Morningstar Report: Mutual Fund Data Definitions

Snapshot

Performance

Growth of $10,000 Graph

The Growth of $10,000 graph shows a fund's performance
based on how $10,000 invested in the fund would have
grown over time. The returns used in the graph are not
load-adjusted. The growth of $10,000 begins at the date of
the fund's inception, or the first year listed on the graph,
whichever is appropriate. Located alongside the fund's
graph line is a line that represents the growth of $10,000
in either the S&P 500 index (for stock funds and hybrid
funds) or the LB Aggregate index (for bond funds). The
third line represents the fund's Morningstar category (see
definition below). These lines allow investors to compare
the performance of the fund with the performance of a
benchmark index and the fund's Morningstar category.
Both lines are plotted on a logarithmic scale, so that
identical percentage changes in the value of an investment
have the same vertical distance on the graph.

For example, the vertical distance between $10,000 and

$20,000 is the same as the distance between $20,000 and
$40,000 because both represent a 100% increase in
investment value. This provides a more accurate
representation of performance than would a simple
arithmetic graph. The graphs are scaled so that the full
length of the vertical axis represents a tenfold increase in
investment value. For securities with returns that have
exhibited greater than a tenfold increase over the period
shown in the graph, the vertical axis has been compressed
accordingly.

Annual Returns
Total returns calculated on a calendar-year basis. Total
return includes both income (in the form of dividends or
interest payments) and capital gains or losses(the increase
or decrease in the value of a security). Morningstar
calculates total return by taking the change in a fund's
NAV, assuming the reinvestment of all income and capital
gains distributions (on the actual reinvestment date used
by the fund) during the period, and then dividing by the
initial NAV. Unless marked as load-adjusted total returns,
Morningstar does not adjust total return for sales charges
or for redemption fees. Total returns do account for
management, administrative, and 12b-1 fees and other
costs automatically deducted from fund assets.

+/- S&P 500 or +/- LB Aggregate

A benchmark index gives the investor a point of reference
for evaluating a fund's performance. In all cases where
such comparisons are made, Morningstar uses the S&P 500
as the primary benchmark for stock-oriented funds, and
the Lehman Brothers Aggregate Bond index (an overall
bond benchmark) as the benchmark index for bond funds.
The +/- (Calendar Year) figure indicates the amount by
which a fund over- or underperformed its primary index
during a given calendar year.

Note: The total returns for the S&P 500 assume

reinvestment of dividends on the last day of the month.
This may account for differences between the index
returns published on Morningstar.com and the index
returns published elsewhere.

+/- Category
The Morningstar category gives the investor a point of
reference for evaluating a fund's performance (see the
Morningstar category definition below). The +/- (Calendar
Year) figure indicates the amount by which a fund over- or
underperformed its category during a given calendar year.

Key Stats

Morningstar Category
While the investment objective stated in a fund's
prospectus may or may not reflect how the fund actually
invests, the Morningstar category is assigned based on the
underlying securities in each portfolio. Morningstar
categories help investors and investment professionals
make meaningful comparisons between funds. The
categories make it easier to build well-diversified
portfolios, assess potential risk, and identify top-
performing funds. We place funds in a given category
based on their portfolio statistics and compositions over
the past three years. If the fund is new and has no
portfolio history, we estimate where it will fall before
giving it a more permanent category assignment. When
necessary, we may change a category assignment based on
recent changes to the portfolio.

