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  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="5" face="Times New Roman" style="font-size:18.0pt;font-weight:bold;">UNITED STATES</font></b></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="5" face="Times New Roman" style="font-size:18.0pt;font-weight:bold;">SECURITIES AND EXCHANGE COMMISSION</font></b></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Washington, D.C.&nbsp; 20549</font></b></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <div align="center" style="margin:0in 0in .0001pt;text-align:center;"><hr size="1" width="25%" noshade color="black" align="center"></div>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="5" face="Times New Roman" style="font-size:18.0pt;font-weight:bold;">FORM&nbsp;8-K</font></b></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <div align="center" style="margin:0in 0in .0001pt;text-align:center;"><hr size="1" width="25%" noshade color="black" align="center"></div>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="3" face="Times New Roman" style="font-size:12.0pt;font-weight:bold;">CURRENT REPORT</font></b></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="3" face="Times New Roman" style="font-size:12.0pt;font-weight:bold;">Pursuant to Section&nbsp;13 or 15(d)&nbsp;of</font></b></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="3" face="Times New Roman" style="font-size:12.0pt;font-weight:bold;">the Securities Exchange Act of 1934</font></b></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Date of Report (Date of earliest event reported):<b>&nbsp;&#160; June&nbsp;6, 2008</b></font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="5" face="Times New Roman" style="font-size:18.0pt;font-weight:bold;">MORNINGSTAR, INC.</font></b></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(Exact name of registrant as specified in its charter)</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <div align="center">
  
  <table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
   <tr>
    <td width="32%" valign="top" style="padding:0in .7pt 0in .7pt;width:32.0%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Illinois</font></b></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">
    <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
    </td>
    <td width="32%" valign="top" style="padding:0in .7pt 0in .7pt;width:32.0%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">000-51280</font></b></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">
    <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
    </td>
    <td width="32%" valign="top" style="padding:0in .7pt 0in .7pt;width:32.0%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">36-3297908</font></b></p>
    </td>
   </tr>
   <tr>
    <td width="32%" valign="top" style="padding:0in .7pt 0in .7pt;width:32.0%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(State or other jurisdiction<br>
    of incorporation)</font></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="32%" valign="top" style="padding:0in .7pt 0in .7pt;width:32.0%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(Commission<br>
    File Number)</font></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="32%" valign="top" style="padding:0in .7pt 0in .7pt;width:32.0%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(I.R.S. Employer<br>
    Identification No.)</font></p>
    </td>
   </tr>
   <tr>
    <td width="32%" valign="top" style="padding:0in .7pt 0in .7pt;width:32.0%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
    </td>
    <td width="32%" valign="top" style="padding:0in .7pt 0in .7pt;width:32.0%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
    </td>
    <td width="32%" valign="top" style="padding:0in .7pt 0in .7pt;width:32.0%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
    </td>
   </tr>
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    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">
    <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
    </td>
    <td width="32%" valign="top" style="padding:0in .7pt 0in .7pt;width:32.0%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">225 West Wacker Drive</font></b><font size="2" style="font-size:10.0pt;"><br>
    <b>Chicago, Illinois</b></font></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">
    <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
    </td>
    <td width="32%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:32.0%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">60606</font></b></p>
    </td>
   </tr>
   <tr>
    <td width="32%" valign="top" style="padding:0in .7pt 0in .7pt;width:32.0%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="32%" valign="top" style="padding:0in .7pt 0in .7pt;width:32.0%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(Address of principal executive offices)</font></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.0%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="32%" valign="top" style="padding:0in .7pt 0in .7pt;width:32.0%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(Zip Code)</font></p>
    </td>
   </tr>
  </table>
  
  </div>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">(312) 696-6000</font></b></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(Registrant&#146;s telephone number, including area code)</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">N/A</font></b></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(Former name or former address, if changed since last report)</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <div align="center" style="margin:0in 0in .0001pt;text-align:center;"><hr size="1" width="25%" noshade color="black" align="center"></div>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Check the appropriate box
  below if the Form&nbsp;8-K filing is intended to simultaneously satisfy the
  filing obligation of the registrant under any of the following provisions:</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Wingdings" style="font-size:10.0pt;">o</font><font size="2" style="font-size:10.0pt;">&nbsp;&nbsp;&nbsp; Written communications
  pursuant to Rule&nbsp;425 under the Securities Act (17 CFR 230.425)</font></p>
  
  <p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Wingdings" style="font-size:10.0pt;">o</font><font size="2" style="font-size:10.0pt;">&nbsp;&nbsp;&nbsp; Soliciting material
  pursuant to Rule&nbsp;14a-12 under the Exchange Act (17 CFR 240.14a-12)</font></p>
  
  <p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Wingdings" style="font-size:10.0pt;">o</font><font size="2" style="font-size:10.0pt;">&nbsp;&nbsp;&nbsp; Pre-commencement
  communications pursuant to Rule&nbsp;14d-2(b)&nbsp;under the Exchange Act (17
  CFR 240.14d-2(b))</font></p>
  
  <p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Wingdings" style="font-size:10.0pt;">o</font><font size="2" style="font-size:10.0pt;">&nbsp;&nbsp;&nbsp; Pre-commencement
  communications pursuant to Rule&nbsp;13e-4(c)&nbsp;under the Exchange Act (17
  CFR 240.13e-4(c))</font></p>
  
  <p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <div style="border:none;border-bottom:double windowtext 6.0pt;padding:0in 0in 0in 0in;">
  
  <p style="border:none;margin:0in 0in .0001pt .25in;padding:0in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  </div>
  
  <p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  </div>
  <!-- SEQ.=1,FOLIO='',FILE='C:\JMS\aneetz\08-16157-1\task2976384\16157-1-ba.htm',USER='aneetz',CD='Jun  5 21:40 2008' -->
  
  
  
  <br clear="all" style="page-break-before:always;">
  <div style="font-family:Times New Roman;">
  
  <p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Item
  7.01.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Regulation FD Disclosure.</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The following information
  is included in this Current Report on Form&nbsp;8-K as a result of Morningstar,&nbsp;Inc.&#146;s
  policy regarding public disclosure of corporate information. Answers to
  additional inquiries, if any, that comply with this policy are scheduled to
  become available on July&nbsp;7, 2008.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Caution
  Concerning Forward-Looking Statements</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This current report on Form&nbsp;8-K
  contains forward-looking statements as that term is used in the Private
  Securities Litigation Reform Act of 1995. These statements are based on our
  current expectations about future events or future financial performance.
  Forward-looking statements by their nature address matters that are, to
  different degrees, uncertain, and often contain words such as &#147;may,&#148; &#147;could,&#148; &#147;expect,&#148;
  &#147;intend,&#148; &#147;plan,&#148; &#147;seek,&#148; &#147;anticipate,&#148; &#147;believe,&#148; &#147;estimate,&#148; &#147;predict,&#148; &#147;potential,&#148;
  or &#147;continue.&#148; These statements involve known and unknown risks and
  uncertainties that may cause the events we discussed not to occur or to differ
  significantly from what we expected. For us, these risks and uncertainties
  include, among others, general industry conditions and competition; damage to
  our reputation resulting from claims made about possible conflicts of interest;
  liability for any losses that result from an actual or claimed breach of our
  fiduciary duties; legal, regulatory, or political issues related to our data
  center in China; the potential impact of market volatility on revenue from
  asset-based fees; a prolonged outage of our database and network facilities;
  challenges faced by our non-U.S. operations; and the availability of free or
  low-cost investment information. A more complete description of these risks and
  uncertainties can be found in our filings with the Securities and Exchange
  Commission, including our Annual Report on Form&nbsp;10-K for the year ended December&nbsp;31,
  2007. If any of these risks and uncertainties materialize, our actual future
  results may vary significantly from what we projected. We do not undertake to
  update our forward-looking statements as a result of new information or future
  events.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Investor Questions and Answers: June&nbsp;2008</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <h1 style="font-weight:bold;margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:normal;">We plan
  to make written responses available addressing investor questions about our
  business on the first Friday of every month. The following answers respond to
  selected questions received through June&nbsp;5, 2008. We intend to answer as
  many questions as time allows, although we will not answer product support
  questions through this channel. We may wait to respond to a given question until
  the following month if we need more time to research the answer.</font></b></h1>
  
  <h1 style="font-weight:bold;margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></b></h1>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">If you would like to
  submit a question, please send an e-mail to investors@morningstar.com, contact
  us via fax at 312-696-6009, or write to us at the following address:</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Morningstar,&nbsp;Inc.<br>
  Investor Relations<br>
  225 West Wacker Drive<br>
  Chicago, IL 60606</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Capital Spending</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">1.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">Cap ex has ranged between 1.5%
  and 4.3% of revenue over the past four years. Is it reasonable to expect
  expenditures to be in that range, with variances driven by seasonal factors,
  internal investment shifts, and variance in top-line growth?</font></i></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2</font></p>
  
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  </div>
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  <div style="font-family:Times New Roman;">
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In keeping with our policy of not making forecasts, we
  don&#146;t specify an expected range of capital spending as a percentage of revenue.
  We do disclose an expected amount of capital spending for the upcoming year in
  our annual 10-K and first-quarter 10-Q, and we&#146;ve said that we anticipate that
  our capital expenditures in 2008 will be significantly higher than in previous
  years because of the build-out of our new office space in Chicago. We expect to
  make capital expenditures of approximately $55 million in 2008, including about
  $40 million in gross spending for the build-out of the new office space. A
  portion of the capital expenditures will be offset by $11 million in tenant
  improvement allowances.</font></p>
  
