LCF INVESTMENT MANAGER SUMMARIES

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1 LCF INVESTMENT MANAGER SUMMARIES The following insights from LCF investment advisor, Cambridge Associates, are provided to help donors better understand the role and function of each investment within the LCF s investment portfolios. Aberdeen Emerging Markets Equity Fund (emerging markets equity) Aberdeen Emerging Markets Equity Fund provides concentrated exposure to Emerging Markets equities with a relatively low volatility portfolio. It is combined with the LCF s other Global ex-u.s. equity managers to produce a diversified Global ex-u.s. equity portfolio. The LCF s Global ex-u.s. equity portfolio plays an integral role in the LCF s long-term strategic asset allocation. Global ex-u.s. equities should provide long term returns that are higher than those of fixed income with accordingly increased volatility; over the long term, an allocation to diversified equities should help the LCF grow assets and meet its spending needs. Aberdeen Emerging Markets Equity Fund invests in stocks in emerging markets across the globe. The fund conducts fundamental, bottom-up research that focuses first on quality and then on valuation. Quality is defined in reference to management, business focus, balance sheet and corporate governance. Valuation is calculated relative to key financial ratios, the market, peer groups, and business prospects. The resulting portfolio has a growth-at-a-reasonable-price flavor and tends to have lower volatility than the market. The portfolio typically holds between 45 and 70 names and its turnover averages between 25% and 35%. American EuroPacific Growth Fund (global non-u.s. equity) American EuroPacific Growth Fund offers growth- and large-biased diversified exposure to equities in Europe and the Pacific Basin. It is combined with the LCF s other global non-u.s. equity managers to produce a diversified global non-u.s. equity portfolio. The LCF s global non-u.s. equity portfolio plays an integral role in the LCF s long-term strategic asset allocation. Global ex-u.s. equities should provide long term returns that are higher than those of fixed income with accordingly increased volatility; over the long term, an allocation to diversified equities should help the LCF grow assets and meet its spending needs. American EuroPacific Growth Fund invests at least 80% of the fund s assets in non-u.s. companies, primarily in Europe and the Pacific Basin; a maximum of 20% of the fund s assets can be invested in emerging markets (the fund does not consider Taiwan and Korea emerging markets). The fund conducts fundamental bottom-up and top-down research that examines company and stock characteristics and analyzes the current environment for various economies, industries, currencies and markets. It seeks companies with strong earnings and revenue growth that are trading at a discount to intrinsic value. The resulting portfolio has a large-cap growth bias and is unconstrained with respect to the benchmark (All Country World Index ex-u.s.). The portfolio typically holds between 190 and 300 names and its turnover averages between 20% and 35%. 10/1/12 1

2 American Washington Mutual Fund (U.S. equity) American Washington Mutual Fund provides conservative exposure to large-cap value U.S. equities. It is combined with the LCF s other U.S. equity managers to produce a diversified U.S. equity portfolio. The LCF s U.S. equity portfolio plays an integral role in the LCF s long-term strategic asset allocation. U.S. equities should provide long-term returns that are higher than those of fixed income with accordingly increased volatility; over the long term, an allocation to diversified equities should help the LCF grow assets and meet its spending needs. American Washington Mutual Fund invests in large-cap U.S. equities. It conducts fundamental, bottomup research to find high quality companies with stocks that are trading at a discount to intrinsic value. Its high quality, value bias tends to produce returns with low volatility relative to the market that can protect during down markets. The resulting portfolio is benchmark (S&P 500) aware, consists primarily of wellestablished, blue chip U.S. equities and has a value tilt. Additionally, the fund does not invest with any companies that derive their primary revenues from tobacco or alcohol. The portfolio typically holds between 120 and 165 names and its turnover averages between 5% and 35%. Boston Trust U.S. Small Cap Fund (U.S. equity) Boston Trust U.S. Small Cap Fund provides diversified exposure to high quality, mission-related, smallcap U.S. equities. It is combined with the LCF s other global equity managers to produce a diversified global equity portfolio within the Mission Portfolio. The LCF s global equity portfolio plays an integral role in the LCF s long-term strategic asset allocation. Global equities should provide long term returns that are higher than those of fixed income with accordingly increased volatility; over the long term, an allocation to diversified equities should help the LCF grow assets and meet its spending needs. Boston Trust U.S. Small Cap Fund utilizes quantitative screening and fundamental analysis to identify companies with three key characteristics: