USA Southern Territory Investment Portfolio

BEYONDlove

FOR YEAR ENDING DECEMBER 31, 2022

USA SOUTHERN TERRITORY

BEYOND love

The goal of The Salvation Army’s Love Beyond campaign is to increase public awareness of our year-round services. We love beyond hunger, homelessness, destruction, fear, loss, addiction, loneliness, despair, overdue bills and so much more. We love beyond the circumstances of those we serve, seeing and valuing each person.

DEAR FRIENDS,

As the world continues to face the challenges brought about by the pandemic, it’s more important than ever for The Salvation Army to be wise stewards of the resources entrusted to us. That’s why we’re thrilled to share with you the impact we’ve made in the lives of those across the USA Southern Territory.

Through compassionate service to the homeless, hope for the addicted, and meaningful ministry to disaster victims, we’ve brought light to millions during the holiday season. With the support of countless bellringers and successful fundraising efforts, Christmas was brighter for those in need.

In this report, we’re proud to showcase the results of our investment operations in the Southern Territory, which have been carefully managed to grow the assets entrusted to us. Despite a challenging economic and investment landscape, we’ve remained steadfast in our mission to serve those in need, and we have been able to offset much of the challenging environment with sound investment decision making and a long-term investment approach that accounts for the ongoing needs of the Southern Territory. As of the end of 2022, the portfolio had total assets of $2.57 billion.

As we look ahead to the future, we remain confident in the Lord who has guided and provided for The Salvation Army for over 150 years. Your generosity and support, including donations, prayers, and time, make it possible for us to continue to show “Love Beyond” to those who need us most.

Thank you for being a part of our mission. God bless you.

Commissioners Kelly & Donna Igleheart Territorial Leaders USA Southern Territory

“ABOVE ALL, LOVE.”

1Peter 4:8

WHO WE ARE

The Salvation Army has been referred to as “Christianity with its sleeves rolled up.” We currently serve in 133 countries around the world thanks to the men and women who have devoted their lives to making an impact in their communities. Founded in 1865, The Salvation Army remains an evangelical part of the universal Christian Church. Our message is based on the Bible. Our ministry is motivated by the love of God, and our mission is to preach the gospel of Jesus Christ and to meet human needs in His name without discrimination.

The Salvation Army’s programs and services have grown and evolved over the last 150 years as the needs for the programs and services arose. In 1884, a women’s rescue home was opened to assist those fleeing domestic violence and prostitution. Against a backdrop of poor and often dangerous working conditions, in 1891, The Salvation Army opened its own match factory in Old Ford, East London. From the frontlines of World War I and II to the countless emergency disaster services operations, The Salvation Army has been there to provide comfort, resources, and to share hope for those in need.

Those bells you hear during the holidays help us ‘LoveBeyond’ by providing emergency assistance, family assistance, individual rehabilitation, denominational worship, social services, older adult ministries, character building, youth and music programs and the list goes on. Over 25 million Americans will be given the hope that The Salvation Army offers throughout its myriad of services. 82 cents of every dollar given to us goes right back to meeting human need. God bless you and thank you for your support.

EVERYONE HAS A SEAT AT THE TABLE

of Inman Coffee, with Joel serving as The Salvation Army’s Christian Education Director in Cleveland.

Founded in 2011 in Cleveland, Tennessee, Inman Coffee is a oneof-a-kind ministry of The Salvation Army that aims to reach and develop young persons for Christ by creating a healthy ministry through an age-specific, community-minded business that models biblical unity in the name of Jesus Christ. Joel and Cheryl Rogers, co-founders of what was then called the Inman Street Coffee House, arrived in the region and were introduced to Sergeant Ruth Forgey, eventually leading to the planting of the Cleveland Corps in 2010 and the opening of a vital ministry, within the same building, just one year later.

“The mission of Inman Coffee is to be a ministry from seed to cup,” Joel Rogers said. “So much relationally can happen over a cup of coffee. We love to be there for people, to be the listening ear when they are hurting or broken, or if they just need a place to be.”

The idea for the coffeehouse sprung from a desire to create community, drawing on experience for both Joel and Cheryl in operating in the coffee world and pairing that knowledge with a passion for empowering young people. Cheryl is the now the food service manager

Inman Coffee, named for the street on which it is located, is a full-fledged community endeavor. Lee University has thousands of college students, many of whom are frequent consumers. The shop also caters to seniors, homeless individuals, and anyone seeking valuable relationships. Once inside the shop, individuals learn of The Salvation Army’s holistic ministry, planting the seeds for community and spiritual growth.

“The most important aspect of Inman Coffee is the impact it has had through inclusion and being the space where everyone has a seat at the table. We have witnessed subtle miracles of healing and transformation that have translated into lives lived with passion and purpose,” said Sergeant Forgey. “It ranges from suicidal youth grabbing enough hope over a cup of coffee to hang on for another day, a homeless friend needing a cold drink and cool place to sit on a hot day, and a young adult unsure of next steps maturing into adults that are literally changing the world.”

