Lehman Global May 2007

8/3/2019 Lehman Global May 2007

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PLEASE SEE ANALYST(S) CERTIFICATION AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 37.

Gabriela Baez, CFA212-526-9374Index & Portfolio Analysis

Global Index Performance Monthly ReviewJune 5, 2007

Gabriela Baez, CFA1.212.526.9374

[email protected]

Jennifer C. Liu1.212.526.6115

[email protected]

Zhan Shen1.212.526.6933

[email protected]

May 2007 Performance Review

The global equity markets continued to rally in May on the back of increasing M&A activity and a strongearnings season. An FOMC meeting on May 9 left the benchmark U.S. interest rate unchanged at5.25% as the Fed maintained that inflation remained the predominant economic risk. The MSCI World,EAFE, and EMF indices are up 3.37%, 3.20%, and 4.01%, respectively, last month.

On a net basis in May, investors put $570 million into global ETFs, $513 million into European ETFs,and took $561 million out of Asian Pacific ETFs. The iShares MSCI EAFE Index Fund (EFA) was up2.36% and experienced net cash inflows of $438 million last month. Year-to-date, EFA has net inflowsof $4.62 billion and global ETFs have total net inflows of $5.46 billion.

The MSCI Emerging Markets Index (EMF) was up 4.01% for the month (up 4.95% in USD terms). Forthe second consecutive month, investors increased their stake in the emerging markets ETF space asnet flows in May were $1.0 billion. The iShares MSCI Emerging Market Index Fund (EEM) was up4.93% for the month and experienced a net cash inflow of $456 million. Year-to-date, EEM has netinflows of $42 million and VWO has net inflows of $1.06 billion.

Nearly every regional MSCI index was up in May, with the emerging market regions leading inoutperformance. MSCI Latin America and Asia were the best performing regional indexes, up 6.83%and 5.85% for the month, respectively, while Europe, Middle East, & Africa was the worst performingregional index, down 1.44%. In the developed markets, performance across the Pacific, Europe, andNorth America regions was relatively similar. The North America region was up 3.54%, Pacific was up3.25%, and Europe was up 3.18%.

The MSCI May 2007 Annual Review was effective at the close on May 31, 2007. MSCI announced the

changes after the close on May 3, 2007. We estimate index managers needed to trade more than $16billion cross the developed markets to rebalance their portfolios. On the rebalance date, the overallbuys less sells spread was up 0.71%, the EAFE spread was up 0.84% and the Kokusai spread was up0.87%, from open to close. We recap the performance of the trade.

On June 1, S&P announced that it make a number of additions and deletions during the upcomingS&P/ASX quarterly rebalance, effective at the close on June 15, 2007. S&P and the Australian StockExchange initially announced the undertaking of a consultation process with interested indexstakeholders, focusing on the issue of foreign-domiciled companies and the domestic suite ofS&P/ASX indices on May 18, 2006. We highlight the changes to the S&P/ASX 200 (AS51) and projectweight changes and indexer flows.

The annual Russell Reconstitution will take place at the close on June 22, 2007. We estimate Russellmanagers will need to trade $59.0 billion to rebalance their portfolios. A large slice of the MSCIStandard U.S. securities will be involved in the reconstitution and we highlight the top names.

In this report and going forward, we include three additional futures products in our optimized portfolioto track the MSCI ACWI ex-US. They include the S&P/CNX Nifty (NIFTY), Bombay Stock ExchangeSensitive Index (SENSEX), and FTSE/Xinhua China 25 Index (FCX25).


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Global Index Performance Monthly Review June 5, 2007

Table of Contents

May Performance Review.............................................................................................................3MSCI Developed Markets: Performance Summary ..................................................................3MSCI Emerging Markets: Performance Summary ....................................................................4MSCI Regional and Sector Performance..................................................................................5

Largest Contributors..................................................................................................................6

Outlook........................................................................................................................................10 Recap of the MSCI May 2007 Annual Review ........................................................................10S&P/ASX Quarterly Rebalance Additions & Deletions ...........................................................10MSCI U.S. Names Involved in Russell Reconstitution............................................................10Industry Group Performance in June ......................................................................................10

Recap: MSCI May 2007 Annual Review.....................................................................................12MSCI Annual Review: Benchmark Analysis............................................................................12Performance on May 31 ..........................................................................................................13Regional Analysis ....................................................................................................................15Stock Level Analysis ...............................................................................................................17

Reversion ................................................................................................................................18Topic: S&P/ASX June Quarterly Rebalance Additions and Deletions ........................................20

Topic: MSCI U.S. Names Involved in Russell Reconstitution.....................................................21

Monthly Performance Data .........................................................................................................22

Liquidity Analysis.........................................................................................................................28

Exchange Traded Funds Activity ................................................................................................29

Optimized CFTC Approved Futures Portfolios to Track MSCI Benchmarks ..............................30

Trading Statistics.........................................................................................................................33

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May Performance Review

MSCI Developed Markets: Performance Summary

The global equity markets continued to rally in May on the back of increasing M&A activity and a strongearnings season. An FOMC meeting on May 9 left the benchmark U.S. interest rate unchanged at 5.25%as the Fed maintained that inflation remained the predominant economic risk. The MSCI World, EAFE,

and EMF indices are up 3.37%, 3.20%, and 4.01%, respectively, last month.

The MSCI World,

EAFE, and EMF

indices are up 3.37%,3.20%, and 4.01%,

respectively, last

month.

The MSCI World and EAFE indexes opened up for the first few days in May, driven by positive earningsreports from companies like MasterCard (MA UN), Verizon (VZ UN), and Time Warner (TWX UN). Theannouncement of numerous mergers and takeovers boosted the equity markets. They include (inchronological order) NewsCorps $5.5 billion offer for Dow Jones; Goldman Sachs 27.5 billion offer forAlltel; UniCredit $29.5 billion offer for Capitalia; Royal Bank Groups $95.6 billion counteroffer for ABNAmro; and Alcoas increased $33 billion offer for Alcan.Lehman Brothers also provided a fairness opinion to Cablevision's public shareholders. LehmanBrothers is advising the Managing Board of ABN AMRO on its potential merger with Barclays PLCand on its sale of LaSalle to Bank of America as well as the bid from the consortium of Royal Bankof Scotland, Santander and Fortis. Lehman Brothers is acting as financial advisor to Alcoa Inc. inits potential acquisition of all of the outstanding common shares of Alcan Inc.

