concordia university, nebraska & concordia foundation,...

Concordia University, Nebraska & Concordia Foundation, Inc.December 31, 2012

Exceeding Your Expectations

500 West Madison Street, Suite 1700 | Chicago, IL 60661 | 312.853.1000

Quarterly ConsiderationsQ yPlan SponsorsSave More ‐ 401(k) plan contribution limits rise to $17,500 in 2013. For participants age 50 and older, catch‐up contributions rise to $5,500. Approximately 5 percent of the 60+ million 401(k) plan participants maximize contributions.

Save Less? ‐ The tax deferral advantage for retirement savings will get plenty of attention in tax‐reform talks. 2013’s fiscal budget proposed budget estimates that during the g g g p y g p p g gnext five years alone, retirement tax deductions add up to $419 billion in lost tax revenue. We’ll keep you informed of developments.

Roth & Roll ‐ As part of the fiscal cliff deal, new legislation permits any amounts in 401(k), 403(b) and 457 plans to be converted to Roth. Conversions are taxed at today’s rates, but allow for tax‐free distributions under the Roth provision. The plan must permit Roth deferral contributions and conversions. Let us assist you in analyzing a Roth feature.

Positively Funded Status ‐ Rising equity markets and falling liabilities combined to improve the funded status of the typical U.S. corporate pension plan in 2012. The funded

Non-Profit Organizationsstatus rose 1% to 76.3%, according to BNY Mellon.

Foreign Impact ‐ 2012 fiscal returns were much lower than returns for fiscal 2011 for endowments of all sizes. Playing into weaker returns were poor relative results from international equities. As of June 30th, the average equity allocation, including domestic, international and emerging markets, was 26.8%.

More Forgiving ‐ The IRS updated its voluntary program to allow for corrections that were previously limited or made unavailable due to a number of 403(b) plan operational and

Th W lth Offi ™

More Forgiving ‐ The IRS updated its voluntary program to allow for corrections that were previously limited or made unavailable due to a number of 403(b) plan operational and documentation errors. This update is important because, now, employers who missed the written plan document deadline of December 31st, 2009, can correct the problem with the IRS’s blessing.

Charitable Reach ‐ Foundation investments have a much wider reach than the support they provide to specific causes, according to a recent study by the Philanthropic Collaborative. For instance, there are approximately 1 million jobs created over the span of a year after grants trickle throughout the economy.

The Wealth Office™Step Back from the Ledge ‐ Less than 12‐hours into 2013, Congress passed the American Taxpayer Relief Act of 2012 which averted the so‐called ‘fiscal cliff’, at least for now. Subsequently, many are trying to understand the Act’s impact on their individual situations. To that end, Nick Breit, a Senior Consultant in The Wealth OfficeTM, recently authored a summary of the Act’s main provisions. Please contact The Wealth OfficeTM to obtain a copy of the publication which is also available in the Research & Resource Center on the DiMeo Schneider website.

Give ‘Til it Hurts ‐ A provision in The American Taxpayer Relief Act of 2012 extended the qualified charitable distribution [QCD] provisions for 2012 and 2013. Provided certain timing restrictions are met, an IRA owner can treat a contribution made to a qualified charity in January 2013 as a 2012 QCD. Additionally, a QCD made in January 2013 that is treated as a 2012 QCD can satisfy an IRA owners 2012 required minimum distribution provided the amount equals or exceeds the 2012 RMD amount. Please contact The Wealth OfficeTM if you’re interested in learning more about this opportunity.

Song Remains the Same: While the potential for further change exists, the tax‐exempt status of municipal bond income was not altered as part of the American Taxpayer Relief Act of 2012. After flows turned negative in December of last year, municipal bond investors cheered this news and resumed pouring assets into municipal bond mutual funds. The Wealth OfficeTM can help you understand how changes with respect to the tax‐exempt status of muni bond income might affect your fixed income assets.

2

Market Snapshot

28.9%30%

35%

Fixed Income Equities Alternatives

15.8%16.8% 16.0%

18.1% 17.9% 18.6%

15%

20%

25%

30%

0.7%

-0.2%

0.2%

-1.0%

3.3% 4.1%

-0.4%

2.6%

6.0% 6.6%5.6%

1.3% 1.3%

7.3%

3.0%4.2% 4.1%

-1.1%

4.8%6.2%

4.8%

5%

0%

5%

10%

-6.3%-3.4%

-10%

-5%

Barclays TIPS

Barclays Muni Bond 5

Year

Barclays Aggregate

Barclays Global

Aggregate ex. US

Unhedged

Barclays U.S.

Corporate High Yield

JPMorgan GBI-EM Global

Diversified Unhedged

S&P 500 NAREIT All Equity

S&P Developed

World Property

MSCI EAFE MSCI EM DJ UBS Commodity

Index

HFRI Fund of Funds

Composite

HFRI Weighted

Composite

Alerian MLP Index

Source: Bloomberg Key: Left bars: Quarter returnRight bars: Trailing 1 year return

• The presidential election, pending negotiations on the ‘fiscal cliff’, and tepid economic growth weighed on domestic stock buyers in the fourth quarter. The S&P 500 Index fell 0.4%.

D ti t i t k t t t i t ti l d i it k t A i E• Domestic returns were in stark contrast to international and emerging equity markets. Asian, European, and most Latin American stock indices rose on renewed optimism about economic growth in China.

• Alternatives were mixed. Real assets represented by the DJ UBS Commodity Index and the AlerianMLP Index retreated 6.3% and 3.4%, respectively, in the fourth quarter as regulatory concerns and p y q g ysupply impacted the markets.

3

U.S. Economy

• U.S. GDP increased at an annual quarter-over-quarter rate of 3.1% for the prior quarter. Positive

6%

U.S. Real GDP Growth (Seasonally Adjusted - YoY % Change)

contributions came from exports, private inventory investment, personal consumption expenditures (PCE), federal government spending, and residential fixed investment. These were partly offset by negative contributions from nonresidential fixed investment

2.6%

-2%

0%

2%

4%

contributions from nonresidential fixed investment.

• The fourth quarter 2012 GDP advance estimate is due out on January 30th, 2013. -6%

-4%

2%

Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12

• Current inflation measures such as the CPI have thus far remained relatively steady despite

Real GDP Growth % YoY

Sources: Bloomberg & Bureau of Economic Analysis

5%

6%

U.S. Inflation (YoY % Change)

y y punprecedented changes in U.S. monetary policy.

• The Fed announced a new monthly bond-buying initiative of $45 billion in long-term U.S. Treasuries adding to its ongoing monthly

1.7%1.9%

0%

1%

2%

3%

4%

%

Treasuries, adding to its ongoing monthly mortgage-backed securities purchases of $40 billion. Additionally, the Fed provided thresholds for unemployment (6.5%) and inflation (2.5%) that will steer its interest rate setting policy.

-2%

-1%

0%


CPI CPI CoreSources: Bloomberg & The Bureau of Labor StatisticsSources: Bloomberg & The Bureau of Labor Statistics

4

U.S. Economy

• The index of leading economic indicators (LEI) declined 0.2% in November after a 0.3% gain in October and a 0 4% increase in September The November pull back to10%

15%

U.S. Leading Economic Indicators(YoY % Change)

0.4% increase in September. The November pull back to a 1.8% year-over-year gain pointed to an increasing risk of a slowdown in the U.S. economy in early 2013 as companies rein in investment amid the ongoing fiscal debate and as global growth slows.

2.7%

-15%

-10%

-5%

0%

5%

10%

• Gains in the residential construction (building permits) component of the LEI were offset by weak manufacturing new orders, consumer expectations and labor market indicators.

-25%

-20%


Sources: Bloomberg & The Conference Board

• The U.S. Census Bureau reported that construction on new homes fell 3% in November to a seasonally adjusted annual rate of 861,000. Despite the decline, housing starts have gained sharply from l l b t till ll b l b bbl

U.S. Private Housing Starts(Seasonally Adjusted - YoY % Change)

levels one year ago, but are still well below a bubble peak of over 2 million in 2006.

• Meanwhile, home prices recorded a 3.6% gain in the prior quarter according to the S&P/Case-Shiller

30.3%

0%

20%

40%

Index. Spurred by record low mortgage rates and an improving labor market, this is the largest jump in prices since the second quarter of 2010. Home prices, which remain approximately 30% below 2006 levels, still face challenges from strict lending

-60%

-40%

-20%

Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-122006 levels, still face challenges from strict lending conditions and shadow inventory. Source: Bloomberg & U.S. Census Bureau

5

International Economies

15%

Global Real GDP & Inflation Rates (YoY)September 30, 2012As of:

2.6%

0 0% 0.9%0 0%

1.3% 0.5%

7.4%

0.9%

2.9%

5.3%

2.0%2.6% 2.2% 2.0% 1.9%

3.4% 3.4%

0.9% 1.9%

5.3%6.6%

9.1%

5%

10%

-0.6%

0.0% 0.0%

-2.4% -1.6%

-7.2%

0.9%

-0.4% -0.3%

10%

-5%

0%

• Europe officially entered recession for the second time since 2009. GDP in the 17-nation Eurozone declined in both the 2Q and 3Q as strength in G t i h d b t ti l h i th i

-10%U.S. Eurozone U.K. Germany France Italy Spain Greece Switzerland Japan China Brazil Russia India

Source: Bloomberg Key: Flagged bars: YoY Real GDP growthBlue bars: YoY CPI change

U S 107% Greece 171%Gross Debt / GDP

Germany was outweighed by contractions elsewhere in the region.

• Japan’s economy is also technically in recession after GDP declined at a negative annual quarter-over-quarter rate in the 2Q and 3Q. This is the country’s fifth recession in 15 years. The Bank of Japan is widely expected

U.S. 107% Greece 171%Eurozone 94% Switzerland 47%U.K. 89% Japan 237%Germany 83% China 22%France 90% Brazil 64%

to raise its inflation target from 1% to 2% in a bid to fight deflation. This has resulted in a sharp decline in the value of the yen.

• In the emerging markets, China GDP slowed in the 3Q to 7.4%, slightly below the government’s 7 5% target In India inflation fell sharply from

Italy 126% Russia 11%Spain 91% India 68%

Data as of: 12/31/2012below the government s 7.5% target. In India, inflation fell sharply from September levels to 7.5% in December as the pace of food prices eased. Source: IMF

6

Global Fixed Income

9 7% 9 8%

15.8%16.8%

12%

14%

16%

18%Fixed Income Sector Returns

0 1%

0.7%

0 2%

0.2%

0 2%

0.2%1.2% 1.1%

3.3%

1.3%

4.1%

2.0%

7.3%

3.0%4.2%

2.6%3.7%

9.7% 9.8%

6.5%

4.1%

0%

2%

4%

6%

8%

10%

• Investor appetite for yield remained plentiful during the fourth quarter, with investment grade corporates and

-0.1% -0.2% -0.2%-1.0%-2%

U.S. Treasuries U.S. TIPS U.S. Muni 5 Year Barclays U.S. Agg

U.S. MBS U.S. ABS U.S. CMBS U.S. Corporates U.S. High Yield Barclays Global Agg ex. U.S.

Hedged

Barclays Global Agg ex. U.S. Unhedged

JPMorgan GBI-EM Global Diversified Unhedged

QTR 1 YearSource: Bloomberg & Barclays

q , g phigh yield outperforming treasuries and most securitized sectors.

• As sentiment improved somewhat in continental Europe, fixed income investors were attracted to wider spreads

12.3%

5 6%10%

15%Barclays Global Aggregate Regional Returns

fixed income investors were attracted to wider spreads in European bonds as a result of the macro E.U. concerns that remain.

• Due to the yen’s considerable deprecation relative to the

0.2%

4.4%

-1.1%

4.2%

7 0%

5.6%

-5%

0%

5%

U.S. dollar, Asian denominated bonds declined significantly for U.S. investors.

• Emerging markets debt was a strong performer as economic fundamentals associated with modest debt

-8.6%-7.0%

-10%Barclays U.S. Agg Barclays Euro Agg Barclays AsianPac Agg Barclays Canadian Agg

QTR 1 YearSource: Bloomberg & Barclays

positions continue to be attractive for emerging nations.

7

U.S. Fixed Income• The yield curve steepened modestly during the quarter

after the Fed announced a new commitment to purchase an additional $45 billion per month of nominal treasuries.

4%

U.S. Yield Curve

$ p

• Longer maturities sold off due to higher duration securities being more sensitive to heightened inflation expectations as the result of the Fed’s new commitment requiring a further increase in the money supply1%

2%

3%

requiring a further increase in the money supply.

• The Fed opted not to extend “Operation Twist” into 2013 since inflation has continued to keep pace with the Fed’s expectations.

0%3 Month 6-Month 2-Year 5-Year 10-Year 30-Year

Dec-11 Sep-12 Dec-12Source: Bloomberg

• The 10-year breakeven rate inched up modestly during the quarter, which was due to a 20 basis point pick up in the 10-year treasury yield, and offset by a 10 basis point increase in the 10-year TIPS yield to -0.7%. 5%

6%

10-Year Breakeven Inflation Rate

• Overall, the short and intermediate part of the real yield curve remains negative within a range of -0.5% to -1.5% and the 20- and 30-year maturities at modestly positive real yields

2.5%

1.8%1%

2%

3%

4%

real yields.

• Market implied inflation of 2.5% remains right on top of the Fed’s recently released threshold for the metric, which suggests the Fed beginning a tightening cycle remains unlikely in the near term

-0.7%

-2%

-1%

0%

Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12

10-Year Breakeven Inflation10-Year Treasury YieldSource: Bloombergremains unlikely in the near term. 10 Year Treasury Yield10-Year TIPS Yield

g

8

U.S. Fixed Income• Investment grade credit spreads were mostly

unchanged during the quarter and remain at pre-financial crisis levels.

6%

7%

Investment Grade Yield Spreadsover 10-Year Treasury

• Financial spreads tightened by 27 basis points during the quarter, outperforming industrial and utility corporate bonds, and driving performance of the sector.

1.9%2%

3%

4%

5%

6%

• Despite not being explicitly high relative to historical levels, the Fed’s near-zero interest rate environment has driven fund flows in excess of $200 billion into investment grade corporate bond funds for the calendar year 2012 according to a Morningstar

0.5%

1.3%

0%

1%


Agency Spread Corporate A Spread Corporate BBB SpreadSource: Bloomberg

calendar year 2012, according to a Morningstar estimate.• Interest in high yield remains strong among

investors, and high yield spreads tightened 50, 30, and 40 basis points for CCC, B, and BB rated debt, respectively.

25%

30%

High Yield Option Adjusted Spreads

• Overall, corporate balance sheets remain strong relative to history, and corporate debt issuance is expected to remain at its brisk pace as a result of low historical credit spreads. 8.1%

10%

15%

20%

25%

• Fund flows into high yield have also been strong during the last three years as investors have sold out of money market and equity funds in favor of corporate bond funds generating yield.

3.6%4.9%

8.1%

0%

5%


BB Spread B Spread CCC SpreadSource: Bloomberg & Barclayscorporate bond funds generating yield.

9

International Fixed Income

11.7%12%

14%

10-Year Sovereign Borrowing Rates

4.5%5.2%

8.5%

6.9%8.1%

6%

8%

10%

1.8% 1.8%1.3%

2.0%

0.5% 0.8%

3.6%

0%

2%

4%

U.S. U.K. Germany France Italy Spain Greece Switzerland Japan China Brazil Russia India

B iti h

Source: Bloomberg

Currency: U.S. Dollar British Pound

Euro Euro Euro Euro Euro SwissFranc

Yen Yuan Real Ruble Rupee

• Disparity remains in the Eurozone with 10-year German bunds trading at significant premiums to Greek, Spanish, and Italian bonds despite the 7.8%

10%

Currency Returns vs. U.S. Dollar

ECB’s explicit commitment to support the bond markets of overleveraged nations.

• Yields in Brazil, Russia, and India highlight continued inflation fears.

2.5%

0.5% 0.0%0.9%

-0.9%

2.6%

0.2%1.7%

4.4%

1.0%

2.9% 2.4% 1.8%

5%

0%

5%

continued inflation fears.

• The Japanese yen sold off significantly during the quarter as the result of demand for yen failing to keep pace with the strong demand seen during the European sovereign debt crisis

-11.3%-12.8%

-15%

-10%

-5%

Euro Japanese Yen British Pound Mexico Peso Chinese Yuan Canadian Dollar Swiss Franc Australian Dollar

the European sovereign debt crisis.QTR 1 YearSource: Bloomberg

10

Equity MarketsU.S. Equities: • In the U.S. and overseas, value stocks outperformed their growth counterparts during

the fourth quarter, extending their year-to-date gains.

• Across the globe, the more economically sensitive areas of the market generally QTR 1 YR QTR 1 YR QTR 1 YR

Value Core Growth

outperformed, while sectors perceived to be more defensive typically lagged.

• U.S. equities pared early losses after the elections and following the renewed commitment from both political parties to work together on federal budget negotiations.

QTR 1 YR QTR 1 YR QTR 1 YR

1.5 0.1 -1.3

Larg

e

15.316.517.5

• In Europe, equity markets across the region extended their third quarter rally, despite dismal economic data and record high unemployment of nearly 12%.

• Within the Pacific region, Japan benefited from growing expectations for additional monetary easing after Shinzo Abe a former Prime Minister was re elected as PM0.4

Mid

ll

18.5 17.7

1.7

15.8

1.93.2

3.9 2.9

32.1%35%MSCI Equity Returns by Country / Region

monetary easing after Shinzo Abe, a former Prime Minister, was re-elected as PM.

• Emerging markets equities posted gains amid improving economic data from China. 14.616.3Sma

18.1

7 1%8.5%

10.9%12.9%

16.1%19.9%

15.3%

22.8%

14.6%

8.4%

24.7%

21.2%23.1%

26.0%

14.4%

8.9%

29.1%

9.9%

22.5%

10%

15%

20%

25%

30%

-0.2%

7.1%4.2%

5.9% 5.8% 6.1% 5.9%

0.5%3.6% 2.5%

4.4%5.7%

0.9%

5.9%

0.3%

-5%

0%

5%

10%

U.S. Europe Germany United Kingdom

France Pacific Japan Pacific (ex. Japan)

EM Asia China India Brazil Russia EM Latin America

Mexico Canada EM EMEA

QTR 1 YearSource: Bloomberg

11

Quarterly Equity Sector Returns

8.5% 8.0%8%

10%

Domestic Equity Sector Returns

2.9%

-1.0%

5.4%

0.0%

4.1% 4.5%3.9%

0.4%

-0.6%

2.7%3.7%

-2%

0%

2%

4%

6%

-2.5%

-6.3%

-4.3%

-6.8%

-2.3%

-8%

-6%

-4%

Consumer Discretionary

Consumer Staples Energy Financial Services Health Care Materials & Processing

Producer Durables Technology Utilities

Domestic Large Cap (Russell 1000) Domestic Small Cap (Russell 2000)Source: Bloomberg

12.3%11.4%

9.9% 9 4%10.1%

12%

14%

International Equity Sector Returns

3.1%2.1%

8.5%9.9% 9.4%

1.6%

4.0%

7.6%

1.0%

4.9% 5.3% 5.4% 6.0%

0.7%1.5%

0%

2%

4%

6%

8%

10%

-0.8%

-4.6%-6%

-4%

-2%

0%

Consumer Discretionary

Consumer Staples Energy Financials Health Care Industrials Information Technology

Materials Telecommunication Services

Utilities

International (MSCI EAFE) Emerging Markets (MSCI EM)Source: Bloomberg

12

U.S. Equity Market Fundamentals

40%

S&P 500 Price / Trailing 12-Month EarningsYoY Multiple Expansion / (Contraction)

• Except for a brief period in 2011 and the recent expansion, multiples have contracted creating a drag on S&P prices since 2010.

9.9%0%

10%

20%

30%• This recent multiple expansion is the longest since

2008 when multiples were compressed.

• Given decelerating year-over-year earnings growth (see graph below) future price appreciation will likely rely

-40%

-30%

-20%

-10%


graph below) future price appreciation will likely rely more on multiple expansion.

• The S&P 500 ended the fourth quarter of 2012 with a P/E of 14.4x. That is still lower than its 10 year average

• Margin expansion has contributed significantly to the most recent spike in year-over-year earnings

th

Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12

Source: Bloomberg

60%

80%

S&P 500 YoY Earnings Growthof 16.6x.

growth.

• However, since the second quarter of 2010, margin expansion has decelerated and recently turned negative in the fourth quarter.

0%

20%

40%

• It is likely that future year-over-year earnings growth will be more dependent on revenue growth than on margin expansion.

3.2%

-40%

-20%

0%


Source: Bloomberg & Standard & Poor's

13

Real Estate

• Yearly performance was positive across all property types but lagged international markets.

18 1%

26.7%

20.4%19.9%

20%

25%

30%Domestic REIT Sector Returns

• Domestic REITs continue to trade at a premium to NAV.

