Morningstar Rating, Return, and Risk

The Morningstar Rating™ for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.

 

The Morningstar Return rates a fund's performance relative to other managed products in its Morningstar Category. It is an assessment of a product's excess return over a risk-free rate (the return of the 90-day Treasury Bill) in comparison with the products in its Morningstar category. In each Morningstar category, the top 10% of products earn a High Morningstar Return (High), the next 22.5% Above Average (+Avg), the middle 35% Average (Avg), the next 22.5% Below Average (-Avg), and the bottom 10% Low (Low). Morningstar Return is measured for up to three time periods (three, five, and 10 years). These separate measures are then weighted and averaged to produce an overall measure for the product. Products with less than three years of performance history are not rated.

 

Morningstar Risk evaluates a fund's downside volatility relative to that of other products in its Morningstar Category. It is an assessment of the variations in monthly returns, with an emphasis on downside variations, in comparison with the products in its Morningstar category. In each Morningstar category, the 10% of products with the lowest measured risk are described as Low Risk (Low), the next 22.5% Below Average (-Avg), the middle 35% Average (Avg), the next 22.5% Above Average (+Avg), and the top 10% High (High). Morningstar Risk is measured for up to three time periods (three, five, and 10 years). These separate measures are then weighted and averaged to produce an overall measure for the product. Products with less than three years of performance history are not rated.

 

Morningstar Style Box^TM

The Morningstar Style Box™ reveals a fund’s investment strategy as of the date noted on this report.

 

For equity funds, the vertical axis shows the market capitalization of the long stocks owned, and the horizontal axis shows the investment style (value, blend, or growth.) A darkened cell in the style box matrix indicates the weighted average style of the portfolio.

 

For portfolios holding fixed-income investments, a Fixed Income Style Box is calculated. The vertical axis shows the credit quality based on credit ratings and the horizontal axis shows interest-rate sensitivity as measured by effective duration. There are three credit categories - "High", "Medium", and "Low"; and there are three interest rate sensitivity categories - "Limited", "Moderate", and "Extensive"; resulting in nine possible combinations. As in the Equity Style Box, the combination of credit and interest rate sensitivity for a portfolio is represented by a darkened square in the matrix. Morningstar uses credit rating information from credit rating agencies (CRAs) that have been designated Nationally Recognized Statistical Rating Organizations (NRSROs) by the Securities and Exchange Commission (SEC) in the United States. For a list of all NRSROs, please visit https://www.sec.gov/ocr/ocr-current-nrsros.html. Additionally, Morningstar will use credit ratings from CRAs which have been recognized by foreign regulatory institutions that are deemed the equivalent of the NRSRO designation. To determine the rating applicable to a holding and the subsequent holding weighted value of a portfolio two methods may be employed. First is a common methodology approach where if a case exists such that two CRAs have rated a holding, the lower rating of the two should be applied; if three or more CRAs have rated a holding, the median rating should be applied; and in cases where there are more than two ratings and a median rating cannot be determined, the lower of the two middle ratings should be applied. Alternatively, if there is more than one rating available an average can be calculated from all and applied.

 

Please Note: Morningstar, Inc. is not an NRSRO nor does it issue a credit rating on the fund. Credit ratings for any security held in a portfolio can change over time.

 

Morningstar uses the credit rating information to calculate a weighted-average credit quality value for the portfolio. This value is based only upon those holdings which are considered to be classified as "fixed income", such a government, corporate, or securitized issues. Other types of holdings such as equities and many, though not all, types of derivatives are excluded. The weighted-average credit quality value is represented by a rating symbol which corresponds to the long-term rating symbol schemas employed by most CRAs. Note that this value is not explicitly published but instead serves as an input in the Style Box calculation. This symbol is then used to map to a Style Box credit quality category of "low," "medium," or "high". Funds with a "low" credit quality category are those whose weighted-average credit quality is determined to be equivalent to the commonly used High Yield classification, meaning a rating below "BBB", portfolios assigned to the "high" credit category have either a "AAA" or "AA+" average credit quality value, while "medium" are those with an average rating of "AA-" inclusive to "BBB-". It is expected and intended that the majority of portfolios will be assigned a credit category of "medium".

 

For assignment to an interest-rate sensitivity category, Morningstar uses the average effective duration of the portfolio. From this value there are three distinct methodologies employed to determine assignment to category. Portfolio which are assigned to Morningstar municipal-bond categories employ static breakpoints between categories. These breakpoints are: "Limited" equal to 4.5 years or less, "Moderate" equal to 4.5 years to less than 7 years; and "Extensive" equal to more than 7 years. For portfolios assigned to Morningstar categories other than U.S. Taxable, including all domiciled outside the United States, static duration breakpoints are also used: "Limited" equals less than or equal to 3.5 years, "Moderate" equals greater than 3.5 years but less than or equal to 6 years, and "Extensive" is assigned to portfolios with effective durations of more than 6 years.

 

Note: Interest-rate sensitivity for non-U.S. domiciled portfolios (excluding those in Morningstar convertible categories) may be assigned using average modified duration when average effective duration is not available.

