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Kathy Panagopouloskathy.panagopoulos@morningstar.com
Morningstar Announces 2003 Fund Manager of the Year Awards

CHICAGO, Jan. 5, 2004 – In a year tainted by scandal, good mutual fund managers showed how important skillful management and dedication to shareholder interests can be. For the past 17 years, Morningstar, Inc., the leading provider of investment research, has recognized outstanding portfolio managers with its Fund Manager of the Year awards. Today, the company announces the 2003 winners in three categories: domestic stock, international stock, and fixed income.

  • Domestic-Stock Fund Manager of the Year:
    Howard Schow, Theo Kolokotrones, and Joel Fried
    Vanguard Primecap (VPMCX) and Vanguard Capital Opportunity (VHCOX)
  • International-Stock Fund Manager of the Year:
    Bill Fries, Thornburg International Value (TGVAX)
  • Fixed-Income Fund Manager of the Year:
    Fidelity’s Municipal Bond Team, Fidelity Spartan Municipal Income (FHIGX)

“2003 will be remembered as a great year for fund performance and a terrible year for fund leadership,” said Russel Kinnel, director of fund research for Morningstar. “While the market rebounded in 2003, these gains were overshadowed by lapses in judgment and fiduciary responsibility by several fund companies.”

He added, “Our annual fund manager of the year award has long recognized quality of management and the importance of putting shareholders first. This year's winners have done an outstanding job for shareholders in a time when it’s more important than ever to invest with a company that can be trusted.”

Domestic-Stock Fund Manager of the Year:
Howard Schow, Theo Kolokotrones, and Joel Fried
Vanguard Primecap and Vanguard Capital Opportunity

Even in the overcrowded large-blend category, Vanguard Primecap stands out. The managers employ a contrarian growth strategy that leads them to own out-of-favor stocks alongside more traditional investments, which has proved to be quite profitable in 2003, three years into a bear market.

The managers’ long tenure speaks to the steadiness and success of the fund: Howard Schow began managing Vanguard Primecap in 1984, Theo Kolokotrones began managing the fund in 1985, and Joel Fried began comanaging it in 1994. The fund’s return for the past 15 years – more than 15 percent on an annualized basis – beat the SandP 500’s annualized return by nearly 3 percentage points. Since the team began managing Vanguard Capital Opportunity in 1998, the fund has grown 20 percent per year, versus 3.6 percent per year for the SandP 500.

“We chose Schow, Kolokotrones, and Fried over a number of strong candidates because they represent everything you’d look for in a manager. They apply a rigorous fundamental approach that takes them on a slightly different path from other managers. This team has a knack for finding great out-of-favor stocks,” Kinnel said.

“Schow, Kolokotrones, and Fried stay with the same approach year in and year out, gaining impressive returns without bending to prevailing trends at various points in time. Most importantly, they’ve made a lot of money for shareholders during a long period of time,” Kinnel added.

International-Stock Fund Manager of the Year:
Bill Fries
Thornburg International Value

International-stock fund managers showed their domestic-stock counterparts a thing or two in 2003, with most foreign-stock categories posting stellar gains. While managing Thornburg International Value, Bill Fries has proved he’s adept at investing in emerging markets and at spotting opportunities among less well-known firms in developed markets.

His concentrated portfolio features dividend-paying blue-chip stocks and higher-risk stocks with attractive growth prospects. Fries also invests heavily in emerging markets, finding opportunities that other managers ignore. Combined with the portfolio’s concentration of nearly 50 stocks, the emerging markets angle makes this fund one of the boldest international stock funds.

“Remarkably, Thornburg International Value fund performed well in every market environment it has faced since it was launched in 1998,” Kinnel said. “In every calendar year, the fund has landed in the top 10 percent of its category. We also like Thornburg’s openness with shareholders. After purchasing a stock, Thornburg shares the transaction on its Web site along with a short summary of the business.”

Fixed-Income Manager of the Year:
Municipal bond fund team, led by Dwight Churchill and Charles Morrison
Fidelity Spartan Municipal Income, led by Christine Thompson

Fidelity’s fixed-income division is led by Dwight Churchill and its bond-fund group is led by Charles Morrison. Christine Thompson leads the municipal portfolio managers.

Although Fidelity has long been associated with outstanding stock-picking, it has quietly transformed itself into one of the best municipal bond fund shops in the industry. Municipal fund portfolio leader Christine Thompson and her team have done a great job across all categories this year – they are cautious about taking on undue risk, yet they have outperformed their peers.

Management doesn’t make interest-rate bets – it follows the Lehman Brothers Municipal Bond Index for the Fidelity Spartan Municipal Income fund and maintains minimal credit risk. The team also uses sophisticated analytics to measure market risk and keeps a close watch on how bonds will respond to different market scenarios given their particular tax status or structure.

The result: low costs and very dependable funds. Of the firm’s 16 Spartan no-load municipal bond funds, 15 land in the top quartile of their categories for 2003. Of the 15 funds with five-year records, all land in the top 10 percent of their categories for the trailing five years.

“Fidelity has done an excellent job of bringing a disciplined, institutional approach to municipal bonds. The municipal bond fund managers keep a tight rein on risk while boosting returns through comprehensive quantitative analysis,” Kinnel said. “Fidelity Spartan Municipal Income is the flagship in a top-performing municipal bond shop.”

Established in 1988, the Morningstar Fund Manager of the Year Award recognizes portfolio managers who demonstrate excellent investment skill and the courage to differ from the consensus. To qualify for the award, managers must have not only a great year, but also must have a record of delivering outstanding long-term performance and of aligning their interests with shareholders'. The Fund Manager of the Year Award winners are chosen based upon Morningstar’s proprietary research and in-depth evaluation by its senior analysts.

For the complete report, go to:

For a list of past and present winners, go to:

About Morningstar, Inc.
Chicago-based Morningstar, Inc. is a global investment research firm, offering an extensive line of print, software, and Internet-based products and services for individuals, financial advisors and institutions. The company is a trusted source for investment information, data, and analysis of stocks, mutual funds, exchange-traded funds, closed-end funds, and variable annuity/life subaccounts.

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