Ray McDaniel - Chairman and CEO Linda Huber - CFO Liz Zale - VP, Investor Relations Michel Madelain - COO Moody's Investors Service Mark Almeida - President Moddy's Analytics

Peter Appert - Piper Jaffray Michael Meltz - JPMorgan Craig Huber - Barclays Capital John Neff - William Blair Edward Atorino - Benchmark Capital Catriona Fallon - Citigroup

Good day, and welcome ladies and gentlemen to the Moody's Corporation fourth quarter and fiscal year end 2008 earnings conference call. I will now turn the conference over to Liz Zale, Vice President, Investor Relations. Please go ahead.

Thank you, Audra. Good morning, everyone and thanks for joining us on this teleconference to discuss Moody's results for 2008. I am Liz Zale, Vice President of Investor Relations. Moody's released its results for the fourth quarter and full year of 2008 this morning. The earnings release and the presentation to accompany this teleconference are both available on our website at ir.moodys.com. Ray McDaniel, Chairman and Chief Executive Officer of Moody's Corporation will lead this morning's conference call. Also making prepared remarks on the call this morning is Linda Huber, Chief Financial Officer of Moody's Corporation. Before we get started, I call your attention to the cautionary language set out at the end of our earnings release. Certain statements my colleagues and I make today may be forward-looking within the spirit of the Private Securities Litigation Reform Act of 1995. This act provides the Safe Harbor for such forward-looking statements. I direct your attention to the management's discussion and analysis section and the risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2007, company's quarterly report on Form 10-K for the quarter ended September 30, 2008, and in other SEC filings made by the company from time to time. I would also like to point out the Safe Harbor statement under the Private Securities Litigation Reform act of 1995 contained in our press release issued this morning. These set forth important factors that could cause actual results to differ materially from those contained in any such forward-looking statements. I should point out that members of the media may be on the call this morning in a listen-only mode. I am now pleased to turn the call over to Ray McDaniel.

Thank you, Liz and thank you all for joining today's call. I'll begin our remarks this morning with a brief summary of Moody's fourth quarter and full year 2008 results. Linda will then take you through additional revenue detail and operating highlights and provide commentary on other related matters. I'll then speak to recent developments in the regulatory area and will provide Moody's outlook for 2009. After our prepared remarks, we will be happy to respond to your questions. The weak credit market conditions that prevailed throughout most of 2008 were exacerbated in the fourth quarter by the broader downturn in global economic activity. In fact, credit market conditions in the fourth quarter were the weakest we have witnessed resulting in revenue for the quarter of $404 million, down 20% from a year ago. While these results clearly reflect the challenging market conditions we are facing, Moody's performance in this difficult environment nonetheless reflected ongoing cost management efforts, resilience from the areas of Moody's Investor Service that generate recurring revenue and growth for Moody's Analytics. Excluding the unfavorable impact of foreign currency translation, revenue declined 18%. Operating income for the fourth quarter was $125 million, a decline of 41% year-over-year. The decline in revenue was made worse by increased expenses relating to acquisitions, as well as comparatively lower incentive compensation costs in the fourth quarter of 2007 due to favorable adjustments in that period. Diluted earning per share for the quarter were $0.37 and included $0.04 of dilution relating to our acquisition of Fermat, compared to $0.49 a year ago. Excluding restructuring charges in 2007, diluted EPS for the quarter declined 38% year-over-year. Regarding full year results, revenue for 2008 was approximately $1.75 billion, a decrease of 22% from 2007. Operating income of $748 million was down 34% from a year ago. Excluding the favorable foreign exchange impact, revenue and operating income declined 23% and 36% respectively. Reported earnings per share of $1.87 for 2008 included a $0.05 benefit related to the resolution of certain legacy tax matters, minor adjustments for the 2007 restructuring, and dilution of $0.04 relating to the Fermat acquisition. Excluding legacy tax and restructuring items, 2008 diluted earnings per share were $1.82 and decreased 27% from 2007. Recent credit market activity has improved in selective areas over the lows of the fourth quarter, but is mostly limited to high-grade corporate and financial institution issuance. Growth for other areas is likely to be constrained as long as spreads remain wide and risk aversion persists among fixed income investors. We believe the timing for recovery remains uncertain, and we may see interruptions in bond issuance patterns before sustained recovery occurs. At this point, I'll turn the call over to Linda to provide further details on our results and other updates.

