UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(MARK ONE)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 20062009

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROMTO.

COMMISSION FILE NUMBER 1-14037

MOODY’S CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

99 CHURCH STREET,7 World Trade Center at 250 Greenwich Street, NEW YORK, NEW YORK 10007

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(ZIP CODE)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 553-0300.

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes x  No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes ¨  No x

Indicate by check mark whether the Registrant: (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.    Yes x  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes x  No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer (see definition of “accelerated filer and large accelerated filer” in Exchange Act Rule 12b-2).

Large Accelerated Filer x    Accelerated Filer ¨    Non-accelerated Filer ¨    Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes ¨  No x

The aggregate market value of Moody’s Corporation Common Stock held by nonaffiliates* on June 30, 20062009 (based upon its closing transaction price on the Composite Tape on such date) was approximately $15.3$6.2 billion.

As of January 31, 2007, 278.52010, 236.9 million shares of Common Stock of Moody’s Corporation were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive proxy statement for use in connection with its annual meeting of stockholders scheduled to be held on April 24, 2007,20, 2010, are incorporated by reference into Part III of this Form 10-K.

The Index to Exhibits is included as Part IV, Item 15(3) of this Form 10-K.

MOODY’S CORPORATION

INDEX TO FORM 10-K

GLOSSARY OF TERMS AND ABBREVIATIONS

The following terms, abbreviations and acronyms are used to identify frequently used terms in this report:

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PART I

BackgroundBACKGROUND

As used in this report, except where the context indicates otherwise, the terms “Moody’s” or the “Company” refer to Moody’s Corporation, a Delaware corporation, and its subsidiaries. The Company’s executive offices are located at 99 Church7 World Trade Center at 250 Greenwich Street, New York, NY 10007 and its telephone number is (212) 553-0300.

Prior to September 30, 2000, the Company operated as part of The Dun & Bradstreet Corporation (“OldCorporation.

THE COMPANY

Moody’s is a provider of (i) credit ratings, (ii) credit and economic related research, data and analytical tools, (iii) risk management software and (iv) quantitative credit risk measures, credit portfolio management solutions and training services. In 2007 and prior years, Moody’s operated in two reportable segments: Moody’s Investors Service and Moody’s KMV. Beginning in January 2008, Moody’s segments were changed to reflect the Reorganization announced in August 2007 and Moody’s now reports in two new reportable segments: MIS and Moody’s Analytics. As a result of the Reorganization, the rating agency remains in the MIS operating segment and several ratings business lines have been realigned. All of Moody’s other non-rating commercial activities are included within the new MA segment. Financial information and operating results of these segments, including revenue, expenses, operating income and total assets, are included in Part II, Item 8. Financial Statements of this annual report, and are herein incorporated by reference.

MIS, the credit rating agency, publishes credit ratings on a wide range of debt obligations and the entities that issue such obligations in markets worldwide, including various corporate and governmental obligations, structured finance securities and commercial paper programs. Revenue is derived from the originators and issuers of such transactions who use MIS ratings to support the distribution of their debt issues to investors. MIS provides ratings in more than 110 countries. Ratings are disseminated via press releases to the public through a variety of print and electronic media, including the Internet and real-time information systems widely used by securities traders and investors. As of December 31, 2009, MIS had ratings relationships with approximately 12,000 corporate issuers and approximately 25,000 public finance issuers. Additionally, the Company has rated and currently monitors ratings on approximately 106,000 structured finance obligations (representing approximately 16,000 transactions).

The MA segment develops a wide range of products and services that support the risk management activities of institutional participants in global financial markets. Within its Research, Data and Analytics business, MA distributes investor-oriented research and data developed by MIS as part of its ratings process, including in-depth research on major debt issuers, industry studies, commentary on topical credit related events and also provides economic research and credit data and analytical tools such as quantitative credit risk scores. Within its Risk Management Software business, MA provides both economic and regulatory capital risk management software and implementation services. Within its professional services business it provides quantitative credit risk measures, credit portfolio management solutions and training services. MA customers represent more than 4,800 institutions worldwide operating in approximately 115 countries. Throughout 2009, Moody's research web site was accessed by 174,000 individuals and by users representing 29,000 client relationships.

The Company operated as part of “Old D&B”). On until September 8,30, 2000, the Board of Directors ofwhen Old D&B approved a plan to separateseparated into two publicly traded companies – the CompanyMoody’s Corporation and The New D&B Corporation (“New D&B”). On September 30, 2000 (“the Distribution Date”),&B. At that time, Old D&B distributed to its shareholders all of the outstanding shares of New D&B common stock (the “2000 Distribution”).stock. New D&B comprised the business of Old D&B’s Dun & Bradstreet operating company (the “D&B Business”).company. The remaining business of Old D&B consisted solely of the business of providing ratings and related research and credit risk management services (the “Moody’s Business”) and was renamed “Moody’s Corporation”.

New D&B is the accounting successor to Old D&B, which was incorporated under the laws of the State of Delaware on April 8, 1998. Old D&B began operating as an independent publicly-owned corporation on July 1, 1998 as a result of its June 30, 1998 spin-off (the “1998 Distribution”) from the corporation now known as “R.H. Donnelley Corporation” and previously known as “The Dun & Bradstreet Corporation” (“Donnelley”). Old D&B became the accounting successor to Donnelley at the time of the 1998 Distribution.

Prior to the 1998 Distribution, Donnelley was the parent holding company for subsidiaries then engaged in the businesses currently conducted by New D&B, Moody’s and Donnelley. Prior to November 1, 1996, it also was the parent holding company of subsidiaries conducting business under the names Cognizant Corporation (“Cognizant”) and ACNielsen Corporation (“ACNielsen”). On that date Donnelley effected a spin-off of the capital stock of Cognizant and ACNielsen to its stockholders (the “1996 Distribution”). Cognizant subsequently changed its name to Nielsen Media Research, Inc. in connection with its 1998 spin-off of the capital stock of IMS Health Incorporated (“IMS Health”).

Corporation. For purposes of governing certain ongoing relationships between the Company and New D&B after the 2000 Distribution and to provide for an orderly transition, the Company and New D&B entered into various agreements including a Distribution Agreement, Tax Allocation Agreement, Employee Benefits Agreement, Shared Transaction Services Agreement, Insurancedistribution agreement, tax allocation agreement and Risk Management Services Agreement, Data Services Agreement and Transition Services Agreement.

Detailed descriptions of the 1996, 1998 and 2000 Distributions are contained in the Company’s 2000 annual report on Form 10-K, filed on March 15, 2001.

The Company

Moody’s is a provider of (i) credit ratings, research and analysis covering fixed-income securities, other debt instruments and the entities that issue such instruments in the global capital markets, and credit training services and (ii) quantitative credit risk assessment products and services and credit processing software for banks, corporations and investors in credit-sensitive assets. Founded in 1900, Moody’s employs approximately 3,400 people worldwide. Moody’s maintains offices in 22 countries and has expanded into developing markets through joint ventures or affiliation agreements with local rating agencies. Moody’s customers include a wide range of corporate and governmental issuers of securities as well as institutional investors, depositors, creditors, investment banks, commercial banks and other financial intermediaries. Moody’s is not dependent on a single customer or a few customers, such that a loss of any one would have a material adverse effect on its business.

Moody’s operates in two reportable segments: Moody’s Investors Service and Moody’s KMV. For additional financial information on these segments, see Part II, Item 8. “Financial Statements – Note 17 – Segment Information”.

Moody’s Investors Service publishes rating opinions on a broad range of credit obligors and credit obligations issued in domestic and international markets, including various corporate and governmental obligations, structured finance securities and commercial paper programs. It also publishes investor-oriented credit information, research and economic commentary, including in-depth research on major debt issuers, industry studies, special comments and credit opinion handbooks. Moody’s credit ratings and research help investors analyze the credit risks associated with fixed-income securities. Such independent credit ratings and research also contribute to efficiencies in markets for other obligations, such as insurance policies and derivative transactions, by providing credible and independent assessments of credit risk. Moody’s provides ratings andemployee benefits agreement.

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credit research on governmental and commercial entities in more than 100 countries. Moody’s global and increasingly diverse services are designed to increase market efficiency and may reduce transaction costs. As of December 31, 2006, Moody’s had ratings relationships with more than 12,000 corporate issuers and approximately 29,000 public finance issuers. Additionally, the Company has rated more than 96,000 structured finance obligations. Ratings are disseminated via press releases to the public through a variety of print and electronic media, including the Internet and real-time information systems widely used by securities traders and investors.

Beyond credit rating services for issuers, Moody’s Investors Service provides research services, data and analytic tools that are utilized by institutional investors and other credit and capital markets professionals. These services cover various segments of the loan and debt capital markets, and are sold to more than 9,300 customer accounts worldwide. Within these accounts, more than 29,000 users accessed Moody’s research website (www.moodys.com) during calendar year 2006. In addition to these clients, more than 148,000 other individuals visited Moody’s website to retrieve current ratings and other information made freely available to the public.

The Moody’s KMV business develops and distributes quantitative credit risk assessment products and services and credit processing software for banks, corporations and investors in credit-sensitive assets. Moody’s KMV serves more than 1,700 clients operating in approximately 85 countries, including most of the world’s largest financial institutions. Moody’s KMV’s quantitative credit analysis tools include models that estimate the probability of default for approximately 29,000 publicly traded firms globally, updated daily. In addition, Moody’s KMV’s RiskCalc^™ models extend the availability of these probabilities to privately held firms in many of the world’s economies. Moody’s KMV also offers services to value and improve the performance of credit-sensitive portfolios.

Prospects for GrowthPROSPECTS FOR GROWTH

Over recent decades, global public and private fixed-income markets have grown significantly in terms of outstanding principal amount and types of securities. Whilesecurities or other obligations. Beginning in mid-2007 there is potentialwas a severe market disruption and decline in issuance activity for periodic cyclicalsome significant asset classes of securities in the U.S. and internationally. Despite the recent market disruption, in these developments, Moody’s believes that the overall trend andlong-term outlook remainremains favorable for continued secular growth of fixed-income markets worldwide. Moody’s business prospects correspond closely to the health of the world’s major economies and capital markets. Throughout 2009 there has been gradual improvement in global capital market and economic conditions. The sustainability of these improvements will influence the Company’s growth over the near term. Moody’s is well positioned to benefit from a long-term recovery in global credit market activity worldwide. In addition, the securities being issuedand a more informed use of credit ratings, research and related analytical products in the global fixed-income markets are becoming more complex.an environment of renewed attention to risk analysis and risk management. Restoring investor confidence in structured products may require further enhancements to MIS’s rating processes and may be facilitated by greater transparency from issuers of structured (or securitized) debt. Moody’s expects that these trendsinitiatives will providesupport continued long-term demand for high-quality, independent credit opinions. These phenomena are especially apparent internationally, where economic expansionAn expectation of recovery-driven growth in capital market activity, supported by initiatives to increase market share, leverage pricing opportunities, and integration are driving increased use of publicdevelop additional data, research and rating products, represent key growth drivers for Moody’s.

Growth in global fixed-income markets for corporate financing activities,is attributable to a number of forces and factors such as enabling regulation and increased acceptance of new financial technologies by debt issuers and investors have driven growthtrends. Advances in structured finance issuance.

Communicationinformation technology such as the Internet, makesmake information about investment alternatives widely available throughout the world. This technologyTechnology facilitates issuers’ ability to place securities outside their national markets and investors’ capacity to obtain information about securities issued outside their national markets. IssuersTechnology allows issuers and investors are alsothe ability to more readily able to obtain information about new financing techniques and new types of securities that they may wish to purchase or sell, manywhich in the absence of whichthe appropriate technology may not be unfamiliar to them.easily obtainable. This availability of information promotes the ongoing integration and development of worldwide financial markets and a greater need for credible, and globally comparable opinions about credit risk. As a result, existing capital markets have expanded and a number of new capital markets have emerged. In addition, more issuers and investors are accessing developed capital markets. Information technology also provides opportunities to further build a global platform to support Moody’s continued expansion in developing markets.

Another trend that is increasing the size ofin the world’s capital markets is the ongoing disintermediation of financial systems. Issuers are increasingly financingraise capital in the global public capital markets, in addition to, or in substitution for, traditional financial intermediaries. Moreover, financial intermediaries are sellinghave sold assets in the global public capital markets, in addition to or instead of retaining those assets. Structured finance securitiesRecent credit market disruptions have slowed the trend of disintermediation globally, but Moody’s believes that debt capital markets for many types of assets have developedoffer advantages in many countriescapacity and are contributingefficiency compared to these trends.the traditional banking systems. Thus, disintermediation is expected to accelerate in the longer-term, with Moody’s continuing to target investment and resources to growing international markets where disintermediation and bond issuance should remain more robust.

The complexity of capital market instruments is also growing. Consequently, assessingstrong growth trend seen in the credit risk of such instruments becomes more of a challenge for financial intermediaries and asset managers. In the credit markets, reliable third-party ratings and research increasingly supplement or substitute for traditional in-house research as the scale, geographic scope and complexity of financial markets grow.

