avatar Msci Inc. Finance, Insurance, And Real Estate

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    2 0 2 0 A N N U A L R E P O R T


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    About MSCI Inc. MSCI is a leading provider of critical decision support tools and services for the global investment community. With over 50 years of expertise in research, data and technology, we power better investment decisions by enabling clients to understand and analyze key drivers of risk and return and confidently build more effective portfolios. We create industry-leading research-enhanced solutions that clients use to gain insight into and improve transparency across the investment process. To learn more, please visit www.msci.com.


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    Financial highlights YEAR ENDED IN THOUSANDS, EXCEPT PER SHARE DATA 2020 2019 2018 2017 2016 Operating revenues $1,695,390 $1,557,796 $1,433,984 $1,274,172 $1,150,669 Operating expenses $810,626 $802,095 $747,086 $694,402 $662,565 Operating income $884,764 $755,701 $686,898 $579,770 $488,104 Net income $601,822 $563,648 $507,885 $303,972 $260,855 Earnings per share: Earnings per basic common share $7.19 $6.66 $5.83 $3.36 $2.72 Earnings per diluted common share $7.12 $6.59 $5.66 $3.31 $2.70 Cash and cash equivalents $1,300,521 $1,506,567 $904,176 $889,502 $791,834 Long-term debt, net of current maturities $3,366,777 $3,071,926 $2,575,502 $2,078,093 $2,075,201 Total shareholders’ equity (deficit) $(443,234) $(76,714) $(166,494) $401,012 $317,605


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    Selected quarterly financial data (unaudited) IN THOUSANDS, EXCEPT PER SHARE DATA Q1 Q2 Q3 Q4 Fiscal year Operating revenues 2020 $416,780 $409,616 $425,333 $443,661 $1,695,390 2019 $371,381 $385,558 $394,251 $406,606 $1,557,796 Operating expenses 2020 $208,896 $194,441 $197,713 $209,576 $810,626 2019 $208,706 $193,180 $193,032 $207,177 $802,095 Operating income 2020 $207,884 $215,175 $227,620 $234,085 $884,764 2019 $162,675 $192,378 $201,219 $199,429 $755,701 Net income 2020 $148,125 $115,123 $182,358 $156,216 $601,822 2019 $178,192 $125,690 $136,983 $122,783 $563,648 Earnings per basic common share 2020 $1.75 $1.38 $2.18 $1.89 $7.19 2019 $2.11 $1.48 $1.62 $1.45 $6.66 Earnings per diluted common share 2020 $1.73 $1.36 $2.16 $1.87 $7.12 2019 $2.08 $1.47 $1.60 $1.44 $6.59 Headcount December 31, 2020 3,633 December 31, 2019 3,396 December 31, 2018 3,112


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    Dear fellow shareholders, MSCI’s mission is to power better investments for a better world by helping global investors build better portfolios. For decades, we have aimed to bring greater transparency and understanding throughout the investment process. We believe that the solutions we provide facilitate more efficient pricing of assets, better capital allocation, and more meaningful and sustainable economic growth, which drives thriving and prosperous societies around the world. Through our strategic focus, differentiated capabilities, and mission-critical solutions, MSCI is uniquely positioned to lead the investment industry and enable our clients to address this major shift and the other transformational revolutions taking place in the investment world. For decades, we have worked to prepare clients for, and help bring about the day, when sustainable investing becomes mainstream — and that day has arrived. In January 2020, we published the MSCI Principles of Sustainable Investing, which urges investors to incorporate ESG integration as a core component throughout all aspects of the investment process in order to identify opportunities, manage risks and achieve long-term, sustainable performance. In 2020, we also enhanced our existing ESG-integration tools, such Henry A. Fernandez as our ESG Ratings and ESG and Climate indexes, and introduced an innovative Chairman and Chief Executive Officer Climate Value-at-Risk model to represent climate risk in monetary terms, in order to support clients’ critical investment decisions. We remain committed to expanding our support for clients as the world transitions to a net-zero carbon emissions economy by equipping them with the necessary data, tools, and solutions to meet their objectives. In addition, to lead by example, we also “walked the walk” in 2020 through our own corporate responsibility activities, including the following steps: 1. Established defined targets. We announced our plan to reduce our Scope 1 and Scope 2 carbon emissions by 50% by 2035 and our Scope 3 emissions by 20% by 2035, which is aligned with the objectives of the Paris Agreement (using 2019 as the base level). 2. Enhanced transparency. We published our first Task Force on Climate-related Financial Disclosures (“TCFD”) Report, providing greater transparency around MSCI’s approach to sustainability and our long-term financial risks and opportunities related to climate change. 3. Expanded actions to reduce our impact on the environment. We increased our use of renewables, reduced commuting and business travel, and established a governance structure to monitor and address climate risks and opportunities. Future-Focused Business Strategy Our business strategy continues to be centered on delivering research- and technology-driven solutions for investors around the world and creating shareholder value. MSCI’s research-based tools and solutions, high-quality data and cutting-edge technology help investors achieve investment differentiation, build sustainable portfolios and improve operational efficiency. We continue to build a resilient and growing franchise by enhancing our winning strategy and expanding into new areas of potential growth. We do this across three dimensions: serving more client segments, expanding our products and services to meet those clients’ needs, and deepening our capabilities to ensure we are prepared to meet those needs into the future.


