Performance Review. Metropolitan St. Louis Sewer District Deferred Compensation Plan. 4th Quarter 2015

Transcription

1 Performance Review Metropolitan St. Louis Sewer District Deferred Compensation Plan 4th Quarter 205 Pavilion Advisory Group Inc. 227 W. Monroe Street, Suite 2020 Chicago, IL Phone: Fax:

2 Table Of Contents Executive Summary 2 Performance Summary 4 3 Plan Assets 2 4 Manager Evaluation 5 5 Capital Markets Review 49

3 Executive Summary

4 Deferred Compensation Plan Executive Summary Performance Summary - December 205 Fourth quarter equity, balanced and target retirement date fund returns were positive on an absolute basis due to relatively stronger equity markets. Within the target date retirement funds, the longer dated funds with higher allocations to equity were the best absolute performers. 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 200 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. Jim Barrow stepped down as PM of Vanguard Windsor II at the end of 205. He had managed Barrow Hanley s portion of Windsor II assets (approximately 60%) since 985. As had already been wellcommunicated over the past couple of years, his replacements are David Ganucheau and Jeff Fahrenbruch. Fourth quarter performance for the active managers in the investment menu were mixed. Vanguard US Growth and Vanguard International Growth outpaced their respective benchmarks by 00 and 380 basis points, respectively. Conversely, Vanguard Windsor II returned 0 basis points less than its benchmark as a result of poor stock selection. Target retirement date funds approximated their respective benchmarks over longer-term periods. 2

5 Deferred Compensation Plan Executive Summary Capital Markets Review The Federal Reserve raised interest rates 25 bps in December, placing its policy trajectory at odds with other central banks. China s central bank lowered its lending rate to a record low; the European Central Bank stood poised to enact further stimulus; the Bank of England stated that rate increases were not necessary as economic uncertainty spread. The disparity between rising U.S. rates and the rest of the world sent major currencies lower versus the dollar and furthered oil s decline, as it is traded in USD. The S&P finished the year strong, posting a fourth quarter return of 7.0% to end the year at.4%. While the market retreated slightly in the latter two months of the quarter, strong economic data (especially in the labor market) helped push markets to near all-time highs. Non-U.S. equities finished the year mixed. In general, the developed markets did well during the fourth quarter. European indices saw modest gains as growth finally showed signs of picking up amidst heavy stimulus measures from the ECB. 205 saw a large divergence between growth and value stocks. U.S. large growth stocks performed especially well versus other market segments. During periods of weak economic growth, the growth style tends to outperform the value style. Growth stocks also performed well within non-u.s. markets. China s policy to force stock purchases and restrict selling temporarily boosted its stock market after a summer rout. Investors remained leery of government directives to dictate asset prices, which detach asset prices from actual values and eventually lead to rapid selloffs if growth does not rebound to levels supporting stock valuations. Investors remain cautious as growth prospects for 206 continue to look weaker. Recommendations or Action Items No recommendations at this time. 3

6 Performance Summary 4

7 Performance Summary Investment Options To Quarter Domestic Equity Options Vanguard 500 Index (VFINX) 7.0 (34).2 (42).2 (42) 5.0 (33) 2.4 (24) 7.2 (33) S&P (34).4 (4).4 (4) 5. (3) 2.6 (22) 7.3 (30) IM U.S. Large Cap Equity Vanguard US Growth (VWUSX) 8.3 (34) 8.5 (2) 8.5 (2) 8.4 (5) 4.3 (3) 7.4 (52) Russell 000 Growth Index 7.3 (62) 5.7 (48) 5.7 (48) 6.8 (37) 3.5 (25) 8.5 (22) IM U.S. Large Cap Growth Equity Vanguard Windsor II (VWNFX) 4.5 (73) -3.2 (36) -3.2 (36) 2.0 (56).0 (25) 6. (30) Russell 000 Value Index 5.6 (25) -3.8 (5) -3.8 (5) 3. (24).3 (8) 6.2 (29) IM U.S. Large Cap Value Equity Vanguard Mid-Cap Index (VIMSX) 3.4 (36) -.5 (38) -.5 (38) 4.8 (20).4 (20) 7.8 (28) Vanguard Mid-Cap Index Fund Blended Benchmark 3.5 (35) -.3 (36) -.3 (36) 5.0 (5).6 (5) 8.0 (23) IM U.S. Mid Cap Equity Vanguard Small-Cap Index (NAESX) 3. (50) -3.8 (35) -3.8 (35) 2.4 (30) 0.3 (23) 7.8 (0) Vanguard Small-Cap Index Fund Blended Benchmark 3. (50) -3.7 (34) -3.7 (34) 2.6 (29) 0.4 (20) 7.9 (8) IM U.S. Small Cap Equity International Equity Option Vanguard International Growth (VWIGX) 7.0 (6) -0.7 (37) -0.7 (37) 4.8 (32) 3.6 (30) 4.6 (26) MSCI AC World ex USA (Net) 3.2 (5) -5.7 (6) -5.7 (6).5 (64). (65) 2.9 (56) IM International Equity Fixed Income Options Vanguard Total Bond Market Index (VBMFX) -0.6 (59) 0.3 (2) 0.3 (2).2 (54) 3.0 (78) 4.4 (69) Vanguard Total Bond Market Index Fund Benchmark -0.6 (58) 0.4 (6) 0.4 (6).4 (48) 3.2 (64) 4.5 (65) IM U.S. Broad Market Core+ Fixed Income Vanguard Retirement Savings Trust Ryan 3 Yr GIC Master Returns are expressed as percentages. Returns for periods greater than one year are annualized. Peer group percentile ranks are shown in parenthesis. 5