Thanks Ray. I'll begin with revenue for the fourth quarter. Global revenue for Moody's Corporation was down 20% and US revenue declined 29% year-over-year to $196 million. Revenue from outside the US was $208 million, declining 9% versus a year ago, which represented 52% of Moody's total revenue for the quarter. Recurring revenue of $283 million was up 5% from the fourth quarter of 2007, which represented 70% of total revenue for the quarter. For the full year 2008, recurring revenue grew 10% to $1.1 billion, which represented 64% of total revenue. Looking at each of our businesses, Moody's Investor Service revenue for the quarter was $254 million, a decline of 32% year-over-year. Excluding the unfavorable impact of foreign currency translation, revenue declined 29%. Within the US, ratings revenue was down 40%, compared to a 21% decrease in non US ratings revenue. Revenue from outside the US represented 50% of total ratings revenue. Global structured finance revenue for the fourth quarter was $92 million, down 42% year-over-year. US structured finance revenue decreased 57% driven by issuance declines in all asset classes. Non US structured finance revenue was down 26% from the prior year period. International trends were consistent with the third quarter of this year with declines in the European credit derivatives and commercial real estate finance lines of business, partially offset by growth in asset-backed and residential mortgage-backed securities. The growth was driven by banks securitizing balance sheet assets through the European Central Bank, the Bank of England and others. Global corporate finance revenue of $57 million for the fourth quarter declined 37% from a year ago. US corporate finance revenue decreased 45% year-over-year with the majority of the transaction-based revenue coming from investment grade ratings and with very limited high yield and bank loan activity. Outside the US, corporate finance revenue was down 23% due primarily to an absence of the speculative grade issuance and reduced levels of investment grade issuance. Global financial institutions revenue of $57 million decreased 15% from the fourth quarter of 2007. US financial institutions revenue was down 16% due to revenue declines in most business lines, particularly the banking and insurance businesses. Outside the US, financial institutions revenue declined 14% primarily driven by declines in European bank issuance. Global revenue for public, project and infrastructure finance declined 15% to $49 million. The decline of 19% in US revenue from the fourth quarter of 2007 was largely driven by lower levels of activity in the US public finance business. Non US revenue decreased 7% as strong increases in project and infrastructure finance activity in Europe and the Middle East were more than offset by difficult market conditions for other business lines and regions. Turning now to Moody's Analytics, global revenue of $150 million increased 13% from the fourth quarter of 2007. US revenue was up 6% to $70 million while non US revenues grew 21% and represented 54% of the total revenue. Within Analytics, global revenue from subscription rose 9% to $122 million, while the software and consulting businesses saw strong double-digit revenue growth driven by the October acquisition of Fermat International and customer demand for specialized consulting projects respectively. Moody's fourth quarter operating expenses were $278 million, 5% lower than the prior year period. Excluding the 2007 restructuring charge and related adjustments in 2008, operating expenses were 14% higher than the prior year period. This was largely due to incremental expenses from businesses acquired in 2008 and a fourth quarter impairment charge of $11 million related to software and database intangibles. Increase results are due to lower incentive compensation costs in the fourth quarter of 2007 when compensation was adjusted to reflect unexpectedly weak performance in the second half of 2007. Operating margin for the fourth quarter of 2008 was 31% compared to 42% for the fourth quarter of 2007. Our effective tax rate for the quarter was 28.6%, compared with 33.8% for the prior year period. Decrease was primarily driven by a larger portion of consolidated taxable income generated outside the US which is generally taxed at a lower rate than US statutory rate, as well as the realization of benefits available for US based manufacturing and research activities. Effective tax rate for the year 2008 was 37%. For 2009, we expect an effective tax rate in the range of 38% to 39%. I'd like to turn now to an update on capital allocation and stock buyback. Moody's remains commit to do using its strong cash flow to create value for shareholders by investing in growing areas of our business, reinvesting in ratings quality initiatives, making selective acquisitions in related businesses, repurchasing our own stock and paying a modest dividend. As we mentioned on our previous call, we intend to uphold our commitment to returning capital to shareholders in a manner that is consistent with maintaining sufficient liquidity in this uncertain environment. In the near-term that means maintaining our current dividend but curtailing share repurchase activities. During fourth quarter of 2008, Moody's repurchased 4.8 million shares at a total cost of $120 million, and issued 136,000 shares under employee stock-based compensation plans. For the quarter, we've repurchased shares of an average price of $25.05. Share repurchases during the quarter were funded by a combination of free cash flow and borrowings. Outstanding shares as of December 31, 2008, totaled 235 million, representing a 6% reduction from a year ago. For full year 2008, Moody's repurchased 18.2 million shares for a total cost of $593 million at an average price of $32.54 and issued about 2.2 million shares under employee stock-based compensation plan. For this period, share repurchases were funded using a combination of free cash flow and borrowings. As of December 31, 2008, Moody's had 1.4 billion of share repurchase authority remaining under its current program. Moody's had 1.5 billion of outstanding debt at year end with approximately 300 million of additional available capacity. Capital expenditures for 2008 were 84 million including the remaining build out of our corporate headquarters at 7 World Trade Center and planned improvements to other facilities. For 2009, we expect CapEx to be in the range of $90 million to $120 million including approximately $50 million related to the build out of our Canary Wharf facility in London which began earlier this year. We will incur rent expense of roughly $10 million in 2009 during the build out but will realize future cost savings with this consolidation of our London operations. Before I turn the call over to Ray, I'd like to provide an update on our most recent acquisitions. Our October 2008 acquisition of Fermat International extends our offering in bank risk management software positioning Moody's to deliver a comprehensive suite of software solutions for financial institutions worldwide. Integration is proceeding according to plan and we expect this acquisition to be a few cents dilutive for 2009 overall, but anticipate it will contribute positively to earnings in the fourth quarter of 2009. Our acquisition of Enb Consulting in early December further expands our credit and capital markets training service business providing training programs for financial professionals with emphasis on markets outside the US. And with that, I will turn the call back to Ray.

