund is expected to wind down its activities and liquidate all investments in 2021. In the interim, invested capital cannot be redeemed. Instead, distributions will be received as the underlying investments are liqui-dated. The fair value of investments in this class has been estimated using the net asset value per share of the investments and all transactions into and out of the fund are conducted on the basis of the NAV.

(i) This class includes an investment in a private equity fund focused on pro-viding growth capital to companies in the U.S. oil and gas industry. The fund is focused on exploiting undeveloped reserves, and establishing positions in geologic areas with proven resources, as well as enhancing operations of the companies in which it invests. The fund is expected to wind down its activities and liquidate all investments in 2022.

In the interim, invested capital cannot be redeemed. Instead, distributions will be received as the underlying investments are liquidated. The fair value of in-vestments in this class has been estimated using the net asset value per share of the investments and all transactions into and out of the fund are conducted on the basis of the NAV.

(a) This class includes investments in hedge funds that invest primarily long and short in U.S. and international common stocks. The underlying hedge funds maintain long positions in securities expected to rise in value and short positions in those expected to decrease in value. Management of hedge funds also has the ability to shift from small to large capitalization stocks, across industry sectors and countries, as well as from a net short to a net long posi-tion. The fair value of investments in this class has been estimated using the net asset value per share of the investments.

(b) This class includes investments in funds of hedge funds that seek to profit from events resulting from overall shifts in the economic environment. Investments in this class include both equity and fixed income and may include equity stakes in distressed companies, leveraged loans, consumer and corporate loans and high yield bonds as examples. The managers of the underlying funds identifying those segments of the market that are in distress and invest with the strategy that a turn-around in the economy will produce acceptable returns with low correlation to the traditional bond and equity markets. The fair value of all investments in this class has been estimated using the net asset value per share of the investments.

(c) This class includes an investment in a fund that seeks to maximize returns through a combination of different equity and fixed income strategies. The man-agement of the fund may invest in domestic and international stocks, domestic and international fixed income, commodities, forwards, and futures, as well as engage in currency hedging. By allocating the assets among a varied group of strategies, the fund aims to achieve its investment target with lower volatility than any single underlying strategy. The fair value of the investment in this class has been estimated using the net asset value per share of the investments.

(d) This class includes investments in private equity funds that invest in forests in the United States and globally, in Australia, New Zealand, Chile, Uruguay and Cos-ta Rica. In the interim, invested capital cannot be redeemed. Instead, distributions will be received as the underlying investments are liquidated. The investments are expected to wind down and liquidate all of the holdings in 2017. The fair value of investments in this class has been estimated using the net asset value per share of the investments and all transactions into and out of the fund are conducted on the basis of the NAV.

(e) This class includes private equity funds focused on infrastructure invest-ments. The target assets of the funds include public infrastructure, energy infrastructure and industrial infrastructure that encompass roads, airports, electric transmission, and wastewater treatment, among others. The funds investments are located both in the United States and overseas, primarily in the United Kingdom. The funds are expected to wind down their activities and liquidate all investments between 2018 and 2020. In the interim, invested capi-tal cannot be redeemed. Instead, distributions will be received as the underly-ing investments are liquidated. The fair value of investments in this class has been estimated using the net asset value per share of the investments and all transactions into and out of the fund are conducted on the basis of the NAV.


(j) This class includes an investment that seeks to generate returns by in-vesting in funds that invest predominantly in a broad range of commodity-related strategies. The Investment Manager allocates the assets of the port-folio to selected funds and structured products intended by the Investment Manager to provide exposure predominantly to commodity-related strategies including, but not limited to, (a) trading commodity futures, derivatives and physical commodities, (b) trading debt and equity securities, long and short in entities engaged in commodities and utilities-related activities; (c) systematic trading of futures and forward contracts; and (d) commodities index and/or index-replication strategies. The fair value of the investment is estimated using the NAV per share.

