Loading...
HomeMy Public PortalAbout2014 3rd Quarter ReportPerformance Review Metropolitan St. Louis Sewer District Deferred Compensation Plan 3rd 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 12 5 Capital Markets Review 46 Table Of Contents Executive Summary 1 Performance Summary - September 2014 Amidst volatile markets, due partly to continued geopolitical concerns, third quarter fund returns were mixed. 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 October 2014, Vanguard announced that Charles Anniss, CFA, replaced Greg Aldridge as portfolio manager for the portion of the International Growth Fund managed by M&G Investment Management Limited (M&G). The funds' multimanager approach and other portfolio managers are unchanged. Pavilion will continue to monitor the manager for further developments. There were no major changes to the other investment options. Third quarter performance for the available active managers in the investment menu was mixed. Vanguard U.S. Growth trailed the Russell 1000 Growth Index by 70 basis points due primarily to an overweight allocation to the information technology sector. Vanguard Windsor II matched the Russell 1000 Value Index, while Vanguard International Growth outperformed the MSCI AC World ex USA Index by 40 basis points as a result of strong stock selection in emerging markets and the Pacific regions. The domestic large-cap core and growth 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 It was a difficult quarter in the capital markets. U.S. large-cap equities posted modest gains while small-cap equities severely underperformed. International equity declined across foreign markets, with developed markets underperforming emerging markets. Fixed income volatility returned to the market highlighted by a flight to quality in long term rates. Local currency international debt performed poorly due to a strengthening U. S. Dollar. An expansion of Russia’s invasion of Ukraine, Israel’s military actions to clear Gaza of missiles and tunnels used by attackers, and ISIS conquering territory across Iraq caused investors to pull monies out of Europe and Asia for the perceived safety of the U.S. dollar and Treasury bonds. The rapid ascent of the U.S. dollar sent foreign investment values sharply lower versus their local-currency returns. A wave of economic weakness enveloped Europe, Japan, Brazil, China and many smaller countries. The European Central Bank (ECB) inched closer toward purchasing asset-backed bonds, while further lowering its deposit rate to -0.2%. With the German economy near a zero-growth rate and countries such as Greece and Spain pleading for an end to austerity, the Eurozone economy offered little near-term outlook for growth. Hopes turned to the ECB to offer a Federal Reserve style bailout and inflate the flagging economy, though the bank has been reluctant to put plans into action based on German leaders’ protests. The impending culmination of the Federal Reserve’s asset purchases was a late-quarter headwind for stocks. The U.S. economy faced a perplexing mix of economic readings. The unemployment rate fell to 5.9%, though the number of workers leaving the workforce remained dauntingly high. Retail sales were choppy, yet on an upward trend. A steep drop in oil prices, brought on by increased U.S. production, will be a negative for upcoming energy spending, due to falling gasoline prices, but will be a broader benefit for the economy. Recommendations or Action Items No recommendations at this time. 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)1.1 (26)8.2 (16)19.5 (18)22.8 (32)15.5 (26)8.0 (46) S&P 500 1.1 (25)8.3 (15)19.7 (16)23.0 (29)15.7 (24)8.1 (42) Large-Cap Equity Peer Group Median 0.1 6.0 16.4 21.5 14.3 7.8 Vanguard US Growth (VWUSX)0.8 (55)6.5 (35)18.2 (32)23.3 (24)15.0 (52)8.1 (61) Russell 1000 Growth Index 1.5 (38)7.9 (21)19.1 (24)22.4 (36)16.5 (24)8.9 (42) Large-Cap Growth Equity Peer Group Median 1.1 5.5 16.7 21.5 15.1 8.5 Vanguard Windsor II (VWNFX)-0.2 (47)7.4 (27)17.6 (35)22.7 (38)14.7 (35)7.9 (41) Russell 1000 Value Index -0.2 (47)8.1 (17)18.9 (22)23.9 (22)15.3 (24)7.8 (42) Large-Cap Value Equity Peer Group Median -0.3 6.1 16.2 21.8 14.0 7.5 Vanguard Mid-Cap Index (VIMSX)-1.2 (19)6.5 (10)15.7 (13)23.1 (23)16.9 (16)10.2 (24) Vanguard Mid-Cap Index Fund Blended Benchmark -1.1 (18)6.7 (10)15.9 (12)23.4 (20)17.1 (14)10.3 (19) Mid-Cap Equity Peer Group Median -3.3 1.4 9.4 20.8 14.8 9.1 Vanguard Small-Cap Index (NAESX)-5.5 (26)0.5 (8)9.3 (11)23.4 (22)16.1 (20)9.7 (11) Vanguard Small-Cap Index Fund Blended Benchmark -5.5 (25)0.7 (8)9.6 (10)23.6 (20)16.2 (18)9.8 (10) Small-Cap Equity Peer Group Median -6.6 -4.4 4.2 20.8 14.3 8.0 International Equity Option Vanguard International Growth (VWIGX)-4.9 (24)-2.7 (67)4.4 (50)15.0 (24)8.3 (25)7.9 (25) MSCI AC World ex USA (Net)-5.3 (35)0.0 (24)4.8 (42)11.8 (79)6.0 (68)7.1 (40) International Equity Peer Group Median -5.8 -1.7 4.3 13.6 6.8 6.6 Fixed Income Options Vanguard Total Bond Market Index (VBMFX)0.1 (34)4.0 (68)3.8 (76)2.2 (90)3.9 (85)4.5 (66) Vanguard Total Bond Market Index Fund Benchmark 0.2 (31)4.0 (66)4.0 (70)2.5 (83)4.2 (79)4.6 (59) Market Duration Fixed Income Peer Group Median 0.0 4.2 4.6 3.6 4.9 4.8 Vanguard Retirement Savings Trust 0.5 1.3 1.7 2.1 2.4 3.2 Ryan 3 Yr GIC Master 0.3 0.8 1.0 1.3 2.1 3.1 Performance Summary Investment Options As of September 30, 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 September 30, 2014 Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Equity/Fixed Income Blend Options Vanguard Balanced Index (VBINX)0.0 (10)5.7 (10)11.9 (13)14.3 (33)11.1 (19)7.2 (19) Vanguard Balanced Index Fund Benchmark 0.1 (10)5.9 (10)12.2 (11)14.6 (28)11.3 (15)7.3 (15) 60% Equity / 40% Fixed Peer Group Median -0.8 3.6 9.6 13.7 10.0 6.5 Vanguard Target Retirement Income (VTINX)-0.4 (7)4.0 (26)6.5 (49)7.4 (64)7.0 (46)5.5 (27) Vanguard Target Income Composite Index -0.4 (7)4.1 (22)6.7 (43)7.5 (61)7.1 (42)5.5 (27) IM Mixed-Asset Target Alloc Consv (MF) Median -1.1 3.2 6.3 8.1 6.8 4.9 Vanguard Target Retirement 2010 (VTENX)-0.5 (6)4.2 (7)7.5 (24)9.6 (46)8.2 (30)N/A Vanguard Target 2010 Composite Index -0.5 (5)4.3 (4)7.8 (18)9.7 (44)8.3 (26)N/A IM Mixed-Asset Target 2010 (MF) Median -1.3 3.1 6.9 9.5 7.6 4.9 Vanguard Target Retirement 2015 (VTXVX)-0.7 (14)4.5 (5)9.1 (6)11.7 (22)9.2 (12)6.3 (19) Vanguard Target 2015 Composite Index -0.7 (13)4.6 (4)9.3 (4)11.9 (20)9.3 (10)6.3 (18) IM Mixed-Asset Target 2015 (MF) Median -1.3 3.2 7.0 10.3 8.0 5.6 Vanguard Target Retirement 2020 (VTWNX)-0.8 (13)4.8 (1)10.1 (3)13.3 (19)10.0 (9)N/A Vanguard Target 2020 Composite Index -0.8 (13)4.9 (1)10.4 (2)13.6 (15)10.3 (4)N/A IM Mixed-Asset Target 2020 (MF) Median -1.5 3.3 7.7 11.0 8.4 5.4 Vanguard Target Retirement 2025 (VTTVX)-1.0 (14)4.8 (5)10.8 (6)14.6 (27)10.6 (20)6.7 (28) Vanguard Target 2025 Composite Index -0.9 (11)5.0 (4)11.2 (4)14.9 (24)10.9 (9)6.8 (22) IM Mixed-Asset Target 2025 (MF) Median -1.6 3.6 8.9 13.2 9.6 6.4 Vanguard Target Retirement 2030 (VTHRX)-1.2 (17)4.7 (3)11.5 (7)15.9 (20)11.2 (13)N/A Vanguard Target 2030 Composite Index -1.1 (13)5.0 (1)11.9 (5)16.1 (16)11.5 (8)N/A IM Mixed-Asset Target 2030 (MF) Median -1.8 3.5 9.5 14.3 9.9 5.9 Vanguard Target Retirement 2035 (VTTHX)-1.4 (16)4.8 (4)12.2 (6)17.2 (20)11.8 (11)7.2 (28) Vanguard Target 2035 Composite Index -1.3 (10)5.0 (1)12.6 (4)17.4 (16)12.1 (5)7.3 (20) IM Mixed-Asset Target 2035 (MF) Median -1.9 3.5 10.1 15.7 10.8 6.7 Vanguard Target Retirement 2040 (VFORX)-1.5 (20)4.7 (6)12.7 (6)17.9 (16)12.1 (8)N/A Vanguard Target 2040 Composite Index -1.4 (16)5.0 (2)13.0 (3)18.1 (10)12.4 (3)N/A IM Mixed-Asset Target 2040 (MF) Median -2.0 3.5 10.3 16.0 10.7 6.1 _________________________ 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 September 30, 2014 Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Equity/Fixed Income Blend Options (cont.) Vanguard Target Retirement 2045 (VTIVX)-1.5 (14)4.8 (9)12.7 (7)17.9 (21)12.1 (9)7.6 (N/A) Vanguard Target 2045 Composite Index -1.4 (13)5.0 (4)13.0 (6)18.1 (15)12.4 (4)7.7 (N/A) IM Mixed-Asset Target 2045 (MF) Median -2.0 3.5 10.7 16.9 11.1 N/A Vanguard Target Retirement 2050 (VFIFX)-1.5 (19)4.8 (12)12.7 (7)17.9 (27)12.1 (9)N/A Vanguard Target 2050 Composite Index -1.4 (16)5.0 (6)13.0 (5)18.1 (16)12.4 (4)N/A IM Mixed-Asset Target 2050 (MF) Median -2.0 3.5 10.7 16.8 11.1 N/A Vanguard Target Retirement 2055 (VFFVX)-1.5 (18)4.8 (14)12.7 (10)17.9 (31)N/A N/A Vanguard Target 2055 Composite Index -1.4 (13)5.0 (6)13.0 (6)18.1 (26)N/A N/A IM Mixed-Asset Target 2055+ Funds (MF) Median -1.9 3.4 11.1 17.1 10.9 N/A Vanguard Target Retirement 2060 (VTTSX)-1.5 (17)4.8 (13)12.7 (9)N/A N/A N/A Vanguard Target 2060 Composite Index -1.4 (13)5.0 (6)13.0 (6)N/A N/A N/A IM Mixed-Asset Target 2055+ Funds (MF) Median -1.9 3.4 11.1 17.1 10.9 N/A Money Market Option Vanguard Prime Money Market (VMMXX)0.0 0.0 0.0 0.0 0.0 1.7 BofA Merrill Lynch 