Data Definitions

	Morningstar Report: Mutual Fund Data Definitions


	Category Rating Like the Morningstar Risk-Adjusted Rating (more commonly called the star rating; see definition below), the Morningstar category rating is a quantitative measure of risk-adjusted returns. This three-year rating shows how well a fund has balanced risk and return relative to other funds in its Morningstar category (see definition below). The category rating uses the same methodology as the star rating; however, the category rating does not reflect any front- or back-end loads. Other expenses, such as 12b-1 fees, are included. As with the star rating, 5 is the best rating and 1 is the worst. Category Return A statistic that compares a fund's excess return over the risk-free rate (as measured by the return on Treasury bills) to the average excess return for the Morningstar category. With the return on Treasury bills set as the benchmark, the bottom 10% of funds in each Morningstar category earn a Low category return, 22.5% Below Average, 35% Average, 22.5% Above Average, and 10% High. If the average excess return of the category is below the return of the T-bill, the return of T-bill alone is used as the benchmark. Unlike the overall Morningstar Return statistic, loads are not accounted for in the category return. Category return is calculated only for a three-year period. Category Risk A statistic that evaluates a fund's downside volatility relative to the other funds in its Morningstar category. To calculate risk, Morningstar concentrates on those months during which the fund underperformed the average return of a three-month Treasury bill. We add up the amounts by which the fund fell short of the Treasury bill's return and divide the result by the total number of months in the rating period. The fund's average monthly loss is then compared with the average monthly loss for the fund's Morningstar category. The resulting risk rating expresses how risky the fund is relative to the average fund in its Morningstar category. The 10% of funds with the least risk in each Morningstar category earn a Low category risk rating, 22.5% earn Below Average, 35% Average, 22.5% Above Average, and 10% High. Unlike the overall Morningstar Risk statistic, category risk is calculated only for a three-year period. 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, financials, health care, natural resources, precious metals, real estate, technology, utilities, convertible bond, and domestic hybrid. (Precious-metals funds are assigned star ratings in the international-stock asset class.) 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. 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. Diversified Pacific: 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. Diversified Emerging Markets: at least 50% of stocks invested in emerging markets. Foreign: an international fund having no more than 10% of stocks invested in the United States. World: an international fund having more than 10% of stocks invested in the United States. International Hybrid: used for funds with stock holdings of greater than 20% but less than 70% of the portfolio where 40% of the stocks and bonds are foreign. 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 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: 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 six years, or an average effective maturity of more than four but 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. International Bond: A fund that invests at least 40% of bonds in foreign markets. Emerging-Markets Bond: at least 65% assets in emerging-markets bonds. High-Yield Bond: A fund with at least 65% of assets in bonds rated below BBB. 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. 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 New York Long-Term: A fund with at least 80% of assets in New York municipal debt, with average duration of more than seven years, or an average maturity of more than 12 years. Municipal New York Intermediate-Term: A fund with at least 80% of assets in New York municipal debt, with an average duration of between 4.5 years and seven years. Municipal California Long-Term: A fund with at least 80% of assets in California municipal debt, with average duration of more than seven years, or an average maturity of more than 12 years. Municipal California Intermediate-Term: A fund with at least 80% of assets in California municipal debt, with an average duration of between 4.5 years and seven years. Municipal Single-State Long-Term: A single-state fund with an average duration of more than seven years, or average maturity of more than 12 years. Municipal Single-State Intermediate-Term: A single-state 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 Bond Short-Term (national and single state): 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. Star Rating The Morningstar Risk-Adjusted Rating brings both performance and risk together into one evaluation. To determine a fund's star rating for a given period (three, five, or 10 years), the fund's Morningstar Risk score is subtracted from its Morningstar Return score. The resulting number is plotted along a bell curve to determine the fund's rating for each time period: If the fund scores in the top 10% of its broad investment class (domestic stock, international stock, taxable bond, or municipal bond), it receives 5 stars (Highest); if it falls in the next 22.5%, it receives 4 stars (Above Average); a place in the middle 35% earns it 3 stars (Average); those in the next 22.5% receive 2 stars (Below Average); and the bottom 10% get 1 star (Lowest). The star ratings are recalculated monthly. Morningstar Risk The Morningstar Risk statistic evaluates the fund's downside volatility relative to that of other funds in its broad investment class (domestic stock, international stock, taxable bond, or municipal bond). Morningstar uses a proprietary risk measure that operates differently from traditional risk measures, such as beta and standard deviation, which see both greater- and less-than-expected returns as added volatility. Morningstar believes that most investors' greatest fear is losing money--defined as underperforming the risk-free rate of return an investor can earn from the 90-day Treasury bill--so our risk measure focuses only on that downside risk. To calculate the risk score, we plot monthly fund returns in relation to T-bill returns. We add up the amounts by which the fund trails the T-bill return each month and divide that total by the period's total number of months. This number, the average monthly underperformance statistic, is then compared with those of other funds in its same broad investment class to assign our risk scores. The resulting risk score expresses how risky the fund is relative to the average fund in its investment class. The average risk score for the category is set equal to 1.00; a Morningstar Risk score of 1.35 for a taxable-bond fund means that the fund has been 35% riskier than the average taxable-bond fund for the period considered. Morningstar does not rate any fund that has less than three years of performance data. Morningstar Return The Morningstar Return figure rates a fund's performance relative to other funds in its broad investment class (domestic stock, international stock, taxable bond, or municipal bond). After adjusting for maximum front-end loads, applicable deferred loads, and applicable redemption fees, Morningstar calculates the excess return for each fund, defined as the fund's load-adjusted return minus the return of the 90-day T-bill over the same period. The use of excess instead of raw returns reflects our belief that mutual funds should be rated highly for only those returns earned beyond those of a T-bill, which is essentially a risk-free investment. The excess returns are then compared with the higher of the average excess return of the fund's broad investment class or the 90-day T-bill return. This last adjustment prevents distortions caused by having low or negative average excess returns in the equation's denominator, as might occur during a protracted down market. The equation is: (Return on Fund* - T-bill)/Higher of (Category Return* - T-bill) or T-bill *Fund returns are adjusted for loads. Investment class average is based on load-adjusted returns. The resulting Morningstar Return figure is listed relative to the average excess return of the investment category or the T-bill, whichever is higher. A footnote indicates when the T-bill comparison is used. If the Morningstar Return figure is compared with the broad investment class, 1.00 represents the class average. Thus, a figure of 1.10 means that the fund outperformed the class average by 10 percent, while 0.90 means that the fund underperformed by 10 percent. For T-bill comparisons, the same concept is true, but 1.00 occurs when a fund's load-adjusted excess return equals the T-bill. Therefore, a score of 0.90 with a T-bill footnote indicates that the fund's excess return has been 10% lower than the T-bill. In periods of low returns, a fund's raw returns could hypothetically underperform T-bill returns, in which case the figure would be a negative number, such as minus 0.35, meaning that fund's raw returns were 35% less than those of the T-bill. © Copyright 2008 Morningstar, Inc. All rights reserved.