 

For portfolios Morningstar classifies as U.S. Taxable Fixed-Income, interest-rate sensitivity category assignment is based on the effective duration of the Morningstar Core Bond Index (MCBI). The classification assignment is dynamically determined relative to the benchmark index value. A "Limited" category will be assigned to portfolios whose average effective duration is between 25% to 75% of MCBI average effective duration, where the average effective duration is between 75% to 125% of the MCBI the portfolio will be classified as "Moderate", and those portfolios with an average effective duration value 125% or greater of the average effective duration of the MCBI will be classified as "Extensive".

 

Forward P/E

Price/projected earnings for a stock is the ratio of the company's most recent month-end share price to the company's estimated earnings per share (EPS) for the current fiscal year. If a third-party estimate for the current year EPS is not available, Morningstar will calculate an internal estimate based on the most recently reported EPS and average historical earnings growth rates. Price/projected earnings is one of the five value factors used to calculate the Morningstar Style Box. For portfolios, this data point is calculated by taking an asset-weighted average of the earnings yields (E/P) of all the stocks in the portfolio and then taking the reciprocal of the result.

 

Price/Book

Price/book (projected) for a stock is the ratio of the company's most recent month-end share price to the company's estimated book value per share (BPS) for the current fiscal year. Book value is the total assets of a company, less total liabilities. Morningstar calculates internal estimates for the current year BPS based on the most recently reported BPS and average historical book value growth rates. Price/book (projected) is one of the five value factors used to calculate the Morningstar Style Box. For portfolios, this data point is calculated by taking an asset-weighted average of the book value yields (B/P) of all the stocks in the portfolio and then taking the reciprocal of the result.

 

Price/Sales

Price/sales (projected) for a stock is the ratio of the company's most recent month-end share price to the company's estimated sales per share (SPS) for the current fiscal year. Morningstar calculates internal estimates for the current year SPS based on the most recently reported SPS and average historical sales growth rates. Price/sales (projected) is one of the five value factors used to calculate the Morningstar Style Box. For portfolios, this data point is calculated by taking an asset-weighted average of the sales yields (S/P) of all the stocks in the portfolio and then taking the reciprocal of the result.

 

Price/Cash Flow

Price/cash flow (projected) for a stock is the ratio of the company's most recent month-end share price to the company's estimated cash flow per share (CPS) for the current fiscal year. Cash flow measures the ability of a business to generate cash and it acts as a gauge of liquidity and solvency. Morningstar calculates internal estimates for the current year CPS based on the most recently reported CPS and average historical cash flow growth rates. Price/cash flow (projected) is one of the five value factors used to calculate the Morningstar Style Box. For portfolios, this data point is calculated by taking an asset-weighted average of the cash flow yields (C/P) of all the stocks in the portfolio and then taking the reciprocal of the result.

 

Dividend Yield

Dividend yield (projected) for a stock is the percentage of its stock price that a company is projected to pay out as dividends. It is calculated by dividing estimated annual dividends per share (DPS) for the current fiscal year by the company's most recent month-end stock price. Morningstar calculates internal estimates for the current year DPS based on the most recently reported DPS and average historical dividend growth rates. This is one of the five value factors used to calculate the Morningstar Style Box. For portfolios, this data point is calculated by taking an asset-weighted average of the dividend yields of all the stocks in the portfolio.

 

Long-Term Earnings

The long-term projected earnings growth rate for a stock is the average of the available third-party analysts' estimates for three- to five-year EPS growth. Long-term projected earnings growth is one of the five growth factors used to calculate the Morningstar Style Box. For portfolios, this data point is the share-weighted average of the projected earnings growth estimates for all the stocks in the portfolio. (The share-weighted average is more accurate than an asset-weighted average for this type of calculation.)

 

Historical Earnings

The historical earnings growth rate for a stock is a measure of how the stock's earnings per share (EPS) has grown over the last five years. Morningstar uses EPS from continuing operations to calculate this growth rate. Historical earnings growth is one of the five growth factors used to calculate the Morningstar Style Box. For portfolios, this data point is the share-weighted collective earnings growth for all stocks in the current portfolio. (The share-weighted average is more accurate than an asset-weighted average for this type of calculation.)

 

Sales Growth

The sales growth rate for a stock is a measure of how the stock's sales per share (SPS) has grown over the last five years. Sales growth is one of the five growth factors used to calculate the Morningstar Style Box. For portfolios, this data point is the share-weighted collective sales growth for all stocks in the current portfolio. (The share-weighted average is more accurate than an asset-weighted average for this type of calculation.)

 

Cash-Flow Growth

The cash flow growth rate for a stock is a measure of how the stock's cash flow per share (CFPS) has grown over the last three to five years. Cash flow growth is one of the five growth factors used to calculate the Morningstar Style Box. For portfolios, this data point is the share-weighted collective cash flow growth for all stocks in the current portfolio. (The share-weighted average is more accurate than an asset-weighted average for this type of calculation.)

 

Book-Value Growth

The book value growth rate for a stock is a measure of how the stock's book value per share (BVPS) has grown over the last five years. Book value growth is one of the five growth factors used to calculate the Morningstar Style Box. For portfolios, this data point is the share-weighted collective book value growth for all stocks in the current portfolio. (The share-weighted average is more accurate than an asset-weighted average for this type of calculation.)

 

Morningstar Category

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

 

Stock Investment Options

Domestic-Stock Investment Options

Investment options with at least 70% of assets in domestic stocks are categorized based on the style and size of the stocks they typically own. The style and size divisions reflect those used in the Morningstar investment option Style Box: value, blend, or growth style and small, medium, or large median market capitalization. (See Equity Style Box for more details on style methodology.)

