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Home My Public Portal About2014 1st Quarter ReportPerformance Review Metropolitan St. Louis Sewer District Deferred Compensation Plan 1st Quarter 2014 Pavilion Advisory Group Inc. 227 W. Monroe Street, Suite 2020 Chicago, IL 60606 Phone: 312-798-3200 Fax: 312-902-1984 www.pavilioncorp.com 1 Executive Summary 1 2 Performance Summary 3 3 Plan Assets 10 4 Manager Evaluation 13 5 Capital Markets Review 47 Table Of Contents Executive Summary 1 Performance Summary - March 2014 First quarter fund performance was due to relatively muted performance from the equity markets, due to weak global economic data, and a bounce-back from the global fixed income market, which benefited from the volatility and uncertainty surrounding the equity markets. Plan Assets The investment menu provides a combination of single strategy funds and diversified portfolios including a balanced fund and target retirement date funds. The retirement dates range from 2010 through 2060 in five year increments. Manager Evaluation Vanguard is a market leader and well known for its low cost market index and institutional investment funds. In February 2014, Vanguard announced that the Vanguard Growth Equity Fund merged with the Vanguard U.S. Growth Fund. The merged fund will keep Vanguard U.S. Growth Fund's current subadvisors, Delaware, Wellington, and William Blair, while adding Vanguard Growth Equity Fund's subadvisors, Bailie Gifford and Jennison, effectively increasing the number of advisors from 3 to 5. Pavilion will continue to monitor the manager for further developments. There no were major changes to the other investment options. More detailed analysis of the managers' performance can be found in the Manager Evaluation section. Of the three active managers available in the investment menu, Vanguard U.S. Growth and Vanguard International Growth were the weakest relative performers. The managers trailed their respective style benchmarks by 40 and 130 basis points during the first quarter, as stock selection within the technology sector was a main detractor for both strategies. The large-cap value and mid-cap segments were the best absolute performers for the quarter. Target retirement date funds modestly trailed their respective benchmarks over longer-termed periods. Capital Markets Review Macroeconomic and geopolitical concerns sent the global equity markets on a roller coaster ride during the first quarter. In the beginning of the quarter, risk aversion grew, equity markets tumbled, and emerging market currencies sold off. However, in February and March, as emerging market currencies stabilized and U.S. market weakness was attributed to the brutal winter weather, equity markets rebounded and produced modest gains for the quarter. Stronger corporate earnings also helped spark the turnaround. Within the domestic equity market, value companies significantly outperformed growth companies, while large-cap companies outperformed small-cap companies. Nonetheless, the strongest returns came from the mid-cap segment. Moreover, defensive sectors, including utilities and health care, saw the strongest rallies. In the developed international equity market, it was a tale of two continents, where the European region, in particular the Nordic countries, experienced robust results while the Asia-Pacific region, in particular Japan, produced negative returns. The fixed income market bounced back considerably from poor 2013 results. All major fixed income benchmarks produced positive total returns during the quarter, as the yield curve flattened during the quarter. Recommendations or Action Items No recommendations at this time. Pavilion will prepare an investment structure review to be presented at the November 2014 Finance Committee Meeting. Deferred Compensation Plan Executive Summary 2 Performance Summary 3 Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Domestic Equity Options Vanguard 500 Index (VFINX)1.8 (42)1.8 (42)21.7 (53)14.5 (30)21.0 (33)7.3 (48) S&P 500 1.8 (41)1.8 (41)21.9 (51)14.7 (26)21.2 (31)7.4 (45) Large-Cap Equity Peer Group Median 1.5 1.5 21.9 13.2 20.1 7.2 Vanguard US Growth (VWUSX)0.7 (40)0.7 (40)24.4 (45)14.8 (29)20.3 (54)7.0 (65) Russell 1000 Growth Index 1.1 (31)1.1 (31)23.2 (55)14.6 (32)21.7 (33)7.9 (43) Large-Cap Growth Equity Peer Group Median 0.3 0.3 23.7 13.3 20.4 7.5 Vanguard Windsor II (VWNFX)2.9 (21)2.9 (21)21.9 (45)14.8 (21)21.1 (32)7.7 (35) Russell 1000 Value Index 3.0 (18)3.0 (18)21.6 (49)14.8 (22)21.8 (21)7.6 (37) Large-Cap Value Equity Peer Group Median 1.9 1.9 21.4 13.2 20.0 7.1 Vanguard Mid-Cap Index (VIMSX)3.2 (24)3.2 (24)23.4 (42)13.4 (32)24.9 (26)9.8 (32) Vanguard Mid-Cap Index Fund Blended Benchmark 3.3 (23)3.3 (23)23.8 (40)13.7 (28)25.2 (22)10.0 (28) Mid-Cap Equity Peer Group Median 1.7 1.7 22.6 12.2 23.0 9.1 Vanguard Small-Cap Index (NAESX)2.6 (22)2.6 (22)25.1 (52)14.2 (35)26.6 (25)9.8 (18) Vanguard Small-Cap Index Fund Blended Benchmark 2.6 (21)2.6 (21)25.3 (50)14.3 (32)26.8 (24)9.8 (17) Small-Cap Equity Peer Group Median 1.1 1.1 25.2 13.3 24.7 8.4 International Equity Option Vanguard International Growth (VWIGX)-0.8 (78)-0.8 (78)18.4 (37)7.0 (43)18.2 (23)7.9 (29) MSCI AC World ex USA (Net)0.5 (53)0.5 (53)12.3 (81)4.1 (83)15.5 (60)7.1 (47) International Equity Peer Group Median 0.6 0.6 16.1 6.4 15.9 6.9 Fixed Income Options Vanguard Total Bond Market Index (VBMFX)1.9 (69)1.9 (69)-0.3 (74)3.6 (79)4.6 (89)4.3 (66) Vanguard Total Bond Market Index Fund Benchmark 1.8 (72)1.8 (72)0.0 (61)3.8 (67)4.9 (84)4.5 (58) Market Duration Fixed Income Peer Group Median 2.0 2.0 0.4 4.3 6.9 4.7 Vanguard Retirement Savings Trust 0.4 0.4 1.7 2.2 2.5 3.3 Ryan 3 Yr GIC Master 0.3 0.3 1.0 1.5 2.4 3.2 Performance Summary Investment Options As of March 31, 2014 _________________________ Returns are expressed as percentages. Returns for periods greater than one year are annualized. Peer group percentile ranks are shown in parenthesis. 4 Performance Summary Investment Options As of March 31, 2014 Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Equity/Fixed Income Blend Options Vanguard Balanced Index (VBINX)2.0 (27)2.0 (27)12.9 (57)10.3 (16)15.0 (42)6.8 (24) Vanguard Balanced Index Fund Benchmark 2.0 (25)2.0 (25)13.3 (48)10.7 (10)15.4 (32)7.0 (18) 60% Equity / 40% Fixed Peer Group Median 1.5 1.5 13.2 9.1 14.8 6.3 Vanguard Target Retirement Income (VTINX)1.6 (54)1.6 (54)4.9 (66)6.3 (39)9.3 (77)5.3 (32) Vanguard Target Income Composite Index 1.6 (51)1.6 (51)5.2 (61)6.4 (36)9.5 (75)5.3 (32) IM Mixed-Asset Target Alloc Consv (MF) Median 1.6 1.6 5.9 5.9 10.7 4.8 Vanguard Target Retirement 2010 (VTENX)1.7 (29)1.7 (29)7.2 (47)7.1 (19)12.1 (49)N/A Vanguard Target 2010 Composite Index 1.7 (27)1.7 (27)7.5 (43)7.2 (18)12.3 (48)N/A IM Mixed-Asset Target 2010 (MF) Median 1.5 1.5 7.0 5.7 12.0 4.7 Vanguard Target Retirement 2015 (VTXVX)1.8 (23)1.8 (23)9.9 (20)8.0 (12)13.7 (37)6.1 (9) Vanguard Target 2015 Composite Index 1.8 (20)1.8 (20)10.3 (13)8.1 (9)13.8 (29)6.1 (9) IM Mixed-Asset Target 2015 (MF) Median 1.5 1.5 8.2 6.3 13.1 4.5 Vanguard Target Retirement 2020 (VTWNX)1.8 (15)1.8 (15)12.0 (15)8.7 (9)14.9 (29)N/A Vanguard Target 2020 Composite Index 1.9 (12)1.9 (12)12.3 (9)9.0 (4)15.2 (25)N/A IM Mixed-Asset Target 2020 (MF) Median 1.5 1.5 9.1 6.8 13.8 5.3 Vanguard Target Retirement 2025 (VTTVX)1.8 (26)1.8 (26)13.4 (23)9.3 (15)16.1 (45)6.4 (N/A) Vanguard Target 2025 Composite Index 1.8 (20)1.8 (20)13.8 (20)9.6 (10)16.4 (34)6.5 (N/A) IM Mixed-Asset Target 2025 (MF) Median 1.5 1.5 11.8 8.1 15.8 N/A Vanguard Target Retirement 2030 (VTHRX)1.7 (18)1.7 (18)15.0 (23)9.8 (15)17.2 (30)N/A Vanguard Target 2030 Composite Index 1.8 (12)1.8 (12)15.3 (20)10.1 (9)17.5 (22)N/A IM Mixed-Asset Target 2030 (MF) Median 1.5 1.5 13.2 8.2 16.3 5.7 Vanguard Target Retirement 2035 (VTTHX)1.7 (18)1.7 (18)16.4 (26)10.3 (18)18.1 (27)6.9 (N/A) Vanguard Target 2035 Composite Index 1.8 (12)1.8 (12)16.8 (17)10.6 (10)18.5 (19)7.0 (N/A) IM Mixed-Asset Target 2035 (MF) Median 1.4 1.4 15.0 9.2 17.4 N/A Vanguard Target Retirement 2040 (VFORX)1.7 (24)1.7 (24)17.5 (18)10.7 (12)18.4 (26)N/A Vanguard Target 2040 Composite Index 1.8 (17)1.8 (17)17.8 (13)11.0 (7)18.7 (17)N/A IM Mixed-Asset Target 2040 (MF) Median 1.4 1.4 15.5 9.1 17.5 5.9 _________________________ Returns are expressed as percentages. Returns for periods greater than one year are annualized. Peer group percentile ranks are shown in parenthesis. 5 Performance Summary Investment Options As of March 31, 2014 Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Equity/Fixed Income Blend Options (cont.) Vanguard Target Retirement 2045 (VTIVX)1.7 (18)1.7 (18)17.5 (27)10.8 (16)18.5 (40)7.2 (N/A) Vanguard Target 2045 Composite Index 1.8 (16)1.8 (16)17.8 (20)11.0 (9)18.7 (25)7.3 (N/A) IM Mixed-Asset Target 2045 (MF) Median 1.5 1.5 16.5 9.7 18.2 N/A Vanguard Target Retirement 2050 (VFIFX)1.7 (25)1.7 (25)17.5 (29)10.7 (16)18.5 (33)N/A Vanguard Target 2050 Composite Index 1.8 (19)1.8 (19)17.8 (22)11.0 (7)18.7 (22)N/A IM Mixed-Asset Target 2050 (MF) Median 1.4 1.4 16.4 9.7 17.9 N/A Vanguard Target Retirement 2055 (VFFVX)1.7 (17)1.7 (17)17.5 (36)10.8 (17)N/A N/A Vanguard Target 2055 Composite Index 1.8 (17)1.8 (17)17.8 (29)11.0 (11)N/A N/A IM Mixed-Asset Target 2055+ Funds (MF) Median 1.4 1.4 16.8 9.8 17.8 N/A Vanguard Target Retirement 2060 (VTTSX)1.7 (20)1.7 (20)17.5 (37)N/A N/A N/A Vanguard Target 2060 Composite Index 1.8 (17)1.8 (17)17.8 (29)N/A N/A N/A IM Mixed-Asset Target 2055+ Funds (MF) Median 1.4 1.4 16.8 9.8 17.8 N/A Money Market Option Vanguard Prime Money Market (VMMXX)0.0 0.0 0.0 0.0 0.1 1.7 BofA Merrill Lynch 3 Month US T-Bill 0.0 0.0 0.1 0.1 0.1 1.7 _________________________ Returns are expressed as percentages. Returns for periods greater than one year are annualized. Peer group percentile ranks are shown in parenthesis. 