Growth in issuance of structured finance securities has generally been stronger than growthreversed dramatically in straight corporate and financial institutions debt issuance, and2008 due to market turmoil, with continued declines seen in 2009. The market disruptions that escalated in 2008 are expected to continue in the immediate term, however Moody’s expects that trend to continue. Growthsee some revenue stabilization from this market in 2010. Despite significant declines from peak market levels, Moody’s believes that structured finance has reflected increased acceptancesecurities will continue to play a role in global credit markets, and provide opportunities for longer term growth. Moody’s will continue to monitor and support the progress of structured finance as a financingthis market and refinancing mechanism, regulatory changes that facilitateadapt to meet the usechanging needs of structured finance, and increases in the scope of asset types, including for example consumer debt, that form the underlying asset pools for structured finance securities.its participants.

Rating fees paid by debt issuers account for most of the revenue of Moody’s Investors Service.MIS. Therefore, a substantial portion of Moody’sMIS’s revenue is dependent upon the volume and number of ratable debt securities issued in the global capital markets thatmarkets. Moody’s rates. Moody’s is thereforeresults can be affected by factors such as the performance, of, and the prospects for growth, of the major world economies,

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and by the fiscal and monetary policies pursued by their governments.governments, and the decisions of issuers to request MIS ratings to aid investors in their investment decision process. However, annual fee arrangements with frequent debt issuers, annual debt monitoring fees and annual fees from commercial paper and medium-term note programs, bank and insurance company financial strength ratings, mutual fund ratings, subscription-based research and other areas are less dependentpartially mitigate Moody’s dependence on or independent of, the volume or number of debt securities issued in the global capital markets.

Moody’s operations are also subject to various risks inherent in carrying onconducting business internationally. Such risks include currency fluctuations and possible nationalization, expropriation, exchange and price controls, changes in the availability of data from public sector sources, limits on providing information across borders and other restrictive governmental actions. Management believes that the risks of nationalization or expropriation are reduced because the Company’s basic service is the creation and dissemination of information, rather than the production of products that require manufacturing facilities or the use of natural resources. However, the formation of, for example, a new government-sponsored regional or global rating agency would pose a risk to Moody’s growth prospects. Management believes that this risk, compared to other regulatory changes under consideration for the credit rating industry, is relatively low because of the likelihood that substantial investments over a sustained period would be required, with uncertainty about the likelihood of financial success.success for the entity.

Legislative bodies and regulators in both the United StatesU.S., Europe and Europeselective other jurisdictions continue to conduct regulatory reviews of credit rating agencies,CRAs, which may result in, for example, an increased number of competitors, changes to the business model or restrictions on certain business expansion activities by Moody’s Investors Serviceof MIS, or increased costs of doing business for Moody’s. Therefore, in order to broaden the potential for expansion of non-ratings services, Moody’s reorganized in January 2008 into two distinct businesses: MIS, consisting solely of the ratings business, and MA. MA conducts all non-ratings activities including the sale of credit research produced by MIS and the production and sale of other economic and credit-related products and services. The reorganization broadens the opportunities for expansion by MA into activities which may have otherwise been restricted for MIS, due to the potential for conflicts of interest with the ratings business. At present, Moody’s is unable to assess the nature and effect that any regulatory changes may have on future growth opportunities. See “Regulation” below.

MA expects to benefit from the growing demand among credit market participants for information that enables them to make sound investment and risk management decisions. These customers require advanced qualitative and quantitative tools to support their management of increasingly complex capital market instruments. Such complexity creates analytical challenges for market participants, including financial intermediaries, asset managers and other investors. In recent years, reliable third-party ratings and research served to supplement or substitute for traditional in-house research as the scale, geographic scope and complexity of financial markets grew. Moody’s remains focused on driving improvements in customer retention, product placements and new customer acquisition in this area.

Recent disruptions in credit markets have resulted in higher than normal customer attrition in MA. Moody’s remains focused on driving improvements in customer retention, product placements and new customer acquisition and expects to sustain reliance on its offerings as enhancements to credit rating methodologies and other changes in securities origination processes restore investor confidence and more orderly market operations.

Growth in Moody’s KMVMA is also expected from increased awareness and adoption byas financial institutions ofadopt active credit portfolio management practices and the estimation of economic capital, for which MKMV provides products and services. In addition, Moody’s KMV will continue to see revenue growth from the implementation ofimplement internal ratingcredit assessment tools for compliance with Basel II compliance and credit analysis best practices.regulations. MA offers products that respond to these needs. This growth will be realized by, for example, the development of new private firm default probability models for specific countries and by expanding analysis capabilities of new asset classes.

CompetitionCOMPETITION

The Moody’s Investors ServiceMIS business competes with other credit rating agenciesCRAs and with investment banks and brokerage firms that offer credit opinions and research. Institutional investorsMany of Moody’s customers also have in-house credit research capabilities. Moody’s largest competitor in the global credit rating business is Standard & Poor’s Ratings Services, (“S&P”), a division of The McGraw-Hill Companies, Inc. There are some rating markets, based on industry, geography and/or instrument type, in which Moody’s has made investments and obtained market positions superior to S&P’s. In&P’s while in other markets, the reverse is true.

In addition to S&P, Moody’s competitors include Fitch, a subsidiary of Fimalac S.A., Dominion Bond Rating Service Ltd. of Canada, (“DBRS”) and A.M. Best Company Inc, Japan Credit Rating Agency Ltd., Rating and Investment Information Inc. One orof Japan and Egan-Jones Ratings Company. In 2008 two more significantfirms were granted the Nationally Recognized Statistical Rating Organizations status in the U.S: LACE Financial Corp. and Realpoint LLC. Additional rating agencies may emerge in the United StatesU.S. as the Securities and Exchange Commission (“SEC”) maySEC continues to expand the number of Nationally Recognized Statistical Rating Organizations (“NRSRO”).NRSROs. Other competition may arise in the U.S. from credit opinion providers who do not operate as NRSRO’s, such as Morningstar or Coface. Competition may also emergeincrease in developed or developing markets outside the United StatesU.S. over the next few years as the number of rating agencies increase.increases, although a more regulated credit ratings industry, both domestic and internationally, may provide for a less appealing expansion territory.

Financial regulators are reviewing their approach to supervision and have sought or are seeking comments on changes to the global regulatory framework that could affect Moody’s. Bank regulators, under the oversight of the Basel Committee on Banking Supervision, have proposed using refined risk assessments as the basis for minimum capital requirements. The proposed Standardized Approach relies on rating agency opinions, while the proposed Internal Ratings Based Approach relies on systems and processes maintained by the regulated bank. The increased regulatory focus on credit risk presents both opportunities and challenges for Moody’s. Global demand for credit ratings and risk management services may rise, but regulatory actions may result in a greater number of rating agencies and/or additional regulation of Moody’s and its competitors. Alternatively, banking or securities market regulators could seek to reduce the use of ratings in regulations, thereby reducing certain elements of demand for ratings, or otherwise seek to control the analysis or business of rating agencies.

Credit rating agencies such as Moody’sMIS also compete with other means of managing credit risk, such as credit insurance. Competitors that develop quantitative methodologies for assessing credit risk also may pose a competitive threat to Moody’s.

Moody’s KMV’sMA competes broadly in the financial information space against diversified competitors such as Thomson-Reuters, Bloomberg, RiskMetrics, S&P, Fitch, Dun & Bradstreet, and Markit Group among others. MA’s main competitors for quantitative measures of default riskwithin RD&A include the RiskMetrics Group, S&P, CreditSights, R&I’s Financial Technology Institute (in Japan), Fitch Algorithmics, Dun and Bradstreet, models developed internally by customersCreditSights, Thomson-Reuters, Intex, IHS Global Insight, BlackRock Solutions and other smaller vendors. Other firms may compete in the future. Baker Hill, acquired by Experian,boutique providers of fixed income analytics, valuations, economic data and Bureau van Dijk Electronic Publishing are Moody’s KMV’s main competitors in the software market to assist banks in their commercial lending activities. Mercer Oliver Wymanresearch. In RMS, MA faces competition from Fitch Algorithmics, SunGard, SAS, Oracle and other various smaller vendors and in-house solutions. Within professional services, MA competes with the professional services group at Moody’s KMVOliver Wyman for certain credit risk consultingadvisory services, business.with Omega Performance, DC Gardner, and a host of boutique providers for financial training.

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Moody’s StrategyMOODY’S STRATEGY

Moody’s continues to follow growth strategies that adapt to market conditions and capitalize on emerging opportunities:

Given recent market turmoil, Moody’s immediate focus is on making effective business decisions to adapt to challenging economic and market conditions while positioning the Company to benefit from an eventual recovery in global credit market activity.

Given the renewed attention to risk analysis and risk management, Moody’s is committed to further encouraging the informed use of credit ratings, research and related analytics products.

Moody’s seeks to differentiate itself from incumbent and potential competitors with predictive, uniquely thoughtful and forward-looking opinions about credit and the credit industry.

Adapting to market change is a key factor in maintaining market relevance. Moody’s continuously monitors opportunities to selectively diversify its revenue base through organic growth and acquisitions, in order to replace areas of lost revenue and position the Company for new sources of business.

In support of those goals Moody’s intends to continue its focus onin the following opportunities:areas:

Expansion in Financial Centers

Moody’s serves its customers through its global network of offices and business affiliations. Moody’s currently maintains comprehensive rating and marketingcommercial operations in financial centers including Buenos Aires, Dubai, Frankfurt, Hong Kong, London, Madrid, Milan, Mexico City, Moscow, New York, Paris, Sao Paolo, Seoul, Singapore, Sydney, Tokyo and Tokyo.Toronto. Moody’s expects that its global network will position it to benefit from the expansion of worldwide capital markets and thereby increase revenue. Moody’s also expects that the growth of its Moody’s Investors ServiceMIS business as a consequence of financial market integration in Europe will continue.return. Additionally, Moody’s expects to continue its expansion into developing markets either directly or through joint ventures. This will allow Moody’s to extend its credit opinion franchise to local and regional obligors, through domestic currency ratings and national scale ratings. These developing market efforts have been supported in 2006 by the acquisition of 100% of CRA Rating Agency in the Czech Republic to form Moody’s Central Europe and the acquisition of a 49% stake in China Cheng Xin International Credit Rating Co. Ltd. in China, and in January 2007 by the acquisition of 99% of PT Kasnic Credit Rating in Indonesia to form Moody’s Indonesia. Moody’s expects to continue its expansion into developing markets either directly or through joint ventures.

New Rating Products

Moody’s is pursuing numerous initiatives to expand credit ratings, including from public fixed-income securities markets to other sectors with credit risk exposures. Within established capital markets, Moody’s continues to expand its rating coverage of bank loansrespond to investor demand for new products and project finance loansenhancements. In the recent market turmoil, attention to core strengths has been crucial and securities. In globalenhancements have and local counterparty markets, Moody’s offers distinct sets of rating productscontinue to addressbe focused on quality and transparency. Given the creditworthiness of financial firms, including bank financial strength and deposit ratings, and insurance financial strength ratings. Moody’s has also introduced issuer ratings for corporations not activeparticular disruption in the debt markets. As the structured finance markets, continueMIS has been developing enhanced structured finance offerings to grow worldwide and secondary markets continue to develop, demandmeet investor demands for more information content. Leveraging the diversity of its research data and analytics, Moody’s has introduced cross-sector analysis supporting these markets has heightened. In orderto better illustrate the broader impacts of recent market events. This is further enhanced by the incorporation of macroeconomics to frame conditions and assumptions. MIS continues to capitalize on market developments and to enhance ratings surveillance efficiency, Moody’s has created a new products group within structured finance to focusfocusing on new ratings products, such as hedge fund operations quality ratings, and to identify, design, develop and maintain value-added research, analytics and data products serving the structured finance market. The acquisition of Wall Street Analytics in December 2006 broadens Moody’s capabilities in the analysis and monitoring of complex debt securities and provides a deeper pool of dedicated analytic and product development staff to create new software analytic tools for the structured finance market.

In response to growing investor demand for expanded credit opinion in the high yield market, Moody’s has introduced a number of new products, including joint default analysis, corporate financial metrics, and both loss-given-default and probability-of-default ratings.capital markets.

Additional Opportunities in Structured Finance

The repackaging of financial assets has had a profound effect on the fixed-income markets. New patterns of securitization are expected to emerge in the next decade. Although the bulk of assets securitized in the past five years have been consumer assets owned by banks, commercial assets — principally commercial mortgages, term receivables and corporate obligations — are now increasingly being securitized. Securitization has evolved into a strategic corporate finance tool in North America, Europe and Japan, and is evolving elsewhere internationally. Ongoing global development of non-traditional financial instruments, especially credit derivatives, has accelerated in recent years. Increasingly complex collateralized debt obligations (“CDO”s) have been introduced, which should continue to support growth. Moody’s has introduced new services enabling investors to monitor the performance of their investments in structured finance, covering asset-backed finance, commercial mortgage finance, residential mortgage finance and credit derivatives.

Internet-Enhanced Products and Services

Moody’s is expanding its use of the Internet and other electronic media to enhance clientcustomer service. Moody’s website provides the public with instant access to ratings and provides the public and subscribers with credit research.research and risk assessment tools. Internet delivery also enables Moody’s to provide services to more individuals within a clientcustomer organization than were available with paper-based products and to offer higher-value services because of more timely delivery. Moody’s expects that access to these applications will increase clientcustomer use of Moody’s services. Moody’s expects to continue to invest in electronic media to capitalize on these and other opportunities.