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The bulk of our capital
  spending is for leasehold improvements and computer equipment, and the amount
  of capital spending in a given year mostly depends on the amount we decide to
  invest in these two areas to support our long-term business strategies.
  Seasonal factors and changes in top-line growth don&#146;t really affect our level
  of capital spending.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">2.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">Is it possible to lay out the
  expected free-cash flow effects of the new office building for this year and
  going forward? Apologies if you have done this before.</font></i></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">As mentioned in our
  response to the previous question, we expect to spend about $40 million gross
  in 2008 for the build-out of our new office space in Chicago, or $29 million
  after accounting for the tenant improvement allowances we expect to receive.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The table below
  (excerpted from our 10-K) shows our minimum future rental commitments due in
  each of the next five years and thereafter for all non-cancelable operating
  leases. These commitments are primarily for office space and include all of our
  global facilities, including our new headquarter in Chicago.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
   <tr>
    <td width="86%" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in .7pt 0in .7pt;width:86.58%;">
    <p style="margin:0in 0in .0001pt;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Minimum Future Rental
    Commitments</font></b></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.66%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
    </td>
    <td width="8%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in .7pt 0in .7pt;width:8.44%;">
    <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">($000)</font></b></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.32%;">
    <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
    </td>
   </tr>
   <tr>
    <td width="86%" valign="top" bgcolor="#CCEEFF" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:86.58%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2008</font></p>
    </td>
    <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.66%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="1%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;border:none;padding:0in .7pt 0in .7pt;width:1.3%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
    </td>
    <td width="7%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;border:none;border-top:solid windowtext 1.0pt;padding:0in .7pt 0in .7pt;width:7.14%;">
    <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7,427</font></p>
    </td>
    <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.32%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
   </tr>
   <tr>
    <td width="86%" valign="top" style="padding:0in .7pt 0in .7pt;width:86.58%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2009</font></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.66%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="8%" colspan="2" valign="bottom" style="padding:0in .7pt 0in .7pt;width:8.44%;">
    <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7,533</font></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.32%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
   </tr>
   <tr>
    <td width="86%" valign="top" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:86.58%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2010</font></p>
    </td>
    <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.66%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="8%" colspan="2" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:8.44%;">
    <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">13,013</font></p>
    </td>
    <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.32%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
   </tr>
   <tr>
    <td width="86%" valign="top" style="padding:0in .7pt 0in .7pt;width:86.58%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2011</font></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.66%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="8%" colspan="2" valign="bottom" style="padding:0in .7pt 0in .7pt;width:8.44%;">
    <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">12,302</font></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.32%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
   </tr>
   <tr>
    <td width="86%" valign="top" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:86.58%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2012</font></p>
    </td>
    <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.66%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="8%" colspan="2" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:8.44%;">
    <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10,454</font></p>
    </td>
    <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.32%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
   </tr>
   <tr>
    <td width="86%" valign="top" style="padding:0in .7pt 0in .7pt;width:86.58%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Thereafter</font></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.66%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="8%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in .7pt 0in .7pt;width:8.44%;">
    <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">90,540</font></p>
    </td>
    <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.32%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
   </tr>
   <tr>
    <td width="86%" valign="top" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:86.58%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Total</font></p>
    </td>
    <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.66%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="1%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;border:none;border-bottom:double windowtext 1.5pt;padding:0in .7pt 0in .7pt;width:1.3%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
    </td>
    <td width="7%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;border-bottom:double windowtext 1.5pt;border-left:none;border-right:none;border-top:solid windowtext 1.0pt;padding:0in .7pt 0in .7pt;width:7.14%;">
    <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">141,269</font></p>
    </td>
    <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in .7pt 0in .7pt;width:2.32%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
   </tr>
  </table>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Non-U.S. Business</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">3.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">In the US you built your business
  from the individual investor and advisor up to institutions. But overseas it
  seems that you are going the opposite route with most of the business (at the
  start) being driven by data licensing to different types of institutions and
  later efforts moving toward analysis for individuals and advisors. What
  challenges are posed by this differing strategy overseas and what might its
  longer-term implications be?</font></i></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Your summary of our approach
  to building our business outside of the United States is pretty much on target.
  We are taking a different approach in most markets outside of the United States
  partly because there needs to be an active investing and ownership culture in
  order for us to sell products to individual investors. In some (but not all)
  countries outside the United States, the investing culture is still developing.
  For example, in some European markets, investors tend to hold a larger
  percentage of their assets in cash and fixed-income securities, with less
  direct ownership of stocks and stock-based mutual funds. On the other hand, in
  Australia equity ownership levels are similar to those in North America, so our
  individual investor business is well-developed. Overall, though, the majority
  of our non-U.S. revenue is currently from the Institutional and Advisor
  segments.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">One challenge we face
  with this strategy is that in the United States, the products we develop for
  individual investors create pull demand and brand recognition among advisors
  and institutions. It may be more difficult to establish a well-known brand
  outside of the United States without a widespread retail presence. That&#146;s one
  of the reasons that we&#146;ve established Web sites for individual investors in
  numerous markets outside of the United States. We also plan to continue
  expanding our fund analyst teams around the world.</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='3',FILE='C:\JMS\c900146\08-16157-1\task2977438\16157-1-da.htm',USER='c900146',CD='Jun  6 22:54 2008' -->
  
  
  <br clear="all" style="page-break-before:always;">
  
  
  <div style="font-family:Times New Roman;">
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">As far as the long-term
  implications, we may need to invest more in sales and marketing outside of the
  United States and/or conduct additional research to tailor our products to the
  needs of the local market at the individual investor level. Despite these
  challenges, we think our approach makes sense given the current structure of
  most markets outside the United States.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Product Pricing</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">4.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">Can you lay out the current
  prices/fees you charge for:</font></i></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt 1.25in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><i><font size="2" style="font-size:10.0pt;font-style:italic;">Advisor Workstation</font></i></p>
  
  <p style="margin:0in 0in .0001pt 1.25in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><i><font size="2" style="font-size:10.0pt;font-style:italic;">Morningstar Direct</font></i></p>
  
  <p style="margin:0in 0in .0001pt 1.25in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><i><font size="2" style="font-size:10.0pt;font-style:italic;">Investment Consulting</font></i></p>
  
  <p style="margin:0in 0in .0001pt 1.25in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><i><font size="2" style="font-size:10.0pt;font-style:italic;">Morningstar.com</font></i></p>
  
  <p style="margin:0in 0in .0001pt 1.25in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><i><font size="2" style="font-size:10.0pt;font-style:italic;">Licensed Data</font></i></p>
  
  <p style="margin:0in 0in .0001pt 1.25in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><i><font size="2" style="font-size:10.0pt;font-style:italic;">Morningstar Managed Portfolios</font></i></p>
  
  <p style="margin:0in 0in .0001pt 1.25in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><i><font size="2" style="font-size:10.0pt;font-style:italic;">Retirement advice</font></i></p>
  
  <p style="margin:0in 0in .0001pt 1.25in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We provide information
  about pricing for our major products in the 10-K, but we&#146;ll give you a brief summary
  here to make things easier.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Morningstar Advisor
  Workstation: Pricing for the Enterprise Edition varies based on the number of
  users, as well as the level of functionality offered, and generally ranges
  between $80 and $2,975 per licensed user. The prices at the low end reflect
  tools-only enterprise licenses for a small subset of the software, while the
  high end reflects what we charge an independent financial advisor for access to
  the full range of Advisor Workstation functionality. We generally charge $5,400
  per user for an annual license for Office Edition.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Morningstar Direct:
  Pricing for Morningstar Direct is based on the number of licenses purchased. We
  charge $16,000 for the first user, $10,500 for the second user, and $8,000 for
  each additional user.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Investment Consulting:
  Pricing for the consulting services we provide through both Morningstar
  Associates and Ibbotson Associates varies is based on the scope of work and the
  level of service required. In the majority of our contracts, we receive asset-based
  fees, reflecting our work as a portfolio construction manager or subadvisor for
  a mutual fund or variable annuity.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Morningstar.com: We
  currently charge $16.95 for a monthly subscription, $159 for an annual
  subscription, $269 for a two-year subscription, and $369 for a three-year
  subscription for Morningstar.com&#146;s Premium service in the United States.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Licensed Data: Pricing
  for Licensed Data is based on the number of funds or other securities covered,
  the amount of information provided for each security, and the level of
  distribution.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Morningstar Managed
  Portfolios: We charge asset-based fees for Morningstar Managed Portfolios. The
  management fee is based on a tiered schedule&nbsp;that depends on the client&#146;s
  average daily portfolio balance and generally ranges from 0.20% to 0.40% of
  assets.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Retirement Advice: We
  offer two Retirement Advice offerings that help retirement plan participants
  plan and invest for retirement: Morningstar Retirement Manager, a service of
  Morningstar Associates, LLC, and Advice by Ibbotson, a service of Ibbotson
  Associates,&nbsp;Inc.&nbsp; Both companies are registered investment advisors
  and wholly owned subsidiaries of Morningstar,&nbsp;Inc. Pricing in both areas
  depends on the number of participants, as well as the level of service we provide.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">5.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">Can [you] discuss how often your
  pricing is reviewed and how prices for your various key products have evolved
  over time?</font></i></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='4',FILE='C:\JMS\c900146\08-16157-1\task2977438\16157-1-da.htm',USER='c900146',CD='Jun  6 22:54 2008' -->
  