• Within retail, solid fundamentals and class A regional 2.6% 1.5%

0.1%1.7% 2.8%

5.9%

18.1%

12.2%14.2%

6.9%

12.5%

0%

5%

10%

15%

20%

malls drove outperformance.

• Further recovery in multi-family housing caused the apartment sector to underperform.

0.0%

-6.4%-10%

-5%

0%

All Equity Index

Diversified Office Apartment Retail Lodging & Resorts

Health Care Mortgage

QTR 1 YSource: Bloomberg & NAREIT

• Expansionary BOJ initiatives drove Japan to outperform for the quarter and full year.

• Continental Europe produced positive results following

QTR 1 YearSource: Bloomberg & NAREIT

38.5%

43.3%

40%

45%

50%Global REIT Region Returns

p p p greduced concerns about the sovereign debt crisis. Austria was the top performing country during the quarter.

• The United Kingdom trailed the continent but 10 2%

28.9%30.7%

15%

20%

25%

30%

35%

• The United Kingdom trailed the continent but continued to see strong demand for prime assets.

• Emerging markets REITs returned mixed results. China outperformed while Mexico posted a quarterly

6.0%8.8% 10.2% 8.9%

0%

5%

10%

S&P Developed Property S&P Developed Ex-U.S Property

Europe (S&P Developed Property)

Asia Pacific (S&P Developed Property)

QTR 1 Yearloss. QTR 1 YearSource: Bloomberg & Standard & Poor's

14

Real Assets• 16 out of 20 subsectors traded lower during the

quarter.

L d b t h t

18.1%

15%

20%

25%DJ UBS Commodity Returns

• Lessened concerns about a poor harvest season led to further weakness in corn, soybeans, and wheat.

• Livestock surged during the quarter due in part -6.3% -5.3% -3.7%

4.7%

-1.4%

-7.4% -7.0%

-1.1%

9 4%

0.6%

-3.6%

0.4%

6.2%

-10%

-5%

0%

5%

10%

g g q pto lower feed prices.

• Improved supply levels within cocoa and coffee caused weakness in softs.

-11.6%-9.4%

-22.5%-25%

-20%

-15%

DJ UBS Commodity Composite

Energy Grains Industrial Metals

Livestock Petroleum Precious Metals

Softs

QTR 1 YearSource: Bloomberg

10%MLP Yield Spreads over 10-Year Treasury

• The Alerian MLP Index ended the year yielding 6.6%. The spread compared to similar securities and treasuries continues to increase and is currently above the long term average of 3 3%

4.4%

2%

4%

6%

8%above the long term average of 3.3%.

• Regulatory and ‘fiscal cliff’ related concerns weighed on quarterly results.

Hi h di i f t b t d t

-2%

0%

2%

Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12

MLP Spread FTSE NAREIT All Equity REIT Spread

• High dispersion of returns between and amongst sectors continued during the quarter.

• General partner and crude oil MLPs outperformed while MLPs sensitive to weak ethane, coal, and

A-Rated Corporate Spread BBB-Rated Corporate SpreadSource: Bloomberg propane prices lagged for the quarter.

15

Hedge Funds

• Event driven outperformed as an uptick in M&A activity and special dividend10.5%

12%Hedge Fund Returns

in M&A activity and special dividend payments drove results.

• Macro strategies lagged due to sharp reversals continuing to hinder systematic

b t t i i O t b d3 2%

4.8%

6.2%

7.4%

8.6%

4%

6%

8%

10%

sub-strategies in October and November.

• Relative value strategies completed a strong year as MBS/ABS sub-strategies

1.3% 1.3%1.9%

3.2%

-1.2%

2.3%

-0.4%-2%

0%

2%

4%

led performance.

Th HFRI F d W i ht d C it I d d d 1 3% d th HFRI F d f F d C it I d

Fund of Funds Composite

Fund Weighted Composite

Equity Hedge Event Driven Macro Relative Value

QTR 1 YearSource: Bloomberg & Hedge Fund Research

• The HFRI Fund Weighted Composite Index advanced 1.3% and the HFRI Fund of Funds Composite Index rose 1.3% during the quarter. The industry finished 2012 strong, posting gains in six of the final seven months.

• Over the 12-month span ending November 2012, the industry shed roughly 2% of total assets ($2.3 trillion).p g y g y ( )

• Notably since January 2010, direct hedge funds have taken in $100.7 billion while fund of hedge funds have seen outflows of $67.8 billion.

16

Why Diversify?2003 2004 2005 2006 2007 2008 2009 2010 2011 YTD

Emerging56.3%

REITs31.6%

Emerging34.5%

REITs35.0%

Emerging39.8%

Aggregate Bond5.2%

Emerging79.0%

MLP35.9%

MLP13.9%

Emerging18.6%

Smal l Growth48.5%

Emerging26.0%

Commodities21.4%

Emerging32.6%

Emerging Debt18.1%

Foreign Bond4.4%

MLP76.4%

Smal l Growth29.1%

TIPS13.6%

REITs18.1%

Smal l Blend47.3%

Emerging Debt23.0%

International14.0%

International26.9%

Commodities16.2%

Cash1.8%

High Yield58.2%

REITs27.9%

REITs8.3%

Smal l Value18.1%

Smal l Value46.0%

Smal l Value22.2%

REITs12.2%

MLP26.1%

MLP12.7%

TIPS‐2.4%

Large Growth37.2%

Smal l Blend26.9%

Aggregate Bond7.8%

Internationa l17.9%

MLP44.5%

International20.7%

Large Value7.1%

Smal l Value23.5%

Large Growth11.8%

Emerging Debt‐5.2%

Smal l Growth34.5%

Smal l Value24.5%

High Yield5.0%

Large Value17.5%

Internationa l39.2%

Smal l Blend18.3%

MLP6.3%

Large Value22.2%

TIPS11.6%

Balanced‐24.8%

International32.5%

Emerging19.2%

Foreign Bond4.4%

Emerging Debt16.8%

REITs37.1%

MLP16.7%

Emerging Debt6.3%

Smal l Blend18.4%

Internationa l11.6%

High Yield‐26.2%

REITs28.0%

Commodities16.8%

Large Growth2.6%

Smal l Blend16.3%

Large Value30.0%

Large Value16.5%

Balanced5.8%

Large Blend15.8%

Foreign Bond11.0%

Smal l Value‐28.9%

Smal l Blend27.2%

Large Growth16.7%

Large Blend2.1%

Large Blend16.0%

Large Growth29.7%

Smal l Growth14.3%

Large Growth5.3%

Balanced15.4%

Smal l Growth7.0%

Smal l Blend‐33.8%

Large Blend26.5%

Emerging Debt15.7%

Balanced1.1%

High Yield15.8%

High Yield29.0%

Foreign Bond12.5%

Large Blend4.9%

Emerging Debt15.2%

Aggregate Bond7.0%

Commodities‐35.6%

Emerging Debt22.0%

Large Value15.5%

Large Value0.4%

Large Growth15.3%

Large Blend28.7%

Balanced12.5%

Smal l Value4.7%

Smal l Growth13.3%

Large Blend5.5%

Large Value‐36.8%

Balanced21.4%

High Yield15.1%

Cash0.1%

Smal l Growth14.6%

Balanced26.1%

High Yield11.1%

Smal l Blend4.6%

High Yield11.9%

Cash4.7%

MLP‐36.9%

Smal l Value20.6%

Large Blend15.1%

Emerging Debt‐1.8%

Balanced12.9%

Commodities23.9%

Large Blend10.9%

Smal l Growth4.2%

Large Growth9.1%

Balanced4.7%

Large Blend‐37.0%

Large Value19.7%

Balanced13.9%

Smal l Growth‐2.9%

TIPS7.0%

Foreign Bond19.4%

Commodities9.1%

Cash3.0%

Foreign Bond8.2%

High Yield1.9%

REITs‐37.7%

Commodities18.9%

International8.2%

Smal l Blend‐4.2%

MLP4.8%

Emerging Debt16.9%

TIPS8.5%

TIPS2.8%

Cash4.8%

Large Value‐0.2%

Large Growth‐38.4%

TIPS11.4%

Aggregate Bond6.5%

Smal l Value‐5.5%

Aggregate Bond4.2%

TIPS8.4%

Large Growth6.3%

High Yield2.7%

Aggregate Bond4.3%

Smal l Blend‐1.6%

Smal l Growth‐38.5%

Foreign Bond7.5%

TIPS6.3%

International‐11.7%

Foreign Bond4.1%

Aggregate Bond4.1%

Aggregate Bond4.3%

Aggregate Bond2.4%

Commodities2.1%

Smal l Value‐9.8%

Internationa l‐43.1%

Aggregate Bond5.9%

Foreign Bond4.9%

Commodities‐13.3%

Cash0.1%

C h C h F i B d TIPS REIT E i C h C h E i C di iCash1.1%

Cash1.2%

Foreign Bond‐8.7%

TIPS0.5%

REITs‐15.7%

Emerging‐53.2%

Cash0.2%

Cash0.1%

Emerging‐18.2%

Commodities‐1.1%

17

Source: Bloomberg

Financial Markets PerformancePeriods greater than one year are annualized

As of: December 31, 2012

Source: BloombergAll returns are in U.S. dollar terms

Global Fixed Income Markets QTR YTD 1YR 2YR 3YR 5YR 7YR 10YR

Citi 3-Month T-Bill 0.0% 0.1% 0.1% 0.1% 0.1% 0.4% 1.7% 1.7%Barclays US TIPS 0.7% 7.3% 7.3% 10.6% 9.1% 7.1% 6.8% 6.7%Barclays Municipal Bond (5 Year) -0.2% 3.0% 3.0% 4.9% 4.4% 5.3% 5.0% 4.3%Barcla s US Aggregate 0 2% 4 2% 4 2% 6 0% 6 2% 5 9% 5 9% 5 2%Barclays US Aggregate 0.2% 4.2% 4.2% 6.0% 6.2% 5.9% 5.9% 5.2%Barclays Global Aggregate ex-US Hedged 1.3% 6.5% 6.5% 5.2% 4.6% 4.8% 4.5% 4.4%Barclays Global Aggregate ex-US Unhedged -1.0% 4.1% 4.1% 4.2% 4.5% 5.1% 6.3% 6.6%Barclays US Corporate High Yield 3.3% 15.8% 15.8% 10.3% 11.9% 10.3% 9.3% 10.6%JPMorgan GBI-EM Global Diversified Unhedged 4.1% 16.8% 16.8% 7.1% 9.9% 8.9% 11.1% 12.3%

Global Equity Markets QTR YTD 1YR 2YR 3YR 5YR 7YR 10YR

S&P 500 -0.4% 16.0% 16.0% 8.8% 10.9% 1.7% 4.1% 7.1%Dow Jones Industrial Average -1.7% 10.2% 10.2% 9.3% 10.9% 2.6% 5.7% 7.3%NASDAQ Composite -2.5% 17.7% 17.7% 8.1% 11.3% 3.8% 5.7% 9.5%Russell 3000 0.2% 16.4% 16.4% 8.4% 11.2% 2.0% 4.4% 7.7%Russell 1000 0.1% 16.5% 16.5% 8.7% 11.1% 1.9% 4.3% 7.5%Russell 1000 Growth -1.3% 15.3% 15.3% 8.8% 11.3% 3.1% 5.2% 7.6%Russell 1000 Value 1 5% 17 5% 17 5% 8 6% 10 9% 0 6% 3 3% 7 4%Russell 1000 Value 1.5% 17.5% 17.5% 8.6% 10.9% 0.6% 3.3% 7.4%Russell Mid Cap 2.9% 17.7% 17.7% 7.6% 13.3% 3.7% 5.6% 10.7%Russell Mid Cap Growth 1.7% 15.8% 15.8% 6.7% 12.9% 3.2% 5.4% 10.4%Russell Mid Cap Value 3.9% 18.5% 18.5% 8.1% 13.4% 3.8% 5.3% 10.7%Russell 2000 1.9% 16.3% 16.3% 5.6% 12.2% 3.6% 4.8% 9.7%Russell 2000 Growth 0.4% 14.6% 14.6% 5.5% 12.8% 3.5% 5.3% 9.9%Russell 2000 Value 3.2% 18.1% 18.1% 5.6% 11.6% 3.5% 4.1% 9.6%MSCI ACWI ex. U.S. 5.9% 17.4% 17.4% 0.9% 4.3% -2.4% 4.0% 10.2%MSCI EAFE 6.6% 17.9% 17.9% 2.0% 4.0% -3.2% 2.7% 8.7%MSCI EAFE Growth 5.8% 17.3% 17.3% 1.7% 5.2% -2.7% 3.2% 8.1%MSCI EAFE Value 7.4% 18.4% 18.4% 2.3% 2.8% -3.7% 2.1% 9.2%MSCI EAFE Small Cap 6.0% 20.4% 20.4% 0.8% 7.5% -0.5% 2.5% 12.3%MSCI Emerging Markets 5.6% 18.6% 18.6% -1.5% 5.0% -0.6% 8.7% 16.9%

Alternatives QTR YTD 1YR 2YR 3YR 5YR 7YR 10YR

Consumer Price Index -0.2% 1.7% 1.7% 2.4% 2.1% 1.8% 2.2% 2.4%FTSE NAREIT Equity REIT 2.6% 18.1% 18.1% 13.1% 17.8% 5.4% 5.8% 11.6%S&P Developed World Property x U.S. 8.8% 38.5% 38.5% 8.7% 11.7% -0.8% 4.5% 12.6%S&P Developed World Property 6.0% 28.9% 28.9% 10.4% 14.0% 1.3% 4.8% 11.9%DJ UBS Commodity Total Return -6.3% -1.1% -1.1% -7.4% 0.1% -5.2% -1.3% 4.1%HFRI Fund of Funds Composite 1.3% 4.8% 4.8% -0.6% 1.5% -1.8% 1.6% 3.6%HFRI F d W i ht d C it 1 3% 6 2% 6 2% 0 3% 3 5% 1 5% 4 2% 6 7%HFRI Fund Weighted Composite 1.3% 6.2% 6.2% 0.3% 3.5% 1.5% 4.2% 6.7%Alerian MLP -3.4% 4.8% 4.8% 9.3% 17.5% 12.6% 14.4% 16.5%

18

Source: Bloomberg

Financial Markets PerformancePeriods greater than one year are annualized

As of: December 31, 2012

Source: BloombergAll returns are in U.S. dollar terms

Russell 3000 Sectors QTR YTD 1YR 2YR 3YR 5YR 7YR 10YR

Consumer Discretionary 2.9% 25.7% 25.7% 14.5% 18.7% 8.1% 6.6% 8.6%Consumer Staples -1.0% 10.3% 10.3% 12.2% 13.2% 6.6% 8.7% 8.8%Energy -2.5% 3.9% 3.9% 3.4% 9.1% -0.7% 6.1% 12.3%Financials 5.1% 26.8% 26.8% 5.7% 8.0% -5.5% -4.8% 0.4%Health Care -0.6% 19.5% 19.5% 15.1% 11.9% 5.8% 5.8% 6.7%Producer Durables 4.5% 16.5% 16.5% 6.6% 13.0% 1.0% 3.1% 7.0%Materials & Processing 5.0% 19.2% 19.2% 5.2% 11.7% 0.7% 5.5% 8.8%Technology -5.7% 12.4% 12.4% 5.8% 8.4% 3.7% 6.2% 8.9%Utilities -4.2% 7.7% 7.7% 10.0% 10.6% 2.0% 5.8% 7.0%

MSCI C t / R i R t QTR YTD 1YR 2YR 3YR 5YR 7YR 10YRMSCI Country / Region Returns QTR YTD 1YR 2YR 3YR 5YR 7YR 10YR

U.S. -0.2% 16.1% 16.1% 8.8% 11.0% 1.8% 4.2% 7.3%Europe 7.1% 19.9% 19.9% 3.6% 3.9% -3.7% 3.5% 9.0%Germany 8.5% 32.1% 32.1% 4.4% 6.0% -3.8% 6.3% 12.5%United Kingdom 4.2% 15.3% 15.3% 6.0% 6.9% -2.0% 3.6% 8.1%France 10.9% 22.8% 22.8% 1.6% -0.1% -5.3% 2.4% 8.1%P ifi 5 9% 14 6% 14 6% 0 5% 4 7% 1 8% 1 2% 8 3%Pacific 5.9% 14.6% 14.6% -0.5% 4.7% -1.8% 1.2% 8.3%Japan 5.8% 8.4% 8.4% -3.6% 2.4% -4.1% -2.7% 5.1%Pacific (ex. Japan) 6.1% 24.7% 24.7% 4.4% 8.4% 2.0% 9.9% 15.5%EM Asia 5.9% 21.2% 21.2% 0.2% 6.2% -0.3% 9.3% 15.2%China 12.9% 23.1% 23.1% 0.3% 1.8% -3.3% 14.4% 19.4%India 0.5% 26.0% 26.0% -11.0% -1.4% -7.2% 8.7% 18.0%Brazil 3.6% 0.3% 0.3% -11.3% -5.6% -3.3% 12.0% 26.2%Russia 2 5% 14 4% 14 4% 3 9% 3 3% 10 0% 2 0% 14 0%Russia 2.5% 14.4% 14.4% -3.9% 3.3% -10.0% 2.0% 14.0%EM Latin America 4.4% 8.9% 8.9% -6.2% 0.4% 0.1% 11.7% 23.0%Mexico 5.7% 29.1% 29.1% 6.5% 13.1% 5.3% 10.8% 19.7%Canada 0.9% 9.9% 9.9% -1.7% 5.4% 0.2% 6.5% 14.4%EM EMEA 5.9% 22.5% 22.5% -1.1% 6.6% -2.0% 5.4% 15.9%

Currency Returns vs. USD QTR YTD 1YR 2YR 3YR 5YR 7YR 10YR

Euro 2.5% 1.7% 1.7% -0.7% -2.8% -2.0% 1.5% 2.3%Japanese Yen -11.3% -12.8% -12.8% -3.4% 2.3% 4.9% 4.3% 3.1%British Pound 0.5% 4.4% 4.4% 2.0% 0.2% -4.1% -0.8% 0.1%Mexico Peso 0.0% 7.8% 7.8% -2.1% 0.6% -3.4% -2.7% -2.2%Chinese Yuan 0.9% 1.0% 1.0% 2.9% 3.0% 3.1% 3.6% 2.8%Canadian Dollar -0.9% 2.9% 2.9% 0.3% 2.0% 0.1% 2.2% 4.5%Swiss Franc 2 6% 2 4% 2 4% 1 1% 4 0% 4 2% 5 0% 4 0%Swiss Franc 2.6% 2.4% 2.4% 1.1% 4.0% 4.2% 5.0% 4.0%Australian Dollar 0.2% 1.8% 1.8% 0.8% 4.7% 3.4% 4.8% 6.0%

19

Index Definitions & DisclosuresPlease note: Due to rounding methodologies of various data providers, certain returns in this report might differ slightly when compared to other sources.

Index Definitions:-Barclays Treasury U.S. T-Bills-1-3 Months includes all publicly issued zero-coupon U.S. Treasury Bills that have a remaining maturity of less than 3 months and more than 1 month, are rated investment grade, and have $250 million or more of outstanding face value. In addition, the securities must be denominated in U.S. dollars and must be fixed rate and non convertible.-Barclays Capital US Treasury Inflation Protected Securities Index measures bonds with fixed rate coupon payments that adjust for inflation as measured by the Consumer Price Index. All bonds must be publicly traded, investment grade and have a minimum maturity of one year and a minimum amount outstanding of $250 million of face value. It currently is comprised of only US Treasury issued securities.-Barclays Muni 5 Year index contains USD-denominated municipal bonds with maturities between 4 and 6 years that are classified as revenue bonds, general obligation bonds, pre-refunded bonds, or insured bonds.-Barclays U.S. Aggregate and Global Aggregate ex. USD Indices are unmanaged market value-weighted performance benchmarks for investment-grade fixed-rate debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of at least one year. -The Barclays U.S. Corporate High Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds with a maturities of greater than one year. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below, excluding emerging market debt. -JP Morgan Government Bond Index-Emerging Market (GBI-EM) Index is a comprehensive emerging market debt index that tracks local currency bonds issued by emerging market governments; The Index is comprised of 14 countries whose weights are capped at 10% to avoid bias to more debt-laden countries.-The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s.-The Dow Jones Industrial Index is based on the average performance of the 30 blue-chip stocks monitored.-The NASDAQ measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market.-Russell 3000 is a market-cap-weighted index which consists of roughly 3,000 of the largest companies in the U.S. As such, it represents nearly 98% of the investable U.S. equity market.-Russell 1000 is a market-cap-weighted index which consists of roughly 1,000 of the largest companies in the U.S. Russell 1000 Growth measures the performance of those Russell 1000 companies with higher P/B ratios and higher forecasted growth values-Russell 1000 Growth measures the performance of those Russell 1000 companies with higher P/B ratios and higher forecasted growth values.