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Expansion of Credit Research Products and Investment Analytic Tools

Moody’s plans to expand its research and analytic services through internal development and by acquisition. To respond to client demand,potentially through acquisitions. Most new product initiatives are generally more analytical and data-intensive than traditional narrative research offerings. Such services address investor interest in replicating the types of monitoring activities conducted by for example, Moody’s securitization analysts and provide the means for customers to gain access to raw data and financial statistics and ratios used by Moody’s analystsMIS in the rating process for municipalities, companies and financial institutions. These products represent important sources of growth for the research business unit.business. MA is developing products in the fixed-income valuations and pricing arena that facilitate price transparency in global fixed income markets, especially for complex structured securities and derivative instruments. Moreover, Moody’s continues to explore opportunities to extend its research relevance in new domestic or regional markets (e.g., China) as well as new functional markets (e.g., hedge funds).

New Quantitative Credit Risk Assessment Services

Moody’s will continue to provide banks and other institutions with quantitative credit risk assessment services.solutions. Moody’s believes that there will be increased demand for such services because they assist customers trading or holding credit-sensitive assets to producebetter manage risk and deliver better performance. Also, recent proposals by international bank regulatory authorities to recognizeare assessing the adequacy of banks’ internal credit risk management systems for the purpose of determining regulatory capital are expected tocapital. The acquisition of Fermat accelerates Moody’s capabilities in this area. Such regulatory initiatives create demand for, and encourage adoption of, suchrelated services by banks from third-party providers. Moody’s also expects to provide extensions to existing services and new services, such as valuations of credit-sensitive assets.

RegulationREGULATION

In the United States, Moody’s Investors ServiceU.S., since 1975, MIS has been designated as aan NRSRO by the SEC. The SEC first applied the NRSRO designation in 1975that year to companies whose credit ratings could be used by broker-dealers for purposes of determining their net capital requirements. Since that time, Congress, (including in certain mortgage-related legislation), the SEC (including in certain of its regulations under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended and the Investment Company Act of 1940, as amended) and other governmental and private bodies have used the ratings of NRSROs to distinguish between “investment-grade” and “non-investment-grade” securities, among other things, “investment grade” and “non-investment grade” securities. Moody’s Investors Service has also voluntarily registered with the SEC as a NRSRO under the Investment Advisers Act of 1940, as amended. Once SEC rules underpurposes.

In September 2006, the Credit Rating Agency Reform Act of 2006 discussed below, are promulgated and become effective, approved NRSROs will be required to register pursuant to the Securities Exchange Act of 1934.

Over the past several years, U.S. regulatory and congressional authorities have reviewed the suitability of continuing to use ratings in federal securities laws and, if such use is continued, the potential needwas passed, which created a voluntary registration process for altering the regulatory framework under which rating agencies operate. This review ultimately resulted in the passage of the Credit Rating Agencywishing to be designated as NRSROs. The Reform Act of 2006 (“Reform Act”) in September 2006. The stated objectives of the Reform Act are to foster competition, transparency and accountability in the credit rating industry. It makes changes to the SEC’s processes for designating rating agencies as NRSROs, and formalizes the framework through whichprovides the SEC oversees them. However, the legislation provides thatwith authority to oversee NRSROs, while prohibiting the SEC shall not regulatefrom regulating the substance of credit ratings or the procedures and methodologies by which any NRSRO determines credit ratings. The Reform Act requires the SEC to issue final implementing rules byIn June 26, 2007. On February 5, 2007, the SEC published for comment its proposedfirst set of rules addressingunder the Reform Act. These rules address the NRSRO application and registration process, as well as oversight rules related to recordkeeping, financial reporting, policies for handlingprevention of misuse of material non-public information, conflicts of interest, and prohibited acts and practices. In June 2007, MIS filed its application for registration as an NRSRO with the SEC. In September 2007, the SEC registered MIS as an NRSRO under the Securities Exchange Act of 1934, and as of that time MIS has been subject to the SEC’s oversight rules described above. As required by the rules, MIS has made its Form NRSRO Initial Application, its Annual Certification of Form NRSRO, and any associated updates publicly available by posting it on the Regulatory Affairs page of the Company’s website.

In July 2008, the SEC released a report on its examination of CRAs. The SEC began its review of the ratings processes and procedures of the three leading rating agencies – MIS, S&P and Fitch – in August 2007, focusing on subprime RMBS and CDOs. While the Commission’s Staff noted that most of the period under review pre-dated the implementation of SEC rules for the industry, the report identified areas that were either of concern to the SEC or that the SEC believed could be enhanced going-forward. The concerns identified by the Commission’s Staff generally fall into three categories: policies addressing potential conflicts of interest; resources and resource allocation; documentation around policies and procedures and enhancing transparency. The SEC also summarized the various steps that are already being put in place by the rating agencies, as well as those that are under consideration in the SEC’s current rule-making process.

In February 2009, the SEC published a second set of rules applicable to NRSROs, the majority of which provide requirements for managing conflicts of interest, enhancing record keeping requirements, and certain prohibitions against unfair, coercive or abusive practices. Interested parties have until March 12, 2007improving transparency of ratings performance and methodologies. Several of these rules became operative in April 2009.

In April 2009, MIS participated in a roundtable held by the SEC on the oversight of credit rating agencies. The SEC’s stated objective was to elicit the views of a broad cross-section of market participants. The roundtable was a full-day event and consisted of four panels: Current NRSRO Perspectives; Competition Issues; Users’ Perspectives; and Approaches to Improve Credit Rating Agency Oversight. In preparation for the roundtable, participants were asked to submit statements and MIS’s statement is available on the Regulatory Affairs page of the Company’s website.

In November 2009, the SEC published a third set of final rules for NRSROs. These rules, which will come into force in June 2010, require additional disclosure of rating histories and prohibit NRSROs from rating structured finance products unless the issuer makes the same information accessible to all NRSROs that it provides to an NRSRO hired to determine the rating. In 2009, the SEC also determined to eliminate references to NRSRO ratings in certain regulations, retain some references and seek additional comments on other references. In December 2009, the comment period closed on an SEC proposal to require disclosure about credit ratings when ratings are used in connection with the sale of registered securities and a concept release on the treatment of NRSROs as experts under the Securities Act of 1933. In February 2010, the comment period closed on proposed SEC rules for NRSROs regarding the compliance function and disclosure about revenues received for credit rating services. MIS’s comments to the SEC. Moody’s isSEC can be found on the Regulatory Affairs webpage of the Company’s website.

Both chambers of Congress, as well as the Administration, are reviewing the broader U.S. regulatory infrastructure and as part of this review, the role and function of CRAs will continue to be studied. For example, as part of a series of hearings focusing on the existing market turmoil, on October 22, 2008, the House Committee on Oversight and Government Reform (“House Oversight Committee”) held a hearing on the Role of Credit Rating Agencies in which MIS participated.

On June 17, 2009, the U.S. Department of the Treasury (“Treasury”) published its proposal on “Financial Regulatory Reform: A New Foundation” (“Administration’s Proposal”). As it pertains to CRAs, the Administration’s Proposal asked the SEC to continue its efforts to strengthen the regulation of CRAs, including measures to require that firms have robust policies and procedures that manage and disclose conflicts of interest, differentiate between structured and other products, and otherwise promote the integrity of the rating process. The Administration’s Proposal also recommended that regulators should reduce their use of credit ratings in regulations and supervisory practices, wherever possible.

Subsequently, the Treasury produced and sent to Congress a series of proposed rules and intendsbills that seek to submit commentsimplement the various aspects of the Administration’s Proposal. With respect to the SEC.CRA industry, the Treasury’s proposed bill was sent to the Congress on July 21st. It is

entitled “Improvements to the Regulation of Credit Rating Agencies” and is organized in order to address the following areas: mandatory registration of credit rating agencies; enhanced regulation of nationally recognized statistical rating organizations; strengthening credit rating agency independence; and issuer disclosure of preliminary ratings.

As part of the ongoing debate in Congress, MIS participated in two hearings on September 30, 2009. One hearing was held by the House Oversight Committee and the other by the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises. Following these hearings, the House Financial Services Committee approved a bill entitled “Accountability and Transparency in Rating Agencies Act”. The rating agency bill was later incorporated into the larger financial reform draft legislation, which was approved by the full House in December 2009. Presently, the Senate is considering its version of a bill that would enhance oversight of CRAs. Both the House and Senate bills currently contain provisions that could potentially increase the costs associated with the operation of a CRA and increase the legal risk associated with the issuance of credit ratings. As the legislative process is still ongoing, it is as yet too early to assess the potential impact of additional legislation.

Internationally, several regulatory developments have occurred:

The Group of 8 and the Group of 20—In November 2008, the Heads of State of the G-20 reached agreement on a wide-ranging set of proposals to better regulate financial systems. Among other things, the G-20 committed to implement oversight of the CRAs, consistent with the strengthened International Organization of Securities Commissions’ Code of Conduct (see below) and agreed that, in the medium term, the countries should implement a registration system for CRAs. The G-20 also committed to formulate their regulations and other measures in a consistent manner and recommended that IOSCO— review CRAs’ adoption of the standards and mechanisms for monitoring compliance.

On April 2, 2009, the G-20 Heads of State meeting was held in London, where the G-20 provided a six-part action plan to address the financial crisis: (1) to restore confidence, growth, and jobs; (2) to repair the financial system to restore lending; (3) to strengthen financial regulation and rebuild trust; (4) to fund and reform international financial institutions to overcome the current crisis and prevent future ones; (5) to promote global trade and investment and reject protectionism; and (6) to build an inclusive, green, and sustainable recovery. The G-20’s plan also contains a number of provisions that are specific to CRAs. In particular, the G-20 member states agreed to extend regulatory oversight to and require registration of CRAs in order to ensure that they adhere to the international code of good practice. On July 10, 2009, the G-8 restated its commitment to implement the G-20’s statement.

In September 2009, the G-20 met in Pittsburgh and developed a progress report on actions to promote global financial regulatory reform. With respect to CRAs, the G-20 acknowledged that stronger oversight regimes for CRAs have been developed in the EU, the U.S. and Japan, and recognized that the development of good practices for due diligence by asset managers investing in structured finance products will result in reduced reliance on credit ratings. The G-20 also expressed concern about the creation of globally inconsistent regulations.

IOSCO—In December 2004, the Technical Committee of the International Organization of Securities Commissions (“IOSCO”)IOSCO published theits Code of Conduct Fundamentals for Credit Rating Agencies (the “IOSCO Code”).Agencies. In May 2008, IOSCO published the revised IOSCO Code. The IOSCO Code is the product of approximately two years of collaboration among IOSCO, rating agencies and market participants, and incorporates provisions that address three broad areas:

The IOSCO Code is not binding on credit rating agencies. It relies on voluntary compliance and public disclosure of areas of non-compliance by credit rating agencies so that users of credit ratings can better assess rating agency behavior and performance.

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Moody’s Investors Service endorsed the IOSCO Code broadly address greater transparency of methodologies and processes by CRAs. In July 2008, IOSCO also announced that it will monitor the CRAs implementation of the IOSCO Code changes and it will explore the means by which IOSCO members might work together to verify the proper and complete disclosure by CRAs of information required by the IOSCO Code.

On March 12, 2009, IOSCO published its second review of the CRAs implementation of the IOSCO Code. The report noted that seven out of the 21 CRAs reviewed had implemented the IOSCO Code in June 2005their own codes of conduct. In particular, MIS was found to have substantially implemented the 2008 revisions to the IOSCO Code. IOSCO also published and sent a note to the G-20 and Financial Stability Forum regarding the use of the IOSCO Code as the basis for international oversight of CRAs and mechanisms by which regulators can help assure adequate cross-border supervision of globally active CRAs. In addition, IOSCO announced the establishment of a new standing committee that will address global issues regarding the CRA industry.

MIS initially published its Code of Professional Conduct (the “Moody’s Code”) pursuant to the IOSCO Code in June 2005 and published an updated version in October 2007. In November 2008, MIS revised its Code to reflect the changes made to the IOSCO Code. In AprilBeginning in 2006, Moody’s Investors ServiceMIS has annually published its first annuala report on thethat describes its implementation of Moody’sthe Code. The report discusses policies, procedures and processes that implement the Moody’s Code. The report also describes differences between the Moody’sMIS Code and the IOSCO Code and how Moody’s believesthree annual reports that the objectives of the IOSCO Code are otherwise addressed. Both Moody’s Code and the reporthave been published thus far can be found on theRegulatory Affairspage of the Company’s website.

European Union—The European Commission (“Commission”) issued a Communication on rating agencies in January 2006. The Commission noted that recent European Union (“EU”) financial services legislative measures that are relevant to credit rating agencies, combined with a self-regulatory framework for rating agencies based onFinally, IOSCO is exploring the IOSCO Code, provided a suitable frameworkpossibility of supervisory colleges and/or bilateral cooperation arrangements for the oversight of rating agenciesCRAs to address concerns relating to globally fragmented regulations and in order to promote greater interaction between CRAs and regulators, as well as greater coordination among regulators overseeing international CRAs.