  
  <br clear="all" style="page-break-before:always;">
  
  
  <div style="font-family:Times New Roman;">
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We typically review our
  product pricing about once a year for subscription-based products, or prior to
  the contract renewal date for multi-year contracts. When evaluating our
  pricing, we look at pricing levels for competing products, the value that we
  provide to our clients, and our analysis of how the product fits in with the
  other products and services we provide for various customer segments. Typically
  we&#146;ve moderately increased prices on most of our products every year or two.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">MORN Stock Ownership</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">6.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">According to the Security
  Ownership Table as of 3/1/08 in the recent proxy report, director Frank Ptak
  (appointed 2/07) does not beneficially own any shares and director Bill Lyons
  (appointed 9/07 after the last annual meeting) owns 1,000
  shares.&nbsp;According to the discussion in the Directors&#146; Compensation
  Equity-Based Compensation section, new non-employee directors in lieu of
  receiving an annual grant of restricted stock units, receive an initial grant
  of restricted stock units covering shares with a value of $250,000 at grant and
  vesting over a period of three years. Where is this stock ownership in the case
  of Frank Ptak? Is Bill Lyons&#146; ownership properly represented?</font></i></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The security ownership
  table reflects share ownership only for restricted stock units that had already
  vested as of April&nbsp;30, 2008. Because Frank Ptak&#146;s restricted stock units
  vested on May&nbsp;15, 2008, they were not included in this table. Bill Lyons
  purchased Morningstar&#146;s common stock in a separate transaction, and his
  ownership interest is properly represented in the table.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Recurring Revenue</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">7.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">What percentage of your revenue
  would you define as recurring and how has that percentage shifted over the past
  five years?</font></i></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Although we no longer calculate a total for recurring
  revenue, we do disclose information on retention and renewal rates. We estimate
  that about 20% of our 2007 revenue was from subscription-based products, which
  have average retention rates in the range of 65% to 70%. Close to three-fourths
  of our 2007 revenue was from contract-based products (including contracts where
  we&#146;re paid asset-based fees), with an average renewal rate ranging from 95% to
  100%.</font></p>
  
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Overall, we believe that recurring revenue continues
  to account for a substantial percentage of our company-wide revenue.</font></p>
  
  <p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We previously disclosed
  that recurring revenue (which we defined as the sum of renewal revenue and
  walk-in revenue) totaled about 83.8% of revenue excluding acquisitions in 2006,
  compared with 82.8% in 2005, 74.6% in 2004, and 77.4% in 2003.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Concentration of Revenue by
  Client</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">8.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">You&#146;ve disclosed that your
  biggest customer is less than 10% of revenue. What percentage does that
  customer make up? Is it correct to say that life insurers comprise the majority
  of your five largest customers or are they fund companies, brokers, etc.?</font></i></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Our largest customer in
  2007 made up less than 5% of consolidated revenue. It is correct to say that
  insurance companies make up more than half of our five largest customers,
  although we also have large clients that are asset management companies,
  brokerage firms, and other types of institutions.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Valuation Metrics for
  Acquisitions</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">9.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">What are the relevant valuation
  metrics for your various acquisitions? Can you review the metrics you paid in
  recent deals for which the purchase price was disclosed?</font></i></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='5',FILE='C:\JMS\c900146\08-16157-1\task2977438\16157-1-da.htm',USER='c900146',CD='Jun  6 22:54 2008' -->
  
  
  <br clear="all" style="page-break-before:always;">
  
  
  <div style="font-family:Times New Roman;">
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">It&#146;s been our practice to
  disclose the purchase price for acquisitions but not valuation metrics such as
  price as a multiple of sales. We typically don&#146;t break out revenue separately
  for each acquired operation; instead, we report combined revenue from acquisitions
  in our quarterly financial reports.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We focus intently on
  valuation during our due-diligence process, and we create detailed valuation
  models when considering potential acquisitions.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Employee Headcount</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">10.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">Could you provide an employee
  headcount by business unit, even at the Individual, Advisor, Institutional
  levels? Is it possible to see how that headcount has evolved in the different
  units over time?</font></i></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Over the past three
  years, headcount for our Institutional segment has made up the largest portion of
  our total headcount, and the percentage has increased because of employees
  added with our acquisition of the fund data business from Standard&nbsp;&amp;
  Poor&#146;s as well as continued growth in our data processing and development
  center in Shenzhen, China. The Advisor segment is the next-largest segment
  based on headcount, followed by the Individual segment and corporate area.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Compensation Expense</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">11.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">Is it possible to disclose
  compensation as a percentage of revenue for each of the past five years? Is it
  also possible to break this number out rather than embedding it in operating
  expenses since it&#146;s the largest overall expense item?</font></i></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We don&#146;t report a
  separate expense category for compensation, but a large portion of the expense
  recorded in all of our expense categories consists of compensation-related
  expense, including salaries, bonuses, commissions, and other
  compensation-related costs.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Revenue from Fund Companies</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">12.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">What percentage of your revenue
  comes from fund firms whose firms [funds] you rate?</font></i></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Keep in mind that we
  provide quantitative ratings on all mutual funds that have at least three years
  of performance history. This means that pretty much any fund company with which
  we do business has funds with Morningstar Ratings. The Morningstar Rating for
  mutual funds is based on a quantitative measure of a fund&#146;s historical
  performance and risk relative to funds with similar investment profiles. The
  amount of business we do with a particular fund company has no bearing on the
  ratings its funds receive, and the Morningstar Rating does not incorporate any
  analyst input.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We don&#146;t break out
  revenue by client type. But in total, about 53% of our consolidated revenue in
  2007 was from the Institutional business segment. This segment includes revenue
  from a variety of institutional clients, including fund companies, insurance
  companies, banks, brokerage firms, media outlets, and retirement plan sponsors
  and providers.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">13.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">I am wondering about conflicts
  within Morningstar.&nbsp; It seems easy on 1 star and 5 star funds to rate a
  funds&#146; performance (star rating).&nbsp; However, in the middle, what kind of
  sway is there for the 2, 3, or 4 star rated funds relative to advertising that
  a large firm may pay for on your website versus a small firm that cannot afford
  to advertise on your site.&nbsp; In other words, what prevents an analyst from
  being biased by a large fund&#146;s advertising? &nbsp;Has it ever happened?&nbsp;
  If it were to occur, how would it be handled?&nbsp; You are moving to a new
  location, how will the analysts be segregated from the other parts of the
  business?</font></i></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">As we mentioned in our
  response to the previous questions, the Morningstar Rating is a quantitative
  measure. The Morningstar Rating for mutual funds, commonly called the &#147;star
  rating,&#148; brings both </font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='6',FILE='C:\JMS\c900146\08-16157-1\task2977438\16157-1-da.htm',USER='c900146',CD='Jun  6 22:54 2008' -->
  
  
  <br clear="all" style="page-break-before:always;">
  
  
  <div style="font-family:Times New Roman;">
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">performance and risk
  together into one evaluation. We rank funds within their categories according
  to their risk-adjusted return (after accounting for all sales charges and
  expenses), and assign stars based on a classic bell-shaped curve with the
  largest section in the center. The 10% of funds in each category with the
  highest risk-adjusted return receive five stars, the next 22.5% receive four
  stars, the middle 35% receive three stars, the next 22.5% receive two stars,
  and the bottom 10% receive one star. We rate funds for up to three periods&#151;the
  trailing three, five, and 10 years&#151;and calculate an overall rating based on a
  weighted average of the ratings for each period. We recalculate star ratings
  monthly.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In addition to the
  quantitative Morningstar Rating, we conduct a variety of qualitative research
  on mutual funds. Independence is at the heart of what we do, and all
  Morningstar employees are required to adhere to our Employee Code of Ethics and
  our Securities Trading Policy. In addition, we maintain a strict line of
  separation between our analysts and the sales teams. With few exceptions, sales
  personnel are prohibited from setting up meetings between analysts and clients
  or potential clients. In addition, our analysts may not disclose the content of
  their reports to any outside parties before publication.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">For more information on
  the policies we have in place to protect our analysts&#146; independence, you can
  refer to the Code of Ethics posted on our corporate site at the link below:</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">http://corporate.morningstar.com/US/documents/PR/CodeOfEthics.pdf</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Our retail fund and stock
  analysts will be physically separate from our consulting units and sales and
  marketing teams in our new corporate headquarters (as they are now).</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Effective Tax Rate</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">14.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">Tax rate: It seems that the
  company&#146;s tax rate has gotten more consistent of late. Is there a run-rate or
  range investors should expect?</font></i></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We&#146;re not going to give
  you a specific answer on this for two reasons: 1) we don&#146;t give financial
  forecasts, and 2) it would be difficult to pinpoint a future tax rate with any
  level of precision if we did. We expect our tax rate to continue to vary based
  on a variety of factors, including the mix of earnings and losses in our
  international operations, the impact of tax-law changes, and tax planning
  strategies.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Potential Developments in Data
  Business</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">15.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">Does the eventual/expected sale
  of Bloomberg pose a threat to your business, i.e. if the business was purchased
  by a large rival in the data business like Reuters? Obviously the value of
  Bloomberg is large, but is that an asset that could dovetail with the
  institutional/advisor portions of your company?</font></i></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We can&#146;t speculate about
  whether the sale of Bloomberg is expected or eventual (or any other
  transactions that other companies might undertake). We believe that we&#146;re
  pursuing a sound strategy and will continue to have many opportunities
  available to us regardless of any transactions that take place among other
  companies.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Also, we have
  historically had a different focus from Bloomberg and Reuters. We have
  typically focused more on fundamental analysis and portfolio tools as opposed
  to news and real-time data. As a results, we would not view any transaction
  involving companies that focus more on news and real-time data as a large
  competitive threat, although these assets could be viewed as complementary to
  our business.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Investment Consulting</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">16.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">For the investment consulting
  market, can you estimate your market share and name your leading competitors?
  Relative to those competitors, does your investment consulting clientele lean
  toward </font></i></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='7',FILE='C:\JMS\c900146\08-16157-1\task2977438\16157-1-da.htm',USER='c900146',CD='Jun  6 22:54 2008' -->
  