Success stories are frequent and wide-ranging, with people often making return trips to Cleveland to express gratitude and to reengage with the Rogers’ and other familiar faces.

“Inman provided me a chance to really come to know God,” said Jordan Barto, a former student who credits the outreach with turning his life around. “I was an atheist for years. This place really helped me turn my life around and come back to the Lord. It provided me with

friendships and social interactions, a place to go and talk about my problems. It also provided good job skills and, most importantly, with a family and a group of people that I’ve become very close to and love. It really opened a lot of doors for me in the community and to serve God.”

Inman Coffee’s outreach is a training ground for leadership development. Students transform relationships into ministry opportunities, and the program seeks to teach individual responsibility coupled with marketable job skills. Overall, however, the focus is to empower people and bring them closer to God.

“Our vision is to be a model of ministry that remains fruitful and inspires others to try new initiatives in their cities and neighborhoods that make them relevant to those they serve,” Sergeant Forgey said. “We hope that it is easy to see how ‘Drink Coffee, Change Lives’ is not just a slogan, but a reality.”

love BEYOND HOMELESSNESS

WALKING TO BATON ROUGE

“I had no car, no money for bus fare, and no friend to take me to the Army’s program where I was determined to get the help I really needed,” Matthew James says. “Nothing was going to stop me, so I began walking.

“I walked out of the ‘trap house’ where I was staying and getting my regular fix, and one of the dealers got in my face for a block or two trying to get me to turn around.”

But Matthew was resolute. Literally carrying everything he owned, Matthew knew the seven-mile trek before him would be hard. Looking back, he realizes that the Holy Spirit was helping him put each foot in front of the other.

Matthew likens his testimony to the parable of the prodigal son recorded in Luke 15:11-32. When the son “comes to his senses” while literally wallowing in a pig sty, he got to his feet and began the long walk back to his father’s house.

“We’re not told how far he had to walk,” Matthew says. “The Bible just states that ‘he went to a far-away country’ so it’s a sure bet the distance he had to walk was a lot more than seven miles. But to me, it seemed my walk was just as far,” he adds, chuckling.

183,459 PERSONS SERVED IN SALVATION ARMY INSTITUTIONS

“All I had was in a laundry bag and whatever I could carry in my arms,” he says, “and every now and then I dropped a few items simply because I couldn’t carry everything for so long. But I was determined not to stop, even if it meant leaving what little possessions I had behind and lost forever.”

What spiraled Matthew to the depth he now found himself took about ten years. A string of deaths and depression caused him to sink lower and lower into forms of addiction.

At 16 he found his mother dead, and that experience was so traumatic he began using alcohol to cope. When he turned 22, his beloved grandmother diedand his drinking got worse, only this time he began depending on heroin as well. By the time he was 27, his grandfather passed. By then only crack cocaine helped him forget.

“It was the worst mistake in a series of ‘worse mistakes’ I made,” he admits. He was “out of control” and realized something drastic needed to be done.

It took Matthew a good part of the day to walk the seven miles to the Army’s recovery center. As soon as he entered the foyer, he dropped into a chair in exhaustion.

Immediately admitted into the Army’s CSRC (Corps Salvage & Rehabilitation Center) program, one of the first things Matthew enrolled in was every Bible study course offered.

“I couldn’t get enough,” Matthew exclaims, “and the more I learned about God’s Word, the more healing I experienced.” Oddly, his anger and the cravings for alcohol and drugs disappeared, and he adds, “it doesn’t work that quickly for everyone, but it did for me. I believe with all my heart that God took all that stuff away!”

Matthew remains as an employee. He manages the Army’s emergency shelter, also located on Airline Highway in Baton Rouge.

“I never want to lose sight of who I used to be and what I can now become-all because of Christ’s redemptive work and the power of the Holy Spirit,” he says.

A BEAM OF LIGHT IN A JAIL CELL

ing to function well only fueled her rationalization during her alcohol and drug abuse.

For years prior to 2004, Ann had many close calls with the law and was arrested numerous times-each time behind bars for no more than a week. She admits, “There hardly was a time I wasn’t ‘under the influence’ behind the wheel” of her car.

Despite an excellent job after graduation, she just could not stop using. It all caught up to her one night with a knock on her door. Police were looking for her friend, but since she was on “intense probation,” the drugs they found in her house landed her in jail for possession of meth-this time for nearly three months.

Ann describes her childhood and young adult life as “a hot mess.” Both her parents were alcoholics, her father severely abusing her mother. He finally abandoned the family when Ann was seven, and her mom remarried several times. One of Ann’s stepdads committed suicide. Little wonder that by age thirteen, Ann was experimenting with alcohol, marijuana, psychedelic drugs; and later on, cocaine and meth.