EU—In late April 2009, the European Parliament voted and passed on a new regulation (“EU Regulation”) that no legislative actions were required atestablishes an oversight regime for the time.CRA industry in the European Union. The Commission indicatedCompany expects that it would monitor developments relatedCRAs will need to rating agencies and asked the Committee of European Securities Regulators (“CESR”) to monitor rating agencies’be in compliance with the IOSCO CodeEU Regulation of CRAs in the second half of 2010. The framework for the EU Regulation requires the registration, formal regulation and report back regularly.

CESR completed

periodic inspection of CRAs operating in the EU. The EU Regulation also sets out specific requirements for the use of ratings that are produced outside of the EU and used for regulatory purposes in the EU. Among these is a processrequirement for the relevant competent authority in the EU and the competent authority of the non-EU jurisdiction where that rating has been produced to enter into a cooperation agreement containing provisions related to the exchange of information and the coordination of supervisory activities. The details of how these and other requirements will be implemented have yet to be decided, and it is therefore too early to assess such compliance and published a report in January 2007. The CESR process focused on four internationally active rating agencies that operate in the European Union, including Moody’s, and involved discussions with the individual rating agencies as well as a survey of market participants. CESR concluded that the four rating agencies are largely compliant with the IOSCO Code and identified a few areas where it believed rating agencies could improve their processes and disclosures and where the IOSCO Code could be improved. CESR indicated that for its 2007 report, it will look into these areas in particular as well as the impact of the Reform Act and the SEC’s implementing rulesEU Regulation on the rating business in the European Union. As a result of the CESR report, in January 2007 the Commission reiterated its stance that the self-regulatory approach was, at present, the appropriate regulatory framework for rating agencies in Europe.MIS’s operations or financial results.

The Basel Committee—Committee—In June 2004, the Basel Committee on Banking Supervision published a new bank capital adequacy framework, (“called Basel II”)II, to replace its initial 1988 framework. Under Basel II, ratings assigned by recognized credit rating agencies (called External Credit Assessment Institutions,CRAs or “ECAIs”) couldECAIs, can be used by banks in determining credit risk weights for many of their institutional credit exposures. National authorities will begin implementing these aspects of Basel II during 2007. Recognized ECAIs could be subject to a broader range of oversight.

In the EU, Basel II has been adopted through the Capital Requirements Directive (“CRD”), which, among other things, sets out criteria for recognizing ECAIs within the EU. The Commission created the Committee of European Banking Supervisors (“CEBS”), comprised of European banking regulators, to advise it on banking policy issues that include implementing the CRD. In January 2006, CEBS published guidelines that provide the basis for a consistent approach by EU Member States to the implementation of the CRD’s ECAI recognition and supervision criteria. Moody’s completed an application process pursuant to the CEBS guidelines and in August 2006, CEBS announced a shared view among EU banking National authorities that Moody’s should be recognized as an ECAI. However, as each Member State must formally recognize ECAIs for use in its jurisdiction, the recognition process is ongoing.

Bank regulators in other jurisdictions globally have begun the ECAI recognition process, and Moody’sprocess. MIS has been recognized as an ECAI in several jurisdictions. At this time Moody’s cannot predictjurisdictions and the long-term impact of Basel II on the mannerrecognition process is ongoing in which the Company conducts its business. However, Moody’smany others. MIS does not currently believe that Basel II will materially affect its financial position or results of operations. As a result of the recent regulatory activity, the banking authorities of the Basel Committee are reconsidering the overall Basel II framework. It is as yet too early to assess the form and content of this re-evaluation.

Other legislation and regulation relating to credit rating and research services has beenis being considered from time to time by local, national and multinational bodies and this type of activity is likely to be consideredcontinue in the future. In addition, in certain countries, governments may provide financial or other support to locally-based rating agencies. In addition,For example, governments may from time to time establish official rating agencies or credit ratings criteria or procedures for evaluating local issuers. If enacted, any such legislation and regulation could significantly change the competitive landscape in which Moody’sMIS operates. In addition, theThe legal status of rating agencies has been addressed by courts in various decisions and is likely to be considered and addressed in legal proceedings from time to time in the future. Management of Moody’sMIS cannot predict whether these or any other proposals will be enacted, the outcome of any pending or possible future legal proceedings, or regulatory or legislative actions, or the ultimate impact of any such matters on the competitive position, financial position or results of operations of Moody’s.

Finally, the G-20 has announced that by the end of 2009, the Basel Committee will review the role of external ratings in regulation and determine whether any adverse incentives need to be addressed. It is our understanding that this work has begun.

Intellectual PropertyINTELLECTUAL PROPERTY

Moody’s and its affiliates own and control a variety of trade secrets, confidentialintellectual property, including by not limited to proprietary information, trademarks, traderesearch, software tools and applications, models and methodologies, databases, domain names, copyrights, patents, databases and other intellectual property rightsproprietary materials (“Intellectual Property”) that, in the aggregate, are of material importance to Moody’s business. Management of Moody’s believes that each of the “Moody’s”, “Moody’s KMV” and the “M Circle Logo” trademarks and related corporate names, marks and logos containing the term “Moody’s” are of material importance to Moody’s.the Company. The Company, primarily through Moody’s Analytics, licenses certain of its databases, software applications, research and other publications and services that contain Intellectual Property to its customers. These licenses are provided pursuant to standard fee-bearing agreements containing customary restrictions and intellectual property protections. In addition, Moody’s is licensed to use certain technology and other intellectual property rights owned and controlled by others,third parties. Specifically, Moody’s licenses financial information (including market and similarly, other companies are licensed to use certainindex data, financial statement data, third-party research, default data, and security identifiers), as well as software applications. The Company obtains such technology and other intellectual property rights owned and controlled by Moody’s. Moody’sfrom a variety of sources. The Company considers its trademarks, service marks, databases, software and other intellectual propertyIntellectual Property to be proprietary, and Moody’s relies on a combination of copyright, trademark, trade secret, patent, non-disclosure and contractual safeguards for protection.

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In 2002, Moody’s formed two subsidiaries that hold somealso pursues instances of third-party infringement of its intellectual property. The first, MIS Quality Management Corp., was formedIntellectual Property in order to own, manage, protect enforce and license the trademarks of Moody’s and its affiliates. The second, Moody’s Assurance Company, Inc., is a New York State “captive” insurance company that self-insures Moody’s against certain risks and owns Moody’s ratings databases, methodologies and related software and processes in addition to other assets in support of its insurance program.Company’s rights.

The names of Moody’s products and services referred to herein are trademarks, service marks or registered trademarks or service marks owned by or licensed to Moody’s or one or more of its subsidiaries.

EmployeesEMPLOYEES

As of December 31, 2006,2009, the number of full-time equivalent employees of Moody’s was approximately 3,400.4,000.

Available InformationAVAILABLE INFORMATION

Moody’s investor relations Internet website is http://ir.moodys.com/. Under the “SEC Filings” tab at this website, the Company makes available free of charge its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after they are filed with, or furnished to, the SEC.

EXECUTIVE OFFICERS OF THE REGISTRANTThe SEC maintains an internet site that contains annual, quarterly and current reports, proxy and other information statements that the Company files electronically with the SEC. The SEC’s internet site is http://www.sec.gov/.

EXECUTIVE OFFICERS OF THE REGISTRANT

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The following risk factors and other information included in this annual report on Form 10-K should be carefully considered. The risks and uncertainties described below are not the only ones the Company faces. Additional risks and uncertainties not presently known to the Company or that the Company’s management currently deems minor or insignificant also may impair its business operations. If any of the following risks occur, Moody’s business, financial condition, operating results and cash flows could be materially adversely affected.

Changes in the Volume of Debt Securities Issued in Domestic and/or Global Capital Markets and Changes in Interest Rates and Other Volatility in the Financial Markets

Approximately 80%50% of Moody’sMIS’ revenue for 2009 was transaction-based, compared to 49% of MIS’ revenue in 2006 was derived2008 and 68% of MIS' revenue in 2007. Revenue from ratings, a significant portion of which was related to the issuance of credit-sensitive securitiesrating transactions, in the global capital markets. The Company anticipates that a substantial part of its business will continue to beturn, is dependent on the number and dollar volume of debt securities issued in the capital markets. Therefore, the Company’s results could be adversely affected by a reduction in the level of debt issuance.

Unfavorable financial or economicAccordingly, any conditions that either reduce investor demand for debt securities or reduce issuers’ willingness or ability to issue such securities could reduce the number and dollar volume of debt issuanceissuances for which Moody’s provides ratings services. In addition,services and thereby have an adverse effect on the fees derived from the issuance of ratings.

A significant disruption in world financial markets, particularly in the credit markets, began in mid-2007, when many credit markets experienced a severe lack of liquidity. This disruption continues to be felt. These credit market disruptions together with the current economic slowdown have negatively impacted the volume of debt securities issued in global capital markets and the demand for credit ratings. Notwithstanding a recent increase in investment-grade and speculative-grade debt issuances in 2009, future issuance could be negatively affected by a sharp increase in long-term interest rates or factors which cause instability or volatility in the global capital markets. New debt issuances in the structured finance market are likely to continue to be significantly below peak levels reached in the middle of the past decade. Consequently, the Company has experienced a substantial reduction in the overall demand for rating newly issued debt securities. Changes in the markets and the role, regulation and structure of rating agencies may have material adverse effects on the Company even if the markets recover.

The timing and nature of any recovery in the credit and other financial markets remains uncertain, and there can be no assurance that market conditions will improve in the future or that financial results will not continue to be adversely affected. A sustained period of market decline or weakness, especially if it relates to credit sensitive securities, for which there was historically a high level of demand for ratings, could continue to have a material adverse effect on Moody’s business and financial results. Initiatives that the Company has undertaken to reduce costs may not be sufficient to offset the results of a continued or more severe downturn, and further cost reductions may be difficult or impossible to obtain in the near term, due in part to rent, technology and other fixed costs associated with some of the Company’s operations as well as the need to monitor outstanding ratings. Further, the cost-reduction initiatives undertaken to date could result in strains in the Company’s operations if the credit markets and demand for ratings return to levels that prevailed prior to mid-2007 or otherwise unexpectedly surge.

Other factors that could further reduce investor demand for debt securities or reduce issuers’ willingness or ability to issue such securities include increases in interest rates or credit spreads, continued volatility in financial markets or the interest rate environment, significant regulatory, political or economic events, the use of alternative sources of credit including financial institutions and government sources, defaults of significant issuers and other unfavorable market and economic factors may negatively impact the general levelconditions.

Furthermore, issuers of debt issuance,securities may elect to issue securities without ratings or which are rated or evaluated by non-traditional parties such as financial advisors, rather than traditional credit rating agencies, such as Moody's. The SEC and other regulatory and governmental authorities globally have also been proposing and implementing changes in existing rules to decrease the reliance on ratings for regulatory purposes. Decreases in the use of ratings in debt issuance plans of certain categories of borrowers, and/issuances or the types of credit-sensitive products being offered. A sustained period of market decline or weaknessreliance upon non-CRA risk evaluations could also have a material adverse effect on Moody’s businessresult in reduced revenues and financialadversely impact Moody's results.

Possible Loss of Market Share or Revenue Through Competition or Regulation

TheFinally, given the changing regulatory and market environment, even if credit markets revive, there is no assurance that the demand for credit ratings researchwould follow prior patterns. As such, no assurance can be given as to the amount of revenues that would be derived there from.

Regulation as a Nationally Recognized Statistical Rating Organization and Potential for New Domestic and Overseas Legislation and Regulations

Credit rating agencies are regulated in both the U.S. and in other countries (including by state and local authorities). Currently, Moody’s is designated as an NRSRO pursuant to SEC regulations enacted in response to the adoption of the Reform Act. One of the central promises of the Reform Act was to encourage competition among rating agencies. Given its comparatively recent adoption and the number of additional reforms being proposed and considered, Moody’s is unable accurately to assess the future impact of any regulatory changes that may result from the SEC’s regulations or the impact on Moody’s competitive position or its current practices. Possible consequences of these new regulations include issues that may affect all entities engaged in the rating agency business, such as expected increased costs, or issues that may affect Moody’s in a disproportionate manner. Any of these changes could negatively

impact Moody’s operations or profitability, the Company’s ability to compete, or the markets for its products and services in ways that Moody’s presently is unable to predict.

Further, over the past year, both the G-8 and the G-20 Finance Ministers and Central Bank Governors have sought to analyze and arrive at a consistent approach for addressing the various areas of the financial market and have made a variety of recommendations as to regulation of rating agencies and the markets for ratings. Finance ministers have also agreed to register rating agencies in their home jurisdiction. As a result, of the internationally coordinated activity, individual countries have begun implementing registration regimes for the oversight of CRAs in the coming years. In particular, the European Union adopted a new regulatory framework for rating agencies operating in the E.U. The regulation seeks to introduce a common EU regulatory approach to the oversight of CRAs. Its primary objective is to enhance the integrity, transparency, responsibility, governance and reliability of credit risk management services are increasingly competitive. Moody’s competesrating activities, by laying down conditions for the issuance of credit ratings and rules on the basisorganization and conduct of credit rating agencies. The regulation will likely become fully implemented by the second quarter of 2010. As with the recent regulatory initiatives in the U.S., these initiatives may affect all entities engaged in the rating agency business or may affect Moody’s in a disproportionate manner, and could negatively impact Moody’s operations or profitability, the Company’s ability to compete, or the markets for its products and services in ways that Moody’s presently is unable to predict.

