morningstar investment...

Morningstar Investment Conference

Karen Dolan

Conference Best Bets:Gundlach: Debt Is Still the Problem 3 After predicting a subprime meltdown three years ago, DoubleLine Capital’s CEO sees problems on the horizon.

Reynolds: Focus on the (Time) Horizon 4 Putnam’s Bob Reynolds talks with us about Putnam, 401(k)s, and how advisors and their clients can cope with the market.

A Chat With Bill McNabb 7Vanguard’s chairman talks about fees, markets, and what scares him.

Arnott: Not the Time to Be Greedy 12 Rob Arnott says investors need to lower their return expectations and increase exposure to inflation-protected assets.

Also in This Issue:Full Three-Day Conference Agenda 8

ETF Analysts Speak Out 11

A New Take on Account Aggregation 15

Where to Eat (provided by Time Out Chicago) 18Dining options within range of McCormick Place, and Chinatown highlights.

Welcome to Morningstar’s 2010 Investment Conference. Markets have climbed higher since we met here in Chicago last year, but the ride has remained uncomfortably turbulent. The regulatory response to 2008 has kicked into high gear, and while corporations and individuals have been paring back their debt levels, governments around the world have been kicking theirs up. Higher interest rates and inflation seem to be a question of when, not if, and bruised investors need your guid-ance more than ever. Our panelists, keynoters, and moderators are prepared to share their latest research on these pressing matters, discuss where they are finding opportunities, and caution you away from the danger zones.

Here’s a sneak peek at some of the highlights.Jeffrey Gundlach will kick things off this after-

noon with his broad views about the economy, the bond market, and, of course, his special-ty—mortgage-backed securities. He will set the stage for a big-picture discussion between two investors with wide-ranging approaches. Steven Romick and Rudolph Riad-Younes will start at the top with a debate about broad markets and bring it all the way down to the individual securities they own.

We’ll descend from the 30,000-foot view and dive into some more-targeted themes Thursday. Dividends have quickly moved from passé to chic. Sonya Morris will talk to three investors who have been clued into the virtues of dividend investing for quite some time. You’ll also hear from two of the mutual fund industry’s vocal and well-recognized executives, Vanguard CEO Bill McNabb and Putnam CEO Bob Reynolds.

Our breakout sessions on Thursday and Friday cover prescient topics and allow you to tailor

the conference to your interests. Health-care investing, tactical asset allocation, target-date funds, convertibles, income strategies, alter-native investments, and foreign stocks will all be covered, among other things. With all the money flowing into bond funds lately and the low interest-rate environment we’re in, the bond-focused panel is more relevant than ever. I also encourage you to consider Morning-star’s research sessions. We’re hosting one on Thursday focused on ETFs and surfacing ideas from our stock strategists on Friday.

We’re saving some of the best for last. The conference will conclude with a panel led by Pat Dorsey, featuring Staley Cates, Bill Miller, and Richie Freeman. Those four stock junkies are sure to leave us with ideas we can take with us until we meet again next year.

Karen Dolan is Morningstar’s director of fund analysis.

33 Fund Research Round Table, General Session; 4:10p–5:00p, Wednesday; Room S100.

Wed., June 23–Thurs., June 24 Edition

A Bumpy RideVolatile markets have left investors bruised and confused. It’s time to help them get back on their feet.

Higher interest rates and inflation seem to be a ques-tion of when, not if, and bruised investors need your guidance more than ever.

Tactical / ActiveLong / Short Fixed Income

Frontier MarketsReal Estate / Infrastructure

Learn more at www.forwardfunds.com or call (888) 312-4100.

A Focus on Alternative Strategies in Mutual Funds

Forward ThinkingForward Funds

You should consider the investment objectives, risks, charges and expenses carefully before investing. A prospectus with this and other information about the funds may be obtained by calling (888) 312-4100 or by downloading one from www.forwardfunds.com. It should be read carefully before investing. Forward Funds are distributed by ALPS Distributors, Inc. ©2010 Forward Funds

Mutual fund investing involves risks, including the possible loss of principal. Consult a fund’s prospectus for additional information on risks.

Carefully consider a fund’s investment objectives, risks, charges, and expenses before investing. For a current prospectus, containing this and other information, call 1-888-877-9275 or visit www.wellsfargo.com/advantagefunds. Read it carefully before investing.Wells Fargo Funds Management, LLC, a wholly owned subsidiary of Wells Fargo & Company, provides investment advisory and administrative services for Wells Fargo Advantage Funds®. Other affiliates of Wells Fargo & Company provide subadvisory and other services for the Funds. The Funds are distributed by Wells Fargo Funds Distributor, LLC, Member FINRA/SIPC, an affiliate of Wells Fargo & Company. 123481 06-10

© 2010 Wells Fargo Funds Management, LLC. All rights reserved.

A partner as dedicated to you as you are to your clients.

In an increasingly complex environment, we remain

committed to guiding you through the investment

terrain. Everything we do is backed by the integrity

of our parent company, Wells Fargo & Company;

the expertise of our unique blend of independent

investment teams; and the collaborative level of

superior service that is our trademark.

We are convinced that by forming a strategic

partnership, we can help you pursue market

opportunities, manage risk, and accomplish your

business goals. Working together, we’ll focus on not

only developing sound asset management solutions

for your clients but helping you grow your business

as well. To get started, call us at 1-888-877-9275.

Let’s talk. Stop by booth 116.

Morningstar Investment Conference 2010 Wed., June 23–Thurs., June 24 Edition 3

Jeffrey Gundlach, CEO and CIO of the asset-management firm DoubleLine Capital LLC, doesn’t deny that there’s been some good economic news lately. He just doesn’t believe it’ll last much longer.

Gundlach, who will deliver the keynote ad-dress Wednesday, said the federal govern-ment’s stimulus package helped the economy grow for a year or two.

But that growth isn’t organic. The stimulus, once over, will likely weaken the overall economy. He expects economic growth to slow within nine months to a year.

“It’s kind of like pouring Miracle-Gro on top of some perennials,” Gundlach said during a recent interview. “It works great for a year be-cause it’s basically like putting your perennials on steroids. Or amphetamines. In the short term that works, but it ends up burning out the basic strength of the organism. And I think that’s the next stage in the economic cycle.”

He said he doubts the government will continue any economic stimulus programs because the public views them negatively.

“You can’t just government-stimulate your way to a healthy economy in perpetuity,” he said.

“The economy is going to suffer underneath the retrenchment of this stimulus.”

He said that starting in March of last year, he saw a “tremendous rally” in both the equities market and in all the credit markets. But he called it a discounting mechanism—it discounted this growth period that we’re having. Now, Gundlach said, we’re seeing the opposite happening.

“We’re starting to see tremendous volatility in the equity market. And we’re starting to see a flight to quality occurring, broadly speaking, again, in the commodity and credit markets,” Gundlach said. “To me, that suggests that the forecast of slow economic growth some several months ahead, or a couple of quarters ahead, is dovetailing with the message of the markets.”

He said the instability could last for several years. This is all part of what Gundlach sees as the problem of over-indebtedness in Amer-ica. The earlier phase of the current credit meltdown was caused, in part, by consumers who were on a debt binge. He blames the next phase, which we are entering, on govern-ment debt. Gundlach predicts the government will raise taxes in a “well-intentioned” move to balance the budget or attack the deficit. But this, in turn, will hurt the economy further.

“As you attempt to raise taxes, what will end up happening is that it will take a bite out of economic growth,” he said.

