July 2012 Morningstar DirectSM U.S. Open-end Asset Flows Update

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1 July 2012 Morningstar DirectSM U.S. Open-end Asset Flows Update Data through June 30 U.S. Open-End Funds Investors Stay on Holiday by Kevin McDevitt, CFA, Editorial Director Long-term mutual fund inflows hit a year-to-date low with just $10.8 billion in net new money, down from May's $14.1 billion. Also inside: Extended tables... 4 Money market funds also saw $30.1 billion in outflows after last month's tepid $1.4 billion in inflows. Money market assets ($2.4 trillion) are at their lowest level since reaching $2.1 trillion in August Alternatively, taxable-bond funds saw inflows increase by more than $3 billion over last month to $10.9 billion. Intermediate-term bond flows recovered to $4.8 billion after being flat in May. However, this is still below the $7 billion-$12 billion monthly range that intermediate-term flows have typically hovered about since early U.S.-stock funds remained in familiar territory with $8.5 billion in outflows, with large-cap funds once again at the bleeding edge. International-stock funds received greater interest with $4.8 billion in inflows; diversified emerging-markets funds once again led the way with $2.6 billion in new contributions. Estimated Net Flows $Mil June 2012 YTD One Year Assets $Bil U.S. Stock (8,504) (42,644) (129,375) 3,315 Sector Stock 79 4, International Stock 4,765 25,196 7,481 1,237 Balanced (890) 18,360 6, Taxable Bond 10, , ,361 2,276 Municipal Bond 3,810 28,156 38, Alternative 588 5,459 11, Commodities 47 2,861 5, All Long Term 10, ,109 97,780 8,597 Money Market (30,128) (161,868) (149,493) 2,390 Source: Morningstar Direct Asset Flows. Totals include merged and liquidated funds. Are Allocation Funds Losing Appeal? The balanced asset class, which includes mostly allocation funds, saw nearly $1 billion in outflows in June, its first in What's notable is that the outflows hit some of the group's more prominent offerings, especially in the world-allocation category. BlackRock Global Allocation, one of the largest world-allocation funds with more than $52 billion in assets, had outflows of nearly $500 million, its greatest outflows since October Recall that world-allocation funds had been market darlings in recent years as investors looked to macro-oriented vehicles that could potentially protect them from global threats. But BlackRock Global Allocation wasn't alone in falling from grace. Well-known peers IVA Worldwide and Ivy Asset Strategy also had modest outflows of $232 million and $171 million, respectively. The $232 million was a record outflow for IVA Worldwide, which partially closed to new investors in early On the other hand, new world-allocation entrant Wells Fargo Advantage Absolute Return, which is subadvised by GMO, has already taken in $832 million since its March 1 launch. To learn more about Morningstar Direct, visit us at this link. For weekly updates about the fund industry, check Fund Times on Morningstar.com each Thursday afternoon. Notes: The figures in this report were compiled June 11, 2012, and reflect only the funds that had reported net assets by that date. Calamos is not included. The figures in both the commentary and the extended tables are survivorship-bias free Morningstar, Inc. All rights reserved.