Performance was mixed during the middle of the month as weaker-than-forecasted earnings at powercompanies and lower forecasted consumer spending clouded the marketplace. An unexpected jump innew-home sales overshadowed expectations that the Fed would lower interest rates. Positivemacroeconomic data (the ISM index rose to the highest level in almost a year, higher worker productivityand slower growth in the cost of labor) and falling oil prices also supported the markets in May. The monthended on a positive note due to M&A and earnings news.

MSCI World had its largest daily gain on May 2, up 0.74%, as U.S. companies announced stronger thanexpected earnings, and its largest daily loss on May 24, down 0.83%, after the unexpected rise in new-home sales. MSCI EAFE had its largest daily loss on May 8, down 0.71%, and its largest daily gain of0.91% on the business day of the month, May 31. Simultaneously, the MSCI May 2007 Annual Reviewwas effective at the close on May 31. Figure 12 summarizes a timeline of events in May.

On a net basis, investors put $570 million into global ETFs, $513 million into European ETFs, and took$561 million out of Asian Pacific ETFs in May. The iShares MSCI EAFE Index Fund (EFA) was up 2.36%

and experienced net cash inflows of $438 million. Year-to-date, EFA has net inflows of $4.62 billion andglobal ETFs have total net inflows of $5.46 billion. We highlight international ETF activity on page 29.

Figure 1: MSCI World May Performance Figure 2: MSCI EAFE May Performance

98.00

99.00

100.00

101.00

102.00

103.00

104.00

30-Apr

1-May

2-May

3-May

4-May

7-May

8-May

9-May

10-May

11-May

14-May

15-May

16-May

17-May

18-May

21-May

22-May

23-May

24-May

25-May

28-May

29-May

30-May

31-May

-1.00%

-0.75%

-0.50%

-0.25%

0.00%

0.25%

0.50%

0.75%

1.00%

99.00

100.00

101.00

102.00

103.00

104.00

30-Apr

1-May

2-May

3-May

4-May

7-May

8-May

9-May

10-May

11-May

14-May

15-May

16-May

17-May

18-May

21-May

22-May

23-May

24-May

25-May

28-May

29-May

30-May

31-May

-1.00%

-0.50%

0.00%

0.50%

1.00%

Note: Returns are measured in local currency assuming net dividends reinvested.

Source: Lehman Brothers, FAME Data Services



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The U.S. dollar strengthened relative to almost every currency in the developed markets in May, hurtingreturns to U.S. investors with assets invested abroad. U.S. dollar-based investors tracking MSCI EAFEwithout hedging currency exposure experienced a return of 1.75% while the index was up 3.20% in localcurrency in last month.

In particular, the U.S. dollar strengthened relative to the three currencies which make up the largestportion of the developed markets. For the month, the Euro weakened 1.42%, the British Pound was down1.06%, and the Japanese Yen was down 1.93% relative to the U.S. dollar. Figure 3 shows the World and

EAFE weights in terms of currency denomination and currency fluctuations in May.

In contrast, in the emerging markets, U.S. investors with assets invested abroad were buoyed with theopportunity to capture a 4.59% return without hedging currency exposure while the index returned a returnof 4.01% in local currency.

Figure 3: MSCI World and EAFE Currency FluctuationsReturn of U.S. Dollar Relative to Foreign

Currency, m-o-m (%)

Curr

World

Wgt

World

Wgt

EAFE

Wgt

EAFE

Wgt

(May-07) (Apr-07) (May-07) (Apr-07)

Jan-07 Feb-07 Mar-07 Apr-07 May-072007

YTD

AUD 2.93 2.93 6.11 6.03 -1.76 1.69 2.46 2.94 -0.57 4.77CAD 3.80 3.59 0.00 0.00 -1.44 0.67 1.61 4.20 3.26 8.13

CHF 3.25 3.36 6.77 6.91 -2.22 2.13 0.03 1.15 -1.55 -0.39DKK 0.42 0.42 0.88 0.87 -1.50 1.69 0.77 2.46 -1.39 2.08EUR 17.09 17.21 35.61 35.43 -1.48 1.63 0.77 2.46 -1.42 2.01

GBP 11.00 11.15 22.93 22.95 0.01 0.12 0.08 1.93 -1.10 1.06HKD 0.81 0.83 1.70 1.70 -0.41 -0.04 -0.02 -0.09 0.14 -0.43

JPY 10.17 10.31 21.19 21.22 -1.51 2.05 0.35 -1.21 -1.93 -2.23NOK 0.47 0.47 0.99 0.96 -0.59 1.92 0.64 2.57 -1.49 3.05NZD 0.07 0.08 0.16 0.16 -2.59 1.88 2.03 3.76 -0.76 4.37SEK 1.25 1.33 2.60 2.75 -1.82 -0.70 0.01 4.39 -3.04 -1.01SGD 0.51 0.49 1.07 1.01 -0.15 0.44 0.74 -0.09 -0.64 0.32USD 48.22 47.84 0.01 0.01 -- -- -- -- -- --


MSCI Emerging Markets: Performance SummaryThe MSCI Emerging Markets Index (EMF) was up 4.01% for the month (up 4.95% in USD terms). For thesecond consecutive month, investors increased their stake in the emerging markets ETF space as netflows in May were $1.0 billion. The iShares MSCI Emerging Market Index Fund (EEM) was up 4.93% forthe month and experienced a net cash inflow of $456 million. The iShares S&P Latin America (ILF),iShares MSCI Brazil (EWZ), and Vanguard Emerging Market ETF (VWO) also experienced net cashinflows of $326 million, $279 million, and $197 million, respectively. The iShares FTSE/Xinhua China 25(FXI), however, experienced a net cash outflow of $371. Year-to-date, EEM has net inflows of $42 millionand VWO has net inflows of $1.06 billion. Figure 4 shows the daily performance of the MSCI EMF index inlocal currency terms in May.

The MSCI Emerging

Markets Index (EMF)

was up 4.01% for the

month (up 4.95% in

USD terms).

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Figure 4: MSCI Emerging Markets May Performance

99.00

100.00

101.00

102.00

103.00

104.00

105.00

30-Apr

1-May

2-May

3-May

4-May

7-May

8-May

9-May

10-May

11-May

14-May

15-May

16-May

17-May

18-May

21-May

22-May

23-May

24-May

25-May

28-May

29-May

30-May

31-May

-1.50%

-1.00%

-0.50%

0.00%

0.50%

1.00%

1.50%


Source: Lehman Brothers, FAME Data Services, Bloomberg

MSCI Regional and Sector Performance

Nearly every regional MSCI index was up in May, with the emerging market regions leading inoutperformance. MSCI Latin America and Asia were the best performing regional indexes, up 6.83% and5.85% for the month, respectively, while Europe, Middle East, & Africa was the worst performing regionalindex, down 1.44%. In the developed markets, performance across the Pacific, Europe, and NorthAmerica regions was relatively similar. The North America region was up 3.54%, Pacific was up 3.25%,and Europe was up 3.18%.