Gundlach, 50, has been the bearer of bad news before. During his 2007 Morningstar Invest-ment Conference keynote address, Gundlach told the audience that the free-falling subprime market was a disaster and it was only going to get worse.

“I have every intention of giving at least as equally as thoughtful and forward-looking speech that people will be able to remember three years forward,” he said recently.

A lot has changed since Gundlach gave that 2007 address. At the time, he was the chief investment officer for TCW, where he worked for more than two decades. At one point, he and his team managed $70 billion.

But in December 2009, TCW fired him, setting off a legal battle between Gundlach and TCW. Gundlach cofounded DoubleLine Capital

later that month. DoubleLine, based in Los Angeles, now manages $3 billion.

“We like to think of ourselves as a significant player in the mutual fund industry,” he said. “I was managing a $12 billion fund—my fund now is $600 million. The good news is it’s growing fairly rapidly. I suspect that we’ll be in the few-billion-dollar category in our mutual return fund by the end of this year.”

Gundlach sees a bright spot in the economy. He said there hasn’t been a single day when the U.S. government bond market has failed to be the beneficiary of risk concerns globally, especially over the euro.

“And as long as that’s the case, the probability is the 10-year Treasury is going to go to the yield of two-and-a-half percent,” he said.

“Which sounds very low, but it’s been there before. In Japan, when they were dealing with similar problems, the bond yield stayed below that level for 20 years. So the bond market outlook in government bonds, for the time being, is positive.”

David Kihara is a freelance journalist based in Washington, D.C.

2010 Conference DailyEditorRyun Patterson

ContributorsChristine Benz, Michael Brennan, Dan Culloton, Karen Dolan, Jennifer Gierat, David Kihara, Helen Modly, Bill Winterberg

Designers Chris Cantore, Meghan Tweedie

Publisher Jill Jacobs-Baar

33 See Jeffrey Gundlach, Opening Keynote Session; 3:00p–4:00p, Wednesday; Room S100.

Gundlach: Debt Is Still the Problem After predicting a subprime meltdown three years ago, DoubleLine Capital’s CEO sees problems on the horizon.By David Kihara

Jeffrey Gundlach, founder, DoubleLine Capital LLC.


33 See A Conversation With Bob Reynolds, General Session; 4:30p–5:30p, Thursday; Room S100. Moderated by Don Phillips.

Reynolds: Focus on the (Time) HorizonPutnam’s Bob Reynolds talks with us about Putnam, 401(k)s, and how advisors and their clients can cope with the market.By Ryun Patterson

Bob Reynolds is president and chief executive officer of Putnam Investments, a member of Putnam Investments’ executive board of directors, and president of the Putnam Funds. He has more than 30 years of invest-ment and financial services experience.

Prior to joining Putnam Investments in 2008, Reynolds was vice chairman and chief operating officer of Fidelity Investments from 2000 to 2007. During this time, Reynolds served on the board of directors for FMR Corporation, Fidelity Investments Insurance Ltd., Fidelity Investments Canada Ltd., and Fidelity Management Trust Company. He was also a trustee of the Fidelity Family of Funds.

We interviewed Reynolds on June 2; here’s a transcript of the interview.

Q: What do you think were the strengths you saw at Putnam that you could build around when you started there?A: Number one was that Putnam has a 75-plus-year history, so it has tremendous brand awareness in the marketplace.

It’s also a firm that I have known. Having competing against it for two decades, I knew the strengths and weaknesses of their firm. They had an excellent fixed-income team in place, an excellent global-allocation team. The problems, as I saw them, were on the equities side, which I thought were very, very fixable with the right people, the right process, the right compensation structure in place.

And I did love their distribution. It has always been through the advisor channel, which to me is the future of mutual fund distribution, and Putnam’s strength has always been distribution, and I would say service along with that. So it was a combination of things that brought me to Putnam.

Q: What are the most significant changes you’ve made at Putnam, and why did you undertake them?A: I would put them in two baskets: One, we totally restructured the equity area at Putnam, bringing in new people on the fund management side and rebuilding fundamental

research, and we did change compensation; and then, in another bucket, we rolled out 14 new products that played off the strengths of Putnam, and they were based on needs we saw in the marketplace. So I think it was a combination of those two things.

Q: What do you think is right with the U.S. retirement system, and what do you think needs improvement?A: I think the 401(k)/defined contribution system is the right system for America’s workforce because of its portability, self-de-termination, and ability to customize to the individual. I do think the system itself is a great system.

As with everything in life, I do think it can be made better. A lot of changes have happened over the last 20 years in 401(k)s—the system has been one of the most dynamic, self-correcting systems that I’ve seen, and I think there’s tremendous opportunity to make it a better system.

Q: What do you think is the most pressing issue facing investors today?A: The current market! I think the volatility of the market—the uncertainty—clearly is the most pressing issue facing investors. Whenever you have this type of market, these types of conditions, it makes the value of the advisor that much greater, and I think that’s a real opportunity for people to provide advice service in today’s market.

Q: What should or shouldn’t the fund industry be doing to restore investor confidence, in the wake of having two bear markets in a decade?A: So much of investing—probably the most critical point—is time horizon. It’s having a real grasp on what you are investing for. The most interesting thing about the market is that the longer-term your time horizon, the more predictable the market is. I think it’s time horizon and being able to put together the right portfolio, and then taking that type of view of the market and not react to day-today movement.

Q: What advice do you give to advisors who are trying to keep clients during markets like this?A: Move your money to Putnam! (laughs) The key is try to find the right fund firm, the right products, and be willing to stay with them. I think there is an influx of new products; we’ve been on the forefront of the whole absolute-return concept, which allows people to participate in the market at much lower volatility levels. It’ll be that type of innovation and structure that I think will pay dividends over the long term.

Q: Do you think there will be a day when Putnam goes no-load or makes more-aggressive fee cuts in the wake of the new transparency moves that have been going on?A: I don’t think so. We have shares that are load-waived, that are no-load today—Y-shares that are used in a lot of defined-contri-bution plans—so I think that adjustment’s already in play. The idea of going totally no-load and direct distribution will not happen at Putnam. We’re dedicated to the advisor and that’s a channel we will stay dedicated to.

Ryun Patterson is the managing editor of Morningstar Advisor magazine and MorningstarAdvisor.com.

Bob Reynolds, CEO, Putnam Investments.

Innovation.At Putnam, these are some of the

innovations we’re applying to the

challenges and opportunities that

face today’s investors. We’re also

lowering the cost of investing in

our funds, and pursuing superior

performance to shareholders.

That’s innovation you can use.

This is Putnam today.

Get the current thinking of our senior market strategists. putnam.com

Jeff combines absolute and relative

return strategies in a single portfolio

designed to moderate the risks for

retirement investors.

Robert Reynolds Chief Executive Officer

Rob applies institutional

strategies to manage risk

and deliver returns for

individual investors.

Jeff Knight, CFAPortfolio Manager Putnam RetirementReady® Funds, Putnam Absolute Return 500 and 700 Funds

Rob Bloemker Portfolio Manager Putnam Income Fund, Putnam Absolute Return 100 and 300 Funds

Your clients should carefully consider the investment objective, risks, charges, and expenses of a fund before investing.