8 Performance Summary Investment Options To Quarter Equity/Fixed Income Blend Options Vanguard Balanced Index (VBINX) 3.4 (47) 0.4 (8) 0.4 (8) 9. (28) 8.5 (6) 6.5 (3) Vanguard Balanced Index Fund Benchmark 3.5 (4) 0.6 (3) 0.6 (3) 9.4 (24) 8.7 (2) 6.6 () IM Mixed-Asset Target Alloc Growth Vanguard Target Retirement Income (VTINX).2 (33) -0.2 (7) -0.2 (7) 3.7 (22) 4.9 (2) 5.0 (3) Vanguard Target Income Composite Index.4 (24) 0. (2) 0. (2) 3.9 (7) 5. () 5.0 (9) IM Mixed-Asset Target Today Vanguard Target Retirement 200 (VTENX).4 (7) -0.2 (8) -0.2 (8) 4.9 (28) 5.6 (23) N/A Vanguard Target 200 Composite Index.6 (5) (4) (4) 5. (22) 5.7 (7) N/A IM Mixed-Asset Target 200 (MF) Median Vanguard Target Retirement 205 (VTXVX) 2. (34) -0.5 (4) -0.5 (4) 6.2 (0) 6.3 (2) 5.4 (8) Vanguard Target 205 Composite Index 2.4 (9) -0.2 (9) -0.2 (9) 6.5 (4) 6.4 (8) 5.4 (7) IM Mixed-Asset Target 205 (MF) Median Vanguard Target Retirement 2020 (VTWNX) 2.7 (2) -0.7 (23) -0.7 (23) 7.2 (5) 6.9 (8) N/A Vanguard Target 2020 Composite Index 3.0 (5) -0.4 (4) -0.4 (4) 7.5 (4) 7. (3) N/A IM Mixed-Asset Target 2020 (MF) Median Vanguard Target Retirement 2025 (VTTVX) 3. (3) -0.8 (24) -0.8 (24) 7.9 (0) 7.2 (6) 5.5 () Vanguard Target 2025 Composite Index 3.4 () -0.6 (8) -0.6 (8) 8.2 (7) 7.5 (8) 5.7 (7) IM Mixed-Asset Target 2025 (MF) Median Vanguard Target Retirement 2030 (VTHRX) 3.5 (28) -.0 (30) -.0 (30) 8.5 () 7.6 (3) N/A Vanguard Target 2030 Composite Index 3.8 (2) -0.8 (23) -0.8 (23) 8.8 (7) 7.9 (8) N/A IM Mixed-Asset Target 2030 (MF) Median Vanguard Target Retirement 2035 (VTTHX) 3.9 (34) -.3 (38) -.3 (38) 9.2 (4) 7.9 (9) 5.8 (6) Vanguard Target 2035 Composite Index 4.3 (22) -.0 (30) -.0 (30) 9.5 (8) 8.2 (2) 5.9 (0) IM Mixed-Asset Target 2035 (MF) Median Vanguard Target Retirement 2040 (VFORX) 4.3 (34) -.6 (44) -.6 (44) 9.5 (5) 8. (3) N/A Vanguard Target 2040 Composite Index 4.7 () -.2 (36) -.2 (36) 9.9 (8) 8.5 (8) N/A IM Mixed-Asset Target 2040 (MF) Median Returns are expressed as percentages. Returns for periods greater than one year are annualized. Peer group percentile ranks are shown in parenthesis. 6

9 Performance Summary Investment Options To Quarter Equity/Fixed Income Blend Options (cont.) Vanguard Target Retirement 2045 (VTIVX) 4.3 (38) -.6 (44) -.6 (44) 9.5 (7) 8. (2) 5.9 (28) Vanguard Target 2045 Composite Index 4.7 (3) -.3 (37) -.3 (37) 9.9 (9) 8.4 (2) 6. (2) IM Mixed-Asset Target 2045 (MF) Median Vanguard Target Retirement 2050 (VFIFX) 4.3 (4) -.6 (46) -.6 (46) 9.5 (9) 8. (20) N/A Vanguard Target 2050 Composite Index 4.7 (6) -.3 (37) -.3 (37) 9.9 () 8.4 () N/A IM Mixed-Asset Target 2050 (MF) Median Vanguard Target Retirement 2055 (VFFVX) 4.3 (46) -.7 (57) -.7 (57) 9.4 (28) 8.2 (28) N/A Vanguard Target 2055 Composite Index 4.7 (2) -.3 (39) -.3 (39) 9.9 (4) 8.4 (2) N/A IM Mixed-Asset Target (MF) Median N/A Vanguard Target Retirement 2060 (VTTSX) 4.3 (42) -.7 (53) -.7 (53) 9.4 (27) N/A N/A Vanguard Target 2060 Composite Index 4.7 (2) -.3 (39) -.3 (39) 9.9 (4) N/A N/A IM Mixed-Asset Target (MF) Median N/A Money Market Option Vanguard Prime Money Market (VMMXX).3 BofA Merrill Lynch 3 Month U.S. T-Bill Returns are expressed as percentages. Returns for periods greater than one year are annualized. Peer group percentile ranks are shown in parenthesis. 7

10 Performance Summary Manager Compliance Checklist Managers Vanguard S&P 500 Index (VFINX) Vanguard US Growth (VWUSX) Vanguard Windsor II (VWNFX) Vanguard Mid-Cap Index (VIMSX) Vanguard Small-Cap Index (NAESX) Vanguard International Growth (VWIGX) Vanguard Total Bond Market Index (VBMFX) Organizational/Product Issues No material changes to investment team No material organizationalchanges Accounting or regulatory concerns Currently in adherence to guidelines Portfolio characteristics meet stylistic expectations Relative Performance Three-year return better than benchmark N/A + - N/A N/A + N/A N/A Three-year ranking better than peer group median N/A Vanguard Retirement Trust Five year return better than benchmark N/A + - N/A N/A + N/A N/A Five year ranking better than peer group median N/A Performance status Summary status Manager performance is evaluated net of investment management fees. 8

