The following discussion and analysis of the financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 (the "Form 10-K"). This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in "Item 1A.-Risk Factors," in our Form 10-K for the fiscal year ended December 31, 2011 as updated by our Form 10-Q for the quarter ended March 31, 2012.

Overview

We are a leading global provider of investment decision support tools, including indices, portfolio risk and performance analytics and corporate governance products and services. Our products and services address multiple markets, asset classes and geographies and are sold to a diverse client base, including asset owners such as pension funds, endowments, foundations, central banks, family offices and insurance companies; institutional and retail asset managers, such as managers of pension assets, mutual funds, exchange traded funds ("ETFs"), hedge funds and private wealth; financial intermediaries such as banks, broker-dealers, exchanges, custodians and investment consultants; and corporate clients. As of June 30, 2012, we had offices in 29 cities in 20 countries to help serve our diverse client base, with 54.8% of our revenue from clients in the Americas, 32.1% in Europe, the Middle East and Africa ("EMEA") and 13.1% in Asia and Australia based on revenues for the six months ended June 30, 2012.

Our principal sales model in both of our business segments is to license annual, recurring subscriptions to our products and services for use at specified locations, often by a given number of users or for a certain volume of services for an annual fee paid up front. We also derive revenues from certain institutional clients that use our indices as the basis for passively managed funds and separate accounts. These clients commonly pay us a license fee for the use of our intellectual property based on the investment product's assets. We generate a limited amount of our revenues from certain exchanges that use our indices as the basis for futures and options contracts and pay us a license fee for the use of our intellectual property based on their volume of trades. We also receive revenues from one-time fees related to implementation, historical or customized reports, advisory and consulting services and overages relating to the proxy research and voting services, fees relating to recovery of securities class action settlements and from certain products and services that are designed for one-time usage.

In evaluating our financial performance, we focus on revenue growth for the company in total and by product category as well as operating profit growth and the level of profitability as measured by our operating margin. Our business is not highly capital intensive and, as such, we expect to continue to convert a high percentage of our operating profits into excess cash in the future. Our revenue growth strategy includes: (a) expanding and deepening our relationships with investment institutions worldwide; (b) developing new and enhancing existing product offerings, including combining existing product features or data derived from our products to create new products; and (c) actively seeking to acquire products, technologies and companies that will enhance, complement or expand our client base and our product offerings.

To maintain and accelerate our revenue and operating income growth, we expect to continue to invest in and expand our operating functions and infrastructure, including additional product management, sales and client support staff and facilities in locations around the world and additional staff and supporting technology for our research and our data operations and technology functions. At the same time, managing and controlling our operating expenses is very important to us and a distinct part of our culture. Over time, our goal is to keep the rate of growth of our operating expenses below the rate of growth of our revenues, allowing us to expand our operating margins. However, at times, because of significant market opportunities, it may be more important for us to invest in our business in order to support increased efforts to attract new clients and to develop new product offerings, rather than emphasize short-term operating margin expansion. Furthermore, in some periods our operating expense growth may exceed our operating revenue growth due to the variability of revenues from several of our products, including our equity indices licensed as the basis of ETFs and non-recurring fees.

Operating Segments

We are operating under two segments: the Performance and Risk business and the Governance business. See Note 13, "Segment Information," for further information about MSCI's operating segments.

Our Performance and Risk business is a leading global provider of investment decision support tools, including equity indices, portfolio risk and performance analytics, credit analytics and environmental, social and governance ("ESG") products. Our Performance and Risk products are used in many areas of the investment

process, including portfolio construction and rebalancing, performance benchmarking and attribution, risk management and analysis, index-linked investment product creation, asset allocation, assessment of social responsibility and environmental stewardship and the effects of climate change on investments, investment manager selection and investment research. The flagship products within our Performance and Risk business are our global equity indices and ESG products marketed under the MSCI and ESG brands, our market and credit risk analytics marketed under the RiskMetrics and Barra brands, our portfolio risk and performance analytics covering global equity and fixed income markets marketed under the Barra brand and our valuation models and risk management software for the energy and commodities markets marketed under the FEA brand.

Our Governance business is a leading provider of corporate governance and specialized financial research and analysis services to institutional investors and corporations around the world. Among other things, the Governance business facilitates the voting of proxies by institutional investors and provides in-depth research and analysis to help inform voting decisions and identify issuer-specific risk. The Governance business offers both global security coverage and fully integrated products and services, including proxy voting, policy creation, research, vote recommendations, vote execution, post-vote disclosure and reporting and analytical tools. Within a firewall designed to separate it from the rest of the Governance business, ISS Corporate Services also provides products and services to corporate clients who may use those products and services to learn about and improve their governance practices. The flagship products within our Governance business are our governance research and outsourced proxy voting and reporting services marketed under the ISS brand and our forensic accounting risk research, legal/regulatory risk assessment and due diligence products marketed under the CFRA brand.