Stock Funds
Domestic-Stock Funds
Funds with at least 70% of assets in domestic stocks are
categorized based on the style and size of the stocks they
typically own. The style and size divisions reflect those
used in the Morningstar investment style box: value,
blend, or growth style and small, medium, or large median
market capitalization. (See Equity Style Box for more
details on style methodology.)
Based on their investment style over the past three years,
domestic-stock funds are placed in one of the nine
categories: large growth, large blend, large value, medium
growth, medium blend, medium value, small growth, small
blend, small value. Domestic-equity funds that specialize
in a particular sector of the market are placed in a
specialty category: communications, consumer
discretionary, consumer staples, equity energy (funds that
hold stocks of energy companies), financials, health care,
industrials, natural resources, real estate, technology,
utilities, and miscellaneous.
Also see "Allocation--30% to 50% Equity" and "Allocation--
50% to 70% Equity" in the "Balanced Funds" section below.
International-Stock Funds
Stock funds that have invested 40% or more of their equity
holdings in foreign stocks (on average over the past three
years) are placed in an international-stock category.
Foreign Large Value: These funds seek capital
appreciation by investing in large international stocks that
are value-oriented. Large-cap foreign stocks have market
capitalizations greater than $5 billion. Value is defined
based on low price/book and price/cash-flow ratios,
relative to the MSCI EAFE Index. These funds typically will
have less than 20% of assets invested in U.S. stocks.
Foreign Large Blend: These funds seek capital
appreciation by investing in a variety of large international
stocks. Large-cap foreign stocks have market
capitalizations greater than $5 billion. The blend style is
assigned to funds where neither growth nor value
characteristics predominate. These funds typically will
have less than 20% of assets invested in U.S. stocks.
Foreign Large Growth: These funds seek capital
appreciation by investing in large international stocks that
are growth-oriented. Large-cap foreign stocks have market
capitalizations greater than 5 billion. Growth is defined
based on high price/book and price/cash-flow ratios,
relative to the MSCI EAFE Index. These funds typically will
have less than 20% of assets invested in U.S. stocks.
Foreign Small/Mid Value: These funds seek capital
appreciation by investing in small- and mid-sized
international stocks that are value-oriented. Small-and
mid-cap stocks have market capitalizations less than $5
billion. Value is defined based on low price/book and
price/cash-flow ratios, relative to the MSCI EAFE Index.
These funds typically will have less than 20% of assets
invested in U.S. stocks.
Foreign Small/Mid Growth: These funds seek capital
appreciation by investing in small- and mid-sized
international stocks that are growth-oriented. Small-and
mid-cap stocks have market capitalizations less than $5
billion. Growth is defined based on high price/book and
price/cash-flow ratios, relative to the MSCI EAFE Index.
These funds typically will have less than 20% of assets
invested in U.S. stocks.
World Stock: an international fund having more than 20%
of stocks invested in the United States.
Diversified Emerging Markets: at least 50% of stocks
invested in emerging markets.
Diversified Pacific Asia: at least 65% of stocks invested in
Pacific countries, with at least an additional 10% of stocks
invested in Japan.
Asia/Pacific ex-Japan: at least 75% of stocks invested in
Pacific countries, with less than 10% of stocks invested in
Japan.
China Region: China region stock portfolios invest almost
exclusively in stocks from China, Taiwan and Hong Kong.
These portfolios invest at least 70% of total assets in
equities and invest at least 75% of stock assets in one
specific region or a combination of China, Taiwan and/or
Hong Kong.
Broad Asset Class Index: MSCI EAFE NR USD
Category Index: Russell China TR USD
Europe: at least 75% of stocks invested in Europe.
Japan: at least 75% of stocks invested in Japan.
Latin America: at least 75% of stocks invested in Latin
America.
Global Real Estate: Global real estate portfolios invest
primarily in non-U.S. real estate securities but may also
invest in U.S. real estate securities. Securities that these
portfolios purchase include: debt and equity securities,
convertible securities, and securities issued by real estate
investment trusts (REITs) and REIT-like entities. Portfolios
in this category also invest in real-estate operating
companies.
Also see "World Allocation" in the "Balanced Funds" section
below.
Bond Funds
Funds with 80% or more of their assets invested in bonds
are classified as bond funds. Bond funds are divided into
two main groups: taxable bond and municipal bond. (Note:
For all bond funds, maturity figures are used only when
duration figures are unavailable.)
Taxable-Bond Funds
Long-Term Government: A fund with at least 90% of its
bond portfolio invested in government issues with a
duration of greater than or equal to six years or an
average effective maturity of greater than 10 years.
Intermediate-Term Government: A fund with at least 90%
of its bond portfolio invested in government issues with a
duration of greater than or equal to 3.5 years and less
than six years or an average effective maturity of greater
than or equal to four years and less than 10 years.
Short-Term Government: A fund with at least 90% of its
bond portfolio invested in government issues with a
duration of greater than or equal to one year and less than
3.5 years, or average effective maturity of greater than or
equal to one year and less than four years.
Long-Term Bond: A fund that focuses on corporate and
other investment-grade issues with an average duration of
more than six years, or an average effective maturity of
more than 10 years.
Intermediate-Term Bond: A fund that focuses on
corporate, government, foreign or other issues with an
average duration of greater than or equal to 3.5 years but
less than or equal to six years, or an average effective
maturity of more than four years but less than 10 years.
Short-Term Bond: A fund that focuses on corporate and
other investment-grade issues with an average duration of
more than one year but less than 3.5 years, or an average
effective maturity of more than one year but less than
four years.
Ultrashort Bond: Used for funds with an average duration
or an average effective maturity of less than one year.
This category includes general- and government-bond
funds, and excludes any international, convertible,
multisector, and high-yield bond funds.
High-Yield Bond: A fund with at least 65% of assets in
bonds rated below BBB.
World Bond: A fund that invests at least 40% of bonds in
foreign markets.
Emerging-Markets Bond: at least 65% assets in emerging-
markets bonds.
Multisector Bond: Used for funds that seek income by
diversifying their assets among several fixed-income
sectors, usually U.S. government obligations, foreign
bonds, and high-yield domestic debt securities.
Inflation-Protected Bond: Inflation-protected bond
portfolios invest primarily in debt securities that adjust
their principal values in line with the rate of inflation.
These bonds can be issued by any organization, but the
U.S. Treasury is currently the largest issuer for these types
of securities.
Bank Loan: funds that invest primarily in floating-rate
bank loans instead of bonds. In exchange for their credit
risk, they offer high interest payments that typically float
above a common short-term benchmark.
Corporate Bond:Corporate Bond portfolios concentrate on
bonds issued by corporations. These tend to have more
credit risk than government or agency-backed bonds.
These portfolios hold more than 65% of their assets in
corporate bonds, hold less than 40% of their assets in
foreign bonds, less than 35% in high yield bonds, and have
an effective duration of more than 75% of the Morningstar
Core Bond Index.
Category Group Index: Barclays US Agg Bond TR USD
Category Index: Barclays US Corp IG TR USD
Preferred Stock: Preferred stock portfolios concentrate on
preferred stocks and perpetual bonds. These portfolios
tend to have more credit risk than government or agency
backed bonds, and effective duration longer than other
bond portfolios. These portfolios hold more than 65% of
assets in preferred stocks and perpetual bonds.
Category Group Index: Barclays US Agg Bond TR USD
Category Index: BofAML Preferred Stock Fixed Rate TR
Municipal Bond Funds
Municipal National Long-Term: A national fund with an
average duration of more than seven years, or average
maturity of more than 12 years.
Municipal National Intermediate-Term: A national fund
with an average duration of more than 4.5 years but less
than seven years, or average maturity of more than five
years but less than 12 years.
Municipal Short: A fund that focuses on municipal
debt/bonds with an average duration of less than 4.5
years, or an average maturity of less than five years.
State-specific munis: A municipal bond fund that primarily
invest in one specific state. These funds must have at least
80 percent of assets invested in municipal bonds from that
state. Each state-specific muni category includes long,
intermediate, and short duration bond funds. State-
specific funds that do not fall into one of the below
categories will occupy either the Muni Single State Long-
Term or Muni Single State Intermediate category. Muni
California Intermediate
Muni California Long-Term
Muni Massachusetts
Muni Minnesota
Muni New Jersey
Muni New York Intermediate
Muni New York Long-Term
Muni Ohio
Muni Pennsylvania
High Yield Muni: A fund that invest at least 50 percent of
assets in high-income municipal securities that are not
rated or that are rated by a major rating agency at the
level of BBB (considered speculative in the municipal
industry) or below.
Balanced Funds
Funds in these categories offer investors a mix of stocks
and bonds to provide capital appreciation, income,
diversification, or specific allocations based on planned
retirement dates. This group also includes funds that
invest in convertibles, which act a bit like stocks and a bit
like bonds.
Convertibles: Convertible bond portfolios are designed to
offer some of the capital-appreciation potential of stock
portfolios while also supplying some of the safety and yield
of bond portfolios. To do so, they focus on convertible
bonds and convertible preferred stocks. Convertible bonds
allow investors to convert the bonds into shares of stock,
usually at a preset price. These securities thus act a bit
like stocks and a bit like bonds.
Allocation--30% to 50% Equity: Funds in allocation
categories seek to provide both income and capital
appreciation by investing in multiple asset classes,
including stocks, bonds, and cash. These portfolios are
dominated by domestic holdings and have equity exposures
between 30% and 50%.
Allocation--50% to 70% Equity: Funds in allocation
categories seek to provide both income and capital
appreciation by investing in multiple asset classes,
including stocks, bonds, and cash. These portfolios are
dominated by domestic holdings and have equity exposures
between 50% and 70%.
Allocation--70% to 85% Equity: Funds in allocation
categories seek to provide both income and capital
appreciation by investing in multiple asset classes,
including stocks, bonds, and cash. These portfolios are
dominated by domestic holdings and have equity exposures
between 70% and 85%.
Broad Asset Class Index: Morningstar Moderate Target Risk
Category Index: Morningstar Aggressive Target Risk
World Allocation: World-allocation portfolios seek to
provide both capital appreciation and income by investing
in three major areas: stocks, bonds, and cash. While these
portfolios do explore the whole world, most of them focus
on the U.S., Canada, Japan, and the larger markets in
Europe. It is rare for such portfolios to invest more than
10% of their assets in emerging markets. These portfolios
typically have at least 10% of assets in bonds, less than
70% of assets in stocks, and at least 40% of assets in non-
U.S. stocks or bonds.
Target-Date Portfolios: Target-date portfolios provide a
diversified exposure to stocks, bonds, and cash for those
investors who have a specific date in for retirement or
another goal. These portfolios aim to provide investors
with an optimal level of return and risk, based solely on
the target date. Over time, management adjusts the
allocation among asset classes to more conservative mixes
as the target date approaches. Morningstar divides target-
date funds into the following categories:

