Dear Morningstar Clients,
This e-mail contains Morningstar Data Release Notes for March 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
*New Expense Data Points
*New Closed-End Data Points, Upcoming Methodology Change
*Fund Category Review
*Index Name Changes
*Morningstar Indexes Yearbook
*Morningstar Direct Launches, includes Hedge Funds
RECAP OF PREVIOUS ANNOUNCEMENTS
*Stewardship Grades for Stocks
*Risk Measures
NEWS FROM MORNINGSTAR
*Industry Shows
*The Power of One - Morningstar Data Across Multiple Universes
*Data Questions
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Morningstar Data Release Notes � March 2005
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*New Expense Data Points
In response to client requests, Morningstar will be adding two additional data points to our database: Annual Operating Expense Ratio and Prospectus Net Expense Ratio. These data points will reflect the current expenses of a fund and are not meant to replace what we consider to be a valuable data point, the annual audited expense ratio. However, many funds have been lowering their expense ratios, and these new data points capture the most current information from a prospectus or 497 filing in advance of an annual audit. This new data will be ready for May month-end data delivered in June, and is available in a Licensed Data feed or on a Profile page. Please contact your account team for more information.
*New Closed-End Data Points, Upcoming Methodology Change
We are pleased to inform you that we have added several new data points to our closed-end database: Shares Outstanding, Preferred Assets, Common Assets, Continuously Offered and Percent Leverage. Percent Leverage allows investors to determine the fund�s exposure to debt or preferred shares, resulting in more informed investment decisions. In addition, effective July 1 we will change our calculation method for closed-end dividend yield. Going forward, closed-end dividend yield will be based on market price instead of NAV (net asset value).
*Fund Category Review
Thank you to all who participated in our quarterly review of new funds with one year of history or less. New category assignments and the resulting Morningstar Rating were available on our websites on March 2. The next review will include all funds, and is scheduled for mid-May.
*Index Name Changes
Several Dow Jones indexes have changed names. Please click here for details.
*Morningstar Indexes Yearbook
Watch your mail in early April for a copy of the Morningstar Indexes Yearbook. This annual Yearbook summarizes Morningstar Index performance for 2004, identifies companies that created or eroded value for investors, and looks at whether actively managing small caps and indexing large caps paid off in 2004. Distinct and style-pure, Morningstar Indexes is a family of 16 indexes that tracks the U.S. market by capitalization and investment style. If you would like another copy of the Yearbook, or have questions about Morningstar Indexes, please contact your account team.
*Morningstar Direct Launches, includes Hedge Funds
On March 2, Morningstar introduced Morningstar Direct, a Web-based global research platform that connects institutional investment professionals throughout the world to our investment data and research. Designed for asset managers, consultants, retirement plan sponsors and insurance companies, Morningstar Direct will replace Morningstar DataLab. Along with open-end mutual funds, separate accounts and variable products data, Morningstar Direct also features our new hedge funds data, along with European and offshore funds, exchange-traded and closed-end funds. Functionality includes peer analysis and performance evaluation, full returns-based style analysis to compliment its holdings-based style analysis, extensive customization options, and charting and reporting functionality. Current Morningstar DataLab clients will be contacted individually, approximately three to six months prior to renewal, to develop transition plans so you can benefit from the new functionality. If you have specific questions about Morningstar Direct, or would like a 15-day risk free trial, please contact your account team or call our product consultants at 1 866 229-0216. Click here to learn more about Morningstar Direct.
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Recap of Previous Announcements
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*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 made some minor changes to the methods we use to calculate standard deviation, Sharpe Ratio, and Modern Portfolio Theory (MPT) statistics. These changes occurred 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 available here: Standard Deviation & Sharpe Ratio and Morningstar MPT Statistics.
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News from Morningstar
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*Morningstar at Industry Shows
Morningstar will attend the MMI Annual Convention in Philadelphia, PA, March 29-30, and the World Series of Exchange Traded Funds in Key Biscayne, FL, March 31-April 1. And, we hope to see you at the IMCA Spring Professional Development Conference in Palm Dessert, CA, April 10-13.
*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(TM) and Morningstar Style Box(TM), as well as key performance, portfolio and operations information. They are NASD-reviewed to facilitate immediate distribution and are 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(TM)�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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