 

Based on their investment option style over the past three years, domestic-stock investment options are placed in one of the ten Categories: large growth, large blend, large value, medium growth, medium blend, medium value, small growth, small blend, small value, leveraged net long. Domestic-equity investment options that specialize in a particular sector of the market are placed in the sector equity category: communications, consumer cyclical, consumer defensive, energy limited partnership, equity energy, equity precious metals, financial, global real estate, health, industrials, infrastructure, natural resources, real estate, technology, utilities, and miscellaneous sector.

 

Balanced Investments Options

Allocation - 15% to 30% Equity: Funds in allocation categories seek to provide both income and capital appreciation by investing in multiple asset classes, including stocks, bonds, and cash. These portfolios are dominated by domestic holdings and have equity exposures between 15% and 30%.

 

Allocation - 30% to 50% Equity: Funds in allocation categories seek to provide both income and capital appreciation by investing in multiple asset classes, including stocks, bonds, and cash. These portfolios are dominated by domestic holdings and have equity exposures between 30% and 50%.

 

Allocation - 50% to 70% Equity: Funds in allocation categories seek to provide both income and capital appreciation by investing in multiple asset classes, including stocks, bonds, and cash. These portfolios are dominated by domestic holdings and have equity exposures between 50% and 70%.

 

Allocation - 70% to 85% Equity: Funds in allocation categories seek to provide both income and capital appreciation by investing in multiple asset classes, including stocks, bonds, and cash. These portfolios are dominated by domestic holdings and have equity exposures between 70% and 85%.

 

Allocation - 85%+Equity: Funds in allocation categories seek to provide both income and capital appreciation by investing in multiple asset classes, including stocks, bonds, and cash. These portfolios are dominated by domestic holdings and have equity exposures of more than 85%. These funds typically allocate at least 10% to equities of foreign companies and do not exclusively allocate between cash and equities.

 

Convertibles: Convertible-bond portfolios are designed to offer some of the capital-appreciation potential of stock portfolios while also supplying some of the safety and yield of bond portfolios. To do so, they focus on convertible bonds and convertible preferred stocks. Convertible bonds allow investors to convert the bonds into shares of stock, usually at a preset price. These securities thus act a bit like stocks and a bit like bonds.

 

World Allocation: World-allocation portfolios seek to provide both capital appreciation and income by investing in three major areas: stocks, bonds, and cash. While these portfolios do explore the whole world, most of them focus on the U.S., Canada, Japan, and the larger markets in Europe. It is rare for such portfolios to invest more than 10% of their assets in emerging markets. These portfolios typically have at least 10% of assets in bonds, less than 70% of assets in stocks, and at least 40% of assets in non-U.S. stocks or bonds.

 

Target Date 2000-2010: Investment options that provide a diversified exposure to stocks, bonds and cash for those investors who have a specific date in mind (in this case, the years 2000-2010) for retirement or another goal. These portfolios aim to provide investors with an optimal level of return and risk, based solely on the target date. Over time, management adjusts the allocation among asset classes to more conservative mixes as the target date approaches.

 

Target Date 2015: Investment options that provide a diversified exposure to stocks, bonds and cash for those investors who have a specific date in mind (in this case, the years 2011-2015) for retirement or another goal. These portfolios aim to provide investors with an optimal level of return and risk, based solely on the target date. Over time, management adjusts the allocation among asset classes to more conservative mixes as the target date approaches.

 

Target Date 2020: Investment options that provide a diversified exposure to stocks, bonds and cash for those investors who have a specific date in mind (in this case, the years 2016-2020) for retirement or another goal. These portfolios aim to provide investors with an optimal level of return and risk, based solely on the target date. Over time, management adjusts the allocation among asset classes to more conservative mixes as the target date approaches.

 

Target Date 2025: Investment options that provide a diversified exposure to stocks, bonds and cash for those investors who have a specific date in mind (in this case, the years 2021-2025) for retirement or another goal. These portfolios aim to provide investors with an optimal level of return and risk, based solely on the target date. Over time, management adjusts the allocation among asset classes to more conservative mixes as the target date approaches.

 

Target Date 2030: Investment options that provide a diversified exposure to stocks, bonds and cash for those investors who have a specific date in mind (in this case, the years 2026-2030) for retirement or another goal. These portfolios aim to provide investors with an optimal level of return and risk, based solely on the target date. Over time, management adjusts the allocation among asset classes to more conservative mixes as the target date approaches.

 

Target Date 2035: Investment options that provide a diversified exposure to stocks, bonds and cash for those investors who have a specific date in mind (in this case, the years 2031-2035) for retirement or another goal. These portfolios aim to provide investors with an optimal level of return and risk, based solely on the target date. Over time, management adjusts the allocation among asset classes to more conservative mixes as the target date approaches.

 

Target Date 2040: Investment options that provide a diversified exposure to stocks, bonds and cash for those investors who have a specific date in mind (in this case, the years 2036-2040) for retirement or another goal. These portfolios aim to provide investors with an optimal level of return and risk, based solely on the target date. Over time, management adjusts the allocation among asset classes to more conservative mixes as the target date approaches.

