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INVESTMENT POLICY STATEMENT

For

Investment Funds of All Saints’ Episcopal Church, Carmel CA

I. PURPOSE OF THE INVESTMENT POLICY STATEMENT

This Investment Policy Statement is designed to:

A. Establish investment objectives and overall standards for the management of the

assets held in the Parish Investment Fund (Vestry Fund) of the All Saints’ Episcopal

Church, Carmel CA (Parish).

B. Provide an environment that favors a stable and prudent investment strategy

consistent with the goal of the Parish to have a reliable source of investment income.

C. Define overall risk and return objectives of the portfolio.

D. Establish a philosophy, policies and procedures, and identify and maintain any

existing restrictions that will guide the Investment Committee of the Parish in

decisions regarding the management of portfolio assets.

E. Establish a methodology for monitoring and evaluating performance of the portfolio.

II. BACKGROUND INFORMATION

A. The Parish Investment Fund of the All Saints’ Episcopal Church, Carmel CA,

(referred to herein as “the Vestry Fund”), authorized by and reporting to the Vestry of

the Parish, is operated under the Investment Fund Plan of All Saints’ Episcopal

Church, a 501c(3) non-profit public benefit organization, with accumulated

investment assets from earnings, donations and/or bequests. The Vestry Fund

investment portfolio is administered by the Investment Committee at the direction of

the Vestry of All Saints’ Episcopal Church, Carmel CA (Vestry).

B. The investment portfolio covered by this Investment Policy Statement currently

consists of real estate, art, stocks, bonds, mutual funds, exchange traded funds and

money market funds.

C. In addition to the funds addressed in II-B, and outside of the publicly traded securities

in the managed portfolio, the Vestry Fund may also hold an equity ownership

investment in the Rector’s residence and other such resources deemed consistent with

the philosophy and policies of the Vestry Fund and the needs of the Parish.

D. All Saints’ Episcopal Church (Parish) also benefits from the endowed proceeds of a

fund known as the Foundation Trust Fund of All Saints’ Episcopal Church (a 509a3

entity, “Trust Fund”). Although its purpose is solely to benefit the Parish according to

its policies and bylaws, the Trust Fund is separately governed and managed by a

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Board that is independent of the Parish and its Rector, Wardens and Vestry. This

policy statement contemplates that the governance and management of the Trust Fund

will continue to be independent of the Parish although it also anticipates that the Trust

Fund and the Parish will continue to collaborate toward the good and benefit of the

Parish and its mission.

III. INVESTMENT PHILOSOPHY

The Investment Committee is charged with creating a management process with

sufficient flexibility to capture investment opportunities as they may occur, yet

maintaining reasonable parameters to ensure a stable and prudent investment strategy for

the investment program, consistent with the goal of the Parish to have reliable sources of

investment income.

IV. INVESTMENT GOAL

The overall investment goal of the Vestry Fund is to preserve the purchasing power of

these assets for future use as needed and to maximize the return of the portfolio within

reasonable and prudent levels of risk.

A. The Vestry Fund will be managed and invested under the leadership of an Investment

Committee to be comprised of the Foundation Trust Fund Board members. The

Foundation Trust Fund Board members will continue to be solely responsible for the

investments within the Trust Fund.

B. The Vestry Fund will be managed in a manner consistent with the Uniform Prudent

Management of Institutional Funds Act (UPMIFA). In accordance with UPMIFA, the

Investment Committee considers the following factors in making a determination to

appropriate or accumulate donor-restricted investment funds:

1. The duration and preservation of the fund,

2. The purposes of the organization and the donor-restricted investment fund,

3. General economic conditions,

4. The possible effect of inflation and deflation,

5. The expected return from income and the appreciation of investments,

6. Other resources of the Parish

7. The investment policies of the Parish

V. INVESTMENT OBJECTIVES

In order of importance, the Vestry Fund’s investment objectives will be:

Safety of principal

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Long term growth of capital

Income

Prudent diversification

Liquidity

VI. RISK

A. Total investment risk refers to the volatility of the Return on Investment strategy

employed. It is defined as the unpredictability of investment returns, the chance that

actual returns of individual investments are different from expected returns and the

possibility that overall portfolio performance does not match target expectations.

B. Working closely with the Vestry Fund’s investment manager and using survey tools

available to investment managers, the Investment Committee, in communication with

the treasurer and the Finance Committee of the Parish, will prepare a Risk

Assessment from time to time in order to ascertain the current risk tolerance of the

Vestry Fund leadership. It is anticipated that The Vestry Fund has a conservative to

moderate tolerance for risk. As such, it is willing to accept some volatility in the

portfolio in order to achieve its return objectives.