3 Month U.S. T-Bill 0.0 0.0 0.0 0.1 0.1 1.6 _________________________ 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 September 30, 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 tiona l Grow th (V WIGX) Vangua rd Total Bond Marke 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 investment team +-+++-++ No ma teria l o rg aniza tional changes ++++++++ Accounting or regulatory concerns ++++++++ Cu rrently in adherence to guidelin es ++++++++ Po rt fo lio characteris tics me et stylis tic expectations ++++++++ Re lati ve Perfor mance 1 Three-year return better than benchmark N/A +-N/A N/A +N/A N/A Three-year rankin g better than peer group median ++++++-N/A Fiv e year re turn better than benchmark N/A --N/A N/A +N/A N/AFive year re turn better than benchmark N/A --N/A N/A +N/A N/A Fiv e year ra nkin g better than peer group median ++++++-N/A Perfor manc e s tatus ++++++++ Summar y s tatus +-++++++ 1 Manager performance is evaluated net of investment management fees. 7 Pe rformance Summary Manager Compliance Checklist (Continued) As of September 30, 2014 Manage rs Vanguard Ba lance d Index (V BI NX ) Vanguard Target Re ti re ment Income Fund (VTINX) Vangua rd Target Re tirement 2010 (VTENX) Vangua rd Ta rget Re tire ment 2015 (V TXVX) Vangua rd Ta rge t Re ti re ment 2020 (V TWNX ) Vangua rd Ta rge t Re ti re ment 2025 (V TTVX) Vanguard Targe t Re ti re ment 2030 (V THRX) Vangua rd Targe t Re tire ment 2035 (VTTHX) Organizati onal /Produ ct Is sues No ma terial c hanges to investment team ++++++++ No ma terial o rganiza tional changes ++++++++ Accounting or regulatory concerns ++++++++ Cu rrently in adherence to guidelin es ++++++++ Po rt fo lio characteris tics me et stylis tic expectations ++++++++ Relative Perfor mance 1 Three-year return better than benchmark N/A N/A N/A N/A N/A N/A N/A N/A Three-year rankin g better than peer group median +-++++++ Five year return better than benchmark N/A N/A N/A N/A N/A N/A N/A N/AFive year return better than benchmark N/A N/A N/A N/A N/A N/A N/A N/A Five year rankin g better than peer group median ++++++++ Performance status ++++++++ Summar y s tatus ++++++++ 1 Manager performance is evaluated net of investment management fees. 8 Pe rformance Summary Manager Compliance Checklist (Continued) As of September 30, 2014 Mana gers Vanguard Ta rge t Re ti re ment 2040 (V FORX) Vangua rd Ta rget Re ti re ment 2045 (V TIVX) Va ngua rd Targe t Re ti re ment 2050 (V FIFX) Vangua rd Targe t Re ti re ment 2055 (V FFVX) Vangua rd Ta rge t Re ti re ment 2060 (V TTSX) Vangua rd Prime Mone y Marke t Fund (V MMXX) Organizational /Produ ct Is sues No ma teria l c hanges to investment team ++++++ No ma teria l o rg aniza tional changes ++++++ Accounting or regulatory concerns ++++++ Cu rre ntly in adherence to guidelin es ++++++ Po rt fo lio characteris tics me et stylis tic expectations ++++++ 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 ++++N/A N/A Fiv e year return better than benchmark N/A N/A N/A N/A N/A N/A 1 Manager performance is evaluated net of investment management fees. 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 +++N/A N/A N/A Performance status ++++++ Summary status ++++++ 9 Plan Assets 10 Plan Summary Fee Comparison Summary As of September 30, 2014 Inv estment Option Expe nse Ratio Morningstar Cate gory Av erage Fe e Level Comp arison Group Median eVestment Al liance Univ erse Median Cate gory Fe e Level Comp arison Group eVestment Alliance Univ erse Va nguard 500 In dex 0.17 1.10 0.96 0.17 La rg e Blend La rg e Cap No Lo ad US Pa ssive La rg e Cap Equity Va nguard US Gro wt h 0.45 1.23 0.96 0.85 La rge Gro wth La rg e Cap No Lo ad US Large Cap Gr owth Va nguard Windsor 0.36 1.15 0.84 0.84 La rg e Value La rg e Cap No Lo ad US Large Cap Va lu e Va nguard Mid-Ca p Index 0.24 1.23 1.11 0.27 Mid Ble nd Mid Cap No Lo ad US Passive Mid Cap Equity Va nguard Sma ll-Ca p Index 0.24 1.16 1.20 0.24 Small Ble nd Small Ca p No Load US Pa ssive Small Ca p Equity Va nguard International Gr owth 0.48 1.37 1.11 1.09 Foreig n Large Gro wt h Foreign Large Cap No Lo ad ACWI ex-US Gro wt h Equity Va nguard Total Bo nd Marke t Index 0.20 0.84 0.65 0.52 Interme diate-Term Bond Interme diate-Term Bond No Load US Co re Fixe d Income Va nguard Retire me nt Saving Trust 0.52 N/A N/A 0.70 N/A N/A US St able Value Fixed Income Va nguard Balanced Index 0.24 0.87 0.92 0.73 Moderate Allo cation Moderate Allo cation No Load US Ba la nced Va nguard Target Retirement Income 0.16 0.68 0.65 0.46 Re tire me nt Income Retire me nt Income No Load Li fecycle/Target Date Income Va nguard Target Retirement 2010 0.16 0.48 0.64 0.55 Target Date 2000-2010 Target Retireme nt 2000-2010 No Lo ad Life cycle/Target Date 2010Vanguard Target Retirement 2010 0.16 0.48 0.64 0.55 Target Date 2000-2010 Target Retireme nt 2000-2010 No Lo ad Life cycle/Target Date 2010 Va nguard Target Retirement 2015 0.16 0.53 0.85 0.61 Target Date 2011-2015 Target Retireme nt 2011-2015 No Lo ad Life cycle/Target Date 2015 Va nguard Target Retirement 2020 0.16 0.59 0.82 0.62 Target Date 2016-2020 Target Retireme nt 2016-2020 No Lo ad Life cycle/Target Date 2020 Va nguard Target Retirement 2025 0.17 0.53 0.88 0.64 Target Date 2021-2025 Target Retireme nt 2021-2025 No Lo ad Life cycle/Target Date 2025 Va nguard Target Retirement 2030 0.17 0.59 0.82 0.65 Target Date 2026-2030 Target Retireme nt 2026-2030 No Lo ad Life cycle/Target Date 2030 Va nguard Target Retirement 2035 0.18 0.54 0.91 0.70 Target Date 2031-2035 Target Retireme nt 3031-2035 No Lo ad Life cycle/Target Date 2035 Va nguard Target Retirement 2040 0.18 0.60 0.86 0.69 Target Date 2036-2040 Target Retireme nt 2036-2040 No Lo ad Life cycle/Target Date 2040 Va nguard Target Retirement 2045 0.18 0.55 0.96 0.72 Target Date 2041-2045 Target Retireme nt 2041-2045 No Lo ad Life cycle/Target Date 2045 Va nguard Target Retirement 2050 0.18 0.57 0.84 0.68 Target Date 2046-2050 Target Retireme nt 2046-2050 No Lo ad Life cycle/Target Date 2050 Va nguard Target Retirement 2055 0.18 0.46 0.93 0.47 Target Date 2051+Target Retireme nt 2051+ No Lo ad Life cycle/Target Date 2055 Va nguard Target Retirement 2060 0.18 0.46 0.93 N/A Target Date 2051+Target Retireme nt 2051+ No Lo ad N/A Va nguard Prime Money Marke t 0.16 0.13 N/A 0.20 Money Marke t Taxable N/A US Cash Management 11 Manager Evaluation 12 Historical Performance Three Year Rolling Percentile Ranking Relative Performance Historical Statistics (Oct-2009 - Sep-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)1.1 8.2 19.5 22.8 15.5 8.0 32.2 15.8 2.0 14.9 26.5 -37.0 5.4 15.6 4.8 10.7 S&P 500 1.1 8.3 19.7 23.0 15.7 8.1 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 0.1 6.0 16.4 21.5 14.3 7.8 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 26 16 18 32 26 46 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 -0.4Return (%)12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Vanguard 500 Index Fund (VFINX)S&P 500 0 25 50 75 100Return Percentile Rank12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard 500 Index Fund (VFINX)15.5 14.1 15.6 -0.1 1.0 1.1 0.0 -9.0 8.2 0.0 38y 1m S&P 500 15.7 14.1 15.8 0.0 1.0 1.1 0.0 N/A 8.1 0.0 38y 1m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 14.1 -1.1 0.0 20.0 38y 1m Manager Evaluation Vanguard 500 Index Fund (VFINX) vs. S&P 500 As of September 30, 2014 13 Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Apple Inc 3.4 3.4 0.0 9.0 Exxon Mobil Corp 2.3 2.3 0.0 -5.9 Microsoft Corp 2.2 2.2 0.0 11.9 Johnson & Johnson 1.7 1.7 0.0 2.6 General Electric Co 1.5 1.5 0.0 -1.7 Wells Fargo & Co 1.4 1.4 0.0 -0.6 Berkshire Hathaway Inc 1.3 1.4 -0.1 9.1 Procter & Gamble Co (The)1.3 1.3 0.0 7.4 JPMorgan Chase & Co 1.3 1.3 0.0 5.3 Chevron Corp 1.3 1.3 0.0 -7.8 % of Portfolio 17.6 17.8 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)128,982 129,536 Median Mkt. Cap ($M)17,195 17,148 Price/Earnings ratio 18.6 18.6 Price/Book ratio 2.9 2.9 5 Yr. EPS Growth Rate (%)14.6 14.5 Current Yield (%)2.0 2.0 Debt to Equity 1.2 1.2 Number of Stocks 505 502 Beta (5 Years, Monthly)1.00 1.00 Consistency (5 Years, Monthly)1.67 1.00 Sharpe Ratio (5 Years, Monthly)1.17 1.18 Information Ratio (5 Years, Monthly)-7.52 - Up Market Capture (5 Years, Monthly)99.63 - Down Market Capture (5 Years, Monthly)100.37 - Sector Weights (%) Vanguard 500 Index Fund (VFINX)S&P 500 0.0 5.0 10.0 15.0 20.0 25.0 Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.4 3.0 2.4 3.4 19.6 10.2 13.8 16.3 9.7 9.5 11.6 0.0 3.0 2.4 3.5 19.7 10.3 13.9 16.3 9.7 9.5 11.7 Distribution of Market Capitalization (%) Vanguard 500 Index Fund (VFINX)S&P 500 0.0 15.0 30.0 45.0 60.0 >$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Cash 48.7 34.7 16.1 0.5 0.0 48.5 34.5 16.0 0.5 0.4 Manager Evaluation Vanguard 500 Index Fund (VFINX) vs. S&P 500 As of September 30, 2014 14 Historical Performance Buy and Hold Attribution Risk and Return (Oct - 2009 - Sep - 