  
  <br clear="all" style="page-break-before:always;">
  
  
  <div style="font-family:Times New Roman;">
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">specific
  types (e.g. corporate pensions,&nbsp;government pensions, university
  endowments) or size groups (e.g. small, mid-market, large)?</font></i></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We don&#146;t have data on the
  size of the investment consulting market based on revenue, but we estimate that
  we have roughly a 6% share of assets under advisement or management within the
  funds of funds arena. Our combined assets under advisement or management for
  Investment Consulting, managed retirement accounts, and Morningstar Managed
  Portfolios totaled about $113 billion as of year-end 2007. Cerulli Associates
  estimates that total assets in this area were about $1.9 trillion as of the
  same date.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Some of our major
  competitors on the investment consulting side include Lipper, Frank Russell,
  Mercer, and Wilshire, as well as some smaller firms in the retirement
  consulting business. Many of our Investment Consulting clients are large
  insurance or asset management companies. We tend to focus less on other
  channels such as pensions and endowments, although we do have business in these
  areas.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">17.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">How much of the asset under
  advisement organic growth in 2005, 2006, and 2007 can be attributed to: 1)
  contract conversion from flat fee to % of assets under advisement; 2) market
  appreciation; 3) inflows from existing clients?</font></i></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The majority of organic
  growth in our assets under advisement for Investment Consulting over the past
  few years has been driven by new inflows from existing clients, as well as
  assets from new clients for Ibbotson Associates. Part&nbsp;of the large
  increase in assets under advisement for Ibbotson Associates in 2006 was driven
  by the conversion of one large client from a flat fee to percentage-based fees.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Market appreciation was
  also a positive factor in the three years you mentioned, but to a lesser
  degree.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">18.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">Hypothetically, if all of your
  consulting clients converted to % of assets under advisement pricing vs. flat
  fee pricing, what would be the total approximate reported assets under
  advisement for Morningstar?</font></i></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The majority of
  Investment Consulting clients served through Morningstar Associates currently
  pay asset-based fees; on the Ibbotson Associates side, we have more clients who
  pay us flat fees. Many of the consulting projects that Ibbotson handles under
  flat-fee arrangements are for portfolio guidance rather than asset management,
  so they&#146;re not always connected to a specific asset pool. In addition, we don&#146;t
  have information on assets under management for clients who currently pay us
  flat fees, so we can&#146;t really approximate a total in this area.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">19.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">[Follow up to question from
  Morningstar&#146;s annual meeting]: Can you provide more detail on the types of
  assets/companies included in the $1.9 trillion total you cited from Cerulli
  Associates for industry-wide assets in funds of funds? What portion of these
  assets is managed in-house vs. by external managers?</font></i></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Cerulli Associates
  provides estimates on the global multimanager market based on total assets. In
  these totals, it includes funds of funds, which it defines as funds that invest
  in shares of other publicly offered funds; manager of managers, which it
  defines as vehicles managed by multiple underlying subadvisors; and funds of
  hedge funds, which are hedge funds that invest in shares of other hedge funds.
  There are a variety of investor types participating in the global multimanager
  market, including defined contribution plans, financial advisors, banks,
  defined benefit plans, high net-worth investors, insurance accounts,
  foundations, endowments, and other investors.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Of the $1.9 trillion in
  global multimanager assets, Cerulli reports that about $1.2 trillion is
  invested in funds of funds (including funds of hedge funds); $440 billion is in
  retail manager of managers portfolios; and $300 billion is invested in
  institutional manager of manager products. Within the manager of managers
  categories, the majority of assets are &#147;unfettered,&#148; meaning that the
  subadvisors are from outside firms. On the funds of funds side, roughly
  one-third of the assets are unfettered, and others are &#147;fettered,&#148; or managed
  in-house, based on Cerulli&#146;s analysis.</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='8',FILE='C:\JMS\c900146\08-16157-1\task2977438\16157-1-da.htm',USER='c900146',CD='Jun  6 22:54 2008' -->
  
  
  <br clear="all" style="page-break-before:always;">
  
  
  <div style="font-family:Times New Roman;">
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Licensed Data</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">20.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">How much of your licensed data
  organic growth over the past three years is attributable to traditional
  analytics such as mutual fund ratings and style boxes, etc. vs. new products
  launched within the last three years? Can you please provide some examples of
  products that have most contributed to organic growth over that time frame?</font></i></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Revenue from licensing
  Morningstar proprietary statistics makes up about one-third of our total
  revenue from Licensed Data. We have an extensive reach in sales of data
  licenses for our open-end fund ratings and style boxes, particularly in the
  United States, and this portion of our data licensing revenue has grown at low
  double-digit rates over the past three years. Other areas of our licensed data
  business&#151;including global data, multi-universe packages, and other data licenses
  such as those for our &#147;Warehouse&#148; and &#147;Fact Sheet&#148; packages&#151; have been growing
  at higher rates. Increases in the number of securities and type of data we
  collect have also been major drivers behind the growth in our Licensed Data
  business.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">21.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">How much of your organic growth
  over the past three years can you attribute to the U.S. vs. international
  within the licensed data business?</font></i></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">About 60% to 70% of the
  organic growth in our Licensed Data business has been driven by business based
  in the United States, with the remainder from other areas around the world.
  Although our acquisitions of Aspect Huntley and the fund data business from
  Standard&nbsp;&amp; Poor&#146;s significantly increased non-U.S. revenue for this
  product, we have also had organic growth in our Licensed Data business outside
  the United States.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Morningstar Equity Research</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">22.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">Has Morningstar disclosed the
  revenue that it receives from the Wall Street investment banks as part of their
  research settlement with Spitzer that required some use of independent
  research? A recent sell side note indicated that the 5 year term of this deal
  ends in the summer of 2009. Can the company comment on the likelihood of
  retaining some/all of that business? What would be the incentive for a Wall
  Street investment bank to keep your services beyond the mandated timeframe?
  Would it be prudent to assume that some significant portion of that revenue
  goes away starting in the summer of 2009? Thank you.</font></i></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Yes, we&#146;ve previously
  disclosed that independent equity research related to the Global Analyst
  Research Settlement made up about 5% of our consolidated revenue in 2007. We
  have contracts in place to provide independent research to six of the
  investment banks who signed the settlement. The period covered by the
  settlement will expire in July&nbsp;2009; after that date, the firms involved
  will no longer be required to provide independent investment research to their
  clients.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We
  haven&#146;t yet begun formal renewal discussions with these investment banking
  firms, and we can&#146;t predict how much, if any, of this equity research revenue
  we&#146;ll retain following the end of the settlement period.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">There
  are a few reasons why an investment bank might choose to continue providing our
  research to its clients following the mandated timeframe:</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">We believe that individual
  investors holding accounts with these brokerage firms and their advisors find
  our research valuable and may want to continue receiving it through this
  channel.</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">These companies can enhance
  their reputation and the value they provide to their clients and advisors by
  providing them with independent research.</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">We believe that long-term
  industry trends toward open architecture will help support the need for
  independent investment research.</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">Many sell-side firms have
  cut back on the number of analysts they employ and the number of companies
  under coverage, which may increase the need for outside research.</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='9',FILE='C:\JMS\c900146\08-16157-1\task2977438\16157-1-da.htm',USER='c900146',CD='Jun  6 22:54 2008' -->
  