In addition to the foregoing, in the wake of the credit crisis, many legislative and regulatory agencies, both in the U.S. and in other countries, have been studying or pursuing new laws and regulations addressing CRAs and the use of credit ratings, particularly in the area of structured finance securities, and the role of CRAs in leading up to such disruptions. Given the G-20 statement, it is likely that such initiatives will lead to additional laws or regulations affecting Moody’s operations or profitability, the Company’s ability to compete, or the markets for its products and services. This could include adopting regulations that affect the need for debt securities to be rated, establish criteria for credit ratings or authorize only certain entities to provide credit ratings, which could negatively affect competition among rating agencies, the level of demand for ratings or the Company’s ability to provide objective assessments of creditworthiness. Additional regulations are likely to increase the costs associated with the operation of a CRA, alter the rating agencies’ communications with the issuers as part of the rating assignment process, increase the legal risk associated with the issuance of credit ratings, change the regulatory framework to which CRAs are subject and affect the competitive environment in which CRAs operate.

As existing laws and regulations applicable to credit ratings and rating agencies continue to evolve and new laws or regulations are adopted, the costs of compliance can be expected to increase, and Moody’s may not be able to pass these costs through the pricing of its products. In addition, increased regulatory uncertainty over the scope, interpretation and administration of laws and regulations may increase costs, decrease demand or affect the manner in which Moody’s or its customers or users of credit ratings operate, or alter the economics of the credit ratings business by restricting or mandating the business models under which a CRA is permitted to operate.

Moody's stock price may also be affected by speculation regarding legislative and regulatory initiatives and their potential impact on Moody's business.

A description of several of the more recent regulatory initiatives in the U.S. and other countries is described above under the section entitled “Regulation” in Item 1. “Business”, of this Form 10-K.

Legal, Economic and Regulatory Risks of Operating in Foreign Jurisdictions

Moody’s maintains offices outside the U.S. and derives a significant portion of its revenue from sources outside the U.S. In addition to the regulatory risks discussed above, operations in different countries expose Moody’s to a number of factors,legal, economic and regulatory risks such as restrictions on the ability to convert local currency into U.S. dollars and currency fluctuations; U.S. laws affecting overseas operations including qualityregulations applicable under the Office of ratings, customer service, research, reputation, regulatory qualification,Foreign Asset Control and the Foreign Corrupt Practices Act; domestic and foreign export and import restrictions, tariffs and other trade barriers; political and economic instability; the possibility of nationalization, expropriation, price geographic scope, range of productscontrols and technological innovation. For example, a large investment grade default could impact the Company’s reputationother restrictive governmental actions; longer payment cycles and possible problems in collecting receivables; and potentially leadadverse tax consequences.

In addition to greater regulatory oversight. Moody’s faces competition from among others, S&P, Fitch, DBRS, localother rating agencies that operate in a number of international jurisdictions and nichespecialized companies that provide ratings for particular types of financial products or issuers (such as A.M. Best Company, Inc., with respect to the insurance industry). Since, in many foreign countries Moody’s believes that some of its most significant challenges and opportunities will arise outside the U.S., it will have to compete with rating agencies that may have a stronger local presence and greater familiarity or a longer operating history in those markets. These local providers or comparable competitors that may emerge in the future may receive support from local governments or other institutions that Moody’s does not receive.receive, putting Moody’s at a competitive disadvantage.

Currently, Moody’s, S&P, Fitch, DBRSUncertain Impact of Government Actions to Stabilize Financial Institutions and A.M. Best Company, Inc. are designated as NRSROsMarkets

The U.S. government announced several programs in 2008, including the Emergency Economic Stabilization Act, the October 14, 2008 joint statement by the SEC.U.S. Treasury, Federal Reserve and FDIC announcing the Troubled Asset Relief Program through which the government is authorized to purchase up to $700 billion in whole loans and mortgage-related securities as well as to invest directly in financial institutions, the Treasury Department’s money market mutual fund guaranty program, the Federal Reserve’s commercial paper

funding facility and payment of interest on reserve balances, the FDIC’s temporary liquidity guarantee program and the February 10, 2009 statement by the U.S. Treasury. Additionally, the governments of many nations and international organizations such as the International Monetary Fund have announced similar measures for institutions and countries around the world. There is no assurance that these programs individually or collectively will have beneficial effects in the credit markets, will address credit or liquidity issues of companies that participate in the programs, will reduce volatility or uncertainty in the financial markets or will reverse or moderate the slowdown and downturn of world economies. The failure of these programs to have their intended effects could have a material adverse effect on the financial markets, which in turn could materially and adversely affect the Company’s business, financial condition and results of operations. In September 2006,addition, these and similar initiatives could reduce the United States Congress passed into lawdemand for ratings of credit securities or other financial products, could result in increased government regulation of such markets and could have other unanticipated adverse effects on the Credit Rating Agency Reform Actmarkets for and demand for debt securities and/or for ratings of 2006. As a direct result,such instruments.

Increased Pricing Pressure from Competitors and/or Customers

In the SEC is mandatedcredit rating, research and credit risk management markets, competition for customers and market share has spurred more aggressive tactics by some competitors in areas such as pricing and service, as well as increased competition from non-NRSROs that evaluate debt risk for issuers or investors. At the same time, bankruptcies and consolidation of customers, particularly those involved in structured finance products, and other factors affecting demand may enhance the market power of customers. While Moody’s seeks to complete a rule-making process which implementscompete primarily on the legislation (see “Regulation”, above, for further information) by June 2007. At present,basis of the quality of its products and service, if its pricing and services are not sufficiently competitive with its current and future competitors, Moody’s is unable to assess the impact of any regulatory changes that may result from the SEC’s rule-making process.lose market share.

Introduction of Competing Products or Technologies by Other Companies

The markets for credit ratings, research and credit risk management services are highly competitive. The ability to provide innovative products and technologies that anticipate customers’ changing requirements and to utilize emerging technological trends is a key factor in maintaining market share. Competitors may develop quantitative methodologies or related services for assessing credit risk that customers and market participants may deem preferable, more cost-effective or more valuable than the credit risk assessment methods currently employed by Moody’s.Moody’s, or may price or market their products in manners that differ from those utilized by the Company. Customers or others may develop alternative, proprietary systems for assessing credit risk. Such developments could affect demand for Moody’s products and the Company’s growth prospects. In addition, Moody’s growth prospects also could also be adversely affected by limitations of its information technologies that fail to provide adequate capacity and capabilities to meet increased demands of producing quality ratings and research products.products at levels achieved by competitors.

Increased Pricing Pressure from Competitors and/or CustomersSignificant Amount of Intangible Assets

Moody's has a significant amount of intangible assets on its balance sheet consisting of $349.2 million of goodwill and $104.9 of amortizable intangible assets. Approximately 97% of these intangibles reside in the MA business and are allocated to the three reporting units within MA: RD&A; RMS; and Training. Failure to achieve business objectives and financial projections in one or all of these reporting units could result in an asset impairment charge which would reduce net income in the period the impairment is recorded. Impairment of goodwill or intangibles would result in a non-cash charge to operating expenses. An impairment would result if the fair value of a reporting unit or asset group which holds goodwill or any intangible assets is less than the carrying amount of its net assets. A significant factor in the determination of the fair value of a reporting unit or asset group is its projected cash flows. Future cash flows of MA are dependent on a variety of factors such as, but not limited to, general economic growth, capital market activity, product innovation, pricing, market share and competition. The breakdown in or the failure to achieve success in managing one or a combination of these factors could lead to reduced cash flows resulting in an asset impairment charge.

Exposure to Litigation Related to Moody’s Rating Opinions

Currently, Moody’s has received subpoenas and inquiries from states attorneys general and governmental authorities, as part of ongoing investigations, and is responding to those inquiries. In addition, Moody’s faces litigation from parties claiming damages relating to ratings actions, as well as other related business practices. In these difficult economic times and turbulent markets, when the value of credit-dependent instruments has declined and defaults have increased, the number of investigations and legal proceedings Moody’s is facing has increased significantly. These proceedings impose additional expenses on the Company, which may increase over time as these matters progress procedurally, require the attention of senior management to an extent that may significantly reduce their ability to devote time addressing other business issues, and, given the number of these proceedings and lawsuits, present a greater risk that Moody's may be subject to fines or damages, which would be the case if we are deemed to have violated any laws or regulations. As Moody’s international business expands, these types of claims may increase or become more costly because foreign jurisdictions may not have legal protections or liability standards comparable to those that currently exist in the U.S. (such as protections for the expression of credit opinions as provided by the First Amendment) and may pose criminal rather than civil penalties for non-compliance. These risks often are and may continue to be difficult to assess or quantify and we may not have adequate insurance or reserves to cover them, and their existence and magnitude often remains unknown for substantial periods of time.

In addition, to the extent that any of the recent legislative initiatives are successful in modifying, in a manner adverse to CRAs, the rules governing the potential liability of CRAs in connection with the issuance of ratings, the number of legal proceedings, especially as related to future ratings, may increase materially and the potential exposure of CRAs thereunder may also increase.

Exposure to Reputational and Credibility Concerns

Moody’s reputation is one of the key bases on which the Company competes. To the extent that the rating agency business as a whole or Moody’s, relative to its competitors, has suffered a loss in credibility in the course of the credit crisis, or, in the future, suffers a loss in credibility, Moody’s business could be adversely affected. Factors that may have already affected credibility and could potentially continue to have an impact in this regard include the appearance of a conflict of interest, the performance of securities relative to the rating researchassigned to such securities by a particular rating agency, the timing and credit risk management markets, competition for customersnature of changes in ratings, adverse publicity as to the ratings process, a major compliance failure, and market share has spurred more aggressive tacticsincreased criticism by some competitors in areas such as pricingusers of ratings, regulators and service. While Moody’s seeks to compete primarily on the basis of the quality of its products and service, if its pricing and services are not sufficiently competitive with its current and future competitors, Moody’s may lose market share.legislative bodies.

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Possible Loss of Key Employees to Investment or Commercial Banks or Elsewhere and Related Compensation Cost Pressures

Moody’s success depends in part upon recruiting and retaining highly skilled, experienced financial analysts and other professionals. Competition for qualified staff in the financial services industry is intense, and Moody’s ability to attract staff could be impaired if it is unable to offer competitive compensation and other incentives.incentives or if the regulatory environment mandates restrictions on or disclosures about individual employees that would not be necessary in competing analytical industries. Investment banks, investors and other competitors formay seek to attract analyst talent may be able to offerby or providing more favorable working conditions or, within the limits of today's market constraints, offering higher compensation than Moody’s.Moody's. Moody’s also may not be able to identify and hire employees in some markets outside the U.S. with the required experience or skills to perform sophisticated credit analysis. Moody’s may also lose key employees due to other factors, such as catastrophes, that could lead to disruption of business operations. Moody’s ability to compete effectively will continue to depend, among other things, on its ability to attract new employees and to retain and motivate existing employees.

ExposureThe Trading Price of Our Stock Could be Affected by Third Party Actions

Ownership of our stock is highly concentrated with a majority of our shares held by a few institutional stockholders. Due to Litigation Relatedthis concentrated stockholder base, the trading price of our stock could be affected considerably by decisions of significant stockholders to increase or decrease their positions, including any actions taken to implement such a decision.

Moody’s Rating OpinionsOperations and Infrastructure may Malfunction or Fail

Moody’s faces litigation from timeability to time fromconduct business may be adversely impacted by a disruption in the infrastructure that supports its businesses and the communities in which Moody’s is located, including having its headquarters in New York City and offices in major cities worldwide. This may include a disruption involving electrical, communications or other services used by the Company or third parties claiming damages relatingwith or through whom Moody’s conducts business, whether due to ratings actions. In addition, ashuman error, natural disasters, power loss, telecommunication failures, break-ins, sabotage, computer viruses, intentional acts of vandalism, acts of terrorism or war or otherwise. Moody’s international business expands, these typesefforts to secure and plan for potential disruptions of claims may increase because foreign jurisdictionsmajor operating systems may not be successful. The Company does not have legal protectionsfully redundant systems for most of its smaller office locations and low-risk systems, and its disaster recovery plan does not include restoration of non-essential services. If a disruption occurs in one of Moody’s locations or liability standards comparablesystems and its personnel in those locations or those who rely on such systems are unable to thoseutilize other systems or communicate with or travel to other locations, their ability to service and interact with Moody’s clients and customers may suffer.

The Company’s operations also rely on the secure processing, storage and transmission of confidential and other information in its computer systems and networks. The business relies upon and processes a great deal of data through its systems, the U.S. (such as protectionsquality of which must be maintained in order for the expression of credit opinionsbusiness units to perform. Although Moody’s takes protective measures and endeavor to modify them as is provided by the First Amendment). These risks oftencircumstances warrant, its computer systems, software and networks may be difficultvulnerable to assess or quantify and their existence and magnitude often remains unknown for substantial periods of time.

Potential Emergence of Government-Sponsored Credit Rating Agencies

When governments adopt regulations that require debt securities to be rated, establish criteria for credit ratings or authorize only certain entities to provide credit ratings, the competitive balance among rating agencies and the level of demand for ratings may be positively or negatively affected. Government-mandated ratings criteria may also have the effect of displacing objective assessments of creditworthiness. In these circumstances, debt issuers may be less likely to base their choice of rating agencies on criteria such as independence and credibility, and more likely to base their choice on their assumption as to which credit rating agency might provide a higher rating, which may negatively affect the Company.

