Definition Of Terms Print

Alpha

A measure of the difference between a portfolio's actual returns and its expected performance, given its level of risk as measured by beta. A positive Alpha figure indicates the portfolio has performed better than its beta would predict. In contrast, a negative Alpha indicates the portfolio has underperformed, given the expectations established by beta.

Annual Turnover Ratio

A measure of the portfolio manager'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.

Asset Class

A classification of an Exchange Traded Products (ETP) based on its underlying constituent's structure, performance and risk characteristics. Includes Equity, Fixed Income, Currency, Commodity, Multi-Asset and Real Estate .

Beta

A quantitative measure of the volatility of a stock relative to the Standard & Poor's 500 (S&P 500), generally considered representative of the overall securities market. Specifically, Beta is the performance the stock has experienced in the last 36 or 60 months as the S&P 500 moved 1% up or down. A Beta of 1 indicates the stock's price will move with the S&P 500. A Beta of less than 1 means it will be less volatile than the S&P 500. Many utilities stocks have a Beta of less than 1. Generally speaking, the higher the Beta, the riskier the investment.

Beta measures volatility, but it does not predict direction. A stock that does 50 percent worse than the S&P 500 and a stock that does 50 percent better than the S&P 500 will both have a high Beta. Therefore, Beta is best used for finding companies that tend to move with the S&P 500, meaning they have Betas closer to 1.

Beta vs. S&P 500

A quantitative measure of the volatility of a stock relative to the Standard & Poor's 500 (S&P 500), generally considered representative of the overall securities market. Specifically, Beta is the performance the stock has experienced in the last 36 or 60 months as the S&P 500 moved 1% up or down. A Beta of 1 indicates the stock's price will move with the S&P 500. A Beta of less than 1 means it will be less volatile than the S&P 500. Many utilities stocks have a Beta of less than 1. Generally speaking, the higher the Beta, the riskier the investment.

Beta measures volatility, but it does not predict direction. A stock that does 50 percent worse than the S&P 500 and a stock that does 50 percent better than the S&P 500 will both have a high Beta. Therefore, Beta is best used for finding companies that tend to move with the S&P 500, meaning they have Betas closer to 1.

Beta Measurements for Exchange Traded Products (ETPs)

Beta is a measure of a portfolio's sensitivity to market movements. The beta of the market is 1.00 by definition. Morningstar calculates beta by comparing a portfolio's excess return over T-bills to the benchmark's excess return over T-bills, so a beta of 1.10 shows that the portfolio has performed 10% better than its benchmark in up markets and 10% worse in down markets, assuming all other factors remain constant. Conversely, a beta of 0.85 indicates that the portfolio's excess return is expected to perform 15% worse than the benchmark's excess return during up markets and 15% better during down markets.

Cash Flow Per Share

A measure of a firm's financial strength, calculated as:

Cash Flow Per Share = (Operating Cash Flow – Preferred Dividends) / Common Shares Outstanding.

Cash flow per share shows the after-tax earnings plus depreciation, on a per share basis. Many financial analysts place more emphasis on the cash flow per share value than on earnings per share values. While earnings per share value can be easily manipulated to appear more positive than it really is, therefore putting its reliability in question, cash is more difficult to alter, resulting in what some analysts believe is a more accurate value of the strength and sustainability of a particular business model.

Dividends Paid (last 12 months)

Indicates if a dividend was paid in the last 12 months.

Effective Duration (Yrs)

Effective duration is a measure of a security's price sensitivity to changes in interest rates. Effective duration differs from maturity in that it considers a security's interest payments in addition to the amount of time until the security reaches maturity, and also takes into account certain maturity shortening features (e.g., demand features, interest rate resets, and call options) when applicable. Securities with longer effective durations generally tend to be more sensitive to interest rate changes than securities with shorter effective durations. A fund with a longer average effective duration generally can be expected to be more sensitive to interest rate changes than a fund with a shorter average effective duration. Effective Duration is only available for Fidelity Fixed Income ETFs and provided by FMR, LLC.

Estimated Cash

An estimate of the cash component of the ETP.

