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RiskMetrics Group Inc – IPO: ‘S-1’ on 9/19/07

On:  Wednesday, 9/19/07, at 2:55pm ET   ·   Accession #:  1047469-7-7087   ·   File #:  333-146167

Previous ‘S-1’:  None   ·   Next:  ‘S-1/A’ on 11/2/07   ·   Latest:  ‘S-1/A’ on 1/24/08   ·   1 Reference:  By:  SEC – ‘UPLOAD’ on 1/23/08

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 9/19/07  RiskMetrics Group Inc             S-1                   19:8.7M                                   Merrill Corp/New/FA

Document/Exhibit                   Description                      Pages   Size 

 1: S-1         Registration Statement (General Form)               HTML   2.00M 
 2: EX-10.1     Material Contract                                   HTML    853K 
11: EX-10.10    Material Contract                                   HTML    108K 
12: EX-10.11    Material Contract                                   HTML    676K 
13: EX-10.12    Material Contract                                   HTML    401K 
14: EX-10.13    Material Contract                                   HTML    286K 
15: EX-10.14    Material Contract                                   HTML     30K 
16: EX-10.15    Material Contract                                   HTML    549K 
 3: EX-10.2     Material Contract                                   HTML     96K 
 4: EX-10.3     Material Contract                                   HTML    240K 
 5: EX-10.4     Material Contract                                   HTML    681K 
 6: EX-10.5     Material Contract                                   HTML     97K 
 7: EX-10.6     Material Contract                                   HTML    278K 
 8: EX-10.7     Material Contract                                   HTML    123K 
 9: EX-10.8     Material Contract                                   HTML    137K 
10: EX-10.9     Material Contract                                   HTML    137K 
17: EX-21.1     Subsidiaries of the Registrant                      HTML     18K 
18: EX-23.1     Consent of Experts or Counsel                       HTML     10K 
19: EX-23.2     Consent of Experts or Counsel                       HTML      9K 

As filed with the Securities and Exchange Commission on September 19, 2007

Registration No. 333-            

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form S-1

REGISTRATION STATEMENT
THE SECURITIES ACT OF 1933

RiskMetrics Group, Inc.

(Exact name of registrant as specified in its charter)

Steven E. Friedman, Esq.
General Counsel
One Chase Manhattan Plaza, 44^th Floor
New York, New York 10005
(212) 981-7475

(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Copies to:

Approximate date of commencement of proposed sale of securities to the public: As soon as practicable after the registration statement becomes effective.

        If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. / /

        If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

        If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

        If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.    o

CALCULATION OF REGISTRATION FEE

(1)

Estimated solely for the purposes of determining the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.

        The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We and the selling stockholders may not sell the securities described in this document until the registration statement filed with the Securities and Exchange Commission is declared effective. This preliminary prospectus is not an offer to sell these securities and neither we nor the selling stockholders are soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED SEPTEMBER 19, 2007

PROSPECTUS

                        Shares

RiskMetrics Group, Inc.

Common Stock

        We are offering          shares of our common stock and the selling stockholders named in this prospectus are offering           shares of our common stock held by them. We will not receive any proceeds from the sale of the shares by the selling stockholders.

        This is our initial public offering and there is currently no established trading market for our shares. We currently estimate that the initial public offering price will be between $              and $              per share.

        The underwriters have an option to purchase a maximum of          additional shares of common stock from us and the selling stockholders to cover over-allotments. The underwriters can exercise this right at any time within 30 days from the date of this prospectus.

        We intend to apply for a listing of our common stock on the          under the symbol "              ."

        Investing in our common stock involves risks. See "Risk Factors" beginning on page 14.

        Delivery of the shares of common stock will be made on or about              , 2007.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is              , 2007.

TABLE OF CONTENTS

        You should rely only on the information contained in this document or to which we have referred you. We have not authorized anyone to provide you with information that is different. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of this document.

ABOUT THIS PROSPECTUS

        Unless the context otherwise indicates or requires, as used in this prospectus, references to "we," "us," "our" or the "company" refer to RiskMetrics Group, Inc., its subsidiaries and predecessors. References to "RiskMetrics" refer only to our subsidiary, RiskMetrics Solutions, Inc. and its subsidiaries, references to "ISS" refer only to Institutional Shareholder Services Holdings, Inc. and its subsidiaries, and references to "CFRA" refer only to RMG-CFRA, LLC, formerly CFRA Holdings, LLC, and its subsidiary. References to our "clients" include each business unit, division or wholly-owned subsidiary of a parent company which has entered into a separate customer contract with us. References to "pro forma" financial information refers to financial information that gives effect to the acquisition of ISS and related financing as if they had occurred on January 1, 2006. A full discussion of the adjustments made to our U.S. GAAP financial information to arrive at the pro forma information is provided in this prospectus under the heading "Unaudited Pro Forma Statements of Operations," beginning on page 28.

        In this prospectus, amounts are expressed in U.S. dollars and the financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, or U.S. GAAP, except as otherwise indicated.

        We own or have rights to use trademarks, trade names and service marks that we use in conjunction with the operation of our business, including, but not limited to: CGQ, CreditManager, DataMetrics, Governance Analytics, HedgePlatform, RiskManager, RiskMetrics and WealthBench. All other trademarks, trade names and service marks included in this prospectus are the property of their respective owners.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward looking statements. These forward looking statements include, in particular, statements about our plans, strategies and prospects under the headings "Prospectus Summary," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." These statements are based on our current expectations and projections about future events and are identified by terminology such as "may," "will," "should," "expect," "scheduled," "plan," "seek," "intend," "anticipate," "believe," "estimate," "aim," "potential," or "continue" or the negative of those terms or other comparable terminology. Although we believe that our plans, intentions and expectations are reasonable, we may not achieve our plans, intentions or expectations.

        These forward-looking statements involve risks and uncertainties. Important factors that could cause actual results to differ materially from the forward looking statements we make in this prospectus are set forth in "Risk Factors." We undertake no obligation to update any of the forward looking statements after the date of this prospectus to conform those statements to reflect the occurrence of unanticipated events, except as required by applicable law.

        You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement on Form S-1, of which this prospectus is a part, that we have filed with the Securities and Exchange Commission, or SEC, completely and with the understanding that our actual future results, levels of activity, performance and achievements may be different from what we expect and that these differences may be material. We qualify all of our forward looking statements by these cautionary statements.

ii

INDUSTRY AND MARKET DATA

        The market data and other statistical information used throughout this prospectus are based on independent industry publications. Some data are also based on our good faith estimates, which are derived from our review of internal surveys, as well as independent industry publications, government publications, reports by market research firms or other published independent sources. Although we believe that these sources are reliable, we have not independently verified the information. None of the independent industry publications used in this prospectus was prepared on our or our affiliates' behalf or at our expense.

        In particular, the Gartner Reports described in this prospectus represent data, research, opinions or viewpoints published, as part of a syndicated subscription service available only to clients, by Gartner, Inc., a corporation organized under the laws of the State of Delaware, and its subsidiaries, collectively referred to as Gartner, and are not representations of fact. The Gartner Reports do not constitute a specific guide to action and the reader of this prospectus assumes sole responsibility for his or her selection of, or reliance on, the Gartner Reports, or any excerpts thereof, in making any decision, including any investment decision. Each Gartner Report speaks as of its original publication date (and not as of the date of this prospectus) and the opinions expressed in the Gartner Reports are subject to change without notice. Gartner is not responsible, nor shall it have any liability, to us or to any reader of this prospectus for errors, omissions or inadequacies in, or for any interpretations of, or for any calculations based upon data contained in, the Gartner Reports, or any excerpts thereof.

iii

PROSPECTUS SUMMARY

        The following summary highlights information contained elsewhere in this prospectus. It is not complete and does not contain all of the information that you should consider before investing in our common stock. You should read the entire prospectus carefully, especially the risks of investing in our common stock discussed under "Risk Factors" and our consolidated financial statements and accompanying notes.