  
  <br clear="all" style="page-break-before:always;">
  
  
  <div style="font-family:Times New Roman;">
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">We believe our fundamental
  approach to equity research, with a heavy emphasis on analyzing each company&#146;s
  degree of competitive advantage and long-term prospects, sets us apart from
  other research providers. Our analysts </font><font size="2" style="font-size:10.0pt;">focus on determining the value of a business, its
  risks, and whether the stock price accurately reflects both.</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In
  addition, we are continuing to pursue our efforts to expand our equity research
  through other channels, such as financial advisors, asset management firms, and
  companies outside of the United States. We believe that we have a compelling
  value proposition because of our 121-person analyst staff, our broad coverage,
  and our fundamental approach to stock analysis. Our buy-side service for asset
  managers, for example, gives them access to our analysts, their valuation
  models, and their expertise on 2,000+ stocks, 130 industries, and every initial
  public offering that hits the U.S. market.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Morningstar Advisor Workstation</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">23.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">Roughly what percentage of
  Advisor Workstation users rely on the accounting/administrative functions of
  the application? I ask because I assume that those users who rely on these
  functions are less likely to switch to a rival application. Also, what rival
  applications do Advisor Workstation/Principia and Morningstar Direct compete
  with? I ask because I don&#146;t know of any that are actually very similar. Lipper
  provides data, but not much analysis it seems.</font></i></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The accounting and
  administrative functions are mainly in Advisor Workstation Office Edition,
  which is geared toward independent financial advisors and has a smaller user
  base compared with&#160; the Enterprise
  Edition for advisors affiliated with a larger firm. About half of these users
  currently use the portfolio accounting system.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Morningstar Advisor
  Workstation and Principia compete with products offered by other companies such
  as Thomson-Reuters, SunGard Data Systems, Standard&nbsp;&amp; Poor&#146;s, Advent
  Software, Schwab Portfolio Center, Advisor Software,&nbsp;Inc., and Interactive
  Advisory Software.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Morningstar Direct
  competes with products offered by other companies such as FactSet Research
  Systems, Zephyr Associates, PerTrac, Lipper (a division of Reuters), Bloomberg,
  eVestment Alliance, Strategic Insight, MPI Stylus, Informa, and Wilshire.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">To
  some extent, our products also compete with software developed internally at
  institutions. We agree with your assessment that most competing products don&#146;t
  offer the same range of functionality and analysis.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Hedge Fund Database and Analyst
  Reports</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">24.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">Who are the customers/clients for
  your hedge-fund database? Given the vagaries of hedge-fund data and research,
  are there databases that are bigger than yours by number of funds or fund
  assets? Also, hedge-fund research has been a cottage industry for some time,
  what kind of demand has there been for your hedge-fund analyst reports?</font></i></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">So far, our hedge fund
  research has been primarily used by hedge funds of funds, family offices,
  consultants, mutual fund companies, and other investment managers. We&#146;re also
  marketing our hedge fund data to hedge fund administrators, which provide
  back-office services to hedge fund managers; prime brokers, which are heavy
  users of hedge fund data for research purposes; and hedge fund firms that are
  interested in obtaining data for competitive research purposes. We&#146;ve created a
  hedge fund data profile page&nbsp;that we plan to offer to institutional
  clients, and we offer hedge fund data and manager information through our
  Altvest software and Licensed Data feeds. In addition, qualified individual
  investors and financial advisors have access to our hedge fund data and
  research through Morningstar.com, Morningstar Direct, and Advisor Workstation
  Office Edition.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We started creating our
  hedge fund database about four years ago, and we believe that it&#146;s now one of
  the largest in the industry. We currently provide data on nearly 9,000 hedge
  funds and funds of hedge funds </font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='10',FILE='C:\JMS\c900146\08-16157-1\task2977438\16157-1-da.htm',USER='c900146',CD='Jun  6 22:54 2008' -->
  
  
  <br clear="all" style="page-break-before:always;">
  
  
  <div style="font-family:Times New Roman;">
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">globally. It is a global
  database, and is the only place where one can find proprietary Morningstar data
  points for hedge funds, such as the Morningstar Rating, Morningstar Category,
  and a family of 22 Morningstar Hedge Fund indexes.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We&#146;re currently writing
  hedge fund research reports on a small number of individual hedge funds, but we&#146;ve
  started producing shorter write-ups for a larger list of funds. We expect that
  these new analyst reports will begin appearing in some of our products later
  this year.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Morningstar Indexes</font></b></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">25.</font></i><i><font size="1" style="font-size:3.0pt;font-style:italic;">&#160;&#160;&#160;&#160;&#160;&#160; </font></i><i><font size="2" style="font-size:10.0pt;font-style:italic;">How do you earn money from your
  indices beyond your own products? Said another way: Aside from ETFs
  [exchange-traded funds] that license some of your indices and your own Web
  sites/software (Morningstar.com or Morningstar Direct, for example), are there other
  customers for those indices outside your own data products?</font></i></p>
  
  <p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Yes,
  in addition to the companies that license the Morningstar indexes for the
  creation of investment products, we also have a few customers who license
  Morningstar index data for benchmarking or investor communications. This is a
  small portion of our index business now, but one that we hope to see grow over
  time.</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">11</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  </div>
  <!-- SEQ.=1,FOLIO='11',FILE='C:\JMS\c900146\08-16157-1\task2977438\16157-1-da.htm',USER='c900146',CD='Jun  6 22:54 2008' -->
  
  
  <br clear="all" style="page-break-before:always;">
  
  
  <div>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">SIGNATURES</font></b></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Pursuant to the
  requirements of the Securities Exchange Act of 1934, the registrant has duly
  caused this report to be signed on its behalf by the undersigned hereunto duly
  authorized.</font></p>
  
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
   <tr>
    <td width="56%" valign="top" style="padding:0in 0in 0in 0in;width:56.0%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="44%" colspan="3" valign="top" style="padding:0in 0in 0in 0in;width:44.0%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">MORNINGSTAR, INC.</font></p>
    </td>
   </tr>
   <tr>
    <td width="56%" valign="top" style="padding:0in 0in 0in 0in;width:56.0%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
    </td>
    <td width="44%" colspan="3" valign="top" style="padding:0in 0in 0in 0in;width:44.0%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
    </td>
   </tr>
   <tr>
    <td width="56%" valign="top" style="padding:0in 0in 0in 0in;width:56.0%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
    </td>
    <td width="44%" colspan="3" valign="top" style="padding:0in 0in 0in 0in;width:44.0%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
    </td>
   </tr>
   <tr>
    <td width="56%" valign="top" style="padding:0in 0in 0in 0in;width:56.0%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Date: June&nbsp;6, 2008</font></p>
    </td>
    <td width="6%" valign="top" style="padding:0in 0in 0in 0in;width:6.98%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:</font></p>
    </td>
    <td width="37%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:37.02%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ Scott Cooley</font></p>
    </td>
   </tr>
   <tr>
    <td width="56%" valign="top" style="padding:0in 0in 0in 0in;width:56.0%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="6%" valign="top" style="padding:0in 0in 0in 0in;width:6.98%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Name:</font></p>
    </td>
    <td width="33%" valign="top" style="border:none;border-top:solid windowtext 1.0pt;padding:0in 0in 0in 0in;width:33.68%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Scott Cooley</font></p>
    </td>
    <td width="3%" valign="top" style="padding:0in 0in 0in 0in;width:3.34%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
   </tr>
   <tr>
    <td width="56%" valign="top" style="padding:0in 0in 0in 0in;width:56.0%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
    </td>
    <td width="6%" valign="top" style="padding:0in 0in 0in 0in;width:6.98%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Title:</font></p>
    </td>
    <td width="37%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:37.02%;">
    <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Chief Financial Officer</font></p>
    </td>
   </tr>
  </table>
  
