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Average Market Cap ($mil) 15,939.49 66,337.71Price/Earnings 19.81 18.95Price/Book 2.34 2.60Price/Sales 1.56 1.71Price/Cash Flow 10.89 11.48
Top 10 Net Underlying Holdings 03-31-2015
Assets % Name Type Sector Country
1.30 Apple Inc(USD) ST Technology United States0.77 Simon Property Group Inc(USD) ST Real Estate United States0.64 Exxon Mobil Corporation(USD) ST Energy United States
0.56 Microsoft Corp(USD) ST Technology United States0.49 Johnson & Johnson(USD) ST Healthcare United States
0.49 Wells Fargo & Co(USD) ST Financial Services United States0.45 US Treasury Bond 3.625% BND — United States0.45 General Electric Co(USD) ST Industrials United States0.45 Berkshire Hathaway Inc Class B(USD) ST Financial Services United States0.41 US Treasury Bond 3.125% BND — United States
3 Months 11.47 ( Feb 2010-Apr 2010 ) -9.10 ( Jul 2011-Sep 2011 )1 Year 24.84 ( Oct 2011-Sep 2012 ) 2.31 ( Oct 2010-Sep 2011 )3 Years 16.56 ( Oct 2011-Sep 2014 ) 11.26 ( May 2011-Apr 2014 )
Portfolio Yield ( 03-31-2015 ) Yield %
12-Month Yield 2.50
Portfolio-Level Performance Disclosure
The portfolio-level performance shown is hypothetical and for illustrative purposes only.Investor returns will differ from the results shown. The performance data reflects monthlyportfolio rebalancing.
Holdings 03-31-2015
Top 8 holdings out of 8 Symbol Type Holding Value $ % Assets
The portfolio-level performance shown is hypothetical and for illustrative purposes only. Investor returns will differ from the results shown. The performance data reflects monthlyportfolio rebalancing.
Fundamental Analysis 03-31-2015
Market Maturity% of Stocks Portfolio Bmark
Developed Markets 98.48 99.81Emerging Markets 1.52 0.19Not Available 0.00 0.00
Performance DisclosureThe performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate; thus aninvestor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than return data quoted herein. For performance datacurrent to the most recent month-end, please visit http://advisor.morningstar.com/familyinfo.asp.See Disclosure Page for Standardized Returns.
Standardized and Tax Adjusted Returns Disclosure Statement
The performance data quoted represents past performance and does notguarantee future results. The investment return and principal value of aninvestment will fluctuate; thus an investor's shares, when redeemed, may beworth more or less than their original cost. Current performance may be lower orhigher than return data quoted herein. For performance data current to the mostrecent month-end please visit http://advisor.morningstar.com/familyinfo.asp.
An investment in a money-market vehicle is not insured or guaranteed by theFDIC or any other government agency. The current yield quotation reflects thecurrent earnings of the money market more closely than the total returnquotation. Although money markets seek to preserve the value of yourinvestment at $1.00 per share, it is possible to lose money by investing in them.
Standardized Returns assume reinvestment of dividends and capital gains. Theydepict performance without adjusting for the effects of taxation, but areadjusted to reflect sales charges and ongoing fund expenses.
If adjusted for taxation, the performance quoted would be significantly reduced.
For variable annuities, additional expenses will be taken into account, includingM&E risk charges, fund-level expenses such as management fees and operatingfees, contract-level administration fees, and charges such as surrender,contract, and sales charges.
After-tax returns are calculated using the highest individual federal marginalincome tax rates, and do not reflect the impact of state and local taxes. Actualafter-tax returns depend on the investor's tax situation and may differ fromthose shown. The after-tax returns shown are not relevant to investors who holdtheir fund shares through tax-deferred arrangements such as 401(k) plans or anIRA. After-tax returns exclude the effects of either the alternative minimum taxor phase-out of certain tax credits. Any taxes due are as of the time thedistributions are made, and the taxable amount and tax character of eachdistribution are as specified by the fund on the dividend declaration date. Due toforeign tax credits or realized capital losses, after-tax returns may be greaterthan before-tax returns. After-tax returns for exchange-traded funds are basedon net asset value.
Annualized returns 03-31-2015
Standardized Returns (%) 7-day YieldSubsidized
7-day YieldUnsubsidized
1Yr 5Yr 10Yr SinceInception
Inception Date Max FrontLoad %
Max BackLoad %
Net ExpRatio %
Gross ExpRatio %
iShares Micro-Cap-NAV — — 3.87 14.48 — 6.01 08-12-2005 NA NA 0.60 0.60iShares Micro-Cap-Market — — 3.60 14.48 — 5.98 08-12-2005 NA NA 0.60 0.60Vanguard FTSE All-World ex-US ETF-NAV — — -0.49 5.02 — 2.27 03-02-2007 NA NA 0.14 0.14Vanguard FTSE All-World ex-US ETF-Market — — -0.37 4.99 — 2.06 03-02-2007 NA NA 0.14 0.14Vanguard Intermediate-Term Bond ETF-NAV — — 6.93 6.07 — 6.33 04-03-2007 NA NA 0.10 0.10
Vanguard Intermediate-Term Bond ETF-Market
— — 6.98 6.03 — 6.32 04-03-2007 NA NA 0.10 0.10
Vanguard Long-Term Corporate Bond ETF-NAV
— — 12.90 10.03 — 9.54 11-19-2009 NA NA 0.12 0.12
Vanguard Long-Term Corporate Bond ETF-Market
— — 12.56 9.82 — 9.37 11-19-2009 NA NA 0.12 0.12
Vanguard Long-Term Government Bond ETF-NAV
— — 20.95 10.39 — 9.06 11-19-2009 NA NA 0.12 0.12
Vanguard Long-Term Government Bond ETF-Market
— — 20.80 10.41 — 8.96 11-19-2009 NA NA 0.12 0.12
Vanguard REIT ETF-NAV — — 24.08 15.83 9.87 10.21 09-23-2004 NA NA 0.10 0.10Vanguard REIT ETF-Market — — 24.00 15.82 9.86 10.20 09-23-2004 NA NA 0.10 0.10Vanguard Small-Cap Value ETF-NAV — — 10.59 15.09 9.19 9.42 01-26-2004 NA NA 0.09 0.09Vanguard Small-Cap Value ETF-Market — — 10.68 15.11 9.22 9.42 01-26-2004 NA NA 0.09 0.09Vanguard Total Stock Market ETF-NAV — — 12.31 14.76 8.56 6.33 05-24-2001 NA NA 0.05 0.05
Vanguard Total Stock Market ETF-Market — — 12.11 14.71 8.55 6.57 05-24-2001 NA NA 0.05 0.05
Barclays US Agg Bond TR USD 5.72 4.41 4.93 — 12-31-1975Barclays US Corp IG TR USD 6.81 6.50 5.90 — —Barclays US Credit TR USD 6.74 6.23 5.80 — —Barclays US Government Long TR USD 21.03 10.49 7.83 — —Barclays US Govt/Credit 5-10 Yr TR USD 7.03 6.12 5.89 — —
DJ US Select REIT TR USD 25.26 15.89 9.45 — —Morningstar Small Value TR USD 9.27 15.00 10.00 — —MSCI ACWI Ex USA NR USD -1.01 4.82 5.46 — —MSCI ACWI NR USD 5.42 8.99 6.44 — —MSCI EAFE NR USD -0.92 6.16 4.95 — 12-31-1969
Stock Intersection: Sample PortfolioThis Stock Detail table shows how the top 50 net stock holdings are distributed across the portfolio, ranked by the percentage of portfolio net assets. The Holding Portfolio Date is thedate that the fund's portfolio was last updated. When making comparisons among funds, it is an important date to keep in mind. It is possible that a fund's portfolio could be up to eightmonths old at the time of publication. See disclosures for more information.
Stock Details
Stock Ticker/ISIN Market Value $ % of Investments Holding PortfolioDate
Sector
Apple Inc(USD) AAPL 1,295 1.30 a Technology
Source of Stock
Vanguard Total Stock Market ETF (USD) VTI 1,295 1.30 02-28-15
Simon Property Group Inc(USD) SPG 773 0.77 u Real Estate
Correlation Matrix 03-31-2012 to 03-31-2015: Sample PortfolioReport Currency
USD
Correlation Matrix 3 Year
1 Investment Key1 Vanguard Total Stock Market ETF (USD, VTI)2 Vanguard Long-Term Corporate Bond ETF (USD, VCLT)3 Vanguard REIT ETF (USD, VNQ)4 Vanguard Small-Cap Value ETF (USD, VBR)5 iShares Micro-Cap (USD, IWC)6 Vanguard FTSE All-World ex-US ETF (USD, VEU)7 Vanguard Long-Term Government Bond ETF (USD, VGLT)8 Vanguard Intermediate-Term Bond ETF (USD, BIV)
1 2
2 -0.19 3
3 0.28 0.62 4
4 0.94 -0.17 0.33 5
5 0.80 -0.27 0.21 0.91 6
6 0.78 0.01 0.40 0.72 0.56 7
7 -0.49 0.85 0.47 -0.44 -0.45 -0.37 8
8 -0.14 0.89 0.61 -0.13 -0.21 0.04 0.86
Degree of Correlation
High
0.70 to 1.00
Moderate
0.11 to 0.69
None
0.10 to -0.10
Moderately Negative
-0.11 to -0.69
Highly Negative
-0.70 to -1.00
The Correlation Matrix demonstrates the relationship of return patterns amonginvestments. It is based upon the correlation coefficient, a number between -1.0 and 1.0.A perfect negative linear relationship between two investments has a correlation of -1.0,whereas a perfect positive linear relationship exists with a correlation of 1.0.
A correlation coefficient of 0.0 indicates no linear relationship between the investments.Correlation information can be valuable in assessing the diversification effect ofcombining an investment with other investing options.
36 Month Rolling Returns: 11-30-2009 to 03-31-2015 Currency of Security Report Currency
USD USD
Total Return%
Time PeriodPeriod's Cumulative
Total Return %Period's Annualized
Total Return %
iShares Micro-Cap (USD, IWC) 11-30-2009 to 03-31-2015 132.65 17.15Highest Historical Return 09-30-2011 to 09-30-2014 84.52 22.65Lowest Historical Return 04-30-2010 to 04-30-2013 30.80 9.36
Performance Disclosure
The performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate; thus an investor'sshares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than return data quoted herein. For performance data current to themost recent month-end, please visit http://advisor.morningstar.com/familyinfo.asp.
36 Month Rolling Returns: 11-30-2009 to 03-31-2015 Currency of Security Report Currency
USD USD
Total Return%
Time PeriodPeriod's Cumulative
Total Return %Period's Annualized
Total Return %
Vanguard FTSE All-World ex-US ETF (USD,VEU)
11-30-2009 to 03-31-2015 31.79 5.31
Highest Historical Return 09-30-2011 to 09-30-2014 43.18 12.71Lowest Historical Return 04-30-2011 to 04-30-2014 8.65 2.81
Performance Disclosure
The performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate; thus an investor'sshares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than return data quoted herein. For performance data current to themost recent month-end, please visit http://advisor.morningstar.com/familyinfo.asp.
36 Month Rolling Returns: 11-30-2009 to 03-31-2015 Currency of Security Report Currency
USD USD
Total Return%
Time PeriodPeriod's Cumulative
Total Return %Period's Annualized
Total Return %
Vanguard Intermediate-Term Bond ETF (USD,BIV)
11-30-2009 to 03-31-2015 33.51 5.57
Highest Historical Return 12-31-2009 to 12-31-2012 29.53 9.01Lowest Historical Return 09-30-2011 to 09-30-2014 10.05 3.25
Performance Disclosure
The performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate; thus an investor'sshares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than return data quoted herein. For performance data current to themost recent month-end, please visit http://advisor.morningstar.com/familyinfo.asp.
36 Month Rolling Returns: 11-30-2009 to 03-31-2015 Currency of Security Report Currency
USD USD
Total Return%
Time PeriodPeriod's Cumulative
Total Return %Period's Annualized
Total Return %
Vanguard Long-Term Corporate Bond ETF(USD, VCLT)
11-30-2009 to 03-31-2015 60.02 9.22
Highest Historical Return 12-31-2009 to 12-31-2012 43.93 12.91Lowest Historical Return 08-31-2010 to 08-31-2013 14.45 4.60
Performance Disclosure
The performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate; thus an investor'sshares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than return data quoted herein. For performance data current to themost recent month-end, please visit http://advisor.morningstar.com/familyinfo.asp.
Vanguard Long-Term Government Bond ETF (USD, VGLT)
36 Month Rolling Returns: 11-30-2009 to 03-31-2015 Currency of Security Report Currency
USD USD
Total Return%
Time PeriodPeriod's Cumulative
Total Return %Period's Annualized
Total Return %
Vanguard Long-Term Government Bond ETF(USD, VGLT)
11-30-2009 to 03-31-2015 56.76 8.79
Highest Historical Return 12-31-2009 to 12-31-2012 45.41 13.29Lowest Historical Return 09-30-2011 to 09-30-2014 5.56 1.82
Performance Disclosure
The performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate; thus an investor'sshares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than return data quoted herein. For performance data current to themost recent month-end, please visit http://advisor.morningstar.com/familyinfo.asp.
36 Month Rolling Returns: 11-30-2009 to 03-31-2015 Currency of Security Report Currency
USD USD
Total Return%
Time PeriodPeriod's Cumulative
Total Return %Period's Annualized
Total Return %
Vanguard REIT ETF (USD, VNQ) 11-30-2009 to 03-31-2015 145.94 18.38Highest Historical Return 01-31-2010 to 01-31-2013 80.08 21.66Lowest Historical Return 12-31-2010 to 12-31-2013 30.71 9.34
Performance Disclosure
The performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate; thus an investor'sshares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than return data quoted herein. For performance data current to themost recent month-end, please visit http://advisor.morningstar.com/familyinfo.asp.