Company Overview

        We are a leading provider of risk management and corporate governance products and services to participants in the global financial markets. Our solutions enable our clients to better understand and manage the risks associated with their financial holdings, provide greater transparency to their internal and external constituencies, satisfy regulatory and reporting requirements and make more informed investment decisions. We provide our solutions across multiple asset classes, markets and geographies to a diverse client base, including asset managers, hedge funds, pension funds, banks, insurance companies, financial advisors and corporations. As of June 30, 2007, we had approximately 3,300 clients located in 50 countries. Among our clients are 74 of the 100 largest investment managers, 31 of the 50 largest mutual fund companies, 34 of the 50 largest hedge funds, each of the 10 largest global investment banks and 17 of the 30 OECD central banks.

        Our company consists of two industry leading businesses: RiskMetrics and ISS. Together, our products and services comprise what we believe is the most comprehensive suite of risk management and corporate governance solutions available in our industry. Our combined products and services cover the market, credit, portfolio, governance, accounting, legal and environmental risks associated with our clients' financial holdings.

        RiskMetrics.    RiskMetrics is a leading global provider of multi-asset, position-based risk and wealth management solutions. We provide our clients with comprehensive, interactive solutions that allow them to measure and quantify portfolio risk across security types, geographies and markets. Our flagship RiskManager market risk system integrates consistently-modeled market data with our widely adopted analytical models and robust processing capabilities into a comprehensive risk reporting solution. Our clients access RiskManager through our secure web-based application or engage us to provide fully-outsourced risk reporting services. The breadth, performance and scalability of our RiskManager system is the result of nearly a decade of investment in research and development, which we believe provides us with a significant competitive advantage. RiskMetrics serves a diverse group of approximately 650 clients worldwide.

        ISS.    ISS is a leading provider of corporate governance and specialized financial research and analysis services to institutional investors and corporations around the world. Through ISS, which we acquired on January 11, 2007, we facilitate the voting of proxies by institutional investors and provide in-depth research and analysis to help inform their voting decisions and assess issuer-specific risk. We offer both global security coverage and fully-integrated, end-to-end solutions, from policy creation to comprehensive research, vote recommendations, reliable vote execution, post-vote disclosure and reporting and analytical tools. Our financial research and analysis services provide our clients with insights into many investment criteria that have become increasingly important to investors, including companies' environmental, social and governance attributes and accounting and compensation polices. ISS serves approximately 2,750 clients. On August 1, 2007, in order to further increase our range of specialized financial research and analysis products and services, we acquired CFRA, a leading forensic accounting research firm.

        We sell our products and services primarily on an annual subscription basis and generally receive upfront subscription payments from our clients. On a pro forma basis for the year ended December 31, 2006, we generated revenues of $204.5 million, Adjusted EBITDA of $56.9 million and a net loss of

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$4.8 million. For a discussion of Adjusted EBITDA, see the section below entitled "Summary Consolidated Financial Information and Other Data."

Our Market Opportunity

        Our target market is a cross-section of global financial services firms. We also target other market participants, such as third-party advisors and corporations. We believe that a number of key market trends are driving the growth of our business and increasing the value of our solutions to our clients:

        Growing Global Financial Markets and Investment Portfolio Complexity.    Over the past ten years, assets under management, or AUM, have increased steadily on a worldwide basis. Additionally, the variety, complexity and geographic diversity of financial assets held by investors have expanded significantly, resulting in multi-asset class, multi-national portfolios often including derivatives and other structured products.

        Increasing Demand for Transparency.    Investors increasingly need to document their risk profile on a regular basis for both internal audiences, such as risk committees, as well as external constituencies, such as limited partners and regulators. In order to satisfy these demands, comprehensive risk management and proxy voting have become essential services.

        Increasing Regulatory Requirements.    Regulatory bodies around the world continue to drive change and create opportunities in the markets we serve. Portfolio risk reporting and measurement regulations, such as the European Union's Undertakings for Collective Investments in Transferable Securities, or UCITS III, U.S. Department of Labor proxy voting requirements and corporate governance-related regulations, including the Sarbanes-Oxley Act, have increased regulatory compliance requirements and have further emphasized the need for comprehensive risk management tools.

        Increased Focus on Corporate Governance.    During the past several years, there has been significant growth in the visibility of corporate governance and recognition of the risks associated with poor governance practices. Furthermore, investors are increasingly focusing on companies' environmental and social attributes when making investment and proxy voting decisions.

        Increasing Demand for Outsourced Solutions.    Many financial services firms are increasingly utilizing outsourced solutions that enable them to focus on their core competencies and provide greater capabilities on a more cost effective basis than their in-house systems. In particular, an increasing number of firms are utilizing risk management solutions from external vendors. These vendors provide independent risk reporting services, which are often requested by the financial services firms' clients.

Our Competitive Strengths

        We intend to continue to capitalize on our market opportunity by leveraging the competitive strengths outlined below. We believe these strengths provide us with significant advantages in our markets:

        Industry Leading Brands.    We believe that each of our brands is among the most established and trusted names in its respective market. Trust, reliability and confidence are of paramount importance to our clients, as they rely on our solutions to help make critical investment decisions. Our products and services are widely recognized and used throughout our industry, and we believe we are helping to establish common standards for risk management and corporate governance. We believe that the prominence of our brands, combined with our long track record, proven capabilities and well-known and thorough reporting capabilities, have helped us to create and maintain our market leadership positions.

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        Comprehensive Market Coverage.    Our products and services incorporate what we believe to be among the broadest data sets of any provider in our industry. RiskMetrics' database includes over four million active global securities across 150,000 issuers, spanning 200 countries, 220 exchanges, 11,000 global benchmarks and over 750,000 market data time series updated every business day. In addition, our analytical models cover almost all of the equity, fixed income and derivative securities held in our clients' portfolios. Similarly, in 2006 ISS provided proxy research and vote recommendations for more than 38,000 shareholder meetings across 100 countries and voted approximately 7.6 million ballots on behalf of our clients, representing almost 700 million shares.

        Leading Market Risk Methodology.    We are a leader in the multi-asset class risk management market. Our transparent risk methodology was originally published in 1994 and has evolved through more than a decade of research and development, client input and collaboration with the world's foremost financial institutions and leading academics. We believe our commitment to transparency and collaboration has resulted in our methodologies being among the financial industry's most studied, trusted and implemented frameworks for risk management.

        Fully-Outsourced Solution.    Increasingly, many of our RiskMetrics clients rely on us for a fully-outsourced risk reporting solution, which typically includes automated importation of client positions, matching of client positions with security terms and conditions data and automatic production of risk reports. Our solutions leverage our technology and data infrastructure, which has the capacity to process millions of positions and thousands of reports each night. Similarly, we can provide our ISS clients with a fully-outsourced proxy research and voting service through our Governance Analytics platform. This service typically includes standard benchmark guidelines or custom voting policies, comprehensive research coverage, and high volume, integrated electronic proxy voting and regulatory reporting.

        Global, Diversified Client Base.    We have a global footprint, which allows us to support our highly- diversified client base across numerous geographies with in-depth analysis based on local knowledge. As of June 30, 2007, our client base included approximately 2,100 financial institutions and 1,200 corporations and professional service organizations located in 50 countries. Among our clients are 74 of the 100 largest investment managers, 31 of the 50 largest mutual fund companies, 34 of the 50 largest hedge funds, each of the 10 largest global investment banks and 17 of the 30 OECD central banks. No client or group of affiliated clients represented more than 2.1% of our pro forma revenues in 2006 and our top 20 clients and their affiliates represented less than 13.1%. Our client base is geographically diverse as well, with 34% of our pro forma revenues in 2006 generated from sales to clients located outside of the Americas.

