Cheryl Gustitus - Head of IP Ethan Berman - CEO David Obstler - CFO

James Kissane - Bank of America/Merrill Lynch Kelly Flynn - Credit Suisse David Scharf - JMP Securities Peter Appert - Piper Jaffray Michael Weisberg - ING

Good day, ladies and gentlemen, and welcome to the First Quarter 2009 RiskMetrics Group Inc. Earnings Call. My name is Lacy and I will be your coordinator for today. (Operator Instructions). As a reminder this call is being recorded for replay purposes. I would now like to turn the presentation over to your host for today’s call Ms. Cheryl Gustitus, Head of Investor Relations. Please proceed.

Thank you. Good morning and thank you for joining us to discuss RiskMetrics Group's first quarter 2009 financial results. With us today are Ethan Berman, CEO of RiskMetrics; and David Obstler, Chief Financial Officer. This conference call is being recorded on behalf of RiskMetrics Group and consists of copyrighted material that may not be recorded, reproduced, retransmitted, rebroadcast or downloaded or otherwise used without RiskMetrics’ express written permission. Your participation in the question-and-answer session constitutes your consent to having any comments or statements you make appear in any transcript or broadcast of this call. Information provided during this call will include certain forward-looking statements. These statements relate to future events or to future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by the forward-looking statements made in this call. You should not place undue reliance on these forward-looking statements. Reconciliation of non-GAAP financial measures to the nearest GAAP equivalents are included in Tables C, H and I of RiskMetrics’ earnings release, which was issued earlier today and is accessible on our website at www.riskmetrics.com. It is now my pleasure to introduce our CEO, Ethan Berman.

Thank you, Cheryl and thank you everyone for joining us this morning for our quarterly call. We are pleased to report that RiskMetrics delivered solid financial results for the first quarter of 2009, despite a market environment that continues to be challenging. On a consolidated basis, we achieved annual revenue growth of 8.7% and adjusted EBITDA growth of 26.5% with an adjusted EBITDA margin of 37.9% an expansion of 530 basis points over Q1'08. As we expected and communicated in our last quarterly call the beginning of 2009 is shaping up to look very much like the end of 2008. Renewal rates were in the low to mid 80s similar to Q4 and down from the high 80s a year ago. The weakness was mainly due to hedge fund closures, price pressure in the proxy business and lower renewal rates from our more discretionary CFRA and corporate services businesses. Renewal rates in our core risk and proxy businesses remained in the mid 80s. On the new sales front, sales cycles continue to lengthen and contract signings were down despite a strong pipeline with significant interest in both our product lines. While, our revenues continue to flatten, growth was still 8.7% over last year and revenues increased nearly $2 million from Q4 to Q1. Our risk business continue to lead the way growing 16.7%, while ISS grew 1.1% over prior year, including Innovest which we acquired in March of this year. EBITDA margins expanded significantly in Q1 as we continue to realize the benefits of our technology investment and scalability of our business model. On a segment level, EBITDA margin for risk was 42.7% in Q1'09 and 32.8% for ISS. EBITDA costs were flat versus Q1'08 due to cautious spending and certain onetime cost benefits. Given the stability we are starting to see in our end markets and the continued demand for risk products, we expect to increase investment in the second half of the year. As a result, we do not expect full year EBITDA margins to be as high as Q1 margins, but we will still be at or above our previous guidance. For the rest of 2009, we expect to continue to face longer sales cycles and pressure on renewal rates and pricing, as client experience the fallout from AUM reductions, consolidations and budget tightening. We don't expect these market dynamics to substantially change in the second quarter, but given our client discussions, we are cautiously optimistic that new sales and renewal rates will begin to improve in the second half of the year. In a few minute, David will take you through the details of our financial results. Before that I would like to update you on some of our recent announcements and on the investments, we are making in each of our businesses. One of our most exciting developments, is the addition of Knut Kjaer, who joined RiskMetrics on May 1 as our new President. In his role Knut will leader two main businesses, risks and governance as well as overseeing our sales and research and development organizations. Knut is like an accomplished professional and proven entrepreneur, most recently serving for 10 years as Chief Executive Officer of Norges Bank Investment Management, a division of the Central Bank of Norway, which he grew from a small $300 million asset manager into the second largest sovereign wealth fund in the world with over $350 billion in assets. At NBIM, Knut was a former client of both the risk and governance businesses, whom I had the good pleasure of working with personally for many years. Adding Knut as part of our ongoing plan to continue to invest in our business and strength our management team to take advantage of new market opportunities. You may have also seen the news that we opened our 20th global office last week in Beijing. This new location will initially survey the risk, research and development center building out to a full service officer over the next 12 to 18 months. We are still on schedule to begin migrating clients to our new proxy voting platform this fall. Several large and midsize clients are currently participating in our [beta] program which will then be followed by preview period in which proxy voting clients will be able to interact with proxy exchange in a non-production environment before going live. This new technology solution is helping us to achieve significant headcount and operational efficiencies that will allow us to grow our margin ISS and provide efficient and valuable service for our client going forward. In March, we strengthen our environmental research capabilities through an acquisition of Innovest, a leading provider of sustainability, research and ratings. Environmental factors like climate change and sustainability are increasingly playing the role in the way asset owners invest and view their portfolio risk. To conclude, we are pleased with the results for the first quarter of 2009. We achieved revenue growth of 8.7% grew our adjusted EBITDA 26.5% and significantly expanded margins all leading to adjusted EPS growth of over 50%. Although, a challenging sales environment and pressure on renewal rates has slowed revenue growth, we believe there are scaleable operating model will allow us to deliver strong profitability growth even against the backdrop of difficult market conditions. I will now turn the call over to David to provide more financial details in guidance.