C. The Investment Committee and the Vestry understand that the actual level of risk as

well as returns may be higher or lower than the Vestry Fund’s stated risk tolerance

and return objective.

VII. CONTRIBUTIONS (BEQUESTS AND GIFTS)

The entire Vestry Fund will be accounted for under Generally Accepted Accounting

Principles as defined by the American Institute of Certified Public Accountants’ rules on

fund accounting. According to these rules, the chart of accounts will be organized in three

major fund categories, those being: (i) Unrestricted, (ii) Temporarily Restricted, and (iii)

Permanently Restricted. These restrictions may be established by donors either through

written statement, in the case of a living donor, or by Testamentary Device, in the case of

a deceased donor, at the time the gift is made. The Vestry reserves all rights of

acceptance or non-acceptance at the time the gift is made.

Contributions to the Vestry Fund will be accepted in accordance with the Gift

Acceptance Policies and Procedures (Section 2 of the Investment Fund Plan) and

generally will be assigned to one of the following funds:

A. General Fund: to support the General Operation of the Parish, with no restrictions.

B. Foundation Trust Fund, managed solely by the Foundation Trust Board under its own

bylaws, policies and procedures.

C. Worship Fund: to support the stated Parish vision and goals for excellence in worship,

including liturgy, preaching and music.

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D. Community Fund: to support the stated Parish Community vision and goals.

E. Discipleship Fund: to support the stated Parish Discipleship vision and goals.

F. Outreach Fund: to support the stated Parish vision and goals for Outreach beyond the

congregational community.

G. Capital Improvements Funds: to support the stated Parish capital improvement goals,

and including:

a. Grounds Fund, especially including gardens, including plants and hardscape.

b. Building Fund, to include funds periodically transferred from the Foundation

Trust Fund. The Building Fund will be used for new building and construction

as well as for maintenance and repairs on existing buildings.

H. Term Endowment Fund for Strategic Initiatives: A “Term Endowment” is an account

established by a donor whose principal will be fully distributed over a pre-determined

term of years, not to exceed ten (10), following a pre-determined schedule. The term

and purpose of the “Term Endowment” will be agreed upon between the donor and

the Vestry and the agreement will be recorded in writing. A minimum donation of

$100,000 is required in order to establish a “Term Endowment”.

I. Establishment of a new endowment would need to be in accordance with the Gift

Acceptance Policy.

The above distribution purposes of each Fund can be changed from time to time by a

60% vote of the Vestry, after consultation with the Finance Committee and the

Investment Committee.

The funds will be accounted for under General Accepted Accounting Rules for Not-for-

Profit-Organizations. Each fund described above will be organized in accordance to the

stated wishes of donors and accounted for accordingly, as shown below:

Unrestricted Accounts – These are accounts that are given by the donor either

inter-vivos or through testamentary means that are intended to be used by the

Parish according to the direction of the Vestry. They are completely unrestricted

and unencumbered except must be used for the good of the Parish as stated in this

document. Distributions from these accounts will be determined annually by the

Vestry.

Temporarily Restricted Accounts – These are accounts established by donors

either inter-vivos or through testamentary means that place a certain restriction on

the use of the funds towards a specific purpose which, when met, can be lifted and

the funds flow to the Parish in an unrestricted fashion. These accounts are

commonly used to meet donor wishes during campaigns. The Gift Acceptance

Policies mentioned in this document apply to these and all gifts. Distributions

from these accounts will be determined annually according to a report from the

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Finance Committee to the Vestry demonstrating the lifting of the restriction due to

full compliance with the donor’s restrictive request.

Permanently Restricted Accounts – These are accounts, sometimes known as

endowments, established by donors either inter-vivos or through testamentary

means which place a permanent restriction on the use of the Corpus of the gift and

restrict the account to distribute earnings only for the use of the Parish and

according to the stated purpose of the endowment.

VIII. DISTRIBUTIONS (SPENDING RULES)

Distributions from the portfolios will be made in accordance with the Spending Rules,

established for each Fund and in accordance to General Accepted Accounting Principles.

A. Parish Permanently Restricted Fund: This Fund will pay on a rate ranging from 3% to

5%. The rate will be set annually by the Investment Committee in consultation with

the Finance Committee and will be based on several factors, including: prevailing

rates, prior year investment performance of the Vestry Fund, and needs of the Parish.

Returns will be reported to the Investment Committee and the Vestry annually.

The above distribution limits of this Fund can be changed from time to time by a 60%

vote of the Investment Committee but only with the consultation of the Finance

Committee and the endorsement, by a majority vote, of the Vestry.

B. Foundation Trust Fund: Neither the Investment Committee nor the Vestry have

management control of the Trust Fund. Under current Trust Fund Board bylaws, the

Trust Fund pays at a rate of 4.5% of the value of the securities portfolio.

