Investor News

NEW YORK--(BUSINESS WIRE)-- MSCI Inc. (NYSE: MSCI), a leading global provider of investment decision support tools, including indices, portfolio risk and performance analytics and corporate governance services, today announced results for the fourth quarter and fiscal year ended November 30, 2010. For comparative purposes, selected results excluding the impact of acquisitions are presented, as are pro forma results as if MSCI had acquired RiskMetrics Group, Inc. ("RiskMetrics") on December 1, 2008.

(Note: Percentage changes are referenced to the comparable period in fiscal year 2009, unless otherwise noted.)

• Operating revenues increased 79.6% to $213.3 million in fourth quarter 2010 and 49.7% to $662.9 million for fiscal year 2010.
• Compared to pro forma 2009, revenues grew by 9.2% to $213.3 million in fourth quarter 2010. Pro forma fiscal year 2010 revenues rose 9.4% to $816.4 million.
• Net income increased by 23.4% to $30.3 million in fourth quarter 2010. For fiscal year 2010, net income increased by 12.7% to $92.2 million. Diluted EPS for fourth quarter 2010 rose 4.2% to $0.25. For fiscal year 2010, Diluted EPS rose 1.3% to $0.81.
• Adjusted EBITDA (defined below) grew by 66.7% to $98.9 million with an Adjusted EBITDA margin of 46.4% for fourth quarter 2010 and for fiscal year 2010 grew by 43.0% to $307.6 million with a margin of 46.4%.
• Compared to pro forma fourth quarter 2009, Adjusted EBITDA grew by 16.9% to $98.9 million and the Adjusted EBITDA margin expanded to 46.4% from 43.3%. Pro forma fiscal year 2010 Adjusted EBITDA rose 14.1% to $356.6 million and the Adjusted EBITDA margin expanded to 43.7% from 41.9%.
• Fourth quarter 2010 Adjusted EPS (defined below) rose 16.1% to $0.36 and 20.5% to $1.35 for fiscal year 2010.

Henry A. Fernandez, Chairman and CEO, said, "We delivered a strong fourth quarter 2010, aided by strong demand for our equity indices and our risk management analytics products. Our pro forma revenues grew by 9.2% and our pro forma Adjusted EBITDA grew by 16.9%. Our Adjusted EPS grew by 16.1%.

"Fiscal year 2010 was an important year for MSCI. By acquiring RiskMetrics and Measurisk, we have enhanced our position as a leading provider of risk management and reporting solutions for our institutional investor clients. In addition, we continued to strengthen MSCI's standing as a leading provider of benchmark equity indices to global active and passive investors. We are focused on completing our integration process and continuing to invest in our businesses. These investments should enable MSCI to take advantage of the long-term trends driving our business and contribute to our revenue growth over the next three to five years," added Mr. Fernandez.

Table 1: MSCI Inc. Selected Financial Information (unaudited)

		Three Months Ended						Change from		Fiscal Year Ended						Change from
		November 30,						November 30,		November 30,						November 30,
In thousands, except per share data		2010			2009			2009		2010			2009			2009
Operating revenues		$	213,318		$	118,790		79.6%		$	662,901		$	442,948		49.7%
Operating expenses			142,598			75,034		90.0%			456,778			291,956		56.5%
Net income			30,266			24,535		23.4%			92,170			81,801		12.7%
% Margin			14.2%			20.7%					13.9%			18.5%
Diluted EPS		$	0.25		$	0.24		4.2%		$	0.81		$	0.80		1.3%
Adjusted EPS1			0.36			0.31		16.1%			1.35			1.12		20.5%
Adjusted EBITDA2		$	98,914		$	59,343		66.7%		$	307,603		$	215,155		43.0%
% Margin			46.4%			50.0%					46.4%			48.6%
1 Per share net income before after-tax impact of amortization of intangibles, non-recurring stock-based compensation, third party transaction expenses associated with the acquisition of RiskMetrics and debt repayment expenses. See Table 17 titled "Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income and EPS" and information about the use of non-GAAP financial information provided under "Notes Regarding the Use of Non-GAAP Financial Measures."
2 Net Income before interest income, interest expense, other expense (income), provision for income taxes, depreciation, amortization, non-recurring stock-based compensation, and third party transaction expenses associated with the acquisition of RiskMetrics. See Table 15 titled "Reconciliation of Adjusted EBITDA to Net Income" and information about the use of non-GAAP financial information provided under "Notes Regarding the Use of Non-GAAP Financial Measures."

Summary of Results for Fiscal Fourth Quarter 2010 compared to Fiscal Fourth Quarter 2009

Operating Revenues — See Table 4

Total operating revenues for the three months ended November 30, 2010 (fourth quarter 2010) increased $94.5 million, or 79.6%, to $213.3 million compared to $118.8 million for the three months ended November 30, 2009. The biggest drivers of revenue growth were the acquisitions of RiskMetrics and Measurisk which took place on June 1, 2010 and July 30, 2010, respectively, and which together contributed revenues of $78.6 million to growth in the fourth quarter. Total subscription revenues rose $83.0 million, or 88.5%, to $176.8 million while asset-based fees increased $5.5 million, or 23.9%, to $28.3 million. Non-recurring revenues increased $6.1 million to $8.2 million.

Excluding the impact of the acquisitions of RiskMetrics and Measurisk, total operating revenues grew by $15.9 million, or 13.4%, to $134.7 million, subscription revenues grew $7.9 million, or 8.4%, to $101.7 million in fourth quarter 2010 and non-recurring revenues increased $2.5 million to $4.7 million.

By segment, Performance and Risk revenues rose $66.2 million, or 55.8%, to $185.0 million. The Performance and Risk segment is comprised of index and ESG (defined below) products, risk management analytics, portfolio management analytics, and energy and commodity analytics. Revenues for the Governance segment were $28.3 million.

Index and ESG products: Our index and ESG products primarily consist of index subscriptions, equity index asset based fees products and environmental, social and governance ("ESG") products. Revenues related to Index and ESG products increased $19.9 million, or 27.8%, to $91.2 million. Index and ESG subscription revenue grew by $12.7 million, or 26.2%, to $61.1 million. The inclusion of ESG products contributed revenue growth of $4.7 million. Non-recurring index and ESG products revenue rose to $4.9 million from $2.1 million.

Excluding the impact of the RiskMetrics acquisition, index and ESG subscription revenue grew by $8.1 million, or 16.7%, driven by higher revenues from MSCI's core benchmark indices and higher usage fees. Non-recurring revenues were $4.5 million, up from $2.1 million in fourth quarter 2009.

Revenues attributable to equity index asset based fees rose $7.2 million, or 31.4%, to $30.0 million. The increase in equity index asset-based fees was driven primarily by an increase in ETF asset-based fees. The average value of assets in ETFs linked to MSCI equity indices increased 38.7% to $300.7 billion for fourth quarter 2010 compared to $216.8 billion for fourth quarter 2009. As of November 30, 2010, the value of assets in ETFs linked to MSCI equity indices was $311.0 billion, representing an increase of $76.8 billion, or 32.8%, from $234.2 billion as of November 30, 2009 and $52.3 billion, or 20.2%, from $258.7 billion as of August 31, 2010. We estimate that the $52.3 billion sequential increase was attributable to $28.2 billion of net asset appreciation and cash inflows of $24.1 billion in fourth quarter 2010. The three MSCI indices with the largest amount of ETF assets linked to them as of November 30, 2010 were the MSCI Emerging Markets, EAFE (an index of stocks in developed markets outside North America), and U.S. Broad Market indices. The assets linked to these indices were $102.7 billion, $39.4 billion, and $15.6 billion, respectively. Asset-based fees also include $1.7 million of non-recurring revenue in fourth quarter 2010.

Risk management analytics: Our risk management analytics products offer a consistent risk assessment framework for managing and monitoring investments in a variety of asset classes and are based on our proprietary integrated fundamental multi-factor risk models, value-at-risk methodologies and asset valuation models. Revenues related to risk management analytics increased $47.3 million, or 444.9%, to $58.0 million. The acquisitions of RiskMetrics and Measurisk added $45.8 million, or 430.1%, to growth in the fourth quarter.