4 . Financial Instruments With Off-Balance Sheet Risk

In the normal course of business, the Board enters into transactions in various financial instruments with off-balance sheet risk. Market risk rep-resents the potential loss that can be caused by a change in the fair value of the financial instrument. Liquidity risk represents the possibility that the Board may not be able to rapidly adjust the size of its positions in times of high volatility and financial stress at a reasonable price. The Board is exposed to risks that the exchange rate of the U.S. dollar relative to other currencies may change in a manner which has an adverse effect on the reported value of the Board’s assets and liabilities denominated in curren-cies other than the U.S. dollar. At December 31, 2011, cash aggregating $26.81 million was deposited with broker-dealers. Of this amount, $5.24 million was to satisfy margin requirements. These balances, which are included in Investments Under Management, earn interest. All deposits and securities owned by the Board are held by its custodian or by cus-todians engaged by certain investment managers. The Board is subject to credit risk should broker-dealers be unable to repay amounts owed or if the custodians are unable to fulfill their obligations to the Board. This risk is mitigated by the fact that the Board’s accounts are carried by the broker-dealers as customer accounts, as defined, and are therefore sub-ject to Securities and Exchange Commission rules with regard thereto, and under the Securities Investor Protection Corporation’s insurance pro-gram and supplemental insurance programs maintained by such brokers. Debt obligations are subject to interest rate risk. Interest rate risk is the risk that the Board may incur losses due to adverse changes in interest rates. Fluctuations in interest rates have a direct impact on the market valuation of debt obligations. Securities sold, not yet purchased by the Board, may give rise to off-balance sheet risk. The Board may sell a security it does not own in anticipation of a decline in the fair value of that security. When the Board sells a security short, it must borrow the security sold short. A gain, limited to the price at which the Board sold the security short, or a loss, unlimited in amount, will be recognized upon the termination of a short sale. The Board has recorded this obligation in the financial state-ments at the December 31, 2011, at fair value of these securities. There is an element of market risk in that, if the securities increase in value, it will be necessary to purchase the securities at a cost in excess of the price

reflected in the statement of net assets. The Board participates in a secu-rities lending program whereby its Custodian may lend its securities to certain borrowers based on, among other things, their creditworthiness in exchange for collateral initially equal to at least 102% of the value of the securities on loan and is thereafter maintained at a minimum of at least 102% of the fair value of the securities loaned. The fair value of the securities on loan to each borrower is monitored daily and the borrower is required to deliver additional collateral if the fair value of the collateral falls below 100% of the fair value of the securities on loan. The fair value of the collateral amounted to approximately $95 million, which represents 102% of the carrying value at December 31, 2011. Under the guidance provided in ASC 860-10, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” the Board recognizes the collateral as an asset and a corresponding liability, which is reported in Investments Under Management in the statement of net assets. The Board receives compensation, which is net investment earnings on the collateral, and these earnings are divided between the Board and the Custodian. The Board’s portion of this income is included in the statement of changes in net assets.

5 . Employee Benefits

The Board accrues the expected cost of its employees’ postretirement benefits during the years that the employees render the necessary service. The plan is funded on a pay-as-you-go basis. The following sets forth the plan’s funded status reconciled with amounts reported in MMBB’s state-ment of net assets at December 31, 2011. The assumed health care cost trend rates for Pre-Medicare and Post-Medicare were 8.00% and 7.00%, respectively, for 2011. The assumed health care cost trend rates will gradu-ally decline to 5% (the ultimate trend rate) in the year 2019. Increasing the assumed health care cost trend rates by one percentage point would increase the postretirement benefit obligation as of December 31, 2011, by $2,594,000 and increase the aggregate of the service cost and interest cost components of net periodic postretirement benefit cost for 2011 by $205,000. Decreasing the assumed health care cost trend rates by one percentage point would decrease the postretirement benefit obligation as of December 31, 2011, by $2,026,000 and decrease the aggregate of the service cost and interest cost components of net periodic postretire-ment benefit cost for 2011 by $158,000. A weighted average discount rate of 4.35% was used to determine the postretirement benefit obligation and net periodic postretirement benefit cost. The postretirement benefit obligation presented in the financial statements at December 31, 2011 reflects the impact of the Retiree Drug Subsidy expected to be received on the account of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 as required by ASC 715-60; “Defined Benefit Plans—Other Postretirement”, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug Improvement and Moderniza-tion Act of 2003.” The effect of the subsidy on the measurement of net periodic postretirement benefit cost for the current period was $106,233. Included in decrease in additional postretirement benefit obligation is a




net loss of $3,145,309, which is not reflected in net periodic postretire-ment benefit cost at December 31, 2011. The net periodic postretirement benefit cost recognized in the financial statements was $907,838 for the year ended December 31, 2011.

