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, 20072010

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)

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, 20072010 (based upon its closing transaction price on the Composite Tape on such date) was approximately $16.6$4.6 billion.

As of January 31, 2008, 247.82011, 229.4 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 22, 2008,19, 2011, 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 7 World Trade Center at 250 Greenwich Street, New York, NY 10007 and its telephone number is (212) 553-0300. Prior to September 8,30, 2000, the Company operated as part of The Dun & Bradstreet Corporation.

The CompanyTHE COMPANY

Moody’s is a provider of (i) credit ratings, (ii) credit and economic related research, data and analytical tools, (ii)(iii) risk management software and (iv) quantitative credit risk measures, risk scoring software and credit portfolio management solutions, training and (iii) beginning in January 2008, fixed income pricing datafinancial credentialing and valuation models. Founded in 1900,certification services. In 2007 and prior years, Moody’s employs approximately 3,600 people worldwide. Moody’s maintains offices in 27 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 operatesoperated in two reportable segments: Moody’s Investors Service and Moody’s KMV (“MKMV”). For additional financial information on these segments, see Part II, Item 8. “Financial Statements – Note 18 – Segment Information.”KMV. Beginning in January 2008, Moody’s segments were changed to reflect the implementation of the business reorganizationReorganization announced in August 2007. A discussion concerning2007 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, as if they wereincluding revenue, expenses, operating income and total assets, are included in place beginning January 1, 2005, is outlined inPart II, Item 7. “Management’s Discussion8. Financial Statements of this annual report, and Analysis of Financial Condition and Results of Operations.”are herein incorporated by reference.

Moody’s Investors ServiceMIS, the credit rating agency, publishes credit ratings and associated opinions on a broadwide range of obligorsdebt obligations and the entities that issue such obligations issued in domestic and international markets worldwide, including various corporate and governmental obligations, structured finance securities and commercial paper programs. It also publishes investor-oriented credit information, researchRevenue is derived from the originators and economic commentary, including in-depth research on majorissuers of such transactions who use MIS ratings to support the distribution of their 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 and other credit-sensitive instruments. Such independent credit ratings and research also contributeissues to efficiencies in markets for other obligations, such as insurance policies and derivative transactions, by providing credible and independent assessments of credit risk. Moody’sinvestors. MIS provides ratings and credit research on governmental and commercial entities in more than 100110 countries. Moody’s global and increasingly diverse services are designed to increase market efficiency and may reduce transaction costs. As of December 31, 2007, Moody’s had ratings relationships with more than 11,000 corporate issuers and approximately 26,000 public finance issuers. Additionally, the Company has rated more than 110,000 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.

Moody’s As of December 31, 2010, MIS had ratings relationships with approximately 11,000 corporate issuers and approximately 22,000 public finance issuers. Additionally, the Company has rated and currently monitors ratings on approximately 102,000 structured finance obligations (representing approximately 15,000 transactions). The aforementioned amounts relating to the number of issuers and transactions represent issuers or transactions that had an active rating at any point during the year ended December 31, 2010. 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 services,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 analyticanalytical tools 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 8,700 customer accounts worldwide. Within these accounts, more than 30,000 unique users accessed Moody’s research website (www.moodys.com) during calendar year 2007. In addition to these clients, more than 167,000 other individuals visited Moody’s website to retrieve current ratings and other information made freely available to the public.

MKMV develops and distributessuch as quantitative credit risk assessment productsscores. Within its Risk Management Software business, MA provides both economic and services, includingregulatory capital risk management software and implementation services. Within its Professional Services business it provides quantitative credit processing and analytical tools forrisk measures, credit portfolio management. Withmanagement solutions, training and financial credentialing and certification services. MA customers represent more than 1,800 clients4,100 institutions worldwide operating in approximately 85 countries, MKMV serves banks, corporations115 countries. During 2010 Moody’s research web site was accessed by over 185,000 individuals including 27,000 client users.

The Company operated as part of “Old D&B” until September 30, 2000, when Old D&B separated into two publicly traded companies – Moody’s Corporation and institutional investors, including mostNew D&B. At that time, Old D&B distributed to its shareholders shares of New D&B stock. New D&B comprised the business of Old D&B’s Dun & Bradstreet operating company. The remaining business of Old D&B consisted solely of the world’s largest financial institutions. MKMV’s quantitativebusiness of providing ratings and related research and credit analysis tools include models that estimaterisk management services and was renamed Moody’s Corporation. For purposes of governing certain ongoing relationships between the probability of defaultCompany and New D&B after the 2000 Distribution and to provide for approximately 29,000 publicly traded firms globally, updated daily. In addition, MKMV’s RiskCalc™ models extendan orderly transition, the availability of these probabilities to privately held firms in many of the world’s economies. MKMV also offers services to valueCompany and improve the performance of credit-sensitive portfolios.New D&B entered into various agreements including a distribution agreement, tax allocation agreement and employee benefits agreement.

Prospects for GrowthPROSPECTS FOR GROWTH

Over recent decades, global fixed-income markets have grown significantly in terms of outstanding principal amount and types of securities or other obligations. Despite the recentBeginning in mid-2007 there was a severe market disruption and decline in issuance activity for some importantsignificant asset classes of securities in the U.S. and internationally,internationally. Despite the market disruption, Moody’s believes that the overall long-term outlook remains favorable for continued secular growth of fixed-income markets worldwide. However, Moody’s expects that,business prospects correspond closely to the health of the world’s major economies and capital markets. Throughout 2010 there were signs of recovery in the near-term,U.S. economy while the global economy has been more volatile with European sovereign debt and related banking sector concerns offset by strong economic growth drivers such as financial innovationin emerging markets. Continued improvement of the U.S. economy and disintermediation will slow as capital market participants adjust tohousing sector, specifically, along with the

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recent poor performance stabilization of some structured finance asset classes, such as U.S. residential mortgage-backed securities and credit derivatives. Restoring investor confidence in structured products will require enhancements to Moody’s rating processes and probably greater transparency from issuers of structured (or securitized) debt.the European sovereign debt concerns should influence the Company’s growth over the near term. Moody’s is developing updated rating methodologies, volatility measures,well positioned to benefit from a long-term recovery in global credit market activity and pricinga more informed use of credit ratings, research and valuation servicesrelated analytical products in an environment of renewed attention to aid the return of investor trustrisk analysis and though it is likely to be a measured process,risk management. Moody’s expects that these initiativesdevelopments will support continued long-term demand for high-quality, independent credit opinions.opinions, research, data and risk management tools and services. An expectation of recovery-driven growth in capital market activity, supported by initiatives to increase market share, leverage pricing opportunities, capture disintermediation activity in developed and developing markets and develop additional data, research and rating products, represent key growth drivers for Moody’s.