11 Performance Summary Manager Compliance Checklist (Continued) Managers Vanguard Balanced Index (VBINX) Vanguard Target Retirement Income Fund (VTINX) Vanguard Target Retirement 200 (VTENX) Vanguard Target Retirement 205 (VTXVX) Vanguard Target Retirement 2020 (VTWNX) Vanguard Target Retirement 2025 (VTTVX) Vanguard Target Retirement 2030 (VTHRX) Organizational/Product Issues No material changes to investment team No material organizational changes Accounting or regulatory concerns Currently in adherence to guidelines Portfolio characteristics meet stylistic expectations Relative Performance Three-year return better than benchmark N/A N/A N/A N/A N/A N/A N/A N/A Vanguard Target Retirement 2035 (VTTHX) Three-year ranking 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/A Five year ranking better than peer group median Performance status Summary status Manager performance is evaluated net of investment management fees. 9

12 Performance Summary Manager Compliance Checklist (Continued) Managers Vanguard Target Retirement 2040 (VFORX) Vanguard Target Retirement 2045 (VTIVX) Vanguard Target Retirement 2050 (VFIFX) Vanguard Target Retirement 2055 (VFFVX) Vanguard Target Retirement 2060 (VTTSX) Vanguard Prime Money Market Fund (VMMXX) Organizational/Product Issues No material changes to investment team No material organizationalchanges Accounting or regulatory concerns Currently in adherence to guidelines Portfolio characteristics meet stylistic expectations Relative Performance Three-year return better than benchmark N/A N/A N/A N/A N/A N/A Three-year ranking better than peer group median N/A Five year return better than benchmark N/A N/A N/A N/A N/A N/A Five year ranking better than peer group median N/A N/A Performance status Summary status Manager performance is evaluated net of investment management fees. 0

13 Manager Compliance Checklist Fourth Quarter 205 Manager Vanguard Windsor II Compliance Issue Investment Team Changes Explanation Jim Barrow stepped down as PM of Windsor II at the end of 205. He had managed Barrow Hanley s portion of Windsor II assets (approximately 60%) since 985. As had already been wellcommunicated over the past couple of years, his replacements are David Ganucheau and Jeff Fahrenbruch. It was also announced that a second generation PM, Tim Culler, will be retiring in March 206. Recommended Action Hold Comments Messrs. Ganucheau and Fahrenbruch have 9 and 8 years of investment experience, respectively, and have managed money for Barrow Hanley since July 20. However, investors are losing a great deal of experience with this change. We recommend holding on the to the Fund but will observe performance and flows over the coming months. The Barrow Hanley process is structured so that different accounts are managed by different PMs so Mr. Culler s departure should not impact Windsor II.

14 Plan Assets 2

15 Plan Summary Deferred Compensation Plan Assets Investment Options Investment Style Allocation Percentage Domestic Equity Funds $ Change From Previous Qtr % Change From Previous Qtr Vanguard 500 Index Inv US Large Cap Equity - Core $ 6,600, % $ 390, % Vanguard Windsor II Inv US Large Cap Equity - Value $ 8,04,7 6.4% $ 63, % Vanguard US Growth Inv US Large Cap Equity - Growth $ 4,857, % $ 502, % Vanguard Mid Cap Index Inv US Mid Cap Equity - Core $ 2,624, % $ 2, % Vanguard Small Cap Index Inv US Small Cap Equity - Core $ 2,424,59 4.9% $ 03, % $ 24,6, % $,73, % International Equity Funds Vanguard International Growth International Equity $ 2,028,576 4.% $ 00, % $ 2,028,576 4.% $ 00, % Fixed Income/Alternative Funds Vanguard Total Bond Market Index Inv Market Duration $ 2,654, % $ 53, % Vanguard Retirement Savings Trust Short Duration $ 3,69, % $ 5, % Vanguard Balanced Index Inv Balanced $ 4,025,98 8.% $ 04, % $ 0,300, % $ 274, % Cash Vanguard Prime Money Market Cash $,693,69 3.4% $ 324, % $,693,69 3.4% $ 324, % Target Funds Vanguard Target Retirement Income Inv Blend $ 294,80 0.6% $ 0, % Vanguard Target Retirement 200 Inv Blend $ 536,227.% $ (767) - 0.% Vanguard Target Retirement 205 Inv Blend $ 679,306.4% $ (93,25) - 2.% Vanguard Target Retirement 2020 Inv Blend $ 2,050,649 4.% $ (29,88) -.4% Vanguard Target Retirement 2025 Inv Blend $ 2,392,33 4.8% $ 65, % Vanguard Target Retirement 2030 Inv Blend $,029,532 2.% $ 72, % Vanguard Target Retirement 2035 Inv Blend $,49,90 2.3% $ 74, % Vanguard Target Retirement 2040 Inv Blend $ 666,825.3% $ 60,408 + % Vanguard Target Retirement 2045 Inv Blend $ 63,047.2% $ 6, % Vanguard Target Retirement 2050 Inv Blend $ 29, % $ 39, % Vanguard Target Retirement 2055 Inv Blend $ 39,500 0.% $ 9, % Vanguard Target Retirement 2060 Inv Blend $ 26,42 0.% $ 4, % $ 9,768,69 9.7% $ 374, % Loan Fund Loan Fund Loan Fund $,07, % $ (68,952) - 5.9% TOTAL $ 49,509,796 0% $ 2,78, % 3

