7
Morningstar FundInvestor
July 2
013
Morningstar Analyst Rating
06-06-13
Œ
Morningstar Pillars
Process
Performance
People
Parent
Price
Positive
Positive
Positive
Positive
Positive
Morningstar Analyst Rating
Morningstar evaluates mutual funds based on five key pillars, which
its analysts believe lead to funds that are more likely to outperform
over the long term on a risk-adjusted basis.
Analyst Rating Spectrum
Œ „ ´ˇ ¨
Pillar Spectrum
Positive
§
Negative
¶
Neutral
NAV
24.57
24.11
22.93
21.70
20.37
18.40
21.82
21.81
21.07
21.58
20.91
19.90
Total Return %
3.44
10.06
9.63
10.65
16.02
-9.84
5.61
11.28
3.48
7.57
9.66
4.64
+/-M* MdTgRk
-1.12
-1.98
9.04
-1.68
-5.75
12.35
-3.02
-1.67
-3.56
-3.91
-12.82
11.33
+/-Mstr Md Cn Rk
1.05
0.40
7.03
1.00
0.71
3.22
-2.40
1.56
-1.45
-1.38
-6.33
5.83
Income Return %
1.54
3.39
3.84
4.00
4.93
4.60
4.38
4.42
4.08
4.08
4.44
4.65
Capital Return %
1.90
6.67
5.79
6.65
11.09
-14.44
1.23
6.86
-0.60
3.49
5.22
-0.01
Total Rtn % Rank Cat
18
44
2
40
79
10
34
10
46
20
72
9
Income $
0.37
0.77
0.82
0.80
0.89
0.99
0.94
0.92
0.87
0.84
0.87
0.91
Capital Gains $
0.00
0.34
0.00
0.00
0.00
0.32
0.26
0.67
0.38
0.04
0.00
0.00
Expense Ratio %
.
0.25
0.25
0.28
0.31
0.25
0.25
0.25
0.24
0.26
0.31
0.30
Income Ratio %
.
3.39
3.76
3.99
5.00
4.60
4.21
4.21
3.98
4.06
4.33
4.72
Turnover Rate %
.
33
48
30
53
27
21
19
18
23
28
43
Net Assets $mil
12,178
11,647
10,279
8,323
8,478
6,876
7,941
7,743
7,614
9,268
8,439
7,484
Performance
06-30-13
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
Total
2009
2010
2011
2012
2013
-6.69 9.44 10.15 3.14 16.02
2.79 -1.06
7.20 1.49 10.65
2.68 2.34
-1.68 6.11
9.63
3.66 1.48
3.88 0.72 10.06
3.99 -0.53
. . .
Trailing
Total
+/- M* +/- Mstr
%Rank Growth of
Return% MdTgRk Md Cn Rk
Cat
$10,000
3 Mo
6 Mo
1 Yr
3 Yr Avg
5 Yr Avg
10 Yr Avg
15 Yr Avg
-0.53 0.01
0.41
15 9,947
3.44 -1.12
1.05
18 10,344
8.23 -2.87
1.00
29 10,823
10.74 -0.08
2.33
12 13,580
8.63 2.99
3.32
3 15,127
6.90 -0.59
0.52
8 19,488
6.90
. .
7 27,206
Tax Analysis
Tax-Adj Rtn% %Rank Cat Tax-Cost Rat %Rank Cat
3 Yr (estimated)
5 Yr (estimated)
10 Yr (estimated)
9.57
6
1.05
65
7.33
3
1.20
68
5.52
7
1.30
78
Potential Capital Gain Exposure: 14% of assets
Rating and Risk
Time Load-Adj
Morningstar
Morningstar
Morningstar
Period Return % Rtn vs Cat
Risk vs Cat
Risk-Adj Rating
1 Yr
8.23
3 Yr
10.74
High
-Avg
5 Yr
8.63
High
-Avg
10 Yr
6.90
High
-Avg
Incept
10.09
Other Measures
Standard Index
Best Fit Index
M* MdTgRk Mstr Lft Mod 2010
Alpha
5.7
4.7
Beta
0.43
0.58
R-Squared
68
75
Standard Deviation
4.79
Mean
10.74
Sharpe Ratio
2.14
Morningstar’s Take
by Kevin McDevitt, CFA 06-06-13
There’s only so much Vanguard Wellesley Income can
do to protect its Achilles heel.
This fund held up a bit better than expected during
the latest stress test. Interest rates shot up in May
2013, hitting the fund where its defenses are lowest.
The 10-year Treasury’s yield spiked 52 basis points for
the month to 2.16%. Given that the fund’s 6.4-year
duration is among the longest in the
conservative-allocation category, one might have
expected it to get hit the hardest. But the fund’s 0.9%
loss for the month was slightly better than the category
average’s 1% drop.
But investors shouldn’t take too much comfort in
these results. That’s because as rate spikes go, this
one was mild. The fund’s results during the more
severe yield hike in 2010-11 are more instructive. From
October 2010 through January 2011, the 10-year
Treasury yield rose nearly 1.3 percentage points to
3.65%. The fund lagged its average rival by nearly 2.4
percentage points during that stretch. Then as now, the
fund’s returns were bolstered somewhat by its
overweighting in equities. The fund’s equity weighting
typically stays close to its current 39% versus 33% for
the category average.
