Attachment

OTHER POST-EMPLOYMENT BENEFITS (OPEB) BOARD AGENDA NOVEMBER 8, 2012 - 11:00 A.M. CITY HALL CONFERENCE ROOM 15 LOOCKERMAN PLAZA DOVER, DELAWARE Public comments are welcomed on any item and will be permitted at appropriate times. When possible, please notify the City Clerk (736-7008 or e-mail at CityClerk@dover.de.us) should you wish to be recognized. AGENDA ADDITIONS/DELETIONS 1. Adoption of Minutes - OPEB Board Meeting of August 15, 2012 2. Quarterly Performance Review (Quarter Ending September 30, 2012) (Milliman, Inc.) 3. Approval of Amendments to Investment Policy 4. Changes/Additions to Investment Managers (Milliman, Inc.) 5. Adjournment /js S:\AGENDAS-MINUTES-PACKETS\Misc-Agendas\OPEB\2012\11-08-2012 OPEB BOARD.wpd TO ASSURE THAT THERE WILL BE A QUORUM, PLEASE RSVP BY CONTACTING THE CITY CLERK’S OFFICE BY EMAIL AT CITYCLERK@DOVER.DE.US OR BY CALLING 736-7008 AS SOON AS POSSIBLE. THE AGENDA ITEMS AS LISTED MAY NOT BE CONSIDERED IN SEQUENCE. THIS AGENDA IS SUBJECT TO CHANGE TO INCLUDE THE ADDITION OR THE DELETION OF ITEMS, INCLUDING EXECUTIVE SESSIONS.

OTHER POST EMPLOYMENT BENEFITS (OPEB) BOARD The Other Post-Employment Benefits (OPEB) Board meeting was held on August 15, 2012 at 3:00 p.m. with Chairwoman Williams presiding. Members present were Mr. Hare, Mr. Koenig, and Mrs. Mitchell. Mrs. Hawkins was absent. Councilman Perza was also present. AGENDA ADDITIONS/DELETIONS By unanimous consent, the agenda was approved as presented. ADOPTION OF MINUTES - OPEB BOARD MEETING OF FEBRUARY 8, 2012 Mr. Hare moved for adoption of the minutes of the OPEB Board meeting of February 8, 2012, seconded by Mrs. Mitchell and unanimously carried. ORGANIZATIONAL ISSUES - ELECTION OF CHAIR Mrs. Williams opened the floor for nominations for Chair. Mr. Hare moved to nominate Mrs. Williams to serve as Chair. Mrs. Williams respectfully declined. Mr. Hare moved to nominate Mrs. Donna Mitchell, Controller/Treasurer, to serve as Chair, seconded by Mrs. Williams. Mr. Hare moved to close nominations, seconded by Mr. Koenig and unanimously carried. The motion to elect Mrs. Mitchell to serve as Chair of the OPEB Board was unanimously carried. QUARTERLY PERFORMANCE REVIEW (QUARTER ENDING JUNE 30, 2012) (MILLIMAN, INC.) Mr. Jeff Marzinsky, Principal and Employee Benefits Consultant, Milliman, Inc., reviewed the Quarterly Performance of the OPEB Trust Fund as of June 30, 2012. He noted that the fund balance was approximately $8.43M at the beginning of the quarter and the ending balance was approximately $10.48M, including contributions of approximately $2.15M. Mr. Marzinsky stated that there was a slight gain during the quarter due to the timing of the contribution. He indicated that the majority of investments, including passive index investments, ranked well and exceeded their benchmarks during this time period and that no changes in investments were recommended at this time. DISCUSSION - LIABILITY TO ASSET ALLOCATION STUDY (MILLIMAN, INC.) Mr. Jeff Marzinsky, Principal and Employee Benefits Consultant, Milliman, Inc., reviewed the City of Dover, DE - OPEB Asset Liability Study, dated July 31, 2012. He advised members that two (2) factors affect the plan assets: the liability stream (future payments) and the risk/return profile of the assets in the plan, and Milliman considers both when conducting analysis. Using data provided by Mr. Scott Porter, Milliman’s actuary, annual projected benefit obligations were used to develop a statistic called duration, which indicates when (on average) payments will be due. Mr. Marzinsky reminded members that the plan has a projected target return of 7% that is used for actuarial valuation and to develop an optimal portfolio.

OPEB BOARD MEETING OF AUGUST 15, 2012 PAGE 2 Mr. Marzinsky explained that the Optimization Input Review on Page 2 of the report listed the projected returns and projected volatility (standard deviation) of OPEB fund investments. He advised members that the Input Correlation on Page 3 reflected how closely the investment asset categories move together and that a correlation of 1.00 indicates an exact match. He noted that assets should not move up or down simultaneously since maintaining diversification is important. Referring to Page 4 of the report, Mr. Marzinsky indicated that the far right column reflected the OPEB plan’s current investment allocations. He reviewed three (3) alternative options that were developed to allow members to consider which would add different asset categories and different allocations within categories. He noted that Option 2 reflected a reduction in stock allocation from 68.0% to approximately 60.73% and that allocating in this manner would create more diversification, hit the same target return, and lower the volatility of the portfolio. Mr. Marzinsky stated that approximately 32% of the portfolio was allocated to fixed income (bond-type) investments and 68% allocated to equities. He felt that this was a fairly good allocation, since weighing the plan more heavily in equities would provide more growth potential, although volatility would be higher. Responding to Mrs. Williams regarding the relatively high standard deviation, Mr. Marzinsky stated that there would be a long window of time to potentially grow the portfolio, noting that the majority of benefits would become due in 20-30 years. In addition, he noted that growth would be needed within the portfolio and the equity investments would be helpful in this regard. In response to Mrs. Williams regarding whether the standard deviation would decrease in the future, Mr. Marzinsky indicated that portfolios for pooled investments with a future liability are typically “de-risked” as the liability moves closer to a funded status. Equity is removed from the portfolio and fixed income is added, and this lowers the risk and the standard deviation. He estimated that this could be considered by the City in five (5) or ten (10) years and that Milliman would continue to monitor the status periodically to evaluate how well the plan is funded, how much the assets have grown, and the amount of contributions to the plan. Mr. Marzinsky explained that the three (3) yellow dots on the graph on Page 5 reflected the three (3) optimal portfolio options. The blue dot, representing the current OPEB plan, indicated that it was not as efficient as the alternative scenarios presented. Page 6 showed the variability of potential returns for the dispersion of expected outcomes and demonstrated that adding the asset categories would reduce the likelihood of a wider dispersion of potential outcomes. Page 7 reflected expected future payments, which allowed for the development of the isolated duration number, which indicated that in approximately 24 years, the core of the benefits would begin to be paid. Mr. Marzinsky explained that Page 8 revealed a mismatch in the duration of the assets and the duration of the portfolio. He recommended gradually transitioning to a liability-driven investment portfolio. He indicated that Page 9 contained an analysis of the optimal portfolio (Option #2) which would allocate some of the fixed income holdings to longer-term investments and achieve a better match in the duration of the assets to the duration of the liabilities. Mr. Marzinsky noted that the steps involved would be: 1) changing the allocation of the plan by adding different asset categories,

OPEB BOARD MEETING OF AUGUST 15, 2012 PAGE 3 which would reduce the volatility of the portfolio and achieve an expected target return close to the valuation target return; and 2) allocating some of the portfolio to longer-term bond investments, which would start to match the duration of the assets to the duration of the liabilities within the plan. Referring to the 24-25 year projected duration, Mrs. Williams expressed her concern that the money would come in after it was needed, since most employees would be retired or nearly retired by this time. Mrs. Mitchell explained that the City was in a ten-year phase-in period for funding the liability and these funding assumptions were built into Milliman’s report. In reponse to Mrs. Williams, Mr. Marzinsky stated that the implications of capping the fund would be considered on the actuarial side rather than the investment side. Mrs. Mitchell stated that capping the fund would decrease the duration mismatch. Responding to Mr. Koenig, Mr. Marzinsky stated that the 24.97 figure for duration was based on actuarial information, including participant data and when those benefits would come due. A schedule was developed of all payments to be issued in the next 70-80 years and dollar amounts were projected year by year. This data was run through a calculation that determined, on average, when the core or majority of benefits would come due. In response to Mr. Koenig, Mr. Marzinsky confirmed that the targeted 7% return was very optimistic in the current market. He noted that diversifying into different asset categories would increase the likelihood of meeting target returns. He stated that he was not aware of fixed asset investments that were currently yielding this rate of return; however, some were generating this amount of return based on share price in terms of the net asset value of portfolios. After further discussion, in response to Mr. Hare, Mr. Marzinsky recommended Option #2 as a “middle of the road” strategy for allocating the OPEB portfolio. He suggest that consideration be given at a subsequent meeting to setting high and low thresholds for each of the asset categories so that the portfolio would not have to be rebalanced frequently. Mr. Hare moved to adjust the portfolio by adopting Option #2, as outlined on Page 4, Portfolio Options, of the City of Dover, DE OPEB Asset Liability Study dated July 31, 2012 (Attachment #1). The motion was seconded by Mrs. Williams and unanimously carried. SCHEDULING OF FUTURE MEETING DATES By unanimous consent members agreed that staff would set future meeting dates and coordinate with members. Mrs. Williams requested that adequate time be allowed for meetings so that members could consider matters thoroughly. Mr. Koenig moved for adjournment, seconded by Mrs. Williams and unanimously carried.

OPEB BOARD MEETING OF AUGUST 15, 2012 PAGE 4 Meeting Adjourned at 3:38 P.M. Donna S. Mitchell Chair DSM/JS/mk/dd/tm S:\AGENDAS-MINUTES-PACKETS\Misc-Minutes\OTHER POST-EMPLOYMENT BENEFITS (OPEB) BOARD\2012\08-15-2012 OPEB.wpd Attachment Attachment #1 - Page 4, Portfolio Options - City of Dover, DE OPEB Asset Liability Study dated July 31, 2012

ATTACHMENT #1 OPEB Board Meeting of 08/15/2012 Quarterly Investment Monitor - June 2012 Asset Allocation Study Portfolio Options Gen Option Option Option EE & OPEB 1 2 3 Police Pension Cash 5.000 5.000 5.000 2.000 1.000 ML U.S. Treasuries, Inflation-Linked 7.000 7.000 7.000 0.000 0.000 Barclays Capital Interm U.S.Govt/Credit 10.000 10.000 10.000 34.000 31.000 Barclays Capital Long Gov/Credit Index 20.000 17.268 12.287 0.000 0.000 Russell 1000 Value Index 12.117 10.000 11.344 14.000 10.000 Russell 1000 Growth Index 10.000 10.738 14.369 14.000 15.000 Russell Midcap Index 5.000 5.000 5.000 8.000 11.000 Russell 2000 Index 5.000 5.000 5.000 5.000 7.000 FTSE NAREIT REIT: Equity 5.000 4.994 5.000 0.000 0.000 MSCI EAFE (Net) Index 10.000 10.000 10.000 23.000 25.000 MSCI EM (Emerging Markets) Index 10.883 15.000 15.000 0.000 0.000 Fixed Income 42.00% 39.27% 34.29% 36.00% 32.00% Equity 58.00% 60.73% 65.71% 64.00% 68.00% Option 1 Option 2 Option 3 Gen EE & Police Pension OPEB Expected Return 6.75% 7.00% 7.25% 6.70% 7.00% Expected Standard Deviation 11.3045 12.1307 13.0225 12.1951 13.1609 Expected Sharpe Ratio 0.3760 0.3710 0.3648 0.3444 0.3422 Option 1 Option 3 OPEB Option 2 Gen EE & Police Pension Expected Return Expected Risk Expected Sharpe Ratio 8 14 13.16 7.25 13.02 0.50 7.00 7.00 12.13 12.20 6.75 6.70 12 11.30 6 0.38 0.37 0.36 Expected Sharpe Ratio 10 0.34 0.34 Expected Return Expected Risk 8 4 0.25 6 4 2 2 0 0 0.00 4

Milliman Meeting City of Dover Delaware OPEB Board November 8, 2012 Presented by: Jeff Marzinsky, CIMA, CPC Milliman, Inc. 1

Milliman Meeting TABLE OF CONTENTS Section I Market Commentary & Investment Monitor Section II Asset Liability Study – Allocation Summary Section III Fund Detail Pages Section IV Investment Policy Statement Amendment 2

