Data Definitions

	Morningstar Report: Mutual Fund Data Definitions

	Portfolio
	Style Box Details

	OWNERSHIP ZONE Traditionally, Morningstar has used the equity style box to classify funds based on their underlying holdings. However, to offer a more complete picture of how the fund's holdings are distributed, Morningstar has developed ownership zones. Ownership zones are the shaded areas of the style box intended to be a visual measure of a fund's style scope--that is, the primary area of a fund's ownership within the style box. Some key points to remember about the ownership zone are that it encompasses 75% of the stock holdings in the fund's portfolio, and that it is centered around a centroid that is determined using an asset-weighted calculation. The fund's centroid represents the weighted average of all the fund's holdings. The centroid's position is used to assign a fund to one of the nine style-box-based fund categories. Observing where the ownership zone falls within the equity style box is useful because many funds that appear similar in size and style may actually include quite different security types. For example, it's expected that a fund holding mainly large-cap growth stocks would behave differently than one containing both large-and mid-cap growth stocks, yet both funds might be classified as large-cap growth. Over a period of time, the shape and location of a fund's ownership zone may vary. This movement is a good indicator of how consistent a fund's style is. 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). 1. PRICE/EARNINGS - PROJECTED Price/projected earnings for a stock is the ratio of the company's most recent month-end share price to the company's estimated earnings per share (EPS) for the current fiscal year. If a third-party estimate for the current year EPS is not available, Morningstar will calculate an internal estimate based on the most recently reported EPS and average historical earnings growth rates. Price/projected earnings is one of the five value factors used to calculate the Morningstar Style Box. For portfolios, this data point is calculated by taking an asset-weighted average of the earnings yields (E/P) of all the stocks in the portfolio and then taking the reciprocal of the result. Benefits The P/E ratio relates the price of the stock to the per-share earnings of the company. A high P/E generally indicates that the market will pay more to obtain the company because it has confidence in the company's ability to increase its earnings. Conversely, a low P/E indicates that the market has less confidence that the company's earnings will increase, and therefore will not pay as much for its stock. In most cases high average P/E ratio indicates a manager has paid a premium for stocks that have a high potential for increased earnings. If the average P/E ratio is low, the manager may believe that the stocks have an overlooked or undervalued potential for appreciation. Origin Morningstar generates this figure in-house based on stock statistics from our internal equities databases. For stocks, this figure is calculated monthly. For funds and portfolios, Morningstar updates this figure upon receipt of the most-recent portfolio holdings from the asset manager. 2. PRICE/BOOK - PROJECTED Price/book (projected) for a stock is the ratio of the company's most recent month-end share price to the company's estimated book value per share (BPS) for the current fiscal year. Book value is the total assets of a company, less total liabilities. Morningstar calculates internal estimates for the current year BPS based on the most recently reported BPS and average historical book value growth rates. Price/book (projected) is one of the five value factors used to calculate the Morningstar Style Box. For portfolios, this data point is calculated by taking an asset-weighted average of the book value yields (B/P) of all the stocks in the portfolio and then taking the reciprocal of the result. Benefits The price/book ratio can tell investors approximately how much they're paying for a company's tangible assets, based on accounting valuations. Assets are usually valued on a company's books at the historical acquisition cost, less any depreciation. The book value may be different than the current market value for those assets and the stock price may reflect that. Also, book value often excludes intangible assets, such as patents, trademarks, and brand names; therefore, companies with a lot of intangible assets often have larger price/book ratios. Value investors frequently look for companies or portfolios that have low price/book ratios. br> Origin Morningstar generates this figure in-house based on stock statistics from our internal equities databases. For stocks, this figure is calculated monthly. For funds and portfolios, Morningstar updates this figure upon receipt of the most-recent portfolio holdings from the asset manager. 3. PRICE/SALES - PROJECTED Price/sales (projected) for a stock is the ratio of the company's most recent month-end share price to the company's estimated sales per share (SPS) for the current fiscal year. Morningstar calculates internal estimates for the current year SPS based on the most recently reported SPS and average historical sales growth rates. Price/sales (projected) is one of the five value factors used to calculate the Morningstar Style Box. For portfolios, this data point is calculated by taking an asset-weighted average of the sales yields (S/P) of all the stocks in the portfolio and then taking the reciprocal of the result. Benefits Price/sales is a valuation measure that indicates how much an investor is paying for a revenue stream. Because revenue measures are less subject to accounting standards than many financial statement figures, this valuation measure is more useful than many others in comparing stocks from different countries. Still, without information about the profit margins of the underlying stocks, this statistic is of limited use. This is less of a problem for specialty portfolios, since margins across specific industries are more consistent. Origin Morningstar generates this figure in-house based on stock statistics from our internal equities databases. For stocks, this figure is calculated monthly. For funds and portfolios, Morningstar updates this figure upon receipt of the most-recent portfolio holdings from the asset manager. 