-Russell 1000 Value measures the performance of those Russell 1000 companies with lower P/B ratios and lower forecasted growth values.-Russell Mid Cap measures the performance of the 800 smallest companies in the Russell 1000 Index.-Russell Mid Cap Growth measures the performance of those Russell Mid Cap companies with higher P/B ratios and higher forecasted growth values.-Russell Mid Cap Value measures the performance of those Russell Mid Cap companies with lower P/B ratios and lower forecasted growth values.-Russell 2000 is a market-cap-weighted index which consists of the 2,000 smallest U.S. companies in the Russell 3000 universe. -Russell 2000 Growth measures the performance of the Russell 2000 companies with higher P/B ratios and higher forecasted growth values.-Russell 2000 Value measures the performance of those Russell 2000 companies with lower P/B ratios and lower forecasted growth values. -MSCI ACWI (All Country World Index) ex. U.S. Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global developed and emerging markets. The index consists of the 48 developed and emerging markets outside the U.S. This index represents approximately 60% of global market capitalization measured in U.S. dollars.p g g p pp y g p-MSCI EAFE is a market-cap weighted index representing 22 of the developed markets outside North America. These 22 countries include 16 European countries and 6 Pacific countries.-MSCI EAFE Value and MSCI EAFE Growth are free float-adjusted market cap indexes designed to measure the equity market performance of developed markets, excluding US & Canada. Five growth and three value variables are used to assign stocks to a specific style index. These include, book value to price, 12-months forward earnings to price, dividend yield, long-term forward earnings per share (EPS) growth rate, short-term forward EPS growth rate, current internal growth rate, long-term historical EPS growth trend, and long-term historical sales per share growth trend.-MSCI EAFE Small Cap Index represents the small cap size segment of the MSCI EAFE Index. The small cap universe consists of the securities of those companies whose securities are not included in the large cap or mid cap segments of a particular market, which together comprise approximately 85% of each market’s free float-adjusted market cap. The small cap segment covers the 85-99% range of each market’s free float-adjusted market cap.-MSCI Emerging Markets is a market-cap weighted index representing the major emerging countries in the world.-Consumer Price Index is the United States Headline Consumer Price Index.-NAREIT Equity REITs measures equity REITs. The index contains health care REITs, but no mortgage and hybrid REITs.S& S f f S-S&P Developed World Property x U.S. measures the investable universe of publicly traded property companies in developed countries outside of the U.S.

-S&P Developed World Property measures the investable universe of publicly traded property companies in developed countries.-Dow Jones UBS Commodity Index is composed of futures contracts on 19 physical commodities. No related group of commodities (e.g., energy, precious metals, livestock, grains, etc.) may constitute more than 33% of the index. Livestock = live cattle and lean hogs. Softs = sugar, cotton and coffee. Industrial Metals = aluminum, copper, zinc and nickel. Precious Metals = gold and silver. Grains = wheat, corn, soybeans. Energy = natural gas, crude oil, unleaded gas and heating oil. Petroleum = crude oil, unleaded gas and heating oil.-HFRI Fund Weighted Composite Index - Fund of Funds invest with multiple managers through funds or managed accounts. The strategy designs a diversified portfolio of managers with the objective of significantly lowering the risk (volatility) of investing with an individual manager. The Fund of Funds manager has discretion in choosing which strategies to invest in for the portfolio. A manager may allocate funds to numerous managers within a single strategy, or with numerous managers in multiple strategies. The minimum investment in a Fund of Funds may be lower than an investment in an individual hedge fund or managed account. The investor has the advantage of diversification among managers and styles with significantly less capital than investing with separate managers. PLEASE NOTE: The HFRI Fund of Funds Index is not included in the HFRI Fund Weighted Composite Index.-The Alerian MLP Index is a composite of the 50 most prominent energy master limited partnerships and will be calculated by Standard & Poor’s using a float-adjusted market capitalization-weighted methodology-The Alerian MLP Index is a composite of the 50 most prominent energy master limited partnerships and will be calculated by Standard & Poor s using a float-adjusted, market capitalization-weighted methodology.-Cambridge Associates LLC calculates end-to-end returns for both a U.S. private equity index and a U.S. venture capital index. For the private equity index, data is compiled from 986 U.S. private equity funds formed since 1986, and for the U.S. venture capital index, 1,368 venture capital funds formed since 1981 are used. Returns include fully liquidated partnerships, and are net of fees, expenses, and carried interest. Historical returns are updated at year end to adjust for changes in the index sample. Data is subject to a one or two quarter lag, and may include the most recent preliminary data release when prudent to minimize the lag in data.Additional:-Equity sector returns are calculated by Russell and MSCI for domestic and international markets, respectively. MSCI sector definitions correspond to the MSCI GICS® classification (Global Industry Classification System); Russell uses its own sector and industry classifications. -MSCI country returns are calculated by MSCI, and are free float-adjusted market capitalization indices that are designed to measure equity market performance in each specific country.-Currency returns are calculated using Bloomberg’s historical spot rate indices and are calculated using the U.S. dollar as the base currency.-The Index of Leading Economic Indicators, calculated by The Conference Board, is used as a barometer of economic activity over a range of three to six months. The index is used to determine the direction and stability of the economy. g y y g y yThe composite index of leading indicators, which is derived from 10 leading indicators, helps to signal turning points in the economy and forecast economic cycles. The leading indicators are the following: average weekly hours, average weekly initial claims, manufacturers new orders, both consumer and non defense capital goods, vendor performance, building permits, stock prices, money supply (M2), the interest rate spread and the index of consumer expectations.

20

Asset Class Summaries

Fixed Income The yield curve steepened modestly during the quarter after the Fed announced a new commitment to purchase an additional $45 billion per month of

Fourth Quarter 2012

nominal treasuries. Longer maturities sold off due to higher duration securities being more sensitive to heightened inflation expectations as the result of the Fed’s new commitment requiring a further increase in the money supply. The Fed opted not to extend “Operation Twist” into 2013 since inflation has continued to keep pace with the Fed’s expectations. Investor appetite for yield remained plentiful during the fourth quarter, with investment grade corporates and high yield outperforming treasuries and most securitized sectors. Overall, investment grade credit spreads were mostly unchanged during the quarter and remain at pre-financial crisis levels, but credit spreads of financial corporates tightened by 27 basis points during the quarter, outperforming industrial and utility corporate bonds, and driving performance of the sector. High yield spreads tightened 50, 30, and 40 basis points for CCC, B, and BB rated debt, respectively Overall corporate balance sheets remain strong relative to history and corporate debt issuance is expected to remain at its current brisk pacerespectively. Overall, corporate balance sheets remain strong relative to history, and corporate debt issuance is expected to remain at its current brisk pace as a result of low historical credit spreads. As sentiment improved somewhat in continental Europe, fixed income investors were attracted to wider spreads in European bonds as a result of the macro E.U. concerns that remain. However, disparity remains in the Eurozone with 10-year German bunds trading at significant premiums to Greek, Spanish, and Italian bonds despite the ECB’s explicit commitment to support the bond markets of overleveraged nations. Due to the yen’s considerable deprecation relative to the U.S. dollar, Japanese denominated bonds declined significantly for U.S. investors. Emerging markets debt was a strong performer as economic fundamentals associated with modest debt positions continue to be attractive for emerging nations. However yields in Brazil Russia and India highlight continued inflation fearsHowever, yields in Brazil, Russia, and India highlight continued inflation fears.

TIPS TIPS modestly outperformed treasuries during the quarter, partly due to a new purchase commitment by the Fed that investors expect to put upward pressure on inflation. The 10-year breakeven rate inched up modestly during the quarter, which was due to a 20 basis point pick up in the 10-year treasury yield, and offset by a 10 basis point increase in the 10-year TIPS yield to -0.7%. Overall, the short and intermediate part of the real yield curve remains negative within a range of 0.5% to -1.5% and the 20 and 30-year maturities remain at modestly positive real yields. Market implied inflation of 2.5% remains g g y y p y pright on top of the Fed’s recently released threshold for the metric, which suggests the Fed beginning a tightening cycle remains unlikely in the near term.

Munis Muni bonds outperformed treasuries during the quarter, but lagged higher-yielding spread sectors such as investment grade corporates and high yield. Despite challenging credit profiles of many high profile states, such as California and Illinois, lower-quality municipals outperformed higher rated issues by significant margins for calendar year 2012 (BBB +9.8% vs. AAA +4.5%). Overall, state revenues increased modestly during 2012, but revenue at the local level remains constrained. Additionally, rating downgrades in the space continue to outpace upgrades by a 4 to 1 margin. Cautious investors will continue to view municipalities in California as a key consideration for the creditworthiness of much of the muni market. Although the January 1, 2013 congressional budget deal did not include a cap on municipal income, the increase in the top-bracket rate to 39.6% will affect investors that have an income in excess of $400,000. However, higher tax rates are generally viewed as a positive for the space, since the tax-efficiency of munis becomes more prevalent in higher tax environments.

1

21


Foreign Bonds Foreign bonds generated returns of 1.3% and -1.0% on a hedged and unhedged basis, respectively during the quarter. European bonds fared better than

Fourth Quarter 2012

Japanese bonds as sentiment improved somewhat in continental Europe and fixed income investors were attracted to wider spreads in European bonds as a result of the macro E.U. concerns that remain. However, disparity remains in the Eurozone with 10-year German bunds trading at significant premiums to Greek, Spanish, and Italian bonds despite the ECB’s explicit commitment to support the bond markets of overleveraged nations. Japanese bonds lagged partly due to the yen’s considerable deprecation relative to the U.S. dollar. Emerging markets debt was a strong performer as economic fundamentals associated with modest debt positions continue to be attractive for emerging nations. However, yields in Brazil, Russia, and India continue to highlight inflation fears.

High Yield High yield bonds outperformed other domestic fixed income sectors, mainly due to investors continuing to search for yield and corporate balance sheets being in good shape. High yield spreads tightened 50, 30, and 40 basis points for CCC, B, and BB rated debt, respectively. Corporate debt issuance is expected to remain at its current brisk pace as a result of low historical credit spreads. Fund flows into high yield have also been strong during the last three years as investors have sold out of money market and equity funds in favor of corporate bond funds generating yield.

Balanced U.S. equity markets ended the final quarter of 2012 with mostly positive results amid optimism U.S. policymakers would reach an agreement and avoid the year-end ‘fiscal cliff’. For the quarter, the S&P 500 Index ended modestly lower, while the Russell 2000 Index of smaller companies gained 2%. Financials, industrials and materials were among the top performing sectors, while utilities, information technology and telecom lagged. Across market capitalizations, small- and mid-cap issues outperformed large-cap companies. Meanwhile, value stocks outperformed their growth counterparts. U.S. fixed income markets posted flat to generally positive results. Lower quality, higher yielding corporate securities performed strongly during the quarter. Investment grade p g y p q y, g y g p p g y g q gcorporates also moved higher. Treasuries were among the worst performing sector as risk assets outperformed. Mortgage-backed securities moved slightly lower as investors feared record low mortgage rates would lead to an uptick in refinancing activity.

Broad Equity Domestic stock owners entered the fourth quarter with some concern. The presidential election, pending negotiations on the ‘fiscal cliff’, and tepid economic growth provided enough grounds for domestic stock investors to slow their advance from the third quarter. Subsequently, stocks fell throughout October and early November rebounding only after the newly reelected President Obama and House Speaker John Boehner agreed to work together. As domestic stocks rallied in December the major indices fell short of producing positive returns for the quarter. The S&P 500, Dow Jones Industrial Average, and NASDAQ Composite Index each fell 0.4%, 1.7%, and 2.5% respectively. These returns were in stark contrast to international and emerging equity markets. Asian, European, and most Latin American stock indices rose on encouraging economic data from China. Europe continued to benefit from a powerful rally that started in the third quarter off of Mario Draghi’s proclamation that the European Central Bank (ECB) is prepared to do whatever it takes to maintain the Eurozone. The MSCI EAFE returned 6.6% for the quarter increasing its stellar performance for the year to 17.9%.

2

22


Large Cap Value Value stocks outperformed their growth counterparts during the fourth quarter, extending their year-to-date gains. For the quarter, the Russell 1000 Value

Fourth Quarter 2012

Index advanced 1.5%, the Russell 1000 Growth Index ended down 1.3%, and the Russell 1000 Index closed unchanged. Across market capitalizations, large cap stocks marginally underperformed mid- and small-cap issues. Within the Russell 1000 Value Index, financials posted solid gains amid strong results from banks, asset managers and mortgage finance companies. Citigroup rallied sharply following the sudden departure of CEO Vikram Pandit as investors were encouraged that his successor, Michael Corbat, would turn the bank around after a lengthy period of inconsistent profits and ongoing legal trouble. Other economically sensitive sectors such as materials and industrials also advanced. Meanwhile, information technology stocks moved lower as weaker-than-expected earnings from several IT bellwethers weighed on the sector. The more defensive areas such as telecom and utilities underperformed as investors gravitated towards riskier assets and away from safety and yieldas investors gravitated towards riskier assets and away from safety and yield.

Large Cap Core The S&P 500 Index ended the quarter fractionally lower. Financials, industrials and materials outperformed the broader market. Meanwhile, several of the more defensive areas, such as telecommunications services and utilities, underperformed. Value stocks outperformed growth stocks, while large cap stocks underperformed small- and mid-caps. Equity markets declined throughout October and early November and then rose after the re-election of President Obama and following the renewed commitment from both political parties to work together on federal budget negotiations However Republicans andObama and following the renewed commitment from both political parties to work together on federal budget negotiations. However, Republicans and Democrats failed to find common ground until the final trading day of the year with the announcement that a deal had been reached, which sent stocks soaring. While Congress provided welcome tax relief for many, a significant portion of the nation’s fiscal debate surrounding spending cuts was delayed two months and is now set to begin on March 1st, 2013. Additionally, the legislation did not include an increase to the current debt ceiling. On December 31st, 2012, Treasury Secretary Timothy Geithner noted that the U.S. had once again reached its statutory debt ceiling, making spending negotiations even more critical.

Large Cap Growth Large cap growth stocks modestly underperformed their large cap value counterparts. For the quarter, the Russell 1000 Growth Index ended down 1.3%, the Russell 1000 Value index gained 1.5%, and the Russell 1000 Index was unchanged. Across market capitalizations, small- and mid-cap issues outperformed large-cap companies. Sectors such as industrials, materials, financial services and consumer discretionary fared well during the quarter. Financials benefited from new monetary stimulus measures in the U.S. and other developed markets. The materials sector advanced on significant strength from mining and platinum/precious metals stocks. Industrial-related stocks also rallied led by the construction & materials and transport/trucking sub-sectors. Meanwhile, information technology stocks underperformed. Apple ended below $600/share following the departure of two high-level executives as well as several analyst downgrades. Elsewhere, the defensively-oriented utilities and telecom sectors retreated, and energy shares lagged as oil prices softened.

3

23


Mid Cap The Russell Midcap Index returned 2.9% for the fourth quarter, advancing its returns for the year to 17.7%. Valuation sensitive sectors performed the best

Fourth Quarter 2012

with the industrials, financials, and consumer cyclicals sectors leading the way for the quarter. Specifically, manufacturing and insurance were the best sub-sectors within industrials and financials. Only the utility and technology sectors weighed on returns for the quarter with software technology companies providing the greatest drag. All sectors were flat or positive for 2012. In comparison to the value and growth indexes, value outperformed for the quarter with a return of 3.9% for the Russell Midcap Value Index that beat the Russell Midcap Growth Index’s return of 1.7%. This trend was the same for 2012 with the Value Index returning 18.5% versus its growth counterpart’s return of 15.8%.

Small Cap ValueSmall Cap ValueThe Russell 2000 Value Index gained 3.2% for the quarter pushing its 2012 return up to 18.1%. Valuation sensitive sectors contributed the greatest amounts for the quarter with industrials, financials, and consumer cyclicals leading the way. Within industrials, electronics and building materials added the most to the Index return as each sub-sector was up 13.7% and 23.5%, respectively for the quarter. REITs, the second largest financial component of the Index, contributed the most to returns. Utilities were the largest drag on performance over the quarter. Historically viewed as a defensive sector due to high regulation, barriers to entry, and stable demand, utility stocks were out of favor as other risk assets were in greater demand for the quarter.

Small Cap CoreThe Russell 2000 Core Index gained 1.9% for the quarter pushing its 2012 return up to 16.3%. Valuation sensitive sectors exhibited the best return for the quarter and for 2012 in its entirety. Industrials, consumer cyclicals and financials contributed the most for the quarter with particularly strong performance from building materials. Compared to its value and growth counter parts, the Core Index performed in the middle. The Russell 2000 Value led the way for the quarter and for the year with 3.2% and 18.1% returns respectively. The Russell 2000 Growth trailed with 0.4% returns for the quarter and 14.6% for 2012. Consumer non-cyclical stocks detracted from returns the most in the fourth quarter with the pharmaceuticals and healthcare-products industry groups y q p p y g pshowing the worst returns.

Small Cap Growth The Russell 2000 Growth Index returned 0.4% in the fourth quarter, ending the year with a 14.6% positive return. These results trailed value and core peer indexes as valuation sensitive stocks were in favor. In that vein, the largest sector contributors to performance over the quarter were industrials, consumer cyclicals, and financials. Six of the eleven sectors had a negative return for the quarter with the worst coming from consumer non-cyclical. The sector was down 4.3% with the returns from biotechnology and pharmaceuticals accounting for 73% of negative attribution. Each industry group was down 8.8% and 9.2% respectively.

4

24


International Equity International markets advanced, with the MSCI EAFE Index rising 7%. Canada advanced 1%. The Bank of Canada left interest rates on hold at 1% at its

Fourth Quarter 2012

most recent meeting in December, citing weak global economic conditions. The United Kingdom ended up 4% as the Bank of England maintained its asset purchase program and voted to keep interest rates on hold at 0.5%, where it has stood since March 2009 as disappointing manufacturing and construction/service sector figures reflected Britain’s stagnant economy. The European Central Bank left interest rates unchanged at a record low of 0.75%. Among the largest European markets, Italy and Germany each gained 9%. Meanwhile, France rose 11%, while Spain advanced 10%. The smaller Greek market soared 28% after making significant headway in restructuring its debt. Within the Pacific region, Australia advanced 7% as the central bank surprised economists by cutting interest rates in two separate moves by a total of 50 basis points to 3%, reacting to evidence the mining investment boom that has underpinned the country's economic growth is fading Meanwhile Japan and Hong Kong each gained 6%underpinned the country's economic growth is fading. Meanwhile, Japan and Hong Kong each gained 6%.

Emerging Markets Emerging markets moved higher with the MSCI EM Index gaining 6%. Within Asia, China rallied 13% as the most sweeping government reorganization in a decade gets underway. Vice President Xi Jinping is widely expected to take the reins of the world’s second-largest economy from President Hu Jintao in March 2013. Among other large Asian markets, South Korea, Taiwan and India rose 5%, 2% and 1%, respectively. In Latin America, Brazil gained 4% as the central bank surprised the market by trimming rates by 25 basis points to 7 25% Brazil started easing from 12 5% in August 2011 as governmentthe central bank surprised the market by trimming rates by 25 basis points to 7.25%. Brazil started easing from 12.5% in August 2011 as government officials began to see deterioration in global growth outlooks. Mexico rose 6% as newly-elected President Enrique Pena Nieto officially assumed the office previously held by Felipe Calderon. Among EMEA countries, South Africa advanced 6%. In the Middle East, Turkey skyrocketed 18%, while Egypt plunged 11%. Within Eastern Europe, the Czech Republic fell 3%, while Poland rallied 12%. Meanwhile, Russia posted a gain of 3% for the quarter.

International Small Cap Equity International small cap equities ended the fourth quarter of 2012 higher as investors cheered efforts by policymakers to address the European debt crisis p q q g y p y pand U.S. fiscal challenges. The U.S. dollar weakened against the Euro, while advancing sharply against the Japanese yen. In general, the more economically sensitive areas of the market outperformed, while sectors perceived to be more defensive typically lagged. International small value stocks outperformed their international small growth counterparts. Meanwhile, across market capitalizations, smaller-cap international stocks underperformed larger-cap international stocks. For the quarter, European stocks generally outperformed those in the Pacific region. Among emerging markets, several Emerging Asian, Latin American and EMEA (Eastern Europe, Middle East and Africa) countries performed strongly. China was the best performing major emerging market, rallying 13% amid signs the economy was regaining momentum.

Global Equity During the final quarter of 2012, the S&P 500 Index ended modestly lower, while the Russell 2000 Index of smaller companies gained 2%. Meanwhile, the Dow Jones Industrial Average and the technology-heavy NASDAQ Composite each declined 2%. International markets advanced, with the MSCI EAFE Index rising 7%, despite worsening economic activity and record-high unemployment. The ECB left interest rates unchanged at a record low of 0.75% and sharply downgraded its outlook for GDP in the Eurozone for 2013. Within Europe, Germany and Italy each gained 9%. Meanwhile, Spain rose 10%, while France advanced 11% In the Pacific region Australia advanced 7% while Japan and Hong Kong each rose 6% In the emerging markets several countries

5

France advanced 11%. In the Pacific region, Australia advanced 7%, while Japan and Hong Kong each rose 6%. In the emerging markets, several countries posted solid results with the MSCI EM Index advancing 6%.

