3. ACQUISITIONS

Acquisition of RiskMetrics

On June 1, 2010, MSCI acquired RiskMetrics Group, Inc. ("RiskMetrics"). Under the terms of the Agreement and Plan of Merger dated as of February 28, 2010 by and among MSCI, Crossway Inc. ("Merger Sub"), a wholly owned subsidiary of MSCI, and RiskMetrics, Merger Sub merged with and into RiskMetrics, with RiskMetrics continuing as the surviving corporation and a wholly owned subsidiary of MSCI. MSCI and RiskMetrics began joint operations immediately after the merger became effective. MSCI acquired RiskMetrics to, among other things, offer clients a more expansive portfolio of investment decision support tools that will enable clients to understand risk across their entire investment processes as well as broaden the concentration of the Company's client base beyond asset owners, asset managers and broker dealers to include a greater number of hedge fund , mutual fund and bank clients.

The total preliminary purchase price for RiskMetrics was approximately $1,572.4 million and was comprised of:

MSCI issued approximately 12.6 million class A common shares and reserved approximately 4.3 million class A common shares for outstanding vested and unvested stock options and unvested restricted stock awards assumed as part of the acquisition of RiskMetrics.

The preliminary fair values of stock options assumed were estimated using a Hull-White Lattice option-pricing model. The preliminary fair value of the unearned portion of the unvested RiskMetrics stock options and restricted stock awards will be recorded as operating expense over the remaining service periods, while the preliminary fair values of the earned portion of the vested and unvested stock options and unvested restricted stock awards are included in the total preliminary purchase price. The total preliminary purchase price for RiskMetrics is subject to change during the measurement period as MSCI finalizes the number of RiskMetrics common shares outstanding that it purchased, validates the conversion calculations of RiskMetrics stock options and restricted stock awards assumed, and finalizes the proportion of such stock options and restricted stock awards assu med that are earned as of the acquisition date.

For the nine months ended August 31, 2010, MSCI incurred approximately $21.2 million in transaction related costs related to the acquisition of RiskMetrics. These costs are reflected in "selling, general and administrative" on the Condensed Consolidated Statements of Income.

Preliminary Purchase Price Allocation

The acquisition method of accounting is based on ASC Subtopic 805-10, "Business Combinations," and uses the fair value concepts defined in ASC Subtopic 820-10, "Fair Value Measurements and Disclosures," which MSCI has adopted as required. The total preliminary purchase price for RiskMetrics was allocated to the preliminary net tangible and intangible assets based upon their preliminary fair values as of June 1, 2010 as set forth below. The excess of the preliminary purchase price over the fair values of the preliminary net tangible assets and preliminary intangible assets was recorded as goodwill. The preliminary allocation of the purchase price was based upon a preliminary valuation and the estimates and assumptions are subject to change within the measurement period. The primary areas of the preliminary purchase price a llocation that are not yet finalized relate to the fair values of certain tangible assets acquired and liabilities assumed, the valuation of intangible assets acquired, certain legal matters, income and non-income based taxes and residual goodwill. MSCI expects to continue to obtain information to assist it in determining the fair value of the net assets acquired at the acquisition date during the measurement period. The preliminary purchase price allocation for RiskMetrics is as follows:

MSCI generally does not expect the goodwill recognized to be deductible for income tax purposes. Approximately $1,002.5 million and $238.3 million of the preliminary goodwill was allocated to the Performance and Risk and the Governance segments, respectively.