higher financial quality than the market; distinct innovation in product, service or practice; and a business model leveraged to one of several favored secular trends. The team believes that these innovative, higher quality small-cap firms will perform well through economic cycles. An analysis of a company s social responsibility is a crucial component of this strategy, which is reflected in its research on Environmental, Social, and Governance (ESG) factors and in the team s shareholder advocacy. The team believes that the line between socially responsible investing and traditional investing is blurring and therefore evaluating a company along both metrics is critical to investment success. The portfolio is well diversified (typically holding stocks) with sector weights comparable to those of the overall market. Portfolio turnover is typically around 20% Boston Common International Equity SRI (U.S. equity) Boston Common International Equity SRI provides diversified exposure to mission related, non-u.s. equities. It is combined with the LCF s other global equity managers to produce a diversified global equity portfolio within the Mission Portfolio. The LCF s global equity portfolio plays an integral role in the LCF s long-term strategic asset allocation. Global equities should provide long term returns that are higher than those of fixed income with accordingly increased volatility; over the long term, an allocation to diversified equities should help the LCF grow assets and meet its spending needs. The product s philosophy places equal emphasis on investment fundamentals and Environmental, Social, and Governance ( ESG ) factors. The bottom-up strategy invests in socially-responsible, non-u.s. companies that appear undervalued relative to their long-term fundamental outlook. Their ESG strategy 2

3 has three primary components: (1) to avoid certain companies (tobacco, alcohol, gambling, weapons and nuclear power), (2) to seek ESG leaders; and (3) to engage with companies through shareholder advocacy. Each holding is capped at 5%. Major regions are kept within a band of 50% to 200% of the MSCI EAFE. Major sectors (>10%) are also kept within a 50% to 200% band of the benchmark. The resulting portfolio is diversified by region and sector, holding stocks and averaging 25% turnover. Calvert CSIF U.S. Equity Portfolio (U.S. equity) Calvert CSIF U.S. Equity Portfolio provides diversified mission related exposure to large-cap U.S. equities. It is combined with the LCF s other global equity managers to produce a diversified global equity portfolio within the Mission Portfolio. The LCF s global equity portfolio plays an integral role in its long-term strategic asset allocation. Global equities should provide long-term returns that are higher than those of fixed income with accordingly increased volatility; over the long term, an allocation to diversified equities should help the LCF grow assets and meet its spending needs. Calvert CSIF Equity Portfolio invests primarily in the common stocks of U.S. large-cap companies, although it can invest in foreign stocks and mid-cap stocks. The fund has two components that impact its holdings: financial analysis and social analysis. To begin, the fund is sub-advised by Atlanta Capital, a growth equity manager that seeks established companies with a history of steady earnings growth, the ability to sustain growth through high profitability, and reasonable pricing with respect to the Atlanta Capital s expectations for the companies growth. Once Atlanta Capital has selected a portfolio of companies based on these criteria, Calvert s social analysts evaluate each company's record on product safety, the environment, workplace practices, international operations, human rights, and weapons contracting. Only stocks that meet Calvert s social criteria may be included in the Calvert Equity Portfolio. In addition to conducting social analysis, Calvert will also be an active investor in its portfolio companies, engaging company management to promote improvement in the companies records on environmental, social, and governance issues. The resulting portfolio typically holds 80 stocks, averaging 50% turnover. Calvert Global Alternative Energy Fund (real assets) Calvert Global Alternative Energy Fund provides exposure to equity securities within the alternative energy business. It is combined with the LCF s other liquid real assets managers to produce a diversified liquid real assets portfolio within the Mission Portfolio. The LCF s liquid real assets portfolio plays an integral role in the LCF s long-term strategic asset allocation. A basket of diversified liquid real assets tends to have a higher correlation to unexpected inflation than equity or fixed income markets; real assets also serve to diversify the portfolio, resulting in lower overall volatility. Over the long term, a diversified liquid real assets portfolio should reduce volatility and mitigate the impact of high unexpected inflation, which can be detrimental to institutions that might be otherwise be forced to sell depressed securities to meet spending needs. The Calvert Global Alternative Energy Fund invests primarily equity securities of U.S. and non-u.s. companies that focus derive a significant amount of their revenues from alternative energy. The fund has two components that impact its holdings: financial analysis and social analysis. To begin, the fund is subadvised by KBC, an alternative energy investment manager. KBC conducts bottom-up, fundamental financial analysis to select stocks in renewable energy, such as solar, wind, geothermal, biofuel, hydrogen, and biomass; the technologies that enable these sources to be tapped; and the services or technologies that conserve or enable more efficient use of energy. Wind and solar energy comprise about half of the fund s 3