 

Target Date 2045: Investment options that provide a diversified exposure to stocks, bonds and cash for those investors who have a specific date in mind (in this case, the years 2041-2045) for retirement or another goal. These portfolios aim to provide investors with an optimal level of return and risk, based solely on the target date. Over time, management adjusts the allocation among asset classes to more conservative mixes as the target date approaches.

 

Target Date 2050: Investment options that provide a diversified exposure to stocks, bonds and cash for those investors who have a specific date in mind (in this case, the years 2046-2050) for retirement or another goal. These portfolios aim to provide investors with an optimal level of return and risk, based solely on the target date. Over time, management adjusts the allocation among asset classes to more conservative mixes as the target date approaches.

 

Target Date 2055: Investment options that provide a diversified exposure to stocks, bonds and cash for those investors who have a specific date in mind (in this case, the years 2051-2055) for retirement or another goal. These portfolios aim to provide investors with an optimal level of return and risk, based solely on the target date. Over time, management adjusts the allocation among asset classes to more conservative mixes as the target date approaches.

 

Target Date 2060: Investment options that provide a diversified exposure to stocks, bonds and cash for those investors who have a specific date in mind (in this case, the years 2056-2060) for retirement or another goal. These portfolios aim to provide investors with an optimal level of return and risk, based solely on the target date. Over time, management adjusts the allocation among asset classes to more conservative mixes as the target date approaches.

 

Target Date 2065+: Investment options that provide a diversified exposure to stocks, bonds and cash for those investors who have a specific date in mind (in this case, the years 2061-2065 and beyond) for retirement or another goal. These portfolios aim to provide investors with an optimal level of return and risk, based solely on the target date. Over time, management adjusts the allocation among asset classes to more conservative mixes as the target date approaches.

 

Target Date Retirement: Investment options that provide a mix of stocks, bonds and cash for those investors already in or entering retirement. These portfolios tend to be managed to more of a conservative asset allocation strategy. These portfolios aim to provide investors with steady income throughout retirement.

 

International-Stock Investment options

Stock investment options that have invested 40% or more of their equity holdings in foreign stocks (on average over the past three years) are placed in an international-stock Category.

 

Europe: at least 75% of stocks invested in Europe.

 

China Region: China-region stock portfolios invest almost exclusively in stocks from China, Taiwan, and Hong Kong. These portfolios invest at least 70% of total assets in equities and invest at least 75% of stock assets in one specific region or a combination of China, Taiwan, and/or Hong Kong.

 

India Equity: India-stock portfolios emphasize companies based in India. These portfolios invest at least 70% of total assets in equities and invest at least 75% of stock assets in India.

 

Japan : at least 75% of stocks invested in Japan.

 

Latin America: at least 75% of stocks invested in Latin America.

 

Diversified Pacific/Asia: at least 65% of stocks invested in Pacific countries, with at least an additional 10% of stocks invested in Japan.

 

Asia/Pacific ex-Japan: at least 75% of stocks invested in Pacific countries, with less than 10% of stocks invested in Japan.

 

Diversified Emerging Markets: at least 50% of stocks invested in emerging markets.

 

Miscellaneous Region: Miscellaneous Region stock portfolios invest in countries or smaller regions that do not have their own category. They typically have a narrow geographical range.

 

Foreign Large Value: Foreign large-value investment options invest mainly in big international stocks that are less expensive than the market as a whole. Most of these investment options divide their assets among a dozen or more developed markets, including Japan, Britain, France, and Germany. They tend to invest the rest in emerging markets such as Hong Kong, Brazil, Mexico and Thailand. These investment options typically will have less than 20% of assets invested in U.S. stocks.

 

Foreign Large Blend: Foreign large-blend investment options invest in a variety of big international stocks. Most of these investment options divide their assets among a dozen or more developed markets, including Japan, Britain, France, and Germany. They tend to invest the rest in emerging markets such as Hong Kong, Brazil, Mexico and Thailand. These investment options typically will have less than 20% of assets invested in U.S. stocks.

 

Foreign Large Growth: Foreign large-growth investment options focus on high-priced growth stocks, mainly outside of the United States. Most of these investment options divide their assets among a dozen or more developed markets, including Japan, Britain, France, and Germany. They tend to invest the rest in emerging markets such as Hong Kong, Brazil, Mexico and Thailand. These investment options typically will have less than 20% of assets invested in U.S. stocks.

 

Foreign Small-/Mid-Value: Foreign small-/mid-value investment options invest in international stocks that are smaller and less expensive than the market as a whole. Most of these investment options divide their assets among a dozen or more developed markets, including Japan, Britain, France, and Germany. These investment options typically will have less than 20% of assets invested in U.S. stocks.

 

Foreign Small-/Mid-Blend: Foreign small/mid-blend portfolios invest in a variety of international stocks that are smaller. These portfolios primarily invest in stocks that fall in the bottom 30% of each economically integrated market (such as Europe or Asia ex-Japan). The blend style is assigned to portfolios where neither growth nor value characteristics predominate. These portfolios typically will have less than 20% of assets invested in U.S. stocks..

 

Foreign Small-/Mid-Growth: Foreign small-/mid-growth investment options invest in international stocks that are smaller and higher-priced than the market as a whole. Most of these investment options divide their assets among a dozen or more developed markets, including Japan, Britain, France, and Germany. These investment options typically will have less than 20% of assets invested in U.S. stocks.