Thank you, Ethan. I will discuss our first quarter financial performance as well as provide an update on what we expect for the remainder of 2009. Turning first to revenues, total consolidated revenues for the quarter were $77.4 million up 8.7% over Q1 '08. As expected, our revenue growth has decelerated compared to 2008 levels with revenues up $1.9 million or 2.5% from Q4 '08. Specifically, Q1 '09 risk revenue was down slightly compared to Q4 '08 as a result of lower new sales, higher hedge funds non-renewals, and some negative currency effects. ISS revenue increased $2.2 million in Q1 '09, compared to Q4 '08, primarily due to increased non-recurring revenue from our corporate advisory service products, as a result of the current proxy season, as well as a result of the Innovest acquisition which accounted for $600,000 of revenues in Q1. Our revenues were also impacted by the devaluation of currency rates compared to the US dollar. Primarily the Euro and British pound, which had a negative effect on revenue for Q1 '09 of less than $0.5 million. Although the currency impact on revenue was not significant in Q1, the future impact to revenue for the remainder of 2009 resulted in an approximate $4 million $6 million decline in year-over-year revenue at current foreign exchange rates, most of which will be offset by positive operating expense facts. I will now discuss the main drivers of revenue and ACV, our renewal rates and our new sales. Our renewal rate for Q1'09 was 83.5, slightly below the 84.2 Q4'08 rate and significantly lower than the Q1'08 rate of 88.4. The main drivers impacting the decline in renewal rates from Q1'08 were as follows. First an increase in non-renewals for risk hedge fund customers, due to AUM losses, liquidations and consolidations, which resulted in the risk renewal rate for hedge fund customers continuing at lower than historical rates. Overall the Q1'09 risk renewal rates was 85.8%, flat with Q1'08 as the renewal rate remained constant across most of our segments. The proxy business renewal rate in Q1'09 was only slightly lower than Q4'08 indicating a flattening of the rate of decline. Versus Q1'08 the proxy renewal rate was lower, due to cost cutting and budget constraints amongst our ISS customers. Finally, we experienced continued renewal rate declines some of our more discretionary product lines such as CFRA and the corporate services subscription products as we discussed on our last earnings call. Of the $8 million of non-renewals for Q1, the majority were related to US customers in the alternative investment and asset management sectors. 25% of the non-renewals were down sales to clients who retained our products at a lower price. The majority of the remainder were client's loss for reasons related to budget constraints, consolidations, liquidations or AUM reductions. In Q2 we expect our renewal rate to remain in the low 80s before rebounding to the mid-80s in Q3. As we said on our last earnings call, our new recurring sales slowdown in Q1. New recurring sales for Q1'09 were $8.2 million compared to $21.8 million in Q1'08 and $16.7 million in Q4 '08. In Q1, our ability to harvest our pipeline and get clients to sign deals worsened versus Q3 and Q4 last year as we discussed in our last call. We remain in discussions on many sizable deals, particularly in the risk segment as the global financial crisis and investor and regulatory pressures have created new needs for our products. As a result of the renewal rate and the new ACV picture above, consolidated ACV was $288 million at the end of Q1, up 7.6% from the prior year, and up slightly from year end '08, primarily due to the Innovest acquisition. Excluding invest Innovest, ACV increased 5.7% year-over-year and declined 1.1% versus Q4 reflecting the flattening of our organic subscription business, as well as the stronger dollar particularly against the Euro. Currency accounted for more than $2.5 million of ACV loss. On a segment basis, Risk ACV increased 12.3% versus last year and was flat compared to Q4. ISS ACV increased 2.3% year-over-year and was up 1.7% sequentially. While our recurring subscription sales slowed in Q1, one-time sales were strong at $7.8 million, up 19% over Q1'08, primarily due to increase demand for corporate services, compensation analysis products due to the higher focus on proxy compensation proposals, as well as increased implementation fees in the risk area and over adjustment proxy. We also acquired approximately $800,000 of AUM deals from Innovest which are expected