Target-Date 2000-2010
Target-Date 2015
Target-Date 2020
Target-Date 2025
Target-Date 2030
Target-Date 2035
Target-Date 2040
Target-Date 2045
Target-Date 2055
Target-Date Retirement
Tactical Allocation: Tactical Allocation portfolios seek to
provide capital appreciation and income by actively
shifting allocations between asset classes. These portfolios
have material shifts across equity regions, and bond
sectors on a frequent basis. To qualify for the Tactical
Allocation category, the fund must first meet the
requirements to be considered in an allocation category.
Next, the fund must historically demonstrate material
shifts within the primary asset classes either through a
gradual shift over three years or through a series of
material shifts on a quarterly basis. The cumulative asset
class exposure changes must exceed 10% over the
measurement period.
Category Group Index: Morningstar Moderate Target Risk
Category Index: Morningstar Moderately Aggr Target Risk
Alternative
Alternative funds may take short positions or invest in
currencies, derivatives, or other instruments. Funds in this
group may attempt to move in the opposite direction of
the market or may have performance that is not
correlated with the broader markets.
Bear Market : Bear-market portfolios invest in short
positions and derivatives in order to profit from stocks that
drop in price. Because these portfolios often have
extensive holdings in shorts or puts, their returns generally
move in the opposite direction of the benchmark index.
Currency: Currency portfolios invest in U.S. and foreign
currencies through the use of short-term money market
instruments; derivative instruments including (and not
limited to) forward currency contracts, index swaps, and
options; and cash deposits.
Long-Short: Long-short portfolios hold sizable stakes in
both long and short positions. Some funds that fall into
this category are market neutral--dividing their exposure
equally between long and short positions in an attempt to
earn a modest return that is not tied to the market's
fortunes. Other portfolios that are not market neutral will
shift their exposure to long and short positions depending
upon their macro outlook or the opportunities they
uncover through bottom-up research.
Market Neutral: Market neutral portfolios seek income
while maintaining low correlation to fluctuations in market
conditions. Market neutral portfolios typically have net
equity exposure between -20% and 20% and a beta
between -0.3 and 0.3.
Broad Asset Class Index: ML USD LIBOR 3 Mon CM
Category Index: IA SBBI US 30 Day TBill TR USD
Specialty-Precious Metals: Specialty-precious metals
portfolios focus on mining stocks, though some do own
small amounts of gold bullion. Most portfolios concentrate
on gold-mining stocks, but some have significant exposure
to silver-, platinum-, and base-metal-mining stocks as
well. Precious-metals companies are typically based in
North America, Australia, or South Africa.
Managed Futures, FF: These funds primarily trade liquid
global futures, options, swaps, and foreign exchange
contracts, both listed and over-the-counter. A majority of
these funds follow trend-following, price-momentum
strategies. Other strategies included in this category are
systematic mean-reversion, discretionary global macro
strategies, commodity index tracking, and other futures
strategies. More than 60% of the fund's exposure is
invested through derivative securities. These funds obtain
exposure primarily through derivatives; the holdings are
largely cash instruments.
Broad Asset Class Index: S&P 500 TR
Category Index: S&P Diversified Trends Indicator TR
Multialternative, AM These funds offer investors exposure
to several different alternative investment tactics. Funds
in this category have a majority of their assets exposed to
alternative strategies. An investor’s exposure to different
tactics may change slightly over time in response to
market movements. Funds in this category include both
funds with static allocations to alternative strategies and
funds tactically allocating among alternative strategies
and asset classes. Average Gross short exposures is greater
than 20%.
Broad Asset Class Index: S&P 500
Category Index: BarCap US AggBond TR
Trading--Inverse Commodities, IC These funds seek to
generate returns equal to an inverse multiple of short-
term returns of a commodity index. The compounding of
short-term returns results in performance that does not
correspond to those of investing in the index with external
leverage. For example, a fund attempting to achieve
negative 2 times the returns of a given index on a daily
basis is unlikely to deliver anything like negative 2 times
the index’s returns over periods longer than one day. Many
of these funds seek to generate a multiple typically
negative 1 to negative 3 times of the daily or weekly
return of the reference index. Trading funds are not
considered suitable for a long-term investor and are
designed to be used by active traders.
Broad Asset Class Index: S&P 500 TR
Category Index: DJ UBS Commodity TR
Trading--Inverse Equity, IE These funds seek to generate
returns equal to an inverse fixed multiple of short-term
returns of an equity index. The compounding of short-term
returns results in performance that does not correspond to
those of investing in the index with external leverage. For
example, a fund attempting to achieve negative 2 times
the returns of a given index on a daily basis is unlikely to
deliver anything like negative 2 times the index’s returns
over periods longer than one day. Many of these funds
seek to generate a multiple typically negative 1 to
negative 3 times the daily or weekly return of the
reference index. Trading funds are not considered suitable
for a long-term investor and are designed to be used by
active traders.
Broad Asset Class Index: S&P 500 TR
Category Index: BofAML USD Libor 3 Mon CM
Trading--Miscellaneous, TS These funds seek to generate
returns equal to a fixed multiple (positive or negative) of
short-term returns of an index. The reference index for
this category is not equity, fixed-income, or commodity
linked. The compounding of short-term returns results in
performance that does not correspond to those of
investing in the index with external leverage. For
example, a fund attempting to achieve 2 times the returns
of a given index on a daily basis is unlikely to deliver
anything like 2 times the index’s returns over periods
longer than one day. Many of these funds seek to generate
a multiple of the daily or weekly return of the reference
index. Trading funds are not considered suitable for a
long-term investor and are designed to be used by active
traders.
Broad Asset Class Index: S&P 500 TR
Category Index: BofAML USD Libor 3 Mon CM
Trading--Leveraged Commodities, LC These funds seek to
generate returns equal to a fixed multiple of short-term
returns of a commodity index. The compounding of short-
term returns results in performance that does not
correspond to those of investing in the index with external
leverage. For example, a fund attempting to achieve 2
times the returns of a given index on a daily basis is
unlikely to deliver anything like 2 times the index’s returns
over periods longer than one day. Many of these funds
seek to generate a multiple of the daily or weekly return
of the reference index. Trading funds are not considered
suitable for a long-term investor and are designed to be
used by traders.
Broad Asset Class Index: S&P 500 TR
Category Index: DJ UBS Commodity TR
Trading--Leveraged Equity, LE These funds seek to
generate returns equal to a fixed multiple of the short-
term returns of an equity index. The compounding of
short-term returns results in performance that does not
correspond to those of investing in the index with external
leverage. For example, a fund attempting to achieve 2
times the returns of a given index on a daily basis is
unlikely to deliver anything like 2 times the index’s returns
over periods longer than one day. Many of these funds
seek to generate a multiple of the daily or weekly return
of the reference index. Trading funds are not considered
suitable for a long-term investor and are designed to be
used by active traders.
Broad Asset Class Index: S&P 500 TR
Category Index: BofAML USD Libor 3 Mon CM
Trading--Inverse Debt, IT These funds seek to generate
returns equal to an inverse fixed multiple of short-term
returns of a fixed-income index. The compounding of
short-term returns results in performance that does not
correspond to those of investing in the index with external
leverage. For example, a fund attempting to achieve
negative 2 times the returns of a given index on a daily
basis is unlikely to deliver anything like negative 2 times
the index’s returns over periods longer than one day. Many
of these funds seek to generate a multiple typically
negative 1 to negative 3 times of the daily or weekly
return of the reference index. Trading funds are not
considered suitable for a long-term investor and are
designed to be used by active traders.
Broad Asset Class Index: BarCap US AggBond TR
Category Index: BofAML USD Libor 3 Mon CM
Trading--Leveraged Debt, GD These funds seek to
generate returns equal to a fixed multiple of the short-
term returns of a fixed-income index. The compounding of
short-term returns results in performance that does not
correspond to those of investing in the index with external
leverage. For example, a fund attempting to achieve 2
times the returns of a given index on a daily basis is
unlikely to deliver anything like 2 times the index’s returns
over periods longer than one day. Many of these funds
seek to generate a multiple of the daily or weekly return
of the reference index. Trading funds are not considered
suitable for a long-term investor and are designed to be
used by active traders.
Broad Asset Class Index: BarCap US AggBond TR
Category Index: BofAML USD Libor 3 Mon CM
Volatility, VY Volatility strategies trade volatility as an
asset class. Directional volatility strategies aim to profit
from the trend in the implied volatility embedded in
derivatives referencing other asset classes. Volatility
arbitrage seeks to profit from the implied volatility
discrepancies between related securities.
Broad Asset Class Index: S&P 500 TR
Category Index: S&P VIX Mid Term Futures TR

