Morningstar Full Holdings - Transparency in a regulated market

1. Morningstar Full Holdings - Transparency in a regulated market SIX Telekurs Switzerland Events

2. Morningstar, Inc. (NASDAQ: MORN) • Who We Are today: • Geographic and breadth of solutions we provide • Expansion from our US founding to now having researchers, data experts, technology professionals and support teams in over 25 countries. • Known for pioneering and innovative solutions to the investment industry • Today, a leading provider of independent investment research Morningstar Global Offices

3. Why are we here today? • Our partnership with SIX Telekurs • A fast growing relationship • Contact points across Europe

4. Regulation - The Macro Picture • Pre credit crisis • Increased investment freedom for funds • More transparency & choice for investors • Level playing field • Post credit crisis • Financial stability & good governance • All encompassing regulation • Customer protection • Product intervention

5. Regulation Capital markets; Buy-side; Tax Core Fund Regulations Distribution • Short selling & CDS • EMIR/ OTC • MIFID • CRD II • Solvency II • Product Intervention • UCITS (IV & V) • AIFM • Money Market • KIID • MIFID • PRIPS • FATCA • Dodd-Frank

6. Morningstar Full Holdings capability • Using Solvency II within the Insurance sector as the base of the example

7. What is Solvency II ? • Overview - A new Capital Adequacy regime is being put in place for the European insurance industry via an updated set of EU-wide solvency capital requirements (SCR) and risk management standards. • Who? - All EU insurance companies with premium income > €5m • When? - Directive, published in November 2009, takes effect on 1st January 2013

8. Solvency Requirement based on 5 Risk Categories • Non-Life underwiting • Life underwriting • Health underwriting • Market • Credit default • Starts in January 2013 • Must be reported annually & monitored regularly

9. Where does Holdings Data come in? • Market risk • Have to evaluate the risk inherent in their investment portfolio • Concentration risk • Equity risk • Interest rate risk • Foreign exchange rate risk • For investments in funds they have to look-thru to underlying securities • Deconstruct each fund • Re-aggregate all holdings to create composite portfolio • Run different scenarios to assess solvency requirement

10. What is needed to have a full view of what is held in a portfolio • A mechanism to collect holdings from all current and future providers • A way of identifying the holdings and categorize the holdings into the correct buckets • Systems to manage the exceptions, errors, format changes • Analysts to manage this system and the exceptions • Consistency • Example: • 1000 funds • Average #holdings 100 • Quarterly portfolios • Based on our experience: • 1000 funds x 100 holdings x 4/year = 400,000 holdings to identify. • Average defect rate: 5% gives 20,000 holdings to identify • Just spending 1 minute on each equals to 42 days per year on that process alone

11. Morningstar and investment transparency • Morningstar was founded on the principal of bringing transparency to the world of funds • We have collected full underlying holdings since 1986 in the US and since 1998 in Europe • We have built up capabilities to ensure we can maintain and keep filling this database • We strongly believe that the data is comparable between funds and fund types

12. Global Reach, Global Database Morningstar Global Offices Bangkok Hong Kong Seoul Shenzhen Singapore Taipei Tokyo • Data analysts in all local offices • Global shared systems and result measures • Over 85% global portfolio coverage for managed investments Chicago Toronto Amsterdam Copenhagen Frankfurt London Madrid Milan Munich Oslo Paris Stockholm Zurich Mumbai New Delhi Cape Town Auckland Sydney

13. Results • A fully uniform, comparable global database • Unique independent statistics • A total of 4.5m+ historical full holding portfolios stored!

14. Fund level: Results – sample of data available • Equity Style Box Details • Equity Statistics • Bond Statistics • Bond Regional Exposure • Asset Allocation • Market Capital Breakdown • Style box breakdown • Morningstar Sector weightings • Morningstar Global Sector weightings • Morningstar Group Industry weightings • Morningstar Industry weightings • Stock Type Breakdown • Regional Exposure • Country Exposure • Currency Exposure • Special Breakdown • GICS Sector Breakdowns (4 levels) • Bond Sector Breakdown • Coupon Range Breakdown • Maturity Range Breakdown • Credit analysis • CUSTOM BREAKDOWNS Holdings level: • Holding Morningstar Id (SecId) • Holding Type Code • Holding Name • ISIN • CUSIP • Country • Currency • Maturity Date • Coupon • Weighting • Number of Shares • Market Value • Cost Basis • Share Change • Morningstar Sector • Morningstar Global Sector • Morningstar Global Industry • GICS (require additional license)

15. What is the technical solution? • SIX Telekurs Valordata Feed (VDF) • VDFS Interface • Changes are processed on a daily basis and updates are supplied via VDF.

16. Conclusion • With ever increasing regulation, knowledge of a funds composition is essential • Knowing the breakdown of a fund makes it possible to establish the exposure of the client’s total investment regarding a particular company, industry sector, region, rating, or asset category • Data on fund composition creates transparency regarding the key figures of a fund • Offers a significant advantage for investors to identify the investment strategy of a fund, thereby knowing how and where their money is invested • It can be used to ensure compliance with client objectives and investment strategies, or to provide solid underlying information to risk managers