4. PRICE/CASH FLOW - PROJECTED Price/cash flow (projected) for a stock is the ratio of the company's most recent month-end share price to the company's estimated cash flow per share (CPS) for the current fiscal year. Cash flow measures the ability of a business to generate cash and it acts as a gauge of liquidity and solvency. Morningstar calculates internal estimates for the current year CPS based on the most recently reported CPS and average historical cash flow growth rates. Price/cash flow (projected) is one of the five value factors used to calculate the Morningstar Style Box. For portfolios, this data point is calculated by taking an asset-weighted average of the cash flow yields (C/P) of all the stocks in the portfolio and then taking the reciprocal of the result. Benefit The price/cash flow ratio can tell investors approximately how much they're paying for a dollar of cash flow. Because of differences in accounting standards across the globe, price/earnings ratios are not always reasonable for comparing companies from different countries. Price/Cash Flow attempts to provide a consistent standard of comparison. Origin Morningstar generates this figure in-house based on stock statistics from our internal equities databases. For stocks, this figure is calculated monthly. For funds and portfolios, Morningstar updates this figure upon receipt of the most-recent portfolio holdings from the asset manager. 5. DIVIDEND YIELD - PROJECTED Dividend yield (projected) for a stock is the percentage of its stock price that a company is projected to pay out as dividends. It is calculated by dividing estimated annual dividends per share (DPS) for the current fiscal year by the company's most recent month-end stock price. Morningstar calculates internal estimates for the current year DPS based on the most recently reported DPS and average historical dividend growth rates. This is one of the five value factors used to calculate the Morningstar Style Box. For portfolios, this data point is calculated by taking an asset-weighted average of the dividend yields of all the stocks in the portfolio. Benefit When companies make a profit, they can either share that profit with shareholders in the form of a dividend, or they can reinvest that money into the business. High dividend yields are often indicative of value stocks. Growth stocks tend to reinvest profits back into the company and therefore have low or no dividends. Origin Morningstar generates this figure in-house based on stock statistics from our internal equities databases. For stocks, this figure is calculated monthly. For funds and portfolios, Morningstar updates this figure upon receipt of the most-recent portfolio holdings from the asset manager. 6. LONG-TERM PROJECTED EARNINGS GROWTH The long-term projected earnings growth rate for a stock is the average of the available third-party analysts' estimates for three- to five-year EPS growth. Long-term projected earnings growth is one of the five growth factors used to calculate the Morningstar Style Box. For portfolios, this data point is the share-weighted average of the projected earnings growth estimates for all the stocks in the portfolio. (The share-weighted average is more accurate than an asset-weighted average for this type of calculation.) Benefits Investors and institutions trade stocks based on their expectations for how stocks will perform in the future. The long-term projected earnings growth rate summarizes stock analysts' estimates for how quickly a company will grow its earnings per share. This measure helps Morningstar determine how strong the overall growth-orientation is for a stock or portfolio. Origin Morningstar generates this figure in-house based on stock statistics from our internal equities databases. For stocks, this figure is calculated monthly. For funds and portfolios, Morningstar updates this figure upon receipt of the most-recent portfolio holdings from the asset manager. 7. HISTORICAL EARNINGS GROWTH The historical earnings growth rate for a stock is a measure of how the stock's earnings per share (EPS) has grown over the last five years. Morningstar uses EPS from continuing operations to calculate this growth rate. Historical earnings growth is one of the five growth factors used to calculate the Morningstar Style Box. For portfolios, this data point is the share-weighted collective earnings growth for all stocks in the current portfolio. (The share-weighted average is more accurate than an asset-weighted average for this type of calculation.) Benefits The historical earnings growth rate can tell investors how quickly a company's profits are growing. A company may increase its earnings per share by increasing its sales, decreasing its costs, or reducing the number of shares outstanding in the marketplace. The historical earnings growth rate helps Morningstar determine how strong the overall growth-orientation is for a stock or portfolio. Origin Morningstar generates this figure in-house based on stock statistics from our internal equities databases. For stocks, this figure is calculated monthly. For funds and portfolios, Morningstar updates this figure upon receipt of the most-recent portfolio holdings from the asset manager. 