4 exposure. Once KBC has selected a portfolio of companies based on its fundamental analysis, Calvert s social analysts evaluate each company's record on product safety, the environment, workplace practices, international operations, human rights, and weapons contracting. Only stocks that meet Calvert s social criteria may be included in the Calvert Equity Portfolio. The fund invests primarily in developed countries but may purchase securities in emerging markets. The resulting portfolio typically holds 60 stocks and has an average turnover of 65%. CRA Qualified Investment Instl. Fund (Community Capital) (fixed income) CRA Qualified Investment Instl. Fund (Community Capital) provides mission-related exposure to U.S. community bonds. It is combined with the LCF s other domestic fixed income managers to produce a diversified fixed income portfolio with the Mission Portfolio. Fixed income plays an integral role in the LCF s long-term strategic asset allocation, providing the LCF with protection during periods of prolonged economic contraction. During such periods, this allocation should allow the LCF to sell bonds to meet spending needs and thus preclude the need to sell equities at depressed prices. In addition, bonds may provide an overall reduction in portfolio volatility, a steady flow of income, and high liquidity. Community Capital invests primarily in bonds issued to promote community development activities across the country. These activities include affordable housing, environmental sustainability, environment restoration, education, job creation and training, affordable healthcare, and neighborhood revitalization. They conduct fundamental credit research to create a diversified portfolio of bonds, with a duration of 4-5 years. The resulting portfolio typically holds 45-65% in agency (i.e., government-backed) mortgagebacked securities, under 10% in asset-backed securities, and 25-40% in taxable municipal bonds. Chilton Global Natural Resources International II, Ltd. (real assets) Chilton Global Natural Resources International II, Ltd. provides diversified exposure to global natural resources stocks. It is combined with the LCF s other liquid real assets managers to produce a diversified liquid real assets portfolio. The LCF s liquid real assets portfolio plays an integral role in the LCF s longterm strategic asset allocation. A basket of diversified liquid real assets tends to have a higher correlation to unexpected inflation than equity or fixed income markets; real assets also serve to diversify the portfolio, resulting in lower overall volatility. Over the long term, a diversified liquid real assets portfolio should reduce volatility and mitigate the impact of high unexpected inflation, which can be detrimental to institutions that might be otherwise be forced to sell depressed securities to meet spending needs. Chilton Global Natural Resources invests primarily in stocks of companies that derive the majority of their revenues from natural resources, such as oil and gas, minerals, metals, and mining. In addition to investing in global natural resources stocks, Chilton will opportunistically borrow and then sell natural resources stocks ( go short ), use derivates to hedge the portfolio, and purchase physical commodities through exchange-traded funds or futures contracts. The fund conducts top-down macroeconomic analysis of the global natural resources markets, focusing on supply and demand to generate forecasts of commodity prices and allocate the portfolio accordingly. The fund then conducts fundamental, bottomup research on individual natural resources companies to select stocks offering investors attractive risk/return profiles within a given commodity sector. The resulting portfolio is typically 50-80% net long and is expected to have a high correlation to global commodity prices. 4

5 Gresham Tangible Asset Program, Ltd. (real assets/commodities) Gresham Tangible Asset Program ( TAP ) provides exposure to actively managed commodities futures. It is combined with the LCF s other liquid real assets managers to produce a diversified liquid real assets portfolio. The Lutheran Community LCF s liquid real assets portfolio plays an integral role in the LCF s long-term strategic asset allocation. A basket of diversified liquid real assets tends to have a higher correlation to unexpected inflation than equity or fixed income markets; real assets also serve to diversify the portfolio, resulting in lower overall volatility. Over the long term, a diversified liquid real assets portfolio should reduce volatility and mitigate the impact of high unexpected inflation, which can be detrimental to institutions that might be otherwise be forced to sell depressed