Nearly every regional

MSCI index was up in

May, with the

emerging market

regions leading in

outperformance.In the developed markets, Portugal and Finland were the best performing countries in May, up 9.23% and7.64%, respectively. Italy and Switzerland were the worst performing countries last month, up 0.10% and

0.38%, respectively. Year-to-date, the Scandinavian countries are outperforming the other countryindexes, while Italy and Hong Kong are the underperforming their peers.

In the emerging markets, Mexico and South Korea were the best performing countries in May, with gainsof 9.92% and 8.02%, respectively. Once again, Russia and Jordan were the worst performing countrieslast month, down 5.64% and 3.93%, respectively. Year-to-date, Peru and Pakistan are up 53.58% and32.68%, respectively, while Russia and Columbia are down 11.38 and 9.71%.

In MSCI World and EAFE, Materials was the best performing sector, up 7.04% and 7.16%, respectively.In both benchmarks, the Health Care sector was the worst performing sector in May, up 0.65% in MSCIWorld and down 1.07% in MSCI EAFE.

In MSCI EMF, the Industrials sector was once again the best performing sector for the month, up 12.31%,while the Information Technology sector, up 0.64%, was the worst performing sector. We highlight themonthly and year-to-date country and sector performance from page 22 to 25.

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Figure 5: MSCI Developed Market (Left) and Emerging Market (Right) Country Monthly Index Performance

MSCI

EAFE

Wgt

MSCI

World

Wgt

Monthly

Return

Contrib

to MSCI

EAFE

Contrib

to MSCI

WorldAsia PacificAustralia 6.04 2.90 2.04 0.12 0.06

Hong Kong 1.70 0.82 1.80 0.03 0.01

Japan 21.28 10.21 3.60 0.76 0.37New Zealand 0.16 0.08 3.59 0.01 0.00

Singapore 1.04 0.50 5.59 0.06 0.03

Europe

Austria 0.65 0.31 2.89 0.02 0.01

Belgium 1.23 0.59 1.51 0.02 0.01

Denmark 0.88 0.42 3.57 0.03 0.02Finland 1.64 0.79 7.64 0.12 0.06

France 10.39 4.99 3.58 0.37 0.18

Germany 8.22 3.95 5.65 0.46 0.22

Greece 0.68 0.33 5.77 0.04 0.02

Ireland 0.86 0.41 6.12 0.05 0.02

Italy 3.79 1.82 0.10 0.00 0.00Netherlands 3.59 1.72 0.88 0.03 0.02

Norway 0.96 0.46 3.90 0.04 0.02Portugal 0.37 0.18 9.23 0.03 0.02

Spain 4.14 1.99 7.16 0.29 0.14

Sweden 2.63 1.26 1.72 0.05 0.02

Switzerland 6.74 3.23 0.38 0.03 0.01United Kingdom 23.00 11.03 2.82 0.65 0.31

North America

Canada -- 3.78 4.99 na 0.18

United States -- 48.23 3.43 na 1.64

MSCIEMF Wgt

Monthly

Return

Contrib

to MSCI

EMFAsiaChina 11.68 7.39 0.83

India 6.66 5.43 0.35

Indonesia 1.60 1.55 0.02Malaysia 2.95 2.90 0.09

Pakistan 0.24 4.65 0.01

Philippines 0.56 7.71 0.04

South Korea 15.89 8.02 1.23Taiwan 11.52 3.06 0.35

Thailand 1.45 5.87 0.08

Europe, Middle East, & AfricaCzech Republic 0.81 3.16 0.03

Egypt 0.84 6.30 0.05

Hungary 1.02 6.30 0.07

Israel - Domestic 2.18 4.80 0.11

Israel - Non Dome 0.28 -0.63 0.00Jordan 0.13 -3.93 -0.01

Morocco 0.34 -1.30 0.00Poland 1.79 1.84 0.03

Russia 8.99 -5.64 -0.57

South Africa 8.09 -2.20 -0.19

Turkey 1.65 4.69 0.08

Latin America

Argentina 0.76 7.24 0.05

Brazil 11.64 6.12 0.67Chile 1.63 2.15 0.04

Colombia 0.30 -2.37 -0.01

Mexico 6.40 9.92 0.60

Peru 0.61 6.68 0.04

Note: Values are shown in percent. Monthly return is measured in local currency (net dividends reinvested).

Source: Lehman Brothers, MSCI, FAME Data Services

Largest Contributors

Figure 6 to Figure 11 show the top five companies by largest positive and largest negative returncontributions to the MSCI World, EAFE, and EMF performances in USD and local currency in May.

Last month, the largest positive contributors to MSCI World performance in U.S. dollar terms were ExxonMobil (XOM UN), Apple (AAPL UW), and telecommunication industry leaders AT&T (T UN), VerizonCommunications (VZ UN), and Vodafone Group (VOD LN). The largest negative contributors to MSCIWorld performance were largely pharmaceutical and bank sector companies: GlaxoSmithKline (GSK LN),Amgen (AMGN UW), Unicredito Italiano (UC IM), Societe Generale (GLE FP) and Intesa SanPaolo (ISPIM).

Vodafone Group, Rio Tinto (RIO LN), Mizuho Financial Group (8411 JT), Anglo American (AAL LN), andDaimlerChrysler (DCX GY) were the largest positive contributors to MSCI EAFE performance in U.S.dollar terms. GlaxoSmithKline, Unicredito Italiano, Societe Generale, Intesa SanPaolo, and Novartis(NOVN VX) were the largest negative contributors to EAFE performance in May.

America Movil (AMXL MM), Cemex CPO (CEMEXCP MM), Posco (005490 KP), Hyundai HeavyIndustries (009540 KP), and Sinopec China (386 HK) were the largest positive contributors to MSCI EMFperformance in May in USD terms. Gazprom (GAZP RU), Samsung Electronics (005930 KP), SberbankRussia (SBER RM), Lukoil Holdings (LKOH RU), and Mtn Group (MTN SJ) were the largest negativecontributors to MSCI EMF performance last month.