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)-0.2 7.4 17.6 22.7 14.7 7.9 30.7 16.7 2.7 10.6 27.1 -36.7 2.2 18.2 7.0 18.3 Russell 1000 Value Index -0.2 8.1 18.9 23.9 15.3 7.8 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 -0.3 6.1 16.2 21.8 14.0 7.5 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 47 27 35 38 35 41 62 29 17 86 42 45 56 36 38 7 13.8 14.4 15.0 15.6 16.2 Return (%)14.5 14.6 14.7 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 Rank12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Average Active Weight 0.0 6.0 12.0-6.0-12.0 Utilities Telecommunication Services Other Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -2.3 0.4 0.3 -1.8 3.8 -2.2 3.6 -7.5 -2.1 2.5 3.0 2.2 Allocation (Total: 0.5) 0.0 0.3 0.6-0.3-0.6 0.1 0.0 0.0 0.0 0.2 0.1 0.1 -0.2 0.2 0.1 0.0 0.0 Stock (Total: -0.3) 0.0 0.4 0.8-0.4-0.8 -0.1 0.0 0.0 0.0 0.0 0.4 0.1 0.0 -0.3 -0.3 -0.2 0.0 Vanguard Windsor II (VWNFX) 0.0 0.3 0.6 0.9-0.3-0.6-0.9 0.0 0.0 0.0 0.1 0.2 0.5 0.2 -0.2 -0.1 -0.2 -0.3 0.0 Manager Evaluation Vanguard Windsor II (VWNFX) vs. Russell 1000 Value Index As of September 30, 2014 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 15 Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Microsoft Corp 3.0 1.4 1.7 11.9 JPMorgan Chase & Co 2.7 2.3 0.4 5.3 Pfizer Inc 2.6 1.9 0.7 0.5 Intel Corp 2.6 1.6 1.0 13.5 Wells Fargo & Co 2.5 2.5 0.0 -0.6 Johnson & Johnson 2.3 2.6 -0.3 2.6 Medtronic Inc 2.3 0.6 1.6 -2.4 Citigroup Inc 2.3 1.6 0.7 10.0 WellPoint Inc 2.2 0.3 1.9 11.6 Philip Morris International Inc 2.2 0.6 1.6 0.1 % of Portfolio 24.6 15.3 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)109,816 112,109 Median Mkt. Cap ($M)22,184 6,878 Price/Earnings ratio 15.7 16.5 Price/Book ratio 2.2 2.0 5 Yr. EPS Growth Rate (%)16.0 11.2 Current Yield (%)2.7 2.4 Debt to Equity 1.2 0.9 Number of Stocks 258 690 Beta (5 Years, Monthly)0.97 1.00 Consistency (5 Years, Monthly)43.33 1.00 Sharpe Ratio (5 Years, Monthly)1.09 1.11 Information Ratio (5 Years, Monthly)-0.24 - Up Market Capture (5 Years, Monthly)96.21 - Down Market Capture (5 Years, Monthly)95.96 - Sector Weights (%) Vanguard Windsor II (VWNFX)Russell 1000 Value Index 0.0 8.0 16.0 24.0 32.0 40.0 Other Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.3 2.3 3.8 2.7 1.6 13.3 8.5 17.3 21.4 10.6 9.4 8.9 0.0 0.0 6.0 2.3 3.3 9.4 10.2 13.5 29.2 12.9 7.1 6.2 Distribution of Market Capitalization (%) Vanguard Windsor II (VWNFX)Russell 1000 Value Index 0.0 15.0 30.0 45.0 60.0 >$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Cash 42.4 31.3 20.1 6.2 0.0 45.4 35.1 15.6 1.7 2.3 Manager Evaluation Vanguard Windsor II (VWNFX) vs. Russell 1000 Value Index As of September 30, 2014 16 Historical Performance Buy and Hold Attribution Risk and Return (Oct - 2009 - Sep - 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)0.8 6.5 18.2 23.3 15.0 8.1 35.5 18.4 -0.7 11.5 35.0 -37.8 10.1 1.8 11.2 7.0 Russell 1000 Growth Index 1.5 7.9 19.1 22.4 16.5 8.9 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 1.1 5.5 16.7 21.5 15.1 8.5 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 55 35 32 24 52 61 41 16 48 83 40 46 75 90 17 59 12.0 14.0 16.0 18.0 20.0 Return (%)13.2 13.8 14.4 15.0 15.6 16.2 16.8 17.4 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 Rank12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Average Active Weight 0.0 5.0 10.0-5.0-10.0 Utilities Telecommunication Services Other Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -0.1 -1.9 0.0 -1.1 3.4 -5.9 1.5 3.4 -0.9 -3.4 2.7 2.4 Allocation (Total: 0.3) 0.0 0.2 0.4-0.2-0.4 0.0 0.0 0.0 0.0 0.1 0.2 0.1 -0.1 0.1 0.0 0.0 0.0 Stock (Total: -0.8) 0.0 0.6 1.2-0.6-1.2 0.0 0.0 0.0 -0.2 -0.6 0.0 0.2 0.4 -0.1 -0.3 -0.2 0.0 Vanguard US Growth (VWUSX) 0.0 0.4 0.8-0.4-0.8-1.2 0.0 0.0 0.0 -0.1 -0.5 0.2 0.3 0.3 0.0 -0.3 -0.3 0.0 Manager Evaluation Vanguard US Growth (VWUSX) vs. Russell 1000 Growth Index As of September 30, 2014 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 17 Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) MasterCard Inc 3.1 0.7 2.3 0.8 Celgene Corp 2.7 0.7 2.0 10.4 Google Inc (Class C)2.5 1.6 0.9 0.4 Visa Inc 2.4 1.1 1.4 1.5 Priceline.Com Inc 2.4 0.6 1.8 -3.7 Gilead Sciences Inc 2.3 1.6 0.7 28.4 Apple Inc 2.3 5.9 -3.7 9.0 Google Inc 2.2 1.6 0.6 0.6 Adobe Systems Inc 2.2 0.3 1.8 -4.4 Qualcomm Inc.2.1 1.2 0.9 -5.1 % of Portfolio 24.1 15.4 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)88,048 116,514 Median Mkt. Cap ($M)22,127 8,528 Price/Earnings ratio 27.1 21.9 Price/Book ratio 4.4 4.9 5 Yr. EPS Growth Rate (%)19.8 17.8 Current Yield (%)1.0 1.5 Debt to Equity 2.3 1.4 Number of Stocks 176 674 Beta (5 Years, Monthly)1.10 1.00 Consistency (5 Years, Monthly)46.67 1.00 Sharpe Ratio (5 Years, Monthly)1.00 1.20 Information Ratio (5 Years, Monthly)-0.34 - Up Market Capture (5 Years, Monthly)104.08 - Down Market Capture (5 Years, Monthly)118.44 - Sector Weights (%) Vanguard US Growth (VWUSX)Russell 1000 Growth Index 0.0 8.0 16.0 24.0 32.0 40.0 Other Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.0 3.0 0.0 0.5 2.9 31.3 6.1 15.4 8.8 4.6 6.7 20.6 0.0 0.0 0.1 2.4 4.2 28.4 11.9 13.6 5.1 5.7 10.3 18.2 Distribution of Market Capitalization (%) Vanguard US Growth (VWUSX)Russell 1000 Growth Index 0.0 15.0 30.0 45.0 60.0 >$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Cash 43.0 31.4 21.3 4.2 0.0 34.3 36.0 24.2 2.5 3.0 Manager Evaluation Vanguard US Growth (VWUSX) vs. Russell 1000 Growth Index As of September 30, 2014 18 Historical Performance Three Year Rolling Percentile Ranking Relative Performance Historical Statistics (Oct-2009 - Sep-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)-1.2 6.5 15.7 23.1 16.9 10.2 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 -1.1 6.7 15.9 23.4 17.1 10.3 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 -3.3 1.4 9.4 20.8 14.8 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 19 10 13 23 16 24 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 (%)12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Vanguard Mid-Cap Index Fund (VIMSX) Vanguard Mid-Cap Index Fund Blended Benchmark 0 25 50 75 100Return Percentile Rank12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Mid-Cap Index Fund (VIMSX)16.9 16.4 17.2 -0.2 1.0 1.0 0.1 -3.5 9.9 0.0 16y 4m Vanguard Mid-Cap Index Fund Blended Benchmark 17.1 16.4 17.5 0.0 1.0 1.1 0.0 N/A 9.9 0.0 16y 4m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 16.4 -1.1 0.0 25.0 16y 4m Manager Evaluation Vanguard Mid-Cap Index Fund (VIMSX) vs. Vanguard Mid-Cap Index Fund Blended Benchmark As of September 30, 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. 19 Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Vertex Pharmaceuticals Inc 0.9 0.9 0.0 18.6 Avago Technologies Ltd 0.7 0.7 0.0 21.2 Chipotle Mexican Grill Inc 0.7 0.7 0.0 12.5 Health Care REIT Inc.0.7 0.7 0.0 0.8 Moody's Corp.0.6 0.6 0.0 8.1 Alcoa Inc 0.6 0.6 0.0 8.3 AvalonBay Communities Inc.0.6 0.6 0.0 0.0 Delphi Automotive PLC 0.6 0.6 0.0 -10.4 Cerner Corp 0.6 0.6 0.0 15.5 Sherwin-Williams Co (The)0.6 0.6 0.0 6.1 % of Portfolio 6.5 6.5 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)11,209 11,277 Median Mkt. Cap ($M)8,696 8,696 Price/Earnings ratio 21.0 21.0 Price/Book ratio 2.9 2.9 5 Yr. EPS Growth Rate (%)16.8 16.8 Current Yield (%)1.4 1.4 Debt to Equity 1.0 1.0 Number of Stocks 368 367 Beta (5 Years, Monthly)1.02 1.00 Consistency (5 Years, Monthly)35.00 1.00 Sharpe Ratio (5 Years, Monthly)1.09 1.14 Information Ratio (5 Years, Monthly)-0.25 - Up Market Capture (5 Years, Monthly)100.74 - Down Market Capture (5 Years, Monthly)103.21 - Sector Weights (%) Vanguard Mid-Cap Index Fund (VIMSX) CRSP U.S. Mid Cap TR Index 0.0 5.0 10.0 15.0 20.0 25.0 Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.6 5.2 1.1 6.4 14.4 13.0 10.6 16.9 7.1 6.0 18.5 0.0 5.3 1.1 6.5 14.5 13.1 10.6 17.0 7.2 6.0 18.6 Distribution of Market Capitalization (%) Vanguard Mid-Cap Index Fund (VIMSX) CRSP U.S. Mid Cap TR Index 0.0 50.0 100.0 150.0 $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Cash 7.0 89.8 3.2 0.07.0 89.2 3.2 0.6 Manager Evaluation Vanguard Mid-Cap Index Fund (VIMSX) vs. CRSP U.S. Mid Cap TR Index As of September 30, 2014 20 Historical Performance Three Year Rolling Percentile Ranking Relative Performance Historical Statistics (Oct-2009 - Sep-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)-5.5 0.5 9.3 23.4 16.1 9.7 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 -5.5 0.7 9.6 23.6 16.2 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 -6.6 -4.4 4.2 20.8 14.3 8.0 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 26 8 11 22 20 11 59 24 46 39 34 41 47 37 40 32 Cumulative Annualized Over/Under Relative Performance Over/Under Performance 0.0 0.2 0.4 -0.2 -0.4Return (%)12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Vanguard Small-Cap Index Fund (NAESX) Vanguard Small-Cap Index Fund Blended Benchmark 0 25 50 75 100Return Percentile Rank12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Small-Cap Index Fund (NAESX)16.1 17.9 16.8 -0.1 1.0 0.9 0.0 -3.2 11.0 10.0 46y 8m Vanguard Small-Cap Index Fund Blended Benchmark 16.2 17.9 16.9 0.0 1.0 0.9 0.0 N/A 11.0 0.0 46y 8m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 17.9 -0.9 0.0 25.0 46y 8m Manager Evaluation Vanguard Small-Cap Index Fund (NAESX) vs. Vanguard Small-Cap Index Fund Blended Benchmark As of September 30, 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. 