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    Increasing the Client Segments We Serve When we talk about putting our traditional clients — defined-benefit pension and sovereign wealth funds, equity and hedge-fund managers, banks and derivatives exchanges — at the center of everything we do, that means deeply understanding our clients’ needs and providing solutions for their investment problems. This spirit of close partnership helps build strong, long-term, and mutually beneficial relationships, helping ensure MSCI’s future growth. As a result, MSCI’s products and services aim to achieve three objectives. First, we enable clients to design investment strategies, using our portfolio-construction tools and indexes. Second, we enable clients to manage those strategies with risk and performance models that provide insight at the security and portfolio level, and at the total plan or firm level via asset-allocation models. Last, but not least, we enable them to evaluate their strategies and communicate results to their clients using benchmarks, performance-attribution applications and a range of risk analytics and reporting. We have applied this same philosophy as we expand our footprint to cover new segments, including wealth managers, insurance companies, and corporate clients. Our strategic focus on wealth management centers on financial advisors’ focus on direct indexing, portfolio construction, risk and performance management, and ESG and Climate. We are also quite encouraged by our work within the insurance industry, specifically the opportunity to help these firms with their fixed-income investments. Corporate clients represent another new opportunity for MSCI, as issuers seek the tools needed to better understand the impact and importance of ESG Ratings. We are seeing early traction, with over 80 corporate clients for our ESG and Climate offerings so far. We recently launched an interactive industry ESG materiality map on MSCI.com to help these clients better understand how different ESG risk exposures affect their ratings. More broadly, equity and bond issuers and their advisers are leveraging our ESG Ratings universe for use cases ranging from benchmarking to climate modeling. This is a vast market with significant growth opportunities. Our goal is to be the leading one-stop provider of the mission-critical tools investors need for every important investment decision. We believe we can provide a wide range of solutions for the providers and users of capital, as well as financial intermediaries, an area where we have deepened our relationships with derivative exchanges, banks, and broker-dealers. Expanding Products and Services To meet our goals, we are continuing to work toward increasing our competitive advantage within existing solutions, including equity indexes and equity and multi-asset-class analytics. The ESG and Climate segment, in particular, represents a fast-growing opportunity, both within equities and fixed income, as we develop new index and analytics solutions. These include a growing suite of climate tools as well as our tools aligned with the U.N. Sustainable Development Goals. And we continue to enhance our core real estate offering, including incorporation of our Climate Value-at-Risk model into this asset class. In fixed income, we are developing new solutions, including fixed-income indexes and analytics that add deeper insight into this asset class to support bond investors. We are also mapping our ESG Ratings to bank loans, expanding ESG Ratings coverage of fixed-income securities, and enhancing fixed-income factor content for our risk and performance analytics.


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    Additionally, we are aggressively expanding our solutions to help clients who build multi-asset-class portfolios. To do this, they need a better understanding of private assets and how they can be integrated into portfolios. Doing so depends on new methods and tools that help investors better understand these markets, the characteristics of the investments, asset valuations, and the impact of leverage, cash flow, and liquidity. Building on our experience providing industry-leading tools for public asset classes, combined with our equity ownership and strategic relationship with private-capital data specialist The Burgiss Group, LLC (“Burgiss”), we will foster greater data transparency and superior analytics for clients. Deepening Capabilities All our products benefit from MSCI’s embrace of advanced technology in combination with superior data and sophisticated models to build scale and efficiency in the investment process. We continue to build out our critical capabilities internally, especially around data and technology. In addition to optimizing our internal investment spend, we opportunistically pursue mergers, partnerships, and acquisitions, with an emphasis on partnerships as a way to accelerate growth in key strategic areas and generate returns well above our cost of capital. These include partnerships with clients, vendors, distributors, academic institutions, and data and technology providers, such as Burgiss and Microsoft Corp. The partnership with Microsoft, for example, has accelerated the transition of our product suite to the cloud. It has also allowed us to make great progress with our strategy for application programming interfaces (“APIs”), which includes building accessibility to our ESG Ratings and underlying data through APIs and other state-of-the-art content-delivery platforms. We are also excited about expanding our capacity to enable clients to customize and personalize our offerings on a large scale through enhanced user experiences that allow easier access to MSCI content and capabilities across products. To this end, MSCI recently announced four Investment Solutions as a Service for Index, ESG, Data Management, and Analytics. Building on our experience providing industry-leading tools for public asset classes, combined with our equity ownership and strategic relationship with private-capital data specialist Burgiss, we will foster greater data transparency and superior analytics for clients.


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    Strong Financial Results Demonstrate Our Franchise Resilience 2020 was a very strong year for MSCI, even in the face of a global pandemic that led to economic turmoil and significant changes in how we and our clients work. We delivered mission-critical tools to help clients navigate uncertainty and respond to industry transformations resulting from the unprecedented environment. We executed against our strategic priorities, staying incredibly productive and engaged as a team. This relentless focus on execution, as well as our disciplined approach to investments and our strategic capital allocation, underpinned our ability to deliver value to our shareholders. During 2020, we achieved total revenue growth of nearly 9% and total recurring 1 Please refer to page 39 of our 2020 Form 10-K for a definition of “Run Rate.” subscription run rate 1 growth of nearly 11%, net income growth of nearly 7%, 2 Adjusted EBITDA, Adjusted EPS, and free cash flow are adjusted EBITDA 2 growth of over 14%, diluted EPS growth of 8%, and adjusted non-GAAP measures. Please refer to “Notes Regarding EPS2 growth of nearly 22%. Importantly, we generated operating cash of $811 the Use of Non-GAAP Financial Measures” at the end of this shareholder letter for definitions of Adjusted million and free cash flow 2 of $760 million, up nearly 16% from 2019. We returned EBITDA and Adjusted EPS and reconciliations to the nearly $975 million in capital to our shareholders in 2020, including opportunistic comparable GAAP measures. repurchases of our shares at an average price of $291.76 and quarterly dividends. Following closely on the incredible momentum we built in 2020, MSCI has never been better positioned to take advantage of accelerating secular and disruptive investment trends, which will allow us to deliver sustained and significant top- line growth. We remain deeply committed to investing responsibly in “triple crown” opportunities (i.e., high rates of return, fast payback, and large valuation multiples) to leverage and build on the established scale of our business and continue to drive long-term value for shareholders. Looking more specifically at our business segments: Index. We recorded another year of solid revenue growth from recurring subscriptions — more than 9% for the full year — which reflected solid growth in market-cap-weighted index products, as well as strong growth in factor, ESG and Climate, and custom index products. At the end of 2020, assets under management in equity ETFs linked to MSCI indexes reached record levels, surpassing $1 trillion. Total asset-based fees for 2020 grew nearly 11% to almost $400 million. Innovation within our ESG and Climate and factor indexes has been a key differentiator of our products. Analytics. Our Analytics segment’s recurring subscriptions revenue growth was 3.4% for the full year, primarily reflecting growth in multi-asset-class products. We We delivered continue to drive growth through integration of our models and analytical engines mission-critical within clients’ workflows. We additionally see ongoing benefit from the integration of our models into our index, ESG and Climate, and private-asset offerings, tools to help enabling product innovation across MSCI. clients navigate All Other, including ESG and Real Estate. Combined revenues from our ESG uncertainty and and Real Estate segments grew 18% for the full year. ESG revenues grew nearly 23%, with strong contributions from ESG Ratings, Climate, and screening respond to industry products. Our Real Estate revenues grew 9%, reflecting progress scaling of our transformations Enterprise Analytics and Global Intel products. Beginning in the first quarter of 2021, we will be reporting MSCI’s ESG business as a stand-alone reporting resulting from the segment, which will be named ESG and Climate. Our All Other segment will consist of our Private Assets business, including Real Estate and our equity method unprecedented investment in Burgiss. This incremental transparency will enhance awareness and environment. understanding of these important growth areas for MSCI.