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Figure 6: Largest Positive and Negative MSCI World Contributors (USD Currency)

Sedol Ticker Issuer Country GICS Industry Group World Wgt

May-07

Return

(Local)

May-07

Return

(USD)

May-07

Contribution

(Local)

May-07

Contribution

(USD)

Positive Contributors

2326618 XOM UN EXXON MOBIL CORP US Energy 1.63% 4.77% 4.77% 0.08% 0.08%

2046251 AAPL UW APPLE US Technology Hardware & Equipm 0.30% 21.80% 21.80% 0.07% 0.07%

2831811 T UN AT&T US Telecommunication Services 0.85% 6.77% 6.77% 0.06% 0.06%

2090571 VZ UN VERIZON COMMUNICATI US Telecommunication Services 0.39% 14.01% 14.01% 0.06% 0.06%

B16GWD5 VOD LN VODAFONE GROUP GB Telecommunication Services 0.53% 10.10% 8.91% 0.05% 0.05%Negative Contributors

0925288 GSK LN GLAXOSMITHKLINE GB Pharmaceuticals, Biotechnology 0.59% -9.59% -10.58% -0.06% -0.06%

2023607 AMGN UW AMGEN US Pharmaceuticals, Biotechnology 0.26% -12.18% -12.18% -0.03% -0.03%

4232445 UC IM UNICREDITO ITALIANO O IT Banks 0.28% -7.98% -9.27% -0.02% -0.03%

5966516 GLE FP SOCIETE GENERALE FR Banks 0.28% -7.48% -8.78% -0.02% -0.02%

4076836 ISP IM INTESA SANPAOLO ORD IT Banks 0.21% -8.25% -9.54% -0.02% -0.02%

Figure 7: Largest Positive and Negative MSCI World Contributors (Local Currency)


May-07

Return

(Local)

May-07

Return

(USD)

May-07

Contribution

(Local)

May-07

Contribution

(USD)


2326618 XOM UN EXXON MOBIL CORP US Energy 1.63% 4.77% 4.77% 0.08% 0.08%2046251 AAPL UW APPLE US Technology Hardware & Equipm 0.30% 21.80% 21.80% 0.07% 0.07%2831811 T UN AT&T US Telecommunication Services 0.85% 6.77% 6.77% 0.06% 0.06%2090571 VZ UN VERIZON COMMUNICATI US Telecommunication Services 0.39% 14.01% 14.01% 0.06% 0.06%

B16GWD5 VOD LN VODAFONE GROUP GB Telecommunication Services 0.53% 10.10% 8.91% 0.05% 0.05%Negative Contributors

0925288 GSK LN GLAXOSMITHKLINE GB Pharmaceuticals, Biotechnology 0.59% -9.59% -10.58% -0.06% -0.06%2023607 AMGN UW AMGEN US Pharmaceuticals, Biotechnology 0.26% -12.18% -12.18% -0.03% -0.03%4232445 UC IM UNICREDITO ITALIANO O IT Banks 0.28% -7.98% -9.27% -0.02% -0.03%5966516 GLE FP SOCIETE GENERALE FR Banks 0.28% -7.48% -8.78% -0.02% -0.02%


Figure 8: Largest Positive and Negative MSCI EAFE Contributors (USD Currency)

Sedol Ticker Issuer Country GICS Industry Group EAFE Wgt

May-07

Return

(Local)

May-07

Return

(USD)

May-07

Contribution

(Local)

May-07

Contribution

(USD)


B16GWD5 VOD LN VODAFONE GROUP GB Telecommunication Services 1.10% 10.10% 8.91% 0.11% 0.10%0718875 RIO LN RIO TINTO PLC GB Materials 0.46% 19.43% 18.13% 0.09% 0.08%

6591014 8411 JT MIZUHO FINANCIAL GRO JP Banks 0.42% 18.92% 16.67% 0.08% 0.07%

0490151 AAL LN ANGLO AMERICAN (GB) GB Materials 0.55% 13.86% 12.62% 0.08% 0.07%

5529027 DCX GY DAIMLERCHRYSLER DE Automobiles & Components 0.54% 13.83% 12.24% 0.08% 0.07%Negative Contributors


4232445 UC IM UNICREDITO ITALIANO O IT Banks 0.59% -7.98% -9.27% -0.05% -0.05%5966516 GLE FP SOCIETE GENERALE FR Banks 0.57% -7.48% -8.78% -0.04% -0.05%


7103065 NOVN VX NOVARTIS CH Pharmaceuticals, Biotechnology 0.99% -2.27% -3.77% -0.02% -0.04%

Figure 9: Largest Positive and Negative MSCI EAFE Contributors (Local Currency)


May-07

Return

(Local)

May-07

Return

(USD)

May-07

Contribution

(Local)

May-07

Contribution

(USD)


B16GWD5 VOD LN VODAFONE GROUP GB Telecommunication Services 1.10% 10.10% 8.91% 0.11% 0.10%0718875 RIO LN RIO TINTO PLC GB Materials 0.46% 19.43% 18.13% 0.09% 0.08%6591014 8411 JT MIZUHO FINANCIAL GRO JP Banks 0.42% 18.92% 16.67% 0.08% 0.07%

6335171 8306 JT MITSUBISHI UFJ FIN GRP JP Banks 0.65% 12.00% 9.88% 0.08% 0.06%0490151 AAL LN ANGLO AMERICAN (GB) GB Materials 0.55% 13.86% 12.62% 0.08% 0.07%

Negative Contributors


4232445 UC IM UNICREDITO ITALIANO O IT Banks 0.59% -7.98% -9.27% -0.05% -0.05%

5966516 GLE FP SOCIETE GENERALE FR Banks 0.57% -7.48% -8.78% -0.04% -0.05%4076836 ISP IM INTESA SANPAOLO ORD IT Banks 0.44% -8.25% -9.54% -0.04% -0.04%7266139 FORB BB FORTIS BE Diversified Financials 0.39% -6.88% -8.18% -0.03% -0.03%

Source: Lehman Brothers, MSCI, Bloomberg, FAME

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Figure 10: Largest Positive and Negative MSCI Emerging Markets Contributors (USD Currency)

Sedol Ticker Issuer Country GICS Industry Group EMF Wgt

May-07

Return

(Local)

May-07

Return

(USD)

May-07

Contribution

(Local)

May-07

Contribution

(USD)


2667470 AMXL MM AMERICA MOVIL L MX Telecommunication Services 1.87% 12.82% 14.72% 0.24% 0.28%

2406457 EMEXCP MMCEMEX CPO MX Materials 0.89% 17.13% 19.10% 0.15% 0.17%

6693233 005490 KP POSCO KR Materials 1.21% 13.34% 13.59% 0.16% 0.16%

6446620 009540 KP HYUNDAI HEAVY INDUST KR Capital Goods 0.45% 34.04% 34.33% 0.15% 0.15%

