Dear Morningstar Clients,
This e-mail contains Morningstar Data Release Notes for February 2005. 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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IN THIS ISSUE
*Quarterly Category Review
*Stewardship Grades for Stocks
*Risk Measures
RECAP OF PREVIOUS ANNOUNCEMENTS
*Effective Maturity for Muni Bond Funds
*Frequently Asked Data Questions
*Morningstar Acquires VARDS Unit from Finetre
NEWS FROM MORNINGSTAR
*Morningstar at Industry Shows
*Data Questions
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Morningstar Data Release Notes � January 2005
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*Fund Category Review
The quarterly Morningstar Category review began Feb. 14, with the appeal period running until Monday, Feb. 21. This review includes new funds with one year of history or less, and uses portfolio data through Dec. 31, 2004. (Established funds with more than one year of history are reviewed semi-annually and will be assessed in May 2005.) Please note that as a general rule, category assignments (where applicable) in the open-end and variable annuity data universes will match and change on the same schedule.
Complete details and instructions were sent via e-mail on Feb. 14. If you need information on the Category Review, please contact your account team. You can see new categories and the resulting Morningstar Rating(TM) on our websites on March 2.
NOTE: Please use the category@morningstar.com e-mail box only for category appeals. This mailbox is attended during the category review period and e-mail in this mailbox is only read during this time. Please use your regular communication channels for other business so we can respond to your messages in a timely manner.
*New Stewardship Grade for Stocks
On Feb. 7, Morningstar introduced a new grading system for stocks to help investors identify and compare companies that consistently align their interests with those of shareholders. The Morningstar Stewardship Grade for stocks is designed to help individual investors more easily evaluate a company�s financial transparency, shareholder friendliness, management incentives and ownership, as well as overall corporate stewardship of investors� capital. Grades have been assigned to 500 of the largest and most widely held stocks, and will eventually be assigned to the more than 1,500 stocks that Morningstar analysts cover. The new grades were launched as part of Premium Membership on Morningstar.com, our Web site for individual investors, and in Morningstar StockInvestor(TM). This new measure follows our launch last year of a grading system for mutual funds, introduced as Fiduciary Grades, now also known as Stewardship Grades. We are developing our plans regarding licensing and roll-out of this data into other Morningstar products and will keep you informed.
*Risk Measures
As previously announced, 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. 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://morningstardirect.morningstar.com/clientcomm/morningstar standard deviation & sharpe ratio.pdf>
<http://morningstardirect.morningstar.com/ClientComm/Morningstar MPT Statistics.pdf>
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Recap of Previous Announcements
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*Effective Maturity for Muni Bond Funds
Morningstar surveys fund managers for credit quality, maturity, and duration data on fixed income funds. Beginning with March 31 portfolios, Morningstar will collect and report effective maturity across all fund categories. Previously, we collected and reported effective maturity for all categories except municipal bond funds, where we collected and reported nominal maturity. This change will allow a more direct comparison of fixed income funds across categories.
*Frequently Asked Data Questions
As you know, Morningstar established the Data Questions hotline as an additional point of contact to report issues with Morningstar data, or to ask questions. Answers to some of the more frequently asked questions have been posted on our Web site here: http://www.morningstar.com/Help/Data.html. We will continue to post the more frequently asked questions in this area. The contact information for the Data Questions hotline can be found at the bottom of this newsletter.
*Morningstar Acquires VARDS Unit from Finetre
Morningstar has acquired Finetre�s VARDS unit and we are especially pleased about the complementary nature of the two databases. Morningstar significantly enhanced our VA data in 2003 and integrating the VARDS database further strengthens Morningstar�s coverage of contract, assets and sales flows data. Morningstar will continue to support the VARDS Online product, a web-based research tool that is used by most firms that offer variable annuity products. In addition, the two firms agreed to integrate the VARDS Web-based research products with Finetre�s AnnuityNet platform. The planned integration will provide brokers with access to information and research in real time as they complete transactions.
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News from Morningstar
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*Morningstar at Industry Shows
Morningstar will attend the ASPA 401(k) Sales Summit in San Diego, CA, March 17-19. We will also attend the MMI Annual Convention in Philadelphia, PA, March 29-30. And, we hope to see you at the National Association for Variable Annuities Marketing Conference at the Westin La Paloma in Tucson, Arizona, Feb. 27 through March 2.
*The Power of One � Data Across 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.
Investment Profiles are one-page reports that utilize innovative methodologies and the industry's most comprehensive databases to present objective information in a clear format. Investment Profiles include the Morningstar Rating� and Morningstar Style Box�, as well as key performance, portfolio and operations information. They are NASD-reviewed to facilitate immediate distribution and available for all types of investments, including mutual funds, stocks, variable annuity/life subaccounts, separate accounts, custom funds, and 529 plans. Use them individually, or present them as an Investment Guide��a collection of Investment Profiles, summary information, and educational articles.
Please contact your account team for more information on how a Data License or Investment Profiles 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
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