Change in Benefit Obligation (amounts in thousands) Benefit Obligation at Beginning of Year $ 9,073 Service Cost 369 Interest Cost 535 Actuarial Loss 3,148 Retiree Drug Subsidy Received 19 Benefits Paid (222)Benefits obligation at end of Year $ 12,922

Postretirement Benefit Obligation (PBO) Breakout Retirees and Surviving Spouses $ 4,853 Preretired Fully Eligible 3,238 Other Preretireds 4,831 total pBo $ 12,922

Change in Plan Assets: Fair Value of Plan Assets at Beginning of Year $ – Actual Return on Plan Assets – Employer Contribution 222 Benefits Paid (222)fair value of plan Assets at end of Year $ –

Reconciliation of Funded Status at End of Year Unfunded Status $ 12,922 Amount Recognized $ 12,922 Amounts Recognized in the Statement of Net Assets Consist of Current Liabilities $ (302) Noncurrent Liabilities (12,620)Accrued postretirement Benefits $ (12,922)

Amounts Recognized in Other Changes in Net Assets Consist of Net Actuarial Loss $ (3,147) Recognized Actuarial gain – Recognized Prior Service Cost 2 total Amount Recognized $ (3,145)

Components of Net Periodic Postretirement Benefit Cost for the Year Service Cost $ 370 Interest Cost 536 Recognition of Prior Service Cost 2 net periodic expense $ 908

Amounts Expected to Be Recognized in Net Periodic Cost in the Coming Yearprior service cost Recognition $ 2

Gross Estimated Future Benefit Payments Without Subsidy Are as Follows: (Year ending December 31) 2012 $ 347 2013 378 2014 411 2015 446 2016 471 2017–2020 2,906total for the next 10 Years $ 4,959

Estimated Future Subsidy Payments Are as Follows: (Year ending December 31) 2012 $ 36 2013 38 2014 41 2015 43 2016 46 2017–2020 298total for the next 10 Years $ 502






6 . Investment In Limited Partnership and Mortgage Payable

MMBB acquired a 25% ownership interest in the Mission Center property located in King of Prussia, Pennsylvania. MMBB is a limited partner in 588 Associates, LP, which was formed to purchase the Mission Center prop-erty. MMBB also acquired a 25% ownership interest in 588 Associates gP, LLC, a Pennsylvania limited liability company set up to hold the Mission Center property. 588 Associates gP, LLC is the general partner in 588 As-sociates, LP with a 1% ownership interest. MMBB records its investment in 588 Associates, LP in accordance with the equity method of accounting. The value of this investment in 588 Associates, LP at December 31, 2011, was $4.9 million. In March 2009, MMBB entered into a mortgage agree-ment with American Baptist Churches USA (“ABCUSA”) for $5,000,000 to finance this acquisition. Under the terms of this agreement, the mortgage is payable to ABCUSA in monthly installments of $58,054, including inter-est at 7% per annum, and due on March 1, 2019.

In March 2009, MMBB terminated its rental lease agreement with ABC USA and entered into an operating lease agreement with 588 Associates, LP, for office space. MMBB paid $10,099 in rental expense to 588 Associates, LP, for the year ended December 31, 2011. An Officer of MMBB is also an Officer of 588 Associates, LP.

Mortgage payable matures as follows:

Year ending December 312012 $ 4342013 4652014 4982015 5352016 573Thereafter 1,447total $ 3,952

7 . Temporarily Restricted Net Assets and Net Assets Released From Restriction

Temporarily restricted net assets result from contributions and other in-flows of assets whose use by MMBB is limited by donor-imposed stipula-tions that either expire by passage of time or can be fulfilled and removed by actions of MMBB pursuant to those stipulations. When such stipula-tions end or are fulfilled, such temporarily restricted net assets are reclassi-fied to unrestricted net assets and reported in the statement of changes in net assets. Contributions subject to donor-imposed stipulations that are met in the same reporting period are reported as unrestricted support. Temporarily restricted net assets at December 31, 2011, were $2,786,000 and net assets released from restriction were $200,000 for 2011.