Quarterly Investment Monitor Market Indices - 3rd Quarter 2012 Index 3 1 3 5 Months Year Years Years BofAML US Treasury Bill 3 Mon 0.03 0.07 0.11 0.72 Barclays US Govt 1-3 Yr TR USD 0.26 0.65 1.49 2.94 Barclays US Govt/Credit Interm TR USD 1.40 4.40 5.18 5.71 Barclays US Government Long TR USD 0.34 6.41 11.93 10.94 Barclays US Long Credit TR USD 5.22 14.91 12.74 10.61 Barclays US Corporate High Yield TR USD 4.53 19.37 12.90 9.34 DJ Industrial Average TR USD 5.02 26.52 14.45 2.16 S&P 500 TR 6.35 30.20 13.20 1.05 NASDAQ 100 TR USD 7.36 32.37 18.71 6.84 NASDAQ Composite TR USD 6.50 30.53 14.81 3.89 Russell 1000 Value TR USD 6.51 30.92 11.84 -0.90 Russell 1000 TR USD 6.31 30.05 13.27 1.22 Russell 1000 Growth TR USD 6.11 29.19 14.73 3.24 Russell 2000 Value TR USD 5.67 32.63 11.72 1.35 Russell 2000 TR USD 5.25 31.91 12.99 2.21 Russell 2000 Growth TR USD 4.84 31.18 14.19 2.96 FTSE NAREIT All REITs TR 1.85 34.37 20.32 2.50 MSCI EAFE NR USD 6.92 13.75 2.12 -5.24 MSCI EAFE Small Cap NR USD 7.89 12.56 4.75 -2.98 MSCI EM NR USD 7.74 16.93 5.63 -1.28 3 City of Dover, Delaware Other Postemployment Benefit (OPEB) GASB 45 3

Quarterly Investment Monitor Broad Market Commentary - 3rd Quarter 2012 Broad Markets - Quarter Broad Markets - Five Years Jul-12 - Sep-12 Sep-07 - Sep-12 7 140 130 6 120 5 110 Total Return, % Growth of $100 100 4 90 3 80 2 70 60 1 50 0 40 Jul-12 - Sep-12 Sep-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Sep-12 Total Total Barclays US Govt/Credit Interm TR USD S&P 500 TR Barclays US Govt/Credit Interm TR USD S&P 500 TR NASDAQ Composite TR USD MSCI EAFE NR USD NASDAQ Composite TR USD MSCI EAFE NR USD Market Commentary · The U.S. stock market rose in response to additional stimulus by the Federal Reserve (“QE3”) and improvements in certain areas of the U.S. economy, particularly the housing market. · The international equity markets made substantial gains after the European Central Bank announced it will do “whatever it takes” to preserve the euro and approved a plan to buy unlimited amounts of bonds issued by struggling euro-zone nations. · The Federal Reserve Bank announced its intentions to purchase $40 billion in mortgage-backed securities each month in an effort to lower mortgage interest rates, help the housing market, and ultimately, reduce unemployment. · As the quarter ended, mutual fund investors increased their holdings in bonds and decreased their holdings in stocks. For the quarter, bond funds had net inflows of $85.4 billion, while stock funds had net outflows of $48.1 billion. Total money market mutual fund assets increased by $37.69 billion to $2.576 trillion. · The unemployment rate fell from 8.2% to 7.8%, as total employment increased by 437,000 jobs. · The price of oil increased from $85 per barrel to $92 during the quarter, an increase of 8.2%. · For the three months ending September 30, 2012, annualized seasonally adjusted CPI – U was 5.0%. Rising prices for gasoline drove the increase. 4 City of Dover, Delaware Other Postemployment Benefit (OPEB) GASB 45 4

Quarterly Investment Monitor US Fixed Income Market Commentary - 3rd Quarter 2012 US Fixed Income - Quarter US Fixed Income - Five Years Jul-12 - Sep-12 Sep-07 - Sep-12 6 180 5 160 140 Growth of $100 4 Total Return, % 120 3 100 2 80 1 60 0 Sep-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Sep-12 Jul-12 - Sep-12 Total Total BofAML US Treasury Bill 3 Mon Barclays US Govt 1-3 Yr TR USD BofAML US Treasury Bill 3 Mon Barclays US Govt 1-3 Yr TR USD Barclays US Govt/Credit Interm TR USD Barclays US Government Long TR USD Barclays US Govt/Credit Interm TR USD Barclays US Government Long TR USD Barclays US Long Credit TR USD Barclays US Corporate High Yield TR USD Barclays US Long Credit TR USD Barclays US Corporate High Yield TR USD US Bond Market · Most fixed income markets rose in the 3rd quarter, as investors shifted from higher quality bonds to lower quality bonds. · The short end of the yield curve remained unchanged as the Fed maintained its near-zero interest rate policy. · Interest rates were virtually unchanged across the yield curve. · Long-term corporate bonds were the best performing sector this quarter, up 5.53%, as corporate credit spreads hit near record lows in response to strong demand from investors. · Long-term government bonds were the worst performing sector this quarter, up 0.34%, as investors favored bonds with higher yields. · 91-Day T-Bill returned 0.03% in the third quarter, the same return as in the second quarter. 5 City of Dover, Delaware Other Postemployment Benefit (OPEB) GASB 45 5

Quarterly Investment Monitor US Equity Market Commentary - 3rd Quarter 2012 US Equity - Quarter US Equity - Five Years Jul-12 - Sep-12 Sep-07 - Sep-12 7 120 6 110 100 5 Total Return, % Growth of $100 90 4 80 3 70 2 60 1 50 0 40 Jul-12 - Sep-12 Sep-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Sep-12 Total Total Russell 1000 Value TR USD Russell 1000 TR USD Russell 1000 Value TR USD Russell 1000 TR USD Russell 1000 Growth TR USD Russell 2000 Value TR USD Russell 1000 Growth TR USD Russell 2000 Value TR USD Russell 2000 TR USD Russell 2000 Growth TR USD Russell 2000 TR USD Russell 2000 Growth TR USD US Stock Market · Most major domestic equity indices posted a gain for the quarter. The large-cap Russell 1000 Value Index had the best return, up 6.5%. · Large-cap stocks outperformed small-caps, up 6.3% vs. 5.3%. · In comparing styles, value stocks did better than growth stocks. · In a reversal from last quarter, REITs fell 0.38%, as investors favored riskier assets over the relatively stable cash flows offered by commercial real estate. The worst performing sectors were apartments and resorts/lodging. · Energy was the best performing sector, up 10.14%, on higher crude oil prices and concerns about supply. · Utilities were the worst performing sector, up 0.01%, as investors generally moved out of lower-risk assets. 6 City of Dover, Delaware Other Postemployment Benefit (OPEB) GASB 45 6

Quarterly Investment Monitor International Market Commentary - 3rd Quarter 2012 International - Quarter Jul-12 - Sep-12 8 7 International - Five Years 6 Sep-07 - Sep-12 Total Return, % 5 120 4 3 110 2 1 100 0 90 Growth of $100 MSCI EAFE NR USD MSCI EAFE Small Cap NR USD 80 MSCI EM NR USD Regional Performance - Quarter 70 Jul-12 - Sep-12 12 60 10 8 50 Total Return, % 6 40 4 Sep-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Sep-12 2 MSCI EAFE NR USD MSCI EAFE Small Cap NR USD 0 MSCI EM NR USD -2 MSCI Australia NR USD MSCI Europe Ex UK NR USD MSCI UK NR USD MSCI Pacific Ex Japan NR USD MSCI Japan NR USD MSCI EM Latin America NR USD International Markets · The dollar was down against the euro, pound, and yen. · For the quarter, the EAFE Index was up 6.92% and Emerging Markets were up 7.74%. Local currency returns for the EAFE Index and Emerging Markets were 4.67% and 5.91%, respectively. · Among the major international regions, Indian stocks had the highest return (+14.34%), spurred by a series of economic reforms, including plans to allow foreign investors to buy larger stakes in supermarkets and airlines. · Stocks in the Asia Pacific region (except for Japan) also rose substantially (+10.71%), especially Hong Kong whose booming property market benefited real estate stocks. · Small-cap stocks, up 7.9%, outperformed large-cap stocks, up 6.9%. 7 City of Dover, Delaware Other Postemployment Benefit (OPEB) GASB 45 7

Quarterly Investment Monitor Data as of 09/30/2012 Performance Summary 8 City of Dover, Delaware Other Postemployment Benefit (OPEB) GASB 45 8

Quarterly Investment Monitor Data as of 09/30/2012 Asset Allocation Balances As of Percent As of Balances As of Percent As of Notes 09/30/2012 09/30/2012 06/30/2012 06/30/2012 Wells Fargo Advantage Cash Inv MMkt I $314,703 2.97% $315,935 3.01% PIMCO Total Return Instl $1,303,199 12.30% $1,280,295 12.21% Vanguard Total Bond Market Index Signal $1,894,385 17.88% $1,868,340 17.83% American Funds Washington Mutual R6 $1,053,066 9.94% $1,033,832 9.86% Vanguard 500 Index Signal $1,540,048 14.53% $1,518,956 14.49% Vanguard Mid Cap Index Adm $1,108,597 10.46% $1,100,867 10.50% Target Small Capitalization Value T $742,233 7.00% $742,595 7.08% American Funds New Perspective R6 $1,352,537 12.76% $1,334,316 12.73% Harding Loevner Global Equity Inst $1,289,051 12.16% $1,286,406 12.27% Plan Total $10,597,819 $10,481,542 9 City of Dover, Delaware Other Postemployment Benefit (OPEB) GASB 45 9

Quarterly Investment Monitor Data as of 09/30/2012 Investment Policy Review - Active Management Return Return Excess Excess Relative Relative Alpha Sharpe Alpha Sharpe Fund Rank Rank Return Return StdDev StdDev Rank Rank Rank Rank Name 3Y 5Y 3Y 5Y 3Y 5Y 3Y 3Y 5Y 5Y PIMCO Total Return Instl 25 0 2.51 3.22 1.36 1.30 46 51 0 0 American Funds Washington Mutual R6 7 21 2.46 2.30 0.83 0.83 10 9 32 28 Target Small Capitalization Value T 53 18 -2.63 0.19 0.91 0.90 26 25 20 17 American Funds New Perspective R6 27 19 1.50 2.93 0.96 0.92 32 27 20 19 Harding Loevner Global Equity Inst 27 19 1.56 3.01 0.95 0.94 29 27 19 18 Definitions Return Rank - Fund's category percentile return rank, a value less than 50 (1 is the best and 100 is the worst) implies the fund is beating more than 50% of its peer group. Excess Return - Fund's excess return over its becnchmark, a value greater than 0 implies the fund's return is higher than its benchmark. Relative StdDev - Fund's standard deviation relative to its benchmark, a value less than 1 implies the fund's standard deviation is lower than its benchmark. Alpha Rank - Fund's category percentile Alpha rank, a value less than 50 (1 is the best and 100 is the worst) implies the fund is beating more than 50% of its peer group. Sharpe Rank - Fund's category percentile Sharpe Ratio rank, a value less than 50 (1 is the best and 100 is the worst) implies the fund is beating more than 50% of its peer group. 10 City of Dover, Delaware Other Postemployment Benefit (OPEB) GASB 45 10

Quarterly Investment Monitor Data as of 09/30/2012 Investment Policy Review - Passive Management Excess Excess Tracking Tracking Fund Beta Beta Expense Return Return Error Error Name 3Y 5Y Ratio 3Y 5Y 3Y 5Y Vanguard Total Bond Market Index Signal -0.16 NA 1.04 0.28 NA NA 0.10 Vanguard 500 Index Signal -0.02 0.02 1.00 0.02 1.00 0.03 0.05 Vanguard Mid Cap Index Adm -0.08 -0.03 1.00 0.02 1.00 0.04 0.10 Definitions Excess Return - Fund's excess return over its becnchmark, a value greater than 0 implies the fund's return is higher than its benchmark. Beta - Fund's Beta or sensitivity to movements compared to its benchmark, a value of 1 implies its moving in sync with its benchmark. Tracking Error - Fund's Tracking Error versus its benchmark, a value of 0 implies the Fund's ups and downs are the same size as its benchmark. 11 City of Dover, Delaware Other Postemployment Benefit (OPEB) GASB 45 11

Quarterly Investment Monitor Data as of 09/30/2012 Investment Option Return Summary Asset Fund 3 1 3 5 10 Mstar Expense YTD Ticker Class Name Months Year Years Years Years Rating Ratio Taxable Money Market Wells Fargo Advantage Cash Inv MMkt I 0.02 0.04 0.05 0.10 0.96 1.94 WFIXX NA 0.20 BofA ML 3-month T-bill total return Index 0.03 0.07 0.07 0.11 0.72 1.82 N/A NA NA Intermediate-term Bond PIMCO Total Return Instl 3.15 9.08 11.51 7.69 8.92 6.95 PTTRX 5.00 0.46 Intermediate-term Bond Vanguard Total Bond Market Index Signal 1.55 4.02 5.03 6.11 6.53 5.28 VBTSX 3.00 0.10 BC Intermediate Government/Credit 1.40 3.53 4.40 5.18 5.71 4.76 N/A NA NA Barclays US Agg Float Adj TR USD 1.61 4.07 5.26 6.26 NA NA N/A NA NA Large Value American Funds Washington Mutual R6 4.68 12.35 25.52 13.85 0.73 7.58 RWMGX 5.00 0.31 S&P 500 Value 6.30 15.78 30.81 11.39 (1.56) 7.79 N/A NA NA Large Blend Vanguard 500 Index Signal 6.34 16.42 30.17 13.19 1.07 7.96 VIFSX 4.00 0.05 S&P 500 Index 6.35 16.44 30.20 13.20 1.05 8.01 N/A NA NA Mid-Cap Blend Vanguard Mid Cap Index Adm 5.21 12.80 26.47 13.98 1.87 10.34 VIMAX 4.00 0.10 MSCI US Mid Cap 450 Index USD 5.23 12.84 26.53 14.05 1.90 10.94 N/A NA NA Small Value Target Small Capitalization Value T 5.02 10.01 26.08 12.50 3.48 12.11 TASVX 4.00 0.71 S&P 600 Index 5.40 13.80 33.35 15.14 3.29 10.74 N/A NA NA World Stock American Funds New Perspective R6 6.48 16.29 23.67 8.73 0.86 10.79 RNPGX 4.00 0.46 World Stock Harding Loevner Global Equity Inst 5.76 16.17 22.77 8.78 0.93 10.06 HLMVX 4.00 0.95 MSCI AC World Index ND USD 6.84 12.88 20.98 7.23 (2.07) 8.61 N/A NA NA Total Plan OPEB-GROSS RETURN 4.59 16.95 25.74 NA NA NA N/A NA NA Total Plan OPEB-NET RETURN 4.50 16.63 25.29 NA NA NA N/A NA NA OPEB Plan Policy Index 4.77 11.31 19.42 9.41 2.26 7.60 N/A NA NA 12 City of Dover, Delaware Other Postemployment Benefit (OPEB) GASB 45 12