8. BOOK VALUE GROWTH The book value growth rate for a stock is a measure of how the stock's book value per share (BVPS) has grown over the last five years. Book value growth is one of the five growth factors used to calculate the Morningstar Style Box. For portfolios, this data point is the share-weighted collective book value growth for all stocks in the current portfolio. (The share-weighted average is more accurate than an asset-weighted average for this type of calculation.) Benefits Book value growth tells an investor how quickly a company is building its asset base. A company may increase its book value by buying more assets or decreasing its liabilities. The book value growth rate helps Morningstar determine how strong the overall growth-orientation is for a stock or portfolio. Origin Morningstar generates this figure in-house based on stock statistics from our internal equities databases. For stocks, this figure is calculated monthly. For funds and portfolios, Morningstar updates this figure upon receipt of the most-recent portfolio holdings from the asset manager. 9. SALES GROWTH The sales growth rate for a stock is a measure of how the stock's sales per share (SPS) has grown over the last five years. Sales growth is one of the five growth factors used to calculate the Morningstar Style Box. For portfolios, this data point is the share-weighted collective sales growth for all stocks in the current portfolio. (The share-weighted average is more accurate than an asset-weighted average for this type of calculation.) Benefits Sales growth tells an investor how quickly a company is increasing its revenues. The sales growth rate helps Morningstar determine how strong the overall growth-orientation is for a stock or portfolio. Origin Morningstar generates this figure in-house based on stock statistics from our internal equities databases. For stocks, this figure is calculated monthly. For funds and portfolios, Morningstar updates this figure upon receipt of the most-recent portfolio holdings from the asset manager. 10. CASH FLOW GROWTH The cash flow growth rate for a stock is a measure of how the stock's cash flow per share (CFPS) has grown over the last three to five years. Cash flow growth is one of the five growth factors used to calculate the Morningstar Style Box. For portfolios, this data point is the share-weighted collective cash flow growth for all stocks in the current portfolio. (The share-weighted average is more accurate than an asset-weighted average for this type of calculation.) Benefits Cash flow growth tells an investor how quickly a company is generating inflows of cash from operations. The cash flow growth rate helps Morningstar determine how strong the overall growth-orientation is for a stock or portfolio. Origin Morningstar generates this figure in-house based on stock statistics from our internal equities databases. For stocks, this figure is calculated monthly. For funds and portfolios, Morningstar updates this figure upon receipt of the most-recent portfolio holdings from the asset manager. 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 duration 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 duration 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.
	Asset Allocation

	This section breaks down how the fund's assets are invested. Morningstar calculates portfolio statistics on the long and short positions in each fund and displays long, short, and net (long minus short) statistics as appropriate. (For more on long and short positions, see below.) In the accompanying bar chart, the net percentage position (long exposure minus short exposure) in each asset class is indicated with a solid bar. When applicable, gross short exposure and gross long exposure in each asset class are indicated with clear, outlined bars. Long and Short Positions Most portfolios take long positions in securities. Long positions involve buying the security outright and then selling it later, with the hope that the security price rises over time. In contrast, short positions are taken by some funds (most commonly long-short, bear market, and market-neutral funds) to benefit from anticipated price declines. In this type of transaction, the fund borrows the security from another investor, sells it and receives cash, and is then obligated to buy it back at some point in the future in order to return it to the lender. If the security's price falls after the short sale, the fund will have sold high and can now buy low to "close" the short position and lock in a profit. However, if the price of the security increases after the short sale, the fund will experience losses by having to buy it at a higher price than the sale price. Short positions produce negative exposure to the security that is being shorted. This means that when the security rises in value, the short position will fall in value, and vice versa. Asset Allocation: Cash This data point identifies the percentage of the fund's assets held in cash (long, short, and net). 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. Asset Allocation: Stocks This data points indicates the percentage of the fund's assets devoted to equity investments (long, short, and net). Asset Allocation: Bonds This data point identifies the percentage of the fund's assets held in bonds (long, short, and net) and bond exposure gained from derivatives. Bonds include everything from government notes to high-yield corporate bonds. Asset Allocation: Other Other includes long, short, and net positions in 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. Unidentified holdings are also grouped in this category. Asset Allocation: Foreign When listed, this data point reflects only the percentage of a portfolio's stock holdings that are held in foreign stocks (long, short, and net) and is calculated from the fund's most recent portfolio.
