
Growth of $10,000
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 loadadjusted. 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 on Snapshot
screen). 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.


All references to total return represent a fund's gains over a specified
period of time. 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 loadadjusted total returns, Morningstar does not adjust
total return for sales charges or for redemption fees. (Morningstar Return,
Morningstar RiskAdjusted Ratings, and the loadadjusted returns do incorporate
those fees.) Total returns do account for management, administrative,
and 12b1 fees and other costs automatically deducted from fund assets.
+/ S&P 500
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 stockoriented funds.
The +/ (Trailing Time Period) figure indicates the amount by which a
fund over or underperformed the S&P 500 during the specified time
period.
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.
% Rank in Category
This is the fund's totalreturn percentile rank for the specified
time period relative to all funds that have the same Morningstar category.
The highest (or most favorable) percentile rank is 1 and the lowest (or
least favorable) percentile rank is 100. The topperforming fund in a
category will always receive a rank of 1. Percentile ranks within categories
are most useful in those categories that have a large number of funds.


Pretax Return
See the trailing total returns definition above.
Taxadjusted Return
Taxadjusted returns and tax cost ratio are estimates of the impact taxes have had on a fund. We assume the highest tax rate in calculating these figures. These returns follow the SEC guidelines for calculating returns before sale of shares. Taxadjusted returns show a fund's annualized after tax total return for the three, five, and 10year periods, excluding any capitalgains effects that would result from selling the fund at the end of the period. Fund loads are also subtracted from the figure. To determine this figure, all income and shortterm capital gains distributions are taxed at the maximum federal rate at the time of distribution. Longterm capital gains are taxed at a 15% rate. The after tax portion is then assumed to be reinvested in the fund. State and local taxes are not included in our calculations. For taxexempt funds, we only adjust for capital gains tax, as the income from these funds is almost always nontaxable.
For domestic stock funds, which report income that qualifies for a lower tax rate under the dividend tax cut enacted in 2003, we apply the lower rate consistent with that legislation. In practice, however, most fund companies do not specify if their distributions are eligible for this lower rate. Further NASDAQ, which supplies the raw daily data feed on distributions and NAVs for mutual funds, is not currently equipped to distinguish between income distributions that are eligible for the lower rate and those that are not. For funds that do not make such a distinction in their direct reports to us, we therefore must adjust their aftertax returns using the maximum federal rate. As a result, since most stock dividends qualify for a lower tax rate, some domestic stock funds with sizable yields may have understated aftertax returns in our system.
% Rank in Category
This is the fund's taxadjusted totalreturn percentile rank for the specified
time period relative to all funds that have the same Morningstar category.
The highest (or most favorable) percentile rank is 1 and the lowest (or
least favorable) percentile rank is 100. The topperforming fund in a
category will always receive a rank of 1. Percentile ranks within categories
are most useful in those categories that have a large number of funds.
Tax Cost Ratio
This represents the percentagepoint reduction in an annualized return that results from income taxes. Mutual funds regularly distribute stock dividends, bond dividends and capital gains to their shareholders. Investors then must pay taxes on those distributions during the year they were received.
The tax cost ratio is a measure of how one factor can negatively impact performance. The ratio is usually concentrated in the range of 05%. 0% indicates that the fund had no taxable distributions and 5% indicates that the fund was less tax efficient.
For example, if a fund had a 2% tax cost ratio for the threeyear time period, it means that on average each year, investors in that fund lost 2% of their assets to taxes. If the fund had a threeyear annualized pretax return of 10%, an investor in the fund took home about 8% on an aftertax basis. (Because the returns are compounded, the aftertax return is actually 7.8%.)
Benefit
Per the SEC's guidance, aftertax returns reflect both tax effects and sales loads. The tax cost ratio isolates the effects of taxes alone.
Origin
Morningstar calculates the tax cost ratio on a monthly basis, using loadadjusted and taxadjusted returns for different time periods.
Potential Capital Gains Exposure
Potential capital gain exposure is an estimate of the percent of a fund's assets that represent gains. Potential capital gain exposure measures how much the fund's assets have appreciated, and it can be an indicator of possible future capital gain distributions.
Benefits
Morningstar calculates potential capital gain exposure (PCGE) to give investors some idea of the potential tax consequences of their investment in a fund. PCGE measures the gains that have not yet been distributed to shareholders or taxed. It is especially relevant for investors who are considering a new purchase of a fund. If there are a lot of gains embedded in the fund, the investor may potentially receive capital gain distributions for gains that happened before they purchased the fund.
A positive PCGE means that the fund's holdings have generally increased in value. For example, if a fund started with $2,000, gained $500 and lost $100, the fund's PCGE would be 17%, i.e. the net $400 gain divided by the total net assets of $2,400. The fund can either continue to hold the securities that appreciated or it can sell them. When a fund sells a security at a gain, it must distribute substantially all of those gains to shareholders that year. Investors then must pay taxes on those gains. So, a high PCGE can indicate the potential for upcoming capital gain distributions.
A negative PCGE means that the fund has reported losses on its books. The fund may be able to use those losses to offset future gains, thereby reducing the possibility of a capital gain distribution. Thus, investors should expect funds with negative capital gain exposure to be highly taxefficient going forward.
Origin
Morningstar uses data from the fund's annual report as the basis for potential capital gain exposure. To keep the calculation current, we update the information between shareholder reports by accounting for a fund's recent market losses or gains, the sale or redemption of shares, and the payment of capital gains. The updates are made with the net assets, capital gains, and share prices that are provided by the fund company. This data point is recalculated on a monthly basis. The figure is more of an estimate than the one based solely on data from the shareholder report, but it is more current and therefore more relevant to the investor.
