Dear Morningstar Clients,
We wish all our clients a very happy holiday season.
This e-mail contains Morningstar Data Release Notes for December 2004. 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
**************************************************
IN THIS ISSUE
*Full-Month Returns for Funds' Inception Months
*Stable Value Funds
*Risk Measures
*Price Ratio Methodology Change Postponed
RECAP OF PREVIOUS ANNOUNCEMENTS
*Quarterly Fund Category Review
*Database Update
NEWS FROM MORNINGSTAR
*Morningstar Data License for Multiple Universes
*Data Questions
**************************************************
Morningstar Data Release Notes � December 2004
**************************************************
*Full-Month Returns for Funds' Inception Months
Effective Feb. 28, 2005, Morningstar will no longer calculate a full-month return for a fund's inception month when that fund incepted on the first business day of the month. For example, if a fund started on Monday, Oct. 2, 2000, Morningstar calculated a one-month return on Oct. 31, 2000, a one-year return on Sept. 30, 2001, and a Morningstar Rating on Sept. 30, 2003. After the change, this fund's first full and complete month of performance will be Oct. 31, 2000 to Nov. 30, 2000 and it will be eligible for five-year returns on Oct. 31, 2005. About 25% of share classes will be affected by this change. This change only affects performance statistics calculated through a month-end; it does not affect since-inception returns or returns calculated on a daily basis.
*Stable Value Funds
As previously announced, Morningstar will re-categorize any open-end mutual funds in the Stable Value category between now and December 31, 2004. Fund companies have been changing the investment mandates for these funds in response to increased scrutiny from the SEC about the stable-value structure. While Morningstar will eliminate the category for open-end investments, we will continue to support the category in our custom and separate account databases. Morningstar will use the Short-Term Bond category as a proxy for assigning Morningstar Ratings and percentile ranks to stable value custom funds. (Morningstar rates and ranks custom funds against the most similar open-end category.)
*Risk Measures
Morningstar is planning to make some minor changes to the methods we use to calculate standard deviation, Sharpe Ratio, and Modern Portfolio Theory (MPT) statistics. These changes will occur on Feb. 28, 2005 (not Jan. 31, 2005 as previously announced). We will be using the sample method instead of the population method for standard deviation and covariance. Also, we are changing how we annualize standard deviation, Sharpe Ratio, and alpha.
Please note that this is a methodology change only and will not affect the format or structure of client files.
Methodology papers for these statistics are now available:
http://datalab.morningstar.com/ClientComm/Morningstar_Standard_Deviation_Sharpe_Ratio.pdf
http://datalab.morningstar.com/ClientComm/Morningstar_MPT_Statistics.pdf
*Price Ratio Methodology Change Postponed
Morningstar had planned to make some changes to the methodology for portfolio-level price ratios (P/E, P/B, P/S, P/C and dividend yield) on March 31, 2005. In order to accommodate other scheduled changes and quarter-end projects, we have postponed this project. We will provide a new roll-out date when it is available.
**************************************************
Recap of Previous Announcements
**************************************************
*Quarterly Fund Category Review
Thank you to all who participated in this quarterly review. Results were available on our Websites on Dec. 3.
*Database Update
As of September month-end processing, our open-end database contained more than 17,000 active funds. Our separate accounts database now covers 5,000 separate accounts and more than 1,000 managers. In addition, we are pleased to remind you that our 529 and ETF databases offer 100% coverage of these investment universes. Our database teams are committed to providing complete, high-quality coverage of all the data universes we maintain. Comprehensive coverage in our databases allows us to create the very best products for investors, advisors and institutional clients.
*******************************************************************
News from Morningstar
*******************************************************************
*Morningstar Data License for Multiple Universes
A Morningstar Data License allows you to use Morningstar�s data and proprietary statistics like the Morningstar Rating(TM) and Style Box(TM) to inform and educate your investors. Multiply the power of your message by using consistent data and Morningstar statistics across ETFs, mutual funds, money market funds, stocks, 529 plans, variable annuities and separate accounts � and more. Please contact your account team for information on how a Data License can help you provide innovative solutions to investors.
*Data Questions
Contact your account team or our data quality department:
Phone: 312-696-6600
Fax: 312-696-6019
E-mail: dataquestions@morningstar.com
Mailing address: Data Questions
Morningstar, Inc.
225 West Wacker Drive
Chicago, Illinois 60606
*******************************************************************
(C) 2004, 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 our 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 no longer wish to receive this e-mail, we will quickly remove your name from the distribution list.