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    The Importance of Culture Climate change is clearly the largest long-term issue facing the world today. But the COVID-19 pandemic stole the world’s focus early in 2020, with its dramatic implications for growth, markets and how business is conducted. Like many of you, MSCI and our clients had to quickly adapt to a virtual world of work. This sudden transformation required a fresh mindset and drew on the innovative, entrepreneurial spirit of our global workforce, as well as a commitment to keeping clients at the center of everything we do. We have become more productive and efficient during the pandemic and have delivered value to shareholders by taking advantage of our existing corporate infrastructure and new technology. We are actively looking for ways to incorporate digital experiences into the entire sales and engagement life cycle through transformations led by our Client Coverage and Technology teams. A high-quality client and user experience will further enhance MSCI’s competitive advantage long after the pandemic is behind us. Our corporate culture was critical to getting us through this challenging period and building for the years ahead. We embrace a culture where all individuals are respected and encouraged to bring their authentic selves to work. Our Corporate Responsibility initiatives capture our values and actions, laying out our commitment to diversity, equality, and inclusion. We are committed to fighting against racial injustice in the workplace, as well as helping clients integrate these considerations into their investment process. Focusing on diversity, equality and inclusion in the workplace is not only the right thing to do, we believe it also accelerates innovation and increases engagement within our company and with clients, ultimately driving company performance and value for shareholders. I would also like to acknowledge a key contributor to MSCI’s culture and valued member of our Board of Directors since 2008, Benjamin F. duPont, who has decided not to stand for re-election in 2021. Ben joined the Board shortly after MSCI’s IPO, and during his 13-year tenure, the Board and management benefitted from his expertise and counsel, especially in guiding the focus of our business strategy on technology-driven solutions, and in fostering the “owner-operator” and entrepreneurial mindset that has been central to MSCI’s growth. We thank Ben for his service and commitment to many of the initiatives that have contributed to MSCI’s current success and wish him well in his future endeavors.


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    Reaffirming Our Strategic Commitment A high-quality client Many of the challenges we navigated during 2020 will remain with us in 2021 and beyond, but we are confident in our ability to successfully execute on our and user experience strategy by delivering innovative solutions to a loyal client base, leveraging our will further enhance first-mover advantage and industry leadership on ESG and Climate and other key areas, continuing our disciplined capital allocation, and supercharging our MSCI’s competitive entrepreneurial mindset and owner-operator culture. advantage long after In short, we remain committed to a relentless focus on creating value for all the pandemic is our stakeholders. behind us. For clients, mission-critical tools that enable investment differentiation and operating efficiency and scale. For employees, unparalleled career opportunities, a unique, innovative, and empowered culture, and a value system that believes strongly that diversity, equality, and inclusion drive better decisions and better outcomes. For communities, responsible and dedicated engagement in their affairs and a commitment to corporate responsibility and good stewardship of our environment. For shareholders, robust governance that aligns our board, management, and shareholders, disciplined stewardship of their capital, and a relentless focus on compounding returns over time. MSCI has a long track record of success in creating value. And we have only just begun. Sincerely yours, Henry A. Fernandez Chairman and Chief Executive Officer


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    Notes Regarding the Use of Non-GAAP Financial Measures MSCI has presented supplemental non-GAAP financial measures as part of this shareholder letter. Reconciliations are provided at the end of this shareholder letter that reconcile each non-GAAP financial measure with the most comparable GAAP measure. The non- GAAP financial measures presented in this shareholder letter should not be considered as alternative measures for the most directly comparable GAAP financial measures. The non- GAAP financial measures presented in this shareholder letter are used by management to monitor the financial performance of the business, inform business decision-making and forecast future results. “Adjusted EBITDA” is defined as net income before (1) provision for income taxes, (2) other expense (income), net, (3) depreciation and amortization of property, equipment and leasehold improvements, (4) amortization of intangible assets and, at times, (5) certain other transactions or adjustments, including the impact related to the vesting of the multi- year restricted stock units subject to performance payout adjustments granted in 2016 (the “Multi-Year PSUs”). “Adjusted net income” and “adjusted EPS” are defined as net income and diluted EPS, respectively, before the after-tax impact of the amortization of acquired intangible assets, including the amortization of the basis difference between the cost of the equity method investment and MSCI’s share of the net assets of the investee at historical carrying value, the impact of divestitures, the impact of adjustments for the Tax Cuts and Jobs Act that was enacted on December 22, 2017 (“Tax Reform”), except for certain amounts associated with active tax planning implemented as a result of Tax Reform, and, at times, certain other transactions or adjustments, including the impact related to the vesting of the Multi-Year PSUs and costs associated with debt extinguishment. “Capex” is defined as capital expenditures plus capitalized software development costs. “Free cash flow” is defined as net cash provided by operating activities, less Capex. We believe adjusted EBITDA is a meaningful measure of the operating performance of MSCI because it adjusts for significant one-time, unusual or non-recurring items as well as eliminates the accounting effects of certain capital spending and acquisitions that do not directly affect what management considers to be our ongoing operating performance in the period. We believe adjusted net income and adjusted EPS are meaningful measures of the performance of MSCI because they adjust for the after-tax impact of significant one-time, unusual or non-recurring items as well as eliminate the impact of any transactions that do not directly affect what management considers to be our ongoing operating performance in the period. We also exclude the after-tax impact of the amortization of acquired intangible assets and amortization of the basis difference between the cost of the equity method investment and MSCI’s share of the net assets of the investee at historical carrying value, as these non-cash amounts are significantly impacted by the timing and size of each acquisition and therefore not meaningful to the ongoing operating performance in the period. We believe that free cash flow is useful to investors because it relates the operating cash flow of MSCI to the capital that is spent to continue and improve business operations, such as investment in MSCI’s existing products. Further, free cash flow indicates our ability to strengthen MSCI’s balance sheet, repay our debt obligations, pay cash dividends and repurchase shares of our common stock. We believe that the non-GAAP financial measures presented in this shareholder letter facilitate meaningful period-to-period comparisons and provide a baseline for the evaluation of future results. Adjusted EBITDA, adjusted net income, adjusted EPS, Capex and free cash flow are not defined in the same manner by all companies and may not be comparable to similarly-titled non-GAAP financial measures of other companies. These measures can differ significantly from company to company depending on, among other things, long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. Accordingly, the Company’s computation of these measures may not be comparable to similarly-titled measures computed by other companies.