Potential for New U.S., Foreign, State and Local Legislation and Regulations, Including Those Relating to Nationally Recognized Statistical Rating Organizations

In the United States and other countries, the laws and regulations applicable to credit ratings and rating agencies continue to evolve and are presently subject to review by a number of legislative or regulatory bodies, including the SEC in the United States and the CESR on behalf of the European Union. It is possible that such reviews could lead to greater oversight or regulation concerning the issuance of credit ratings or the activities of credit rating agencies. Such additional regulations could, potentially, increase the costs associated with the operation of a credit rating agency, alter the rating agencies’ communications with the issuers as part of the rating assignment process, increase the legal risk associated with the issuance of credit ratings, change the regulatory framework to which credit rating agencies are subject and/or affect the competitive environment in which credit rating agencies operate. A description of certain of the more recent regulatory initiatives in the United States and other countries is described above under the section entitled “Regulation” in Item 1. “Business”, of this Form 10-K. At present, Moody’s is unable to predict the regulatory changes that may result from ongoing reviews by the SECunauthorized access, computer viruses or other regulatory bodies or the effectmalicious events that any such changes may have on its business.

Exposure to Increased Risk from Multinational Operations

Moody’s maintains offices outside the U.S. and derives a significant portion of its revenue from sources outside the U.S. Operations in different countries expose Moody’s to a number of legal, economic and regulatory risks such as:

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Any of these factors could have a material adverse effect onsecurity impact. If one or more of such events occur, this could jeopardize Moody’s or its clients’ or counterparties’ confidential and other information processed and stored in, and transmitted through, its computer systems and networks, or otherwise cause interruptions or malfunctions in the business, financial conditionCompany’s, its clients’, its counterparties’ or third parties’ operations. Moody’s may be required to expend significant additional resources to modify its protective measures or to investigate and results of operations ofremediate vulnerabilities or other exposures, and the Company in the future.may be subject to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by Moody’s.

None.

Moody’s corporate headquarters is located at 99 Church Street, New York, New York, with approximately 441,000 square-feet. During the fourth quarter of 2006, the Company completed the sale of its corporate headquarters and is leasing back the building until the headquarters relocation is completed. On October 20, 2006, the Company entered into an operating lease agreement with 7 World Trade Center, LLC for 589,945 square-feet of an office building located at 7 World Trade Center at 250 Greenwich Street, New York, New York which will serve as Moody’s new10007, with approximately 668,513 square feet of leased space. During the fourth quarter of 2006, the Company completed the sale of its former

corporate headquarters beginning in mid- to late 2007.building at 99 Church Street, New York, New York. As of December 31, 2006,2009, Moody’s operations were conducted from 15 U.S. offices and 3244 non-U.S. office locations, all of which are leased. These properties are geographically distributed to meet operating and sales requirements worldwide. These properties are generally considered to be both suitable and adequate to meet current operating requirements and virtually all space is being utilized.requirements.

From time to time, Moody’s is involved in legal and tax proceedings, governmental investigations, claims and litigation that are incidental to the Company’s business, including claims based on ratings assigned by Moody’s.MIS. Moody’s is also subject to ongoing tax audits in the normal course of business. Management periodically assesses the Company’s liabilities and contingencies in connection with these matters based upon the latest information available. Moody’s discloses material pending legal proceedings other than routine litigation incidentalpursuant to Moody’s business, material proceedings known to be contemplated by governmental authorities,SEC rules and other pending matters thatas it may determine to be appropriate.

Following the events in the U.S. subprime residential mortgage sector and the credit markets more broadly over the last two years, MIS and other credit rating agencies are the subject of intense scrutiny, increased regulation, ongoing investigation, and civil litigation. Legislative, regulatory and enforcement entities around the world are considering additional legislation, regulation and enforcement actions, including with respect to MIS’s compliance with newly imposed regulatory standards. Moody’s has received subpoenas and inquiries from states attorneys general and other governmental authorities and is responding to such investigations and inquiries. Moody’s is cooperating with a review by the SEC relating to errors in the model used by MIS to rate certain constant-proportion debt obligations. In addition, the Company is facing market participant litigation relating to the performance of MIS rated securities. Although Moody’s in the normal course experiences such litigation, the volume and cost of defending such litigation has significantly increased in the current economic environment.

On June 27, 2008, the Brockton Contributory Retirement System, a purported shareholder of the Company’s securities, filed a purported shareholder derivative complaint on behalf of the Company against its directors and certain senior officers, and the Company as nominal defendant, in the Supreme Court of the State of New York, County of New York. The plaintiff asserts various causes of action relating to the named defendants’ oversight of MIS’s ratings of RMBS and constant-proportion debt obligations, and their participation in the alleged public dissemination of false and misleading information about MIS’s ratings practices and/or a failure to implement internal procedures and controls to prevent the alleged wrongdoing. The plaintiff seeks compensatory damages, restitution, disgorgement of profits and other equitable relief. On July 2, 2008, Thomas R. Flynn, a purported shareholder of the Company’s securities, filed a similar purported shareholder derivative complaint on behalf of the Company against its directors and certain senior officers, and the Company as nominal defendant, in the Supreme Court of the State of New York, County of New York, asserting similar claims and seeking the same relief. The cases have been consolidated and plaintiffs filed an amended consolidated complaint in November 2008. The Company removed the consolidated action to the United States District Court for the Southern District of New York in December 2008. In January 2009, the plaintiffs moved to remand the case to the Supreme Court of the State of New York, which the Company opposed. On February 23, 2010, the court issued an opinion remanding the case to the Supreme Court of New York. On October 30, 2008, the Louisiana Municipal Police Employees Retirement System, a purported shareholder of the Company’s securities, also filed a shareholder derivative complaint on behalf of the Company against its directors and certain officers, and the Company as a nominal defendant, in the U.S. District Court for the Southern District of New York. This complaint too asserts various causes of action relating to the Company’s ratings of RMBS, CDO and constant-proportion debt obligations, and named defendants’ participation in the alleged public dissemination of false and misleading information about MIS’s ratings practices and/or a failure to implement internal procedures and controls to prevent the alleged wrongdoing. On December 9, 2008, Rena Nadoff, a purported shareholder of the Company, filed a shareholder derivative complaint on behalf of the Company against its directors and its CEO, and the Company as a nominal defendant, in the Supreme Court of the State of New York. The complaint asserts a claim for breach of fiduciary duty in connection with alleged overrating of asset-backed securities and underrating of municipal securities. On October 20, 2009, the Company moved to dismiss or stay the action in favor of related federal litigation. On January 26, 2010, the court entered a stipulation and order, submitted jointly by the parties, staying the Nadoff litigation pending coordination and prosecution of similar claims in the above and below described federal derivative actions. On July 6, 2009, W. A. Sokolowski, a purported shareholder of the Company, filed a purported shareholder derivative complaint on behalf of the Company against its directors and current and former officers, and the Company as a nominal defendant, in the United States District Court for the Southern District of New York. The complaint asserts claims relating to alleged mismanagement of the Company’s processes for rating structured finance transactions, alleged insider trading and causing the Company to buy back its own stock at artificially inflated prices.

Two purported class action complaints have been filed by purported purchasers of the Company’s securities against the Company and certain of its senior officers, asserting claims under the federal securities laws. The first was filed by Raphael Nach in the U.S. District Court for the Northern District of Illinois on July 19, 2007. The second was filed by Teamsters Local 282 Pension Trust Fund in the U.S. District Court for the Southern District of New York on September 26, 2007. Both actions have been consolidated into a single proceeding entitled In re Moody’s Corporation Securities Litigation in the U.S. District Court for the Southern District of New York. On June 27, 2008, a consolidated amended complaint was filed, purportedly on behalf of all purchasers of the Company’s securities during the

period February 3, 2006 through October 24, 2007. Plaintiffs allege that the defendants issued false and/or misleading statements concerning the Company’s business conduct, business prospects, business conditions and financial results relating primarily to MIS’s ratings of structured finance products including RMBS, CDO and constant-proportion debt obligations. The plaintiffs seek an unspecified amount of compensatory damages and their reasonable costs and expenses incurred in connection with the case. The Company moved for dismissal of the consolidated amended complaint in September 2008. On February 23, 2009, the court issued an opinion dismissing certain claims and sustaining others.

For those mattersclaims, litigation and proceedings not related to income taxes, where it is both probable that a liability has beenis expected to be incurred and the amount of loss can be reasonably estimated, the Company has recorded reservesrecords liabilities in the consolidated financial statements and periodically adjusts these as appropriate. In other instances, because of uncertainties related to the probable outcome and/or the amount or range of loss, management does not record a liability but discloses the contingency if significant. As additional information becomes available, the Company adjusts its assessments and estimates of such liabilitiesmatters accordingly. For income tax matters, the Company employs the prescribed methodology of Topic 740 of the ASC which requires a company to first determine whether it is more-likely-than-not (defined as a likelihood of more than fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information. A tax position that meets this more-likely-than-not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority.

The discussionCompany cannot predict the ultimate impact that any of the legallegislative, regulatory, enforcement or litigation matters under Part II, Item 7. “Management’s Discussionmay have on how its business is conducted and Analysisthus its competitive position, financial position or results of Financial Condition and Results of Operations—Contingencies”, commencing on page 28 of this annual report on Form 10-K, is incorporated into this Item 3 by reference.

operations. Based on its review of the latest information available, in the opinion of management, the ultimate monetary liability of the Company in connection withfor the pending legal and tax proceedings, claims and litigation will not have a material adverse effect on Moody’s financial position, results of operations or cash flows, subjectmatters referred to above (other than the contingencies describedLegacy Tax Matters that are discussed under the section entitled “Contingencies” in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contingencies”.Operations” of this Form 10-K ) is not likely to have a material adverse effect on the Company’s consolidated financial position, although it is possible that the effect could be material to the Company’s consolidated results of operations for an individual reporting period.

During the fourth quarter of the fiscal year covered by this annual report on Form 10-K, no matter was submitted to a vote of security holders.

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PART II

Information in response to this Item is set forth under the captions “Common Stock Information” and “Dividends” in Item 7 of this annual report on Form 10-K, and under the caption “Equity Compensation Plan Information” in the Company’s definitive proxy statement for use in connection with its annual meeting of stockholders scheduled to be held on April 24, 2007, and is incorporated herein by reference.below.

MOODY’S PURCHASES OF EQUITY SECURITIES

For the Three Months Ended December 31, 20062009

During the fourth quarter of 2006,2009, Moody’s repurchased 2.3issued 0.4 million shares at an aggregate cost of $149.6 million and issued 1.1 million shares of stock under employee stock-based compensation plans. Since becomingplans and did not repurchase any shares of its common stock.

COMMON STOCK INFORMATION AND DIVIDENDS

The Company’s common stock trades on the New York Stock Exchange under the symbol “MCO”. The table below indicates the high and low sales price of the Company’s common stock and the dividends declared and paid for the periods shown. The number of registered shareholders of record at January 31, 2010 was 3,194. A substantially greater number of the Company’s common stock is held by beneficial holders whose shares are held of record by banks, brokers and other financial institutions.

During 2007, the Company paid a public companyquarterly dividend of $0.08 per share of Moody’s common stock in October 2000 and througheach of the quarters, resulting in dividends paid per share during the year ended December 31, 2006,2007 of $0.32.

On December 15, 2009, the Board of the Company approved the declaration of a quarterly dividend of $0.105 per share of Moody’s has repurchased 84.4 million sharescommon stock, payable on March 10, 2010 to shareholders of record at a total costthe close of $2.9 billion, including 38.6 million sharesbusiness on February  20, 2010. The continued payment of dividends at the rate noted above, or at all, is subject to offset issuances under employee stock-basedthe discretion of the Board.

EQUITY COMPENSATION PLAN INFORMATION

The table below sets forth, as of December 31, 2009, certain information regarding the Company’s equity compensation plans.

PERFORMANCE GRAPH

The following graph compares the total cumulative shareholder return of the Company to the performance of Standard & Poor’s Stock 500 Composite Index (the “S&P 500”) and an index of performance peer group companies (the “Performance Peer Group”).

The Company does not believe there are any publicly traded companies that represent strict peers. However, eachthe Russell 3000 Financial Services Index. Both of the companiesaforementioned indexes are easily accessible to the Company’s shareholders in newspapers, the Performance Peer Group offers business information products in one or more segmentsinternet and other readily available sources for purposes of its business. The Performance Peer Group consists of Dow Jones & Company, Inc., The McGraw-Hill Companies, Pearson PLC, Reuters Group PLC, Thomson Corporation and Wolters Kluwer nv.the following graph.

The comparison assumes that $100.00 was invested in the Company’s common stock (the “Common Stock”) and in each of the foregoing indices on December 31, 2001.2004. The comparison also assumes the reinvestment of dividends, if any. The total return for the Common Stockcommon stock was 254%(36%) during the performance period as compared with a total return during the same period of 35%(45%) for the Russell 3000 Financial Services Index and 2% for the S&P 500 Composite Index.

Comparison of Cumulative Total Return

Moody’s Corporation, Russell 3000 Financial Services Index and 27% for the Performance Peer Group.