36 Month Rolling Returns: 11-30-2009 to 03-31-2015 Currency of Security Report Currency
USD USD
Total Return%
Time PeriodPeriod's Cumulative
Total Return %Period's Annualized
Total Return %
Vanguard Small-Cap Value ETF (USD, VBR) 11-30-2009 to 03-31-2015 138.16 17.67Highest Historical Return 09-30-2011 to 09-30-2014 91.75 24.24Lowest Historical Return 04-30-2010 to 04-30-2013 37.82 11.28
Performance Disclosure
The performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate; thus an investor'sshares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than return data quoted herein. For performance data current to themost recent month-end, please visit http://advisor.morningstar.com/familyinfo.asp.
36 Month Rolling Returns: 11-30-2009 to 03-31-2015 Currency of Security Report Currency
USD USD
Total Return%
Time PeriodPeriod's Cumulative
Total Return %Period's Annualized
Total Return %
Vanguard Total Stock Market ETF (USD, VTI) 11-30-2009 to 03-31-2015 116.83 15.62Highest Historical Return 09-30-2011 to 09-30-2014 86.17 23.02Lowest Historical Return 12-31-2009 to 12-31-2012 38.06 11.35
Performance Disclosure
The performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate; thus an investor'sshares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than return data quoted herein. For performance data current to themost recent month-end, please visit http://advisor.morningstar.com/familyinfo.asp.
Trailing Returns 1 Yr 3 Yr 5 Yr 10 Yr InceptStd Mkt03-31-15 3.60 — 14.48 — 5.98
Std NAV03-31-15 3.87 — 14.48 — 6.01
Mkt Total Ret 3.60 17.11 14.48 — 5.98NAV Total Ret 3.87 17.23 14.48 — 6.01
+/- S&P 500 TRUSD -8.86 1.12 0.02 — —
+/- Russell 2000TR USD -4.34 0.96 -0.08 — —
% Rank Cat 87 31 77 —No. in Cat 24 17 14 —
Subsidized Unsubsidized
30-day SEC Yield 0.96 —
Performance DisclosureThe Overall Morningstar Rating is based on risk-adjusted returns,derived from a weighted average of the three-, five-, and 10-year(if applicable) Morningstar metrics.The performance data quoted represents past performance anddoes not guarantee future results. The investment return andprincipal value of an investment will fluctuate; thus an investor'sshares, when sold or redeemed, may be worth more or less thantheir original cost.Current performance may be lower or higher than return dataquoted herein. For performance data current to the most recentmonth-end, please call 800-474-2737 or visit www.ishares.com.
Fees and ExpensesFund Expenses
Management Fees % 0.60Expense Ratio % 0.6012b1 Expense % NA
Risk and Return Profile3 Yr 5 Yr 10 Yr
620 funds 559 funds 360 funds
Morningstar RatingTM 4Q 3Q —Morningstar Risk High High —Morningstar Return +Avg Avg —
3 Yr 5 Yr 10 Yr
Standard Deviation NAV 14.52 18.88 —Standard Deviation MKT 14.51 19.08 —Mean NAV 17.23 14.48 —Mean MKT 17.11 14.48 —Sharpe Ratio 1.17 0.81 —
Trailing Returns 1 Yr 3 Yr 5 Yr 10 Yr InceptStd Mkt03-31-15 -0.37 — 4.99 — 2.06
Std NAV03-31-15 -0.49 — 5.02 — 2.27
Mkt Total Ret -0.37 6.63 4.99 — 2.06NAV Total Ret -0.49 6.62 5.02 — 2.27
+/- MSCI ACWIEx USA NR USD 0.52 0.21 0.21 — —
+/- MSCI ACWIEx USA NR USD 0.52 0.21 0.21 — —
% Rank Cat 32 84 71 —No. in Cat 23 14 8 —
Subsidized Unsubsidized
30-day SEC Yield — —
Performance DisclosureThe Overall Morningstar Rating is based on risk-adjusted returns,derived from a weighted average of the three-, five-, and 10-year(if applicable) Morningstar metrics.The performance data quoted represents past performance anddoes not guarantee future results. The investment return andprincipal value of an investment will fluctuate; thus an investor'sshares, when sold or redeemed, may be worth more or less thantheir original cost.Current performance may be lower or higher than return dataquoted herein. For performance data current to the most recentmonth-end, please call 800-662-7447 or visit www.vanguard.com.
Fees and ExpensesFund Expenses
Management Fees % 0.10Expense Ratio % 0.1412b1 Expense % NA
Trailing Returns 1 Yr 3 Yr 5 Yr 10 Yr InceptStd Mkt03-31-15 6.98 — 6.03 — 6.32
Std NAV03-31-15 6.93 — 6.07 — 6.33
Mkt Total Ret 6.98 3.95 6.03 — 6.32NAV Total Ret 6.93 3.99 6.07 — 6.33
+/- Barclays USAgg Bond TRUSD
1.21 0.89 1.66 — —
+/- Barclays USAgg Bond TRUSD
1.21 0.89 1.66 — —
% Rank Cat 9 9 1 —No. in Cat 13 13 10 —
Subsidized Unsubsidized
30-day SEC Yield 2.27 —
Performance DisclosureThe Overall Morningstar Rating is based on risk-adjusted returns,derived from a weighted average of the three-, five-, and 10-year(if applicable) Morningstar metrics.The performance data quoted represents past performance anddoes not guarantee future results. The investment return andprincipal value of an investment will fluctuate; thus an investor'sshares, when sold or redeemed, may be worth more or less thantheir original cost.Current performance may be lower or higher than return dataquoted herein. For performance data current to the most recentmonth-end, please call 800-662-7447 or visit www.vanguard.com.
Fees and ExpensesFund Expenses
Management Fees % 0.07Expense Ratio % 0.1012b1 Expense % NA
Risk and Return Profile3 Yr 5 Yr 10 Yr
905 funds 803 funds 584 funds
Morningstar RatingTM 4Q 5Q —Morningstar Risk High High —Morningstar Return +Avg High —
3 Yr 5 Yr 10 Yr
Standard Deviation NAV 4.39 4.47 —Standard Deviation MKT 4.45 4.54 —Mean NAV 3.99 6.07 —Mean MKT 3.95 6.03 —Sharpe Ratio 0.90 1.33 —
Trailing Returns 1 Yr 3 Yr 5 Yr 10 Yr InceptStd Mkt03-31-15 12.56 — 9.82 — 9.37
Std NAV03-31-15 12.90 — 10.03 — 9.54
Mkt Total Ret 12.56 8.13 9.82 — 9.37NAV Total Ret 12.90 8.29 10.03 — 9.54
+/- Barclays USAgg Bond TRUSD
7.18 5.19 5.61 — —
+/- Barclays USCorp IG TR USD 6.09 3.08 3.53 — —
% Rank Cat 1 1 1 —No. in Cat 28 20 8 —
Subsidized Unsubsidized
30-day SEC Yield 4.12 —
Performance DisclosureThe Overall Morningstar Rating is based on risk-adjusted returns,derived from a weighted average of the three-, five-, and 10-year(if applicable) Morningstar metrics.The performance data quoted represents past performance anddoes not guarantee future results. The investment return andprincipal value of an investment will fluctuate; thus an investor'sshares, when sold or redeemed, may be worth more or less thantheir original cost.Current performance may be lower or higher than return dataquoted herein. For performance data current to the most recentmonth-end, please call 800-662-7447 or visit www.vanguard.com.
Fees and ExpensesFund Expenses
Management Fees % 0.08Expense Ratio % 0.1212b1 Expense % NA
Risk and Return Profile3 Yr 5 Yr 10 Yr
153 funds 127 funds 86 funds
Morningstar RatingTM 5Q 4Q —Morningstar Risk High High —Morningstar Return High +Avg —
3 Yr 5 Yr 10 Yr
Standard Deviation NAV 8.32 8.50 —Standard Deviation MKT 8.69 8.74 —Mean NAV 8.29 10.03 —Mean MKT 8.13 9.82 —Sharpe Ratio 0.99 1.16 —
Trailing Returns 1 Yr 3 Yr 5 Yr 10 Yr InceptStd Mkt03-31-15 20.80 — 10.41 — 8.96
Std NAV03-31-15 20.95 — 10.39 — 9.06
Mkt Total Ret 20.80 7.72 10.41 — 8.96NAV Total Ret 20.95 7.58 10.39 — 9.06
+/- Barclays USAgg Bond TRUSD
15.23 4.47 5.98 — —
+/- Barclays USGovernmentLong TR USD
-0.08 -0.03 -0.10 — —
% Rank Cat 50 38 50 —No. in Cat 9 9 9 —
Subsidized Unsubsidized
30-day SEC Yield 2.40 —
Performance DisclosureThe Overall Morningstar Rating is based on risk-adjusted returns,derived from a weighted average of the three-, five-, and 10-year(if applicable) Morningstar metrics.The performance data quoted represents past performance anddoes not guarantee future results. The investment return andprincipal value of an investment will fluctuate; thus an investor'sshares, when sold or redeemed, may be worth more or less thantheir original cost.Current performance may be lower or higher than return dataquoted herein. For performance data current to the most recentmonth-end, please call 800-662-7447 or visit www.vanguard.com.
Fees and ExpensesFund Expenses
Management Fees % 0.05Expense Ratio % 0.1212b1 Expense % NA
Trailing Returns 1 Yr 3 Yr 5 Yr 10 Yr InceptStd Mkt03-31-15 24.00 — 15.82 9.86 10.20
Std NAV03-31-15 24.08 — 15.83 9.87 10.21
Mkt Total Ret 24.00 14.10 15.82 9.86 10.20NAV Total Ret 24.08 14.10 15.83 9.87 10.21
+/- MSCI ACWINR USD 18.66 3.35 6.83 3.43 —
+/- S&P UnitedStates REIT TRUSD
-0.03 -0.08 -0.03 0.27 —
% Rank Cat 36 15 10 1No. in Cat 15 15 11 4
Subsidized Unsubsidized
30-day SEC Yield — —
Performance DisclosureThe Overall Morningstar Rating is based on risk-adjusted returns,derived from a weighted average of the three-, five-, and 10-year(if applicable) Morningstar metrics.The performance data quoted represents past performance anddoes not guarantee future results. The investment return andprincipal value of an investment will fluctuate; thus an investor'sshares, when sold or redeemed, may be worth more or less thantheir original cost.Current performance may be lower or higher than return dataquoted herein. For performance data current to the most recentmonth-end, please call 800-662-7447 or visit www.vanguard.com.
Fees and ExpensesFund Expenses
Management Fees % 0.07Expense Ratio % 0.1012b1 Expense % NA
Trailing Returns 1 Yr 3 Yr 5 Yr 10 Yr InceptStd Mkt03-31-15 10.68 — 15.11 9.22 9.42
Std NAV03-31-15 10.59 — 15.09 9.19 9.42
Mkt Total Ret 10.68 18.28 15.11 9.22 9.42NAV Total Ret 10.59 18.29 15.09 9.19 9.42
+/- S&P 500 TRUSD -2.14 2.17 0.63 1.18 —
+/- Russell 2000Value TR USD 6.17 3.50 2.55 1.66 —
% Rank Cat 1 8 12 40No. in Cat 15 14 10 6
Subsidized Unsubsidized
30-day SEC Yield 1.81 —
Performance DisclosureThe Overall Morningstar Rating is based on risk-adjusted returns,derived from a weighted average of the three-, five-, and 10-year(if applicable) Morningstar metrics.The performance data quoted represents past performance anddoes not guarantee future results. The investment return andprincipal value of an investment will fluctuate; thus an investor'sshares, when sold or redeemed, may be worth more or less thantheir original cost.Current performance may be lower or higher than return dataquoted herein. For performance data current to the most recentmonth-end, please call 800-662-7447 or visit www.vanguard.com.
Fees and ExpensesFund Expenses
Management Fees % 0.06Expense Ratio % 0.0912b1 Expense % NA
Risk and Return Profile3 Yr 5 Yr 10 Yr
362 funds 297 funds 201 funds
Morningstar RatingTM 5Q 5Q 4QMorningstar Risk -Avg -Avg AvgMorningstar Return High High +Avg
3 Yr 5 Yr 10 Yr
Standard Deviation NAV 12.03 16.55 19.58Standard Deviation MKT 12.03 16.60 19.56Mean NAV 18.29 15.09 9.19Mean MKT 18.28 15.11 9.22Sharpe Ratio 1.46 0.93 0.48
MPT Statistics Standard Index Best Fit Index
NAVMorningstar Small
Value TR USDAlpha 0.24 1.32Beta 1.12 0.96R-Squared 80.14 98.16
Trailing Returns 1 Yr 3 Yr 5 Yr 10 Yr InceptStd Mkt03-31-15 12.11 — 14.71 8.55 6.57
Std NAV03-31-15 12.31 — 14.76 8.56 6.33
Mkt Total Ret 12.11 16.36 14.71 8.55 6.57NAV Total Ret 12.31 16.39 14.76 8.56 6.33
+/- S&P 500 TRUSD -0.42 0.28 0.29 0.55 —
+/- Russell 1000TR USD -0.42 -0.05 0.03 0.22 —
% Rank Cat 41 19 19 17No. in Cat 55 43 34 13
Subsidized Unsubsidized
30-day SEC Yield 1.84 —
Performance DisclosureThe Overall Morningstar Rating is based on risk-adjusted returns,derived from a weighted average of the three-, five-, and 10-year(if applicable) Morningstar metrics.The performance data quoted represents past performance anddoes not guarantee future results. The investment return andprincipal value of an investment will fluctuate; thus an investor'sshares, when sold or redeemed, may be worth more or less thantheir original cost.Current performance may be lower or higher than return dataquoted herein. For performance data current to the most recentmonth-end, please call 800-662-7447 or visit www.vanguard.com.