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    Reconciliation of operating revenue growth to organic operating revenue growth (unaudited) COMPARISON OF THE YEARS ENDED DECEMBER 31, 2020 AND 2019 Recurring Asset-based Non-recurring Total subscription fees revenues Change Change Change Change Index Percentage Percentage Percentage Percentage Operating revenue growth 10.4% 9.3% 10.5% 29.6% Impact of acquisitions and divestitures -% -% -% -% Impact of foreign currency exchange rate fluctuations (0.1%) -% (0.1%) (0.2%) Organic operating revenue growth 10.3% 9.3% 10.4% 29.4% Analytics Operating revenue growth 3.4% 4.1% -% (29.5%) Impact of acquisitions and divestitures -% —% -% -% Impact of foreign currency exchange rate fluctuations (0.1%) (0.1)% -% (0.3%) Organic operating revenue growth 3.3% 4.0% -% (29.8%) All Other Operating revenue growth 18.0% 18.1% -% 14.7% Impact of acquisitions and divestitures (1.0%) (0.7%) -% (11.9%) Impact of foreign currency exchange rate fluctuations (0.2%) (0.3%) -% (0.2%) Organic operating revenue growth 16.8% 17.1% -% 2.6% Consolidated Operating revenue growth 8.8% 8.2% 10.5% 13.4% Impact of acquisitions and divestitures (0.1%) (0.1%) -% (0.9%) Impact of foreign currency exchange rate fluctuations —% (0.1%) (0.1%) (0.2%) Organic operating revenue growth 8.7% 8.0% 10.4% 12.3%


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    Reconciliation of adjusted EBITDA to Net income (unaudited) YEAR ENDED Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 IN THOUSANDS 2020 2019 2018 2017 2016 Index adjusted EBITDA $766,493 $670,188 $607,853 $522,241 $431,478 Analytics adjusted EBITDA $172,924 $152,113 $143,645 $125,624 $128,507 All other adjusted EBITDA $32,093 $28,198 $20,935 $11,892 $9,472 Consolidated adjusted EBITDA $971,510 $850,499 $772,433 $659,757 $569,457 Multi-year PSU payroll tax expense $- $15,389 $- $- $- Amortization of intangible assets $56,941 $49,410 $54,189 $44,547 $47,033 Depreciation and amortization of property, equipment and leasehold improvements $29,805 $29,999 $31,346 $35,440 $34,320 Operating income $884,764 $755,701 $686,898 $579,770 $488,104 Other expense (income), Net $198,539 $152,383 $57,002 $112,871 $102,166 Provision for income taxes $84,403 $39,670 $122,011 $162,927 $125,083 Net income $601,822 $563,648 $507,885 $303,972 $260,855 Adjusted EBITDA margin % 57.3% 54.6% 53.9% 51.8% 49.5% Operating margin % 52.2% 48.5% 47.9% 45.5% 42.4%


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    Reconciliation of Net income and diluted EPS to adjusted Net income and adjusted EPS (unaudited) YEAR ENDED Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 IN THOUSANDS, EXCEPT PER SHARE DATA 2020 2019 2018 2017 2016 Net income $601,822 $563,648 $507,885 $303,972 $260,855 Plus: Amortization of acquired intangible assets and equity method investment basis difference $37,413 $34,773 $43,981 $39,157 $47,033 Plus: Multi-year PSU payroll tax expense $- $15,389 $- $- $- Less: Discrete excess tax benefit related to multi-year PSU vesting $- ($66,581) $- $- $- Plus: Debt extinguishment costs associated with the 2024 and 2025 senior notes redemptions $44,930 $16,794 $- $- $- Less: Gain on sale of Alacra (not tax effected) $- $- $- ($771) $- Less: Gain on sale of FEA (not tax effected) $- $- ($10,646) $- $- Less: Gain on sale of InvestorForce $- $- ($46,595) $- $- Less: Valuation allowance released related to InvestorForce divestiture $- $- ($7,758) $- $- Less: Tax Reform adjustments ($6,256) $- ($8,272) $34,500 $- Less: Income tax effect ($16,490) ($13,226) $1,678 ($10,772) ($15,243) Adjusted Net income $661,419 $550,797 $480,273 $366,086 $292,645 Diluted EPS $7.12 $6.59 $5.66 $3.31 $2.70 Plus: Amortization of acquired intangible assets and equity method investment basis difference $0.44 $0.41 $0.49 $0.43 $0.49 Plus: Multi-year PSU payroll tax expense $- $0.18 $- $- $- Less: Discrete excess tax benefit related to multi-year PSU vesting $- ($0.78) $- $- $- Plus: Debt extinguishment costs associated with the 2024 and 2025 senior notes redemptions $0.53 $0.20 $- $- $- Less: Gain on sale of Alacra (not tax effected) $- $- $- ($0.01) $- Less: Gain on sale of FEA (not tax effected) $- $- ($0.12) $- $- Less: Gain on sale of InvestorForce $- $- ($0.52) $- $- Less: Valuation Allowance released related to InvestorForce divestiture $- $- ($0.09) $- $- Plus: Tax reform adjustments ($0.07) $- ($0.09) $0.38 $- Less: Income tax effect ($0.19) ($0.16) $0.02 ($0.13) ($0.16) Adjusted EPS $7.83 $6.44 $5.35 $3.98 $3.03