“But God had His eye on me,” she says. Thanks to the Christian influence of her maternal grandmother, seeds were planted during Ann’s childhood that would one night literally save her life.

“I was bullied a lot in school. I lived in a small town where everybody knows everybody, and all their secrets,” Ann says.

Despite this, Ann remained in school graduating on the Dean’s List, with a Bachelor’s Degree in Business Administration. Continu-

It turns out, “God’s will for my life came as a knock on the door by the police.”

That extended stay behind bars became “the first time I was ‘clean’ since the age of thirteen!” She thought more about God, and the gospel truths impressed on her through her grandmother. She remembered at age seven receiving a Confirmation Bible.

“It was like a beam of light in that dark cell-the image of that little Bible!”

She still has that Bible. Upon release from jail, she found it and took it with her to the halfway house she was assigned to for parole. Ann took Isaiah 51:11 as the key verse for her recovery: “Those the Lord has rescued will return. They will enter Zion with singing; everlasting joy will crown their heads. Gladness and joy will overtake them, and sorrow and sighing will flee away.”

Ann landed a job at a Microtel motel around the corner from the Atlanta Temple Corps. There she discovered “Celebrate Recovery.” Involvement in Temple Corps activities followed, and she was mentored by (then) corps officers, Lt. Colonels Allan & Fiona Hofer. She became a soldier in 2006.

Captain Ann Hawk became an officer in 2012 serving in corps appointments in the Carolinas, Texas and Oklahoma. She now serves in Front Royal, Virginia.

LED ME TO THE ARMY”

She has a heart for ministry among the homeless. “Although I was never homeless myself-there’s just something about helping desperate people in need!”

Hers is a brand-new life. “God led me to the Army,” she says. “The Army became my family; something I lacked all my childhood.”

Approaching twenty years of sobriety, Captain Ann no longer questions the “whys” of her life before the moment a shaft of light illuminated her psyche one dark night in jail.

Her message to others “on the brink” is simple. “God steps in and does something really amazing!”

“GOD

love BEYOND THE STORM

ATTITUDE OF GRATITUDE

cal corps across the state were responding by feeding, distributing clean-up kits, and providing emotional and spiritual care.”

After intensifying over the Gulf of Mexico, Hurricane Ian made landfall on September 28, 2022 in southwestern Florida. Upon its arrival, Ian was a Category 4 hurricane with wind speeds measuring near 150 miles per hour. Ian was the fifth-most powerful storm to strike the United States, pouring water across Florida before strengthening again to make an additional landfall on the coast of South Carolina.

The Salvation Army was on guard, preparing an emergency disaster response, and hundreds and thousands of officers, employees, volunteers, soldiers, and partners deployed to serve.

“Hurricane Ian will be remembered as one of Florida’s worst disasters,” said Jeff Jellets, Emergency Disaster Services Coordinator for The Salvation Army’s USA Southern Territory. “Damage stretched from the southwest coast of Florida across the state. Over 40 Salvation Army feeding units from six states were deployed, with more than 100,000 meals served. In addition to disaster teams operating in the hardest hit areas-Fort Myers, Port Charlotte, Naples and Venice-lo-

In Naples, Captains Ben and Annie Bridges, corps officers, were unable to reach the corps building and, in their stead, Roger and Ada Morales offered to stand guard and maintain order at the facility during Ian’s height. Individuals sought refuge within the walls, with the Morales’ sleeping at the corps, utilizing available cots, and bringing a hopeful and God-driven spirit to the proceedings. “One of the most beautiful things that came out of this was that everyone seeking shelter had an attitude of gratitude,” Ada said. “There was no complaining, yelling or frustration.”

In Port Charlotte, an assisted living facility was unable to keep generators running, leaving seniors vulnerable due to elevator challenges and the immobility of some housed at the center. Salvation Army workers provided meals, and bottles of water, with volunteers scaling the stairs to hand deliver the nourishment.

In a shopping center parking lot in Punta Gorda, Florida, The Salvation Army began distributing meals to the community. A lot of people were coming to get food. Major Serge LaLanne gave a pen and paper to someone who wanted to say thank you. That person wrote a heartfelt message and left the pen and paper on a table. Others saw it and wrote their own nice messages like: “Thank you for your generosity and service to our community,” wrote Paul and Beth. “Thank

God for people like you.” “Thank you so much,” wrote Cindy. “You don’t know what this means to someone who can’t even get into their home.”

Reading these messages was a powerful reminder of the impact that small acts of kindness can have on those in need. The Salvation Army volunteers were not just providing food and resources, but also hope and a sense of community for those who had been struggling.

Salvation Army units also sustained considerable damage from Ian’s wrath. In North Port, a service center was wholly destroyed. The Port Charlotte Corps suffered significant damage, with notable tree and flood damage at the Venice Corps, along with damage in Sarasota, St. Petersburg, Sanford, and others.