Fees and ExpensesFund Expenses
Management Fees % 0.03Expense Ratio % 0.0512b1 Expense % NA
The Investment Proposal Agreement is the cornerstone of the investment management process. Investment recommendations will be made in concert with theguidelines that we agree upon and outline in this document. The Investment Proposal Agreement opens a channel of communication between us, so that importantissues and concerns for either party can be clarified. An effectively developed Agreement is the foundation upon which our work together will be based:1. It establishes the criteria for matching long-term objectives to an appropriate investment plan.2. It provides a frame of reference that will help keep us focused on long-term investment objectives. This focus is especially valuable during periods of market
volatility when there may be a temptation to react to short-term factors.3. It establishes the criteria against which progress can be measured.
General Investment Philosophy and Objectives
Consistent with the Advisor's and with the Client's respective investment styles and philosophies, the Advisor should make every effort to preserve capital and pro-tect the real value of the assets. It is understood that losses may occur in individual securities, but that risk and losses will be considered at the aggregate portfoliolevel. The Advisor should adhere to the investment management styles for which they were hired and make reasonable efforts to control risk, recognizing that somerisk is necessary to produce long-term results that are sufficient to meet the investment objectives.
Risk
The Advisor has discussed the various factors that influence your risk tolerance, such as time horizon and investment objectives. An understanding of your risk toler-ance helps define an investment strategy that you will feel confident maintaining through markets ups and downs.
Return Requirements
Given this risk tolerance, the Advisor will seek the best possible returns for the asset allocation mix. NOTE: Financial markets do fluctuate and there is no guaran-tee that a certain return will be met, and past performance is not a guarantee of future results.NOTE: Financial markets do fluctuate and there is no guarantee that a certain return will be met, and past performance is not a guarantee of future results.
Time Horizon
In determining your risk tolerance, the Advisor assessed the time horizon for the assets in this investment proposal. Generally speaking, the longer the time frame,the more aggressive the portfolio should be if one wishes to obtain efficient returns.
Asset Allocation
A sound asset allocation strategy is the cornerstone of prudent investing. Our investment strategy will involve under and overweighting various asset classes basedon our assessment of the risk and return potential specific to each asset class at any point in time.
Investment Policy Review
To assure continued relevance of the guidelines and objectives established in this statement of investment policy, the Client plans to review the investment policyat least annually. By committing our agreed upon thoughts to a written document, we minimize the potential for conflict and general misunderstandings. For thisreason, we ask you to sign this Agreement-to confirm that you concur with its contents. This Investment Policy Statement is not a contract of any kind. It is onlymeant to be a summary of our agreed upon investment strategy for your portfolio.
I have reviewed and approve the discussion above. I agree with the Investment Proposal as outlined in this document. I further agree that this document shallprovide the guidelines under which my investment portfolio will be managed. I will notify my advisor of any changes to my information, risk tolerance, goals orinvestments.
GeneralThis is an illustration of a simulated investment that assumes the portfolioholding(s) were purchased on the first day of the period indicated. Sales and taxcharges, including those required in the event of transfers between assets, aretaken into account at the rates shown and may be higher or lower than what aninvestor would have actually paid had the investments been purchasedthen or now. The performance data represents past performance and is notindicative of future results. Principal value and investment returns will fluctuate,and an investor's shares/units, when redeemed, may be worth more or less thanthe original investment.
The underlying holdings of the portfolio are not federally or FDIC-insured and arenot deposits or obligations of, or guaranteed by, any financial institution.Investing in securities involves investment risks including possible loss ofprincipal and fluctuation in value.
The investment returns do not reflect active trading and do not necessarilyreflect the results that might have been achieved by active management of theaccount. The investment returns of other clients of the advisor may differmaterially from the investment portrayed.
The information contained in this report is from the most recent informationavailable to Morningstar as of the release date, and may or may not be anaccurate reflection of the current composition of the securities included in theportfolio. There is no assurance that the weightings, composition and ratios willremain the same.
Pre-inception ReturnsThe analysis in this report may be based, in part, on adjusted historical returnsfor periods prior to the fund's actual inception. These calculated returns reflectthe historical performance of the oldest share class of the fund, adjusted toreflect the fees and expenses of this share class. These fees and expenses arereferenced in the report's Charges and Fees section.
When pre-inception data is presented in the report, the header at thetop of the report will indicate this.
While the inclusion of pre-inception data provides valuable insight into theprobable long-term behavior of newer share classes of a fund, investors shouldbe aware that an adjusted historical return can only provide an approximation ofthat behavior. For example, the fee structures of a retail share class will varyfrom that of an institutional share class, as retail shares tend to have higheroperating expenses and sales charges. These adjusted historical returns are notactual returns. Calculation methodologies utilized by Morningstar may differfrom those applied by other entities, including the fund itself.
The investment returns do not necessarily reflect the deduction of all investmentadvisory fees. Client investment returns may be reduced if additional fees areincurred.
Performance for closed-end and exchange-traded funds is calculated based onthe fund's end of the day market prices as reported by the New York StockExchange. Separate account performance is based on the mean experience ofan investor in the account.
This illustration may reflect the results of systematic investments and/or
withdrawals. Systematic investment does not ensure a profit, nor does it protectthe investor against a loss in a declining market. Also, systematic investing willnot keep an investor from losing money if shares are sold when the market isdown.
Investment Summary GraphThe investment summary graph plots the approximate market value of thesecurity or portfolio over the investing horizon. It may also include the totalinvestment assumed in the illustration and/or a benchmark. Total investmentincludes dollar inflows and outflows, including outflows representing notedtaxes and annual fees paid out of pocket. If a benchmark index is included on agraph, it assumes a similar pattern of investment/withdrawal as that of thesecurity or portfolio. Taxes and transaction costs are also applied to thebenchmark index. Note that direct investment in an index is not possible.Indexes are unmanaged portfolios representing different asset classes, withvarying levels of associated risk. The benchmark index included in the graphmay or may not represent an appropriate or accurate comparison with thesecurity or portfolio illustrated.
Standardized ReturnsFor ETFs, the standardized returns reflect performance, both at market price andNAV price, without adjusting for the effects of taxation or brokeragecommissions. These returns are adjusted to reflect all ongoing ETF expensesand assume reinvestment of dividends and capital gains. If adjusted, the effectsof taxation would reduce the performance quoted.
For HOLDRs, the standardized returns reflect performance at market price,without adjusting for the effects of taxation or brokerage commissions. Thesereturns are adjusted to reflect all ongoing expenses and assume reinvestment ofdividends and capital gains. If adjusted, the effects of taxation would reduce theperformance quoted.
For money-market mutual funds, standardized return is total return adjusted forsales charges and reflects all ongoing fund expenses. Current 7-day yield moreclosely reflects the current earnings of the money-market fund than the totalreturn quotation.
For mutual funds, standardized return is total return adjusted for sales chargesand reflects all ongoing fund expenses. Preceding this disclosure statement,standardized returns for each portfolio holding are shown.
For VA subaccounts, standardized return is total return based on the inceptiondate within the separate account and is adjusted to reflect recurring and non-recurring charges such as surrender fees, contract charges, maximum front-endload, maximum deferred load, maximum M&E risk charge, administration fees,and actual ongoing fund-level expenses.
For VL subaccounts, standardized return is total return based on the inceptiondate within the separate account and is adjusted to reflect recurring and non-recurring charges such as surrender fees, contract charges, maximum front-endload, maximum deferred load, maximum M&E risk charge, administration fees,and actual ongoing fund-level expenses. For VLs, additional fees specific to a VLpolicy such as transfer fees and cost of insurance fees, which are based onspecific characteristics of an individual, are not included. If VL fees wereincluded in the return calculations, the performance would be significantlylower. An investor should contact a financial advisor and ask for a personalizedperformance illustration, either hypothetical or historical, which reflects allapplicable fees and charges including the cost of insurance. Please review theprospectus and SAI for more detailed information.
Bond ReturnsPrice evaluations and fixed coupon amounts are provided by Interactive Data
Corporation. The fixed coupon amount is assumed to be paid out semi-annuallywith the first payment beginning six months after the bond start date within theillustration.
Definitions of Report TermsAnnual Fee Paid: Your advisor was able to specify whether annual fees, if any,should be assumed paid out of pocket or from selling shares of securities held inthe illustration.
Average Annualized Return: Average annualized money-weighted return(internal rate of return). In illustrations with time periods less than one year, thisfigure is not annualized.
Capital Gains (Individual Report): Percentage of the total market value of theholding that is attributable to the reinvestment of capital gains distributions.
Charges & Fees (Investment Detail): The sum of fees charged to the investorduring the period, including front or deferred loads, VA charges, and annualfees.
Cumulative Return: The total money-weighted return of the investment over theentire time period of the illustration.
Distribution/Withdrl: The sum of distributions not reinvested, plus any cashwithdrawals during the period.
Income (Individual Report): The percentage of the total market value of theholding that is attributable to the reinvestment of income or dividenddistributions.
Liquidate: Indicates whether the advisor chose that the holding be liquidated onthe end date.
Median (Comparison Report): The total money-weighted return (internal rate ofreturn) of the median security in the illustration for the calendar year indicated.
New investment: Any new cash invested during the period.
Principal (Individual Reports): The percentage of the total market value of theholding that is attributable to new investment.
Rebalance (Planning Assumptions): Indicates whether rebalancing is used, andits frequency. "No" indicates no rebalancing. Options for rebalancing frequencyare monthly, quarterly, semi-annually, and annually.
Rebalance (Investment Assumptions): Percentage of total asset allocation to bemaintained in this holding through rebalancing.
Security Return (Comparison Report): The total money-weighted return (internalrate of return) for the holding in the calendar year indicated, taking into accountcash flows, charges, and fees.
Subsequent Invest/Withdwl: The amount, type, and frequency of subsequentinvestments or withdrawals from the holding. Withdrawals are represented bya negative number. Systematic investments and withdrawals may be mademonthly, quarterly, semi-annually, or annually. If "Custom", a custom scheduleof investments or withdrawals was used.
Taxes Due: The total amount of taxes due from the investor, determined byapplying specified tax rates to distributions and sale of shares during eachcalendar year.
Taxes Paid: Your advisor was able to specify whether taxes, if any, should beassumed paid out of pocket or from selling shares of securities held in theillustration.
Net Amount Invested: The total out-of-pocket expense for the investor. Includesnew investment, annual fees paid to advisor, and taxes due. This figure is netof withdrawals, including liquidation.
Total Reinvest: The sum of distributions reinvested during the period.
Total Return %: The total money-weighted return (internal rate of return) oninvestments for the period.
Portfolio X-Ray ReportDisclosure Statement
GeneralThis report summarizes the composition characteristics of a portfolio ofsecurities. It considers broad asset allocation and regional exposure, securitystyle, and sector exposure to provide a variety of ways for considering the levelof diversification within a portfolio, its potential riskiness, and its possiblebehavior in the future.
The Portfolio X-Ray report is supplemental sales literature and must bepreceded or accompanied by the fund’s/policy’s current prospectus orequivalent. Please read these carefully before investing. In all cases, thisdisclosure statement should accompany the Portfolio X-Ray report. Morningstaris not itself a FINRA-member firm.
Data for this analysis is collected in several ways. For mutual funds, closed-endfunds, exchange-traded funds, and variable annuity subaccounts, equity data isbased upon Morningstar's analysis of the holdings, which are providedperiodically by the fund to Morningstar. For fixed-income securities included inthese products, duration and other data is provided by the fund company. Forseparately managed accounts, data for the account composite reflecting theaverage investor's experience is provided directly by the manager. Stock data isbased upon Morningstar analysis.
An investment in the funds/subaccounts listed in this report is not insured orguaranteed by the Federal Deposit Insurance Corporation (FDIC) or any othergovernment agency.
The information contained in this report is from the most recent informationavailable to Morningstar as of the release date, and may or may not be anaccurate reflection of the current composition of the securities included in theportfolio. There is no assurance that the weightings, composition, ratios, etc.will remain the same.
Notes Regarding Included SecuritiesA closed-end fund is an investment company, which typically makes one publicoffering of a fixed number of shares. Thereafter, shares are traded on asecondary market such as the New York Stock Exchange. As a result, thesecondary market price may be higher or lower than the closed-end fund's netasset value (NAV). If these shares trade at a price above their NAV, they aresaid to be trading at a premium. Conversely, if they are trading at a price belowtheir NAV, they are said to be trading at a discount.
An exchange-traded fund (ETF) is an investment company that typically has aninvestment objective of striving to achieve a similar return as a particular market
index. The ETF will invest in either all or a representative sample of thesecurities included in the index it is seeking to imitate. ETFs can be traded on asecondary market and thus have a market price that may be higher or lower thanits net asset value. If these shares trade at a price above their NAV, they aresaid to be trading at a premium. Conversely, if they are trading at a price belowtheir NAV, they are said to be trading at a discount.
The market price noted on the Detail Report is the price of the ETF as of theclose of trading on the last business day at month-end. This date is listed at thetop of the Detail Report.
A holding company depository receipt (HOLDR) is similar to an ETF, but isfocused on narrow industry groups and initially owns 20 stocks which areunmanaged, and can become more concentrated due to mergers, or thedisparate performance of their holdings. HOLDRs can only be bought in 100-share increments. Investors may exchange shares of a HOLDR for its underlyingstocks at any time.