6 Pe rformance Summary Manager Compliance Checklist As of March 31, 2014 Ma na gers Vanguard S&P 500 Inde x (V FINX) Va nguard US Grow th (VWUSX) Va nguard Windsor II (V WNFX) Vangua rd Mid-Ca p Index (V IMSX) Va nguard Small-Ca p Inde x (NAES X) Vangua rd Interna ti ona l Grow th (V WIGX) Vangua rd Total Bond Ma rke t Inde x (VBMFX) Vangua rd Re ti re ment Trust Organi zati onal /Produ ct Is sues No ma teria l c hanges to inves tment team ü Ye s ü ü ü ü ü ü No ma teria l o rg aniza tional changes ü ü ü ü ü ü ü ü Accounting or regulatory concerns ü ü ü ü ü ü ü ü Cu rrently in adherence to guidelin es ü ü ü ü ü ü ü ü Po rt fo lio characteris tics me et stylis tic expectations ü ü ü ü ü ü ü ü Re lati ve Perfor mance 1 Three-year return better than benchmark N/A ü In Li ne N/A N/A ü N/A N/A Three-year rankin g better than peer group median ü ü ü ü ü ü No (7 9)N/A Fiv e year re turn better than benchmark N/A No (-1 40 bps )No (-7 0 bps )N/A N/A ü N/A N/A Fiv e year ra nkin g better than peer group median ü No (5 4)ü ü ü ü No (8 9)N/AFive year ra nkin g better than peer group median ü No (5 4)ü ü ü ü No (8 9)N/A Perfor manc e s tatus Gr een Gr een Gr een Gr een Gr een Gr een Gr een Gr een Summar y s tatus Gr een Ye llow Gr een Gr een Gr een Gr een Gr een Gr een 1 Manager performance is evaluated net of investment management fees. 7 Pe rformance Summary Manager Compliance Checklist (Continued) As of March 31, 2014 Ma na ge rs Vanguard Ba lance d Inde x (V BI NX) Vangua rd Targe t Re ti re ment Income Fund (V TINX) Va ngua rd Targe t Re ti re ment 2010 (VTENX ) Va nguard Ta rge t Re ti re ment 2015 (V TXVX) Vangua rd Ta rge t Re ti re ment 2020 (V TW NX ) Vanguard Ta rge t Re ti re ment 2025 (V TTVX) Vangua rd Targe t Re ti re ment 2030 (V THRX ) Vangua rd Ta rget Re tire ment 2035 (V TTHX) Or ganizati onal /Produ ct Is sues No ma teria l c hanges to inves tment team ü ü ü ü ü ü ü ü No ma teria l o rg aniza tional changes ü ü ü ü ü ü ü ü Accounting or regulatory concerns ü ü ü ü ü ü ü ü Cu rrently in adherence to guidelin es ü ü ü ü ü ü ü ü Po rt fo lio characteris tics me et stylis tic expectations ü ü ü ü ü ü ü ü Re lati ve Perfor ma nce 1 Th re e-year return better than benchmark N/A N/A N/A N/A N/A N/A N/A N/A Th re e-year rankin g better than peer group median ü ü ü ü ü ü ü ü Five year re turn better than benchmark N/A N/A N/A N/A N/A N/A N/A N/A Five year ra nkin g better than peer group median ü No (7 7)ü ü ü ü ü üFive year ra nkin g better than peer group median ü No (7 7)ü ü ü ü ü ü Performan ce status Gr een Gr een Gr een Gr een Gr een Gr een Gr een Gr een Summar y s tatus Gr een Gr een Gr een Gr een Gr een Gr een Gr een Gr een 1 Manager performance is evaluated net of investment management fees. 8 Pe rformance Summary Manager Compliance Checklist (Continued) As of March 31, 2014 Mana gers Vanguard Ta rget Re ti re ment 2040 (V FORX) Vangua rd Targe t Re ti re ment 2045 (V TIVX) Va ngua rd Ta rge t Re ti re me nt 2050 (V FIFX) Vangua rd Ta rge t Re ti re ment 2055 (V FFVX) Vangua rd Ta rget Re ti re ment 2060 (VTTSX) Vangua rd Prime Mone y Marke t F und (V MMXX) Organizational /Produ ct Is sues No ma teria l c hanges to investment team ü ü ü ü ü ü No ma teria l o rg aniza tional changes ü ü ü ü ü ü Accounting or regulatory concerns ü ü ü ü ü ü Cu rre ntly in adherence to guidelin es ü ü ü ü ü ü Po rt fo lio characteris tics me et stylis tic expectations ü ü ü ü ü ü Re lati ve Performanc e 1 Thre e-year re turn better than benchmark N/A N/A N/A N/A N/A N/A Thre e-year ra nkin g better than peer group median ü ü ü ü N/A N/A Fiv e year return better than benchmark N/A N/A N/A N/A N/A N/A Fiv e year rankin g better than peer group median ü ü ü N/A N/A N/A 1 Manager performance is evaluated net of investment management fees. Fiv e year rankin g better than peer group median ü ü ü N/A N/A N/A Performance s tatus Gr een Gr een Gr een Gr een Gr een Gr een Summary status Gr een Gr een Gr een Gr een Gr een Gr een 9 Plan Assets 10 Plan Summary Deferred Compensation Plan Assets As of March 31, 2014 Invest ment Options Investm ent Style Al location Percentage Domestic Eq uity Funds Vanguard 500 Index I nv US Large Cap Equit y -Core $ 5,842,153 12.6%$ (41,369)- 0.7% Vanguard Windsor II Inv US Large Cap Equit y -Value $ 8,651,499 18.7%$ 255,943 + 3.0% Vanguard US Growth Inv US Large Cap Equit y -Growth $ 3,744,379 8.1%$ 47,906 + 1.3% Vanguard M id Cap Index I nv US Mid Cap Equit y -Core $ 2,477,487 5.4%$ 155,785 + 6.7% Vanguard Small Cap Index Inv US Small Cap Equit y -Core $ 2,689,056 5.8%$ 62,305 + 2.4% $ 23,404,575 50.6%$ 480,571 + 2.1% International Equ ity Funds Vanguard Internat ional Growth Internat ional Equit y $ 2,418,111 5.2%$ (39,807)- 1.6% $ 2,418,111 5.2%$ (39,807)- 1.6% Fi xed I ncome/Alte rnative Fu nds Vanguard T otal Bond M arket Index Inv Market Duration $ 2,477,124 5.4%$ (186,366)- 7.0% Vanguard Ret irement Savings Trust Short Durat ion $ 3,341,258 7.2%$ (40,342)- 1.2% Vanguard Balanced Index Inv Balanced $ 3,815,508 8.3%$ 50,790 + 1.3% $ 9,633,890 20.8%$ (175,918)- 1.8% $ Change From Previous Qtr % C hange From Pre vi ous Qtr $ 9,633,890 20.8%$ (175,918)- 1.8% Cash Vanguard Prime M oney Market Cash $ 1,132,207 2.4%$ 64,920 + 6.1% $ 1,132,207 2.4%$ 64,920 + 6.1% Ta rge t Date Funds Vanguard T arget Ret irement Income Inv Blend $ 253,990 0.5%$ (48,407)- 16.0% Vanguard T arget Ret irement 2010 Inv Blend $ 634,486 1.4%$ 10,105 + 1.6% Vanguard T arget Ret irement 2015 Inv Blend $ 1,152,405 2.5%$ 45,408 + 4.1% Vanguard T arget Ret irement 2020 Inv Blend $ 1,684,102 3.6%$ 130,468 + 8.4% Vanguard T arget Ret irement 2025 Inv Blend $ 2,016,245 4.4%$ 53,663 + 2.7% Vanguard T arget Ret irement 2030 Inv Blend $ 832,732 1.8%$ 36,218 + 4.5% Vanguard T arget Ret irement 2035 Inv Blend $ 769,298 1.7%$ 99,103 + 14.8% Vanguard T arget Ret irement 2040 Inv Blend $ 449,619 1.0%$ (5,135)- 1.1% Vanguard T arget Ret irement 2045 Inv Blend $ 418,473 0.9%$ 35,081 + 9.2% Vanguard T arget Ret irement 2050 Inv Blend $ 113,627 0.2%$ 14,796 + 15.0% Vanguard T arget Ret irement 2055 Inv Blend $ 9,286 0.0%$ 2,373 + 34.3% Vanguard T arget Ret irement 2060 Inv Blend $ 14,762 0.0%$ 520 + 3.7% 8,349,024$ 18.1%374,192$ + 4.7% Loan Fund Loan Fund Loan Fund $ 1,285,631 2.8%$ 62,652 + 5.1% TO TA L $ 46,223,439 100.0%$ 766,611 + 1.7% 11 Plan Summary Fee Comparison Summary Inv estment Option Expense Ratio Morningstar Cate gory Av erage Fe e Level Comparison Group M edian eVestment Al liance Univ erse Median Category Fe e Level Comparison Group eVestment Alliance Univ erse Va nguard 500 In dex 0.17 0.58 0.96 0.17 La rg e Ble nd La rg e Cap No Load US Passive La rg e Cap Equity Va nguard US Gro wt h 0.45 0.84 0.96 0.86 La rg e Growt h La rg e Cap No Load US Large Cap Gr owth Va nguard Windsor 0.36 0.90 0.96 0.83 La rg e Value La rg e Cap No Load US Large Cap Va lu e Va nguard Mid-Ca p Index 0.24 1.39 1.11 0.27 Mid Blend Mid Cap No Load US Pa ssive Mid Cap Equity Va nguard Sma ll-Ca p Index 0.24 0.79 1.20 0.27 Small Ble nd Small Ca p No Load US Passive Small Ca p Equity Va nguard International Gr owth 0.48 1.43 1.10 1.10 Foreign Large Gro wt h Fo re ig n Large Ca p No Load ACWI ex-US Gro wt h Equity Va nguard Total Bo nd Market Index 0.20 0.90 0.66 0.54 In terme diate-Term Bo nd In terme diate-Term Bond No Load US Co re Fixe d Income Va nguard Retire me nt Saving Trust 0.52 N/A N/A 0.68 N/A N/A US Stable Value Fixed In come Va nguard Balanced Index 0.24 0.73 0.93 0.73 Moderate Allo cation Moderate Allo cation No Load US Ba la nced Va nguard Target Retirement Income 0.16 0.67 0.66 0.46 Re tirement Income Re tire me nt Income No Load Life cycle/Target Date Income Va nguard Target Retirement 2010 0.16 0.53 0.64 0.55 Targ et Date 2000-2010 Target Retirement 2000-2010 No Lo ad Life cycle/Targ et Date 2010Vanguard Target Retirement 2010 0.16 0.53 0.64 0.55 Targ et Date 2000-2010 Target Retirement 2000-2010 No Lo ad Life cycle/Targ et Date 2010 Va nguard Target Retirement 2015 0.16 0.64 0.85 0.61 Targ et Date 2011-2015 Target Retirement 2011-2015 No Lo ad Life cycle/Targ et Date 2015 Va nguard Target Retirement 2020 0.16 0.67 0.80 0.62 Targ et Date 2016-2020 Target Retirement 2016-2020 No Lo ad Life cycle/Targ et Date 2020 Va nguard Target Retirement 2025 0.17 0.66 0.86 0.64 Targ et Date 2021-2025 Target Retirement 2021-2025 No Lo ad Life cycle/Targ et Date 2025 Va nguard Target Retirement 2030 0.17 0.68 0.82 0.65 Targ et Date 2026-2030 Target Retirement 2026-2030 No Lo ad Life cycle/Targ et Date 2030 Va nguard Target Retirement 2035 0.18 0.68 0.90 0.70 Targ et Date 2031-2035 Target Retirement 3031-2035 No Lo ad Life cycle/Targ et Date 2035 Va nguard Target Retirement 2040 0.18 0.68 0.84 0.69 Targ et Date 2036-2040 Target Retirement 2036-2040 No Lo ad Life cycle/Targ et Date 2040 Va nguard Target Retirement 2045 0.18 0.67 0.94 0.72 Targ et Date 2041-2045 Target Retirement 2041-2045 No Lo ad Life cycle/Targ et Date 2045 Va nguard Target Retirement 2050 0.18 0.65 0.84 0.68 Targ et Date 2046-2050 Target Retirement 2046-2050 No Lo ad Life cycle/Targ et Date 2050 Va nguard Target Retirement 2055 0.18 0.47 0.93 0.47 Targ et Date 2051+Target Retirement 2051+ No Lo ad Life cycle/Targ et Date 2055 Va nguard Target Retirement 2060 0.18 0.47 0.93 N/A Targ et Date 2051+Target Retirement 2051+ No Lo ad N/A Va nguard Prime Money Marke t 0.17 0.12 N/A 0.20 Money Marke t Taxable N/A US Cash Management 12 Manager Evaluation 13 Historical Performance Three Year Rolling Percentile Ranking Relative Performance Historical Statistics (Apr-2009 - Mar-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Vanguard 500 Index Fund (VFINX)1.8 1.8 21.7 14.5 21.0 7.3 32.2 15.8 2.0 14.9 26.5 -37.0 5.4 15.6 4.8 10.7 S&P 500 1.8 1.8 21.9 14.7 21.2 7.4 32.4 16.0 2.1 15.1 26.5 -37.0 5.5 15.8 4.9 10.9 Large-Cap Equity Peer Group Median 1.5 1.5 21.9 13.2 20.1 7.2 32.4 14.6 -1.0 14.0 27.8 -37.5 6.2 13.3 5.9 10.2 Vanguard 500 Index Fund (VFINX) Rank 42 42 53 30 33 48 52 38 23 40 57 46 56 33 63 45 Cumulative Annualized Over/Under Relative Performance Over/Under Performance 0.0 0.2 -0.2 -0.3Return (%)6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Vanguard 500 Index Fund (VFINX)S&P 500 0 25 50 75 100Return Percentile Rank6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard 500 Index Fund (VFINX)21.0 15.7 20.7 -0.1 1.0 1.3 0.0 -3.4 8.2 5.0 37y 7m S&P 500 21.2 15.7 20.8 0.0 1.0 1.3 0.0 N/A 8.1 0.0 37y 7m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 15.7 -1.3 0.0 20.0 37y 7m Manager Evaluation Vanguard 500 Index Fund (VFINX) vs. S&P 500 As of March 31, 2014 14 Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Apple Inc 2.9 2.9 0.0 -3.8 Exxon Mobil Corp 2.5 2.5 0.0 -2.8 Google Inc 1.9 1.9 0.0 -0.6 Microsoft Corp 1.8 1.9 0.0 10.4 Johnson & Johnson 1.7 1.7 0.0 8.0 General Electric Co 1.6 1.6 0.0 -6.8 Wells Fargo & Co 1.4 1.4 0.0 10.3 JPMorgan Chase & Co 1.4 1.4 0.0 4.5 Chevron Corp 1.4 1.4 0.0 -4.0 Procter & Gamble Co (The)1.3 1.3 0.0 -0.2 % of Portfolio 17.7 17.8 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)117,237 117,990 Median Mkt. Cap ($M)16,994 16,984 Price/Earnings ratio 17.6 17.6 Price/Book ratio 2.8 2.8 5 Yr. EPS Growth Rate (%)10.0 9.9 Current Yield (%)2.0 2.0 Debt to Equity 0.8 0.8 Number of Stocks 503 500 Beta (5 Years, Monthly)1.00 1.00 Consistency (5 Years, Monthly)6.67 1.00 Sharpe Ratio (5 Years, Monthly)1.45 1.46 Information Ratio (5 Years, Monthly)-4.03 - Up Market Capture (5 Years, Monthly)99.73 - Down Market Capture (5 Years, Monthly)100.34 - Sector Weights (%) Vanguard 500 Index Fund (VFINX)S&P 500 0.0 3.0 6.0 9.0 12.0 15.0 18.0 21.0 24.0 Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.6 3.0 2.4 3.5 18.5 10.6 13.3 16.3 10.1 9.6 12.0 0.0 3.1 2.5 3.5 18.6 10.7 13.4 16.4 10.1 9.7 12.1 Distribution of Market Capitalization (%) Vanguard 500 Index Fund (VFINX)S&P 500 0.0 20.0 40.0 60.0 80.0 >$59 Bil $15 Bil - $59 Bil $2 Bil - $15 Bil Cash 54.3 34.3 11.4 0.0 53.9 34.1 11.3 0.6 Manager Evaluation Vanguard 500 Index Fund (VFINX) vs. S&P 500 As of March 31, 2014 15 Historical Performance Buy and Hold Attribution Risk and Return (Apr - 2009 - Mar - 2014)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Vanguard Windsor II (VWNFX)2.9 2.9 21.9 14.8 21.1 7.7 30.7 16.7 2.7 10.6 27.1 -36.7 2.2 18.2 7.0 18.3 Russell 1000 Value Index 3.0 3.0 21.6 14.8 21.8 7.6 32.5 17.5 0.4 15.5 19.7 -36.8 -0.2 22.2 7.1 16.5 Large-Cap Value Equity Peer Group Median 1.9 1.9 21.4 13.2 20.0 7.1 31.7 15.0 -1.5 13.5 25.4 -37.3 2.9 16.6 6.1 12.5 Vanguard Windsor II (VWNFX) Rank 21 21 45 21 32 35 62 29 17 86 42 45 56 36 38 7 20.0 21.0 22.0 23.0 Return (%)16.4 16.5 16.6 Risk (Standard Deviation %) Russell 1000 Value Index Vanguard Windsor II (VWNFX) Vanguard Windsor II (VWNFX)Russell 1000 Value Index 0 25 50 75 100Return Percentile Rank6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Average Active Weight 0.0 5.0 10.0-5.0-10.0-15.0 Utilities Telecommunication Services Other Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -2.2 0.2 1.2 -1.6 -0.8 1.4 4.3 -7.6 -2.0 2.7 0.9 3.4 Allocation (Total: -0.1) 0.0 0.2 0.3 0.5-0.2-0.3 -0.1 0.0 0.0 0.0 0.0 0.0 0.2 0.0 0.1 0.0 0.0 -0.1 Stock (Total: 0.0) 0.0 0.5 1.0-0.5-1.0 0.1 -0.1 0.0 0.0 0.2 0.5 -0.4 -0.2 -0.1 -0.2 0.1 0.0 Vanguard Windsor II (VWNFX) 0.0 0.2 0.4 0.6 0.8-0.2-0.4-0.6 -0.1 -0.1 0.0 0.0 0.2 0.5 -0.2 -0.3 0.0 -0.2 0.1 -0.1 Manager Evaluation Vanguard Windsor II (VWNFX) vs. Russell 1000 Value Index As of March 31, 2014 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 16 Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) JPMorgan Chase & Co 2.8 2.4 0.4 4.5 Microsoft Corp 2.8 0.0 2.8 10.4 Raytheon Co.2.7 0.3 2.4 9.6 Pfizer Inc 2.7 2.3 0.4 5.8 WellPoint Inc 2.7 0.3 2.4 8.3 Wells Fargo & Co 2.5 2.5 0.0 10.3 American Express Co 2.5 0.0 2.5 -0.5 Medtronic Inc 2.3 0.7 1.6 7.2 Johnson & Johnson 2.3 2.5 -0.3 8.0 Bank of America Corp 2.2 2.0 0.2 10.5 % of Portfolio 25.3 13.0 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)98,254 112,687 Median Mkt. Cap ($M)21,820 6,640 Price/Earnings ratio 15.3 16.2 Price/Book ratio 2.2 2.0 5 Yr. EPS Growth Rate (%)11.2 6.2 Current Yield (%)2.6 2.2 Debt to Equity 1.2 1.0 Number of Stocks 291 664 Beta (5 Years, Monthly)0.96 1.00 Consistency (5 Years, Monthly)43.33 1.00 Sharpe Ratio (5 Years, Monthly)1.42 1.42 Information Ratio (5 Years, Monthly)-0.26 - Up Market Capture (5 Years, Monthly)95.53 - Down Market Capture (5 Years, Monthly)93.03 - Sector Weights (%) Vanguard Windsor II (VWNFX)Russell 1000 Value Index 0.0 4.0 8.0 12.0 16.0 20.0 24.0 28.0 32.0 36.0 Other Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.8 2.4 3.9 2.6 1.5 9.1 11.8 17.8 21.7 12.1 8.9 7.2 0.0 0.0 6.1 2.5 2.9 9.0 10.2 13.5 29.1 14.5 5.8 6.4 Distribution of Market Capitalization (%) Vanguard Windsor II (VWNFX)Russell 1000 Value Index 0.0 20.0 40.0 60.0 80.0 >$59 Bil $15 Bil - $59 Bil $2 Bil - $15 Bil $0 - $2 Bil Cash 47.8 31.3 20.6 0.2 0.0 52.1 32.5 13.0 0.0 2.4 Manager Evaluation Vanguard Windsor II (VWNFX) vs. Russell 1000 Value Index As of March 31, 2014 *Portfolio characteristics as of 12/31/2013. 17 Historical Performance Buy and Hold Attribution Risk and Return (Apr - 2009 - Mar - 2014)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Vanguard US Growth (VWUSX)0.7 0.7 24.4 14.8 20.3 7.0 35.5 18.4 -0.7 11.5 35.0 -37.8 10.1 1.8 11.2 7.0 Russell 1000 Growth Index 1.1 1.1 23.2 14.6 21.7 7.9 33.5 15.3 2.6 16.7 37.2 -38.4 11.8 9.1 5.3 6.3 Large-Cap Growth Equity Peer Group Median 0.3 0.3 23.7 13.3 20.4 7.5 34.6 14.6 -0.8 15.3 33.4 -38.3 13.8 7.1 6.2 7.7 Vanguard US Growth (VWUSX) Rank 40 40 45 29 54 65 41 16 48 83 40 46 75 90 17 59 18.0 20.0 22.0 24.0 Return (%)15.0 15.3 15.6 15.9 16.2 16.5 16.8 17.1 17.4 17.7 18.0 18.3 18.6 Risk (Standard Deviation %) Russell 1000 Growth Index Vanguard US Growth (VWUSX) Vanguard US Growth (VWUSX)Russell 1000 Growth Index 0 25 50 75 100Return Percentile Rank6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Average Active Weight 0.0 5.0 10.0 15.0-5.0-10.0 Utilities Telecommunication Services Other Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -0.2 0.1 0.0 -1.8 6.0 -5.6 -0.1 0.9 0.3 -5.4 3.5 2.5 Allocation (Total: -0.1) 0.0 0.1 0.2-0.1-0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 -0.1 0.0 Stock (Total: -0.2) 0.0 0.5 1.0 1.5-0.5-1.0 0.0 0.0 0.0 -0.1 -0.4 -0.2 -0.1 -0.4 0.0 0.8 0.2 0.0 Vanguard US Growth (VWUSX) 0.0 0.5 1.0 1.5-0.5-1.0 0.0 0.0 0.0 -0.1 -0.4 -0.2 -0.1 -0.4 0.0 0.9 0.1 0.0 Manager Evaluation Vanguard US Growth (VWUSX) vs. Russell 1000 Growth Index As of March 31, 2014 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 18 Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Google Inc 4.7 3.1 1.6 -0.6 Visa Inc 3.2 1.2 2.0 -2.9 Priceline.Com Inc 3.0 0.6 2.4 2.5 Allergan Inc.2.9 0.4 2.5 11.8 Microsoft Corp 2.6 3.5 -0.9 10.4 Qualcomm Inc.2.5 1.4 1.1 6.7 EOG Resources Inc.2.4 0.5 1.9 17.0 Apple Inc 2.3 3.9 -1.6 -3.8 Liberty Interactive Corp 2.1 0.0 2.1 -1.6 Walgreen Co 2.0 0.5 1.6 15.5 % of Portfolio 27.7 15.0 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)77,390 98,236 Median Mkt. Cap ($M)22,626 8,349 Price/Earnings ratio 24.6 19.7 Price/Book ratio 3.9 4.5 5 Yr. EPS Growth Rate (%)18.4 14.1 Current Yield (%)1.0 1.6 Debt to Equity 0.2 1.4 Number of Stocks 119 626 Beta (5 Years, Monthly)1.09 1.00 Consistency (5 Years, Monthly)48.33 1.00 Sharpe Ratio (5 Years, Monthly)1.26 1.46 Information Ratio (5 Years, Monthly)-0.30 - Up Market Capture (5 Years, Monthly)103.88 - Down Market Capture (5 Years, Monthly)119.02 - Sector Weights (%) Vanguard US Growth (VWUSX)Russell 1000 Growth Index 0.0 4.0 8.0 12.0 16.0 20.0 24.0 28.0 32.0 36.0 Other Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.0 2.6 0.0 0.1 2.8 30.6 6.9 12.0 8.1 5.2 7.6 24.1 0.0 0.0 0.1 2.2 4.6 27.2 12.3 12.4 5.5 4.8 11.7 19.2 Distribution of Market Capitalization (%) Vanguard US Growth (VWUSX)Russell 1000 Growth Index 0.0 15.0 30.0 45.0 60.0 >$59 Bil $15 Bil - $59 Bil $2 Bil - $15 Bil $0 - $2 Bil Cash 48.5 30.2 21.2 0.1 0.0 37.5 40.0 19.9 0.0 2.6 Manager Evaluation Vanguard US Growth (VWUSX) vs. Russell 1000 Growth Index As of March 31, 2014 *Portfolio characteristics as of 12/31/2013. 19 Historical Performance Three Year Rolling Percentile Ranking Relative Performance Historical Statistics (Apr-2009 - Mar-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Vanguard Mid-Cap Index Fund (VIMSX)3.2 3.2 23.4 13.4 24.9 9.8 35.0 15.8 -2.1 25.5 40.2 -41.8 6.0 13.6 13.9 20.4 Vanguard Mid-Cap Index Fund Blended Benchmark 3.3 3.3 23.8 13.7 25.2 10.0 35.4 16.0 -1.9 25.7 40.5 -41.8 6.2 13.7 13.9 20.5 Mid-Cap Equity Equity Peer Group Median 1.7 1.7 22.6 12.2 23.0 9.1 34.6 14.6 -2.7 21.8 34.2 -40.2 8.1 11.9 9.4 15.3 Vanguard Mid-Cap Index Fund (VIMSX) Rank 24 24 42 32 26 32 48 40 45 26 32 61 59 38 17 18 Cumulative Annualized Over/Under Relative Performance Over/Under Performance 0.0 0.2 0.4 -0.2 -0.4Return (%)6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Vanguard Mid-Cap Index Fund (VIMSX) Vanguard Mid-Cap Index Fund Blended Benchmark 0 25 50 75 100Return Percentile Rank6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Mid-Cap Index Fund (VIMSX)24.9 18.7 24.5 -0.2 1.0 1.3 0.1 -2.8 9.9 5.0 15y 10m Vanguard Mid-Cap Index Fund Blended Benchmark 25.2 18.7 24.7 0.0 1.0 1.3 0.0 N/A 9.9 0.0 15y 10m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 18.7 -1.3 0.0 20.0 15y 10m Manager Evaluation Vanguard Mid-Cap Index Fund (VIMSX) vs. Vanguard Mid-Cap Index Fund Blended Benchmark As of March 31, 2014 Note: Prior to May 16, 2003, the Vanguard Mid-Cap Index was benchmarked to the S&P MidCap 400 Index. From May 16, 2003 to January 30, 2013, the Index fund was benchmarked to the MSCI US Mid Cap 450 Index. Starting on January 31, 2013, the benchmark transitioned to the CRSP US Mid Cap Index. 20 Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Delphi Automotive PLC 0.7 0.7 0.0 13.3 Western Digital Corp 0.7 0.7 0.0 9.8 SanDisk Corp 0.6 0.6 0.0 15.5 Mylan Inc 0.6 0.6 0.0 12.5 Boston Scientific Corp 0.6 0.6 0.0 12.5 Chipotle Mexican Grill Inc 0.6 0.6 0.0 6.6 Seagate Technology Plc 0.6 0.6 0.0 0.9 Cerner Corp 0.6 0.6 0.0 0.9 Health Care REIT Inc.0.6 0.6 0.0 12.8 Moody's Corp.0.6 0.6 0.0 1.4 % of Portfolio 6.0 6.0 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)10,780 10,826 Median Mkt. Cap ($M)8,389 8,389 Price/Earnings ratio 21.1 21.0 Price/Book ratio 2.9 2.9 5 Yr. EPS Growth Rate (%)11.4 11.4 Current Yield (%)1.4 1.4 Debt to Equity 3.4 3.5 Number of Stocks 375 374 Beta (5 Years, Monthly)1.03 1.00 Consistency (5 Years, Monthly)40.00 1.00 Sharpe Ratio (5 Years, Monthly)1.43 1.48 Information Ratio (5 Years, Monthly)-0.04 - Up Market Capture (5 Years, Monthly)101.08 - Down Market Capture (5 Years, Monthly)103.46 - Sector Weights (%) Vanguard Mid-Cap Index Fund (VIMSX) CRSP U.S. Mid Cap TR Index 0.0 3.0 6.0 9.0 12.0 15.0 18.0 21.0 24.0 Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.4 5.4 0.8 6.3 14.7 13.7 10.1 16.6 7.5 6.3 18.2 0.0 5.4 0.8 6.3 14.7 13.8 10.2 16.8 7.5 6.3 18.2 Distribution of Market Capitalization (%) Vanguard Mid-Cap Index Fund (VIMSX) CRSP U.S. Mid Cap TR Index 0.0 50.0 100.0 $15 Bil - $59 Bil $2 Bil - $15 Bil $0 - $2 Bil Cash 18.1 81.8 0.1 0.0 18.1 81.4 0.1 0.4 Manager Evaluation Vanguard Mid-Cap Index Fund (VIMSX) vs. CRSP U.S. Mid Cap TR Index As of March 31, 2014 21 Historical Performance Three Year Rolling Percentile Ranking Relative Performance Historical Statistics (Apr-2009 - Mar-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Vanguard Small-Cap Index Fund (NAESX)2.6 2.6 25.1 14.2 26.6 9.8 37.6 18.0 -2.8 27.7 36.1 -36.1 1.2 15.6 7.4 19.9 Vanguard Small-Cap Index Fund Blended Benchmark 2.6 2.6 25.3 14.3 26.8 9.8 37.8 18.2 -2.8 27.8 36.1 -36.2 1.2 15.8 7.5 20.0 Small-Cap Equity Peer Group Median 1.1 1.1 25.2 13.3 24.7 8.4 39.0 14.6 -3.4 26.4 31.8 -38.2 0.3 13.5 6.3 16.3 Vanguard Small-Cap Index Fund (NAESX) Rank 22 22 52 35 25 18 59 24 46 39 34 41 47 37 40 32 Cumulative Annualized Over/Under Relative Performance Over/Under Performance 0.0 0.2 0.3 -0.2 -0.3Return (%)6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Vanguard Small-Cap Index Fund (NAESX) Vanguard Small-Cap Index Fund Blended Benchmark 0 25 50 75 100Return Percentile Rank6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Small-Cap Index Fund (NAESX)26.6 20.5 26.3 -0.1 1.0 1.3 0.0 -2.9 10.7 10.0 46y 2m Vanguard Small-Cap Index Fund Blended Benchmark 26.8 20.5 26.4 0.0 1.0 1.3 0.0 N/A 10.7 0.0 46y 2m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 20.5 -1.3 0.0 20.0 46y 2m Manager Evaluation Vanguard Small-Cap Index Fund (NAESX) vs. Vanguard Small-Cap Index Fund Blended Benchmark As of March 31, 2014 Note: Prior to May 16, 2003, the Vanguard Small-Cap Index was benchmarked to the Russell 2000 Index. From May 16, 2003 to January 30, 2013, the Index fund was benchmarked to the MSCI US Small Cap 1750 Index. Starting on January 31, 2013, the benchmark transitioned to the CRSP US Small Cap Index. 