OPEB Allocation Adjustment 2012 - Asset Liability Study Target Wgtd Wgtd Fixed Asset Category Minimum Target Maximum Duration Duration Duration Cash & Short Term Bond (cash @ 0%) 0% 5% 10% 0.25 0.01 0.03 US Treasuries/Inflation-linked 0% 2% 7% 6.00 0.12 0.30 Intermediate Term Bond 6% 11% 16% 6.00 0.66 1.65 Long Term Bond 17% 22% 27% 14.00 3.08 7.70 Large Cap Value – US Stock 5% 10% 15% 0.00 0.00 Large Cap Growth – US Stock 5% 10% 15% 0.00 0.00 Mid Cap – US Stock 0% 5% 10% 0.00 0.00 Small Cap – US Stock 0% 5% 10% 0.00 0.00 Real Estate/REIT 0% 5% 10% 0.00 0.00 Non-US Stock 5% 10% 15% 0.00 0.00 Emerging Markets 10% 15% 20% 0.00 0.00 100% 3.87 9.68 Dynamic Investment Policy Funded Status Asset Category 40% 70% 80% 85% 90% 95% 100% Cash & Short Term Bond 5% 5% 5% 5% 5% 5% 5% US Treasuries/Inflation-linked 2% 3% 4% 6% 7% 8% 10% Intermediate Term Bond 11% 11% 12% 12% 13% 16% 18% Long Term Bond 22% 24% 26% 28% 30% 36% 42% Large Cap Value – US Stock 10% 10% 9% 9% 8% 7% 4% Large Cap Growth – US Stock 10% 9% 9% 8% 8% 5% 4% Mid Cap – US Stock 5% 5% 5% 5% 5% 4% 3% Small Cap – US Stock 5% 5% 4% 3% 3% 3% 3% Real Estate/REIT 5% 5% 4% 4% 3% 3% 3% Non-US Stock 10% 9% 9% 8% 7% 6% 3% Emerging Markets 15% 14% 13% 12% 11% 7% 5% Equity 60% 57% 53% 49% 45% 35% 25% Fixed Income/Cash 40% 43% 47% 51% 55% 65% 75% Total 100% 100% 100% 100% 100% 100% 100% Approximate Weighted Plan Duration 3.87 4.21 4.61 5.01 5.41 6.49 7.57 Approximate Fixed Income Duration 9.68 9.80 9.81 9.83 9.84 9.99 10.10 FUND CHANGES REQUIRED TO MEET ALLOCATION POLICY Fund Manager Asset Cat Prior Bal Asset Class / Strategy Allocation Existing Funds WF Treas Money Mkt CA $109,869 T-Bills 2% PIMCO Total Ret/Vang Total Bond Index FI $2,463,382 Interm Bonds 11% Vanguard 500 Index FI $1,347,271 US Large Caps 0% Vanguard Mid Cap Index EQ $832,669 US Mid Caps 5% Amer Fund Washington Mutual EQ $837,534 US Large Value 10% Target Small Cap Value EQ $623,517 US Small Value 5% American Fds New Perspc/HardnLoev Glb EQ $2,221,701 Global Equity 10% New Funds Vanguard Short Term Bond (used in EE and POL) FI Short Bonds 3% PIMCO Long Duration & Vanguard Long Term Index FI Long Bond 22% Vanguard REIT Index EQ US REITs 5% Vanguard Emerging Mkts Stock Index or ETF EQ Emerging Markets Equity 15% Vanguard Growth Index EQ US Large Growth 10% Vanguard Inflation Protected Sec FI Inflation-Indexed Bonds 2% 100% 13

Data through September 30, 2012 Vanguard Short-Term Bond Index Inv Ticker VBISX Status Open Yield 1.5% SEC Yield 0.43% Total Assets $26,100 mil Mstar Category Short-Term Bond Morningstar Analyst Rating 10-25-12 Historical Profile Investment Style Fixed Income Return Above Avg 38 38 28 33 57 72 62 65 64 Income Rtn %Rank Cat Risk Œ Rating Average Above Avg Manager Change 18.0 Partial Manager Change Morningstar Pillars 16.0 Process Positive Growth of $10,000 14.0 Performance Positive Investment Values of 12.0 Fund People Positive 10.0 Investment Values of Parent Positive BC Agg Bnd Price Positive Performance Quartile (within Category) Morningstar Analyst Rating 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 09-12 History Morningstar evaluates mutual funds based on five key pillars, which its analysts believe lead to funds that are more likely to outperform 10.19 10.32 10.28 10.14 9.92 9.89 10.13 10.28 10.42 10.55 10.61 10.68 NAV over the long term on a risk-adjusted basis. 8.88 6.10 3.37 1.70 1.31 4.09 7.22 5.43 4.28 3.92 2.96 1.82 Total Return % 0.44 -4.16 -0.73 -2.64 -1.12 -0.24 0.25 0.19 -1.65 -2.62 -4.88 -2.17 +/-BC Agg Bnd Analyst Rating Spectrum -0.15 -2.02 0.02 -0.15 -0.13 -0.13 -0.05 0.30 -0.34 -0.16 -0.18 -0.21 +/-BarCap Gt/Ct 1-5TR Œ „ ´ˇ ¨ 5.85 4.53 3.23 2.99 3.51 4.38 4.71 3.91 2.89 2.22 1.85 1.12 Income Return % 3.03 1.57 0.14 -1.29 -2.20 -0.29 2.51 1.52 1.39 1.70 1.11 0.70 Capital Return % Pillar Spectrum 3 37 21 41 59 44 3 4 85 47 13 83 Total Rtn % Rank Cat Positive § Negative ¶ Neutral 0.57 0.45 0.33 0.30 0.35 0.43 0.46 0.39 0.29 0.23 0.19 0.12 Income $ 0.07 0.02 0.06 0.01 0.00 0.00 0.00 0.00 0.00 0.05 0.06 0.00 Capital Gains $ 0.21 0.22 0.20 0.18 0.18 0.18 0.18 0.19 0.22 0.22 0.22 . Expense Ratio % Performance 09-30-12 5.45 5.63 3.17 2.97 3.50 4.32 4.58 3.79 2.78 2.15 1.81 . Income Ratio % 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total 156 139 111 92 106 106 79 101 77 60 67 Turnover Rate % . 2008 3.03 -1.08 -0.25 3.71 5.43 1,680 2,553 3,041 3,795 2,951 2,731 2,773 3,680 5,283 4,226 3,802 3,255 Net Assets $mil 2009 0.51 1.42 2.04 0.24 4.28 2010 1.13 1.81 1.57 -0.62 3.92 2011 0.09 1.52 0.92 0.41 2.96 Rating and Risk Portfolio Analysis 06-30-12 2012 0.43 0.56 0.82 . . Time Load-Adj Morningstar Morningstar Morningstar Date of Amount Value % Net Period Return % Rtn vs Cat Risk vs Cat Risk-Adj Rating Total Fixed-Income:1291 Maturity $000 $000 Assets Trailing Total +/- BC +/- BarCap %Rank Growth of 1 Yr 2.23 US Treasury Note 0.375% 07-31-13 473,840 474,356 1.87 Return% Agg Bnd Gt/Ct 1-5TR Cat $10,000 3 Yr 2.98 Avg Avg 3 Mo 0.82 -0.76 -0.07 79 10,082 US Treasury Note 2.5% 03-31-15 392,198 414,749 1.63 5 Yr 4.20 +Avg Avg 6 Mo 1.39 -2.29 -0.09 68 10,139 10 Yr 3.73 +Avg Avg US Treasury Note 2.625% 07-31-14 393,725 412,242 1.62 1 Yr 2.23 -2.93 -0.24 80 10,223 Incept 5.00 US Treasury Note 1% 03-31-17 401,590 407,301 1.60 3 Yr Avg 2.98 -3.21 -0.24 61 10,921 US Treasury Note 0.875% 12-31-16 383,541 387,077 1.52 5 Yr Avg 4.20 -2.33 -0.11 26 12,284 Other Measures Standard Index Best Fit Index US Treasury Note 1.75% 05-31-16 354,725 370,964 1.46 10 Yr Avg 3.73 -1.59 -0.12 30 14,423 BC Agg Bnd BarCap Gt/Ct 1-5TR Alpha -0.3 -0.3 US Treasury Note 0.25% 02-28-14 364,650 364,253 1.43 15 Yr Avg 4.74 -1.41 -0.22 22 20,030 US Treasury Note 2.375% 10-31-14 346,285 362,408 1.43 Beta 0.53 1.03 Tax Analysis Tax-Adj Rtn% %Rank Cat Tax-Cost Rat %Rank Cat R-Squared 77 98 US Treasury Note 0.75% 06-30-17 333,100 333,570 1.31 3 Yr (estimated) 2.23 51 0.73 35 US Treasury Note 0.25% 10-31-13 327,095 326,892 1.29 Standard Deviation 1.64 5 Yr (estimated) 3.22 23 0.94 35 Mean 2.98 US Treasury Note 0.875% 04-30-17 294,949 297,300 1.17 10 Yr (estimated) 2.57 23 1.12 44 Sharpe Ratio 1.75 US Treasury Note 0.875% 02-28-17 281,270 283,776 1.12 Potential Capital Gain Exposure: 3% of assets US Treasury Note 1.875% 04-30-14 276,005 283,725 1.12 US Treasury Note 2.125% 11-30-14 270,915 282,302 1.11 Morningstar’s Take by David Falkof 10-25-12 US Treasury Note 1.25% 10-31-15 274,925 281,754 1.11 Vanguard Short-Term Bond Index sails through stormy category norm. US Treasury Note 1% 10-31-16 269,270 273,436 1.08 weather. While the fund can provide ballast to a portfolio US Treasury Note 1.875% 02-28-14 262,020 268,736 1.06 This index fund keeps a higher credit-quality profile during turbulent markets, it’s also more sensitive to US Treasury Note 2.375% 03-31-16 251,547 268,604 1.06 than most of its short-term bond peers. The fund tracks interest-rate changes than its typical peer. The fund’s US Treasury Note 1% 09-30-16 262,830 267,020 1.05 the Barclays Capital U.S. 1-5 Year Government/Credit duration is short relative to the broader bond market, US Treasury Note 2.25% 05-31-14 253,755 262,994 1.03 Float Adjusted Index, which has three fourths of its but if interest rates rise, it could lag its short-term Sector Breakdown % of assets Current Investment Style assets in AAA rated bonds (as of Sept. 30, 2012), bond competitors. Moreover, the portfolio’s Duration US Treasury 60 Ltd Mod Ext nearly all of which is U.S. government debt. The higher-quality emphasis means it produces less Non US Government 2 Quality median short-term bond fund, meanwhile, has roughly income to offset capital losses. Government Related 14 half its assets in bonds rated AAA and only 11% of Investors comfortable with those risks, though, Corporate 21 assets in government bonds. In addition, the fund’s have a fine option here. Vanguard’s bond indexing High Med Low 1 figure provided Agency MBS Pass-Through 0 2.7-year average duration (a measure of interest-rate team is experienced and capable. Since manager Greg by fund Agency MBS ARM 0 sensitivity) is longer than the category norm of 1.9 Davis took the helm in 2005, the fund’s returns have Avg Eff Duration1 2.7 Yrs Agency MBS CMO 0 years. stayed within 0.15% of its benchmark’s during every Avg Eff Maturity 2.8 Yrs Non-Agency Residential MBS 0 As a result of that higher-quality, longer-duration rolling one-month period through September 2012. Avg Credit Quality AA Commercial MBS 0 Avg Wtd Coupon 2.28% Asset-Backed 0 portfolio, the fund has delivered strong performance in Moreover, the fund’s rock-bottom 0.11% fee means Avg Wtd Price 103.83% of par risk-averse market environments. During 2008’s credit shareholders get to keep more of what the fund earns. Municipal 0 Coupon Range % of Bonds Rel Cat crisis, for instance, investors flocked to high-quality Those advantages make this a solid option for Cash & Equivalents 3 0% PIK 0.0 0.0 assets, which helped this fund gain 5.5%, topping all short-term high-quality bond exposure. 0% to 6% 96.3 1.1 Other 0 but two of its competitors. And amid 2011’s market 6% to 8% 2.9 0.4 8% to 10% 0.6 0.3 Composition - Net volatility, the fund gained 3.1%, nearly doubling the Cash 2.7 Bonds 97.3 More than 10% 0.3 0.5 Address: PO Box 2600 Minimum Purchase: $3000 Add: $100 IRA: $3000 Stocks 0.0 Other 0.0 1.00=Category Average Valley Forge, PA 19482 Min Auto Inv Plan: $0 Add: $50 800-662-7447 Sales Fees: No-load Credit Analysis % bonds 06-30-12 Special Securities Web Address: www.vanguard.com Management Fee: 0.19% AAA 74 BB 0 Restricted/Illiquid Secs Trace Inception: 03-01-94 Actual Fees: Mgt:0.18% Dist: . AA 6 B 0 Exotic Mortgage-Backed 0 Advisor: Vanguard Group, Inc. Expense Projections: 3Yr:$71 5Yr:$124 10Yr:$280 A 12 Below B 0 Emerging-Markets Secs 1 Subadvisor: None Income Distribution: Monthly BBB 8 NR/NA 0 Options/Futures/Warrants No NTF Plans: Vanguard NTF 14 correct, complete or © 2012 Morningstar, Inc. All rights reserved. The information herein is not represented or warranted to be accurate, Mutual Funds FI timely. Past performance is no guarantee of future results. Access updated reports at mfb.morningstar.com. To order reprints, call 312-696-6100.

