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United Church Funds — Overview
The trusted investment partner of over 1,000 local churches and ministries of the United Church of Christ
Over $797 million in assets under management*
Thirteen investment funds, with socially responsible fund options
Experienced leadership in the development, management and governance of endowments
* As of November 30, 2014
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Our mission in four words —
Invest responsibly. Strengthen ministry.
United Church Funds lives its mission by —
Investing wisely to help our investors achieve their financial goals for their ministries
Using the power of ownership to effect positive change, believing a responsibly managed company makes a better long-term investment
Offering our investors a range of options and resources to strengthen their portfolios, their endowment management, and the ministries they value
Our Mission
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For over 100 years, United Church Funds (UCF) has served the churches and ministries of the UCC
UCF offers professional investment management services in a not-for-profit structure, reducing costs and providing more money for ministry
With experienced leadership overseeing carefully chosen fund managers who represent some of the best minds on Wall Street, and a commitment to responsibility in ecumenical collaboration, UCF offers a unique opportunity for investors seeking to do well and do good
United Church Funds’ Structure
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UCF INVESTMENT COMMITTEE
Veteran financial professionals from avariety of backgrounds volunteer their time and expertise to establish UCF’s investment policy and overall strategy
CHIEF INVESTMENT STRATEGIST
David Klassen and his team manage
asset allocation among a carefullychosen set of managers, and
ensure daily oversight of UCF’s portfolios
INVESTMENT CONSULTANT
Summit Strategies provides the Investment Committee and Chief Investment Strategist with manager research, due diligence and monitoring
INVESTMENT MANAGERS
A diversified group of managers selected for their particular
expertise and experience in a given asset class or investment
style
Investment Management Governance &
Process
Investment Process — Management
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Our investment committee approves allocations to investment managers based on the recommendation of the Chief Investment Strategist, with input from our external consultant
Based on market conditions, and in alignment with UCF’s Investment Policy, the investment team may overweight or underweight certain asset classes, or allocate to managers with an investment strategy that achieves portfolio goals
Investment Process — Asset Allocation
Chief Investment Strategist David Klassen, CFA
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Our investment team works through our investment managers, who are ultimately responsible for specific security selection
Our investment team tracks and manages our investment managers to ensure they remain competitive with benchmarks and peers, and remain true to their strategy, risk profile, and UCF’s social responsibility mandate
Investment Process — Investment Selection
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UCF uses recognized benchmarks relevant to each fund’s asset class, and creates custom benchmarks for our funds of funds
Our investment team uses benchmarks to track the performance and risk profile of our funds, making tactical changes and shifting manager allocations — even manager selections — based on manager performance and risk profile against the benchmark
Investment Process — Benchmarks
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UCF offers 13 funds —
• Six actively managed funds with exposure to fixed income, domestic equity, international equity, and alternatives
• Six funds of funds providing managed allocations consistent with varying risk profiles
• A money market fund
UCF works to help each investor understand their risk tolerance so that they can choose funds consistent with their long-term objectives
A Family of Funds — Traditional Offerings
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A Family of Funds — Beyond Fossil Fuels
On November 1, UCF opened the Beyond Fossil Fuels Fund — an enhanced index domestic equity fund free of companies that extract or produce fossil fuels
For investors who prefer to invest in a balanced fund, UCF also offers the Beyond Fossil Fuels Balanced Fund, which will substitute the domestic core equity portion of the Moderate Balanced Fund with a similar allocation to the Beyond Fossil Fuels Fund
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In 2015, UCF anticipates opening a fund focused on community finance and inclusive, global microenterprise
A Family of Funds — Impact Investing
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Corporate Engagementsto encourage better policies & practices
Shareholder Resolutionsas a tool to strengthen engagement
Collaboration with Key Partners including the Interfaith Center on Corporate Responsibility and US SIF, and as a signer to the UN Principles for Responsible Investing and the Carbon Disclosure Project
Proxy Votingconsistent with UCC values & goals
Screened Portfolioscurrently excluding tobacco, alcohol, gambling, and military products/services
Social Responsibility — a Multi-Faceted Approach
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Current Shareholder Engagements — Environmental
Carbon Asset Risks Addressing oil companies’ unburned reserves
Greenhouse Gas Emissions Encouraging sustainable oil production
Hydraulic Fracturing Demanding disclosures on fracking process and fracking fluid additives
Water Highlighting manufacturers’ water use in water- stressed regions and the human right to water
Sustainable Agriculture Persuading food conglomerates to use practices that ensure safe, sustainable food production
RECENT WIN
Seventy investor partners, including United Church Funds, have expanded the public’s awareness of the potential risks companies continue to incur by counting unburned fossil fuels as assets on corporate balance sheets.