Excluding the impact of the acquisitions, risk management analytics revenues grew by $1.6 million, or 14.8%. Increased revenues from the BarraOne product were the biggest driver of this growth.

Portfolio management analytics: Our portfolio management analytics products consist of analytics tools for equity and fixed income portfolio management. Revenues related to portfolio management analytics decreased by $0.9 million, or 2.8%, to $31.0 million. Declines in software and analytics revenues more than offset a modest increase in revenues from the licensing of models.

Energy and commodity analytics: Our energy and commodity analytics products consist of software applications which help users value and model physical assets and derivatives across a number of market segments including energy and commodity assets. Revenues from energy and commodity analytics products declined slightly by $0.1 million, or 1.4%, to $4.9 million. Growth in options analytics was more than offset by a decline in portfolio products revenues.

Governance: Our governance products consist of corporate governance products and services, including proxy research, recommendation and voting services for asset owners and asset managers as well as governance advisory and compensation services for corporations. It also includes forensic accounting research as well as class action monitoring and claims filing services to aid institutional investors in the recovery of funds from securities litigation, all of which were acquired as part of our acquisition of RiskMetrics. Governance revenues were $28.3 million in fourth quarter 2010.

Operating Expenses — See Table 6

Total operating expense increased $67.6 million, or 90.0%, to $142.6 million in fourth quarter 2010 compared to fourth quarter 2009. The acquisitions added $65.1 million to operating expenses. Restructuring costs related to the ongoing integration of RiskMetrics contributed $1.9 million to operating expenses.

Compensation costs: Total compensation costs rose $36.9 million, or 81.0%, to $82.4 million in fourth quarter 2010. The increase in compensation largely reflects an increase in headcount, most of which was due to the acquisition of RiskMetrics. Excluding non-recurring stock-based compensation expense of $4.0 million, total compensation costs rose $39.1 million, or 99.5%, to $78.4 million.

Non-recurring stock-based compensation expenses for fourth quarter 2010 consisted of $1.9 million related to the founders grants awarded to certain employees at the time of the Company's initial public offering ("IPO") and $2.1 million related to the performance awards granted to certain employees in connection with the acquisition of RiskMetrics. The aggregate value of the performance awards of approximately $15.9 million is being amortized through 2012 and the aggregate value of the founders grants of approximately $68.0 million is being amortized through 2011. As a result of the vesting of portions of the founders grants, the related expense decreased $4.3 million, or 69.0%, to $1.9 million. In fourth quarter 2010, $1.6 million and $2.4 million of costs related to non-recurring stock-based compensation were recorded in cost of services and selling, general and administrative expense ("SG&A"), respectively.

Non-compensation costs excluding depreciation and amortization: Total non-compensation operating expenses excluding depreciation and amortization and restructuring costs rose $15.9 million, or 78.7%, to $36.0 million in fourth quarter 2010. The acquisition of RiskMetrics was the biggest driver behind the increase.

Cost of services: Total cost of services expenses rose by $36.9 million, or 114.6%, to $69.1 million. Within costs of services, compensation expenses increased by $27.6 million, or 120.3%, and non-compensation expenses increased by $9.4 million, or 100.5%. In both cases, the biggest driver behind the increase was the acquisition of RiskMetrics.

Selling, general and administrative expense (SG&A): Total SG&A expense rose $15.8 million, or 47.2%, to $49.3 million. Within SG&A, compensation expenses increased by $9.3 million, or 41.1%, and non-compensation expenses increased by $6.5 million, or 60.0%. In both cases, the biggest driver behind the increase was the acquisition of RiskMetrics.

Amortization of intangibles: Amortization of intangibles expense totaled $16.7 million compared to $6.3 million in fourth quarter 2009. The $10.4 million increase consisted of $12.4 million of increased amortization associated with the acquisitions of RiskMetrics and Measurisk, partially offset by a $2.0 million decline in amortization of intangible assets related to the acquisition of Barra.

Adjusted EBITDA — See Table 15

Adjusted EBITDA, which excludes among other things the impact of non-recurring stock-based compensation, was $98.9 million, an increase of $39.6 million, or 66.7% from fourth quarter 2009. Adjusted EBITDA margin declined to 46.4% from 50.0% as a result of the dilutive impact of the acquisition of the lower margin RiskMetrics.

By segment, Adjusted EBITDA for the Performance and Risk segment increased $31.2 million, or 52.6%, to $90.6 million from fourth quarter 2009. Adjusted EBITDA margin for this segment fell to 48.9% from 50.0% in fourth quarter 2009. Adjusted EBITDA for the Governance segment was $8.4 million and the Adjusted EBITDA margin was 29.6%.

See Table 15 titled "Reconciliation of Adjusted EBITDA to Net Income" and "Notes Regarding the Use of Non-GAAP Financial Measures" below.

Other Expense (Income), Net

Other expense (income), net for fourth quarter 2010 was $19.6 million, an increase of $15.5 million from fourth quarter 2009. Interest expense rose $13.0 million as a result of the increased levels of indebtedness incurred in connection with the acquisition of RiskMetrics. The remaining $2.5 million increase primarily reflects $2.4 million of increased foreign exchange losses recognized during fourth quarter 2010.

Provision for Income Taxes

The provision for income tax expense was $20.8 million for fourth quarter 2010, an increase of $5.7 million, or 37.7%, compared to $15.1 million for the same period in 2009. The effective tax rate was 40.7% for fourth quarter 2010 compared to 38.1% for fourth quarter 2009. The fourth quarter 2010 effective tax rate excluding the impact of transaction costs would have been 39.9%.

Net Income and Earnings per Share - See Table 17

Net income increased $5.7 million, or 23.4%, to $30.3 million for fourth quarter 2010. The net income margin decreased to 14.2% from 20.7% as a result of the impact of the acquisition of the lower margin RiskMetrics business as well as the additional amortization of intangibles, restructuring costs, and higher interest expense related to the same acquisition. Diluted EPS increased 4.2% to $0.25.

Adjusted net income, which excludes the after-tax impact of amortization of intangibles, non-recurring stock-based compensation expense, and restructuring costs totaling $14.1 million, rose $12.0 million, or 37.3%, to $44.3 million. Adjusted EPS, which excludes the after-tax, per share impact of amortization of intangibles, non-recurring stock-based compensation expense, and restructuring costs totaling $0.11, rose 16.1% to $0.36.

See table 17 titled "Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income and EPS."

Summary of Results for Fiscal Year 2010 compared to Fiscal Year 2009

Operating Revenues — See Table 5

Total operating revenues for fiscal year 2010 increased $220.0 million, or 49.7%, to $662.9 million compared to $442.9 million for fiscal year 2009. The acquisitions of RiskMetrics and Measurisk added revenues of $156.7 million in fiscal year 2010. Total subscription revenue rose $175.6 million, or 48.5%, to $537.8 million, while asset-based fees rose $32.1 million, or 44.6%, to $104.1 million. Total non-recurring revenues increased $12.2 million, or 138.1%, to $21.0 million.

Excluding the impact of the acquisitions, total operating revenues grew by $63.2 million, or 14.3%, subscription revenues grew by $26.5 million, or 7.3%, and non-recurring revenues grew by $4.6 million, or 52.2%, from fiscal year 2009. Excluding the impact of the acquisitions, index and ESG products and risk management analytics revenues grew 23.3% and 21.2%, respectively, in fiscal year 2010. Portfolio management analytics revenues declined 4.7% and Energy and other commodity analytics revenues rose 4.5%.

By segment, Performance and Risk revenues rose $161.4 million, or 36.4%, to $604.3 million for fiscal year 2010. Governance revenues were $58.6 million.