For a prospectus, or a summary prospectus, if available, containing this and other information for any Putnam fund or

product, call Putnam Dealer Marketing Services at 1-800-354-4000. Your clients should read the prospectus carefully

before investing. Putnam Retail Management

Created by Putnam Investments Design Studio • Slug date: Thu Jun 3 15:17:06 EDT 2010Publication name: 2010 Morningstar Investment Conference Daily Run date: 2010Operator: bting • Account exec: NHancock • Putnam Job #: 261689InDesign filename: 261689 Morningstar Conf Ad Innovation.inddAd trim size: 8.5” x 11.5”Colors and inks: 4 Process Inks; 0 Spot Inks- Name and Type: Process Cyan- Name and Type: Process Magenta- Name and Type: Process Yellow- Name and Type: Process Black

261689 Morningstar Conf Ad Innovation.indd 1 6/3/10 3:18 PM

Past performance is not a guarantee or reliable indicator of future results. Investments carry the possibility of loss. Morningstar award announced January 2010. ©2010, PIMCO.

They rely on PIMCO for one purpose...

Bill Gross and team are proud to have been named and we dedicate this honor to the millions of

clients in the U.S. and around the world who have placed their trust in us. You inspire us to reach for excellence.

In nearly four decades, there has been no time which has presented more investment challenges. . .both great and small. PIMCO works day after day to manage risk and deliver returns on behalf of the people who matter most: you, our clients.

We are privileged and grateful for the opportunity to continue that mission.

to manage risk and deliver returns.

www.pimco.com


33 See Bill McNabb, Luncheon Keynote Presentation; 12:00p–1:30p, Thursday; Room S100.

A Chat With Bill McNabbVanguard’s chairman talks about fees, markets, and what scares him.By Dan Culloton

Editor’s Note: This interview was originally published in Morningstar’s January 2010 Vanguard Fund Family newsletter.

Shortly after Bill McNabb took over as Vanguard CEO from Jack Brennan in late 2008, the financial system faced Armageddon. By the end of 2009 the end was no longer nigh and Vanguard had once again emerged from a crisis not only as a survivor, but arguably, as a big winner. I spoke with McNabb about that year and what may lie ahead for Vanguard and investing in general. An edited transcript of our conversation follows.

Q: It has been a tumultuous year. Have you ever felt, since taking over the job, like calling Jack and offering his job back?A: I think Jack’s the best market-timer in history. He joined us in July of ’82, and then made the announcement in February of

’08, just a little past the then market peak. All kidding aside, I didn’t have that desire, but it certainly has been an amazing period for us all. I don’t think we’re done yet. We’re certainly in a much better place than we were nine months ago. But I still think there are issues that haven’t been resolved.

Q: What issues haven’t been resolved?A: There’s going to be some level of regulatory reform, and how that shapes up is a big question. There’s the whole idea of systemic risk, and what constitutes it, and how to monitor and regulate it. There’s the whole area of how to better protect consumers—the Consumer Protection Financial Agency that’s been proposed is certainly trying to get at that. There’s a question in our business specif-ically about money market funds and what their future is. These are all issues that are going to be dealt with probably in the next three to six months.

Q: In terms of asset growth and fund flows, it hasn’t been a lost decade for

Vanguard. What can trip Vanguard up going forward?A: I think for any company in our business, ultimately, reputation is vital. It’s a business built on trust, for us, arguably, more so than anyone else. The unique ownership structure we have, the way we do business—all

really are built upon a tremendous implicit trust between our investors and us. Anything we could do to violate that trust would put us in a very precarious situation.

Q: Fees went up after assets fell in 2008. Now that assets have recovered, will fees come back down?A: The short answer is “yes,” but as you know, we don’t really “raise fees” or “lower fees.” They are a product of what it costs us to run the place, divided by the assets. The assets shrank so quickly (in 2008 and early 2009) that even with the most aggressive cost-cutting you could imagine, expense ratios were going to go up a little bit. … That said, we’ve had a tremendous runup in assets. We continue to invest aggressively in the business. But as we stand today, I would expect expense ratios to be trending back down.

Q: Have any of those cost cuts been reinstated?A: We figured out how to do certain things more efficiently as a result of the downward pressure, and you don’t give that back up when the market recovers. The efficiencies are still there. For example, people-wise, we’re only a couple hundred people bigger than we were in 2000. It’s a different mix, to be fair, but from an overall size standpoint, it’s not that much different. Between technology and some of the things we’ve

done to improve our own internal processes, we’ve gained a lot of efficiency, because we’re a lot bigger—not just assetwise, but accountwise and servicewise—than we were a decade ago.

Q: You’ve said Vanguard is accelerating overseas expansion. How does that help domestic clients? How much growth is too much?A: One of the paradoxical issues our leader-ship team has to come to grips with is we never have a growth plan. We don’t sit down at business planning time and say, “We want to grow 10% a year over the next three

years and gain XYZ points of market share.” It’s just not the way we think. Yet we’ve been pretty fortunate to continue to grow. The first question we ask ourselves is, “Whom do we want to serve, and why?” And we ask ourselves, “Can we be best in class at serving that end investor?”

When we started up Australia and Europe more than a decade ago, frankly, those were more institutionally oriented businesses. One of the things we’ve asked over the last three or four years is, “Where’s the individual investor at the end of the equation?” Asking ourselves that question has actually gotten us to refocus where we want to invest. And as to the why, I don’t want this to sound self- serving, but we think there’s a need for people to have low-cost, highly diversified invest-ments and the basic education to go along with how to use it.

I go up and I teach periodically at an advanced management program at Harvard Business School, Wharton, and a couple of other places. And I listen to people talk about the invest-ment-management business, and then there’s usually a little case study on Vanguard.

These audiences tend to be 70% non-U.S., and at the end of it, when the professor has

Bill McNabb, CEO, Vanguard.

Continued on Page 16


Conference Agenda

Opening Remarks/Keynote S100 3:00p – 4:00p

Fund Research Round Table S100 4:10p – 5:00p

Break 5:00p – 5:10p

General Session 5:10p – 6:00p S100 The Big Picture View

Exhibit Hall Open 5:30p – 7:30p

Reception in Exhibit Hall Hall B1 6:00p – 7:30p

June 23

Breakfast in Exhibit Hall Hall B1 7:00a – 8:00a

General Session 8:00a – 9:00a S100 Dedicated to Dividends

Breakout Session 1A 9:10a –10:00a S402 The Shifting Dynamics of Health-Care Investing S404 Stock-Picking Across the Globe S401 Investing 501: Convertibles S403 Income Strategies for Retirees

Exhibit Hall Open 9:00a –11:00a

Break in Exhibit Hall Hall B1 10:00a –10:45a

Breakout Session 1B 11:00a –11:50a See Breakout Session 1A

Lunch/Keynote Presentation S100 12:00p –1:30p

Breakout Session 2A 1:40p – 2:30p S401 Investing 501: Rob Arnott S404 Foreign Stocks From Three Different Angles S402 Path to Retirement S403 Hot Topics in ETFs

Exhibit Hall Open 2:30p – 4:30p

Breakout Session 2B 2:40p – 3:30p See Breakout Session 2A

Break in Exhibit Hall Hall B1 3:30p – 4:30p

General Session 4:30p – 5:30p S100 A Conversation With Bob Reynolds

Reception in Exhibit Hall Hall B1 5:30p – 7:00p

June 24

Breakfast in Exhibit Hall Hall B1 7:00a – 8:00a

General Session 8:00a – 9:00a S100 Old Wine, New Bottles

Breakout Session 3A 9:00a – 9:50a S402 A Search Across Sectors: What’s Next for Bonds? S404 Alternative Mutual Funds: From Wall Street to Main Street S401 Investing 501: Your Lizard Brain and Your Money with Terry Burnham S403 Putting Cash to Work

Exhibit Hall Open 9:00a –11:00a

Break in Exhibit Hall Hall B1 9:50a –10:50a

Breakout Session 3B 10:50a –11:40a See Breakout Session 3A

General Session 11:45a –12:45p S100 The Monsters of Stock

Informal Networking Lunch Hall B1 12:45p –1:30p

June 25

A member of Deutsche Bank Group

Through consistent performance. Unwavering investment discipline in all markets. And relying on some of the most experienced managers in the industry. Markets change. The way we manage Muni Funds doesn’t.