Thanks, Linda. I will start with a brief update on regulatory developments. We continue to have active communications with regulatory authorities on both the global and regional level. So starting with the US; on February 2, the Securities and Exchange Commission published new rules applicable to nationally recognized statistical rating organizations or NRSROs that have been approved in December. The main points of focus for these rules are managing conflicts of interest and enhancing the transparency of credit processes and rating methodologies. The commission also re-proposed additional rules initially put forth in December and provided for a 45-day comment period. The rule proposals pertained to the public availability of historical ratings information to facilitate performance comparison across NRSROs and the distribution of underlying transaction information to all NRSROs by structured finance originators which aims to eliminate ratings shopping by issuers. It's clear that there will be further discussion and debate relating to the use of ratings and regulation and the oversight of credit rating agencies. We also continue to anticipate that there will be additional hearings throughout the year as US policy makers and regulators seek to restore confidence in the stability and resiliency of the US financial system. Turning to Europe; in November, the European Commission public a revised proposal for the oversight of rating agencies in the European Union subject to review, amendments, and approval by the European Parliament and the Council of the European Union. That review process is now underway as policy makers and regulators consider potential changes to the broader regulatory regime for the financial system within the EU. The European Commission's proposal on the regulation of credit rating agencies has four broad objectives; to avoid or adequately manage conflicts of interest, to improve ratings quality, to increase transparency, and to ensure an efficient registration and surveillance framework. While timing is uncertain, we believe that it is likely a proposal that could be voted on within the current legislative session of parliament which ends in April. At a global level, we continue our effort to update the market on various steps we have taken over the past 18 months including revising the Moody's Investors Service Code of Professional Conduct to reflect recent changes to the International Organization of Securities Commissions or IOSCO code of conduct for credit rating agencies. Moody's supports the ongoing efforts undertaken by global policy makers and regulators to restore confidence in the credit markets. We will continue to communicate our messages and address the issues and concerns that various authorities may have in our shared goal of greater market stability and the return of investor confidence. I'd like to conclude this morning's prepared comments by discussing our full year guidance. Moody's outlook for 2009 is based on assumptions about many macroeconomic and capital market factors, corporate and consumer borrowing, securitization, and the nature and impact of government sponsored economic stabilization and stimulus initiatives. It is an important degree of uncertainty surrounding these assumptions and if actual conditions differ, Moody's results for the year may differ materially from our current outlook. We expect full year 2009 revenue for Moody's Corporation to decline in the low single-digit percent range, assuming foreign currency translation at current exchange rates. Given current business conditions, revenue is likely to show a modest cyclical decline from the fourth quarter through the early part of 2009. We are maintaining rigorous focus on expense management and planning conservatively for reduced issuance. Our lower revenue expectations anticipates sluggish fixed income issuance as well as financial industry challenges that will limit the near-term growth potential of Moody's Analytics. Recurring revenue from both of our business segments will continue to provide a stable base and is expected to be about flat to 2008. Full year operating expenses are expected to increase in the mid single-digit percent range including costs associated with the Fermat acquisition and rent for Canary Wharf. Excluding acquisitions, full year 2009 operating expenses are expected to be about flat, and we expect expenses to be relatively constant throughout the year. Our operating margin for 2009 is expected to be in the mid to high 30s percentage range. Company projects diluted earnings per share for the full year in 2009 in the range of $1.40 to $1.50 which includes a few cents of dilution for Fermat as Linda mentioned. For the global Moody's Investor Service business, we expect revenue for the full year 2009 to decline in the high single-digit percent range both inside and outside the US. We expect structured finance revenue to decline in the high 20s to low -- in high teen to low 20s percent range reflecting continuing declines across all asset classes. Corporate finance revenue is expected to decrease in the mid to high single-digit percent range with weakness most pronounced in issuance of speculative grade bonds and bank loans. Revenue from financial institutions and public, project, and infrastructure finance is expected to be about flat with the full year 2008. For Moody's Analytics, we expect full year 2009 revenue growth in the mid single-digit percent range including revenue from Fermat. In the current business environment, customer attrition is running above historical levels as a result of consolidation among large financial institutions and the contraction in activity in the credit markets. However, interest in risk measurement and risk management tools is elevated and is simulating demands for capabilities in other customer segments. As a result, we expect full year revenue growth for Moody's Analytics by far to be well below the historical trend. US revenue is expected to be about flat for the full year 2008, while we expect growth outside the US to be in the low double-digit percent range. Project revenue declined in the low single-digit percent range for the subscription business will be offset by strong global revenue growth in both the software and consulting businesses. That concludes our prepared remarks. And joining us for the question and answer session are Michel Madelain, the Chief Operating Officer of Moody's Investors Service, and Mark Almeida, President of Moody's Analytics. We are pleased to take any questions you may have.