Preliminary Valuations of Intangible Assets Acquired

The following table sets forth the preliminary components of intangible assets acquired in connection with the RiskMetrics acquisition:

Preliminary Pre-Acquisition Contingencies Assumed

MSCI has evaluated and continues to evaluate pre-acquisition contingencies relating to RiskMetrics that existed as of the acquisition date. MSCI has preliminarily determined that certain of these pre-acquisition contingencies are probable in nature and estimable as of the acquisition date and, accordingly, have preliminarily recorded the best estimates for these contingencies as a part of the preliminary purchase price allocation for RiskMetrics. MSCI continues to gather information for, and evaluate substantially all, pre-acquisition contingencies that have been assumed from RiskMetrics. If MSCI makes changes to the amounts recorded or identifies additional pre-acquisition contingencies during the remainder of the measurement period, such amounts recorded will be included in the purchase price allocation during the measurement period and, subsequently, in MSCI's resu lts of operations.

Actual Impact of RiskMetrics Acquisition

The following table presents information for RiskMetrics from the June 1, 2010 acquisition date that is included in MSCI's condensed consolidated statements of income for the three and nine months ended August 31, 2010.

RiskMetrics' Operations Included in MSCI's Results for the Three and Nine Months Ended August 31, 2010

Other Fiscal 2010 Acquisition

On July 30, 2010, MSCI acquired Measurisk, LLC ("Measurisk") to expand its product offerings to hedge fund investors. This was not deemed to be an individually significant acquisition. MSCI has accounted for this acquisition in accordance with the ASC Subtopic 805-10 and has included the financial results of Measurisk in its consolidated results from the July 30, 2010 acquisition date. For the three and nine months ended August 31, 2010, Measurisk contributed approximately $1.1 million to MSCI's revenue and $0.3 million to MSCI's earnings. The preliminary purchase price allocations for this acquisition were $2.3 million for other assets, $9.5 million for identifiable intangible assets, $1.9 million for other liabilities and $21.1 million for goodwill based upon a preliminary valuation and those estimates and assumptions are subject to change as MSCI obtains additional information during the applicable measurement period.

Unaudited Pro Forma Financial Information

The unaudited pro forma financial information in the table below summarizes the combined results of operations for MSCI and RiskMetrics as though the companies were combined as of December 1, 2008. The pro forma financial information for all periods presented exclude transaction costs directly attributable to the acquisition and also includes the business combination accounting effects resulting from the acquisition including the amortization charges from acquired intangible assets (certain of which are preliminary), adjustments to interest income for lower average cash balances, interest expense for borrowings and the amortization of deferred financing fees, debt discounts and prepaid agency fees and the related tax effects as though the aforementioned companies were combined as of December 1, 2008. No adjustments have been made for the Measurisk ac quisition because it was not deemed to be an individually significant acquisition. The pro forma financial information as presented below is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisitions and any borrowings undertaken to finance the RiskMetrics acquisition had taken place at December 1, 2008.

The unaudited pro forma financial information for the nine months ended August 31, 2010 combined the historical results of MSCI for the nine months ended August 31, 2010, the historical results of RiskMetrics for the three month-period ended March 31, 2010 and the historical results of RiskMetrics for the three month-period ended December 31, 2009 (due to differences in reporting periods). The unaudited pro forma financial information for the nine months ended August 31, 2009 combined the historical results of MSCI for the nine months ended August 31, 2009 and the historical results of RiskMetrics for the nine month-period ended September 30, 2009 (due to differences in reporting periods). The unaudited pro forma financial information for the three months ended August 31, 2010 reflects the results of MSCI for the three months ended August 31, 2010. The unaudited pro forma financial information for the three months ended August 31, 2009 combined the historical results of MSCI for the three months ended August 31, 2009 and the historical results of RiskMetrics for the three month-period ended September 30, 2009 (due to differences in reporting periods).

The unaudited pro forma financial information and the effects of the pro forma adjustments listed above were as follows for the three months ended August 31, 2010 and 2009:

The unaudited pro forma financial information and the effects of the pro forma adjustments listed above were as follows for the nine months ended August 31, 2010 and 2009:

The unaudited pro forma financial information by MSCI's operating segments' and the effects of the pro forma adjustments listed above are presented in the table below (See Note 15, "Segment Information," for further information about MSCI's operating segments):