Operating Expenses — See Table 7

Total operating expenses increased $164.8 million, or 56.5%, to $456.8 million in fiscal year 2010 compared to fiscal year 2009. Operating expenses included third party transaction expenses related to the acquisition of RiskMetrics of $21.2 million and restructuring costs of $8.9 million. Excluding these expenses, total operating expenses would have risen by $134.7 million, or 46.1%. The $134.7 million increase reflects increases of $80.0 million, or 67.4%, in cost of services and $33.3 million, or 24.5%, in SG&A expense.

Adjusted EBITDA — See Table 15

Adjusted EBITDA was $307.6 million, an increase of $92.4 million, or 43.0%, from fiscal year 2009. Adjusted EBITDA margin fell to 46.4% from 48.6%.

By segment, Adjusted EBITDA for the Performance and Risk segment increased $76.5 million, or 35.5%, to $291.6 million from fiscal year 2009. Adjusted EBITDA margin fell to 48.3% from 48.6% in fiscal year 2009. Adjusted EBITDA for the Governance segment was $16.0 million and the Adjusted EBITDA Margin was 27.2%.

See Table 15 titled "Reconciliation of Adjusted EBITDA to Net Income" and "Notes Regarding the Use of Non-GAAP Financial Measures" below.

Other Expense (Income), Net

Other expense (income), net for fiscal year 2010 was $52.6 million, an increase of $33.4 million from fiscal year 2009. Approximately $31.7 million of increased interest expense resulted from the $1,275.0 million term loan we assumed as part of our acquisition of RiskMetrics and interest expense recognized during fiscal year 2010 associated with the accelerated amortization of deferred financing and debt discount costs as a result of our termination of our former term loans. In addition, the increase in other expense (income) reflects $2.6 million of increased foreign exchange losses partially offset by $1.0 million of increased miscellaneous non-operating income.

Provision for Income Taxes

The provision for income tax expense was $61.3 million for fiscal year 2010, an increase of $11.4 million, or 22.8%, compared to $49.9 million for fiscal year 2009. Our effective tax rate for fiscal year 2010 was 40.0% compared to 37.9% for fiscal year 2009. The fiscal year 2010 effective tax rate includes the impact of the acquisition-related transaction costs, some of which were not tax deductible, which increased our effective tax rate by 2.6%.

Net Income and Earnings per Share — See Table 17

Net income increased $10.4 million, or 12.7%, to $92.2 million and the net income margin decreased to 13.9% from 18.5%. Diluted EPS rose by 1.3% to $0.81 from $0.80.

Adjusted net income, which excludes the after-tax impact of amortization of intangibles, non-recurring stock-based compensation expense, transaction expenses, debt repayment expenses, and restructuring costs totaling $62.2 million, rose $40.1 million, or 35.1%, to $154.3 million. Adjusted EPS, which excludes the after-tax, per share impact of amortization of intangibles, non-recurring stock-based compensation expense, transaction expenses, debt repayment expenses, and restructuring costs totaling $0.54, rose 20.5% to $1.35 in fiscal year 2010.

See table 17 titled "Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income and EPS."

Summary of Results for Pro Forma Fourth Quarter 2010 compared to Pro Forma Fourth Quarter 2009

Operating Revenues — See Table 9

Compared to pro forma fourth quarter 2009, total operating revenues increased $18.1 million, or 9.2%, to $213.3 million. By segment, Performance and Risk revenues rose $22.1 million, or 13.6%, to $185.0 million. Governance revenue trends are described further below. Subscription revenues rose by $12.2 million, or 7.4%, to $176.8 million and non-recurring revenues increased $0.4 million to $8.2 million.

Index and ESG products: Compared to pro forma fourth quarter 2009, total index and ESG revenues rose $15.4 million, or 20.2%, to $91.2 million. Index and ESG subscription revenues rose by $8.2 million, or 15.5%, to $61.1 million from $53.0 million. The strong growth was driven by higher revenues from MSCI's core benchmark indices and higher usage fees. Revenues from asset-based fees increased $7.2 million, or 31.4%, to $30.0 million, compared to pro forma fourth quarter 2009. Non-recurring Index and ESG products revenues rose by $2.2 million to $4.9 million.

Risk management analytics: Compared to pro forma fourth quarter 2009, risk management analytics revenues rose $7.8 million, or 15.4% to $58.0 million, driven by growth in revenues from both BarraOne and RiskManager products. The acquisition of Measurisk contributed $3.3 million, or 6.6%, to growth in the fourth quarter.

Governance: Compared to pro forma fourth quarter 2009, governance revenues declined $4.1 million, or 12.6%, to $28.3 million. Because a higher proportion of non-recurring revenues in this segment are recognized in December, which are included in the pro forma fourth quarter 2009 figure but excluded from that of 2010, the pro forma comparison for the fourth quarter results in a seasonal mismatch that impacted the comparison by $1.2 million. Excluding this timing difference, revenues fell by $2.9 million, or 9.4%.

After adjusting for differences in seasonality, the 9.4% fall in revenues was led by a decline of 12.3% in proxy research and voting revenues offset, in part, by a 1.8% increase in revenues from our corporate compensation advisory business. Revenues from forensic accounting services also declined. Non-recurring revenues were $2.8 million in fourth quarter 2010 versus $4.4 million in the pro forma fourth quarter 2009.

The acquisition of RiskMetrics did not impact the revenues attributable to the asset-based fees sub-category of index and ESG products, portfolio management analytics and energy and commodity analytics and comparisons for these products are not presented. Comparisons to fourth quarter 2009 revenues comparisons are discussed in the Summary of Results for Fiscal Fourth Quarter 2010 compared to Fiscal Fourth Quarter 2009 above.

Operating Expenses — See Table 10

Compared to pro forma fourth quarter 2009, total operating expenses excluding restructuring costs fell $0.1 million to $140.2 million.

Compensation costs: Compared to pro forma fourth quarter 2009, compensation costs excluding non-recurring stock-based compensation expense rose $3.4 million, or 4.5%, to $78.4 million. The increase in compensation costs reflects higher headcount and an increase in overall compensation. Compensation costs benefited from a reduction in the full year bonus accrual, which had a $1.5 million impact on fourth quarter 2010. Total non-recurring stock-based compensation expense fell by $2.2 million, or 35.6%, to $4.0 million.

Non-compensation costs excluding depreciation and amortization: Compared to pro forma fourth quarter 2009, total non-compensation costs excluding depreciation and amortization as well as restructuring costs increased $0.3 million, or 0.9%, to $36.0 million. Higher outside professional and travel and entertainment expenses more than offset lower taxes and license fees.

Cost of services: Compared to pro forma fourth quarter 2009, total cost of services rose $0.6 million, or 0.8%, to $69.1 million. Compensation expenses excluding non-recurring stock-based compensation expense rose $1.6 million, or 3.3%, to $48.8 million. Non-compensation expenses fell by $0.5 million, or 2.7%, to $18.7 million, driven by lower market data costs.

Selling, general and administrative expense (SG&A): Compared to pro forma fourth quarter 2009, total SG&A expense rose $0.9 million, or 1.9%, to $49.3 million. Within SG&A, compensation expenses excluding non-recurring stock-based compensation rose $1.8 million, or 6.6%, to $29.5 million. Non-compensation expenses rose $0.8 million, or 5.1%, to $17.4 million. The increase in non-compensation expenses was driven primarily by higher outside professional and travel and entertainment expenses.

Adjusted EBITDA — See Table 16

Compared to pro forma fourth quarter 2009, Adjusted EBITDA increased $14.3 million, or 16.9%, to $98.9 million and the margin expanded to 46.4% from 43.3%. Performance and Risk segment Adjusted EBITDA grew by $14.5 million, or 19.1%, to $90.6 million and the margin increased to 48.9% from 46.7%. Governance Adjusted EBITDA fell by $0.2 million, or 2.7%, to $8.4 million and the margin increased to 29.6% from 26.5%.

See Table 16 titled "Reconciliation of Pro Forma Adjusted EBITDA to Pro Forma Net Income" and "Notes Regarding the Use of Non-GAAP Financial Measures" below.