22 Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Hanesbrands Inc 0.3 0.3 0.0 9.3 Harman International Industries Inc.0.3 0.3 0.0 30.4 Packaging Corp Of America 0.3 0.3 0.0 11.8 Foot Locker Inc.0.3 0.3 0.0 13.9 E*TRADE Financial Corporation 0.2 0.3 0.0 17.2 Snap-On Inc 0.2 0.2 0.0 4.0 Cooper Companies Inc. (The)0.2 0.2 0.0 10.9 Goodyear Tire & Rubber Co 0.2 0.2 0.0 9.8 Alaska Air Group Inc.0.2 0.2 0.0 27.6 Arthur J. Gallagher & Co.0.2 0.2 0.0 2.2 % of Portfolio 2.5 2.5 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)3,219 3,236 Median Mkt. Cap ($M)1,747 1,734 Price/Earnings ratio 21.7 21.7 Price/Book ratio 2.5 2.5 5 Yr. EPS Growth Rate (%)10.7 10.7 Current Yield (%)1.4 1.4 Debt to Equity 1.0 1.0 Number of Stocks 1,463 1,441 Beta (5 Years, Monthly)1.02 1.00 Consistency (5 Years, Monthly)35.00 1.00 Sharpe Ratio (5 Years, Monthly)1.35 1.41 Information Ratio (5 Years, Monthly)-0.64 - Up Market Capture (5 Years, Monthly)99.92 - Down Market Capture (5 Years, Monthly)104.41 - Sector Weights (%) Vanguard Small-Cap Index (NAESX) CRSP U.S. Small Cap TR Index 0.0 4.0 8.0 12.0 16.0 20.0 24.0 28.0 Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.5 3.6 0.6 6.2 16.5 16.1 10.8 23.0 5.3 3.0 14.3 0.0 3.6 0.6 6.2 16.6 16.1 10.9 23.2 5.3 3.0 14.4 Distribution of Market Capitalization (%) Vanguard Small-Cap Index (NAESX) CRSP U.S. Small Cap TR Index 0.0 50.0 100.0 $15 Bil - $59 Bil $2 Bil - $15 Bil $0 - $2 Bil Cash 0.0 71.9 28.1 0.00.0 71.5 27.9 0.5 Manager Evaluation Vanguard Small-Cap Index (NAESX) vs. CRSP U.S. Small Cap TR Index As of March 31, 2014 23 Historical Performance Buy and Hold Attribution Risk and Return (Apr - 2009 - Mar - 2014)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Vanguard International Growth (VWIGX)-0.8 -0.8 18.4 7.0 18.2 7.9 22.9 20.0 -13.7 15.7 41.6 -44.9 16.0 25.9 15.0 19.0 MSCI AC World ex USA (Net)0.5 0.5 12.3 4.1 15.5 7.1 15.3 16.8 -13.7 11.2 41.4 -45.5 16.7 26.7 16.6 20.9 International Equity Peer Group Median 0.6 0.6 16.1 6.4 15.9 6.9 20.8 18.4 -13.7 11.6 33.5 -44.4 11.9 25.2 15.0 18.5 Vanguard International Growth (VWIGX) Rank 78 78 37 43 23 29 31 32 51 25 23 54 28 43 50 45 10.0 15.0 20.0 25.0 Return (%)19.8 20.1 20.4 20.7 21.0 21.3 21.6 21.9 22.2 22.5 22.8 Risk (Standard Deviation %) MSCI AC World ex USA (Net) Vanguard International Growth (VWIGX) Vanguard International Growth (VWIGX)MSCI AC World ex USA (Net) 0 25 50 75 100Return Percentile Rank6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Average Active Weight 0.0 5.0 10.0 15.0-5.0-10.0-15.0 Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -2.9 -1.8 -2.0 7.9 3.6 0.1 -3.5 -5.3 -3.8 5.3 2.4 Allocation (Total: -0.1) 0.0 0.1 0.2-0.1-0.2-0.3 -0.2 0.1 0.0 0.1 0.0 0.0 0.0 0.0 0.0 -0.1 0.0 Stock (Total: -1.1) 0.0 0.5 1.0-0.5-1.0 0.0 -0.3 0.0 -0.4 -0.1 -0.1 0.5 -0.1 -0.1 -0.4 0.0 0.0 0.3 0.5 0.8 1.0-0.3-0.5-0.8-1.0 -0.2 -0.3 0.0 -0.3 -0.1 -0.1 0.5 -0.1 -0.1 -0.5 0.0 Manager Evaluation Vanguard International Growth (VWIGX) vs. MSCI AC World ex USA (Net) As of March 31, 2014 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 24 Total Attribution 0.0 0.2 0.3 0.5 0.6-0.2-0.3-0.5-0.6-0.8-0.9-1.1-1.2-1.4 Pacific Other North America Middle East Frontier Markets Europe ex EMU EMU EM Latin America EM Europe + Middle East + Africa EM Asia Cash -0.1 0.0 -0.4 0.0 0.0 -0.9 0.2 0.1 0.0 0.1 0.0 Performance Attribution Average Active Weight 0.0 4.0 8.0 12.0-4.0-8.0-12.0 Pacific Other North America Middle East Frontier Markets Europe ex EMU EMU EM Latin America EM Europe + Middle East + Africa EM Asia Cash -6.3 -0.2 -2.7 0.8 0.3 5.9 0.8 -0.2 -2.1 1.3 2.4 Allocation (Total: 0.4) 0.0 0.1 0.2 0.3-0.1-0.2 0.2 0.0 0.0 0.1 0.0 0.1 0.0 0.0 0.0 0.0 0.0 Stock (Total: -1.5) 0.0 0.3 0.5 0.8-0.3-0.5-0.8-1.0-1.3-1.5 -0.3 0.0 -0.4 -0.2 -0.1 -0.9 0.2 0.1 0.0 0.1 0.0 Manager Evaluation Vanguard International Growth (VWIGX) vs. MSCI AC World ex USA (Net) 1 Quarter Ending March 31, 2014 25 Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Tencent Holdings LTD 3.0 0.4 2.6 9.0 AIA Group Ltd 2.4 0.3 2.1 -5.5 Softbank Corp 2.3 0.4 1.9 -13.3 Baidu Inc 2.3 0.0 2.3 -14.4 Industria De Diseno Textil Inditex SA 1.8 0.2 1.6 -9.1 Atlas Copco AB 1.8 0.1 1.7 3.7 Smc Corp 1.8 0.1 1.7 5.2 Prudential PLC 1.7 0.3 1.4 -3.0 Banco Popular Espanol SA, Madrid 1.6 0.1 1.6 26.0 Amazon.com Inc 1.5 0.0 1.5 -15.7 % of Portfolio 20.3 1.8 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)53,972 57,884 Median Mkt. Cap ($M)22,645 7,072 Price/Earnings ratio 17.1 14.4 Price/Book ratio 2.5 2.0 5 Yr. EPS Growth Rate (%)10.6 6.5 Current Yield (%)2.1 3.1 Debt to Equity 1.3 1.2 Number of Stocks 177 1,832 Beta (5 Years, Monthly)1.05 1.00 Consistency (5 Years, Monthly)53.33 1.00 Sharpe Ratio (5 Years, Monthly)0.95 0.87 Information Ratio (5 Years, Monthly)0.73 - Up Market Capture (5 Years, Monthly)107.55 - Down Market Capture (5 Years, Monthly)99.84 - Sector Weights (%) Vanguard International Growth (VWIGX) MSCI AC World ex USA (Net) 0.0 4.0 8.0 12.0 16.0 20.0 24.0 28.0 32.0 Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 2.5 0.4 3.7 7.2 14.9 15.2 6.1 23.6 4.2 6.2 16.0 0.0 3.5 5.2 8.7 6.8 11.2 8.2 26.6 9.1 9.9 10.8 Distribution of Market Capitalization (%) Vanguard International Growth (VWIGX) MSCI AC World ex USA (Net) 0.0 20.0 40.0 60.0 >$59 Bil $15 Bil - $59 Bil $2 Bil - $15 Bil $0 - $2 Bil Cash 33.9 37.3 28.2 0.6 0.0 30.3 44.1 22.4 0.6 2.5 Manager Evaluation Vanguard International Growth (VWIGX) vs. MSCI AC World ex USA (Net) As of March 31, 2014 *Portfolio characteristics as of 12/31/2013. 26 Vanguard International Growth (VWIGX) MSCI AC World ex USA (Net) Australia 2.1 5.7 Hong Kong 5.2 3.3 Japan 10.0 14.2 New Zealand 0.0 0.1 Singapore 0.4 1.1 Pacific 17.6 24.3 Austria 0.0 0.2 Belgium 0.0 0.9 Finland 0.4 0.7 France 7.9 7.1 Germany 5.5 6.8 Ireland 0.3 0.2 Italy 2.9 1.8 Netherlands 1.2 2.2 Portugal 0.3 0.1 Spain 5.5 2.5 EMU 24.0 22.5 Denmark 1.3 1.0 Norway 1.9 0.6 Sweden 5.5 2.4 Switzerland 7.1 6.7 United Kingdom 15.7 15.2 Europe ex EMU 31.5 25.9 Canada 1.9 7.3 United States 1.7 0.0 Israel 1.2 0.4 Middle East 1.2 0.4 Developed Markets 77.9 80.4 Vanguard International Growth (VWIGX) MSCI AC World ex USA (Net) Brazil 2.3 2.3 Cayman Islands 0.0 0.0 Chile 0.3 0.3 Colombia 0.0 0.2 Mexico 0.6 1.1 Peru 0.7 0.1 Virgin Islands 0.0 0.0 EM Latin America 4.0 4.0 China 6.6 2.6 India 1.9 1.4 Indonesia 0.3 0.5 Korea 3.2 3.2 Malaysia 0.0 0.8 Philippines 0.0 0.2 Taiwan 1.0 2.4 Thailand 0.5 0.5 EM Asia 13.5 11.7 Czech Republic 0.0 0.1 Egypt 0.0 0.0 Greece 0.0 0.1 Hungary 0.0 0.0 Poland 0.0 0.4 Russia 0.5 1.1 South Africa 0.3 1.6 Turkey 0.8 0.3 EM Europe + Middle East + Africa 1.6 3.6 Emerging Markets 19.1 19.3 Frontier Markets 0.4 0.0 Cash 2.5 0.0 Other 0.2 0.2 Total 100.0 100.0 Manager Evaluation Vanguard International Growth (VWIGX) vs. MSCI AC World ex USA (Net) As of March 31, 2014 *Portfolio country breakdown as of 12/31/2013. 27 Historical Performance Three Year Rolling Percentile Ranking Relative Performance Historical Statistics (Apr-2009 - Mar-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Vanguard Total Bond Market Index Fund (VBMFX)1.9 1.9 -0.3 3.6 4.6 4.3 -2.3 4.0 7.6 6.4 5.9 5.1 6.9 4.3 2.4 4.2 Vanguard Total Bond Market Index Fund Benchmark 1.8 1.8 0.0 3.8 4.9 4.5 -2.0 4.3 7.9 6.6 5.9 5.2 7.0 4.3 2.4 4.3 Market Duration Fixed Income Peer Group Median 2.0 2.0 0.4 4.3 6.9 4.7 -1.8 7.0 6.7 7.5 12.5 -1.7 5.7 4.2 2.1 4.3 Vanguard Total Bond Market Index Fund (VBMFX) Rank 69 69 74 79 89 66 74 91 18 82 93 13 18 45 32 57 Cumulative Annualized Over/Under Relative Performance Over/Under Performance 0.0 0.5 -0.5Return (%)6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Vanguard Total Bond Market Index Fund (VBMFX) Vanguard Total Bond Market Index Fund Benchmark 0 25 50 75 100Return Percentile Rank6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Total Bond Market Index Fund (VBMFX)4.6 3.2 4.5 -0.4 1.0 1.4 0.2 -1.3 1.3 30.0 27y 3m Vanguard Total Bond Market Index Fund Benchmark 4.9 3.2 4.7 0.0 1.0 1.5 0.0 N/A 1.2 0.0 27y 3m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 3.2 -1.5 0.0 20.0 27y 3m Manager Evaluation Vanguard Total Bond Market Index Fund (VBMFX) vs. Vanguard Total Bond Market Index Fund Benchmark As of March 31, 2014 Note: Prior to January 1, 2010, the Vanguard Total Bond Market Index was benchmarked to the Barclays Aggregate Index. Starting on January 1, 2010, the benchmark was transitioned to the Barclays Aggregate Float Adjusted Index. 28 Credit Quality Distribution (%) Vanguard Total Bond Market Index (VBMFX) Barclays U.S. Aggregate Float Adjusted 0.0 50.0 100.0 AAAAAABBB68.8 5.4 12.6 13.3 69.6 4.2 12.7 13.5 Portfolio Characteristics Portfolio Benchmark Effective Duration 5.6 5.6 Avg. Maturity 7.7 7.6 Avg. Quality AA+AA+ Yield To Maturity (%)2.3 2.3 Sector Distribution (%) Vanguard Total Bond Market Index (VBMFX) Barclays U.S. Aggregate Float Adjusted 0.0 20.0 40.0 60.0 TreasuriesAgenciesCreditMBSABSNon-USEmergingOtherCMBS39.5 5.0 21.2 21.8 0.5 7.6 2.5 0.0 1.9 40.2 3.9 25.9 20.2 0.5 6.8 0.0 0.4 2.1 Maturity Distribution (%) Vanguard Total Bond Market Index (VBMFX) Barclays U.S. Aggregate Float Adjusted 0.0 20.0 40.0 60.0 < 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.0 27.6 21.0 36.6 4.2 10.6 1.0 26.4 21.1 35.4 5.2 10.9 Manager Evaluation Vanguard Total Bond Market Index (VBMFX) vs. Barclays U.S. Aggregate Float Adjusted As of March 31, 2014 29 Historical Performance Three Year Rolling Percentile Ranking Relative Performance Historical Statistics (Apr-2009 - Mar-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Vanguard Retirement Savings Trust 0.4 0.4 1.7 2.2 2.5 3.3 1.7 2.4 2.9 2.9 3.0 4.3 4.5 4.3 4.1 3.9 Ryan 3 Yr GIC Master 0.3 0.3 1.0 1.5 2.4 3.2 1.1 1.5 2.4 3.5 4.5 4.8 4.5 3.8 3.2 3.4 Short Duration Fixed Income Peer Group 0.4 0.4 0.6 1.7 3.3 2.9 0.3 2.7 1.4 3.4 6.7 -0.1 5.4 4.2 1.6 1.8 Vanguard Retirement Savings Trust Rank 44 44 10 32 70 24 5 55 8 68 79 28 70 38 1 1 Cumulative Annualized Over/Under Relative Performance Over/Under Performance 0.0 1.0 2.0 -1.0Return (%)6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Vanguard Retirement Savings Trust Ryan 3 Yr GIC Master 0 25 50 75 100Return Percentile Rank6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Retirement Savings Trust 2.5 0.3 2.4 1.7 0.3 9.7 0.4 0.3 0.0 65.0 11y 3m Ryan 3 Yr GIC Master 2.4 0.6 2.3 0.0 1.0 3.9 0.0 N/A 0.0 0.0 11y 3m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.0 0.0 N/A 0.6 -3.9 0.0 0.0 11y 3m Manager Evaluation Vanguard Retirement Savings Trust vs. Ryan 3 Yr GIC Master As of March 31, 2014 30 Historical Performance Three Year Rolling Percentile Ranking Relative Performance Historical Statistics (Apr-2009 - Mar-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Vanguard Balanced Index Fund (VBINX)2.0 2.0 12.9 10.3 15.0 6.8 17.9 11.3 4.1 13.1 20.1 -22.2 6.2 11.0 4.7 9.3 Vanguard Balanced Index Fund Benchmark 2.0 2.0 13.3 10.7 15.4 7.0 18.2 11.7 4.7 13.5 19.8 -22.0 6.3 11.1 4.8 9.3 60% Equity / 40% Fixed Peer Group Median 1.5 1.5 13.2 9.1 14.8 6.3 19.2 10.7 0.8 12.3 21.6 -23.1 6.0 9.7 5.0 8.5 Vanguard Balanced Index Fund (VBINX) Rank 27 27 57 16 42 24 70 39 10 34 63 41 49 30 58 36 Cumulative Annualized Over/Under Relative Performance Over/Under Performance 0.0 0.5 1.0 -0.5 -1.0Return (%)6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Vanguard Balanced Index Fund (VBINX) Vanguard Balanced Index Fund Benchmark 0 25 50 75 100Return Percentile Rank6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Balanced Index Fund (VBINX)15.0 9.4 14.6 -0.3 1.0 1.5 0.2 -2.2 4.3 10.0 21y 4m Vanguard Balanced Index Fund Benchmark 15.4 9.5 14.9 0.0 1.0 1.6 0.0 N/A 4.2 0.0 21y 4m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 9.4 -1.6 0.0 15.0 21y 4m Manager Evaluation Vanguard Balanced Index Fund (VBINX) vs. Vanguard Balanced Index Fund Benchmark As of March 31, 2014 Note: Prior to June 1, 2005, the Vanguard Balanced Index was benchmarked to 60% DJ U.S. Total Stock Market Index/40% LB Aggregate Bond Index. From June 1, 2005 to December 31, 2009, the Index fund was benchmarked to 60% MSCI US Broad Market Index/40% BC Aggregate Index. From January 1, 2010 to January 14, 2013, the Index fund was benchmarked to 60% MSCI US Broad Market Index/40% BC Aggregate Float Adjusted Index. Starting January 15, 2013, the benchmark transitioned to 60% CRSP US Total Market Index/40% BC Aggregate Float Adjusted Index. 