to increase non-recurring revenues. Turning from revenues to profitability, consolidated adjusted EBITDA increased 26.5% in Q1 to $29.4 million resulting in an EBITDA margin of 37.9% which is a 530 basis point expansion from Q1’08. Our EBITDA margin expansion was driven by revenue growth of 8.7% compared to EBITDA expenses remaining flat. Risk adjusted EBITDA increased to $17.2 million with the margin of 42.7% and ISS Adjusted EBITDA increased to $12.2 million, a margin of 32.8%. We've continued to expand our EBITDA margins as expense growth has slowed due to the following. First, a decline in marketing and [T&A] expenses due to both, a decline in overall spending and the pasting of expense spending. Secondly, a one-time data cost reduction of $750,000 in Q1 as a result of renegotiating a data contract with one of our vendors. Next, favorable fluctuations in foreign currencies, particularly the British pound was declining 27% in Q1'08 and the euro which declined 14% resulted in a net savings of $900,000 in EBITDA expenses. And lastly, we’ve exercised control over both headcount and compensation expenses. While we’ve been experiencing substantial margin growth, we do not expect to maintain the Q1 margin for the whole year. Some of the factors include the one-time nature of the $750,000 reduction in data cost, some backward waiting of marketing expenses, increased hiring and investment, and less favorable currency comparisons as the year progresses. While our adjusted EBITDA margin was 37.9% in Q1, we expect it to be less than that for the full year. We continue to expect adjusted EBITDA to be in the previously provided range of $112 million to $120 million for 2009 resulting in a full year adjusted EBITDA margin expansion of 200 basis points plus versus the 34.1% full year '08 margin. EPS excluding non-recurring cost in Q1 was $0.14 a share, this metric adds back $1.3 million of non-recurring cost, which are comprised of ISS acquisition and restructuring costs, and lease exit costs. Including the one-time cost, GAAP EPS for Q1 was $0.13 a share, Q1 adjusted EPS which adds back amortization of intangibles, one-time cost and stock-based comp was $0.21 a share compared to $0.13 a share in the prior-year period, a growth of over 50%. During Q1, we signed an operating lease for our new ISS headquarters in Rockville, Maryland. We expect to move into this new facility in either the third quarter or fourth quarter of '09. The new lease is an 11-year agreement with a total commitment of $10.4 million. The annual projected savings from our move is approximately $1.3 million per year in EBITDA expenses starting at 2010. As a result of this lease signing, we will exit our current Rockville lease and expect to take a GAAP charge ranging from $2 million to $2.5 million in the third or fourth quarter of 2009. This charge represents the future net lease commitment obligation for the existing Rockville facility which will be paid over the remaining three-year obligation. Turning to cash flow, we continued to have a very strong cash flow generation quarter in Q1 despite the first quarter generally representing the weakest cash flow quarter of our year due to payment of year end bonuses and commissions. Free cash flow, or operating cash flow less CapEx increased to a positive $3.7 million in Q1'09 versus negative $14.7 million in Q1'08. CapEx decreased from $1.8 million to $0.6 million due to the timing of certain payments on facilities projects. CapEx will be higher for the remainder of 2009 mainly due to payments on those projects such as our Rockville relocation. Our CapEx for the year is still expected to be in the $10 million to $11 million range. In addition, in Q1 we used $14.9 million of net cash for Innovest. With that I'd like to turn to provide an update of our previously provided 2009 annual guidance. If you're considering foreign currency effects, our bottoms up review of customer account information, our current view of the market and its impact on 2009 new sales and renewal rates. We expect 2009 annual revenue to be at or below the low end of our previously provided $315 million to $330 million range. Despite the lower revenue guidance the company still expects adjusted EBITDA to be in the previously communicated $112 million to $120 million range, reflecting higher than expected margins. We continue to expect free cash flow for 2009 to be in the previously provided $70 million to $80 million range. With those remarks, Ethan and I will now open the call for your questions.