Internet: dws-investments.com

Phone: (800) 621-1148

Deutsche Bank Group

As of 3/31/10. Source: Morningstar, Inc. Ratings are historical, based on risk adjusted performance and do not guarantee future results. The Overall rating for a fund is a weighted average of the ratings for the time periods indicated. Not all share classes are available to all investors. Institutional shares have a million dollar minimum to invest in the share class. Not all share classes are available to all investors. © 2010 Morningstar, Inc. All rights reserved. Morningstar, Inc., shall not be responsible for investment decisions, damages or other losses resulting from use of this rating. For each fund with

at least a 3-year history, Morningstar calculates a Morningstar Rating based on a Morningstar risk-adjusted return measure that accounts for variation in a fund’s monthly performance (including, unless load-waived, the effects of sales charges, loads and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in a 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. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.)Bond investments are subject to interest-rate and credit risks. When interest rates rise, bond prices, and thus the fund’s value, can decline. Credit risk refers to the ability of an issuer to make timely payments of principal and interest. Although these funds seek income that is federally tax-free, a portion of the fund’s distributions may be subject to federal, state, local and alternative minimum tax. To obtain a summary prospectus, if available, or prospectus, download one from www.dws-investments.com, talk to your financial representative or call (800) 621-1148. Carefully consider the product’s objectives, risks, charges and expenses before investing. The prospectus contains this and other important information about the investment product. Read the prospectus carefully before you invest. DWS Investments is part of Deutsche Bank’s Asset Management division and, within the US, represents the retail asset management activities of Deutsche Bank AG, Deutsche Bank Trust Company Americas, Deutsche Investment Management Americas Inc. and DWS Trust Company. DWS Funds are distributed by DWS Investments Distributors, Inc. NOT FDIC/NCUA INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | NOT A DEPOSIT | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY© 2010 DWS Investments Distributors, Inc. All rights reserved. R-015928-1 (2/10)

MORNINGSTAR RATING AND (NUMBER OF FUNDS RATED IN CATEGORY)

FUND TICKER CaTEgoRy oVERaLL 3-yR 5-yR 10-yR

DWS California Tax-Free Income Fund - Class S SDCSX Muni California Long 5 (156) 5 (156) 5 (143) -

DWS Intermediate Tax/aMT Free Fund - Class INST SZMIX Muni National Interm 5 (210) 5 (210) 5 (189) -

DWS Managed Municipal Bond Fund - Class S SCMBX Muni National Long 5 (251) 5 (251) 5 (228) 5 (200)

DWS Massachusetts Tax-Free Fund - Class S SCMaX Muni Massachusetts 5 (75) 5 (75) 5 (70) 5 (59)

DWS New york Tax-Free Income Fund - Class S SNWyX Muni New york Long 5 (112) 5 (112) 5 (109) -

DWS Strategic High yield Tax-Free Fund - Class S SHyTX High yield Muni 5 (131) 5 (131) 5 (108) 5 (83)

Six of the seven DWS Municipal Bond Funds have earned Morningstar’s 5-star rating.

How?

A member of Deutsche Bank Group

job name: ”Algae” Fact Ad

media type: Magazine

media unit: Page

b/w or color: 4/C

client: iSharesjob #: ISHN-ISAD-ISHN1035-J

size: J

live: 0” x 0”

trim: 8.5” x 10.5”

bleed: 0” x 0”

gutter: None

laser output at: 100%

file name: ISHN1035_J_prf.indd

studio artist: Studio MacPro [Stephan Alm]

date: 6-15-2010 3:51 PM

rounds: 1 collects: 0appr

oval

sign

off PF CD TM

AD PR AB

CW AE QC

link names: Algae_BKG_SWOP_J.tif (CMYK; 422 ppi; 71.09%), GreenHands_SWOP.psd (CMYK; 413 ppi; 72.54%), BlackRock_Logo_white_nobar.ai (13.42%), is_grad_4c_rev_cmyk_r_tagline_V2.ai (53.79%)

inks: CMYKfonts: Gotham (BoldItalic, Medium, Book), Trade Gothic (Bold, Medium), Times (Regular)notes: Morningstar Advisor

251897mea01_J df

C M Y K

The Pentagon plans to produce over 50 million gallons of jet fuel from algae.

TYPO

GRAP

HY

Hea

dlin

e: 2

2.2

5 p

tB

ody

copy

: 10

.5 p

tB

old

lega

l: 1

0.5

pt

CTA

: 10

pt

Reg

ular

/Ita

lic le

gal: 7

.5 p

tC

opy/

lega

l col

or:

75%

K

Call 1-800-iShares to request a prospectus, which includes investment objectives, risks, fees, expenses and other information that you should read and consider carefully before investing. Investing involves risk, including possible loss of principal. Narrowly focused investments typically exhibit higher volatility. Technology companies may be subject to severe competition and product obsolescence. Funds distributed by SEI Investments Distribution Co. (“SEI”) and advised by BlackRock Fund Advisors (“BFA”). BFA is a subsidiary of BlackRock Institutional Trust Company, N.A. (“BlackRock”), neither of which is affi liated with SEI. ©2010 BlackRock. All rights reserved. iShares® is a registered trademark of BlackRock. All other trademarks, servicemarks or registered trademarks are the property of their respective owners. iS-2777-0610. Source: www.Guardian.Co.UK 02/10.

Visit iShares.com to learn more about our Technology ETFs.

Technologyis evolving. Shouldn’t the way you invest in it evolve as well?

L:8.5”

L:10

.5”

PACIFIC DIGITAL IMAGE • 333 Broadway, San Francisco CA 94133 • 415.274.7234 • www.pacdigital.comFilename:

Colors:Operator: Time:

Date:251897mea01_J.ps_wf02Cyan, Magenta, Yellow, Black

SpoolServer 17:56:2910-06-15

NOTE TO RECIPIENT: This file is processed using a Prinergy Workflow System with an Adobe Postscript Level 3 RIP. The resultant PDF contains traps and overprints. Please ensure that any post-processing used to produce these files supports this functionality. To correctly view these files in Acrobat, please ensure that Output Preview (Separation Preview in earlier versions than 7.x) and Overprint Preview are enabled. If the files are re-processed and these aspects are ignored, the traps and/or overprints may not be interpreted correctly and incorrect reproduction may result. Please contact Pacific Digital Image with any questions or concerns.


On Thursday, members of Morningstar’s ETF research team will present “Hot Topics in ETFs,” looking at issues like commodities ETFs, ETFs’ role in the “flash crash” of May 6, and fixed-income ETFs, among other things. Director of ETF analysis Scott Burns and Morningstar ETF strategists Paul Justice and John Gabriel sat down recently to discuss their take on the ETF universe.

Question: How has Morningstar’s ETF research evolved over time?Scott Burns: In the beginning we started with research as the focus, and research is still a huge focus for us, but we realized that research presumes understanding, and that there was actually still quite a large education gap. So what we’re really focused on right now is an education and research mission and delivering the full solution set. There’s naturally a bit of education in every piece of research, and vice versa, but in the beginning I don’t think we had a fully fleshed-out concept of what it was that people needed. And that’s true whether it’s individuals, advisors, or institutions—people are still working up the learning curve.