securities to meet spending needs. Gresham TAP gains exposure to the price of commodities by holding futures contracts on commodities and investing the collateral for those contracts in U.S. Treasury Bills. Gresham holds future contracts on a wide variety of commodities, including energy, livestock, agriculture, metals and mining, and consumer goods. Gresham will adjust its target exposure to these different commodities depending on the level of world production and the level of world trade. The resulting portfolio provides diversified exposure to the prices of global commodities and uses the Dow Jones UBS Commodities Index as its benchmark. MFS International Growth Equity Fund (global non-u.s. equity) MFS International Growth provides relatively concentrated, diversified exposure to growth stocks in the developed markets of Europe, Asia and the Far East. It is combined with the LCF s other Global ex-u.s. equity managers to produce a diversified Global ex-u.s. equity portfolio. The LCF s Global ex-u.s. equity portfolio plays an integral role in the LCF s long-term strategic asset allocation. Global ex-u.s. equities should provide long term returns that are higher than those of fixed income with accordingly increased volatility; over the long term, an allocation to diversified equities should help the LCF grow assets and meet its spending needs. MFS International Growth Equity Fund invests in global ex-u.s. equities, primarily in developed markets; typically 10% to 20% of the portfolio is invested in emerging markets. The fund conducts fundamental, bottom-up research to identify global ex-u.s. equities that will provide above-average, sustainable earnings growth while also being attractively valued. It seeks companies with sustainable competitive advantage in industries experiencing long term secular growth. The resulting portfolio is not index (Europe, Asia and the Far East Index) oriented, tends to be tilted to mid-cap stocks, and has a growth bias. The portfolio typically holds between 90 and 125 names and its turnover averages between 60% and 90%. Nyes Ledge Horizon Hedge Fund (marketable alternatives) Nyes Ledge Horizon Hedge Fund provides relatively conservative, diversified exposure to hedge fund strategies. Its fund-of-funds structure allows the LCF to gain diversification across hedge fund strategies and managers and as such is the LCF s sole hedge fund investment. The LCF s hedge fund portfolio plays an integral role in the LCF s long-term strategic asset allocation. Diversified hedge funds should provide long term returns that are higher than those of fixed income and lower than those of equities, with volatility between that of fixed income and equities. In addition, hedge fund returns are expected to be uncorrelated to the equity markets. Over the long term, a hedge fund portfolio should lower the overall volatility of the LCF s portfolio and should help protect the portfolio during periods of distressed equity markets. 5

6 Nyes Ledge Horizon Hedge Fund is a fund-of-hedge-funds manager, which means it invests in many different hedge funds. In other words, when the LCF invests in Nyes Ledge, it is essentially investing in over 20 different underlying hedge fund managers. These different hedge funds can be split into two broad categories: absolute return hedge funds and long/short hedge funds. Absolute return hedge funds employ a variety of strategies that are expected to produce returns that are uncorrelated to the markets. These strategies include distressed company investing, intra-capital arbitrage, convertible arbitrage, eventdriven strategies and merger arbitrage. Long/short hedge funds invest in the global equity markets, and will both buy stocks ( go long ) and borrow and then sell stocks ( go short ) or short stocks through derivatives. Long/short hedge funds are expected to produce long-term returns that are less than perfectly correlated with the equity markets, with lower return and volatility than the markets. Nyes Ledge currently invests approximately 40% of its assets in absolute return hedge funds and approximately 60% in long/short hedge funds; however, Nyes Ledge can adjust this allocation according to the current market environment. Nyes Ledge focuses on managers that have well-defined, conservative strategies that employ minimal leverage. Nyes Ledge constantly supervises its underlying funds by examining performance attribution and holdings, regularly conducting on-site manager visits, and continuously monitoring performance. At the portfolio level, Nyes Ledge routinely examines aggregate strategy allocation and aggregate gross and net asset class exposures. The managers in this fund s portfolio represent a large cross-section of what Cambridge Associates considers to be the top funds available (and in many cases not available) to today s investors. A position in this fund-of-funds offers the LCF a well-diversified alternative assets portfolio while paying fees that are decidedly low for a fund-of-funds. Sanderson International Value Equity Fund (global non-u.s. equity) Sanderson International Value Equity Fund provides relatively concentrated, diversified exposure to value stocks in the developed markets of Europe, Asia and the Far East. It is combined with the LCF s