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">12</font></p>
  
  <div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>
  
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  
  </div>
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text: UNITED STATES
  SECURITIES AND EXCHANGE COMMISSION
  Washington, D.C.  20549
  FORM 8-K
  CURRENT REPORT
  Pursuant to Section 13 or 15(d) of
  the Securities Exchange Act of 1934
  Date of Report (Date of earliest event reported):
  June 6, 2008
  MORNINGSTAR, INC.
  (Exact name of registrant as specified in its charter)
  Illinois
  000-51280
  36-3297908
  (State or other jurisdiction
  of incorporation)
  (Commission
  File Number)
  (I.R.S. Employer
  Identification No.)
  225 West Wacker Drive
  Chicago, Illinois
  60606
  (Address of principal executive offices)
  (Zip Code)
  (312) 696-6000
  (Registrant's telephone number, including area code)
  N/A
  (Former name or former address, if changed since last report)
  Check the appropriate box
  below if the Form 8-K filing is intended to simultaneously satisfy the
  filing obligation of the registrant under any of the following provisions:
  o
  Written communications
  pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
  o
  Soliciting material
  pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
  o
  Pre-commencement
  communications pursuant to Rule 14d-2(b) under the Exchange Act (17
  CFR 240.14d-2(b))
  o
  Pre-commencement
  communications pursuant to Rule 13e-4(c) under the Exchange Act (17
  CFR 240.13e-4(c))
  Item
  7.01.       Regulation FD Disclosure.
  The following information
  is included in this Current Report on Form 8-K as a result of Morningstar, Inc.'s
  policy regarding public disclosure of corporate information. Answers to
  additional inquiries, if any, that comply with this policy are scheduled to
  become available on July 7, 2008.
  Caution
  Concerning Forward-Looking Statements
  This current report on Form 8-K
  contains forward-looking statements as that term is used in the Private
  Securities Litigation Reform Act of 1995. These statements are based on our
  current expectations about future events or future financial performance.
  Forward-looking statements by their nature address matters that are, to
  different degrees, uncertain, and often contain words such as "may," "could," "expect,"
  "intend," "plan," "seek," "anticipate," "believe," "estimate," "predict," "potential,"
  or "continue." These statements involve known and unknown risks and
  uncertainties that may cause the events we discussed not to occur or to differ
  significantly from what we expected. For us, these risks and uncertainties
  include, among others, general industry conditions and competition; damage to
  our reputation resulting from claims made about possible conflicts of interest;
  liability for any losses that result from an actual or claimed breach of our
  fiduciary duties; legal, regulatory, or political issues related to our data
  center in China; the potential impact of market volatility on revenue from
  asset-based fees; a prolonged outage of our database and network facilities;
  challenges faced by our non-U.S. operations; and the availability of free or
  low-cost investment information. A more complete description of these risks and
  uncertainties can be found in our filings with the Securities and Exchange
  Commission, including our Annual Report on Form 10-K for the year ended December 31,
  2007. If any of these risks and uncertainties materialize, our actual future
  results may vary significantly from what we projected. We do not undertake to
  update our forward-looking statements as a result of new information or future
  events.
  Investor Questions and Answers: June 2008
  We plan
  to make written responses available addressing investor questions about our
  business on the first Friday of every month. The following answers respond to
  selected questions received through June 5, 2008. We intend to answer as
  many questions as time allows, although we will not answer product support
  questions through this channel. We may wait to respond to a given question until
  the following month if we need more time to research the answer.
  If you would like to
  submit a question, please send an e-mail to investors@morningstar.com, contact
  us via fax at 312-696-6009, or write to us at the following address:
  Morningstar, Inc.
  Investor Relations
  225 West Wacker Drive
  Chicago, IL 60606
  Capital Spending
  1.
  Cap ex has ranged between 1.5%
  and 4.3% of revenue over the past four years. Is it reasonable to expect
  expenditures to be in that range, with variances driven by seasonal factors,
  internal investment shifts, and variance in top-line growth?
  2
  In keeping with our policy of not making forecasts, we
  don't specify an expected range of capital spending as a percentage of revenue.
  We do disclose an expected amount of capital spending for the upcoming year in
  our annual 10-K and first-quarter 10-Q, and we've said that we anticipate that
  our capital expenditures in 2008 will be significantly higher than in previous
  years because of the build-out of our new office space in Chicago. We expect to
  make capital expenditures of approximately $55 million in 2008, including about
  $40 million in gross spending for the build-out of the new office space. A
  portion of the capital expenditures will be offset by $11 million in tenant
  improvement allowances.
  The bulk of our capital
  spending is for leasehold improvements and computer equipment, and the amount
  of capital spending in a given year mostly depends on the amount we decide to
  invest in these two areas to support our long-term business strategies.
  Seasonal factors and changes in top-line growth don't really affect our level
  of capital spending.
  2.
  Is it possible to lay out the
  expected free-cash flow effects of the new office building for this year and
  going forward? Apologies if you have done this before.
  As mentioned in our
  response to the previous question, we expect to spend about $40 million gross
  in 2008 for the build-out of our new office space in Chicago, or $29 million
  after accounting for the tenant improvement allowances we expect to receive.
  The table below
  (excerpted from our 10-K) shows our minimum future rental commitments due in
  each of the next five years and thereafter for all non-cancelable operating
  leases. These commitments are primarily for office space and include all of our
  global facilities, including our new headquarter in Chicago.
  Minimum Future Rental
    Commitments
  ($000)
  2008
  $
  7,427
  2009
  7,533
  2010
  13,013
  2011
  12,302
  2012
  10,454
  Thereafter
  90,540
  Total
  $
  141,269
  Non-U.S. Business
  3.
  In the US you built your business
  from the individual investor and advisor up to institutions. But overseas it
  seems that you are going the opposite route with most of the business (at the
  start) being driven by data licensing to different types of institutions and
  later efforts moving toward analysis for individuals and advisors. What
  challenges are posed by this differing strategy overseas and what might its
  longer-term implications be?
  Your summary of our approach
  to building our business outside of the United States is pretty much on target.
  We are taking a different approach in most markets outside of the United States
  partly because there needs to be an active investing and ownership culture in
  order for us to sell products to individual investors. In some (but not all)
  countries outside the United States, the investing culture is still developing.
  For example, in some European markets, investors tend to hold a larger
  percentage of their assets in cash and fixed-income securities, with less
  direct ownership of stocks and stock-based mutual funds. On the other hand, in
  Australia equity ownership levels are similar to those in North America, so our
  individual investor business is well-developed. Overall, though, the majority
  of our non-U.S. revenue is currently from the Institutional and Advisor
  segments.
  One challenge we face
  with this strategy is that in the United States, the products we develop for
  individual investors create pull demand and brand recognition among advisors
  and institutions. It may be more difficult to establish a well-known brand
  outside of the United States without a widespread retail presence. That's one
  of the reasons that we've established Web sites for individual investors in
  numerous markets outside of the United States. We also plan to continue
  expanding our fund analyst teams around the world.
  3
  As far as the long-term
  implications, we may need to invest more in sales and marketing outside of the
  United States and/or conduct additional research to tailor our products to the
  needs of the local market at the individual investor level. Despite these
  challenges, we think our approach makes sense given the current structure of
  most markets outside the United States.
  Product Pricing
  4.
  Can you lay out the current
  prices/fees you charge for:
  ·
  Advisor Workstation
  ·
  Morningstar Direct
  ·
  Investment Consulting
  ·
  Morningstar.com
  ·
  Licensed Data
  ·
  Morningstar Managed Portfolios
  ·
  Retirement advice
  We provide information
  about pricing for our major products in the 10-K, but we'll give you a brief summary
  here to make things easier.
  Morningstar Advisor
  Workstation: Pricing for the Enterprise Edition varies based on the number of
  users, as well as the level of functionality offered, and generally ranges
  between $80 and $2,975 per licensed user. The prices at the low end reflect
  tools-only enterprise licenses for a small subset of the software, while the
  high end reflects what we charge an independent financial advisor for access to
  the full range of Advisor Workstation functionality. We generally charge $5,400
  per user for an annual license for Office Edition.
  Morningstar Direct:
  Pricing for Morningstar Direct is based on the number of licenses purchased. We
  charge $16,000 for the first user, $10,500 for the second user, and $8,000 for
  each additional user.
  Investment Consulting:
  Pricing for the consulting services we provide through both Morningstar
  Associates and Ibbotson Associates varies is based on the scope of work and the
  level of service required. In the majority of our contracts, we receive asset-based
  fees, reflecting our work as a portfolio construction manager or subadvisor for
  a mutual fund or variable annuity.
  Morningstar.com: We
  currently charge $16.95 for a monthly subscription, $159 for an annual
  subscription, $269 for a two-year subscription, and $369 for a three-year
  subscription for Morningstar.com's Premium service in the United States.
  Licensed Data: Pricing
  for Licensed Data is based on the number of funds or other securities covered,
  the amount of information provided for each security, and the level of
  distribution.
  Morningstar Managed
  Portfolios: We charge asset-based fees for Morningstar Managed Portfolios. The
  management fee is based on a tiered schedule that depends on the client's
  average daily portfolio balance and generally ranges from 0.20% to 0.40% of
  assets.
  Retirement Advice: We
  offer two Retirement Advice offerings that help retirement plan participants
  plan and invest for retirement: Morningstar Retirement Manager, a service of
  Morningstar Associates, LLC, and Advice by Ibbotson, a service of Ibbotson
  Associates, Inc.  Both companies are registered investment advisors
  and wholly owned subsidiaries of Morningstar, Inc. Pricing in both areas
  depends on the number of participants, as well as the level of service we provide.
  5.
  Can [you] discuss how often your
  pricing is reviewed and how prices for your various key products have evolved
  over time?
  4
  We typically review our
  product pricing about once a year for subscription-based products, or prior to
  the contract renewal date for multi-year contracts. When evaluating our