Paul Justice: I think it’s promoting the discovery process. People go to research reports typically because either A) they own the fund, or B) they’re thinking about owning the fund. And what we’ve tried to do is promote the ideas around why people should look at ETFs to find solutions for their asset-exposure needs and helping them understand when an ETF can be beneficial either as a mutual fund or a single stock replacement. And I think serving that diverse audience is key.

Q: Has ETF knowledge improved?SB: I think that the amount of investors who are past that 101, 201 stage has increased,

but there’s still a lot of very early adopters. So we find ourselves having to go back over a lot of the same issues, and that’s always going to be true. I always like to talk about mutual funds. We all take it for granted now that people, at least advisors and more- sophisticated investors, understand things like the Morningstar Style Box, and mutual fund returns, and how to use a mutual fund, and what they are. But if you go back to 1992, that wasn’t true, and Morningstar played a huge role in that and played a huge role in creating the self-directed investor and the independent advisor. So we’re looking to continue that mission for this different set of vehicles.

John Gabriel: ETFs have been around for 20 years, but like Scott was saying, we’re still in the adoption phase—there’s a lot of people still coming to them. So we might have got the first wave, but there’s always a steady flow of investors coming in all the time, and a lot of them are coming from mutual fund investing, too, so that’s why there are so many issues we can touch on, especially with the capital markets and trading.

PJ: ETFs are all the rage right now. They’re still less than a tenth of the size of mutual funds, but they’ve been growing extremely rapidly. If we look back at 2005, ETFs crossed the $200 million mark. Now we’re looking at, what, a trillion in assets under manage-ment? The number of products has grown exponentially as well. There are so many asset classes you can get exposure to, so many index styles. They’ve really created this new segment of products, and they will allow people to become their own active indexers.

Q: You guys were really early to sound the alarm about leveraged ETFs. Are there any pitfalls that have been exposed that people should look out for now?PJ: What we’ve highlighted over the last two years is some of the weaknesses of commodi-ties as an investment asset class. And it’s really because the back-testing that was done, in a great study by Rouwenhorst and Gary Gorton in 2005, looked at a time period from 1959 to 2000, when not that many people were investing in commodities, and they didn’t anticipate the market impact of financial

investors going into that space and distorting the entire market. For many commodities, you have to use futures, and now futures markets are entirely distorted. I don’t know that commodities make a lot of sense right now as a portfolio diversifier, unless you’re holding physical underlying [goods], and it’s been the case for three years running, no matter what prices do.

SB: The capital-markets aspect for ETFs was always there, but we’ve had some things that have exposed some issues. ETFs did extremely poorly in the “flash crash,” and these things exposed some bad investor behavior that was going on that we weren’t aware of—people using stop-losses and things like that on investment funds, not trading funds. That kind of stuff has its merits in trading, but if you’re investing, putting a 20% out of the money stop-loss on the total world stock market is a bad idea (laughs). Why would you do that?

When you look at the back half of 2010, con-tinuing education on the capital markets aspect of ETFs is going to be at the forefront for us, much like leveraged ETFs were in 2009.

PJ: ETFs require just a slightly higher level of sophistication than mutual funds do. Tradi-tionally, people have either been only mutual fund investors or stock investors. With ETFs you have to develop a new skill set that encompasses aspects of both. That’s the education effort that I think we need to further going forward. I think ETFs got a negative stigma from the “flash crash.” They are not perfect, but they remain viable and good products, and they are a great solution for many people, if the ETF is available to cover the asset class that they want to get into.

I think that’s the key reason why every research report we write starts off with a suitability assessment. Not all these products are right for everyone. In fact, most people should ignore 90% of the ETFs that are available and find the ones that are right for them. Are leveraged ETFs bad for everyone? No. They’re right for a very small portion of the population. It would be difficult to educate the general public on how to use these appropriately, and so our efforts are more or less tied to educating the public on which ones they should be using the most often.

Ryun Patterson is the managing editor of Morningstar Advisor magazine and MorningstarAdvisor.com.

33 See Hot Topics in ETFs, Breakout Sessions 2A, 2B; 1:40–2:30p, Thursday; Room S403.

ETF Analysts Speak OutMorningstar’s ETF experts talk about the big issues on their minds right now.By Ryun Patterson

33 Register now for the Morningstar ETF Invest Conference, Sept. 15–17, at the Swissôtel in Chicago. http://www.MorningstarAdvisor.com/2010ETFInvest


Morningstar’s Christine Benz sat down with Research Affiliates’ Rob Arnott at a conference last month for a Morningstar.com video interview. Here’s a transcript of the ensuing discussion.

Christine Benz: So Rob, you talked this morning, and one might have come away with the sense that you have a pretty gloomy outlook for traditional asset classes overall. You think conventional bonds, stocks are pretty expensive right now. Is that a correct assessment?

Rob Arnott: I think that’s accurate. What people will often do is shape their expectations on what’s happened in the past, rather than looking at current yields.

And yields on stocks—they’ve doubled in the last 10 years, because it was such a horrific decade. They’re still half what they’ve been historically. So the yields on stocks are low. The yields on bonds, and an array of other asset classes, are low. People need to ratchet down their return expectations. If you’re expecting double-digit returns on your investments, then I’m a bear. I think you’re not going to get there.

If you’re expecting 5% return on your investments and you’re well diversified and you’re taking advantage of an array of alternative markets—yeah, that’s not just achievable, but reasonably easily achievable. Six percent or eight percent is possible.

Benz: One idea you talked about this morning is just looking at TIPS for the conservative sleeve of a retiree portfolio. Can you talk about how you’re thinking about inflation and why you think TIPS are relatively attractive?

Arnott: Well, inflation is the big risk that threatens people’s retirements in the years ahead. Capital market returns have hurt them, but severe inflation would be crippling.

So that’s the big risk, and unfortunately right now, with debt at unprecedented levels in U.S. history, we have a problem. We’re borrowing from future generations, and then we’re wanting those future generations to fund our retirements through Social Security and Medicare. The deal is going to change.

It will change. It’ll change because society can’t afford the deal that’s currently on the table.

So, as a consequence of that, looking to protect yourself from inflation, TIPS are a great vehicle. When they have their occasional corrections and become cheap, the opportunity to add to our allocations to commodities, to emerging-markets debt, to REITs. These all represent very, very interesting diversifications away from an over-reliance on mainstream stocks and bonds—neither of which serves us well in a reflationary world. The risk is that the reflation could potentially be pretty severe.

Benz: So it’s hard to argue that any asset classes you just enumerated are particularly cheap now. Correct?

Arnott: Correct.

Benz: So what should you do, if you’re someone sitting there with maybe cash?

Arnott: If you want to be tactical, take a lot of risk off the table. Warren Buffett has been quoted as saying, “Be greedy when others are terrified. Be terrified when others are greedy.”

A year ago, people were terrified. It was a great time to take risk, because it was so frightening to do so. Today, quality spreads on high yield are approaching where they were in 2007. Same with investment grade. The same holds true for emerging-markets bonds. The P/E ratios for stocks are approach-ing where they were two years ago.

This is not a time to get greedy. This is a time to take some of that risk off of the table and say, “Thank you very much for those wonder-ful returns in the last year.”

With so many people thinking the global financial crisis is past, not prologue, the risks are to the downside. We have a tax hike coming at the end of the year.