25


Commodities Commodities declined for the second straight year and lagged broader equity markets for the quarter and full year. During the quarter, agriculture

Fourth Quarter 2012

experienced the largest decline, losing over 10%, while livestock rallied almost 5%. 12 of 27 subsectors declined for the year led by coffee, orange juice and natural gas. A strong harvest season in Brazil specifically weighed on coffee prices. Feeder cattle delivered solid returns in the fourth quarter thanks to lower input prices. Within energy, WTI Crude declined while Brent rallied. Forecasts of warmer weather further depressed natural gas prices. Declines in December as a result of the looming fiscal cliff led to precious metals declining for the quarter. Supply and demand dynamics caused soybean meal to rebound from a weak 2011 and return 49% in 2012. Grains reversed course and saw generally lower prices because of improved supply expectations.

Global Real EstateGlobal Real Estate With the exception of Mexico, real estate markets globally produced very strong gains during 2012 and positive results for each quarter of the year. Domestic REITs returned 18% for the year but still lagged the surging international markets. Quarterly performance was positive for all domestic property types, led by industrial, regional mall and shopping center owners. Improved consumer spending and sentiment contributed to the sectors strong gains. Office/industrial declined for the quarter and apartments lagged as investors anticipated an improving housing market. New supply remains below historic norms across all sectors but apartments did notably see a slight uptick towards the end of the year. Within Europe, France and Germany were the top performing countries for the quarter as investors preferred their higher quality assets over the turbulent peripheral countries Norway was the only decliningperforming countries for the quarter as investors preferred their higher quality assets over the turbulent peripheral countries. Norway was the only declining country for the quarter due to stock specific issues. Asia rebounded from a material decline in 2011 to deliver the highest regional performance for the year. Above average performance can be seen across almost every country in the region. Favorable macroeconomic tail winds led to real estate developers in China and Japan returning over 20% for the quarter. However, valuation concerns weighed on J-REIT quarterly performance. Wide dispersion of returns was seen within emerging markets REITs. An improved residential sector and retail sales plus a favorable change in leadership caused China to deliver the highest return for the quarter and year. Mexico trailed for the year as homebuilders struggled under difficult business conditions, as new mortgage requirements have made it difficult to generate cash flows from operations. Additionally, the Macquarie Mexico REIT IPO was poorly received.q g p y, q p y

Hedge Funds (based on preliminary reports according to Hedge Fund Research, Inc.)Hedge fund returns during the fourth quarter were strong and broad based. Event driven produced steady results throughout the quarter as renewed strength in the M&A environment, distressed situations and special distributions drove gains. Notably, the strategy produced positive results over the last seven months of the year. Relative value continued to benefit from the structured credit tailwind, ending the year as the top performing strategy in the industry. Equity hedge managers produced positive results as fundamental managers were able to navigate choppy markets early in the quarter and participate in the upside through December. Short-biased and energy-focused struggles persisted during the quarter leading them to be the two strategies which lost the most capital over the span of 2012. Tactical trading managers delivered negative results during the quarter, ending the year roughly flat. Trend following and other systematic/quantitative strategies continued to weigh on results through October and November but finished with a strong December to limit quarterly losses. Fund of hedge funds produced stable returns throughout the quarter but modestly underperformed direct hedge funds for the year. While the industry experienced modest outflows over the course of 2012, those investors that are putting capital to work continue to gravitate toward structured credit and relative value-based strategies.

6

26


MLPs2012 was a volatile year for MLPs. Initial strength was offset by declines in the latter part of the fourth quarter. Specifically, a combination of equity issuance,

Fourth Quarter 2012

regulatory concerns, and tax related selling by retail investors led to December weakness. The Alerian MLP Index returned 4.8% for 2012, trailing the S&P 500 Index for only the third time in the past ten years. As shown by positive distribution growth, heightened capital raises, and a strong development pipeline, MLP fundamentals remain robust. Sector dispersion of returns was above historical norms for the year. During the fourth quarter, crude oil sensitive MLPs and general partners outperformed while weakness in natural gas and natural gas liquids weighed on the space. Access to prime regions, such as the Bakken and the Northeast, drove relative performance for individual MLPs throughout the year. Regulatory reforms and tax changes continue to be primarily only headline risks and do not pose an immediate threat to the asset class.

7

27

Fourth Quarter 2012 Knowledge CollegeQ g g

In the interest of avoiding further damaging an already turbulent economy, H.R. 8 (the American Taxpayer Relief Act of 2012) was passed by the Senate inthe early hours of New Year’s Day and by the House of Representatives later the same day. The resolution avoided reverting to higher tax rates for mostAmericans but did indeed raise taxes on the country’s highest earners Additionally the bill postponed automatic spending cuts for two months Below we

The Impact of the New Year’s Resolution and the ‘Fiscal Cliff’

Americans, but did indeed raise taxes on the country s highest earners. Additionally, the bill postponed automatic spending cuts for two months. Below, wehave summarized key elements of the deal along with what items were not explicitly addressed.

Permanently extends previous tax rates for all but the highest-earning households. Imposes an increased tax rate of 39.6% for individuals making over $400,000 and families making over $450,000.

What's In ItIncome Tax Rates

Federal Income Single Filers Married Filing Jointly (MFJ)Federal Income Single Filers Married Filing Jointly (MFJ)

Tax Bracket (Taxable Income between…) (Taxable Income between…)

10% $ 0 - $ 8,925 $ 0 - $ 17,85015% $ 8,926 - $ 36,250 $ 17,851 - $ 72,50025% $ 36,251 - $ 87,850 $ 72,501 - $ 146,400 28% $ 87,851 - $ 183,250 $ 146,401 - $ 223,05033% $ 183,251 - $ 398,350 $ 223,051 - $ 398,35035% $ 398 351 $ 400 000 $ 398 351 $ 450 000

The federal tax rate on long-term capital gains and dividends increases from 15% to 20% for taxpayers with taxable income over $400,000 for individuals and over $450,000 for families.

Capital Gains and Dividends

Itemized Deductions and Personal Exemptions

35% $ 398,351 - $ 400,000 $ 398,351 - $ 450,00039.6% Over $400,000 Over $450,000

Figures above based on IRS Rev. Proc. 2013-15, as released on 01/11/2013.

Itemized deductions and personal exemptions will be limited for taxpayers with an adjusted gross income (AGI) above $250,000 for individuals and $300,000 for families.

The legislation did not include an increase to the current debt ceiling. On Monday, December 31st, Treasury Secretary Timothy Geithner noted that the U S had reached its $16 4 trillion debt ceiling The Treasury Department will now take ‘extraordinary measures’ to avoid a default as long as possible

p

What's Left OutU.S. Debt Ceiling Resolution

U.S. had reached its $16.4 trillion debt ceiling. The Treasury Department will now take extraordinary measures to avoid a default as long as possible (projected for late February 2013). As a result, Congress will need to agree upon additional legislation in order to raise the current debt ceiling.

The payroll tax cut (which had been in effect for 2011 and 2012) was not extended by the legislation. As a result, workers will see their Social Security withholding on 2013 earned income increase from 4.2% to 6.2%, up to the Social Security wage base ($113,700 for 2013).

Lawmakers did not explicitly address the country's long term fiscal concerns especially as they pertain to a complicated tax code and rising entitlement

Extension of the Payroll Taxcut

Long-Term Fiscal Solution

22

Lawmakers did not explicitly address the country's long-term fiscal concerns, especially as they pertain to a complicated tax code and rising entitlement spending.

28

Fourth Quarter 2012 Knowledge College

Top Federal Income Tax Rate of 39.6% *

$0 $50,000 $100,000 $150,000 $200,000

Top Federal Income Tax Rate of 39.6%

$

$600,000 > $600k$300,000 $350,000 $400,000 $450,000 $500,000 $550,000$250,000

Q g gUnderstanding 2013 Taxes

New 0.9% Tax on Earned Income

New 3.8% Tax on Investment Income **

Qualified Dividends ***

Long‐Term Capital Gains ***

Pease Limitation on Itemized Deductions **

SINGLE TAXPAYER

0.9% Tax Applies on Earned Income Above the $200k Threshold

3.8% Tax Applies on Lesser of 1) Investment Income or 2) AGI Above the $200k Threshold

Qualified Dividends Taxed at 15% Qualified Dividends Taxed at 20%

Long‐Term Capital Gains Taxed at 15% Long‐Term Capital Gains Taxed at 20%

Pease Limitation on Itemized DeductionsPease Limitation on Itemized Deductions **

Phaseout of Personal Exemption **

Top Federal Income Tax Rate of 39.6% *

Personal Exemption Phased Out Above $372,500

$100,000 $150,000 $200,000

Pease Limitation on Itemized Deductions

Partial Phaseout

$550,000 $600,000 > $600k

Top Federal Income Tax Rate of 39.6%

$250,000 $300,000 $350,000 $400,000 $450,000 $500,000$0 $50,000

New 0.9% Tax on Earned Income

New 3.8% Tax on Investment Income **

Qualified Dividends ***

Long‐Term Capital Gains ***

ARRIED FILING JOINTLY (MFJ) 0.9% Tax Applies on Earned Income Above the $250k Threshold

3.8% Tax Applies on Lesser of 1) Investment Income or 2) AGI Above the $250k Threshold

Qualified Dividends Taxed at 15% Qualified Dividends Taxed at 20%

Long‐Term Capital Gains Taxed at 15% Long‐Term Capital Gains Taxed at 20%

Pease Limitation on Itemized Deductions **

Phaseout of Personal Exemption **

* Income Threshold Refers to Taxable Income

** Income Threshold Refers to Adjusted Gross Income (AGI)

*** Income Threshold refers to Taxable Income. Qualified dividends and long‐term capital gains are taxed at a federal rate of 20% for Single Taxpayers with Taxable Income above $400k, or MFJ with Taxable Income above $450k.

MA

Pease Limitation on Itemized Deductions

Partial Phaseout Personal Exemption Phased Out Above $422,500

ConclusionConclusionThe legislation passed on January 1st has taken measures to ensure that the U.S. did not encounter what many call the “fiscal cliff.” However, the countrymay not be “out of the woods” as far as fiscal obstacles are concerned. The country’s focus now turns toward the next impasse of how to close the long-termgap between tax revenues and spending promises. As previously noted, the New Year’s resolution does not explicitly address how to revise the increasinglycomplicated tax code or stymie rising entitlement spending. Both of which are crucial concerns for lawmakers charged with closing the gap.

If you would like more information on this topic, ask your Dimeo Schneider & Associates, L.L.C. investment consultant or visit our Research & Resource

23

If you would like more information on this topic, ask your Dimeo Schneider & Associates, L.L.C. investment consultant or visit our Research & ResourceCenter at www.dimeoschneider.com for a copy of a more comprehensive paper, Summary of the ‘Fiscal Cliff” Deal.

29

ACCOUNT RECONCILIATION

BENCHMARK COMPOSITION

TRAILING PERFORMANCE SUMMARY

CALENDAR YEAR PERFORMANCE SUMMARY

CurrentQuarter

YTD1

Year3

Years5

YearsSince

InceptionInception

Date

Historical Account Composite 12/31/2003

Beginning Market Value 36,333,218 32,379,401 32,379,401 27,324,359 27,575,742 16,533,579

Net Contributions -605,700 -461,640 -461,640 150,371 572,957 2,816,812

Gain/Loss 577,266 4,387,023 4,387,023 8,830,055 8,156,086 16,954,394

Ending Market Value 36,304,785 36,304,785 36,304,785 36,304,785 36,304,785 36,304,785

CurrentQuarter

YTD1

Year3

Years5

Years10

YearsSince

InceptionInception

Date

Historical Account Composite 1.57 13.50 13.50 9.66 5.09 8.23 7.40 12/31/2003

Target Asset Allocation 1.01 12.09 12.09 8.32 2.39 7.65 6.28 12/31/2003

2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

Historical Account Composite -1.56 18.01 31.50 -26.08 8.07 12.52 9.11 8.88 19.07 N/A

Target Asset Allocation 0.70 12.62 24.89 -29.09 7.98 14.67 7.25 11.64 25.23 N/A

Allocation Mandate Weight (%)

May-2012

Russell 3000 Index 32.00

Barclays Aggregate 35.00

MSCI AC World ex USA 13.00

DSA Hedge Fund Index 20.00

Concordia University-Nebraska

Endowment

December 31, 2012

30

6

Concordia University, Nebraska & Concordia Foundation, Inc.Portfolio Engineer™

7.0%

7.5%

8.0%

Expe

cted

Ret

urn

Target Allocation

12/31/2012

9/30/2012

Past Allocations

Constraint Radius = 0.45%

Cash TIPS Muni Bond

US Bond

For. Dev. Bond

HY Bond

EM Bond

LC US Equity

MC US Equity

SC US Equity

Real Estate

Int'l Equity

EM Equity

Commod. Fut.

HFs Portfolio MLPs Expected

ReturnExpected

Risk

Distance From

Target

Rebalance Required

Target 0.0% 6.0% 0.0% 7.0% 7.0% 7.0% 5.0% 12.0% 3.0% 1.0% 6.0% 9.0% 4.0% 8.0% 20.0% 5.0% 7.20% 10.98% N.A. N.A.12/31/2012 0.0% 5.9% 0.0% 7.0% 6.9% 7.0% 5.0% 11.8% 3.1% 1.0% 6.2% 9.3% 4.3% 7.7% 20.1% 4.6% 7.21% 11.05% 0.07% No9/30/2012 0.0% 6.0% 0.0% 7.1% 7.1% 7.1% 4.9% 12.0% 2.9% 1.0% 6.1% 8.8% 4.0% 8.5% 19.6% 4.9% 7.18% 10.96% 0.03% No6/30/2012 0.1% 6.2% 0.0% 7.1% 7.1% 7.1% 4.9% 11.8% 2.9% 1.0% 6.3% 8.6% 3.9% 8.0% 20.0% 4.9% 7.15% 10.88% 0.11% No3/31/2012 0.1% 10.6% 0.0% 7.9% 5.9% 5.0% 4.9% 14.5% 3.0% 2.1% 6.0% 12.1% 5.0% 7.7% 10.2% 4.9% 7.08% 11.63% 0.66% Yes

12/31/2011 0.1% 11.6% 0.0% 7.8% 4.8% 4.0% 0.0% 13.5% 2.1% 5.4% 6.3% 11.8% 8.0% 9.6% 9.6% 5.5% 7.35% 12.12% 1.15% Yes9/30/2011 2.1% 13.3% 0.0% 8.2% 5.2% 4.0% 0.0% 12.5% 1.9% 4.6% 5.5% 10.3% 7.0% 9.9% 10.2% 5.3% 6.98% 11.27% 0.36% No6/30/2011 0.0% 11.5% 0.0% 7.9% 4.7% 3.9% 0.0% 13.5% 2.2% 5.3% 6.1% 12.0% 7.8% 10.2% 9.8% 5.2% 7.33% 12.10% 1.13% Yes3/31/2011 0.1% 11.2% 0.0% 7.6% 4.6% 3.9% 0.0% 13.4% 2.2% 5.5% 5.9% 11.9% 7.6% 10.8% 9.9% 5.5% 7.35% 12.10% 1.14% Yes

12/31/2010 0.1% 11.4% 0.0% 7.7% 4.8% 3.9% 0.0% 13.1% 2.1% 5.3% 5.9% 11.9% 7.9% 10.6% 10.0% 5.4% 7.34% 12.07% 1.10% Yes9/30/2010 0.1% 10.4% 0.0% 10.3% 2.1% 7.1% 0.0% 14.8% 2.5% 4.9% 10.7% 13.5% 8.4% 10.5% 0.0% 4.9% 7.31% 13.22% 2.24% Yes6/30/2010 0.1% 11.5% 0.0% 10.9% 2.3% 7.5% 0.0% 14.6% 2.4% 4.9% 9.9% 12.7% 7.8% 10.2% 0.0% 5.2% 7.19% 12.87% 1.89% Yes3/31/2010 0.1% 7.4% 0.0% 16.9% 1.1% 4.9% 0.0% 18.0% 2.6% 5.6% 7.4% 15.5% 5.3% 9.8% 0.0% 5.1% 7.15% 12.66% 1.68% Yes

6.5%8.5% 9.5% 10.5% 11.5% 12.5% 13.5%

Expected Risk (Standard Deviation)

31

December 31, 2012 September 30, 2012

September 30, 2012December 31, 2012

Market Value($)

Allocation(%)

Target(%)

TIPS 2,196,441 6.0 6.0

Broad Domestic Fixed 2,564,923 7.1 7.0

High Yield Fixed 2,584,675 7.1 7.0

International Fixed Hedged 2,593,510 7.1 7.0

Emerging Markets Debt 1,764,397 4.9 5.0

Large Cap 4,355,101 12.0 12.0

Mid Cap 1,069,019 2.9 3.0

Small Cap 358,794 1.0 1.0

International Equity 3,198,014 8.8 9.0

Emerging Markets 1,444,545 4.0 4.0

Real Estate Domestic 2,199,819 6.1 6.0

S&P Developed Ex-U.S. Property - - 0.0

Commodities 3,105,820 8.5 8.0

MLP 1,764,803 4.9 5.0

Hedge Funds 7,125,561 19.6 20.0

Cash/Equivalents 7,797 0.0 0.0

Total Fund 36,333,218 100.0 100.0

Market Value($)

Allocation(%)

Target(%)

TIPS 2,130,613 5.9 6.0

Broad Domestic Fixed 2,554,135 7.0 7.0

High Yield Fixed 2,530,499 7.0 7.0

International Fixed Hedged 2,521,924 6.9 7.0

Emerging Markets Debt 1,829,577 5.0 5.0

Large Cap 4,297,242 11.8 12.0

Mid Cap 1,111,664 3.1 3.0

Small Cap 368,926 1.0 1.0

International Equity 3,377,719 9.3 9.0

Emerging Markets 1,549,301 4.3 4.0

Real Estate Domestic 2,255,704 6.2 6.0

Commodities 2,808,553 7.7 8.0

MLP 1,684,524 4.6 5.0

Hedge Funds 7,279,884 20.1 20.0

Cash/Equivalents 4,520 0.0 0.0

Total Fund 36,304,785 100.0 100.0


Endowment

December 31, 2012

32

CurrentQuarter

YTD1

Year3

Years5

Years10

YearsSince

InceptionInception

Date

Historical Account Composite 1.57 13.50 13.50 9.66 5.09 8.23 7.40 12/31/2003

Target Asset Allocation 1.01 12.09 12.09 8.32 2.39 7.65 6.28 12/31/2003


Endowment

December 31, 2012

33

Up Market Capture

Down Market Capture

Concordia University-NebraskaVersus Target Asset Allocation

As of December 31, 2012

34

1Year

3Years

5Years

7Years

10Years

Return 13.50 9.66 5.09 6.54 8.23

Standard Deviation 7.15 11.48 14.66 12.89 18.06

Downside Risk 4.24 6.92 10.13 8.78 11.06

vs. Target Asset Allocation

Alpha -0.05 0.83 2.67 1.65 1.17

Beta 1.12 1.06 0.99 0.99 1.04

Consistency 66.67 61.11 66.67 59.52 54.17

Information Ratio 0.87 0.57 1.10 0.74 0.11

M-Squared -0.21 0.64 2.67 1.64 -1.82

R-Squared 0.96 0.96 0.97 0.97 0.43

Tracking Error 1.53 2.30 2.36 2.18 13.64

Treynor Ratio 0.12 0.09 0.06 0.06 0.08

vs. Target vs. AA

Alpha 2.01 N/A N/A N/A N/A

Beta 1.02 N/A N/A N/A N/A

Consistency 83.33 N/A N/A N/A N/A

Information Ratio 3.18 N/A N/A N/A N/A

M-Squared 2.12 N/A N/A N/A N/A

R-Squared 0.99 N/A N/A N/A N/A

Tracking Error 0.70 N/A N/A N/A N/A

Treynor Ratio 0.13 N/A N/A N/A N/A

vs. Citigroup 3 Month T-Bill

Sharpe Ratio 1.80 0.86 0.38 0.43 0.43

Concordia University-NebraskaHistorical Account Composite


Calculation based on monthly periodicity.