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    Reconciliation of Net cash provided by operating activities to free cash flow (unaudited) YEAR ENDED Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 IN THOUSANDS 2020 2019 2018 2017 2016 Net cash provided by operating activities $811,109 $709,523 $612,762 $404,158 $442,363 Capital expenditures (21,826) (29,116) (30,257) (33,177) (32,284) Capitalized software development costs (29,149) (24,654) (18,704) (15,640) (10,344) Capex (50,975) (53,770) (48,961) (48,817) (42,628) Free cash flow $760,134 $655,753 $563,801 $355,341 $399,735


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    Offices AMERICAS San Francisco Frankfurt Manila 101 California Street An der Welle 5 29th Floor, Zuellig Building New York (Global Headquarters) Suite 910 D-60322 Frankfurt am Main Makati Avenue corner 7 World Trade Center San Francisco, CA 94111 Germany Paseo de Roxas 250 Greenwich Street, 49th Floor United States Makati City 1226 New York, NY 10007 Geneva Philippines United States São Paulo 3 Place des Bergues, Oscar Freire 585 CH 1201 Geneva Mumbai Ann Arbor Rua Oscar Freire 585 Switzerland 12th Floor & 13th Floor Nesco 912 N. Main St., Suite 200 6th fl Suite 114 IT Building 3 Ann Arbor, MI 48104 Milan Nesco IT Park Jardim Paulista United States Via Dante, 9 Nesco Complex São Paulo, SP 20123 Milan Goregaon (East) Berkeley 01426-001 Italy Mumbai 400063 2100 Milvia Street Brazil Suite 200 Paris India Toronto Berkeley, CA 94704 Washington Plaza Pune 1 First Canadian Place United States 29 Rue de Berri 8th Floor, Panchshil Futura 100 King Street West 2nd Floor Magarpatta Road Boston Suite 4540 75008 Paris Kirtane Baugh 101 Federal Street Toronto, Ontario M5B 1B1 France Magarpatta Suite 2105 Canada Boston, MA 02110 Potsdam Hadapsar EUROPE, MIDDLE EAST, Pune, MH 411028 United States Unicorn Potsdam, AND AFRICA India Kutschstallhof am Chicago London Neue Markt 9e, 311 South Wacker Drive Seoul Ninth Floor 14467 Potsdam 17F, Tower 1 Gran Seoul Suite 1600 Ten Bishops Square, Spitalfields Germany Chicago, IL 60606 33 Jong-ro, Jongno-gu London E1 6EG Stockholm Seoul 03159 United States United Kingdom Regus Central, Korea Gaithersburg Amsterdam Master Samuelsgatan 60 9711 Washingtonian Boulevard Shanghai Keizersgracht 62 SE-111 21, Stockholm Suite D, 16/F, Mirae Asset Tower Suite 550 1015 CS, Amsterdam Sweden Gaithersburg, MD 20878 166 Lu Jia Zui Ring Road, The Netherlands Zurich Shanghai, 200120 United States Barcelona Prime Tower PRC Monterrey Regus-Barcelona, Hardstrasse 201 Equus Torre Norte Singapore Plaza Catalunya, Triangle Building 8005 Zürich One Raffles Quay Av. Ricardo Margain #444, 08002, Barcelona Switzerland Piso PH #09-04, North Tower Spain ASIA PACIFIC Singapore 048583 Col. Valle del Campestre San Pedro Garza García, NL Budapest Sydney Hong Kong C.P. 66265 Monterrey Kassák Lajos utca 19-25 Suite 1, Level 1 Suite 1201 - 1203 Mexico 1134 Budapest 56 Pitt Street 12th Floor, Three Pacific Place Hungary Sydney, NSW 2000 Norman 1 Queen’s Road East Three Partners Place Cape Town Hong Kong Australia 201 David L. Boren Boulevard Spaces Sunclare Taipei Beijing Suite 300 21 Dreyer Street Room 1176, 11/F Excel Centre Norman, OK 73072 Claremont Walsin Xinyi Building Suite 1101 United States Western Cape No. 1, Songzhi Road No. 6 Wudinghou Street Cape Town 7708 Xinyi District Taipei Portland Xicheng District South Africa 11047 63 Federal Street Beijing 100033 Portland, ME 04101 Dubai PRC Taiwan United States Al Fattan Currency House Tokyo Office 110, Level 1, Tower 1 Tokyo Sankei Building 17F DIFC 1-7-2 Otemachi, Chiyoda-ku PO Box 506 624 Tokyo 100-0004 Dubai, UAE Japan