Growth in global fixed-income markets is attributable to a number of forces and trends. Advances in information technology such as the Internet, make 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 also 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, 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 driving growth in the world’s capital markets is the disintermediation of financial systems. Issuers increasingly raise capital in the global public capital markets, in addition to, or in substitution for, traditional financial intermediaries. Moreover, financial intermediaries have sold assets in the global public capital markets, in addition to or instead of retaining those assets. Recent credit market disruptions have slowed the trend of disintermediation in important markets such as the U.S. and Europe,globally, but Moody’s believes that debt capital markets offer advantages in capacity and efficiency compared to the traditional banking systems. Thus, disintermediation is expected to expandaccelerate in the longer-term.longer-term, with Moody’s continuing to target investment and resources to growing international markets where disintermediation and bond issuance should remain more robust.

GrowthThe strong growth trend seen in the issuance of structured finance securities has generally been stronger than growthfrom the mid-1990’s reversed dramatically in straight corporate and financial institutions debt issuance, though with recent2008 due to market turmoil, this trend iswith continued declines seen in 2009 and 2010. The market disruptions that escalated in 2008 are expected to change at least overcontinue in the nearimmediate term, and possibly longer, with investors preferring simpler, more standardized and more transparent securities to more complex financial instruments. Compared with 2007,however Moody’s expects a declineto see some revenue stabilization from this market in the future. Despite significant declines from peak market levels, Moody’s believes that structured finance securities will continue to play a role in global credit markets, and provide opportunities for longer term revenue at least through 2008growth. Moody’s will continue to monitor this market and possibly into 2009 and beyond.adapt to meet the changing needs of 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 dollar-equivalent volume and number of ratable debt securities issued in the global capital markets that Moody’s rates. Moody’s is thereforemarkets. MIS’s results can be affected by for example,factors such as the performance, and the prospects for growth, of the major world economies, the fiscal and monetary policies pursued by their governments, and the decisions of issuers to request Moody’sMIS 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 MIS’s dependence on or independent of, the volume or number of new 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’sMIS’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 States,U.S., Europe and selective 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 activities of Moody’s Investors Service,MIS, or increased costs of doing business for Moody’s.MIS. Therefore, in order to broaden the potential for expansion of non-ratings services, beginningMoody’s reorganized in January 2008 Moody’s has reorganized into two distinct businesses, Moody’s Investors Service,businesses: MIS, consisting solely of the ratings business, and Moody’s Analytics. Moody’s Analytics nowMA. MA conducts all non-ratings activities and includes the MKMV business,including the sale of credit research produced by Moody’s Investors ServiceMIS and the production and sale of other credit relatedeconomic and credit-related products and services. The reorganization is expected to broadenbroadens the opportunities for expansion by Moody’s AnalyticsMA into activities which were previouslymay 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.

Moody’s AnalyticsMA 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

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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. Recent disruptionsMA remains focused on driving improvements in credit markets threatencustomer retention, product placements and new customer acquisition in this area. Credit market conditions improved in 2010, helping to slow this trend, but Moody’s expects to sustain reliance on its offerings as enhancements to credit rating methodologies and other changesraise customer retention level after a period of higher than normal customer attrition in securities origination processes restore investor confidence and more orderly market operations.MA.

Growth in Moody’s AnalyticsMA is also expected as financial institutions adopt active credit portfolio management practices and implement internal credit assessment tools for compliance with Basel II regulations. Moody’s AnalyticsMA 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.

The 2010 acquisition of CSI Global Education, Inc., Canada’s leading provider of financial learning, credentials and certification, strengthens MA’s capabilities for delivering credit training programs, and represents another means for the Company to pursue its objectives of enhancing risk management practices, furthering financial education and promoting efficiency in the capital markets.

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. Many users of our customersMIS’s ratings 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’sMIS’s competitors include Fitch, a subsidiary of Fimalac S.A., Dominion Bond Rating Service Ltd. of Canada, (“DBRS”) and A.M. Best Company Inc. In 2007,Inc, Japan Credit Rating Agency Ltd., Rating and Investment Information Inc, (R&I)Inc. of Japan and Egan-Jones alsoRatings Company. In 2008 two more firms were designated asgranted the Nationally Recognized Statistical Rating Organizations (“NRSRO”), andstatus in February 2008,the U.S: LACE Financial Corp. also was registeredand Realpoint LLC. In 2010 these two firms were acquired by Kroll Bond Rating Agency, Inc. and Morningstar, Inc., respectively, to enable them to compete as an NRSRO. One or more additionalNRSROs. Additional rating agencies may emerge in the United StatesU.S. as the Securities and Exchange Commission (“SEC”)SEC continues to expand the number of NRSROs. Other competition may arise in the U.S. from credit opinion providers who do not operate as NRSRO’s, such as Bloomberg. Competition may also increase in developed or developing markets outside the United StatesU.S. over the next few years as the number of rating agencies increases.may increase, although a more regulated credit ratings industry, both in the U.S. and internationally, may provide for a less appealing expansion opportunity.

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 Analytics’MA 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, Fitch Algorithmics, Dun and Bradstreet,CreditSights, Thomson-Reuters, Intex, IHS Global Insight, BlackRock Solutions and other smaller boutique providers of fixed income analytics, valuations, economic data and research. In RMS, MA faces competition from Fitch Algorithmics, SunGard, SAS, Oracle and other various smaller vendors as well as models developed internally by customers. Other firms may compete in the future. Baker Hill, acquired by Experian, and Bureau van Dijk Electronic Publishing are Moody’s Analytics’ main competitors in the market for analytical software supporting commercial lending activities. Mercerin-house solutions. Within professional services, MA competes with Oliver Wyman competes with the professional services group at Moody’s Analytics for certain credit risk consultingadvisory services, business. In economic analysis, data and modeling services, Moody’s Analytics faces competition from Global Insight, Haver Analyticswith Omega Performance, DC Gardner, and a numberhost of smaller firms aroundboutique providers for financial training.

MOODY’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, market and regulatory conditions while positioning the world.Company to benefit from gradual recovery in global credit market activity.

Given the renewed attention to risk analysis and risk management, Moody’s Strategyis 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 changes 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 Beijing, Buenos Aires, Dubai, Frankfurt, Hong Kong, London, Madrid, Mexico City, Milan, 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 once there is clarity on the resolution of the European sovereign debt crisis. 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.