Data through September 30, 2012 PIMCO Long Duration Total Return Instl Ticker PLRIX Status Open Yield 3.5% SEC Yield 3.27% Total Assets $5,750 mil Mstar Category Long-Term Bond Morningstar Analyst Rating 04-10-12 Historical Profile Investment Style Fixed Income Return Above Avg 51 71 61 29 54 62 Income Rtn %Rank Cat Risk „ Rating Average Above Avg Manager Change 18.0 Partial Manager Change Morningstar Pillars 16.0 Process Positive Growth of $10,000 14.0 Performance Positive Investment Values of 12.0 Fund People Positive 10.0 Investment Values of Parent ¶ Neutral BC Agg Bnd Price Positive Performance Quartile (within Category) Morningstar Analyst Rating 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 09-12 History Morningstar evaluates mutual funds based on five key pillars, which its analysts believe lead to funds that are more likely to outperform . . . . . 10.09 10.32 10.92 10.62 10.85 11.79 12.59 NAV over the long term on a risk-adjusted basis. . . . . . . 7.83 12.38 5.62 11.64 18.57 9.80 Total Return % . . . . . . 0.86 7.14 -0.31 5.10 10.73 5.81 +/-BC Agg Bnd Analyst Rating Spectrum . . . . . . 1.23 3.94 3.70 1.48 -3.92 1.50 +/-BC Govt/Cred Long Œ „ ´ˇ ¨ . . . . . . 5.15 4.82 5.21 5.97 4.77 2.92 Income Return % . . . . . . 2.68 7.56 0.41 5.67 13.80 6.88 Capital Return % Pillar Spectrum . . . . . . 19 5 71 35 20 62 Total Rtn % Rank Cat Positive § Negative ¶ Neutral . . . . . 0.17 0.51 0.49 0.55 0.62 0.51 0.34 Income $ . . . . . 0.00 0.02 0.13 0.34 0.37 0.51 0.00 Capital Gains $ . . . . . . 0.50 0.50 0.50 0.50 0.50 0.50 Expense Ratio % Performance 09-30-12 . . . . . . 4.99 4.85 5.02 5.02 4.71 4.33 Income Ratio % 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total 330 314 398 364 240 219 Turnover Rate % . . . . . . 2008 3.02 -1.99 -4.13 16.10 12.38 3 446 1,677 3,708 4,603 5,757 5,723 Net Assets $mil . . . . . 2009 -5.92 4.54 9.65 -2.07 5.62 2010 2.36 7.60 7.11 -5.36 11.64 2011 0.23 3.68 11.23 2.58 18.57 Rating and Risk Portfolio Analysis 06-30-12 2012 -1.18 7.59 3.27 . . Time Load-Adj Morningstar Morningstar Morningstar Date of Amount Value % Net Period Return % Rtn vs Cat Risk vs Cat Risk-Adj Rating Total Fixed-Income:684 Maturity $000 $000 Assets Trailing Total +/- BC +/- BC %Rank Growth of 1 Yr 12.63 US Treasury Bond 4.375% 05-15-41 259,800 347,036 5.95 Return% Agg Bnd Govt/Cred Long Cat $10,000 3 Yr 12.49 +Avg +Avg 3 Mo 3.27 1.69 0.17 70 10,327 PIMCO Short-Term Floatin 11-01-12 30,731 307,926 5.28 5 Yr 12.68 +Avg Avg 6 Mo 11.11 7.43 0.46 17 11,111 10 Yr US Treasury Bond 6.25% 08-15-23 153,050 222,329 3.81 . . . . 1 Yr 12.63 7.47 1.55 59 11,263 Incept 11.21 US Treasury Bond 4.25% 11-15-40 155,550 203,503 3.49 3 Yr Avg 12.49 6.30 0.02 37 14,234 Resolution Fdg Fed Bk Pr 10-15-19 134,700 121,660 2.09 5 Yr Avg 12.68 6.15 1.78 12 18,165 Other Measures Standard Index Best Fit Index FNMA 6.625% 11-15-30 78,200 119,003 2.04 10 Yr Avg BC Agg Bnd BC Govt/Cred Long . . . . . U S Treas Bd Stripped Pr 11-15-39 225,300 102,953 1.77 15 Yr Avg Alpha -3.4 1.2 . . . . . Resolution Fdg Fed Bk Pr 04-15-30 156,402 96,154 1.65 Beta 2.58 0.90 Tax Analysis Tax-Adj Rtn% %Rank Cat Tax-Cost Rat %Rank Cat R-Squared 75 93 US Treasury Bond 4.5% 05-15-38 67,700 91,585 1.57 3 Yr (estimated) 9.58 41 2.58 87 Resolution Fdg Fed Bk Pr 01-15-30 144,300 89,524 1.54 Standard Deviation 8.05 5 Yr (estimated) 10.07 12 2.32 67 Mean 12.49 AID 5.5% 04-26-24 64,825 85,340 1.46 10 Yr (estimated) . . . . Sharpe Ratio 1.50 FNMA 06-01-17 80,650 76,546 1.31 Potential Capital Gain Exposure: 17% of assets Tennessee Valley Auth 7. 05-01-30 45,000 69,778 1.20 Quebec Prov Medium Term 12-01-43 62,600 69,733 1.20 Morningstar’s Take by Eric Jacobson 04-10-12 U S Treas Sec Stripped I 05-15-37 141,100 68,954 1.18 If you can’t take the heat, you don’t belong in PIMCO But the other side of that coin looks better when US Treasury Bond 3.125% 11-15-41 63,500 68,272 1.17 Long Duration Total Return’s kitchen. yields are falling, as they did over the summer in 2011. US Treasury Bond 8% 11-15-21 40,855 64,142 1.10 The fund’s most recent bout of warmth came in this A firmwide PIMCO decision had been in place to US Treasury Bond 5.25% 02-15-29 42,560 60,043 1.03 year’s first quarter. Amid diminished fears of European shorten the durations of the firm’s funds, but this one US Treasury Bond 4.625% 02-15-40 40,700 56,306 0.97 crisis contagion and mildly positive economic still had plenty of rate-sensitivity ammo to ride the FNMA 5.625% 07-15-37 38,970 55,884 0.96 indicators, U.S. Treasuries sold off, with the 10-year rally. Its 18.6% gain for 2011 placed it in the Sector Breakdown % of assets Current Investment Style note’s yield rising some 48 basis points from the end of category’s best quartile. Duration US Treasury 24 Ltd Mod Ext January to April 3. That’s been enough movement to The fund does look to add value in other ways, Non US Government 3 Quality knock this fund down by more than 3% over the same including with bets outside of its Treasury and Government Related 16 stretch, among the hardest hits taken by any fund in corporate bond focus. Of late it has held 9% in Corporate 34 the long-term bond category. non-U.S. bonds and 8% in municipals, for example, High Med Low 1 figure provided Agency MBS Pass-Through 2 The root of that outcome is the fund’s interest-rate and combined with an overall trend of falling yields, by fund Agency MBS ARM 0 sensitive profile. The fund has--and uses--the flexibility that has worked well over the long haul. The fund has Avg Eff Duration1 13.9 Yrs Agency MBS CMO 1 to manage its duration with a wide berth, but it’s beaten its benchmark handily over the trailing five Avg Eff Maturity 22.1 Yrs Non-Agency Residential MBS 3 benchmarked off of the Barclays Long-Term years through Dec. 31, turning in an 11.7% average Avg Credit Quality . Commercial MBS 1 Avg Wtd Coupon 5.85% Asset-Backed 1 Government/Credit index, which excludes mortgages. annual gain versus 9.7% for the index. But while it Avg Wtd Price 116.61% of par They tend to carry modest durations and are virtually may make sense for investors looking to balance out Municipal 7 Coupon Range % of Bonds Rel Cat absent in the fund, as well. So while it hasn’t always an otherwise short portfolio, or needing a portfolio of Cash & Equivalents 9 0% PIK 13.2 2.9 been so, the portfolio’s duration of late has been this type for other reasons, the fund’s basic 0% to 6% 50.4 1.0 Other 0 running among the longest in the category (13.9 years construction otherwise makes it appropriate for only 6% to 8% 31.7 1.0 8% to 10% 4.1 0.4 Composition - Net as of February 2012). the most risk-tolerant investors. Cash -6.4 Bonds 105.7 More than 10% 0.7 0.3 Address: PIMCO Funds Minimum Purchase: $1000000 Add: $0 IRA: $0 Stocks 0.0 Other 0.7 1.00=Category Average Stamford, CT 06902 Min Auto Inv Plan: $0 Add: . 888-877-4626 Sales Fees: No-load Credit Analysis % bonds 06-30-12 Special Securities Web Address: www.pimco-funds.com Management Fee: 0.25%, 0.25%A AAA . BB . Restricted/Illiquid Secs 10 Inception: 08-31-06 Actual Fees: Mgt:0.50% Dist: . AA . B . Exotic Mortgage-Backed 0 Advisor: Pacific Investment Management Co LLC Expense Projections: 3Yr:$160 5Yr:$280 10Yr:$628 A . Below B . Emerging-Markets Secs 4 Subadvisor: None Income Distribution: Monthly BBB NR/NA Options/Futures/Warrants No . . NTF Plans: N/A © 2012 Morningstar, Inc. All rights reserved. The information herein is not represented or warranted to be accurate, correct, 15 complete or Mutual Funds FI timely. Past performance is no guarantee of future results. Access updated reports at mfb.morningstar.com. To order reprints, call 312-696-6100.

