We’re also monitoring the EU Transparency Directive. One of the key features of this piece of legislation concerns the disclosure of significant holdings of and by companies. This Directive has con- tributed to our expansion of the global ownership database, with additional coverage in Germany, France, and the United Kingdom. We are reviewing the newly published EU Commission report on the Directive and potential revisions to the major shareholder obligations. 

The United Kingdom’s Retail Distribution Review (RDR), which emphasizes increased regulation of advisory fees, higher profes- sional standards for financial advisors, and an emphasis on “whole of market” investment solutions, is scheduled to come into effect at the end of 2012. Because advisors will be obligated to give clients a choice of all investment vehicles (including funds, ETFs, and other products) and demonstrate that they consider different investment options without bias, we believe it may increase the business need for investment information on multiple investment types, which we offer through products such as Morningstar Direct and Morningstar Advisor Workstation. 

In the United States, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law in July 2010. The Act creates a number of new regulatory, supervisory, and advi- sory bodies and touches on the regulation of virtually every aspect of U.S. financial markets and activities. The Act also left numerous matters to be addressed through rulemaking and other regulatory action, giving the regulators significant discretion in many areas. As a result, the final shape and effect of the legislation are continu- ing to emerge. 

Aside from corporate governance and disclosure requirements that apply to all public companies generally, we believe the portion of the Act that is the most relevant to Morningstar is subtitle C of Title IX, which contains changes to the regulatory framework for credit rating agencies. 

This section subjects Nationally Recognized Statistical Rating Organizations (NRSROs), including Realpoint, the subsidiary we acquired in May 2010, to greater oversight by the SEC. Among other things, it requires the SEC to remove the current exemption in Regulation FD for credit rating agencies, allows investors to bring private rights of action against credit rating agencies for failing to conduct a reasonable investigation of the facts or to obtain analy- sis from an independent source, and repeals Rule 436(g) under the Securities Act of 1933, which exempted credit rating agencies from 

being considered “experts” subject to liability for ratings included in registration statements. However, the SEC issued a no-action letter regarding the repeal of Rule 436(g) and extended the letter indefinitely. 

Aside from subtitle C and the general corporate governance and disclosure requirements, we believe the majority of the Dodd-Frank Act and related regulations will not have a direct effect on Morningstar. However, we continue to monitor the potential impact of these regulations on our clients. For example, the SEC recently recommended that regulators adopt rules requiring that broker- dealers be subject to a fiduciary standard, which would impose additional requirements on commission-based advisors. 

Overall, we believe the uncertainty in the financial services sector continued easing throughout 2010. With the exception of continued weakness in consumer discretionary spending, business trends steadily improved during the year. As discussed in more detail in the Consolidated Operating Income section below, during 2010 we continued phasing in some of the benefits and other compensation- related expenses we previously reduced. 

## Performance Summary 

The list below summarizes the key accomplishments and challenges that our management team has highlighted related to our 2010 performance: 

## Accomplishments 

U  We made solid progress building a base for our credit research business and now offer credit ratings and reports on more than 720 corporate credit issuers. We acquired Realpoint, a Nationally Recognized Statistical Rating Organization that specializes in commercial mortgage-backed securities. 

U  We expanded our analyst research and investment consulting work on exchange-traded funds, closed-end funds, alternative investments, 529 plans, and target-date funds—all areas that have seen strong investor interest. 

U  We continued to expand our equity research business, doubling our client base in just one year. 

U  We continued building out our global operations, establishing a presence in Brazil, Chile, Mexico, and Luxembourg. We also expanded our international investment research and consulting businesses by acquiring Aegis, Seeds Group, and OBSR. 

