The Episcopal Church Foundation in West Texas

Investment Program

June 30, 2018

Market Report

US common stocks advanced in the second quarter with positive earnings momentum and
generally favorable economic conditions. Market volatility remained, although more muted than
the previous quarter. Wage growth was positive, bolstering consumer confidence. The primary
negative during the quarter was moves by the government to impose trade tariffs on China and
other trading partners, causing concerns about long-term growth prospects.

For the quarter, the broad US stock market gained 3.9% (using the Russell 3000 index as
a proxy for the market). Small capitalization stocks outperformed large cap stocks by over 400
basis points. As shown below, within the small cap category, value style stocks outperformed
growth style stocks, whereas the reverse occurred in the large cap category. US stocks
outperformed international stocks by a wide margin, as foreign stocks sustained losses during the
quarter.

Problems continued in the fixed income market, with interest rates rising across the
maturity spectrum. When interest rates rise, the value of bonds decline. Cash equivalents
outperformed bonds for the second consecutive quarter. The Federal Reserve continued with its
plan to increase short-term interest rates.

Market Returns for Quarter

8.3%

7.2%

5.8%

1.2%
0.3%

-0.2%
-0.8%

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 Foundation’s model portfolios achieved gains, ranging from 0.2% for
Capital Maintenance to 3.1% for Growth. Performance relative to peer groups and to passive
indices for the three models containing common stocks was favorable for the quarter and the
year. Longer-term relative performance for all models is generally favorable.

At the beginning of the quarter, allocations of the Growth, Growth & Income, and
Income models was changed to reduce the duration of the fixed income portfolio. This was
accomplished by reducing the exposure to intermediate term bonds and a corresponding increase
to cash and short-term bonds (in the G&I and Income models).

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

Asset Class Investment Results

The Foundation’s performance for the 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 4.6% 3.9%
Fixed Income -0.3% -0.2%
Cash Equivalents 0.3% 0.4%

Account Status

Foundation assets at quarter-end totaled $73.5 million, an increase of $4.5 million during
the quarter and a new high. Investment gains were $2 million or 2.8%. Five new accounts were
opened during the quarter, totaling $1.4 million in initial deposits.

At June 30th, the Foundation had a total of 219 accounts as follows:

Ownership Number of Accounts Amount

Churches/Schools 161 $ 40.9 million
Diocese/Foundation 58 32.6 million
 Model Portfolio Performance as of June 30, 2018*

Growth
3 Mo 1 Yr 3 Yr 5 Yr

Portfolio Total Return 3.14 12.21 7.44 8.42

+/- Peer Group Composite 1.02 3.15 0.71 0.51
+/- Index Composite 0.53 2.61 (0.32) (0.38)

Growth & Income

3 Mo 1 Yr 3 Yr 5 Yr

Portfolio Total Return 2.31 8.91 6.24 7.12

+/- Peer Group Composite 0.75 2.38 0.81 0.65
+/- Index Composite 0.43 2.08 (0.17) (0.14)

Income
3 Mo 1 Yr 3 Yr 5 Yr

Portfolio Total Return 1.68 6.46 5.21 5.70

+/- Peer Group Composite 0.53 1.90 0.88 0.68
+/- Index Composite 0.35 1.79 0.24 0.15

Capital Maintenance
3 Mo 1 Yr 3 Yr 5 Yr

Portfolio Total Return 0.20 0.54 0.82 0.87

+/- Peer Group Composite (0.03) (0.04) 0.08 0.10
+/- Index Composite (0.10) (0.23) 0.02 0.09

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