8 . Donor-restricted Endowment Assets

MMBB maintains a donor-restricted endowment fund (“the endowment fund”) which consists of monies bequeathed to it and which must be held in perpetuity in the Ives Fund. The Ives Fund consists of contributions received from the Last Will and Testament of a donor for the purpose of benefitting needy Baptist ministers and missionaries and their families in the states of New York, New Jersey and Connecticut.

The Board is a New York State institution and is subject to the provisions of NYPMIFA. Under the provisions of the law, the Board must exercise a prudent standard of care when spending funds belonging to the endow-ment. NYPMIFA also allows the Board to appropriate endowment funds, including the principal, as it finds prudent, while taking into account the uses, benefits, purposes and duration for which the fund was established.

In exercising the prudent standard of care, the Board must consult the fol-lowing factors, among others, that might be relevant when considering the purpose for which endowment funds will be spent:

a. the duration and preservation of the endowment fund

b. purpose of the fund

c. general economic conditions

d. possible effect of inflation or deflation

e. expected total return from income and appreciation of investments

f. other resources available to the Board

g. the Board’s investment policy

h. alternatives to spending from the endowment and possible effects of those alternatives.

For the year ended December 31, 2011, all invested assets included in MMBB’s Ives Fund are as follows:

Asset Class Total (in thousands)U.S. Equity $ 129International Equity 147Fixed Income 188Hedge Fund of Funds 228Private Equity 40Tactical Asset Allocation 59total $ 791




The following table provides a reconciliation of the change in MMBB’s Ives Fund net assets for the year ended December 31, 2011:

Temporarily Permanently (in thousands) Restricted Restricted TotalEndowment Net Assets, Beginning of Year $ 832 $ 188 $ 1,020Net Assets Transferred Out (127) – (127)Investment Income – – –Net Appreciation/(Depreciation) (18) – (18)Other Changes 70 – 70endowment net Assets, end of Year $ 757 $ 188 $ 945

MMBB has adopted investment and spending policies for endowment as-sets that attempt to provide a predictable stream of funding to programs supported by its endowment while maintaining the original historical val-ue of those assets donated in perpetuity. Under this policy, as approved by the Board of Managers, the endowment assets are invested to achieve a total maximum rate of return at a level consistent with prudent man-agement, taking into consideration the safety of principal, potential for market appreciation and income. To achieve its long-term rate-of-return objectives, the Board relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and un-realized) and current yield (interest and dividends). The Board invests in a diversified portfolio of assets that places greater emphasis on equity-based investments to achieve its long-term return objects with prudent risk constraints. In 2011 the Board had an annual target spending policy for its endowment assets of 5.0 percent. The actual spending rate was 5.30% for 2011. The Board expects its endowment funds, over time, to provide an average rate of return of approximately 7.1 percent. Actual returns in any given year may vary from this amount. MMBB measures performance of the endowment funds according to a custom blended benchmark.

9 . Commitments and Contingencies

The Board has entered into several noncancelable operating leases for office space and equipment. At December 31, 2011, the aggregate future minimum payments for these commitments were as follows:

Year ending December 31 (in thousands)2012 $ 7642013 6982014 6962015 6942016 663Thereafter 1,817

Rent expense under these leases for 2011 was $741,000, which is included in MMBB administrative expenses.

As of December 31, 2011, the Board was committed to contribute ap-proximately $37 million of additional investments to certain limited partnerships and an asset management firm based on the term of the investment period as defined in each partnership and investment man-agement agreement. Of these commitments, $15 million is expected to be drawn down in 2012, $15 million in 2013, $5 million in 2014 and $2 million in 2015. These funds may be drawn after the commitment pe-riod ends for fees and prior commitments before the end of the period. Additionally, the Board may receive income in the form of distributions from its investment with these managers.