  pricing, we look at pricing levels for competing products, the value that we
  provide to our clients, and our analysis of how the product fits in with the
  other products and services we provide for various customer segments. Typically
  we've moderately increased prices on most of our products every year or two.
  MORN Stock Ownership
  6.
  According to the Security
  Ownership Table as of 3/1/08 in the recent proxy report, director Frank Ptak
  (appointed 2/07) does not beneficially own any shares and director Bill Lyons
  (appointed 9/07 after the last annual meeting) owns 1,000
  shares. According to the discussion in the Directors' Compensation
  Equity-Based Compensation section, new non-employee directors in lieu of
  receiving an annual grant of restricted stock units, receive an initial grant
  of restricted stock units covering shares with a value of $250,000 at grant and
  vesting over a period of three years. Where is this stock ownership in the case
  of Frank Ptak? Is Bill Lyons' ownership properly represented?
  The security ownership
  table reflects share ownership only for restricted stock units that had already
  vested as of April 30, 2008. Because Frank Ptak's restricted stock units
  vested on May 15, 2008, they were not included in this table. Bill Lyons
  purchased Morningstar's common stock in a separate transaction, and his
  ownership interest is properly represented in the table.
  Recurring Revenue
  7.
  What percentage of your revenue
  would you define as recurring and how has that percentage shifted over the past
  five years?
  Although we no longer calculate a total for recurring
  revenue, we do disclose information on retention and renewal rates. We estimate
  that about 20% of our 2007 revenue was from subscription-based products, which
  have average retention rates in the range of 65% to 70%. Close to three-fourths
  of our 2007 revenue was from contract-based products (including contracts where
  we're paid asset-based fees), with an average renewal rate ranging from 95% to
  100%.
  Overall, we believe that recurring revenue continues
  to account for a substantial percentage of our company-wide revenue.
  We previously disclosed
  that recurring revenue (which we defined as the sum of renewal revenue and
  walk-in revenue) totaled about 83.8% of revenue excluding acquisitions in 2006,
  compared with 82.8% in 2005, 74.6% in 2004, and 77.4% in 2003.
  Concentration of Revenue by
  Client
  8.
  You've disclosed that your
  biggest customer is less than 10% of revenue. What percentage does that
  customer make up? Is it correct to say that life insurers comprise the majority
  of your five largest customers or are they fund companies, brokers, etc.?
  Our largest customer in
  2007 made up less than 5% of consolidated revenue. It is correct to say that
  insurance companies make up more than half of our five largest customers,
  although we also have large clients that are asset management companies,
  brokerage firms, and other types of institutions.
  Valuation Metrics for
  Acquisitions
  9.
  What are the relevant valuation
  metrics for your various acquisitions? Can you review the metrics you paid in
  recent deals for which the purchase price was disclosed?
  5
  It's been our practice to
  disclose the purchase price for acquisitions but not valuation metrics such as
  price as a multiple of sales. We typically don't break out revenue separately
  for each acquired operation; instead, we report combined revenue from acquisitions
  in our quarterly financial reports.
  We focus intently on
  valuation during our due-diligence process, and we create detailed valuation
  models when considering potential acquisitions.
  Employee Headcount
  10.
  Could you provide an employee
  headcount by business unit, even at the Individual, Advisor, Institutional
  levels? Is it possible to see how that headcount has evolved in the different
  units over time?
  Over the past three
  years, headcount for our Institutional segment has made up the largest portion of
  our total headcount, and the percentage has increased because of employees
  added with our acquisition of the fund data business from Standard &
  Poor's as well as continued growth in our data processing and development
  center in Shenzhen, China. The Advisor segment is the next-largest segment
  based on headcount, followed by the Individual segment and corporate area.
  Compensation Expense
  11.
  Is it possible to disclose
  compensation as a percentage of revenue for each of the past five years? Is it
  also possible to break this number out rather than embedding it in operating
  expenses since it's the largest overall expense item?
  We don't report a
  separate expense category for compensation, but a large portion of the expense
  recorded in all of our expense categories consists of compensation-related
  expense, including salaries, bonuses, commissions, and other
  compensation-related costs.
  Revenue from Fund Companies
  12.
  What percentage of your revenue
  comes from fund firms whose firms [funds] you rate?
  Keep in mind that we
  provide quantitative ratings on all mutual funds that have at least three years
  of performance history. This means that pretty much any fund company with which
  we do business has funds with Morningstar Ratings. The Morningstar Rating for
  mutual funds is based on a quantitative measure of a fund's historical
  performance and risk relative to funds with similar investment profiles. The
  amount of business we do with a particular fund company has no bearing on the
  ratings its funds receive, and the Morningstar Rating does not incorporate any
  analyst input.
  We don't break out
  revenue by client type. But in total, about 53% of our consolidated revenue in
  2007 was from the Institutional business segment. This segment includes revenue
  from a variety of institutional clients, including fund companies, insurance
  companies, banks, brokerage firms, media outlets, and retirement plan sponsors
  and providers.
  13.
  I am wondering about conflicts
  within Morningstar.  It seems easy on 1 star and 5 star funds to rate a
  funds' performance (star rating).  However, in the middle, what kind of
  sway is there for the 2, 3, or 4 star rated funds relative to advertising that
  a large firm may pay for on your website versus a small firm that cannot afford
  to advertise on your site.  In other words, what prevents an analyst from
  being biased by a large fund's advertising?  Has it ever happened? 
  If it were to occur, how would it be handled?  You are moving to a new
  location, how will the analysts be segregated from the other parts of the
  business?
  As we mentioned in our
  response to the previous questions, the Morningstar Rating is a quantitative
  measure. The Morningstar Rating for mutual funds, commonly called the "star
  rating," brings both
  6
  performance and risk
  together into one evaluation. We rank funds within their categories according
  to their risk-adjusted return (after accounting for all sales charges and
  expenses), and assign stars based on a classic bell-shaped curve with the
  largest section in the center. The 10% of funds in each category with the
  highest risk-adjusted return receive five stars, the next 22.5% receive four
  stars, the middle 35% receive three stars, the next 22.5% receive two stars,
  and the bottom 10% receive one star. We rate funds for up to three periods—the
  trailing three, five, and 10 years—and calculate an overall rating based on a
  weighted average of the ratings for each period. We recalculate star ratings
  monthly.
  In addition to the
  quantitative Morningstar Rating, we conduct a variety of qualitative research
  on mutual funds. Independence is at the heart of what we do, and all
  Morningstar employees are required to adhere to our Employee Code of Ethics and
  our Securities Trading Policy. In addition, we maintain a strict line of
  separation between our analysts and the sales teams. With few exceptions, sales
  personnel are prohibited from setting up meetings between analysts and clients
  or potential clients. In addition, our analysts may not disclose the content of
  their reports to any outside parties before publication.
  For more information on
  the policies we have in place to protect our analysts' independence, you can
  refer to the Code of Ethics posted on our corporate site at the link below:
  http://corporate.morningstar.com/US/documents/PR/CodeOfEthics.pdf
  Our retail fund and stock
  analysts will be physically separate from our consulting units and sales and
  marketing teams in our new corporate headquarters (as they are now).
  Effective Tax Rate
  14.
  Tax rate: It seems that the
  company's tax rate has gotten more consistent of late. Is there a run-rate or
  range investors should expect?
  We're not going to give
  you a specific answer on this for two reasons: 1) we don't give financial
  forecasts, and 2) it would be difficult to pinpoint a future tax rate with any
  level of precision if we did. We expect our tax rate to continue to vary based
  on a variety of factors, including the mix of earnings and losses in our
  international operations, the impact of tax-law changes, and tax planning
  strategies.
  Potential Developments in Data
  Business
  15.
  Does the eventual/expected sale
  of Bloomberg pose a threat to your business, i.e. if the business was purchased
  by a large rival in the data business like Reuters? Obviously the value of
  Bloomberg is large, but is that an asset that could dovetail with the
  institutional/advisor portions of your company?
  We can't speculate about
  whether the sale of Bloomberg is expected or eventual (or any other
  transactions that other companies might undertake). We believe that we're
  pursuing a sound strategy and will continue to have many opportunities
  available to us regardless of any transactions that take place among other
  companies.
  Also, we have
  historically had a different focus from Bloomberg and Reuters. We have
  typically focused more on fundamental analysis and portfolio tools as opposed
  to news and real-time data. As a results, we would not view any transaction
  involving companies that focus more on news and real-time data as a large
  competitive threat, although these assets could be viewed as complementary to
  our business.
  Investment Consulting
  16.
  For the investment consulting
  market, can you estimate your market share and name your leading competitors?
  Relative to those competitors, does your investment consulting clientele lean
  toward
  7
  specific
  types (e.g. corporate pensions, government pensions, university
  endowments) or size groups (e.g. small, mid-market, large)?
  We don't have data on the
  size of the investment consulting market based on revenue, but we estimate that
  we have roughly a 6% share of assets under advisement or management within the
  funds of funds arena. Our combined assets under advisement or management for
  Investment Consulting, managed retirement accounts, and Morningstar Managed
  Portfolios totaled about $113 billion as of year-end 2007. Cerulli Associates
  estimates that total assets in this area were about $1.9 trillion as of the
  same date.
  Some of our major
  competitors on the investment consulting side include Lipper, Frank Russell,
  Mercer, and Wilshire, as well as some smaller firms in the retirement
  consulting business. Many of our Investment Consulting clients are large
  insurance or asset management companies. We tend to focus less on other
  channels such as pensions and endowments, although we do have business in these
  areas.
  17.
  How much of the asset under
  advisement organic growth in 2005, 2006, and 2007 can be attributed to: 1)
  contract conversion from flat fee to % of assets under advisement; 2) market
  appreciation; 3) inflows from existing clients?
  The majority of organic
  growth in our assets under advisement for Investment Consulting over the past
  few years has been driven by new inflows from existing clients, as well as
  assets from new clients for Ibbotson Associates. Part of the large