Fund Structure (ETP Type)

The type of Exchange Traded Product as defined by the funds structure and composition; the choices are ETF, ETN, and HOLDRs. The ETP Type is updated as necessary and reflects what is stated in the prospectus or categorized by Marco Polo XTF.

• Exchange Traded Fund (ETF) — an ETF represents an interest in a portfolio of securities that often seeks to track an underlying benchmark or index (for example, S&P 500 or Dow Jones Industrial Average), or other asset classes. ETFs are listed on an exchange and can be traded intraday at a price set by the market (which may be different than its Net Asset Value).
• Exchange Traded Note (ETN)— An ETN is a senior, unsecured, unsubordinated debt security issued by an underwriting bank. ETNs have a maturity date and are backed only by the credit of the issuer. ETNs are traded on an exchange and are linked to the return of an index or other benchmark.
• HOLDRs— HOLDRs are publicly traded grantor trusts where the underlying basket of securities does not change except to reflect corporate actions. HOLDRs are traded on an exchange.

Fund Type

The type of Exchange Traded Product as defined by the funds structure and composition; the choices are ETF, ETN, and HOLDRs. The ETP Type is updated as necessary and reflects what is stated in the prospectus or categorized by Marco Polo XTF.

• Exchange Traded Fund (ETF) — an ETF represents an interest in a portfolio of securities that often seeks to track an underlying benchmark or index (for example, S&P 500 or Dow Jones Industrial Average), or other asset classes. ETFs are listed on an exchange and can be traded intraday at a price set by the market (which may be different than its Net Asset Value).
• Exchange Traded Note (ETN)— An ETN is a senior, unsecured, unsubordinated debt security issued by an underwriting bank. ETNs have a maturity date and are backed only by the credit of the issuer. ETNs are traded on an exchange and are linked to the return of an index or other benchmark.
• HOLDRs— HOLDRs are publicly traded grantor trusts where the underlying basket of securities does not change except to reflect corporate actions. HOLDRs are traded on an exchange.

Inception Date

The date on which a fund commenced operations.

Issuer / Sponsor

The name of the issuer or sponsor of the ETP.

Last Dividend Rate/Amount

The dollar amount per share of the latest dividend paid.

Management Expense Ratio

The expense ratio of a stock or asset fund is the total percentage of fund assets used for administrative, management, advertising (12b-1), and all other expenses. An expense ratio of 1% per annum means that each year 1% of the fund's total assets will be used to cover expenses.

Management Fee

Money paid by an investment product to its investment manager or advisor for overseeing the investment product's portfolio.

Market Cap % Change from Last Month Outstanding

Percentage change in the market capitalization of the underlying securities from the prior month.

Market Capitalization

The market value of an entire company or fund, calculated by multiplying the number of common shares outstanding by the market price per share. Market Capitalization is a measure of size. For comparison purposes, companies are usually divided into three groups according to Market Capitalization—large cap, mid cap, and small cap. Many of the companies in the Dow Jones Industrial Average and the Standard & Poor's 500 (S&P 500) are large cap. Small cap companies are typically not widely followed by Wall Street analysts. Because they are smaller, small cap companies have the potential to grow faster, but with more risk than larger, more established companies.

Morningstar ^TM Category

This is a proprietary Morningstar data point which is based on a fund's style as measured by its underlying portfolio holdings over the past 3 years and may change at any time. These style calculations do not represent the funds' objectives and do not predict the funds' future styles

Morningstar ^TM Rating

A rating based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a mutual fund's monthly performance, and includes the effects of sales charges, loads, and redemption fees, placing more emphasis on downward variations and rewards consistent performance. Funds must have a three-year history to receive a Morningstar Rating. Morningstar Ratings break down as follows:

• Five Stars
  The top 10% of funds in each category.
• Four Stars
  The next 22.5% funds in each category.
• Three Stars
  The next 35% funds in each category.
• Two Stars
  The next 22.5% in each category.
• One Star
  The bottom 10% in each category.

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.

Overall Morningstar Rating^TM

The Overall Morningstar Rating^TM for a fund is derived from a weighted average of the performance figures associated with its three-, five-, and ten-year performance, if applicable. Morningstar ratings are updated monthly.