MMBB is a defendant in various legal actions arising out of the normal course of its operations, the final outcome of which cannot presently be determined. One of these legal actions was settled in 2011 and the liabil-ity is included in the financial statements. MMBB’s management is of the opinion that the ultimate liability, if any, with respect to the ongoing mat-ters will not have a material adverse effect on MMBB’s financial position.

10 . Subsequent Events

The Board’s management has performed subsequent event procedures through March 27, 2012, which is the date the financial statements were available to be issued, and there were no subsequent events requiring adjustment to the financial statements or disclosures as stated herein.


The Ministers and Missionaries Benefit Board of American Baptist Churches A d M i n i s t R At i o n

Management Team

Louis P. BarbarinDeputy Executive Director and Chief Financial Officer/Treasurer

James R. CookNational Outreach Manager

Candace CoxChief Investment Officer

Sara E. DayMember Service Director

William H. FosterNational Outreach Manager

Sumner M. GrantExecutive Director

Winona A. GreenFinancial Services Director

Matthew D. HoffmanDirector of Service

Perry J. HopperAssociate Executive Director

Thomas M. HuberDirector of Outreach and Marketing

William R. HunnexDirector of Human Capital Management

James F. KeeganDirector of Marketing and Service

Harold S. LeibovitzDirector of Communications

Frank R. O’BrienDirector of Compliance and Employer Relations

Senior Benefits Specialists

Melody S. ChartierGrace CruzBrian K. HaynesMaureen E. HoyteOscar R. LanzaPaqueta A. Moorehead

Senior Benefits Consultants

Augustine H. BauJonathan BullardMiriam Chacón-Peralta Rose M. HarperDavid HinsonPatricia L. HunterWilliam J. KeyClifton MorganPaul Weers

Staff Transitions

William Hunnex Retired June 30, 2011. He joined MMBB October 23, 1995

James Keegan Retired August 31, 2011. He joined MMBB January 13, 1997

Carol Stegall Retired June 30, 2011. She joined MMBB April 11, 1988


The Ministers and Missionaries Benefit Board of American Baptist Churches o f f i c e R s A n d B o A R d o f M A n A g e R s

Officers

George H. Tooze, Jr.President

Gwynn L. PerlichVice President

Sumner M. GrantExecutive Director

Louis P. BarbarinTreasurer

Matthew D. HoffmanCorporate Secretary

Candace CoxChief Investment Officer

Board of Managers

Herald R. BaughmanWinston-Salem, North CarolinaSenior Vice President, Executive Banking, One Valley Bancorp of West Virginia, Retired.Lifetime Honorary Member

William L. Cobb, Jr.New York, New YorkExecutive Vice President and Chief Investment Officer, The Church Pension Fund.Public Manager

Kathleen A. Condon New York, New YorkConsultant, Northern Trust global Investors.Public Manager

Danny CortésPhiladelphia, PennsylvaniaSenior Vice President and Chief of Staff, Esperanza.Manager-at-Large

William S. EppsLos Angeles, CaliforniaSenior Pastor, Second Baptist Church, Los Angeles.Manager-at-Large

Brenda A. FlukerMattapan, MassachusettsPrincipal, Law Office of Brenda Fluker.Representative from General Board

Debbie R. JacksonSeattle, WashingtonVice President/Controller,Quadrant Corporation, Retired.Consultant

Clifford I. JohnsonWilmington, DelawarePastor, Shiloh Baptist Church.Representative from General Board

Stephen D. KingSaratoga, CaliforniaCEO/Publisher, Online Legal Media.Manager-at-Large

Annie Marie LeBarbourHilton, New YorkOrganizational Development Consultant, LeBarbour Associates.Manager-at-Large

Edward A. LibbyRockford, IllinoisMinister of Pastoral Care for ABC of the great Rivers Region, Retired.Manager-at-Large

Maurice E. MaertensNew York, New YorkChief Investment Officer, New York University, New York City.Public Manager

Darrel A. MorfCedar Rapids, IowaSenior Partner, Law Firm of Simmons, Perrine, Moyer & Bergman.Manager-at-Large