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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 loans and project finance loans and securities. In global and local counterparty markets, Moody’s offers distinct sets of rating productsrespond to address 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 active in the debt markets. 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-defaultenhancements. In the recent market turmoil, attention to core strengths has been crucial and probability-of-default ratings. The recent disruptionsenhancements have and continue to be focused on quality and transparency. Given the particular disruption in the structured finance markets, may provide opportunities to enhanceMIS has been developing enhanced structured finance offerings to meet investor demands for more information content. In orderLeveraging the diversity of its research data and analytics, Moody’s has introduced cross-sector analysis to 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 Moody’s Investors Service 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 capital markets.

Internet-Enhanced Products and Services

Moody’s is expanding its use of the Internet and other electronic media to enhance clientcustomer service. Moody’sThe Company’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’sthe Company’s services. Moody’s expects to continue to invest in electronic media to capitalize on these and other opportunities.

Expansion of Credit Research Products and Investment Analytic Tools

Moody’s plans to expand its research and analytic services through internal development and potentially through acquisitions. Most new product initiatives tend to beare 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 adjusted 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 researchMA’s RD&A business. Moody’s AnalyticsMA 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 explorepursue 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. Moody’ssolutions. The Company believes that there will be increased demand for such services because they assist customers trading or holding credit-sensitive assets to better manage risk and deliver better performance. Also, international bank regulatory authorities are assessing the

adequacy of banks’ internal credit risk management systems for the purpose of determining regulatory capital. The acquisition of Fermat in 2008 accelerated Moody’s capabilities in this area. Such regulatory initiatives create demand for, and encouragesencourage adoption of, related services by banks from third-party providers.

RegulationREGULATION

In the United States,U.S., since 1975, Moody’s Investors Service (“MIS”)MIS has been designated as an NRSRO by the SEC. The SEC first applied the NRSRO designation in that year to companies whose credit ratings could be used by broker-dealers for purposes of determining their net capital requirements. Since that time, Congress, the SEC 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.purposes.

In September 2006, the Credit Rating Agency Reform Act of 2006 (“Reform Act”) was passed, which created a voluntary registration process for rating agencies wishing to be designated as NRSROs. The Reform Act providesprovided the SEC with authority to oversee NRSROs, while prohibiting the SEC from regulating the substance of credit ratings or the procedures and methodologies by which any NRSRO determines credit ratings. In June 2007, the SEC published finalits first set of rules to implement

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implementing the Reform Act, whichAct. These rules address the NRSRO application and registration process, as well as oversight rules related to recordkeeping, financial reporting, prevention of misuse of material non-public information, conflicts of interest, and prohibited acts and practices. In June 2007, MIS submitted toFebruary 2009, the SEC its applicationpublished a second set of rules applicable to NRSROs, the majority of which provide requirements for registrationmanaging conflicts of interest, enhancing record keeping requirements, and improving transparency of ratings performance and methodologies. In November 2009, the SEC published a third set of final rules for NRSROs. These rules, which came 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.

MIS has been registered as an NRSRO and inwith the SEC under the Exchange Act as of September 2007, the SEC registeredand as of that time MIS as an NRSRO under the Securities Exchange Act of 1934. Consequently, MIS is nowhas been subject to the SEC’s oversight rules described above and, asabove. 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.

The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law on July 21, 2010. The subtitle of the Financial Reform Act that addresses the CRA industry is Title IX, Subtitle C. This subtitle seeks, among other things, to enhance transparency and accountability in the credit rating agency industry, and to reduce the regulatory reliance on credit ratings. The majority of the provisions of Subtitle C of Title IX of the Financial Reform Act seek to regulate the activities of those CRAs that are registered under the SEC’s regulatory framework for NRSROs. Therefore, these provisions will apply to any CRAs in MIS’s corporate family that fall under the NRSRO regime.

Provisions of the Financial Reform Act applicable to NRSROs include, among others:

Certain of the above mentioned provisions were effective immediately. These include provisions that potentially impact CRAs’ liability environment. The enhanced regulatory regime for CRAs could potentially increase the costs associated with the operation of a CRA and increase the legal risk associated with the issuance of credit ratings. Moreover, it is possible that the number of legal proceedings, especially as related to future ratings, may increase materially and the potential exposure of CRAs thereunder may also increase. It is possi-

ble that implementing changes to the Company’s operations to address the changed liability environment may result in lower revenues and/or increased expenses and may significantly change the manner in which the Company conducts its credit rating business.

The majority of the provisions in the Financial Reform Act as it pertains to CRAs are to be implemented through rule-making by the SEC and other regulatory authorities. The SEC has published a schedule for its rule making activity over the coming year, and it appears that the majority of the rule-making as it pertains to the CRA industry will be conducted and completed in the first half of 2011. Specifically, the SEC has indicated that it expects to propose various rules for NRSROs to implement the relevant provisions of the Financial Reform Act before the end of March 2011. One provision that the SEC has already implemented, in accordance with the mandated time-line under the Financial Reform Act, is the elimination of the specific exemption from Regulation Fair Disclosure for information provided by issuers to CRAs, for the purpose of developing a rating.

In addition, the SEC has several pending rule proposals on CRAs, including: 1) a rule proposal to require disclosure about credit ratings when ratings are used in connection with the sale of registered securities; 2) a rule proposal regarding the NRSRO compliance function and disclosure about revenues received for credit rating services; and 3) rule proposals regarding structured finance regulations. In January 2011, the SEC adopted a rule, which will come into effect on September 26, 2011, requiring NRSROs to disclose information about the representations and warranties of the structured finance securities they rate. The bank regulators also have begun their rule making activities, and in October 2010 they closed a comment period requesting views from market participants on alternatives to credit ratings that could be incorporated into banking supervision. MIS and MA both provided comments, and these can be found on the Company’s website.

Finally, as part of the ongoing debate surrounding the financial crisis, MIS participated in a hearing held by the Financial Crisis Inquiry Commission (“FCIC”) on June 2, 2010. The FCIC’s report and two dissenting opinions were published on January 27, 2011.

Internationally, several regulatory developments have occurred:

The GroupG-8 and the G-20—In November 2008, the Heads of 7 Finance Minister and Central Bank Authorities (G-7)—After their October 2007 meeting, the G-7 published a joint-statement outlining their intended approach to the recent financial turbulence. In this statement, the Finance Ministers formally asked the Financial Stability Forum (FSF) to analyze the underlying causesState of the turbulence andG-20 reached agreement on a wide-ranging set of proposals to provide an update atbetter regulate financial systems. Among other things, the G-7’s meetings in late Spring 2008. The G-7 identifiedG-20 committed to implement oversight of the following four areas on which it would likeCRAs, consistent with the FSF to offer proposals: liquidity and risk management; accounting and valuation of financial derivatives; role, methodologies and use of credit rating agencies in structured finance; and basic supervisory principles of prudential oversight, including the treatment of off-balance sheet vehicles. The FSF has been working on this request and is expected to provide its recommendations at the G-7’s Spring 2008 meeting.