(Operator Instructions). And our first question will come from the line of James Kissane with Bank of America/Merrill Lynch. Please proceed. James Kissane - Bank of America/Merrill Lynch: Just a quick question on the pipeline, maybe a little more color around the composition of hedge funds and loan only in the pipeline?

I don't think there is a different mix to our pipeline then our overall clients today. It’s not like its coming from one segment or another. Same for regions, it’s about equal in the US and Europe about consistent with our current percentage around banks, asset managers and hedge funds. I think that the larger hedge funds are all spending more time with their investors on improving reporting to investors. Traditional asset managers are obviously becoming far more aware of risk concerns. There is obviously a significant amount of talk around regulation in the hedge fund space and how hedge funds will have to report going forward. So I don't think the dialogue is any different than it was a year ago. James Kissane - Bank of America/Merrill Lynch: And Ethan you mentioned you're going to step up investment given that the market stabilize. Can you give a sense on where the investments will be focused in the back half?

Primarily on the risk side, with new products that are extensions of what we already do with clients, not a typical of sort of performance attribution that we invested in last fall. I think broadly the area of credit, structured products, how some of these programs are going to work and some of our clients are looking at being part of those programs. James Kissane - Bank of America/Merrill Lynch: Great. It's George. Just a couple of quick questions. Can you give us a breakdown of revenue growth between the US and Europe and also may be, how the new sales in the quarter broke down among geographies?

Yeah. In terms of revenue growth, and this will be in our Q. The revenue growth was about 5% Americas, 17.5% in Europe and roughly flat in Asia, continues as in previous quarters to be if risk was 16 point something, it continues to be roughly that amount in both Americas and Europe with slower growth for ISS in the US and faster growth in Europe So, the growth of rest 16.7% was around 17.5%, 18% or both the Americas and Europe, very similar to what we saw in terms of distribution in previous quarters. In terms of the new sales, the new sales were about 50% in the US and 50% outside of the US, which is similar to what we've been seeing. James Kissane - Bank of America/Merrill Lynch: You guys sort of what's your comfort level around new business signings in the year around that mid $50 million range or so?

We think it’s more backward weighted than we had previously thought. The signing were slower in the first quarter, there are some deals that we signed already that are not in ACV. So I think, we’re still where we were previously, but it more backward waited than we had previously thought.

And obviously, its' the lower revenue for the year from accounting point of view.

New sales signed earlier in the year is obviously more valuable than one later in the year. James Kissane - Bank of America/Merrill Lynch: And then last question, what percentage of your ACV came up for renewal in the first quarter?

It was in the upper teens. James Kissane - Bank of America/Merrill Lynch: Great, thank you very much.

