Investment Fund of the Diocese of Long Island

Presentation to the 140th Annual Convention

November 10-11, 2006

John H. Andren, Jr.

Treasurer

Trustees of the Estate Belonging to the

Diocese of Long Island

Objectives of the Fund

Provide professional investment management to any institution of the Episcopal Diocese of Long Island

Maximize total long-term rate of return with reasonable risk by seeking capital appreciation and current income.

Brief History

2006 marks the 60th anniversary of the Fund

Authorized by 1940 Diocesan Convention

Necessary legislation not passed by Albany until 1946

The “Why’s” of the Present Structure

The stock market debacle of 2000-2002 (dotcom implosion, Enron and friends) pointed out weaknesses in our controls, procedures and allocations

Investment Committee undertook a zero-based review of our policies and our managers, leading to significant changes and to hiring an advisory firm

Responsibility of the Trustees

Approval of Allocations

Approval of Managers

Approval of Dividend Rates

“Where the buck stops”

Advised by Investment Committee

Composed of Trustees and other business professionals

Monitors the performance of the managers

Recommends changes, when appropriate, for approval by the Trustees.

Using an Outside Consultant

Consultant, with extensive databases

Tracks performance of many managers

Is alert to management changes

Is alert to market trends

Fund CharacteristicsQuality professional management of the portfolioFiduciary oversightIndependent of General Funds of the DioceseDiversification among various asset classes and strategiesEnhanced investment structure fully implemented as of 2005Difference between Total Return and Dividend Payout - Total Return is intended to accomplish two goals: provide income and preserve buying power by accounting for inflation. Hence a portion of the total return (currently 3%) is retained in the fund.

Financial Highlightsas of September 30, 2006

$610.06Value per Share

178,054Number of Shares

$108,623,180Shareholders’ Equity

805,200Total Liabilities

$109,428,380Total Assets

More Financial Highlightsas of September 30, 2006

=$8,257,876Total Increase in Net Assets

+2,486,972Capital Transactions

=5,770,904Net Increase from operations

-3,190,161Dividends

+5063,762Change in Unrealized Gains

+2,633,027Realized Gains

-312,730Expenses

$1,577,006Interest & Dividend Income

Performance

Historical

Current

Projected

Fund Performance

The Total Fund posted a gain of 11.7% for the one-year period ended September 30, 2006, surpassing both the S&P 500 Index and the average balanced manager by a notable margin.

The portfolio exhibits strong, relative long-term performance with a five-year return of 9.1% compared to the S&P 500 Index return of 7.0% and the 6.6% return of the median balanced manager.

*Returns are reported net of all fees.

Historical Share Price

Investment FundHistorical Share Price

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

$550

$600

$650

$700

$750

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

2006 Share Price

Investment Fund Share Price 2006

$570

$580

$590

$600

$610

$620

Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Future Performance

Asset Allocation

Goals of the allocation process:

Maximum return consistent with prudent trust management

Reduced dependence on equities

Broadened international scope

Lowered volatility

Consistent returns

Asset AllocationInternational equity managers have outpaced international benchmarks and domestic equity returnsThe real estate securities portfolio increases both diversification and yield The fixed income allocation is maintained within the Fund to minimize volatilityHedge fund of funds are used to add further diversification and provide a low-volatility return enhancement to the fixed income allocation.The fund comprises a wide variety of domestic equity managers covering both large cap value and growth as well as small cap core

Russell/Mellon Trust Fund Endowment Universe

Asset Allocation Comparison

Source: Russell/Mellon Endowment Universe, June 30, 2006

As of June 30, 2006

Diocese of Long Island Current Allocation

Returns

The return to investors has two elements: the amount credited to the accounts and the increase in the value of the shares. This is the total return. It includes all fees and expenses.

Inflation effect

Why is it a concern?

Need to maintain purchasing power

Mandatory consideration in managing trust funds

Common sense says it’s the right thing

Inflation – how do we deal with it

We estimate total return, e.g, 8%

We subtract an inflation factor, using Consumer Price Index as a guide, currently 3%

Expenses historically average .5%

Making the dividend rate 4.5%

Amount Credited vs. Total Return

$19,000-$6,060Difference

$577,000$577$25,0204.50%$5562005

$558,000$558$31,0806.00%$5182004

Total Share Value

Year-end Share Price

Cash Paid Out

Payout Rate

Average share Price

Year

Dividend HistoryShare Change in Dividend Total

Dividend Valuation Share Value Yield ReturnPrior Years Annual Annual Annual Annual

1995 $24.00 $464.96 20.39% 6.21% 26.60%1996 25.38 495.92 6.66% 5.46% 12.12%1997 27.16 558.64 12.65% 5.48% 18.12%1998 30.35 645.12 15.48% 5.43% 20.91%1999 33.80 727.11 12.71% 5.24% 17.95%2000 37.67 632.95 -12.95% 5.18% -7.77%2001 39.32 566.38 -10.52% 6.21% -4.31%2002 37.77 462.98 -18.26% 6.67% -11.59%2003 33.50 532.85 15.09% 7.24% 22.33%2004 30.78 558.18 4.75% 5.78% 10.95%2005 22.99 577.18 3.40% 4.12% 7.76%

Actual Vs. Average Share price

300

350

400

450

500

550

600

650

Dec-0

2

Apr-0

3

Aug-0

3

Dec-0

3

Apr-0

4

Aug-0

4

Dec-0

4

Apr-0

5

Aug-0

5

Dec-0

5

Dolla

rs

Share Price

36 MonthAverage

Actual vs. Average Share Price

300.00

350.00

400.00

450.00

500.00

550.00

600.00

650.00

Oct-03

Jan-0

4

Apr-0

4Ju

l-04

Oct-04

Jan-0

5

Apr-0

5Ju

l-05

Oct-05

Jan-0

6

Apr-0

6Ju

l-06

Dol

lars Share Price

36 MonthAverage

Subscribing to the Fund

Participation in the Fund is open to all Parishes and Diocesan Organizations.

Our charter does not allow us to accept accounts from individuals

Contact the Diocesan Office. Details are in your handouts.