“Just like everyone else in southwest Florida, we’ve been deeply impacted by the damaging effects of Hurricane Ian,” said Lt. Colonel Michele Matthews. “But these are our neighbors, and this is what we are called to do, so we have responded with the full resources of The Salvation Army.”

love BEYOND NEW EXPERIENCES

CAMP CHANGES LIVES

I wish I had known about camp when I was younger. I wish I had known about The Salvation Army. It would have changed my whole background and perspective on life. I didn’t even know The Salvation Army was a church. I thought it was just an organization that gives clothes and food and helps people when they need it. And I certainly didn’t know there was a camp for kids.

I first learned about Camp Hidden LakeThe Salvation Army’s camp for the Alabama, Louisiana, Mississippi Division-seven years ago. I was walking down the street when the officer of the local Salvation Army stopped and started talking to me. He asked if I wanted to attend the Tuesday program for children in the neighborhood. I was a shy kid and wasn’t sure about going, but I said yes anyway.

Tuesday rolls around, and sure enough, the officer pulls up in The Salvation Army van to take me, my brothers and sisters to the program. We were greeted by loud music and children having fun and eating snacks, and I thought, hey, this is like a party! So when the officer later asked if I wanted to get more involved in church activities, I was on board!

Before camp, it was very difficult for me to make friends. I was a shy kid and would get picked on for not talking enough. I got bullied for my skin color, how I looked, and what I did or didn’t do. After a while, I just stopped trying because I didn’t want to feel that rejection anymore.

My very first year of camp changed me. My new friends and camp counselors gave me the confidence to find my voice and helped me learn about God and how He can help you in any situation.

Now, I have a lot of friends from all over that come to camp every year. I’ve known them for so long that I consider them family. Here at camp, I feel like I’m home. You turn around and smile, then turn the corner and smile some more.

This is my first year as an instructor. I’m a ropes course instructor and also assist with music. I never thought I was a good teacher or leader, but this year at camp showed me differently. I discovered I could lead well and that I enjoyed teaching. I was teaching a class one morning when it dawned on me that I could do this, and it felt good.

For example, one particular camper didn’t even know how to hold a trumpet, and by the end of the camp, her playing was incredible. She was so good that I would have believed she had played before. And I was part of making that happen.

I feel like I’ve made an impact on lives, and it’s given me a direction for my future. I think about the campers long after they are gone. I make the time to get to know them. Some come from broken homes, so it’s hard leaving camp. Before leaving, they told me how much they would miss me and how they couldn’t wait to come back.

I feel like I’ve impacted lives, and it’s given me a direction for my future. After high school, I’m going on to a community college and then a university.

Quentarius Ross is currently enrolled in nursing school which he credits to The SalvationArmy.

9 CAMPS SERVING OVER

33,000 INDIVIDUALS

BEYONDlove

BY THE NUMBERS

OVER 29 THOUSAND BENEFICIARIES SERVED THROUGH OUR REHABILITATION PROGRAMS

OVER 1.5 MILLION PEOPLE PROVIDED WITH BASIC SOCIAL SERVICES

MORE THAN 69 THOUSAND INDIVIDUALS SERVED DURING DISASTERS

OVER 170 THOUSAND PEOPLE PARTICIPATED IN COMMUNITY CENTERS

2022 USA SOUTHERN TERRITORY STATISTICS

OVER 3.2 MILLION NIGHTS OF LODGING PROVIDED SERVED OVER 13.8 MILLION INDIVIDUALS WITH MEALS

OVER 187 THOUSAND MUSIC & ARTS PROGRAM PARTICIPANTS

MORE THAN 4.4 MILLION ATTENDED COMMUNITY CENTER ACTIVITIES

love BEYOND HUNGER

INVESTMENT INTRODUCTION

For more than one hundred and fifty years The Salvation Army has followed fiscal practices that have fostered public confidence and trust in its financial stewardship. These practices date back to the 1860s when the founder, William Booth, engaged a public accountant to audit the accounts of the newly formed East London Revival Association, which later became The Salvation Army.

With the standard established by William Booth, The Salvation Army Southern Territory operates an institutional, professionally managed investment portfolio. The portfolio’s purpose is to support the ongoing operation of the Territory. Funds are pooled together and invested for a net total return investment strategy with a long-term focus. The monetary gifts bestowed on the Army require a high standard of prudence and care, and investment decisions are based solely on the best interests of the organization.

As part of that standard of care, The Salvation Army Southern Territory has specific policies included in its Investment Policy Statement. These policies provide the guiding principles by which the portfolio is managed and measured. Additionally, policies are also in place that help manage the different sources of funds that the Army allocates for the needs of the fifteen states and District of Columbia within its territory. Some funds are received for immediate use for general or specific purposes such as disaster relief or capital improvements. Other funds have longer time horizons and different purposes such as endowments, reserve accounts, retirement funds, and others that become part of the Army’s investment portfolio. The Salvation Army places great importance on our branding promise of “Doing the Most Good” when using gifts. Donors may contribute to the Army’s general purposes or for more specific purposes, places, or times. The Army adheres to those individual requests, but where there are no specific limits placed on the gift, the Army will distribute the gift by established formulas to support local communities and the broader organization.

