MSCI-Based European Derivatives Begin Trading

NEW YORK/LONDON, 25 May 1999. Morgan Stanley Capital International (MSCI) announced today that futures and options on the MSCI Euro and the MSCI Pan-Euro indices begin trading on the London International Financial Futures and Options Exchange (LIFFE).

These new MSCI-based index derivative products offer global investors the ability to gain or hedge equity exposure in the Eurozone or all of Europe. The key advantage of these new contracts is that they are based on indices which represent the underlying countries and industries, and are explicitly designed to track the broad MSCI benchmarks widely used throughout continental Europe, the U.S., and Japan to measure European equity performance. With approximately US$1.5 trillion of equity assets indexed or benchmarked globally [of which $600 billion are in Europe], the MSCI indices are the widest used international benchmarks.

Details of MSCI Euro Indices

The LIFFE-listed futures and options are based on the MSCI Euro and MSCI Pan-Euro narrow indices, derived respectively from the MSCI EMU and MSCI Europe broad equity market benchmarks. The MSCI Euro and MSCI EMU indices comprise the 10 countries in the EMU (excluding Luxembourg), while MSCI Pan-Euro and MSCI Europe include all 15 developed European markets covered by MSCI.

The two narrow indices include the largest capitalized and most liquid securities, achieving approximately 90% of the broad benchmarks' market capitalization with only 40% of the names. The additional use of industry screens ensures that the narrow indices represent the underlying markets and track the broad benchmarks. These are important elements for market acceptance and successful trading of stock index derivatives.

Key Attributes of Contracts

Because of the market capitalization and liquidity screens used to create the MSCI Euro and Pan-Euro indices, derivative traders are ensured that the constituents are easily traded. The ability to replicate the underlying basis of a derivative contract allows for the construction of offsetting positions in the cash market as well as tighter spreads and more in-depth quotes in the market. This enhances liquidity on the contracts, which is necessary to meet the execution requirements of institutional participants. In addition, the high tracking of the underlying MSCI Euro and Pan-Euro indices to the MSCI broad benchmarks is ideal for passive investors.

MSCI indices are the most widely used benchmarks by global international portfolio managers. Over 1,200 clients worldwide currently use the MSCI benchmarks. In North America and Asia over 90% of institutional international equity assets are benchmarked to MSCI indices. In Europe 74% of Continental fund managers currently use MSCI indices as their benchmark according to a recent Merrill Lynch/Gallup survey. With the evolution of European financial markets plus the large proportion of non-European international portfolios invested in European equities and benchmarked to MSCI indices, these new indices and their associated derivative contracts should attract significant interest and support.

Real-time Index Value Codes

Real-time index values are quoted on Reuters and Bloomberg. On Reuters, the codes are .MSER for MSCI Euro and .MSPE for MSCI Pan-Euro. On Bloomberg, the codes are MSER <Index> for MSCI Euro and MSPE <Index> for MSCI Pan-Euro. Index values are updated every 15 seconds during market trading hours in Europe. The first European markets open at 0730 GMT and the last markets close at 1630 GMT.

More information can be found on the MSCI web site at www.msci.com/products/derive/index.html

Notes to Editors

MSCI

Morgan Stanley Capital International Inc. (MSCI) is a leading provider of global indices and benchmark related products and services to investors worldwide. Morgan Stanley Dean Witter & Co. (MSDW), a global financial services firm and a market leader in securities, asset management, and credit services, is the majority shareholder of MSCI, and The Capital Group Companies, Inc. (Capital), a global investment management group, is a minority shareholder. MSCI has full responsibility for and independence in the design, maintenance, production and distribution of the Indices. In 1999 MSCI celebrates its 30th anniversary as the leader in the benchmark industry. MSCI employs over 100 people located in London, Geneva, New York, San Francisco, Hong Kong, Tokyo and Singapore. MSCI equity indices number over 3,000, covering 51 countries across developed and emerging markets. MSCI recently introduced two series of fixed income indices: The MSCI Sovereign Debt Index and The MSCI Euro Credit Index.

Contact Information

Simon Midgen
MSCI
25 Cabot Square
London E14 4QA
Tel: +44 171 425 4595
Fax: +44 171 425 6669
Email: midgen@ms.com

Note to U.S. Investors

Trading in the aforementioned LIFFE futures and options by U.S. investors is contingent upon obtaining the required approvals from the SEC and CFTC by the LIFFE. Without the necessary approvals, U.S. investors can not be permitted to purchase or sell the LIFFE listed futures and options on these indices.