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Current Shareholder Engagements — Social
Child Labor & Trafficking Eliminating child labor on African cocoa farms
Human Rights Challenging inmate care in private prisons
Ethical Employment & Discouraging profit-making from Occupation Operational Practices support in Israel
RECENT WIN
Faith-based investors celebrated the multi-pronged effort to de-legitimize bank payday loans. Through shareholder resolutions, United Church Funds has long participated in the investor group challenging the financial responsibility and predatory nature of payday lending at Wells Fargo.
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Current Shareholder Engagements — Governance
Corporate Political Lobbying Demanding disclosure of gifts and lobbying by oil and gas, banking and private prison corporations
Corporate Board Diversity Ensuring corporations express gender and racial diversity
Management Compensation Encouraging responsible compensation practices
RECENT WIN
After co-filing a resolution regarding the lobbying practices of Occidental Petroleum in 2014, UCF celebrated this company’s decision to quit its membership in the American Legislative Exchange Council, an environmentally detrimental organization dedicated to drafting legislation jointly with lawmakers and corporate representatives.
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Socially Responsible Investing — New and Upcoming Offerings
As challenges facing our world grow, United Church Funds actively seeks opportunities to enhance our values-based portfolio and options for investors Beyond Fossil Fuels Fund
Large cap equity fund free of fossil fuel companies
Impact Investing Fund*
Mission-aligned investing focusing on community finance and inclusive, global microenterprise
Evaluation of Core Practices
Examining exclusionary screens, optimizing client resources and refining the existing Social Action Fund* Opening in 2015
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Trust Services UCF offers a full range of trust
management services —I.e. The Richard & Helen Brown Endowment for Pastoral Scholarships, has provided more than $5 million to train pastors over the last 14 years
Planned Giving Management of gift annuities,
charitable trusts and other legacy gifts
Educational resources for gift development
Financial Education Seminars, workshops,
conferences
Investor Services at United Church Funds
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UCF’s Investor Services team answers the telephone directly when clients call during office hours — no voice menu to navigate!
UCF’s Investor Development team meets face-to-face or by conference call for periodic portfolio reviews
In addition to quarterly statements and daily updated account information, UCF hosts live performance webinars each quarter featuring the Chief Investment Strategist and his team
Investor Services at United Church Funds
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Building a Legacy — Supporting Church Endowments
UCF provides educational resources to help churches better understand the essential elements of building a strong endowment and related policies
UCF manages administration and marketing of legacy giving for the UCC, with resources under development to assist churches and organizations in creating sustainable legacy programs
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Building a Legacy — Supporting Planned Giving
Since the inception of the UCC’s planned giving program, United Church Funds has served as the fiscal agent for the program
UCF supports local churches and ministries as they develop endowment giving programs — providing educational resources and assisting churches as they grow their legacies
Unlike a commercial broker or bank, UCF stands ready to be your trusted partner to grow your endowment by helping your church create new gift opportunities
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Committed to keeping expenses low and reporting transparent, UCF maintains fully-inclusive expense ratios for all funds.
Established annually based on anticipated expenses and assets
Inclusive of all manager expenses
Inclusive of all administrative, transaction and custody expenses
Not subject to 12b-1 fees or sales commissions
Charged to funds on a quarterly basis before performance is calculated
One Single, Comprehensive Expense Charge
2015 Expense Ratios
Cash & Equivalent .00%
Fixed Income .58%
Domestic Core Equity .62%
Beyond Fossil Fuels .85%
Small Cap Equity 1.41%
International Equity 1.23%
Total Equity 1.03%
Conservative Balanced .82%
Moderate Balanced .89%
Aggressive Balanced .95%
Beyond Fossil Fuels Balanced
.96%
Alternatives Fund 1.56%
Alternatives Balanced 1.07%
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United Church Funds appreciates the opportunityto present our hope and desire to share in and support
the mission and ministry of [insert name here!}
Thank you!