Many donors decide to make charitable gifts during their lives that are designed to strengthen their overall financial plan or estate. Also, many donors choose to make a positive impact on the future through charitable legacy planning. Our Planned Giving Team is available to donors who wish to explore these giving options which include Charitable Gift Annuities, Charitable Trusts, Pooled Income Funds and estate planning. We provide more detail on these services and gift options on page 22 of this report.

The purpose of this report is to provide a greater understanding of the Army’s standard of care exercised in the management of the investment portfolio. The following sections provide information regarding the various aspects of portfolio results and operations:

INVESTMENT RESULTS

ASSET CLASS CONTRIBUTION

INVESTMENT PHILOSOPHY

ASSET ALLOCATION

PORTFOLIO GOVERNANCE MANAGEMENT

TARGET RETURN & RISK CONTROL

PARTICIPATION BY SALVATION ARMY UNITS

The Salvation Army Southern Territory is a member of the Evangelical Council for Financial Accountability.

INVESTMENT RESULTS

The chart below shows the investment results for The Salvation Army USA Southern Territory. The 2020, 2021, and 2022 results are included, along with performance numbers for 3-year, 5-year, and 10-year periods. Results are as of December 31 and are annualized and net of fees. On the following page further performance detail (Asset Class Attribution) is included on the seven composites shown below.

INVESTMENT RESULTS

(Return net of fees)

ASSET CLASS CONTRIBUTION

DOMESTIC EQUITY COMPOSITE

COMPOSITE RETURN: -18.5%

BENCHMARK RETURN: -19.5%

RELATIVE PERFORMANCE:

+1.0%

• The Domestic Equity Composite delivered positive relative returns during 2022. This composite is made up of large, mid, and small cap managers representing growth and value styles, and with active and passive management

• The best performance within the Domestic Equity Composite was delivered by large and small capitalization, quality-oriented investment managers.

ACTUAL % OF PORTFOLIO: 24.7%

INTERNATIONAL EQUITY COMPOSITE

GLOBAL EQUITY COMPOSITE

COMPOSITE RETURN: -30.1%

BENCHMARK RETURN: -18.4%

RELATIVE PERFORMANCE:

-11.7%

• The Global Composite delivered the worst absolute and relative portfolio performance as opposed to 2021 where it was the leader.

• Within the asset class, the poorer performance came from the global managers exposure to growth-oriented investments that did poorly during the higher interest rate and inflationary environment for 2022.

ACTUAL % OF PORTFOLIO: 4.9%

PRIVATE EQUITY COMPOSITE

BENCHMARK RETURN: -16.0%

COMPOSITE RETURN: -19.6% -3.6% RELATIVE PERFORMANCE:

• The International Equity Composite is comprised of developed markets equities ex-US (e.g., the Eurozone and Japan), and emerging markets equities (e.g., China and Brazil).

• The International Emerging Markets Composite was 4.6% of the portfolio and brought down the returns of the international equity composite on an absolute and relative basis. The International Emerging Markets Composite returned -23.3%, versus the benchmark at -20.1%.

ACTUAL % OF PORTFOLIO: 16.6%

TOTAL FIXED INCOME COMPOSITE

COMPOSITE RETURN: -14.5%

BENCHMARK RETURN: -13.0%*

-1.5% RELATIVE PERFORMANCE:

• The Fixed Income Composite is intended to reduce the impact on the portfolio when riskier assets (i.e., equities) decline. The Composite consists of fixed income securities and a small cash position.

• Within the Composite, Domestic Fixed Income was 9.9% of the portfolio and returned -14.9% during 2022. Global Fixed Income was 3.7% of the portfolio and returned -14.0%.

* Benchmark return is the Bloomberg Barclays Aggregate Index.

ACTUAL % OF PORTFOLIO: 13.6%

REAL ASSETS COMPOSITE

COMPOSITE RETURN: -2.8%

COMPOSITE RETURN: +8.8% +4.4%

BENCHMARK RETURN: +4.4%

RELATIVE PERFORMANCE:

• Private equity consists of the equities of companies that are not listed on any stock exchanges. These companies may be in early stages of development (often referred to as venture) or in more mature stages (often referred to as buyouts and special situations).

• Private equity requires long-term commitments by investors. In return for the illiquidity, investors have the potential to receive superior future investment returns.

ACTUAL % OF PORTFOLIO: 19.8%

HEDGE FUNDS COMPOSITE

COMPOSITE RETURN: -3.1% +2.1%

BENCHMARK RETURN: -5.2%

RELATIVE PERFORMANCE:

• Hedge funds offer differentiated return streams in contrast to traditional stocks and bonds. These strategies can be complex in nature or structure, but they provide returns that add diversification for a portfolio of investments.