Performance Returns

A measure of how much the security has risen or dropped over a specified time period, expressed as a percentage.

Time periods measured include:

• 1-Year
• 3-Year
• 5-Year
• 10-Year
• Since Inception

Use Price Performance to find securities that have outperformed or underperformed the market or their industry.

Potential Capital Gains Exposure

Potential capital gain exposure (PCGE) is an estimate of the percent of a fund's assets that represent gains. PCGE measures how much the fund's assets have appreciated, and it can be an indicator of possible future capital gain distributions.

Morningstar calculates potential capital gain exposure (PCGE) to give investors some idea of the potential tax consequences of their investment in a fund. PCGE measures the gains that have not yet been distributed to shareholders or taxed. It is especially relevant for investors who are considering a new purchase of a fund. If there are a lot of gains embedded in the fund, the investor may potentially receive capital gain distributions for gains that happened before they purchased the fund.

A positive PCGE means that the fund's holdings have generally increased in value. For example, if a fund started with $2,000, gained $500 and lost $100, the fund's PCGE would be 17%, i.e. the net $400 gain divided by the total net assets of $2,400. The fund can either continue to hold the securities that appreciated or it can sell them. When a fund sells a security at a gain, it must distribute substantially all of those gains to shareholders that year. Investors then must pay taxes on those gains. So, a high PCGE can indicate the potential for upcoming capital gain distributions.

A negative PCGE means that the fund has reported losses on its books. For example, if a fund started with $2,000, gained $100 and lost $500, the fund's PCGE would be -25%, i.e. the net $400 loss divided by the total net assets of $1,600. The fund may be able to use those losses to offset future gains, thereby reducing the possibility of a capital gain distribution. Thus, investors should expect funds with negative capital gain exposure to be highly tax-efficient going forward.

Because the fund's asset base serves as the denominator in this calculation, a change in assets from the sale or redemption of shares can greatly influence a fund's potential capital gain exposure. As a fund's asset base grows, the tax impact of previous gains to shareholders is diminished. Conversely, a shrinking asset base amplifies the tax impact of past performance.

Price/Book

A stock's price divided by its book value per share. Price/Book ratio compares the market's valuation of a company to its book value according to its financial statements.

The higher the Price/Book ratio, the higher the premium the market is willing to pay for the company above its assets. A low Price/Book ratio may signal a good investment opportunity, as book value is an accounting number and rarely represents the true value of the company. Book value assumes that most assets are worth less now than when they were purchased, and ignores value created through intellectual property.

Price/Earnings (P/E) Ratio

A comparison of a company's current share price to its earnings per share during a specified time period. The higher the P/E Ratio, the more the market is willing to pay for each dollar of annual earnings. For actual time frame comparisons and projected comparisons, the price is the current price. Companies with negative earnings do not have a P/E Ratio.

Prospectus Primary Benchmark

This is a proprietary Morningstar data point which is based on a fund's style as measured by its underlying portfolio holdings over the past 3 years and may change at any time. These style calculations do not represent the funds' objectives and do not predict the funds' future styles.

R²

Reflects the percentage of a portfolio's movements that can be explained by movements in its benchmark index. An R-squared of 100 indicates that all movements of a fund can be explained by movements in the benchmark index.

Revenue Per Share

A calculation of the revenue for the trailing 12-months (TTM) divided by outstanding shares.

30-Day SEC Yield

A standard yield calculation developed by the Securities and Exchange Commission (SEC) that allows for a fair comparison of funds. It is based on the most recent 30-day period covered by the fund's filings with the SEC. The yield figure reflects the dividends and interest earned during the past 30 days after the deduction of the fund's expenses.

1. Updated Daily

2. Calculated using the industry standard formula for SEC yield. The formula looks at stated dividends only, exclusive of special or extra dividends as well as actual expenses during the period, average shares outstanding and the NAV on the last day of the period. Only publicly disseminated income and expenses are used and therefore in certain cases the calculation will differ from the Fund Issuer due to withholding taxes on international securities and other misc. issues. SEC Yield is calculated by State Street Bank for Fidelity Fixed Income ETFs and by XTF Inc., an independent third party for Fidelity Equity ETFs and non-Fidelity ETFs. For all ETFs, the value is calculated to at least four decimals and then rounded to two decimals.

