Media Contact:

Alexa Auerbach, 312-696-6481 or alexa.auerbach@morningstar.com

FOR IMMEDIATE RELEASE

Morningstar Reports Hedge Fund Performance for Fourth Quarter and Year-End 2009, Asset
Flows Through November

CHICAGO, Jan. 22, 2010—Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent
investment research, today reported preliminary hedge fund performance for the fourth quarter and year-
end 2009 and asset flows through November. Although December proved relatively uneventful for hedge
funds, 2009 turned out to be the best year since 2003. The Morningstar 1000 Hedge Fund Index gained
only 0.1% in December, but ended the year up 19.5%, missing 2003's 20.3% rise by a small margin.
Similarly, the currency-hedged Morningstar MSCI Hedge Fund Index rose just 0.2% in December, but
finished the year up 14.1%. The second and third quarters of 2009 generated the most profit for hedge
funds, as the global recovery in stocks and bonds waned toward year end. The Morningstar 1000 Hedge
Fund Index and the Morningstar MSCI Hedge Fund Index rose 2.1% and 1.9%, respectively, in the fourth
quarter, while the MSCI World Stock Index gained 4.1% and the BarCap Global Aggregate Bond Index
declined 0.9% over the same period.

"2009 was a windfall year for hedge funds,” said Nadia Papagiannis, alternative investment strategist at
Morningstar. "The hedge funds that survived 2008's industry purge, or those that launched in the
aftermath, picked up assets at rock-bottom prices and rode the recovery to near record profits, particularly
in U.S. equity and debt markets."

The least successful strategies of 2008 became the most profitable in 2009. The Morningstar Emerging
Market Equity Hedge Fund Index took the largest hit in 2008, declining 45.7%, but rose 50.4% in 2009. The
currency-hedged Morningstar MSCI Emerging Markets Hedge Fund Index increased 1.7% in December,
and 37.1% for the year. The Morningstar U.S. Small Cap Equity Hedge Fund Index finished as the second-
worse performing strategy in 2008, dropping 32.8%, but the third best in 2009, rising 36.4%. These
hedged-equity strategies suffered from poor liquidity in 2008, but regained strength as liquidity returned to
the markets in 2009. However, it's notable that the average emerging market or small-cap equity hedge
fund has not yet recovered from 2008's losses.

Convertible arbitrage was among 2008's worst-performing strategies, but it was 2009's second-best
strategy. The Morningstar Convertible Arbitrage Hedge Fund Index rose 2.1% in December, and more than
37% in 2009, as many convertible-arbitrage hedge funds were wiped out in 2008, leaving opportunity for
those that remained in the market. Merger-arbitrage strategies saw a similar fallout in 2008, as broken
merger deals and investor redemptions caused the liquidation of many of these hedge funds. In 2009,
however, merger activity picked up slowly, and reduced competition in merger-arbitrage trades allowed for
outsized profits. The Morningstar Corporate Actions Hedge Fund Index, which includes merger arbitrage
hedge funds, rose 0.3% in December and 30.0% for the year.

Some hedge fund strategies, though, experienced unimpressive returns in 2009. The Morningstar Short
Equity Hedge Fund Index and the Morningstar Global Trend Hedge Fund Index each fell 3.1% in December,
ending the year down 1.4% and 1.5%, respectively. Substantial rebounds in the global equity markets hurt
those hedge funds that take bets on declining stocks. Global Trend hedge funds, which profit from
momentum or price trends in currencies, interest rates, stocks, and commodities, were challenged when
price trends reversed in many of these markets throughout the year. Ironically, these same strategies were
the only two that protected wealth in 2008.

Although outflows from hedge funds in Morningstar's database netted $53.4 billion for the year through
November, positive inflows started in June as redemption gates lifted and market conditions improved.
Most recently, hedge funds enjoyed $4.7 billion of inflows in November 2009, led by Europe Equity, U.S.
Equity, Multi-Strategy, and Global Non-Trend hedge funds, which bet on macro-economic themes.