• An example of a hedge fund strategy would be Relative Value. In this strategy, an investment manager might make investments in stocks, bonds, convertibles, or derivatives to gain exposure to that investment type. The manager may also make a hedging investment in the same security to capture the value held within the security relative to its current market price, thus capturing the price differential.

ACTUAL % OF PORTFOLIO: 8.4%

BENCHMARK RETURN: +1.7%*

RELATIVE PERFORMANCE:

-4.5%

• Real assets tend to perform well when inflation rises. Therefore, real assets are in the portfolio for inflation protection. Examples of real assets are timber, real estate, infrastructure, and natural resources.

• Despite overall negative returns, many underlying strategies within real assets performed well for the portfolio. Private Real Assets, which make up 7.3% of the total portfolio, provided a return of 11.3% for 2022. The inflationary characteristics of real estate, timber, infrastructure, and natural resources performed well when inflation was high during 2022.

* Benchmark return is weighted between three indices: NCREIF NFI ODCE, Mercer Illiquid Natural Resources Index, and S&P Global Property Index.

ACTUAL % OF PORTFOLIO: 12.0%

INVESTMENT PHILOSOPHY

In order to maintain the purchasing power of its assets, The Salvation Army has a long-term global investment strategy that focuses on the risk and return of its portfolio of investments. This longterm approach starts with a strategic asset allocation that incorporates assets for growth, risk reduction, and inflation protection. In aggregate these assets are designed to meet the ongoing needs of the Southern Territory, while exercising the appropriate amount of care and prudence needed to achieve the Army’s goals.

LONG-TERM FOCUS

The portfolio is managed toward the long-term support of the Army and is meant to be managed in perpetuity. Because of this long-term focus, the investment objectives of the portfolio can be directed toward assets that also achieve growth over longer time frames such as Private Equity, Hedge Funds, and Real Assets (Real Estate, Infrastructure, and Natural Resources).

DIVERSIFICATION

Investment diversification can improve the risk and return characteristics of an investment portfolio. This is achieved by using differentiated asset types, investment strategies, and investment managers with a variety of performance and risk characteristics. When managed together these differentiated characteristics lead to steadier investment returns, and further allow The Salvation Army to reach its goals.

RISK CONTROL

All investing includes some exposure to risk. Further information on the Territory’s view on Risk Control is described on page 20 of this report.

TARGET ALLOCATION

Strategic targets for each asset class have been adopted to achieve the long-term benefits of a widely diversified portfolio. These targets are displayed on page 17 of this report.

INVESTMENT SELECTION

Each asset class, strategy, and manager is carefully selected to help the portfolio achieve its investment return target and to reduce risk. The Territory attempts to identify “best in class” managers for inclusion in the portfolio.

INVESTMENT GUIDELINES

The Territory has adopted specific requirements and restrictions for each asset class. Among others, the Territory is conscious of Socially Responsible Investing (SRI) guidelines and Environmental, Social, and Governance (ESG) factors. The SRI guidelines restrict investments in objectionable products and activities including alcohol, tobacco, gaming, pornography, armaments, and entities with poor environmental records.

ASSET ALLOCATION FRAMEWORK

INFLATION PROTECTION

LIQUID REAL ASSETS

ILLIQUID REAL ASSETS

RISK REDUCTION

DOMESTIC FIXED INCOME

GLOBAL FIXED INCOME

HEDGE FUNDS

GROWTH

DOMESTIC LARGE & MID CAP EQUITY

DOMESTIC SMALL CAP EQUITY

INTERNATIONAL LARGE CAP EQUITY

GLOBAL EQUITY

EMERGING MARKETS EQUITY

PRIVATE EQUITY

Ultimate fiduciary responsibility for the oversight of the investment portfolio resides with the Board of Trustees of the Territory. The Board of Trustees is comprised of senior Salvation Army Officers who represent a cross section of different disciplines (i.e., ministry, business, program, personnel, and legal). Board of Trustees members are appointed to their positions and the appointment requires approval of the Army’s International Headquarters.

While the Board of Trustees holds the fiduciary responsibility, each of the other entities on the chart below have been given delegated authority for various aspects of portfolio management. Each of these supporting entities has an important role in ensuring compliance to Salvation Army policy guidelines, employing best practices in investment management, and exercising the prudent stewardship of Salvation Army assets. While the Board of Trustees may delegate authority, it may not relinquish its fiduciary responsibility.

