Dear Morningstar shareholders, 

Our business rebounded nicely in 2010. Following a moderate decline in 2009, our results improved steadily in 2010 as the markets and the economy recovered. For the year, revenue rose 16% to $555 million, while operating income fell 3% to $121 million. Restoring compensation costs we reduced during the downturn held back earnings growth, which I’ll discuss later. 

The broad U.S. stock market rose 17% in 2010, on top of 28% growth in 2009. That gave our clients more positive financial results and enabled them to do more business with us. Higher market levels also helped our Investment Consulting business, as our fees are often tied to assets under management. 

Overall, it was a productive year for Morningstar. We enlarged our audiences, expanded our investment databases, and introduced significant enhancements to our investment research and software platforms. Our reputation for independent investment research remained strong. We were also named to FORTUNE Magazine’s “ 100 Best Companies to Work For” list, which recognizes top employers in the United States. All this widened our economic “moat” (or sustainable competitive advantage) and adds to our optimism for 2011. 

## Financial Review 

Our revenue growth in 2010 reflects 5% from organic growth, plus another 10% from acquisitions. Organic growth improved each quarter, reaching 12% in the fourth quarter. The dollar was slightly weaker against a basket of major currencies for the year, so currency movements added about 1% to our revenue growth. 

The main growth drivers were Morningstar.com advertising sales and Morningstar Direct. Most products made positive contributions, the major exceptions being some legacy products where users are migrating to other Morningstar offerings with newer technology. 