	Sector Weightings

	Equity Sector Breakdown % Software - Companies engaged in the design and marketing of computer operating systems and applications. Examples include Microsoft, Oracle, and Siebel Systems. Hardware - Manufacturers of computer equipment, communication equipment, semiconductors, and components. Examples include IBM, Cisco Systems, and Intel. Telecommunications - Companies that provide communication servies using fixed-line networks or those that provide wireless access and servies. Examples include SBC Communications, AT&T, and Alltel. Media - Companies that own and operate broadcast networks and those that create content or provide it to other media companies. Examples include AOL Time Warner, Walt Disney, and The Washington Post. Healthcare - Includes biotechnology, pharmaceuticals, research services, HMOs, home health, hospitals, medical equipment and supplies, and assisted living companies. Examples include Abbott Laboratories, Merck, and Cardinal Health. Consumer Services - Includes retail stores, personal servies, home builders, home supply, travel and entertainment companies, and educational providers. Examples include Wal-Mart, Home Depot, and Expedia. Business Services - Includes advertising, printing, publishing, bussiness support, consultants, employment, engineering and construction, security services, waste management, distributors, and transportation companies. Examples include Manpower, R. H. Donnelley, and Southwest Airlines. Financial Services - Includes banks, finance companies, money management firms, savings and loans, securities brokers, and insurance companies. Examples include Citigroup, Washington Mutual, and Fannie Mae. Consumer Goods - Companies that manufacture or provide food, beverages, household and personal products, apparel, shoes, textiles, autos and auto parts, consumer electronics, luxury goods, packaging, and tobacco. Examples include PepsiCo, Ford Motor Co., and Kraft Foods. Industrial Materials - Includes aerospace and defense firms, and companies that provide or manufacture chemicals, machinery, building materials, and commodities. Examples include Boeing, DuPont, and Alcoa. Energy - Companies that produce or refine oil and gas, oilfield Service and equipment companies, and pipeline operators. Examples include Exxon Mobil, Schlumberger, and BP Amoco. Utilities - Electric, gas, and water utilities. Examples include Duke Energy, Exelon, and El Paso. Fixed-Income Sector Breakdown % The fixed-income sector illustrates the type of bonds a fund owns. These sectors help investors compare and understand the sector exposure of each mutual fund. This data is especially useful for comparing two funds that may be in the same Morningstar Category. The fixed-income sectors are calculated for all domestic taxable-bond portfolios. It is based on the securities in the most recent portfolio. This data shows the percentage of bond and cash assets invested in each of the 14 fixed-income sectors. Morningstar groups all taxable fixed-income assets into the following sectors: US Government US Treasuries - This sector includes all conventional fixed-rate debt issued by the Treasury department of the United States government (i.e. this sector excludes TIPS). Some examples of this type of debt are Treasury bonds and Treasury notes. Treasury bills are included under % Cash, because they mature in less than 12 months. TIPS - TIPS are inflation-indexed debt issued by the U.S. Treasury. (The term TIPS derives from their former name, Treasury Inflation-Protected Securities.) These bonds have principal and coupon payments that are linked to movements in the Consumer Price Index. They are a defensive measure against expectations of inflation, which typically erodes the real yield of conventional bonds. Even if inflation fears are in check, these bonds can benefit when the yields fall on traditional Treasuries. These unique securities act very differently than any other fixed-rate bond, and their volatility can change over time, depending on the level of interest rates. US Agency - This sector includes debt securities issued by government agencies--such as the Federal National Mortgage Association (FNMA), also known as Fannie Mae, or the Federal Home Loan Mortgage Corporation (FHLMC), also known as Freddie Mac--to raise capital and finance their operations. These "debentures" are not secured by physical assets, so they differ from most of the mortgage bonds that are issued by these agencies. Mortgage Mortgage Pass-Throughs - These are fixed-income securities that represent a claim to the cash flows associated with a pool of mortgages. The bondholders are entitled to a share of the principal and interest payments paid by the homeowners. The majority of these bonds are issued by a government agency such as FNMA, GNMA, or FHLMC. A few private corporations and banks also securitize and package mortgages in this way, and those are also included in this sector. Mortgage CMO - Collateralized mortgage obligations (CMO) are similar to pass-through mortgage securities, but investors have more control over whether they will be paid sooner or later. CMOs are structured by time, so that some investors can line up for the first series of cash flow payments, while others may choose to put themselves at the end of the line. A fund manager would buy a late-paying CMO if they believed that there would be a lot of mortgage refinancing in the near term. This would protect the fund from getting its money back too early, which would require