 

World Large Stock Growth: World large-stock growth portfolios invest in a variety of international stocks and typically skew towards large caps that are more expensive or projected to grow faster than other global large-cap stocks. World large stock growth portfolios have few geographical limitations. It is common for these portfolios to invest the majority of their assets in developed markets, with the remainder divided among the globe’s emerging markets. These portfolios are not significantly overweight U.S. equity exposure relative to the Morningstar Global Market Index and maintain at least a 20% absolute U.S. exposure.

 

World Large Stock Blend: World large-stock blend portfolios invest in a variety of international stocks and typically skew towards large caps that are fairly representative of the global stock market in size, growth rates, and price. World large stock blend portfolios have few geographical limitations. It is common for these portfolios to invest the majority of their assets in developed markets, with the remainder divided among the globe’s emerging markets. These portfolios are not significantly overweight U.S. equity exposure relative to the Morningstar Global Market Index and maintain at least a 20% absolute U.S. exposure.

 

World Large Stock Value: World large-stock value portfolios invest in a variety of international stocks and typically skew towards large caps that are less expensive or growing more slowly than other global large-cap stocks. World large stock value portfolios have few geographical limitations. It is common for these portfolios to invest the majority of their assets in developed markets, with the remainder divided among the globe’s emerging markets. These portfolios are not significantly overweight U.S. equity exposure relative to the Morningstar Global Market Index and maintain at least a 20% absolute U.S. exposure.

 

World Small/Mid Stock: World small/mid stock portfolios invest in a variety of international stocks that are smaller. World-stock portfolios have few geographical limitations. It is common for these portfolios to invest the majority of their assets in developed markets, with the remainder divided among the globe’s smaller markets. These portfolios are not significantly overweight U.S. equity exposure relative to the Morningstar Global Market Index and maintain at least a 20% absolute U.S. exposure.

 

Bond Investment options

Investment options with 80% or more of their assets invested in bonds are classified as bond investment options. Bond investment options are divided into two main groups: taxable bond and municipal bond. (Note: For all bond investment options, maturity figures are used only when duration figures are unavailable.)

 

Taxable-Bond Investment options

Long Government: An investment option with at least 90% of bond portfolio invested in government issues with a duration of greater than, or equal to six years or an average effective maturity of greater than 10 years.

 

Intermediate Government: An investment option with at least 90% of its bond portfolio invested in government issues with a duration of greater than or equal to 3.5 years and less than six years or an average effective maturity of greater than or equal to four years and less than 10 years.

 

Short Government: An investment option with at least 90% of its bond portfolio invested in government issues with a duration of greater than or equal to one year and less than 3.5 years, or average effective maturity of greater than or equal to one year and less than four years.

 

Inflation-Protected Bond: An investment option that invests primarily in debt securities that adjust their principal values in line with the rate of inflation. These bonds can be issued by any organization, but the U.S. Treasury is currently the largest issuer for these types of securities.

 

Long-Term Bond: An investment option that focuses on corporate and other investment option-grade issues with an average duration of more than six years, or an average effective maturity of more than 10 years.

 

Intermediate Core Bond: Intermediate-term core bond portfolios invest primarily in investment-grade U.S. fixed-income issues including government, corporate, and securitized debt, and hold less than 5% in below-investment-grade exposures. Their durations (a measure of interest-rate sensitivity) typically range between 75% and 125% of the three-year average of the effective duration of the Morningstar Core Bond Index.

 

Intermediate Core-Plus Bond: Intermediate-term core-plus bond portfolios invest primarily in investment-grade U.S. fixed-income issues including government, corporate, and securitized debt, but generally have greater flexibility than core offerings to hold non-core sectors such as corporate high yield, bank loan, emerging-markets debt, and non-U.S. currency exposures. Their durations (a measure of interest-rate sensitivity) typically range between 75% and 125% of the three-year average of the effective duration of the Morningstar Core Bond Index.

 

Short-Term Bond: An investment option that focuses on corporate and other investment option-grade issues with an average duration of more than one year but less than 3.5 years, or an average effective maturity of more than one year but less than four years.

 

Ultrashort Bond: Used for investment options with an average duration or an average effective maturity of less than one year. This category includes general- and government-bond investment options, and excludes any international, convertible, multisector, and high-yield bond investment options.

 

Bank Loan: investment options that invest primarily in floating-rate bank loans instead of bonds. In exchange for their credit risk, they offer high interest payments that typically float above a common short-term benchmark.

 

Stable Value: Investment options that seek to provide income while preventing price fluctuations. The most common stable-value portfolios invest in a diversified portfolio of bonds and enter into wrapper agreements with financial companies to guarantee against fluctuations in their share prices. These wrapper agreements typically provide price stability on a day-to-day basis, thereby insulating each portfolio's net asset value from interest-rate volatility. (This Category is available for Private investments and is not available for Mutual Funds).

 

Corporate Bond: Corporate bond portfolios concentrate on investment-grade bonds issued by corporations in U.S. dollars, which tend to have more credit risk than government or agency-backed bonds. These portfolios hold more than 65% of their assets in corporate debt, less than 40% of their assets in non-U.S. debt, less than 35% in below-investment-grade debt, and durations that typically range between 75% and 150% of the three-year average of the effective duration of the Morningstar Core Bond Index.