31 Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Apple Inc 2.2 2.3 -0.1 -3.8 Exxon Mobil Corp 1.9 2.0 -0.1 -2.8 Google Inc 1.4 1.5 -0.1 -0.6 Microsoft Corp 1.4 1.5 -0.1 10.4 Johnson & Johnson 1.3 1.3 -0.1 8.0 Wells Fargo & Co 1.2 1.3 -0.1 10.3 General Electric Co 1.2 1.3 -0.1 -6.8 JPMorgan Chase & Co 1.1 1.1 -0.1 4.5 Chevron Corp 1.0 1.1 -0.1 -4.0 Procter & Gamble Co (The)1.0 1.1 -0.1 -0.2 % of Portfolio 13.7 14.4 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)91,543 95,967 Median Mkt. Cap ($M)1,166 938 Price/Earnings ratio 18.1 18.1 Price/Book ratio 2.8 2.8 5 Yr. EPS Growth Rate (%)10.5 10.7 Current Yield (%)1.9 1.9 Debt to Equity 1.2 1.2 Number of Stocks 3,349 3,659 Beta (5 Years, Monthly)0.58 1.00 Consistency (5 Years, Monthly)31.67 1.00 Sharpe Ratio (5 Years, Monthly)1.69 1.45 Information Ratio (5 Years, Monthly)-1.08 - Up Market Capture (5 Years, Monthly)62.56 - Down Market Capture (5 Years, Monthly)52.12 - Sector Weights (%) Vanguard Balanced Index Fund (VBINX) - Equity Holdings CRSP U.S. Total Market TR Index 0.0 3.0 6.0 9.0 12.0 15.0 18.0 21.0 24.0 Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 4.5 3.0 2.1 3.7 17.4 11.1 12.5 16.9 8.9 7.9 12.0 0.0 3.1 2.2 3.9 18.3 11.6 13.1 17.7 9.3 8.3 12.5 Distribution of Market Capitalization (%) Vanguard Balanced Index Fund (VBINX) - Equity Holdings CRSP U.S. Total Market TR Index 0.0 20.0 40.0 60.0 >$59 Bil $15 Bil - $59 Bil $2 Bil - $15 Bil $0 - $2 Bil Cash 43.8 28.1 22.8 5.2 0.0 41.8 26.8 21.9 4.9 4.5 Manager Evaluation Vanguard Balanced Index Fund (VBINX) - Equity Holdings vs. CRSP U.S. Total Market TR Index As of March 31, 2014 32 Credit Quality Distribution (%) Vanguard Balanced Index Fund (VBINX) - Fixed Income Holdings Barclays U.S. Aggregate Float Adjusted 0.0 50.0 100.0 AAAAAABBB68.8 5.4 12.6 13.3 69.8 4.0 12.7 13.5 Portfolio Characteristics Portfolio Benchmark Effective Duration 5.6 5.6 Avg. Maturity 7.6 7.6 Avg. Quality AA+AA+ Yield To Maturity (%)2.3 2.3 Sector Distribution (%) Vanguard Balanced Index Fund (VBINX) - Fixed Income Holdings Barclays U.S. Aggregate Float Adjusted 0.0 20.0 40.0 60.0 TreasuriesAgenciesCreditMBSABSNon-USEmergingOtherCMBS39.5 5.0 21.2 21.8 0.5 7.6 2.5 0.0 1.9 36.6 6.3 25.5 22.3 2.6 5.7 0.0 1.0 0.0 Maturity Distribution (%) Vanguard Balanced Index Fund (VBINX) - Fixed Income Holdings Barclays U.S. Aggregate Float Adjusted 0.0 20.0 40.0 60.0 1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs27.6 21.0 36.6 4.2 10.6 24.2 18.7 19.7 8.9 28.5 Manager Evaluation Vanguard Balanced Index Fund (VBINX) - Fixed Income Holdings vs. Barclays U.S. Aggregate Float Adjusted As of March 31, 2014 33 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Apr-2009 - Mar-2014) Historical Statistics (Apr-2009 - Mar-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Vanguard Target Retirement Income (VTINX)1.6 1.6 4.9 6.3 9.3 5.3 5.9 8.2 5.2 9.4 14.3 -10.9 8.2 6.4 3.3 6.8 Vanguard Target Income Composite Index 1.6 1.6 5.2 6.4 9.5 5.3 6.0 8.4 5.3 9.4 14.3 -11.4 8.1 6.5 3.4 6.9 35% Equity / 65% Fixed Peer Group Median 1.5 1.5 8.0 6.7 11.1 5.4 10.7 8.2 2.8 9.8 16.8 -13.2 6.0 7.5 3.7 6.2 Vanguard Target Retirement Income (VTINX) Rank 47 47 92 66 84 53 93 50 12 58 68 34 15 73 63 37 9.3 9.5 9.6 9.8 Return (%)4.8 4.9 5.0 Risk (Standard Deviation %) Vanguard Target Income Composite Index Vanguard Target Retirement Income (VTINX) Vanguard Target Retirement Income (VTINX) Vanguard Target Income Composite Index 0 25 50 75 100Return Percentile Rank6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Target Retirement Income (VTINX)9.3 4.9 9.0 -0.1 1.0 1.9 0.2 -0.8 1.5 40.0 10y 5m Vanguard Target Income Composite Index 9.5 4.9 9.2 0.0 1.0 1.9 0.0 N/A 1.5 0.0 10y 5m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 4.9 -1.9 0.0 15.0 10y 5m Manager Evaluation Vanguard Target Retirement Income (VTINX) vs. Vanguard Target Income Composite Index As of March 31, 2014 34 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Apr-2009 - Mar-2014) Historical Statistics (Apr-2009 - Mar-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Vanguard Target Retirement 2010 (VTENX)1.7 1.7 7.2 7.1 12.1 N/A 9.1 10.1 3.4 11.4 19.3 -20.7 7.7 N/A N/A N/A Vanguard Target 2010 Composite Index 1.7 1.7 7.5 7.2 12.3 N/A 9.5 10.3 3.2 11.6 19.4 -21.0 7.8 N/A N/A N/A 40% Equity / 60% Fixed Peer Group Median 1.5 1.5 8.9 7.2 11.7 5.5 12.5 8.7 2.4 10.4 17.4 -15.5 5.8 7.9 4.0 6.7 Vanguard Target Retirement 2010 (VTENX) Rank 39 39 86 54 41 N/A 90 32 32 31 36 80 24 N/A N/A N/A 11.9 12.0 12.2 12.3 12.5 12.6 Return (%)7.9 8.0 8.1 8.2 Risk (Standard Deviation %) Vanguard Target 2010 Composite Index Vanguard Target Retirement 2010 (VTENX) Vanguard Target Retirement 2010 (VTENX) Vanguard Target 2010 Composite Index 0 25 50 75 100Return Percentile Rank6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Target Retirement 2010 (VTENX)12.1 8.0 11.8 0.0 1.0 1.5 0.2 -0.8 3.3 35.0 7y 9m Vanguard Target 2010 Composite Index 12.3 8.1 12.0 0.0 1.0 1.5 0.0 N/A 3.4 0.0 7y 9m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 8.1 -1.5 0.0 20.0 7y 9m Manager Evaluation Vanguard Target Retirement 2010 (VTENX) vs. Vanguard Target 2010 Composite Index As of March 31, 2014 35 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Apr-2009 - Mar-2014) Historical Statistics (Apr-2009 - Mar-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Vanguard Target Retirement 2015 (VTXVX)1.8 1.8 9.9 8.0 13.7 6.1 13.0 11.4 1.7 12.5 21.3 -24.1 7.5 11.4 4.9 9.0 Vanguard Target 2015 Composite Index 1.8 1.8 10.3 8.1 13.8 6.1 13.5 11.5 1.5 12.6 21.4 -24.4 7.5 11.5 5.0 9.0 55% Equity / 45% Fixed Peer Group Median 1.4 1.4 12.2 8.5 13.9 6.1 17.5 10.2 1.3 11.7 20.9 -21.2 6.1 9.4 4.7 8.0 Vanguard Target Retirement 2015 (VTXVX) Rank 35 35 86 66 58 50 91 30 42 35 48 72 32 17 44 31 13.5 13.7 13.8 14.0 14.1 Return (%)9.7 9.8 9.9 10.0 Risk (Standard Deviation %) Vanguard Target 2015 Composite Index Vanguard Target Retirement 2015 (VTXVX) Vanguard Target Retirement 2015 (VTXVX) Vanguard Target 2015 Composite Index 0 25 50 75 100Return Percentile Rank6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Target Retirement 2015 (VTXVX)13.7 9.8 13.4 0.0 1.0 1.4 0.2 -0.8 4.5 35.0 10y 5m Vanguard Target 2015 Composite Index 13.8 9.9 13.6 0.0 1.0 1.4 0.0 N/A 4.6 0.0 10y 5m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 9.9 -1.4 0.0 20.0 10y 5m Manager Evaluation Vanguard Target Retirement 2015 (VTXVX) vs. Vanguard Target 2015 Composite Index As of March 31, 2014 36 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Apr-2009 - Mar-2014) Historical Statistics (Apr-2009 - Mar-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Vanguard Target Retirement 2020 (VTWNX)1.8 1.8 12.0 8.7 14.9 N/A 15.8 12.3 0.6 13.1 23.1 -27.0 7.5 N/A N/A N/A Vanguard Target 2020 Composite Index 1.9 1.9 12.3 9.0 15.2 N/A 16.3 12.5 0.9 13.3 23.4 -27.5 7.6 N/A N/A N/A 65% Equity / 35% Fixed Peer Group Median 1.5 1.5 14.4 9.6 15.5 6.4 20.9 11.3 0.3 12.9 22.7 -25.1 6.2 10.3 5.3 8.9 Vanguard Target Retirement 2020 (VTWNX) Rank 33 33 84 72 66 N/A 91 32 46 46 48 69 39 N/A N/A N/A 14.4 14.7 15.0 15.3 15.6 15.9 Return (%)11.1 11.2 Risk (Standard Deviation %) Vanguard Target 2020 Composite Index Vanguard Target Retirement 2020 (VTWNX) Vanguard Target Retirement 2020 (VTWNX) Vanguard Target 2020 Composite Index 0 25 50 75 100Return Percentile Rank6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Target Retirement 2020 (VTWNX)14.9 11.2 14.7 -0.3 1.0 1.3 0.1 -1.9 5.5 20.0 7y 9m Vanguard Target 2020 Composite Index 15.2 11.1 14.9 0.0 1.0 1.3 0.0 N/A 5.4 0.0 7y 9m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 11.1 -1.3 0.0 20.0 7y 9m Manager Evaluation Vanguard Target Retirement 2020 (VTWNX) vs. Vanguard Target 2020 Composite Index As of March 31, 2014 37 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Apr-2009 - Mar-2014) Historical Statistics (Apr-2009 - Mar-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Vanguard Target Retirement 2025 (VTTVX)1.8 1.8 13.4 9.3 16.1 6.4 18.1 13.3 -0.4 13.8 24.8 -30.1 7.6 13.2 5.4 10.1 Vanguard Target 2025 Composite Index 1.8 1.8 13.8 9.6 16.4 6.5 18.6 13.4 0.0 14.0 25.3 -30.5 7.6 13.4 5.5 10.1 70% Equity / 30% Fixed Peer Group Median 1.5 1.5 15.5 9.9 16.3 6.6 22.5 11.8 -0.1 13.1 23.5 -27.1 6.2 10.8 5.5 9.3 Vanguard Target Retirement 2025 (VTTVX) Rank 36 36 80 70 56 60 89 24 57 38 41 80 35 20 52 36 15.6 15.9 16.2 16.5 16.8 Return (%)12.4 12.5 12.6 Risk (Standard Deviation %) Vanguard Target 2025 Composite Index Vanguard Target Retirement 2025 (VTTVX) Vanguard Target Retirement 2025 (VTTVX) Vanguard Target 2025 Composite Index 0 25 50 75 100Return Percentile Rank6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Target Retirement 2025 (VTTVX)16.1 12.5 15.8 -0.3 1.0 1.3 0.2 -1.7 6.4 25.0 10y 5m Vanguard Target 2025 Composite Index 16.4 12.5 16.1 0.0 1.0 1.3 0.0 N/A 6.3 0.0 10y 5m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 12.4 -1.3 0.0 15.0 10y 5m Manager Evaluation Vanguard Target Retirement 2025 (VTTVX) vs. Vanguard Target 2025 Composite Index As of March 31, 2014 38 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Apr-2009 - Mar-2014) Historical Statistics (Apr-2009 - Mar-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Vanguard Target Retirement 2030 (VTHRX)1.7 1.7 15.0 9.8 17.2 N/A 20.5 14.2 -1.3 14.4 26.7 -32.9 7.5 N/A N/A N/A Vanguard Target 2030 Composite Index 1.8 1.8 15.3 10.1 17.5 N/A 21.0 14.4 -0.9 14.6 27.1 -33.4 7.6 N/A N/A N/A 80% Equity / 20% Fixed Peer Group Median 1.5 1.5 17.7 10.8 17.7 6.9 25.8 12.9 -0.8 14.2 25.7 -30.9 6.3 11.7 5.9 10.1 Vanguard Target Retirement 2030 (VTHRX) Rank 38 38 82 75 65 N/A 89 27 59 45 43 76 38 N/A N/A N/A 16.5 16.8 17.1 17.4 17.7 18.0 Return (%)13.7 13.8 13.9 Risk (Standard Deviation %) Vanguard Target 2030 Composite Index Vanguard Target Retirement 2030 (VTHRX) Vanguard Target Retirement 2030 (VTHRX) Vanguard Target 2030 Composite Index 0 25 50 75 100Return Percentile Rank6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Target Retirement 2030 (VTHRX)17.2 13.8 17.0 -0.3 1.0 1.2 0.2 -1.4 7.3 30.0 7y 9m Vanguard Target 2030 Composite Index 17.5 13.8 17.3 0.0 1.0 1.3 0.0 N/A 7.1 0.0 7y 9m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 13.8 -1.3 0.0 15.0 7y 9m Manager Evaluation Vanguard Target Retirement 2030 (VTHRX) vs. Vanguard Target 2030 Composite Index As of March 31, 2014 39 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Apr-2009 - Mar-2014) Historical Statistics (Apr-2009 - Mar-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Vanguard Target Retirement 2035 (VTTHX)1.7 1.7 16.4 10.3 18.1 6.9 22.8 15.2 -2.2 15.1 28.2 -34.7 7.5 15.2 6.3 12.0 Vanguard Target 2035 Composite Index 1.8 1.8 16.8 10.6 18.5 7.0 23.4 15.3 -1.9 15.3 28.6 -35.1 7.5 15.4 6.5 11.9 85% Equity / 15% Fixed Peer Group Median 1.5 1.5 18.9 11.4 18.4 7.1 27.3 13.3 -1.0 14.6 26.8 -32.7 6.5 12.2 6.3 10.6 Vanguard Target Retirement 2035 (VTTHX) Rank 41 41 79 73 58 63 87 21 68 41 40 75 41 19 51 31 17.7 18.0 18.3 18.6 18.9 Return (%)14.9 15.0 15.1 15.2 Risk (Standard Deviation %) Vanguard Target 2035 Composite Index Vanguard Target Retirement 2035 (VTTHX) Vanguard Target Retirement 2035 (VTTHX) Vanguard Target 2035 Composite Index 0 25 50 75 100Return Percentile Rank6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Target Retirement 2035 (VTTHX)18.1 15.1 18.1 -0.4 1.0 1.2 0.3 -1.0 8.1 40.0 10y 5m Vanguard Target 2035 Composite Index 18.5 15.0 18.3 0.0 1.0 1.2 0.0 N/A 8.0 0.0 10y 5m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 15.0 -1.2 0.0 15.0 10y 5m Manager Evaluation Vanguard Target Retirement 2035 (VTTHX) vs. Vanguard Target 2035 Composite Index As of March 31, 2014 40 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Apr-2009 - Mar-2014) Historical Statistics (Apr-2009 - Mar-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Vanguard Target Retirement 2040 (VFORX)1.7 1.7 17.5 10.7 18.4 N/A 24.4 15.6 -2.5 15.2 28.3 -34.5 7.5 N/A N/A N/A Vanguard Target 2040 Composite Index 