6291819 386 HK SINOPEC CHINA PET&CH CN Energy 0.57% 26.74% 26.92% 0.15% 0.15%Negative Contributors

4364928 GAZP RU GAZPROM (USD) RU Energy 3.62% -7.58% -7.58% -0.27% -0.27%

6771720 005930 KP SAMSUNG ELECTRONICS KR Semiconductors & Semiconduct 2.80% -6.79% -6.59% -0.19% -0.18%

4767981 SBER RM SBERBANK RUSSIA COM( RU Banks 1.29% -8.01% -8.68% -0.10% -0.11%

4560588 LKOH RU LUKOIL HOLDING (USD) RU Energy 1.43% -3.92% -3.92% -0.06% -0.06%

6563206 MTN SJ MTN GROUP ZA Telecommunication Services 0.76% -5.73% -6.78% -0.04% -0.05%

Figure 11: Largest Positive and Negative MSCI Emerging Markets Contributors (Local Currency)

Sedol Ticker Issuer Country GICS Industry Group EMF Wgt

May-07

Return

(Local)

May-07

Return

(USD)

May-07

Contribution

(Local)

May-07

Contribution

(USD)


2667470 AMXL MM AMERICA MOVIL L MX Telecommunication Services 1.87% 12.82% 14.72% 0.24% 0.28%6693233 005490 KP POSCO KR Materials 1.21% 13.34% 13.59% 0.16% 0.16%2406457 EMEXCP MMCEMEX CPO MX Materials 0.89% 17.13% 19.10% 0.15% 0.17%6291819 386 HK SINOPEC CHINA PET&CH CN Energy 0.57% 26.74% 26.92% 0.15% 0.15%6446620 009540 KP HYUNDAI HEAVY INDUST KR Capital Goods 0.45% 34.04% 34.33% 0.15% 0.15%

Negative Contributors

4364928 GAZP RU GAZPROM (USD) RU Energy 3.62% -7.58% -7.58% -0.27% -0.27%6771720 005930 KP SAMSUNG ELECTRONICS KR Semiconductors & Semiconduct 2.80% -6.79% -6.59% -0.19% -0.18%4767981 SBER RM SBERBANK RUSSIA COM( RU Banks 1.29% -8.01% -8.68% -0.10% -0.11%4560588 LKOH RU LUKOIL HOLDING (USD) RU Energy 1.43% -3.92% -3.92% -0.06% -0.06%

6205122 NINFO IS INFOSYS TECHNOLOGIE IN Software & Services 0.85% -6.21% -4.86% -0.05% -0.04%

Source: Lehman Brothers, MSCI, Bloomberg, FAME

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Figure 12: Event Timeline, May 2007

Date News Event

World Daily

Return

(Local)

World Daily

Return

(USD)

EAFE Daily

Return

(Local)

EAFE Daily

Return

(USD)1-May-07 Healthscope-Led Group Offers $2.3 Bn for Symbion Health; Dow Jones Bancroft Family Rejects Murdoch's $5 Bn 0.02% -0.12% -0.23% -0.50%

Japan's Wages Decline 0.4%, Hampering Growth in Consumer Spending; U.K. Manufacturing Grows at SlowestPace in Three Months on Stronger Pound; U.S. Manufacturing Picks Up, Housing Market Slump Persists

Yum! Profit Rises 14% on Restaurant Openings in China2-May-07 Australian Central Bank Keeps Key Interest Rate Unchanged at 6.25% 0.74% 0.65% 0.75% 0.55%

Allianz First-Quarter Profit Surges 80% on Gains from Asset Sales; MasterCard and Time Warner Earnings TopAnalysts Forecasts; Symantec Profit Slides 49% as Sales Rise at Slowest Rate Since 2000

Cablevision to be Taken Over Private by Founding Dolan Family for $10.6 BnU.S. Factory Orders Rise More Than Forecasts as Businesses Boost Investment

3-May-07 Westpac Bank's First-Half Profit Rises to Record on Lending; UBS Profit Falls for Third Quarter; Shell First-

Quarter Profit Climbs 5.7% as Refining Earnings Advance; Starbucks Earnings Climb 18% on Frappucicino

0.35% 0.28% 0.23% 0.07%

Swedish Steelmaker SSAB Svenskt Agrees to Acquire Ipsco for $7.7 BnProductivity, Service-Industry Growth in U.S. Increase More Than Forecast

4-May-07 Austral ian Central Bank Cuts 2007 Inf lation Forecast; Service Industr ies Growth in Europe Slowed for a Third 0.45% 0.51% 0.69% 0.81%CVC, PAI Partners Offer $17.4 Bn for Altadis, Topping Imperial's BidU.S. Job Growth is at Two-Year Low; Unemployment Rate Rises to 4.5%

7-May-07 Sarkozy Claims Mandate for Tax Cuts, Reforms After Winning French Election 0.37% 0.51% 0.47% 0.72%ABN Amro Rejects Royal Bank-Led Group's $24.5 Bn Offer for LaSalle; BAE Systems Agrees to PurchaseArmour Holdings for $4.1 Bn in CashEU Raises Economic-Growth Forecast to 2.6%, Inflation Outlook

8-May-07 Deutsche Bank Profit Rises 30% on Trading, Investment Banking Fees; Allianz Says Insurance Profit Rose inQuarter, Earnings Fell; Adidas Profit Tops Estimates as Sales Advance; Cisco Profit Rises 34% on Sales to SmallClients and Emerging Markets, Shares Drop on Forecast; Disney Earnings Rise 27% on Surprise Hit 'Wil d Hogs'

-0.38% -0.57% -0.71% -1.09%

9-May-07 BNP Paribas Profit Advances 25% on Investment Bank, One-Time Gains; E.ON First-Quarter Profit Jumps 50%,Full-Year Net Forecast to Rise

0.34% 0.43% 0.36% 0.55%

Fed Says Inflation is 'Predominant' Risk as It Keeps Rate at 5.25%10-May-07 Australia Employment Rises Four Times More Than Forecast; Bank of England Raises Interest Rates, ECB

Signals It May Follow Next Month-0.90% -1.11% -0.48% -0.88%

U.S. March Trade Deficit Widens More Than Estimated on Higher Oil Imports; U.S. Retailer Sales Declined Most