James T. NapolitanChicago, IllinoisCommodities Trader, Chicago Mercantile Exchange.Public Manager

Gwynn L. PerlichZionsville, IndianaVice President and CNO of Patient Care Services, St. Vincent Carmel Hospital.Manager-at-Large

James D. Peters, Jr.Denver, ColoradoPastor Emeritus, New Hope Baptist Church, Retired.Manager-at-Large

John W. ReedAnn Arbor, MichiganProfessor of Law Emeritus, University of Michigan.Lifetime Honorary Manager

Victor J. RaskinNew York, New YorkChief Investment Officer,YMCA Retirement Fund, Retired.Public Manager

Wallace Charles SmithWashington, D.C.President, Palmer Theological Seminary, and Senior Minister, Shiloh Baptist Church.Representative from Board of National Ministries

R. Roosevelt Thomas, Jr.Decatur, georgiaChief Executive Officer, Roosevelt Thomas Consulting & Training, Inc.Manager-at-Large

George H. Tooze, Jr.Indianapolis, IndianaSenior Minister, First Baptist Church, Retired.Public Manager


The Ministers and Missionaries Benefit Board of American Baptist Churches A s s e t M A n A g e R s , i n v e s t M e n t c u s t o d i A n A n d c o u n s e l

Asset Managers

ABS Investment Managementgreenwich, Connecticut

Alinda Capital Partners, LLCNew York, New York

American Century InvestmentsKansas City, Missouri

Artisan Partners Limited PartnershipSan Francisco, California

Barlow PartnersNew York, New York

Blackstone Alternative Asset ManagementNew York, New York

Capital Guardian Trust CompanyNew York, New York

The Clifton GroupMinneapolis, Minnesota

Commonfund Capital, Inc.Wilton, Connecticut

Diversified Investment AdvisorsPurchase, New York

Dodge & CoxSan Francisco, California

The Dreyfus CorporationNew York, New York

Eaton VanceBoston, Massachusetts

EnCap Investments LP.Houston, Texas

Energy Fund InvestorsNeedham, Massachusetts

Federal Street Partners, LLCStamford, Connecticut

Fisher Francis Trees & WattsNew York, New York

Grantham, Mayo, Van Otterloo & Co., LLCBoston, Massachusetts

The Investment Fund for FoundationsWest Conshohocken, Pennsylvania

JPMorganNew York, New York

LSV Asset ManagementChicago, Illinois

Mellon Capital ManagementSan Francisco, California

Mondrian Investment PartnersPhiladelphia, Pennsylvania

Morgan Stanley Investment ManagementNew York, New York

Neuberger BermanNew York, New York

Oak Hill Advisors, LPNew York, New York

OFI Institutional Asset ManagementNew York, New York

Omega Advisors, Inc.New York, New York

Pantheon VenturesNew York, New York

Schroders New Finance CapitalNew York, New York

TA RealtyBoston, Massachusetts

Trust Company of the WestLos Angeles, California; New York, New York

The Vanguard GroupValley Forge, Pennsylvania

Värde Partners, Inc.Minneapolis, Minnesota

Wellington Hedge Management, Inc.Boston, Massachusetts

Wellington Management Company, LLPBoston, Massachusetts

Western Asset Management Company Pasadena, California

Westfield Capital ManagementBoston, Massachusetts

Investment Custodian

BNY MellonBoston, Massachusetts

Investment Consultant

Mercer Norwalk, Connecticut

Actuarial Counsel

Buck ConsultantsNew York, New York

Towers WatsonNew York, New York

Legal Counsel

Patterson, Belknap, Webb & TylerNew York, New York

Independent Certified Public Accountants

BDO USA, LLPNew York, New York

Record Keeper

ACS, a Xerox CompanyWaltham, Massachussetts


the Ministers and M

issionaries Benefit Board

475 Riverside Drive, Suite 1700

New

york, Ny 10115-0049

Tel: 800.986.6222

Fax: 800.986.6782

ww

w.m

mbb.org

aR100610

real planning. real solutions. that’s our calling. · success by looking at quarterly...

Documents