21 Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Cooper Companies Inc. (The)0.3 0.3 0.0 14.9 Trinity Industries Inc.0.3 0.3 0.0 7.1 Medivation Inc 0.3 0.3 0.0 28.3 Arthur J. Gallagher & Co.0.3 0.3 0.0 -1.9 Snap-On Inc 0.3 0.3 0.0 2.5 Gannett Co Inc.0.3 0.3 0.0 -4.7 Harman International Industries Inc.0.3 0.3 0.0 -8.5 E*TRADE Financial Corporation 0.2 0.2 0.0 6.3 WhiteWave Foods Co (The)0.2 0.2 0.0 12.2 Packaging Corp Of America 0.2 0.2 0.0 -10.2 % of Portfolio 2.6 2.6 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)3,217 3,228 Median Mkt. Cap ($M)1,691 1,704 Price/Earnings ratio 20.4 20.4 Price/Book ratio 2.4 2.4 5 Yr. EPS Growth Rate (%)13.0 13.0 Current Yield (%)1.5 1.5 Debt to Equity 1.0 1.0 Number of Stocks 1,483 1,463 Beta (5 Years, Monthly)1.02 1.00 Consistency (5 Years, Monthly)31.67 1.00 Sharpe Ratio (5 Years, Monthly)0.93 0.99 Information Ratio (5 Years, Monthly)-0.70 - Up Market Capture (5 Years, Monthly)99.90 - Down Market Capture (5 Years, Monthly)103.81 - Sector Weights (%) Vanguard Small-Cap Index (NAESX) CRSP U.S. Small Cap TR Index 0.0 5.0 10.0 15.0 20.0 25.0 30.0 Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.3 3.7 0.6 6.2 16.7 15.9 10.8 23.7 5.4 2.9 13.7 0.0 3.7 0.6 6.2 16.8 15.9 10.9 23.9 5.4 2.9 13.8 Distribution of Market Capitalization (%) Vanguard Small-Cap Index (NAESX) CRSP U.S. Small Cap TR Index 0.0 50.0 100.0 150.0 $5 Bil - $20 Bil $0 - $5 Bil Cash 16.4 83.6 0.0 16.4 83.3 0.3 Manager Evaluation Vanguard Small-Cap Index (NAESX) vs. CRSP U.S. Small Cap TR Index As of September 30, 2014 22 Historical Performance Buy and Hold Attribution Risk and Return (Oct - 2009 - Sep - 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)-4.9 -2.7 4.4 15.0 8.3 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)-5.3 0.0 4.8 11.8 6.0 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 -5.8 -1.7 4.3 13.6 6.8 6.6 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 24 67 50 24 25 25 31 32 51 25 23 54 28 43 50 45 2.0 4.0 6.0 8.0 10.0 12.0 Return (%)14.7 15.4 16.1 16.8 17.5 18.2 18.9 19.6 20.3 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 Rank12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Average Active Weight 0.0 10.0 20.0-10.0-20.0 Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -3.5 -1.2 -2.0 8.2 2.5 -1.1 -2.2 -5.7 -4.4 6.9 2.5 Allocation (Total: 0.3) 0.0 0.3 0.6-0.3-0.6 0.0 0.0 0.1 0.1 0.0 -0.1 0.0 0.3 0.0 -0.2 0.1 Stock (Total: 0.3) 0.0 0.7 1.4-0.7-1.4 0.0 0.1 -0.5 0.8 -0.2 0.2 0.1 0.0 -0.1 -0.1 0.0 0.0 0.5 1.0 1.5-0.5-1.0 0.0 0.0 -0.4 0.9 -0.2 0.1 0.1 0.3 -0.1 -0.3 0.1 Manager Evaluation Vanguard International Growth (VWIGX) vs. MSCI AC World ex USA (Net) As of September 30, 2014 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 23 Total Attribution 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4-0.2-0.4-0.6-0.8-1.0-1.2 Pacific Other North America Middle East Frontier Markets Europe ex EMU EMU EM Latin America EM Europe + Middle East + Africa EM Asia Cash 0.3 0.0 -0.1 0.1 0.1 -0.6 -0.1 -0.1 0.1 0.8 0.1 Performance Attribution Average Active Weight 0.0 5.0 10.0 15.0-5.0-10.0 Pacific Other North America Middle East Frontier Markets Europe ex EMU EMU EM Latin America EM Europe + Middle East + Africa EM Asia Cash -5.6 0.0 -3.9 0.7 0.5 5.6 0.6 -0.1 -2.2 2.1 2.5 Allocation (Total: 0.2) 0.0 0.2 0.4-0.2-0.4 -0.1 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.1 0.1 0.1 Stock (Total: 0.4) 0.0 0.5 1.0 1.5-0.5-1.0-1.5 0.4 0.0 0.0 0.0 0.0 -0.5 -0.1 -0.1 0.0 0.7 0.0 Manager Evaluation Vanguard International Growth (VWIGX) vs. MSCI AC World ex USA (Net) 1 Quarter Ending September 30, 2014 24 Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Baidu Inc 3.9 0.0 3.9 16.8 Tencent Holdings LTD 2.9 0.4 2.5 -2.5 AIA Group Ltd 2.6 0.3 2.2 3.3 Softbank Corp 2.2 0.4 1.8 -5.6 Smc Corp 1.9 0.1 1.8 3.3 Amazon.com Inc 1.6 0.0 1.6 -0.7 Roche Holding AG 1.6 1.1 0.4 -0.7 Atlas Copco AB 1.5 0.1 1.4 -0.6 Banco Popular Espanol SA, Madrid 1.5 0.1 1.4 -8.0 Unicredit SPA 1.5 0.2 1.3 -5.5 % of Portfolio 21.0 2.7 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)51,462 57,117 Median Mkt. Cap ($M)22,534 7,225 Price/Earnings ratio 17.0 14.7 Price/Book ratio 2.8 2.1 5 Yr. EPS Growth Rate (%)20.5 13.8 Current Yield (%)2.2 3.1 Debt to Equity 1.2 1.2 Number of Stocks 181 1,829 Beta (5 Years, Monthly)1.07 1.00 Consistency (5 Years, Monthly)51.67 1.00 Sharpe Ratio (5 Years, Monthly)0.54 0.44 Information Ratio (5 Years, Monthly)0.70 - Up Market Capture (5 Years, Monthly)109.59 - Down Market Capture (5 Years, Monthly)100.09 - Sector Weights (%) Vanguard International Growth (VWIGX) MSCI AC World ex USA (Net) 0.0 6.0 12.0 18.0 24.0 30.0 36.0 Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 2.7 0.1 4.2 5.7 16.4 13.4 7.7 24.9 3.7 5.3 15.9 0.0 3.6 5.3 8.0 7.0 10.9 8.7 27.0 9.0 9.8 10.6 Distribution of Market Capitalization (%) Vanguard International Growth (VWIGX) MSCI AC World ex USA (Net) 0.0 15.0 30.0 45.0 60.0 >$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Cash 25.5 38.4 29.3 6.8 0.0 23.0 41.9 25.4 7.0 2.7 Manager Evaluation Vanguard International Growth (VWIGX) vs. MSCI AC World ex USA (Net) As of September 30, 2014 25 Vanguard International Growth (VWIGX) MSCI AC World ex USA (Net) Australia 1.2 5.3 Hong Kong 5.3 3.5 Japan 12.7 14.8 New Zealand 0.0 0.1 Singapore 0.4 1.1 Pacific 19.6 24.8 Austria 0.0 0.2 Belgium 0.0 0.9 Finland 0.8 0.6 France 6.9 6.6 Germany 5.2 6.2 Ireland 0.3 0.2 Italy 2.7 1.7 Netherlands 1.0 2.1 Portugal 0.2 0.1 Spain 3.4 2.5 EMU 20.5 21.2 Denmark 1.8 1.1 Norway 1.8 0.6 Sweden 5.9 2.2 Switzerland 6.9 6.5 United Kingdom 14.3 15.1 Europe ex EMU 30.7 25.5 Canada 1.9 7.6 United States 1.7 0.0 Israel 1.1 0.4 Middle East 1.1 0.4 Developed Markets 75.6 79.5 Vanguard International Growth (VWIGX) MSCI AC World ex USA (Net) Brazil 2.2 2.2 Cayman Islands 0.0 0.0 Chile 0.3 0.3 Colombia 0.0 0.2 Mexico 0.5 1.2 Peru 0.8 0.1 Virgin Islands 0.0 0.0 EM Latin America 3.9 4.0 China 8.2 2.8 India 2.6 1.5 Indonesia 0.3 0.6 Korea 2.2 3.3 Malaysia 0.0 0.9 Philippines 0.0 0.3 Taiwan 1.1 2.6 Thailand 0.9 0.5 EM Asia 15.3 12.3 Czech Republic 0.0 0.1 Egypt 0.0 0.1 Greece 0.0 0.1 Hungary 0.0 0.0 Poland 0.0 0.4 Qatar 0.0 0.1 Russia 0.5 1.0 South Africa 0.4 1.6 Turkey 0.9 0.3 United Arab Emirates 0.0 0.1 EM Europe + Middle East + Africa 1.7 3.9 Emerging Markets 20.9 20.2 Frontier Markets 0.6 0.0 Cash 2.7 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 September 30, 2014 26 Historical Performance Three Year Rolling Percentile Ranking Relative Performance Historical Statistics (Oct-2009 - Sep-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)0.1 4.0 3.8 2.2 3.9 4.5 -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 0.2 4.0 4.0 2.5 4.2 4.6 -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 0.0 4.2 4.6 3.6 4.9 4.8 -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 34 68 76 90 85 66 74 91 18 82 93 13 18 45 32 57 Cumulative Annualized Over/Under Relative Performance Over/Under Performance 0.0 0.3 0.6 -0.3 -0.6Return (%)12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Vanguard Total Bond Market Index Fund (VBMFX) Vanguard Total Bond Market Index Fund Benchmark 0 25 50 75 100Return Percentile Rank12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 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)3.9 3.1 3.8 -0.3 1.0 1.2 0.2 -1.3 1.3 30.0 27y 9m Vanguard Total Bond Market Index Fund Benchmark 4.2 3.0 4.1 0.0 1.0 1.4 0.0 N/A 1.2 0.0 27y 9m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 3.0 -1.4 0.0 20.0 27y 9m Manager Evaluation Vanguard Total Bond Market Index Fund (VBMFX) vs. Vanguard Total Bond Market Index Fund Benchmark As of September 30, 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. 