 

Preferred Stock: Preferred stock portfolios concentrate on preferred stocks and perpetual bonds. These portfolios tend to have more credit risk than government or agency backed bonds, and effective duration longer than other bond portfolios. These portfolios hold more than 65% of assets in preferred stocks and perpetual bonds.

 

World Bond: An investment option that invests at least 40% of bonds in foreign markets.

 

World Bond-USD Hedged: USD hedged portfolios typically invest 40% or more of their assets in fixed-income instruments issued outside of the U.S. These portfolios invest primarily in investment-grade rated issues, but their strategies can vary. Some follow a conservative approach, sticking with high-quality bonds from developed markets. Others are more adventurous, owning some lower-quality bonds from developed or emerging markets. Some portfolios invest exclusively outside the U.S., while others invest in both U.S. and non-U.S. bonds. Funds in this category hedge most of their non-U.S.-dollar currency exposure back to the U.S. dollar.

 

Target Maturity: Taxable target maturity portfolios typically invest in corporate and other taxable U.S. investment-grade fixed-income instruments that are all expected to mature in the same year.

 

Emerging-Markets Bond: Emerging-markets bond portfolios invest more than 65% of their assets in foreign bonds from developing countries. The largest portion of the emerging-markets bond market comes from Latin America, followed by Eastern Europe. Africa, the Middle East, and Asia make up the rest.

 

Emerging-Markets Local Currency Bond: Emerging-markets local-currency bond portfolios invest more than 65% of their assets in foreign bonds from developing countries in the local currency. Funds in this category have a mandate to maintain exposure to currencies of emerging markets. The largest portion of the emerging-markets bond market comes from Latin America, followed by Eastern Europe, Africa, the Middle East, and Asia.

 

High-Yield Bond: An investment option with at least 65% of assets in bonds rated below BBB.

 

Multisector Bond: Used for investment options that seek income by diversifying their assets among several fixed-income sectors, usually U.S. government obligations, foreign bonds, and high-yield domestic debt securities.

 

Nontraditional Bond: Inclusion in nontraditional bond is informed by a balance of factors determined by Morningstar analysts. Those typically include a mix of: absolute return mandates; goals of producing returns not correlated with the overall bond market; performance benchmarks based on ultrashort-term interest rates such as T-bills; the ability to take long and short market and security-level positions using a broad range of derivatives; and few or very limited portfolio constraints on exposure to credit, sectors, currency, or interest-rate sensitivity. Funds in this group typically have the flexibility to manage duration exposure over a wide range of years and to take it to zero or a negative value.

 

Single Currency: Currency portfolios invest in a single currency through the use of short-term money market instruments; derivative instruments including and not limited to forward currency contracts, index swaps, and options; and cash deposits.

 

Nontraditional Equity Investment options

Long-Short Equity: Long-short equity portfolios hold sizeable stakes in both long and short positions in equities, exchange traded funds, and related derivatives. Some funds that fall into this category will shift their exposure to long and short positions depending on their macro outlook or the opportunities they uncover through bottom-up research. At least 75% of the assets are in equity securities or derivatives, and funds in the category will typically have beta values to relevant benchmarks of between 0.3 and 0.8.

Derivative Income: Derivative income strategies primarily use an options overlay to generate income while maintaining significant exposure to equity market risk. Income is typically generated through covered call writing strategies, for example, while traditional equity risk factors dictate a substantial portion of the return. Funds in the category will typically have beta values to relevant benchmarks of between 0.6 and 0.9.

 

Alternative Investment options

Macro Trading: Macro trading strategies, using either systematic or discretionary methods, look for investment opportunities by studying such factors as the global economy, government policies, interest rates, inflation, and market trends. As opportunists, these funds are not restricted by asset class and may invest across such disparate assets as global equities, bonds, currencies, and commodities, and make extensive use of derivatives. Although these strategies aim to provide returns that are not correlated to traditional market indexes over a full market cycle, they can take significant directional long or short positions on any asset class over short periods and may have relatively high portfolio turnover.

 

Event Driven: Event driven strategies attempt to profit when security prices change in response to certain corporate actions, such as bankruptcies, mergers and acquisitions, emergence from bankruptcy, shifts in corporate strategy, and other atypical events. Activist shareholder and distressed investment strategies also fall into this category. These portfolios typically focus on equity securities but can invest across the capital structure. They typically have low to moderate equity market sensitivity since company-specific developments tend to drive security prices.

 

Relative Value Arbitrage: Relative value strategies seek out pricing discrepancies between pairs or combinations of securities regardless of asset class. They often employ one or a combination of debt, equity, and convertible arbitrage strategies, among others. They can use significant leverage and typically seek to profit from the convergence of values between securities. Funds in this category typically have low beta exposures to major market indexes due to their offsetting long and short exposures.

 

Options Trading: Options trading strategies use a variety of options trades, including put writing, options spreads, options-based hedged equity, and collar strategies, among others. In addition, strategies in this group that engage in option writing may seek to generate a portion of their returns, either indirectly or directly, from the volatility risk premium associated with options trading strategies. Funds in the category will typically have beta values to relevant benchmarks of less than 0.6.