it to be reinvested at a lower interest rate. Most CMOs are based on mortgages from government agencies, such as FNMA and GNMA. Mortgage ARM- Adjustable-rate mortgage (ARM) securities are backed by residential home mortgages where the interest rate is reset periodically in relation to a benchmark. Most ARMs are from government agencies, such as FNMA and GNMA. Credit US Corporate - This sector includes all fixed-income securities that are issued by corporations domiciled in the United States. Corporate bonds are issued with a wide range of coupon rates and maturity dates. Asset-Backed - Asset-backed securities are based on the expected cash flow from such things as auto loans, credit-card receivables, and computer leases. The cash flows for asset-backed securities can be fixed (e.g. auto loans have a defined payment schedule and a fixed maturity) or variable (credit-card debt is paid at random intervals). These securities typically range in maturity from two to seven years. Convertible - Convertible bonds give the owner an opportunity to convert the bond 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 bond 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. Municipal - Local and state governments issue municipal 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 tollway or a utility. Municipal bonds are exempt from federal tax and often from state and local taxes, too. The tax break allows municipal governments to sell the bonds at a lower interest rate, because the investor gets an additional tax benefit. Corporate Inflation-Protected - Inflation-protected securities are similar to TIPS, but they are issued by a private entity rather than by the U.S. government. These bonds are linked to an index of inflation, and the principal and coupon payments increase when inflation increases. As with TIPS, these securities behave quite differently than conventional bonds. Foreign Foreign Corporate - These fixed-income securities are issued by corporations that are based outside of the United States. Foreign Govt - These fixed-income securities are issued by governments outside the United States. Cash Cash - 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. Because this data point is based on only the cash and bond assets in the fund, it can be different than the % Cash in the composition breakdown, which is expressed as a percent of total assets. Sector weightings are also calculated in-house for municipal-bond funds. Although they are generally listed in order of descending credit risk, the categories are not as neatly divided as the stock sector weightings. General obligation bonds, which garner income from the municipality's tax revenues, are listed first (though some perceive these as risky if the issuing municipality is shaky). Revenue-based municipal-bond sectors follow. Near the bottom of the list are lease-backed and industrial-activity bonds, which are generally considered riskier for investors to hold. Demand notes, however, are unrelated to the other types of municipal bonds and hold little credit risk due to their short durations. Municipal-bond classifications: General Obligation: These are plain municipal bonds issued by state governments or local municipalities. Their source of repayment is not always specified in advance, nor is their use of proceeds. But they are some of the safest municipal bonds in the market because they are backed by the taxing power of their issuer. Advance Refunded: State and local issuers advance-refund municipal bonds to refinance debt at lower costs. However, the issuers cannot always call the bonds at par immediately. So, they buy U.S. Treasury bonds in an escrow account to back the bonds until either the first call-date or maturity. "Pre-refunded" means Treasury-backed municipal bonds will be retired at first-call. "Escrowed to Maturity" means the issuer backs the bonds with Treasuries until maturity date. Bonds from any municipal sector may be advance-refunded. State Appropriated Tobacco: States began issuing these municipal bonds after settling with a group of tobacco companies. The suit requires these companies to make ongoing payments to state governments as compensation for smoking-related state health-care expenditures. States issuing tobacco-backed bonds essentially opt to take the whole payment upfront by issuing bonds. They then pay the bonds' interest payments using revenues from the settlement. "Appropriation-backed" means the states have already earmarked funds to make bond payments. They are safer than non-appropriated bonds. Non-state Appropriated Tobacco: These bonds are backed by the same settlement as state-appropriated tobacco bonds are. But they carry modestly higher default risk because they aren't already backed by state appropriations. Education: Most of these municipal bonds fall into two groups: Bonds for local school districts and bonds for higher education. Local district bonds finance buildings and projects to promote primary and secondary education. They can be backed by local municipalities or by state-level agencies. They may also include charter school bonds. Higher education bonds are issued both by public university systems and by private institutions. Other education-related bonds included projects such as public libraries. Health: Health-related municipal bonds back assisted-living and hospice facilities, hospital projects and equipment, and more. For example, they finance construction of everything from new rural-area hospitals to urban hospitals linked