Dear Morningstar Clients,
This e-mail contains Morningstar Data Release Notes for June 2003. As always, we invite your comments and questions on our communications, products and services. Please contact any member of your account team. Thank you.
Your Morningstar Team
**************************************************
Morningstar(R) Data Release Notes - June 2003
**************************************************
*2003 Tax Cuts
On May 28, 2003, the Jobs and Growth Tax Relief Reconciliation Act of 2003 was signed into law. Morningstar is studying the legislation and accompanying commentary to estimate the effects on our products and methodologies. We will be preparing our programs and databases to accommodate dividends that are eligible for the lower tax. We will also introduce the new lower tax rates for capital gains, dividends and income. We will work with industry groups to determine the best way for mutual funds to transmit the new dividend information to us on a daily and month-end basis. Morningstar will be updating our methodologies and products over the next six months to reflect these new tax rates. The timeline for the new data will be based on the complexity of the programs and the readiness of our data providers, including fund families and custodians. We will provide more information as it becomes available.
*New Foreign Style-Based Categories
Effective September 30, Morningstar will introduce five new style-based foreign categories to help investors differentiate between the multitude of foreign stock funds now available. These five new categories will replace the current Foreign Stock category, across all data universes.
Category Name-Letter Code
Foreign Large Value-FV
Foreign Large Blend-FB
Foreign Large Growth-FG
Foreign Small/Mid Value-FA
Foreign Small/Mid Growth-FR
As with Morningstar�s other categories, these new categories will be assigned based on a dual quantitative and qualitative approach. After the models are run and our fund analysts have reviewed the category assignments, we will share the results individually with fund companies in a process similar to the quarterly category review communication and appeal process. These preliminary category assignments will be provided to fund companies the week of July 28. The following month, we will offer fund companies a preliminary look at the resulting Morningstar Rating(TM), based on these new categories and August data. On September 30, Morningstar will roll out the new style-based foreign categories. Account teams will be in touch with our Licensed Data Feeds clients to discuss implementation details and establish a schedule for test file deliveries. Please contact your account team if you need additional details.
*Index Name Change
Please note effective immediately, all Salomon indexes have been renamed Citigroup.
*Change to Daily Performance Data Collection Procedures
Earlier this month, your operations team received a communication from us explaining enhancements we are making to our daily performance collection process. We have provided a standard file format template, and an FTP (file transfer protocol) site to which the daily performance data files should be copied. This new, standardized format accommodates the new tax law changes, allows for automation of the data collection process, and enables the application of data filters to catch errors. This will result in more accurate and timely data on your products in the Morningstar databases. Please contact any of your Morningstar representatives for additional details, or a copy of the new procedures.
*Morningstar Sectors
In response to client requests, we are pleased to provide you with the attached research report on the Morningstar sector structure.
***********************************************************************
Recap of Previous Announcements
***********************************************************************
*New Methodology - Geometric Average Capitalization
As previously announced, effective June 30 we implemented a change to our methodology for calculating the overall size of a mutual fund portfolio. Previously we used median market capitalization, but found this method was not always representative of the average size of the fund�s holdings. Geometric average capitalization better identifies the fund�s �center of gravity,� and can help an investor differentiate between funds that fall in the same Morningstar Category(TM). Please see the attached paper for more details.
*Change to Secondary Index
Effective March 31, we began using the Merrill Lynch Convertibles Index in place of the CSFB Convertibles Index in order to provide more timely data.
*New Categories
Eleven new categories were implemented in the open-end fund universe effective with May month-end data, and in the variable annuity/life universe with June month-end data.
*Category Review
Thank you to all who participated in the recent open-end category review. We appreciate your input. The next regular quarterly review will be in August.
***********************************************************************
News from Morningstar
***********************************************************************
*Morningstar(R) DataLab(R) Update
Our product development has been guided by feedback from our clients, and over the past few months we have released several significant enhancements that may interest you. In addition to our comprehensive Open-End Mutual Funds data universe, we have just released Separate Accounts and Variable Annuity data modules. Ask your Morningstar representative about the Style Consistency(SM) tool, and learn how you can evaluate style drift using holdings-based analysis. This interactive tool and revealing PDF report are available in the Holdings Metrics(SM) module. A new charting tool allows you to create customized floating bar charts and scatter plot graphs. The charting tool can be applied to any of DataLab�s numerical data points, and improves labeling of key items in the graphs, enhancing understanding of your analysis. Graphs can be captured and imported into Excel, PowerPoint or into PDF reports. The charting tool is available under �tools� in the analyze tab in the base module.
*529 Data Now Available from Morningstar
Please contact your account team for more information on the 529 products Morningstar has for our institutional clients. Select from products such as ready-to-implement selector tools and editorial for your Web site, Licensed Data feeds to populate your databases and fuel competitive analysis, and Investment Profiles(TM) to support investor communications.
*Variable Annuity/Life Database Enhancements
We are pleased to announce that our VA/L database has been significantly enhanced, making it one of the most comprehensive in the industry. Our coverage includes policies, subaccounts and underlying funds to allow institutional investors and financial advisors to better compare and evaluate these products. Completely updated with the new Morningstar categories and enhanced Morningstar Rating(TM) methodology, this data is available through Investment Profile(TM) pages, DataLab(R), and Licensed Data packages. Please contact your account team for more information.
***********************************************************************
(C) 2003, Morningstar, Inc. This e-mail contains privileged and confidential information and is intended only for the use of the person(s) named above. Any dissemination, distribution or duplication of this communication without prior written consent from Morningstar is strictly prohibited. You are receiving this e-mail because you are a Morningstar Data client, or because you asked that your name be added to the distribution list. If you wish to remove yourself from the institutional client communication list, please hit reply with �remove� in the subject line. If you would like to opt-in to this e-mail list, please hit reply and include your full name, title, company name and address. We will be happy to add you to the list. The newsletter is free, and we never release e-mail addresses to third parties. If you change your mind, we will quickly remove your name from the distribution list.