2 The Muni Rebound By Miriam Sjoblom, Associate Director of Fixed-Income Analysis Is anyone out there still guarding their savings against the coming municipal bond apocalypse? That doesn't look likely, judging by the volume of new cash flooding muni funds over the past several months. Once the muni headline scare of late 2010 subsided, investors began dipping their toes back into the water last spring. Later that year and into 2012, they were diving in with abandon, performing jackknifes, cannonballs, and can openers. Since the tide turned following a record $43 billion in outflows from November 2010 through April 2011, municipal-bond funds have taken in about $40 billion. Flow patterns over the past 12 months suggest muni fund investors are getting more and more comfortable taking risk. At first, they favored short and intermediate muni-bond funds while continuing to pull money out of long-term funds; high-yield muni funds saw more tepid demand. Flows into long-term funds turned positive last September, though, and high-yield muni funds have been in vogue so far this year, taking in $6.7 billion through June. This behavior--investors reaching further and further out into the risk spectrum in search of elusive incremental yield and reward- -should please Ben Bernanke. The Federal Reserve's actions since the financial crisis--the zero interest-rate policy, quantitative easing, and operation twist--seem designed to push return-starved investors into riskier assets by keeping yields on risk-free U.S. Treasuries and other high-quality assets repressively low. That trend has played out elsewhere in the bond market, too: High-yield corporate and emerging-markets bond funds have taken in more than $42 billion combined over the past 12 months. Reinforcing this behavior, risk-taking has paid off for muni investors lately. In 2011, for instance, funds that took more interestrate risk generally had the highest returns. Most funds in the muni national long category gained between 9% and 13% last year (the median fund in the category gained 10.7%), far outpacing their income streams as yields plunged; high-yield muni funds garnered similar returns. If you used leverage, all the better: The closed-end muni national long category returned 18%. That blistering pace hasn't showed signs of slowing this year, either. Muni funds have continued to tear up the turf so far in 2012, this time with lower-quality leading the charge. The high-yield muni category median shot up 6.7% in the year's first half alone, while the long-term median followed with a 4.7% gain. Recent muni returns may have defied predictions of a looming muni Armageddon, but can they continue? That looks like a long shot give how far yields have fallen. Top-10 Open-End Fund Families Ranked by June 2012 Estimated Net Flow Excludes money markets and funds of funds Estimated Net Flow $Mil Fund Family June YTD 2012 One Year 1-Year OGR* % AUM $Bil Vanguard 5,849 58,260 72, ,450 PIMCO 4,185 21,668 28, DoubleLine 2,290 12,791 20, T. Rowe Price 1,101 11,861 13, Lord Abbett 978 5,800 7, Legg Mason/Western 768 1,455 (754) TCW 694 2,575 3, Prudential Investments 687 3,927 5, Federated , MFS 590 7,091 9, *OGR = Organic Growth Rate = Flows over the period / beginning net assets Source: Morningstar Direct Asset Flows 2012 Morningstar, Inc. All rights reserved.

3 Open-End Fund Family Highlights Vanguard remained on top in June with nearly $6 billion in inflows, but as with long-term flows overall, its numbers have declined. June's totals were less than half the record $13.6 billion it collected in January. Regardless, Vanguard has dominated long-term inflows over the past five years thanks to its index-heavy lineup, which has become the preferred method of investing for many advisors and individuals. So even though overall industry assets have grown slowly over the past five years, Vanguard has picked up significant market share. While overall long-term assets have grown just 10.5% over the past five years, Vanguard's have grown nearly 40%. As a result, the firm's market share has surged to 16.9% from 13.4% five years ago. Growing market share by roughly a fourth in a slowgrowth environment is particularly impressive. It's hard to imagine, at this point, what it would take to knock Vanguard from its perch. At the other end of the spectrum are the American Funds. That firm has now endured 36 consecutive months of outflows. Its struggles stretch back to the 2008 credit crisis. In the four years since then, investors have pulled a net $222 billion through May 2012, or about 20% of the firm's June 2008 mutual-fund asset base. Fund performance has been inconsistent during that period, too. Over the past five years through June, the average American fund lands in its category's 45th percentile. This middling result compares with a still-sterling 26th percentile average ranking over the trailing 15 years. DoubleLine Total Return Bond led all funds again with $2.1 billion in inflows. It also leads all rivals over the trailing 12 months with $18.1 billion in new money. This accounts for the lion's share of the firm's inflows during that time, as it has taken in $20.8 billion overall Morningstar, Inc. All rights reserved.