Ever in April as Cold Deterred ShoppersAIG Reports 29% Increase in First-Quarter Profit to $4.13 Bn

11-May-07 Babcock Agrees to Buy Alinta for $6.5 Bn, Beating Macquarie Bank Bid; Thomson, Bidding for Reuters, Agrees toSell Two Units for $7.75 Bn; Chicago Merc Raises Bid for Board of Trade, Still Trailing ICE's Offer

0.58% 0.60% 0.12% 0.21%

China Trade Surplus Swells to $16.9 Bn as Exports Surge14-May-07 China's Inflation Rate Curbs Appeal of Bank Deposits, Adds to Stock Bubble -0.05% -0.03% 0.15% 0.14%

Nokia Increases Forecast for Market; Stock Climbs to Four-Year HighDaimler Hands Chrysler to Cerberus, Ends Nine-Year, $36 Bn Investment

15-May-07 Japan's Machinery Orders Unexpectedly Drop, Undermining Economic Growth; Europe Economy Grows More

Than Forecast in Quarter on Corporate Investment; Consumer Prices in U.S. Rise Less Than Analysts Forecastas Economy Cools; Median Home Price in U.S. Declines 1.8% to Two-Year Low of $212,300

-0.07% 0.09% -0.01% 0.26%

HeidelbergCement Agrees to Buy Hanson for $16 Bn to Gain Sand, GravelDaimlerChrysler Profit Doubles, Beating Estimates, as Mercedes Recovers

16-May-07 China's Industrial Output Climbed 17.4% in April; Bank of England Signals Rates To Rise; Unemployment Falls to

Two-Year Low

0.40% 0.26% -0.09% -0.33%

Credit Agricole Profit Misses Estimates on Slump at French Consumer Unit; Deere Net Drops 16%, ShareDecline as Profit Outlook Falls Short; Hewlett-Packard Profit Falls 6.5%, Sales Climb as It Tackles Dell

17-May-07 Japan's Economic Growth Slows; Central Bank Keeps Interest Rate Unchanged 0.07% -0.16% 0.23% -0.30%U.S. Leading Indicators Unexpectedly Fall on Housing Slump; Job Loss SlowsOil Surges $2 on Concern Summer Gas Supply Will be Below NormalBernanke Warns of Subprime-Led Housing Slump, Private Equity Lending Risk

18-May-07 Japan's Service Demand Slips From Record, Led by Wholesalers, Retailers; U.S. Consumer ConfidenceUnexpectedly Gains on Higher Stocks, Labor Market 0.55% 0.59% 0.50% 0.52%

Microsoft Agrees to Buy Online Ad Agency Aquantive for $6 Bn in Cash21-May-07 Goldman Sachs Private Equity, TPG Agree to Buy Alltel for $27.5 Bn; UniCredit to Buy Capitalia for $29.5 Bn,

Creating Biggest Euro Bank; Popolare Milano to Buy Popolare Emilia for $7.6 Bn as Mergers Surge0.21% 0.09% 0.24% -0.04%

U.K. House Prices Increase at Slowest Pace Since December22-May-07 German Investor Confidence Advances More Than Forecast to 11-Month High 0.05% 0.11% 0.13% 0.26%

Marks & Spencer Profit Rises 22%; Shares Fall as Sales Growth SlowsAlcan Rejects Alcoa's Unsolicited $27.4 Bn Takeover Offer as Too Low

23-May-07 Norilsk Nickel Raises LionOre Offer to $6.3 Bn, Trumps Xstrata's Bid 0.18% 0.35% 0.51% 0.82%Bank of England Signals Interest Rates to Keep Rising After Unanimous VoteGreenspan Predicts Surging China Stocks May Undergo 'Dramatic Contraction'

24-May-07 Japan's Exports to U.S. Fall for the First Time in Two Years, Slowing Growth; German Business Confidence Heldat Second-Highest Level on Record in May; Sales of New Homes in U.S. Unexpectedly Jump; Durable Goods

-0.83% -0.95% -0.63% -0.87%

25-May-07 Japan Consumer Prices Fall at Slower Pace, Signaling Inflation May Return; Existing-Home Sales in U.S.Unexpectedly Drop to Lowest Level in Four Years

0.15% 0.17% -0.29% -0.27%

Nasdaq to Buy OMX for $3.7 Bn; Coca-Cola Will Buy Maker of Glaceau Vitaminwater for $4.1 Bn28-May-07 U.S. Markets Closed in Observance of Memorial Day 0.11% 0.11% 0.21% 0.21%29-May-07 Japan's Jobless Rate Unexpectedly Falls to Nine-Year Low, Spending Climbs; U.S. Consumer Confidence Rises

More Than Forecast on Stocks, Labor Market0.25% 0.29% 0.37% 0.39%

China Triples Tax on Securities Trades Amid Market RecordsRoyal Bank Group Bids $95.6 Bn for ABN, Topping Rival Barclay's Offer

Vodafone Posts Wider-Than-Estimated Loss, Shares Rise on Growth Prospects30-May-07 Fed Says Housing Will Linger as Drag on Economy, Inflation Risk Remains 0.31% 0.20% -0.28% -0.49%31-May-07 Morgan Stanley Real Estate to Buy Australia's Investa for $3.9 Bn 0.44% 0.52% 0.91% 1.03%

European Business, Consumer Confidence Unexpectedly Rises to Six-Year High; U.S. Economy Grows at 0.6%Annual Rate, Weakest Pace in Four Years; Home Prices in U.S. Climbed at Slowest Pace in Decade During FirstDell Reports Profit, Sales That Exceed Estimates, Plans to Cut 8,800 JobsMSCI Global Standard Indices Annual Review -- Effective at the close

Lehman Brothers is acting as financial advisor to Imperial Tobacco in regards to its proposal to Altadis in relation to a possible combination of Imperial Tobacco and

Altadis. Lehman Brothers is acting as financial advisor to Chicago Mercantile Exchange Holdings on the potential merger with CBOT Holdings. Lehman Brothers is

advising Banca Popolare di Milano Scrl, an Italian regional lender in connection with the exclusive merger talks it has entered into with Banca Popolare dell'Emilia

Romagna Scrl.

Source: Lehman Brothers, Bloomberg, FAME

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Outlook

Recap of the MSCI May 2007 Annual Review

The MSCI May 2007 Annual Review was effective at the close on May 31, 2007. MSCI announced thechanges after the close on May 3, 2007. We estimate index managers needed to trade more than $16billion cross the developed markets to rebalance their portfolios. On the rebalance date, the overall buysless sells spread was up 0.71%, the EAFE spread was up 0.84% and the Kokusai spread was up 0.87%,

from open to close. We recap the performance of the trade beginning on page 12.

