## Item 1. Business 

Morningstar is a leading provider of independent investment research to investors around the world. Since our founding in 1984, our mission has been to create great products that help investors reach their financial goals. We offer an extensive line of data, soft- ware, and research products for individual investors, financial advi- sors, and institutional clients through our Investment Information segment. We also provide asset management services for advisors, institutions, and retirement plan participants through our Investment Management segment. In addition to our U.S.-based products and services, we offer local versions of our products designed for inves- tors in Asia, Australia, Canada, Europe, and South Africa. Morningstar serves approximately 7.4 million individual investors, 270,000 finan- cial advisors, and 4,300 institutional clients. We have operations in 26 countries. 

We maintain a series of comprehensive databases on many types of investments, focusing on investment vehicles that are widely used by investors globally. After building these databases, we add value and insight to the data by applying our core skills of research, technology, and design. As of December 31, 2010, we provided extensive data on approximately 380,000 investments, including: 

U  21,900 mutual fund share classes in the United States; 

U  105,200 mutual funds and similar vehicles in international markets; 

U  4,900 exchange-traded funds (ETFs); 

U  2,600 closed-end funds; 

U  29,500 stocks; 

U  11,300 hedge funds; 

U  8,200 separate accounts and collective investment trusts; 

U  118,900 variable annuity/life subaccounts and policies; 

U  51,600 insurance, pension, and life funds; 

U  12,800 unit investment trusts; 

U  4,400 state-sponsored college savings plan portfolios (commonly known as Section 529 College Savings Plans); 

U 84 years of capital markets data capturing performance of several major asset classes; 

U  Extensive cash flow, ownership, and biographical data on directors and officers; 

U  Real-time market data on more than 4 million exchange-traded equities, derivatives, commodities, futures, foreign exchanges, precious metals, news, company fundamentals, and analytics; and 

U  Real-time price quotes for global foreign currencies. 

Our business model is based on leveraging our investments in these databases by selling a wide variety of products and services to individual investors, financial advisors, and institutions around the world. 

Our data and proprietary analytical tools such as the Morningstar Rating for mutual funds, which rates past performance based on risk- and cost-adjusted returns, and the Morningstar Style Box, which provides a visual summary of a mutual fund’s underlying investment style, have become important tools that millions of investors and advisors use in making investment decisions. We’ve created other tools, such as the Ownership Zone, Sector Delta, and Market Barometer, which allow investors to see how different investments work together to form a portfolio and to track its progress. We developed a popular Portfolio X-Ray tool that helps investors reduce risk and understand the key characteristics of their portfolios based on nine different factors. 

We offer a variety of qualitative measures such as Stewardship Grades, which help investors identify companies and funds that have demonstrated a high level of commitment to shareholders and stewardship of investors’ capital. We also offer qualitative research and ratings on mutual funds based in Europe, Asia, and Australia; closed-end funds; 529 plans; target-date funds, and stocks. 

Since 1998, we’ve expanded our research efforts on individual stocks and have worked to popularize the concepts of economic moat, a measure of competitive advantage originally developed by Warren Buffett; and margin of safety, which reflects the size of the discount in a stock’s price relative to its estimated value. The Morningstar Rating for stocks is based on the stock’s current price relative to our analyst-generated fair value estimates, as well as the company’s level of business risk and economic moat. 

In 2009, we began publishing credit ratings and associated research on corporate debt issuers. We currently provide ratings on more than 720 companies and also provide research and ratings on com- mercial mortgage-backed securities. 

We’ve also developed in-depth advice on security selection and portfolio building to meet the needs of investors looking for inte- grated portfolio solutions. We believe many investors rely on these tools because they offer a useful framework for comparing potential investments and making decisions. Our independence and our his- tory of innovation make us a trusted resource for investors. 