  increase in assets under advisement for Ibbotson Associates in 2006 was driven
  by the conversion of one large client from a flat fee to percentage-based fees.
  Market appreciation was
  also a positive factor in the three years you mentioned, but to a lesser
  degree.
  18.
  Hypothetically, if all of your
  consulting clients converted to % of assets under advisement pricing vs. flat
  fee pricing, what would be the total approximate reported assets under
  advisement for Morningstar?
  The majority of
  Investment Consulting clients served through Morningstar Associates currently
  pay asset-based fees; on the Ibbotson Associates side, we have more clients who
  pay us flat fees. Many of the consulting projects that Ibbotson handles under
  flat-fee arrangements are for portfolio guidance rather than asset management,
  so they're not always connected to a specific asset pool. In addition, we don't
  have information on assets under management for clients who currently pay us
  flat fees, so we can't really approximate a total in this area.
  19.
  [Follow up to question from
  Morningstar's annual meeting]: Can you provide more detail on the types of
  assets/companies included in the $1.9 trillion total you cited from Cerulli
  Associates for industry-wide assets in funds of funds? What portion of these
  assets is managed in-house vs. by external managers?
  Cerulli Associates
  provides estimates on the global multimanager market based on total assets. In
  these totals, it includes funds of funds, which it defines as funds that invest
  in shares of other publicly offered funds; manager of managers, which it
  defines as vehicles managed by multiple underlying subadvisors; and funds of
  hedge funds, which are hedge funds that invest in shares of other hedge funds.
  There are a variety of investor types participating in the global multimanager
  market, including defined contribution plans, financial advisors, banks,
  defined benefit plans, high net-worth investors, insurance accounts,
  foundations, endowments, and other investors.
  Of the $1.9 trillion in
  global multimanager assets, Cerulli reports that about $1.2 trillion is
  invested in funds of funds (including funds of hedge funds); $440 billion is in
  retail manager of managers portfolios; and $300 billion is invested in
  institutional manager of manager products. Within the manager of managers
  categories, the majority of assets are "unfettered," meaning that the
  subadvisors are from outside firms. On the funds of funds side, roughly
  one-third of the assets are unfettered, and others are "fettered," or managed
  in-house, based on Cerulli's analysis.
  8
  Licensed Data
  20.
  How much of your licensed data
  organic growth over the past three years is attributable to traditional
  analytics such as mutual fund ratings and style boxes, etc. vs. new products
  launched within the last three years? Can you please provide some examples of
  products that have most contributed to organic growth over that time frame?
  Revenue from licensing
  Morningstar proprietary statistics makes up about one-third of our total
  revenue from Licensed Data. We have an extensive reach in sales of data
  licenses for our open-end fund ratings and style boxes, particularly in the
  United States, and this portion of our data licensing revenue has grown at low
  double-digit rates over the past three years. Other areas of our licensed data
  business—including global data, multi-universe packages, and other data licenses
  such as those for our "Warehouse" and "Fact Sheet" packages— have been growing
  at higher rates. Increases in the number of securities and type of data we
  collect have also been major drivers behind the growth in our Licensed Data
  business.
  21.
  How much of your organic growth
  over the past three years can you attribute to the U.S. vs. international
  within the licensed data business?
  About 60% to 70% of the
  organic growth in our Licensed Data business has been driven by business based
  in the United States, with the remainder from other areas around the world.
  Although our acquisitions of Aspect Huntley and the fund data business from
  Standard & Poor's significantly increased non-U.S. revenue for this
  product, we have also had organic growth in our Licensed Data business outside
  the United States.
  Morningstar Equity Research
  22.
  Has Morningstar disclosed the
  revenue that it receives from the Wall Street investment banks as part of their
  research settlement with Spitzer that required some use of independent
  research? A recent sell side note indicated that the 5 year term of this deal
  ends in the summer of 2009. Can the company comment on the likelihood of
  retaining some/all of that business? What would be the incentive for a Wall
  Street investment bank to keep your services beyond the mandated timeframe?
  Would it be prudent to assume that some significant portion of that revenue
  goes away starting in the summer of 2009? Thank you.
  Yes, we've previously
  disclosed that independent equity research related to the Global Analyst
  Research Settlement made up about 5% of our consolidated revenue in 2007. We
  have contracts in place to provide independent research to six of the
  investment banks who signed the settlement. The period covered by the
  settlement will expire in July 2009; after that date, the firms involved
  will no longer be required to provide independent investment research to their
  clients.
  We
  haven't yet begun formal renewal discussions with these investment banking
  firms, and we can't predict how much, if any, of this equity research revenue
  we'll retain following the end of the settlement period.
  There
  are a few reasons why an investment bank might choose to continue providing our
  research to its clients following the mandated timeframe:
  ·
  We believe that individual
  investors holding accounts with these brokerage firms and their advisors find
  our research valuable and may want to continue receiving it through this
  channel.
  ·
  These companies can enhance
  their reputation and the value they provide to their clients and advisors by
  providing them with independent research.
  ·
  We believe that long-term
  industry trends toward open architecture will help support the need for
  independent investment research.
  ·
  Many sell-side firms have
  cut back on the number of analysts they employ and the number of companies
  under coverage, which may increase the need for outside research.
  9
  ·
  We believe our fundamental
  approach to equity research, with a heavy emphasis on analyzing each company's
  degree of competitive advantage and long-term prospects, sets us apart from
  other research providers. Our analysts
  focus on determining the value of a business, its
  risks, and whether the stock price accurately reflects both.
  In
  addition, we are continuing to pursue our efforts to expand our equity research
  through other channels, such as financial advisors, asset management firms, and
  companies outside of the United States. We believe that we have a compelling
  value proposition because of our 121-person analyst staff, our broad coverage,
  and our fundamental approach to stock analysis. Our buy-side service for asset
  managers, for example, gives them access to our analysts, their valuation
  models, and their expertise on 2,000+ stocks, 130 industries, and every initial
  public offering that hits the U.S. market.
  Morningstar Advisor Workstation
  23.
  Roughly what percentage of
  Advisor Workstation users rely on the accounting/administrative functions of
  the application? I ask because I assume that those users who rely on these
  functions are less likely to switch to a rival application. Also, what rival
  applications do Advisor Workstation/Principia and Morningstar Direct compete
  with? I ask because I don't know of any that are actually very similar. Lipper
  provides data, but not much analysis it seems.
  The accounting and
  administrative functions are mainly in Advisor Workstation Office Edition,
  which is geared toward independent financial advisors and has a smaller user
  base compared with  the Enterprise
  Edition for advisors affiliated with a larger firm. About half of these users
  currently use the portfolio accounting system.
  Morningstar Advisor
  Workstation and Principia compete with products offered by other companies such
  as Thomson-Reuters, SunGard Data Systems, Standard & Poor's, Advent
  Software, Schwab Portfolio Center, Advisor Software, Inc., and Interactive
  Advisory Software.
  Morningstar Direct
  competes with products offered by other companies such as FactSet Research
  Systems, Zephyr Associates, PerTrac, Lipper (a division of Reuters), Bloomberg,
  eVestment Alliance, Strategic Insight, MPI Stylus, Informa, and Wilshire.
  To
  some extent, our products also compete with software developed internally at
  institutions. We agree with your assessment that most competing products don't
  offer the same range of functionality and analysis.
  Hedge Fund Database and Analyst
  Reports
  24.
  Who are the customers/clients for
  your hedge-fund database? Given the vagaries of hedge-fund data and research,
  are there databases that are bigger than yours by number of funds or fund
  assets? Also, hedge-fund research has been a cottage industry for some time,
  what kind of demand has there been for your hedge-fund analyst reports?
  So far, our hedge fund
  research has been primarily used by hedge funds of funds, family offices,
  consultants, mutual fund companies, and other investment managers. We're also
  marketing our hedge fund data to hedge fund administrators, which provide
  back-office services to hedge fund managers; prime brokers, which are heavy
  users of hedge fund data for research purposes; and hedge fund firms that are
  interested in obtaining data for competitive research purposes. We've created a
  hedge fund data profile page that we plan to offer to institutional
  clients, and we offer hedge fund data and manager information through our
  Altvest software and Licensed Data feeds. In addition, qualified individual
  investors and financial advisors have access to our hedge fund data and
  research through Morningstar.com, Morningstar Direct, and Advisor Workstation
  Office Edition.
  We started creating our
  hedge fund database about four years ago, and we believe that it's now one of
  the largest in the industry. We currently provide data on nearly 9,000 hedge
  funds and funds of hedge funds
  10
  globally. It is a global
  database, and is the only place where one can find proprietary Morningstar data
  points for hedge funds, such as the Morningstar Rating, Morningstar Category,
  and a family of 22 Morningstar Hedge Fund indexes.
  We're currently writing
  hedge fund research reports on a small number of individual hedge funds, but we've
  started producing shorter write-ups for a larger list of funds. We expect that
  these new analyst reports will begin appearing in some of our products later
  this year.
  Morningstar Indexes
  25.
  How do you earn money from your
  indices beyond your own products? Said another way: Aside from ETFs
  [exchange-traded funds] that license some of your indices and your own Web
  sites/software (Morningstar.com or Morningstar Direct, for example), are there other
  customers for those indices outside your own data products?
  Yes,
  in addition to the companies that license the Morningstar indexes for the
  creation of investment products, we also have a few customers who license
  Morningstar index data for benchmarking or investor communications. This is a
  small portion of our index business now, but one that we hope to see grow over
  time.
  11
  SIGNATURES
  Pursuant to the
  requirements of the Securities Exchange Act of 1934, the registrant has duly
  caused this report to be signed on its behalf by the undersigned hereunto duly
  authorized.
  MORNINGSTAR, INC.
  Date: June 6, 2008
  By:
  /s/ Scott Cooley
  Name:
  Scott Cooley
  Title:
  Chief Financial Officer
  12