Other notable trends for the year include the outperformance of small hedge funds over large and single-
manager hedge funds over funds of hedge funds. The Morningstar MSCI Composite Small Fund Hedge
Fund Index jumped 21.5% in 2009, while the Morningstar MSCI Composite Core Fund Hedge Fund Index
increased only 16.5%. Funds with smaller assets under management can more easily take advantage of
riskier, smaller, and less-liquid investment opportunities. The Morningstar Hedge Fund of Fund Index
underperformed single-manager multi-strategy hedge funds (as measured by the Morningstar Multi-
Strategy Hedge Fund Index) in 2009 by a wide margin of more than nine percentage points. Hedge funds of
funds came under fierce criticism after poor performance and scandal in 2008, and 2009's results didn't
help to bolster their market share.

December returns and November asset flows for the Morningstar Hedge Fund Indexes are based on funds
that reported as of Jan. 20, 2010. Returns for the Morningstar MSCI Hedge Fund Indexes are based on
funds that reported December performance as of Jan. 15, 2010. Hedge fund investors, managers,
consultants, and advisors can access additional information through the Morningstar® Alternative
Investment CenterSM, formerly Morningstar® AltvestSM, the company’s the research platform designed
specifically for hedge funds. Visit http://alternativeinvestments.morningstar.com for more information.

Morningstar has approximately 8,000 hedge funds and funds of hedge funds in its database. The
Morningstar 1000 Hedge Fund Index, a global, broadly representative benchmark for hedge fund
performance, has return history from January 2003. The index comprises the top 90% of eligible assets in
Morningstar’s hedge fund database. For the purposes of the index, Morningstar counts funds with shared
portfolios as a single hedge fund; funds of hedge funds are excluded from consideration. The index is
updated daily for the previous month-end, rebalanced monthly, and reconstituted semi-annually. In
addition, Morningstar has 17 category indexes and four broad category indexes based on Morningstar’s
strategy-specific classification system for hedge funds. Morningstar’s hedge fund indexes are not
investable.

In addition to calculating the Morningstar Hedge Fund Indexes, Morningstar also calculates hedge fund
indexes by applying the MSCI Hedge Fund Index Methodology and Hedge Fund Classification Standard to
Morningstar’s hedge fund database. These indexes demonstrate the performance of hedge funds to
investors who have hedged their currency exposure back into U.S. dollars. The MSCI Hedge Fund Index
Methodology classifies hedge funds by investment process, geography, and asset class.

This release is not intended to be an offer or solicitation for the sale of hedge funds. The information is not
warranted to be accurate, complete, or timely. When considering hedge funds, investors should consider
various risks, including the fact that some products engage in leveraging and other speculative investment
practices that may increase the risk of investment loss, can be illiquid, are not required to provide periodic
pricing or valuation information to investors, may involve complex tax structures and delays in distributing
important tax information, are not subject to the same regulatory requirements as mutual funds, often
charge high fees, and in many cases the underlying investments are not transparent and are known only to
the investment manager. The high degree of leverage that is often obtainable in trading can lead to large
losses as well as gains. Neither Morningstar nor its content providers are responsible for any damages or
losses arising from any use of this information. Past performance is no guarantee of future results.

About Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe,
Australia, and Asia. The company offers an extensive line of Internet, software, and print-based products
and services for individuals, financial advisors, and institutions. Morningstar provides data on more than
325,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time
global market data on more than 4 million equities, indexes, futures, options, commodities, and precious
metals, in addition to foreign exchange and Treasury markets. The company has operations in 20 countries
and minority ownership positions in companies based in two other countries.
Morningstar Hedge Fund Index Performance Dec. 2009 Q4 2009 Full Year 2009

Morningstar 1000 HF USD 0.09 2.09 19.47

Morningstar Hedge Fund of Funds -0.65 1.29 13.06

Morningstar Hedge Fund Category Indexes

Morningstar Convtbl Arbitrage HF USD 2.11 3.89 37.26
Morningstar Corporate Actions HF USD 0.29 2.80 29.97
Morningstar Debt Arbitrage HF USD 1.75 5.39 26.73
Morningstar Distressed Sec HF USD 4.57 7.64 23.99
Morningstar Dvlp Asia Equity HF USD 1.40 0.34 18.40
Morningstar EM Equity HF USD 1.91 6.55 50.44
Morningstar Equity Arbitrage HF USD -0.16 0.88 6.93
Morningstar Europe Equity HF USD -0.49 -0.31 16.97
Morningstar Global Debt HF USD 0.73 3.29 21.96
Morningstar Global Equity HF USD 1.18 2.55 21.67
Morningstar Global Non Trend HF PUSD -1.45 1.30 7.49
Morningstar Global Trend HF USD -3.12 -0.85 -1.48
Morningstar Multi-Strategy HF USD 0.66 2.60 22.50
Morningstar Short Equity HF PUSD -3.11 -3.36 -1.41
Morningstar US Equity HF USD 2.28 3.71 28.17
Morningstar US Small Cap Eqty HF USD 3.80 4.25 36.36