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    Corporate information BOARD OF DIRECTORS EXECUTIVE COMMITTEE ANNUAL MEETING Henry A. Fernandez Henry A. Fernandez(a) The annual meeting of the shareholders Chairman and CEO, MSCI Inc. Chairman and CEO of MSCI Inc. will be held virtually via the internet at: Robert G. Ashe(1),(4),(5) C.D. Baer Pettit(a) www.virtualshareholdermeeting.com/ Former General Manager, President and Chief Operating Officer MSCI2021 Business Analytics, IBM Corp Andrew C. Wiechmann(a) on April 27, 2021 at 2:30 PM (EDT) (Formerly CEO of Cognos Inc.) Chief Financial Officer REGISTRAR AND TRANSFER AGENT Benjamin F. duPont(2),(3),(6) Jeremy Baskin Broadridge Corporate Issuer Solutions Co-Founder and Partner, Head of Client Coverage—Americas MSCI Inc. Chartline Capital Partners Remy Briand c/o Broadridge Corporate Wayne Edmunds(1),(2) Issuer Solutions Head of ESG Former Interim Group CEO, BBA Aviation, P.O. Box 1342 and Former CEO, Invensys plc Scott A. Crum(a) Brentwood, NY 11717 Chief Human Resources Officer Catherine R. Kinney(3) T: +1 877 830 4936 Former President, Robert J. Gutowski(a) (inside the U.S. & Canada) New York Stock Exchange General Counsel T: +1 720 378 5591 Jacques P. Perold(3),(4) Axel Kilian (outside the U.S. & Canada) Former President, Fidelity Management Head of Client Coverage-EMEA and Research Company W: www.shareholder.broadridge.com Jorge Mina E: shareholder@broadridge.com Sandy C. Rattray(1),(4) Head of Analytics Chief Investment Officer, Man Group INDEPENDENT AUDITOR Alvise Munari PricewaterhouseCoopers LLP Linda H. Riefler(1),(2) Global Head of Client Coverage New York, NY Former Chairman of Global Research and Chief Talent Officer, Morgan Stanley Kazuya Nagasawa STOCK SYMBOL Head of Client Coverage-APAC (2),(4) Marcus L. Smith MSCI Inc.’s stock is traded on the New York Former Director of Equity (Canada) Diana H. Tidd Stock Exchange under the symbol MSCI. and Portfolio Manager, Head of Index and MFS Investment Management Chief Responsibility Officer FORM 10-K AND OTHER REPORTS Paula Volent(3),(4) Jigar Thakkar A copy of the MSCI Inc. Form 10-K, as Senior Vice President for Investments and Chief Technology Officer filed with the Securities and Exchange Chief Investment Officer, Bowdoin College and Head of Engineering Commission, is included with this Annual Report and is also available without (1) Member of the Audit Committee Peter J. Zangari charge to shareholders upon written (2) Member of the Compensation & Global Head of Research request. Requests should be directed to Talent Management Committee and Product Development Investor Relations at the corporate address (3) Member of the Nominating and (a) or by email. Designated an Executive Officer for SEC Corporate Governance Committee This Annual Report, as well as Forms 10-K, reporting purposes (4) Member of the Strategy and Finance 10-Q and 8-K and earnings and other news Committee releases, can be viewed and printed at (5) Lead Director http://ir.msci.com. (6) Not standing for re-election at 2021 annual meeting of shareholders CORPORATE ADDRESS 7 World Trade Center 250 Greenwich Street, 49th FL New York, NY 10007 T: +1 212 804 3900 F: +1 212 804 2919 W: www.msci.com E: investor.relations@msci.com


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    )25:$5'/22.,1*67$7(0(176 We have included in this Annual Report on Form 10-K, and from time to time may make in our public filings, press releases or other public statements, certain statements that constitute forward-looking statements. In addition, our management may make forward-looking statements to analysts, investors, representatives of the media and others. These forward-looking statements are not historical facts and represent only MSCI’s beliefs regarding future events, many of which, by their nature, are inherently uncertain and beyond our control. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” or the negative of these terms or other comparable terminology. Statements concerning our financial position, business strategy and plans or objectives for future operations are forward-looking statements. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control and that could materially affect our actual results, levels of activity, performance or achievements. Such risks and uncertainties include those set forth under “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K. The forward-looking statements in this report speak only as of the time they are made and do not necessarily reflect our outlook at any other point in time. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or for any other reason. Therefore, readers should carefully review the risk factors set forth in other reports or documents we file from time to time with the Securities and Exchange Commission (the “SEC”). 3$57, ,WHP %XVLQHVV 0LVVLRQ 06&,¶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³(7)V´ DQGRWKHULQGH[HGILQDQFLDOSURGXFWVDQGIDFLOLWDWHUHSRUWLQJWRVWDNHKROGHUV 2XUOHDGLQJUHVHDUFKHQKDQFHGSURGXFWVDQGVHUYLFHVLQFOXGHLQGH[HVSRUWIROLRFRQVWUXFWLRQDQGULVNN PDQDJHPHQWDQDO\WLFVHQYLURQPHQWDOVRFLDODQGJRYHUQDQFH ³(6*´ DQGFOLPDWHVROXWLRQVDQGUHDOHVWDWH EHQFKPDUNVUHWXUQDQDO\WLFVDQGPDUNHWLQVLJKWV7KURXJKRXULQWHJUDWHGIUDQFKLVHZHSURYLGHVROXWLRQVDFURVVRXUU SURGXFWVDQGVHUYLFHVWRVXSSRUWRXUFOLHQWV¶G\QDPLFDQGFRPSOH[QHHGV2XUFRQWHQWDQGFDSDELOLWLHVFDQEH DFFHVVHGE\RXUFOLHQWVWKURXJKPXOWLSOHFKDQQHOVDQGSODWIRUPV :HDUHIRFXVHGRQSURGXFWLQQRYDWLRQWRDGGUHVVWKHHYROYLQJQHHGVRIRXUFOLHQWVLQOLJKWRIFKDQJLQJ LQYHVWPHQWWUHQGVDQGDQLQFUHDVLQJO\FRPSOH[LQGXVWU\,QRUGHUWRPRVWHIIHFWLYHO\VHUYHRXUFOLHQWVZHDUH FRPPLWWHGWRGULYLQJDQLQWHJUDWHGVROXWLRQVEDVHGDSSURDFKDFKLHYLQJVHUYLFHH[FHOOHQFHHQKDQFLQJRXUU GLIIHUHQWLDWHGUHVHDUFKDQGFRQWHQWDQGGHOLYHULQJIOH[LEOHFXWWLQJHGJHWHFKQRORJ\DQGSODWIRUPV 