1.8 1.8 17.8 11.0 18.7 N/A 24.8 15.5 -2.1 15.3 28.6 -35.1 7.5 N/A N/A N/A 90% Equity / 10% Fixed Peer Group Median 1.4 1.4 19.7 11.8 19.3 7.2 29.4 13.7 -1.4 15.2 27.5 -34.5 6.5 12.6 6.5 11.0 Vanguard Target Retirement 2040 (VFORX) Rank 41 41 77 70 70 N/A 87 24 68 51 46 51 42 N/A N/A N/A 18.0 18.3 18.5 18.8 19.0 19.3 Return (%)15.1 15.2 15.3 15.4 Risk (Standard Deviation %) Vanguard Target 2040 Composite Index Vanguard Target Retirement 2040 (VFORX) Vanguard Target Retirement 2040 (VFORX) Vanguard Target 2040 Composite Index 0 25 50 75 100Return Percentile Rank6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Target Retirement 2040 (VFORX)18.4 15.3 18.4 -0.4 1.0 1.2 0.2 -1.0 8.3 35.0 7y 9m Vanguard Target 2040 Composite Index 18.7 15.2 18.6 0.0 1.0 1.2 0.0 N/A 8.1 0.0 7y 9m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 15.2 -1.2 0.0 15.0 7y 9m Manager Evaluation Vanguard Target Retirement 2040 (VFORX) vs. Vanguard Target 2040 Composite Index As of March 31, 2014 41 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Apr-2009 - Mar-2014) Historical Statistics (Apr-2009 - Mar-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Vanguard Target Retirement 2045 (VTIVX)1.7 1.7 17.5 10.8 18.5 7.2 24.4 15.6 -2.5 15.2 28.2 -34.6 7.5 16.0 6.9 12.9 Vanguard Target 2045 Composite Index 1.8 1.8 17.8 11.0 18.7 7.3 24.8 15.5 -2.1 15.3 28.6 -35.1 7.5 16.2 7.0 13.0 90% Equity / 10% Fixed Peer Group Median 1.4 1.4 19.7 11.8 19.3 7.2 29.4 13.7 -1.4 15.2 27.5 -34.5 6.5 12.6 6.5 11.0 Vanguard Target Retirement 2045 (VTIVX) Rank 39 39 77 70 70 50 87 23 67 51 47 51 42 17 43 27 18.0 18.3 18.5 18.8 19.0 19.3 Return (%)15.1 15.2 15.3 15.4 Risk (Standard Deviation %) Vanguard Target 2045 Composite Index Vanguard Target Retirement 2045 (VTIVX) Vanguard Target Retirement 2045 (VTIVX) Vanguard Target 2045 Composite Index 0 25 50 75 100Return Percentile Rank6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Target Retirement 2045 (VTIVX)18.5 15.3 18.4 -0.3 1.0 1.2 0.2 -0.9 8.3 40.0 10y 5m Vanguard Target 2045 Composite Index 18.7 15.2 18.6 0.0 1.0 1.2 0.0 N/A 8.1 0.0 10y 5m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 15.2 -1.2 0.0 15.0 10y 5m Manager Evaluation Vanguard Target Retirement 2045 (VTIVX) vs. Vanguard Target 2045 Composite Index As of March 31, 2014 42 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Apr-2009 - Mar-2014) Historical Statistics (Apr-2009 - Mar-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Vanguard Target Retirement 2050 (VFIFX)1.7 1.7 17.5 10.7 18.5 N/A 24.3 15.6 -2.5 15.2 28.3 -34.6 7.5 N/A N/A N/A Vanguard Target 2050 Composite Index 1.8 1.8 17.8 11.0 18.7 N/A 24.8 15.5 -2.1 15.3 28.6 -35.1 7.5 N/A N/A N/A 90% Equity / 10% Fixed Peer Group Median 1.4 1.4 19.7 11.8 19.3 7.2 29.4 13.7 -1.4 15.2 27.5 -34.5 6.5 12.6 6.5 11.0 Vanguard Target Retirement 2050 (VFIFX) Rank 41 41 77 70 70 N/A 87 23 68 51 46 52 42 N/A N/A N/A 18.0 18.3 18.5 18.8 19.0 19.3 Return (%)15.1 15.2 15.3 15.4 Risk (Standard Deviation %) Vanguard Target 2050 Composite Index Vanguard Target Retirement 2050 (VFIFX) Vanguard Target Retirement 2050 (VFIFX) Vanguard Target 2050 Composite Index 0 25 50 75 100Return Percentile Rank6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Target Retirement 2050 (VFIFX)18.5 15.3 18.4 -0.4 1.0 1.2 0.2 -0.9 8.3 40.0 7y 9m Vanguard Target 2050 Composite Index 18.7 15.2 18.6 0.0 1.0 1.2 0.0 N/A 8.1 0.0 7y 9m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 15.2 -1.2 0.0 15.0 7y 9m Manager Evaluation Vanguard Target Retirement 2050 (VFIFX) vs. Vanguard Target 2050 Composite Index As of March 31, 2014 43 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Oct-2010 - Mar-2014) Historical Statistics (Oct-2010 - Mar-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Vanguard Target Retirement 2055 (VFFVX)1.7 1.7 17.5 10.8 N/A N/A 24.3 15.6 -2.3 N/A N/A N/A N/A N/A N/A N/A Vanguard Target 2055 Composite Index 1.8 1.8 17.8 11.0 N/A N/A 24.8 15.5 -2.1 N/A N/A N/A N/A N/A N/A N/A 90% Equity / 10% Fixed Peer Group Median 1.4 1.4 19.7 11.8 19.3 7.2 29.4 13.7 -1.4 15.2 27.5 -34.5 6.5 12.6 6.5 11.0 Vanguard Target Retirement 2055 (VFFVX) Rank 38 38 77 69 N/A N/A 87 23 63 N/A N/A N/A N/A N/A N/A N/A 13.4 13.5 13.7 13.8 14.0 14.1 Return (%)12.8 12.9 13.0 13.1 Risk (Standard Deviation %) Vanguard Target 2055 Composite Index Vanguard Target Retirement 2055 (VFFVX) Vanguard Target Retirement 2055 (VFFVX) Vanguard Target 2055 Composite Index 0 25 50 75 100Return Percentile Rank6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Target Retirement 2055 (VFFVX)13.7 13.0 13.8 -0.2 1.0 1.1 0.2 -0.5 8.2 42.9 3y 6m Vanguard Target 2055 Composite Index 13.8 12.9 13.9 0.0 1.0 1.1 0.0 N/A 8.0 0.0 3y 6m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 12.9 -1.1 0.0 14.3 3y 6m Manager Evaluation Vanguard Target Retirement 2055 (VFFVX) vs. Vanguard Target 2055 Composite Index As of March 31, 2014 44 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Apr-2012 - Mar-2014) Historical Statistics (Feb-2012 - Mar-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Vanguard Target Retirement 2060 (VTTSX)1.7 1.7 17.5 N/A N/A N/A 24.3 N/A N/A N/A N/A N/A N/A N/A N/A N/A Vanguard Target 2060 Composite Index 1.8 1.8 17.8 N/A N/A N/A 24.8 15.5 N/A N/A N/A N/A N/A N/A N/A N/A 90% Equity / 10% Fixed Peer Group Median 1.4 1.4 19.7 11.8 19.3 7.2 29.4 13.7 -1.4 15.2 27.5 -34.5 6.5 12.6 6.5 11.0 Vanguard Target Retirement 2060 (VTTSX) Rank 40 40 77 N/A N/A N/A 87 N/A N/A N/A N/A N/A N/A N/A N/A N/A 14.6 14.7 14.8 14.9 15.0 Return (%)7.4 7.5 7.6 7.7 7.8 7.9 8.0 Risk (Standard Deviation %) Vanguard Target 2060 Composite Index Vanguard Target Retirement 2060 (VTTSX) Vanguard Target Retirement 2060 (VTTSX) Vanguard Target 2060 Composite Index 0 25 50 75 100Return Percentile Rank6/04 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 3/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Target Retirement 2060 (VTTSX)N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 2y 2m Vanguard Target 2060 Composite Index 18.6 8.8 17.7 0.0 1.0 2.0 0.0 N/A 2.6 0.0 2y 2m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 8.8 -2.0 0.0 11.1 2y 2m Manager Evaluation Vanguard Target Retirement 2060 (VTTSX) vs. Vanguard Target 2060 Composite Index As of March 31, 2014 45 Manager Evaluation Ta rget-Date Funds Asset Allocation As of March 31, 2014 U.S.Equi ty 21.1%27.2%36.7%43.3%48.5%53.7%59.0%62.9%62.9%63.0%62.9%63.0% Va nguard Total Stock Marke t Index Fu nd 21.1%27.2%36.7%43.3%48.5%53.7%59.0%62.9%62.9%63.0%62.9%63.0% Non-U.S . Equ ity 9.0%11.8%15.8%18.6%20.8%23.1%25.3%27.0%27.1%27.1%27.1%27.0% Va nguard Total In ternational St ock In dex Fu nd 9.0%11.8%15.8%18.6%20.8%23.1%25.3%27.0%27.1%27.1%27.1%27.0% Fi xe d In come 69.9%61.0%47.5%38.1%30.7%23.2%15.7%10.1%10.0%9.9%10.0%10.0% Va nguard Total Bo nd Marke t II In dex Fu nd 39.2%36.0%31.7%30.5%24.6%18.6%12.6%8.1%8.0%7.9%8.0%8.0% Va nguard Total In ternational Bo nd Stock In dex Fu nd 14.0%12.1%9.5%7.6%6.1%4.6%3.1%2.0%2.0%2.0%2.0%2.0% Va nguard Infla tion-Pro tected Securit ie s Fund 16.7%12.9%6.3%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0% TO TA L 100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0% Tar get Date 2020 Tar get Date 2025 Tar get Date 2010 Tar get Date 2060 Tar get Date 2030 Tar get Date 2035 Tar get Date 2040 Tar get Date 2055VanguardComponent Funds Reti rement In come Tar get Date 2045 Tar get Date 2050 Tar get Date 2015 0% 10% 20% 30% 40% 50% 60% 70% 80% U.S. Equity No n-U.S. Equity Fixed Income Ret iremen t Income Ta rget Date 2010 Ta rget Date 2015 Ta rget Date 2020 Ta rget Date 2025 Ta rget Date 2030 Ta rget Date 2035 Ta rget Date 2040 Ta rget Date 2045 Ta rget Date 2050 Ta rget Date 2055 Ta rget Date 2060 46 Capital Markets Review 47 Weather and Russian Aggression Drive Markets •Intense weather patterns affected the U.S.economy to a greater extent than seen in many years.The Federal Reserve tied weather extremes to nearly every major data point in their outlook for first quarter growth,setting expectations lower for GDP segments not tied to energy. •The western half of the U.S.was hit with a withering drought,which challenged farmers to find alternative irrigation sources.Cities imposed strict limits on residential water usage,and the country braced for higher fruit prices emanating from under-producing California farms.Ranchers struggled to find adequate grasslands for livestock,even as herds were thinned over the past several years.Beef prices hit a multi-year high as a result.The eastern U.S.struggled through a winter that offered heavy snowstorms and bitter cold with ruthless repetitiveness.Consumers sheltered in their homes more often than usual,turning malls and auto showrooms into ghost towns for days at a time.Retail sales were hurt during the quarter,but as the temperature warms,consumers are likely to release their pent-up shopping desires. •Housing construction has remained relatively level over the past year,with volatility increasing in the southern U.S.The South depends on northern transplants to bolster housing construction.As recent graduates faced a tough job market,their usual home Capital Markets Rev iew Economy 0 100 200 300 400 500 600 Mar-08Jul-08Nov-08Mar-09Jul-09Nov-09Mar-10Jul-10Nov-10Mar-11Jul-11Nov-11Mar-12Jul-12Nov-12Mar-13Jul-13Nov-13Mar-14ThousandsHousing Permits New Eng land Mid wes t South West Source:Bloomberg 52 54 56 58 Manufacturin g PMI U.S. housing construction.As recent graduates faced a tough job market,their usual home buying pattern shifted causing more to rent or live with parents.Older homebuyers rely on younger buyers mo ving up in home size in order to sell their own homes,and as the pattern has been disrupted,homebuilders have faced weaker demand. •Emerging markets faced continued headwinds from slogging commodity prices, excepting energy.China’s manufacturing sector contracted as domestic demand and exports weakened.A tepid Eurozone and struggling emerging economies contributed to China’s export weakness. •The Fed taper pressured foreign currencies as central banks struggled to either match U.S.dollar mo vements by tightening or standing pat and dealing with rising inflation. Turkey’s central bank chose to raise interest rates,against the wishes of the Turkish leadership,which was afraid of a public backlash.As the Federal Reserve stimulus had to wind down at some point,countries whose currencies are tied to the U.S.dollar knew that they would need to follow suit or face economic headwinds. •Russia’s invasion of Crimea sparked worldwide condemnation.Sanctions imposed by the U.S.and its allies sent the Russian stock market tumbling while the ruble shed over 10%of its value for a short time.The Russian economy is likely to enter a recession as trade suffers.Europe worried about natural gas supplies,fearing that Putin could stop exports in retaliation of the sanctions. 