Shares Outstanding

ETP shares currently held by investors, Also referred to as "issued and outstanding".

Sharpe Ratio

A risk-adjusted measure developed by Nobel Laureate William Sharpe. It is calculated by using standard deviation and excess return to determine reward per unit of risk. The higher the Sharpe Ratio, the better the fund's historical risk-adjusted performance. The Sharpe ratio is calculated for the past 36-month period by dividing a fund's annualized excess returns by the standard deviation of a fund's annualized excess returns. Since this ratio uses standard deviation as its risk measure, it is most appropriately applied when analyzing a fund that is an investor's sole holding. The Sharpe Ratio can be used to compare two funds directly on how much risk a fund had to bear to earn excess return over the risk-free rate.

Standard Deviation

Standard Deviation is the statistical measure of market volatility. If prices trade in a tight narrow trading range then the standard deviation will return a low value indicating volatility is low. Conversely if prices swing wildly up and down then standard deviation returns a high value indicating volatility is high. What it does is measure how widely prices are dispersed from the average or mean price.

Interpretation:

• Standard deviation rises as prices become more volatile. As price action calms, standard deviation heads lower.
• Market tops accompanied by increased volatility over short periods of time, indicate nervous and indecisive traders. Or market tops with decreasing volatility over long time frames, indicate maturing bull markets.
• Market bottoms accompanied by decreased volatility over long periods of time, indicate bored and disinterested traders. Or market bottoms with increasing volatility over relatively short time periods, indicate panic sell off.

Standard Deviation for Exchange Traded Funds

A statistical measurement of dispersion about an average, which, for an Exchange Traded Product (ETP), depicts how widely the returns varied over a certain period of time. Investors use the standard deviation of historical performance to try to predict the range of returns that are most likely for a given product. When an ETP has a high standard deviation, the predicted range of performance is wide, implying greater volatility. Standard deviation is most appropriate for measuring risk if it is for an ETP that is an investor's only holding. The figure can not be combined for more than one product because the standard deviation for a portfolio of multiple products is a function of not only the individual standard deviations, but also of the degree of correlation among the funds' returns. If an ETP's returns follow a normal distribution, then approximately 68 percent of the time they will fall within one standard deviation of the mean return for the fund, and 95 percent of the time within two standard deviations. Morningstar computes standard deviation using the trailing monthly total returns for the appropriate time period. All of the monthly standard deviations are then annualized. Standard Deviation is available for 1, 3 and 5 year periods

Tax Cost Ratio

The Morningstar Tax Cost Ratio measures how much a fund's annualized return is reduced by the taxes investors pay on distributions. Mutual funds regularly distribute stock dividends, bond dividends and capital gains to their shareholders. Investors then must pay taxes on those distributions during the year they were received.

Like an expense ratio, the tax cost ratio is a measure of how one factor can negatively impact performance. Also like an expense ratio, it is usually concentrated in the range of 0-5%. 0% indicates that the fund had no taxable distributions and 5% indicates that the fund was less tax efficient.

For example, if a fund had a 2% tax cost ratio for the three-year time period, it means that on average each year, investors in that fund lost 2% of their assets to taxes. If the fund had a three-year annualized pre-tax return of 10%, an investor in the fund took home about 8% on an after-tax basis. (Because the returns are compounded, the after-tax return is actually 7.8%.)

Volume (30 Day Average)

The number of shares traded per day, averaged over the last 30 days. Please note that there may be differences in the average values after market close between the security screeners and Research pages due to different update timeframes.

Weighted average coupon

The weighted average of the coupon rate of the underlying bonds in the fund. The average coupon of a bond fund is expressed as a percentage. Weighted Average Coupon is updated daily and calculated by XTF to at least four decimals and then rounded to two decimals.

12 Month Yield

Trailing 12 Month Yield (%) is the percentage income the ETP returned over the past 12 months.