35

5 YEARS3 YEARS

10 YEARS7 YEARS


Endowment

December 31, 2012

36

vs Benchmark3

Years

vs Benchmark5

Years

vs Peer Group3

Years

vs Peer Group5

Years

Alpha3

Years

Alpha5

Years

Consistency5

Years

ExpenseRatio

Firm/StrategyEvaluation

Status

Vanguard Inflation-Protected Secs Adm Discuss

Loomis Sayles Bond Instl Discuss

PIMCO Total Return Instl Pass

JPMorgan High Yield Select Discuss

PIMCO Foreign Bond (USD-Hedged) I Pass

PIMCO Emerging Local Bd Fd Inst Discuss

Dodge & Cox Stock Discuss

iShares Core S&P 500 ETF Pass

iShares Russell 1000 Growth Index Pass

iShares Core S&P Mid-Cap ETF Pass

DFA US Small Cap Value I Pass

Conestoga Small Cap Pass

American Funds EuroPacific Gr F-2 N/A N/A N/A N/A N/A

Aberdeen Emerging Markets Instl Fd Instl Pass

Nuveen Real Estate Secs I Pass

PIMCO Commodity Real Ret Strat Instl N/A N/A N/A N/A

Kayne Anderson MLP Invst Co N/A N/A N/A N/A

Tortoise Energy Infrastructure Corp. N/A N/A N/A N/A

Grosvenor Inst'l Partners, L.P. N/A N/A N/A N/A

Magnitude International N/A N/A N/A N/A

Concordia University-NebraskaManager Evaluation Summary


37

Concordia University-NebraskaManager Evaluation Summary


Outperform Benchmark

Underperform Benchmark

vs Benchmark

Legend For Overall Criteria

1-50 Percentile

51-100 Percentile

vs Peer Group

50% or greater

Lower than 50%

Consistency

Lower than category average

Higher than category average

Expense Ratio

Subjective*

Subjective*

Firm/Strategy Evaluation

Discuss: Trailed 4 or more categories or recognized within Firm/Strategy Evaluation category

Status

Positive Alpha

Negative Alpha

Alpha

* Recognition within Firm/Strategy Evaluation category the result of a FLASH memo issued by DiMeo Schneider Investment Committee based on qualitative factors.

38

Fund &Cat Avg

Exp Ratio

Allocation

MarketValue

($)%

Performance(%)

CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009

Total Plan

Historical Account Composite 36,304,785 100.0 1.6 13.5 13.5 9.7 5.1 8.2 -1.6 18.0 31.5

Target Asset Allocation 1.0 12.1 12.1 8.3 2.4 7.6 0.7 12.6 24.9

CPI + 5.0% 0.4 6.8 6.8 7.2 6.9 7.5 8.1 6.6 7.9

TIPS

Vanguard Inflation-Protected Secs Adm 2,130,613 5.9 0.6 6.9 6.9 8.8 6.8 N/A 13.3 6.3 11.0 0.11

Barclays U.S. Treasury: U.S. TIPS 0.7 7.0 7.0 8.9 7.0 6.7 13.6 6.3 11.4

IM U.S. TIPS (MF) Median 0.6 6.4 6.4 8.3 6.4 6.1 11.9 5.9 10.3 0.83

Vanguard Inflation-Protected Secs Adm Rank 44 25 25 19 30 N/A 12 29 32

Broad Domestic Fixed

Loomis Sayles Bond Instl 1,814,220 5.0 3.1 15.1 15.1 10.7 7.8 10.2 3.8 13.6 37.2 0.63

Barclays Aggregate 0.2 4.2 4.2 6.2 5.9 5.2 7.8 6.5 5.9

IM U.S. Broad Market Core Fixed Income (MF) Median 0.7 6.9 6.9 7.0 6.0 5.0 6.5 7.5 13.3 0.92

Loomis Sayles Bond Instl Rank 2 1 1 1 9 1 93 1 1

PIMCO Total Return Instl 739,915 2.0 1.2 10.4 10.4 7.8 8.4 6.8 4.2 8.9 13.9 0.46

Barclays Aggregate 0.2 4.2 4.2 6.2 5.9 5.2 7.8 6.5 5.9

IM U.S. Broad Market Core Fixed Income (MF) Median 0.7 6.9 6.9 7.0 6.0 5.0 6.5 7.5 13.3 0.92

PIMCO Total Return Instl Rank 18 5 5 22 5 4 90 25 47

High Yield Fixed

JPMorgan High Yield Select 2,530,499 7.0 3.1 14.8 14.8 10.6 9.2 10.0 2.6 14.7 48.5 0.86

Barclays US Corp: High Yield 3.3 15.8 15.8 11.9 10.3 10.6 5.0 15.1 58.2

IM U.S. High Yield Bonds (MF) Median 2.9 14.1 14.1 10.3 7.8 8.7 2.8 13.6 46.5 1.21

JPMorgan High Yield Select Rank 38 37 37 41 15 11 53 30 39

International Fixed Hedged

PIMCO Foreign Bond (USD-Hedged) I 2,521,924 6.9 1.9 11.2 11.2 9.0 8.5 6.5 6.8 9.2 19.0 0.50

Barclays Global Aggregate Ex USD (Hedged) 1.3 6.5 6.5 4.6 4.8 4.4 3.9 3.3 4.4

IM International Fixed Income (MF) Median 0.2 6.7 6.7 5.3 5.4 5.8 3.0 6.4 9.0 1.08

PIMCO Foreign Bond (USD-Hedged) I Rank 27 17 17 4 16 27 7 24 11

Concordia University-NebraskaEndowment


39



Fund &Cat Avg

Exp Ratio

Allocation

MarketValue

($)%

Performance(%)

CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009

Emerging Market Debt

PIMCO Emerging Local Bd Fd Inst 1,829,577 5.0 3.7 15.8 15.8 9.9 8.9 N/A -0.8 15.6 29.3 0.90

JPM GBI-EM Global Diversified 4.1 16.8 16.8 9.9 8.9 12.3 -1.8 15.7 22.0

IM Emerging Markets Debt (MF) Median 3.6 18.7 18.7 12.1 9.7 11.5 5.4 12.7 35.1 1.26

PIMCO Emerging Local Bd Fd Inst Rank 43 86 86 89 75 N/A 84 13 84

Large Cap

Dodge & Cox Stock 1,462,448 4.0 2.9 22.0 22.0 9.9 -0.2 7.3 -4.1 13.5 31.3 0.52

Russell 1000 Value Index 1.5 17.5 17.5 10.9 0.6 7.4 0.4 15.5 19.7

IM U.S. Large Cap Value Equity (MF) Median 1.3 15.6 15.6 8.6 -0.1 6.5 -2.2 12.9 24.2 1.25

Dodge & Cox Stock Rank 11 1 1 21 54 24 71 42 15

iShares S&P 500 Index 1,426,600 3.9 -0.4 15.9 15.9 10.8 1.6 7.0 2.0 15.0 26.4 0.07

S&P 500 -0.4 16.0 16.0 10.9 1.7 7.1 2.1 15.1 26.5

IM S&P 500 Index (MF) Median -0.5 15.5 15.5 10.3 1.2 6.7 1.6 14.6 26.1 0.63

iShares S&P 500 Index Rank 11 11 11 8 8 6 10 9 17

iShares Russell 1000 Growth Index 1,408,194 3.9 -1.4 15.0 15.0 11.1 3.0 7.3 2.5 16.5 36.9 0.20

Russell 1000 Growth Index -1.3 15.3 15.3 11.4 3.1 7.5 2.6 16.7 37.2

IM U.S. Large Cap Growth Equity (MF) Median -1.3 14.9 14.9 9.0 1.3 6.6 -1.8 15.1 34.6 1.33

iShares Russell 1000 Growth Index Rank 53 50 50 15 18 30 12 34 39

Mid Cap

iShares S&P MidCap 400 Index 1,111,664 3.1 3.6 17.8 17.8 13.4 5.0 10.4 -1.9 26.4 37.2 0.15

S&P MidCap 400 3.6 17.9 17.9 13.6 5.1 10.5 -1.7 26.6 37.4

IM U.S. Mid Cap Core Equity (MF) Median 2.9 16.0 16.0 10.8 1.4 8.5 -4.8 23.0 33.6 1.32

iShares S&P MidCap 400 Index Rank 36 34 34 9 7 17 30 12 35

Small Cap

DFA US Small Cap Value I 189,872 0.5 4.8 21.7 21.7 13.8 4.5 11.3 -7.5 30.9 33.6 0.52

Russell 2000 Value Index 3.2 18.1 18.1 11.6 3.5 9.5 -5.5 24.5 20.6

IM U.S. Small Cap Value Equity (MF) Median 3.8 16.9 16.9 11.8 4.5 9.7 -4.8 25.8 30.3 1.53

DFA US Small Cap Value I Rank 21 10 10 10 52 9 81 10 38

Conestoga Small Cap 179,054 0.5 0.4 10.5 10.5 12.7 6.0 9.9 4.6 24.0 29.1 1.10

Russell 2000 Growth Index 0.4 14.6 14.6 12.8 3.5 9.8 -2.9 29.1 34.5

IM U.S. Small Cap Growth Equity (MF) Median -0.6 12.5 12.5 12.4 2.1 8.8 -3.4 27.7 33.4 1.55

Conestoga Small Cap Rank 31 68 68 44 5 24 5 75 74

40



Fund &Cat Avg

Exp Ratio

Allocation

MarketValue

($)%

Performance(%)

CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009

International Equity

American Funds EuroPacific Gr F-2 3,377,719 9.3 5.6 19.5 19.5 4.3 N/A N/A -13.4 9.7 39.5 0.58

MSCI EAFE Index 6.6 17.9 17.9 4.0 -3.2 8.7 -11.7 8.2 32.5

IM International Large Cap Core Equity (MF) Median 7.2 18.3 18.3 3.6 -3.5 8.0 -12.4 7.4 29.7 1.36

American Funds EuroPacific Gr F-2 Rank 84 28 28 25 N/A N/A 72 24 13

Emerging Markets

Aberdeen Emerging Markets Instl Fd Instl 1,549,301 4.3 7.3 26.2 26.2 12.7 8.6 N/A -11.0 27.6 76.6 1.03

MSCI Emerging Markets Index 5.6 18.6 18.6 5.0 -0.6 16.9 -18.2 19.2 79.0

IM Emerging Markets Equity (MF) Median 6.1 18.7 18.7 4.9 -2.1 15.3 -19.5 18.3 73.6 1.63

Aberdeen Emerging Markets Instl Fd Instl Rank 23 8 8 2 1 N/A 4 7 36

Real Estate Domestic

Nuveen Real Estate Secs I 2,255,704 6.2 2.5 18.3 18.3 18.6 7.2 13.4 7.9 30.6 30.5 1.04

FTSE NAREIT Equity REIT Index 2.6 18.1 18.1 17.8 5.4 11.6 8.3 27.9 28.0

IM Real Estate Sector (MF) Median 2.2 16.8 16.8 17.1 5.0 11.1 7.9 27.5 29.0 1.41

Nuveen Real Estate Secs I Rank 23 23 23 13 9 2 50 13 28

Commodities

PIMCO Commodity Real Ret Strat Instl 2,808,553 7.7 -5.8 5.3 5.3 6.5 -0.9 7.7 -7.6 24.1 39.9 0.74

Dow Jones-UBS Commodity Index -6.3 -1.1 -1.1 0.1 -5.2 4.1 -13.3 16.8 18.9

MLP

Kayne Anderson MLP Invst Co 840,754 2.3 -2.3 5.8 5.8 13.9 9.2 N/A 3.0 35.4 69.9 2.40

Alerian MLP Index -3.4 4.8 4.8 17.5 12.6 16.2 13.9 35.9 76.4

ALPS Alerian MLP ETF -2.2 2.2 2.2 N/A N/A N/A 10.1 N/A N/A

Tortoise Energy Infrastructure Corp. 843,770 2.3 -5.1 0.2 0.2 13.4 10.1 N/A 10.8 31.5 99.2 1.54

Alerian MLP Index -3.4 4.8 4.8 17.5 12.6 16.2 13.9 35.9 76.4

ALPS Alerian MLP ETF -2.2 2.2 2.2 N/A N/A N/A 10.1 N/A N/A

41



Fund &Cat Avg

Exp Ratio

Allocation

MarketValue

($)%

Performance(%)

CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009

Hedge Funds

Grosvenor Inst'l Partners, L.P. 3,715,447 10.2 2.3 8.4 8.4 3.6 0.0 4.4 -3.8 6.7 13.9 1.25

HFRI Fund of Funds Composite Index 1.8 5.3 5.3 1.6 -1.7 3.7 -5.7 5.7 11.5

Magnitude International 3,564,437 9.8 2.0 7.6 7.6 6.3 3.4 7.3 4.7 6.7 25.7 1.00

HFRI Fund of Funds Composite Index 1.8 5.3 5.3 1.6 -1.7 3.7 -5.7 5.7 11.5

Cash/Equivalents

Cash & Equivalents 4,520 0.0

42

FUND INFO

HISTORICAL PERFORMANCE

FUND OBJECTIVE

QUARTERLY COMMENTS - FUND

The fund seeks to provide inflation protection and income consistent with investment in inflation-indexed securities. It primarily invests in inflation-indexed bonds issued by the U.S. government. It may invest in bonds of any maturity, though the fund typically maintains a dollar-weightedmaturity of seven to 10 years. Up to 20% of the assets may be invested in non-inflation-indexed securities, including investment grade corporatedebt and U.S. government and agency bonds. At a minimum, all bonds purchased will be rated “investment grade.”

Product Name Vanguard Infl-Prot;Adm (VAIPX)

Fund Family Vanguard Group Inc

Ticker VAIPX

Peer Group IM U.S. TIPS (MF)

Benchmark Barclays Cap US Treasury: US TIPS

Fund Inception 06/10/2005

Portfolio Manager Gemma Wright-Casparius

Total Assets $16,011 Million

Total Assets Date 12/31/2012

Gross Expense 0.11%

Net Expense 0.11%

Turnover 28%

The Barclays U.S. Treasury Inflation Protected Index returned 2.1% for the period. The Inflation-Protected Securities Fund closely tracked theTIPS index and outperformed its peer group during the quarter. The fund invests almost exclusively in TIPS, and its performance can vary fromthat of competing funds that may hold other types of securities.During the quarter, 10-year break-even rates widened from 2.13% to 2.42% as inflationary concerns increased following the Federal Reserve'sannouncement of a third round of QE.

J. Rondini, Senior Investment Analyst, DiMeo Schneider & Associates, L.L.C. 3Q12

CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

Vanguard Infl-Protected Secs Adm 0.62 6.90 6.90 8.79 6.79 N/A 13.29 6.31 10.96 -2.78 11.69 0.52 N/A N/A N/A N/A

Barclays Cap US Treasury: US TIPS 0.69 6.98 6.98 8.90 7.04 6.66 13.56 6.31 11.41 -2.35 11.63 0.49 2.84 8.46 8.39 16.56

IM U.S. TIPS (MF) Median 0.57 6.41 6.41 8.26 6.38 6.11 11.93 5.87 10.26 -2.56 10.62 -0.05 2.06 7.58 7.61 16.07

Vanguard Infl-Protected Secs Adm Rank 44 25 25 19 30 N/A 12 29 32 56 7 17 N/A N/A N/A N/A

Vanguard Infl-Protected Secs Adm

December 31, 2012

43

PEER GROUP ANALYSIS 3 YEAR ROLLING PEER GROUP PERCENTILE RANKING

RELATIVE PERFORMANCE TO INDEXRISK AND RETURN (01/01/08-12/31/12)

CurrentQuarter

1Year

3Years

5Years

Vanguard Infl-Protected Secs Adm 0.6 (44) 6.9 (25) 8.8 (19) 6.8 (30)

Barclays Cap US Treasury: US TIPS 0.7 (34) 7.0 (24) 8.9 (14) 7.0 (20)

5th Percentile 1.9 10.0 9.4 7.6

1st Quartile 0.8 6.9 8.6 6.8

Median 0.6 6.4 8.3 6.4

3rd Quartile 0.5 5.6 7.5 5.5

95th Percentile 0.0 3.2 4.7 2.1


December 31, 2012

44

PORTFOLIO CHARACTERISTICSRISK CHARACTERISTICS

SECTOR EXPOSURE (%)CREDIT QUALITY DISTRIBUTION (%)

1Year

3Years

5Years

10Years

Return 6.90 8.79 6.79 N/A

Standard Deviation 3.83 4.35 7.29 N/A

vs. Barclays Cap US Treasury: US TIPS

Tracking Error 0.27 0.41 0.65 N/A

Alpha 0.05 -0.08 -0.23 N/A

Beta 0.98 1.00 1.00 N/A

R-Squared 1.00 0.99 0.99 N/A

Consistency 33.33 47.22 46.67 N/A

vs. 90 Day U.S. Treasury Bill

Sharpe Ratio 1.74 1.94 0.87 N/A

Portfolio Benchmark

Effective Duration 8.5 5.6

Avg. Maturity 9.4 8.9

Current Yield 3.8 1.2


December 31, 2012

45

FUND INFO


FUND OBJECTIVE


This fund is managed to take full advantage of the 35% limit on below investment-grade bonds, which tends to generate a higher risk/rewardprofile. In addition, management is willing to take on added interest rate risk through obtaining longer-duration bonds in order to gain higher yields.To ease some of this interest rate risk, the fund is structured with counter cyclical elements. In doing so, it will utilize convertible bonds, municipalbonds, preferred stocks and foreign corporate and government bonds, in addition to the domestic corporate bonds which make up the majority of

the fund.

Product Name Loomis Sayles:Bd;Inst (LSBDX)

Fund Family Loomis Sayles & Company LP

Ticker LSBDX

Peer Group IM U.S. Broad Market Core Fixed Income (MF)

Benchmark Barclays Aggregate


Portfolio Manager Fuss/Stokes/Eagan



Gross Expense 0.63%

Net Expense 0.63%

Turnover 20%

The fund’s investment grade financial holdings and an out of benchmark allocation to high yield and non-US dollar denominated securities droverelative outperformance.Positions in the euro, Canadian dollar, New Zealand dollar and British pound all helped results as they appreciated vs. the US dollar.Within the high yield sector, the fund’s allocations to industrial, financial, and utility securities all helped results.A large underweight to US Treasuries helped results as they underperformed both corporate and mortgage bonds.An overweight to the defensive utility sector within investment grade fixed hurt results as investors favored higher yielding issues.The fund’s technology holdings detracted from results as they did not keep pace with other industries.

M. O'Neill, Analyst, DiMeo Schneider & Associates, L.L.C. 3Q12

CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

Loomis Sayles Bond Instl 3.06 15.13 15.13 10.71 7.79 10.18 3.76 13.58 37.19 -21.82 8.53 11.29 4.28 11.30 29.18 13.34

Barclays Aggregate 0.21 4.21 4.21 6.19 5.95 5.18 7.84 6.54 5.93 5.24 6.97 4.34 2.43 4.34 4.11 10.27

IM U.S. Broad Market Core Fixed Income (MF) Median 0.69 6.87 6.87 6.96 6.02 5.00 6.54 7.50 13.31 -3.68 5.25 3.94 1.82 4.02 4.36 8.58

Loomis Sayles Bond Instl Rank 2 1 1 1 9 1 93 1 1 97 2 1 2 1 1 1

Loomis Sayles Bond Instl

December 31, 2012

46



CurrentQuarter

1Year

3Years

5Years

Loomis Sayles Bond Instl 3.1 (2) 15.1 (1) 10.7 (1) 7.8 (9)

Barclays Aggregate 0.2 (85) 4.2 (87) 6.2 (76) 5.9 (53)

5th Percentile 1.7 10.3 9.1 8.2

1st Quartile 1.0 8.2 7.6 6.9

Median 0.7 6.9 7.0 6.0

3rd Quartile 0.4 5.4 6.2 5.3

95th Percentile 0.0 3.5 4.9 3.0


December 31, 2012

47



1Year

3Years

5Years

10Years

Return 15.13 10.71 7.79 10.18

Standard Deviation 5.31 6.96 12.23 9.59

vs. Barclays Aggregate

Tracking Error 5.76 7.47 11.09 8.47

Alpha 16.14 11.98 -0.98 3.57

Beta -0.18 -0.15 1.59 1.31

R-Squared 0.00 0.00 0.21 0.23

Consistency 75.00 58.33 58.33 65.83


Sharpe Ratio 2.68 1.49 0.63 0.88

Portfolio Benchmark





December 31, 2012

48

FUND INFO


FUND OBJECTIVE


PIMCO seeks current income consistent with preservation of capital. The process begins with a top-down review of the global economy andinterest rates. Management looks at the most likely near term scenario with regard to interest rate volatility, yield curve shape, and credit trends.

Once the larger trends are established, they focus on selecting high-quality fixed income securities through the use of proprietary research.

Product Name PIMCO:Tot Rtn;Inst (PTTRX)

Fund Family PIMCO

Ticker PTTRX

Peer Group IM U.S. Broad Market Core Fixed Income (MF)

Benchmark Barclays Aggregate


Portfolio Manager William H. Gross



Gross Expense 0.46%

Net Expense 0.46%

Turnover 584%

The fund outperformed in the third quarter’s “risk on” environment that resulted from further quantitative easing programs announced by theFederal Reserve and the European Central Bank.The fund remains underweight to government-related securities, and is positioned with an overweight to TIPS, an underweight to nominaltreasuries, and an overweight to the “belly of the curve” (6-10 year maturities) while being underweight short and long term maturities.The fund is positioned with an underweight position to investment grade credit, but remains overweight to financials due to 15 of the largest 19U.S. banks passing PIMCO’s most stringent (and unlikely) stress testing scenario, which includes a 13% unemployment rate, a 50% drop inequity markets, and a 21% reduction in home prices.Although the fund is underweight credit, PIMCO views the fund’s tactical positions in municipal bonds and “Build America Bonds” as substitutes to credit that are trading at more attractive yield spreads above treasuries than other traditional investment grade credits.The fund’s foreign holdings remain in Canadian, Mexican and Brazilian issues, but the fund also started purchasing Italian sovereign bondsduring the quarter due to the ECB’s support for euro-denominated sovereign bonds.