The likelihood that high-net-worth investors, affluent consumers—will ramp down their spending as early as the fourth quarter in anticipation of those higher taxes, to brace themselves for it. Very real possibility. What would be the consequences? A second dip in the recession. I think that’s better than a 50-50 chance. The markets are priced to say that’s not happening; that’s not going to be the eventuality. And so if the market is saying

“no recession” and if we get a recession, then the markets will be hit. And in so doing, you will have bargains in some of these inflation-protection strategies.

Benz: You had mentioned this morning that you actually thought, possibly within the next six to 12 months, there could actually be a buying opportunity in some of these assets.

Arnott: Yes. Now is not the time to load up on them, but over the course of the next two to three years, investors really owe it to themselves to ramp up their investment in inflation-protection assets that can help them weather an inflationary storm.

Benz: OK. Well, thanks Rob. Not necessarily a sunny outlook, but helpful.

Arnott: There’s always something interesting to invest in. Always. Christine Benz is Morningstar’s director of personal finance.

33 See Investing 501: Rob Arnott on Tactical Asset Allocation, Breakout Sessions 2A, 2B; 1:40–2:30p, Thursday; Room S401.

Arnott: Not the Time to Be GreedyRob Arnott says investors need to lower their return expectations and increase exposure to inflation-protected assets.By Christine Benz

Rob Arnott, Research Affiliates.

Introducing the MIG/Wilshire Series of Global ETF-Based Asset Allocation Solutions

Visit Us at Booth #47 for More Information

MIG INVESTMENT SOLUTIONS™

RISK—BY EQUITY ALLOCATION AGGRESSIVECONSERVATIVE

n STRATEGIC EQUITY TARGET u

MIG/WILSHIRETACTICAL SERIES

For illustrative purposes only and not intended as investment advice.

n Fixed Income n Equity n Alternatives

20% 40% 60% 80% 95%

Conservative Moderate Conservative

Moderate Moderate Growth Growth

RISK—BY EQUITY ALLOCATION AGGRESSIVECONSERVATIVE

n STRATEGIC EQUITY TARGET u

MIG/WILSHIREENHANCEDTACTICAL SERIES

For illustrative purposes only and not intended as investment advice.

n Fixed Income n Equity n Alternatives

Conservative Moderate Conservative

Moderate Moderate Growth Growth

20% 40% 60% 80% 95%

NA

ManagersI N V E S T M E N T G R O U Pwww.managersinvest.com | 800.368.4410 | Offered and managed by Managers Investment Group LLC

Not FDIC Insured

May Lose Value

Not Bank Guaranteed

AD062

The MIG/Wilshire Tactical Series

The MIG/Wilshire Enhanced Tactical Series

n 5 models spread across the return/risk spectrumn Solely uses ETFsn Applies a tactical allocation overlay

n 4 models spread across the return/risk spectrumn ETFs primarily used for core and tactical holdingsn Includes a diversified alternative fund sleeve designed to

reduce portfolio risk

n Allocates to a 130/30 fund on a tactical basis for improved

alpha opportunity

www.pyxismobile.com*Qualified Leads Only. Licensing Fees Apply.

CONTACT US NOW TO

BUILD A MOBILE APP

FOR FREE.*

............................................................................................

The same software that powers

financial mobility can power your

company's mobile strategy.

YOU’D BE MOBILEBY NOW.

IF YOU CALLED US...


Financial advisors add value to client rela-tionships by providing clients with a comprehensive view of their wealth. This view not only includes investment accounts under the advisor’s management, but also clients’ employer-sponsored 401(k) plans, 529 college-savings plans, and permanent insurance policies “held-away” at other financial institutions.

Many advisory firms use account-aggregation tools to reduce the amount of data manually entered into portfolio-accounting software. Account-aggregation tools capture security price, balance, and transaction information for held-away accounts described above that cannot be moved to the advisor’s preferred custodian. The aggregated data is then imported into portfolio-accounting software, which significantly lessens the need to enter data by hand using month-end account statements obtained from clients.

When it comes to reconciliation-ready account aggregation, advisors have two main vendors from which to choose: ByAllAccounts and Advisor Exchange. Some might argue that products from Yodlee and AllData Advisor, a service from CashEdge, should be included among the choices, but in my opinion the data provided by these services is not suitable for reconciliation into popular portfolio accounting software.

Data aggregated by CashEdge and Yodlee is adequate for a daily snapshot of holdings, but most of the data requires modification before it can be imported into programs such as Schwab Performance Technologies Portfolio Center or Morningstar Principia CAMS and used for historical reports.

A Novel Approach

During a hallway conversation at an advisor conference last year, I met Hemant Moré, CEO of San Carlos, Calif.-based Arcons Technol- ogy. Moré told me about one of his company’s passPort products in a discussion about account aggregation. PassPort uses a novel approach to aggregation by leveraging the functionality of Intuit’s Quicken personal finance software.

Quicken Premier (MSRP $89.99) is a desktop personal finance application that includes tools to manage personal investment portfolios.

Quicken users can create accounts to track investment activity in brokerage, IRA, 401(k), and 529 plan accounts in addition to their regular checking, savings, and credit card accounts.

Quicken Premier includes a feature called One Step Update that connects to financial institutions over the Internet to download transaction and price details for configured

investment accounts. With each activation of One Step Update, Quicken collects updated transactions and prompts the user to add them into each investment account’s register. Duplicate transaction entry is generally avoided through a built-in match feature as the system examines transactions for similar date, price, and quantity information.

As of May 2009, Quicken’s One Step Update utility works with more than 6,700 financial institutions. This falls right in the middle of the roughly 10,000 institutions supported by CashEdge and approximately 3,300 institutions supported by ByAllAccounts. It is difficult to identify the specific breakdown of investment institutions versus banking and credit card companies in the total numbers as they are closely guarded by each company.

passPort Conversion

Once transactions are downloaded and accepted into each account register in Quicken, portfolio data is ready for conversion by Arcons’ passPort utility. PassPort currently supports data conversion for Schwab Performance Technologies PortfolioCenter and Axys from Advent Software Inc., two of the most widely used portfolio-accounting programs on the market.

Investment transaction data is first exported from Quicken via .QIF (Quicken Interchange Format) files. Then passPort is used to convert transactions, prices, securities, accounts, or any combination thereof according to settings selected in the program.

PassPort requires the user to configure mappings for account and security names so the data converted from Quicken matches account numbers and security symbols present in the portfolio-accounting program. The mapping process may take considerable time to configure initially, depending on the volume of data being converted, but only minimal ongoing maintenance should be required once the mapping is set up.

With all the requisite settings and mappings applied, passPort converts the data and saves the output in a file that can be imported into PortfolioCenter or Axys. Data is imported into the portfolio-accounting software through the traditional import engines built into the program, just as it is done for data files provided by most investment custodians.

33 Bill Winterberg writes a monthly technology column for MorningstarAdvisor.com.

A New Take on Account AggregationLeverage off-the-shelf software to jump-start aggregation.By Bill Winterberg

Continued on Page 16

33 Get instant access to conference information, apply for CE credits, and take mobile surveys with the MIC2010 mobile app. BlackBerry users can download the app at http://tinyurl.com/MIC2010; iPhone users can search the app store for “Morningstar MIC2010”

Morningstar Aggregation OptionsMorningstar Office also imports from Quicken (.QIF only) much like passPort does; it also supports Microsoft Money. Additionally, Morningstar Office has integration with CashEdge and ByAllAccounts.