Summary of Results for Pro Forma Fiscal Year 2010 compared to Pro Forma Fiscal Year 2009

Operating Revenues — See Table 9

Total operating revenues for the pro forma fiscal year 2010 compared to pro forma fiscal year 2009 rose $70.1 million, or 9.4%, to $816.4 million. Subscription revenue rose $35.7 million, or 5.6%, to $679.0 million, driven by growth in index and ESG subscriptions and risk management analytics, which more than offset declines from portfolio management analytics and governance. Asset-based fees rose $32.1 million, or 44.6%, to $104.1 million. Non-recurring revenues increased by $2.3 million, or 7.4%, to $33.4 million, as higher non-recurring index and ESG subscription revenues offset declines in non-recurring governance and risk management analytics revenues. The acquisition of Measurisk contributed $4.4 million, or 0.6%, to growth for fiscal year 2010.

The acquisition of RiskMetrics did not impact the revenues attributable to the asset-based fees sub-category of index and ESG products, portfolio management analytics and energy and commodity analytics and comparisons for these products are not presented. Comparisons to fiscal year 2009 revenues are discussed in the Summary of Results for Fiscal Year 2010 compared to Fiscal Year 2009 above.

By segment, Performance and Risk revenues rose $79.3 million, or 12.9%, to $693.2 million. Governance revenues declined $9.2 million, or 6.9%, to $123.2 million.

Operating Expenses — See Table 10

Compared to pro forma fiscal year 2009, total operating expense for pro forma fiscal year 2010 increased $13.4 million, or 2.4%, to $567.3 million.

Total compensation expense excluding non-recurring stock-based compensation increased $20.8 million, or 7.0%, to $319.1 million. Non-compensation costs excluding depreciation and amortization and restructuring costs rose $5.3 million, or 3.9%, to $140.7 million.

Compared to pro forma fiscal year 2009, total cost of services for pro forma fiscal year 2010 rose $14.0 million, or 5.4%, to $272.9 million. The growth was driven by an increase of $12.9 million, or 7.0%, in compensation excluding non-recurring stock-based compensation expense and a $5.8 million, or 8.9%, increase in non-compensation expenses.

Total SG&A declined $2.1 million, or 1.1%, to $199.3 million in fiscal year 2010. The decline was driven by a reduction of $9.6 million, or 55.3%, in non-recurring stock-based compensation and a decrease of $0.5 million, or 0.7%, in non-compensation expenses partially offset by an increase of $7.9 million, or 7.0%, in compensation excluding non-recurring stock-based compensation expense.

Adjusted EBITDA — See Table 16

Compared to pro forma fiscal year 2009, pro forma fiscal year Adjusted EBITDA increased $44.0 million, or 14.1%, to $356.6 million and the margin expanded to 43.7% from 41.9%.

By segment, Performance and Risk Adjusted EBITDA rose $45.1 million, or 16.1%, to $324.3 million. The margin expanded to 46.8% from 45.5%. Governance Adjusted EBITDA declined $1.1 million, or 3.2%, to $32.3 million and the margin rose to 26.2% from 25.2%.

See Table 16 titled "Reconciliation of Pro Forma Adjusted EBITDA to Pro Forma Net Income" and "Notes Regarding the Use of Non-GAAP Financial Measures" below.

Conference Call Information

Investors will have the opportunity to listen to MSCI Inc.'s senior management review fourth quarter 2010 results on Thursday, January 13, 2011 at 11:00 am Eastern Time. To hear the live event, visit the investor relations section of MSCI's website, http://ir.msci.com/events.cfm, or dial 1-877-312-9206 within the United States. International callers dial 1-408-774-4001.

An audio recording of the conference call will be available on our website approximately two hours after the conclusion of the live event and will be accessible through January 20, 2011. To listen to the recording, visit http://ir.msci.com/events.cfm, or dial 1-800-642-1687 (passcode: 33768957) within the United States. International callers dial 1-706-645-9291 (passcode: 33768957).

About MSCI Inc.

MSCI Inc. is a leading provider of investment decision support tools to investors globally, including asset managers, banks, hedge funds and pension funds. MSCI products and services include indices, portfolio risk and performance analytics, and governance tools.

The company's flagship product offerings are: the MSCI indices which include over 120,000 daily indices covering more than 70 countries; Barra portfolio risk and performance analytics covering global equity and fixed income markets; RiskMetrics market and credit risk analytics; ISS governance research and outsourced proxy voting and reporting services; FEA valuation models and risk management software for the energy and commodities markets; and CFRA forensic accounting risk research, legal/regulatory risk assessment, and due-diligence. MSCI is headquartered in New York, with research and commercial offices around the world. MSCI#IR

For further information on MSCI Inc. or our products please visit www.msci.com.

Forward-Looking Statements

This release contains forward-looking statements. These statements relate to future events or to future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "predict," "potential," or "continue" or the negative of these terms or other comparable terminology. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control and that could materially affect actual results, levels of activity, performance, or achievements.

Other factors that could materially affect actual results, levels of activity, performance or achievements can be found in MSCI's Annual Report on Form 10-K for the fiscal year ended November 30, 2009 and filed with the Securities and Exchange Commission (SEC) on January 29, 2010, and in quarterly reports on Form 10-Q and current reports on Form 8-K filed with the SEC. If any of these risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary significantly from what we projected. Any forward-looking statement in this release reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. We assume no obligation to publicly update or revise these forward-looking statements for any reason, whether as a result of new information, future events, or otherwise.

Notes Regarding the Use of Non-GAAP Financial Measures

MSCI has presented supplemental non-GAAP financial measures as part of this earnings release. A reconciliation is provided below that reconciles each non-GAAP financial measure with the most comparable GAAP measure. The presentation of non-GAAP financial measures should not be considered as alternative measures for the most directly comparable GAAP financial measures. These measures are used by management to monitor the financial performance of the business, inform business decision making and forecast future results.

Adjusted EBITDA is defined as net income before provision for income taxes, other net expense and income, depreciation and amortization, non-recurring stock-based compensation expense, restructuring costs, and third party transaction costs related to the acquisition of RiskMetrics.

Adjusted net income and Adjusted EPS are defined as net income and EPS, respectively, before provision for non-recurring stock-based compensation expenses, amortization of intangible assets, third party transaction costs related to the acquisition of RiskMetrics, restructuring costs, and the accelerated interest expense resulting from the termination of an interest rate swap and the accelerated amortization of deferred financing and debt discount costs (debt repayment expenses), as well as for any related tax effects.

We believe that adjustments related to transaction costs and debt repayment expenses are useful to management and investors because it allows for an evaluation of MSCI's underlying operating performance by excluding the costs incurred in connection with the acquisition of RiskMetrics. Additionally, we believe that adjusting for non-recurring stock-based compensation expenses and the amortization of intangible assets may help investors compare our performance to that of other companies in our industry as we do not believe that other companies in our industry have as significant a portion of their operating expenses represented by one-time non-recurring stock-based compensation expenses and amortization of intangible assets. We believe that the non-GAAP financial measures presented in this earnings release facilitate meaningful period-to-period comparisons and provide a baseline for the evaluation of future results.

Adjusted EBITDA, Adjusted net income and Adjusted EPS are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies.