other global non-u.s. equity managers to produce a diversified global non-u.s. equity portfolio. The LCF s Global non-u.s. equity portfolio plays an integral role in the LCF s long-term strategic asset allocation. Global non-u.s. equities should provide long-term returns that are higher than those of fixed income with accordingly increased volatility; over the long term, an allocation to diversified equities should help the LCF grow assets and meet its spending needs. Sanderson International Value Equity Fund invests primarily in developed Global non-u.s. equities; up to 20% of the fund s assets can be invested in emerging markets. The fund conducts bottom-up fundamental research on stocks that meet certain value criteria. Individual stock research concentrates on underlying industry growth, competitive position, reliability of profit streams, strong capitalization, experienced and ethical management, and past track record; the fund has a strong bias for companies with high dividend yields. The resulting portfolio has a strong value bias and is broadly diversified by sectors and countries. The portfolio typically holds between 65 and 80 names and its turnover averages between 15% and 35%. Thrivent Core Bond Fund (fixed income) Thrivent Core Bond Fund provides broad exposure to domestic intermediate-term investment grade fixed income securities. The LCF s domestic fixed income portfolio plays an integral role in the LCF s longterm strategic asset allocation. Domestic fixed income should provide the LCF with protection during periods of prolonged economic contraction. During such periods, this allocation should allow the LCF to sell bonds to meet spending needs and thus preclude the need to sell equities at depressed prices. To serve 6

7 as a reliable hedge, the bonds should be high-quality, non-callable, and of intermediate to long duration; this fund s allocation to Treasuries meet these criteria. In addition, bonds may provide an overall reduction in portfolio volatility, a steady flow of income, and high liquidity. Thrivent Core Bond Fund invests in domestic fixed income securities. These securities include primarily U.S. Treasuries, government agencies, corporate bonds, mortgage-backed securities, asset-backed securities, and commercial mortgage-backed securities. The fund seeks to outperform its Lipper Peer Group composed of intermediate-term bond managers on a quarter by quarter basis. Portfolios are constructed using both top-down and bottom-up analysis. Top-down analysis includes relative value and current market analysis and results in relative (to the Lipper peer group) sector, duration, yield curve, and quality positioning. A team of sector-based analysts then conducts bottom-up, fundamental credit research to select securities within the top-down positioning. The resulting portfolio holds 80 securities on average and tends to underweight U.S. Treasuries and overweight high quality, high yielding bonds in its non-treasury holdings. Thrivent Government Bond Fund (fixed income) Thrivent Government Bond Fund provides broad exposure to government-related, intermediate-term fixed income securities. The LCF s domestic fixed income portfolio plays an integral role in the LCF s long-term strategic asset allocation. Domestic fixed income should provide the LCF with protection during periods of prolonged economic contraction. During such periods, this allocation should allow the LCF to sell bonds to meet spending needs and thus preclude the need to sell equities at depressed prices. To serve as a reliable hedge, the bonds should be high quality, non-callable, and of intermediate to long duration. In addition, bonds may provide an overall reduction in portfolio volatility, a steady flow of income, and high liquidity. Thrivent Government Bond Fund invests in U.S. Treasuries, U.S. Government Agency Debt, U.S. Agency Mortgage-Backed Securities, and U.S. Treasury Inflation-Protected Securities (TIPS). The fund is intended to be index-like and is benchmarked against a blended index of 10% Barclay s U.S. Treasury Index, 40% Barclay s Government Related Index, 10% Barclays TIPS Index and 10% Barclay s Mortgage-Backed Securities Index. The fund has a duration target of 5 years. Thrivent Large Cap Growth Fund (U.S. equity) Thrivent Large Cap Growth Fund provides diversified exposure to large-cap growth U.S. equities. It is combined with the LCF s other U.S. equity managers to produce a diversified U.S. equity portfolio. The LCF s U.S. equity portfolio plays an integral role in the LCF s long-term strategic asset allocation. U.S. equities should provide long term returns that are higher than those of fixed income with accordingly increased volatility; over the long term, an allocation to diversified equities should help the LCF grow assets and meet its spending needs. Thrivent Large Cap Growth invests in large-cap U.S. growth equities, seeking to outperform its Lipper peer group on a one- and three-year basis. The fund conducts fundamental research and technical analysis to find dynamic growth stocks. Fundamental research concentrates on finding companies with market opportunity, competitive positioning, positive pricing trends, strong balance sheets, high return on invested capital, and focused management. Technical analysis seeks to identify stocks with sustained relative price momentum. An ideal stock will have both strong fundamentals and positive price momentum. Risk controls include a high number of holdings, modest sector bets (versus the Lipper peer 7