        Attractive Business Model.    We sell our services primarily on an annual subscription basis and receive upfront annual payments from our clients. In addition, we typically experience high recurring revenues as a percentage of total revenues and high renewal rates. For the six months ended June 30, 2007, our recurring revenue as a percentage of our total revenues, and renewal rates, were approximately 91% and 89%, respectively. We do not price our products and services based on our clients' assets under management. As a result, we are not subject to revenue fluctuations resulting from changes in our clients' AUM. Since many of our costs benefit from economies of scale, we have historically been able to add new clients with less than pro rata incremental expense. These factors, combined with our low capital expenditure requirements, have historically resulted in significant cash flow generation.

        Distinct Corporate Culture.    Our ability to develop new products and services has been, and will continue to be, crucial to keeping pace with evolving financial markets. Consequently, we believe that our success will continue to depend on the strength of our intellectual capital, and that our employees and distinct corporate culture provide us with significant competitive advantages. We work hard to retain our employees by ensuring that they have a challenging, rewarding and fun work environment.

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We also encourage our employees to follow their instincts and develop new ideas, which has resulted in the development of many of our most important solutions. At the same time, we strive to engender a team spirit and sense of common purpose that we believe enables us to attract and retain talented employees. Finally, we believe that all of our employees should hold an ownership stake in our company since a broad-based employee ownership structure closely-aligns the incentives of our employees and stockholders.

Our Growth Strategy

        Our growth strategy is to increase sales to our existing clients, to expand our client base and to extend and enhance our portfolio of risk management and corporate governance products and services through a multi-pronged approach:

        Increase Sales to Existing Clients.    A significant portion of our growth has been driven by our success in increasing the value of the products and services which we provide to our clients. We plan to broaden our relationships with our clients in the following ways:

•

Provide additional data, research and analytical products.    We intend to continue to expand RiskMetrics' coverage of asset classes and library of analytical models, and to increase ISS' global research coverage and new issue-specific research products.



•

Offer more services.    We plan to offer a higher volume of outsourced risk reporting and proxy voting services, enabled by our scalable technology and data infrastructure.



•

Leverage our combined RiskMetrics and ISS sales force.    We believe that our combined sales force will allow us to cross-sell a more complete risk management and corporate governance solution to our combined global client base.

        Expand our Client Base.    We plan to continue to pursue the following initiatives to further expand our client base:

•

Sell our portfolio risk reporting services to new clients.    We intend to sell our fully-outsourced risk reporting services to financial services firms who currently rely on in-house risk management solutions.



•

Sell our governance and financial research and analysis services to new clients.    We plan to sell our fully-outsourced proxy voting services to institutional investors who currently rely on in-house solutions, and to also sell our financial research analysis products and services to portfolio managers, whom we have not traditionally targeted.



•

Expand our significant global presence.    We intend to leverage our globally-recognized RiskMetrics brand and international presence to sell more ISS products and services outside the United States.

        Enhance and Extend our Products and Services.    We plan to continue to augment our suite of products and services in the following ways:

•

Enhance our product capabilities.    We intend to continue to broaden the scope of our products in order to address our clients' comprehensive risk management and governance needs.



•

Extend our service offerings.    We plan to leverage the functionality and scalability of our technology and data infrastructure in order to offer additional fully-outsourced risk reporting and electronic proxy voting services to our clients.



•

Selectively pursue acquisitions.    We intend to continue to selectively pursue acquisition opportunities to complement our product and service offerings and to provide more comprehensive solutions to our clients.

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Corporate Governance and Sustainability

        We believe that strong corporate governance and sustainability policies serve to help maximize long-term shareholder value. We are committed to adopting progressive practices in these areas. Our key principles are outlined in the "Corporate Governance and Sustainability" section of this prospectus, beginning on page 107.

Risk Factors

        Our business is subject to numerous risks. We urge you to carefully consider all the information presented in the "Risk Factors" section of this prospectus, beginning on page 14.

Additional Information

        Our principal executive offices are located at One Chase Manhattan Plaza, 44th Floor, New York, New York 10005, and our telephone number is (212) 981-7475. Our website address is www.riskmetrics.com. Information contained on our website is not part of this prospectus or the registration statement of which it forms a part and is not incorporated herein by reference, and any reference to our website is intended to be an inactive textual reference only and is not intended to create any hypertext link.

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The Offering

        Except as otherwise noted, all information in this prospectus:

•

assumes an initial public offering price of $          per share, the midpoint of the range set forth on the cover of this prospectus; and



•

assumes no exercise of the underwriters' over-allotment option.

        The number of shares of our common stock to be outstanding immediately after this offering excludes:

•

shares of common stock issuable upon the exercise of options issued under our 2007 Omnibus Incentive Compensation Plan, RiskMetrics' 2000 Stock Option Plan, RiskMetrics' 2004 Stock Option Plan and ISS' Equity Incentive Plan, which we collectively refer to as our Stock Incentive Plans, including          options to be granted to our employees simultaneously with the consummation of this offering, at a weighted average exercise price of $          per share,          of which          are currently exercisable; and



•

shares of common stock reserved for future issuance under our Stock Incentive Plans.

        On May 1, 2007, we effected a 2.5 to 1 stock split. Except where indicated otherwise, all share numbers included in this prospectus have been adjusted to reflect this stock split.

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Summary Consolidated Financial Information and Other Data

        The summary consolidated statements of operations data presented for each of the years ended December 31, 2004, 2005 and 2006 and the summary consolidated balance sheet data as of December 31, 2005 and 2006 were derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary consolidated statements of operations data for the years ended December 31, 2002 and 2003 and the summary consolidated balance sheet data as of December 31, 2002, 2003 and 2004 were derived from our audited consolidated financial statements which are not included in this prospectus. The summary consolidated unaudited statements of operations data presented for the six months ended June 30, 2006 and 2007 and the summary consolidated balance sheet data as of June 30, 2007 were derived from our unaudited consolidated interim financial statements included elsewhere in this prospectus. The results of operations for the six months ended June 30, 2007 are not necessarily indicative of the results to be expected for the full year ending December 31, 2007. The as adjusted consolidated balance sheet data give effect to the sale by us of           shares of common stock in this offering at an assumed initial offering price of $          per share, after applying the estimated net proceeds thereof, as if this offering was completed on June 30, 2007.

        On January 11, 2007, we acquired ISS. The consolidated statement of operations data for the six months ended June 30, 2007 includes the impact of the acquisition of ISS beginning on January 12, 2007. The consolidated statement of operations data for the prior period does not include the impact of the acquisition of ISS. The information set forth below should be read in conjunction with the consolidated financial statements and "Management Discussion and Analysis of Financial Condition and Results Operations" included elsewhere in this prospectus.

Consolidated Statement of Operations Data

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Consolidated Balance Sheet Data

Other Financial and Operating Data

        The financial and operating data below sets forth supplementary information that we believe is useful for investors in evaluating our underlying operations:

Notes to Summary Consolidated Financial Information and Other Data

(1)

In March 2003, we acquired JPMorgan Advisory, Inc., an entity which primarily provided wealth management products and services to JPMorgan. In connection with the acquisition, we entered into a three year online services agreement under which we agreed to provide to JPMorgan a customer-specific set of wealth management products and services which were unrelated to our WealthBench product. This agreement was terminated as of April 30, 2006. Our results of operations reflect the revenues from the JPMorgan online services agreement through April 30, 2006. For the years ended December 31, 2003, 2004, 2005 and 2006, we derived $9.5 million, $13.0 million, $12.7 million and $4.3 million of revenue, respectively, from the JPMorgan online services agreement. We derived no revenue from the JPMorgan online services agreement in the six months ended June 30, 2007.

(2)

In 2003 and 2004, we recorded stock-based compensation expense of $0.2 million and $2.6 million, respectively, based on Accounting Principles Board Opinion No. 25, Accounting for Stock Based Compensation for Employees. On January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, or SFAS 123(R). As a result of this adoption, we

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recorded $3.6 million, $1.9 million and $2.5 million of stock-based compensation expense in the year ended December 31, 2006 and the six months ended June 30, 2006 and June 30, 2007, respectively.