A.Novara, Research Analyst, DiMeo Schneider & Associates, L.L.C. 3Q12

CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

PIMCO Total Return Instl 1.16 10.35 10.35 7.76 8.36 6.82 4.16 8.86 13.87 4.82 9.08 3.99 2.88 5.14 5.57 10.21

Barclays Aggregate 0.21 4.21 4.21 6.19 5.95 5.18 7.84 6.54 5.93 5.24 6.97 4.34 2.43 4.34 4.11 10.27

IM U.S. Broad Market Core Fixed Income (MF) Median 0.69 6.87 6.87 6.96 6.02 5.00 6.54 7.50 13.31 -3.68 5.25 3.94 1.82 4.02 4.36 8.58

PIMCO Total Return Instl Rank 18 5 5 22 5 4 90 25 47 13 1 47 4 12 28 10

PIMCO Total Return Instl

December 31, 2012

49



CurrentQuarter

1Year

3Years

5Years

PIMCO Total Return Instl 1.2 (18) 10.4 (5) 7.8 (22) 8.4 (5)

Barclays Aggregate 0.2 (85) 4.2 (87) 6.2 (76) 5.9 (53)

5th Percentile 1.7 10.3 9.1 8.2

1st Quartile 1.0 8.2 7.6 6.9

Median 0.7 6.9 7.0 6.0

3rd Quartile 0.4 5.4 6.2 5.3

95th Percentile 0.0 3.5 4.9 3.0


December 31, 2012

50



1Year

3Years

5Years

10Years

Return 10.35 7.76 8.36 6.82


vs. Barclays Aggregate

Tracking Error 1.43 2.70 2.84 2.12

Alpha 5.68 2.97 2.94 1.73

Beta 1.06 0.76 0.90 0.97

R-Squared 0.67 0.32 0.55 0.72

Consistency 91.67 75.00 73.33 69.17


Sharpe Ratio 3.96 2.32 1.80 1.22

Portfolio Benchmark





December 31, 2012

51

FUND INFO


FUND OBJECTIVE


The fund utilizes a bottom-up, fundamental, value-oriented approach to analyze the issuer's business prospectus, management, capitalrequirements, capital structure, enterprise value, and security structure and covenants. Credit analysts focusing solely on high yield havesignificant influence on buy/sell decisions, industry weighting, and risk profile within an industry. The analysts keep a performance rating on eachindustry they follow, which determines relative weightings in the portfolio. Relative positions within each industry in terms of credit quality alsoresult from analyst ratings. Management may shift from weaker to stronger credits and from cyclical to non-cyclical sectors if they believe the

economic environment will weaken and vice versa if they believe the economy will strengthen.

Product Name JPMorgan:High Yield;Sel (OHYFX)

Fund Family JPMorgan Funds

Ticker OHYFX

Peer Group IM U.S. High Yield Bonds (MF)

Benchmark Barclays US Corp: High Yield


Portfolio Manager Morgan/Shanahan/Gibson



Gross Expense 1.10%

Net Expense 0.86%

Turnover 41%

During the third quarter, security selection in the basic materials and utilities sectors detracted. At the industry level, an underweight position toutilities issuers along with an overweight position in transportation credits also negatively impacted returns.On the positive side, security selection in the capital goods, communications, consumer cyclicals, consumer non-cyclicals, energy and financialservices sectors contributed positively. At the industry level, underweighting basic materials, capital goods and consumer non-cyclicals issuerswas also positive.


CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

JPMorgan High Yield Select 3.14 14.81 14.81 10.56 9.22 9.99 2.65 14.67 48.45 -22.54 2.18 12.80 3.04 11.31 26.10 -1.09

Barclays US Corp: High Yield 3.29 15.81 15.81 11.86 10.34 10.62 4.98 15.12 58.21 -26.16 1.87 11.86 2.74 11.14 28.96 -1.37

IM U.S. High Yield Bonds (MF) Median 2.88 14.10 14.10 10.29 7.79 8.74 2.79 13.60 46.46 -25.30 1.73 9.76 2.71 9.70 24.01 -0.54

JPMorgan High Yield Select Rank 38 37 37 41 15 11 53 30 39 29 37 6 41 18 35 57

JPMorgan High Yield Select

December 31, 2012

52



CurrentQuarter

1Year

3Years

5Years

JPMorgan High Yield Select 3.1 (38) 14.8 (37) 10.6 (41) 9.2 (15)

Barclays US Corp: High Yield 3.3 (30) 15.8 (23) 11.9 (7) 10.3 (4)

5th Percentile 4.2 18.3 12.0 9.9

1st Quartile 3.4 15.6 11.0 8.7

Median 2.9 14.1 10.3 7.8

3rd Quartile 1.9 10.6 9.0 6.1

95th Percentile 1.2 7.3 5.9 3.4


December 31, 2012

53



1Year

3Years

5Years

10Years

Return 14.81 10.56 9.22 9.99


vs. Barclays US Corp: High Yield

Tracking Error 0.56 0.86 3.59 2.69

Alpha -0.09 -1.17 0.84 1.28

Beta 0.95 1.00 0.80 0.81

R-Squared 0.98 0.99 0.96 0.96

Consistency 16.67 36.11 40.00 45.83


Sharpe Ratio 3.79 1.44 0.79 0.93

Portfolio Benchmark





December 31, 2012

54

FUND INFO


FUND OBJECTIVE


The fund takes an all-encompassing approach toward international fixed-income investing. Top-down work begins with a 3-5 year outlook for theglobal economy and interest rates followed by using a country-bond allocation model to help determine which countries have the best risk adjusted

yield. The bottom-up strategy focuses on credit research, stressing fundamental and in depth analysis of all potential holdings.

Product Name PIMCO:For Bd (DH);Inst (PFORX)

Fund Family PIMCO

Ticker PFORX

Peer Group IM International Fixed Income (MF)

Benchmark Barclays Global Aggregate Ex USD (Hedged)


Portfolio Manager Scott A. Mather



Gross Expense 0.50%

Net Expense 0.50%

Turnover 355%Both interest rate strategies and sector strategies drove the fund’s strong relative performance during the third quarter, with the portfolio’sunderweight duration exposure to Japan contributing to performance, as well as overweight duration exposures to Europe, the United Kingdom,and the U.S. also contributing meaningfully.Positions in both non-agency and agency mortgaged backed securities, as well as asset backed securities, drove the fund’s strong performancefrom its sector strategies.The fund remains duration underweight to government bonds, which is the benchmark’s sole focus.


CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

PIMCO Foreign Bond (USD-Hedged) I 1.88 11.19 11.19 9.04 8.55 6.53 6.77 9.19 19.04 -2.36 3.98 2.94 5.72 6.65 3.57 7.66

Barclays Global Aggregate Ex USD (Hedged) 1.29 6.46 6.46 4.55 4.77 4.44 3.94 3.28 4.43 5.75 4.27 3.19 5.42 5.26 2.42 6.85

IM International Fixed Income (MF) Median 0.15 6.69 6.69 5.29 5.39 5.82 2.98 6.44 9.00 2.24 9.29 5.47 -8.08 10.81 17.63 19.93

PIMCO Foreign Bond (USD-Hedged) I Rank 27 17 17 4 16 27 7 24 11 81 83 82 4 80 85 77

PIMCO Foreign Bond (USD-Hedged) I

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55



CurrentQuarter

1Year

3Years

5Years

PIMCO Foreign Bond (USD-Hedged) I 1.9 (27) 11.2 (17) 9.0 (4) 8.5 (16)

Barclays Global Aggregate Ex USD (Hedged) 1.3 (39) 6.5 (55) 4.6 (62) 4.8 (63)

5th Percentile 3.7 15.4 9.0 9.6

1st Quartile 2.2 10.4 7.8 7.9

Median 0.2 6.7 5.3 5.4

3rd Quartile -1.1 4.7 3.7 4.1

95th Percentile -2.5 1.7 1.6 3.1


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56



1Year

3Years

5Years

10Years

Return 11.19 9.04 8.55 6.53


vs. Barclays Global Aggregate Ex USD (Hedged)

Tracking Error 1.80 2.08 3.95 2.93

Alpha 6.61 3.92 3.42 2.07

Beta 0.68 1.09 1.06 1.00

R-Squared 0.28 0.61 0.33 0.41

Consistency 75.00 75.00 70.00 62.50


Sharpe Ratio 5.21 2.62 1.60 1.19

Portfolio Benchmark



Current Yield 8.9


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57

FUND INFO


FUND OBJECTIVE


The fund takes a conservative approach toward emerging market fixed-income investing. Top-down work begins with a 3-5 year outlook for theglobal economy and interest rates followed by using a country-bond allocation model to help determine which countries have the best risk adjustedyield. Country selection also takes into account fiscal and reserve positions, relationship to external trends, and the potential for adverse technical

conditions. The bottom-up strategy focuses on credit research, stressing fundamental and in depth relative value analysis of all potential holdings.

Product Name PIMCO:Em Local Bd;Inst (PELBX)

Fund Family PIMCO

Ticker PELBX

Peer Group IM Emerging Markets Debt (MF)

Benchmark JPM GBI-EM Global Diversified


Portfolio Manager Michael Gomez



Gross Expense 0.90%

Net Expense 0.90%

Turnover 22%

The fund underperformed modestly during the quarter as overweights to Brazil and Mexico underperformed modestly, and underweights tostrong performers Turkey and Hungary detracted from performance.Chinese exposure was scaled back slightly to reflect lower growth expectations.The fund remains overweight to local duration as yields are expected to decline as EM inflation concerns abate.An overweight to EM currencies is the result of PIMCO’s perception of weakness in the U.S. dollar and Euro given recent announcements of further quantitative easing.EM corporates continue to remain attractive in some areas when compared to their sovereign counterparts, specifically in areas like Russiawhere barriers to local market access exist.


CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

PIMCO Emerging Local Bd Fd Inst 3.69 15.81 15.81 9.91 8.93 N/A -0.78 15.55 29.27 -10.66 12.29 N/A N/A N/A N/A N/A

JPM GBI-EM Global Diversified 4.13 16.76 16.76 9.89 8.94 12.30 -1.75 15.68 21.98 -5.22 18.11 15.22 6.27 22.97 16.92 N/A

IM Emerging Markets Debt (MF) Median 3.59 18.71 18.71 12.08 9.72 11.52 5.41 12.66 35.14 -18.37 4.82 11.02 11.40 12.61 30.39 12.02

PIMCO Emerging Local Bd Fd Inst Rank 43 86 86 89 75 N/A 84 13 84 6 1 N/A N/A N/A N/A N/A

PIMCO Emerging Local Bd Fd Inst

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58



CurrentQuarter

1Year

3Years

5Years

PIMCO Emerging Local Bd Fd Inst 3.7 (43) 15.8 (86) 9.9 (89) 8.9 (75)

JPM GBI-EM Global Diversified 4.1 (22) 16.8 (78) 9.9 (89) 8.9 (75)

5th Percentile 5.2 23.3 14.4 11.4

1st Quartile 4.0 19.8 12.8 10.5

Median 3.6 18.7 12.1 9.7

3rd Quartile 3.3 16.9 11.3 8.9

95th Percentile 2.3 14.0 7.4 5.1


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59



1Year

3Years

5Years

10Years

Return 15.81 9.91 8.93 N/A


vs. JPM GBI-EM Global Diversified


Alpha 0.63 0.42 -0.25 N/A

Beta 0.90 0.96 1.04 N/A

R-Squared 0.99 0.99 0.98 N/A

Consistency 33.33 38.89 41.67 N/A



Portfolio Benchmark

Effective Duration 4.9

Avg. Maturity 6.7

Current Yield 5.7


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60

FUND INFO


FUND OBJECTIVE


The portfolio is built based on Dodge & Cox's fundamental research effort, a three-to-five year time horizon, and a strong price discipline. It investsin companies that appear to be temporarily undervalued by the stock market but have a favorable outlook for long-term growth, while focusing onthe underlying financial condition and prospects of individual companies, including future earnings, cash flow, and dividends. Other factors,including financial strength, economic condition, competitive advantage, and quality of the business franchise are weighed against valuation in

selecting individual securities. By prospectus, the fund can invest up to 20% of its assets in U.S. dollar-denominated foreign securities.

Product Name Dodge & Cox Stock (DODGX)

Fund Family Dodge & Cox

Ticker DODGX

Peer Group IM U.S. Large Cap Value Equity (MF)

Benchmark Russell 1000 Value Index


Portfolio Manager Team Managed

Total Assets


Gross Expense 0.52%

Net Expense 0.52%

Turnover 16%

Positioning within information technology contributed positively during the fourth quarter. Finland-based Nokia surged 53% amid favorable newsfor its new Lumina smartphone and optimism over the company’s expansion plans in China.Within financials, higher quality lending-oriented banks which are beneficiaries of stable-to-slightly rising U.S. housing prices, aided results.Performing particularly well was Bank of America, which rallied 32% during the quarter.Elsewhere, the fund’s positioning within the consumer discretionary space aided results. Notable contributors were media-related holdings.Comcast advanced 5% after posting better-than-expected subscriber growth and higher average revenue per user. Time Warner alsocontributed positively, rising 6%.On the negative side, holdings within the energy and industrial-related sectors detracted. Conglomerate General Electric fell 7% after earningsmissed expectations.GE reported that order growth had slowed as businesses remained cautious.


CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

Dodge & Cox Stock 2.85 22.01 22.01 9.92 -0.23 7.30 -4.08 13.49 31.27 -43.31 0.14 18.53 9.37 19.17 32.34 -10.54

Russell 1000 Value Index 1.52 17.51 17.51 10.86 0.59 7.38 0.39 15.51 19.69 -36.85 -0.17 22.25 7.05 16.49 30.03 -15.52

IM U.S. Large Cap Value Equity (MF) Median 1.28 15.61 15.61 8.64 -0.08 6.46 -2.17 12.93 24.16 -36.95 1.47 17.97 5.03 12.94 28.55 -19.52

Dodge & Cox Stock Rank 11 1 1 21 54 24 71 42 15 91 61 44 12 3 21 4

Dodge & Cox Stock

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61



CurrentQuarter

1Year

3Years

5Years

Dodge & Cox Stock 2.9 (11) 22.0 (1) 9.9 (21) -0.2 (54)

Russell 1000 Value Index 1.5 (40) 17.5 (24) 10.9 (7) 0.6 (33)

5th Percentile 3.5 19.4 11.2 2.6

1st Quartile 2.0 17.4 9.7 1.1

Median 1.3 15.6 8.6 -0.1

3rd Quartile 0.5 13.8 7.4 -1.1

95th Percentile -1.1 9.4 5.7 -2.7

Dodge & Cox Stock

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62

RISK CHARACTERISTICS PORTFOLIO CHARACTERISTICS

SECTOR EXPOSURE (%) TOP 10 HOLDINGS

Portfolio Benchmark

Total Securities 82 690

Price/Earnings (P/E) 16.9 13.3

Price/Book (P/B) 2.6 1.9

Dividend Yield 2.6 2.5

1Year

3Years

5Years

10Years

Return 22.01 9.92 -0.23 7.30


vs. Russell 1000 Value Index

Tracking Error 2.62 3.26 4.84 4.11

Alpha 1.28 -1.77 -0.55 -0.44

Beta 1.16 1.11 1.11 1.08

R-Squared 0.97 0.97 0.96 0.95

Consistency 58.33 41.67 50.00 47.50


Sharpe Ratio 1.78 0.63 0.08 0.40

As of 09/30/2012

Comcast Corp ORD 4.3%

Capital One Financial Corp ORD 4.2%

Wells Fargo & Co ORD 4.0%

Merck & Co Inc ORD 3.5%

General Electric Co ORD 3.4%

Time Warner Inc ORD 3.3%

Sanofi SA DR 3.0%

Hewlett-Packard Co ORD 2.7%

Novartis AG DR 2.7%

GlaxoSmithKline PLC DR 2.7%

Dodge & Cox Stock

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63

FUND INFO


FUND OBJECTIVE


This exchange traded fund (ETF) seeks performance corresponding to the price and yield performance, before fees and expenses, of the large capportion of the U.S. equity market, as represented by the S&P 500 Index. Each stock in the Index is held on a market capitalization weighted basiswhere the size of the position in the stock is based on the size of the stock as measured by the stock price times the number of shares outstanding.

The fund attempts to replicate this index by holding all or substantially all of the stocks in the S&P 500.

Product Name iShares:Core S&P 500 (IVV)

Fund Family BlackRock Fund Advisors

Ticker

Peer Group IM U.S. Large Cap Core Equity (MF)

Benchmark S&P 500





Gross Expense 0.07%

Net Expense 0.07%

Turnover 5%

Due to the passive nature of this product, commentary not provided.

CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

iShares Core S&P 500 ETF -0.38 15.91 15.91 10.78 1.62 7.03 2.03 14.96 26.43 -36.95 5.44 15.69 4.83 10.77 28.53 -22.15

S&P 500 -0.38 16.00 16.00 10.87 1.66 7.10 2.11 15.06 26.46 -37.00 5.49 15.79 4.91 10.88 28.68 -22.10

IM U.S. Large Cap Core Equity (MF) Median 0.14 15.35 15.35 9.05 0.89 6.49 -0.55 12.96 26.14 -36.87 5.83 14.32 5.16 9.69 25.95 -21.66

iShares Core S&P 500 ETF Rank 70 41 41 16 29 31 23 19 49 52 55 32 55 39 29 56

iShares Core S&P 500 ETF

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64



CurrentQuarter

1Year

3Years

5Years

iShares Core S&P 500 ETF -0.4 (70) 15.9 (41) 10.8 (16) 1.6 (29)

5th Percentile 2.4 19.9 12.0 3.3

1st Quartile 0.9 16.7 10.2 1.8

Median 0.1 15.4 9.0 0.9

3rd Quartile -0.6 12.9 7.6 -0.3

95th Percentile -1.9 9.2 5.8 -2.4


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65


SECTOR EXPOSURE (%)

Portfolio

TOP 10 HOLDINGS

1Year

3Years

5Years

10Years

Return 15.91 10.78 1.62 7.03


vs. S&P 500

Tracking Error 0.02 0.04 0.04 0.04

Alpha -0.06 -0.06 -0.04 -0.05

Beta 1.00 1.00 1.00 1.00

R-Squared 1.00 1.00 1.00 1.00

Consistency 8.33 19.44 26.67 20.00


Sharpe Ratio 1.52 0.75 0.15 0.42

Total Securities 504

Avg. Market Cap 109.29 Billion

P/E 19.2

P/B 3.8

Div. Yield 2.58%

Annual EPS 17.2

5Yr EPS 9.4

3Yr EPS Growth 15.5

As of 11/30/2012

Apple Inc ORD 4.3%

Exxon Mobil Corp ORD 3.2%

General Electric Co ORD 1.8%

Chevron Corp ORD 1.6%

International Business Machines Corp ORD 1.6%

Microsoft Corp ORD 1.6%

AT&T Inc ORD 1.6%

Procter & Gamble Co ORD 1.5%

Johnson & Johnson ORD 1.5%

Pfizer Inc ORD 1.5%


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66

FUND INFO


FUND OBJECTIVE


This exchange traded fund (ETF) seeks performance corresponding to the price and yield performance, before fees and expenses, of the large capgrowth portion of the U.S. equity market, as represented by the Russell 1000 Growth Index. The Russell 1000 Growth Index is comprised of thestocks within the Russell 1000 Index with higher price-to-book values and higher forecasted growth values. The Russell 1000 Index measures the

performance of the 1,000 largest companies in the Russell 3000 Index.

