Dear Morningstar Clients,
This e-mail contains Morningstar Data Release Notes for July 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
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Morningstar(R) Data Release Notes - July 2003
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*Investment Profile Pages - Change to Treatment of Manager Tenure
For our Profile clients, effective immediately you will notice that we display the full tenure of the manager. Previously, the manager tenure date matched the inception date of the share class or subaccount covered on the page.
*Morningstar Rating(TM) Methodology
We are pleased to inform you that the enhanced Morningstar Rating(TM) methodology introduced for open-end funds last summer will be applied to closed-end and exchange-traded funds effective with August month-end. The enhanced methodology was applied to our variable annuity/life data earlier this year. As such, all data universes will share a consistent methodology. If you would like more details on the Morningstar Rating methodology, please contact your account team.
*New Foreign Style-Based Categories
As a reminder, effective September 30, Morningstar will introduce five new style-based foreign categories to help investors differentiate between the many 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.
A quarterly category review is scheduled for August. To avoid asking fund families to respond to two separate review and appeal periods within a three-week timeframe, we will run the new foreign category review concurrently with the August category review. As a result, we will be communicating the new foreign category assignments during the week of August 11, instead of the week of July 28 as previously announced.
If you wish to appeal any of your funds� category assignments, please plan to do so during this review. The appeal period will run from August 13 until August 20. Full details will be provided with the category assignment data.
We do not normally provide a �preview� of the Morningstar Rating(TM); however, because the foreign categories are newly defined, we plan to provide a preliminary look at the Morningstar Rating(TM) for only those funds assigned to the new foreign categories, based on August month-end data. This preliminary look will be provided during the second week in September, and funds� new foreign category assignment and resulting Rating will be rolled out September 30.
*Fund Category Review
As you know, Morningstar is committed to continuous improvement in our methodologies, procedures, products and services. For the past year we have reviewed all funds� category assignments each quarter. After careful assessment of this procedure, we have determined that a semi-annual review of category assignments for established funds is preferable. This will help us ensure that funds have experienced a sustained strategy shift before we change their category. However, to properly categorize the many new funds that come to market, we will continue our quarterly review of funds with one year�s history or less.
As a result, the next review in August will include only new funds and the new foreign categories. The entire universe of funds will be reviewed the following quarter, in November. The following is the schedule for the next 12 months:
Review Month/Portfolio Data Analyzed/Universe Included
August review/three years through June/new funds, new foreign categories only
November review/three years through September/all funds including new
February review/three years through December/new funds only
May review/three years through March/all funds including new
August review/three years through June/new funds only
Data from the next category review will be communicated the week of August 11, and the appeal period will run from August 13 until August 20. Fund assignment changes within existing categories will be implemented August 29, and the new foreign category assignments will be implemented September 30.
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Recap of Previous Announcements
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*2003 Tax Cuts
On May 28, 2003, the Jobs and Growth Tax Relief Reconciliation Act of 2003 was signed into law. This law calls for different tax treatments for qualified dividends and new tax rates for income, dividends, and capital gains. We will start to collect qualified dividend information through Morningstar�s new daily performance data collection process (see below). 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.
*Index Name Change
Please note effective immediately, all Salomon indexes have been renamed Citigroup.
*Change to Daily Performance Data Collection Procedures
Last 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.
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News from Morningstar
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*Upcoming Client Conference in San Francisco
Save the date of September 23, and watch this space for more details.
*Morningstar(R) DataLab(R) Update
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 for a product demonstration.
*Variable Annuity/Life Database Enhancements
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.
*Morningstar Indexes Data License Now Available
Morningstar Index data is available at the end of each business day or monthly, and is delivered via FTP download. The Index Data License is comprised of more than 50 unique data elements including index closing values, total returns, risk statistics, sector breakdown and more. In addition, we are offering a Web-based tool, the Morningstar Market Barometer(SM), that provides an intuitive way to understand shifting patterns across the market. Please contact your account team for more details.
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