Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia and Asia. They offer an extensive line of products and services for individuals, financial advisors and institutions. Morningstar is highly respected for their independent investment information. Their strength lies in their independent status, expert research and well tested rating and equity scoring models.

The Morningstar Star Rating is derived from a quantitative method in which mutual funds are ranked on the basis of their historical returns (adjusted for risk and costs) over periods of at least three years. These “risk-adjusted returns” are based on the monthly returns of a fund, where downward variations result in a lower score and a consistently good performance is rewarded with a higher score. Another important aspect is costs, making it more difficult for relatively expensive funds to receive a high star rating. The top 10% of funds in each category receive five stars, the next 22.5% receive four stars, the next 35% receive three stars, the next 22.5% receive two stars and the bottom 10% receive one star. Star Ratings are calculated over periods of three, five and ten years.  If possible, Morningstar will also calculate ratings for all time periods in its Overall Morningstar Star Rating.

The Morningstar Medalist Rating is a forward-looking assessment of investment strategies across within funds vehicles, such as funds and managed accounts. The comprehensive system is designed to assess the potential performance and quality of investment strategies within the context of relevant benchmarks and peer group. It takes into account various factors such as historical performance, risk analysis, fund manager expertise, and consistency of investment approach. Open-end mutual funds and ETFs can receive Gold, Silver, Bronze, Neutral or Negative ratings on this scale. A rating of ‘Gold’, ‘Silver’ or ‘Bronze’ is attributed to investment funds that are expected to perform positively going forward. The difference between these ratings is determined by the conviction of the fund analyst with regards to the ability for the fund to outperform its peers. Funds that are not expected to distinguish themselves will receive a ‘Neutral’ rating, while funds that perform below par will be assessed as ‘Negative’.

The Synthetic Risk and Reward Indicator (SRRI) was defined in 2009 by the Committee of European Securities Regulators (CESR) to provide investors with a method of assessing a fund’s risk. The SRRI measures the volatility of the fund. Higher volatility means there is greater uncertainty about the size of the changes in a fund’s value. This means that the price of the fund can change quickly and dramatically in either direction. Lower volatility means that a fund’s value is not expected to fluctuate dramatically, but rather to change in value at a steady pace over a period of time. The table below shows the mapping between the volatility and the SRRI value. The table shows the differences in percentages that the value of a fund may experience over one year (Annualised Volatility). The percentage is linked to the respective SRRI rating. The more limited the variation is, the lower the SRRI Rating of a fund. The higher the variation, the higher the SRRI Rating. SRRI Annualised Volatility 1 0 – 0.49% 2 0.5 – 1.99% 3 2 – 4.99% 4 5 – 9.99% 5 10 – 14.99% 6 15 – 24.99% 7 25% + The SRRI is calculated using the fund returns for the last five years. If a fund is less than five years old, the returns of a comparable benchmark are used for the period before the fund was launched.

Fund Selection Process MeDirect works closely with Morningstar Investment Management Europe (MIME) to define a bespoke fund universe or portfolio of funds to support specific investment goals. The fund selection process is comprised of the following quantitative and qualitative phases: 1. Determining asset allocation Before selecting individual funds Morningstar looks at the composition of the portfolio in terms of stocks and bonds (the so-called asset classes) and examines its geographical and sectorial allocation. This determines the composition of the portfolio. 2. Quantitative Screening Morningstar applies a ranking process that considers the Morningstar Risk Adjusted Return benchmark. Other factors that are taken into consideration are: 3. Qualitative Evaluation The purpose of the qualitative selection methodology is to instil discipline into themanager research process by appraising critical factors that can help determine a fund’s ability to outperform. Funds are evaluated across the five pillars that Morningstar has identified as beinghelpful in predicting the future success of funds: Parent, People, Process, Performance, and Price. 4. Portfolio Construction Morningstar firmly believes that asset allocation is a primary determinant of investment returns within a global fund portfolio. Hence, an important consideration for our final selection is how the fund will complement the remainder of the portfolio or select list.