Table 2: MSCI Inc. Consolidated Statement of Income (unaudited)

			Three Months Ended												Fiscal Year Ended
			November 30,								August 31,				November 30,
In thousands, except per share data				2010				2009				2010				2010				2009
Operating revenues			$	213,318			$	118,790			$	202,733			$	662,901			$	442,948
Operating expenses
Cost of services				69,131				32,214				69,741				198,626				118,665
Selling, general and administrative				49,300				33,487				63,306				190,244				135,780
Restructuring costs				1,943				-				6,953				8,896				-
Amortization of intangible assets				16,694				6,268				16,350				41,599				25,554
Depreciation and amortization of property,				5,530				3,065				4,934				17,413				11,957
equipment, and leasehold improvements
Total operating expenses			$	142,598			$	75,034			$	161,284			$	456,778			$	291,956
Operating income				70,720				43,756				41,449				206,123				150,992
Interest income				(128	)			(339	)			(114	)			(993	)			(1,053	)
Interest expense				17,495				4,513				20,415				51,337				19,683
Other expense (income)				2,274				(71	)			524				2,288				641
Other expense, net			$	19,641			$	4,103			$	20,825			$	52,632			$	19,271
Income before income taxes				51,079				39,653				20,624				153,491				131,721
Provision for income taxes				20,813				15,118				10,305				61,321				49,920
Net income			$	30,266			$	24,535			$	10,319			$	92,170			$	81,801
Earnings per basic common share			$	0.25			$	0.24			$	0.09			$	0.82			$	0.80
Earnings per diluted common share			$	0.25			$	0.24			$	0.08			$	0.81			$	0.80
Weighted average shares outstanding used
in computing earnings per share
Basic				119,309				101,383				118,339				112,074				100,607
Diluted				121,172				101,952				120,341				113,357				100,860

Table 3: MSCI Inc. Selected Balance Sheet Items (unaudited)

								As of
								November 30,			November 30,
In thousands								2010			2009
Cash and cash equivalents								$	226,575		$	176,024
Short-term investments									73,891			295,304
Trade receivables, net of allowances									147,662			77,180
Deferred revenue								$	271,300		$	152,944
Current maturities of long-term debt									54,916			42,088
Long-term debt, net of current maturities									1,207,881			337,622

Table 4: Fourth Quarter 2010 Operating Revenues by Product Category

				Three Months Ended									Change from
				November 30,						August 31,			November 30,			August 31,
In thousands				2010			2009			2010			2009			2010
Index and ESG products
	Subscriptions			$	61,143		$	48,454		$	58,984		26.2	%		3.7	%
	Asset-based fees				30,045			22,874			25,134		31.4	%		19.5	%
Index and ESG products total					91,188			71,328			84,118		27.8	%		8.4	%
Risk management analytics					57,980			10,640			54,593		444.9	%		6.2	%
Portfolio management analytics					30,993			31,883			30,424		(2.8	%)		1.9	%
Energy and commodity analytics					4,871			4,939			3,290		(1.4	%)		48.0	%
	Total Performance and Risk revenues			$	185,032		$	118,790		$	172,425		55.8	%		7.3	%
	Total Governance revenues				28,286			-			30,308		n/m			(6.7	%)
Total operating revenues				$	213,318		$	118,790		$	202,733		79.6	%		5.2	%
	Subscriptions			$	176,791		$	93,770		$	171,384		88.5	%		3.2	%
	Asset-based fees				28,330			22,874			25,134		23.9	%		12.7	%
	Non-recurring revenues				8,197			2,146			6,215		282.0	%		31.9	%
Total operating revenues				$	213,318		$	118,790		$	202,733		79.6	%		5.2	%

Table 5: Fiscal Year 2010 Operating Revenues by Product Category

					Fiscal Year Ended
					November 30,
In thousands					2010			2009			Change
Index and ESG products
	Subscriptions				$	224,600		$	188,531		19.1	%
	Asset-based fees					105,799			71,966		47.0	%
Index and ESG products total						330,399			260,497		26.8	%
Risk management analytics						134,521			37,656		257.2	%
Portfolio management analytics						123,159			129,270		(4.7	%)
Energy and commodity analytics						16,228			15,525		4.5	%
	Total Performance and Risk revenues				$	604,307		$	442,948		36.4	%
	Total Governance revenues					58,594			-		n/m
Total operating revenues					$	662,901		$	442,948		49.7	%
	Subscriptions				$	537,768		$	362,140		48.5	%
	Asset-based fees					104,084			71,966		44.6	%
	Non-recurring revenues					21,049			8,842		138.1	%
Total operating revenues					$	662,901		$	442,948		49.7	%

Table 6: Additional Fourth Quarter 2010 Operating Expense Detail

					Three Months Ended									Change from
					November 30,						August 31,			November 30,			August 31,
In thousands					2010			2009			2010			2009			2010
Cost of services
	Compensation				$	48,849		$	20,800		$	50,313		134.8	%		(2.9	%)
	Non-Recurring Stock Based Comp					1,617			2,103			1,624		(23.1	%)		(0.4	%)
	Total Compensation				$	50,466		$	22,903		$	51,937		120.3	%		(2.8	%)
	Non-Compensation					18,665			9,311			17,804		100.5	%		4.8	%
Total cost of services					$	69,131		$	32,214		$	69,741		114.6	%		(0.9	%)
Selling, general and administrative
	Compensation					29,508			18,473			30,280		59.7	%		(2.5	%)
	Non-Recurring Stock Based Comp					2,410			4,151			2,603		(41.9	%)		(7.4	%)
	Total Compensation				$	31,918		$	22,624		$	32,883		41.1	%		(2.9	%)
	Transaction expenses					-			-			13,692		-			-
	Non-compensation excl. transaction expenses					17,382			10,863			16,731		60.0	%		3.9	%
Total selling, general and administrative					$	49,300		$	33,487		$	63,306		47.2	%		(22.1	%)
Restructuring costs						1,943			-			6,953		n/m			(72.1	%)
Amortization of intangible assets						16,694			6,268			16,350		166.4	%		2.1	%
Depreciation and amortization						5,530			3,065			4,934		80.4	%		12.1	%
Total operating expenses					$	142,598		$	75,034		$	161,284		90.0	%		(11.6	%)
In thousands
Total non-recurring stock based comp					$	4,027		$	6,254		$	4,227		(35.6	%)		(4.7	%)
Compensation excluding non-recurring comp						78,357			39,273			80,593		99.5	%		(2.8	%)
Transaction expenses						-			-			13,692		-			-
Non-compensation excluding transaction expenses						36,047			20,174			34,535		78.7	%		4.4	%
Restructuring charges						1,943			-			6,953		n/m			(72.1	%)
Amortization of intangible assets						16,694			6,268			16,350		166.4	%		2.1	%
Depreciation and amortization						5,530			3,065			4,934		80.4	%		12.1	%
	Total operating expenses				$	142,598		$	75,034		$	161,284		90.0	%		(11.6	%)

Table 7: Additional Fiscal Year 2010 Operating Expense Detail

					Fiscal Year Ended
					November 30,
In thousands					2010			2009				$	Change			% Change
Cost of services
	Compensation				$	142,485		$	78,317				64,168			81.9	%
	Non-Recurring Stock Based Comp					4,639			9,355				(4,716	)		(50.4	%)
	Total Compensation				$	147,124		$	87,672				59,452			67.8	%
	Non-compensation					51,502			30,993				20,508			66.2	%
Total cost of services					$	198,626		$	118,665				79,961			67.4	%
Selling, general and administrative
	Compensation					102,144			75,501				26,643			35.3	%
	Non-Recurring Stock Based Comp					7,727			17,297				(9,571	)		(55.3	%)
	Total Compensation				$	109,871		$	92,798				17,072			18.4	%
	Transaction expenses					21,206			-				21,206			n/m
	Non-compensation excl. transaction expenses					59,167			42,982				16,185			37.7	%
Total selling, general and administrative					$	190,244		$	135,780				54,464			40.1	%
Restructuring costs						8,896			-				8,896			n/m
Amortization of intangible assets						41,599			25,554				16,045			62.8	%
Depreciation and amortization						17,413			11,957				5,456			45.6	%
Total operating expenses					$	456,778		$	291,956				164,822			56.5	%
In thousands												$	Change			% Change
Total non-recurring stock based comp					$	12,366		$	26,652				(14,287	)		(53.6	%)
Compensation excluding non-recurring comp						244,629			153,818				90,811			59.0	%
Transaction expenses						21,206			-				21,206			n/m
Non-compensation excluding transaction expenses						110,669			73,975				36,693			49.6	%
Restructuring charges						8,896			-				8,896			n/m
Amortization of intangible assets						41,599			25,554				16,045			62.8	%
Depreciation and amortization						17,413			11,957				5,456			45.6	%
Total operating expenses					$	456,778		$	291,956				164,822			56.5	%