27 Credit Quality Distribution (%) Vanguard Total Bond Market Index (VBMFX) Barclays U.S. Aggregate Float Adjusted 0.0 25.0 50.0 75.0 100.0 AAAAAABBBBBBBelow BNot Rated68.5 5.4 12.8 13.3 0.0 0.0 0.0 0.0 68.9 4.3 13.1 13.7 0.0 0.0 0.0 0.0 Portfolio Characteristics Portfolio Benchmark Effective Duration 5.6 5.6 Avg. Maturity 7.7 7.7 Avg. Quality AA+AA+ Yield To Maturity (%)2.2 2.3 Sector Distribution (%) Vanguard Total Bond Market Index (VBMFX) Barclays U.S. Aggregate Float Adjusted 0.0 15.0 30.0 45.0 60.0 TreasuriesTIPSAgenciesCreditHigh YieldMBSABSNon-USEmergingMunicipalsCashOtherCMBS39.6 0.0 4.8 21.6 0.0 21.0 0.6 7.6 2.6 0.0 0.0 0.0 2.2 41.9 0.0 3.7 26.5 0.0 17.0 0.6 6.9 0.0 0.0 0.0 1.1 2.3 Maturity Distribution (%) Vanguard Total Bond Market Index (VBMFX) Barclays U.S. Aggregate Float Adjusted 0.0 15.0 30.0 45.0 60.0 < 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.0 27.5 21.2 36.4 3.5 11.4 1.8 28.2 20.4 34.3 3.5 11.8 Manager Evaluation Vanguard Total Bond Market Index (VBMFX) vs. Barclays U.S. Aggregate Float Adjusted As of September 30, 2014 28 Historical Performance Three Year Rolling Percentile Ranking Relative Performance Historical Statistics (Oct-2009 - Sep-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 0.5 1.3 1.7 2.1 2.4 3.2 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 0.8 1.0 1.3 2.1 3.1 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 -0.1 0.8 1.2 1.6 2.1 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 1 21 22 34 41 28 5 55 8 68 79 28 70 38 1 1 Cumulative Annualized Over/Under Relative Performance Over/Under Performance 0.0 0.7 1.4 2.1 -0.7 -1.4Return (%)12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Vanguard Retirement Savings Trust Ryan 3 Yr GIC Master 0 25 50 75 100Return Percentile Rank12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Retirement Savings Trust 2.4 0.3 2.3 1.5 0.4 9.0 0.3 1.0 0.0 75.0 11y 9m Ryan 3 Yr GIC Master 2.1 0.5 2.0 0.0 1.0 3.8 0.0 N/A 0.0 0.0 11y 9m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.0 0.0 N/A 0.5 -3.8 0.0 0.0 11y 9m Manager Evaluation Vanguard Retirement Savings Trust vs. Ryan 3 Yr GIC Master As of September 30, 2014 29 Historical Performance Three Year Rolling Percentile Ranking Relative Performance Historical Statistics (Oct-2009 - Sep-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)0.0 5.7 11.9 14.3 11.1 7.2 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 0.1 5.9 12.2 14.6 11.3 7.3 18.2 11.6 4.1 13.5 19.7 -22.0 6.3 11.1 4.9 9.2 60% Equity / 40% Fixed Peer Group Median -0.8 3.6 9.6 13.7 10.0 6.5 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 10 10 13 33 19 19 70 39 10 34 63 41 49 30 58 36 Cumulative Annualized Over/Under Relative Performance Over/Under Performance 0.0 0.4 0.8 -0.4 -0.8Return (%)12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Vanguard Balanced Index Fund (VBINX) Vanguard Balanced Index Fund Benchmark 0 25 50 75 100Return Percentile Rank12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Balanced Index Fund (VBINX)11.1 8.2 10.9 -0.1 1.0 1.3 0.2 -1.1 4.3 25.0 21y 10m Vanguard Balanced Index Fund Benchmark 11.3 8.3 11.1 0.0 1.0 1.3 0.0 N/A 4.3 0.0 21y 10m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 8.3 -1.3 0.0 15.0 21y 10m Manager Evaluation Vanguard Balanced Index Fund (VBINX) vs. Vanguard Balanced Index Fund Benchmark As of September 30, 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. 30 Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Apple Inc 2.7 2.8 -0.1 9.0 Exxon Mobil Corp 1.8 1.9 -0.1 -5.9 Microsoft Corp 1.5 1.6 -0.1 11.9 Johnson & Johnson 1.3 1.4 -0.1 2.6 Wells Fargo & Co 1.2 1.3 -0.1 -0.6 General Electric Co 1.1 1.2 -0.1 -1.7 Berkshire Hathaway Inc 1.0 0.7 0.3 9.1 Procter & Gamble Co (The)1.0 1.1 -0.1 7.4 JPMorgan Chase & Co 1.0 1.1 -0.1 5.3 Chevron Corp 1.0 1.1 -0.1 -7.8 % of Portfolio 13.6 14.0 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)100,939 105,860 Median Mkt. Cap ($M)1,159 828 Price/Earnings ratio 18.9 18.9 Price/Book ratio 2.8 2.8 5 Yr. EPS Growth Rate (%)14.8 15.1 Current Yield (%)1.9 1.9 Debt to Equity 0.9 0.8 Number of Stocks 3,286 3,792 Beta (5 Years, Monthly)0.58 1.00 Consistency (5 Years, Monthly)35.00 1.00 Sharpe Ratio (5 Years, Monthly)1.36 1.15 Information Ratio (5 Years, Monthly)-0.82 - Up Market Capture (5 Years, Monthly)62.11 - Down Market Capture (5 Years, Monthly)53.28 - Sector Weights (%) Vanguard Balanced Index Fund (VBINX) - Equity Holdings CRSP U.S. Total Market TR Index 0.0 5.0 10.0 15.0 20.0 25.0 Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 4.9 2.9 2.1 3.6 18.0 10.6 12.9 16.8 8.6 7.9 11.6 0.0 3.0 2.2 3.8 19.0 11.1 13.6 17.7 9.0 8.3 12.2 Distribution of Market Capitalization (%) Vanguard Balanced Index Fund (VBINX) - Equity Holdings CRSP U.S. Total Market TR Index 0.0 15.0 30.0 45.0 60.0 >$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Cash 39.6 28.8 19.4 12.3 0.0 37.7 27.4 18.5 11.5 4.9 Manager Evaluation Vanguard Balanced Index Fund (VBINX) - Equity Holdings vs. CRSP U.S. Total Market TR Index As of September 30, 2014 31 Credit Quality Distribution (%) Vanguard Balanced Index Fund (VBINX) - Fixed Income Holdings Barclays U.S. Aggregate Float Adjusted 0.0 25.0 50.0 75.0 100.0 AAAAAABBBBBBBelow BNot Rated68.5 5.4 12.8 13.3 0.0 0.0 0.0 0.0 69.5 4.2 12.9 13.4 0.0 0.0 0.0 0.0 Portfolio Characteristics Portfolio Benchmark Effective Duration 5.6 5.6 Avg. Maturity 7.7 7.7 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 15.0 30.0 45.0 60.0 TreasuriesTIPSAgenciesCreditHigh YieldMBSABSNon-USEmergingMunicipalsCashOtherCMBS39.6 0.0 4.8 21.6 0.0 21.0 0.6 7.6 2.6 0.0 0.0 0.0 2.2 40.0 0.0 3.6 25.7 0.0 20.9 3.1 5.7 0.0 0.0 0.0 1.0 0.0 Maturity Distribution (%) Vanguard Balanced Index Fund (VBINX) - Fixed Income Holdings Barclays U.S. Aggregate Float Adjusted 0.0 15.0 30.0 45.0 60.0 < 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.0 27.5 21.2 36.4 3.5 11.4 24.1 18.7 19.7 8.8 28.7 0.0 Manager Evaluation Vanguard Balanced Index Fund (VBINX) - Fixed Income Holdings vs. Barclays U.S. Aggregate Float Adjusted As of September 30, 2014 32 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Oct-2009 - Sep-2014) Historical Statistics (Oct-2009 - Sep-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)-0.4 4.0 6.5 7.4 7.0 5.5 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 -0.4 4.1 6.7 7.5 7.1 5.5 6.0 8.4 5.3 9.4 14.3 -11.3 8.1 6.5 3.4 6.9 35% Equity / 65% Fixed Peer Group Median -0.5 3.6 7.1 9.2 7.8 5.7 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 43 40 64 91 72 57 93 50 12 58 68 34 15 73 63 37 6.8 7.0 7.2 7.4 Return (%)3.9 4.0 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 Rank12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Target Retirement Income (VTINX)7.0 3.9 6.8 -0.1 1.0 1.7 0.1 -1.0 1.5 35.0 10y 11m Vanguard Target Income Composite Index 7.1 4.0 6.9 0.0 1.0 1.7 0.0 N/A 1.5 0.0 10y 11m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 4.0 -1.7 0.0 20.0 10y 11m Manager Evaluation Vanguard Target Retirement Income (VTINX) vs. Vanguard Target Income Composite Index As of September 30, 2014 33 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Oct-2009 - Sep-2014) Historical Statistics (Oct-2009 - Sep-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)-0.5 4.2 7.5 9.6 8.2 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 -0.5 4.3 7.8 9.7 8.3 N/A 9.3 10.2 3.3 11.5 19.3 -20.9 7.7 N/A N/A N/A 40% Equity / 60% Fixed Peer Group Median -0.6 3.6 7.6 10.1 8.3 5.9 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 47 36 52 66 53 N/A 90 32 32 31 36 80 24 N/A N/A N/A 8.1 8.2 8.3 8.4 8.5 Return (%)6.3 6.4 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 Rank12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Target Retirement 2010 (VTENX)8.2 6.3 8.1 0.0 1.0 1.3 0.1 -0.8 3.3 35.0 8y 3m Vanguard Target 2010 Composite Index 8.3 6.4 8.2 0.0 1.0 1.3 0.0 N/A 3.3 0.0 8y 3m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 6.4 -1.3 0.0 25.0 8y 3m Manager Evaluation Vanguard Target Retirement 2010 (VTENX) vs. Vanguard Target 2010 Composite Index As of September 30, 2014 34 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Oct-2009 - Sep-2014) Historical Statistics (Oct-2009 - Sep-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)-0.7 4.5 9.1 11.7 9.2 6.3 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 -0.7 4.6 9.3 11.9 9.3 6.3 13.3 11.5 1.6 12.5 21.2 -24.4 7.6 11.5 5.0 9.1 55% Equity / 45% Fixed Peer Group Median -0.8 3.6 9.1 12.8 9.6 6.4 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 48 24 52 74 65 52 91 30 42 35 48 72 32 17 44 31 9.1 9.2 9.3 9.4 9.5 Return (%)8.0 8.1 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 Rank12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Target Retirement 2015 (VTXVX)9.2 8.0 9.2 -0.1 1.0 1.1 0.1 -0.7 4.5 30.0 10y 11m Vanguard Target 2015 Composite Index 9.3 8.0 9.3 0.0 1.0 1.2 0.0 N/A 4.5 0.0 10y 11m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 8.0 -1.2 0.0 25.0 10y 11m Manager Evaluation Vanguard Target Retirement 2015 (VTXVX) vs. Vanguard Target 2015 Composite Index As of September 30, 2014 35 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Oct-2009 - Sep-2014) Historical Statistics (Oct-2009 - Sep-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)-0.8 4.8 10.1 13.3 10.0 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 -0.8 4.9 10.4 13.6 10.3 N/A 16.2 12.5 1.0 13.3 23.3 -27.4 7.6 N/A N/A N/A 65% Equity / 35% Fixed Peer Group Median -0.9 3.7 10.2 14.5 10.6 6.7 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 45 23 52 76 70 N/A 91 32 46 46 48 69 39 N/A N/A N/A 9.6 9.9 10.2 10.5 10.8 Return (%)9.2 9.3 9.4 