IOSCO— In April 2007, the Technical Committee of thestrengthened International Organization of Securities Commissions (“IOSCO”) announcedCommissions’ Code of Conduct (see below) and agreed that, it would reconstitutein the Task Forcemedium 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 rating agenciesactions to undertake a new mandate onpromote global financial regulatory reform. With respect to CRAs, the role of credit rating agenciesG-20 acknowledged that stronger oversight regimes for CRAs have been developed in relation tothe 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. This work is to be carried outproducts will result in close cooperation with the Committeereduced reliance on the Global Financial System (CGFS). In November 2007, IOSCO announcedcredit ratings. The G-20 also expressed concern about the creation of globally inconsistent regulations.

More recently, on October 23, 2010, the G-20 Finance Ministers and Central Bank Governors met in Seoul, Korea in preparation for the November 2010 meeting of the G-20 Heads of State. Broadly, the Finance Ministers and Central Bank Governors have agreed to continue to work in cooperation with one another. In advance of this meeting, the International Monetary Fund (IMF) and the Financial Stability Board (FSB) published a newreport and dedicated Task Forcea statement, respectively with the FSB publishing a more detailed report on October 27, 2010. As pertaining to review the issues facing securities regulators following the recent eventsCRAs, both institutions advocate that governments reduce their reliance on credit ratings in the global credit markets. The topics which will be covered by this Task Force include: risk management / prudential supervision; transparency / due diligence; valuation of assets / accounting issues; and, credit rating agencies. It is anticipatedregulation. While both entities acknowledge that the Task Forceprocess will present its final report totake time, they believe that the Technical Committee in May 2008 during IOSCO’s Annual Conference in Paris.mechanistic use of ratings by governments should over time be discontinued.

IOSCO—In December 2004, the Technical Committee of IOSCO published its Code of Conduct Fundamentals for Credit Rating Agencies (“Agencies. In May 2008, IOSCO Code”).published the revised IOSCO Code. The changes made to 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 their own codes of conduct. In particular, MIS initially publishedwas found to have substantially implemented the 2008 revisions to the IOSCO Code. In addition, IOSCO announced the establishment of a new standing committee that will address global issues regarding the CRA industry.

MIS has revised its Code of Professional Conduct (“MIS Code”) pursuant(fashioned on the IOSCO Code) on several occasions to reflect the changes made to the IOSCO Code and the broader changes in June 2005 andthe regulatory environment for CRAs. Beginning in 2006, MIS has annually published an updated Moody’s Code in October 2007. In December 2007, MIS publisheda report that describes its second, annual report on the implementation of the Moody’sits Code. The two annual reports and the MIS Code and implementation reports can be found on the Regulatory Affairs page of the Company’s website.

EU—In late April 2009, the European Union—TheParliament voted and passed a new regulation (“EU Regulation”) that establishes an oversight regime for the CRA industry in the European Commission (“Commission”) stated in January 2006 and again in January 2007 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 on the IOSCO Code, provided a suitableUnion. The framework for the oversightEU Regulation requires the registration, formal regulation and periodic inspection of rating agencies and that no legislative actions were required at the time. The Committee of European Securities Regulators (“CESR”) has been charged with monitoring rating agencies’ compliance with the IOSCO Code and reporting back to the Commission regularly. CESR conducted its first annual review to assess such compliance during 2006 and published its report in January 2007. CESR concluded that four internationally active rating agenciesCRAs operating in the EU. The EU including Moody’s,Regulation also sets out specific requirements for the use of ratings that are largely compliant withproduced outside of the IOSCO Code,EU and used for regulatory purposes in the EU. Among these is a requirement 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. At this time it identifiedis too early to give a few areas where it believed rating agencies could improve their processes and disclosures and where the IOSCO Code could be improved. CESR began its second annual review in 2007 and is evaluating the areas identified in its 2006 report,more precise assessment of the impact of the Reform ActEU Regulation on MIS. The Company expects that there will be increases in our operational and compliance costs on a one-time and recurring basis. In addition, the ratings businessEuropean Securities and Market Authority (ESMA) was established in January 2011, and will have direct supervisory responsibility for the CRA industry in the EU. It is expected to be fully operational by June 2011. Also, the regulatory framework of the CRA industry continues to be discussed in the European Union,Union. The European Commission recently published a consultation document on the need for additional measures to supervise the CRA industry and the role of rating agencies inEuropean Parliament is debating and modifying an Own Initiative Report on the structured finance process, including securitizations backed by subprime residential mortgages. As part of CESR’s review process, CESR has on two occasions requested comments from rating agencies and other market participants. The written responses MIS submittedtopic. MIS’s response to the CESR questionnairesCommission’s consultation document can be found on the Regulatory Affairs page of the Company’s website. CESR plans toAmong the issues being debated are the issuer-pay business model, use of ratings in regulation, sovereign ratings, competition and CRAs’ liability environment. It is expected that in the near future the European Commission will publish its second annual report in mid-2008.a proposal for additional regulation that will consider some or all of these topics.

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 InstitutionsCRAs or “ECAIs”)ECAIs, can be used by banks in determining credit risk weights for many of their institutional credit exposures. Recognized ECAIs could be subject to a broader range of oversight. National authorities have begun the ECAI recognition process. Moody’sMIS has been recognized as an ECAI in several jurisdictions and the recognition process is ongoing in many others. Moody’s does not currently believe that Basel II will materially affect its financial position or results of operations.

In addition, asAs a result of the recent eventsdevelopments in the U.S. subprime residential mortgage sector andfinancial markets, the credit markets more broadly, various national and global regulatory and otherbanking authorities have initiated, or indicated that they are considering, reviews of the role of rating agencies inBasel Committee have been reconsidering the U.S. subprime mortgage-backed securitization market and structured finance more generally. Moody’s is the subject of a number of such reviews and cannot predict the ultimate outcome of such current or potential future reviews, or their ultimate impactoverall framework. Work on the competitive position, financial position or results of operations of Moody’s.new framework, Basel III, substantially has been completed. It is to be implemented in stages, beginning in 2010 and concluding in 2018. Basel III continues to use credit ratings as a tool in bank supervision.

