Annual Report

Report of the Executive Director

By Sumner M. Grant

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.

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 culturalchallenge 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.

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

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MMBB Outreach
OUR Strategy for Growth

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 tom.huber@mmbb.org. 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

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MMBB SERVICE
MMBB Consultative Service = Christian Values + Financial Expertise

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. HoffmanDirector of Service

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Benefit Plans

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.”

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 service 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.

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.

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 service@mmbb.org or visit www.mmbb.org.

Administration

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Officers and Board of Managers

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Asset Managers, Investment Custodian and Counsel

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