Table 8: Summary Fourth Quarter 2010 Segment Information

			Three Months Ended										Fiscal Year Ended							Change from
			November 30,						August 31,				November 30,									FYE
In thousands			2010			2009			2010				2010			2009				Q4 2009		11/30/2009
Revenues:
Performance and Risk			$	185,032		$	118,790		$	172,425			$	604,307		$	442,948			55.8%		36.4%
Governance				28,286			-			30,308				58,594			-			n/m		n/m
	Total Operating revenues		$	213,318		$	118,790		$	202,733			$	662,901		$	442,948			79.6%		49.7%
Operating Income
Performance and Risk				67,743			43,756			38,672				200,369			150,992			54.8%		32.7%
	Margin			36.6%			36.8%			22.4%				33.2%			34.1%
Governance				2,977			-			2,777				5,754			-			n/m		n/m
	Margin			10.5%						9.2%				9.8%
	Total Operating Income		$	70,720		$	43,756		$	41,449			$	206,123		$	150,992			61.6%		36.5%
	Margin			33.2%			36.8%			20.4%				31.1%			34.1%
Adjusted EBITDA
Performance and Risk				90,552			59,343			80,007				291,642			215,155			52.6%		35.5%
	Margin			48.9%			50.0%			46.4%				48.3%			48.6%
Governance				8,362			-			7,599				15,961			-			n/m		n/m
	Margin			29.6%						25.1%				27.2%
	Total Adjusted EBITDA		$	98,914		$	59,343		$	87,606			$	307,603		$	215,155			66.7%		43.0%
	Margin			46.4%			50.0%			43.2%				46.4%			48.6%

Table 9: Pro Forma Operating Revenues by Product Category

										Fiscal Year Ended								Change from
			Fourth Quarter							November 30,								Q4			Fiscal Year
In thousands			2010			2009 1				2010 2				2009 3				2009			2009
Index and ESG products
	Subscriptions		$	61,143		$	52,960			$	233,667			$	200,781			15.5	%		16.4	%
	Asset-based fees			30,045			22,874				105,799				71,966			31.4	%		47.0	%
Index and ESG products total				91,188			75,834				339,466				272,747			20.2	%		24.5	%
Risk management analytics				57,980			50,230				214,327				196,348			15.4	%		9.2	%
Portfolio management analytics				30,993			31,883				123,159				129,270			(2.8	%)		(4.7	%)
Energy and commodity analytics				4,871			4,939				16,226				15,525			(1.4	%)		4.5	%
	Total Performance and Risk revenues		$	185,032		$	162,886			$	693,178			$	613,890			13.6	%		12.9	%
	Total Governance revenues			28,286			32,376				123,241				132,419			(12.6	%)		(6.9	%)
Total operating revenues			$	213,318		$	195,262			$	816,419			$	746,309			9.2	%		9.4	%
	Subscriptions		$	176,791		$	164,625			$	678,968			$	643,266			7.4	%		5.6	%
	Asset-based fees			28,330			22,874				104,084				71,966			23.9	%		44.6	%
	Non-recurring revenues			8,197			7,763				33,367				31,077			5.6	%		7.4	%
Total operating revenues			$	213,318		$	195,262			$	816,419			$	746,309			9.2	%		9.4	%
1MSCI's fourth quarter ended November 30, 2009 and RiskMetrics' fourth quarter ended December 31, 2009
2Includes MSCI's results for the fiscal year ended November 30, 2010 and RiskMetrics' fourth quarter ended December 31, 2009 and first quarter ended March 31, 2010.
3Includes MSCI's results for the fiscal year ended November 30, 2009 and RiskMetrics' fiscal year ended December 31, 2009.

Table 10: Pro Forma Operating Expense Detail

										Fiscal Year Ended								Change from
			Fourth Quarter							November 30,								Q4			Fiscal Year
In thousands			2010			2009 1				2010 2				2009 3				2009			2009
Cost of services
	Compensation		$	48,849		$	47,277			$	197,417			$	184,523			3.3	%		7.0	%
	Non-Recurring Stock Based Comp			1,617			2,103				4,639				9,355			(23.1	%)		(50.4	%)
	Total Compensation		$	50,466		$	49,380			$	202,056			$	193,878			2.2	%		4.2	%
	Non-compensation			18,665			19,181				70,883				65,077			(2.7	%)		8.9	%
Total cost of services			$	69,131		$	68,561			$	272,939			$	258,955			0.8	%		5.4	%
Selling, general and administrative
	Compensation			29,508			27,675				121,722				113,805			6.6	%		7.0	%
	Non-Recurring Stock Based Comp			2,410			4,151				7,727				17,297			(41.9	%)		(55.3	%)
	Total Compensation		$	31,918		$	31,826			$	129,449			$	131,102			0.3	%		(1.3	%)
	Transaction expenses			-			-				-				-			-			-
	Non-compensation excl. transaction expenses			17,382			16,535				69,841				70,323			5.1	%		(0.7	%)
Total selling, general and administrative			$	49,300		$	48,361			$	199,290			$	201,425			1.9	%		(1.1	%)
Restructuring costs				1,943			-				8,896				-			n/m			n/m
Amortization of intangible assets				16,230			18,171				64,477				73,164			(10.7	%)		(11.9	%)
Depreciation and amortization				5,530			5,161				21,660				20,306			7.2	%		6.7	%
Total operating expenses			$	142,134		$	140,254			$	567,262			$	553,850			1.3	%		2.4	%
In thousands
Total non-recurring stock based comp			$	4,027		$	6,254			$	12,366			$	26,652			(35.6	%)		(53.6	%)
Compensation excluding non-recurring comp				78,357			74,952				319,139				298,328			4.5	%		7.0	%
Transaction expenses				-			-				-				-			-			-
Non-compensation excluding transaction expenses				36,047			35,716				140,724				135,400			0.9	%		3.9	%
Restructuring charges				1,943			-				8,896				-			n/m			n/m
Amortization of intangible assets				16,230			18,171				64,477				73,164			(10.7	%)		(11.9	%)
Depreciation and amortization				5,530			5,161				21,660				20,306			7.2	%		6.7	%
	Total operating expenses		$	142,134		$	140,254			$	567,262			$	553,850			1.3	%		2.4	%
1MSCI's fourth quarter ended November 30, 2009 and RiskMetrics' fourth quarter ended December 31, 2009
2Includes MSCI's results for the fiscal year ended November 30, 2010 and RiskMetrics' fourth quarter ended December 31, 2009 and first quarter ended March 31, 2010.
3Includes MSCI's results for the fiscal year ended November 30, 2009 and RiskMetrics' fiscal year ended December 31, 2009.

Table 11: Pro Forma Summary Segment

											Fiscal Year Ended								Change from
			Fourth Quarter1								November 30,								Q4			Fiscal Year
In thousands			2010				2009 1				2010 2				2009 3				2009			2009
Revenues:
Performance and Risk			$	185,032			$	162,886			$	693,178			$	613,890			13.6	%		12.9	%
Governance				28,286				32,376				123,241				132,419			(12.6	%)		(6.9	%)
	Total Operating revenues		$	213,318			$	195,262			$	816,419			$	746,309			9.2	%		9.4	%
Operating Income
Performance and Risk				68,177				50,781				235,883				176,421			34.3	%		33.7	%
	Margin			36.8	%			31.2	%			34.0	%			28.7	%
Governance				3,007				4,227				13,274				16,038			(28.9	%)		(17.2	%)
	Margin			10.6	%			2.2	%			10.8	%			2.1	%
	Total Operating Income		$	71,184			$	55,008			$	249,157			$	192,459			29.4	%		29.5	%
	Margin			33.4	%			28.2	%			30.5	%			25.8	%
Adjusted EBITDA
Performance and Risk				90,552				76,004				324,283				279,230			19.1	%		16.1	%
	Margin			48.9	%			46.7	%			46.8	%			45.5	%
Governance				8,362				8,590				32,273				33,351			(2.7	%)		(3.2	%)
	Margin			29.6	%			26.5	%			26.2	%			25.2	%
	Total Adjusted EBITDA		$	98,914			$	84,594			$	356,556			$	312,581			16.9	%		14.1	%
	Margin			46.4	%			43.3	%			43.7	%			41.9	%
1MSCI's fourth quarter ended November 30, 2009 and RiskMetrics' fourth quarter ended December 31, 2009
2Includes MSCI's results for the fiscal year ended November 30, 2010 and RiskMetrics' fourth quarter ended December 31, 2009 and first quarter ended March 31, 2010.
3Includes MSCI's results for the fiscal year ended November 30, 2009 and RiskMetrics' fiscal year ended December 31, 2009.