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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 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.

Intellectual PropertyINTELLECTUAL PROPERTY

Moody’s and its affiliates own and control a variety of trade secrets, confidentialintellectual property, including but 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 trademarks and related corporate names, marks and logos containing the term “Moody’s” are of material importance to the Company. The Company, primarily through Moody’s Analytics, licenses certain of its databases, software applications, credit risk models, training courses in credit risk and capital markets, 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.from 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 other contractual safeguards for protection. Moody’s also pursues instances of third-party infringement of its Intellectual Property in order to protect the 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, 2007,2010 the number of full-time equivalent employees of Moody’s was approximately 3,600.4,500.

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.

The 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 occurs,occur, Moody’s business, financial condition, operating results and cash flows could be materially adversely affected.

Laws and Regulations Affecting the Credit Rating Industry are Rapidly Evolving and May Negatively Impact the Nature and Economics of the Company’s Business

Credit rating agencies are regulated in both the U.S. and in other countries (including by state and local authorities). Over the past few years, many jurisdictions have adopted or proposed new laws and regulations that impact the operation of credit rating agencies and the markets for securities that are rated. Additional laws and regulations have been proposed or are being considered, and further legislation or regulation may be proposed or implemented in the future. Some of the more prominent developments are discussed below or under the section entitled “Regulation” in Part I, Item 1 of this Form 10-K. These laws and regulations are intended to cause, or may result in, increased competition in the credit rating business. In addition, these laws or regulations may cause or result in (i) alternatives to credit ratings, (ii) regulations or restrictions on how information is used in the development or maintenance of credit ratings, (iii) increased regulatory oversight of the credit markets and credit rating agency operation, or (iv) changes in the pricing of credit ratings. All of these items could result in an increase in costs that Moody’s may not be able to pass through to customers and a decrease in the demand for or changes in the use of credit ratings.

New pleading and liability standards that have been adopted in the U.S. and proposed elsewhere potentially subject credit rating agencies to a greater number of legal proceedings claiming liability for losses suffered by investors on rated securities, could result in such legal proceedings continuing for a greater period of time before being resolved, and could result in increased uncertainty over and exposure to liability of credit rating agencies. As new laws and regulations applicable to credit ratings and rating agencies rapidly evolve, the costs of compliance is expected to increase, and Moody’s may not be able to pass on these costs through the pricing of its services. In addition, there may be greater uncertainty over the scope, interpretation and administration of new laws and regulations, which may increase compliance costs and increase the possibility of fines, penalties or other sanctions (including restrictions on activities) being imposed.

Given the comparatively recent adoption and the number of additional reforms that have been or will be adopted, including those under the legislative and regulatory initiatives discussed below, Moody’s is unable to accurately assess the future impact of any regulatory changes that may result or the impact on Moody’s competitive position or its current practices. Although these recent and pending legislative and regulatory initiatives apply to rating agencies and credit markets generally, they may affect Moody’s in a disproportionate manner. Responding to these developments will increase Moody’s fixed and variable costs of operations, perhaps to a degree that is significantly greater than Moody’s currently expects, and Moody’s may not be able to pass through or otherwise recoup such costs. These developments may alter MIS’s communications with issuers as part of the rating assignment process, alter the manner in which MIS’s ratings are developed, assigned and communicated, and decrease demand or affect the manner in which MIS or its customers or users of credit ratings operate, and alter the economics of the credit ratings business, including by restricting or mandating the business models under which a rating agency 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 and by increased uncertainty over potential liability and adverse legal or judicial determinations. Each of these developments increase the costs and legal risk associated with the issuance of credit ratings and may negatively impact Moody’s operations or profitability, the Company’s ability to compete, or result in changes in the demand for credit ratings, in the manner in which ratings are utilized and in the manner in which Moody’s operates in ways that cannot presently be predicted.

In the U.S., MIS is designated as an NRSRO pursuant to SEC regulations adopted under the Reform Act. One of the central tenets of the Reform Act was to encourage competition among rating agencies. The Reform Act established standards for the SEC to have direct jurisdiction over credit rating agencies that seek NRSRO status and to inspect their operations.

In the U.S., one of the tenets of the recently enacted Financial Reform Act is that credit rating agencies perform a “gatekeeper” role and should be subject to enhanced oversight standards that could result in enhanced liability. The Financial Reform Act amends a number of laws and regulations, requires the SEC to adopt a number of rules affecting rating agencies and the use of credit ratings, especially in structured finance markets, and authorizes a number of studies relating to the operations and legal standards applicable to CRAs. Provisions of the Financial Reform Act and other rules that may be adopted by the SEC in furtherance of the Financial Reform Act that pose risks to the Company’s business include, among others:

The Financial Reform Act rescission of Rule 436(g) under the Securities Act, which was an exemption from expert liability under the Securities Act for ratings information included in registration statements, could impact Moody’s in a number of ways. SEC rules relating to offerings of asset-backed securities that are registered with the SEC require certain disclosures regarding credit ratings if, as is common in the market for such securities, the issuance or sale of any class of such asset-backed securities is conditioned on the assignment of a rating by one or more rating agencies. As a result of the repeal of Rule 436(g) under the Securities Act and accordingly the imposition of a heightened liability standard that would result from such disclosures, MIS and other credit rating agencies have declined to consent to issuers of such securities making such disclosures regarding their ratings. The staff of the SEC has informally advised issuers of asset-backed securities that, pending further review of rulemaking required under the Financial Reform Act, the SEC staff will not recommend enforcement action if an issuer omits the ratings disclosure required by SEC rules for registered offerings of asset-backed securities. If the SEC staff position were reversed or if SEC rules otherwise were adopted or applied in a manner that resulted in rating agencies being subject to heightened standards of liability in such offerings, it could adversely impact the volume of securities sold in such offerings, demand for MIS’s ratings, the pricing structure for ratings issued by MIS and/or Moody’s exposure to liability and could have other effects that Moody’s is not able to predict, any of which could have a material adverse effect on the Company’s business.

In addition, in October 2009, the SEC proposed a rule providing that, if credit ratings are used in connection with an offering of any other type of security that is registered under the Securities Act (which as proposed would include use of a credit rating for certain unregistered securities offerings that are subsequently subject to a registered exchange offer), the ratings must be included in the registration statement. If adopted, this proposal, coupled with the Financial Reform Act’s rescission of Rule 436(g), would mean that common practices used in the U.S. to market and sell securities in such offerings would have to be altered unless MIS or other credit rating agencies consented to subject themselves to expert liability provisions of the Securities Act with respect to their credit ratings. Adoption of this or a similar rule could impact the volume of securities sold in such offerings, demand for MIS’s ratings, the pricing structure for ratings issued by MIS and/or Moody’s exposure to liability and could have other effects that Moody’s is not able to predict, any of which could have a material adverse effect on the Company’s business.