Product Name iShares:Russ 1000 Gr Idx (IWF)


Ticker

Peer Group IM U.S. Large Cap Growth Equity (MF)

Benchmark Russell 1000 Growth Index





Gross Expense 0.20%

Net Expense 0.20%

Turnover 19%


CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

iShares Russell 1000 Growth Index -1.36 15.03 15.03 11.14 2.95 7.33 2.47 16.47 36.94 -38.48 11.63 8.86 5.08 6.09 29.46 -27.99

Russell 1000 Growth Index -1.32 15.26 15.26 11.35 3.12 7.52 2.64 16.71 37.21 -38.44 11.81 9.07 5.26 6.30 29.75 -27.88

IM U.S. Large Cap Growth Equity (MF) Median -1.30 14.95 14.95 9.01 1.30 6.56 -1.79 15.08 34.65 -39.67 13.71 6.58 5.68 7.36 26.94 -27.05

iShares Russell 1000 Growth Index Rank 53 50 50 15 18 30 12 34 39 40 68 25 58 67 32 57

iShares Russell 1000 Growth Index

December 31, 2012

67



CurrentQuarter

1Year

3Years

5Years

iShares Russell 1000 Growth Index -1.4 (53) 15.0 (50) 11.1 (15) 3.0 (18)

5th Percentile 2.3 20.5 12.4 4.4

1st Quartile -0.3 17.4 10.3 2.5

Median -1.3 14.9 9.0 1.3

3rd Quartile -1.9 13.0 7.9 -0.2

95th Percentile -3.1 10.3 5.4 -1.9


December 31, 2012

68


SECTOR EXPOSURE (%)

Portfolio

TOP 10 HOLDINGS

1Year

3Years

5Years

10Years

Return 15.03 11.14 2.95 7.33


vs. Russell 1000 Growth Index

Tracking Error 0.03 0.04 0.04 0.04

Alpha -0.17 -0.17 -0.16 -0.17

Beta 1.00 1.00 1.00 1.00

R-Squared 1.00 1.00 1.00 1.00

Consistency 8.33 8.33 11.67 6.67


Sharpe Ratio 1.32 0.75 0.22 0.43



P/E 21.8

P/B 5.8

Div. Yield 2.30%

Annual EPS 20.1

5Yr EPS 18.2

3Yr EPS Growth 21.0

As of 11/30/2012

Apple Inc ORD 7.7%

International Business Machines Corp ORD 2.9%

Microsoft Corp ORD 2.8%

Google Inc ORD 2.5%

The Coca-Cola Co ORD 2.1%

Philip Morris International Inc ORD 2.0%

Verizon Communications Inc ORD 1.8%

Oracle Corp ORD 1.7%

PepsiCo Inc ORD 1.5%

Qualcomm Inc ORD 1.5%


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69

FUND INFO


FUND OBJECTIVE


The iShares S&P Midcap 400 Fund seeks investment results that correspond generally to the price and yield performance of the S&P Midcap 400index. The fund invests at least 90% of assets in the securities of the underlying index. It uses a replication strategy in order to track the S&P

Midcap 400 index, which measures the performance of the mid-capitalization sector of the US equity market.

Product Name iShares:Core S&P Md-Cp (IJH)


Ticker

Peer Group IM U.S. Mid Cap Core Equity (MF)

Benchmark S&P MidCap 400


Portfolio Manager Team Mnanaged



Gross Expense 0.15%

Net Expense 0.15%

Turnover 14%


CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

iShares Core S&P Mid-Cap ETF 3.60 17.76 17.76 13.45 5.03 10.39 -1.89 26.38 37.21 -36.19 7.80 10.13 12.48 16.29 35.36 -14.70

S&P MidCap 400 3.61 17.88 17.88 13.62 5.15 10.53 -1.73 26.64 37.38 -36.23 7.98 10.32 12.55 16.50 35.64 -14.51

IM U.S. Mid Cap Core Equity (MF) Median 2.85 16.00 16.00 10.80 1.44 8.48 -4.75 23.05 33.57 -39.54 5.26 12.74 10.07 15.88 33.08 -15.02

iShares Core S&P Mid-Cap ETF Rank 36 34 34 9 7 17 30 12 35 22 37 72 30 44 40 47

iShares Core S&P Mid-Cap ETF

December 31, 2012

70



CurrentQuarter

1Year

3Years

5Years

iShares Core S&P Mid-Cap ETF 3.6 (36) 17.8 (34) 13.4 (9) 5.0 (7)

5th Percentile 5.1 21.5 14.2 5.1

1st Quartile 4.0 18.3 11.9 3.0

Median 2.9 16.0 10.8 1.4

3rd Quartile 2.1 13.4 8.9 0.3

95th Percentile 0.2 8.5 5.1 -2.3


December 31, 2012

71


SECTOR EXPOSURE (%)

Portfolio

TOP 10 HOLDINGS

1Year

3Years

5Years

10Years

Return 17.76 13.45 5.03 10.39


vs. S&P MidCap 400

Tracking Error 0.02 0.03 0.05 0.07

Alpha -0.09 -0.14 -0.10 -0.12

Beta 1.00 1.00 1.00 1.00

R-Squared 1.00 1.00 1.00 1.00

Consistency 0.00 2.78 13.33 10.00


Sharpe Ratio 1.58 0.79 0.31 0.55



P/E 25.4

P/B 3.2

Div. Yield 2.32%

Annual EPS 22.1

5Yr EPS 7.2

3Yr EPS Growth 13.5

As of 11/30/2012

Regeneron Pharmaceuticals Inc ORD 1.1%

HollyFrontier Corp ORD 0.8%

Ametek Inc ORD 0.8%

Equinix Inc ORD 0.8%

Kansas City Southern ORD 0.7%

Vertex Pharmaceuticals Inc ORD 0.7%

PVH Corp ORD 0.7%

Church & Dwight Co Inc ORD 0.6%

Macerich Co 0.6%

Rackspace Hosting Inc ORD 0.6%


December 31, 2012

72

FUND INFO


FUND OBJECTIVE


The process selects stocks from the bottom deciles of NYSE issues, but include only the “value” subset. Stocks are ranked by book-to-marketratio, and stocks falling in the top three deciles (30%) are purchased for the fund. Book value is reconstructed for each eligible issue based onmanagement’s interpretation of how accounting charges affect “real” book value. This product will not own REITs, ADRs or foreign stocks, recently

issued IPOs, companies with less than 3 years of history, or OTC companies with fewer than 4 market makers.

Product Name DFA US Small Cap Val;I (DFSVX)

Fund Family Dimensional Fund Advisors LP

Ticker DFSVX

Peer Group IM U.S. Small Cap Value Equity (MF)

Benchmark Russell 2000 Value Index





Gross Expense 0.52%

Net Expense 0.52%

Turnover 14%

The DFA Small Cap Value fund outperformed its benchmark for the quarter in part due to relative outperformance from market-cap weighting.Both a relatively higher allocation to large and micro cap stocks, respectively, contributed to relative performance.The strongest-performing sectors in the quarter were energy, materials, consumer staples, and consumer discretionary. The portfolio generatednearly all of its relative outperformance over the quarter on the back of strong stock selection within each of these sectors.Not having exposure within telecommunication services detracted from relative results, as the sector was a market leader over the quarter.

B. McNaul, Investment Research Associate, DiMeo Schneider & Associates, L.L.C. 3Q12

CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

DFA US Small Cap Value I 4.77 21.72 21.72 13.78 4.47 11.27 -7.55 30.90 33.62 -36.79 -10.75 21.55 7.79 25.39 59.40 -9.27

Russell 2000 Value Index 3.22 18.05 18.05 11.57 3.55 9.50 -5.50 24.50 20.58 -28.92 -9.78 23.48 4.71 22.25 46.03 -11.43

IM U.S. Small Cap Value Equity (MF) Median 3.76 16.85 16.85 11.79 4.54 9.69 -4.76 25.82 30.25 -32.26 -6.91 16.87 6.10 20.36 43.02 -11.82

DFA US Small Cap Value I Rank 21 10 10 10 52 9 81 10 38 69 75 8 31 8 14 32

DFA US Small Cap Value I

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73



CurrentQuarter

1Year

3Years

5Years

DFA US Small Cap Value I 4.8 (21) 21.7 (10) 13.8 (10) 4.5 (52)

Russell 2000 Value Index 3.2 (68) 18.1 (38) 11.6 (54) 3.5 (67)

5th Percentile 6.6 22.7 16.0 7.2

1st Quartile 4.6 19.2 12.8 5.6

Median 3.8 16.9 11.8 4.5

3rd Quartile 2.8 13.8 10.6 3.0

95th Percentile 1.1 9.7 8.7 1.3


December 31, 2012

74



Portfolio Benchmark

Total Securities 1,316 1,416




1Year

3Years

5Years

10Years

Return 21.72 13.78 4.47 11.27


vs. Russell 2000 Value Index

Tracking Error 3.04 3.73 4.36 4.12

Alpha 2.66 0.86 0.94 0.97

Beta 1.03 1.13 1.10 1.10

R-Squared 0.94 0.99 0.98 0.97

Consistency 50.00 55.56 55.00 58.33


Sharpe Ratio 1.65 0.68 0.28 0.52

As of 07/31/2012

BlackRock Liquidity TempCash Portfolio;Inst 1.2%

Dillard's Inc ORD 0.9%

LifePoint Hospitals Inc ORD 0.9%

CNO Financial Group Inc ORD 0.9%

GATX Corp ORD 0.9%

Esterline Technologies Corp ORD 0.8%

Westlake Chemical Corp ORD 0.8%

Helix Energy Solutions Group Inc ORD 0.8%

The Hain Celestial Group Inc ORD 0.8%

Cabela's Inc ORD 0.7%


December 31, 2012

75

FUND INFO


FUND OBJECTIVE


The investment style focuses on high quality small cap companies with long term sustainable growth in the 15 – 20% range. Ideas are generatedapproximately equally across three sources – quantitative screening; regional, boutique brokers; and company contacts through industryconferences, trade shows or other research. Fundamental research is focused on strong earnings and ROE growth, a low debt to capitalization

rate, strong balance sheet, and a solid management team. The portfolio is fairly concentrated at 45 – 50 stocks with turnover around 30%.

Product Name Conestoga Small Cap (CCASX)

Fund Family Conestoga Capital Advisors LLC

Ticker CCASX

Peer Group IM U.S. Small Cap Growth Equity (MF)

Benchmark Russell 2000 Growth Index


Portfolio Manager Mitchell/Martindale

Total Assets $317 Million


Gross Expense 1.27%

Net Expense 1.10%

Turnover 16%

Negative stock selection effects in every sector other than technology detracted from relative performance over the quarter.The largest contributing stock for the quarter was Bottomline Technologies, a developer of banking and payment software services for financialinstitutions. The company has been transitioning to a cloud-based delivery of its software, which has significantly boosted revenue growth.Positive stock selection within technology, however, was largely mitigated by an unfavorable significant overweight to the sector.Energy and healthcare were the largest sector laggards over the quarter.Within healthcare, several positions lagged the benchmark, including Quality Systems Inc. (QSII); Neogen Corp. (NEOG) and MeridianBioscience Inc. (VIVO). Conestoga sold QSII in early October after reviewing the results of a proxy battle over board positions.The strategy’s three positions in the energy sector all suffered modestly from declines in natural gas prices.The weakest stock in the portfolio from a contribution to return standpoint was Raven Industries Inc., a Sioux Falls, SD-based mini-conglomerate.

B. McNaul, Investment Research Associate, DiMeo Schneider & Associates, L.L.C. 3Q12

CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

Conestoga Small Cap 0.42 10.54 10.54 12.74 5.99 9.93 4.55 23.99 29.09 -27.68 6.43 9.18 4.39 18.81 33.68 N/A

Russell 2000 Growth Index 0.45 14.59 14.59 12.82 3.49 9.80 -2.91 29.09 34.47 -38.54 7.05 13.35 4.15 14.31 48.54 -30.26

IM U.S. Small Cap Growth Equity (MF) Median -0.58 12.49 12.49 12.37 2.11 8.80 -3.41 27.75 33.39 -42.31 8.33 9.69 5.26 11.11 44.44 -28.04

Conestoga Small Cap Rank 31 68 68 44 5 24 5 75 74 1 57 56 61 10 87 N/A

Conestoga Small Cap

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76



CurrentQuarter

1Year

3Years

5Years

Conestoga Small Cap 0.4 (31) 10.5 (68) 12.7 (44) 6.0 (5)

Russell 2000 Growth Index 0.4 (29) 14.6 (27) 12.8 (43) 3.5 (37)

5th Percentile 2.5 17.7 15.8 6.0

1st Quartile 0.6 14.8 14.1 4.3

Median -0.6 12.5 12.4 2.1

3rd Quartile -2.3 9.9 10.3 0.0

95th Percentile -5.5 5.0 3.7 -2.4

Conestoga Small Cap

December 31, 2012

77



Portfolio Benchmark

Total Securities 47 1,120




1Year

3Years

5Years

10Years

Return 10.54 12.74 5.99 9.93


vs. Russell 2000 Growth Index

Tracking Error 5.85 6.09 6.66 6.38

Alpha -0.04 1.83 2.69 1.72

Beta 0.73 0.83 0.82 0.81

R-Squared 0.81 0.92 0.94 0.92

Consistency 58.33 50.00 51.67 48.33


Sharpe Ratio 0.98 0.76 0.36 0.53

As of 10/31/2012

CoStar Group Inc ORD 3.8%

Raven Industries Inc ORD 3.4%

Tyler Technologies Inc ORD 3.4%

Sun Hydraulics Corp ORD 3.3%

Simpson Manufacturing Co Inc ORD 3.1%

Bottomline Technologies (de), Inc ORD 3.1%

ACI Worldwide Inc ORD 3.1%

Abaxis Inc ORD 2.7%

Stamps.com Inc ORD 2.6%

PROS Holdings Inc ORD 2.6%

Conestoga Small Cap

December 31, 2012

78

FUND INFO


FUND OBJECTIVE


The fund is sub-advised by Capital Research and Management Company. Using a common pool of industry analysts for research, eight portfoliocounselors construct independent portfolios using their individual styles from growth to value. The fund tends to focus on blue chip multinationalcompanies while allowing each portfolio sleeve to invest up to 25% in emerging markets. The resulting portfolio holds over 400 securities with

relatively low turnover.

Product Name American Funds EuPc;F-2 (AEPFX)

Fund Family American Funds

Ticker AEPFX

Peer Group IM International Large Cap Core Equity (MF)

Benchmark MSCI EAFE Index





Gross Expense 0.58%

Net Expense 0.58%

Turnover 24%Regionally, limited exposure to Japan, especially in the areas of banks and utilities, was beneficial. The fund’s holdings of firms domiciled in theemerging markets was also positive, particularly India and South Korea. However, the fund was held back by a relatively low concentration of companies located in Australia and Singapore.From a sector perspective, limited exposure to utility companies was beneficial since firms in this sector lagged the broader market, but a

cautious stance in the financial services sector detracted from overall results.Among individual contributors, Canadian oil producer Nexen rallied after it received a takeover bid. Among financials, U.K. bank Barclays and India’s Housing Development Finance were positive contributors. However, in the telecom sector, Mexican provider America Movil detractedafter reporting disappointing results. Hong Kong-based trading and logistics group Li & Fung struggled following the release of weak results,which indicated that it was being affected by the slowdown in global demand.


CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

American Funds EuroPacific Gr F-2 5.64 19.54 19.54 4.34 N/A N/A -13.36 9.67 39.47 N/A N/A N/A N/A N/A N/A N/A

MSCI EAFE Index 6.60 17.90 17.90 4.04 -3.21 8.70 -11.73 8.21 32.46 -43.06 11.63 26.86 14.02 20.70 39.17 -15.66

IM International Large Cap Core Equity (MF) Median 7.22 18.34 18.34 3.61 -3.52 7.99 -12.40 7.37 29.66 -42.71 11.16 25.37 13.39 17.54 33.13 -16.74

American Funds EuroPacific Gr F-2 Rank 84 28 28 25 N/A N/A 72 24 13 N/A N/A N/A N/A N/A N/A N/A

American Funds EuroPacific Gr F-2

December 31, 2012

79



CurrentQuarter

1Year

3Years

5Years

American Funds EuroPacific Gr F-2 5.6 (84) 19.5 (28) 4.3 (25) N/A

MSCI EAFE Index 6.6 (62) 17.9 (55) 4.0 (34) -3.2 (39)

5th Percentile 9.2 21.8 6.0 -1.0

1st Quartile 7.6 19.8 4.3 -2.6

Median 7.2 18.3 3.6 -3.5

3rd Quartile 5.9 16.4 2.8 -4.5

95th Percentile 5.1 13.3 1.2 -5.9


December 31, 2012

80


SECTOR EXPOSURE (%)REGION WEIGHTS (%)

Portfolio Benchmark





1Year

3Years

5Years

10Years

Return 19.54 4.34 N/A N/A

Standard Deviation 14.41 18.66 N/A N/A

vs. MSCI EAFE Index

Tracking Error 3.34 3.70 N/A N/A

Alpha 3.19 0.47 N/A N/A

Beta 0.89 0.95 N/A N/A

R-Squared 0.96 0.96 N/A N/A

Consistency 66.67 55.56 N/A N/A


Sharpe Ratio 1.32 0.32 N/A N/A


December 31, 2012

81

FUND INFO


FUND OBJECTIVE


The fund seeks to invest in high quality companies when they are trading at a discounted price. High quality companies are defined as those withrecurring revenue growth, a quality management team, a “core” business, and strong balance sheet. Fundamental research is conducted byAberdeen's global team to understand the growth prospects of the firm and the quality of the financials. The valuation metrics used are determined by the type of company and its economic sector. Within risk controls, portfolios are constructed on a bottom-up basis using a very long-termoutlook that has led to a low turnover rate, but can also produce higher tracking error. The portfolio will typically hold 50 - 70 securities. Expensecap of 0.95% expires on 11/23/11. Expenses after 11/23 will reflect actual fees capped at 1.10% through 2/27/13 (reviewed annually thereafter).Actual fees were 1.05% for the year ending 10/31/10.

Product Name Aberdeen:Em Mkt;I (ABEMX)

Fund Family Aberdeen Asset Management Inc

Ticker ABEMX

Peer Group IM Emerging Markets Equity (MF)

Benchmark MSCI Emerging Markets Index





Gross Expense 1.03%

Net Expense 1.03%

Turnover 2%

From a sector perspective, positioning in South Korea, Chile and Turkey detracted in the third quarter. In South Korea, an underweight position,coupled with negative stock selection, detracted from results. Notable decliners included BS Financial Group, E Mart and Shinsegae. In Chile,Banco Santander disappointed on the back of weak loan growth and reduced net margins.Meanwhile, the fund’s positioning in India (overweight), China (underweight) and Thailand proved positive to overall results. Among the fund’sThai holdings, Siam Cement and Siam Commercial Bank posted solid returns. Exposure to non-Index Argentina also aided results as Tenarisrallied on the back of strong revenues and a continued recovery in margins.


CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

Aberdeen Emerging Markets Instl 7.25 26.15 26.15 12.70 8.55 N/A -11.05 27.58 76.55 -40.36 N/A N/A N/A N/A N/A N/A

MSCI Emerging Markets Index 5.61 18.64 18.64 4.99 -0.61 16.89 -18.17 19.20 79.02 -53.18 39.78 32.59 34.54 25.95 56.28 -6.00

IM Emerging Markets Equity (MF) Median 6.07 18.66 18.66 4.86 -2.06 15.30 -19.53 18.35 73.65 -54.86 36.44 32.20 32.14 24.11 54.51 -5.63

Aberdeen Emerging Markets Instl Rank 23 8 8 2 1 N/A 4 7 36 2 N/A N/A N/A N/A N/A N/A

Aberdeen Emerging Markets Instl

December 31, 2012

82



CurrentQuarter

1Year

3Years

5Years

Aberdeen Emerging Markets Instl 7.3 (23) 26.2 (8) 12.7 (2) 8.6 (1)

MSCI Emerging Markets Index 5.6 (63) 18.6 (52) 5.0 (48) -0.6 (26)

5th Percentile 9.0 28.4 8.7 3.1

1st Quartile 7.2 20.6 6.1 -0.6

Median 6.1 18.7 4.9 -2.1

3rd Quartile 5.2 15.2 2.0 -3.6

95th Percentile 1.6 8.0 -2.3 -8.2


December 31, 2012

83


SECTOR EXPOSURE (%)REGION WEIGHTS (%)

Portfolio Benchmark





1Year

3Years

5Years

10Years

Return 26.15 12.70 8.55 N/A


vs. MSCI Emerging Markets Index


Alpha 8.37 7.84 8.67 N/A

Beta 0.89 0.88 0.86 N/A

R-Squared 0.94 0.95 0.95 N/A

Consistency 50.00 61.11 60.00 N/A




December 31, 2012

84

FUND INFO



FUND OBJECTIVE

The fund is managed on a relative basis with a focus on individual stock selection rather than economic or market cycles. The ultimate goal is toselect securities that have positive growth aspects at a reasonable price. A research-driven team approach utilizes front end quantitative screenswith qualitative assessments, sub-sector analysis, and economic research. The outcome is a diversified portfolio from both a sector and geographic basis, which holds securities with the best risk/reward for their given industry. Effective December 31, 2010 the First American Real

Estate Securities fund was renamed to Nuveen Real Estate Securities. Also effective December 31, 2010, the fund is closed to new investment.

Product Name Nuveen Real Est;I (FARCX)

Fund Family Nuveen Fund Advisors Inc

Ticker FARCX

Peer Group IM Real Estate Sector (MF)

Benchmark FTSE NAREIT Equity REIT Index


Portfolio Manager Rosenberg/Wenker/Sedlak



Gross Expense 1.04%

Net Expense 1.04%

Turnover 103%

The portfolio had a flat return for the quarter and modestly underperformed its benchmark.Top advancing sectors, relative to the benchmark, were office, net lease and community centers.A almost 3% overweight in National Retail Properties Inc., a net lease REIT, was the primary driver of outperformance in a sector that posted the second strongest absolute returns within the asset class.Malls and health care REITs were the two primary areas of relative underperformance for the quarter. A 6% underweight to healthcare REITsnegatively impacted results as the sector modestly outperformed the broader benchmark.An overweight to the underperforming apartments sector was a top detractor from results.Small out of index allocations produced solid gains across infrastructure, international REITs and healthcare operators.