(3)

Adjusted EBITDA is a metric used by management to measure operating performance and for planning, including preparation of annual budgets, analyzing investment decisions and evaluating profitability. It is also a key metric used by our lenders in evaluating compliance with the covenants in our credit facilities. Adjusted EBITDA, as defined in our credit facilities, represents net income (loss) before interest expense, interest income, income tax expense (benefit), depreciation and amortization of property and equipment, amortization of intangible assets, non-cash stock-based compensation expense and extraordinary or non-recurring charges or expenses.

We present Adjusted EBITDA as a supplemental performance measure because we believe that this measure provides our board of directors, management and investors with additional information to measure our performance, provide comparisons from period to period by excluding potential differences caused by variations in capital structure (affecting interest expense), tax position (such as the impact on periods of changes in effective tax rates or net operating losses), the age and book depreciation of fixed assets (affecting relative depreciation expense), acquisitions (affecting amortization expense) and compensation plans (affecting stock-based compensation expense).

Adjusted EBITDA is not a measurement of our financial performance under U.S. GAAP and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with U.S. GAAP or as an alternative to cash flow from operating activities as a measure of our profitability or liquidity.

We understand that, although Adjusted EBITDA is frequently used by securities analysts, lenders and others in their evaluation of companies, Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for an analysis of our results as reported under U.S. GAAP. Some of these limitations are:

•

Adjusted EBITDA does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;



•

Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;



•

Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments on our indebtedness;



•

Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and



•

Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

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The table below sets forth a reconciliation of Adjusted EBITDA to net income (loss) on our historical results:

(a)

In 2003 and 2004, stock-based compensation expense was recorded in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Compensation to Employees. We adopted SFAS 123(R) on January 1, 2006 utilizing the modified prospective transition method and recorded stock-based compensation expense for all share-based payments granted or vested subsequent to December 31, 2005.



(b)

Represents impairment of goodwill during the year ended December 31, 2005. This is defined as a non-recurring item within our credit facilities.



(c)

Represents the write-off of furniture and equipment during the years ended December 31, 2003, 2004, 2005, 2006 and the six month periods ended June 30, 2006 and 2007, respectively. This is defined as a non-recurring item within our credit facilities.

(4)

We define free cash flow as cash provided by operating activities less capital expenditures. Our management uses free cash flow, and we present it to investors, because it is an important measure of the cash generation of our business and our ability to repay indebtedness and invest in our business.

(5)

We define annualized contract value as the aggregate value, on an annualized basis, of all recurring subscription contracts in effect on a reporting date. We included the value of the JPMorgan online services agreement for purposes of calculating annualized contract value, which amounted to $11.8 million for the years ended December 31, 2003, 2004 and 2005. The contract terminated in April 2006 and was therefore not included in annualized contract value at December 31, 2006 or June 30, 2006 and 2007.

(6)

We define recurring revenue as a percentage of total revenue as revenue from subscription contracts divided by total revenue during the applicable period.

10

Summary Pro Forma Financial Information and Other Data

        The pro forma financial information for the year ended December 31, 2006 and for the six months ended June 30, 2006 and 2007 was prepared as though ISS had been acquired on January 1, 2006. The pro forma as adjusted financial information for the year ended December 31, 2006 and the six-month periods ended June 30, 2006 and 2007 give further effect to the sale by us of           shares of common stock in this offering at an assumed initial offering price of $          per share and the application of the estimated net proceeds thereof as if this offering was completed on January 1, 2006. See "Unaudited Pro Forma Statements of Operations." The pro forma financial information does not give effect to our acquisition of CFRA on August 1, 2007, since it is not considered a significant subsidiary under applicable SEC regulations.

11

Other Financial and Operating Data

The table below sets forth our pro forma Adjusted EBITDA, annualized contract value and recurring revenue as a percentage of total revenue (as defined in the notes below):

Notes to Summary Pro Forma Financial Information and Other Data

(1)

On January 1, 2006, we adopted SFAS 123(R). As a result of this adoption, we recorded $5.5 million, $2.8 million and $2.5 million of stock-based compensation expense in the year ended December 31, 2006 and the six months ended June 30, 2006 and June 30, 2007, respectively.

(2)

The table below sets forth a reconciliation of Adjusted EBITDA to net loss for our pro forma results:

(a)

We adopted SFAS 123(R) on January 1, 2006 and recorded stock-based compensation expense for all share-based payments granted or vested subsequent to December 31, 2005.

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(b)

Represents the write-off of furniture and equipment during the year ended December 31, 2006 and the six month periods ended June 30, 2006 and 2007, respectively. This is defined as a non-recurring item within our credit facilities.



(c)

Total operating costs and expenses for ISS for the period of January 1, 2007 through January 11, 2007 includes $13.4 million of non-recurring expenses associated with the ISS acquisition, which constitute non-recurring items as defined in our credit facilities. These costs were incurred by ISS prior to the acquisition and include the following:

        Non-recurring expenses consists of: a transaction fee of $6.7 million, non-cash stock based compensation of $3.0 million, cash compensation and other charges of $5.4 million, partially offset by a deferred rent credit of $1.7 million.

(d)

Interest expense for ISS for the period of January 1, 2007 through January 11, 2007 includes a $1.2 million non-recurring charge associated with the ISS acquisition, which constitutes a non-recurring item as defined in our credit facilities. This cost represents the write-off of unamortized debt issuance costs related to the pre-existing outstanding indebtedness of ISS.

(3)

We define our annualized contract value as the aggregate value, on an annualized basis, of all recurring subscription contracts in effect on a reporting date.

(4)

We define recurring revenue as a percentage of total revenue as revenue from subscription contracts divided by total revenue during the applicable period.

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RISK FACTORS

        Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors, as well as the other information in this prospectus, before deciding whether to invest in our common stock. If any of the events highlighted in the following risks actually occurs, our business, results of operations or financial condition would likely suffer. In such an event, the trading price of our common stock could decline and you could lose all or part of your investment.

Risk Factors Related to our Business and Industry

We may experience difficulty in integrating our recent acquisitions of ISS and CFRA into our operations and we may not realize the anticipated benefits of the acquisitions.

        Our acquisition of ISS, which was consummated on January 11, 2007, and our acquisition of CFRA, which was consummated on August 1, 2007, each involve a number of special risks, including some or all of the following:

•

the diversion of management's attention from our core businesses;



•

the disruption of our ongoing business;



•

entry into markets in which we have limited or no experience;



•

the ability to integrate the acquisitions without substantial costs, delays or other problems;



•

managing a much larger combined business, including implementing adequate internal controls;



•

inaccurate assessment of undisclosed liabilities;



•

the failure to realize expected synergies and costs savings;



•

the loss of key employees or clients of the acquired businesses;



•

increasing demands on our operational systems; and



•

possible adverse effects on our reported operating results.

        The expansion of our business and operations resulting from the ISS and CFRA acquisitions may strain our administrative, operational and financial resources. The successful integration of ISS and CFRA into our company will require, among other things, the development of and coordination of their lines of proxy voting and research, financial research and analysis and corporate governance products and services; the adaptation of their technology, information systems and other processes; and the retention of their clients. The integration process could create a number of potential challenges and adverse consequences for us, including the possible unexpected loss of key employees. Since the consummation of the ISS acquisition, some members of the ISS management team, including its former chief executive officer, have left our company. Richard Leggett, the chief executive officer of CFRA prior to its acquisition, has recently become head of our ISS business, and we have filled other openings at ISS through internal promotion. These types of challenges and uncertainties could have a material adverse effect on our business, financial condition and results of operations. In addition, we may acquire other businesses. In the event that we consummate such transactions, we may be subject to similar risks.

We have incurred significant indebtedness which could affect our ability to finance our operations, pursue desirable business opportunities or successfully run our businesses in the future.