Morningstar Rating for Funds

Morningstar rates mutual funds from one to five stars
based on how well they've performed (after adjusting for
risk and accounting for all sales charges) in comparison to
similar funds. Within each Morningstar Category, the top
10% of funds receive five stars, the next 22.5% four stars,
the middle 35% three stars, the next 22.5% two stars, and
the bottom 10% receive one star. Funds are rated for up to
three time periods--three-, five-, and 10 years--and these
ratings are combined to produce an overall rating. Funds
with less than three years of history are not rated. Ratings
are objective, based entirely on a mathematical
evaluation of past performance. They're a useful tool for
identifying funds worthy of further research, but shouldn't
be considered buy or sell recommendations.

NAV
A fund's net asset value (NAV) represents its per-share
price. A fund's NAV is derived by dividing the total net
assets of the fund, less fees and expenses, by the number
of shares outstanding.

Day Change
The change in the price of the fund during the prior
business day.

Total Assets
This figure is recorded in millions of dollars and represents
the fund's total asset base.

Expense Ratio %
This is the percentage of fund assets paid for operating
expenses and management fees. The expense ratio
typically includes the following types of fees: accounting,
administrator, advisor, auditor, board of directors,
custodial, distribution (12b-1), legal, organizational,
professional, registration, shareholder reporting, sub-
advisor, and transfer agency. The expense ratio does not
reflect the fund's brokerage costs or any investor sales
charges.

Fund expenses (net of waivers and reimbursements) are

subtracted from the fund's assets on a daily basis. This
causes the expense ratio to be accrued evenly, with little
daily effect to the fund's NAV. Most companies associated
with the fund, such as the investment advisor, are actually
paid on a monthly basis.

For most funds, the Expense Ratio that appears in the

Snapshot view is pulled from the fund's audited annual
report. Annual-report expense ratios reflect the actual
fees charged during a particular fiscal year.

For funds of funds only, the Snapshot Expense Ratio is the

prospectus expense ratio from the fund's most recent
prospectus. The prospectus expense ratio reflects material
changes to the expense structure for the current period
and is the aggregate expense ratio as defined as the sum
of the wrap or sponsor fees plus the estimated weighted
average of the underlying fund fees.

Funds of Funds- The prospectus expense ratio for a fund of

funds is the aggregate expense ratio as defined as the sum
of the wrap or sponsor fees plus the estimated weighted
average of the underlying fund fees.

Benefits
The expense ratio is useful because it shows the actual
amount that a fund takes out of its assets each year to
cover its expenses. Investors should note not only the
current expense-ratio figure, but also the trend in these
expenses; it could prove useful to know whether a fund is
becoming cheaper or more costly. When considering high
expenses vs. low expenses, potential investors must also
consider the fund's objective and its size. Certain
objectives, such as foreign-equity funds, have higher costs
and, therefore, higher expense ratios. As for size, smaller
funds are normally costlier than larger funds, because they
do not have the benefits of economies of scale.

Front-end Load
The initial, or front-end, sales charge is a one-time
deduction from an investment made into the fund. The
amount is generally relative to the amount of the
investment, so that larger investments incur smaller rates
of charge. The sales charge serves as a commission for the
broker who sold the fund.

Deferred Load
These are also known as back-end sales charges and are
imposed when investors redeem shares. The percentage
charged generally declines the longer shares are held. This
charge, often coupled with 12b-1 fees as an alternative to
a traditional front-end load, diminishes over time.

Yield
Yield, expressed as a percentage, represents a fund's
income return on capital investment for the past 12
months. This figure refers only to interest distributions
from fixed-income securities, dividends from stocks, and
realized gains from currency transactions. Monies
generated from the sale of securities or from options and
futures transactions are considered capital gains, not
income. Return of capital is also not considered income
NMF--or No Meaningful Figure--appears in this space for
those funds that do not properly label their distributions.
We list N/A if a fund is less than one year old, in which
case we cannot calculate yield.

Morningstar computes yield by dividing the sum of the

fund's income distributions for the past 12 months by the
previous month's NAV (adjusted upward for any capital
gains distributed over the same time period).

Manager Name
The name of the individual or individuals who are
employed by the advisor or subadvisor who are directly
responsible for managing the fund's portfolio, as taken
directly from the fund's prospectus. Other terms that may
appear in this column include the following:

Multiple Managers
This term appears when more than two people are
involved in the fund management, and they manage
independently. Where this term is used, quite often the
fund has divided net assets in set amounts among the
individual managers. In most cases, multiple managers are
employed at different subadvisors or investment firms.

Management Team
This is used when there are more than two people involved
in fund management, and they manage together, or when
the fund strongly promotes its team-managed aspect.