IX. INVESTMENT VEHICLES/ASSET ALLOCATION

The portfolio will be managed and invested guided by the underlying philosophy and

principles stated in Sections I through VI above. The management of the portfolio will be

influenced by market trends and conditions as well as cash flow needs and other

requirements of the various funds within the Vestry Fund.

The Investment Committee will use the principles below to guide their investment

decision-making.

The portfolio will be invested and managed as a whole, and accordingly, the Investment

Manager will be apprised of liquidity needs for each of the Funds.

A. Fixed Income Securities – Fixed income securities may include the following: U.S.

Treasury obligations, federal agency obligations, marketable corporate bonds,

commercial bank certificates of deposit, preferred stocks and money market funds.

1. Bonds will be selected and managed so as to assure appropriate balance of

quality, maturity and coupons consistent with current money market and

economic conditions.

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2. At time of purchase, all bonds will be investment grade (no rating lower than

BBB) as rated by the bond services. The weighted average quality of the fixed

income portfolios will be AA or better.

B. Equity Securities (Stocks)

1. Stocks are defined to include convertible issues as well as common stocks and/or

stock mutual funds and Exchange Traded Funds (ETFs). All equity securities

within the Vestry Fund must be traded on at least one of several major exchanges.

2. Investments in any one security should not exceed 5% of the portfolio’s equity

investments based on market value at the time of purchase.

C. Other

Assets donated to and accepted by the Vestry of All Saints’ Parish in accordance

with the procedures of Section 1.1.10 and 2 of the Investment Fund Plan, are also

managed by the Investment Committee under the direction of the Vestry. The

Investment Committee may manage them directly, or may delegate their

management to a qualified investment manager. That manager may be the same

as used for the management of the financial assets, or may be one or more

different ones, depending on available expertise, cost of administration, and other

relevant considerations. The Investment Committee will report to the Vestry on

the management of these assets at the time of any substantial change of these

assets and at least annually.

D. Prohibited Transactions

Only investments consistent with ‘Prudent Investor’ strategies will be allowed.

E. Asset Allocation

1. The Investment Committee will define the strategic asset allocation among

various asset classes given the Vestry Fund’s objectives, time horizon, constraints

and risk tolerance.

2. The Investment Committee will meet with the investment managers to review

their proposed sub-asset allocation policy and determine its correlation to current

risk tolerance protocols as well as investment results, and make adjustments

accordingly.

3. The asset allocation policy shall be expressed in terms of a percentage range of

acceptable weights in the portfolio and for a specific period of time. The

investment manager will have discretion to target the weight within the range.

4. Assets may be temporarily invested in short-term U.S. treasury/agency

obligations and/or money market funds. Cash balances will normally be kept at a

minimum.

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5. These initial grade specifications and allocations among investment vehicles may

be changed from time to time by a 60% vote of the Investment Committee. The

Investment Committee will advise the Vestry of such changes as they occur.

F. Rebalancing Policy

1. There will be periodic deviations in actual asset weights from the policy asset

weight specified above due to market movements, cash flows and varying asset

class performance

2. The Investment Committee authorizes the investment manager to evaluate the

need to rebalance the portfolio when necessary, and at least annually, to ensure

adherence to the Investment Policy.

X. TRANSACTIONS

The investment manager will determine and report to the Investment Committee its

portfolio turnover rates, and keep them consistent with the Vestry Fund objectives.

XI. PERFORMANCE EVALUATION

A. Investment returns will be measured on a total return basis, which includes income

and both realized and unrealized gains/losses. Rates of return will be calculated based

on a time-weighted rate of return formula as recommended by the Chartered Financial

Analyst Institute’s Global Investment Performance Standards (GIPS) and will be

reported net of all fees and costs.

B. Appropriate benchmarks for performance evaluation will be selected and reported.

C. Performance of the portfolio will be measured over a three to five year time period

and reported quarterly.

XII. DISCRETIONARY INVESTMENT AUTHORITY

Subject to the guidelines of this policy statement, the investment manager retained by the

Parish will have full discretionary authority over the assets of the Vestry Fund and shall

invest the assets in a manner that is consistent with Uniform Prudent Management of

Institutional Funds Act.

XIII. AMENDMENTS

Amendments to this Policy Statement except for Section IX may only be made under the

procedure defined in Section 1.5 of the Investment Fund Plan. Amendments to Section

IX may be made by a positive vote of the Investment Committee operating under its rules

in Section 1.1.4 of the Investment Fund Plan.

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Approved:

______________________________________________________________________________

Senior Warden (for the Rector, Wardens and Vestry) Date

____________________________________

Parish Secretary/Clerk