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    *HQHUDO5LVNV Our business performance might not be sufficient for us to meet the full-year financial guidance or long-term targets that we provide publicly. :HSURYLGHFHUWDLQIXOO\HDUILQDQFLDOJXLGDQFHDQGORQJWHUPWDUJHWVWRWKHSXEOLFEDVHGXSRQRXU DVVXPSWLRQVUHJDUGLQJRXUH[SHFWHGILQDQFLDOSHUIRUPDQFHWKDWPD\QRWDOZD\VSURYHWREHDFFXUDWHDQGPD\YDU\ IURPDFWXDOUHVXOWV,IZHIDLOWRPHHWWKHIXOO\HDUILQDQFLDOJXLGDQFHRUDFKLHYHWKHORQJWHUPWDUJHWVWKDWZH SURYLGHRULIZHILQGLWQHFHVVDU\WRUHYLVHVXFKJXLGDQFHRUWDUJHWVWKHPDUNHWYDOXHRIRXUFRPPRQVWRFNRURWKHU VHFXULWLHVFRXOGEHDGYHUVHO\DIIHFWHG Our growth and profitability may not continue at the same rate as we have experienced in the past for several reasons, including if our operating costs are higher than expected, which could have a material adverse effect on our business, financial condition or results of operations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e may be exposed to liabilities as a result of failure to comply with anti-corruption laws and any determination that we violated these laws could have a material adverse effect on our business. :HDUHVXEMHFWWRYDULRXVDQWLFRUUXSWLRQODZVWKDWSURKLELWLPSURSHUSD\PHQWVRUEHQHILWVRURIIHUVRI P SD\PHQWVRUEHQHILWVWRIRUHLJQJRYHUQPHQWVDQGWKHLURIILFLDOVDQGLQVRPHFDVHVWRHPSOR\HHVRIDEXVLQHVVIRU WKHSXUSRVHRIGLUHFWLQJREWDLQLQJRUUHWDLQLQJEXVLQHVV:HFRQGXFWEXVLQHVVLQFRXQWULHVDQGUHJLRQVWKDWDUHOHVV GHYHORSHGWKDQWKH86DQGLQVRPHFDVHVDUHJHQHUDOO\UHFRJQL]HGDVSRWHQWLDOO\PRUHFRUUXSWEXVLQHVV HQYLURQPHQWV2XUDFWLYLWLHVLQWKHVHFRXQWULHVFUHDWHWKHULVNRIXQDXWKRUL]HGSD\PHQWVRURIIHUVRISD\PHQWVE\ N RQHRIRXUHPSOR\HHVRUDJHQWVWKDWFRXOGEHLQYLRODWLRQRIYDULRXVDQWLFRUUXSWLRQODZVLQFOXGLQJWKH)RUHLJQ D &RUUXSW3UDFWLFHV$FWRIDVDPHQGHG WKH³)&3$´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f we are unable to successfully identify, execute and realize expected returns and synergies from acquisitions or strategic partnerships or investments, or if we experience integration, financing, or other risks resulting from our acquisitions or strategic partnerships or investments, our financial results may be materially adversely affected. $QHOHPHQWRIRXUJURZWKVWUDWHJ\LVJURZWKWKURXJKDFTXLVLWLRQVVWUDWHJLFSDUWQHUVKLSVDQGLQYHVWPHQWV 'HVSLWHRXUEHVWHIIRUWVWRFRQWLQXHSXUVXLQJVXFKWUDQVDFWLRQVWKHUHFDQEHQRDVVXUDQFHWKDWZHZLOOEHDEOHWR LGHQWLI\VXLWDEOHVWUDWHJLFSDUWQHUVLQYHVWPHQWRSSRUWXQLWLHV RUFDQGLGDWHVIRUVXFFHVVIXODFTXLVLWLRQDWDFFHSWDEOH WHUPV2XUDELOLW\WRDFKLHYHWKHH[SHFWHGUHWXUQVDQGV\QHUJLHVIURPRXUSDVWDQGIXWXUHDFTXLVLWLRQVVWUDWHJLF SDUWQHUVKLSVDQGLQYHVWPHQWVGHSHQGVLQSDUWXSRQRXUDELOLW\WRHIIHFWLYHO\OHYHUDJHRULQWHJUDWHWKHRIIHULQJV \ WHFKQRORJ\VDOHVDGPLQLVWUDWLYHIXQFWLRQVDQGSHUVRQQHORIWKHVHEXVLQHVVHV:HFDQQRWSURYLGHDVVXUDQFHWKDWZH ZLOOEHVXFFHVVIXOLQLQWHJUDWLQJDFTXLUHGEXVLQHVVHVWKDWRXUU DFTXLUHGEXVLQHVVHVZLOOSHUIRUPDWWKHOHYHOVZH DQWLFLSDWHRUWKDWRXUVWUDWHJLFSDUWQHUVKLSVDQGLQYHVWPHQWVZLOODGYDQFHWKHORQJWHUPJURZWKVWUDWHJ\RIRXU 