Morningstar Hedge Fund Indexes with MSCI

Morningstar MSCI Composite AW 0.23 1.89 14.10
Morningstar MSCI Composite EW 1.10 2.66 19.69
Morningstar MSCI Composite Core Funds 0.89 2.29 16.49
Morningstar MSCI Composite Small Fund 1.21 2.81 21.52
Morningstar MSCI Developed Markets 1.51 2.72 18.86
Morningstar MSCI Directional Trading -1.07 1.18 8.00
Morningstar MSCI Emerging Markets 1.68 4.24 37.13
Morningstar MSCI Europe 1.59 0.80 13.98
Morningstar MSCI Global Markets -0.04 2.07 14.22
Morningstar MSCI Japan 1.24 -2.66 7.36
Morningstar MSCI Multi-Process Group 1.08 3.29 26.74
Morningstar MSCI North America 2.41 3.89 25.72
Morningstar MSCI Relative Value 1.83 2.84 18.28
Morningstar MSCI Security Selection 2.36 3.37 26.67
Morningstar MSCI Specialist Credit 3.12 5.08 21.78

Market Indexes
S&P 500 TR 1.93 6.04 26.46
Russell 2000 TR USD 8.05 3.87 27.17
MSCI Europe NR USD 1.51 3.24 35.83
MSCI AC Asia NR USD 2.57 1.80 31.73
MSCI World NR USD 1.80 4.07 29.99
MSCI Emerging Markets NR USD 3.95 8.55 78.51
BarCap US Agg Bond TR USD -1.56 0.20 5.93
BarCap Global Aggregate TR USD -3.76 -0.85 6.93
 Est. Hedge Fund Flows By Morningstar
Category Nov. 2009 Flows YTD Thru Nov.
Convertible Arbitrage $ (80,937,788) $ 168,113,033
Corporate Actions $ 263,074,035 $ (3,474,105,660)
Debt Arbitrage $ (1,176,975) $ (2,899,427,839)
Developed Asia Equity $ 240,441,385 $ (5,354,438,577)
Distressed Securities $ 274,532,013 $ (3,891,441,312)
Emerging Market Equity $ 335,680,176 $ (1,791,606,808)
Equity Arbitrage $ (22,674,410) $ (1,745,299,600)
Europe Equity $ 1,273,266,173 $ 4,214,742,950
Global Debt $ (178,326,278) $ (4,506,349,748)
Global Equity $ 348,466,228 $ (6,671,425,720)
Global Non-Trend $ 743,171,289 $ (2,126,195,137)
Global Trend $ (102,240,277) $ (1,818,784,374)
Multi-strategy $ 929,320,577 $(16,489,087,943)
Short Equity $ (24,162,544) $ (88,022,017)
U.S. Equity $ 676,088,210 $ (6,324,221,518)
U.S. Small Cap Equity $ (23,364,532) $ (613,392,370)
Total $ 4,651,157,282 $(53,410,942,640)

Hedge Fund of Fund Flows

Fund of Funds - Debt $ 24,492,539 $ (69,557,565)
Fund of Funds - Derivatives $ (107,447) $ (130,123,018)
Fund of Funds - Equity $ 65,602,466 $ (2,843,106,074)
Fund of Funds - Event $ 596,110 $ (241,011,179)
Fund of Funds - Multistrategy $ 26,593,477 $ (4,065,619,082)
Fund of Funds - Nondirectional $ (165,337) $ 3,511,354
Total $ 117,011,808 $ (7,345,905,564)

Hedge Fund Flows By Morningstar Rating

5-star $ 1,652,970,479 $ (4,575,281,975)
4-star $ 1,946,296,742 $ (4,923,049,122)
3-star $ 217,966,397 $(16,476,228,651)
2-star $ 9,720,936 $(13,307,214,141)
1-star $ (319,817,037) $ (4,918,110,542)
Not-Rated $ 1,261,031,573 $(16,556,963,773)

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