Factors Affecting the Comparability of Results

Restructuring

In connection with the acquisition of RiskMetrics, we initiated a plan to restructure our operations to eliminate overlapping positions and duplicative occupancy costs, terminate overlapping vendor contracts, and discontinue the planned integration of a product into RiskMetrics' standard product offering suite. We initiated restructuring activities during the third quarter of 2010 and substantially completed the elimination of overlapping positions in the first quarter of 2011 and the elimination of leases or vendor contracts was substantially completed during the year ended December 31, 2011. See "Restructuring" below and Note 3, "Restructuring," for further information about our restructuring-related activities and estimated costs.

Term Loan Repricing

On June 1, 2010, we entered into a senior secured credit agreement with Morgan Stanley Senior Funding, Inc., as administrative agent, Morgan Stanley & Co. Incorporated, as collateral agent, and the other lenders party thereto, which was comprised of (i) a $1,275.0 million six-year term loan facility (the "2010 Term Loan") and (ii) a $100.0 million five-year revolving credit facility (the "2010 Revolving Credit Facility" and together with the 2010 Term Loan, the "2010 Credit Facility"). On March 14, 2011, we completed the repricing of the 2010 Term Loan. The repricing provided for the incurrence of a new senior secured loan (the "2011 Term Loan") in an aggregate principal amount of $1,125.0 million. The proceeds of the 2011 Term Loan, together with $87.6 million of cash on hand, were used to repay the remaining $1,212.6 million outstanding balance of the 2010 Term Loan in full. The 2011 Term Loan would have matured in March 2017. The repricing decreased the interest rate applicable to the 2011 Term Loan from the London Interbank Offered Rate ("LIBOR") plus 3.25% (with a leverage-based stepdown) to LIBOR plus 2.75% (with a leverage-based stepdown) and reduced the LIBOR floor applicable to the 2011 Term Loan from 1.50% to 1.00%. We incurred $6.1 million in fees associated with the repricing which are reflected in "Other expense (income)" on the Company's Condensed Consolidated Statement of Income for the six months ended June 30, 2011.

On May 4, 2012, we amended and restated our 2010 Credit Facility (the credit agreement as so amended and restated, the "Amended and Restated Credit Facility"). The Amended and Restated Credit Facility provides for the incurrence of a new senior secured five-year Term Loan A Facility (the "2012 Term Loan") in an aggregate amount of $880.0 million and a $100.0 million senior secured revolving facility (the "2012 Revolving Credit Facility"). The proceeds of the Amended and Restated Credit Facility, together with cash on hand, were used to repay the remaining outstanding principal of the existing 2011 Term Loan. The 2012 Term Loan and the 2012 Revolving Credit Facility mature on May 4, 2017. In connection with the repayment of the 2011 Term Loan, we terminated our then-existing interest rate swaps and have not entered into new interest rate swaps to hedge our debt as such swaps are not required under the Amended and Restated Credit Facility. At June 30, 2012, the 2012 Term Loan bears interest of LIBOR plus 2.25%, or 2.49%. We incurred $20.6 million in expense related to the accelerated amortization of existing fees or the immediate recognition of new fees associated with this transaction in "Interest expense" on the Company's Condensed Consolidated Statement of Income for the three and six months ending June 30, 2012.

The discussion of our results of operations for the three and six months ended June 30, 2012 and 2011 are presented below. The results of operations for interim periods may not be indicative of future results.

Three Months Ended June 30, 2012 Compared to the Three Months Ended June 30, 2011

Results of Operations



                                               Three Months Ended
                                                    June 30,
                                              2012            2011             Increase/(Decrease)
                                                      (in thousands, except per share data)
Operating revenues                          $ 238,565       $ 226,483       $   12,082            5.3 %
Operating expenses:
Cost of services                               73,243          68,840            4,403            6.4 %
Selling, general and administrative            57,602          53,321            4,281            8.0 %
Restructuring                                     (22 )            40              (62 )       (155.0 )%
Amortization of intangible assets              15,959          16,423             (464 )         (2.8 )%
Depreciation and amortization of
property, equipment, and leasehold
improvements                                    4,662           5,168             (506 )         (9.8 )%

Total operating expenses                      151,444         143,792            7,652            5.3 %

Operating income                               87,121          82,691            4,430            5.4 %
Other expense (income), net                    29,860          13,049           16,811          128.8 %
Provision for income taxes                     19,715          23,982           (4,267 )        (17.8 )%

Net income                                  $  37,546       $  45,660       $   (8,114 )        (17.8 )%

Earnings per basic common share             $    0.31       $    0.38       $    (0.07 )        (18.4 )%

Earnings per diluted common share           $    0.30       $    0.37       $    (0.07 )        (18.9 )%

Operating margin                                 36.5 %          36.5 %

Operating Revenues

We are operating under two segments: the Performance and Risk business and the Governance business. Our revenues are grouped into the following five product and/or service categories:

• Index and ESG

• Risk management analytics

• Portfolio management analytics

• Energy and commodity analytics

• Governance

The Performance and Risk business is comprised of index and ESG, risk management analytics, portfolio management analytics and energy and commodity analytics products. The Governance business is comprised of the governance products.