Data through September 30, 2012 Vanguard Long-Term Bond Index Inv Ticker VBLTX Status Open Yield 3.9% SEC Yield 3.44% Total Assets $5,911 mil Mstar Category Long-Term Bond Governance and Management Historical Profile Investment Style Fixed Income Return Average Stewardship Grade: A 33 36 31 35 45 63 54 46 56 Income Rtn %Rank Cat Risk Average Rating Portfolio Manager(s) Neutral Manager Change Ken Volpert had been a manager of this fund since 1994, and in Partial Manager Change 22.6 2008, Greg Davis was named comanager. Volpert is no longer 19.0 Growth of $10,000 listed as a manager but still leads Vanguard’s taxable-bond group. Davis’ team runs Vanguard’s fixed-income index funds, 16.0 Investment Values of including Short-Term Bond Index VBISX and Total Bond Market 13.0 Fund Index VBMFX. 10.0 Investment Values of BC Agg Bnd Performance Quartile (within Category) Strategy 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 09-12 History The fund strives to match the performance of the Barclays Capital 10.83 11.67 11.50 11.82 11.84 11.53 11.65 11.98 11.56 12.04 13.91 14.60 NAV US Long Government/Credit Index, which includes 8.17 14.35 5.50 8.40 5.32 2.67 6.59 8.64 1.76 10.27 22.05 8.33 Total Return % investment-grade U.S. Treasury, government-agency, and -0.27 4.09 1.40 4.06 2.89 -1.66 -0.38 3.40 -4.17 3.73 14.21 4.34 +/-BC Agg Bnd corporate bonds. Mortgage-backed securities are not included in 0.89 -0.46 -0.37 -0.16 -0.01 -0.04 -0.01 0.20 -0.16 0.11 -0.44 0.03 +/-BC Govt/Cred Long the index. While management assembles a portfolio that resembles key traits of the index, such as duration (a measure of 6.60 6.25 5.50 5.50 5.20 5.22 5.45 5.44 5.21 5.27 4.99 3.12 Income Return % interest-rate sensitivity) and cash flow, the fund does not hold 1.57 8.10 0.00 2.90 0.12 -2.55 1.14 3.20 -3.45 5.00 17.06 5.21 Capital Return % every security in the index. 30 1 62 22 6 92 32 12 93 72 4 74 Total Rtn % Rank Cat 0.68 0.66 0.63 0.62 0.60 0.60 0.61 0.62 0.61 0.59 0.59 0.43 Income $ 0.00 0.00 0.17 0.00 0.00 0.00 0.00 0.00 0.00 0.10 0.12 0.02 Capital Gains $ 0.21 0.21 0.20 0.18 0.18 0.18 0.18 0.19 0.22 0.22 0.22 . Expense Ratio % Performance 09-30-12 6.30 5.92 5.34 5.34 5.03 5.30 5.34 5.49 5.33 4.87 4.62 . Income Ratio % 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total 107 141 76 62 52 55 62 67 69 54 45 Turnover Rate % . 2008 1.23 -1.52 -3.60 13.03 8.64 542 794 951 1,310 1,893 1,898 2,277 2,518 2,049 2,250 2,727 2,908 Net Assets $mil 2009 -6.16 2.85 8.59 -2.91 1.76 2010 1.54 8.84 5.54 -5.46 10.27 2011 -0.36 3.35 16.01 2.17 22.05 Rating and Risk Portfolio Analysis 06-30-12 2012 -2.29 7.55 3.09 . . Time Load-Adj Morningstar Morningstar Morningstar Date of Amount Value % Net Period Return % Rtn vs Cat Risk vs Cat Risk-Adj Rating Total Fixed-Income:1198 Maturity $000 $000 Assets Trailing Total +/- BC +/- BC %Rank Growth of 1 Yr 10.69 US Treasury Bond 4.375% 11-15-39 152,745 196,946 4.31 Return% Agg Bnd Govt/Cred Long Cat $10,000 3 Yr 12.28 Avg High 3 Mo 3.09 1.51 -0.01 75 10,309 US Treasury Bond 4.5% 08-15-39 127,336 167,189 3.66 5 Yr 10.89 +Avg Avg 6 Mo 10.87 7.19 0.22 25 11,087 10 Yr 8.01 Avg Avg US Treasury Bond 4.25% 11-15-40 131,115 166,331 3.64 1 Yr 10.69 5.53 -0.39 70 11,069 Incept 8.38 US Treasury Bond 4.25% 05-15-39 111,528 140,821 3.08 3 Yr Avg 12.28 6.09 -0.19 43 14,155 US Treasury Bond 4.75% 02-15-41 98,985 135,733 2.97 5 Yr Avg 10.89 4.36 -0.01 35 16,767 Other Measures Standard Index Best Fit Index US Treasury Bond 4.375% 05-15-41 87,320 113,175 2.47 10 Yr Avg 8.01 2.69 -0.10 47 21,609 BC Agg Bnd BC Govt/Cred Long Alpha -4.7 -0.6 US Treasury Bond 6.25% 08-15-23 76,215 108,845 2.38 15 Yr Avg 8.38 2.23 0.00 12 33,438 US Treasury Bond 4.375% 05-15-40 81,283 104,931 2.29 Beta 2.78 1.04 Tax Analysis Tax-Adj Rtn% %Rank Cat Tax-Cost Rat %Rank Cat R-Squared 69 99 US Treasury Bond 4.625% 02-15-40 75,576 101,284 2.21 3 Yr (estimated) 10.37 33 1.70 25 US Treasury Bond 7.125% 02-15-23 63,665 96,214 2.10 Standard Deviation 9.06 5 Yr (estimated) 8.92 27 1.77 30 Mean 12.28 US Treasury Bond 4.5% 05-15-38 64,435 84,199 1.84 10 Yr (estimated) 6.03 41 1.84 24 Sharpe Ratio 1.32 US Treasury Bond 6.875% 08-15-25 52,425 80,513 1.76 Potential Capital Gain Exposure: 19% of assets US Treasury Bond 5.25% 11-15-28 55,110 75,337 1.65 US Treasury Bond 3.875% 08-15-40 61,365 73,130 1.60 Morningstar’s Take by David Falkof 10-12-11 US Treasury Bond 6.125% 08-15-29 45,140 67,858 1.48 Vanguard Long-Term Bond Index’s recent strong considerable pain in both absolute and relative terms. US Treasury Bond 4.375% 02-15-38 49,523 63,459 1.39 performance underscores its significant risks. The fund’s higher-quality bias also could cause it to US Treasury Bond 6.75% 08-15-26 26,905 41,383 0.90 After delivering an impressive 10.3% gain in 2010, lag other long-term bond funds in a rising-rate US Treasury Bond 7.5% 11-15-24 22,090 35,202 0.77 this index fund returned a remarkable 17.4% year to environment because higher-quality bonds produce CMT Market Liquidity Rat 23,086 23,086 0.50 date through Oct. 7, 2011. During both years, fears less income to offset capital losses. General Elec Cap Corp Mt 03-15-32 18,975 21,531 0.47 about the eurozone’s sovereign debt crisis and slowing The fund’s extreme sensitivity to bond yield Sector Breakdown % of assets Current Investment Style global growth pushed Treasury yields lower, movements means it’s only suitable for long-term Duration US Treasury 41 Ltd Mod Ext turbo-charging this fund’s performance. That flight to investors and institutions looking to match long-dated Non US Government 4 Quality quality has helped this fund in two ways. For one, it liabilities. Within that framework, though, it does its Government Related 3 holds 41% of its assets in Treasuries, more than any job well. Manager Greg Davis has a strong record of Corporate 45 other long-term bond fund (most invest predominantly tracking this fund’s benchmark and has produced High Med Low 1 figure provided Agency MBS Pass-Through 0 in corporate bonds). In addition, the fund’s 13.9-year similarly capable results at his other bond index fund by fund Agency MBS ARM 0 duration (a measure of interest-rate sensitivity) is one charges. Moreover, the fund’s 0.22% expense ratio Avg Eff Duration1 14.6 Yrs Agency MBS CMO 0 of the category’s highest, allowing it to profit more makes it the category’s cheapest option for no-load Avg Eff Maturity 24.2 Yrs Non-Agency Residential MBS 0 from falling yields. investors. Thus, the fund works well for those who can Avg Credit Quality A Commercial MBS 0 Avg Wtd Coupon 5.69% Asset-Backed 0 Those same characteristics that have helped lately, withstand the acute volatility of a long-term bond Avg Wtd Price 128.71% of par however, also pose significant risks to the fund. fund. Municipal 6 Coupon Range % of Bonds Rel Cat Treasury yields have dropped to all-time lows; in Cash & Equivalents 0 0% PIK 0.1 0.0 August, the yield on the 10-year note fell below 2% for 0% to 6% 56.1 1.1 Other 0 the first time since the 1950s. When yields eventually 6% to 8% 39.7 1.2 8% to 10% 3.7 0.4 Composition - Net rise, the fund’s lengthy duration could cause Cash 0.5 Bonds 99.4 More than 10% 0.5 0.2 Address: PO Box 2600 Minimum Purchase: $3000 Add: $100 IRA: $3000 Stocks 0.0 Other 0.1 1.00=Category Average Valley Forge, PA 19482 Min Auto Inv Plan: $0 Add: $50 800-662-7447 Sales Fees: No-load Credit Analysis % bonds 06-30-12 Special Securities Web Address: www.vanguard.com Management Fee: 0.19% AAA 46 BB 0 Restricted/Illiquid Secs 1 Inception: 03-01-94 Actual Fees: Mgt:0.19% Dist: . AA 7 B 0 Exotic Mortgage-Backed 0 Advisor: Vanguard Group, Inc. Expense Projections: 3Yr:$71 5Yr:$124 10Yr:$280 A 23 Below B 0 Emerging-Markets Secs 4 Subadvisor: None Income Distribution: Monthly BBB 24 NR/NA 0 Options/Futures/Warrants No NTF Plans: Vanguard NTF 16 correct, complete or © 2012 Morningstar, Inc. All rights reserved. The information herein is not represented or warranted to be accurate, Mutual Funds FI timely. Past performance is no guarantee of future results. Access updated reports at mfb.morningstar.com. To order reprints, call 312-696-6100.