40 42 44 46 48 50 May-11Jul-11Sep-11Nov-11Jan-12Mar-12May-12Jul-12Sep-12Nov-12Jan-13Mar-13May-13Jul-13Sep-13Nov-13Jan-14Mar-14China Eurozone Source: Bloomberg/Markit/HSBC Growth > 50 Contraction <50 -12 -10 -8 -6 -4 -2 0 2 4 6 12/31/2013 1/31/2014 2/28/2014 3/31/2014Percent vs USDForeign Curre ncies Canad a Mex ico Tu rkey China S. Korea Brazil Russia Source: Bloomberg 48 -2.1% 0.4% 0.5% 0.6% 1.5% 2.0% 2.2% 2.8% 3.0% 5.7% 9.5% -4.0 %-1.0%2.0%5.0%8.0%11.0% Cons. Disc. Te lecom Indust rials Cons.Staples Fi nancials Russell 30 00 Info Tech Fi nancials Materia ls Health Care Utilities 1st Quarter 2014 Sector Returns Capital Markets Rev iew Equities First Quarter Equity Roller Coaster Ride Ends With Modest Gains •The global equity markets experienced a fair amount of day-to-day volatility caused by macroeconomic and geopolitical concerns that included Janet Yellen’s testimony on potential interest rate increases and Russia’s annexation of the Crimean peninsula.Early in the quarter, risk aversion grew,equity markets tumbled,emerging market currencies sold off,and economic data out of China and the U.S.was relatively weak.The markets,however,turned bullish in the latter half of the quarter as emerging market currencies stabilized,the outlook for military intervention in Ukraine waned,and weak U.S.data was attributed to brutal winter weather.The rally helped the S&P 500 Index gain 1.8%during the quarter.Internationally, developed markets outperformed emerging markets for the sixth straight quarter as the MSCI EAFE Index advanced 0.7%while the MSCI EM Index returned -0.4%. •During the first quarter,value companies significantly outperformed growth companies.From a capitalization perspective,large-cap companies outperformed small-cap companies,however the strongest returns came from the mid-cap segment.Sector performance was mixed.Within the Russell 3000 Index,defensive sectors were the top performers,including utilities (+9.5%) and health care (+5.7%).The utilities sector’s high dividends attracted investors in today’s low interest rate environment.Consumer discretionary (-2.1%)was the only sector to register0% 10% 20% 30%Relative PerformanceDeveloped vs. Emerging Markets: 3 Year Relative Performance Rolling 3 Year Annualized Relative Returns Developed Markets Outperformed low interest rate environment.Consumer discretionary (-2.1%)was the only sector to register a loss during the period,as harsh winter weather kept consumers home. •The MSCI EAFE Index advanced 0.7%during the first quarter.The European region (+2.1%) and,in particular,the Nordic countries (+4.7%)and EMU (+2.8%),performed best as investors cheered slow but stable economic growth and reduced austerity measures.Signs of economic improvement aided markets in peripheral countries Italy (+14.6%),Ireland (+14.0%),and Portugal (+9.7%).The Pacific region (-2.5%)was weighed down by Japan (- 5.6%),as investor sentiment towards aggressive fiscal stimulus faded. •Emerging market equities experienced pronounced volatility and fell in the first quarter.The MSCI EM Index returned -0.4%.A strong rally in the latter half of the quarter almost offset losses experienced in January when developing countries’currencies faced selling pressure. Despite currencies stabilizing later in the quarter,slowing Chinese economic growth and political uncertainty in Russia and Ukraine weighed on performance across the developing world.China (-5.9%),Korea (-2.2%),and Russia (-14.5%)were major detractors among developing countries while Indonesia (+21.2%),India (+8.2%),and Thailand (+7.4%)were notable contributors. •Over the past two years,price-to-earnings ratios have risen on improving fundamentals and investor confidence.U.S.equity valuations are now near their long-term averages.Non-U.S. equity valuations,however,remain below long-term averages,with emerging market valuations appearing least expensive. 10 15 20 25 30 35 Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008 Mar 2009 Mar 2010 Mar 2011 Mar 2012 Mar 2013 Mar 2014 Russell 3000 Price/Earnings Ratio -40% -30% -20% -10% 0%1993199419951996199719981999200020012002200320042005200620072008200920102011201220132014Relative PerformanceEmerging Markets Outperformed Source: Pyramis Global Advisors Source: Russell Indices valuation data 49 Bond Bears Snooze in Q1 •Long-term U.S.Treasury yields declined amid soft economic data and ongoing stress in select emerging markets.The yield curve flattened during the quarter as short term yields rose marginally while ten and thirty year rates declined 31 and 40 basis points (bps), respectively.Bond markets continued to fixate on every comment released by the Federal Reserve.Short-term rates increased in March after the Fed implied it may begin raising rates sooner than investors anticipated,only to fall after Janet Yellen said rates might rise six months after tapering ends.Nevertheless,all major fixed income benchmarks produced positive total returns during the quarter,as longer duration assets benefited from declining long-term rates while continued yield appetite supported credit-related sectors.The Barclays Aggregate Index returned +1.8%in Q1,while other top performing market segments included long government/credit (+6.6%),municipals (+3.3%),and high yield (+3.0%). •Investment grade credit spreads narrowed from 111 bps to 103 bps during the quarter and the sector generated duration-adjusted excess returns to Treasuries of 75 bps.Spreads grinded tighter amid healthy corporate fundamentals,low default rates,accommodative global central bank policy,and investors’ongoing appetite for yield.Investment grade credit spreads,as represented by the Barclays U.S.Credit Index,are currently well-below the ten ye ar average and at the tightest level since the third quarter of 2007.Approximately Source: Barclays US Treasury Yield Curve Change by Maturity Duration-adjusted Excess Returns to Treasuries (bps) Capital Markets Rev iew Fixed Income Best Period Second Best Period Worst Period Second W orst Period 0.4% 0.6% 0.8% 1.0% 1.2%Change in Yield1Q14 1 Year Ending 1Q14 2007 2008 2009 2010 2011 2012 2013 1Q14 Aggregate -206 -710 746 171 -114 226 93 16 Age ncy -56 -110 288 77 -25 166 1 30 MBS -177 -232 495 225 -106 91 98 -24 ABS -634 -2223 2496 169 52 246 24 19 CMBS -435 -3274 2960 1501 47 841 97 65 Cre dit -464 -1786 1990 192 -322 693 226 75 Hi gh Yield -777 -3832 5955 974 -240 1394 923 199 Em erging -457 -2842 3797 508 -537 1503 -32 127 0 100 200 300 400 500 600 Option-Adjusted Spread (OAS)Date Bar clays US Credit 10-Year Average the ten ye ar average and at the tightest level since the third quarter of 2007.Approximately $300 billion of new investment grade corporate bond issuance came to market during the quarter,and many deals were three-to-four times oversubscribed,indicating continued insatiable demand for credit.Below investment grade credit sectors also benefited,as high yield corporates and bank loans generated total returns of +3.0%and +1.1%,respectively. •The Agency MBS sector produced a total return of +1.6%during the quarter but lagged duration-adjusted Treasuries by 24 bps as spreads widened and a variety of technical forces impacted the mortgage market.Since the end of 2013,the Fed has reduced its monthly mortgage purchase amount from $40 billion to $25 billion per month,the latter of which accounts for approximately 70%to 80%of gross new issuance.Supply also pulled back as rising mortgage rates,coupled with severe winter weather,contributed to decreased new purchase applications and refinancing activity during the quarter.Supported by more favorable supply/demand dynamics,CMBS and ABS spreads tightened 19 and 6 bps, respectively,leading to positive duration-adjusted excess returns to Treasuries.Non- Agency MBS produced positive returns during the quarter,as the sector continued to generate interest given attractive loss-adjusted yi elds,appreciating home values,and a lack of new issue supply. •Non-U.S.developed government bonds advanced during the quarter,returning +2.4%in local currency terms and +3.2%in U.S.dollar terms.Emerging markets were shaky to start the year as fears of QE reduction and heightened political tensions in the Ukraine,Turkey, and Venezuela led to a broad sell-off in January.However,most emerging markets recovered in February and March,leading to quarterly returns of +3.7%in hard currency bonds and +1.9%in local currency emerging debt.Source: Barclays Trailing 10-Year Investment Grade Credit Spreads Source: US Dept of The Treasury -0.6% -0.4% -0.2% 0.0% 0.2%Change in YieldMaturity (Years) 50 Hedge Funds Navigate Choppy Markets •Hedge funds generated positive returns during the first quarter’s choppy market environment,with the HFR Hedge Fund Composite Index up 1.1%.The MSCI All-Country World Index suffered a large sell-off in January (-4.0%)fueled by renewed concerns about slowing economic growth and political turmoil in many emerging market countries.Hedge funds largely protected capital during the downturn,with the Hedge Fund Composite Index losing only 50 basis points during the month. A sharp reversal in investor perspectives led to solid hedge fund gains in February (+1.9%),albeit not enough to keep pace with global equities (+4.9%).March,however,proved to be more challenging for hedge funds to navigate,as a late month correction among long equity holdings that had previously outperformed hurt returns.Nonetheless,all strategies other than Global Macro remain in the black for the year. •Global equity markets experienced big swings over the five trading days from March 20 to March 27, and long/short equity managers struggled during this period.According to Goldman Sachs,the weekly return of its “GS VIP”Index,which is comprised of the 50 stocks that most frequently appear among the top ten hedge fund holdings,had one of its worst weeks since 2001.The only periods where the Index performed worse were the market retreats in 2002,2008’s market meltdown,and the 2011 debt ceiling debacle.Despite headwinds in March,the HFR Equity Hedge Index finished the quarter up 1.3%,slightly ahead of the MSCI All-Country World Index. •In a continuation of 2013’s trend,distressed hedge fund strategies were the top performers during the Returns as of March 31, 2014 Source: Hedge Fund Research, Inc. Capital Markets Review Hedge Funds St yle Fi rst Qu ar ter 2013 Co nv er tible A rbitr age 2.1%8.0% Di stressed Sec ur itie s 2.7%14.1% Eq uity He dge 1.3%14.3% Eq uity Ma rket Neutral 1.5%6.4% Ev ent Driven 1.8%12.5% Glo bal Ma cro -0.5%-0.5% Me rger Arbitr age 0.7%4.7% He dge Fund Compos ite 1.1%9.1% Fu nd of Fu nds 0.4%9.0% MS CI A ll-Co untry World Index 1.2%23.4% BC Aggregate Bond Index 1.8%-2.0% •In a continuation of 2013’s trend,distressed hedge fund strategies were the top performers during the quarter (+2.7%).Many distressed hedge fund managers,particularly those that historically focused on U.S.investments,are building out European-focused distressed debt teams as interest in the heavily discounted bonds of bankrupt European companies has grown steadily.The rising number of distressed assets being put up for sale by banks and other financial institutions in Europe has provided hedge fund managers with increased opportunities. •Global macro strategies continued to struggle during the first quarter.Managers that take long and short positions in futures contracts accounted for the majority of the HFR Global Macro Index’s decline.Highly levered exposure to equity markets hurt performance in January when the equity markets sold off,while long exposure to bonds,metals and energy negatively contributed during March.On an annualized basis,the trailing three-year return of the Global Macro Index was a disappointing -4.6%. •The hedge fund industry has achieved near-record level assets under management.According to data compiled from eVestment,total hedge fund industry assets climbed 10%in 2013 to $2.86 trillion, modestly below the all-time