The following table summarizes the revenue by product category for the three months ended June 30, 2012 compared to the three months ended June 30, 2011:

                                      Three Months Ended
                                           June 30,
                                      2012          2011          Increase/(Decrease)
                                                       (in thousands)
   Index and ESG:
   Subscriptions                    $  75,829     $  66,275     $     9,554        14.4  %
   Asset based fees                    34,094        36,287          (2,193 )       (6.0 %)

   Total index and ESG products       109,923       102,562           7,361          7.2 %
   Risk management analytics           64,547        60,806           3,741          6.2 %
   Portfolio management analytics      29,326        29,193             133          0.5 %
   Energy and commodity analytics       3,780         2,949             831         28.2 %
   Governance                          30,989        30,973              16          0.1 %

   Total operating revenues         $ 238,565     $ 226,483     $    12,082          5.3 %

Total operating revenues for the three months ended June 30, 2012 increased $12.1 million, or 5.3%, to $238.6 million compared to $226.5 million for the three months ended June 30, 2011. Subscription revenues consist of our revenues related to index and ESG subscriptions, risk management analytics, portfolio management analytics, energy and commodity analytics and governance products.

Our index and ESG products primarily consist of equity index subscriptions, equity index asset based fees products and ESG products. Our index and ESG products are used to benchmark investment performance, as a basis for index-linked investment products, to assess social responsibility, environmental stewardship and the effects of climate change on investments, for research and for investment manager selection. We derive revenues from our index and ESG products through index data and ESG subscriptions, fees based on assets in investment products linked to our indices and non-recurring licenses of our index historical data. Revenues related to index and ESG products increased 7.2% to $109.9 million for the three months ended June 30, 2012 compared to $102.6 million for the three months ended June 30, 2011.

Subscription revenues from the index and ESG products were up 14.4% to $75.8 million for the three months ended June 30, 2012 compared to $66.3 million for the three months ended June 30, 2011, driven by strong growth in revenues from our All Country World Index ("ACWI") core and other index modules as well as higher usage fees. Included in index and ESG revenues for the three months ended June 30, 2012 were $2.2 million of non-recurring revenues, up from $2.0 million in the three months ended June 30, 2011.

Asset based fee revenues attributable to the index and ESG products decreased 6.0% to $34.1 million for the three months ended June 30, 2012 compared to $36.3 million for the three months ended June 30, 2011. The year over year decrease primarily relates to the impact of the lower average value of assets in ETFs linked to MSCI equity indices. The average value of assets in ETFs linked to MSCI equity indices in the aggregate decreased 7.1% to $331.6 billion for the three months ended June 30, 2012 compared to $356.8 billion for the three months ended June 30, 2011. As of June 30, 2012, the value of assets in ETFs linked to MSCI equity indices was $327.4 billion, representing a decrease of 9.2% from $360.5 billion as of June 30, 2011.

Of the $327.4 billion of assets in ETFs linked to MSCI equity indices as of June 30, 2012, 39.0% were linked to emerging market indices, 32.4% were linked to developed markets outside of the U.S., 25.6% were linked to U.S. market indices and 3.0% were linked to other global indices.

The following table sets forth the value of assets in ETFs linked to MSCI indices and the sequential change of such assets as of the periods indicated:

                                                March 31,       June 30,        September 30,       December 31,       March 31,       June 30,
(in Billions)                                     2011            2011              2011                2011             2012            2012
AUM in ETFs linked to MSCI Indices             $     350.1     $    360.5      $         290.1      $       301.6     $     354.7     $    327.4
Sequential Change

Market Appreciation/(Depreciation)             $      10.1     $     (3.8 )    $         (70.4 )    $        10.5     $      37.9     $    (27.6 )
Cash Inflow                                            6.7           14.2                   -                 1.0            15.2            0.3

Total Change                                   $      16.8     $     10.4      $         (70.4 )    $        11.5     $      53.1     $    (27.3 )

Source: Bloomberg and MSCI

The following table sets forth the average value of assets in ETFs linked to MSCI indices for the periods indicated:

                                                                     Quarterly Average
                                                                2011                                   2012
(in Billions)                             March       June        September       December       March       June
AUM in ETFs linked to MSCI Indices       $ 337.6     $ 356.8     $     329.1     $    305.0     $ 341.0     $ 331.6

Source: Bloomberg and MSCI

The historical values of the assets in ETFs linked to our indices as of the last day of the month and the monthly average balance can be found under the link "AUM in ETFs Linked to MSCI Indices" on our website at http://ir.msci.com. This information is updated on the second U.S. business day of each month. Information contained on our website is not incorporated by reference into this Quarterly Report on Form 10-Q or any other report filed with the Securities and Exchange Commission.