A money market fund is an investment company that invests in commercialpaper, banker's acceptances, repurchase agreements, government securities,certificates of deposit and other highly liquid securities, and pays money marketrates of interest. Money markets are not FDIC-insured, may lose money, and arenot guaranteed by a bank or other financial institution. Although the moneymarket seeks to preserve a stable per share value (i.e. $1.00 per share), it ispossible to lose money by investment in the fund.
Variable annuities are tax-deferred investments structured to convert a sum ofmoney into a series of payments over time. Variable annuity policies havelimitations and are not viewed as short-term liquid investments. An insurancecompany's fulfillment of a commitment to pay a minimum death benefit, aschedule of payments, a fixed investment account guaranteed by the insurancecompany, or another form of guarantee depends on the claims-paying ability ofthe issuing insurance company. Any such guarantee does not affect or apply tothe investment return or principal value of the separate account and itssubaccount. The financial ratings quoted for an insurance company do not applyto the separate account and its subaccount. If the variable annuity subaccount isinvested in a money-market fund, although it seeks to preserve a stable pershare value (i.e. $1.00 per share), it is possible to lose money by investment inthe fund.
Variable life insurance is a cash-value life insurance product that has a variablecash value and/or death benefit depending on the investment performance ofthe subaccount into which premium payments are invested. Unlike traditionallife insurance, variable life insurance has inherent risks associated with it,including market volatility, and is not viewed as a short-term liquid investment.For more information on a variable life product, including each subaccount,please read the current prospectus. Please note, the financial ratings noted onthe report are quoted for an insurance company and do not apply to the separateaccount and its subaccount. If the variable life subaccount is invested in amoney-market fund, although it seeks to preserve a stable per share value (i.e.$1.00 per share), it is possible to lose money by investment in the fund.
Before investing in a 529 portfolio, an investor should consider whether theinvestor's or designated beneficiary's home state offers any state tax or otherbenefits that are only available for investments in such state's 529 collegesavings plan.
A bond is a debt security. When an investor purchases a bond, the purchaseamount is lent to a government, municipality, corporation or other entity knownas an issuer. The issuer promises to pay a specified rate of interest during thelife of the bond and repay the face value of the bond when it matures.Individual bond issue data, price evaluations, and effective duration are
provided by Interactive Data Corporation.
Asset AllocationThe weighting of the portfolio in various asset classes, including "Other" isshown in this graph and table. "Other" includes security types that are notneatly classified in the other asset classes, such as convertible bonds andpreferred stocks.
In the graph and table, allocation to the classes is shown for long positions,short positions, and net (long positions net of short) positions. These newportfolio statistics help investors look "under the hood" of a portfolio. Thesestatistics summarize what the managers are buying and how they arepositioning the portfolio. When short positions are captured in these portfoliostatistics, investors get a more robust description of the funds' exposure andrisk.
Most managed product portfolios hold fairly conventional securities, such aslong positions in stocks and bonds. Other portfolios use other investmentstrategies or securities, such as short positions or derivatives, to reducetransaction costs, enhance returns, or reduce risk. Some of these securities andstrategies behave like conventional securities, while others have unique returnand risk characteristics.
Most portfolios take long positions in securities. Long positions involve buyingthe security outright and then selling it later, with the hope that the securityprice rises over time. In contrast, short positions are taken to benefit fromanticipated price declines. In this type of transaction, the investor borrows thesecurity from another investor, sells it and receives cash, and then is obligatedto buy it back at some point in the future. If the price falls after the short sale,the investor will have sold high and can now buy low to close the short positionand lock in a profit. However, if the price of the security increases after theshort sale, the investor will experience losses by buying it at a higher price thanthe sale price.
The strategy of selling securities short is prevalent in specialized portfolios,such as long-short, market-neutral, bear-market, and hedge funds. Mostconventional portfolios do not typically short securities, although they mayreserve the right to do so under special circumstances. Funds may also shortderivatives, and this is sometimes more efficient than shorting individualsecurities. Short positions produce negative exposure to the security that isbeing shorted. This means that when the security rises in value, the shortposition will fall in value and vice versa. Morningstar's portfolio statistics willcapture this negative exposure. For example, if a fund has many short stockpositions, the percent of assets in stocks in the asset allocation breakdown maybe negative. Funds must provide their broker with cash collateral for the shortposition, so funds that short often have a large cash position, sometimes evenexceeding 100% cash.
World RegionsThis data set provides a broad breakdown of a portfolio's geographicalexposure, by region and by market maturity. Only non-cash long equity assetsare evaluated in determining the exposure. Not Classified indicates thepercentage of the equity portion of the portfolio for which Morningstar is unableto assess region or origin.
Stock SectorsThis table shows the percentage of the portfolio's long equity assets invested ineach of the three supersectors (Cyclical, Sensitive, and Defensive) and 11 majorindustry subclassifications. The Sector Graph accompanying the tabledemonstrates the sector orientation of the portfolio.
This table shows the percentage of the portfolio's long fixed income assetsinvested in each of the six supersectors (Government, Municipal, Corporate,Securitized, Cash & Equivalents, and Derivative). The Sector Graphaccompanying the table demonstrates the sector weighting of the portfolioagainst the benchmark.
Morningstar Style Box DiversificationThe Morningstar Style Box reveals a fund's investment style as of the datenoted on this report.
For equity funds the vertical axis shows the market capitalization of the longstocks owned and the horizontal axis shows investment style (value, blend, orgrowth).
For fixed-income funds, the vertical axis shows the credit quality of the longbonds owned and the horizontal axis shows interest rate sensitivity asmeasured by a bond's effective duration.
Morningstar seeks credit rating information from fund companies on a periodicbasis (e.g., quarterly). In compiling credit rating information Morningstar acceptscredit ratings reported by fund companies that have been issued by allNationally Recognized Statistical Rating Organizations (NRSROs). For a list of allNRSROs, please visithttp://www.sec.gov/divisions/marketreg/ratingagency.htm. Additionally,Morningstar accepts foreign credit ratings from widely recognized or registeredrating agencies. If two rating organizations/agencies have rated a security, fundcompanies are to report the lower rating; if three or moreorganizations/agencies have rated a security, fund companies are to report themedian rating, and in cases where there are more than two organization/agencyratings and a median rating does not exist, fund companies are to use the lowerof the two middle ratings. PLEASE NOTE: Morningstar, Inc. is not itself anNRSRO nor does it issue a credit rating on the fund. An NRSRO or rating agencyratings can change from time-to-time.
For credit quality, Morningstar combines the credit rating information providedby the fund companies with an average default rate calculation to come up witha weighted-average credit quality. The weighted-average credit quality iscurrently a letter that roughly corresponds to the scale used by a leadingNRSRO. Bond funds are assigned a style box placement of "low", "medium", or"high" based on their average credit quality. Funds with a low credit quality arethose whose weighted-average credit quality is determined to be less than"BBB-"; medium are those less than "AA-", but greater or equal to "BBB-"; andhigh are those with a weighted-average credit quality of "AA-" or higher. Whenclassifying a bond portfolio, Morningstar first maps the NRSRO credit ratings ofthe underlying holdings to their respective default rates (as determined byMorningstar's analysis of actual historical default rates). Morningstar thenaverages these default rates to determine the average default rate for the entirebond fund. Finally, Morningstar maps this average default rate to itscorresponding credit rating along a convex curve.
For interest-rate sensitivity, Morningstar obtains from fund companies theaverage effective duration. Generally, Morningstar classifies a fixed-incomefund's interest-rate sensitivity based on the effective duration of theMorningstar Core Bond Index (MCBI), which is currently three years. Theclassification of Limited will be assigned to those funds whose averageeffective duration is between 25% to 75% of MCBI's average effective duration;funds whose average effective duration is between 75% to 125% of the MCBIwill be classified as Moderate; and those that are at 125% or greater of theaverage effective duration of the MCBI will be classified as Extensive.
For municipal bond funds, Morningstar also obtains from fund companies theaverage effective duration. In these cases static breakpoints are utilized. These
breakpoints are as follows: (i) Limited: 4.5 years or less; (ii) Moderate: morethan 4.5 years but less than 7 years; and (iii) Extensive: more than 7 years. Inaddition, for non-US taxable and non-US domiciled fixed income funds staticduration breakpoints are used: (i) Limited: less than or equal to 3.5 years; (ii)Moderate: greater than 3.5 and less than equal to 6 years; (iii) Extensive: greaterthan 6 years.
The below referenced data elements are a weighted average of the longholdings in the portfolio.
Price/Earnings Ratio: The asset-weighted average of the price/earnings ratiosof the stocks in the portfolio. The P/E ratio of a stock is calculated by dividingthe current price of the stock by its trailing 12-months’ earnings per share.
Price/Cashflow: The asset-weighted average of the price/cash flow ratios ofstocks in a portfolio. Price/cash flow shows the ability of a business togenerate cash and acts as a gauge of liquidity and solvency.
Price/Book Ratio is a weighted average of the price/book ratios of all the stocksin the underlying fund's portfolio. The P/B ratio of a company is calculated bydividing the market price of its stock by the company's per-share book value.Stocks with negative book values are excluded from this calculation.
Price/Sales is the asset-weighted average of the portfolio's stock's pricesdivided by the respective company's sales per share.
Geometric Average Capitalization is the overall size of a stock fund's portfolio asthe geometric mean of the market capitalization for all of the stocks it owns. It'scalculated by raising the market capitalization of each stock to a power equal tothat stock's stake in the portfolio. The resulting numbers are multiplied togetherto produce the geometric mean of the market caps of the stocks in the portfolio,which is reported as geometric average cap.
Effective duration is a time measure of a bond's interest-rate sensitivity. Incomputing the average, Morningstar weights the duration of each fixed-incomeholding within the portfolio by the percentage of fixed income assets itrepresents compared with the entire portfolio.
Effective maturity is used for holdings in the taxable fixed-income category. Thisis a weighted average of all the maturities of the bonds in a portfolio, computedby weighting each maturity date by the market value of the security.
Credit quality breakdowns are shown for corporate-bond holdings and depict thequality of bonds in the underlying portfolio. The report shows the percentage offixed-income securities that fall within each credit quality rating as assigned byan NRSRO. Bonds not rated by an NRSRO are included in the not rated (NR)category.
Top 10 Underlying HoldingsThis section indicates the 10 most heavily weighted underlying holdings in theportfolio. It identifies the percentage of assets that each holding represents inthe portfolio, the security type, the sector classification, and the country oforigin.
Portfolio Snapshot ReportDisclosure Statement
GeneralInvestment portfolios illustrated in this report can be scheduled or unscheduled.
With an unscheduled portfolio, the user inputs only the portfolio holdings andtheir current allocations. Morningstar calculates returns using the givenallocations assuming monthly rebalancing. Taxes, loads, and sales charges arenot taken into account.
With scheduled portfolios, the user inputs the date and amount for allinvestments into and withdrawals from each holding, as well as tax rates, loads,and other factors that would have affected portfolio performance. Ahypothetical illustration is one type of scheduled portfolio.
Both scheduled and unscheduled portfolios are theoretical, for illustrativepurposes only, and are not reflective of an investor's actual experience. For bothscheduled and unscheduled portfolios, the performance data given representspast performance and should not be considered indicative of future results.Principal value and investment return of stocks, mutual funds, and variableannuity/life products will fluctuate, and an investor's shares/units, whenredeemed, will be worth more or less than the original investment. Stocks,mutual funds, and variable annuity/life products are not FDIC-insured, may losevalue, and are not guaranteed by a bank or other financial institution. Portfoliostatistics change over time.
Used as supplemental sales literature, the Portfolio Snapshot report must bepreceded or accompanied by the fund/policy's current prospectus or equivalent.In all cases, this disclosure statement should accompany the Portfolio Snapshotreport. Morningstar is not itself a FINRA-member firm.
The underlying holdings of the portfolio are not federally or FDIC-insured and arenot deposits or obligations of, or guaranteed by any financial institution.Investing in securities involves investment risks, including possible loss ofprincipal and fluctuation in value.
The information contained in this report is from the most recent informationavailable to Morningstar as of the release date, and may or may not be anaccurate reflection of the current composition of the securities included in theportfolio. There is no assurance that the weightings, composition and ratios willremain the same.
Items to Note Regarding Certain Underlying SecuritiesA closed-end fund is an investment company, which typically makes one publicoffering of a fixed number of shares. Thereafter, shares are traded on asecondary market such as the New York Stock Exchange. As a result, thesecondary market price may be higher or lower than the closed-end fund's netasset value (NAV). If these shares trade at a price above their NAV, they aresaid to be trading at a premium. Conversely, if they are trading at a price belowtheir NAV, they are said to be trading at a discount.
An exchange-traded fund (ETF) is an investment company that typically has aninvestment objective of striving to achieve a similar return as a particular marketindex. The ETF will invest in either all or a representative sample of thesecurities included in the index it is seeking to imitate. Like closed-end funds, anETF can be traded on a secondary market and thus have a market price that maybe higher or lower than its net asset value. If these shares trade at a priceabove their NAV, they are said to be trading at a premium. Conversely, if theyare trading at a price below their NAV, they are said to be trading at a discount.
A money-market fund is an investment company that invests in commercialpaper, banker's acceptances, repurchase agreements, government securities,certificates of deposit and other highly liquid securities, and pays money marketrates of interest. Money markets are not FDIC-insured, may lose money, and arenot guaranteed by a bank or other financial institution. Although the moneymarket seeks to preserve a stable per share value (i.e. $1.00 per share), it ispossible to lose money by investment in the fund.