We'll go first to Peter Appert of Piper Jaffray. Peter Appert - Piper Jaffray: Ray, I was hoping you could maybe dig a little deeper into the regulatory issues and give us your perspective on how you read the changes in Washington potentially impacting, how the regulatory story might unfold and in particular the changes at the SEC, is that something particularly noteworthy from your view?

Well, clearly, we are facing heightened regulatory scrutiny both in the United States and in the European Union. In the US, we obviously have had changeover in the leadership at the Securities and Exchange Commission and I think I'm at least expecting really two paths to be followed. We will have renewed focus on our industry and our business at the SEC, and I think there will also be consideration of the role and function of rating agencies in connection with the overall review of the financial system and potential financial system reform. So, I think that really for a lot of 2009, we are going to be in a period of exploration, with additional questions coming from the regulatory authorities and additional scrutiny. I think the clear focus is going to be on conflicts of interest and our business model and are we managing those conflicts of interest in a way that is both proper and prudent, but also transparent enough that third-parties being oversight authorities or the market itself can reach a comfortable judgment that we are performing our business properly. That's really where I see the focus in 2009 and it's going to go on for awhile. Peter Appert - Piper Jaffray: I guess the issue is the SEC to-date, it appears from the outside has been the recommendations they've made specifically have been relatively benign would be my interpretation as it relates to the economics of your business model. I'm wondering given the criticism, the agency has been under, does that translate into them taking a more aggressive stance versus what they've been doing in terms of how they approach you guys?

Well, I do think they are going to take an aggressive position in looking at the business. I think they have done so with their inspection process last year frankly, but I certainly don't expect any let up on that. I also though think that they are going to in looking at us, going to consider the arguments and points of view that explain what is most constructive for this industry and for operating the business and I think they will look at that in a rational manner and reach rational conclusions. Peter Appert - Piper Jaffray: Okay and just two other things. One, can you give us any color on specifically what you are seeing in January in terms of momentum in different categories? And two, whether you are seeing any push back from clients from a pricing standpoint?