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 Rank12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Target Retirement 2020 (VTWNX)10.0 9.3 10.0 -0.3 1.0 1.1 0.2 -1.5 5.5 25.0 8y 3m Vanguard Target 2020 Composite Index 10.3 9.2 10.2 0.0 1.0 1.1 0.0 N/A 5.4 0.0 8y 3m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 9.2 -1.1 0.0 25.0 8y 3m Manager Evaluation Vanguard Target Retirement 2020 (VTWNX) vs. Vanguard Target 2020 Composite Index As of September 30, 2014 36 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Oct-2009 - Sep-2014) Historical Statistics (Oct-2009 - Sep-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)-1.0 4.8 10.8 14.6 10.6 6.7 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 -0.9 5.0 11.2 14.9 10.9 6.8 18.5 13.4 0.1 13.9 25.2 -30.4 7.6 13.4 5.6 10.1 70% Equity / 30% Fixed Peer Group Median -1.0 3.7 10.6 15.5 11.1 6.9 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 54 24 46 69 64 61 89 24 57 38 41 80 35 20 52 36 10.2 10.5 10.8 11.1 11.4 Return (%)10.3 10.4 10.5 10.6 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 Rank12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Target Retirement 2025 (VTTVX)10.6 10.5 10.7 -0.3 1.0 1.0 0.2 -1.3 6.4 30.0 10y 11m Vanguard Target 2025 Composite Index 10.9 10.4 10.9 0.0 1.0 1.0 0.0 N/A 6.2 0.0 10y 11m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 10.4 -1.0 0.0 20.0 10y 11m Manager Evaluation Vanguard Target Retirement 2025 (VTTVX) vs. Vanguard Target 2025 Composite Index As of September 30, 2014 37 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Oct-2009 - Sep-2014) Historical Statistics (Oct-2009 - Sep-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)-1.2 4.7 11.5 15.9 11.2 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 -1.1 5.0 11.9 16.1 11.5 N/A 20.9 14.3 -0.9 14.6 27.0 -33.3 7.6 N/A N/A N/A 80% Equity / 20% Fixed Peer Group Median -1.1 3.8 11.6 17.4 12.1 7.2 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 56 26 53 76 72 N/A 89 27 59 45 43 76 38 N/A N/A N/A 10.8 11.1 11.4 11.7 12.0 Return (%)11.5 11.6 11.7 11.8 11.9 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 Rank12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Target Retirement 2030 (VTHRX)11.2 11.8 11.4 -0.4 1.0 1.0 0.2 -1.1 7.3 35.0 8y 3m Vanguard Target 2030 Composite Index 11.5 11.6 11.6 0.0 1.0 1.0 0.0 N/A 7.1 0.0 8y 3m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 11.6 -1.0 0.0 20.0 8y 3m Manager Evaluation Vanguard Target Retirement 2030 (VTHRX) vs. Vanguard Target 2030 Composite Index As of September 30, 2014 38 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Oct-2009 - Sep-2014) Historical Statistics (Oct-2009 - Sep-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)-1.4 4.8 12.2 17.2 11.8 7.2 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 -1.3 5.0 12.6 17.4 12.1 7.3 23.3 15.2 -1.9 15.2 28.7 -35.1 7.6 15.4 6.5 11.9 85% Equity / 15% Fixed Peer Group Median -1.1 3.8 12.1 18.1 12.5 7.4 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 60 28 48 67 68 60 87 21 68 41 40 75 41 19 51 31 11.4 11.7 12.0 12.3 12.6 Return (%)12.7 12.8 12.9 13.0 13.1 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 Rank12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Target Retirement 2035 (VTTHX)11.8 13.0 12.1 -0.4 1.0 0.9 0.3 -0.9 8.1 40.0 10y 11m Vanguard Target 2035 Composite Index 12.1 12.8 12.3 0.0 1.0 1.0 0.0 N/A 8.0 0.0 10y 11m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 12.8 -1.0 0.0 20.0 10y 11m Manager Evaluation Vanguard Target Retirement 2035 (VTTHX) vs. Vanguard Target 2035 Composite Index As of September 30, 2014 39 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Oct-2009 - Sep-2014) Historical Statistics (Oct-2009 - Sep-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)-1.5 4.7 12.7 17.9 12.1 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 -1.4 5.0 13.0 18.1 12.4 N/A 24.8 15.6 -2.1 15.3 28.7 -35.1 7.6 N/A N/A N/A 90% Equity / 10% Fixed Peer Group Median -1.2 3.9 12.6 19.1 13.0 7.5 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 62 30 50 70 77 N/A 87 24 68 51 46 51 42 N/A N/A N/A 11.7 12.0 12.3 12.6 12.9 Return (%)13.0 13.1 13.2 13.3 13.4 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 Rank12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Target Retirement 2040 (VFORX)12.1 13.2 12.4 -0.4 1.0 0.9 0.2 -1.1 8.3 35.0 8y 3m Vanguard Target 2040 Composite Index 12.4 13.1 12.7 0.0 1.0 1.0 0.0 N/A 8.1 0.0 8y 3m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 13.1 -1.0 0.0 20.0 8y 3m Manager Evaluation Vanguard Target Retirement 2040 (VFORX) vs. Vanguard Target 2040 Composite Index As of September 30, 2014 40 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Oct-2009 - Sep-2014) Historical Statistics (Oct-2009 - Sep-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)-1.5 4.8 12.7 17.9 12.1 7.6 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 -1.4 5.0 13.0 18.1 12.4 7.7 24.8 15.6 -2.1 15.3 28.7 -35.1 7.6 16.2 7.1 13.0 90% Equity / 10% Fixed Peer Group Median -1.2 3.9 12.6 19.1 13.0 7.5 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 60 28 48 70 77 48 87 23 67 51 47 51 42 17 43 27 11.7 12.0 12.3 12.6 12.9 Return (%)13.0 13.1 13.2 13.3 13.4 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 Rank12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Target Retirement 2045 (VTIVX)12.1 13.2 12.4 -0.3 1.0 0.9 0.2 -1.0 8.3 40.0 10y 11m Vanguard Target 2045 Composite Index 12.4 13.1 12.7 0.0 1.0 1.0 0.0 N/A 8.1 0.0 10y 11m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 13.1 -1.0 0.0 20.0 10y 11m Manager Evaluation Vanguard Target Retirement 2045 (VTIVX) vs. Vanguard Target 2045 Composite Index As of September 30, 2014 41 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Oct-2009 - Sep-2014) Historical Statistics (Oct-2009 - Sep-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)-1.5 4.8 12.7 17.9 12.1 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 -1.4 5.0 13.0 18.1 12.4 N/A 24.8 15.6 -2.1 15.3 28.7 -35.1 7.6 N/A N/A N/A 90% Equity / 10% Fixed Peer Group Median -1.2 3.9 12.6 19.1 13.0 7.5 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 61 29 49 70 77 N/A 87 23 68 51 46 52 42 N/A N/A N/A 11.7 12.0 12.3 12.6 12.9 Return (%)13.0 13.1 13.2 13.3 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 Rank12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Target Retirement 2050 (VFIFX)12.1 13.2 12.4 -0.4 1.0 0.9 0.2 -1.1 8.3 35.0 8y 3m Vanguard Target 2050 Composite Index 12.4 13.1 12.7 0.0 1.0 1.0 0.0 N/A 8.1 0.0 8y 3m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 13.1 -1.0 0.0 20.0 8y 3m Manager Evaluation Vanguard Target Retirement 2050 (VFIFX) vs. Vanguard Target 2050 Composite Index As of September 30, 2014 42 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Oct-2010 - Sep-2014) Historical Statistics (Oct-2010 - Sep-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)-1.5 4.8 12.7 17.9 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 -1.4 5.0 13.0 18.1 N/A N/A 24.8 15.6 -2.1 N/A N/A N/A N/A N/A N/A N/A 90% Equity / 10% Fixed Peer Group Median -1.2 3.9 12.6 19.1 13.0 7.5 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 62 28 49 70 N/A N/A 87 23 63 N/A N/A N/A N/A N/A N/A N/A 12.4 12.6 12.8 13.0 13.2 Return (%)12.3 12.4 12.5 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 Rank12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Target Retirement 2055 (VFFVX)12.7 12.4 12.9 -0.2 1.0 1.0 0.2 -0.7 7.7 31.3 4y Vanguard Target 2055 Composite Index 12.9 12.3 13.0 0.0 1.0 1.1 0.0 N/A 7.6 0.0 4y 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 12.3 -1.1 0.0 18.8 4y Manager Evaluation Vanguard Target Retirement 2055 (VFFVX) vs. Vanguard Target 2055 Composite Index As of September 30, 2014 43 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Apr-2012 - Sep-2014) Historical Statistics (Feb-2012 - Sep-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)-1.5 4.8 12.7 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 -1.4 5.0 13.0 N/A N/A N/A 24.8 15.6 N/A N/A N/A N/A N/A N/A N/A N/A 90% Equity / 10% Fixed Peer Group Median -1.2 3.9 12.6 19.1 13.0 7.5 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 61 28 48 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 12.6 12.8 13.0 13.2 13.4 Return (%)7.4 7.5 7.6 7.7 7.8 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 Rank12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 9/14 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 8m Vanguard Target 2060 Composite Index 16.3 8.7 15.7 0.0 1.0 1.8 0.0 N/A 2.5 0.0 2y 8m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 8.7 -1.8 0.0 18.2 2y 8m Manager Evaluation Vanguard Target Retirement 2060 (VTTSX) vs. Vanguard Target 2060 Composite Index As of September 30, 2014 44 Manager Evaluation Ta rget-Date Funds Asset Allocation As of September 30, 2014 U.S.Equi ty 21.3%26.5%36.3%43.0%48.0%53.5%58.5%63.2%63.2%63.0%63.0%63.0% Va nguard Total