And our next question will come from the line of Kelly Flynn with Credit Suisse. Please proceed. Kelly Flynn - Credit Suisse: Thanks, I have a couple of questions. Do you think, going back to your initial remarks about, I think you said both signs of stability at risk and some cautious optimism based on recent conversations with the clients. Can you drill down on both of those comments specifically addressing what you are seeing hearing at risk versus at ISS? And then, if you could weave in, when Europe seems to actually be fairly strong for you guys, whereas the macro data coming out of Europe is pretty bad. Is that a source of downside risk, then I have a couple more? You start with that.

Okay. I think what we, sort of have seen is, we’ve talked we have pretty large account management group, that’s been just, I am talking to existing clients and that way we are recently going to be tracking where our renewal rates are going to be, sort of three months to six months out. I think, at the beginning of the year, there was a lot more uncertainty among clients of whether they have got jobs, the next week and I think that is largely blown over and to that that allows people to start moving from talking about our product to actually exchanging contracts. And so, we are starting to see some more movements, on contracts flowing back and forth, not simply seeing sort of demos and presentations and hearing, well, you know there's a lot of uncertainty here. We're starting to hear less of there's a lot of uncertainty here. So, I think that’s what's giving us the confidence in particular on the risk side. Vis-à-vis Europe, Europe has a heavier risk regulation than the US and so, the stickiness of that business is very, very strong and given what's going on in the market, I don’t see regulation getting weaker in Europe. And so, I don’t see risk associated there. So, I think our business is slightly different from the quote, economy that you're talking about. So, we don’t see the same downside risks in Europe but perhaps others might, given the overall economic outlook.

Our renewal rate in Europe given what Ethan said about the regulatory nature has and based on our account-by-account analysis looks fairly strong and stable.

Stronger than the US.

Yes. Kelly Flynn - Credit Suisse: Okay. And then, can you talk in a bit more detail about ISS. You did a good job of explaining that you're seeing more of a head on that discretionary stuff say for in corporate services. But can you drill down a little more into corporate services. I mean where exactly you're seeing that weakness.

Well, on corporate services, this is sold obviously to corporations where they're buying discretionary government services and others, they're not required to buy them but they use them to help, form their own governance policies, and in times where people are cutting budgets, we are seeing lower renewal rates in those products. At the same time, we are seeing more one-time business around helping companies talk about compensation plans, obviously given all the news about executive compensation. So, the overall business continues to grow, but it is moving from the renewal business of governance data and invoice to one-time help with compensation plans. Kelly Flynn - Credit Suisse: Okay. And related to that, do you mentioned David in your comments the one-time sales, that helps I think the new sales number. Can you frame out how that relates to the optimism about the second half of the year. Are you assuming you will continue to see more one-time sales or do you assume that goes the way and positives offset it?

I think we’ve had positive surprises, Ethan on one-time the corporate compensation businesses have been strong and these are related to proxy proposals more focused on that. We see that trend continuing as generally at first and fourth quarter business. So, we've been through the strong period and then in the fourth quarter again, if we still have that tone in the market, which we expect will have some strength. There has also been some good strength in some of the other areas as clients that had a little more specific needs where we've been able to charge in customization fees on top of our normal subscription.

But Kelly to be clear, we are not expecting the same level of one-time sales in the second or third quarter, it is seasonal associated with the proxies. And so, those two numbers will come down second or third quarter and pickup again, in the fourth quarter the past, its consistent with the past.

Because we recognize that corporate subscriptions over three to four month period, the strong fourth quarter and first quarter will spillover in the second quarter, but then one-time cycle is over than the one-time revenues begin to drop as you've seen in our previous results. Kelly Flynn - Credit Suisse: Okay. Thank you very much.

And our next question will come from the line of David Scharf with JMP Securities. Please proceed. David Scharf - JMP Securities: Thank you, good morning. A couple of questions, first on the proxy business. I think you've made reference to some pricing pressures there. We've heard more of the same. Just curious, when you look at past cycles, has there typically been a fair amount of a price competition as the end market get more challenged in a more difficult part of the cycle or do you think there is something secular here and which we are looking at more sustainable lower price points for traditional governance services.