16 Plan Summary Fee Comparison Summary Investment Option Expense Morningstar Category Average Fee Level Comparison Group Median evestment Alliance Universe Median Category Fee Level Comparison Group evestment Alliance Universe Vanguard 500 Index Large Blend evestment US Passive Large Cap Equity Vanguard US Growth Large Growth Large Cap No Load US Large Cap Growth Vanguard Windsor Large Value Large Cap No Load US Large Cap Value Vanguard Mid-Cap Index Mid Blend Mid Cap No Load US Passive Mid Cap Equity Vanguard Small-Cap Index Small Blend Small Cap No Load US Passive Small Cap Equity Vanguard International Growth Foreign Large Growth Foreign Large Cap No Load ACWI ex-us Growth Equity Vanguard Total Bond Market Index Intermediate-Term Bond Intermediate-Term Bond No Load US Core Fixed Income Vanguard Retirement Saving Trust 0.53 N/A N/A 0.82 N/A N/A US Stable Value Fixed Income Vanguard Balanced Index Moderate Allocation Moderate Allocation No Load US Balanced Vanguard Target Retirement Income Retirement Income Retirement Income No Load Lifecycle/Target Income Vanguard Target Retirement Target Target Retirement No Load Lifecycle/Target 200 Vanguard Target Retirement Target Target Retirement No Load Lifecycle/Target 205 Vanguard Target Retirement Target Target Retirement No Load Lifecycle/Target 2020 Vanguard Target Retirement Target Target Retirement No Load Lifecycle/Target 2025 Vanguard Target Retirement Target Target Retirement No Load Lifecycle/Target 2030 Vanguard Target Retirement Target Target Retirement No Load Lifecycle/Target 2035 Vanguard Target Retirement Target Target Retirement No Load Lifecycle/Target 2040 Vanguard Target Retirement Target Target Retirement No Load Lifecycle/Target 2045 Vanguard Target Retirement Target Target Retirement No Load Lifecycle/Target 2050 Vanguard Target Retirement Target 205+ Target Retirement 205+ No Load Lifecycle/Target 2055 Vanguard Target Retirement N/A Target 205+ Target Retirement 205+ No Load N/A Vanguard Prime Money Market N/A 0.9 Money Market Taxable N/A US Cash Management 4

17 5

18 Vanguard 500 Index Fund (VFINX) vs. S&P 500 Historical Performance Quarter To Vanguard 500 Index Fund (VFINX) S&P IM U.S. Large Cap Equity Vanguard 500 Index Fund (VFINX) Rank Three Rolling Percentile Ranking 0 Relative Performance 0.2 Return Percentile Rank /06 3/07 3/08 3/09 3/0 3/ 3/2 3/3 3/4 3/5 2/5 00 3/06 3/07 3/08 3/09 3/0 3/ 3/2 3/3 3/4 3/5 2/5 Cumulative Annualized Over/Under Relative Performance Return (%) Vanguard 500 Index Fund (VFINX) S&P 500 Over/Under Performance Historical Statistics (Jan-20 - Dec-205) Return Standard Deviation Excess Return Alpha Beta Sharpe Tracking Error Information Downside Risk Consistency Inception Vanguard 500 Index Fund (VFINX) y 4m S&P N/A y 4m 90 Day U.S. Treasury Bill N/A y 4m 6

19 Vanguard 500 Index Fund (VFINX) vs. S&P 500 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M) 37,458 37,342 Median Mkt. Cap ($M) 7,732 7,669 Price/Earnings ratio Price/Book ratio Yr. EPS Growth Rate (%) Current Yield (%) Debt to Equity.6.6 Number of Stocks Beta (5, Monthly) Consistency (5, Monthly) Sharpe (5, Monthly) Information (5, Monthly) Up Market Capture (5, Monthly) Down Market Capture (5, Monthly) Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Apple Inc Microsoft Corp Exxon Mobil Corp General Electric Co Johnson & Johnson Amazon.com Inc Wells Fargo & Co JPMorgan Chase & Co Facebook Inc Berkshire Hathaway Inc % of Portfolio Distribution of Market Capitalization (%) >$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Sector Weights (%) Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials 20.9 Information Technology Materials Telecommunication Services Utilities Vanguard 500 Index Fund (VFINX) S&P 500 Vanguard 500 Index Fund (VFINX) S&P 500 7

20 Vanguard Windsor II (VWNFX) vs. Russell 000 Value Index Historical Performance Quarter To Vanguard Windsor II (VWNFX) Russell 000 Value Index IM U.S. Large Cap Value Equity Vanguard Windsor II (VWNFX) Rank Three Rolling Percentile Ranking Risk and Return (Jan Dec - 205) Return Percentile Rank /06 3/07 3/08 3/09 3/0 3/ 3/2 3/3 3/4 3/5 2/ Vanguard Windsor II (VWNFX) Russell 000 Value Index Risk (Standard Deviation %) Buy and Hold Attribution Return (%) Vanguard Windsor II (VWNFX) Russell 000 Value Index Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Other Telecommunication Services Utilities Average Active Weight Allocation (Total: 0.3) Stock (Total: -.) Vanguard Windsor II (VWNFX) 0.4 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 8

21 Vanguard Windsor II (VWNFX) vs. Russell 000 Value Index Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M) 3,32 09,988 Median Mkt. Cap ($M) 9,576 7,068 Price/Earnings ratio Price/Book ratio Yr. EPS Growth Rate (%) Current Yield (%) Debt to Equity.4.2 Number of Stocks Beta (5, Monthly) Consistency (5, Monthly) Sharpe (5, Monthly) Information (5, Monthly) Up Market Capture (5, Monthly) Down Market Capture (5, Monthly) Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Medtronic PLC JPMorgan Chase & Co Microsoft Corp Bank of America Corp Pfizer Inc Wells Fargo & Co Philip Morris International Inc Citigroup Inc PNC Financial Services Group Inc Raytheon Co % of Portfolio Distribution of Market Capitalization (%) >$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities Other Sector Weights (%) Vanguard Windsor II (VWNFX) Russell 000 Value Index Vanguard Windsor II (VWNFX) Russell 000 Value Index 9

