MSCI announced today its plan to transition the FTSE KLD Indices, which are used by investment managers to integrate Environmental, Social and Governance criteria into their investment decisions for performance benchmarking and for asset allocation, to a newly created family of MSCI ESG Indices.  This announcement is related to the recent acquisition of the RiskMetrics Group, Inc. by MSCI Inc.

The transition of the FTSE KLD Indices to the MSCI ESG Indices will coincide with the MSCI August 2010 Index Review that will be implemented as of the close of August 31, 2010 (effective on September 1, 2010).  As part of the transition, the FTSE KLD Indices will be re-named as follows:

• MSCI World ESG Index  (from FTSE KLD Global Sustainability Index)
• MSCI World ex US ESG Index  (from FTSE KLD Global Sustainability ex US Index)
• MSCI EAFE ESG Index  (from FTSE KLD Europe Asia Pacific Sustainability Index)
• MSCI North America ESG Index  (from FTSE KLD North America Sustainability Index)
• MSCI Europe ESG Index  (from FTSE KLD Europe Sustainability Index)
• MSCI Pacific ESG Index  (from FTSE KLD Asia Pacific Sustainability Index)
• MSCI USA ESG Index  (from FTSE KLD US Large-Mid Cap Sustainability Index)
  ** Note the MSCI Global Climate Select Index will be a custom index
• MSCI USA Large Cap ESG Index  (from FTSE KLD US Large Cap Sustainability Index)
• MSCI USA Mid Cap ESG Index  (from FTSE KLD US Mid Cap Sustainability Index)
• MSCI USA Small Cap ESG Index  (from FTSE KLD US Small Cap Sustainability ex US Index)
• MSCI USA IMI ESG Index  ((from FTSE KLD US All Cap Sustainability Index)
• MSCI USA SMID ESG Index  (from FTSE KLD US Small-Mid Cap Sustainability Index)
• MSCI USA ESG Select Index  (from FTSE KLD Select Social Index)
• MSCI KLD 400 Social Index  (from FTSE KLD 400 Social Index)
• MSCI USA Catholic Values Index  (from FTSE KLD Catholic Values 400 Index)
• MSCI Global Climate Select Index**  (from FTSE KLD Global Climate 100 Index)

The new MSCI ESG Indices will be based on the MSCI Global Investable Market Indices and will follow the regular MSCI Index Review schedule.  The ESG criteria for stock selection remain unchanged.

MSCI is proposing to reduce the target sector representation of the MSCI USA ESG Index from 65% to 50% of the parent index market capitalization to bring it in line with the design used for the MSCI World ESG Index.  This change would aim to make the MSCI USA ESG and MSCI World ESG Indices more comparable and in line with the best in class objective.

We also propose that the MSCI World ESG Index will treat Canada and the USA separately, rather than as a combined North America region as is currently done for the purpose of target sector representation.

Finally, we propose that the MSCI USA ESG Select Index will be optimized using the Barra Open Optimizer and the relevant Barra Equity Model for index construction, instead of the current optimizer and risk model.

For ongoing index maintenance, we propose that new additions to the MSCI Global Investable Market Indices due to corporate events will not be added simultaneously to MSCI ESG Indices, but will be considered for inclusion at the following Index Review.  Constituents of the MSCI ESG Indices that are impacted by corporate events would be reviewed on a quarterly basis for compliance with the MSCI ESG Index Methodology.  Any resulting deletion due to non-compliance with the MSCI ESG rating framework would be implemented at the following regular MSCI Index Review.  However, MSCI Global Investable Market Indices constituents deleted following corporate events would be deleted simultaneously from the MSCI ESG Indices.

All FTSE KLD Indices will continue to be calculated, maintained and delivered as per the current process until the transition to the MSCI ESG Indices Methodology is completed on September 1, 2010. In the meantime, indicative lists of MSCI ESG Index constituents are available to clients upon request. MSCI will start distributing the MSCI ESG Indices on a daily basis to subscribing clients via the MSCI Integrated Client File (ICF) from August 25, 2010 onwards.  The pro forma MSCI ESG Indices resulting from the MSCI August 2010 Index Review will be provided to clients starting August 25, 2010.

MSCI welcomes feedback from market participants on the proposed methodology changes described herein for the MSCI World ESG, MSCI USA ESG and MSCI USA ESG Select Indices, and will announce its final methodology decisions by July 16, 2010.