Hard to say, I don't want to profess to been through an up cycles to make a comment on that. Nor I'm sure the industry really has it, got pretty young. I think that we are clearly focused on providing more services around what has traditionally been, purely research and voting. So, as evidenced by the investment in proxy exchange, I think that it’s not simply a case of taking out heads. I actually take it say, significant increase in functionality and usability for clients. And so, we are hopeful that when the economy stabilizes you are going to see stabilization around price, we don't see this is a sort of a one way move towards lower prices that will stay especially since there is a content elements around research. Again I believe keep prices at these levels and then backup again overtime. David Scharf - JMP Securities: Okay. Thank you. And just revisiting the risk side, just focusing on the US may be where new sales and renewals, it would be more challenged. Just I want to dig in a little deeper in the type of dialog and feedback you are getting from customers. Is it primarily just plan and simple budgets are constrained, users are saying listen if its not broken don't fix it, this is in a year we are ready to spend more money or is there any other underlying issues. Do you see any more dialogue in terms of domestic managers questioning the need for more risk management or the efficacy of existing tools or is it just strictly budgetary?

We see no client who said we thought Risk was useful and we don't think it's useful anymore. So we get none of that. I think very specifically as you go through the numbers, a larger percentage of our US businesses is hedge funds than in Europe. And if you look at sort of a year and a half ago, you were still seeing large hedge funds launching, multi-billion dollar launches of hedge funds. That was a business they very quickly were trying to be institutional, they launched a lot of money, they would put institutional Risk systems in place, they would use us. That business is gone away, and a number of those launches have failed and closed. So that's where you get the non-renewals around that and you don't see that in your business. It is not a case of existing clients who have used Risk saying, Risk isn't valuable to us anymore, it's usually we don't exist anymore or we closed three of our trading strategies and therefore we don't need part of the analytics and data they have been providing us in the past. David Scharf - JMP Securities: Is there a breakdown between Risk and ISS for the $8 million of new ACV?

Yes, I think we said that was $5 million for Risk and $3.2 million for ISS because much of the new sales comes from the existing customers. You would typically see a strong fourth quarter because of the higher concentration of the larger contracts in the fourth quarter and the first quarter would have lower new sales in any market. So you would expect to see that in that $3.2 million and then the rest was $5 million. David Scharf - JMP Securities: And lastly, can you just recap or remind me about the pipeline of new products or new versions or upgrades that we would expect to see, probably heading into 2010? I know there is multi-asset performance attribution, you're (17th 0:34), you mentioned the proxy exchange. Can you run down how many new versions or new products we made potentially?

Performance attribution and proxy exchange are an extension of our sustainability, are sort of ES&G products around Innovest, more screening, research and data tools around sustainability. We are spending more time on credit, in particular around counterparty risk. While we have some products there, we are expanding those and hoping to do more in the broadly defined credit space. Then I guess the last thing would be structured products, both from a Risk pricing and valuation and ratings broadly, area around structured products.

And our next question will come from the line of Peter Appert with Piper Jaffray. Please proceed. Peter Appert - Piper Jaffray: Ethan, the 25% of non-renewal due to down selling at lower prices, how do you prevent broad-based price reductions from really impacting the ISS business? I assume you're not doing selective price productions to get renewals?

I think when we say there is price reduction, its often linked to some sort of service that a client no longer needs, in other words, how many shares are they voting, how many countries are they invested in, etcetera. So clearly, it's not simply a case that here is the same service and we'll reduce one client's price and not another client's price. Obviously we are gaining real efficiency within our system and are able to pass some of that on to our clients as well.

Peter there is no systematic price reduction. Most of this would be, the client had a certain package and has either elected or has need which are lower than last year and there is a bundle of price renegotiation, but they are case specific not systematic. Peter Appert - Piper Jaffray: So I think that's the part that probably is not clear to investors, right? So you're not suggesting across the board price reductions, you’re suggesting renewals at lower levels of service.

It will be a combination of lower levels of service or products, lower number of securities voted or renegotiation of which the first two are much more prominent. Peter Appert - Piper Jaffray: And how about on the risk side, what have you done this year on pricing front there?