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    FRPSDQ\2XUSDVWDQGIXWXUHDFTXLVLWLRQVVWUDWHJLFSDUWQHUVKLSVDQGLQYHVWPHQWVPD\VXEMHFWXVWRXQDQWLFLSDWHG ULVNVRUOLDELOLWLHVLQFOXGLQJWKHSRWHQWLDOWRGLVUXSWRXURSHUDWLRQV$GGLWLRQDOO\VWUDWHJLFSDUWQHUVKLSVPD\LQFUHDVH RXUUHOLDQFHRQWKLUGSDUWLHVZKLFKPD\UHVXOWLQIXWXUHGLVUXSWLRQVLIWKRVHSDUWQHUVKLSVDUHXQVXFFHVVIXORU X GLVFRQWLQXHGRUWKHFRQWHQWRUOHYHORIVXSSRUWSURYLGHGE\VWUDWHJLFSDUWQHUVLVGLPLQLVKHG ,QWKHHYHQWWKDWZHH[SHULHQFHDKLJKOHYHORIDFTXLVLWLRQVWUDWHJLFSDUWQHUVKLSRULQYHVWPHQWUHODWHGDFWLYLW\ W ZLWKLQDOLPLWHGSHULRGRIWLPHWKHSUREDELOLW\WKDWFHUWDLQRIWKHVHULVNVZRXOGRFFXUZRXOGOLNHO\LQFUHDVH,Q DGGLWLRQLIZHDUHXQVXFFHVVIXOLQFRPSOHWLQJDFTXLVLWLRQVRIRWKHUEXVLQHVVHVRUDVVHWVH[HFXWLQJVWUDWHJLF SDUWQHUVKLSVRULQYHVWPHQWVRULIVXFKRSSRUWXQLWLHVIRUH[SDQVLRQGRQRWDULVHRXUEUDQGRUUHSXWDWLRQFRXOGVXIIHU DQGRXUIXWXUHJURZWKEXVLQHVVILQDQFLDOFRQGLWLRQRUUHVXOWVRIRSHUDWLRQVFRXOGEHPDWHULDOO\DGYHUVHO\DIIHFWHG Our goodwill and other intangible assets resulting from our acquisitions could be impaired as a result of future business conditions, requiring us to record substantial write-downs that would reduce our operating income. :HHYDOXDWHWKHUHFRYHUDELOLW\RIUHFRUGHGJRRGZLOODPRXQWVDQQXDOO\RUZKHQHYLGHQFHRISRWHQWLDO Q LPSDLUPHQWH[LVWV,QWDQJLEOHDVVHWVDUHUHYLHZHGIRULPSDLUPHQWZKHQHYHUHYHQWVRUFKDQJHVLQFLUFXPVWDQFHV LQGLFDWHWKDWWKHFDUU\LQJYDOXHRIWKHDVVHWPD\QRWEHUHFRYHUDEOH7KHVHLPSDLUPHQWWHVWVDUHEDVHGRQVHYHUDO IDFWRUVUHTXLULQJPDQDJHPHQW¶VMXGJPHQW&KDQJHVLQIDLUPDUNHWYDOXDWLRQVDQGRXURSHUDWLQJSHUIRUPDQFHRU W EXVLQHVVFRQGLWLRQVLQJHQHUDOFRXOGUHVXOWLQIXWXUHLPSDLUPHQWVRIJRRGZLOORULQWDQJLEOHDVVHWVZKLFKFRXOG PDWHULDOO\DGYHUVHO\DIIHFWRXUUHVXOWVRIRSHUDWLRQV,QDGGLWLRQLIZHDUHQRWVXFFHVVIXOLQDFKLHYLQJDQWLFLSDWHG RSHUDWLQJHIILFLHQFLHVDVVRFLDWHGZLWKDFTXLVLWLRQVRXUJRRGZLOODQGLQWDQJLEOHDVVHWVPD\EHFRPHLPSDLUHG If we fail to attract or retain the necessary qualified personnel, including through our compensation programs, our business, financial condition or results of operations could be materially adversely affected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e cannot provide any guaranty that we will continue to repurchase our common shares pursuant to our share repurchase program. 7KHWLPLQJSULFHDQGYROXPHRIUHSXUFKDVHVZLOOEHEDVHGRQPDUNHWFRQGLWLRQVUHOHYDQWVHFXULWLHVODZVDQG D RWKHUIDFWRUV7KHVWRFNUHSXUFKDVHVPD\EHPDGHIURPWLPHWRWLPHWKURXJKRQHRUPRUHRSHQPDUNHWUHSXUFKDVHV RUSULYDWHO\QHJRWLDWHGWUDQVDFWLRQVLQFOXGLQJZLWKRXWOLPLWDWLRQDFFHOHUDWHGVKDUHUHSXUFKDVHWUDQVDFWLRQVWUDGLQJ SODQVRUGHULYDWLYHWUDQVDFWLRQVRURWKHUZLVH 6KDUHUHSXUFKDVHVXQGHURXUVKDUHUHSXUFKDVHSURJUDPFRQVWLWXWHFRPSRQHQWVRIRXUFDSLWDODOORFDWLRQ VWUDWHJ\ZKLFKZHIXQGZLWKIUHHRSHUDWLQJFDVKIORZDQGERUURZLQJV+RZHYHUZHDUHQRWUHTXLUHGWRPDNHDQ\ VKDUHUHSXUFKDVHVXQGHURXUVKDUHUHSXUFKDVHSURJUDP7KHVKDUHUHSXUFKDVHSURJUDPGRHVQRWREOLJDWHXVWR UHSXUFKDVHDQ\VHWGROODUDPRXQWRUQXPEHURIVKDUHVDQGPD\EHPRGLILHGVXVSHQGHGRUWHUPLQDWHGDWDQ\WLPH ZLWKRXWSULRUQRWLFH7KHUHGXFWLRQRUHOLPLQDWLRQRIRXUVKDUHUHSXUFKDVHSURJUDPFRXOGDGYHUVHO\DIIHFWWKHPDUNHW SULFHRIRXUFRPPRQVKDUHV$GGLWLRQDOO\WKHH[LVWHQFHRIDVKDUHUHSXUFKDVHSURJUDPFRXOGFDXVHWKHPDUNHWSULFH RIRXUFRPPRQVKDUHVWREHKLJKHUWKDQLWZRXOGEHLQWKHDEVHQFHRIVXFKDSURJUDPDQGFRXOGSRWHQWLDOO\UHGXFH WKHPDUNHWOLTXLGLW\IRURXUVKDUHV$VDUHVXOWDQ\UHSXUFKDVHSURJUDPPD\QRWXOWLPDWHO\UHVXOWLQHQKDQFHGYDOXH WRRXUVKDUHKROGHUVDQGPD\QRWSURYHWREHWKHEHVWXVHRIRXUU FDVKUHVRXUFHV ,WHP% Unresolved Staff Comments 1RWKLQJUHTXLUHGWREHGLVFORVHG 


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