22 Vanguard US Growth (VWUSX) vs. Russell 000 Growth Index Historical Performance Quarter To Vanguard US Growth (VWUSX) Russell 000 Growth Index IM U.S. Large Cap Growth Equity Vanguard US Growth (VWUSX) Rank Three Rolling Percentile Ranking Risk and Return (Jan Dec - 205) Return Percentile Rank /06 3/07 3/08 3/09 3/0 3/ 3/2 3/3 3/4 3/5 2/ Vanguard US Growth (VWUSX) Russell 000 Growth Index Risk (Standard Deviation %) Buy and Hold Attribution Return (%) Russell 000 Growth Index Vanguard US Growth (VWUSX) Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Other Telecommunication Services Utilities Average Active Weight Allocation (Total: -0.3) Stock (Total: 0.6) Vanguard US Growth (VWUSX) Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 20

23 Vanguard US Growth (VWUSX) vs. Russell 000 Growth Index Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M) 2,455 33,865 Median Mkt. Cap ($M) 2,576 8,546 Price/Earnings ratio Price/Book ratio Yr. EPS Growth Rate (%) Current Yield (%) Debt to Equity Number of Stocks Beta (5, Monthly).0.00 Consistency (5, Monthly) Sharpe (5, Monthly).07.2 Information (5, Monthly) Up Market Capture (5, Monthly) Down Market Capture (5, Monthly) Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Google Inc (Class C) MasterCard Inc Amazon.com Inc Visa Inc Apple Inc Facebook Inc Allergan PLC Celgene Corp Alphabet Inc Home Depot Inc. (The) % of Portfolio Distribution of Market Capitalization (%) >$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities Other Sector Weights (%) Vanguard US Growth (VWUSX) Russell 000 Growth Index Vanguard US Growth (VWUSX) Russell 000 Growth Index 2

24 Vanguard Mid-Cap Index Fund (VIMSX) vs. Vanguard Mid-Cap Index Fund Blended Benchmark Historical Performance Quarter To Vanguard Mid-Cap Index Fund (VIMSX) Vanguard Mid-Cap Index Fund Blended Benchmark IM U.S. Mid Cap Equity Vanguard Mid-Cap Index Fund (VIMSX) Rank Three Rolling Percentile Ranking 0 Relative Performance 0.2 Return Percentile Rank Return (%) /06 3/07 3/08 3/09 3/0 3/ 3/2 3/3 3/4 3/5 2/ /06 3/07 3/08 3/09 3/0 3/ 3/2 3/3 3/4 3/5 2/5 Vanguard Mid-Cap Index Fund (VIMSX) Vanguard Mid-Cap Index Fund Blended Benchmark Cumulative Annualized Over/Under Relative Performance Over/Under Performance Historical Statistics (Jan-20 - Dec-205) Return Standard Deviation Excess Return Alpha Beta Sharpe Tracking Error Information Downside Risk Consistency Inception Vanguard Mid-Cap Index Fund (VIMSX) y 7m Vanguard Mid-Cap Index Fund Blended Benchmark N/A 9.5 7y 7m 90 Day U.S. Treasury Bill N/A y 7m Note: Prior to May 6, 2003, the Vanguard Mid-Cap Index was benchmarked to the S&P MidCap 400 Index. From May 6, 2003 to January 30, 203, the Index fund was benchmarked to the MSCI US Mid Cap 450 Index. Starting on January 3, 203, the benchmark transitioned to the CRSP US Mid Cap Index. 22

25 Vanguard Mid-Cap Index Fund (VIMSX) vs. CRSP U.S. Mid Cap TR Index Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M),777,562 Median Mkt. Cap ($M) 8,697 8,834 Price/Earnings ratio Price/Book ratio Yr. EPS Growth Rate (%) Current Yield (%).6.6 Debt to Equity Number of Stocks Beta (5, Monthly) Consistency (5, Monthly) Sharpe (5, Monthly) Information (5, Monthly) Up Market Capture (5, Monthly) Down Market Capture (5, Monthly) Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) AvalonBay Communities Inc Ross Stores Inc Fiserv Inc Electronic Arts Inc Roper Technologies Inc Cerner Corp ConAgra Foods Inc Hartford Financial Services Group Inc. (The) Royal Caribbean Cruises Ltd Equinix Inc % of Portfolio Distribution of Market Capitalization (%) $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Sector Weights (%) Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services.2.2 Utilities Vanguard Mid-Cap Index Fund (VIMSX) CRSP U.S. Mid Cap TR Index Vanguard Mid-Cap Index Fund (VIMSX) CRSP U.S. Mid Cap TR Index 23

26 Vanguard Small-Cap Index Fund (NAESX) vs. Vanguard Small-Cap Index Fund Blended Benchmark Historical Performance Quarter To Vanguard Small-Cap Index Fund (NAESX) Vanguard Small-Cap Index Fund Blended Benchmark IM U.S. Small Cap Equity Vanguard Small-Cap Index Fund (NAESX) Rank Three Rolling Percentile Ranking 0 Relative Performance 0.4 Return Percentile Rank Return (%) /06 3/07 3/08 3/09 3/0 3/ 3/2 3/3 3/4 3/5 2/ /06 3/07 3/08 3/09 3/0 3/ 3/2 3/3 3/4 3/5 2/5 Vanguard Small-Cap Index Fund (NAESX) Vanguard Small-Cap Index Fund Blended Benchmark Cumulative Annualized Over/Under Relative Performance Over/Under Performance Historical Statistics (Jan-20 - Dec-205) Return Standard Deviation Excess Return Alpha Beta Sharpe Tracking Error Information Downside Risk Consistency Inception Vanguard Small-Cap Index Fund (NAESX) y m Vanguard Small-Cap Index Fund Blended Benchmark N/A.0 47y m 90 Day U.S. Treasury Bill N/A y m Note: Prior to May 6, 2003, the Vanguard Small-Cap Index was benchmarked to the Russell 2000 Index. From May 6, 2003 to January 30, 203, the Index fund was benchmarked to the MSCI US Small Cap 750 Index. Starting on January 3, 203, the benchmark transitioned to the CRSP US Small Cap Index. 24