Not a whole lot Peter. We have seen some price pressure with a number of clients but its been few, they tend to be the very large clients who work it out large bank and meeting with the procurement department, it’s telling you that don't you read the newspaper and know our costs are down and etcetera and isn't there someway of reducing price. We do our best to work with client in areas like that and come up with solutions or maybe you don't need as much as of this service or that service. But it’s not broad-based and as we've often talked, once people put us within their daily operation there, it’s difficult to take us out of that. Peter Appert - Piper Jaffray: I’ve noticed the sales and marketing cost down 20% plus year-to-year, how much of that is timing related or what else is driving specifically that component of cost?

That's been going on for many quarters, that's the consolidation of the sales force. The higher productivity, the lower commissions, given the lower new sales and the flattening of the marketing. I did mention that there is a pacing of marketing, where in the first quarter we spent less than [per rata]. So that's one of the factors in a little more of the backward rating of the sales and marketing, but the overall driver there is the first three effects I mentioned.

It will pick up if new sales pick up due to commission but other than that, I think that's permanent. Peter Appert - Piper Jaffray: And then lastly, Ethan how you are you spending your time now or how will you be spending your time in the context of the senior management change taking place?

I think it started this week, so there is still a good amount for us to be doing together, I don't see my job changing very much in the short run. In the longer run clearly, we’ll have more time to spend on some new initiatives and new market opportunities for the firm which sort of continue to abound throughout given what's happening in the financial markets and broadly the area of risk.

And our next question will come from the line of [Ivory Didiana] with Fox-Pitt, Kelton. Please proceed.

You mentioned earlier that some of the new initiatives you were working on is structured finance on pricing and maybe waiting. Can you tell us more about when you work on these new products and services? How much new revenue you think will be coming from getting the market share from existing players versus a brand new product area?

It obviously varies from product-to-product that we just talked about structured products. I think one could argue that lots of money are spent on structured products if you include the rating agencies, analytic providers, data providers, etcetera. But I think in general the market doesn't feel it has a solution to properly assess risk of these types of instruments. So will it kind of wait, will it be dollar spent away from someone else, I am not sure, that's certainly not how we are looking at it. But to the extent that I think there are many other people looking at figuring out how to come up with better risk modules for that, it's more competing for new dollars. But there clearly is competition in that area.

With regards to the ACV by client types, the largest segments, invest managers, alternative managers and banking and trading, can you update us on the percentage?

The asset management, 57%; banking and trading, 15%; these are very similar to what you saw in previous periods. Hedge funds, 17% and fund-to-fund in prime broker, 6%. Pretty much the same as last quarter, there was no material change in that.

And our next question will come from the line of [Andrea Glucoff] with Brean Murray. Please proceed.

Yes, thanks. To follow-up on the question, I guess David, to the extent you guys are still some declines in just the sheer number of alternative asset managers as clients. Exiting the year whether you think the alternative investments as a percentage of ACV going to be?

Well, with the renewal rate being lower for a couple of quarters, it’s still been in the same range. So, I think we're talking about percentage where too maximum difference between last year and this year.

And we're still seeing enough demand from other hedge funds that I will be surprised if it’s more than a percentage or two away from where it’s been historically.

We're still seeing, there is a very little change from fourth quarter and that we're seeing some new sales from that sector and we're seeing lower renewal rates. And so overall across the whole customer base, it doesn’t really change the 16% to 17% hedge fund percentage of the business.

Okay. And to drill down on the overall renewal rate, I think you suggested that it’s going to be some more or less flattish in the second quarter versus Q1 kind of lower 80. If we segment that, do you think ISS bottomed out here at about 80% or can it get worse.

Well there is, ISS is likely to improve because of the higher renewal rate of the proxy business and the greater concentration of the proxy business particularly in the second half of the year. So, this is very much. Even when we talk in two segments, it’s really a, amassing of individual product rates and with the proxy business having higher renewal rates and let’s say CFRA or corporate, it's likely that the governance business will improve overtime.