8 group), continuous monitoring, and style consistency. The resulting portfolio is benchmark aware, consistently large cap and true to its growth style. The portfolio typically holds between 80 and 120 names with an average turnover of 50% to 100%. Thrivent Large Cap Value Fund (U.S. equity) Thrivent Large Cap Value Fund provides conservative exposure to large-cap value U.S. equities. It is combined with the LCF s other U.S. equity managers to produce a diversified U.S. equity portfolio. The LCF s U.S. equity portfolio plays an integral role in the LCF s long-term strategic asset allocation. U.S. equities should provide long term returns that are higher than those of fixed income with accordingly increased volatility; over the long term, an allocation to diversified equities should help the LCF grow assets and meet its spending needs. Thrivent Large Cap Value Fund invests in large cap U.S. equities, seeking consistently positive relative returns versus its benchmark (Russell 1000 Value) and Lipper peer group. It conducts fundamental, bottom-up research to find high return-on-invested-capital companies at prices that present good value; and, it requires its holdings to have a catalyst within the next two quarters that will unlock this value. Its rigorous risk controls ensure that the portfolio is not making unintentional bets against the benchmark with respect to sector, capitalization, and other factor exposures. The resulting portfolio is benchmark aware, consistently large cap and true to its value style. The portfolio typically holds between 90 and 150 names with an average turnover of 35% to 50%. Thrivent Mid Cap Stock Fund (U.S. equity) Thrivent Mid Cap Stock Fund provides core exposure to mid-cap U.S. equities. It is combined with the LCF s other U.S. equity managers to produce a diversified U.S. equity portfolio. The LCF s U.S. equity portfolio plays an integral role in the LCF s long-term strategic asset allocation. U.S. equities should provide long term returns that are higher than those of fixed income with accordingly increased volatility; over the long term, an allocation to diversified equities should help the LCF grow assets and meet its spending needs. Thrivent Mid Cap Stock Fund invests in mid cap U.S. equities, seeking to outperform its Lipper peer group over a three-year time horizon. It conducts fundamental research on industries and companies, with the latter being the primary focus. The product seeks companies with improving returns on invested capital, focusing also on quality of earnings and valuation. Portfolio construction is conducted from the bottom-up and is not benchmark dependent, although risk controls at the back-end of the process manage risk with respect to the probability of underperforming peers and the benchmark. The resulting portfolio typically holds between 100 and 150 names with an average turnover of approximately %. Thrivent Partner Worldwide Allocation Fund (global non-u.s. equity) Thrivent Partner Worldwide Allocation provides broadly diversified exposure to equity (and some debt) markets outside of the United States, primarily in developed markets but also in emerging markets. It is combined with the LCF s other global non-u.s. equity managers to produce a diversified global ex-u.s. equity portfolio. The LCF s global non-u.s. equity portfolio plays an integral role in the LCF s long-term strategic asset allocation. Global non-u.s. equities should provide long-term returns that are higher than those of fixed income with accordingly increased volatility; over the long term, an allocation to diversified equities should help the LCF grow assets and meet its spending needs. 8

9 Thrivent Partner Worldwide Allocation Fund seeks to achieve its objective by investing primarily in equity, but also some debt securities, of issuers throughout the world. The Fund seeks to diversify its portfolio broadly among developed and emerging countries and among multiple asset classes. Emerging market exposure will typically be around 25 30% (at the upper end of the range, 20% in emerging market equities and 10% in emerging market debt). The Fund uses five sub-advisers: Mercator Asset Management (large cap value), Principal Global Investors (large cap growth), Victory Capital Management (small/mid cap), Aberdeen Asset Management (emerging market equity), and Goldman Sachs Asset Management (emerging market debt). The portfolio typically consists of about 500 holdings and has a turnover ratio just over 80%. Thrivent Small Cap Stock Fund (U.S. equity) Thrivent Small Cap Stock Fund provides core, defensive exposure to small-cap U.S. equities. It is combined with the LCF s other U.S. equity managers to produce a diversified U.S. equity portfolio. The LCF s U.S. equity portfolio plays an integral role in the LCF s long-term strategic asset allocation. U.S. equities should provide long term returns that are higher than those of fixed income with accordingly increased volatility; over the long term, an allocation to diversified equities should