Table 12: Key Operating Metrics¹

			As of or For the Quarter Ended												Change from
			November								August				November			August
Dollars in thousands			2010				2009				2010				2009			2010
Run Rates 2
Index and ESG products
	Subscriptions		$	235,370			$	202,785			$	224,496			16.1	%		4.8	%
	Asset-based fees			114,233				95,201				100,577			20.0	%		13.6	%
Index and ESG products total				349,603				297,986				325,073			17.3	%		7.5	%
Risk management analytics				235,422				197,997				224,581			18.9	%		4.8	%
Portfolio management analytics				117,256				122,192				121,795			(4.0	%)		(3.7	%)
Energy and commodity analytics				15,330				15,365				15,254			(0.2	%)		0.5	%
	Total Performance and Risk Run Rate		$	717,611			$	633,540			$	686,703			13.3	%		4.5	%
	Governance Run Rate			105,534				111,841				105,735			(5.6	%)		(0.2	%)
Total Run Rate			$	823,145			$	745,381			$	792,438			10.4	%		3.9	%
Subscription total				708,912				650,180				691,861			9.0	%		2.5	%
Asset-based fees total				114,233				95,201				100,577			20.0	%		13.6	%
Total Run Rate			$	823,145			$	745,381			$	792,438			10.4	%		3.9	%
Subscription Run Rate by region
% Americas				53	%			51	%			53	%
% non-Americas				47	%			49	%			47	%
Subscription Run Rate by client type
% Asset Management				56	%			57	%			57	%
% Banking & Trading				16	%			16	%			15	%
% Alternative Invt Mgmt				11	%			10	%			12	%
% Asset Owners & Consultants				9	%			9	%			9	%
% Corporate				2	%			2	%			2	%
% Others				5	%			5	%			5	%
New Recurring Sales			$	37,284			$	27,757			$	34,556			34.3	%		7.9	%
Subscription Cancellations				(25,525	)			(28,640	)			(19,113	)		(10.9	%)		33.5	%
Net New Recurring Subscription Sales			$	11,759			$	(883	)		$	15,443			n/m			(23.9	%)
Non-recurring sales				11,147				8,500				6,575			31.1	%		69.5	%
Employees				2,077				2,043				2,063			1.7	%		0.7	%
% Employees by location
High Cost Centers				70	%			77	%			72	%
Low Cost Centers				30	%			23	%			28	%
	1 MSCI Inc. in August and November 2010 quarters and for combined legacy MSCI and RiskMetrics results in prior periods. Includes addition of $13.2 million in risk management analytics run rate as a result of Measurisk LLC acquisition, which was completed on July 31, 2010.
	2 The run rate at a particular point in time represents the forward-looking fees for the next 12 months from all subscriptions and investment product licenses we currently provide to our clients under renewable contracts assuming all contracts that come up for renewal are renewed and assuming then-current exchange rates. For any subscription or license whose fees are linked to an investment product's assets or trading volume, the run rate calculation reflects an annualization of the most recent periodic fee earned under such license or subscription. The run rate does not include fees associated with "one-time" and other non-recurring transactions. In addition, we remove from the run rate the fees associated with any subscription or investment product license agreement with respect to which we have received a notice of termination or non-renewal during the period and we have determined that such notice evidences the client's final decision to terminate or not renew the applicable subscription or agreement, even though the notice is not effective until a later date.

Table 13: Supplemental Operating Metrics

Recurring Subscription Sales & Subscription Cancellations
			2009													2010
			February			May			August			November				February			May			August			November			FY 2009			FY 2010
New Recurring Subscription Sales			$24,711			$21,254			$23,469			$27,757				$30,273			$34,280			$34,556			$37,284			$97,191			$136,393
Subscription Cancellations			(22,692	)		(23,712	)		(28,690	)		(28,640	)			(22,434	)		(17,495	)		(19,113	)		(25,525	)		(103,734	)		(84,567	)
Net New Recurring Subscription Sales			$2,019			($2,457	)		($5,221	)		($883	)			$7,839			$16,785			$15,443			$11,759			($6,543	)		$51,826
Aggregate & Core Retention Rates
			2009													2010
			February			May			August			November				February			May			August			November			FY 2009			FY 2010
Aggregate Retention Rate 1
	Index and ESG products		93.8	%		92.8	%		90.5	%		88.5	%			93.8	%		92.4	%		90.9	%		92.1	%		91.4	%		92.3	%
	Risk management analytics		85.5	%		79.5	%		80.4	%		80.2	%			81.5	%		91.3	%		89.7	%		85.4	%		81.4	%		87.4	%
	Portfolio management analytics		86.5	%		82.2	%		69.1	%		77.7	%			92.3	%		84.6	%		83.7	%		69.1	%		78.9	%		82.4	%
	Energy & commodity analytics		90.5	%		91.3	%		84.5	%		88.5	%			85.5	%		80.5	%		90.5	%		83.4	%		88.7	%		85.0	%
Total Performance and Risk			88.8	%		85.0	%		81.0	%		82.5	%			88.7	%		89.9	%		88.8	%		84.2	%		84.3	%		88.0	%
Total Governance			73.0	%		84.6	%		85.4	%		78.7	%			74.2	%		86.0	%		86.4	%		86.3	%		80.4	%		83.3	%
	Total Aggregate Retention Rate		85.6	%		85.1	%		81.9	%		82.0	%			86.2	%		89.2	%		88.4	%		84.6	%		83.7	%		87.2	%
Core Retention Rate 2
	Index and ESG products		94.0	%		93.1	%		91.2	%		89.1	%			94.5	%		92.9	%		91.2	%		92.4	%		91.9	%		92.7	%
	Risk management analytics		85.5	%		81.4	%		81.0	%		81.2	%			82.9	%		92.3	%		92.0	%		85.4	%		82.3	%		88.5	%
	Portfolio management analytics		87.8	%		83.7	%		70.5	%		78.4	%			94.3	%		86.3	%		86.8	%		71.2	%		80.1	%		84.7	%
	Energy & commodity analytics		90.6	%		91.3	%		84.5	%		89.9	%			85.5	%		80.5	%		90.5	%		83.4	%		89.1	%		85.0	%
Total Performance and Risk			89.2	%		86.3	%		81.8	%		83.4	%			89.9	%		90.8	%		90.5	%		84.8	%		85.2	%		88.9	%
Total Governance			73.0	%		84.6	%		85.4	%		78.7	%			74.2	%		86.0	%		86.4	%		86.3	%		80.4	%		83.3	%
	Total Core Retention Rate		85.9	%		86.1	%		82.6	%		82.6	%			87.2	%		90.0	%		89.8	%		85.0	%		84.3	%		88.1	%
1The quarterly Aggregate Retention Rates are calculated by annualizing the cancellations for which we have received a notice of termination or non-renewal during the quarter and we have determined that such notice evidences the client's final decision to terminate or not renew the applicable subscription or agreement, even though such notice is not effective until a later date. This annualized cancellation figure is then divided by the subscription Run Rate at the beginning of the year to calculate a cancellation rate. This cancellation rate is then subtracted from 100% to derive the annualized Retention Rate for the quarter. The Aggregate Retention Rate is computed on a product-by-product basis. Therefore, if a client reduces the number of products to which it subscribes or switches between our products, we treat it as a cancellation. In addition, we treat any reduction in fees resulting from renegotiated contracts as a cancellation in the calculation to the extent of the reduction. Aggregate Retention Rates are generally higher during the first three fiscal quarters and lower in the fourth fiscal quarter. For the calculation of the Core Retention Rate the same methodology is used except the amount of cancellations in the quarter is reduced by the amount of product swaps.
2Our Core Retention Rate is calculated similarly to our Aggregate Retention Rate except that the Core Retention Rate does not treat switches between our products as a cancellation.