Our risk management analytics products offer risk and performance assessment frameworks for managing and monitoring investments in organizations globally. These products allow clients to analyze investments in a variety of asset classes and are based on our proprietary integrated fundamental multi-factor risk models, value-at-risk methodologies, performance attribution frameworks and asset valuation models.

Revenues related to risk management analytics products increased $3.7 million, or 6.2%, to $64.5 million for the three months ended June 30, 2012 compared to $60.8 million for the three months ended June 30, 2011. The increase in risk management analytics revenues was driven by higher revenues from our primary risk management platforms, RiskManager and BarraOne, as well as our wealth management risk systems.

Our portfolio management analytics products consist of equity portfolio analytics tools and fixed income portfolio analytics tools. Revenues related to portfolio management analytics products were flat at $29.3 million for the three months ended June 30, 2012 compared to $29.2 million for three months ended June 30, 2011.

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 increased 28.2% to $3.8 million for the three months ended June 30, 2012 compared to $2.9 million for the three months ended June 30, 2011. At the beginning of 2012, we corrected an error in our revenue recognition policy for our energy and commodity analytics products. The correction resulted in a greater proportion of annual revenue being recognized during the three months ended June 30, 2012 than during the three months ended June 30, 2011. See Note 1, "Introduction And Basis Of Presentation," of the Notes to the Condensed Consolidated Financial Statements for further information.

Our governance products consist of corporate governance products and services, including proxy research, recommendation and voting services for institutional investors as well as governance advisory and compensation data analytics for corporations. They also include equity research based on forensic accounting research as well as class action monitoring and claims filing services to aid institutional investors in the recovery of funds from class action securities litigation. Governance products were flat at $31.0 million for both the three months ended June 30, 2012 and 2011. Within the governance products, subscription revenues increased $1.0 million to $27.8 million and non-recurring revenues decreased $1.0 million to $3.2 million for the three months ended June 30, 2012 with the changes primarily resulting from a product shift towards subscription-based products.

Run Rate

At the end of any period, we generally have subscription and investment product license agreements in place for a large portion of our total revenues for the following 12 months. We measure the fees related to these agreements and refer to this as our "Run Rate." 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 where 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 subscription or license. 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 such notice is not effective until a later date.

Because the Run Rate represents potential future fees, there is typically a delayed impact on our operating revenues from changes in our Run Rate. In addition, the actual amount of revenues we will realize over the following 12 months will differ from the Run Rate because of:

• revenues associated with new subscriptions and non-recurring sales;

• modifications, cancellations and non-renewals of existing agreements, subject to specified notice requirements;

• fluctuations in asset based fees, which may result from market movements or from investment inflows into and outflows from investment products linked to our indices;

• fluctuations in fees based on trading volumes of futures and options contracts linked to our indices;

• fluctuations in the number of hedge funds for which we provide investment information and risk analysis to hedge fund investors;

• price changes;

• revenue recognition differences under U.S. GAAP;

• fluctuations in foreign exchange rates; and

• the impact of acquisitions and dispositions.

The following table sets forth our Run Rates as of the dates indicated and the percentage growth over the periods indicated:

                                                    As of
                                   June 30,       June 30,       March 31,        Year Over Year         Sequential
                                     2012           2011            2012            Comparison           Comparison
                                                (in thousands)
Run Rates
Index and ESG products
Subscription                       $ 285,604      $ 257,470      $  278,541                  10.9 %              2.5 %
Asset based fees                     129,045        140,144         136,962                  (7.9 )%            (5.8 )%

Index and ESG products total         414,649        397,614         415,503                   4.3 %             (0.2 )%
Risk management analytics            258,995        249,048         257,973                  4.0  %             0.40 %
Portfolio management analytics       117,153        118,452         117,751                  (1.1 )%            (0.5 )%
Energy and commodity analytics        14,839         15,074          14,926                  (1.6 )%            (0.6 )%
Governance                           113,976        107,755         113,054                   5.8 %              0.8 %

Total Run Rate                     $ 919,612      $ 887,943      $  919,207                   3.6 %               -  %

Subscription total                 $ 790,567      $ 747,799      $  782,245                   5.7 %              1.1 %
Asset based fees total               129,045        140,144         136,962                  (7.9 )%            (5.8 )%

Total Run Rate                     $ 919,612      $ 887,943      $  919,207                   3.6 %               -  %

. . .