Dear Morningstar Clients,
In response to your feedback on our Client Survey, you will notice some format changes in this issue of Data Release Notes. You will find a "contents" section at the beginning of the newsletter to help you scan for topics of interest to you. In addition, we will include links to supporting documents instead of including those documents as attachments. We hope these enhancements will make Data Release Notes easier for you to read.
Thank you very much for your suggestions. Your input is always welcome, and helps us to improve our communications, products and services. Please contact any member of your account team. Thank you.
Your Morningstar Team
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IN THIS ISSUE
*Upcoming Fund Category Review
*Data Collection Automation
*529 Peer Group Methodology Change
*Pending Data and Methodology Changes � Bond Sectors and Share Class Consolidation
RECAP OF PREVIOUS ANNOUNCEMENTS
*Change to Portfolio "Top Holdings" Lists *Automation and Data Submission
NEWS FROM MORNINGSTAR
*Rule 482 Data Package
*Morningstar at Industry Shows
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Morningstar(R) Data Release Notes � January 2004
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*Upcoming Fund Category Review
The next quarterly category review will begin on February 13, with the appeal period running from February 16 through February 20. This review will include only funds with one year of history or less. Complete details and instructions will be sent via e-mail on February 13, and new category assignments will be effective with February month-end processing.
*Data Collection Automation
As you may be aware, Morningstar collects a number of data points directly from the N-SAR (Semi-Annual Report of Registered Investment Companies) filings. These data points include advisor, sub-advisor, transfer agent, fund level expenses and fund level expense ratios, among others. We encourage you to submit these data on a timely basis so your information is properly reflected in Morningstar products. Please see a member of your account team if you have any questions.
*529 Peer Group Methodology Changes
Effective April 15, 2004, the asset allocation breakpoints for the five "static" peer groups will change. The "static" peer groups are used to benchmark portfolios whose asset allocation remains constant for the entire term of the investment, in contrast with aged-based portfolios whose asset mix changes over time. Peer groups are used to create portfolio statistics and sector weightings, along with performance comparisons. The new breakpoints will be set as follows:
1. 100% Equity: greater than 97% equities (previous breakpoint was greater than 80% equities) 2. Aggressive: 80-97% equities (previously 60-80% equities) 3. Moderate: 50-80% equities (previously 40-60% equities) 4. Conservative: 3-50% equities (previously 20-40% equities) 5. 100% Bond: less than 3% equities (previously 0-20% equities)
This change better reflects the actual asset allocation within 529 plans, and permits a more even distribution of portfolios within the peer groups. If you have any questions, or would like to learn more about Morningstar�s 529 data, please contact your account team.
*Pending Data and Methodology Changes
As announced previously, Morningstar is committed to ongoing improvement in our processes and our data. Our research department regularly scrutinizes various data, and makes improvements they think will add value for investors. Listed below are several improvements that will take place in the first quarter of 2004.
*Bond Sectors
On February 29, 2004, Morningstar will introduce a new sector breakdown for bond funds. This new layout will offer more detail about the various types of assets held by domestic bond funds. It includes the following sectors:
1 US Treasury
2 TIPS
3 US Agency
4 Mtg Pass-thru
5 Mortgage CMO
6 Mortgage ARM
7 US Corporate
8 Asset-backed
9 Convertible
10 Municipal
11 Inflation-Protected
12 Foreign Corp
13 Foreign Govt
14 Cash
(Please note that we added two additional sectors to the list since it was first announced, and we have changed the order slightly.)
Some Morningstar products will present this data at the super sector level as follows:
US Govt = sectors 1-3
Mortgage = sectors 4-6
Credit = sectors 7-11
Foreign = sectors 12-13
Cash = sector 14
The sector breakdown is expressed as a percentage of the fund's total assets in bonds and cash. It will be provided for all domestic taxable funds (including the following Morningstar Categories: Moderate Allocation, Conservative Allocation, Bank Loan, High Yield, and Multisector, but excluding international, convertible, and municipal bond funds). This new data will replace the current government bond sector breakdown (US Treasury, GNMA, FNMA, FHLMC, CMO, ARM, Other), which was fairly limited in scope.
*Share Class Consolidation
Effective February 29, 2004, we will be consolidating share classes into the 14 categories listed below. We will continue to reflect the registered name of the share class, for example, ABC Mgmt. Co. Aggressive Growth Intsl. Serv. Class II (abbreviations may be necessary), but will group it with other institutional share classes using the codes below. If you need the descriptions for any of the codes listed, please contact your account team.
1 A
2 B
3 C
4 Inst
5 D
6 Adv
7 Inv
8 Retirement
9 S
10 T
11 M
12 N
13 Other
14 "No Load"
Note: To designate the oldest distinct share class in our database, the system looks for the oldest inception date. If a fund has several share classes with that same inception date, the system will use the sequence of the list above to determine the oldest share class. For example, if share classes B, C and Retirement share an inception date, B will be designated "oldest distinct share class."
The new "share class type" data point is available now in DataLab.
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Recap of Previous Announcements
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*Change to Portfolio "Top Holdings" Lists Effective January 31, 2004, the Top 10 and Top 5 holdings lists in Investment Profiles and Licensed Data Feeds will include derivative products that had been suppressed from these lists previously. Complete portfolio holdings lists will not change. This change applies to all abbreviated lists of portfolio holdings. We have seen an increase in the number of funds using derivatives, and their inclusion will more accurately reflect a portfolio�s top holdings. Cash positions will continue to be suppressed from the top holdings lists.
*Automation and Data Submission
To ensure that your investment information is shown properly in Morningstar products, please confirm that your operations teams are using the file templates we have provided for portfolio and performance data. Files not in the proper format will not pass our automated business filters and could result in a delay or omission of data. If you would like an audit of your data submission format, or have any questions, please contact your Morningstar representative.
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News from Morningstar
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*Rule 482 Data License
Morningstar is now offering a data license to support your compliance with recent changes to the SEC�s Rule 482 requiring that month-end performance be available by the seventh business day. This package includes month-end performance data and applicable purchase fees and will be delivered by the fourth business day following each month-end. Please contact your account team for more details.
*Morningstar at Industry Shows
We hope to see you in booth three at the upcoming Defined Contribution/401k Conference, February 2-10, at the J. W. Marriott Grande Lakes, in Orlando, FL. Stop by booth number 211 at the National Association for Variable Annuities Marketing show, February 15-18, at the J. W. Marriott Desert Ridge Resort in Phoenix, AZ. And, look for Morningstar at the American Society of Pension Actuaries 401(k) Sales Summit, February 22-24, at the World Center Marriott in Orlando, Fl.
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