A unit investment trust (UIT) is an investment company organized under a trustagreement between a sponsor and trustee. UITs typically purchase a fixedportfolio of securities and then sell units in the trust to investors. The majordifference between a UIT and a mutual fund is that a mutual fund is activelymanaged, while a UIT is not. On a periodic basis, UITs usually distribute to theunit holder their pro rata share of the trust's net investment income and netrealized capital gains, if any. If the trust is one that invests only in tax-freesecurities, then the income from the trust is also tax-free. UITs generally makeone public offering of a fixed number of units. However, in some cases, thesponsor will maintain a secondary market that allows existing unit holders tosell their units and for new investors to buy units.
Variable annuities are tax-deferred investments structured to convert a sum ofmoney into a series of payments over time. Variable annuity policies havelimitations and are not viewed as short-term liquid investments. An insurancecompany's fulfillment of a commitment to pay a minimum death benefit, aschedule of payments, a fixed investment account guaranteed by the insurancecompany, or another form of guarantee depends on the claims-paying ability ofthe issuing insurance company. Any such guarantee does not affect or apply tothe investment return or principal value of the separate account and itssubaccount. The financial ratings quoted for an insurance company do not applyto the separate account and its subaccount. If the variable annuity subaccount isinvested in a money-market fund, it seeks to preserve a stable per share value(i.e. $1.00 per share), but it is possible to lose money by investment in the fund.
Variable life insurance is a cash-value life insurance that has a variablecashvalue and/or death benefit depending on the investment performance of thesubaccount into which premium payments are invested. Unlike traditional lifeinsurance, variable life insurance has inherent risks associated with it, includingmarket volatility, and is not viewed as a short-term liquid investment. For moreinformation on a variable life product, including each subaccount, please readthe current prospectus. Please note, the financial ratings noted on the report arequoted for an insurance company and do not apply to the separate account andits subaccount. If the variable life subaccount is invested in a money-marketfund, it seeks to preserve a stable per share value (i.e. $1.00 per share), but it ispossible to lose money by investment in the fund.
A bond is a debt security. When an investor purchases a bond, the purchaseamount is lent to a government, municipality, corporation or other entity knownas an issuer. The issuer promises to pay a specified rate of interest during thelife of the bond and repay the face value of the bond when it matures.Individual bond issue data, price evaluations, and effective duration areprovided by Interactive Data Corporation.
Pre-inception ReturnsThe analysis in this report may be based, in part, on adjusted historical returnsfor periods prior to the fund's actual inception. These calculated returns reflectthe historical performance of the oldest share class of the fund, adjusted toreflect the fees and expenses of this share class. These fees and expenses arereferenced in the report's list of holdings and again on the standardized returnspage. When pre-inception data is presented in the report, the header at the topof the report will indicate this and the affected data elements will be displayedin italics.
While the inclusion of pre-inception data provides valuable insight into theprobable long-term behavior of newer share classes of a fund, investors shouldbe aware that an adjusted historical return can only provide an approximation ofthat behavior. For example, the fee structures of a retail share class will varyfrom that of an institutional share class, as retail shares tend to have higheroperating expenses and sales charges. These adjusted historical returns are notactual returns. Calculation methodologies utilized by Morningstar may differfrom those applied by other entities, including the fund itself.
Scheduled Portfolio Trailing ReturnsScheduled Portfolios are customized by the user to account for loads, taxes,cash flows and specific investment dates. Scheduled portfolios use theportfolio's investment history to calculate final market values and returns. Forscheduled portfolios, both individual holdings and portfolio returns are internal-rate-of-return calculations that reflect the timing and dollar size of all purchasesand sales. For stocks and mutual funds, sales charges and tax rates are takeninto account as specified by the user (except in the pre-tax returns, which reflectthe impact of sales charges but not taxes). Note that in some scheduledportfolio illustrations, dividends and capital gains distributions, if applicable, arereinvested at the end of the month in which they are made at the month-endclosing price. This can cause discrepancies between calculated returns andactual investor experience.
The trailing returns for scheduled portfolios commence at the end of the day onthe investment start date. All front-load fees and beginning of period asset-based fees are deducted at the start of the day, therefore these fees will not beincorporated within the trailing return time period that matches the wholeinvestment time period. For example, an investor pays $10,000 for security Awith a 5% front-load and generates a 5-year Hypothetical Illustration thatshows an end value of $12,500. Assuming no cash inflows or outflows asidefrom the initial investment and end value, the whole investment time periodreturn will be 4.56% ((12,500/ $10,000)^(1/5)-1) while the 5-year trailing returnwill be 5.64% (( $12,500/ $9,500)^(1/5)-1).
Scheduled Portfolio Returns-Based Performance DataFor scheduled portfolios, the monthly returns used to calculate alphas, betas, R-squareds, standard deviations, Sharpe ratios and best/worst time-period dataare internal rates of return.
Important VA Disclosure for Scheduled PortfoliosFor variable annuity products, policy level charges (other than front-end loads, ifinput by the advisor) are not factored into returns. When withdrawals andliquidations are made, increases in value over the purchase price are taxed atthe capital gains rate that is currently in effect. This is not reflective of theactual tax treatment for these products, which requires the entire withdrawal tobe taxed at the income tax rate. If adjusted for sales charges and the effects oftaxation, the subaccount returns would be reduced.
Scheduled Portfolio Investment Activity GraphThe historic portfolio values graphed are those used to track the portfolio whencalculating returns.
Unscheduled Portfolio ReturnsMonthly total returns for unscheduled portfolios are calculated by applying theending period holding weightings supplied by the user to an individual holding'smonthly returns. When monthly returns are unavailable for a holding (ie. due toit not being in existence during the historical period being reported), theremaining portfolio holdings are re-weighted to maintain consistent proportions.Inception dates are listed in the Disclosure for Standardized and Tax AdjustedReturns. Trailing returns are calculated by geometrically linking these weighted-average monthly returns. Unscheduled portfolio returns thus assume monthlyrebalancing. Returns for individual holdings are simple time-weighted trailingreturns. Neither portfolio returns nor holding returns are adjusted for loads ortaxes, and if they were, the returns stated would be reduced. The returns statedassume the reinvestment of dividends and capital gains. Mutual fund returnsinclude all ongoing fund expenses. VA/VL returns reflect subaccount level fundexpenses, including M&E expenses, administration fees, and actual ongoingfund-level expenses.
Unscheduled Portfolio Investment Activity GraphThe historic performance data graphed is extrapolated from the ending portfolio
value based on monthly returns.
Benchmark ReturnsBenchmark returns may or may not be adjusted to reflect ongoing expenses suchas sales charges. An investment's portfolio may differ significantly from thesecurities in the benchmark.
Returns for custom benchmarks are calculated by applying user-suppliedweightings to each benchmark's returns every month. Trailing returns arecalculated by geometrically linking these weighted-average monthly returns.Custom benchmark returns thus assume monthly rebalancing.
Standardized ReturnsFor mutual funds, standardized return is total return adjusted for sales charges,and reflects all ongoing fund expenses. Following this disclosure statement,standardized returns for each portfolio holding are shown.
For money-market mutual funds, standardized return is total return adjusted forsales charges and reflects all ongoing fund expenses. Current 7-day yield moreclosely reflects the current earnings of the money-market fund than the totalreturn quotation.
For VA subaccounts, standardized return is total return based on the inceptiondate within the separate account and is adjusted to reflect recurring and non-recurring charges such as surrender fees, contract charges, maximum front-endload, maximum deferred load, maximum M&E risk charge, administration feesand actual ongoing fund-level expenses.
For ETFs, the standardized returns reflect performance, both at market price andNAV price, without adjusting for the effects of taxation or brokeragecommissions. These returns are adjusted to reflect all ongoing ETF expensesand assume reinvestment of dividends and capital gains. If adjusted, the effectsof taxation would reduce the performance quoted.
The charges and expenses used in the standardized returns are obtained fromthe most recent prospectus and/or shareholder report available to Morningstar.For mutual funds and VAs, all dividends and capital gains are assumed to bereinvested. For stocks, stock acquired via divestitures is assumed to beliquidated and reinvested in the original holding.
Non-Standardized ReturnsFor mutual funds, total return is not adjusted for sales charges and reflects allongoing fund expenses for various time periods. These returns assumereinvestment of dividends and capital gains. If adjusted for sales charges andthe effects of taxation, the mutual fund returns would be reduced. Please notethese returns can include pre-inception data and if included, this data will berepresented in italics.
For money-market funds, total return is not adjusted for sales charges andreflects all ongoing fund expenses for various time periods. These returnsassume reinvestment of dividends and capital gains. If adjusted for salescharges and the effects of taxation, the money-market returns would bereduced.
For VA and VL subaccounts, non-standardized returns illustrate performance thatis adjusted to reflect recurring and non-recurring charges such as surrenderfees, contract charges, maximum front-end load, maximum deferred load,maximum M&E risk charge, administrative fees and underlying fund-levelexpenses for various time periods. Non-standardized performance returnsassume reinvestment of dividends and capital gains. If adjusted for the effectsof taxation, the subaccount returns would be significantly reduced. Please notethese returns can include pre-inception data and if included, this data will be
Investment Advisory FeesThe investment(s) returns do not necessarily reflect the deduction of allinvestment advisory fees. Client investment returns will be reduced if additionaladvisory fees are incurred such as deferred loads, redemption fees, wrap fees,or other account charges.
Asset AllocationThe weighting of the portfolio in various asset classes, including "Other", isshown in this graph and table. "Other" includes security types that are notneatly classified in the other asset classes, such as convertible bonds andpreferred stocks. "Not classified" represents the portion of the portfolio thatMorningstar could not classify at all, due to missing data.
In the graph and table, allocation to the classes is shown for long positions,short positions, and net (long positions net of short) positions. These newportfolio statistics help investors look "under the hood" of a portfolio. Thesestatistics summarize what the managers are buying and how they arepositioning the portfolio. When short positions are captured in these portfoliostatistics, investors get a more robust description of the funds' exposure andrisk.
Most managed product portfolios hold fairly conventional securities, such aslong positions in stocks and bonds. Other portfolios use other investmentstrategies or securities, such as short positions or derivatives, to reducetransaction costs, enhance returns, or reduce risk. Some of these securities andstrategies behave like conventional securities, while others have unique returnand risk characteristics.
Most portfolios take long positions in securities. Long positions involve buyingthe security outright and then selling it later, with the hope that the securityprice rises over time. In contrast, short positions are taken to benefit fromanticipated price declines. In this type of transaction, the investor borrows thesecurity from another investor, sells it and receives cash, and then is obligatedto buy it back at some point in the future. If the price falls after the short sale,the investor will have sold high and can now buy low to close the short positionand lock in a profit. However, if the price of the security increases after theshort sale, the investor will experience losses by buying it at a higher price thanthe sale price.
The strategy of selling securities short is prevalent in specialized portfolios,such as long-short, market-neutral, bear-market, and hedge funds. Mostconventional portfolios do not typically short securities, although they mayreserve the right to do so under special circumstances. Funds may also shortderivatives, and this is sometimes more efficient than shorting individualsecurities. Short positions produce negative exposure to the security that isbeing shorted. This means that when the security rises in value, the shortposition will fall in value and vice versa. Morningstar's portfolio statistics willcapture this negative exposure. For example, if a fund has many short stockpositions, the percent of assets in stocks in the asset allocation breakdown maybe negative. Funds must provide their broker with cash collateral for the shortposition, so funds that short often have a large cash position, sometimes evenexceeding 100% cash.
Investment StyleThe Morningstar Style Box reveals a fund's investment style as of the datenoted on this report.
For equity funds, the vertical axis shows the market capitalization of the stocksowned and the horizontal axis shows investment style (value, core, or growth).
For fixed-income funds, the vertical axis shows the credit quality of the bondsowned and the horizontal axis shows interest rate sensitivity as measured by abond's effective duration.
Morningstar seeks credit rating information from fund companies on a periodicbasis (e.g. quarterly). In compiling credit rating information Morningstar acceptscredit ratings reported by fund companies that have been issued by allNationally Recognized Statistical Rating Organizations (NRSROs). For a list of allNRSROs, please visithttp://www.sec.gov/divisions/marketreg/ratingagency.htm. Additionally,Morningstar accepts foreign credit ratings from widely recognized or registeredrating agencies. If two rating organizations/agencies have rated a security, fundcompanies are to report the lower rating; if three or moreorganizations/agencies have rated a security, fund companies are to report themedian rating, and in cases where there are more than two organization/agencyratings and a median rating does not exist, fund companies are to use the lowerof the two middle ratings. PLEASE NOTE: Morningstar, Inc. is not itself anNRSRO nor does it issue a credit rating on the fund. An NRSRO or rating agencyratings can change from time to time.
For credit quality, Morningstar combines the credit rating information providedby the fund companies with an average default rate calculation to come up witha weighted-average credit quality. The weighted-average credit quality iscurrently a letter that roughly corresponds to the scale used by a leadingNRSRO. Bond funds are assigned a style box placement of "low", "medium", or"high" based on their average credit quality. Funds with a low credit quality arethose whose weighted-average credit quality is determined to be less than"BBB-"; medium are those less than "AA-", but greater or equal to "BBB-"; andhigh are those with a weighted-average credit quality of "AA-" or higher. Whenclassifying a bond portfolio, Morningstar first maps the NRSRO credit ratings ofthe underlying holdings to their respective default rates (as determined byMorningstar's analysis of actual historical default rates). Morningstar thenaverages these default rates to determine the average default rate for the entirebond fund. Finally, Morningstar maps this average default rate to itscorresponding credit rating along a convex curve.
For interest-rate sensitivity, Morningstar obtains from fund companies theaverage effective duration. Generally, Morningstar classifies a fixed-incomefund's interest-rate sensitivity based on the effective duration of theMorningstar Core Bond Index (MCBI), which is currently three years. Theclassification of Limited will be assigned to those funds whose averageeffective duration is between 25% to 75% of MCBI's average effective duration;funds whose average effective duration is between 75% to 125% of the MCBIwill be classified as Moderate; and those that are at 125% or greater of theaverage effective duration of the MCBI will be classified as Extensive.