27 Vanguard Small-Cap Index (NAESX) vs. CRSP U.S. Small Cap TR Index Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M) 3,49 3,335 Median Mkt. Cap ($M),682,76 Price/Earnings ratio Price/Book ratio Yr. EPS Growth Rate (%) Current Yield (%).7.7 Debt to Equity.3.3 Number of Stocks,52,489 Beta (5, Monthly).0.00 Consistency (5, Monthly) Sharpe (5, Monthly) Information (5, Monthly) Up Market Capture (5, Monthly) Down Market Capture (5, Monthly) Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Goodyear Tire & Rubber Co Global Payments Inc AGL Resources Inc Ionis Pharmaceuticals Inc Duke Realty Corp JetBlue Airways Corp Signature Bank Spirit Aerosystems Holdings Inc Mid-America Apartment Communities Inc Waste Connections Inc % of Portfolio Distribution of Market Capitalization (%) Sector Weights (%) $5 Bil - $20 Bil $0 - $5 Bil 80.8 Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities Other Vanguard Small-Cap Index (NAESX) CRSP U.S. Small Cap TR Index Vanguard Small-Cap Index (NAESX) CRSP U.S. Small Cap TR Index 25

28 Vanguard International Growth (VWIGX) vs. MSCI AC World ex USA (Net) Historical Performance Quarter To Vanguard Int. Growth (VWIGX) MSCI AC World ex USA (Net) IM International Equity Vanguard Int. Growth (VWIGX) Rank Three Rolling Percentile Ranking Risk and Return (Jan Dec - 205) Return Percentile Rank /06 3/07 3/08 3/09 3/0 3/ 3/2 3/3 3/4 3/5 2/ Vanguard Int. Growth (VWIGX) MSCI AC World ex USA (Net) Risk (Standard Deviation %) Buy and Hold Attribution Return (%) MSCI AC World ex USA (Net) Vanguard Int. Growth (VWIGX) Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities Average Active Weight Allocation (Total: 0.8) Stock (Total: 3.5) Vanguard Int. Growth (VWIGX) Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 26

29 Vanguard International Growth (VWIGX) vs. MSCI AC World ex USA (Net) Quarter Ending December 3, 205 Total Attribution EM Asia 2.6 EM Europe + Middle East + Africa 0.3 EM Latin America EMU -0. Europe ex EMU 0.2 Frontier Markets Middle East North America.2 Other Pacific Performance Attribution EM Asia EM Europe + Middle East + Africa EM Latin America EMU Europe ex EMU Frontier Markets Middle East North America Other 0.4 Pacific Average Active Weight Allocation (Total: 0.) Stock (Total: 4.2) 27

30 Vanguard International Growth (VWIGX) vs. MSCI AC World ex USA (Net) Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M) 64,445 5,667 Median Mkt. Cap ($M) 20,32 6,742 Price/Earnings ratio Price/Book ratio Yr. EPS Growth Rate (%) Current Yield (%).6 3. Debt to Equity. 2. Number of Stocks 60,858 Beta (5, Monthly) Consistency (5, Monthly) Sharpe (5, Monthly) Information (5, Monthly) Up Market Capture (5, Monthly) Down Market Capture (5, Monthly) Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Tencent Holdings LTD AIA Group Ltd Amazon.com Inc Baidu Inc Industria De Diseno Textil Inditex SA Alibaba Group Holding Ltd Fiat Chrysler Automobiles NV Softbank Group Corp Smc Corp Arm Holdings PLC % of Portfolio Distribution of Market Capitalization (%) >$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities Sector Weights (%) Vanguard International Growth (VWIGX) MSCI AC World ex USA (Net) Vanguard International Growth (VWIGX) MSCI AC World ex USA (Net) 28

31 Vanguard International Growth (VWIGX) vs. MSCI AC World ex USA (Net) Vanguard International Growth (VWIGX) MSCI AC World ex USA (Net) Australia Hong Kong Japan New Zealand 0. Singapore Pacific Austria 0. Belgium. Finland France Germany Ireland Italy Netherlands Portugal Spain EMU Denmark 2..4 Norway Sweden Switzerland United Kingdom Europe ex EMU Canada United States 6.7 Israel Middle East Developed Markets Vanguard International Growth (VWIGX) MSCI AC World ex USA (Net) Brazil 0.6. Cayman Islands Chile 0.2 Colombia 0. Mexico Peru Virgin Islands EM Latin America China India Indonesia Korea Malaysia 0.7 Philippines 0.3 Taiwan Thailand EM Asia Czech Republic Egypt Greece 0. Hungary 0. Poland 0.3 Qatar 0.2 Russia South Africa Turkey United Arab Emirates 0.2 EM Europe + Middle East + Africa Emerging Markets Frontier Markets Cash Other 0.3 Total