ByAllAccounts has entered into an agreement with Morningstar to provide enhanced access to aggregated client account data for users of Morningstar Principia CAMS. The solution will capture account data and feed it into Principia CAMS. Data captured overnight is ready for reconciliation the next morning alongside other account information.

Morningstar Back Office Services provides an outsourcing option for advisors who prefer to offload account setup, daily downloads, and reconciliation. Morningstar Office users can request a quote at http://www.global.morning-star.com/BackOfficeServices. Users of Principia CAMS can call (866) 685-4494 to learn more.


A Chat With Bill McNabb

Continued From Page 7

Security and CustodyIn order to perform the One Step Update in Quicken, login credentials are collected for each financial institution and stored in Quicken’s encrypted Password Vault. Anytime client login credentials are used to gain access to held-away accounts, advisors are appropriately concerned about custody issues concerning those assets.

In brief, if an advisor logs on to a client’s held- away account as if she were the client, and the Website permitted an address change request or third-party payment request, the advisor would be deemed to have custody of the funds held in the account. Under the new SEC Rule IA-2968, which took effect on March 12, 2010, taking custody of client funds

subjects the firm to additional compliance requirements, including a surprise audit by an independent CPA.

Avoiding taking custody of clients’ held- away assets is preferable whenever possible because of the increased compliance costs. Therefore, advisors need to employ account aggregation tools that prevent advisors from knowing or obtaining client login credentials. Advisors should ask clients to fill in their login information directly into Quicken during a client meeting. Alternately, advisors can use virtual meeting software such as GoToMeeting and WebEx to give keyboard controls to a client so she can type in the username and password. Passwords in Quicken’s Password Vault are masked with asterisks so they are not visible and copying and pasting in the password field is prohibited. In addition, the Password Vault is protected with its own separate login password. Users must enter the Vault password each time One Step Update is

executed. This adds an additional layer of security to safeguard the credentials stored in the Password Vault and keep them obstructed from the firm, ultimately avoiding the triggering of custody provisions.

In the End …

Advisor use of account aggregation software creates a win-win in the practice. Advisors are able to minimize the cost of manual data entry to monitor held-away accounts, provide ongoing asset management of the accounts, and collect commensurate fees for doing so. Clients receive a comprehensive view of their wealth from one advisor, simplifying their wealth management.

Bill Winterberg, CFP, is a contributor to MorningstarAdvisor.com and a technology and operations consultant to independent financial advisors.

described Vanguard, inevitably, I’ve got 10 or 20 people lined up saying, “When are you coming to my country?” I mean, the list of countries is huge. As somebody said to me the other day—who doesn’t want a good deal? Everybody’s looking as an investor for transparency, for low cost, for a firm they can trust. So, if we think we can do that some-where, we’re going to take a run at it.

Q: In recent years, other firms have cut their index fund fees below those of Vanguard’s. Why doesn’t Vanguard answer those fee cuts?A: A lot of it has been a fund here or a fund there, and some of it’s been temporary. We’re looking at fees all the time. I’m encouraged that we’re having such an impact on people that there’s finally fee competition. For a long time, it didn’t seem like anybody was paying attention to the fee question, and now there seems to be a lot more emphasis on it. We’ve tended not to respond to one-off situations, but I can assure you, we think very hard strategically about where we want to be, and we want to be a low-cost provider. Whether that means every single product, I doubt it. But for broad-based stuff, you can expect us to keep focusing on how to do a better job there.

Q: Vanguard recently revised its SEC application to issue ETF shares for the actively managed Vanguard Inflation-Protected Securities. Will other active Vanguard funds get ETF shares?A: It’s not that likely on the equity side, and in different bond categories probably also not that likely. The full transparency you’re required to provide is a stumbling block for active managers. Putting forth that amount of transparency to the Street is something most active—especially active equity—managers just aren’t that excited about doing. It’s why the T. Rowe thing is so interesting to watch. On the TIPS side, even though our TIPS fund is technically an actively managed fund, there’s no magic, if you will, in what’s being done there. I mean, there’s a very limited universe of TIPS available, and, I think everybody knows what everybody’s buying, and with no disrespect to what our TIPS portfolio-manage-ment team does, it seemed to us that providing transparency there was going to in no way be detrimental to the shareholder.

Q: Vanguard now has market-neutral and endowmentlike Managed Payout funds and has talked of offering a hedge fund. Do other alternative strategies interest Vanguard?A: Our interest in nontraditional stuff is all around diversification. Can we come up with vehicles that have very low correlation to more traditional asset classes and help

dampen volatility for people without sacrific-ing too much return? We have no illusions about discovering the secret sauce, if you will, to outperform the market by X hundreds of basis points. … We have been doing a ton of work to see whether it’s something we can deliver in a consistent manner, and the jury is very much out at this point.

Q: What scares you?A: The market feels a little frothy. We have an economy that’s still very fragile, and we’re working our way through that. We pay a lot of attention to those factors, and they continue to make us nervous at a macro level. If you want to get a little bit more micro, we talked a lot about regulation and what the impact of that would be. Some could be very positive, by the way. It’s just how that all plays through—you worry about it until you know. I worry a little bit about rising rates. I think the industry must be closing in on $300 billion in inflows into bond funds. Quite a bit of that is money moving out the yield curve, from either bank products or our own money funds. You do worry: Have investors forgotten that when interest rates go up, bond prices go down?

Dan Culloton is an associate director of fund analysis for Morningstar.

A New Take on Account Aggregation

Continued From Page 15

Rating based on Class A, load waived. For each U.S. domicile fund with at least a three-year history, Morningstar calculates a Morningstar Rating™ based on a Morningstar risk-adjusted return measure that accounts for variation in a fund’s monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each 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 fund is derived from a weighted average of the performance figures associated with its three-, five- and ten-year (if applicable) Morningstar Rating metrics. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.Investors should carefully consider a fund’s investment objectives, risks, fees, charges and expenses before investing any money. To obtain this and other fund information, please call 866-667-9231 to request a prospectus, or download a prospectus at www.aberdeen-asset.us. Please read the prospectus carefully before investing any money. “Aberdeen” is a U.S. registered service mark of Aberdeen Asset Management PLC.Aberdeen Funds are distributed by Aberdeen Fund Distributors LLC, Member FINRA and SIPC. 1735 Market Street, 32nd floor, Philadelphia, PA 19103. NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE

Our fund managers’ most useful toolNo. 6: a compass

Aberdeen’s five “target-risk” fund of funds aim to maximize

your clients’ returns, based on their individual risk tolerance.

Each fund’s target risk level acts as a clear compass for your

clients, offering the optimal portfolio mix of broadly-diversified

asset classes and geographies.

Morningstar Overall Rating as of March 31, 2010

Optimal Allocations Fund: Specialty (GODAX)Out of 1785 funds in Large Blend category ★★★★★

Optimal Allocations Fund: Growth (GVAAX)Out of 1785 funds in Large Blend category ★★★★★

Optimal Allocations Fund: Moderate Growth (GMAAX)Out of 1785 funds in Large Blend category ★★★★★

Optimal Allocations Fund: Moderate (GMMAX)Out of 955 funds in Moderate Allocation category ★★★★★

Optimal Allocations Fund: Defensive (GASAX)Out of 533 funds in Conservative Allocation category ★★★★

We think the results speak for themselves. In fact, four of our

five Optimal Allocations Funds are now five-star Morningstar

rated. For more information, please call 800-485-2294 or visit

www.aberdeen-asset.us/optimalfunds

Remember that investing involves risk, including possible loss of

principal. The funds are subject to different levels of risk, based

on allocations among various asset classes and underlying funds.