Both the G-8 and the G-20 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. Specifically, the G-20 has also agreed to require the registration of rating agencies in their home jurisdiction. As a result of the internationally coordinated approach, countries other than the U.S. (which as noted above had already adopted a registration regime for NRSROs) have begun the process of implementing registration regimes for the oversight of CRAs. In particular, the EU adopted a new regulatory framework for rating agencies operating in the EU. 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 rating activities, by establishing conditions for the issuance of credit ratings and rules on the organization and conduct of credit rating agencies, including restrictions on certain activities that are deemed to create a conflict of interest and special requirements for the rating of structured finance instruments. The regulation became fully effective on September 6, 2010. MIS applied for registration in August 2010.

In addition, the European Securities and Market Authority has been formed which is expected to be fully operational in June 2011 and will have direct supervisory authority for CRAs in the EU.

The European Commission has also published a consultation paper that discusses:

The EU Parliament is working on its own report discussing a number of these issues.

The foregoing initiatives, if implemented and depending on their terms, could negatively impact Moody’s operations or profitability, ability to compete or the markets for its products and services in ways that Moody’s presently is unable to predict. In particular, exposure to increased liability under future EU regulation may further increase costs and legal risks associated with the issuance of credit ratings and materially and adversely affect Moody’s results of operations.

In addition to the foregoing, in the wake of the credit crisis, legislative and regulatory bodies in both the U.S. and in other countries have adopted or are 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 leading up to the credit crisis.

Moody’s believes that there is still the potential for additional rulemaking that can significantly impact Moody’s business. It is likely that other jurisdictions will adopt additional laws or regulations affecting Moody’s operations 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. However, Moody’s cannot predict the extent of the regulations that may be implemented, or the effect that they may have on Moody’s operations or the potential for increased exposure to liability.

Exposure to Litigation Related to Moody’s Rating Opinions

Moody’s has received subpoenas and inquiries from states attorneys general and governmental authorities as part of ongoing investigations following the credit crisis, and is responding to those inquiries. In addition, Moody’s faces a greater amount of litigation than has historically been the case from parties claiming damages relating to ratings actions, as well as other related business practices. Due to the difficult economic times and turbulent markets over the last several years, the market value of credit-dependent instruments has declined and defaults have increased, significantly increasing the number of legal proceedings, including investigations, Moody’s is currently facing. 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, present a greater risk that Moody’s may be subject to fines or damages if Moody’s is deemed to have violated any laws or regulations. In jurisdictions outside the U.S., these types of proceedings 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 a greater risk of criminal rather than civil penalties. These risks often are and may continue to be difficult to assess or quantify. Moody’s may not have adequate insurance or reserves to cover these risks, and their existence and magnitude often remains unknown for substantial periods of time. Furthermore, to the extent that Moody’s is unable to achieve dismissals from the various litigation at an early stage and matters proceed to trial, the aggregate legal defense costs to be incurred by Moody’s could increase substantially, regardless of the ultimate outcome.

In addition, as discussed above, the Financial Reform Act revised pleading and liability standards and other provisions potentially subjecting CRAs to increased liability under securities law claims. The Financial Reform Act and regulations that will be adopted as a result of it may result in a material increase in the number of legal proceedings, especially as related to future ratings, and, together with judicial decisions under the Financial Reform Act and under pre-existing legal standards, may increase the potential legal exposure of CRAs. Changes in liability standards applicable in markets outside the U.S. also could create a greater potential for liability from operating in such markets. The Company believes that adoption of these provisions could negatively impact credit markets, including causing CRAs to cease to issue ratings on certain securities or issuers, increasing the cost of ratings, delaying issuances of ratings and restricting the public availability of ratings, which changes could materially negatively impact the Company’s business and prospects. It is possible that implementing changes to the Company’s operations to address the changed pleading and liability standards may result in lower revenues and/or increased expenses that the Company may not be able to recoup or offset, which could be material, and the Company may not be successful in avoiding or mitigating the impact of the heightened or changed pleading and liability standards.

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 79%57% of Moody’sMIS’s revenue for 2010 was transaction-based, compared to 50% of MIS’s revenue in 2007 was derived2009 and 49% of MIS’s revenue in 2008. Revenue from ratings. Revenues from ratings, in turn, arerating transactions is dependent on the number and dollar volume of debt securities issued in the capital markets. Accordingly, 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 dollardollar-equivalent volume of debt issuances for which Moody’sMIS provides ratings services and thereby have an adverse effect on the fees derived from the issuance of ratings.

Factors that could reduce investor demand for debt securities or reduce issuers’ willingness or ability to issue such securities include unfavorable financial or economic conditions. In addition, increases in interest rates or credit spreads, volatility in financial markets or the interest rate environment, significant regulatory, political or economic events, defaults of significant issuers and other market and economic factors may negatively affect the general level of debt issuance and/or the debt issuance plans of certain categories of borrowers. Beginning in July 2007, there has been aA 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 as the markets gradually recover. Credit market disruptions together with an economic slowdown have negatively impacted the volume of debt securities issued in global capital markets and the demand for credit ratings. Notwithstanding a strong increase in debt issuances in the corporate, financial institutions and U.S. public finance sectors in 2010, future debt issuances 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 con-

tinue to be significantly below peak levels reached in the middle of the past decade. Consequently, the Company has experienced a reduction in the overall demand for rating newly issued debt securities. Changes in the markets for such securities and in the role and regulation of rating agencies may materially adversely affect the Company even if the volume of securities issuances in all sectors recovers to or exceeds those experienced prior to 2007.

The timing, nature, extent and sustainability of any recovery in the credit and other financial markets remains uncertain, and there can be no assurance that overall market conditions will improve in the future, that recent improvements will be sustained or that Moody’s 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 is typicallywas historically a high level of demand for ratings, could have a material adverse effect on Moody’s business and financial results. TheInitiatives that the Company has recently noted a substantial reduction in the volume of debt securities issuedundertaken to reduce costs may not be sufficient, and related revenues as a result of the uncertainties presently being experienced in the market for collateralized debt and other structured finance obligations. Revenue earned from ratings in 2007 was approximately 9% higher as comparedfurther cost reductions may be difficult or impossible to 2006, however, ratings revenue in the second half of 2007 compared to the second half of 2006 decreased approximately 11% due to the reduced number of credit-sensitive securities issued in the latter half of 2007 as a result of the credit turmoil beginning early in the third quarter of 2007. There can be no assurance that market conditions will improveobtain in the near future or that results will not continueterm, due in part to be adversely affected.

Torent, technology, compliance and other fixed costs associated with some of the Extent that Any Concerns Affecting Credibility are Perceived in the Marketplace Moody’s Market Share and/or Revenue Could be Affected

Moody’s reputation is one key factor on the basis of which it competes. Moody’s is constantly taking steps to help maintain the absolute trustworthiness of its reputation, as well as its credibility in the marketplace. Accordingly, to the extent that rating agency business as a whole or Moody’s, relative to its competitors, suffers a loss in credibility, Moody’s business could be adversely affected. Factors that could affect one's credibility include, potentially, the performance of securities relative to the rating assigned to such securities by a particular rating agency,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 in all sectors return to levels that prevailed prior to mid-2007 or otherwise unexpectedly increase. Other factors that could further reduce investor demand for debt securities or reduce issuers’ willingness or ability to recognize potential changesissue 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 conditions.

Furthermore, issuers of debt securities may elect to issue securities without ratings or securities which are rated or evaluated by non-traditional parties such as financial advisors, rather than traditional credit rating agencies, such as MIS. Changing regulatory considerations and other market developments could negatively affect the demand for credit ratings even if debt security issuances and activities increase. As such, no assurance can be given as to the amount of revenues that may be derived therefrom.

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 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 domestic and foreign export and import restrictions, tariffs and other trade barriers; political and economic instability; the possibility of nationalization, expropriation, price controls and other restrictive governmental actions; longer payment cycles and possible problems in collecting receivables; and potentially adverse tax consequences.

In its non-U.S. operations, Moody’s is subject to regulations applicable under the Office of Foreign Asset Control, the Foreign Corrupt Practices Act (the “FCPA”) and other anti-corruption laws that generally prohibit U.S. companies and their intermediaries from offering, promising, authorizing or making improper payments to foreign government officials (which may include companies affiliated with foreign governments) for the purpose of obtaining or retaining business. Violations of the FCPA and other anti-corruption laws may result in severe criminal and civil sanctions as well as other penalties and the SEC and U.S. Department of Justice have increased their enforcement activities with respect to the FCPA. Internal controls, policies and procedures and employee training and compliance programs that the Company has implemented to deter prohibited practices may not be effective in prohibiting its employees, contractors or agents from violating or circumventing its policies and the law. If Moody’s employees or agents fail to comply with applicable laws or Company policies governing its international operations, the Company may face investigations, prosecutions and other legal proceedings and actions which could result in civil penalties, administrative remedies and criminal sanctions. Any determination that the Company has violated the FCPA could have a timely basis.material adverse effect on Moody’s financial condition. Compliance with international and U.S. laws and regulations that apply to the Company’s international operations increases the cost of doing business in foreign jurisdictions.

In addition to competition from other rating agencies that operate in a number of international jurisdictions and specialized 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), in many foreign countries MIS competes 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 MIS does not receive, putting MIS at a competitive disadvantage.

Increased Pricing Pressure from Competitors and/or Customers

In the credit 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.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 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. In addition, one of the central goals of the Reform Act was to encourage competition among rating agencies. The formation of additional NRSROs may increase pricing, as well as other competitive pressures.

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 assigned to such securities by a particular rating agency, the timing and nature of changes in ratings, adverse publicity as to the ratings process, a major compliance failure, publicity associated with ongoing litigation and new laws and regulations and increased criticism by users of ratings, regulators and legislative bodies. These concerns may be disclosed or highlighted in the course of various investigations or lawsuits that have been or may be instituted, through legislative or regulatory hearings or special studies that are mandated by legislation, or through journalists or others attempting to chronicle or report on the recent credit crisis.

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, or may price or market their products in manners that differ from those utilized by Moody’s. Customers or others may develop alternative, proprietary systems for assessing credit risk. Such developments could affect demand for Moody’s products and its 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 at levels achieved by competitors.

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Regulation as a Nationally Recognized Statistical Rating Organization and Potential for New U.S., State and Local Legislation and RegulationsSignificant Amount of Intangible Assets

When governments adopt regulations that require debt securitiesMoody’s has a significant amount of intangible assets on its balance sheet consisting of $465.5 million of goodwill and $168.8 million of amortizable intangible assets. Approximately 98% of these intangibles reside in the MA business and are allocated to the four reporting units within MA: RD&A; RMS; Training, and CSI. 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 be rated, establish criteria for credit ratingsrecorded if the fair value of a reporting unit or authorize only certain entities to provide credit ratings,asset group which holds goodwill or any intangible assets is less than the competitive balance among rating agencies andcarrying amount of its net assets. A significant factor in the leveldetermination of demand for ratings may be positivelythe fair value of a reporting unit or negatively affected. Government-mandated ratings criteria may also have the effectasset group is its projected cash flows. Future cash flows of displacing objective assessmentsMA are dependent on a variety of creditworthiness. In these circumstances, debt issuers may be less likely to base their choice of rating agencies on criteriafactors such as, independencebut not limited to, general economic growth, capital market activity, product innovation, pricing, market share 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.

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 legislativecompetition. Changes in these factors or regulatory bodies, including the SEC in the United States and state and local oversight. It is possible thatconduct of Moody’s operations in response to such reviewsfactors 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 environmentreduced cash flows resulting in which credit rating agencies operate.

Currently, Moody’s is designated as an NRSRO pursuant to SEC regulation 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 recent adoption, Moody’s is unable 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, although Moody’s would expect the Reform Act to increase costs of all entities engaged in the rating agency business. Similarly, at present, Moody’s is unable to predict the regulatory changes that may result from ongoing reviews by any of the various regulatory bodies or the effect that any such changes may have on its business. A description of several 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.

Potential for Increased Competition and Regulation in Foreign Jurisdictions

Moody’s maintains offices outside the U.S. and derives a significant and increasing 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 restrictions on the ability to convert local currency into U.S. dollars and currency fluctuations, export and import restrictions, tariffs and other trade barriers, political and economic instability as well as nationalization, expropriation, price controls and other restrictive governmental actions, longer payment cycles and possible problems in collecting receivables, and potentially adverse tax consequences.

Moody’s faces competition from, among others, S&P, Fitch, DBRS, local rating agencies in a number of international jurisdictions and specialized 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 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 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, putting Moody’s at a competitive disadvantage.