        We borrowed $425.0 million in connection with our acquisition of ISS. This indebtedness is secured and guaranteed by us and most of our subsidiaries. The annual cost to service this indebtedness is approximately $35.6 million of cash interest costs and approximately $3.0 million of

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annual required principal repayments, plus an additional annual prepayment generally equal to fifty percent of our excess cash flow (as such term is defined in the credit facility agreements) for such year. We are also required to make certain prepayments of this indebtedness in the event that we issue or incur additional indebtedness or sell specified assets. This indebtedness has created substantial demands upon our available cash to pay principal and interest. In order to finance our CFRA acquisition, we also borrowed $15 million under our revolving credit facility on July 31, 2007. Our leverage and debt service obligations could have important consequences to you, including the following:

•

The terms of the indebtedness obligations that we have incurred contain numerous restrictive covenants which, among other things, restrict our ability to pay dividends on or make other distributions or repurchase our capital stock or make other restricted payments, incur additional indebtedness or issue preferred stock, make investments, enter into transactions with affiliates and sell assets or merge with or into other companies or otherwise dispose of all or substantially all of our assets. In addition, we are required to satisfy and maintain specified financial ratios and tests. If we do not comply with these obligations, we may cause an event of default which, if not cured or waived, could require us to repay the indebtedness immediately.



•

We may be vulnerable in the event of downturns and adverse changes in our businesses, in our industries, or in the economy generally, due to our increased debt service.



•

We may have difficulty obtaining additional financing, if necessary, at favorable interest rates or at all, to meet our requirements for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes.



•

We are required to dedicate a substantial portion of our cash flow to the payment of principal and interest on our indebtedness, which will reduce the amount of funds available for operations, capital expenditures and future acquisitions.

We must recruit and retain skilled management and other key employees to succeed in our business.

        Our strategic direction and growth, as well as the development, maintenance and support of our products, are dependent upon the knowledge, experience and ability of our highly skilled, educated and trained employees. Accordingly, the success of our business depends to a significant extent upon the continued service of our executive officers and other key management, research, sales and marketing, information technology and other technical personnel. In particular, M. Ethan Berman, our chief executive officer and a key participant in the formulation of our growth strategy to date, has been instrumental to our success. The loss of Mr. Berman could have a serious negative effect on the future development of our business, particularly if we are not able to implement an effective succession plan. We do not have employment agreements with any of our executive officers.

        We believe that success in our business will continue to be based upon the strength of our intellectual capital. Consequently, we must hire and retain employees with the technical expertise and industry knowledge necessary to continue to develop our services and effectively manage our growing sales and marketing organization to ensure the growth of our operations. The market for highly skilled employees remains very competitive and we compete for talent with some of the largest and best-capitalized financial institutions and corporations in the world.

        If we are unable to retain and recruit a sufficient number of these employees at all levels, our ability to maintain and grow our business could be negatively impacted.

We face competition that may cause price reductions or loss of market share.

        We are subject to competitive conditions in all aspects of our business. ISS competes with firms such as Broadridge (formerly ADP Proxy Services) (which provides proxy voting services), Glass, Lewis & Co. (which provides research, voting recommendation and voting execution services) and

15

Proxy Governance, Inc. (which provides research, voting recommendation and voting execution services). ISS also competes with local niche proxy voting and research providers in certain international markets. In addition, RiskMetrics competes with firms such as Bear Stearns' Bear Measurisk unit, BlackRock Inc.'s BlackRock Solutions unit, DST Systems Inc., Fimalac S.A.'s Algorithmics unit, Moody Corporation's KMV unit, MSCI Inc.'s Barra unit and SunGard Data Systems Inc. We also face competition from:

•

the in-house operations of the businesses we seek as clients;



•

other general and specialized proxy reporting and business information services providers; and



•

other information and professional service providers.

        Intense competition could harm us by causing, among other things, price reductions, reduced margins and loss of market share. We could further be required to reduce the fees we charge clients as a result of competitive pressure, which could result in lower revenues and profitability.

Our ability to compete, succeed and generate profits will depend on our ability to obtain data from third-party vendors on commercially reasonable terms.

        We currently obtain data for use in our products and services from a number of third-party vendors. Termination of one or more of our significant data agreements or exclusion from, or restricted use of a data provider's information could decrease the available information for us to use and offer our clients and may have a material adverse effect on our business, financial condition or results of operations. In addition, ISS relies on our data feed agreement with Broadridge, formerly ADP Proxy Services, which allows for many ballots to be received and proxy votes to be made electronically, minimizing the manual aspects of the proxy voting process and limiting the risk of error inherent in the manual process. If our data feed agreement with Broadridge was terminated, we would have to incur significant expenses in order to input our clients' voting instructions directly into Broadridge's proprietary electronic voting systems and our business and results of operations would be materially adversely affected.

        Some of our competitors could enter into exclusive contracts with our data suppliers. If our competitors enter into such exclusive contracts, we may be precluded from receiving certain data from these suppliers or restricted in our use of such data, which would give our competitors an advantage. Such exclusive contracts would hinder our ability to provide our clients with the data they prefer, which could lead to a decrease in our client base and could have a material adverse effect on our business, financial condition or results of operations.

        In addition, some data suppliers may seek to increase licensing fees for providing their content to us. If we are unable to renegotiate acceptable licensing arrangements with these data suppliers or find alternative sources of equivalent content, we may be required to reduce our profit margins or experience a reduction in our market share.

Any perceived conflicts of interest in our business could harm our reputation and business.

        ISS' institutional clients rely on us to provide them with informed vote recommendations, benchmark proxy voting guidelines and unbiased analyses of companies' environmental, social and governance attributes. The institutional clients of both our RiskMetrics and ISS businesses, particularly hedge funds and more active institutional investors, may have material economic and other interests in the corporations on which we provide proxy analyses and ratings or which are the subject of our financial research and analysis products and services. In some cases these institutional clients pay us a significant amount of money for our RiskMetrics or ISS solutions and, accordingly, there may be a perception that we might advocate a particular position or provide research that supports a particular conclusion with respect to a corporation in order to satisfy the unique economic or other interests of a

16

particular institutional client. As a result, institutional clients, competitors and other market participants could raise questions about our ability to provide unbiased services, which could harm our reputation.

        Through our ISS Corporate Services subsidiary, we provide products and services to corporate clients who often use our services to learn about and improve their governance practices. Accordingly, there may be a perceived conflict of interest between the services we provide to institutional clients and the services provided to certain corporate clients. For example, when we provide corporate governance services to a corporate client and at the same time provide proxy vote recommendations to institutional clients regarding that corporation's proxy items, there may be a perception that we may treat that corporation more favorably due to its use of our services.

        The safeguards that we have implemented may not be adequate to manage these apparent conflicts of interest, and clients or competitors may question the integrity of our services. In the event that we fail to adequately manage these perceived conflicts of interest, we could incur reputational damage, which could have a material adverse effect on our business, financial condition and operating results.

Our businesses rely heavily on electronic delivery systems and the Internet and any failures, disruptions or slowdowns may adversely affect our ability to serve our clients.

        Technological factors may affect our ability to deliver our products and services to our clients. We depend heavily on the capacity, reliability and security of our electronic delivery systems and the Internet. Access to our products and services, and to data for our products and services, via the Internet involves security, availability, architectural compatibility and reliability risks. Our ability to effectively use the Internet may be impaired due to infrastructure failures, service outages at third party Internet providers or increased government regulation. If failures, disruptions or slowdowns of our electronic delivery systems or the Internet occur, our ability to distribute our products and services effectively and to serve our clients may be adversely affected. If our products and/or the technology foundations upon which they are built and delivered, have design or implementation flaws, or otherwise malfunction and cause harm to clients or third parties, claims may be brought against us.

Our revenues and earnings depend substantially upon conditions in the financial services industry, and a significant or prolonged downturn in the financial services industry could decrease demand for our products and services.