Fixed-income manager John Keogh is trying to
reduce the fund’s rate risk, but there’s only so much he
can do. That’s because he keeps duration within a
year of the Barclays U.S. Credit A Index. That index
has a long average duration of 7.1 years. The Barclays
U.S. Aggregate Index, by comparison, has a duration
of just 5.3 years. That longer duration owes to
high-quality companies refinancing debt in recent
years and pushing out their maturities. This, in turn,
has extended the duration of the Barclays U.S. Credit
A Index. As a result, even though the fund’s current
duration is nearly a year shorter than the index, its
duration has lengthened along with the index from 5.2
years in early 2010.
This doesn’t diminish the fund’s appeal as an
excellent core holding, but investors shouldn’t
necessarily expect it to repeat its superb past
performance in all bear markets.
Address:
Po Box 2600
Valley Forge, PA 19482
800-662-7447
Web Address:
Inception:
07-01-70
Advisor:
Wellington Management Company, LLP
Subadvisor:
None
NTF Plans:
Vanguard NTF
Minimum Purchase:
$3000
Add: $100 IRA: $0
Min Auto Inv Plan:
$0
Add:
.
Sales Fees:
No-load
Management Fee:
0.22%
Actual Fees:
Mgt:0.22% Dist:
.
Expense Projections:
3Yr:$80
5Yr:$141 10Yr:$318
Income Distribution:
Quarterly
Data through June 30, 2013
Vanguard Wellesley Income Inv
Ticker
Status Yield Total Assets
Mstar Category
VWINX Open
3.0% $35,058 mil
Conservative Allocation
37% 39% 36% 36% 39% 37% 37% 38% 39%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 06-13
Historical Profile
Return
Risk
Rating
High
Below Avg
Highest
Investment Style
Equity
Stock %
Manager Change
Partial Manager Change
Growth of $10,000
Investment Values of
Fund
Investment Values of
M* MdTgRk
Performance Quartile
(within Category)
History
10.0
12.5
15.0
18.0
20.5
Portfolio Analysis
03-31-13
Total Stocks:64
P/E
YTD % Net
Share change since 12-31-12
Sectors
Ratio Return % Assets
Johnson & Johnson
Hlth care
18.1 25.31 1.89
Chevron Corp
Energy
8.1 11.94 1.73
Merck & Co Inc
Hlth care
20.4 15.80 1.44
Marsh & McLennan Companie Finan Svs
16.2 18.25 1.41
Royal Dutch Shell PLC Cla
Energy
. .
1.27
Pfizer Inc
Hlth care
19.9 12.36 1.20
JPMorgan Chase & Co
Finan Svs
8.4 22.31 1.16
General Electric Co
Industrl
15.1 10.00 1.10
Eaton Corporation PLC
Technology 15.7 23.44 1.06
Date of
Amount
Value % Net
Total Fixed-Income:1434
Maturity
$000
$000 Assets
US Treasury Note 0.25%
616,025 616,315 1.80
US Treasury Bond 2.75%
596,100 553,723 1.62
US Treasury Note 1.5%
06-30-16 341,500 353,507 1.03
US Treasury Note 0.25%
278,000 278,131 0.81
US Treasury Note 0.125%
268,500 268,038 0.78
US Treasury Note 0.75%
120,000 120,376 0.35
General Elec Cap Corp Mtn
01-14-38 85,695 99,375 0.29
Ally Mstr Ownr Tr 2012-5
09-15-19 95,780 96,186 0.28
General Elec Cap Corp Mtn
03-15-32 75,000 95,252 0.28
Equity Style
Fixed-Income Style
Style: Value
Size: Large-Cap
Duration: Extensive
Quality:
Medium
Avg Eff Duration
6.4 Yrs
Avg Eff Maturity
9.4 Yrs
Avg Credit Quality
A
Avg Wtd Coupon
4.18%
figure provided by fund as of 03-31-13
1
1
Value Measures
Rel Category
Price/Earnings
Price/Book
Price/Sales
Price/Cash Flow
Dividend Yield %
13.62
2.17
1.44
8.24
3.45
0.93
1.17
1.04
1.19
1.24
Growth Measures
% Rel Category
Long-Term Erngs
Book Value
Sales
Cash Flow
Historical Erngs
7.24
5.78
1.43
3.46
4.98
0.77
3.11
0.38
1.35
1.89
Market Cap %
Giant 60.3
Large 36.9
Mid 2.8
Small
0.0
Micro
0.0
Avg $mil:
71,171
Composition - Net
(% of Stock)
Cash
1.2
Stocks 39.0
Bonds 58.6
Other
1.2
Foreign 19.4
Sector
Weightings
% of
Stocks
Rel M*
MdTgRk High
3 Year
Low
Cyclical 22.65 0.58
BasicMat 3.26 0.57 4 3
CnsmrCyc 5.31 0.45 8 2
FinanSvs 14.08 0.81 14 9
Real Est 0.00 0.00 0 0
Sensitive 42.48 1.12
CommSrvs 4.27 1.07 5 4
Energy 12.29 1.34 14 12
Industrl 12.78 1.08 17 13
Technlgy 13.14 1.01 13 6
Defensive34.86 1.52
CnsmrDef14.59 1.67 21 15
Hlthcare 14.38 1.41 15 12
Utilities 5.89 1.48 7 5
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2013Morningstar, Inc.All rights reserved. The information herein isnot represented orwarranted to be accurate, correct, complete or
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