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APPENDIX
Contents —
United Church Funds Staff
Board of Directors & Investment Committee
Individual fund details
Disclaimer
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UCF Staff
Donald G. Hart President and Chief Investment OfficerThe Rev. Cheri L. Lovell Director, Marketing & Strategic InitiativesKathryn O. McCloskey Director, Social ResponsibilityThe Rev. Nelson R. Murphy Director, Investor DevelopmentTheodore E. Phillips Director, Finance & AdministrationMilagros Hernandez Investor Services Team LeaderMatthew W. Wagner Investor Development AssociateCrysta Seelal Investor Services RepresentativeKaren Sherman-Chang ControllerMichele Hamilton Staff AccountantCarla Bergmeier Communications SpecialistLynne Hansen Planned Giving AssociateGaylord Tang Administrative Assistant
Contracted Services from The Pension Boards — UCC
David A. Klassen Chief Investment StrategistMichael J. de Guzman Senior Investment Analyst
[email protected] 877-806-4989 ucfunds.org
United Church Funds Staff
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Board of DirectorsMr. Nesa Joseph, ChairThe Rev. Geoffrey A. Black, ex
officioThe Rev. Dr. Charles BuckThe Rev. Kathy DwyerMr. William EpkeMs. Barbara EverettMs. Sylvia G. Ferrell-JonesMs. Edith GuffeyMr. Steven J. GuyThe Honorable Brian F. HolemanThe Rev. Dr. Sandra HulseThe Rev. Gwendolyn V. KirklandThe Rev. Penny L. LowesMs. Stella A. SchoenThe Rev. Harold S. SchultzThe Rev. Bernard Wilson, ex officioMr. Wade Zick
Members EmeritusThe Rev. Dr. Harold C. Smith
Investment Committee
Mr. Steven J. Guy,* ChairMr. Dennis BusheMs. Sylvia G. Ferrell-Jones*Mr. Donald G. Hart, ex officioMr. Douglas HatfieldThe Rev. Dr. Sandra S. Hulse*The Rev. Gwendolyn V. Kirkland*Mr. Mark Parthemer
Member EmeritusThe Rev. Dr. Harold C. Smith
* Members of the Board of Directors
Board of Directors & Investment Committee
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Q3 2014 Performance
Year One Two Three Five Ten
To Date Year Years Years Years Years
Fixed Income Fund 10/1/1994 -0.57% 3.21% 3.54% 0.88% 2.58% 4.11% 4.62%Custom Index 85% Barclays Capital Gov't/Credit Bond, 5% JPM GBI-EM Global Diversified, 10% S&P LSTA Performing Loan
-0.17% 3.73% 3.80% 0.82% 2.43% 4.21% 4.56%
Domestic Core Equity Fund 10/1/2005 0.45% 8.70% 20.08% 19.75% 23.54% 15.58% N/AS&P 500 Index 1.13% 8.34% 19.73% 19.54% 22.99% 15.70%Small Cap Equity Fund 10/1/2005 -4.79% -0.83% 9.55% 19.49% 22.07% 12.52% N/ARussell 2000 Index -7.36% -4.41% 3.93% 16.26% 21.26% 14.29%International Equity Fund 10/1/2005 -6.15% -2.10% 2.55% 7.73% 10.65% 6.11% N/ACustom Index 70% EAFE net, 30% MSCI EM net -5.13% -0.18% 4.36% 10.28% 11.76% 5.79%
Alternatives Fund 7/1/2010 3.79% 5.94% 10.01% 8.16% 6.74% N/A N/A
Custom Index 70% HFRI Funds of Funds Composite, 30% NCREIF Fund Index 0.39% 3.55% 7.20% 7.83% 7.05%
Total Equity Fund42.7% Domestic Core Equity, 10.6% Small Cap Equity and 46.7% International EquityCurrent Policy Index 40% S&P 500, 10% Russell 2000, 35% EAFE,15% MSCI Emerging Markets Net -2.86% 2.77% 10.31% 14.62% 17.21% 11.47% 6.71%Conservative Balanced Fund 1/1/200638.0% Equity, 57.0% Fixed Income and 5.0% C&ECurrent Policy Index 35% Equity Policy, 65% BCGC -1.11% 3.46% 6.12% 5.55% 7.58% 6.99%Moderate Balanced Fund63.0% Equity, 32.0% Fixed Income and 5.0% C&ECurrent Policy Index 60% Equity Policy, 40% BCGC -1.78% 3.22% 7.75% 8.99% 11.28% 8.83% 6.20%Aggressive Balanced Fund 1/1/200678.1% Equity, 17.6% Fixed Income and 4.3% C&ECurrent Policy Index 75% Equity Policy, 25% BCGC -2.19% 3.06% 8.72% 11.09% 13.50% 9.86%Alternatives Balanced Fund 7/1/201056.1% Equity, 22.3% Fixed Income, 21.6% AlternativesCurrent Policy Index 50% Equity Policy, 30% Fixed Income Policy and 20% Alternatives Policy -1.40% 3.28% 7.79% 9.18% 11.13%
10/1/1994
circa 1958
ANNUALIZED
Returns on UCF's funds are presented net of fees QuarterInception
Date
MAN
AG
ED F
UN
DS
FUN
DS
OF
FUN
DS
-3.31% 2.34% 10.15% 13.69%