help the LCF grow assets and meet its spending needs. Thrivent Small Cap Stock Fund invests in small-cap U.S. equities with a blended, core style. It conducts fundamental, bottom-up research to find discounted high quality companies that are able to deliver higher return on invested capital than their cost of capital. Their portfolio holdings tend to have improving fundamentals and a competitive advantage with respect to their peers and/or a niche strategy. Valuation comes at the back-end of the investment process, and focuses on revenue growth, margins, and asset utilization. The portfolio s quality bias results in a defensive posture that should protect the portfolio in down markets but underperform in sharply rising markets. The resulting portfolio typically holds between 200 and 250 names, is largely benchmark-neutral (Lipper Small Cap) with respect to sector exposures, and averages approximately 100% turnover. Vanguard MSCI Emerging Markets ETF (emerging markets equity) Vanguard MSCI Emerging Markets ETF provides highly liquid, cheap and diversified core exposure to Emerging Markets equities. It is combined with the LCF s other Global ex-u.s. equity managers to produce a diversified global ex-u.s. equity portfolio. The LCF s global ex-u.s. equity portfolio plays an integral role in its long-term strategic asset allocation. Global ex-u.s. equities should provide long term returns that are higher than those of fixed income with accordingly increased volatility; over the long term, an allocation to diversified equities should help the Foundation grow assets and meet its spending needs. The Vanguard MSCI Emerging Markets ETF seeks to track the investment performance of the MSCI Emerging Markets Index. The team invests approximately 95% of its assets in the common stocks of the index, while employing a form of sampling to reduce risk. Proprietary software is utilized to implement trading decisions that accommodate cash flow and maintain close correlation with index characteristics. The ETF typically holds between names. Given the ETFs daily liquidity, is it used as a source of funds for rebalancing within the LCF s emerging market equity exposure. 9

10 Wellington Diversified Inflation Hedges (DIH) Fund (real assets) Wellington Diversified Inflation Hedges (DIH) Fund provides diversified exposure to several sub-asset classes within real assets (long-only natural resources equities, commodities, and TIPS). It is combined with the LCF s other liquid real assets managers to produce a diversified liquid real assets portfolio. The LCF s liquid real assets portfolio plays an integral role in the LCF s long-term strategic asset allocation. A basket of diversified liquid real assets tends to have a higher correlation to unexpected inflation than equity or fixed income markets; real assets also serve to diversify the portfolio, resulting in lower overall volatility. Over the long term, a diversified and liquid real assets portfolio should reduce volatility and mitigate the impact of high unexpected inflation, which can be detrimental to institutions that might be otherwise be forced to sell depressed securities to meet spending needs. Wellington DIH is an all-in-one public real assets product, which gains its exposure through actively managed sleeves. About half of its exposure comes from natural resource equities including energy, metals & mining, agriculture, precious metals, and global climate change products. The other half is roughly split between commodities and TIPS. It serves as a satellite manager within the LCF s real asset portfolio and its active management can tactically dial up or dial down the LCF s types of real asset exposure based on market valuations and inflation-hedging capabilities. This strategy serves as a complement to LCF s core real asset manager allocations. Westwood Global Investments Smaller Companies Fund (emerging markets equity) Westwood Global Investments Smaller Companies Fund provides concentrated and differentiated exposure to emerging markets equities with a focus on smaller capitalization companies. It is combined with the LCF s other global ex-u.s. equity managers to produce a diversified global ex-u.s. equity portfolio. The LCF s global ex-u.s. equity portfolio plays an integral role in its long-term strategic asset allocation. Global ex-u.s. equities should provide long term returns that are higher than those of fixed income with accordingly increased volatility; over the long term, an allocation to diversified equities should help the LCF grow assets and meet its spending needs. Westwood Global Investments Smaller Companies Fund invests in securities of smaller capitalization emerging market companies. The fund conducts fundamental, bottom-up research with a focus on free cash flow, valuations and management quality. The universe is screened based on volume (i.e. names that trade less than 10 million shares per day). This approach results in a low turnover portfolio of longterm, high quality holdings and a lower volatility performance pattern versus the broad small cap emerging market equity universe. Westwood is an independently owned firm run by experienced investors. The firm has exhibited financial strength, stability and good business sense since its inception in