S&P/ASX Quarterly Rebalance Additions & Deletions Effective at the close on June 15, 2007

On June 1, S&P announced that it will make a number of additions and deletions during the upcomingS&P/ASX quarterly rebalance, effective at the close on June 15, 2007. S&P and the Australian StockExchange initially announced the undertaking of a consultation process with interested index stakeholders,focusing on the issue of foreign-domiciled companies and the domestic suite of S&P/ASX indices on May18, 2006. We highlight the changes to the S&P/ASX 200 (AS51) and project weight changes and indexerflows beginning on page 20.

MSCI U.S. Names Involved in Russell Reconstitution -- Effective at the close on June 22, 2007

The annual Russell Reconstitution will take place at the close on June 22, 2007. We estimate Russellmanagers will need to trade $59.0 billion to rebalance their portfolios. A large slice of the MSCI StandardU.S. securities will be involved in the reconstitution and we highlight the top names beginning on page 21.

Industry Group Performance in June

The MSCI World and EAFE indexes have both been up 0.8%, on average, in June. On average, Software& Service companies have been the best performers in June in MSCI World, outperforming thebenchmark for 10 of the last 12 years. Household & Personal Product companies have been the bestperformers in EAFE, outperforming the benchmark for 9 of the last 12 years during June. The worstperforming names across both benchmarks have been Media and Telecommunication Service companiesin the MSCI World and EAFE, respectively. We show the historical performance of the MSCI World andEAFE industry groups for the upcoming month in Figure 13.

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Figure 13: MSCI World and EAFE Industry Group Returns in Local Currency in June

GICS Industry Group Avg StDevAvg/

StDevMax Min

Outperf

Bench

Pos.

RetJun-95 Jun-96 Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06

World Industry GroupsSoftware & Svcs 5.4% 5.6% 0.96 19.4% -1.3% 10 10 7.3% 2.4% 3.7% 19.4% 9.0% 10.2% 4.9% -1.3% 2.1% 5.8% -0.6% 2.3%Pharmaceuticals & Biotech 1.9% 5.0% 0.39 10.3% -8.4% 7 8 3.6% 2.6% 10.3% 6.0% 3.1% 6.8% -3.6% -8.4% 3.7% -1.4% -1.2% 1.9%Auto & Components 1.9% 4.7% 0.40 8.7% -7.8% 8 8 -0.3% 2.6% 3.3% 2.4% 6.3% -3.9% 3.0% -7.8% 8.7% 6.8% 2.9% -1.7%Insurance 1.2% 2.8% 0.43 5.0% -5.9% 8 10 0.1% 2.1% 5.0% 4.2% 0.8% 0.7% 3.1% -5.9% -0.8% 2.6% 2.6% 0.1%Retailing 1.2% 3.7% 0.32 7.9% -5.1% 8 8 2.0% 1.6% 5.0% 3.5% 7.9% -2.2% -3.7% -5.1% 3.4% 0.5% 1.9% -0.7%Tech Hardware & Eqp 1.1% 8.0% 0.14 15.3% -16.8% 5 7 7.0% -3.5% 3.7% 3.4% 15.3% 8.6% -5.1% -16.8% 1.3% 3.1% -0.4% -3.1%Food & Staples Retailing 1.1% 4.2% 0.25 8.6% -6.3% 6 9 -0.6% 0.5% 7.4% 8.6% 0.4% 0.0% -4.8% -6.3% 2.2% 0.6% 1.7% 3.1%Cons. Durables & Apparel 1.0% 4.1% 0.25 7.5% -7.3% 6 8 -2.6% 2.8% 3.3% 0.7% 7.5% 4.4% -4.0% -7.3% 2.6% 1.9% 3.8% -0.5%Diversified Financials 0.8% 3.8% 0.21 5.7% -8.3% 5 8 -1.2% 0.5% 5.7% 1.5% 5.5% 1.9% -1.6% -8.3% 4.3% 0.4% 2.4% -1.5%Capital Goods 0.8% 4.2% 0.18 7.3% -6.9% 6 6 -1.9% 0.7% 5.9% -1.7% 7.3% 1.8% -4.0% -6.9% 3.6% 5.1% -0.4% -0.5%Household & Personal Prod 0.6% 2.8% 0.22 4.9% -2.9% 7 7 0.4% 4.2% 4.9% 3.7% -2.7% 0.7% -0.9% -1.6% -2.4% 1.4% -2.9% 2.6%Transportation 0.5% 2.3% 0.22 5.5% -2.9% 4 5 -0.3% -1.0% 3.2% -0.1% -0.1% 1.3% -2.9% -1.8% 0.3% 5.5% -0.4% 2.4%Health Care Eqp & Svcs 0.5% 3.2% 0.16 4.3% -6.6% 7 8 2.2% 0.1% 1.7% -2.4% -2.3% 4.3% 4.0% -6.6% 2.4% 2.1% 1.9% -1.5%Hotels Restaurants & Leisure 0.5% 3.0% 0.16 5.4% -5.8% 5 7 -1.1% 0.4% -1.4% 1.5% 4.5% -1.3% -1.2% -5.8% 5.4% 2.2% 0.8% 1.7%Food Beverage & Tobacco 0.5% 2.9% 0.15 3.2% -7.2% 8 7 0.0% 3.2% 2.6% 3.1% -1.6% 2.8% -0.1% -7.2% 1.0% 2.0% -1.3% 1.1%Real Estate 0.4% 3.3% 0.13 4.1% -6.2% 5 7 -0.7% -0.5% -0.9% -6.2% 3.1% 4.1% 1.9% -4.9% 0.8% 1.4% 3.4% 3.7%Energy 0.4% 3.7% 0.11 7.6% -5.8% 5 7 -3.4% 0.8% 4.3% -1.0% 1.7% -2.2% -5.8% -3.0% 0.6% 3.6% 7.6% 1.5%Commercial Svcs & Supplies 0.3% 3.7% 0.09 6.0% -8.3% 4 8 1.0% -0.5% 4.0% 2.0% 6.0% 0.1% -3.3% -8.3% 2.2% 1.4% 1.8% -2.6%Utilities 0.2% 3.2% 0.08 4.3% -5.2% 5 8 -1.4% 1.9% 3.8% 3.6% 0.4% -4.7% -2.9% -5.2% 0.2% 1.8% 4.3% 1.3%Materials 0.2% 3.5% 0.06 6.7% -4.3% 5 5 -1.5% -2.2% 3.3% -3.0% 6.7% -1.5% -3.5% -4.3% 3.0% 3.8% 1.9% -0.3%Banks -0.1% 4.0% -0.04 7.2% -7.6% 6 7 -5.4% -0.1% 7.2% 0.3% 3.3% -3.7% -1.4% -7.6% 2.1% 0.6% 1.9% 1.1%Telecommunication Svcs -0.4% 5.1% -0.08 4.7% -12.6% 4 8 1.3% -0.5% 4.2% 4.2% 4.7% -3.4% -7.2% -12.6% 0.8% 1.7% 1.6% 0.6%Media -0.6% 5.9% -0.11 4.2% -18.0% 3 6 3.0% -0.4% 0.9% 2.8% 4.2% 3.6% -3.2% -18.0% 0.5% -0.1% -0.9% -0.2%

