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## The Morningstar Rating 

 ★  ★★ ★★★ ★★★★ ★★★★★ 

We provide Morningstar Ratings on mutual funds, stocks, separate accounts, hedge funds, exchange-traded funds, and closed-end funds, as well as variable annuity/life portfolios and subaccounts. For managed investment products, the Morningstar Rating brings performance and risk together into one evaluation, with the top 10% of rated offerings receiving 5 stars and the bottom 10% receiving 1 star. The Morningstar Rating for stocks is based on the difference between a stock’s current market price and our analyst-generated fair value estimate. It also incorporates our analysts’ assessment of the company’s level of business risk and economic moat, or competitive advantage. Value Blend Growth Large 

We also provide a Morningstar Qualitative Rating for funds based in Europe and Asia, which we assign on a s cale r angin g  fro m  Elite  to Im p aired.  In De c embe r 2009, we launched a Morningstar corporate credit rating, which measures the ability of a firm to satisfy its debt and debt-like obligations. For the corporate credit rating, we issue an overall rating ranging from AAA to D as well as scores for the factors underlying the rating. Through our Realpoint subsidiary, we also offer new issue and surveillance ratings on commercial mortgage- backed securities. Small Mid 

## Growth Strategies 

In keeping with our mission, we are pursuing five key growth strat- egies, which we describe below. We review our growth strategies on a regular basis and refine them to reflect changes in our business. 

## Morningstar’s Growth Strategies 

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1. Enhance our position in each of our key market segments by focusing on our three major Internet-based platforms. 

We believe that individual investors, financial advisors, and insti- tutional clients increasingly want integrated solutions as opposed to using different research tools for different parts of their portfolios. To help meet this need, our strategy is to focus our product offerings on our three major platforms: 

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## The Morningstar Style Box 

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We provide three levels of detail for the Morningstar Style Box: a basic grid il- lustrating the overall style of a stock or fund, a basic Ownership Zone illustrat- ing the area of the Style Box in which most of the fund’s holdings tend to fall, and a detailed Ownership Zone that plots precisely where the fund’s holdings fall within the Style Box. For the hypothetical mutual fund shown here, the first illustration shows that the fund’s overall style emphasizes large-capitalization stocks with a blend of value and growth characteristics. 

The second illustration shows that most of the fund’s investments fall into the large-capitalization range and that the fund puts slightly more emphasis on growth stocks than value-oriented stocks. 

The third illustration shows the complete distribution of the fund’s holdings. Because some individual holdings have extremely large market capitalizations, they land outside the traditional Style Box range. 

U  Morningstar.com for individual investors; 

U  Morningstar Advisor Workstation for financial advisors; and 

U  Morningstar Direct for institutional professionals. 

These products all include integrated research and portfolio tools, allowing investors to use our proprietary information and analysis across multiple security types. With each platform, we believe we can continue expanding our reach with our current audience, as well as extending to reach new market segments. 

With Morningstar.com, we’re continuing to expand the range of content and market updates on the site, including third-party content. We’ve also been focusing on mobile development and social net- working, as well as expanding data and functionality to increase the site’s value to both registered users and Premium members. With Advisor Workstation, we plan to build on our large installed base by expanding our mid- and back-office capabilities, improving the product’s interface and design, and integrating real-time data and other functionality. With Morningstar Direct, we’re pursuing an aggressive development program to provide data and analysis on securities and investments around the world. We’re adding third- party data and content and enhancing our technology to allow the product to function as a purely web-based solution. We also plan to expand into new global markets, enhance our capabilities in 

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