4 Morningstar Direct SM Publishing Date: Page 1 of 6 Morningstar Categories Ranked by Current TNA ($Mil) Rank Name Estimated Net Flow ($mil) Total Net Assets ($bil) Total Return 1-Mo YTD 1 Large Blend (985) (7,877) (10,880) (18,415) 1, , Intermediate-Term Bond 4,809 10,216 48,963 72, Large Growth (1,932) (5,001) (12,914) (43,468) Large Value (4,757) (6,916) (9,851) (25,598) Foreign Large Blend 2,221 3,605 3,158 (7,258) Moderate Allocation (1,483) (1,271) (925) (14,949) World Stock (2,139) 5,318 (136) (12,271) World Allocation 342 4,225 9,728 11, High Yield Bond 997 1,630 16,374 25, Short-Term Bond 2,124 8,650 18,901 21, Mid-Cap Growth 611 (298) (2,127) (13,280) Diversified Emerging Mkts 2,628 6,960 15,141 23, Mid-Cap Blend (394) (2,031) (1,349) (6,762) Conservative Allocation 512 3,120 10,290 11, World Bond 138 1,642 4,399 9, Small Blend (382) (2,491) (1,986) (7,386) Multisector Bond 36 2,849 7,983 8, Intermediate Government 984 2,163 3,051 8, (0.02) Small Growth (797) (1,808) (2,677) (7,870) Muni National Interm 811 2,566 7,425 12, (0.16) Foreign Large Growth (225) 391 1, Inflation-Protected Bond 1, ,464 8, (0.40) Mid-Cap Value 65 (130) (262) (3,656) Foreign Large Value 2,165 4,319 5,715 8, Muni National Long 469 1,353 3,029 2, (0.09) Muni National Short 510 1,485 5,788 11, Small Value 66 (250) (599) (2,940) Real Estate ,919 2, High Yield Muni 1,256 3,572 6,708 7, Bank Loan (159) 1,251 1,605 (8,300) Emerging Markets Bond 770 4,526 10,605 16, Nontraditional Bond (6) (685) (2,766) (9,084) Commodities Broad Basket ,861 5, (4.49) 34 Health (270) Short Government (666) (623) (1,088) (741) (0.04) 0.56

5 Morningstar Direct SM Publishing Date: Page 2 of 6 Morningstar Categories Ranked by Current TNA ($Mil) Rank Name Estimated Net Flow ($mil) Total Net Assets ($bil) Total Return 1-Mo YTD 36 Ultrashort Bond 644 1,731 3,143 2, Muni California Long (0.09) Long-Term Bond (114) 319 1,409 1, Muni New York Long (0.02) Muni Single State Long , (0.08) Natural Res (275) (1,148) (1,469) (3,240) (4.48) 42 Global Real Estate 220 1,123 1,745 2, Technology (237) (552) (320) (1,857) Equity Energy (111) (385) 141 (512) (5.79) 45 Equity Precious Metals (13) (197) (426) (1,028) (14.37) 46 Long/Short Equity 366 1,403 2,256 3, Foreign Small/Mid Growth (647) Foreign Small/Mid Blend (273) Utilities , Pacific/Asia ex-japan Stk (82) (363) Market Neutral Multialternative ,290 4, Aggressive Allocation (104) (262) (707) (1,788) Muni Single State Interm (0.19) Europe Stock 140 (148) (571) (1,427) Foreign Small/Mid Value (87) (34) Muni California Intermediate , (0.15) Currency (459) (58) 229 1, Convertibles (111) (449) (795) (1,992) Muni Pennsylvania (0.13) Long Government (1.49) Muni New York Intermediate (0.15) Managed Futures , (2.79) (3.72) 64 Muni New Jersey (0.07) Muni Massachusetts (0.21) Diversified Pacific/Asia China Region (26) (241) (246) (839) Muni Single State Short (0.08) Latin America Stock (86) (333) (352) (1,216) (1.12) 70 Muni Ohio (0.11) 3.82

6 Morningstar Direct SM Publishing Date: Page 3 of 6 Morningstar Categories Ranked by Current TNA ($Mil) Rank Name Estimated Net Flow ($mil) Total Net Assets ($bil) Total Return 1-Mo YTD 71 Financial (79) (213) 38 (207) Muni Minnesota (0.04) Bear Market (442) (6.81) (14.33) 74 Communications (309) Japan Stock (137) (201) (365) Target Date (34) Industrials (6) (19) (59) (349) Consumer Defensive (53) (4) Target Date (40) Target Date Consumer Cyclical (35) Miscellaneous Sector (42) Target Date (18) Retirement Income (1) India Equity (33) (92) (100) (339) Target Date (15) (26) (32) (22) Target Date Target Date Target Date Trading-Inverse Debt (31) (145) (29) (260) (0.83) (7.08) 91 Target Date Target Date Trading-Inverse Commodities (18) (5.33) Trading-Miscellaneous 0 0 (1) (5.90) (15.27) Top 10 (804) 12,579 62,419 9,719 5, , All 10,786 47, ,109 97,780 8, , Top Fund Families Ranked by Current TNA ($Mil) Rank Name Estimated Net Flow ($mil) Assets Under Management ($bil) 1 Vanguard 5,849 21,493 58,260 72,277 1, , American Funds (4,407) (13,136) (29,490) (77,192) Fidelity Investments (806) (2,630) 4,987 (19,739) PIMCO 4,185 12,287 21,668 28, Franklin Templeton Investment Funds (189) 1,554 5,736 5,

7 Morningstar Direct SM Publishing Date: Page 4 of 6 Top Fund Families Ranked by Current TNA ($Mil) Rank Name Estimated Net Flow ($mil) Assets Under Management ($bil) 6 T. Rowe Price 1,101 6,316 11,861 13, JPMorgan 568 5,402 13,780 17, Columbia (330) (6,328) (9,609) (15,311) BlackRock 269 1,847 2,805 4, OppenheimerFunds ,303 (682) Dimensional Fund Advisors 383 3,254 8,430 13, John Hancock 261 (424) 104 (1,622) Dodge & Cox (1,481) (3,066) (4,131) (10,352) Invesco (1,459) MFS 590 4,110 7,091 9, Janus (464) (1,385) (3,378) (7,895) Wells Fargo Advantage 389 1,918 4,446 7, American Century Investments (177) , Hartford Mutual Funds (1,173) (2,855) (5,160) (12,514) Lord Abbett 978 2,627 5,800 7, Principal Funds ,236 4, Legg Mason/Western 768 1,209 1,455 (754) Harbor 221 1,071 3,654 4, ING Retirement Funds (473) (1,021) (1,773) (4,422) Eaton Vance (515) (2,649) (3,546) (9,895) Goldman Sachs (123) (370) (765) (3,725) GMO (516) 296 (109) Federated 674 (95) 306 2, First Eagle 103 1,206 2,987 5, Thornburg ,936 3, Putnam (247) (586) (1,667) (4,885) Dreyfus (425) (381) AllianceBernstein (1,046) Ivy Funds ,737 2, Prudential Investments 687 1,882 3,927 5, DWS Investments (882) (1,566) (2,577) (4,613) MainStay 438 1,148 3,290 7, Nuveen USAA ,546 1, TIAA-CREF Mutual Funds 448 1,398 3,213 7,

8 Morningstar Direct SM Publishing Date: Page 5 of 6 Top Fund Families Ranked by Current TNA ($Mil) Rank Name Estimated Net Flow ($mil) Assets Under Management ($bil) 41 Oakmark Natixis Funds ,841 3, Northern Funds (139) , Schwab Funds (54) Artisan 480 1,039 2,067 1, Russell (110) (220) (192) (586) Pioneer Investments (501) (920) (802) (1,574) Delaware Investments ,635 2, DoubleLine 2,290 5,508 12,791 20, Royce (168) (571) (933) (3,378) Top 10 6,413 27,471 82,302 28,543 4, , Top 50 10,058 42, ,483 79,052 7, , Other 729 5,369 26,098 20,702 1, , All 10,786 48, ,581 99,754 8, , Asset Classes Name Estimated Net Flow ($mil) Assets Under Management ($bil) U.S. Stock (8,504) (26,802) (42,644) (129,375) 3, , Sector Stock , International Stock 4,765 20,256 25,196 7,481 1, , Balanced (890) 5,556 18,360 6, Taxable Bond 10,892 34, , ,361 2, , Municipal Bond 3,810 11,288 28,156 38, Alternative 588 2,150 5,459 11, Commodities ,861 5, All Long Term 10,786 47, ,109 97,780 8, , Morningstar Ratings Name Estimated Net Flow ($mil) Total Net Assets ($bil) QQQQQ 13,597 43,291 99, ,017 1, , QQQQ 9,226 41, , ,217 3, , QQQ (9,645) (36,037) (52,982) (163,452) 2, , QQ (7,722) (24,693) (44,096) (87,154) Q (3,400) (8,612) (15,614) (35,937) Not Rated 8,731 32,348 64, , Total 10,786 47, ,109 97,780 8, ,

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