32 Vanguard Total Bond Market Index Fund (VBMFX) vs. Vanguard Total Bond Market Index Fund Benchmark Historical Performance Quarter To Vanguard Total Bond Market Index Fund (VBMFX) Vanguard Total Bond Market Index Fund Benchmark IM U.S. Broad Market Core+ Fixed Income Vanguard Total Bond Market Index Fund (VBMFX) Rank Three Rolling Percentile Ranking 0 Relative Performance 0.6 Return Percentile Rank Return (%) /06 3/07 3/08 3/09 3/0 3/ 3/2 3/3 3/4 3/5 2/ /06 3/07 3/08 3/09 3/0 3/ 3/2 3/3 3/4 3/5 2/5 Vanguard Total Bond Market Index Fund (VBMFX) Vanguard Total Bond Market Index Fund Benchmark Cumulative Annualized Over/Under Relative Performance Over/Under Performance Historical Statistics (Jan-20 - Dec-205) Return Standard Deviation Excess Return Alpha Beta Sharpe Tracking Error Information Downside Risk Consistency Vanguard Total Bond Market Index Fund (VBMFX) y Vanguard Total Bond Market Index Fund Benchmark N/A.3 29y 90 Day U.S. Treasury Bill N/A y Inception Note: Prior to January, 200, the Vanguard Total Bond Market Index was benchmarked to the Barclays Aggregate Index. Starting on January, 200, the benchmark was transitioned to the Barclays Aggregate Float Adjusted Index. 30

33 Vanguard Total Bond Market Index (VBMFX) vs. Barclays U.S. Aggregate Float Adjusted Portfolio Characteristics Portfolio Benchmark Effective Duration Avg. Maturity Avg. Quality AA+ AA+ Yield To Maturity (%) Credit Quality Distribution (%) 25.0 AAA 4.0 AA A BBB 4.6 Vanguard Total Bond Market Index (VBMFX) Barclays U.S. Aggregate Float Adjusted Maturity Distribution (%) Sector Distribution (%) < Yr < 3 Yrs 3 < 5 Yrs 5 < 0 Yrs < 20 Yrs 4.0 > 20 Yrs Treasuries Agencies Credit MBS ABS Non-US Emerging Other CMBS Vanguard Total Bond Market Index (VBMFX) Barclays U.S. Aggregate Float Adjusted Vanguard Total Bond Market Index (VBMFX) Barclays U.S. Aggregate Float Adjusted 3

34 Vanguard Retirement Savings Trust vs. Ryan 3 Yr GIC Master Historical Performance Quarter To Vanguard Retirement Savings Trust Ryan 3 Yr GIC Master IM U.S. Short Duration Fixed Income Vanguard Retirement Savings Trust Rank Three Rolling Percentile Ranking 0 Relative Performance.5 Return Percentile Rank /06 3/07 3/08 3/09 3/0 3/ 3/2 3/3 3/4 3/5 2/5 00 3/06 3/07 3/08 3/09 3/0 3/ 3/2 3/3 3/4 3/5 2/5 Cumulative Annualized Over/Under Relative Performance Return (%) Vanguard Retirement Savings Trust Ryan 3 Yr GIC Master Over/Under Performance Historical Statistics (Jan-20 - Dec-205) Return Standard Deviation Excess Return Alpha Beta Sharpe Tracking Error Information Downside Risk Consistency Vanguard Retirement Savings Trust y Ryan 3 Yr GIC Master N/A 3y 90 Day U.S. Treasury Bill 0. N/A y Inception 32

35 Vanguard Balanced Index Fund (VBINX) vs. Vanguard Balanced Index Fund Benchmark Historical Performance Quarter To Vanguard Balanced Index Fund (VBINX) Vanguard Balanced Index Fund Benchmark IM Mixed-Asset Target Alloc Growth Vanguard Balanced Index Fund (VBINX) Rank Three Rolling Percentile Ranking 0 Relative Performance 0.8 Return Percentile Rank Return (%) /06 3/07 3/08 3/09 3/0 3/ 3/2 3/3 3/4 3/5 2/ /06 3/07 3/08 3/09 3/0 3/ 3/2 3/3 3/4 3/5 2/5 Vanguard Balanced Index Fund (VBINX) Vanguard Balanced Index Fund Benchmark Cumulative Annualized Over/Under Relative Performance Over/Under Performance Historical Statistics (Jan-20 - Dec-205) Return Standard Deviation Excess Return Alpha Beta Sharpe Tracking Error Information Downside Risk Consistency Inception Vanguard Balanced Index Fund (VBINX) y m Vanguard Balanced Index Fund Benchmark N/A y m 90 Day U.S. Treasury Bill N/A y m Note: Prior to June, 2005, the Vanguard Balanced Index was benchmarked to 60% DJ U.S. Total Stock Market Index/40% LB Aggregate Bond Index. From June, 2005 to December 3, 2009, the Index fund was benchmarked to 60% MSCI US Broad Market Index/40% BC Aggregate Index. From January, 200 to January 4, 203, the Index fund was benchmarked to 60% MSCI US Broad Market Index/40% BC Aggregate Float Adjusted Index. Starting January 5, 203, the benchmark transitioned to 60% CRSP US Total Market Index/40% BC Aggregate Float Adjusted Index. 33

36 Vanguard Balanced Index Fund (VBINX) - Equity Holdings vs. CRSP U.S. Total Market TR Index Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M) 3,24 2,249 Median Mkt. Cap ($M), Price/Earnings ratio Price/Book ratio Yr. EPS Growth Rate (%) Current Yield (%) Debt to Equity.9.8 Number of Stocks 3,300 3,743 Beta (5, Monthly) Consistency (5, Monthly) Sharpe (5, Monthly).9.0 Information (5, Monthly) Up Market Capture (5, Monthly) Down Market Capture (5, Monthly) Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Apple Inc Microsoft Corp Exxon Mobil Corp General Electric Co Johnson & Johnson Amazon.com Inc Wells Fargo & Co JPMorgan Chase & Co.. 9. Berkshire Hathaway Inc Alphabet Inc % of Portfolio Distribution of Market Capitalization (%) >$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities Other Sector Weights (%) Vanguard Balanced Index Fund (VBINX) - Equity Holdings CRSP U.S. Total Market TR Index Vanguard Balanced Index Fund (VBINX) - Equity Holdings CRSP U.S. Total Market TR Index 34