Et al
When this term appears just after a manager name, it
indicates that while other people are involved in fund
management, the person listed acts as the leader or is
recognized by the fund as being the principal management
player.

Infrastructure : Infrastructure equity funds invest

more than 60% of their assets in stocks of companies
engaged in infrastructure activities. Industries
considered to be part of the infrastructure sector
include: oil & gas midstream; waste management;
airports; integrated shipping; railroads; shipping &
ports; trucking; engineering & construction;
infrastructure operations; and the utilities sector.
Emerging-Markets Local-Currency Bond :
Emerging-markets local-currency bond portfolios
invest more than 65% of their assets in foreign bonds
from developing countries in the local currency. Funds
in this category have a mandate to maintain exposure
to currencies of emerging markets. The largest portion
of the emerging-markets bond market comes from
Latin America, followed by Eastern Europe, Africa, the
Middle East, and Asia.
Option Writing : Option writing funds aim to generate
a significant portion of their returns from the collection
of premiums on options contracts sold. This category
includes covered call strategies, put writing strategies,
as well as options strategies that target returns
primarily from contract premiums. In addition, option
writing funds may seek to generate a portion of their
returns, either indirectly or directly, from the volatility
risk premium associated with options trading
strategies.
Long-Short Credit : Funds in the Long-Short Credit
category seek to profit from changes in the credit
conditions of individual bond issuers and credit
markets segments represented by credit indexes.
Typically, portfolios purchase bonds, or sell credit
default swaps, with the expectation of profiting from
narrowing credit spreads; or, the funds sell bonds, or
purchase credit default swaps, with the expectation of
profiting from the deteriorating credit of the underlying
issuer. This category includes funds that use credit
derivatives to hedge systematic risk of credit markets
to isolate credit selection returns. Funds in this
category frequently use derivatives to hedge interest
rate risk.
Prime Money Market : These portfolios invest in
short-term money market securities in order to provide
a level of current income that is consistent with the
preservation of capital. These funds designate
themselves as Prime in form N-MFP and are required
to sell and redeem shares based on the current market
value of the securities in their underlying portfolios
(transact at a "floating" net asset value).
Allocation--15% to 30% Equity : Funds in allocation
categories seek to provide both income and capital
appreciation by investing in multiple asset classes,
including stocks, bonds, and cash. These portfolios are
dominated by domestic holdings and have equity
exposures between 15% and 30%.
Allocation--85%+ Equity : Funds in allocation
categories seek to provide both income and capital
appreciation by investing in multiple asset classes,
including stocks, bonds, and cash. These portfolios are
dominated by domestic holdings and have equity
exposures of over 85%. These funds allocate at least
10% to equities of foreign companies and do not
exclusively allocate between cash and equities.
Premium Features

Analyst Report Summary

A brief description of the fund written by Morningstar's
analysts. For a more complete analysis, the Morningstar
Analyst Report provides unbiased Morningstar commentary
on the fund (click Read full analyst report link).

Analyst Pick or Pan

Analyst Picks or Pans indicate whether a fund is designated
as a most or least favorite choice by Morningstar's in-house
staff of analysts. Only a handful of funds in each
investment category are designated picks and this is an
excellent way to quickly look for quality funds. Looking at
analyst pans is a good way to avoid funds that may be poor
or inappropriate investment options.

Role in Portfolio
A guide to assist with portfolio allocation, funds can be
designated core, supporting player or specialty. Core funds
should be the bulk of an investor's portfolio, while
supporting players contribute to a portfolio, but are
secondary to the core. Specialty offerings tend to be
speculative, and should typically only be a small portion of
investors' portfolios.

Stewardship Grade

Morningstar's Stewardship Grade for funds goes beyond the

usual analysis of strategy, risk, and return. The
Stewardship Grade allows investors and advisors to assess
funds based on factors that we believe influence the
following:
· The manner in which funds are run;
· The degree to which the management company's and
fund board's interests are aligned with fund shareholders;
· The degree to which shareholders can expect their
interests to be protected from potentially conflicting
interests of the management company.
We assign each fund a letter grade from A (best) to F
(worst). Funds are graded on an absolute basis. There is no
"curve."

Morningstar analysts' evaluation of five factors determine

the grade for each fund:
· Regulatory Issues
· Board Quality
· Manager Incentives
· Fees
· Corporate Culture
Morningstar's Stewardship Grade for funds is entirely
different from the Morningstar Rating for funds, commonly
known as the star rating. There is no relationship between
the two.

Portfolio Analysis

MORNINGSTAR STYLE BOX

The Morningstar Style Box™ was introduced in 1992 to help

investors and advisors determine the investment style of a
fund. The equity Style Box is a nine-square grid that
classifies securities by size along the vertical axis and by
value and growth characteristics along the horizontal axis.
Different investment styles often have different levels of
risk and lead to differences in returns. Therefore, it is
crucial that investors understand style and have a tool to
measure their style exposure. For the Fixed-Income
Morningstar Style Box, see Fixed-Income Style Box.

Benefits
Morningstar's equity style methodology uses a "building
block," holdings-based approach that is consistent with
Morningstar's fundamental approach to investing. Style is
first determined at the stock level and then those
attributes are "rolled up" to determine the overall
investment style of a fund or portfolio. This unified
framework can link what are often treated as separate
processes-stock research, fund research, portfolio
assembly, and market monitoring-in the belief that a
shared analytical framework will lead to better portfolio
construction and fund usage.

Morningstar uses 10 different stock characteristics to

measure value and growth, and this produces more
accurate and stable stock and portfolio style assignments.
Morningstar uses both forward-looking and historical-based
components to ensure that information available to active
portfolio managers is incorporated in the model. This
robust approach to style analysis is a powerful lens for
understanding stocks, funds, and portfolios.

The Morningstar Style Box is applicable in all equity

markets. A geographic framework ensures that style
assignments are relevant to local investors everywhere. As
of March 31, 2004, all U.S. and non-U.S. stocks and
portfolios are evaluated under the same style
methodology. This methodology was originally introduced
in May 2002 for U.S. stocks and portfolios only.

Using the Style Box

In general, a growth-oriented portfolio will hold the stocks
of companies that the portfolio manager believes will
increase factors such as sales and earnings faster than the
rest of the market. A value-oriented portfolio contains
mostly stocks the manager thinks are currently
undervalued in price and will eventually see their worth
recognized by the market. A blend portfolio might be a
mix of growth stocks and value stocks, or it may contain
stocks that exhibit both characteristics.

The Morningstar Style Box helps investors construct

diversified, style-controlled portfolios based on the style
characteristics of all the stocks and funds included in that
portfolio.

Origin
Morningstar generates Style Boxes for stocks and portfolios
in-house, using data culled from our internal databases.
Style Box assignments for stocks are updated each month.
Style Box assignments for portfolios are recalculated
whenever Morningstar receives updated holdings for the
portfolio.