Okay. And I get lastly to the extent right now, you are seeing some push backs from your clients, on the offering like the CFRA like some of the corporate offerings. Do you think that your original targets for contribution from Innovest are at any risk?

No, I think the ES&G product lines have both had higher renewal rates upper 80s, low 90s as well as higher top-line growth, both the new sales and the renewal rates have been quiet strong there. There is a different dynamic going on in the ES&G business as it relates to the CFRA business from a product and client side perspective. Another factor would the CFRA business because of its recommendation of accounting in short is more concentrating the hedge fund area, where the ES&G business is more concentrated in traditional asset management area.

I think ES&G is becoming, to use less and lesser discretionary.

And our next question will come from the line of Michael Weisberg with ING. Please proceed. Michael Weisberg - ING: Yeah, good morning, everyone. You guys done a great job on the cost side. If you look at 2010, you talk about a 150 to 200 basis points of margin improvement, is that sustainable in 2010 and is there is a minimum level of revenue you need to be able to do that in 2010?

I'm sure there is minimal number, but I think we feel quiet confident that we will be able to continue to expand margins along the line we talked about. We have run this 150 to 200 basis points and frankly exceeded it most years that's because I think we enough room in the system. I think you’re going to see some real technology benefits on the governance side that you'll fully seen in 2010 that we've sort of seen partially and are still in making real investments there. So we have some room on that side. And on the risk side, obviously margins are exceedingly high and are hopeful that the investments we’re currently making there will lead to the ability to continue to grow them. Michael Weisberg - ING: I think David you mentioned to me that in prior fair market, the CFRA renewal rate has gotten as low as the 60s. Are we down to that level now?

The CFRA renewal rate has been down in about that range. In CFRA business particularly is about 5% of our revenues or less. The CFRA business has been experiencing increased non-renewal but also a fairly healthy new sales environment as the investors have been concentrating on accounting risks, particularly in the financial service area. So the business had more volatility but there is some good end market demand and this is what’s happened in some of our end market in the CFRA history. Michael Weisberg - ING: Okay. This seems like you don't expect a significant improvement or some improvement in the new order front in the second quarter but you’ll hopefully get back to mid-teens kind of new orders second half which would get you to around $50 million or so for the year. Is that the right way of looking at it?

I think it’s too early in the quarter, we have some backlog, we have discussions, we don't know what's going to be the same or little better, etcetera. But we’re not going to get to last years end values in the second quarter given the market environment, that's some reasonable way of looking at it. Michael Weisberg - ING: What did you say, you’re not going to get the last years?

We won't get back into the mid-teens like we were on that mid-teens 20 like we were in the last year in the second quarter. Michael Weisberg - ING: I think you were clear in saying, first half last year was really and normally because of the huge number of hedge funds that started up and bought your service. I mean we shouldn't look at that as a comparison point longer term. Is that right?

Correct. There are a number of investment cycles going on in the first half of the last year including asset management regulation hedge fund, a number of things has a number of our constituencies we’re looking at Risk. And as Ethan mentioned, still lots of discussion and needs, but certainly the new startup hedge fund part of the cycle is not in this point of line. Michael Weisberg - ING: Am I right in saying that the ISS, the shortfall of ISS in doing 2008, the cancels were heavier on the international side and now it's heavier on the US side? I don't know if that's right, but if it is could it imply that maybe we’re bottoming out in terms of the people we need to cancel the service?

No, that’s not correct. There was not an international effect relating to ISS. The effects on ISS relate as we mentioned to, the more discretionary products as well as the cost pressures in the proxy voting business. Michael Weisberg - ING: The $1.3 million you said which was a one-time cost in the first quarter, what portion was the acquisition?

That was a $600,000 lease write-off for the $600,000 and the rest was restructuring of Innovest. We exited one lease in Rockville which accounted for a little less than half of that.

Ladies and gentleman. This concludes the question-and-answer portion of today's call. I would now like to turn the call back over to Mr. Ethan Berman for closing remarks.

Thank you all very much for joining us this morning. And we look forward to speaking to you next quarter.

Thank you for your participation in today's conference. This concludes your presentation. You may now disconnect.