        Our revenues are principally derived from the provision of risk management and corporate governance products and services to the financial services industry. Any downturn in the financial services industry or the global financial markets could decrease demand for our products and services and negatively impact our financial condition. For example, a prolonged downturn in the global financial markets could cause a number of our clients and potential clients to go out of business or search for lower cost alternatives to our products and services.

        Similarly, we are exposed to other market trends in the financial services industry. Consolidation in the financial services industry could reduce our existing client base and the number of potential clients. This may negatively impact our ability to generate future growth and may reduce demand for our products, which could have a material adverse effect on our business, financial condition or results of operations.

Changes in the legislative, regulatory and corporate environments in which our clients operate may adversely impact our financial results.

        ISS' historical growth has been due, in large part, to increased regulatory requirements, highly visible corporate scandals, increased shareholder activism and corporate chief executive officers and boards of directors that are increasingly concerned about, and responsive to, shareholder concerns. To

17

the extent that any of these trends change, the demand for our products and services could be reduced, and this could have a material adverse effect on our business, financial condition or results of operation. In addition, beginning with the 2004 publication of International Convergence of Capital Measurement and Capital Standards: A Revised Framework, or Basel II, which created an international standard for risk management at banks, and continuing with the adoption of Undertakings for Collective Investment in Transferable Securities, or the UCITS III directives, which require European Union member countries to adopt policies governing investment managers' risk practices, a portion of the growth of RiskMetrics has been due to regulatory requirements. To the extent these regulations change or are not extended to other markets, our business, financial condition and results of operation could be materially adversely affected.

Changes in government regulations relating to our business could materially adversely affect our financial condition or results of operations.

        The financial services industry is subject to extensive regulation at the federal and state levels, as well as by foreign governments. It is very difficult to predict the future impact of the legislative and regulatory requirements affecting our business and our clients' businesses. In particular, as a registered investment advisor, our ISS subsidiary is subject to the requirements and regulations of the Investment Advisers Act of 1940. The Investment Advisers Act relates to, among other things, fiduciary duties, recordkeeping and reporting requirements, disclosure requirements, limitations on agency and principal transactions between an advisor and advisory clients, as well as general anti-fraud prohibitions. We may also be adversely affected as a result of new or revised legislation or regulations imposed by the SEC, other U.S. or foreign governmental regulatory authorities or self-regulatory organizations that supervise the financial markets around the world. In addition, we may be adversely affected by changes in the interpretation or enforcement of existing laws and rules by these governmental authorities and self-regulatory organizations. It is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed, or whether any of the proposals will become law. The introduction of any new laws or regulations could make compliance more difficult and expensive and affect the manner in which we conduct business.

Our growth may place significant strain on our management and other resources.

        We have experienced significant growth in the scope of our operations and the number of our employees. This growth has placed, and will continue to place, significant demands on our management, as well as our financial and operational resources. We must continue to improve our operational, financial, management, legal and compliance processes and information systems to keep pace with the growth of our business. Continued growth will likely increase our challenges involved in:

•

attracting and retaining a sufficient number of qualified personnel to meet our needs;



•

managing a large organization;



•

implementing appropriate operational and financial systems;



•

expanding our physical facilities; and



•

expanding our information technology infrastructure and capabilities.

        If we cannot scale and manage our business appropriately, we may not be able to timely execute our business strategies and our business and financial results may be adversely affected.

We are exposed to certain liabilities as a result of our products and services.

        Our products and services support the investment or risk analysis processes of clients that collectively manage trillions of dollars in assets. Our subscription and consulting agreements have

18

provisions designed to limit our exposure to potential liability claims brought by our clients or other third parties based on the use of our products and services. However, these provisions could be invalidated by unfavorable judicial decisions or by federal, state, foreign or local laws. Use of our products and services for investment and/or risk management or research, recommendations, voting and other corporate governance processes creates the risk that our clients, the parties whose funds are managed by our clients or the companies to which our research or recommendations relate, may pursue claims against us for significant dollar amounts. Any such claim, even if the outcome were to be ultimately favorable to us, would involve a significant commitment of management, personnel, financial and other resources. In addition, these sorts of claims and lawsuits could have a material adverse effect on our business, financial condition or results of operations.

Any failure to ensure and protect the confidentiality of client data could adversely affect our reputation and have a material adverse effect on our business, financial condition or results of operations.

        Many of our products and services involve the exchange of information with our clients through a variety of media, including the Internet. We rely on a complex network of process and software controls to protect the confidentiality of client data, such as client portfolio data that may be provided to us or hosted on our systems. If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in implementation of our internal controls, client data could be misappropriated. Such internal control inadequacies could damage our reputation, expose us to litigation and have a material adverse effect on our business, financial condition or results of operations.

We have engaged in hedging transactions and may engage in other hedging transactions which involve risks that could have a materially adverse effect on our financial condition or results of operations.

        In February 2007, we entered into two interest rate swap agreements to reduce our interest rate risk and to manage interest expense, and we may engage in similar transactions in the future. As of June 30, 2007, the interest rate swaps had notional amounts of $318.2 million and a fair value of $2.5 million. Interest rate swaps effectively change variable-rate debt obligations either to fixed-rate debt obligations or to variable-rate debt obligations based on a different index. Interest rate caps effectively limit the maximum interest on variable-rate debt obligations. Developing an effective strategy for dealing with movements in interest rates is complex, and no strategy can completely insulate us from risks associated with such fluctuations. In addition, a counterparty to a derivative instrument could default on its obligation thereby exposing us to credit risk. Further, we may have to repay certain costs, such as transaction fees or brokerage costs, if a derivative instrument is terminated by us. Finally, our interest rate risk management activities could expose us to substantial losses if interest rates move materially differently from our expectations. As a result, our economic hedging activities may not effectively manage our interest rate sensitivity or have the desired beneficial impact on our financial condition or results of operations.

If we are unable to protect our intellectual property rights, our competitive position could be harmed.

        Our success and ability to compete depend in large part upon our ability to protect our proprietary technology. We rely primarily on a combination of trade secret, copyright and trademark rights, as well as contractual protections and technical measures, to protect our products and processes. Existing trade secret, copyright and trademark laws offer only limited protection, and third parties may be able to successfully challenge, oppose, invalidate or circumvent our intellectual property rights.

        We may fail or be unable to obtain or maintain adequate protections for certain of our intellectual property and we cannot be certain that the steps we have taken to protect our proprietary information will be sufficient. For example, when we enter a new geographic market or introduce a new product brand, our existing trademark or service mark of choice may not be available. Further, the fact that we

19

have registered trademarks is not an assurance that other companies may not use similar names. We also typically enter into non-disclosure agreements with our employees and consultants who are involved in our research and development activities or who have access to any of our confidential information. However, if an employee breaches his or her non-disclosure agreement and reveals a trade secret, we could lose the trade secret protection. It may be very difficult to ascertain if a former employee is inappropriately using or disclosing our proprietary information. Additionally, the enforceability of our license and non-disclosure agreements and the remedies available to us in the event of a breach vary due to the many different jurisdictions in which our clients and employees are located. Any such failure or inability to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business, results of operations and financial condition.

        Monitoring and protecting our intellectual property rights is difficult and costly. From time to time, we may be required to initiate litigation or other action to enforce our intellectual property rights, establish their validity or enforce non-compete clauses in our employment arrangements. Any action could result in substantial cost and diversion of resources and management attention, and we may not be successful in preventing unauthorized use of our technology or other proprietary rights, particularly in foreign countries where the laws may not protect our proprietary rights as fully as do the laws of the United States.

If third parties claim that we are in violation of their intellectual property rights, it could have a negative impact on our results of operations and ability to compete.

        Third parties may claim we infringe upon their intellectual property rights. If any third parties were to obtain a patent on a risk analysis model or product service delivery mechanism, we could be sued for infringement. Furthermore, there is always a risk that third parties will sue us for infringement or misappropriation of other intellectual property rights, such as trademarks, copyrights or trade secrets.