S&P 500 Composite Index

COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN AMONG MOODY’S CORPORATION,

SINCE DECEMBER 31, 2001S&P 500 COMPOSITE AND RUSSELL FINANCIAL SERVICES

MOODY’S CORPORATION, S&P COMPOSITE INDEX AND PEER GROUP INDEX

The comparisons in the graph above are provided in response to disclosure requirements of the SEC and are not intended to forecast or be indicative of future performance of the Common Stock.Company’s common stock.

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The Company’s selected consolidated financial data should be read in conjunction with Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”“MD&A” and the Moody’s Corporation consolidated financial statements and notes thereto.

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This discussion and analysis of financial condition and results of operations should be read in conjunction with the Moody’s Corporation consolidated financial statements and notes thereto included elsewhere in this annual report on Form 10-K.

This Management’s Discussion and Analysis of Financial Condition and Results of OperationsMD&A contains Forward-Looking Statements. See “Forward-Looking Statements” commencing on page 3154 and Item 1A. “Risk Factors” commencing on page 1017 for a discussion of uncertainties, risks and other factors associated with these statements.

The CompanyTHE COMPANY

Except where otherwise indicated, the terms “Moody’s” and the “Company” refer to Moody’s Corporation and its subsidiaries. Moody’s is a provider of (i) credit ratings, (ii) credit and economic related research, data and analysis covering fixed-income securities, otheranalytical tools, (iii) risk management software and (iv) quantitative credit risk measures, credit portfolio management solutions and training services. Moody’s operates in two reportable segments: MIS and MA.

MIS, the credit rating agency, publishes credit ratings on a wide range of debt instrumentsobligations and the entities that issue such instrumentsobligations in markets worldwide. Revenue is derived from the originators and issuers of such transactions who use MIS ratings in the global capital markets, and credit training services, and (ii) quantitative credit risk assessmentdistribution of their debt issues to investors.

The MA segment develops a wide range of products and services and credit processing software for banks, corporations and investorsthat support the risk management activities of institutional participants in credit-sensitive assets. Moody’s operates in two reportable segments: Moody’s Investors Service and Moody’s KMV.

Moody’s Investors Service publishes rating opinions on a broad range of credit obligors and credit obligations issued in domestic and international markets, including various corporate and governmental obligations, structured finance securities and commercial paper programs. It also publishesglobal financial markets. Within its RD&A business, MA distributes investor-oriented credit information, research and economic commentary,data developed by MIS as part of its ratings process, including in-depth research on major debt issuers, industry studies special commentsand commentary on topical credit related events. The RD&A business also provides economic research and credit opinion handbooks.

The Moody’s KMV business developsdata and distributesanalytical tools such as quantitative credit risk assessment productsscores. Within its RMS business, MA provides both economic and regulatory capital risk management software solutions. Within its professional services business it provides quantitative credit risk measures, credit portfolio management solutions and credit processing software for banks, corporationstraining services.

Beginning in January 2008, Moody’s segments were changed to reflect the Reorganization announced in August 2007. As a result of the Reorganization, the rating agency is reported in the MIS segment and investorsseveral ratings business lines were realigned. All of Moody’s other non-rating commercial activities are represented in credit-sensitive assets.the MA segment.

The Company operated asAs part of The Dun & Bradstreet Corporation (“Old D&B”) until September 30, 2000 (the “Distribution Date”), when Old D&B separated into two publicly traded companies — Moody’s Corporationthe Reorganization there were several realignments within the MIS LOBs. Sovereign and The New D&B Corporation (“New D&B”). At that time, Old D&B distributedsub-sovereign ratings, which were previously part of financial institutions; infrastructure/utilities ratings, which were previously part of corporate finance; and project finance, which was previously part of structured finance, were combined with the public finance business to its shareholders shares of New D&B stock. New D&B comprisedform a new LOB called public, project and infrastructure finance. In addition, real estate investment trust ratings were moved from financial institutions and corporate finance to the business of Old D&B’s Dun & Bradstreet operating company (the “D&B Business”). The remaining business of Old D&B consisted solelystructured finance business. Furthermore, in August 2008 the global managed investments ratings group, previously part of the structured finance business, was combined with the financial institutions business.

In 2008 within MA, various aspects of providing ratingsthe legacy MIS research business and relatedMKMV business were combined to form the subscriptions, software and professional services businesses. The subscriptions business included credit and economic research, data and analytical models that are sold on a subscription basis; the software business included license and maintenance fees for credit risk, managementsecurities pricing and valuation software products; and the professional services (the “Moody’s Business”)business included advisory services associated with risk modeling, credit scorecard development, and other specialized analytical projects, as well as credit training and other professional development education services that are typically sold on a per-engagement basis. Subscription services are typically sold for an initial 12-month term, with renewal features for subsequent annual periods.

In 2009, the aforementioned MA businesses were realigned and renamed to reflect the reporting unit structure for the MA segment at December 31, 2009. Pursuant to this realignment the subscriptions business was renamed “Moody’s Corporation”.Research Data and Analytics and the software business was renamed Risk Management Software. The method by which Old D&B distributedrevised groupings classify certain subscription-based risk management software revenue and advisory services relating to its shareholders its shares of New D&B stock is hereinafter referredsoftware sales to as the “2000 Distribution”.redefined RMS business.

Critical Accounting EstimatesCRITICAL ACCOUNTING ESTIMATES

Moody’s discussion and analysis of its financial condition and results of operations are based on the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.GAAP. The preparation of these financial statements requires Moody’s to make estimates and judgments that affect reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the dates of the financial statements and revenue and expenses during the reporting periods. These estimates are based on historical experience and on other assumptions that are believed to be reasonable under the circumstances. On an ongoing basis, Moody’s evaluates its estimates, including those related to revenue recognition, accounts receivable allowances, contingencies, goodwill and intangible assets, restructuring liabilities, pension and other post-retirement benefits, UTBs and stock-based compensation. Actual

results may differ from these estimates under different assumptions or conditions. The following accounting estimates are considered critical because they are particularly dependent on management’s judgment about matters that are uncertain at the time the accounting estimates are made and changes to those estimates could have a material impact on the Company’s consolidated results of operations or financial condition.

Revenue Recognition

In recognizing revenue related to ratings, Moody’sMIS uses judgments to allocate billed revenue between the initial assignment of ratings and the future monitoring of ratings in cases where the CompanyMIS does not charge ongoing monitoring fees for a particular issuer. These judgments are not dependent on the outcome of future uncertainties, but rather relate to allocating revenue across accounting periods. In such cases, the CompanyMIS defers portions of rating fees that it estimates will be attributed to future monitoring activities and recognizes the deferred revenue ratably over the estimated monitoring periods.

The portion of the revenue to be deferred is based upon a number of factors, including the estimated fair market value of the monitoring services charged for similar securities or issuers. The estimated monitoring period over which the deferred revenue will be recognized is determined based on factors such as the estimated lives of the rated securities. Currently, the estimated monitoring periods range from one year to ten years. At December 31, 2006, 20052009, 2008 and 2004,2007, deferred revenue included approximately $47$45 million, $36$48 million and $30$54 million, respectively, related to such deferred monitoring fees.

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Additionally, in the case of commercial mortgage-backed securities, derivatives, international residential mortgage-backed and asset-backed securities, issuers can elect to pay the monitoring fees upfront. These fees are deferred and recognized over the future monitoring periodperiods, ranging from three to 51 years, which is determinedare based on the expected lives of the rated securities. Currently, the monitoring periods range from five to 46 years.securities at December 31, 2009. At December 31, 2006, 20052009, 2008 and 2004,2007, deferred revenue related to commercial mortgage-backedthese securities was approximately $62$78 million, $50$82 million and $37$86 million, respectively.

Moody’sMIS estimates revenue for ratings of commercial paper for which, in addition to a fixed annual monitoring fee, issuers are billed quarterly based on amounts outstanding. Related revenueRevenue is accrued each quarter based on estimated amounts outstanding and is billed subsequently when actual data is available. The estimate is determined based on the issuers’ most recent reported quarterly data. At December 31, 2006, 20052009, 2008 and 2004,2007, accounts receivable included approximately $27 million, $34 million $31 million and $29$38 million, respectively, related to accrued commercial paper revenue. Historically, the CompanyMIS has not had material differences between the estimated revenue and the actual billings.

Revenue earned within the MA segment is recognized as follows: subscription-based revenue is recognized ratably over the subscription period which is typically for an initial 12-month term with renewal features for subsequent annual periods, beginning upon delivery of the initial product; software revenue is recognized at time of delivery which is considered to have occurred upon transfer of the product master or first copy. If uncertainty exists regarding customer acceptance of the product or service, revenue is not recognized until acceptance occurs; professional service revenue is generally recognized at the time services are performed.

Certain revenue arrangements within the MA segment include multiple elements such as software licenses, maintenance, subscription fees and professional services. In these types of arrangements, the fee is allocated to the various products or services based on objective measurements of fair value; that is, generally the price charged when sold separately—or vendor-specific objective evidence.

Accounts Receivable Allowance

Moody’s records as reductions of revenue provisions for estimated future adjustments to customer billings as a reduction of revenue, based on historical experience and current conditions. Such provisions are reflected as additions to the accounts receivable allowance. AdjustmentsAdditionally, estimates of uncollectible accounts are recorded as bad debt expense and are reflected as additions to and write-offs ofthe accounts receivable allowance. Billing adjustments and uncollectible account write-offs are charged against the allowance. Moody’s evaluates its accounts receivable allowance by reviewing and assessing historical collection and adjustment experience and the current aging status of customer accounts. Moody’s also considers the economic environment of the customers, both from an industry and geographic perspective, in evaluating the need for allowances. Based on its reviews,analysis, Moody’s establishes or adjusts allowances,its allowance as considered appropriate.appropriate in the circumstances. This process involves a high degree of judgment and estimation and could involve significant dollar amounts. Accordingly, Moody’s results of operations can be affected by adjustments to the allowance. Management believes that the allowance for uncollectible accounts is adequate to cover anticipated adjustments and write-offs under current conditions. However, significant changes in any of the above-notedabove factors, or actual write-offs or adjustments that differ from the estimated amounts could result in revenue adjustmentsamounts that are greater or less than Moody’s estimates. In each of 2006, 2005 and 2004,Each quarter, the Company adjustedrevises its provision rates for billing adjustments and its allowancesuncollectible accounts to reflect its current estimate of the appropriate level of accounts receivable allowance.

Contingencies

Accounting for contingencies, including those matters described in the “Contingencies” section of this “Management’s Discussion and Analysis”“MD&A”, commencing on page 2851 is highly subjective and requires the use of judgments and estimates in assessing their magnitude and likely outcome. In many cases, the outcomes of such matters will be determined by third parties, including governmental or judicial bodies. The provisions made in the consolidated financial statements, as well as the related disclosures, represent management’s best estimates of the then current status of such matters and their potential outcome based on a review of the facts and in consultation with outside legal counsel where

deemed appropriate.appropriate. The Company regularly reviews contingencies and as additionalnew information becomes available may, in the future, adjust its associated liabilities. Based on its review of the provisions madelatest information available, and subject to the contingencies described in respect thereof. SinceItem 7. “MD&A—Contingencies”, the potential exposure on manyultimate monetary liability of these matters is material, and it is possible that these matters could be resolved in amounts that are greater than the Company has reserved, their resolution couldin connection with pending legal and tax proceedings, claims and litigation is not likely to have a material adverse effect on Moody’s future reported results andconsolidated financial position. In addition, potential cash outlays relatedposition, although it is possible that the effect could be material to the resolutionCompany’s consolidated results of these exposures could be material.operations for an individual reporting period.

For the years ended December 31, 2006, 20052009, 2008 and 2004,2007, the provision for income taxes reflected credits of $2.4$4.3 million, $8.8$8.7 million and charges of $30$27.3 million, respectively, due to changes in the Company’s reservesliabilities for legacy income taxLegacy Tax exposures that were assumed by Moody’s in connection with its separation from Old D&B in October 2000. These tax matters are discussedmore fully described under the caption “Legacy Tax Matters” below.within Item 7, “MD&A”.

Goodwill and Other Acquired Intangible Assets

Moody’s evaluates its goodwill for impairment at the reporting unit level, defined as an operating segment or one level below an operating segment, annually as of November 30^th or more frequently if impairment indicators arise in accordance with StatementASC Topic 350. These impairment indicators could include significant events or circumstances that would reduce the fair value of Financial Accounting Standards (“SFAS”) No. 142, “Goodwilla reporting unit below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition or sale or disposition of a significant portion of a reporting unit. During 2009 there was a change in the reporting unit structure of MA to reflect the realignment under which the MA segment is currently managed. Accordingly, it was determined that MA had three reporting units within its segment: RD&A; RMS and Other Intangible Assets”training. The RD&A reporting unit encompasses the distribution of investor-oriented research and data developed by MIS as part of its ratings process, in-depth research on major debt issuers, industry studies, economic research and commentary on topical events and credit analytic tools. The RMS reporting unit consists of credit risk management and compliance software that is sold on a license or subscription basis as well as related advisory services for implementation and maintenance. The training reporting unit consists of the portion of the MA business that offers both credit training as well as other professional development training. As such, at the date of the impairment test, the Company had four primary reporting units: MIS, which encompasses the Company’s ratings operations and the aforementioned three reporting units within MA.