Data through September 30, 2012 Vanguard REIT Index Inv Ticker VGSIX Status Open Yield 3.2% Total Assets $28,072 mil Mstar Category Real Estate Morningstar Analyst Rating 06-29-12 Historical Profile Investment Style Equity Return Average 98% 97% 98% 98% 98% 100% 99% 100% 99% Stock % Risk „ Rating Average Neutral Manager Change 32.0 Partial Manager Change Morningstar Pillars 27.0 20.0 Growth of $10,000 Process Positive 15.0 Investment Values of Performance ¶ Neutral Fund 10.0 Investment Values of People Positive MSCI World Parent Positive 6.0 Price Positive Performance Quartile (within Category) Morningstar Analyst Rating 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 09-12 History Morningstar evaluates mutual funds based on five key pillars, which its analysts believe lead to funds that are more likely to outperform 12.13 11.84 15.18 18.79 19.80 25.58 20.45 12.13 14.84 18.38 19.25 21.58 NAV over the long term on a risk-adjusted basis. 12.35 3.75 35.65 30.76 11.89 35.07 -16.46 -37.05 29.58 28.30 8.47 14.72 Total Return % 29.17 23.64 2.54 16.04 2.40 15.00 -25.50 3.66 -0.41 16.54 14.01 1.71 +/-MSCI World Analyst Rating Spectrum 0.00 0.17 -0.53 -2.40 -1.93 -0.90 1.09 2.15 1.12 0.23 -0.90 0.25 +/-DJ Real Est Œ „ ´ˇ ¨ 7.19 6.40 6.74 6.40 5.11 4.82 2.69 2.84 5.41 4.12 3.60 2.57 Income Return % 5.16 -2.65 28.91 24.36 6.78 30.25 -19.15 -39.89 24.17 24.18 4.87 12.15 Capital Return % Pillar Spectrum 20 54 58 68 56 46 51 31 50 32 43 38 Total Rtn % Rank Cat Positive § Negative ¶ Neutral 0.81 0.76 0.78 0.95 0.94 0.94 0.68 0.57 0.64 0.60 0.65 0.49 Income $ 0.00 0.00 0.00 0.00 0.22 0.12 0.33 0.41 0.00 0.00 0.00 0.00 Capital Gains $ 0.33 0.28 0.27 0.24 0.21 0.21 0.21 0.20 0.21 0.26 0.26 0.24 Expense Ratio % Performance 09-30-12 5.73 4.35 4.90 4.10 3.44 2.91 2.27 2.52 3.36 3.94 2.22 2.30 Income Ratio % 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total 21 10 12 7 13 17 11 13 10 16 12 10 Turnover Rate % 2008 2.13 -5.39 5.35 -38.16 -37.05 1,230 1,784 3,051 4,663 4,407 6,066 4,137 2,732 3,763 2,585 2,444 2,625 Net Assets $mil 2009 -32.08 30.03 34.54 9.05 29.58 2010 10.02 -4.01 13.10 7.42 28.30 2011 6.50 3.51 -14.59 15.20 8.47 Rating and Risk Portfolio Analysis 06-30-12 2012 10.71 3.70 -0.07 . . Time Load-Adj Morningstar Morningstar Morningstar Share change since 03-12 Total Stocks:111 Sector PE Tot Ret% % Assets Period Return % Rtn vs Cat Risk vs Cat Risk-Adj Rating Simon Property Group Inc Real Est 30.0 20.06 10.99 Trailing Total +/- MSCI +/- DJ %Rank Growth of 1 Yr 32.16 Return% World Real Est Cat $10,000 Public Storage Real Est 44.4 5.96 4.98 3 Yr 20.30 Avg Avg Equity Residential Real Est 2.65 4.44 3 Mo -0.07 -6.78 0.31 56 9,993 5 Yr 2.55 +Avg +Avg . Ventas Inc Real Est 47.0 16.29 4.32 6 Mo 3.62 2.32 0.26 42 10,362 10 Yr 11.31 Avg Avg HCP Inc Real Est 30.7 10.98 4.29 1 Yr 32.16 10.57 0.10 36 13,216 Incept 10.75 Boston Properties Inc Real Est 46.3 12.71 3.81 3 Yr Avg 20.30 12.82 -0.22 30 17,410 Other Measures Standard Index Best Fit Index Prologis Inc Real Est 138.9 25.46 3.62 5 Yr Avg 2.55 4.70 0.95 26 11,342 Vornado Realty Trust Real Est 50.5 8.14 3.32 10 Yr Avg 11.31 3.27 0.03 42 29,197 MSCI World DJ Real Est AvalonBay Communities In Real Est 59.5 6.36 3.19 15 Yr Avg 8.70 4.84 -0.24 48 34,950 Alpha 12.4 0.1 Health Care REIT, Inc. Real Est 86.2 9.96 2.91 Beta 0.92 0.99 R-Squared 68 100 Host Hotels & Resorts In Real Est . 10.09 2.65 Tax Analysis Tax-Adj Rtn% %Rank Cat Tax-Cost Rat %Rank Cat Digital Realty Trust, In Real Est 49.8 8.05 2.14 3 Yr (estimated) 18.83 43 1.22 89 Standard Deviation 19.06 Macerich Company Real Est 34.5 16.36 1.85 5 Yr (estimated) 1.14 26 1.37 55 Mean 20.30 Kimco Realty Corp Real Est 58.5 27.16 1.84 10 Yr (estimated) 9.57 41 1.56 53 Sharpe Ratio 1.06 General Growth Propertie Real Est . 34.88 1.81 Potential Capital Gain Exposure: 17% of assets SL Green Realty Corporat Real Est 55.9 21.28 1.64 UDR Inc Real Est . 1.49 1.61 Morningstar’s Take by Rob Wherry 06-29-12 Federal Realty Investmen Real Est 58.5 18.36 1.57 Realty Income Corporatio Real Est 44.4 20.75 1.32 Low fees and a decent record give this fund plenty of of assets are invested in its top 10 holdings. Almost 50 Essex Property Trust Real Est 72.5 7.85 1.27 appeal. funds in the category are more concentrated, though, Vanguard REIT ranks among the cheapest options and this offering’s 115 holdings doubles the tally of Current Investment Style Industry % of Rel Value Blnd Growth Market Cap % Weightings Stocks Cat for diversified real estate exposure. This index fund’s the average actively managed real estate fund. It also Large Mid Small Giant Retail 0.0 13.9 1.2 0.24% annual expense ratio is the third lowest in avoids some of the sector’s more tangential areas, Large Residential 48.0 14.1 1.1 Morningstar’s real estate category, placing behind including timber REITs, real estate operating Mid Industrial 36.5 0.7 0.7 offerings from Fidelity and DFA. (Expenses fall 14 basis companies, and service firms. Instead, it tilts more Small Healthcare 12.9 15.2 1.1 points for Vanguard’s Admiral share class.) Investors toward the real estate industry’s higher quality Micro Office 2.7 11.6 1.0 have found that cost structure attractive. With $24 companies like mall operator Simon Property Group Avg $mil: Diversified 4.6 0.9 billion in assets, the fund is the largest in the category. SPG. 8,155 Hotel/Motel 1.8 1.2 The next biggest is just one fifth its size. The fund has an admirable performance record. A Mgmt & Dev 0.0 0.0 Value Measures Rel Category Other 38.0 0.9 The fund tracks an index that encompasses a wide high R-squared underscores its close correlation with Price/Earnings 42.62 1.07 spectrum of real estate firms. The MSCI U.S. REIT the index, and its long-term performance has been Price/Book 2.17 1.01 Composition - Net benchmark consists of 100-plus securities that focus on relatively in line with that bogy, minus fees. When Price/Sales 6.07 1.10 Cash 0.6 apartments, malls, office buildings, and long-term care lesser-quality REITs surge, investors should expect Price/Cash Flow 16.73 1.03 Stocks 99.4 centers, among other types of properties. The fund this fund to lag. Top-rated actively managed funds Dividend Yield % 3.45 1.01 Bonds 0.0 does a solid job tracking its bogy. Its valuation profile, have easily beaten it over long periods of time, too. Other 0.0 Growth Measures % Rel Category average market cap, and yield closely mirror the MSCI This offering has surpassed the category average over Foreign 0.0 Long-Term Erngs 5.82 0.90 (% of Stock) Index’s. That said, the fund does deviate from category the past decade, though, and it remains a compelling Book Value 1.68 0.95 peers in some regards. Granted, like most real estate option for investors seeking reliable, low-cost real Sales -5.06 NMF offerings, this fund is top-heavy. Slightly less than 50% estate exposure. Cash Flow -35.34 NMF Historical Erngs 14.23 1.02 Address: Po Box 2600 Minimum Purchase: $3000 Add: $100 IRA: $0 Valley Forge, PA 19482 Min Auto Inv Plan: $0 Add: $100 Profitability % Rel Category 800-662-7447 Sales Fees: No-load Web Address: www.vanguard.com Management Fee: 0.21% Return on Equity 7.69 0.99 Inception: 05-13-96 Actual Fees: Mgt:0.21% Dist: . Return on Assets 2.68 1.03 Advisor: Vanguard Group, Inc. Expense Projections: 3Yr:$77 5Yr:$135 10Yr:$306 Net Margin 19.00 1.03 Subadvisor: None Income Distribution: Quarterly NTF Plans: Vanguard NTF 17 correct, complete or © 2012 Morningstar, Inc. All rights reserved. The information herein is not represented or warranted to be accurate, Mutual Funds EQ timely. Past performance is no guarantee of future results. Access updated reports at mfb.morningstar.com. To order reprints, call 312-696-6100.

Data through September 30, 2012 Vanguard Emerging Mkts Stock Idx Ticker VEIEX Status Open Yield 3.2% Total Assets $71,720 mil Mstar Category Diversified Emerging Mkts Morningstar Analyst Rating 11-15-11 Historical Profile Investment Style Equity Return Average 94% 93% 93% 94% 94% 97% 97% 95% 99% Stock % Risk „ Rating Average Neutral Manager Change 40.8 Partial Manager Change Morningstar Pillars 33.8 24.0 Growth of $10,000 Process Positive 17.0 Investment Values of Performance ¶ Neutral Fund Investment Values of People ¶ Neutral 10.0 MSCI EAFE Parent Positive Price Positive Performance Quartile (within Category) Morningstar Analyst Rating 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 09-12 History Morningstar evaluates mutual funds based on five key pillars, which its analysts believe lead to funds that are more likely to outperform 8.37 7.63 11.85 14.68 19.07 24.27 33.12 14.90 25.90 30.34 24.11 26.47 NAV over the long term on a risk-adjusted basis. -2.88 -7.43 57.65 26.12 32.05 29.39 38.90 -52.81 75.98 18.86 -18.78 11.08 Total Return % 18.56 8.51 19.06 5.87 18.51 3.05 27.73 -9.43 44.20 11.11 -6.64 1.00 +/-MSCI EAFE Analyst Rating Spectrum -0.26 -1.26 1.83 0.57 -1.95 -2.75 -0.52 0.52 -2.53 -0.02 -0.36 -0.90 +/-MSCI Emg Mkt Œ „ ´ˇ ¨ 2.38 1.46 2.25 2.19 2.15 2.08 2.42 2.11 2.11 1.68 1.74 1.30 Income Return % -5.26 -8.89 55.40 23.93 29.90 27.31 36.48 -54.92 73.87 17.18 -20.52 9.78 Capital Return % Pillar Spectrum 41 62 30 29 52 72 37 38 36 44 41 54 Total Rtn % Rank Cat Positive § Negative ¶ Neutral 0.21 0.12 0.17 0.26 0.32 0.40 0.59 0.70 0.31 0.43 0.53 0.31 Income $ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Capital Gains $ 0.57 0.57 0.53 0.48 0.45 0.42 0.37 0.32 0.40 0.35 0.33 . Expense Ratio % Performance 09-30-12 1.67 1.67 2.26 2.44 2.48 2.20 2.24 2.81 2.16 1.97 2.25 . Income Ratio % 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total 23 65 16 11 15 26 9 20 12 12 10 Turnover Rate % . 2008 -10.48 -1.35 -25.98 -27.82 -52.81 801 896 1,873 3,140 6,018 8,109 13,313 5,143 7,765 3,218 2,279 2,355 Net Assets $mil 2009 0.07 34.14 21.15 8.22 75.98 2010 2.47 -9.12 18.74 7.49 18.86 2011 1.78 -0.97 -23.97 5.99 -18.78 Rating and Risk Portfolio Analysis 06-30-12 2012 13.94 -8.41 6.45 . . Time Load-Adj Morningstar Morningstar Morningstar Share change since 03-12 Total Stocks:872 Sector Country % Assets Period Return % Rtn vs Cat Risk vs Cat Risk-Adj Rating Samsung Electronics Co L Technology Korea 2.35 Trailing Total +/- MSCI +/- MSCI %Rank Growth of 1 Yr 17.74 China Mobile Ltd. Comm Svs China 1.95 Return% EAFE Emg Mkt Cat $10,000 3 Yr 5.09 Avg Avg America Movil, S.A.B. de Comm Svs Mexico 1.51 3 Mo 6.45 -0.47 -1.29 64 10,645 5 Yr -1.73 Avg Avg China Construction Bank Finan Svs China 1.47 6 Mo -2.50 -1.80 -0.66 55 9,750 10 Yr 16.58 Avg Avg Gazprom OAO ADR Energy Russia 1.30 1 Yr 17.74 3.99 0.81 37 11,774 Incept 7.60 Taiwan Semiconductor Man Technology Taiwan 1.27 3 Yr Avg 5.09 2.97 -0.54 52 11,606 Samsung Electronics Co L Technology Korea 1.13 5 Yr Avg -1.73 3.51 -0.45 40 9,164 Other Measures Standard Index Best Fit Index Industrial And Commercia Finan Svs China 1.07 10 Yr Avg 16.58 8.38 -0.42 33 46,370 MSCI EAFE MSCI Emg Mkt CNOOC, Ltd. Energy China 1.06 15 Yr Avg 7.51 4.14 36 29,630 Alpha 3.3 -0.5 Hyundai Motor Co Ltd Cnsmr Cyc Korea 0.93 . Beta 1.03 1.01 Tencent Holdings Ltd. Technology China 0.89 Tax Analysis Tax-Adj Rtn% %Rank Cat Tax-Cost Rat %Rank Cat R-Squared 81 98 Mtn Group Limited Comm Svs South Africa 0.87 3 Yr (estimated) 4.60 45 0.46 57 Standard Deviation 22.35 Bank Of China Ltd.(Dup) Finan Svs China 0.85 5 Yr (estimated) -2.28 32 0.57 17 Mean 5.09 Vale SA ADR Basic Mat Brazil 0.84 10 Yr (estimated) 16.35 18 0.20 5 Sharpe Ratio 0.33 PetroChina Co Ltd H Shar Energy China 0.81 Potential Capital Gain Exposure: 2% of assets Hon Hai Precision Ind. C Technology Taiwan 0.79 LUKOIL Oil Company JSC A Energy Russia 0.78 Morningstar’s Take by Gregg Wolper 11-15-11 Petroleo Brasileiro SA P Energy Brazil 0.72 Taiwan Semiconductor Man Technology Taiwan 0.70 In one sense, shareholders of Vanguard Emerging Matching the index as closely as possible is this Itau Unibanco Holding SA Finan Svs Brazil 0.69 Markets Stock Index have reason to be disappointed fund’s mission, so shareholders can’t complain if it this year, but in another way, they can be satisfied that achieves that aim. Moreover, it has come close to Current Investment Style Sector % of Rel MSCI 3 Year they’re getting what they wanted. mirroring its benchmark over the long term as well, Market Cap % Weightings Stocks EAFE High Low Value Blnd Growth This fund has plunged 23.6% for the year to date although that is tougher to measure because to adjust Giant 48.0 h Cyclical 46.02 . Large Mid Small through Sept. 23, 2011. The trouble has been spread for limited liquidity in some places, Vanguard used a Large 39.8 r BasicMat 12.59 . 16 13 widely across markets. Of the biggest emerging customized MSCI benchmark until 2006 rather than Mid 12.0 t CnsmrCyc 8.35 . 9 7 markets, China (top-ranked in this fund, with 17.3% of the standard MSCI Emerging Markets Index it now Small 0.2 y FinanSvs 23.16 . 24 22 assets at the end of August) has been held back by uses. Micro 0.0 u Real Est 1.92 . 2 2 fears of slowing growth and rising inflation, while This fund, therefore, has merit. Moreover, its Avg $mil: j Sensitive 41.71 . Brazil (second at 15.2%) has investors concerned about Admiral shares and exchange-traded fund shares are 18,201 i CommSrvs 8.18 . 9 7 that country’s new government as well as a potential very cheap, with expense ratios of 0.22% each. Its Value Measures Rel Category o Energy 11.41 . 14 11 decline in exports if China does slow down. Other slightly more costly Investor shares, at 0.35%, are also Price/Earnings 10.56 0.98 p Industrl 7.57 . 8 7 prominent emerging markets such as India and Russia far less expensive than actively managed alternatives Price/Book 1.41 0.89 a Technlgy 14.55 . 15 12 also have fared poorly this year. Smaller ones, notably as well as prominent rival ETFs. (The Admiral shares Price/Sales 0.86 0.89 Defensive12.28 k . Thailand and Indonesia, have held up better, but play have a $10,000 minimum, while the Investor shares’ Price/Cash Flow 4.47 0.81 s CnsmrDef 7.93 . 8 5 Dividend Yield % 2.98 0.96 far lesser roles in this portfolio. minimum is $3,000.) If emerging markets return to d Hlthcare 0.97 . 3 1 While this year’s decline isn’t pleasant for favor, this fund should reliably deliver their gains. But Growth Measures % Rel Category f Utilities 3.38 . 4 3 shareholders, the fund is meeting its goal. Its 23.6% it will provide no cushion when things go sour. Long-Term Erngs 12.15 0.92 loss is exactly the same as the decline in its Book Value 11.81 1.19 benchmark, the MSCI Emerging Markets Index. Sales -4.42 NMF Regional Exposure % Stock Cash Flow 3.86 0.56 UK/W. Europe 0 N. America 0 Address: PO Box 2600 Minimum Purchase: $3000 Add: $100 IRA: $0 Historical Erngs 10.09 0.21 Japan 0 Latn America 21 Valley Forge, PA 19482 Min Auto Inv Plan: $0 Add: . Asia X Japan 60 Other 19 800-662-7447 Sales Fees: No-load Web Address: www.vanguard.com Management Fee: 0.23% Composition - Net Inception: 05-04-94 Actual Fees: Mgt:0.23% Dist: . Cash 0.0 Bonds 0.0 Country Exposure % Stock Advisor: Vanguard Group, Inc. Expense Projections: 3Yr:$106 5Yr:$185 10Yr:$418 Stocks 98.6 Other 1.4 China 18 Taiwan 11 Subadvisor: None Income Distribution: Annually South Korea 15 South Africa 8 NTF Plans: Vanguard NTF Foreign (% of Stock) 99.7 Brazil 13 18 correct, complete or © 2012 Morningstar, Inc. All rights reserved. The information herein is not represented or warranted to be accurate, Mutual Funds EQ timely. Past performance is no guarantee of future results. Access updated reports at mfb.morningstar.com. To order reprints, call 312-696-6100.