Just to tackle the second first, we have been, I think, appropriately conservative in changing prices for 2009. It is a difficult environment for many, many institutions that are operating in the capital markets and I think that, I think that it would be inappropriate for us to try to be too aggressive with pricing for the year. So, we are being cautious with that and we are aware of the market conditions that we are operating under. Where we provide value that we feel that we may not be being paid appropriately for, we do seek to increase prices just to match the value that is being provided. So, there are some price increases. They are not aggressive. With respect to issuance activity in January, I think, probably many listeners on the call have seen some of the articles that talk about high volumes of issuance coming out of the high-grade market, the higher end of the investment grade market and we certainly are seeing that as well. I would make two comments around that though. First of all, last January, we also saw good issuance in the high-grade markets. So, this issuance activity is not coming against a weak first month of 2008. It's actually coming against a fairly strong first month of 2008. And secondly, we are not seeing a lot of activity at the speculative grade end of the ratings scale or in bank loan activities. So, it is an active market within a narrow slice of what we would normally be seeing in fixed income issuance limited really to the high-grade industries and utilities. Peter Appert - Piper Jaffray: Thanks, Ray.

Next, we'll go to Michael Meltz at JPMorgan Michael Meltz - JPMorgan: Thanks. On Peter's question, Ray that you just answered there, in your commentary on guidance you said, I think you actually said Q1 revenues might be down versus Q4. Can you talk a little bit more about that? I don't really understand why they might. What cyclical issue was there given that Q4 transaction revenues were probably the trough of the cycle? And then secondly, Linda, when you ran through your numbers, I think you said you took an $11 million impairment charge. Could you just clarify what that was, where it's showing up in your numbers? And then I have one follow-up.

Sure. I think the story for our expectations early this year versus the fourth quarter of last year really are built around two ideas. First of all, we are not seeing any kind of broad-based market recovery versus the fourth quarter. As I said to Peter Appert, we do see strength in a slice of the market represented by the high-grade industrial sector. But we are not seeing the recovery at the lower end of the rating spectrum. So, that leads to the question of, well, what is cyclically down versus the fourth quarter of last year, and the answer there is really the structured finance market particularly on the international side. That is a typical cyclical phenomenon. We expect to see it again but as a result we do not expect to see structured finance internationally produce the same kind of revenue early this year that it did in the fourth quarter last year.

And Michael, it's Linda. On your question on the $11 million charge that I mentioned, that falls within Moody's Analytics. It's in the software and databases area of the business and you can also see that it runs through the depreciation and amortization line and again that's an $11 million charge for the fourth quarter. Michael Meltz - JPMorgan: So, what's the D&A run rate in '09, please?

The D&A run rate in '09, it's kind of a squishy number, Michael because a lot of things moving in and out, but we are kind of thinking sort of $60 million to $70 million for '09. Michael Meltz - JPMorgan: On the OPEX side, in terms of staffing, how are you viewing your current staffing levels in terms of if we do see some issuance pick up, what's the estimate of flow through to profits? Do you think incentives will go up but that's about it or are there other costs we should consider?

You got about three questions in there. We can talk about the number of people. We'll talk about what we will do if we see an uptick, and then maybe Ray can talk a little bit about the flow through. We finished the end of the year 2008 without acquisitions, about flattened headcount to 2007. It's about 3,600 people. However with the acquisitions that we bought, we added about 350 people and finished the year at 3,950 employees approximately. So given those additions, I think we feel we are in pretty good shape for any kind of pick up that we might have in the near-term. On the incentive comp line, Michael, we would expect that next year we would keep it about where it is for this year. We full year realize that this forecast is a modest one and we would not see a lot heavier loading of incentive compensation unless we see an increase in performance. And if we do, of course, incentive compensation will move up but we would suggest that people look at the incentive comp line and the stock comp line it's being about the same in 2009 as in 2008. And I'll let Ray talk about the revenue piece of that.

Yeah. The reaction that we would have to make to in improvement in market activity, it really depends on where that improvement is coming from. I expect that improved market activity will be principally on the fundamental side of the business, company's municipalities and that improvement will come as the markets eventually work their way down the risk spectrum and investors become somewhat less risk adverse. That would not lead to an immediate need to add any significant numbers of personnel, because we already have the people onboard for most of the credits that would be going into market, monitoring existing debt that is outstanding. So, we have some room with the recovery in the market of that sort to have people that are already with the company look at new debt issuance activity. If there were unexpectedly in my opinion, a significant recovery in certain areas of the structured finance market, I think that we would have to look more aggressively at moving people back into structured finance or bringing people in from the outside in structured finance in order to accommodate increased transaction activity. So, it is a little bit dependent on where a recovery would come from and how steep that recovery is and we are not expecting a V-shaped recovery this year. Michael Meltz - JPMorgan: Okay. Linda, Fermat, what was the revenue contribution in the fourth quarter and what is in guidance?

The guidance for Fermat is subsumed in the software section of Moody's Analytics for 2009, and we're not breaking out a specific revenue contribution for Fermat for fourth quarter of 2008. Michael Meltz - JPMorgan: Okay, are you breaking it out for '09?

It's going to be within the software segment of Moody's Analytics as I said. Maybe somewhat more helpfully Michael, it is the majority of the software segment of Moody's Analytics. Michael Meltz - JPMorgan: Okay. Great, thank you.

Sure.

We'll go next to Craig Huber at Barclays Capital. Craig Huber - Barclays Capital: Yes. Good morning, thank you. First question; like you usually do, can you break out for us the transaction versus non-transaction contribution across your four segments within the ratings business, those percentages, please?

Sure, Craig. Do you want the fourth quarter, do you want the full year? Craig Huber - Barclays Capital: Please do the fourth quarter and the year.

Okay. Well, we'll start with the fourth quarter then and I'll start with structured finance and as I read these numbers, the first will be transaction and the second will be relationship. So, for the fourth quarter structured finance transaction revenues were 45% of that revenue total and relationship were 55%. Corporate finance transactions 39%, relationship 61%; financial institutions were 23% and 77%, and public project and infrastructure were 52% and 48%. So, the arithmetic sum there for the rating agency, it moved to 40% transaction and 60% relationship. Now for Moody's Analytics the numbers skew a little bit differently. The transaction percentage is 12% and the relationship percentage is 88%. So, again the weighted average for the company as a whole for the fourth quarter of 2008, 30% transaction, 70% relationship which is the most skewed toward relationship we've seen in a while. Now for the full year 2008, running through the same numbers, structured finance 51% transaction, 49% relationship for the year, corporate was 53% and 47%, financial institution 33% and 67% and PPIF 59% and 41%. So for the rating agency for the whole for the year, we were split about evenly transactions were 49%, relationship is 51%. Again, Moody's Analytics is much more toward relationship. Its transaction revenues were 9%, relationship was 91%. And so for the full year, we were 36% transactions and 64% relationship. You see as we're moving later in the year, we are skewing more toward relationship revenue. Craig Huber - Barclays Capital: Yeah, I appreciate that. This Fermat acquisition, I know everybody is frustrated with this, but none of us seem to know what the revenues and the costs are; all we seem to know here is it is $0.04 dilutive in the quarter. Can you give us any sense of perhaps in that D&A number you mentioned 60 to 70 million next year? How much of that do you think is going to come from Fermat?

I don't think we were planning to go there to break out Fermat mainly Craig and I'm sorry if we are frustrating you and others. We report Moody's Analytics as the software business, the consulting business, and the subscription business. So Fermat really wouldn't be identified uniquely as part of that. Maybe we can ask Mark Almeida to comment just a little bit on the nature of the business.

The Fermat business as Linda said is being rolled into the overall software segment within Moody's Analytics, and that is, that's going to become a much more significant part of the overall business of Moody's Analytics. It'll still be much smaller than the subscription segment, which represents at this stage about 80% of total revenue. But, the idea here is to put together the existing software assets and capabilities that we have within analytics, put them together with the capabilities that Fermat brings us and as a result of that we're going to be able to offer a much wider range of software solutions to banks around the world. So, much like the other acquisitions that we've done within the Analytics business over the last couple of years, we're rolling Fermat into the software segment, and we won't continue to report out results for that individual business. Craig Huber - Barclays Capital: What I'm confused about Linda is, you mentioned I think software was mostly all this Fermat acquisition. But a year ago, it was 13.7 million according to your press release here?

Yeah. We picked up some revenue in the fourth quarter for Fermat. We're going through revenue recognition process and accounting conversion process that's pretty complicated. So, again we're not trying to be particularly tricky here, Craig. I think the number that we had given with respect to revenue for Fermat to be $70 million in 2010 when we get this thing on a steady state revenue basis. So, I think we'd really rather leave it at that if that's okay. Craig Huber - Barclays Capital: If I could just ask how confident are you that it was better to buy Fermat as opposed to perhaps that roughly $200 million to buy back? It would have been roughly 4% of your shares outstanding at this level $20 to $23 a share and how confident are you this is actually going to work?

This is Ray. I think we feel very good about it. The early indications are that the performance in the firm is going to be as expected. The integration is going well and in looking at ways to grow the Moody's Analytics business having a preempt set of products and services that we can offer in the way of software analytics around risk measurement and risk management coming out of this financial crisis seems to us to be exactly where we want to be positioned. So, I would do this again in a second if we had to do it over.

Craig, to follow on to that, we feel we bought this business at an attractive price given its run rate. Its margin will be very similar to the rest of analytics. We're not in the business of buying businesses that are going to bring down our margin over the long run and we do feel quite comfortable with how it's performing so far. Craig Huber - Barclays Capital: Great. Thank you for the answers.

We'll go next to John Neff with William Blair. John Neff - William Blair: Hi, thanks. Just following up on some of the Fermat questions, it's a software model. Is that typically an upfront license-based model?

Yeah, it's almost. It is exclusively an upfront license sale. There is a small amount of annual maintenance associated with the licenses out into the future, but then it's primarily a large upfront fee in the first year of the license. John Neff - William Blair: Okay. And Linda, I don't know if you have these numbers in front of you, but I assume they will be in the K, but to break the operating margins by MIS versus Analytics in 2008, do you have that handy?

Yes. Would you like the quarter, would you like the year? John Neff - William Blair: Yes.

Okay.

Moody's, I got it in front of me, Linda. Moody's Investors Service for the year was 47% GAAP operating margin and the Moody's Analytics was 27%. John Neff - William Blair: Thanks. And maybe Ray, maybe talk about your view about some of the possible proposals that are floating around vis-à-vis the so called bad bank or the TALF, what those might mean in your view on the efficacy of that kind of a proposal?

Well, I guess in the case of both the bad bank proposal and the TALF, I would view those as being helpful to our business really to the extent that they are helpful in stabilizing markets and restoring investor confidence. I don't see a significant direct revenue opportunity that's going to come from either one of those. But to the extent that we have banks lending again and to the extent that we have investors with greater degree of confidence, and the demand from the investors side is matched by the demand from those seeking capital in the markets right now, that obviously is going to be a benefit for not only our business but everybody else in the market. So, the direct consequences I would not say are material. The indirect consequences could be very material. John Neff - William Blair: And regarding the frequent issuer pricing caps, really there's a point to say but how frequently were those reached in 2008, and is there any if there's unused capacity in 2008, does that roll forward into 2009 or does it stop at the year?

It does not roll forward into 2009, and I don't know up on top of my head the percentage of institutions that hit caps under frequent issuer pricing program. It is generally speaking the larger investment grade industrials and financial institutions that have those. To the extent that they were more active in the market last year than other institutions that would indicate a reasonably high percentage were hitting caps, but I don't have a specific number for you. John Neff - William Blair: And lastly, well, two quick last ones here for Linda. Could you just a little bit more color on the $11 million impairment that ran through D&A in the fourth quarter and also the CapEx guidance $90 million to $120 million in '09, was that a reduction from, I thought, it was that you were expecting more like a $150 million, $160 million? Thank you.

Yeah. John, we're going to not say anything further about $11 million, not a huge number and it is what it is. Yes, we had set as high as $150 million for CapEx for '09, but as we've gotten more definitive expenses regarding Canary Wharf, which is a big part of this, we are comfortable with the title range that we gave earlier. We think Canary Wharf will primarily take the first three quarters of this year as we said. During that time we will have the $10 million double rent expenditure. That will go through the whole year. As we said, we expect that costs will be lower in Canary Wharf. So, that's the same reason for the CapEx rate. We would expect that the CapEx rate after we get down to Canary Wharf would come down to something more typically like $60 to $70 million. But we are having additional capitalized costs on our systems projects and so you'll see a little bit of an increase from the previous years in the normalized run rate. John Neff - William Blair: Thank you.

Next, we'll move to, Edward Atorino at Benchmark Capital. Edward Atorino - Benchmark Capital: Hi. Good morning. Could you discuss the decline in interest and non-operating income from $19.8 million to $1.1 million?

Sure. I'm going to ask Linda to do that, Ed.

Ed, we realize there is some tricky ins and outs in this line for the quarter, but let us just say that the biggest components here are that we borrowed some money and obviously the expense on those borrowings has moved up a bit. So, we have an increase there but that has been pretty well offset by FX gain of about $15 million in the fourth quarter. Edward Atorino - Benchmark Capital: Excuse me, did you say 15?

Yes, 15. Edward Atorino - Benchmark Capital: 15. Thank you very much.

And that's mainly the weakening of the British pound and the re-strengthening of the dollar has helped us there. Edward Atorino - Benchmark Capital: And is there a normal level one can project for '09 or is that just bounce around randomly?

Ed, if we could predict FX rates exactly, we'd probably do something else, but I think on that you want to look at the forward curves and maybe your guess is as good as ours. Edward Atorino - Benchmark Capital: So, if we take out FX, may we use that as a run rate?

No. We built the guidance around foreign exchange at current rates. And so, I think that's the best thing for you to go back and work with, Ed.

I think you can look at the interest expenses being pretty much a reasonable run rate going forward. Edward Atorino - Benchmark Capital: So, then interest would be the bulk of the $60 million and change.

Yes, absolutely correct. Edward Atorino - Benchmark Capital: I can add those two. Thanks.

Good.

We'll go next to Catriona Fallon at Citi. Catriona Fallon - Citigroup: Yes. Hi, thanks for taking the call. A lot of my questions have been answered, but so the guidance for D&A is now $60 to $70 million, what does that mean as far as how much of Q4's depreciation was one-time in nature?

In Q4, the biggest components of the non-comp expense line were professional fees which were up a bit, rent which was off a bit and then depreciation and amortization which ran about three times what we had last year in Q4. So, I would say that about half of the approximately $30 million of D&A Catriona would be one time if I have to say roughly. Catriona Fallon - Citigroup: Okay, great and then thank you very much for giving us the operating margins for Analytics versus Investor Services. Can you give us a sense for what we might see if revenues actually exceed your current projections that's kind of down low single digits? So what's really the incremental margin if we see upside on issuance?

I can't give you a number Catriona, not because I have a number that I don't want to give, but I don't have a number because it really depends on the mix, and if we see recovery coming from areas where again, we have installed resources in the form of analysts and analytic team, we would have more of a benefit than if it comes in areas of, such as securitization or growth in certain international markets where we may not have full analytics teams built out. So, it's going to depend on the mix. Obviously, I think the margins would go up with increased top line activity, but the amount is unknown. Catriona Fallon - Citigroup: Right. And also, so essentially the guidance is that operating margins come down about 500 basis points next year. How much of that do you think is due to the fact that the Analytics business being a 27% margin business is now becoming a larger portion of the total revenue for the company?

Yeah. That is definitely one of the components. The fact that we expect some modest decline in overall revenue is another component. And we do have some expenses associated with regulatory compliance both in the US and in Europe, and then technology project investments that are adding to the expense side of the equation in addition to Moody's Analytics and whatever happens on the top line. Catriona Fallon - Citigroup: Perfect. That's all I had. Thank you.

Thank you.

We'll go next to Craig Huber of Barclays Capital. Craig Huber - Barclays Capital: Yes, I have a follow-up question on Fermat. Sorry, I need to go back this again. You said that Fermat a year ago obviously wasn't a number just $13.7 million of revenues in software and $19.1 million this year. If you assume the underlying software is down say roughly 10% just to round down the $12 million that spread versus the $19 million you've reported this year is obviously $7 million maybe add roughly another million for the eight days or so you didn't have it in the quarter. That put the revenues are roughly $8 million for Fermat in the quarter. Am I thinking that even remotely closed and that seems like a very low number roughly $30 to $32 million annualized or is there some seasonal about the business?

You are in the right code but you're getting into some complexities here with revenue recognition and the way that this business is coming on and as John Neff had discussed with Mark, this is a subscription business and a license business. So, you can't use that result as a way to extrapolate very accurately Craig. And I'm sorry if that's a frustration for you, but once we get a run rate that we're comfortable with. We promise we will let you know what the software run rate should be maybe hopefully as soon as in the next quarter call. Craig Huber - Barclays Capital: I appreciate that. You did say, I thought you said $70 million thinking for maybe 2010. Is that correct?

Yes, we had put out that number in fact, I believe when we acquired the business. Craig Huber - Barclays Capital: No change in that thought there?

No. Craig Huber - Barclays Capital: No change in anything on the expense front that investors should be aware?

No, that’s correct.

No. Craig Huber - Barclays Capital: Okay. Very good, thank you.

Thanks Craig.

And that does conclude our question and answer session. Mr. McDaniel., I'll turn the conference back over to you for any closing remarks.

Okay. Thank you very much. This concludes the earnings call and I'd like to remind everyone that a replay of this call is available after 4:00 P.M. today on our website. So, thank you all again for joining us.

And that does conclude today's conference. Again thank you for your participation.