The Company evaluates the recoverability of goodwill using a two-step impairment test approach at the reporting unit level by ASC Topic 350, "Intangibles—Goodwill and Other". The evaluationIn the first step, the fair value of the reporting unit is compared to its carrying value including goodwill. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill requires thatis not impaired and the Company make importantis not required to perform further testing. If the fair value of the reporting unit is less than the carrying value, the Company must perform a second step of the impairment test to determine the implied fair value of the reporting unit's goodwill. The implied fair value of the goodwill is determined based on the difference between the fair value of the reporting unit and the net fair value of the identifiable assets and liabilities of the reporting unit. If the implied fair value of the goodwill is less than the carrying value, the difference is recognized as an impairment charge.

Determining the fair value of a reporting unit or an indefinite-lived acquired intangible asset is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions, and appropriate market comparables. The Company bases its fair value estimates on assumptions believed to be reasonable. However, as these estimates and assumptions are unpredictable and inherently uncertain, actual future results may differ from these estimates. In addition, the Company also makes certain judgments aboutand assumptions in allocating shared assets and liabilities to determine the carrying values for each of its reporting units.

As a result of the reporting structure realignment in the MA segment described above, the company reassigned the assets and liabilities of the MA segment to each of its reporting units. Goodwill is reassigned to the reporting units using a relative fair value allocation approach; other assets and liabilities, including applicable corporate assets, are allocated to the extent they are related to the operation of respective reporting units.

Based on the result of the above test, the Company does not believe any of its reporting units are at risk of failing Step 1 of the impairment test as the fair value for all reporting units is well in excess of the respective reporting unit’s carrying value.

The following table identifies the amount of goodwill allocated to each reporting unit as well as the amount by which the net assets of each reporting unit would exceed the fair value under Step 1 of the goodwill impairment test as prescribed in ASC Topic 350, assuming hypothetical reductions in their fair values as of November 30, 2009:

The fair value of each reporting unit is estimated using a discounted cash flow methodology. The results of the DCF are evaluated against comparable public company and precedent transaction multiples in order to assess the reasonableness of the DCF fair values. The DCF analysis requires significant judgments regarding the derivation of fair value, including estimation of future operating results and cash flows as well as terminal values and discount rates. In estimating future operating results and cash flows, Moody’s considersof each reporting unit, which is based on internal budgets and strategic plans, expected long-term growth rates, terminal values, weighted average cost of capital and the effects of external factors and market conditions. If actual future operating resultsChanges in these estimates and cash flows or external conditions differ fromassumptions could materially affect the Company’s judgments, or if changesdetermination of the fair value and goodwill impairment for each reporting unit which could result in assumed terminal values or discount rates are made, an impairment charge may be necessary to reduce the carrying value of goodwill, which charge could be material to the Company’s financial position and results of operations. Moody’s allocates newly acquired goodwill to reporting units based on the reporting unit expected to benefit from the acquisition. The Company evaluates its reporting units on an annual basis, or more frequently if there are changes in the reporting structure of the Company due to acquisitions or realignments.

The following discusses the key assumptions utilized in the discounted cash flow valuation methodology which requires significant management judgment:

Amortizable intangible assets are reviewed for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The difficult market and economic conditions in 2009 resulted in lower than anticipated revenue for the RMS and training reporting units compared to forecasted results causing the Company to test the intangible assets within these reporting units for impairment at November 30, 2009. This test was performed by comparing the undiscounted cash flows of each asset group that contained the aforementioned intangible assets to the carrying amount of the asset group. The undiscounted cash flows were sufficient to cover the carrying value of the asset group and resulted in an excess of 39% and 48% for the RMS and training reporting units, respectively.

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Restructuring

The Company has engaged in restructuring actions, which require management to utilize significant estimates related to expenses for severance and other employee benefit costs, contract termination costs and asset impairments. If the actual amounts differ from these estimates, the amount of the restructuring charge could be impacted. For both the 2007 Restructuring Plan and the 2009 Restructuring Plan, there have not been any significant differences between original estimates and actual amounts recorded upon completion of both plans. For a full description of Moody’s restructuring actions, refer to the “Results of Operations” section below and Note 10 to the consolidated financial statements.

Pension and Other Post-Retirement Benefits

The expenses, assets liabilities and obligationsliabilities that Moody’s reports for its pension and other post-retirement benefitsbenefit plans are dependent on many assumptions concerning the outcome of future events and circumstances. These assumptions include the following:

The discount rate selected to measure the present value of the Company’s benefit obligations as of December 31, 20062009 was derived using a cash flow matching method whereby the Company compares the plans’ projected payment obligations by year with the corresponding yield on the Citibank Pension Discount Curve.pension discount curve. The cash flows are then discounted back to their present value and an overall discount rate is determined.

Moody’s major assumptions vary by plan and assumptions used are set forth in Note 1011 to the consolidated financial statements. In determining these assumptions, the Company consults with outside actuaries and other advisors as deemed appropriate. While the Company believes that the assumptions used in its calculations are reasonable, differences in actual experience or changes in assumptions could have a significant effect on the expenses, assets and liabilities related to the Company’s pension and other post-retirement benefits.Post-Retirement Plans.

When actual plan experience differs from the assumptions used, actuarial gains or losses arise. To the extent theThe Company amortizes, as a component of annual pension expense, total outstanding gain or loss exceeds a corridor threshold as defined in SFAS No. 87, “Employers’ Accounting for Pensions” (“SFAS No. 87”), the excess is subject to amortization in annual expense over the estimated average future working lifetime of active plan participants.participants to the extent that the gain/loss exceeds 10% of the greater of the beginning-of-year projected benefit obligation or the market-related value of plan assets. For Moody’s pension and other post-retirement benefit plans,Post-Retirement Plans, the total losses as of December 31, 2006 which2009 that have not been recognized in annual expense are $ 41.0$55.0 million, and Moody’s expects to recognize $2.2net periodic pension expense of $3.3 million in 2010 for the amortization of actuarial losses in 2007 annual net periodic benefit expense.losses.

For Moody’s funded pension plan, the differences between the expected long-term rate of return assumption and actual experience could also affect the net periodic pension expense. As permitted under SFAS No. 87, theThe Company spreads the impact of asset experience over a five-year period for purposes of calculating the market relatedmarket-related value of assets whichthat is used in determining the expected return on assetsassets’ component of annual expense and in calculating the total unrecognized gain or loss subject to amortization. As of December 31, 2006,2009, the Company has an unrecognized asset gainloss of $7.8$20.7 million, of which $3.3$6.3 million will be recognized in the market relatedmarket-related value of assets whichthat is used to calculate the expected return on assetsassets’ component in 2008of 2011 expense.

The table below shows the estimated effect that a one percentage-point decrease in each of these assumptions will have on Moody’s 20072010 operating income (dollars in millions).income. These effects have been calculated using the Company’s current projections of 20072010 expenses, assets liabilities, obligations and expensesliabilities related to pension and other post-retirement plans,Moody’s Post-Retirement Plans, which could change as updated data becomes available.

A one percentage-point increase in assumed healthcare cost trend rates will not affect 20072010 projected expenses. Based on current projections, the Company estimates that expenses related to pension and post-retirement plansPost-Retirement Plans will be approximately

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$14.4$21.6 million in 20072010 compared with $14.9$14.5 million in 2006.2009. The expected expense decreaseincrease in 20072010 reflects the effects of higher benefit obligations primarily due to assumption changes, such as higher cash balance interest crediting rate and lower discount rates, as well as higher plan asset gains and lower amortization of actuarial losses, which are partially offset by normal growth in plan liabilities.losses.

Stock-Based Compensation

On January 1, 2006, theThe Company adopted, under the modified prospective application method, the fair value method of accounting for stock-based compensation under Statement of Financial Accounting Standards (“SFAS”) No. 123 (Revised 2004) “Share-Based Payment” (“SFAS No. 123R”). Under this pronouncement, companies are required to recordrecords compensation expense for all share-based payment award transactions granted to employees based on the fair value of the equity instrument at the time of grant. This includes shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights. Previously, on January 1, 2003, the Company adopted, on a prospective basis, the fair value method of accounting for stock-based compensation under SFAS No. 123, “Accounting for Stock-Based Compensation”. The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model that uses assumptions and estimates that the Company believes are reasonable. Some of the assumptions and estimates, such as share price volatility and expected option holding period, are based in part on Moody’s experience during the period since becoming a public company, which is limited. The use of different assumptions and estimates in the Black-Scholes option pricing model could produce materially different estimated fair values for option awards and related expense.

An increase in the following assumptions would have had the following estimated effect on operating income in 20062009 (dollars in millions):

Income Taxes

The Company is subject to income taxes in the U.S. and various foreign jurisdictions. The Company’s tax assets and liabilities are affected by the amounts charged for service provided and expenses incurred as well as other tax matters such as inter-company transactions. The Company accounts for income taxes under the asset and liability method in accordance with ASC Topic 740. Therefore, income tax expense is based on reported income before income taxes, and deferred income taxes reflect the effect of temporary differences between the amounts of assets and liabilities that are recognized for financial reporting purposes and the amounts that are recognized for income tax purposes.

Moody’s is subject to tax audits in various jurisdictions which involve Legacy Tax and other tax matters. The Company regularly assesses the likely outcomes of such audits in order to determine the appropriateness of liabilities for UTPs. The Company classifies interest related to income taxes as a component of interest expense in the Company’s consolidated financial statements and associated penalties, if any, as part of other non-operating expenses.

For UTP’s, ASC Topic 740 requires a company to first determine whether it is more-likely-than-not (defined as a likelihood of more than fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information. A tax position that meets this more-likely-than-not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority. As the determination of liabilities related to UTPs and associated interest and penalties requires significant estimates to be made by the Company, there can be no assurance that the Company will accurately predict the outcomes of these audits, and thus the eventual outcomes could have a material impact on the Company’s operating results or financial condition.

For certain of its foreign subsidiaries, the Company has deemed a portion of the undistributed earnings relating to these subsidiaries to be permanently reinvested within its foreign operations. Accordingly, the Company has not provided deferred income taxes on these indefinitely reinvested earnings. A future distribution by the foreign subsidiaries of these earnings could result in additional tax liability for the Company which may be material to Moody’s future reported results, financial position and cash flows.

Other Estimates

In addition, there are other accounting estimates within Moody’s consolidated financial statements, including recoverability of deferred tax assets, anticipated dividend distributions from non-U.S. subsidiaries and valuation of investments in affiliates. Management believes the current assumptions and other considerations used to estimate amounts reflected in Moody’s consolidated financial statements are appropriate. However, if actual experience differs from the assumptions and other considerations used in estimating amounts reflected in Moody’s consolidated financial statements, the resulting changes could have a material adverse effect on Moody’s consolidated results of operations or financial condition.

See Note 2 to the consolidated financial statements for further information on keysignificant accounting policies that impact Moody’s.

Operating SegmentsOPERATING SEGMENTS

Beginning in January 2008, Moody’s Investors Servicesegments were changed to reflect the Reorganization announced in August 2007. As a result of the Reorganization, the rating agency is reported in the MIS segment and several ratings business lines have been realigned. All of Moody’s other non-rating commercial activities are represented in the MA segment.

As part of the Reorganization there were several realignments within the MIS LOBs. Sovereign and sub-sovereign ratings, which were previously part of financial institutions; infrastructure/utilities ratings, which were previously part of corporate finance; and project finance, which was previously part of structured finance, were combined with the public finance business to form a new LOB called public, project and infrastructure finance. In addition, real estate investment trust ratings were moved from financial institutions and corporate finance to the structured finance business. Furthermore, in August 2008 the global managed investments ratings group, previously part of the structured finance business, was combined with the financial institutions business.

The MIS segment now consists of four rating groups — lines of business—structured finance, corporate finance, financial institutions and sovereign risk,public, project and public finance — infrastructure finance—that generate revenue principally from fees for the assignment and ongoing monitoring of (i) credit ratings on issuersdebt obligations and issues of fixed-incomethe entities that issue such obligations in markets worldwide.

As part of the debt markets,Reorganization, various aspects of the legacy MIS research business and (ii) research, which primarily generates revenue fromMKMV business were combined to form the sale of investor-orientedsubscriptions, software and professional services businesses within MA. The subscriptions business included credit information, and research, principally produced by the rating groups, and economic commentary. For presentation purposes, Europe represents Europe,research, data and analytical models that are sold on a subscription basis for an initial 12-month term, with renewal features for subsequent annual periods; the Middle Eastsoftware business included license and Africamaintenance fees for credit risk, securities pricing and public finance represents U.S. public finance. Givenvaluation software products; and the dominanceprofessional services business included credit training associated with risk modeling, credit scorecard development, and other specialized analytical projects, as well as credit and other professional development education services that are typically sold on a per-engagement basis.

In 2009, the aforementioned MA businesses were realigned and renamed to reflect the reporting unit structure for the MA segment at December 31, 2009. Pursuant to this realignment the subscriptions business was renamed Research, Data and Analytics and the software business was renamed Risk Management Software. The revised groupings classify license software sales, certain subscription-based risk management software revenue, maintenance and advisory services relating to software sales to the redefined RMS business. The following tables are reconciliations of Moody’s Investors Servicethe revenue groupings previously disclosed to Moody’s overallthe new groupings for each of the years ended December 31, 2008 and 2007: