(PUB) Morningstar FundInvestor

April 2 014

Morningstar FundInvestor

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An Explosive 12 Months for Vanguard Capital Value Leaders & Laggards | Flynn Murphy

among the strongest-performing bonds in 2013 and early 2014 . The fund’s 8 . 1% return during the 12 months through March bested 84% of high-yield category peers. Laggards American Funds American Mutual AMRMX A light stake in technology firms and an elevated stake in sluggish energy firms weighed on this fund during the past year. This offering typically holds up better than large-value peers during market de- clines but rarely leads during rallies. The 12 months through March were no exception, as the fund’s 17 . 9% return lagged more than 80% of category peers’. The fund’s leading detractor, FirstEnergy FE , declined by more than 14% during the stretch. Also in the red during the past 12 months were staples such as Coca-Cola KO and Avon Products AVP , which historically have lagged the broader market during prolonged bull markets. Wasatch Small Cap Growth WAAEX This fund’s cautious approach, and a few stock-picking misfires, led to peer-lagging returns. In the midst of a small-growth rally, this offering’s 21 . 3% gain during the trailing 12 months fell to the category’s bottom quintile. During that stretch, manager Jeff Cardon trimmed top-performing holdings as their prices rose—forgoing further potential gains in order to avoid holding stocks with lofty valuations. The fund also missed on some stock picks. Data storage firm Fusion-io FIO and a slug of international equities, including Mumbai-based Yes Bank , tempered returns. Eaton Vance Floating Rate EVBLX This fund’s conservative positioning was a headwind during the 12 months through March. The fund carried a heavy weighting to bank loans rated BB or higher during the latter part of 2013 . Those high-quality issues didn’t keep pace with racier CCC rated fare. The fund’s 3 . 1% gain, a decent absolute result, lagged the bank-loan category average of 4 . 1% and fell to the category’s bottom quintile during the past year. œ

Leaders Vanguard Capital Value VCVLX

Ten Best-Performing Funds

Fund Name

YTD Cat Rank %

Strong stock-picking in the technology and health- care sectors has driven recent results at this fund. The fund’s 34% return during the trailing 12 months through March 2014 outpaced the large-blend category average by nearly 13 percentage points. Semiconductor manufacturers were among the fund’s top contributors: Micron Technology MU and GT Advanced Technologies GTAT both posted triple-digit returns during the period. The fund’s stake in small-cap specialty pharmaceutical company TherapeuticsMD TXMD also boosted returns as the stock rose more than 250% during the period. T. Rowe Price New Horizons PRNHX Tech and health-care names powered small-cap funds, too. T. Rowe Price New Horizons benefited from strong returns during the past year from tech holdings such as Netflix NFLX and biotech firms such as Regeneron Pharmaceuticals REGN , which markets therapies to combat eye disease, inflammation, and cancer. The fund’s international picks also fared well, led by Chinese Internet television company Youku Tudou YOKU , which gained 66% in 2013 before suffer- ing a loss when China-region equities broadly strug- gled in 2014 ’s first quarter. In the 12 months through March, this fund’s 33 . 7% return outpaced 91% of peers. (The fund, which is the largest actively man- aged small-growth offering at roughly $ 17 billion in assets, closed its doors to new investors at the end of 2013 .) Janus High-Yield JAHYX This fund’s move to shun interest-rate risk in favor of taking on additional credit risk paid off during the past year. The fund holds a larger slug of debt rated B or lower—including a sizable stake in CCC rated fare—compared with its typical high-yield category peer. That stake fueled results as CCC issues were

ClearBridge Aggressive Gr

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FPA Capital

FPA Perennial 1 Fairholme Focused Income 1 First Eagle Overseas 1 Janus Contrarian 1 Loomis Sayles Investment 1 Oakmark Select 1 Vanguard Capital Value 1 Virtus Foreign Opportunity 1

Ten Worst-Performing Funds

Fund Name

YTD Cat Rank %

Conestoga Small Cap

100

CGM Focus

99

Weitz Hickory 99 ASTON/Montag & Caldwell 98 CGM Realty 98 Eaton Vance Floating Rate 98 Ariel Investor 97 Dynamic US Growth 97 Thornburg International 97 Franklin Balance Sheet 96