Table 14: ETF Assets Linked to MSCI Indices¹

			2009													2010
In Billions			February				May			August			November			February				May				August			November			FY 2009			FY 2010
Quarterly Average AUM in ETFs linked to MSCI Indices			$	126.4			$	134.7		$	180.3		$	216.8		$	239.3			$	252.3			$	252.0		$	300.7		$	164.5		$	261.1
Quarter-End AUM in ETFs linked to MSCI Indices				107.8				175.9			199.2			234.2			233.5				238.1				258.7			311.0			234.2			311.0
Sequential Change ($ Growth in Billions)
Appreciation/Depreciation			$	(13.6	)		$	42.2		$	20.1		$	18.0		$	(8.6	)		$	(4.4	)		$	6.8		$	28.2		$	66.7		$	22.0
Cash Inflow/ Outflow				2.4				25.9			3.2			17.0			8.3				9.0				13.8			24.1			48.5			55.2
Total Change			$	(11.2	)		$	68.1		$	23.3		$	35.0		$	(0.3	)		$	4.6			$	20.6		$	52.3		$	115.2		$	77.2
1Our ETF assets under management calculation methodology is ETF net asset value (NAV) multiplied by shares outstanding. The numbers in the tables are presented on this basis beginning with the February 2010 quarter. Periods prior to the February 2010 quarter have not been restated and are therefore not directly comparable.
Source: Bloomberg and MSCI

Table 15: Reconciliation of Adjusted EBITDA to Net Income

		Three Months Ended November 30, 2010						Three Months Ended November 30, 2009
		Performance and Risk		Governance		Total		Performance and Risk		Governance		Total
Net Income						$ 30,266						$ 24,535
Plus: Other expense (income), net						19,641						4,103
Plus: Provision for income taxes						20,813						15,118
Operating income		$ 67,743		$ 2,977		$ 70,720		$ 43,756		$ -		$ 43,756
Plus: Non-recurring stock based comp		4,027		-		4,027		6,254		-		6,254
Plus: Transaction costs		-		-		-		-		-		-
Plus: Depreciation and amortization		4,797		733		5,530		3,065		-		3,065
Plus: Amortization of intangible assets		13,344		3,350		16,694		6,268		-		6,268
Plus: Restructuring costs		641		1,302		1,943		-		-		-
Adjusted EBITDA		$ 90,552		$ 8,362		$ 98,914		$ 59,343		$ -		$ 59,343
		Fiscal Year Ended November 30, 2010						Fiscal Year Ended November 30, 2009
		Performance and Risk		Governance		Total		Performance and Risk		Governance		Total
Net Income						$ 92,170						$ 81,801
Plus: Other expense (income), net						52,632						19,271
Plus: Provision for income taxes						61,321						49,920
Operating income		$ 200,369		$ 5,754		$ 206,123		$ 150,992		$ -		$ 150,992
Plus: Non-recurring stock based comp		12,366		-		12,366		26,652		-		26,652
Plus: Transaction costs		21,206		-		21,206		-		-		-
Plus: Depreciation and amortization		16,129		1,284		17,413		11,957		-		11,957
Plus: Amortization of intangible assets		34,899		6,700		41,599		25,554		-		25,554
Plus: Restructuring costs		6,673		2,223		8,896		-		-		-
Adjusted EBITDA		$ 291,642		$ 15,961		$ 307,603		$ 215,155		$ -		$ 215,155

Table 16: Reconciliation of Pro Forma Adjusted EBITDA to Pro Forma Net Income

		Three Months Ended November 30, 2010									Three Months Ended November 30, 2009
		Performance and Risk			Governance			Total			Performance and Risk			Governance			Total
Net Income								$	30,557								$	23,703
Plus: Other expense (income), net									19,340									17,553
Plus: Provision for income taxes									21,287									13,752
Operating income		$	68,177		$	3,007		$	71,184		$	50,781		$	4,227		$	55,008
Plus: Non-recurring stock based comp			4,027			-			4,027			6,254			-			6,254
Plus: Transaction costs			-			-			-			-			-			-
Plus: Depreciation and amortization			4,797			733			5,530			4,148			1,013			5,161
Plus: Amortization of intangible assets			12,910			3,320			16,230			14,821			3,350			18,171
Plus: Restructuring costs			641			1,302			1,943			-			-			-
Adjusted EBITDA		$	90,552		$	8,362		$	98,914		$	76,004		$	8,590		$	84,594
		Fiscal Year Ended November 30, 2010									Fiscal Year Ended November 30, 2009
		Performance and Risk			Governance			Total			Performance and Risk			Governance			Total
Net Income								$	110,831								$	79,852
Plus: Other expense (income), net									71,430									67,744
Plus: Provision for income taxes									66,896									44,863
Operating income		$	235,883		$	13,274		$	249,157		$	176,421		$	16,038		$	192,459
Plus: Non-recurring stock based comp			12,366			-			12,366			26,652			-			26,652
Plus: Transaction costs			-			-			-			-			-			-
Plus: Depreciation and amortization			18,224			3,436			21,660			16,393			3,913			20,306
Plus: Amortization of intangible assets			51,137			13,340			64,477			59,764			13,400			73,164
Plus: Restructuring costs			6,673			2,223			8,896			-			-			-
Adjusted EBITDA		$	324,283		$	32,273		$	356,556		$	279,230		$	33,351		$	312,581

Table 17: Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income and EPS

			Three Months Ended													Fiscal Year Ended
			November 30,								August 31,					November 30,
			2010				2009				2010					2010				2009
GAAP - Net income			$	30,266			$	24,535			$	10,319				$	92,170			$	81,801
Plus: Non-recurring stock based comp				4,027				6,254				4,227					12,366				26,652
Plus: Amortization of intangible assets				16,694				6,268				16,350					41,599				25,554
Plus: Transaction costs1				-				-				14,526					22,040				-
Plus: Debt repayment expenses				-				-				1,994					8,274				-
Plus: Restructuring costs			$	1,943				-				6,953				$	8,896				-
Less: Income tax effect2				(8,610	)			(4,771	)			(13,880	)				(31,015	)			(19,786	)
Adjusted net income			$	44,320			$	32,286			$	40,489				$	154,330			$	114,221
GAAP - EPS			$	0.25			$	0.24			$	0.08				$	0.81			$	0.80
Plus: Non-recurring stock based comp				0.03				0.06				0.03					0.11				0.26
Plus: Amortization of intangible assets				0.14				0.06				0.13					0.36				0.25
Plus: Transaction costs1				0.00				0.00				0.12					0.19				0.00
Plus: Debt repayment expenses				0.00				0.00				0.02					0.07				0.00
Plus: Restructuring costs				0.02				0.00				0.06					0.08				0.00
Less: Income tax effect2				(0.08	)			(0.05	)			(0.11	)				(0.27	)			(0.19	)
Adjusted EPS			$	0.36			$	0.31			$	0.33				$	1.35			$	1.12
1For the third quarter of 2010, includes $13.7 million in third party transaction expense included in SG&A expense and $0.8 million of expense included in interest expense. For the fiscal year 2010, includes $21.2 million in third party transaction expense included in SG&A expense and $0.8 million of expense included in interest expense
2For the purposes of calculating Adjusted EPS, non-recurring stock based compensation, amortization of intangible assets, debt repayment expenses, and restructuring costs are assumed to be taxed at the effective tax rate excluding transaction costs. For the fourth quarter and fiscal year 2010, the rates are 39.9% and 37.4%, respectively. For the fourth quarter and fiscal year 2009, the rates are 38.1% and 37.9%, respectively.

MSCI Inc.
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or
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or
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Source: MSCI Inc.

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