For municipal bond funds, Morningstar also obtains from fund companies theaverage effective duration. In these cases static breakpoints are utilized. Thesebreakpoints are as follows: (i) Limited: 4.5 years or less; (ii) Moderate: morethan 4.5 years but less than 7 years; and (iii) Extensive: more than 7 years. Inaddition, for non-US taxable and non-US domiciled fixed income funds staticduration breakpoints are used: (i) Limited: less than or equal to 3.5 years; (ii)Moderate: greater than 3.5 and less than equal to 6 years; (iii) Extensive: greaterthan 6 years.
Stock RegionsThis section provides the allocation of the portfolio's long stock positions to theworld regions, in comparison with a benchmark.
Risk and ReturnStandard deviation is a statistical measure of the volatility of a portfolio'sreturns around its mean.
Mean represents the annualized geometric return for the period shown.
Sharpe ratio uses a portfolio's standard deviation and total return to determinereward per unit of risk.
Alpha measures the difference between a portfolio's actual returns and itsexpected performance, given its beta and the actual returns of the benchmarkindex. Alpha is often seen as a measurement of the value added or subtractedby a portfolio's manager.
Beta is a measure of the degree of change in value one can expect in a portfoliogiven a change in value in a benchmark index. A portfolio with a beta greaterthan one is generally more volatile than its benchmark index, and a portfoliowith a beta of less than one is generally less volatile than its benchmark index.
R-squared reflects the percentage of a portfolio's movements that is explainedby movements in its benchmark index, showing the degree of correlationbetween the portfolio and a benchmark. This figure is also helpful in assessinghow likely it is that alpha and beta are statistically significant.
Portfolio YieldThe dividend yield produced for the most recent 12 months is presented.
Fundamental AnalysisThe below referenced data elements are a weighted average of the long equityholdings in the portfolio.
The median market capitalization of a subaccount's equity portfolio gives you ameasure of the size of the companies in which the subaccount invests.
The Price/Cash Flow ratio is a weighted average of the price/cash-flow ratios ofthe stocks in a subaccounts portfolio. Price/cash-flow shows the ability of abusiness to generate cash and acts as a gauge of liquidity and solvency.
The Price/Book ratio is a weighted average of the price/book ratios of all thestocks in the underlying fund's portfolio. The P/B ratio of a company iscalculated by dividing the market price of its stock by the company's per-sharebook value. Stocks with negative book values are excluded from this calculation.
The Price/Earnings ratio is calculated by dividing the market value of the equityassets by the trailing 12 month earnings. The 12 month earnings value comesfrom multiplying the number of shares and the adjusted trailing 12 months'earnings per share for each equity asset and summing the results.
The Price/Sales ratio is a weighted average of the price/sales ratios of thestocks in the underlying fund's portfolio. The P/S ratio of a stock is calculated bydividing the current price of the stock by its trailing 12 months' revenues pershare. In computing the average, Morningstar weights each portfolio holding bythe percentage of equity assets it represents.
The return on assets (ROA) is the percentage a company earns on its assets in agiven year. The calculation is net income divided by end-of-year total assets,multiplied by 100.
The Return on Equity (ROE) is the percentage a company earns on itsshareholders' equity in a given year. The calculation is net income divided byend-of-year net worth, multiplied by 100.
Market Maturity shows the percentage of a holding's long common stocks thatare domiciled in developed and emerging markets.
The data elements listed below are a weighted average of the long fixed incomeholdings in the portfolio.
Average maturity is used for holdings in the taxable fixed-income category. Thisis a weighted average of all the maturities of the bonds in a portfolio, computedby weighting each maturity date by the market value of the security.
Credit quality breakdowns are shown for corporate-bond holdings and depict thequality of bonds in the underlying portfolio. The report shows the percentage offixed-income securities that fall within each credit quality rating as assigned byan NRSRO. Bonds not rated by an NRSRO are included in the not rated (NR)category.
Debt as a percentage of capital is calculated by dividing long-term debt by totalcapitalization (the sum of common equity plus preferred equity plus long-termdebt). This figure is not provided for financial companies.
Duration is a time measure of a bond`s interest-rate sensitivity.
Net Margin is a measure of profitability. It is equal to annual net income dividedby revenues from the same period for the past five fiscal years, multiplied by100.
Type Weightings divide the stocks in a given holding's portfolio into eight typedesignations, each of which defines a broad category of investmentcharacteristics. Not all stocks in a given holding's portfolio are assigned a type.These stocks are grouped under NA.
The data elements listed below are a weighted average of the total holdings inthe portfolio.
The average expense ratio is the percentage of assets deducted each year foroperating expenses, management fees, and all other asset-based costs incurredby the fund, excluding brokerage fees. Please note for mutual funds, variableannuities/life, ETFs and closed-end funds, we use the gross prospectus ratio asprovided in the prospectus. Separate accounts and stocks are excluded from theaverage expense ratio.
Potential capital gains exposure is the percentage of a holding's total assetsthat represent capital appreciation.
Stock Intersection ReportDisclosure Statement
Used as supplemental sales literature, the Stock Intersection report must bepreceded or accompanied by the fund's/policy's current prospectus orequivalent. In all cases, this disclosure statement should accompany the StockIntersection report. Morningstar is not itself a FINRA-member firm. Informationcontained in the report is from the most recent information available toMorningstar.
The Stock Intersection report reviews the top 50 holdings in the portfolio toidentify, at a glance, the portfolio's overall weighting in a particular security orsector. This report only displays the top 50 holdings; the investor's portfolio mayhold substantially more.
Note that while the investor does not own the securities held by an open-endfund, closed-end fund, or similar investment, the holdings are relevant inreviewing the overall asset allocation and diversification. This report is not an
offer or recommendation by Morningstar to purchase or liquidate any securitylisted.
Percentage of PortfolioThe Percentage of Portfolio column indicates the percentage of net assets anygiven security (either as an individual holding or as an underlying stock) makesup as an overall position of the portfolio.
Holding Portfolio DateThe Portfolio Date is the date that the fund's portfolio was last updated. Whenmaking comparisons among funds, it is an important date to keep in mind.Although Morningstar tries to ensure that we receive timely information, wedon't always receive current information from fund companies. By law, fundsneed only report this information two times during the calendar year, and theyhave two months after the report date to actually release the shareholder reportand portfolio. Therefore, it is possible that a fund's portfolio could be up to eightmonths old at the time of publication.
SectorMorningstar breaks down all equities into the following sectors: ConsumerDefensive, Healthcare, Utilities, Communication Services, Energy, Industrials,Technology, Basic Materials, Consumer Cyclical, Financial Services, and RealEstate.
Correlation GraphDisclosure Statement
The Correlation Graph is supplemental sales literature and therefore must bepreceded or accompanied by the funds' and subaccounts' current prospectuses,or equivalent, and a disclosure statement. In all cases, this disclosure statementshould accompany the graph reports.
Morningstar is not itself a FINRA-member firm. All data is based on the mostrecent information available to Morningstar.
Correlation Matrix GraphThe Correlation Matrix is based on the correlation coefficient calculated for themonthly returns of each investment showing in the report against the otherinvestments in the report. The correlation coefficient is a number between -1.0and 1.0.
If there is a perfect positive linear relationship between the returns ofinvestments, the correlation will be 1.0. A correlation close to 1.0 means thattwo investments perform similarly—when one investment is performing aboveits average return, the other performs above its average return. The opposite isalso true—when one investment performs below its average return, the otheralso performs below its average.
A correlation coefficient of 0.0 means that there is no linear relationshipbetween the returns of two investments. Securities with a correlationcoefficient at or near 0 indicate a pattern of returns between two securities thatare unrelated.
If there is a perfect negative linear relationship between two investments thecorrelation coefficient is -1.0. If there is a perfectly negative relationshipbetween two investments, when one investment performs above its averagereturn, the other performs below its average, and vice versa.
Correlation between securities is a helpful measure because it indicates theextent to which securities may serve to improve diversification within aportfolio. Portfolios containing securities with low correlation of returnsproduce portfolio risk that is lower than the average risk of the individualsecurities. The lower the correlation between securities, the greater the impactin lowering portfolio risk. Securities with correlations equal to 1.0 indicate apattern of returns that do not contribute to beneficial diversification in aportfolio and do not lower overall portfolio risk when the securities arecombined in a portfolio. Securities with correlations equal to 0.0 or close to 0.0indicate a pattern of returns that serve to improve diversification effects in aportfolio. Securities with correlations equal to -1.0 or close to -1.0 indicate apattern of returns that serve to strongly improve diversification effects in aportfolio, notably, lower overall portfolio risk. Note that it is very unusual tohave investments with extremely strong negative correlation patterns. Mostsecurities have a correlation above 0.
Note that return patterns between securities may change over time. Thecorrelation coefficient between two investments over one period may differfrom that of another period.
Further, note that while combining securities with correlation coefficients lessthan 1.0 in a portfolio can reduce risk, risk cannot be completely eliminated withdiversification. There is no guarantee that any particular mix of securities willeliminate risk, reduce your current exposure to risk, or manage your exposure torisk in a way that is tolerable for you.
Individual bond price evaluations are provided by Interactive Data Corporation.
Pre-inception Returns for Mutual Funds and VariableAnnuity/LifeSubaccountsThe analysis in these graphs may be based, in part, on adjusted historicalreturns for periods prior to the fund's actual inception.
For mutual funds, these calculated returns reflect the historical performance ofthe oldest share class of the fund, adjusted to reflect the fees and expenses ofthis share class.
For variable annuity or life subaccounts, these calculated returns reflecthistorical performance of the oldest share class of the underlying insurancefund, adjusted to reflect the same fees and expenses of variable annuity or lifecontract.
When pre-inception data are presented in the report, the header at thetop of the report will indicate this.While the inclusion of pre-inception data provides valuable insight into theprobable long-term behavior of newer share classes of a fund, investors shouldbe aware that an adjusted historical return can only provide an approximation ofthat behavior. For example, the fee structures between a retail share class willvary from that of an institutional share class, as retail shares tend to havehigher operating expenses and sales charges. These adjusted historical returnsare not actual returns. Calculation methodologies utilized by Morningstar maydiffer from those applied by other entities, including the fund itself.
Rolling Return ReportDisclosure Statement
The Rolling Return report is supplemental sales literature and therefore must bepreceded or accompanied by the noted fund/subaccount's current prospectus, or
equivalent, and a disclosure statement. In all cases, this disclosure statementshould accompany the report.
Morningstar is not itself a FINRA-member firm. All data is based on the mostrecent information available to Morningstar.
General Information on the Rolling Return GraphThis graph allows open-end mutual funds, money-market mutual funds, closed-end funds, exchange-traded funds, variable annuity/life subaccounts, stocks,separate accounts, indices, and Morningstar categories to be graphed overcustomized time periods. For exchange-traded funds and closed-end funds,market returns are used.
This graph is based on the investment assumptions for the hypotheticalillustration, which is also included in this report. The same investments,withdrawals, reinvestment of dividends and gains, rebalancing, and fees, areapplied. The graph reflects the discrete return of each period possible over theillustration time horizon. The return shown in this graph is money-weightedreturn (or internal rate of return), which is impacted by investor cash flows.
The returns noted for a security reflect any sales charges that wereapplied in the illustration, but do not reflect impacts of taxation. Ifimpacts of taxation were reflected, the returns would be lower thanthose indicated in the report.
Pre-inception Returns for Mutual FundsThe analysis in this report may be based, in part, on adjusted historical returnsfor periods prior to the fund's actual inception. These calculated returns reflectthe historical performance of the oldest share class of the fund, adjusted toreflect the fees and expenses of this share class.
Pre-inception Returns for VA/VL Subaccounts (Investment options)Pre-inception returns will be calculated for most subaccounts included in thereport. These adjusted historical returns are based on the inception date of theoldest share class of the underlying fund. These returns will be adjusted toreflect the same fees and expenses of the subaccount.
When pre-inception data is presented in the report, the header at thetop of the report will indicate this.
While the inclusion of pre-inception data provides valuable insight into theprobable long-term behavior of newer share classes of a fund and/or ofsubaccounts, investors should be aware that an adjusted historical return canonly provide an approximation of that behavior. For example, the fee structuresof a retail share class will vary from that of an institutional share class, as retailshares tend to have higher operating expenses and sales charges. Theseadjusted historical returns are not actual returns. Calculation methodologiesutilized by Morningstar may differ from those applied by other entities, includingthe fund and/or subaccount itself.
Items to Note Regarding Certain Underlying SecuritiesThe underlying holdings of the portfolio are not federally or FDIC-insured and arenot deposits or obligations of, or guaranteed by, any financial institution.Investing in securities involves investment risks including possible loss ofprincipal and fluctuation in value.
A closed-end fund is an investment company, which typically makes one publicoffering of a fixed number of shares. Thereafter, shares are traded on asecondary market such as the New York Stock Exchange. As a result, thesecondary market price may be higher or lower than the closed-end fund's netasset value (NAV). If these shares trade at a price above their NAV, they aresaid to be trading at a premium. Conversely, if they are trading at a price below
their NAV, they are said to be trading at a discount.
An exchange-traded fund (ETF) is an investment company that typically has aninvestment objective to achieve a similar return as a particular market index.The ETF will invest in either all or a representative sample of the securitiesincluded in the index it is seeking to imitate. Like a closed-end fund, an ETF canbe traded on a secondary market and thus have a market price that may behigher or lower than its net asset value. If these shares trade at a price abovetheir NAV, they are said to be trading at a premium. Conversely, if they aretrading at a price below their NAV, they are said to be trading at a discount.