        Any such infringement claims, even those without merit, could:

•

be expensive and time-consuming to defend;



•

cause us to cease making, licensing, using or selling services or products that incorporate the challenged intellectual property;



•

require us to redesign our products or services, if feasible;



•

divert management's attention and resources; and



•

require us to enter into royalty or licensing agreements in order to obtain the right to use necessary intellectual property.

        Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against us in connection with a third party's use of our technology could result in our being required to pay significant damages, enter into costly license or royalty agreements or stop the sale of certain products or services, any of which could have a negative impact on our operating profits and harm our future prospects. Furthermore, if it is determined that our products or services infringe on the intellectual property rights of others, our clients could be enjoined from continuing to use our products, and we may be required to indemnify our clients for any damages they suffer.

Operations outside the United States involve certain risks which may adversely affect us.

        A significant portion of our business is conducted outside the United States. For the year ended December 31, 2006, approximately 34% of our pro forma revenues were generated from sales to clients

20

outside of the Americas. In addition, 32% of our combined employee base was located in our offices outside of the United States, including approximately 150 employees located in our Manila, Philippines office. As a result, we are subject to certain risks inherent in doing business in some jurisdictions outside the United States, including the following:

•

difficulties in maintaining products and services that are tailored to the needs of local clients;



•

difficulty maintaining and monitoring effective and consistent policies and procedures around the world;



•

lack of local acceptance or knowledge of our products and services;



•

instability of international economies and governments;



•

changes in international laws and policies affecting the financial services industry;



•

exposure to varying legal standards, including intellectual property protection laws, in other jurisdictions;



•

potentially adverse tax consequences; and



•

fluctuations in foreign currency exchange rates.

        These risks could affect our ability to continue to expand our business outside the United States, which may adversely affect our ability to increase our revenues and to service our non-U.S. clients.

Risk Factors Related to this Offering

There has been no prior public market for our common stock, and an active trading market in our stock may not develop or be sustained.

        Prior to this offering, there has been no public market for our common stock. An active trading market in our common stock may not develop or be sustained after this offering. Although we intend to list our common stock on the          , we do not know whether third parties will find our common stock to be attractive or whether firms will be interested in making a market for our stock. The initial public offering price of our common stock will be determined through negotiations between us and the representatives of the underwriters and thus may not be indicative of the market price for our common stock after this offering. Consequently, you may not be able to resell your shares above the initial public offering price and may suffer a loss on your investment.

Our stock price may be volatile and may be affected by market conditions beyond our control, and you may be unable to resell your shares at or above the offering price or at all.

        The initial public offering price of the common stock offered hereby will be determined through our negotiations with the underwriters and may not be indicative of the market price of the common stock after this offering. The market price of our common stock after this offering will be subject to significant fluctuations in response to, among other factors:

•

variations in our operating results and market conditions specific to the risk analysis and corporate governance industries;



•

changes in earnings estimates or recommendations by securities analysts;



•

the emergence of new competitors or new technologies;



•

changes in our board or management;



•

commencement of, or our involvement in, litigation;



•

changes in governmental regulations; and

21

•

general economic conditions and slow or negative growth of related markets.

        In addition, if the market for stocks in our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition or results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.

Future sales of shares of our common stock by our affiliates and other stockholders or by us may adversely affect the price, and the future exercise of options may lower the price of shares of our common stock.

        We cannot predict what effect, if any, future sales of shares of our common stock, or the availability of shares for future sale, may have on the trading price of our common stock. Future sales of shares of our common stock by our existing stockholders and other stockholders or by us, or the perception that such sales may occur, could adversely affect the market price of shares of our common stock and may make it more difficult for you to sell your shares of our common stock at a time and price that you determine appropriate.

We will incur additional costs as a result of becoming a public company.

        As a result of our becoming a public company, we will be subjected to significant additional regulatory and reporting requirements, including under the Exchange Act, the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley, and          listed company rules. We will incur additional costs on an ongoing basis in order to comply with these additional requirements. These costs include those related to expanding our internal control and compliance functions, recruiting and retaining additional staff, and engaging outside advisors. The historical consolidated financial information in this prospectus does not reflect the added costs that we expect to incur as a public company or the resulting changes that will have occurred in our capital structure and operations. For more information, see our historical consolidated financial statements and related notes included elsewhere in this prospectus.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.

        Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. Any inability to provide reliable financial reports or prevent fraud could harm our business. Sarbanes-Oxley requires management and our auditors to evaluate and assess the effectiveness of our internal controls over financial reporting. We will be required to adhere to these requirements by the end of the year following the one in which we become a public company. Sarbanes-Oxley requirements may be modified, supplemented or amended from time to time. Implementing these changes may take a significant amount of time and may require specific compliance training of our personnel. In the future, we may discover areas of our internal controls that need improvement. If our independent registered public accounting firm or we discover a material weakness, the disclosure of that fact, even if quickly remedied, could reduce the market's confidence in our financial statements and harm our stock price. We may not be able to effectively and timely implement necessary control changes and employee training to ensure continued compliance with Sarbanes-Oxley and other regulatory and reporting requirements. Our rapid growth in recent periods, and our possible future expansion through acquisitions, present challenges to maintain the internal control and disclosure control standards applicable to public companies. If we fail to maintain effective internal controls, we could be subject to regulatory scrutiny and sanctions and investors could lose confidence in the accuracy and completeness of our financial reports. We may not be able to fully comply with the requirements of Sarbanes-Oxley or that management or our independent registered public accounting firm will conclude that our internal controls are effective in future periods.

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Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.

        We expect the initial public offering price of our common stock in this offering will be substantially higher than the net tangible book value per share of our common stock immediately after this offering. Therefore, if you purchase our common stock in this offering, you will incur an immediate dilution of $          in net tangible book value per share from the price you paid, based on an assumed initial offering price of $          per share (the midpoint of the range set forth on the cover page of this prospectus). The exercise of outstanding options will result in further dilution. For a further description of the dilution you will experience immediately after this offering, see the section entitled "Dilution."

Upon closing of this offering, our principal stockholders will still have the ability to significantly influence our business, which may be disadvantageous to other shareholders and adversely affect the price of our shares of common stock.

        Upon closing of this offering, M. Ethan Berman, our chief executive officer and a director, investment entities affiliated with General Atlantic LLC, investment entities affiliated with Spectrum Equity Investors IV, L.P. and investment entities affiliated with TCV V, L.P. will, collectively, beneficially own approximately          % of our outstanding shares of common stock (          % if the underwriters' over-allotment option is exercised in full). As a result, these stockholders, if they act together, will have the ability to exert substantial influence over all matters requiring approval by our shareholders, including the election and removal of directors, any proposed merger, consolidation or sale of all or substantially all of our assets and other corporate transactions. These stockholders may have interests that are different from ours or other investors.

        Our officers, directors and principal stockholders could delay or prevent an acquisition or merger of our company even if the transaction would benefit other stockholders. Moreover, this concentration of share ownership may make it difficult for shareholders to replace management. This concentration could be disadvantageous to other shareholders with interests different from those of our officers, directors and principal stockholders and the price of our shares of common stock could be adversely affected.

We may allocate the proceeds of this offering in ways with which you or other stockholders may not agree.

        We intend to use the net proceeds from this offering to repay the certain indebtedness outstanding under our credit facilities and for general corporate purposes, including working capital. Consequently, other than those net proceeds which will be used to repay portions of our outstanding indebtedness, our management will have broad discretion in the application of the net proceeds from this offering and may apply them in ways with which you or other stockholders may not agree. Failure by our management to apply these funds effectively could adversely affect our ability to continue to maintain and expand our business.