St ock M arke t Index Fu nd 21.3%26.5%36.3%43.0%48.0%53.5%58.5%63.2%63.2%63.0%63.0%63.0% Non-U.S . Equ ity 9.0%10.8%14.7%17.7%25.6%22.9%24.7%26.8%26.8%27.0%27.0%27.0% Va nguard Total In ternational Stock In dex F und 9.0%10.8%14.7%17.7%25.6%22.9%24.7%26.8%26.8%27.0%27.0%27.0% Fi xe d In come 69.7%62.7%49.0%39.3%26.4%23.6%16.8%10.0%10.0%10.0%10.0%10.0% Va nguard Total Bo nd Marke t II In dex F und 39.1%36.5%32.0%31.4%20.0%18.9%13.4%8.0%8.0%8.0%8.0%8.0% Va nguard Total In ternational Bo nd Stock In dex F und 13.9%12.6%9.8%7.9%6.4%4.7%3.4%2.0%2.0%2.0%2.0%2.0% Va nguard Infla tion-Pro tected Securit ie s Fund 16.7%13.6%7.2%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 2060 Tar get Date 2030 Tar get Date 2035 Tar get Date 2040 Tar get Date 2055VanguardComponent Funds Re ti rement In come Tar get Date 2045 Tar get Date 2050 Tar get Date 2015 Tar get Date 2020 Tar get Date 2025 Tar get Date 2010 0% 10% 20% 30% 40% 50% 60% 70% 80% U.S.Equity Non-U.S.Equity Fixed In come Re ti rem ent Inc om e Target Date 2010 Target Date 2015 Target Date 2020 Target Date 2025 Target Date 2030 Target Date 2035 Target Date 2040 Target Date 2045 Target Date 2050 Target Date 2055 Target Date 2060 45 Capital Markets Review 46 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 PercentYen Yuan Real Rub le Euro Capital Markets Rev iew Economy Currencies Fall vs. U.S. Dollar Retail Sales and Unemployment Source: Bloomberg Source: Trading Economics -10 -5 0 5 10 15 PercentRet ail Sales, Quart erly Rat e o f Chang e Unemployment Rat e Source: Economy.com Foreign Growth Weakens, U.S. Dollar Becomes Safe Haven •An expansion of Russia’s invasion of Ukraine,Israel’s military actions to clear Gaza of missiles and tunnels used by attackers,and ISIS conquering territory across Iraq caused investors to pull monies out of Europe and Asia for the perceived safety of the U.S.dollar and Treasury bonds.The rapid ascent of the U.S.dollar sent foreign investment values sharply lower versus their local-currency returns. •A wave of economic weakness enveloped Europe,Japan,Brazil,China and many smaller countries.The European Central Bank (ECB)inched closer toward purchasing asset-backed bonds,while further lowering its deposit rate to -0.2%. With the German economy near a zero-growth rate and countries such as Greece and Spain pleading for an end to austerity,the Eurozone economy offered little near-term outlook for growth.Hopes turned to the ECB to offer a Federal Reserve- style bailout and inflate the flagging economy,though the bank has been reluctant to put plans into action based on German leaders’protests.The impending culmination of the Federal Reserve’s asset purchases was a late-quarter headwind for stocks. •The U.S.economy faced a perplexing mix of economic readings.The unemployment rate fell to 5.9%,though the number of workers leaving the workforce remained dauntingly high.Retail sales were choppy,yet on an upward trend.A steep drop in oil prices,brought on by increased U.S.production,will be a negative for upcoming energy spending,due to falling gasoline prices,but will be a broader benefit for the economy. Central Bank Interest Rates Source: Bloomberg -1 0 1 2 3 4 5 6 PercentCent ral Bank I nt er est Rat es ECB Deposit Rate Fed eral Res erv e Targ et Rat e China 1-Year D ep osit Rate 47 Third Quarter and YTD 2014 Sector Returns Capital Markets Rev iew Equities Third Quarter 2014 World Equity Returns (USD) 3.6% 12.3% 1.0% 6.6% 0.3% 7.0% 6.1% 6.9% 6.6% 11.8% 15.2% -9.1% -4.9% -2.9% -1.6% -0.7% 0.0% 0.8% 1.5% 2.2% 3.6% 4.5% -12.0%-7.0%-2.0%3.0%8.0%13.0%18.0% Energy Utilities Indust rials Materials Cons. Disc. Russell 30 00 Financials Cons.Stapl es Te lecom In fo Tech Health Care 3Q1 4 YTD -16.0% -12.0% -8.0% -4.0% 0.0% 4.0% 8.0% 12.0% -5.3% 1.1% -3.6%-4.5%-5.9%-7.0%-8.7% -1.6% -3.5% -5.5% -8.0% -12.4% Developed Markets Emerging Markets Russell 1000 Index vs. Russell 2000 Index Equity Markets Cool Off as Strengthening USD Impact Felt •The Russell 3000 Index advanced for a seventh consecutive quarter,albeit a very modest gain in comparison to recent quarters.After setting a number of new all-time highs during the quarter,major domestic equity indices retreated in the latter half of September as a result of heightened geopolitical worries and disappointing economic data internationally.Sector performance varied widely during the quarter.Health care and information technology were the best performing sectors,boosted by M&A activity,while the energy and utilities sectors struggled as the price of oil and other commodities plummeted. •Small-cap stocks severely underperformed their large-cap counterparts and experienced their worst quarterly decline since September 2011.The quarterly underperformance versus large-caps was the largest since March 1999. Increased geopolitical tensions and concerns over future interest rate hikes decreased investor risk appetite for small-cap companies. •Emerging markets,though outperforming developed international markets, declined 3.5%due to falling commodity prices,currency weakness,and poor Chinese economic data.Developed international markets fell 5.9%.Economic data out of Europe was particularly poor,calling into question the region’s future growth prospects.Additionally,the strengthening U.S.dollar negatively impacted developed markets as the dollar appreciated versus all major currencies. 0.7% -7.4% -0.2% -8.6% 1.5% -6.1% 8.0% -4.4% 8.1% -4.7% 7.9% -4.0% -10.0% -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Russell 1000 Index Russell 2000 In dex Russell 1000 Value Russell 2000 Value Russell 1000 Growth Russell 2000 Growth 3Q 14 YTD Broad Va lue Growth 48 -1 .0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10 .0%YTD Total ReturnDa te US Agg US Credit High Yield Global Agg EMD MBS Source: Barclays Source: Barclays Duration-adjusted Excess Returns to Treasuries (bps) Cumulative Year-to-Date Total Returns Capital Markets Rev iew Fixed Income Best Period Second Best Period Wors t Period Second W orst Period 2007 2008 2009 2010 2011 2012 2013 1Q14 2Q14 3Q14 Aggre ga te -206 -710 746 171 -114 226 93 16 52 -28 Agency -56 -110 288 77 -25 166 1 30 50 -11 MBS -177 -232 495 225 -106 91 98 -24 90 -27 ABS -634 -2223 2496 169 52 246 24 19 30 -5 CMBS -435 -3274 2960 1501 47 841 97 65 55 -36 Cr edit -464 -1786 1990 192 -322 693 226 75 81 -67 Hi gh Yield -777 -3832 5955 974 -240 1394 923 199 137 -205 Em erging -457 -2842 3797 508 -537 1503 -32 127 282 -112 Source: Barclays US Treasury Yield Curve Change by Maturity Source: US Dept of The Treasury Spreads Reverse Course in Q3 •Bond market volatility picked up during the third quarter,highlighted by a flight- to-quality in long term rates and wider spreads across corporate and securitized credit markets.TIPS produced negative total returns as inflationary pressures eased amid plunging commodity prices and a strengthening dollar. •The yield curve flattened during the quarter.Ongoing geopolitical tensions and a rally in European government rates contributed to strong demand for longer term U.S.Treasuries,while continued tapering and a more hawkish tone from the Fed caused shorter maturity yields to rise.The spreads between five-and 30-year Treasuries continued to decrease and reached the lowest level since January 2009. •Corporate credit returns suffered during the quarter as safe-haven demand increased and supportive technical factors faded.High yield credit was particularly vulnerable during the quarter due to heavy new issuance coupled with asset outflows.Despite selling pressure in the third quarter,spread sector total returns remain positive year-to-date. -1.0% -0.8% -0.6% -0.4% -0.2% 0.0% 0.2% 0.4%Change in YieldMa turity (Years) 3Q 14 YTD Ending 3Q1 4 49 Capital Markets Review Hedge Funds HFRI Index Performance –Third Quarter and YTD 2014 Growth of As sets in Hedge Funds Hedge Fund Return Capture Ratio All Funds Median Net Return/MSCI AC World, % 4.1% 3.7% 2.4% 3.1% 1.7% 3.8% 2.8% 2.1% 1.9% 2.4% 2.2% 0.2% -2.3% 0.3% -0.1% -0.2% 2.7% -1.5% 0.4% -1.3% -2.9% -1.2% -4%-2%0%2%4%6% BC Aggregate Bond Index MSCI All-Country World Index Fu nd of Fu nds Hedge Fund Com posite Merger Arbitrage Global Macro Event Driven Equity Market Neutral Equity Hedge Distressed Securiti es Convertible Arbitra ge Q3 YT D 27% 46% 62% 33% 44%45% 31% 52% 0% 10% 20% 30% 40% 50% 60% 70% 80% 2008 2009 2010 2011 2012 2013 Aug '14 YTD Sep '14 YTD% Downside in Down Years % Upside in Up Ye ars Source: Morgan Stanley Prime Brokerage -$500,000 $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013Q12014Q2014Q32014Assets ($MM)Net Asset Flow Estimated Assets Source: HFR Inc. Largest U.S. Public Pension Plan Exits Hedge Funds •Hedge fund manager performance was generally negative across strategies during the third quarter.With the exception of distressed securities managers,however,hedge funds generally outpaced the MSCI All-Country World Index during the quarter.Global macro was the top performing strategy for the quarter (+2.7%)and consequently one of the best performing strategies year-to-date. •The median hedge fund manager tends to lag global equities during strong up markets, but fares better during down months such as September.The median hedge fund trailed equities significantly year-to-date through August.Following September's decline,the median hedge fund manager has captured just over half of this year’s equity market return,according to Morgan Stanley Prime Brokerage. •California Public Employees’Retirement System (CalPERS),the largest public pension plan in the U.S.,announced that it will exit its $4 billion hedge fund program over the next year,in an effort simplify its strategy and reduce costs.The Plan’s large asset size ($298 billion in total assets)and desire to hire managers willing to provide fee concessions limited the universe of managers from which it could select,and likely inhibited the performance of its hedge fund allocation. •The hedge-fund industry saw inflows of $15.8 billion during the third quarter according to Hedge Fund Research.Event driven and relative value managers attracted $11.4 and $11.1 billion,respectively,while macro hedge funds saw a withdrawal of $11.1 billion during the quarter. Hedge Fund Assets and Flows 50 -11.8% -5.6% -6.6% -5.3% -1.4%-1.0% 14% 12% 10% -8% -6% -4% -2% 0% QTD YTD 1 Year 3 Years 5 Years 10 Y ears Capital Markets Review Real Assets Returns as of September 30, 2014 Source: Bloomberg Bloomberg Commodity Index Returns for Periods Ended September 30, 2014 NCREIF 3 M on.YT D 1 Yr.3 Yrs.5 Y rs.10 Yrs. NCREIF 2.9%5.7%11.2%11.3%9.7%8.6% Apartm ents 2.4%4.7%9.9%11.3%10.8%8.3% In dus trials 3.3%6.1%12.6%11.9%9.1%8.2% Offic e 2.9%5.2%10.3%10.1%8.6%8.3% Retail 3.2%7.7%13.5%13.2%10.8%10.0% Ho tel 2.6%3.4%8.0%7.9%6.2%6.8% Eas t 2.3%4.4%9.0%9.7%9.3%8.5% Mi dwes t 2.8%5.4%10.5%10.7%8.7%7.2% South 3.2%6.7%13.1%12.4%10.0%8.7% West 3.4%6.5%12.5%12.5%10.2%9.3% Source: NACREIF Equity REIT Yields Are Low, Although They Provide A Premium to Treasuries; Mortgage REIT Yields Remain Elevated Real Estate Fundamentals Remain Strong; Commodities Tank •Equity REITs declined 2.5%during the third quarter,bringing the year-to-date return to 13.4%.Strong property fundamentals and a continued search for yield were offset by the possibility of rising U.S.interest rates.Since quarter end,concerns have shifted to slower economic growth and interest rates have fallen,making the 3.8% yield on U.S.equity REITs look fairly attractive.Foreign REITs have underperformed the U.S.market with Asia Pacific and Europe returning 0.0%and 5.6%,year to date. •Private real estate continued to perform well,returning 2.9%during the second quarter and 5.7%for the first half of 2014.Strong fundamentals (net operating income growth and transaction volume),along with low interest rates,contributed to a further decline in capitalization rates,now at 6.8%according to Real Capital Analytics.The cap rate remains well below the long term trend rate,but relative to Treasuries,cap rates remain around average levels since the 1990s.Income returns are averaging around 5.0%,also below historical levels but favorable relative to Treasury yields. •Commodity prices declined dramatically during the third quarter,bringing year-to-date and returns out to ten years into negative territory.The IEA’s forecast of weaker demand growth for oil,along with favorable supply dynamics,and a strengthening U.S.dollar,drove oil prices lower.An abundant harvest led to lower grain prices, while industrial metals prices suffered from weaker global demand,especially out of China.A strong U.S.dollar with little sign of inflation led to weaker gold demand and prices. Source: NAREIT 0 5 10 15 20 25 30 Sep-1974Sep-1976Sep-1978Sep-1980Sep-1982Sep-1984Sep-1986Sep-1988Sep-1990Sep-1992Sep-1994Sep-1996Sep-1998Sep-2000Sep-2002Sep-2004Sep-2006Sep-2008Sep-2010Sep-2012Sep-2014PercentEquit y REITs Mortgage REITs 10-Year Treasury 51 0 2 4 6 8 10 12 14 16 18 20 0 5 10 15 20 25 30 35 40 Agg. Value ($,Billions)# of DealsVen ture-Bac ked IPOs #Ven ture-Backed IPOs $Value Venture-Backed IPO ActivityInvestment Horizon Pooled IRR as of 03/31/14 Fund Type 3 Months 1 Year 3 Years 5 Years 10 Years 20 Years Early Stage VC 5.3%31.5%15.7%14.6%9.2%44.1% Late/Expansion Stage VC 3.5%32.6%14.4%18.6%12.3%11.0% Multi-Stage VC 5.3%28.3%13.4%12.2%10.2%12.3% All Venture Capital 5.1%30.5%14.8%14.2%9.8%26.1% Small Buyouts 1.8%12.3%11.6%16.8%19.6%14.5% Medium Buyouts 1.9%15.3%10.2%14.3%17.1%15.8% Large Buyouts 3.2%18.8%11.9%16.7%15.5%16.1% Mega Buyouts 3.4%22.2%13.9%18.8%12.3%10.9% All Buyouts 3.1%19.9%12.7%17.4%14.3%13.4% Mezzanine/Sub Debt 2.6%11.8%11.4%12.9%9.8%9.7% Distressed 2.8%16.2%10.9%20.0%11.6%11.9% All Private Equity 3.3%19.9%12.4%16.8%13.1%14.6% S&P 500 1.8%21.8%14.4%20.6%8.5%8.7% Capital Markets Rev iew Pr ivate Equity Ven ture-Bac ked IPOs #Ven ture-Backed IPOs $Value $0 $20 $40 $60 $80 $100 $120 $,BillionsVC Buy out Real As sets Sec ondary Funds Di stressed/SS Fundraising,IPO Activity Remain Strong Despite Modest Declines •Private equity market performance data through June 30,2014 was not yet available at the time of report production.During 1Q14,private equity funds outperformed their public market counterparts with venture capital and buyout funds producing pooled quarterly IRRs of 5.1%and 3.1%,respectively, compared to a 1.8%return for the S&P 500.Early stage venture funds were the strongest performers while small-and mid-cap buyout funds lagged. •During 3Q14,private equity fundraising saw a modest decline from the post- crisis high seen in 2Q14.However,the $97 billion raised by private equity funds in 3Q14 was in line with the quarterly average seen since early 2013 when the pace of fundraising picked up considerably.Venture capital and secondary funds saw the biggest percentage declines during the third quarter while distressed/special situations funds saw an increase in commitments. •Venture-backed IPO activity slowed during 3Q14 as 23 venture-backed IPOs raised an aggregate $2.6 billion compared to 2Q14 when 28 IPOs raised $4.9 billion.However,it was the sixth consecutive quarter with more than 20 venture-backed IPOs after that mark was exceeded in only one other quarter since the beginning of 2008.Biotechnology companies dominated IPO activity during 3Q14,representing 18 of the 23 IPOs that occurred during the quarter. Source: ThomsonOne/Cambridge Associates database, October 2014. Note: Data is continuously updated and is therefore subject to change. S&P 500 1.8%21.8%14.4%20.6%8.5%8.7% Source: Thomson Reuters, ThomsonOne database, October 2014. Source: Thomson Reuters, ThomsonOne database, October 2014. Global Fundraising 52 Quarter Year To Date 1 Year 2 Years 3 Years 5 Years 7 Years 10 Years Domestic Equity Indices Dow Jones Wilshire 5000 0.0 6.9 17.7 19.8 23.0 15.9 6.5 8.7 S&P 500 1.1 8.3 19.7 19.5 23.0 15.7 6.0 8.1 Russell 1000 Index 0.7 8.0 19.0 20.0 23.2 15.9 6.3 8.5 Russell 1000 Growth Index 1.5 7.9 19.1 19.2 22.4 16.5 7.6 8.9 Russell 1000 Value Index -0.2 8.1 18.9 20.6 23.9 15.3 4.8 7.8 Russell Midcap Index -1.7 6.9 15.8 21.7 23.8 17.2 7.5 10.3 Russell Midcap Growth Index -0.7 5.7 14.4 20.8 22.7 17.1 7.5 10.2 Russell Midcap Value Index -2.6 8.2 17.5 22.5 24.7 17.2 7.3 10.2 Russell 2000 Index -7.4 -4.4 3.9 16.3 21.3 14.3 6.0 8.2 Russell 2000 Growth Index -6.1 -4.0 3.8 17.5 21.9 15.5 6.9 9.0 Russell 2000 Value Index -8.6 -4.7 4.1 15.0 20.6 13.0 5.1 7.3 International Equity Indices MSCI EAFE -5.9 -1.4 4.3 13.6 13.6 6.6 -0.2 6.3 MSCI EAFE Growth Index -5.5 -2.2 2.9 12.6 13.3 7.6 0.3 6.6 MSCI EAFE Value Index -6.2 -0.6 5.7 14.6 13.9 5.5 -0.8 5.9 MSCI EAFE Small Cap -7.8 -2.7 3.0 15.5 14.5 8.9 2.0 8.1 MSCI AC World Index -2.3 3.7 11.3 14.5 16.6 10.1 2.4 7.3 MSCI AC World ex US -5.3 0.0 4.8 10.5 11.8 6.0 -0.2 7.1 MSCI Emerging Markets Index -3.4 2.7 4.7 3.0 7.6 4.8 0.1 11.0 Fixed Income Indices Barclays U.S. Aggregate 0.2 4.1 4.0 1.1 2.4 4.1 4.9 4.6 Barcap Intermediate U.S. Government/Credit 0.0 2.2 2.2 0.8 2.0 3.4 4.3 4.0 Barclays U.S. Long Government/Credit 1.0 13.0 12.9 1.7 4.7 8.0 8.2 7.0 Barclays US Corp: High Yield -1.9 3.5 7.2 7.2 11.1 10.6 8.7 8.3 BofA Merrill Lynch 3 Month U.S. T-Bill 0.0 0.0 0.0 0.1 0.1 0.1 0.5 1.6 Barclays U.S. Treasury: U.S. TIPS -2.0 3.7 1.6 -2.3 1.3 4.5 4.9 4.6 Citigroup Non-U.S. World Government Bond -5.4 0.2 -1.0 -3.3 -1.1 1.0 3.6 4.0 JPM EMBI Global Diversified (external currency)-0.6 8.0 9.7 2.6 8.0 8.0 7.9 8.3 JPM GBI-EM Global Diversified (local currency)-5.7 0.0 -1.5 -2.6 2.2 4.4 5.4 8.8 Real Asset Indices Dow Jones - UBS Commodity -11.8 -5.6 -6.6 -10.5 -5.3 -1.4 -5.2 -1.0 Dow Jones Wilshire REIT -3.1 14.5 13.5 9.3 16.5 16.0 3.8 8.3 Capital Markets Review Index Returns As of September 30, 2014 (Percentage Return) _________________________ Returns for periods greater than one year are annualized. 53