The Style Box also forms the basis for the style-based
Morningstar Categories and market indexes.

For the Pros

The Morningstar Style Box captures three of the major
considerations in equity investing: size, security valuation
and security growth. Value and growth are measured
separately because they are distinct concepts. A stock's
value orientation reflects the price that investors are
willing to pay for some combination of the stock's
anticipated per-share earnings, book value, revenues, cash
flow, and dividends. A high price relative to these
measures indicates that a stock's value orientation is
weak, but it does not necessarily mean that the stock is
growth-oriented. Instead, a stock's growth orientation is
independent of its price and reflects the growth rates of
fundamental variables such as earnings, book value,
revenues, and cash flow. When neither value nor growth is
dominant, stocks are classified as "core" and portfolios are
classified as "blend."

Stock Size Score: Vertical Axis

Rather than using a fixed number of "large cap" or "small
cap" stocks, Morningstar uses a flexible system that isn't
adversely affected by overall movements in the market.
World equity markets are first divided into seven style
zones:

United States
Latin America
Canada
Europe
Japan
Asia ex-Japan
Australia/New Zealand
The stocks in each style zone are further subdivided into
size groups. Giant-cap stocks are defined as those that
account for the top 40% of the capitalization of each style
zone; large-cap stocks represent the next 30%; mid-cap
stocks represent the next 20%; small-cap stocks represent
the next 7% and micro-cap stocks represent the smallest
3%. For value-growth scoring, giant-cap stocks are included
with the large-cap group for that style zone, and micro-
caps are scored against the small-cap group for that style
zone.

Stock Style Score: Horizontal Axis

The scores for a stock's value and growth characteristics
determine its horizontal placement. There are five value
factors and five growth factors, which are listed below.

Value Score Components and Weights

Forward Looking

Price/Projected Earnings 50.0%

Historical-Based Measures
Price/Book 12.5%
Price/Sales 12.5%
Price/Cash Flow 12.5%
Dividend Yield 12.5%

Growth Score Components and Weights

Forward Looking

Long-term Projected Earnings Growth 50.0%

Historical-Based Measures
Book Value Growth 12.5%
Sales Growth 12.5%
Cash Flow Growth 12.5%
Historical Earnings Growth 12.5%

The five value and five growth characteristics for each

individual stock are compared to those of other stocks
within the same scoring group (groups based on style zone
and size, e.g. Europe large-caps). Stocks are then assigned
Overall Value and Overall Growth scores based on the ten
factors. If either growth or value is dominant, the stock is
classified accordingly. If the scores for value and growth
are similar in strength, the stock is classified as "core."

The thresholds between value, core, and growth stocks

vary to some degree over time, as the distribution of stock
styles changes in each style zone. However, on average,
the three stock styles each account for approximately one-
third of the total capitalization in each scoring group.

Moving from Individual Stocks to Portfolios

A stock fund or portfolio is an aggregation of individual
stocks and its style is determined by the style assignments
of the stocks it owns. Style Box assignments for portfolios
are based on the asset-weighted average of the style and
size scores of the underlying stocks. Few or no portfolios
contain only stocks with extreme value-growth
orientations, and both value and growth managers often
hold core stocks for diversification or other reasons.
Therefore, for portfolios, the central column of the Style
Box represents the "blend" style (a mixture of growth and
value stocks or mostly core stocks).

Fixed-Income Style Box

Domestic and international fixed-income funds focus on
the two pillars of fixed-income performance: interest-rate
sensitivity and credit quality. Morningstar splits fixed-
income funds into three groups of interest rate sensitivity
(high, medium, and low) and three credit-quality groups
(high, medium, and low). These groupings graphically
display a portfolio's average effective duration and credit
quality. As with equity funds, nine possible combinations
exist, ranging from short maturity/high quality for the
safest funds to long maturity/low quality for the more
volatile.

Along the horizontal axis of the style box lies the average
term length of a fund's bond portfolio based on average
effective duration. This figure, which is calculated by the
fund companies, weights each bond's duration by its
relative size within the portfolio. Duration provides a more
accurate description of a bond's true interest-rate
sensitivity than does maturity because it takes into
consideration all mortgage prepayments, puts, and
adjustable coupons. Funds with an average effective
maturity of less than 3.5 years qualify as short term. Funds
with bonds that have an average effective duration greater
than or equal to 3.5 years but less than or equal to six
years are categorized as intermediate, and those with
maturity that exceeds six years are long term. (The
duration ranges vary slightly for municipal-bond funds:
Less than 4.5 years is short term; 4.5 to seven years is
intermediate; and greater than seven years is long term.)

If duration data are not available, Morningstar will use

average effective maturity figures to calculate the fund's
style box. Although duration is the more accurate
measurement, maturity can also be used to gauge the
amount of interest-rate risk in a fund's portfolio. Funds
with bonds that have an average effective maturity of less
than four years qualify as short term. Funds with an
average effective maturity greater than or equal to four
years but less than or equal to 10 years are categorized as
intermediate, and those with maturity that exceeds 10
years are long term.

Along the vertical axis of a fixed-income style box lies the

average quality rating of a bond portfolio. Funds that have
an average credit rating of AAA or AA are categorized as
high quality. Bond portfolios with average ratings of A or
BBB are medium quality, and those rated below BB are
categorized as low quality. For the purposes of
Morningstar's calculations, U.S. government securities are
considered AAA bonds, nonrated municipal bonds generally
are classified as BB, and all other nonrated bonds are
considered B.

For hybrid funds, both equity and fixed-income style boxes

appear.

Portfolio Date (explanation of reporting frequency)

Morningstar makes every effort to gather the most up-to-
date portfolio information from a fund. By law, however,
funds need only report this information two times during a
calendar year, and they have two months after the report
date to actually release the shareholder report and
portfolio. Therefore, it's possible that a fund's portfolio
could be up to eight months old at the time of publication.
We print the date the portfolio was reported.

Older portfolios should not be disregarded, however.

Although the data may not represent the exact current
holdings of the fund, it may still provide a good picture of
the overall nature of the fund's management style.

Average Market Capitalization

The average market capitalization of a fund's equity
portfolio gives you a measure of the size of the companies
in which the fund invests. Market capitalization is
calculated by multiplying the number of a company's
shares outstanding by its price per share. At Morningstar
we calculate this figure by taking the geometric mean of
the market capitalizations of the stocks a fund owns.

Asset Allocation

% Cash
This data point identifies the percentage of the fund's net
assets held in cash. Cash encompasses both actual cash
and cash equivalents (fixed-income securities with a
maturity of one year or less) held by the portfolio plus
receivables minus payables. Negative percentages of cash
indicate that the portfolio is leveraged, meaning it has
borrowed against its own assets to buy more securities or
that it has used other techniques to gain more than 100%
exposure to the market.

% Stocks
The percentage listed under the heading Stocks
incorporates only the portfolio's straight common stock
holdings.

