MSCI Inc. Reports Record Revenues for Second Quarter 2008

Business Wire, July 2, 2008

The three MSCI indices with the largest amount of ETF assets linked to them as of May 31, 2008 were the MSCI EAFE, Emerging Markets and Brazil Indices. The assets linked to these indices were $49.0 billion, $40.6 billion and $11.0 billion, respectively.

Equity Portfolio Analytics: Revenues related to Equity Portfolio Analytics products increased 12.2% to $33.9 million in second quarter 2008 compared to the same period in 2007 and increased 4.8% compared to first quarter 2008. The year-over-year increase reflects continued new subscriptions of our proprietary equity risk data accessed through our Equity Models Direct and Barra on Vendors products. Overall growth reflects an increase in demand for our tools used in managing equity portfolio risk and enhancing equity trading strategies; however, we experienced an increase in cancellations of equity portfolio analytics subscriptions as a result of the closing of several quantitative portfolio management teams at several of our clients during the quarter.

Multi-Asset Class Portfolio Analytics: Revenues related to Multi-Asset Class Portfolio Analytics increased 94.6% to $8.6 million in second quarter 2008 compared to the same period in 2007 and increased 8.9% compared to first quarter 2008. The year-over-year increase is attributable to revenue growth from BarraOne due primarily to strong demand from asset managers and asset owners for our risk management application used for internal risk reporting and compliance reporting. We also benefited from licensing to existing clients our performance attribution module which was launched in first quarter 2008.

Other Products: Revenues from Other Products decreased 11.3% to $5.6 million in second quarter 2008 compared to the same period in 2007. The decline reflects a decrease of 66.8% to $0.5 million in asset based fees from investment products linked to MSCI hedge fund indices and a decrease of 19.8% to $1.8 million for fixed income analytics offset by a 28.2% increase to $3.3 million for our energy and commodity analytics products. The decline in hedge fund indices revenues reflects lower values of assets in hedge fund indices linked to our indices, caused by market depreciation and investor withdrawals.

Operating Expenses

Operating expenses increased 20.4% to $74.7 million in second quarter 2008 compared to second quarter 2007. Excluding expenses related to the founders grant (as described below), operating expenses increased 9.3% to $67.9 million in second quarter 2008, with increases in compensation and non-compensation expenses of 11.0% and 5.5%, respectively. Expenses associated with replacing services currently provided by Morgan Stanley were $5.1 million in second quarter 2008 compared to $2.7 million in first quarter 2008, and the allocation expense for cost of services provided by Morgan Stanley was $5.8 million in second quarter 2008 compared to $6.3 million in both second quarter 2007 and first quarter 2008.

Compensation expense in second quarter 2008 includes $1.9 million of expenses attributable to people hired to eventually replace Morgan Stanley services. In addition, the increase compared to second quarter 2007 reflects higher compensation costs for existing staff and new hires offset, in part, by a movement of personnel to lower cost locations. The non-compensation expense increase reflects expenses of $3.2 million related to replacing Morgan Stanley services, $1.3 million associated with being a public company and $0.9 million from expenses associated with the May 2008 secondary equity offering. In addition, higher occupancy and information technology costs contributed to the increase. These expenses were offset by a $0.6 million reduction in the expense allocation from Morgan Stanley, declines in professional service fees and a bad debt provision reversal.