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1 Strategic Insights, 12/31/12
2 J.P. Morgan Asset Management, 12/31/12
3 Dalbar, 2012
4 Barron's, February 11, 2013

HOW FUND FAMILIES ARE RANKED BY BARRON'S:

To qualify for the Barron's/Lipper fund survey, a group must have at least three funds in Lipper's general U.S.-stock category, as well as one in world equity, which combines global and international funds. At least one mixed-asset (or balanced) fund, which holds stocks and bonds is also required. Fund shops also must have at least two taxable-bond funds and one tax-exempt offering. For the first time this year, the performance of emerging-market funds is included in the world equity category. Each fund's returns are adjusted for 12b-1 fees, which are used for marketing and distribution expenses. The funds usually add these fees back into returns. The aim is to measure the manager's skill. Fund loads, or sales charges, aren't included in the calculation of returns, either. Each fund's return is measured against those of all funds in its Lipper category (such as small value). That leads to a percentile ranking, with 100 the highest and 1 the lowest, which is then weighted by asset size relative to the fund family's other assets in its general classification --world equity, for instance. If a family's biggest funds do well, that boosts its overall ranking. Poor performance in a big fund can have a big effect on the ranking. Finally, the score is multiplied by the weighting of its general classification, as determined by the entire Lipper universe of funds. The category weightings for the one-year results: general equity, 34.9%; world equity, 16.3%; mixed-asset, 17.3%; taxable bonds, 27.2%; and tax-exempt bonds, 4.3%. The category weightings for the five-year results: general equity, 40.12%; world equity, 12.32%; mixed-asset, 17.30%; taxable bonds, 25.56% and tax-exempt bonds, 4.70%. The category weightings for the 10-year results: general equity, 41.89%; world equity, 12.30%; mixed-asset, 14.44%; taxable bonds, 25.99%; and tax-exempt bonds, 5.38%. The scoring: Say a company has a fund in the general U.S. equity category that has $50 million in assets and that it accounts for half of the company's assets in that category. Its ranking is the 75th percentile. The first calculation would be 75 times 0.50, which comes to 37.5. That score is then multiplied by 38.04, general equity's overall weighting in Lipper's universe. So it would be 37.5 times 0.3804, which totals 14.265. Similar calculations are done for each fund in our study. Then, all the numbers are added up for a total score. The fund shop with the highest score wins, both for every category and overall. The same process is repeated for the five- and 10-year rankings based on their weightings.