BOARD OF TRUSTEES

PORTFOLIO GOVERNANCE DELEGATED AUTHORITY

Holds ultimate fiduciary responsibility for investment portfolio

OFFICE OF INVESTMENTS

Conducts day-to-day portfolio operations and management

CONSULTANT CUSTODIAN

INVESTMENT ADVISORY BOARD

Responsible for performance reporting, strategy recommendations, and manager due diligence

Responsible for asset safekeeping and servicing

Provides oversight and guidance for portfolio management

PORTFOLIO INVESTMENT MANAGERS

Managers: 45 Strategies: 79

The USA Southern Territory employs a thoughtful investment process to construct and monitor the investment portfolio. The day-to-day management of the portfolio is one of the delegated responsibilities from the Board of Trustees. The Office of Investments oversees this function and works closely with the other remaining entities to ensure efficient operations. The collaboration between these entities leads to the selection of investment strategies and external investment managers that align with the goals of The Salvation Army and the goals of the portfolio.

Collaborative due diligence for the USA Southern Territory is an ongoing process of monitoring and evaluating portfolio managers and strategies. Great care is exercised in this process which produces idea generation and decision making. Each of the entities has a role in this process that is vital to the successful operation of the portfolio. Articulated on the previous page is each entity’s principal role in this process. As a result of implementation of the collaborative due diligence process the current portfolio consists of 45 managers who invest across 79 strategies.

MANAGEMENT love BEYOND

BASIC NEEDS

TARGET RETURN & RISK CONTROL

TARGET RETURN

The annual target return for The Salvation Army USA Southern Territory’s Investment Portfolio is based on two factors: the Southern Territory’s historical spending rate and the current expected inflation rate. The spending rate is a calculation of the percentage of the Investment Portfolio required for funding the operations of The Salvation Army, and it is updated annually. In calculating the annual spending rate, a historical average of past annual spending rates is used to smooth out years when unforeseen circumstances have required abnormally high levels of spending. The current expected annual spending rate is 4.1%.

The rate of inflation impacts spending power. To preserve the spending power of the required spending rate, an estimate of annual inflation is added to the spending rate calculation. The current expected long-term inflation rate (10-Year) used by the Southern Territory is 2.8%. Adding together the current expected annual spending rate and the current expected inflation rate (4.1% + 2.8%) gives a figure of 6.9%. This figure is the current target return for the Southern Territory’s Investment Portfolio, and it is recalculated annually to account for changes in long-term inflation and spending.

In some years, the portfolio performance may not meet the target return because of adverse financial market conditions. For example, in some years stocks may not perform well and may not contribute positively to the overall performance of the portfolio. In those years, the spending needs of the Army must be met by drawing down a larger percentage.

RISK CONTROL

In attempting to achieve long-term spending and purchasing power goals, with an investment portfolio, there are risks involved. A key goal in managing the Army’s portfolio is risk control. Controlling risk helps in preserving the portfolio over time and allows for the Army to meet its goal of maintaining its inflation adjusted purchasing power. The Salvation Army USA Southern Territory strives to exercise prudence and to consider the risks involved in making investment decisions by seeking investments that not only accomplish return goals, but also produce steadier returns over time. This is accomplished by considering the volatility of investments individually and collectively.

Risks can also be measured in other ways beyond price movement or volatility. There are also the risks of not meeting return goals or opportunity cost, the risk of liquidity (not being able to raise cash from investments in a timely manner), the risk of macroeconomic changes, and the risk of policy or political change. For the Southern Territory, the greatest potential risk is the permanent loss of capital. A portfolio gain or loss is not permanent until it is realized. Avoiding, or at least limiting, permanent loss of capital is the primary risk control objective of the Southern Territory.

As discussed previously in this report, the measures taken to provide risk control and to limit a permanent loss of capital include having a long-term investment focus, a well-developed asset allocation framework, a diversified portfolio, and an investment due diligence process that employs quality investment managers. The portfolio is designed to be managed with the dual purpose of achieving (or exceeding) the target return and providing the appropriate risk control.

PARTICIPATION BY SALVATION ARMY UNITS

FIXED RATES

Reserves on deposit, excluding donor-restricted permanent endowments, receive a fixed rate of return. Fixed-rate reserves include quasi-endowments and other deposits. The Territory’s governing board designates quasi-endowments to be set aside for a long but unspecified period, to provide interest income for current operations. Other fixed-rate deposits are eligible for current spending in accordance with any donor restrictions and with Army spending policy. The Territory approved a 5.00% interest allocation for quasi-endowments effective March 1, 2011.

Other fixed-rate reserves receive a market-based interest allocation. The rate matches U.S. market rates for interest-bearing bank deposits and money market accounts. Territorial Finance Council policy resets these allocations to market rates semi-annually. These rates became effective October 1, 2017.

PURCHASE

& CONSTRUCTION RESERVES

0.41% ALL

OTHER FIXED

RESERVES

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BEYOND THE AFTERMATH

SPENDING POLICY

Donor-restricted permanent endowments receive proportional allocations of dividends, interest, gains and losses based on the results of the territorial investment portfolio. Permanent endowment spending conforms to the Uniform Prudent Management of Institutional Funds Act. The Territory allocates an amount available for appropriation for spending each year equal to a weighted average of the prior year’s spending allocation, adjusted for inflation plus a percentage of the endowment fund’s fair value.* With long-term real growth expected through investment returns, the expected long-term average percentage rate is 4.1%. The Territory thus expects the spending policy to allow its endowments to maintain or grow the purchasing power of the endowment assets held in perpetuity or for a specified term as well as to provide additional real growth through new gifts.