to larger care networks . Housing: Housing-related municipal bonds back several types of projects. For example, land-development bonds finance projects preparing land, sewer, road, and other systems for either single-family housing neighborhoods or multi-family housing complexes. These bonds are backed by property taxes which, usually, are initially paid by developers. As residents move into completed neighborhoods and complexes, they assume the property tax obligation. Other housing-related bonds finance the brick-and-mortar construction of low-income government housing developments . Industrial: Industrial municipal bonds may be backed by local municipalities, state governments, or even for-profit corporations. They finance a wide variety of projects including pollution clean-up and private-activity bonds. Similar to some housing-related bonds, private activity bonds may back, for example, the preparation of land that a for-profit company will use to build a new facility. Such bonds are initially backed by government entities before responsibility for their repayment transfers to corporations. Transportation: Transportation-related municipal bonds finance all sorts of projects in addition to non-toll and toll-backed road, bridge, and tunnel construction. They may also finance airport and seaport construction, recurring maintenance of intra-county and city public transportation systems, and more. They may be backed by taxes, tolls, ridership fees, and more. Utilities: Utility-related municipal bonds finance construction and maintenance of power plants, electrical grids, telephone grids, and more. Their source of backing varies but may include property taxes, usage fees, and more. Water/Sewer: These municipal bonds are similar to utility-related issues. They provide initial financing for construction of water and sewer systems that property taxes or other income will eventually repay. Miscellaneous Revenue: This category describes harder-to-categorize municipal bonds that may finance a wide variety of projects. Stock Sectors Relative to S&P 500 Morningstar shows how the sector weightings of an individual fund compare with the sector weightings of the S&P 500. The S&P 500 is set equal to 1.00. For example, a domestic-equity fund with a utilities weighting of 1.50 has 50% more in utilities issues than the S&P 500. 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.
	Bond Quality

	For corporate-bond and municipal-bond funds, the credit analysis depicts the quality of bonds in the fund's portfolio. The analysis reveals the percentage of fixed-income securities that fall within each credit-quality rating as assigned by Standard & Poor's or Moody's. At the top of the ratings are U.S. government bonds. Bonds issued and backed by the federal government are of extremely high quality and thus are considered superior to bonds rated AAA, which is the highest possible rating a corporate issue can receive. Morningstar gives U.S. government bonds a credit rating separate from AAA securities to allow for a more accurate credit analysis of a portfolio's holdings. Bonds with a BBB rating are the lowest bonds that are still considered to be of investment-grade. Bonds that are rated BB or lower (often called junk bonds or high-yield bonds) are considered to be quite speculative. Any bonds that appear in the Not Rated or Not Available category are either not rated by Standard & Poor's or Moody's, or do not have a rating available at this time.
	International Exposure

	Regional Exposure Displays the percentage of the fund's assets invested in the United States, Europe, Japan, the Pacific Rim, Latin America, and other regions. Country Exposure Displays the countries in which the fund invests most heavily. This information is gathered from fund companies and is the most recent data available. 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.
	Top 25 Holdings

	Total Number of Stock Holdings Denotes the total number of equity securities in a fund's portfolio. This number can be quite useful for gaining greater insight into the portfolio's diversification. Total Number of Bond Holdings Denotes the total number of fixed-income securities in a fund's portfolio. This number can be quite useful for gaining greater insight into the portfolio's diversification. Turnover 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. 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). Top 10 and Top 25 Holdings The top 10 and top 25 holdings in the fund's portfolio are ranked by the % Net Assets. Sector Sector for the stock holding. P/E Price/Earnings ratio for the stock holding. YTD Return % YTD return for the stock holding, updated daily. % 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. % Assets in Top 10 Holdings 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 concentration and 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. 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.
	Master/Feeder Fund Structure

	A fund indicated as a �feeder fund� in the portfolio and data interpreter sections of its Fund Report invests 100% of its assets in a separate master fund, which invests directly in individual securities. The individual securities and other portfolio data displayed in a feeder fund's Morningstar report pages are actually those of the corresponding master portfolio. Master/feeder funds are also referred to as hub-and-spoke funds--a registered service mark of Signature Financial Group. © Copyright 2012 Morningstar, Inc. All rights reserved.