Aberdeen Optimal Allocations Funds give your clients the right risk direction.


Where to EatRestaurant recommendations from Time Out Chicago. Need more ideas? Go to www.timeoutchicago.com.

Contemporary American

Naha | Average main course: $33 500 N Clark St (312-321-6242)Chef Carrie Nahabedian delivers an upscale experience minus the pomp, courtesy of an elegant room, great service, and a seasonal menu that reads like a who’s who in regional, sustainable foods. Recently, Nahabedian’s been serving an entrée of slow-roasted Mint Creek Farm lamb shoulder over green garlic–studded risotto. Hours : Lunch (Mon–Fri), dinner (Mon–Sat).

NoMI | Average main course: $42800 N Michigan Ave (312-239-4030) Presentation is topnotch in this stunning—if a bit chilly—dining room. The chefs wrap crab so neatly in thin slivers of gorgeous beets that it resembles a maki roll, and cook meats expertly, such as the lamb, given a Moroccan treatment, which was as tender as brioche. End on a high note with pastry chef Frederic Moreau’s fantastic, slightly molecular versions of crème brulée and mille-feuille. Hours: Breakfast (Sat, Sun), lunch (Mon–Fri), dinner.

Sepia | Average main course: $26123 N Jefferson St (312-441-1920)Despite significant staff shifts—Andrew Zimmerman (formerly the chef de cuisine at NoMI) and Joshua Pearson came on as chef and cocktail master, respectively—very little feels out of step at this acclaimed West Looper. This is a classic place serving standouts like pork cheek salad with pickled pumpkin and a flatiron steak with bone marrow beignets.Hours: Lunch (Mon–Fri), dinner.

Italian/Pizza

Coal Fire | Average pizza: $131321 W Grand Ave (312-226-2625) East Coast–style pizza in Chicago? Yep, right down to the namesake coal-fired oven. The pies these guys are turning out are immensely impressive, with slightly charred bubbles here and there and crisp edges that give way to a salty, yeasty chew. We’re fans of the sweet-heat combo on the Fiorentino, a marriage of red peppers and hot salami. Fans of ricotta could skip red pies altogether and go with the white pizza (ricotta dominates, but mozz, pecorino romano, oregano, and fresh basil round out this light option). Hours: Dinner (closed Mon).

Coco Pazzo | Average main course: $17300 W Hubbard St (312-836-0900)Start with some antipasti at this popular mainstay—on your way in, you probably passed by a table stocked with the wonderful chunks of Parmesan, white beans slick with olive oil and herbs, and thin slices of tender prosciutto. The garganelli pasta dish is doused in lamb ragù; housemade gelati are decadent endings. Hours: Lunch (Mon–Fri), dinner.

Spiaggia/Café spiaggia | Average main course: $37980 N Michigan Ave (312-280-2750) Want one of the best fine-dining experiences in town? Splurge here. Executive chef Tony Mantuano steps into spring with bright dishes like risotto with fresh artichokes and dry-aged strip steak with Piemontese white truffle essence, lemon, and celery. As usual, pastas and gelati are made fresh every day. Toss in a two-dozen-choice cheese cave and perfect service, and you’ve got a night that’s worth the hefty tab. Don’t want to shell out as much cash? The next-door sister spot, Café Spiaggia, is your not-as-pricey answer. Hours: Dinner

Steakhouses

Chicago Chop House | Average main course: $3060 W Ontario St (312-787-7100) This century-old brownstone is a quintessential Chicago steakhouse in every sense of the word. Conventioneers and local businessmen with fat expense wallets head upstairs for white-tablecloth service, pricey wines from a 650-bottle list, and 48- or 64-ounce porterhouses fit for a king. We prefer the subterranean piano bar, where every inch of wall is covered with vintage photos of Capone and crew and the high wooden tables are packed with loud storytellers, unapologetic smokers and uncompromis-ing carnivores. Go for the creamed spinach-topped baked clams, the New York strip (ask for it “charred”), and the fatty but tasty lamb chops. Hours: Lunch (Mon–Fri), dinner.

N9NE | Average main course: $30. 440 W Randolph St (312-575-9900)This eight-year-old steakhouse still hasn’t lost its sparkle—mirrored tiles, pro athletes, and a neon-glowing Champagne and caviar bar are as posh as the menu. Lobster dots mashed potatoes, steaks (reputedly cooked at 1,200-degrees Fahrenheit) are prime, and catch-of-the-day dishes are well prepared and over-the-top. Ditto for excessive desserts like the pouf of cotton candy studded with candy and ice cream. And you don’t have to head for the loungey Ghost Bar upstairs to spot celebs; each bathroom stall is fitted with a tiny TV. Hours: Lunch (Mon–Fri), dinner (Mon–Sat)

Chinatown Highlights

Chicago’s bustling Chinatown is a mile due west of the McCormick Place Convention Center. Here are three of our favorites spots; all of them average around $10 for a main course.

Lao Sze Chuan 2172 S Archer Ave, (312-326-5040)This place is the best spot for Szechuan cuisine in town. Our favorites are Chengdu dumplings, crispy Chinese eggplant with ground pork, “chef’s special” dry chili string beans, and “chef’s special” dry chili chicken.

Shui Wah 2162 S Archer Ave, (312-225-8811)This spot serves dim sum every day—check off your order on the provided paper (no rolling carts here) and soon you’ll be stuffed with all the classics, from dumplings to memorable salt-and-pepper squid. Come 3pm, a co-owner and another kitchen crew take over, swapping out the dim-sum menu for excellent dinner offerings.

Spring World

2109-A S China Pl, (312-326-9966)Spring World’s owners are from Yunan, so the food has touches of puckery vinegar and spicy red chilies. Try the hand-shredded chicken with spicy sesame vinaigrette dotted with peanuts, garlic, sesame seeds, and scallion slivers or the crispy whole tilapia topped with tangy garlic-ginger-chili paste.

Spiaggia (photo by Nicole Radja)

The Funds’ investment objectives, risks, charges, expenses, and other information are described in the prospectus which must be read and considered carefully before investing and may be obtained by calling 800 387 6977 or visiting www.artiofunds.com. Mutual fund investing involves risk. Principal loss is possible.

This material is provided for informational purposes only and does not in any sense constitute a solicitation or offer for the purchase or sale of securities. Investments are not deposits or obligations of, nor guaranteed by any banking institution; nor are they insured by the Federal Deposit Insurance Corporation (“FDIC”) or any other government agency, and involve investment risks, including the possible loss of the principal amount invested. Artio Global Management LLC, a registered investment adviser, is the indirect subsidiary of Artio Global Investors Inc., a publicly traded company under the ticker symbol “ART”. Artio Global Funds are distributed by Quasar Distributors, LLC.

International Equity, Global Equity, US Equity, Total Return Bond, High Yield

1.888.80.ARTIO | [email protected]

At Artio Global Management, we approach the market with no precon-ceived notions—and a willingness to challenge the conventional wisdom. We take a flexible, open-minded approach to identifying what we believe are the right global opportunities. Having developed a strategy, we execute it with a disciplined investment philosophy that manages risk while seeking to maximize returns. Unconventional ideas. Disciplined execution. That’s how Artio Global seeks to uncover exceptional performance.

Creative Thinking That Uncovers Opportunities.

Unconventional Ideas. Disciplined Execution.

morningstar investment...

Documents