Data through September 30, 2012 Vanguard Growth Index I Ticker VIGIX Status Open Yield 1.2% Total Assets $27,106 mil Mstar Category Large Growth Governance and Management Historical Profile Investment Style Equity Return Above Avg Stewardship Grade: A 100% 99% 100% 100% 100% 100% 100% 100% 100% Stock % Risk Average Rating Portfolio Manager(s) Above Avg Manager Change Gerard O’Reilly has been in control of this fund since 2005 but Partial Manager Change 12.0 has been with Vanguard since 1992. He also manages Vanguard Growth of $10,000 REIT Index VGSIX and Vanguard Total Stock Market 10.0 Index VTSMX. Investment Values of Fund 8.0 Investment Values of S&P 500 6.0 Performance Quartile (within Category) Strategy 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 09-12 History Since 2003, this fund has tracked the MSCI U.S. Prime Market 26.42 19.95 24.92 26.41 27.54 29.77 33.23 20.30 27.32 31.60 31.79 37.26 NAV Growth Index. This index represents growth stocks contained in -12.85 -23.58 26.09 7.34 5.24 9.16 12.73 -38.19 36.50 17.17 1.89 18.31 Total Return % the MSCI U.S. Prime Market 750 Index (which contains the 750 -0.96 -1.48 -2.59 -3.54 0.33 -6.63 7.24 -1.19 10.04 2.11 -0.22 1.87 +/-S&P 500 largest companies by free-float market capitalization in the 7.57 4.30 -3.66 1.04 -0.02 0.09 0.92 0.25 -0.71 0.46 -0.75 1.51 +/-Russ 1000Gr United States). MSCI defines style (growth versus value) using an eight-factor model that includes measures ranging from dividend 0.72 0.96 1.04 1.32 0.92 1.01 1.07 0.92 1.63 1.37 1.27 1.07 Income Return % yield to long-term historical sales per share. MSCI also employs -13.57 -24.54 25.05 6.02 4.32 8.15 11.66 -39.11 34.87 15.80 0.62 17.24 Capital Return % buffer zones to limit the migration of stocks between the growth 14 24 58 52 59 30 51 31 39 33 14 23 Total Rtn % Rank Cat and value camps, which should help keep the fund’s portfolio 0.22 0.25 0.21 0.33 0.24 0.28 0.32 0.31 0.33 0.37 0.40 0.34 Income $ turnover low. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Capital Gains $ 0.10 0.10 0.10 0.08 0.08 0.08 0.07 0.07 0.08 0.08 0.08 . Expense Ratio % Performance 09-30-12 0.80 1.10 0.92 1.29 0.89 1.00 0.98 1.09 1.40 1.31 1.26 . Income Ratio % 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total 31 23 44 24 23 28 23 27 29 26 23 Turnover Rate % . 2008 -9.96 2.38 -12.00 -23.81 -38.19 921 675 782 1,185 1,448 2,132 3,210 2,016 2,913 3,934 4,726 6,304 Net Assets $mil 2009 -4.19 15.59 14.19 7.94 36.50 2010 4.90 -12.12 13.41 12.08 17.17 2011 5.01 0.92 -13.34 10.95 1.89 Rating and Risk Portfolio Analysis 06-30-12 2012 15.23 -3.85 6.79 . . Time Load-Adj Morningstar Morningstar Morningstar Share change since 03-12 Total Stocks:411 Sector PE Tot Ret% % Assets Period Return % Rtn vs Cat Risk vs Cat Risk-Adj Rating Apple, Inc. Technology 15.7 65.37 8.22 Trailing Total +/- +/- Russ %Rank Growth of 1 Yr 31.26 Return% S&P 500 1000Gr Cat $10,000 International Business M Technology 15.1 14.15 3.25 3 Yr 15.10 High Avg Coca-Cola Co Cnsmr Def 20.1 10.60 2.40 3 Mo 6.79 0.44 0.68 31 10,679 5 Yr 3.57 +Avg Avg Philip Morris Internatio Cnsmr Def 17.8 17.65 2.27 6 Mo 2.67 -0.76 0.83 13 10,267 10 Yr 8.38 +Avg -Avg Microsoft Corporation Technology 14.9 16.95 2.27 1 Yr 31.26 1.06 2.07 14 13,126 Incept 3.70 Google, Inc. Class A Technology 22.3 16.81 2.26 3 Yr Avg 15.10 1.90 0.37 10 15,248 Other Measures Standard Index Best Fit Index Wal-Mart Stores Inc Cnsmr Def 15.5 25.49 1.98 5 Yr Avg 3.57 2.52 0.33 11 11,917 Oracle Corporation Technology 15.6 23.35 1.80 10 Yr Avg 8.38 0.37 -0.03 30 22,361 S&P 500 Russ 1000Gr Qualcomm, Inc. Technology 21.1 15.90 1.42 15 Yr Avg Alpha 1.1 -0.1 Cisco Systems Inc Technology 12.8 6.83 1.40 . . . . . Beta 1.05 1.03 R-Squared 97 100 McDonald’s Corporation Cnsmr Cyc 17.2 -6.46 1.36 Tax Analysis Tax-Adj Rtn% %Rank Cat Tax-Cost Rat %Rank Cat Schlumberger NV Energy 18.0 7.50 1.31 3 Yr (estimated) 14.87 9 0.19 72 Standard Deviation 16.62 Amazon.com Inc Cnsmr Cyc . 46.92 1.26 5 Yr (estimated) 3.37 9 0.19 46 Mean 15.10 Home Depot, Inc. Cnsmr Cyc 21.7 45.67 1.23 10 Yr (estimated) 8.17 28 0.20 56 Sharpe Ratio 0.92 Comcast Corp Class A Comm Svs 20.6 52.13 1.13 Potential Capital Gain Exposure: 23% of assets Visa, Inc. Finan Svs 96.2 33.12 0.98 UnitedHealth Group Inc Hlth care 11.3 10.49 0.92 Morningstar’s Take by David Falkof 10-05-11 American Express Co Finan Svs 13.2 21.77 0.92 3M Co Industrl 15.1 15.25 0.89 Vanguard Growth Index is a sound low-cost option. domestic banks have sold off. However, that Amgen Inc Hlth care 18.4 32.95 0.87 This index fund tracks the MSCI U.S. Prime Market performance trend could reverse if financials rally. Growth Index, which holds the more-expensively Generally, the fund’s marketlike portfolio makes it Current Investment Style Sector % of Rel 3 Year Value Blnd Growth Market Cap % Weightings Stocks S&P 500 High Low valued and higher-growth stocks among the 750 unlikely to have standout returns in any short time Large Mid Small Giant 42.8 h Cyclical 25.49 0.89 largest domestic companies. Unlike most other period. Over the long haul, though, its low fees have Large 38.6 r BasicMat 3.42 1.12 5 3 indexes, this one allows companies to remain in the helped it deliver modestly above-average results. The Mid 18.3 index for additional time if their size or growth fund charges a rock-bottom expense ratio of 0.12%, 1 t CnsmrCyc15.39 1.79 15 11 Small 0.3 y FinanSvs 4.68 0.30 7 4 characteristics change. This feature reduces the percentage point less than the typical large-growth Micro 0.0 u Real Est 2.00 1.37 2 1 amount of trading required by the fund, leading to fund. As a result, the fund’s 4.5% annualized gain Avg $mil: improved tax efficiency for investors. since it changed its benchmark in May 2003 through j Sensitive 51.95 1.19 45,050 The fund invests broadly across more than 400 Oct. 4 tops 60% of its large-growth competitors. i CommSrvs 3.54 0.88 4 2 Value Measures Rel Category holdings, meaning no individual security will drive During that time, manager Gerard O’Reilly has closely o Energy 6.00 0.56 10 6 Price/Earnings 15.62 0.95 p Industrl 13.23 1.16 14 10 performance, but its focus on growth leads to some tracked the index’s performance, keeping the fund’s Price/Book 3.24 1.11 a Technlgy 29.18 1.66 32 26 sector biases relative to the broader market. returns after fees within 0.14 percentage points of its Price/Sales 1.57 0.92 Historically, technology companies have traded at benchmark’s for every 12-month period. Price/Cash Flow 9.54 1.04 k Defensive22.55 0.82 higher premiums than value-oriented companies like All told, this index fund is a solid option for Dividend Yield % 1.29 0.99 s CnsmrDef12.47 1.03 15 12 d Hlthcare 9.98 0.84 14 9 financials. As a result, the portfolio holds 25% of investors seeking broad exposure to large-cap growth Growth Measures % Rel Category f Utilities 0.10 0.03 0 0 assets in technology and 4% in financials, stocks. Long-Term Erngs 13.48 1.00 compared with the S&P 500’s 17% and 13% respective Book Value 9.06 0.92 allocations. So far in 2011, the fund’s light financials Sales 8.87 0.96 Composition - Net stake has helped it outpace the broad market as Cash Flow 16.39 0.99 Cash 0.3 Historical Erngs 17.09 0.93 Stocks 99.6 Address: Vanguard Index Funds Minimum Purchase: $5000000 Add: $100 IRA: $0 Bonds 0.0 Valley Forge, PA 19482 Min Auto Inv Plan: $0 Add: . Profitability % Rel Category Other 0.1 800-662-7447 Sales Fees: No-load Web Address: www.vanguard.com Management Fee: 0.05% Return on Equity 28.68 1.19 Foreign 1.1 Inception: 05-14-98 Actual Fees: Mgt:0.05% Dist: . Return on Assets 12.37 1.08 (% of Stock) Advisor: Vanguard Group, Inc. Expense Projections: 3Yr:$26 5Yr:$45 10Yr:$103 Net Margin 15.70 1.02 Subadvisor: None Income Distribution: Quarterly NTF Plans: N/A 19 correct, complete or © 2012 Morningstar, Inc. All rights reserved. The information herein is not represented or warranted to be accurate, Mutual Funds EQ timely. Past performance is no guarantee of future results. Access updated reports at mfb.morningstar.com. To order reprints, call 312-696-6100.

