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Morningstar Introduces New Investor Return Data to Capture How the Average Investor Fared in a Fund over a Period of Time

CHICAGO, Oct. 5, 2006 – Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today announced it is providing new data for open-end mutual funds and exchange-traded funds to capture how the average investor fared in a fund over a period of time. The new measure, called Morningstar® Investor Return™, estimates the return earned collectively by all the investors in a fund. Investor return, also known as dollar-weighted return, accounts for all cash inflows and outflows from purchases and sales and the growth in fund assets. It complements the more traditional metric of total return, which measures what investors could have earned had they bought and held the fund, reinvesting all dividends, over a period of time.

“Investors know they should hold diversified portfolios, but many chase past performance and end up buying funds too late or selling too soon,” said Don Phillips, managing director of Morningstar. “For example, if most investors bought a fund at a high point and sold in a trough, that fund’s investor return would be lower than its total return. Similarly, a fund’s investor return might be higher than its total return if investors, in aggregate, timed their purchases and sales astutely. In essence, investor return shows how well—or how poorly— investors in a fund have fared.”

Investor return is an internal rate of return calculation that places greater emphasis on periods in which fund assets are larger. Morningstar now calculates one-, three-, five-, and 10-year trailing and annual investor returns for open-end mutual funds and exchange-traded funds based in the United States.

“Fund companies don’t have complete control over how investors use their funds, but that doesn’t mean they can’t exercise any control,” Phillips said. “Fund companies can influence investor behavior through fund design, the timing of launches and closings, marketing efforts, and shareholder communications. With access to investor returns, investors and advisors can determine which fund companies are successfully deploying strategies that result in a better outcome for investors.” 

Morningstar is rolling out investor return data in the following products this month:  Morningstar DirectSM, Morningstar® Advisor Workstation, Morningstar® Principia®, and Morningstar® Licensed Data. Individual investors will be able to access the new data in early November on Morningstar.com, the company’s investment Web site.  

For more information about Morningstar® Investor Return™, please see the accompanying fact sheet at: http://global.morningstar.com/investorreturn

About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment research. The company offers an extensive line of Internet, software, and print-based products and services for individuals, financial advisors, and institutions around the world. Morningstar provides data on more than 145,000 investment offerings, including stocks, mutual funds, and similar vehicles.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This press release contains forward-looking statements. These statements relate to future events or to future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements.  In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other comparable terminology.  You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control and that could materially affect actual results, levels of activity, performance, or achievements.
 
Other factors that could materially affect actual results, levels of activity, performance or achievements can be found in Morningstar’s filings with the Securities and Exchange Commission, including Morningstar’s Prospectus filed on May 4, 2005. If any of these risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary significantly from what we projected.  Any forward-looking statement you read in this press release reflects our current views with respect to future events and is subject to these and other risks, uncertainties, and assumptions relating to our operations, results of operations, growth strategy, and liquidity.  We assume no obligation to publicly update or revise these forward-looking statements for any reason, whether as a result of new information, future events, or otherwise.

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©2006 Morningstar, Inc.  All rights reserved.

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