 

Multistrategy: Multistrategy portfolios offer investors exposure to two or more alternative investment strategies, as defined by Morningstar’s alternative category classifications, through either a single-manager or multi-manager approach. Funds in this category typically have a majority of their assets exposed to alternative strategies, but at a minimum, alternatives must comprise greater than 30% of the strategy’s gross exposure. The category includes funds with static allocations to alternative strategies as well as those that tactically adjust their exposure to different alternative strategies and asset classes. Multistrategy funds typically aim to have low to modest sensitivity to traditional market indexes, although that may not be the case for strategies with lower alternatives allocations.

 

Equity Market Neutral: Equity market neutral strategies attempt to profit from long and short stock selection decisions while minimizing systematic risk created by exposure to factors such as overall equity market beta, sectors, market-cap ranges, investment styles, or countries. They try to achieve this by matching long positions within each area against offsetting short positions, though they may vary their exposure to market risk factors modestly. These funds’ investment strategies may be discretionary or systematic, and they keep at least 75% of their gross assets in equities or equity-related instruments such as derivatives. They typically have beta values to a relevant benchmark of less than 0.3.

 

Systematic Trend: Systematic trend strategies primarily implement trend-following, price-momentum strategies by trading long and short liquid global futures, options, swaps, and foreign exchange contracts. The remaining exposure may be invested in a mix of other complementary nontraditional risk premia. These portfolios typically obtain exposure referencing a mix of diversified global markets, including commodities, currencies, government bonds, interest rates and equity indexes.

 

Morningstar Rating for Investment options

Morningstar rates mutual investment options from one to five stars based on how well they've performed (after adjusting for risk and accounting for all sales charges) in comparison to similar investment options. Within each Morningstar Category, the top 10% of investment options receive five stars, the next 22.5% four stars, the middle 35% three stars, the next 22.5% two stars, and the bottom 10% receive one star. Investment options are rated for up to three time periods--three-, five-, and 10 years--and these ratings are combined to produce an overall rating. Investment options with less than three years of history are not rated. Ratings are objective, based entirely on a mathematical evaluation of past performance. They're a useful tool for identifying investment options worthy of further research, but shouldn't be considered buy or sell recommendations. For unregistered/private investments, the Rating is determined by taking the Morningstar Risk-Adjusted Return of the unregistered investment and hypothetically placing it the comparable Morningstar open end Category. Thus, Morningstar Ratings for unregistered investments are considered hypothetical.

 

Total Assets

This figure is recorded in millions of dollars and represents the investment option's total asset base.

 

Expense Ratio %

The percentage of investment option assets paid for operating expenses and management fees, including 12b-1 fees, administrative fees, and all other asset-based costs incurred by the investment option, except brokerage costs. Sales charges are not included in the expense ratio.

 

For separate accounts, Total Investment Expense is the amount of money, expressed as a percentage, deducted for the costs of managing the Separate Account, and where applicable, fees for administrative services, agent compensation.

 

Yield

The yield of an investment option refers to the income generated by an investment in that investment option over an identified period of time. The SEC 30-day yield refers to the income generated by an investment in an investment option over an identified 30-day period. The SEC 30-day yield is calculated by dividing: (I) the net investment income per share of the investment option earned over a 30-day period; by (II) the maximum offering price per share of the investment option on the last day of the period. This number is then annualized using semi-annual compounding. This means that the amount of income generated during the 30-day period is assumed to be generated each month over a 12-month period and is reinvested every six months. The yield does not necessarily reflect income actually earned by investing in the investment option because of certain adjustments required by the SEC and, therefore, may not correlate to the dividends or other distributions paid to shareholders.

 

Manager Name

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

 

Multiple Managers

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

 

Management Team

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

 

Et al

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

 

Average Market Capitalization

Morningstar defines the overall "size" of a stock investment option's portfolio as the geometric mean of the market capitalization for all of the stocks it owns. It's calculated by raising the market capitalization of each stock to a power equal to that stock's stake in the portfolio. The resulting numbers are multiplied together to produce the geometric mean of the market caps of the stocks in the portfolio, which is reported as average market capitalization. For example, if an investment option currently held equal stakes in three stocks, with market capitalizations of $2 billion, $10 billion, and $25 billion, the geometric mean would equal ($2 billion^1/3) x ($10 billion^1/3) x ($25 billion^1/3) = $7.94 billion.

Portfolio Date (explanation of reporting frequency)

Morningstar makes every effort to gather the most up-to-date portfolio information from an investment option. By law, however, registered investment options need only report this information four times during a calendar year, and they have up to 60 days after the report date to actually release the document to shareholders. Therefore, it's possible that an investment option's portfolio could be up to five months old at the time of publication. When displaying portfolio information, Morningstar includes the date the portfolio was reported.

 

Older portfolios should not be disregarded, however. Although the data may not represent the exact current holdings of the investment option, it may still provide a good picture of the overall nature of the investment option's management style.

Asset Allocation

 

%U.S. Stocks

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

 

%Non-U.S. Stocks

When listed, this data point reflects only the percentage of a portfolio's stock holdings that are held in foreign stocks and is calculated from the investment option's most recent portfolio.

 

% Cash

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

 

% Bonds

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

 

% Other

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

 

For portfolios that are long only, we display a pie chart to graphically depict the asset allocation breakdown. For portfolios that invest in shorts and derivatives, we use a bar chart to show the long and short positions of each investment class. We also display the overall net percentage value of each investment class.