% Bonds
This data point identifies the percentage of the fund's net
assets held in bonds. Bonds include everything from
government notes to high-yield corporate bonds.

% Other
Other includes preferred stocks (equity securities that pay
dividends at a specific rate) as well as convertible bonds
and convertible preferreds, which are corporate securities
that are exchangeable for a set amount of another form of
security (usually common shares) at a prestated price.
Other also may denote holdings in not-so-neatly-
categorized securities, such as warrants and options.

Turnover Ratio
This is a measure of the fund's trading activity which is
computed by taking the lesser of purchases or sales
(excluding all securities with maturities of less than one
year) and dividing by average monthly net assets. A
turnover ratio of 100% or more does not necessarily
suggest that all securities in the portfolio have been
traded. In practical terms, the resulting percentage
loosely represents the percentage of the portfolio's
holdings that have changed over the past year. Benefits: A
low turnover figure (20% to 30%) would indicate a buy-and-
hold strategy. High turnover (more than 100%) would
indicate an investment strategy involving considerable
buying and selling of securities. Origin: Morningstar does
not calculate turnover ratios. The figure is culled directly
from the financial highlights of the fund's annual report.

% Assets in Top 10
The aggregate assets, expressed as a percentage, of the
fund's top 10 portfolio holdings. This figure is meant to be
a measure of portfolio risk. Specifically, the higher the
percentage, the more concentrated the fund is in a few
companies or issues, and the more the fund is susceptible
to the market fluctuations in these few holdings. The
figure is calculated from the most recent available fund
holdings. Benefits: The Percent Assets in Top 10 Holdings
figure provides insight into the degree to which a portfolio
is diversified. Used in combination with the total number
of holdings, it can indicate how concentrated a fund is.
Origin: This figure is calculated in-house, using the most
recent portfolio we have available for the fund. It
currently counts cash as a holding.

Equity Sector Breakdown %

Basic Materials - Companies that manufacture chemicals,
building materials and paper products. This sector also
includes companies engaged in commodities exploration
and processing. Companies in this sector include
ArcelorMittal, BHP Billiton and Rio Tinto.

Communication Services - Companies that provide

communication services using fixed-line networks or those
that provide wireless access and services. This sector also
includes companies that provide internet services such as
access, navigation and internet related software and
services. Companies in this sector include AT&T, France
Telecom and Verizon Communications.

Consumer Cyclical - This sector includes retail stores, auto

and auto parts manufacturers, companies engaged in
residential construction, lodging facilities, restaurants and
entertainment companies. Companies in this sector
include Ford Motor Company, McDonald’s and News
Corporation.

Consumer Defensive - Companies engaged in the

manufacturing of food, beverages, household and personal
products, packaging, or tobacco. Also includes companies
that provide services such as education & training services.
Companies in this sector include Philip Morris
International, Procter & Gamble and Wal-Mart Stores.

Energy - Companies that produce or refine oil and gas, oil

field services and equipment companies, and pipeline
operators. This sector also includes companies engaged in
the mining of coal. Companies in this sector include BP,
ExxonMobil and Royal Dutch Shell.

Financial Services - Companies that provide financial

services which includes banks, savings and loans, asset
management companies, credit services, investment
brokerage firms, and insurance companies. Companies in
this sector include Allianz, J.P. Morgan Chase and Legg
Mason.

Healthcare - This sector includes biotechnology,

pharmaceuticals, research services, home healthcare,
hospitals, long-term care facilities, and medical
equipment and supplies. Companies in this sector include
Astra Zeneca, Pfizer and Roche Holding.

Industrials - Companies that manufacture machinery,

hand-held tools and industrial products. This sector also
includes aerospace and defense firms as well as companied
engaged in transportations and logistic services.
Companies in this sector include 3M, Boeing and Siemens.

Real Estate - This sector includes mortgage companies,

property management companies and REITs. Companies in
this sector include Kimco Realty Corporation, Vornado
Realty Trust and Westfield Group.

Technology - Companies engaged in the design,

development, and support of computer operating systems
and applications. This sector also includes companies that
provide computer technology consulting services. Also
includes companies engaged in the manufacturing of
computer equipment, data storage products, networking
products, semi¬conductors, and components. Companies in
this sector include Apple, Google and Microsoft.

Utilities - Electric, gas, and water utilities. Companies in

this sector include Electricité de France, Exelon and PG&E
Corporation.

Fixed-Income Sectors

Morningstar's fixed-income sector scheme consists of three

levels: Super Sector, Primary Sector, and Secondary
Sector. There are six Super Sectors, which divide into 17
Primary Sectors, which in turn are formed by 72 Secondary
Sectors.

The Super Sectors and Primary Sectors are as shown

below.

Government

 Government

 Government Related

Municipal

 Municipal Taxable

 Municipal Tax-Exempt

Corporate

 Bank Loan

 Convertible

 Corporate Bond

 Preferred Stock

Securitized

 Agency Mortgage-Backed

 Non-Agency Residential Mortgage-Backed

  Commercial Mortgage-Backed

 Covered Bond

 Asset-Backed

Cash & Equivalents

 Cash & Equivalents

Other

 Swap

 Future/Forward

 Option/Warrant

Primary sector definitions are as follows:

Government

This Primary Sector includes all conventional debt issued

by governments, including bonds issued by a Central Bank
or Treasury and bonds issued by local governments,
cantons, regions and provinces. Securities in this sector
include U.S. Treasury: inflation-protected instruments and
sovereign bonds such as German Bundesobligationen, UK
index-linked Gilts, and Japanese government securities.

Government Related

This Primary Sector includes debt obligations issued by

government agencies as well as interest-rate swaps and
Treasury futures that are generally considered to have a
risk profile commensurate with government bonds but may
not have explicit government backing. Bonds issued by
government-sponsored enterprises such as Federal
National Mortgage Association and Federal Home Loan
Mortgage Corporation can be found in this Primary Sector,
while securities backed by mortgages that carry
guarantees from government agencies can be found in the
agency mortgage backed Primary Sector. Securities in this
sector include U.S. bonds issued by the Export Import Bank
of the United States, The Tennessee Valley Authority, the
Commodity Credit Corporation, and the Small Business
Administration as well as Treasury futures. This Primary
Sector also includes bonds issued by agencies of central
governments and bonds issued by supranational agencies.
Securities in this Primary Sector include:
Bundesschatzanweisungen (German federal notes) and
Australian bonds issued by electrical suppliers and backed
by the commonwealth of Australia; securities issued by the
International Bank for Reconstruction and Development
(World Bank), the European Investment Bank, the Inter-
American Development Bank, and more.