Data through September 30, 2012 Vanguard Inflation-Protected Secs Inv Ticker VIPSX Status Open Yield 2.3% SEC Yield -1.11% Total Assets $44,277 mil Mstar Category Inflation-Protected Bond Morningstar Analyst Rating 11-15-11 Historical Profile Investment Style Fixed Income Return Above Avg 4 19 42 17 49 34 21 7 64 Income Rtn %Rank Cat Risk Œ Rating Average Above Avg Manager Change Partial Manager Change Morningstar Pillars 20.5 17.5 Growth of $10,000 Process Positive 15.0 Performance Positive Investment Values of 12.5 Fund People Positive 10.0 Investment Values of Parent Positive BC Agg Bnd Price Positive Performance Quartile (within Category) Morningstar Analyst Rating 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 09-12 History Morningstar evaluates mutual funds based on five key pillars, which its analysts believe lead to funds that are more likely to outperform 10.62 11.84 12.21 12.57 12.16 11.78 12.45 11.52 12.55 13.00 14.11 14.85 NAV over the long term on a risk-adjusted basis. 7.61 16.61 8.00 8.27 2.59 0.43 11.59 -2.85 10.80 6.17 13.24 6.17 Total Return % -0.83 6.35 3.90 3.93 0.16 -3.90 4.62 -8.09 4.87 -0.37 5.40 2.18 +/-BC Agg Bnd Analyst Rating Spectrum -0.29 0.04 -0.40 -0.19 -0.25 0.02 -0.05 -0.50 -0.61 -0.14 -0.32 -0.08 +/-BC US Tr US TIPS Œ „ ´ˇ ¨ 4.37 4.39 3.85 4.70 5.53 3.54 5.60 5.01 1.86 2.55 4.43 0.91 Income Return % 3.24 12.22 4.15 3.57 -2.94 -3.11 5.99 -7.86 8.94 3.62 8.81 5.26 Capital Return % Pillar Spectrum 58 14 30 22 22 21 10 57 35 37 10 25 Total Rtn % Rank Cat Positive § Negative ¶ Neutral 0.45 0.46 0.45 0.57 0.68 0.43 0.65 0.61 0.21 0.32 0.57 0.13 Income $ 0.07 0.06 0.12 0.07 0.05 0.00 0.00 0.00 0.00 0.00 0.02 0.00 Capital Gains $ 0.25 0.25 0.22 0.18 0.17 0.20 0.20 0.20 0.25 0.22 0.20 . Expense Ratio % Performance 09-30-12 6.38 3.92 4.55 3.46 4.83 4.83 3.87 5.02 2.00 2.48 4.21 . Income Ratio % 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total 122 75 108 63 73 47 21 28 14 29 28 Turnover Rate % . 2008 5.31 -0.14 -3.88 -3.89 -2.85 772 2,988 4,746 7,182 6,332 5,440 6,662 8,593 12,946 12,979 15,220 16,269 Net Assets $mil 2009 5.25 0.25 3.05 1.91 10.80 2010 0.36 3.90 2.57 -0.74 6.17 2011 1.85 3.40 4.84 2.56 13.24 Rating and Risk Portfolio Analysis 06-30-12 2012 0.68 3.24 2.14 . . Time Load-Adj Morningstar Morningstar Morningstar Date of Amount Value % Net Period Return % Rtn vs Cat Risk vs Cat Risk-Adj Rating Total Fixed-Income:33 Maturity $000 $000 Assets Trailing Total +/- BC +/- BC %Rank Growth of 1 Yr 8.89 US Treasury Note 04-15-16 2,144,000 2,327,050 5.47 Return% Agg BndUS Tr US TIPS Cat $10,000 3 Yr 9.16 +Avg +Avg 3 Mo 2.14 0.56 0.02 33 10,214 US Treasury Note 0.125% 01-15-22 2,044,900 2,201,889 5.18 5 Yr 7.61 +Avg Avg 6 Mo 5.45 1.77 0.11 20 10,545 10 Yr 6.39 +Avg Avg US Treasury Note 1.125% 01-15-21 1,770,000 2,144,141 5.04 1 Yr 8.89 3.73 -0.21 24 10,889 Incept 7.61 US Treasury Note 07-15-21 1,833,000 2,086,129 4.91 3 Yr Avg 9.16 2.97 -0.13 18 13,007 US Treasury Note 2% 01-15-14 1,564,100 2,022,516 4.76 5 Yr Avg 7.61 1.08 -0.32 30 14,430 Other Measures Standard Index Best Fit Index US Treasury Bond 3.875% 04-15-29 864,200 1,956,047 4.60 10 Yr Avg 6.39 1.07 -0.25 39 18,578 BC Agg Bnd BC US Tr US TIPS Alpha 1.2 -0.1 US Treasury Bond 2.375% 01-15-25 1,213,770 1,952,657 4.59 15 Yr Avg . . . . . US Treasury Note 1.25% 07-15-20 1,236,100 1,515,624 3.56 Beta 1.28 1.00 Tax Analysis Tax-Adj Rtn% %Rank Cat Tax-Cost Rat %Rank Cat R-Squared 51 99 US Treasury Bond 3.625% 04-15-28 683,890 1,501,875 3.53 3 Yr (estimated) 8.00 13 1.06 53 US Treasury Bond 2% 01-15-26 966,698 1,430,929 3.36 Standard Deviation 4.84 5 Yr (estimated) 6.49 14 1.04 28 Mean 9.16 US Treasury Note 0.5% 04-15-15 1,228,600 1,354,754 3.19 10 Yr (estimated) 4.92 11 1.38 37 Sharpe Ratio 1.82 US Treasury Bond 02-15-41 887,500 1,332,841 3.13 Potential Capital Gain Exposure: 16% of assets US Treasury Bond 2.375% 01-15-27 857,389 1,313,565 3.09 US Treasury Note 1.375% 01-15-20 1,022,000 1,265,297 2.98 Morningstar’s Take by David Falkof 11-15-11 US Treasury Note 1.875% 07-15-19 923,750 1,191,711 2.80 A manager change at Vanguard Inflation-Protected He and Wright-Casparius don’t plan to change that US Treasury Note 1.25% 04-15-14 1,027,000 1,152,832 2.71 Securities’ should be smoother than TIPS’ bumpy ride. strait-laced style. The fund’s low expense ratio also US Treasury Bond 2.5% 01-15-29 770,200 1,146,520 2.70 In mid-August 2011, Vanguard hired Gemma means they don’t need to get fancy for the fund to US Treasury Note 1.375% 07-15-18 936,500 1,141,467 2.68 Wright-Casparius to replace this fund’s longtime compete. US Treasury Note 1.625% 01-15-15 847,215 1,085,162 2.55 comanager Ken Volpert, who remains at the firm as The combination of low fees and a no-frills US Treasury Bond 1.75% 01-15-28 787,125 1,083,985 2.55 head of Vanguard’s taxable fixed-income group. approach has delivered consistently good results over Sector Breakdown % of assets Current Investment Style Wright-Casparius joins John Hollyer, who has the long run. Since the fund’s 2000 inception it has Duration US Treasury 0 Ltd Mod Ext comanaged the fund with Volpert since its June 2000 outpaced its typical peer during 87% of rolling Non US Treasury 0 Quality inception. In her previous role, Wright-Casparius ran a three-year periods. Still, there are risks to consider. US Treasury Inflation-Protected100 global inflation-linked bond portfolio for Singapore’s TIPS have had a great run recently, fueling this fund’s Non US Inflation-Protected 0 sovereign wealth fund, although she has no public 10.2% gain for the year to date through Aug. 29. That High Med Low 1 figure provided Government Related 0 track record. strong performance has come as investors seeking by fund Corporate 0 These changes aren’t terribly concerning. Volpert safety pushed TIPS’ real yields to historic lows, even Avg Eff Duration1 8.6 Yrs Agency MBS 0 remains at the firm overseeing the team that manages negative for maturities under 10 years. Although TIPS Avg Eff Maturity 9.6 Yrs Non-Agency Residential MBS 0 this fund, and Hollyer has expertly run the fund for offer protection against rising inflation, they can suffer Avg Credit Quality AAA Commercial MBS 0 Avg Wtd Coupon 1.68% Asset-Backed 0 years with the same straightforward approach. Unlike losses when real yields rise, as they did in late Avg Wtd Price 135.67% of par some inflation-protected bond peers who augment 2010. The fund is a solid option for long-term TIPS Covered Bond 0 Coupon Range % of Bonds Rel Cat their Treasury Inflation-Protected Securities holdings exposure, but investors should brace for some Municipal 0 0% PIK 0.0 0.0 with tactical moves in and out of other bond sectors, volatility. 0% to 6% 100.0 1.0 Hollyer sticks with TIPS, making small shifts along their 6% to 8% 0.0 0.0 maturity spectrum depending on where he finds value. 8% to 10% 0.0 0.0 Composition - Net More than 10% 0.0 0.0 Cash 0.1 Bonds 99.9 Address: PO Box 2600 Minimum Purchase: $3000 Add: $100 IRA: $3000 Stocks 0.0 Other 0.0 1.00=Category Average Valley Forge, PA 19482 Min Auto Inv Plan: $0 Add: . 800-662-7447 Sales Fees: No-load Credit Analysis % bonds 06-30-12 Special Securities Web Address: www.vanguard.com Management Fee: 0.17% AAA 100 BB 0 Restricted/Illiquid Secs 0 Inception: 06-29-00 Actual Fees: Mgt:0.17% Dist: . AA 0 B 0 Exotic Mortgage-Backed . Advisor: Vanguard Group, Inc. Expense Projections: 3Yr:$64 5Yr:$113 10Yr:$255 A 0 Below B 0 Emerging-Markets Secs 0 Subadvisor: None Income Distribution: Quarterly BBB 0 NR/NA 0 Options/Futures/Warrants No NTF Plans: Vanguard NTF 20 correct, complete or © 2012 Morningstar, Inc. All rights reserved. The information herein is not represented or warranted to be accurate, Mutual Funds FI timely. Past performance is no guarantee of future results. Access updated reports at mfb.morningstar.com. To order reprints, call 312-696-6100.

AMENDMENT I TO THE INVESTMENT POLICY STATEMENT FOR CITY OF DOVER OPEB BOARD The following amendment to the investment policy has been reviewed and approved by the Board: I. Allocation of Plan Assets – The plan will utilize a dynamic policy linked to funded status of the plan. As funded status improves to the next threshold, the allocation of the plan will be adjusted to the specified allocation. Within each threshold, there will be a range of +/- 5% to the target to allow for modest market fluctuations before rebalancing of the portfolio. The portfolio will be reviewed at least quarterly and adjusted as necessary to maintain alignment with the target allocations. Dynamic Investment Policy Funded Status Asset Category 40% 70% 80% 85% 90% 95% 100% Cash & Short Term Bond 5% 5% 5% 5% 5% 5% 5% US Treasuries/Inflation‐linked 2% 3% 4% 6% 7% 8% 10% Intermediate Term Bond 11% 11% 12% 12% 13% 16% 18% Long Term Bond 22% 24% 26% 28% 30% 36% 42% Large Cap Value – US Stock 10% 10% 9% 9% 8% 7% 4% Large Cap Growth – US Stock 10% 9% 9% 8% 8% 5% 4% Mid Cap – US Stock 5% 5% 5% 5% 5% 4% 3% Small Cap – US Stock 5% 5% 4% 3% 3% 3% 3% Real Estate/REIT 5% 5% 4% 4% 3% 3% 3% Non‐US Stock 10% 9% 9% 8% 7% 6% 3% Emerging Markets 15% 14% 13% 12% 11% 7% 5% Equity 60% 57% 53% 49% 45% 35% 25% Fixed Income/Cash 40% 43% 47% 51% 55% 65% 75% II. Performance Monitoring Benchmarks – The plan will utilize asset category specific benchmarks to monitor investment manager performance. In addition, overall portfolio performance will be benchmarked to a normal portfolio composed of category indexes allocated based on the Dynamic Investment Policy funded status position. Asset Category Index Cash & Money Market CitiGroup 3 Month TBill Short‐term Bond BofA Merrill Lynch 1‐3 Yr Corp Index Intermediate‐term Bond BarCap Interm US Govt/Credit Index Long‐term Bond BarCap Long GovtCredit Index Large Cap Value S&P/Citi 500 Value Large Cap Blend S&P 500 Index Large Cap Growth S&P/Citi 500 Growth Mid Cap Value S&P/Citi Mid‐Cap 400 Value Mid Cap S&P 400 Mid Cap Mid Cap Growth S&P/Citi Mid‐Cap 400 Growth Small Cap Value S&P/Citi Small Cap 600 Value Small Cap S&P 600 Small Cap Small Cap Growth S&P/Citi Small Cap 600 Growth Non‐US Stock MSCI EAFE Non‐US Small Cap Stock MSCI EAFE Small Cap Emerging Markets MSCI EM (Emerging Markets) REITS/Real Estate FTSE NAREIT Equity REIT 21

AMENDMENT I TO THE INVESTMENT POLICY STATEMENT FOR CITY OF DOVER OPEB BOARD III. Approval by the Board – To indicate approval of this amendment to the Investment Policy Statement, the appropriate designated Board member shall sign below. This Amendment to the Statement of Investment Policy approved by action of the Board. Date: Approved by: Chairman Title: 22

The analysis in this report was prepared utilizing data from third parties and other sources including but not limited to internal computer software and databases, including among others mpiStylus Pro©,, software designed by Markov Processes International. Reasonable care has been taken to assure the accuracy of the data contained herein, and comments are objectively stated and are based on facts gathered in good faith. These reports do not constitute investment advice with respect to the sale or disposition of individual securities. Milliman disclaims responsibility, financial or otherwise, for the accuracy or completeness of this report. This Milliman work product was prepared solely for the internal business use of our clients. Milliman's work may not be provided to third parties without Milliman's prior written consent. Milliman does not intend to benefit any third party recipient of its work product, even if Milliman consents to the release of its work product to such third party. Past performance is no guarantee of future results. Unless explicitly stated in your Service Agreement, there should be no reliance on Milliman services to provide analysis or reporting on a daily basis, the changes to manager rankings, ratings or opinions thereon. Unless explicitly stated in your Service Agreement, Milliman services are not intended to monitor investment manager compliance with individual security selection criteria, limits on security selection, and/or prohibitions to the holding of certain securities or security types. Milliman provides a copy of its SEC Form ADV Part II to clients without charge upon request. 23Cities Worldwide Offices in Principal