 

Target Asset Allocation Graph (Glide Path)

Also known as the glide path, the target asset allocation graph displays the target date investment's target allocations from the earliest retirement date in the fund series to the last. The vertical axis represents the percentage of the investment's assets allocated to each investment type. The horizontal axis represents the years until retirement. The graph is identical for all of the Target Date funds in the series.

 

Turnover Ratio

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

 

% Assets in Top 10, 20, 25

The aggregate assets, expressed as a percentage, of the investment option's top 10, 20 or 25 portfolio holdings. This figure is meant to be a measure of portfolio risk. Specifically, the higher the percentage, the more concentrated the investment option is in a few companies or issues, and the more the investment option is susceptible to the market fluctuations in these few holdings. The figure is calculated from the most recent available investment option holdings. Benefits: The Percent Assets in Top 10, 20 or 25 Holdings figure provides insight into the degree to which a portfolio is diversified. Used in combination with the total number of holdings, it can indicate how concentrated an investment option is. Origin: This figure is calculated in-house, using the most recent portfolio we have available for the investment option.

 

Equity Sector Breakdown %

Software - Companies engaged in the design and marketing of computer operating systems and applications.

 

Hardware - Manufacturers of computer equipment, communication equipment, semiconductors, and components.

 

Telecommunications - Companies that provide communication services using fixed-line networks or those that provide wireless access and services.

 

Media - Companies that own and operate broadcast networks and those that create content or provide it to other media companies.

 

Healthcare - Includes biotechnology, pharmaceuticals, research services, HMOs, home health, hospitals, medical equipment and supplies, and assisted living companies.

 

Consumer Services - Includes retail stores, personal service, home builders, home supply, travel and entertainment companies, and educational providers.

 

Business Services - Includes advertising, printing, publishing, business support, consultants, employment, engineering and construction, security services, waste management, distributors, and transportation companies.

 

Financial Services - Includes banks, finance companies, money management firms, savings and loans, securities brokers, and insurance companies.

 

Consumer Goods - Companies that manufacture or provide food, beverages, household and personal products, apparel, shoes, textiles, autos and auto parts, consumer electronics, luxury goods, packaging, and tobacco.

 

Industrial Materials - Includes aerospace and defense firms, and companies that provide or manufacture chemicals, machinery, building materials, and commodities.

 

Energy - Companies that produce or refine oil and gas, oilfield Service and equipment companies, and pipeline operators.

 

Utilities - Electric, gas, and water utilities

 

Fixed-Income Sector Breakdown %

In 2004, Morningstar introduced new portfolio statistics to illustrate the sectors in which a bond investment's assets are invested. The fixed-income securities in an investment's portfolio are mapped into one of 14 sectors, which in turn roll up to five super sectors. These sectors will help investors and investment professionals easily compare and understand the sector exposure of each investment. This data is especially useful for comparing two investments that may be in the same Morningstar Category.

 

U.S. Government: contains U.S. Treasury, TIPS and U.S. Agency sectors

 

Mortgage: contains Mortgage Pass-thru, Mortgage CMO and Mortgage ARM

 

U.S. Credit: contains U.S. Corporate, Asset-backed, Convertible, Municipal and Inflation-Protected

 

Non-U.S. Credit: contains Non-U.S. Corporate and Non-U.S. Government

 

Bond Quality

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

 

Average Effective Duration

Average effective duration provides a measure of an investment option's interest-rate sensitivity--the longer an investment option's duration, the more sensitive the investment option is to shifts in interest rates. The relationship between investment options with different durations is straightforward: An investment option with a duration of 10 years is twice as volatile as an investment option with a five-year duration.

 

Average Effective Maturity

Used for taxable fixed-income portfolios only, this figure takes into consideration all mortgage prepayments, puts, calls, and adjustable coupons. The number listed is a weighted average of all the maturities of the bonds in the portfolio, computed by weighing each maturity date (the date the security comes due) by the market value of the security. Since this is collected by survey, it is important to bear in mind that different fund companies may use different interest-rate assumptions in determining call likelihood and timing. Generally speaking, the longer the maturity, the greater the interest rate risk. When duration is unavailable, this is used in the calculation of the fixed-income style box.

 

Top 10, 20 or 25 Holdings

These are the top 10, 20 or 25 holdings in the investment option's portfolio ranked by the % of net assets. Morningstar does not show cash holdings in the Top Holdings list.

 

Top Aggregated Holdings

For fund of fund structured investments only, Morningstar aggregates holdings for all underlying funds and then ranks by the % Net Assets each represents within the entire portfolio.

 

Total Number of Stock Holdings

Denotes the total number of equity securities in an investment option's portfolio. This number can be quite useful for gaining greater insight into the portfolio's diversification.

 

Total Number of Bond Holdings

Denotes the total number of fixed-income securities in an investment option's portfolio. This number can be quite useful for gaining greater insight into the portfolio's diversification.

% of Net Assets

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

 

World Regions

Displays the percentage of the investment option's assets invested in three Super Regions (Americas, Greater Europe and Greater Asia) and the ten Regions (North America, Latin America, United Kingdom, Europe Developed, Europe Emerging, Africa/Middle East, Australasia, Asia Developed and Asia Emerging).

 

Country Exposure

World Regions

Displays the countries in which the investment option invests most heavily. This information is calculated from the most recent portfolio holdings available.

 

 

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