Municipal Taxable

United States regulations require that bonds benefiting

from a federal tax exemption be issued only for certain
purposes. The interest on municipal bonds may be taxable
(that is, not excluded from gross income for federal
income tax purposes) if they are deemed to be issued in
support of certain private activities. A municipal security
is considered a private-activity bond if it meets either of
two sets of conditions set out in Section 141 of the Internal
Revenue Code, which includes limits on the use of bond
proceeds for private business use. The interest from so-
called qualified private-activity bonds may be excluded
from gross income for federal income tax purposes, but it
remains subject to the Alternative Minimum Tax. These
"AMT bonds" are included in the Municipal Tax-Exempt
Primary Sector. This sector also includes Build America
Bonds, which were issued under the 2009 American
Recovery and Reinvestment Act, and non-U.S. municipal
bonds.

Municipal Tax-Exempt

Local governments, state governments, provinces, and

regional authorities are often referred to more generally
as "municipalities" and typically issue bonds in order to
raise money for operations and development. This
financing is sometimes used to build or upgrade hospitals,
sewer systems, schools, housing, stadiums, or industrial
complexes. Some municipal bonds are backed by the
issuing entity, while others are linked to a revenue stream,
such as from a toll way or a utility. Municipal bonds in the
United States are typically exempt from federal taxes and
often the taxes of the states in which they are issued.
Those taxation advantages may allow municipal
governments to sell bonds at lower interest rates than
those offered by comparable taxable bonds. This Primary
Sector includes issues that are subject to the Alternative
Minimum Tax but not other federal taxes.

Bank Loan

The bank loans most commonly held within investment

portfolios are typically referred to as leveraged loans,
because the balance sheets of their borrowers carry heavy
debt burdens. Loans of this kind are: normally issued with
interest payments that float above a commonly used short-
term benchmark such as the London Interbank Offered
Rate, or LIBOR, by at least 300 basis points; typically
senior to nearly all other debt and equity in a company's
capital structure; and very often secured by specific assets
or cash flows.

Convertible

Convertible bonds and convertible preferreds give their

owners an opportunity to convert each security to a
certain number of shares of common stock at a certain
price. As the stock approaches that price, the option to
convert becomes more valuable and the price of the
convertible also rises. These securities usually provide
lower interest payments because the option to convert to
stock could potentially be quite valuable at some point in
the future.

Corporate Bond

This sector includes all conventional debt securities that

are issued by corporations. Corporate bonds are issued
with a wide range of coupon rates and maturity dates.

Preferred Stock

Preferred stock is legally structured as equity, above

common equity in a company's capital structure, but does
not offer voting rights. Preferred stock often pays a fixed
dividend and has priority over common equity when an
issuing company elects to pay dividends. Although
preferred stocks are not debt instruments, investors often
treat them as such because of their income payouts and
higher capital-structure placement.

Agency Mortgage-Backed (Agency MBS)

This sector contains securities that represent a claim on

the cash flows associated with pools of mortgages
guaranteed by a government agency. Rolling into this
sector are items such as mortgage pass-throughs, mortgage
CMOs, and mortgage ARMs. These securities are
guaranteed by Ginnie Mae, an agency of the U.S.
government, or by U.S.-government-sponsored enterprises
such as Fannie Mae or Freddie Mac.

Non-Agency Residential Mortgage-Backed

Non-agency residential mortgage-backed securities are

those not issued and guaranteed by Fannie Mae, Freddie
Mac, or Ginnie Mae. Conforming loan size limits set by the
U.S. government determine if a mortgage loan can qualify
for an agency guarantee, and those that do not qualify
make up the bulk of non-agency RMBS collateral. Because
they lack a third-party guarantee, protection in the case
of non-agency RMBS is generally provided through the
creation of subordinate securities. These are first in line to
offer credit protection to the senior most AAA rated
classes and are accordingly priced at lower prices relative
to AAAs, reflecting their higher exposure to credit risk.

Commercial Mortgage-Backed(Commercial MBS)

A type of mortgage-backed security backed by mortgages

on commercial rather than residential real estate.

Covered Bond

Covered bonds are securities issued by a bank and backed

by either high-quality mortgage loans or public-sector
loans, which represent the "cover pool." Issuers raise
assets for cover pools by selling "covered bonds" to
investors, which maintain a claim on the cover pool but
also a claim on the general assets and credit of the issuer.
Part of what differentiates a cover pool from the assets
supporting a typical mortgage-backed security is that the
cover pool remains on the balance sheet of its issuer,
usually a bank or special financial institution set up for this
purpose.

Asset-Backed

Asset-backed securities are based on the expected cash

flows from debts such as auto loans, credit card
receivables, and computer leases among others. The cash
flows for asset-backed securities can be fixed or variable.
These securities typically range in effective maturity from
two to seven years.

Cash & Equivalents

Cash can be cash in the bank, certificates of deposit,

currency, or money market holdings. Cash can also be any
fixed-income securities that mature in less than 12
months. Cash also includes commercial paper and any
repurchase agreements held by the fund.

Swap

Swaps are risk-shifting, over-the-counter agreements that

allow one party to trade one type of exposure for another.
Each party agrees in advance to trade one set of payments
(e.g., fixed or floating interest rates on a predetermined
notional amount) for a different set of payments for a set
amount of time.

Future/Forward

By entering into a futures contract, the buyer (long

position) has an obligation to purchase a specific
underlying asset at an agreed-upon price at a specific date
in the future. The seller of the futures contract takes a
short position in the asset and agrees to sell it according to
those terms.

Forward contracts are very similar to futures contracts in

that they also represent the obligation to buy or sell a
specific asset on a specific future date.

Option/Warrant

Options are contracts that allow the holder to profit if the

price of the underlying asset moves in a certain direction.
Call options give the holder (the long position) the right,
but not the obligation, to buy an asset at a predetermined
strike price and profit when the asset price is higher than
the strike price. Put options give the holder the right to
sell an asset at a specific strike price and profit when the
market price of the asset is below the strike price. The
parties that write options take a short position and have
the obligation to sell or buy the asset from the long
position if the option is exercised.

Warrants are a type of call option that is issued by the

company, usually as part of a bond offering.

Top 5 Holdings

These are the top 5 holdings in the fund's portfolio ranked

by the % of net assets.

YTD Return %
The holding's YTD return through the last close.

% of Net Assets
Morningstar calculates the percentage of net assets figure
by dividing the market value of the security by the fund's
total net assets. If a few securities take up a large
percentage of the fund's net assets, the fund uses a
concentrated portfolio strategy. If the percentage figures
are low, then the manager is not willing to bet heavily on
any particular security.

Recent News

These are the five most recent news stories posted on this
fund and taken from the following sources.

Dow Jones
The date in this column links to the latest Dow Jones
Online News story filed with Morningstar that mentions a
security in your portfolio. DJON is a premium service.

Morningstar
The date in this column links to the latest story written by
Morningstar's news team that mentions a security in your
portfolio. This is a premium service.

Press release
The date in this column links to the latest press release
filed with Morningstar.com that mentions a security in
your portfolio. Morningstar.com offers press releases from
the two largest PR services, BusinessWire and PR
Newswire. Investors should use some caution in reading
press releases; press releases should not be assumed to
have been written by objective sources.

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