* The prior year’s spending allocation is weighted at 60% and the percentage of the fund’s fair value is weighted at40%.Thepercentageofthefund’sfairvaluevariesinaband,dependingontheratioofthefund’sfairvalueto thepurchasingpoweroftheendowmentgiftsasmeasuredbychangesinCPI-U.

PLANNED GIVING SERVICES

The USA Southern Territory is also Trustee of and responsible for the oversight of the investment and administrative functions of life income agreements. Currently, the Territory oversees or directly administers the activity of 1,229 of these life income agreements and makes payments to 780 income beneficiaries. Gifts in these agreements are in excess of $74.9 million.

There are three different life income agreements that are managed by the territory: Charitable Gift Annuities (CGA’s), Charitable Remainder Trusts (CRT’s), and Pooled Income Funds (PIF’s). All three gift types pay out an income stream to the donor or a beneficiary for their lifetime and the remainder or residuum is distributed to the Army upon the death of the last beneficiary.

The investments of all three gift types are managed by Bank of New York Mellon Wealth Management (BNYMWM) who serves in an advisory capacity for these programs. The Army consults with BNYMWM for best practices in the operation, oversight, and investments of these funds.

The USA Southern Territory has had an active Planned Giving Program since the 1960’s. These Planned Giving programs provide donors with a way to make a meaningful gift to the Army while also maintaining an income stream during their lifetime. Payments to beneficiaries are made on an ongoing basis from these gifts. Charitable life income agreements can have significant tax advantages to donors.

WEBSITE: WWW.TSALEGACYOFLOVE.ORG

CONTACT NUMBER: 1-866-551-7585

THE SALVATION ARMY SOUTHERN TERRITORY

SOUTHERN TERRITORIAL HEADQUARTERS

Territorial Leaders Commissioners Kelly & Donna Igleheart

1424 Northeast Expressway, Brookhaven, GA 30329 404-728-1300

EVANGELINE BOOTH COLLEGE

President/Principal & Asst. Principal for Ministry Development & Campus Life

Majors Anthony & Elizabeth Juliana

1032 Metropolitan Parkway SW, Atlanta, GA 30310 404-753-4166

ADULT REHABILITATION CENTER COMMAND

Commander & Director of Special Services

Majors John & Cristina Murphy

1424 Northeast Expressway, Brookhaven, GA 30329 404-728-1371

ALABAMA, LOUISIANA & MISSISSIPPI

ALABAMA, LOUISIANA & MISSISSIPPI DIVISION

Divisional Leaders:

Majors Mark & Jan Harwell

1450 Riverside Drive, Jackson, MS 39202 601-969-7560

ARKANSAS & OKLAHOMA DIVISION

Divisional Leaders:

Lt. Colonels Dean & Pamela Hinson

6601 North Broadway Ext., Ste. 300, Oklahoma City, OK 73116 405-254-1100

FLORIDA DIVISION

Divisional Leaders:

Lt. Colonels Kent & Melody Davis

5631 Van Dyke Road, Lutz, FL 33558 813-962-6611

GEORGIA DIVISION

Divisional Leaders:

Majors Algerome & Teresa Newsome 1000 Center Place, SW, Norcross, GA 30093 770-441-6200

KENTUCKY & TENNESSEE DIVISION

Divisional Leaders:

Majors Thomas & Julie Anne Louden 214-216 West Chestnut Street, Louisville, KY 40202 502-583-5391

NORTH & SOUTH CAROLINA DIVISION

Divisional Leaders:

Lt. Colonels Ronnie & Sharon Raymer 501 Archdale Drive, Charlotte, NC 28217 704-522-4970

POTOMAC DIVISION

Divisional Leaders:

Lt. Colonels Allan & Fiona Hofer 2626 Pennsylvania Ave., NW, Washington, DC 20037 202-756-2600

TEXAS DIVISION

Divisional Leaders:

Lt. Colonels Art & Ann Penhale 1221 River Bend Drive, Dallas, TX 75247 214-956-6000

INTERNATIONAL MISSION STATEMENT

The Salvation Army, an international movement, is an evangelical part of the universal Christian church. Its message is based on the Bible. Its ministry is motivated by the love of God. Its mission is to preach the gospel of Jesus Christ and to meet human needs in His name without discrimination.

SOUTHERN TERRITORY MISSION STATEMENT

The Salvationists of the Southern Territory are answering God’s call to make radical followers of Jesus Christ who love inclusively, serve helpfully, and disciple effectively in the communities where they live.

© 2023 The Salvation Army, A Georgia Corporation