Holding company depository receipts (HOLDRs) are similar to ETFs, but theyfocus on narrow industry groups. HOLDRs initially own 20 stocks, which areunmanaged, and can become more concentrated due to mergers, or thedisparate performance of their holdings. HOLDRs can only be bought in 100-share increments. Investors may exchange shares of a HOLDR for its underlyingstocks at any time.
A money-market fund is an investment company that invests in commercialpaper, banker's acceptances, repurchase agreements, government securities,certificates of deposit and other highly liquid securities, and pays money marketrates of interest. Although the money-market seeks to preserve a stable pershare value (i.e. $1.00 per share), it is possible to lose money by investing in thefund.
A separate account is a professionally managed portfolio of individual securitiesthat can be customized for individual investor preferences and managed tocontrol taxable events. Assets are held in a segregated account instead ofplacing in them in a pool with those of other investors, as is the case with amutual fund. Reporting is different because managers disclose each holding andall transactions separately, rather than as an integrated portfolio. Inappearance, separate accounts look like just a collection of individual stocks.
A variable annuity subaccount is a tax-deferred investment structured to converta sum of money into a series of payments over time. Variable annuity policieshave limitations and are not viewed as short-term liquid investments. Aninsurance company's fulfillment of a commitment to pay a minimum deathbenefit, a schedule of payments, a fixed investment account guaranteed by theinsurance company, or another form of guarantee depends on the claims-payingability of the issuing insurance company. Any such guarantee does not affect orapply to the investment return or principal value of the separate account and itssubaccount. The financial ratings quoted for an insurance company do not applyto the separate account and its subaccount.
A variable life insurance policy is a cash-value life insurance policy that has avariable cash value and/or death benefit depending on the investmentperformance of the subaccount into which premium payments are invested.Unlike traditional life insurance, variable life insurance has inherent risksassociated with it, including market volatility, and is not viewed as a short-termliquid investment. For more information on a particular variable life product,including each subaccount, please read the current prospectus or equivalent.Please note, the financial ratings noted on the report are quoted for aninsurance company and do not apply to the separate account and itssubaccount.
A bond is a debt security. When an investor purchases a bond, the purchaseamount is lent to a government, municipality, corporation or other entity knownas an issuer. The issuer promises to pay a specified rate of interest during thelife of the bond and repay the face value of the bond when it matures.Individual bond issue data, price evaluations, and effective duration areprovided by Interactive Data Corporation.
PerformanceThe performance data given represents past performance and is not indicativeof future results. Principal value and investment return will fluctuate, so that aninvestor's units, when redeemed, may be worth more or less than the originalinvestment. Fund and subaccount portfolio statistics may change over time.
Open-end Mutual Funds: Total Return reflects performance without adjusting forsales charges or the effects of taxation, but is adjusted to reflect all actualongoing fund expenses and assumes reinvestment of dividends and capitalgains. If adjusted for sales charges and the effects of taxation,the performance quoted would be reduced.
Pre-inception returns will be calculated for the fund. These adjusted historicalreturns are based on the inception date of the oldest share class. These returnswill be adjusted to reflect the same fees and expenses as referenced under thePre-inception Return section above.
Standardized Total Return is reflected as of month- and quarter-end timeperiods. It depicts performance without adjusting for the effects of taxation, butis adjusted for sales charges, all ongoing fund expenses, and assumesreinvestment of dividends and capital gains. If adjusted for the effects oftaxation, the performance quoted would be reduced. The sales charge used inthe calculation was obtained from the fund's most recent prospectus availableto Morningstar. Standardized returns never include pre-inception history.
Money-Market Mutual Funds: Total Return reflects performance withoutadjusting for sales charges or the effects of taxation, but is adjusted to reflectall actual ongoing fund expenses and assumes reinvestment of dividends andcapital gains. If adjusted for sales charges and the effects of taxation, theperformance quoted would be reduced. Current 7-day yield more closely reflectsthe current earnings of the money market fund than the total returnquotation.
Exchange Traded-Funds/Closed-End Funds/Stocks: Exchange-traded funds andclosed-end funds trading on a secondary market may trade at, above, or belowtheir net asset value (NAV). If these shares trade at a price above their NAV,they are said to be trading at a premium. Conversely, if they are trading at aprice below their NAV, they are said to be trading at a discount. Total Returnreflects performance without adjusting for sales charges, brokeragecommissions or the effects of taxation and is based on Market Price. The totalreturn is adjusted to reflect all actual ongoing ETF fund expenses and assumesreinvestment of dividends and capital gains. If adjusted, the effects of taxationand brokerage commissions would reduce the performance quoted. Anexchange-traded or closed-end fund is not FDIC-insured, may lose value, and isnot guaranteed by a bank or other financial institution.
All separate account performance data is reported as a "composite" of similarlymanaged portfolios. As such, investors in the same separate account may haveslightly different portfolio holdings because each investor has customizedaccount needs, tax considerations and security preferences. The method forcalculating composite returns can vary. Gross returns are collected on a monthlyand quarterly basis for separate accounts and commingled pools. Thisinformation is collected directly from the asset management firm running theproduct(s). Morningstar calculates total returns, using the raw data (grossmonthly and quarterly returns), collected from these asset management firms.
Variable Annuity/Life Subaccounts: Total Return reflects the investmentexperience of the subaccount since the inception date of the underlying fund.The total returns assume reinvestment of dividends and capital gains and areadjusted to reflect fees and expenses such as M&E risk charges, administrationfees, sales charges (including surrender charges), contract fees, and fund-levelexpenses such as management fees and operating fees. They are not adjusted
to reflect the effects of taxation if redeemed early. Adjusting for the effects oftaxation would reduce the performance quoted.Pre-inception returns will be calculated for the subaccount. These adjustedhistorical returns are based on the inception date of the oldest share classof the underlying fund. These returns will be adjusted to reflect the same feesand expenses as referenced under the Total Return section above.
Both monthly and quarterly standardized returns for variable annuity/lifesubaccounts assume reinvestment of dividends and capital gains. They areadjusted to reflect expenses, including M&E risk charges, administration fees,fund-level expenses such as management fees and operating fees, and policy-level charges such as surrender, contract and sales charges. StandardizedReturns are calculated in accordance with the rules outlined in SEC Rule 482,Forms N-3 and N-4, and reflect the investment experience from the inceptiondate of the subaccount within the separate account.
Please refer to the hypothetical illustration in the prospectus, whichamong other things, shows the effect that fees and charges have onperformance. We urge investors to obtain a personalized illustrationthat reflects the costs of insurance protection.
ETF Detail ReportDisclosure Statement
The Exchange-traded Fund (ETF) Detail report is supplemental sales literature,and therefore must be preceded or accompanied by the fund's currentprospectus or an equivalent statement. Please read this information carefully.In all cases, this disclosure statement should accompany the ETF Detail Report.Morningstar is not itself a FINRA-member firm. All data presented is based onthe most recent information available to Morningstar.
ETFs trading on a secondary market may trade at, above, or below their netasset value (NAV). If an ETF's shares trade at a price above their NAV they aresaid to be trading at a "premium." Conversely, if they are trading at a pricebelow their NAV, they are said to be trading at a "discount."
Holding company depository receipts (HOLDRs) are similar to ETFs, but theyfocus on narrow industry groups. HOLDRs initially own 20 stocks, which areunmanaged, and can become more concentrated due to mergers, or thedisparate performance of their holdings. HOLDRs can only be bought in 100-share increments. Investors may exchange shares of a HOLDR for its underlyingstocks at any time.
The market price noted on the Detail Report is the price of the ETF as of theclose of trading on the last business day at month-end. This date is listed at thetop of the Detail Report.
PerformanceThe performance data given represents past performance and should not beconsidered indicative of future results. Principal value and investment returnwill fluctuate, so that an investor's shares, when sold, may be worth more orless than the original investment. Portfolio statistics change over time. ETFsand HOLDRs are not FDIC-insured, may lose value, and are not guaranteed by abank or other financial institution.
For ETFs, standardized total return is reflected as of month- and quarter- endtime periods. It depicts performance without adjusting for brokeragecommissions and the effects of taxation, but is adjusted to reflect all actualongoing ETF expenses and assumes reinvestment of dividends and capital
gains. If adjusted, the effects of brokerage commissions and taxation wouldreduce the performance quoted.
For HOLDRs, the standardized total return reflects performance at market price,without adjusting for the effects of taxation or brokerage commissions. Thesereturns are adjusted to reflect all ongoing expenses and assume reinvestmentof dividends and capital gains. If adjusted, the effects of taxation would reducethe performance quoted.
The 12-month yield is derived by summing the trailing 12-months' incomedistributions and dividing the sum by the last month's ending NAV, plus anycapital gains distributed over the same period. Income refers only to interestpayments from fixed-income securities and dividend payoffs from commonstocks.
Growth of 10,000This graph compares the growth of an investment of 10,000 (in the basecurrency of the fund) with that of an index and with that of the average for allfunds in its Morningstar category. The NAV total returns are not adjusted toreflect the effects of taxation, but they are adjusted to reflect actual ongoingfund expenses and assume reinvestment of dividends and capital gains. Ifadjusted, the effect of taxation would reduce the performance quoted. Pleasenote, while the investor obtaining an ETF through the secondary market doesnot obtain it at NAV, the purpose in presenting this graph based on NAV is toprovide an illustration of the historical performance of the ETF strategy. In noway should this performance be considered indicative of or a guarantee of thefuture performance of this ETF nor should it be viewed as a substitute for anactual investor experience.
The index is an unmanaged portfolio of specified securities, and cannot beinvested in directly. The index and the category average do not reflect anyinitial or ongoing expenses. A fund's portfolio may differ significantly from thesecurities in the index. The index is chosen by Morningstar.
Risk MeasuresThe risk measures below are calculated for ETFs with at least a three-yearhistory.
Standard deviation is a statistical measure of the volatility of the ETF's NAVreturns.
Mean represents the annualized geometric NAV return for the period shown.
The Sharpe ratio uses standard deviation and excess return to determinereward per unit of risk.
Alpha measures the difference between an ETF's NAV returns and its expectedperformance, given its level of risk as measured by beta. Alpha is often seen asa measure of the value added or subtracted by a portfolio manager.
Beta is a measure of an ETF's sensitivity to market movements. A portfolio witha beta greater than 1 is more volatile than the market, and a portfolio with abeta less than 1 is less volatile than the market.
R-squared reflects the percentage of an ETF's movements that is explained bymovements in its benchmark index, showing the degree of correlation betweenthe ETF and the benchmark. This figure is also helpful in assessing how likely itis that alpha and beta are statistically significant.
Best fit index: Alpha, beta, and R-squared statistics are presented for a broadmarket index and a "Best fit" index. The Best-Fit index identified in this reportwas determined by Morningstar by calculating R-squared for the fund against
approximately 100 indexes tracked by Morningstar. The index representing thehighest R-squared is identified as the best-fit index. The best-fit index may notbe the fund's benchmark, nor does it necessarily contain the types of securitiesthat may be held by the fund.
Asset AllocationThe weighting of the portfolio in various asset classes, including "Other" isshown in the table. "Other" includes security types that are not neatly classifiedin the other asset classes, such as convertible bonds and preferred stocks.
In the table, allocation to the classes is shown for long positions, shortpositions, and net (long positions net of short) positions. These statisticssummarize what the managers are buying and how they are positioning theportfolio. When short positions are captured in these portfolio statistics,investors get a more robust description of the funds' exposure and risk.
Most managed product portfolios hold fairly conventional securities, such aslong positions in stocks and bonds. Other portfolios use other investmentstrategies or securities, such as short positions or derivatives, to reducetransaction costs, enhance returns, or reduce risk. Some of these securities andstrategies behave like conventional securities, while others have unique returnand risk characteristics.
Most portfolios take long positions in securities. Long positions involve buyingthe security outright and then selling it later, with the hope that the securityprice rises over time. In contrast, short positions are taken to benefit fromanticipated price declines. In this type of transaction, the investor borrows thesecurity from another investor, sells it and receives cash, and then is obligatedto buy it back at some point in the future. If the price falls after the short sale,the investor will have sold high and can now buy low to close the short positionand lock in a profit. However, if the price of the security increases after theshort sale, the investor will experience losses by buying it at a higher price thanthe sale price.
The strategy of selling securities short is prevalent in specialized portfolios,such as long-short, market-neutral, bear-market, and hedge funds. Mostconventional portfolios do not typically short securities, although they mayreserve the right to do so under special circumstances. Funds may also shortderivatives, and this is sometimes more efficient than shorting individualsecurities. Short positions produce negative exposure to the security that isbeing shorted. This means that when the security rises in value, the shortposition will fall in value and vice versa. Morningstar's portfolio statistics willcapture this negative exposure. For example, if a fund has many short stockpositions, the percent of assets in stocks in the asset allocation breakdown maybe negative. Funds must provide their broker with cash collateral for the shortposition, so funds that short often have a large cash position, sometimes evenexceeding 100% cash.
Note that all other portfolio statistics presented in this report are based on thelong holdings of the fund only.
Style AnalysisThe Morningstar Style Box reveals a fund's investment style as of the datenoted on this report.
For equity funds the vertical axis shows the market capitalization of the longstocks owned and the horizontal axis shows investment style (value, blend, orgrowth).
For fixed-income funds, the vertical axis shows the credit quality of the longbonds owned and the horizontal axis shows interest rate sensitivity asmeasured by a bond's effective duration.