Because Moody’s operates globally and plans to expand its international scope, it must also react to regulatory changes abroad. CESR has monitored rating agencies’ compliance with the IOSCO Code. Although the CESR recently concluded in a report that the four internationally active rating agencies that operate in the European Union, including Moody’s, are largely compliant with the IOSCO Code, it did identify a few areas where it believed the rating agencies could improve their processes and disclosures and where the IOSCO Code could be improved. CESR indicated that it will look into these areas in particular, as well as the impact of the Reform Act and the SEC’s implementing rules on the rating business in the European Union. Moody’s is unable to assess the potential impact of any regulatory changes that may result from the CESR’s review, including whether any additional regulation would restrict or otherwise inhibit Moody’s expansion into foreign markets. See the discussion under the section entitled “Regulation” in Item 1. “Business”, of this Form 10-K, for additional information regarding the IOSCO Code and the CESR.

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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 cooperating with those inquiries. The outcome of such investigations is presently unknown. In addition, Moody’s faces litigation from time to time from parties claiming damages relating to ratings actions, as well as other related actions. 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 in the U.S. (such as protections for the expression of credit opinions as is provided by the First Amendment and criminal rather than civil penalties). These risks often may be difficult to assess or quantify, and their existence and magnitude often remains unknown for substantial periods of time.asset impairment charge.

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, retaining and retainingmotivating 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 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 providing more favorable working conditions or offering higher compensation than Moody’s or subject employees to less individual scrutiny.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 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.

OurThe Trading Price of Moody’s Stock Could be Affected by Third Party Actions

Ownership of Moody’s stock is highly concentrated with a majority of shares held by a few institutional stockholders. Due to this concentrated stockholder base, the trading price of Moody’s stock could be affected considerably by actions of significant stockholders to increase or decrease their positions in Moody’s stock.

Moody’s Operations and Infrastructure may Malfunction or Fail

OurMoody’s ability to conduct business may be adversely impacted by a disruption in the infrastructure that supports ourits businesses and the communities in which we are located.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 usthe Company or third parties with or through whom we conductMoody’s conducts business, whether due to human error, natural disasters, power loss, telecommunication failures, break-ins, sabotage, computer viruses, intentional acts of vandalism, acts of terrorism or war or otherwise. We doMoody’s efforts to secure and plan for potential disruptions of major operating systems may not be successful. The Company does not have fully redundant systems for most of ourits smaller office locations and low-risk systems, and ourits disaster recovery plan does not include restoration of non-essential services. If a disruption occurs in one of theseMoody’s locations or systems and ourits personnel in those locations or those who rely on such systems are unable to utilize other systems or communicate with or travel to other locations, ourtheir ability to service and

interact with ourMoody’s clients and customers from these locations may suffer.

Our The Company’s operations also rely on the secure processing, storage and transmission of confidential and other information in ourits computer systems and networks. Although we take protectiveThe business relies upon and processes a great deal of data through its systems, the quality of which must be maintained in order for the business units to perform. Protective measures and endeavorthat Moody’s takes may be circumvented or may not be sufficient to modify them as circumstances warrant, ourguard its computer systems, software and networks may be vulnerable tofrom unauthorized access, computer viruses or other malicious events that could have a security impact. If one or more of such events occur, this could jeopardize ourMoody’s or ourits clients’ or counterparties’ confidential and other information processed and stored in, and transmitted through, ourits computer systems and networks, or otherwise cause interruptions or malfunctions in our, ourthe Company’s, its clients’, our counterparties'its counterparties’ or third parties'parties’ operations. WeMoody’s may be required to expend significant additional resources to modify ourits protective measures or to investigate and remediate vulnerabilities or other exposures, and wethe Company may be subject to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by us.Moody’s.

None.

Moody’s corporate headquarters is located at 7 World Trade Center at 250 Greenwich Street, New York, New York 10007, with approximately 668,513 square feet. During the fourth quarterfeet of 2006, the Company completed the sale of its former corporate headquarters building at 99 Church Street, New York, New York.leased space. As of December 31, 2007,2010, Moody’s operations were conducted from 1615 U.S. offices and 3743 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.

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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 several 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.

In addition, the Company is facing litigation from market participants 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 also 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.

Moody’s Analytics is cooperating with an investigation by the SEC concerning services provided by that unit to certain financial institutions in connection with the valuations used by those institutions with respect to certain financial instruments held by such institutions.

For matters, except thoseclaims, 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 recordedrecords 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. In view of the inherent difficulty of predicting the outcome of litigation, regulatory, enforcement and similar matters and contingencies, particularly where the claimants seek large or indeterminate damages or where the parties assert novel legal theories or the matters involve a large number of parties, the Company cannot predict what the eventual outcome of the pending matters will be or the timing of any resolution of such matters. The Company also cannot predict the impact (if any) that any such matters may have on how its business is conducted, on its competitive position or on its financial position, results of operations or cash flows. As the process to resolve the pending matters referred to above progresses, management will continue to review the latest information available and assess its ability to predict the outcome of such matters and the effects, if any, on its operations and financial condition. However, in light of the inherent uncertainties involved in these matters, the large or indeterminate damages sought in some of them and the novel theories of law asserted, an estimate of the range of possible losses cannot be made at this time. For income tax matters, the Company employs the prescribed methodology of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN No. 48”) implemented asTopic 740 of January 1, 2007. FIN No. 48the 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 discussion of the legal matters under Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contingencies”, commencing on page 17 of this annual report on Form 10-K, is incorporated into this Item 3 by reference.

Moody’s has received subpoenas and inquiries from states attorneys general and governmental authorities and is cooperating with those inquiries.

Based on its review of the latest information available, in the opinion of management, the ultimate liability of the Company for the unresolved matters referred to above is not likely to have a material adverse effect on the Company’s consolidated financial condition, although it is possible that the effect could be material to the Company’s consolidated results of operations for an individual reporting period. This opinion is subject to the contingencies described in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contingencies”.

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 22, 2008, and is incorporated herein by reference.below.

MOODY’S PURCHASES OF EQUITY SECURITIES

For the Three Months Ended December 31, 20072010

During the fourth quarter of 2007,2010, Moody’s issued 0.4 million shares under employee stock-based compensation plans and repurchased 7.73.9 million shares of its common stock, at an aggregate cost of $311.4 million,$104.0 million.

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 issued 0.8 millionlow 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, 2011 was 3,181. A substantially greater number of the Company’s common stock is held by beneficial holders whose shares under employee stock-basedare held of record by banks, brokers and other financial institutions.