37 Vanguard Balanced Index Fund (VBINX) - Fixed Income Holdings vs. Barclays U.S. Aggregate Float Adjusted Portfolio Characteristics Portfolio Benchmark Effective Duration Avg. Maturity Avg. Quality AA+ AA+ Yield To Maturity (%) Credit Quality Distribution (%) 25.0 AAA 4.0 AA A BBB 4.6 Vanguard Balanced Index Fund (VBINX) - Fixed Income Holdings Barclays U.S. Aggregate Float Adjusted Maturity Distribution (%) Sector Distribution (%) < 3 Yrs 3 < 5 Yrs 5 < 0 Yrs < 20 Yrs 4.0 > 20 Yrs Treasuries Agencies Credit MBS ABS Non-US Emerging Other CMBS Vanguard Balanced Index Fund (VBINX) - Fixed Income Holdings Barclays U.S. Aggregate Float Adjusted Vanguard Balanced Index Fund (VBINX) - Fixed Income Holdings Barclays U.S. Aggregate Float Adjusted 35

38 Vanguard Target Retirement Income (VTINX) vs. Vanguard Target Income Composite Index Historical Performance Quarter To Vanguard Target Retirement Income (VTINX) Vanguard Target Income Composite Index IM Mixed-Asset Target Today Vanguard Target Retirement Income (VTINX) Rank Three Rolling Percentile Ranking 0 Risk and Return (Jan-20 - Dec-205) 5.4 Return Percentile Rank /06 3/07 3/08 3/09 3/0 3/ 3/2 3/3 3/4 3/5 2/5 Return (%) Vanguard Target Income Composite Index Vanguard Target Retirement Income (VTINX) Vanguard Target Retirement Income (VTINX) Vanguard Target Income Composite Index Risk (Standard Deviation %) Historical Statistics (Jan-20 - Dec-205) Return Standard Deviation Excess Return Alpha Beta Sharpe Tracking Error Information Downside Risk Consistency Inception Vanguard Target Retirement Income (VTINX) y 2m Vanguard Target Income Composite Index N/A.7 2y 2m 90 Day U.S. Treasury Bill N/A y 2m 36

39 Vanguard Target Retirement 200 (VTENX) vs. Vanguard Target 200 Composite Index Historical Performance Quarter To Vanguard Target Retirement 200 (VTENX) N/A N/A N/A Vanguard Target 200 Composite Index N/A N/A N/A IM Mixed-Asset Target Vanguard Target Retirement 200 (VTENX) Rank N/A N/A N/A Three Rolling Percentile Ranking 0 Risk and Return (Jan-20 - Dec-205) 6.0 Return Percentile Rank /06 3/07 3/08 3/09 3/0 3/ 3/2 3/3 3/4 3/5 2/5 Return (%) Vanguard Target 200 Composite Index Vanguard Target Retirement 200 (VTENX) Vanguard Target Retirement 200 (VTENX) Vanguard Target 200 Composite Index Risk (Standard Deviation %) Historical Statistics (Jan-20 - Dec-205) Return Standard Deviation Excess Return Alpha Beta Sharpe Tracking Error Information Downside Risk Consistency Vanguard Target Retirement 200 (VTENX) y 6m Vanguard Target 200 Composite Index N/A 3.0 9y 6m 90 Day U.S. Treasury Bill N/A y 6m Inception 37

40 Vanguard Target Retirement 205 (VTXVX) vs. Vanguard Target 205 Composite Index Historical Performance Quarter To Vanguard Target Retirement 205 (VTXVX) Vanguard Target 205 Composite Index IM Mixed-Asset Target Vanguard Target Retirement 205 (VTXVX) Rank Three Rolling Percentile Ranking 0 Risk and Return (Jan-20 - Dec-205) 6.6 Return Percentile Rank Return (%) Vanguard Target Retirement 205 (VTXVX) Vanguard Target 205 Composite Index 00 3/06 3/07 3/08 3/09 3/0 3/ 3/2 3/3 3/4 3/5 2/5 Vanguard Target Retirement 205 (VTXVX) Vanguard Target 205 Composite Index Risk (Standard Deviation %) Historical Statistics (Jan-20 - Dec-205) Return Standard Deviation Excess Return Alpha Beta Sharpe Tracking Error Information Downside Risk Consistency Inception Vanguard Target Retirement 205 (VTXVX) y 2m Vanguard Target 205 Composite Index N/A 4.2 2y 2m 90 Day U.S. Treasury Bill N/A y 2m 38

41 Vanguard Target Retirement 2020 (VTWNX) vs. Vanguard Target 2020 Composite Index Historical Performance Quarter To Vanguard Target Retirement 2020 (VTWNX) N/A N/A N/A Vanguard Target 2020 Composite Index N/A N/A N/A IM Mixed-Asset Target Vanguard Target Retirement 2020 (VTWNX) Rank N/A N/A N/A Three Rolling Percentile Ranking 0 Risk and Return (Jan-20 - Dec-205) 7.8 Return Percentile Rank /06 3/07 3/08 3/09 3/0 3/ 3/2 3/3 3/4 3/5 2/5 Vanguard Target Retirement 2020 (VTWNX) Vanguard Target 2020 Composite Index Return (%) Vanguard Target 2020 Composite Index 6.9 Vanguard Target Retirement 2020 (VTWNX) Risk (Standard Deviation %) Historical Statistics (Jan-20 - Dec-205) Return Standard Deviation Excess Return Alpha Beta Sharpe Tracking Error Information Downside Risk Consistency Vanguard Target Retirement 2020 (VTWNX) y 6m Vanguard Target 2020 Composite Index N/A 5.0 9y 6m 90 Day U.S. Treasury Bill N/A y 6m Inception 39