Morningstar seeks credit rating information from fund companies on a periodicbasis (e.g., quarterly). In compiling credit rating information Morningstar acceptscredit ratings reported by fund companies that have been issued by allNationally Recognized Statistical Rating Organizations (NRSROs). For a list of allNRSROs, please visithttp://www.sec.gov/divisions/marketreg/ratingagency.htm. Additionally,Morningstar accepts foreign credit ratings from widely recognized or registeredrating agencies. If two rating organizations/agencies have rated a security, fundcompanies are to report the lower rating; if three or moreorganizations/agencies have rated a security, fund companies are to report themedian rating, and in cases where there are more than two organization/agencyratings and a median rating does not exist, fund companies are to use the lowerof the two middle ratings. PLEASE NOTE: Morningstar, Inc. is not itself anNRSRO nor does it issue a credit rating on the fund. An NRSRO or rating agencyratings can change from time-to-time.
For credit quality, Morningstar combines the credit rating information providedby the fund companies with an average default rate calculation to come up witha weighted-average credit quality. The weighted-average credit quality iscurrently a letter that roughly corresponds to the scale used by a leadingNRSRO. Bond funds are assigned a style box placement of "low", "medium", or"high" based on their average credit quality. Funds with a low credit quality arethose whose weighted-average credit quality is determined to be less than"BBB-"; medium are those less than "AA-", but greater or equal to "BBB-"; andhigh are those with a weighted-average credit quality of "AA-" or higher. Whenclassifying a bond portfolio, Morningstar first maps the NRSRO credit ratings ofthe underlying holdings to their respective default rates (as determined byMorningstar's analysis of actual historical default rates). Morningstar thenaverages these default rates to determine the average default rate for the entirebond fund. Finally, Morningstar maps this average default rate to itscorresponding credit rating along a convex curve.
For interest-rate sensitivity, Morningstar obtains from fund companies theaverage effective duration. Generally, Morningstar classifies a fixed-incomefund's interest-rate sensitivity based on the effective duration of theMorningstar Core Bond Index (MCBI), which is currently three years. Theclassification of Limited will be assigned to those funds whose averageeffective duration is between 25% to 75% of MCBI's average effective duration;funds whose average effective duration is between 75% to 125% of the MCBIwill be classified as Moderate; and those that are at 125% or greater of theaverage effective duration of the MCBI will be classified as Extensive.
For municipal bond funds, Morningstar also obtains from fund companies theaverage effective duration. In these cases static breakpoints are utilized. Thesebreakpoints are as follows: (i) Limited: 4.5 years or less; (ii) Moderate: morethan 4.5 years but less than 7 years; and (iii) Extensive: more than 7 years. Inaddition, for non-US taxable and non-US domiciled fixed income funds staticduration breakpoints are used: (i) Limited: less than or equal to 3.5 years; (ii)Moderate: greater than 3.5 and less than equal to 6 years; (iii) Extensive: greaterthan 6 years.
Equity Portfolio StatisticsThe referenced data elements below are a weighted average of the long equityholdings in the portfolio.
The Price/Earnings ratio is a weighted average of the price/earnings ratios ofthe stocks in the underlying fund's portfolio. The P/E ratio of a stock iscalculated by dividing the current price of the stock by its trailing 12-months'earnings per share. In computing the average, Morningstar weights eachportfolio holding by the percentage of equity assets it represents.
The Price/Cash Flow ratio is a weighted average of the price/cash-flow ratios of
the stocks in a fund's portfolio. Price/cash-flow shows the ability of a businessto generate cash and acts as a gauge of liquidity and solvency.
The Price/Book ratio is a weighted average of the price/book ratios of all thestocks in the underlying fund's portfolio. The P/B ratio of a company iscalculated by dividing the market price of its stock by the company's per-sharebook value. Stocks with negative book values are excluded from this calculation.
The geometric average market capitalization of a fund's equity portfolio givesyou a measure of the size of the companies in which the mutual fund invests.
Fixed-Income Portfolio StatisticsThe referenced data elements below are a weighted average of the long fixedincome holdings in the portfolio.
Duration is a time measure of a bond's interest rate sensitivity. Averageeffective duration is a weighted average of the duration of the underlying fixedincome securities within the portfolio.
Average effective maturity is a weighted average of all the maturities of thebonds in a portfolio, computed by weighting each maturity date by the marketvalue of the security.
Average weighted coupon is generated from the fund's portfolio by weightingthe coupon of each bond by its relative size in the portfolio. Coupons are fixedpercentages paid out on a fixed-income security on an annual basis.
Average weighted price is generated from the fund's portfolio by weighting theprice of each bond by its relative size in the portfolio. This number reveals if thefund favors bonds selling at prices above or below face value (premium ordiscount securities, respectively). A higher number indicates a bias towardpremiums. This statistic is expressed as a percentage of par (face) value.
Credit quality breakdowns are shown for corporate-bond holdings and depict thequality of bonds in the underlying portfolio. The report shows the percentage offixed-income securities that fall within each credit quality rating as assigned byan NRSRO. Bonds not rated by an NRSRO are included in the not rated (NR)category.
Investment Risks
International/Emerging Market Equities: Investing in international securitiesinvolves special additional risks. These risks include, but are not limited to,currency risk, political risk, and risk associated with varying accountingstandards. Investing in emerging markets may accentuate these risks.
Sector Strategies: Portfolios that invest exclusively in one sector or industryinvolve additional risks. The lack of industry diversification subjects the investorto increased industry-specific risks.
Non-Diversified Strategies: Portfolios that invest a significant percentage ofassets in a single issuer involve additional risks, including share pricefluctuations, because of the increased concentration of investments.
Small Cap Equities: Portfolios that invest in stocks of small companies involveadditional risks. Smaller companies typically have a higher risk of failure, andare not as well established as larger blue-chip companies. Historically, smaller-company stocks have experienced a greater degree of market volatility than theoverall market average.
Mid Cap Equities: Portfolios that invest in companies with market capitalizationbelow $10 billion involve additional risks. The securities of these companiesmay be more volatile and less liquid than the securities of larger companies.
High-Yield Bonds: Portfolios that invest in lower-rated debt securities(commonly referred to as junk bonds) involve additional risks because of thelower credit quality of the securities in the portfolio. The investor should beaware of the possible higher level of volatility, and increased risk of default.
Tax-Free Municipal Bonds: The investor should note that the income from tax-free municipal bond funds may be subject to state and local taxation and theAlternative Minimum Tax.
Bonds: Bonds are subject to interest rate risk. As the prevailing level of bondinterest rates rise, the value of bonds already held in a portfolio declines.Portfolios that hold bonds are subject to declines and increases in value due togeneral changes in interest rates.
HOLDRs: The investor should note that these are narrow industry-focusedproducts that, if the industry is hit by hard times, will lack diversification andpossible loss of investment would be likely. These securities can trade at adiscount to market price, ownership is of a fractional share interest, theunderlying investments may not be representative of the particular industry, theHOLDR might be delisted from the AMEX if the number of underlying companiesdrops below nine, and the investor may experience trading halts.
Hedge Funds: The investor should note that hedge fund investing involvesspecialized risks that are dependent upon the type of strategies undertaken bythe manager. This can include distressed or event-driven strategies, long/shortstrategies, using arbitrage (exploiting price inefficiencies), internationalinvesting, and use of leverage, options and/or derivatives. Although the goal ofhedge fund managers may be to reduce volatility and produce positive absolutereturn under a variety of market conditions, hedge funds may involve a highdegree of risk and are suitable only for investors of substantial financial meanswho could bear the entire loss of their investment.
Bank Loan/Senior Debt: Bank loans and senior loans are impacted by the risksassociated with fixed income in general, including interest rate risk and defaultrisk. They are often non-investment grade; therefore, the risk of default is high.These securities are also relatively illiquid. Managed products that invest inbank loans/senior debt are often highly leveraged, producing a high risk ofreturn volatility.
Exchange Traded Notes (ETNs): ETNs are unsecured debt obligations. Anyrepayment of notes is subject to the issuer's ability to repay its obligations.ETNs do not typically pay interest.
Leveraged ETFs: Leveraged investments are designed to meet multiples of thereturn performance of the index they track and seek to meet their fundobjectives on a daily basis (or other time period stated within the prospectusobjective). The leverage/gearing ratio is the amount of excess return that aleveraged investment is designed to achieve in comparison to its indexperformance (i.e. 200%, 300%, -200%, or -300% or 2X, 3X, -2X, -3X).Compounding has the ability to affect the performance of the fund to be eithergreater or less than the index performance multiplied by the multiple statedwithin the funds objective over a stated time period.
Short Positions: When a short position moves in an unfavorable way, the lossesare theoretically unlimited. The broker may demand more collateral and amanager might have to close out a short position at an inopportune time to limitfurther losses.
Long-Short: Due to the strategies used by long-short funds, which may includebut are not limited to leverage, short selling, short-term trading, and investing inderivatives, these funds may have greater risk, volatility, and expenses thanthose focusing on traditional investment strategies.
Liquidity Risk: Closed-end fund, ETF, and HOLDR trading may be halted due tomarket conditions, impacting an investor’s ability to sell a fund.
Market Price Risk: The market price of ETFs, HOLDRs, and closed-end fundstraded on the secondary market is subject to the forces of supply and demandand thus independent of the NAV. This can result in the market price trading ata premium or discount to the NAV, which will affect an investor’s value.
Market Risk: The market prices of ETFs and HOLDRs can fluctuate as a result ofseveral factors, such as security-specific factors or general investor sentiment.Therefore, investors should be aware of the prospect of market fluctuations andthe impact it may have on the market price.
Target-Date Funds: Target-date funds typically invest in other mutual funds andare designed for investors who are planning to retire during the target date year.The fund's target date is the approximate date when investors expect to beginwithdrawing their money. A target-date fund's investment objective/strategytypically becomes more conservative over time, primarily by reducing itsallocation to equity mutual funds and increasing its allocations in fixed-incomemutual funds. An investor's principal value in a target-date fund is notguaranteed at any time, including at the fund's target date.
High double- and triple-digit returns: High double- and triple-digit returns werethe result of extremely favorable market conditions, which may not continue tobe the case. High returns for short time periods must not be a major factor whenmaking investment decisions.
Benchmark Disclosure
Custom BenchmarkSample Portfolio Allocation % Type
USTREAS T-Bill Auction Ave 3 Mon 0.63 IDXS&P 500 TR USD 62.41 IDXMSCI EAFE NR USD 7.26 IDXBarclays US Agg Bond TR USD 29.70 IDX
Barclays US Agg Bond TR USDThis index is composed of the BarCap Government/Credit Index, the Mortgage-Backed Securities Index, and the Asset-Backed Securities Index. The returns wepublish for the index are total returns, which includes the daily reinvestment ofdividends.
Barclays US Corp IG TR USDDescription unavailable.
Barclays US Credit TR USDTracks the returns of all publicly issued, fixed-rate, nonconvertible, dollar-denominated, SEC-registered, investment-grade corporate debt.
Barclays US Government Long TR USDIncludes those indexes found in the BarCap Government index which have amaturity of 10 years or more.
Barclays US Govt/Credit 5-10 Yr TR USDRepresents a combination of the Government and Corporate Bond indices forbonds with maturities between 5 and 10 years. Includes both corporate(publicly-issued, fixed-rate, nonconvertible, investment grade, dollar-denominated, SEC-registered, corporate dept.) and government (Treasury Bondindex, Agency Bond index, and Government index) indices. The returns wepublish for the index are total returns, which include reinvestment of dividends.
DJ US Select REIT TR USDThis index consists of U.S. publicly traded Real Estate Investment Trusts. It is asubset of the Wilshire Real Estate Securities Index.
Morningstar Small Value TR USDThe Morningstar Small Value Index measures the performance of U.S. small-capstocks with relatively low prices given anticipated per-share earnings, bookvalue, cash flow, sales and dividends.
MSCI ACWI Ex USA NR USDThe MSCI AC World ex USA is a free float-adjusted market capitalization indexthat is designed to measure equity market performance in the global developedand emerging markets. The index consists of 48 developed and emerging marketcountry indices. The returns we publish for the index are total returns, whichinclude reinvestment of dividends.
MSCI ACWI NR USDDescription unavailable.
MSCI EAFE NR USDThis Europe, Australasia, and Far East index is a market-capitalization-weightedindex of 21 non-U.S., industrialized country indexes.
This disclosure applies to all MSCI indices: Certain information included hereinis derived by Morningstar in part from MSCI’s Index Constituents (the “IndexData”). However, MSCI has not reviewed any information contained herein anddoes not endorse or express any opinion such information or analysis. MSCIdoes not make any express or implied warranties, representations or guaranteesconcerning the Index Data or any information or data derived therefrom, and inno event will MSCI have any liability for any direct, indirect, special, punitive,consequential or any other damages (including lost profits) relating to any use ofthis information.
Russell 1000 TR USDConsists of the 1000 largest companies within the Russell 3000 index, whichrepresents approximately 98% of the investable US equity market. Also knownas the Market-Oriented Index, because it represents the group of stocks fromwhich most active money managers choose.
Russell 2000 TR USDConsists of the 2000 smallest companies in the Russell 3000 Index.
Russell 2000 Value TR USDTracks the companies within the Russell 2000 Index that have lower price-to-book ratios and lower forecasted growth values.
Russell 3000 TR USDComposed of the 3000 largest U.S. companies by market capitalization,representing approximately 98% of the U.S. equity market.
S&P 500 TR USDA market capitalization-weighted index composed of the 500 most widely heldstocks whose assets and/or revenues are based in the US; it's often used as aproxy for the stock market. TR (Total Return) indexes include daily reinvestmentof dividends.
S&P United States REIT TR USDDescription unavailable.
USTREAS T-Bill Auction Ave 3 MonThree-month T-bills are government-backed, short-term investments consideredto be risk-free and as good as cash because the maturity is only three months.Morningstar collects yields on the T-bill on a weekly basis from the Wall StreetJournal.