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The Episcopal Church Foundation in West Texas

Investment Program

June 30, 2017

Market Report

Investor optimism continued in the June quarter with US stocks gaining 3% and
international stocks gaining 5.8% as measured by broad-based indices (Vanguard Total Stock
Market Index and Vanguard Total International Stock Index). Year-to-date, US stocks have
gained 9%, compared to about 13% for international stocks.

For the quarter, large cap stocks outperformed small cap stocks slightly (about 60 basis
points) and the growth style outperformed the value style in both capitalization categories by
significant amounts.

The Fed raised short-term interest rates in June for the second time this year. Longer
maturity yields did not increase, resulting in a flattening of the yield curve. As shown below,
both short-term and intermediate-term bonds achieved positive results.

Market Returns for Quarter

5.6%

4.7%
4.4%

1.5%
1.3%

0.7%
0.3%

Large Cap Large Cap Small Cap Small Cap International Short Term Intermediate
Growth Value Growth Value Stocks Bonds Bonds
Model Portfolio Review

All four of the Foundations investment strategies (represented by model portfolios)


achieved gains for the quarter. Performance relative to peer groups and to passive indices was
favorable for the quarter and generally favorable for the one-year period. Longer-term relative
performance is mixed.

The Foundation made a fundamental change in its approach to small cap and mid-cap
stock investments at the beginning of the quarter. Both the small cap growth style manager and
the mid-cap value style manager were replaced with the Vanguard S&P Small Cap Index fund.

Details of the performance of the four models are shown below.

Asset Class Investment Results

The Foundations performance this quarter for the three assets classes in which it invests,
along with comparative benchmark returns, are shown in the following table.

Asset Class Return Benchmark


Common Stocks 4.1% 3.0%
Fixed Income 1.5% 1.5%
Cash Equivalents 0.1% 0.1%

Account Status

Foundation assets at quarter-end totaled $64 million, an increase of $900 thousand during
the quarter. Investment gains were $1.8 million or 2.9%. Three new accounts were opened
during the quarter, with initial deposits of $139 thousand.

At June 30th, the Foundation had a total of 210 accounts as follows:

Ownership Number of Accounts Amount


Churches/Schools 154 $ 34.6 million
Diocese/Foundation 56 29.4 million
Portfolio Performance as of June 30, 2017*

Growth
3 Mo 1 Yr 3 Yr 5 Yr

Portfolio Total Return 3.23 12.45 4.19 8.22


+/- Peer Group Composite 1.14 0.07 (0.57) (0.57)
+/- Index Composite 1.22 (1.21) (1.63) (1.39)

Growth & Income


3 Mo 1 Yr 3 Yr 5 Yr

Portfolio Total Return 2.56 10.20 4.12 7.00


+/- Peer Group Composite 0.71 0.30 (0.11) (0.17)
+/- Index Composite 0.97 (0.18) (1.24) (0.91)

Income
3 Mo 1 Yr 3 Yr 5 Yr

Portfolio Total Return 1.92 8.07 3.76 5.66


+/- Peer Group Composite 0.51 0.60 0.25 0.08
+/- Index Composite 0.72 0.50 (0.59) 0.38

Capital Maintenance
3 Mo 1 Yr 3 Yr 5 Yr

Portfolio Total Return 0.44 1.07 0.80 0.86


+/- Peer Group Composite 0.01 0.11 0.15 0.09
+/- Index Composite 0.03 0.37 0.09 0.21

* Returns for greater than one year are annualized. Past performance does not guarantee future
results.

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