-1.64% 2.83% 6.09% 5.47%
-2.31%
17.00% 10.95% 5.82%
7.81% 6.77% N/A
2.61% 7.69% 8.60% 11.32% 8.39% 5.71%
-2.72% 2.51% 8.76% 10.61% 13.59% 9.38% N/A
-1.14% 2.90% 8.14% 8.91% 10.83% N/A N/A
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Fixed Income Fund
Benchmark 85% Barclays Capital US Gov’t/ Credit Index5% JPMorgan Gov’t Bond Index: Emerging Markets Global Diversified10% S&P LSTA Performing Loan
Managers Standish Emerging MarketsPension Boards UCCWestern Asset
Invested primarily in intermediate & long-term US Dollar government and investment-grade corporate fixed income obligations, with up to 10% emerging markets debt
YTD 9/30/14
1 Year 2 Years 3 Years 5 Years 10 Years0%
2%
4%
6%
3.21% 3.54%
0.88%
2.58%
4.11%
4.62%
3.73% 3.80%
0.82%
2.43%
4.21%4.56%
Fixed Income Custom Index
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Domestic Core Equity Fund
Benchmark S&P 500 Index
Managers Fiduciary Management Inc. Quantitative Management AssociatesState Street Global Advisors
YTD 9/30/14
1 Year 2 Years 3 Years 5 Years0%
5%
10%
15%
20%
25%
Domestic Core Equity S&P 500
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Small Cap Equity Fund
Benchmark Russell 2000 Index
Managers Fiduciary Management Inc. (core)Westfield Capital Management (growth)Dimensional Fund Advisors (value)
YTD 9/30/14
1 Year 2 Years 3 Years 5 Years-10%
-5%
0%
5%
10%
15%
20%
25%
-0.83%
9.55%
19.49% 22.07%
12.52%
-4.41%
3.93%
16.26%
21.26%
14.29%
Small Cap Equity Russell 2000
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International Equity Fund
Policy Index 70% EAFE Index30% MSCI Emerging Markets Index
Managers Aberdeen Asset Management (emerging markets)Baillie Gifford (growth)LSV Asset Management (value)Oaktree Capital Management(emerging markets)
YTD 9/30/14
1 Year 2 Years 3 Years 5 Years-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
-2.10%
2.55%
7.73%
10.65%
6.11%
-0.18%
4.36%
10.28%11.76%
5.79%
International Equity Custom Index
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Total Equity Fund
Policy Index 40% S&P 500 Index10% Russell 2000 Index35% EAFE Index15% MSCI Emerging Markets Index
A fund of funds that includes an allocation to equity portfolios
YTD 9/30/14
1 Year 2 Years 3 Years 5 Years 10 Years0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Total Equity Custom Index
Actual 9/30/14 Target
0%10%20%30%40%50%60%70%80%90%
100%
43%40%
11%10%
30%35%
16% 15% Interna-tional, Emerging
Interna-tional,Developed
Small Cap
Domestic Core
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Balanced Funds
Target Allocations
Conservative Balanced Fund35% equity/65% fixed income
Moderate Balanced Fund60% equity/40% fixed income
Aggressive Balanced Fund75% equity/25% fixed income
Conserva-tive Moderate
Aggressive
35%
60%75%
65%
40%25%
Total EquityFixed Income
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Conservative Balanced Fund
Policy Index 35% Total Equity Fund Policy Index65% Barclays Capital US Gov’t/ Credit Index
Target Allocation65% fixed income, 35% equity
YTD 9/30/14
1 Year 2 Years 3 Years 5 Years0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
2.83%
6.09%
5.47%
7.81%
6.77%
3.46%
6.12%
5.55%
7.58%
6.99%
Conservative Balanced FundPolicy Index
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Moderate Balanced Fund
Policy Index 60% Total Equity Fund Policy Index40% Barclays Capital US Gov’t/ Credit Index
Target Allocation60% equity, 40% fixed income
YTD 9/30/14
1 Year 2 Years 3 Years 5 Years0%
2%
4%
6%
8%
10%
12%
2.61%
7.69%
8.60%
11.32%
8.39%
3.22%
7.75%
8.99%
11.28%
8.83%
Moderate Balanced Fund Policy Index
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Aggressive Balanced Fund
Policy Index 75% Total Equity Fund Policy Index25% Barclays Capital US Gov’t/ Credit Index
Target Allocation75% equity, 25% fixed income
YTD 9/30/14
1 Year 2 Years 3 Years 5 Years0%
2%
4%
6%
8%
10%
12%
14%
16%
2.51%
8.76%
10.61%
13.59%
9.38%
3.06%
8.72%
11.09%
13.50%
9.86%
Aggressive Balanced Fund Policy Index