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USE OF PROCEEDS

        We estimate that we will receive net proceeds from this offering of approximately $           million, based on an assumed public offering price of $          , the midpoint of the range set forth on the cover of this prospectus, after payment of underwriters' discounts and commissions and our payment of the expenses of this offering estimated to be $          . We intend to use our proceeds from this offering as follows:

•

To repay $           million of the $15.0 million of indebtedness outstanding under our first lien revolving credit facility. The interest rate currently applicable to the first lien revolving credit facility is equal to LIBOR plus 2.25%. The indebtedness outstanding under our first lien revolving credit facility is scheduled to mature on January 11, 2013 and was incurred on July 31, 2007 in connection with our acquisition of CFRA.



•

To repay $           million of the $299.3 million of indebtedness outstanding under our first lien term loan facility. The interest rate currently applicable to the first lien term loan credit facility is equal to LIBOR plus 2.25%. The indebtedness outstanding under our first lien term loan credit facility is scheduled to mature on January 11, 2014 and was incurred in connection with our acquisition of ISS.



•

To repay $           million of the $125.0 million of indebtedness outstanding under our second lien term loan facility. The interest rate currently applicable to the second lien term loan facility is equal to LIBOR plus 5.50%. The indebtedness outstanding under our second lien term loan facility is scheduled to mature on July 11, 2014 and was incurred in connection with our acquisition of ISS. In connection with our repayment of amounts outstanding under the second lien term loan facility, we will pay a pre-payment premium equal to one percent of such repayment, or $          .



•

The remainder, for general corporate purposes, including working capital.

        In February 2007, we entered into two interest-rate swap agreements to reduce our interest rate risk and to manage interest expense. By entering into these agreements, we converted the LIBOR component of our annual interest rates with respect to 75.0% of our outstanding first lien term loan facility and second lien term loan facility to a fixed rate of 5.099% per annum. As of June 30, 2007, the interest rate swaps had notional amounts of $318.2 million and a fair value of $2.5 million.

        Banc of America Securities LLC and Credit Suisse Securities (USA) LLC acted as joint lead arrangers for our credit facilities. Bank of America, N.A. acted as administrative agent for our credit facilities. Affiliates of Banc of America Securities LLC and Credit Suisse Securities (USA) LLC are lenders under our existing credit facilities and accordingly will receive part of the proceeds, which we intend to use to repay a portion of our outstanding indebtedness under those credit facilities.

        We will not receive any of the proceeds from the sale of common stock by the selling stockholders.

        A $1.00 increase (decrease) in the assumed initial public offering price of $          per share, the midpoint of the range set forth on the cover of this prospectus, would increase (decrease) the net proceeds to us from this offering by $          , assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

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DIVIDEND POLICY

        Our board of directors currently does not intend to declare dividends or make any other distributions to our stockholders. Any determination to pay dividends in the future will be at the discretion of our board of directors and will be dependent on then-existing conditions, including our financial condition and results of operations, contractual restrictions, including restrictive covenants contained in our credit facilities, capital requirements and other factors.

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CAPITALIZATION

        The following table sets forth our cash and cash equivalents and capitalization as of June 30, 2007 on an actual basis and on an as adjusted basis giving effect to:

•

the sale of          shares of common stock in this offering at an assumed initial price to the public of $          per share, which is the mid-point of the price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and our estimated offering expenses; and



•

the repayment of $           million of indebtedness outstanding under our first lien revolving credit facility, $           million of indebtedness outstanding under the first lien term loan facility, and $           million of the $125.0 million of indebtedness outstanding under our second lien term loan facility.

        You should read this table in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes included elsewhere in this prospectus.

        A $1.00 increase (decrease) in the assumed initial public offering price of $           per share, the midpoint of the range set forth on the cover of this prospectus, would increase (decrease) the net proceeds to us from this offering by $          , assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

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DILUTION

        If you invest in our shares of common stock in this offering, your ownership interest in us will be diluted to the extent of the differences between the initial public offering price per share and net tangible book value per share after this offering. Our net tangible book value as of June 30, 2007 is determined by subtracting the total amount of our liabilities as of June 30, 2007 from the total amount of our tangible assets as of June 30, 2007. Our net tangible book value per share as of June 30, 2007 is determined by dividing our net tangible book value as of June 30, 2007 by the number of shares of common stock outstanding as of June 30, 2007. Our net tangible book value as of June 30, 2007 was $          , or $          per share, calculated as described above.

        After giving effect to the issuance in this offering of          shares of common stock at an assumed initial price to the public of $          per share, which is the mid-point of the price range set forth on the cover page of this prospectus, and the application of our estimated net proceeds therefrom, and after deducting underwriting discounts and commissions and our estimated offering expenses, our net tangible book value as of June 30, 2007 would have been an aggregate of $           million, or $          per common share. This amount represents an immediate increase of $          per share to our existing stockholders and an immediate dilution of $          per share from the assumed initial price to the public of $          per share to new investors purchasing shares in this offering. The table below illustrates this per share dilution:

        A $1.00 increase (or decrease) in the assumed initial offering price of $          per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (or decrease) the net tangible book value as of June 30, 2007 by $           million, or $          per share of common stock and the dilution per share to new investors by $          assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the assumed underwriting discounts and commissions.

        The table below sets forth, as of June 30, 2007, the number of our shares of common stock issued, the total consideration paid and the average price per share paid by our existing stockholders and our new investors, after giving effect to the issuance of          shares of common stock in this offering at an assumed initial price to the public of $          per share, which is the mid-point of the price range set forth on the cover page of this prospectus:

(1)

To the extent the underwriters exercise their over-allotment option in full, the number of shares of common stock held by the existing stockholders will be reduced to           shares, or          % of the total number of shares of common stock to be outstanding after this offering, and the number of shares of common stock held by the new investors will increase to          shares, or          % of the total number of shares of common stock to be outstanding after this offering. See "Principal and Selling Stockholders."

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UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS

        On January 11, 2007, we acquired ISS for a purchase price of approximately $542.6 million. The following unaudited pro forma statements of operations for the year ended December 31, 2006 and the six months ended June 30, 2006 and 2007 gives pro forma effect to the acquisition of ISS as if it had occurred on January 1, 2006. The pro forma as adjusted statements of operations for the year ended December 31, 2006 and the six-month periods ended June 30, 2006 and 2007 give further effect to the sale by us of          shares of common stock in this offering at an assumed initial offering price of $          per share and the application of the net proceeds thereof as if this offering was completed on January 1, 2006. The pro forma financial statements do not give effect to our acquisition of CFRA on August 1, 2007, since it is not considered a significant subsidiary under applicable SEC regulations.

        The unaudited pro forma financial statements are based on estimates and assumptions. These estimates and assumptions are preliminary and have been made solely for purposes of developing this pro forma information. Unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have been achieved if the acquisition of ISS had been consummated as of the date indicated, nor is it necessarily indicative of the results of future operations. The pro forma financial information does not give effect to any cost savings or restructuring and integration costs that may result from the integration of ISS' business.

        In connection with the purchase of ISS, we incurred indebtedness of $425.0 million. The first lien term loan is for an aggregate principal amount of $300.0 million and currently bears an annual interest rate of LIBOR plus 2.25%. The second lien term loan is for an aggregate principal amount of $125.0 million and currently bears an annual interest rate of LIBOR plus 5.50%. As required by the credit facilities, we entered into interest-rate swap agreements to reduce our interest rate risk and to manage our interest expense. By entering into these agreements, we changed the fixed/variable interest-rate mix of our debt portfolio. At the date of the acquisition of ISS, ISS' existing indebtedness of approximately $44.9 million was paid in full.

        The ISS purchase price has been allocated based on preliminary estimates of the fair market value of the acquired assets and liabilities. See Note 1 to the Notes to Unaudited Pro Forma Statements of Operations. The pro forma adjustments are subject to change pending a final analysis of the fair values of the assets acquired and liabilities assumed. The impact of these changes could be material.

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RISKMETRICS GROUP, INC.

PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2006

(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)