high of $2.94 trillion reached in June 2008. •Despite total hedge fund capital back up to near-record levels,new hedge fund launches during 2013 fell to their lowest level in three years according to the latest HFR Market Microstructure Industry Report.In addition,fund liquidations increased to their highest level since 2009.Also notable was the very wide performance dispersion between top and bottom decile managers across many hedge fund strategies during 2013.The top decile of all HFR Index constituents reported a gain of 41.6% compared with a decline of 18.9%for the bottom decile.Wide dispersion of manager returns continued through the first quarter. Source: Hedge Fund Research/ The Wall Street Journal -1,500 -1,000 -500 0 500 1,000 1,500 2,000 20002001200220032004200520062007200820092010201120122013Estimated Number of Hedge FundsLaunched Liquidated 51 Returns as of December 31, 2013 Private Real Estate Returns Steady; Commodities Shrug Off Geopolitical Tensions •With interest rates and inflation holding steady at historically low levels,2013 was the fourth consecutive year of double digit gains for private real estate (and sixteenth consecutive quarter of positive gains).The NCREIF Property Index (“NPI”)returned 2.5%in the fourth quarter and 11.0%for the year,lagging the broader equity market but surpassing the bond market.Appreciation and income each achieved returns over 5%for the year with capital appreciation driven mostly from cap rate compression as net operating income was flat on average.Industrial and retail properties outperformed other property types for the year.Within retail,sector returns continue to be bolstered by regional and super regional malls while the warehouse subsector has led industrial properties. •Despite achieving strong and steady performance over the last four years,the private real estate market still has yet to achieve the same level of fundraising experienced pre-2008. According to Preqin,during 2013 only $76 billion in capital was raised among 162 funds,however,this was an improvement over 2012. •In a reversal from 2013,domestic REITs generated an 8.8%return in the first quarter compared to 1.8%for the S&P 500 due to solid quarterly earnings reports and a Capital Markets Review Real Assets NCREIF 3 Mon.1 Yr.3 Yrs.5 Yrs.10 Yrs. NCREIF 2.5%11.0%11.9%5.7%8.6% Ap artments 2.5%10.4%12.3%6.7%8.4% In dustrials 2.9%12.3%12.5%5.1%8.1% Offi ce 2.3%9.9%11.0%4.3%8.2% Retail 2.7%12.9%12.7%7.5%10.1% Hotel 2.3%7.7%9.2%2.5%6.9% Eas t 2.3%9.3%10.8%5.3%8.7% Mi dwest 2.1%10.6%10.9%5.4%7.2% South 2.8%12.5%12.1%6.2%8.5% We st 2.7%11.8%13.2%5.8%9.2% 303 360 321 224250 300 350 400 No. of Closed Funds Aggregate Ca pital Raised ($, bil.) An nual Closed-End Private Real Estate Fundraising compared to 1.8%for the S&P 500 due to solid quarterly earnings reports and a continued low interest rate environment.International REITs were challenged (-1.2%) by several factors including emerging markets growth concerns,particularly China,and Ukraine geopolitical headlines.Investors remain wary on the outlook for REITs with a backdrop of rising interest rates despite strong fundamentals.The real estate market continues to witness little new construction,which has led to declining vacancy rates and rent increases,in turn,improving earnings growth and rising dividends. •Commodity markets bounced back during the first quarter of 2014 with a return of 7.0%, which was well ahead of both equity and bond markets.Harsh weather throughout much of the nation,fears of shortages due to geopolitical tensions in Ukraine,and declining stockpiles of agricultural goods were all driving factors for the quarterly gain. •Softs were the best-performing sector in the Index,up 21.4%,and were driven by coffee (+58.2%)due to drought conditions in Brazil.Livestock and grains each were up over 16%during the quarter.In particular,concerns over potential embargos or military action drove up the prices of wheat and corn as Russia and Ukraine are large producers. Additionally,Kansas,which accounts for approximately 20%of total U.S.wheat production,suffered extreme drought conditions further elevating prices.Industrial metals were the worst-performing sector,down 4.6%.Weak manufacturing data from China,a stronger dollar,and some signs of a strengthening U.S.economy exerted downward pressure on the metals subsectors. Source: Ibbotson DJ-UBS Commodity Index Components Total Return Ending March 31, 2014 Segment 3 Months 1 Year 3 Years 5 Years 30.6%Energy 4.2%2.3%-7.9%-2.8% 14.6%Petroleum 0.5%2.2%-1.3%8.7% 15.0%Indus trial Metals -4.6%-10.5%-14.4%4.7% 15.1%Prec ious Metals 5.4%-22.8%-8.6%6.9% 24.6%Grains 16.1%0.2%-1.2%6.0% 5.7%Live stock 16.4%20.0%-0.4%1.2% 9.0%Soft s 21.4%4.2%-14.7%9.1% 100.0%To tal Mark et 7.0%-2.1%-7.4%4.2% Al loca ti on 190 185 195 224 162 104 131 141 52 47 64 67 76 0 50 100 150 200 250 2006 2007 2008 2009 2010 2011 2012 2013 Ye ar of Final Clos e Source: Preqin Real Estate Online 52 $80 $100 $120 •Private equity performance data in the ThomsonOne database has yet to be updated for the fourth quarter of 2013.During 3Q13,buyout funds modestly outperformed public equity markets,producing a pooled IRR of 5.4%versus 5.2%for the S&P 500.Venture capital funds lagged the S&P 500,producing a pooled IRR of 4.1%.Mega buyout and late stage venture capital funds were the strongest performers for the quarter while small buyout was the worst performing fund segment.Buyout funds exceeded the return of public markets over the trailing one-ye ar period while venture capital funds trailed the S&P 500 by a large margin.However,there was a considerable performance disparity between early and late stage funds for the one-year period,as those segments produced pooled IRRs of 4.7%and 18.5%,respectively. •In total,private equity funds raised nearly $84 billion during 1Q14,9%less than the prior quarter but 20%more than the same period last year.After a flurry of activity in the second half of 2013,buyout funds had their lowest quarterly fundraising total since 3Q12,raising approximately $33 billion.Conversely,venture capital funds experienced a substantial improvement during 1Q14,raising more than $13 billion,an 89%increase from the prior quarter and nearly double the amount raised in the same period last ye ar.U.S.venture firms, which dominate the venture capital space,raised $9.4 billion during 1Q14,their highest quarterly total in more than six years. Source: Thomson Reuters ThomsonOne database, April 2014. Note: Data is continuously updated and is therefore subject to change. Strongest Quarter for Ve nture-Backed IPOs Since 2000 Global Fundraising Investment Horizon Pooled IRR as of 9/30/13 Fund Type 3 Months 1 Year 3 Years 5 Years 10 Years 20 Years Early Stage Venture 3.0%4.7%3.7%0.6%2.3%21.1% Balanced Venture 4.0%6.2%4.9%2.1%6.3%10.0% Later Stage Venture 6.0%18.5%9.3%6.4%8.3%13.6% All Venture 4.1%8.2%5.2%2.3%5.0%14.8% Small Buyouts 0.2%16.1%5.9%3.0%11.2%12.3% Medium Buyouts 2.0%13.5%9.6%5.4%9.9%11.9% Large Buyouts 4.8%17.1%10.2%6.3%12.6%10.3% Mega Buyouts 6.8%24.1%13.7%9.5%9.2%9.2% All Buyouts 5.4%20.4%11.5%7.3%10.9%10.6% Mezzanine 2.8%13.9%7.0%4.6%7.0%7.6% Distressed/Turnaround 3.5%15.8%10.5%10.3%10.2%10.2% All Private Equity 4.9%17.4%10.2%6.7%9.6%11.2% S&P 500 5.2%19.0%16.2%10.6%8.0%8.1% Capital Markets Rev iew Pr ivate Equity $0 $20 $40 $60 $80 $,BillionsVC Buyout Real Assets Secondary Funds Distre ssed/SS 0 5000 10000 15000 20000 0 5 10 15 20 25 30 35 40 Agg. Value ($,Millions)# of DealsVent ure-Backed IPOs #Venture-Bac ked IPOs $ Value quarterly total in more than six years. •During 1Q14,buyout firms announced the fewest number of deals in a quarter in four years. According to Preqin,688 buyout-backed deals were announced during the first quarter, down from 769 deals in the prior quarter and 733 deals in the same period last year. However,the aggregate value of buyout-backed deals increased by 31%during the quarter as the average deal size significantly increased. •Buyout-backed exit activity declined in 1Q14 relative to the prior quarter but remained strong relative to historical averages.According to Preqin,there were 310 buyout-backed exits with an aggregate exit value of $87 billion in 1Q14,compared to 395 exits worth $94 billion in the prior quarter and 324 exits worth $52 billion in the same period last year.Since the beginning of 2006,there has been an average of 266 exits worth $58 billion per quarter. •The first quarter of 2014 saw continued strength for the venture-backed IPO market led by the biotechnology sector.According to Thomson Reuters and the National Venture Capital Association,there were 36 venture-backed IPOs in 1Q14,the highest quarterly total since 2000 and the fourth consecutive quarter with more than 20 venture-backed IPOs.Biotech companies represented 19 of the 36 IPOs that occurred during 1Q14.Venture-backed M&A activity increased modestly during 1Q14,as 105 venture-backed M&A deals were completed versus 92 deals in the prior quarter and 86 deals in the same period last year.The average deal size for venture-backed M&A deals reached $259 million in 1Q14,the highest average since 2004. Source: Thomson Reuters ThomsonOne database, April 2014. Source: Thomson Reuters & National Venture Capital Association, April 2014. Venture-Backed IPO Activity 53 Quarter Year To Date 1 Year 2 Years 3 Years 5 Years 7 Years 10 Years Domestic Equity Indices Dow Jones Wilshire 5000 2.0 2.0 22.8 18.6 14.6 22.1 6.9 8.1 S&P 500 1.8 1.8 21.9 17.8 14.7 21.2 6.3 7.4 Russell 1000 Index 2.0 2.0 22.4 18.4 14.7 21.7 6.6 7.8 Russell 1000 Growth Index 1.1 1.1 23.2 16.5 14.6 21.7 8.2 7.9 Russell 1000 Value Index 3.0 3.0 21.6 20.2 14.8 21.8 4.8 7.6 Russell Midcap Index 3.5 3.5 23.5 20.4 14.4 25.6 7.7 10.1 Russell Midcap Growth Index 2.0 2.0 24.2 18.4 13.5 24.7 8.2 9.5 Russell Midcap Value Index 5.2 5.2 23.0 22.2 15.2 26.4 6.8 10.2 Russell 2000 Index 1.1 1.1 24.9 20.5 13.2 24.3 7.1 8.5 Russell 2000 Growth Index 0.5 0.5 27.2 20.7 13.6 25.2 8.6 8.9 Russell 2000 Value Index 1.8 1.8 22.6 20.3 12.7 23.3 5.4 8.1 International Equity Indices MSCI EAFE 0.7 0.7 17.6 14.4 7.2 16.0 1.3 6.5 MSCI EAFE Growth Index 0.1 0.1 14.9 13.1 7.2 15.9 2.2 6.6 MSCI EAFE Value Index 1.2 1.2 20.2 15.5 7.2 16.1 0.3 6.4 MSCI EAFE Small Cap 3.4 3.4 23.3 18.2 9.4 21.7 2.8 8.6 MSCI AC World Index 1.1 1.1 16.6 13.5 8.6 17.8 3.5 7.0 MSCI AC World ex US 0.5 0.5 12.3 10.3 4.1 15.5 1.7 7.1 MSCI Emerging Markets Index -0.4 -0.4 -1.1 0.6 -2.5 14.8 3.7 10.5 Fixed Income Indices Barclays Aggregate 1.8 1.8 -0.1 1.8 3.7 4.8 5.0 4.5 Barcap Intermediate U.S. Government/Credit 1.0 1.0 -0.1 1.7 3.1 4.2 4.5 3.9 Barclays U.S. Long Government/Credit 6.6 6.6 -0.9 3.9 9.0 9.1 7.5 6.5 Barclays US Corp: High Yield 3.0 3.0 7.5 10.3 9.0 18.2 8.7 8.7 BofA Merrill Lynch 3 Month US T-Bill 0.0 0.0 0.1 0.1 0.1 0.1 0.9 1.7 Barclays U.S. Treasury: U.S. TIPS 1.9 1.9 -6.5 -0.6 3.5 4.9 5.2 4.5 Citigroup Non-U.S. World Government Bond 3.2 3.2 2.4 0.1 1.4 4.1 4.9 4.3 JPM EMBI Global Diversified (external currency)3.7 3.7 0.6 5.2 7.1 11.7 7.4 8.2 JPM GBI-EM Global Diversified (local currency)1.9 1.9 -7.1 0.0 1.1 9.8 7.1 9.3 Real Asset Indices Dow Jones - UBS Commodity 7.0 7.0 -2.1 -2.6 -7.4 4.2 -2.7 0.4 Dow Jones Wilshire REIT 10.1 10.1 4.4 9.1 10.5 29.2 2.0 8.2 Capital Markets Review Index Returns As of March 31, 2014 (Percentage Return) _________________________ Returns for periods greater than one year are annualized. 54