1. Introduction Globally, investors are increasingly seeking to invest in accordance with their values—such as religious beliefs, moral standards, or ethical views. Examples of such beliefs are avoidance of sin stocks, respect for human rights, adherence to an international normative standard such as UN Global Compact, etc. The MSCI Global Socially Responsible indices exclude companies that are inconsistent with specific values based criteria. Additionally, these indices target companies with high Environmental, Social and Governance (ESG) ratings relative to their sector peers, to ensure the inclusion of the best‐of‐class companies from an ESG perspective. Further, these Indices aim to target sector weights that reflect the relative sector weights of the underlying MSCI Global Investable Market Indices to limit the systematic risk introduced by the ESG selection process. Overall the MSCI Global Socially Responsible indices target coverage of 25% of the underlying index. Currently MSCI constructs MSCI Global Socially Responsible Indices for the Standard size‐segment in all Developed Markets. The indices are free float‐adjusted market capitalization weighted.

2. ESG Research Framework The MSCI Global Socially Responsible Indices are based on MSCI’s ESG research framework, which generates a rating of each company’s management of its environmental, social and governance performance. To determine a company's ESG ranking, MSCI ESG Research examines extensive data collected from various sources, such as company filings, media, governments, third‐party data providers and NGOs. Each company is assigned to one of more than 80 industry groups, each of which has a unique set of ESG rating data and weightings. The research model generates numerous sub‐scores for the company across each data category applicable to the industry group. The model aggregates the sub‐ scores to generate separate environmental, social and governance scores for the company, which are ultimately expressed as a single composite ESG score. A company's ESG score is mapped to a 9‐point letter scale, with ratings from AAA (highest) to C (lowest). More information on MSCI ESG Research can be found at http://www.msci.com/products/indices/thematic/esg/esg_research_methodology.html

3. Values Based Criteria The MSCI Global Socially Responsible Indices exclude companies that are inconsistent with the following values based criteria: 

Alcohol

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Civilian Firearms

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Gambling

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Military Weapons

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Nuclear Power

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Tobacco

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Adult Entertainment

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Genetically Modified Organisms (GMO)

Please refer to Appendix 1 for more details on these criteria

4. Constructing the MSCI Global Socially Responsible Indices 4.1. Underlying universe The selection universe for the MSCI Global Socially Responsible Indices is defined by the constituents of the MSCI Global ESG Indices. The MSCI Global ESG Indices target the highest ESG rated companies, making up 50% of the free float adjusted market capitalization in each sector in each region of the MSCI World Index. Only companies with an ESG rating of “B” or above are eligible for inclusion in the MSCI Global ESG Indices. This choice of universe ensures that only the best‐of‐class ESG companies in each region and sector are included in the MSCI Global Socially Responsible Indices.

4.2. Exclusion Criteria Companies that are inconsistent with the values based criteria described in Section 3 are excluded from the MSCI Global Socially Responsible Indices. Additionally, any company that has an ESG rating of “BB” or lower is not eligible for inclusion in the MSCI Global Socially Responsible Indices. This rating criterion ensures a high minimum level of ESG performance, consistent with the aim of including only the best‐of‐ class companies in the index.

4.3. Index Construction Currently MSCI constructs MSCI Global Socially Responsible Indices for the Standard size‐segment in all Developed Markets. These indices are constructed at a regional level with the regions being defined as follows: 

Each regional Socially Responsible index targets 50% of the free float adjusted market capitalization of each Global Industry Classification Standard (GICS®) sector of the underlying MSCI regional ESG Index. These regional Socially Responsible indices are then aggregated together to construct the MSCI World Socially Responsible Index.

5. MAINTAINING THE MSCI GLOBAL SOCIALLY RESPONSIBLE INDICES 5.1. Annual Index Review The composition of the MSCI Global Socially Responsible Indices is reviewed on an annual basis in May to coincide with the annual index review of the underlying MSCI Global ESG Indices. The changes are implemented at the end of May. Ratings used for the annual index review are taken as of the end of April. At the annual index review, the composition of the MSCI Global Socially Responsible Indices is reassessed in order to target 50% free float‐adjusted cumulative market capitalization of each sector of the underlying regional ESG Index. For each sector, the constituents of the underlying regional ESG Index are first ranked based on the company level ESG Score and then by decreasing free float adjusted market capitalization. Constituents for the Socially Responsible index are then selected in the following order till the 50% coverage by cumulative free float adjusted market capitalization target is reached.    

Companies in the top 35% ‘AA’ rated companies in the top 50% Current index constituents in the top 65% Remaining Companies in the eligible universe

The above rules are applied sequentially so that the MSCI Global Socially Responsible index includes companies with high ESG performance, while minimizing turnover.

5.2. Quarterly Index Reviews The MSCI Global Socially Responsible Indices are also reviewed on a quarterly basis to coincide with the regular index reviews of the underlying regional ESG Indices. The changes are implemented at the end of February, August and November. Ratings used for the quarterly index reviews will be taken as of the end of the month preceding the index review, i.e., October, January and July. At the quarterly index reviews, any existing index constituent whose rating falls to “BB” or lower is deleted from the MSCI Global Socially Responsible Indices. Additionally, any existing constituent that is no longer consistent with the values based criteria is also deleted from the MSCI Global Socially Responsible Indices.

Additions to the indices are only considered in those sectors where the resulting free float adjusted market capitalization coverage does not meet the 50% target. Market price movements may cause small deviations in the sector coverage between two index reviews and so a buffer of 10% is used on the target coverage of 50% is used to define under‐representation, in order to minimize turnover. Companies are added only in those sectors where the current market capitalization coverage is less than 45%, until the 50% target is reached. A company must have a rating of “BBB” or higher to be considered for addition to the indices.

5.3. Ongoing Event‐Related Maintenance The MSCI Corporate Events Methodology is applied for the maintenance of the MSCI Global Socially Responsible Indices between index reviews. In general, there will be no additions to or deletions from the index between two index reviews, except when the new security results from an event affecting an existing index constituent. Companies deleted from the underlying index between index reviews are also deleted at the same time from the MSCI Global Socially Responsible Indices. The details relating to the handling of specific corporate event types can be found in the MSCI Corporate Events Methodology book available at: http://www.msci.com/products/indices/size/standard/methodology.html

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