T. Leedy Senior Alternative Investment Research Analyst, DiMeo Schneider & Associates, L.L.C 3Q12

CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

Nuveen Real Estate Secs I 2.54 18.34 18.34 18.57 7.25 13.43 7.89 30.57 30.53 -34.80 -15.19 39.47 15.29 32.49 37.58 7.36

FTSE NAREIT Equity REIT Index 2.58 18.06 18.06 17.82 5.45 11.62 8.29 27.94 28.01 -37.74 -15.70 35.03 12.17 31.56 37.08 3.81

IM Real Estate Sector (MF) Median 2.25 16.84 16.84 17.10 4.98 11.12 7.89 27.46 29.04 -38.99 -17.22 34.69 12.48 32.31 35.96 4.18

Nuveen Real Estate Secs I Rank 23 23 23 13 9 2 50 13 28 10 16 1 17 45 29 13

Nuveen Real Estate Secs I

December 31, 2012

85



CurrentQuarter

1Year

3Years

5Years

Nuveen Real Estate Secs I 2.5 (23) 18.3 (23) 18.6 (13) 7.2 (9)

FTSE NAREIT Equity REIT Index 2.6 (21) 18.1 (25) 17.8 (29) 5.4 (37)

5th Percentile 3.3 26.8 20.8 9.3

1st Quartile 2.5 18.0 18.0 6.0

Median 2.2 16.8 17.1 5.0

3rd Quartile 2.0 15.9 16.2 3.9

95th Percentile 1.4 14.5 14.6 0.7


December 31, 2012

86

RISK CHARACTERISTICS REGION DISTRIBUTION

SECTOR EXPOSURE (%)

1Year

3Years

5Years

10Years

Return 18.34 18.57 7.25 13.43


vs. FTSE NAREIT Equity REIT Index

Tracking Error 0.46 0.87 2.41 2.18

Alpha 0.53 0.81 1.71 2.03

Beta 0.98 0.99 0.94 0.95

R-Squared 1.00 1.00 1.00 0.99

Consistency 50.00 58.33 56.67 60.83


Sharpe Ratio 1.58 1.05 0.37 0.58


December 31, 2012

87

FUND INFO


FUND OBJECTIVE


The fund combines a position in commodity-linked derivative instruments, primarily swaps through an offshore subsidiary, with an actively

managed portfolio principally consisting of Treasury Inflation Protected Securities (TIPS). The derivatives only require the fund to hold around 15%

of its assets as collateral. The commodity-linked derivatives capture the return potential and diversification benefits of the commodity futures

market, while PIMCO's active fixed income management seeks to outperform T-Bills, net of fees. The strategy has the added advantage of

benefiting concurrently from the inflation hedging properties of both commodity futures and TIPS (Double Real).

Product Name PIMCO:Comm RR Str;Inst (PCRIX)

Fund Family PIMCO

Ticker PCRIX

Peer Group IM Commodities General (MF)

Benchmark Dow Jones-UBS Commodity Index


Portfolio Manager Mihir Worah



Gross Expense 0.90%

Net Expense 0.74%

Turnover 177%

Driven by a variety of factors, the fund significantly outperformed its benchmark for the quarter.TIPs collateral outperformed the T-Bills collateral within the index. However, a preference for the middle of the TIPS curve while beingunderweight TIPS overall limited gains.As a whole, commodity alpha strategies, particularly substitution trades, produced positive results over the quarter. However, long positions in soybeans vs. corn negatively impacted results.Noteworthy profits came from exposure to Australian inflation-linked bonds, non-agency mortgages and Brazil.Going forward, the fund will continue to be defensively positioned with a neutral duration position and a focus on intermediate maturity TIPS.


CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

PIMCO Commodity Real Ret Strat Instl -5.78 5.31 5.31 6.51 -0.85 7.67 -7.56 24.13 39.91 -43.33 23.80 -3.04 20.50 16.36 29.82 N/A

Dow Jones-UBS Commodity Index -6.33 -1.06 -1.06 0.07 -5.17 4.09 -13.32 16.83 18.91 -35.65 16.23 2.07 21.36 9.15 23.93 25.91

PIMCO Commodity Real Ret Strat Instl

December 31, 2012

88


RISK CHARACTERISTICS STRATEGY ALLOCATION (index)

1Year

3Years

5Years

10Years

Return 5.31 6.51 -0.85 7.67


vs. Dow Jones-UBS Commodity Index

Tracking Error 2.67 3.22 7.14 6.60

Alpha 6.50 6.59 6.32 3.39

Beta 1.02 1.05 1.17 1.15

R-Squared 0.97 0.97 0.95 0.92

Consistency 75.00 69.44 65.00 56.67


Sharpe Ratio 0.42 0.43 0.09 0.37

PIMCO Commodity Real Ret Strat Instl

December 31, 2012

89

FUND INFO


FUND OBJECTIVE


Kayne Anderson MLP Investment Co. is a non-diversified, closed-end management investment company whose investment objective is to obtain ahigh after-tax total return by investing the vast majority of it's total assets in energy related MLPs and other Midstream Energy Companies. MLPsare publicly traded limited partnerships. Energy-related MLPs own domestic infrastructure assets that are used in the gathering, processing,transportation, storage, refining and distribution of energy-related commodities. Kayne Anderson differentiates itself through an extensive network of relationships with major energy companies and an investment team with over 134 years of combined energy experience. The fund may also investin private or restricted investment opportunities not available to retail investors along with debt securities of MLPs and other Midstream Energy

Companies.

Assets under Management (12/31/11)$3,810 Million

Inception Date9/28/04

Management Fee2.4%

Management Fee is obtained from the most recentannual report. It represents the management fee asa percentage of average net assets which reflects

the fund's deferred tax liability.

The fund's price return of 3.4% underperformed its NAV return of 10.2% and the benchmark return of 8.9%.The fund's premium to NAV decreased during the quarter to 6.0% from 12.9%. During the quarter, the fund priced a public offering with netproceeds of approximately $140 million to make additional portfolio investments.Kinder Morgan Management (KMR), a top ten holding, weighed on results following a secondary offering.An overweight to gathering & processing was accretive to performance. Specifically, MarkWest Energy Partners LP produced positive results over the quarter.Smaller allocation to non-core sectors, including shipping and propane, delivered mixed returns for the quarter.


CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

Kayne Anderson MLP Invst Co -2.25 5.82 5.82 13.87 9.20 N/A 3.04 35.42 69.87 -38.08 -5.68 45.08 2.98 N/A N/A N/A

Alerian MLP Index -3.41 4.80 4.80 17.48 12.57 16.18 13.88 35.85 76.41 -36.80 12.42 27.62 5.22 15.92 41.60 0.24

ALPS Alerian MLP ETF -2.18 2.20 2.20 N/A N/A N/A 10.09 N/A N/A N/A N/A N/A N/A N/A N/A N/A

Kayne Anderson MLP Invst Co

December 31, 2012

90


RISK CHARACTERISTICS STRATEGY ALLOCATION

1Year

3Years

5Years

10Years

Return 5.82 13.87 9.20 N/A


vs. Alerian MLP Index


Alpha 3.41 2.82 2.62 N/A

Beta 0.53 0.67 0.77 N/A

R-Squared 0.37 0.33 0.29 N/A

Consistency 58.33 50.00 51.67 N/A



Kayne Anderson MLP Invst Co

December 31, 2012

91

FUND INFO


FUND OBJECTIVE


Tortoise Energy Infrastructure Corp. is a non-diversified, closed-end management investment company. The fund seeks to provide investors withan efficient vehicle to invest in publicly traded energy infrastructure MLPs while providing a high level of total return with an emphasis on currentdistributions. The fund may additionally invest in private or restricted investment opportunities not available to retail investors along with debt

securities of MLPs and other Midstream Energy Companies.

Assets under Management (1/31/12)$1,690 Million

Inception Date3/2/04

Management Fee

1.54%

Management Fee is obtained from the most recentannual report. It represents the management fee asa percentage of average net assets which reflects

the fund's deferred tax liability.

The fund’s price return of 2.9% underperformed its NAV return of 10.4% and the benchmark return of 8.9%.The fund’s premium to NAV decreased during the quarter to 10.6% from 18.4%.Within the Crude/Refined Products Pipelines sector crude oil sensitive names outperformed and had strong earnings. Three out of the Fund’s topfive holdings are within this sector, specifically Magellan Midstream Partners, L.P. was a notable outperformer for the quarter.A relative underweight to shipping and coal MLPs positively contributed to performance.


CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

Tortoise Energy Infrastructure Corp. -5.05 0.23 0.23 13.43 10.06 N/A 10.75 31.48 99.23 -44.45 1.70 37.50 4.54 N/A N/A N/A

Alerian MLP Index -3.41 4.80 4.80 17.48 12.57 16.18 13.88 35.85 76.41 -36.80 12.42 27.62 5.22 15.92 41.60 0.24

ALPS Alerian MLP ETF -2.18 2.20 2.20 N/A N/A N/A 10.09 N/A N/A N/A N/A N/A N/A N/A N/A N/A

Tortoise Energy Infrastructure Corp.

December 31, 2012

92



1Year

3Years

5Years

10Years

Return 0.23 13.43 10.06 N/A


vs. Alerian MLP Index


Alpha -3.91 -2.50 -1.79 N/A

Beta 0.97 0.96 1.06 N/A

R-Squared 0.67 0.63 0.70 N/A

Consistency 33.33 44.44 50.00 N/A



Tortoise Energy Infrastructure Corp.

December 31, 2012

93

FUND INFO


FUND OBJECTIVE


Assets under Management$5.7 Billion

Inception Date01/00

Minimum Investment$5,000,000 (Negotiable at Manager Discretion)

Management FeeAnnual fees: First $25 m = 1.25%, Next $25 m = 1.00%,Next $50 m = 0.80%, Over $100 m = 0.60%;Fee is subject to a 0.75% min

Performance FeeN/A

ContributionsQuarterly

Withdrawals

Quarterly with 70 days notice

Grosvenor Institutional Partners (“GIP”) is a globally diversified, multi-strategy, multi-manager portfolio that allocates its assets to hedge fundmanagers that specialize in a wide range of alternative investment strategies. GIP has two primary investment objectives: to provide its investorswith a superior long-term, risk-adjusted rate of return and to preserve capital. The Fund will allocate to approximately 40 managers.

Six out of eight sub-strategies delivered positive quarterly results as most funds produced solid gains.Structured credit and RMBS positions drove outperformance within credit and multi-strategy. Positive market technicals and another LehmanBrothers bankruptcy distribution contributed to results.Equity managers produced muted results while continuing to increase net exposures. Strong results within healthcare, telecommunications andfinancials were offset by hedges and deep value positions.Macro was the leading detractor from relative performance due to short Euro and systematic relative value trades within commodities.Following a strategic review after the quarter, Grosvenor streamlined and reorganized the team to better reflect the current and future opportunityset.


CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

Grosvenor Inst'l Partners, L.P. 2.32 8.38 8.38 3.59 0.04 4.41 -3.82 6.66 13.95 -20.89 10.69 9.40 6.80 6.92 11.16 2.27

HFRI Fund of Funds Composite Index 1.79 5.28 5.28 1.61 -1.66 3.68 -5.72 5.70 11.47 -21.37 10.25 10.39 7.49 6.86 11.61 1.02

Grosvenor Inst'l Partners, L.P.

December 31, 2012

94



1Year

3Years

5Years

10Years

Return 8.38 3.59 0.04 4.41


vs. HFRI Fund of Funds Composite Index

Tracking Error 1.33 1.57 1.77 1.63

Alpha 4.17 2.21 1.60 1.20

Beta 0.77 0.84 0.92 0.86

R-Squared 0.85 0.88 0.92 0.91

Consistency 66.67 58.33 60.00 55.00


Sharpe Ratio 2.87 0.88 -0.04 0.55

Grosvenor Inst'l Partners, L.P.

December 31, 2012

95

FUND INFO


FUND OBJECTIVE


Assets under Management$2.5 Billion

Inception Date10/02

Minimum Investment$5,000,000

Management Fee1%

Performance Fee10%

ContributionsMonthly

WithdrawalsQuarterly

Magnitude International is a globally diversified multi-strategy FOHF which targets attractive risk-adjusted returns with limited exposure to passive

risk factors. Management displays a quantitative, arbitrage and relative value bias and will evaluate “corners of the market” for small positions.

All strategies contributed positively during the quarter with only cash marginally detracting from results.The Fund benefited from an overweight to credit relative value. The strategy continued to be the primary portfolio driver as each manager generated quarterly gains. The Fund’s top contributor returned over 10%, benefiting from RMBS exposure.Distressed was the second largest contributor driven by a wide range of exposures including profits from Greek bonds and several liquidationevents.Equity hedge generated a modest return overall with underlying managers delivering mixed results. The team expects to increase the strategy’sallocation over the next few quarters.A less than 1% allocation to a trading strategy produced a noteworthy loss as the fund was impacted negatively by exposure to Midwest weather contracts.During the quarter, the firm added Kristen Clark and Jessica Waring to the operations team and Alfredo Ramirez as an Associate on the portfoliomanagement team.


CurrentQuarter

YTD1

Year3

Years5

Years10

Years2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

Magnitude International 1.95 7.70 7.70 6.36 3.46 7.30 4.67 6.75 25.71 -21.64 13.54 14.30 8.67 8.42 11.60 N/A

HFRI Fund of Funds Composite Index 1.79 5.28 5.28 1.61 -1.66 3.68 -5.72 5.70 11.47 -21.37 10.25 10.39 7.49 6.86 11.61 1.02

Magnitude International

December 31, 2012

96



1Year

3Years

5Years

10Years

Return 7.70 6.36 3.46 7.30


vs. HFRI Fund of Funds Composite Index

Tracking Error 2.13 2.68 3.18 2.84

Alpha 5.51 5.59 5.11 4.18

Beta 0.40 0.44 0.93 0.82

R-Squared 0.77 0.79 0.78 0.74

Consistency 58.33 69.44 70.00 61.67


Sharpe Ratio 4.86 2.76 0.46 1.04

Magnitude International

December 31, 2012

97

DEFINITION OF KEY STATISTICS

Returns Time-weighted average annual returns for the time periods indicated. Time weighted returns seek to eliminate the impact of external cash flows on the rate of return calculations. All returns are annualized if the period for which they are calculated exceeds one year.

Universe Comparison The universe compares the fund's returns to a group of other investment portfolios with similar investment strategies. The returns for the fund, the index and the universe percentiles are displayed. A percentile ranking of 1 is the best, while a percentile ranking of 100 is the worst. For example, a ranking of 50 indicates the fund outperformed half of the universe. A ranking of 25 indicates the fund was in the top 25% of the universe, outperforming 75%.

Returns In Up/Down Markets This measures how the fund performed in both up and down markets. The methodology is to segregate the performance for each time period into the quarters in which the market, as defined by the index, was positive and negative. Quarters with negative index returns are treated as down markets, and quarters with positive index returns are treated as up markets. Thus, in a 3 year or 12 quarter period, there might be 4 down quarters and 8 up quarters. A simple arithmetic average of returns is calculated for the fund and the index based on the up quarters. A simple arithmetic average of returns is calculated for the fund and the index based on the down quarters. The up market capture ratio is the ratio of the fund's return in up markets to the index. The down market capture ratio is the ratio of the fund's return in down markets to the index. Ideally, the fund would have a greater up market capture ratio than down market capture ratio.

Standard Deviation Standard deviation is a statistical measure of the range of performance within which the total returns of a fund fall. When a fund has a high standard deviation, the range of performance is very wide, meaning there is a greater volatility. Approximately 68% of the time, the total return of any given fund will differ from the average total return by no more than plus or minus the standard deviation figure. Ninety-five percent of the time, a fund’s total return will be within a range of plus or minus two times the standard deviation from the average total return. If the quarterly or monthly returns are all the same the standard deviation will be zero. The more they vary from one another, the higher the standard deviation. Standard deviation can be misleading as a risk indicator for funds with high total returns because large positive deviations will increase the standard deviation without a corresponding increase in the risk of the fund. While positive volatility is welcome, negative is not.

R-Squared This reflects the percentage of a fund’s movements that are explained by movements in its benchmark index. An R-squared of 100 means that all movements of a fund are completely explained by movements in the index. Conversely, a

low R-squared indicates very few of the fund’s movements are explained by movements in the benchmark index. R-squared can also be used to ascertain the significance of a particular beta. Generally, a higher R-squared will indicate a more reliable beta figure. If the R-squared is lower, then the beta is less relevant to the fund’s performance. A measure of diversification, R-squared indicates the extent to which fluctuations in portfolio returns are explained by market. An R-squared = 0.70 implies that 70% of the fluctuation in a portfolio's return is explained by the fluctuation in the market. In this instance, overweighting or underweighting of industry groups or individual securities is responsible for 30% of the fund's movement.

Beta This is a measure of a fund’s market risk. The beta of the market is 1.00. Accordingly, a fund with a 1.10 beta is expected to perform 10% better than the market in up markets and 10% worse that the market in down markets. It is

important to note, however, a low fund beta does not imply the fund has a low level of volatility; rather, a low beta means only that the fund’s market-related risk is low. Because beta analyzes the market risk of a fund by showing how responsive the fund is to the market, its usefulness depends on the degree to which the markets determine the fund's total risk (indicated by R-squared ).

Alpha The Alpha is the nonsystematic return, or the return that can’t be attributed to the market. It can be thought of as how the manager performed if the market’s return was zero. A positive alpha implies the manager added value to the return of the portfolio over that of the market. A negative alpha implies the manager did not contribute any value over the performance of the market.

Sharpe Ratio The Sharpe ratio is the excess return per unit of total risk as measured by standard deviation. Higher numbers are better, indicating more return for the level of risk experienced. The ratio is a fund's return minus the risk-free rate of return

(30-day T-Bill rate) divided by the fund’s standard deviation. The higher the Sharpe ratio, the more reward you are receiving per unit of total risk. This measure can be used to rank the performance of mutual funds or other portfolios.

Treynor Ratio The Treynor ratio measures returns earned in excess of that which could have been earned on a riskless investment per each unit of market risk. The ratio relates excess return over the risk-free rate to the additional risk taken; however, systematic risk is used instead of total risk. The Treynor ratio is similar to the Sharpe ratio, except in the fact that it uses the beta to evaluate the returns rather than the standard deviation of portfolio returns. High values mean better return for risk taken.

Tracking Error Tracking error measures the volatility of the difference in annual returns between the manager and the index. This value is calculated by measuring the standard deviation of the difference between the manager and index returns. For example, a tracking error of +/- 5 would mean there is about a 68% chance (1 standard deviation event) that the manager's returns will fall within +/- 5% of the benchmark's annual return.

Information Ratio The information ratio is a measure of the consistency of excess return. This value is determined by taking the annualized excess return over a benchmark (style benchmark by default) and dividing it by the standard deviation of excess return.

Consistency Consistency shows the percent of the periods the fund has beaten the index and the percent of the periods the index has beat the fund. A high average for the fund (e.g. over 50) is desirable, indicating the fund has beaten the index frequently.

Downside Risk Downside risk is a measure similar to standard deviation, but focuses only on the negative movements of the return series. It is calculated by taking the standard deviation of the negative quarterly set of returns. The higher the factor, the riskier the product.

M-Squared M-squared, or the Modigliani risk-adjusted performance measure is used to characterize how well a portfolio’s return rewards an investor for the amount of risk taken, relative to that of some benchmark portfolio and to the risk-free rate.

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VALUATION POLICY

DiMeo Schneider does not engage an independent third party pricing service to value securities. Our reports are generated using the security prices provided by custodians used by our clients. Our pricing hierarchy is to first use valuations provided by the custodian that holds assets for the greatest number of clients. If a client holds a security not reported by this custodian, the valuation is generated from the next most prominent custodian, and so forth. Each custodian uses pricing services from outside vendors, where the vendors may generate nominally different prices. Therefore, this report can reflect minor valuation differences from those contained in a custodian’s report. REPORTING POLICY This report is intended for the exclusive use of clients of DiMeo Schneider & Associates, L.L.C. Content and format is privileged and confidential. Any dissemination or distribution of this report is strictly prohibited. The information contained in this report has been obtained from trade and statistical services and other sources which are deemed but not guaranteed to be accurate. Any opinions expressed herein reflect our judgment at this date and are subject to change. OTHER Rule 204-3 under the Investment Advisors Act of 1940 requires that we make an annual offer to clients to send them, without charge, a written disclosure statement meeting the requirements of such rule. We will be glad to send a copy of such a statement to you upon your written request. Please advise us of any changes in your objectives or circumstances.

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