MSCI World 0.8% 3.4% 0.23 4.9% -7.9% -- 9 -0.5% 0.6% 4.8% 2.5% 4.9% 2.0% -2.6% -7.9% 1.9% 2.0% 1.5% 0.4%

EAFE Industry GroupsHousehold & Personal Prod 3.9% 5.6% 0.70 13.8% -5.0% 9 9 -5.0% 5.6% 10.8% 8.6% 7.0% 13.8% 0.4% -1.5% -2.0% 3.5% 1.2% 4.8%Software & Svcs 2.7% 8.2% 0.33 13.5% -12.7% 8 9 3.5% 7.0% 13.1% 13.5% 3.6% -4.1% -10.6% -12.7% 7.2% 4.7% 5.9% 1.0%Pharmaceuticals & Biotech 1.7% 3.4% 0.50 9.4% -5.1% 8 9 3.2% 2.6% 9.4% 2.6% 0.4% 3.3% 1.2% -5.1% 1.6% -1.1% -0.4% 2.9%Tech Hardware & Eqp 1.5% 8.0% 0.19 18.7% -11.8% 6 8 4.8% -0.6% 6.5% 0.4% 18.7% 2.8% -11.5% -11.8% 4.1% 3.0% 2.0% -0.6%Cons. Durables & Apparel 1.3% 5.0% 0.26 9.2% -9.0% 4 9 -3.2% 3.6% 4.3% 0.2% 9.2% 5.2% -4.9% -9.0% 4.9% 1.8% 3.0% 0.3%Insurance 1.2% 3.9% 0.32 5.4% -10.2% 7 11 0.2% 1.5% 4.0% 2.4% 1.2% 2.0% 3.0% -10.2% 0.9% 5.4% 2.6% 1.7%Food & Staples Retailing 1.1% 4.0% 0.27 7.9% -5.1% 8 7 -2.2% -1.4% 6.5% 7.9% -2.7% -2.1% 0.2% -5.1% 4.3% 3.1% 1.7% 2.8%Materials 1.0% 4.1% 0.25 7.9% -5.6% 6 6 -4.1% -0.4% 3.8% -1.8% 7.9% 3.3% -2.8% -5.6% 4.7% 3.8% 3.6% 0.0%Energy 1.0% 4.6% 0.22 8.9% -5.3% 5 8 -3.8% 1.4% 8.0% -2.1% 3.5% 0.5% -5.3% -5.0% 2.5% 1.8% 8.9% 1.4%Diversified Financials 1.0% 5.3% 0.19 8.3% -10.6% 5 7 -3.7% -0.8% 4.9% -0.8% 5.6% 7.2% 0.1% -10.6% 8.3% 0.3% 3.4% -2.0%Health Care Eqp & Svcs 1.0% 4.4% 0.22 8.8% -7.7% 8 8 -1.4% 3.9% -1.3% -4.7% 8.8% 2.6% 1.8% -7.7% 2.5% 2.9% 4.0% 0.2%Utilities 1.0% 2.9% 0.33 4.5% -3.9% 6 7 -1.4% 0.0% 4.5% 3.8% 3.8% -3.6% 2.5% -3.9% -0.7% 2.3% 3.6% 0.7%Auto & Components 0.9% 4.8% 0.19 8.9% -6.2% 7 6 -0.7% 2.1% 1.3% -2.8% 7.3% -1.0% -1.7% -6.2% 8.9% 7.1% 1.8% -4.8%Food Beverage & Tobacco 0.9% 2.9% 0.32 4.0% -6.4% 7 8 -0.6% 1.6% 4.0% 0.5% -0.5% 2.8% 3.7% -6.4% -0.8% 2.9% 1.2% 2.7%Capital Goods 0.9% 5.1% 0.18 7.0% -8.1% 6 7 -3.0% -0.1% 5.5% -5.4% 5.9% 5.6% -4.6% -8.1% 7.0% 3.7% 3.7% 0.7%Transportation 0.8% 2.9% 0.28 4.9% -5.1% 7 7 -1.5% -0.9% 3.7% -0.6% 0.3% 2.8% -1.8% -5.1% 3.0% 4.9% 3.2% 1.9%Retailing 0.8% 4.0% 0.20 6.7% -7.7% 7 7 -1.2% 3.7% 1.9% -1.4% 4.1% -1.6% -3.1% -7.7% 6.7% 3.2% 3.8% 1.4%Hotels Restaurants & Leisure 0.5% 3.9% 0.12 6.5% -6.1% 8 8 -5.4% 1.2% -2.8% -2.2% 0.1% 6.5% 1.7% -6.1% 3.6% 2.8% 4.6% 1.8%Banks 0.4% 4.7% 0.09 8.3% -9.4% 4 8 -6.6% 0.2% 8.3% 0.0% 2.8% 1.1% -1.8% -9.4% 4.4% 1.1% 3.2% 2.0%Commercial Svcs & Supplies 0.4% 4.5% 0.09 5.4% -8.0% 7 8 -0.9% 3.1% 5.4% 0.1% 5.3% 2.1% -8.0% -7.4% 3.7% 1.6% 2.9% -3.3%Real Estate 0.2% 4.0% 0.05 5.2% -7.5% 7 7 -0.8% -0.5% -1.6% -7.5% 5.2% 4.8% 0.7% -6.7% 0.5% 1.4% 3.3% 3.6%Media -0.6% 6.2% -0.10 6.4% -18.3% 3 9 1.4% 0.5% -1.5% 3.2% 1.4% 6.4% -5.6% -18.3% 0.6% 1.9% 2.2% 0.5%Telecommunication Svcs -1.2% 5.9% -0.20 6.7% -13.6% 3 5 -0.9% -1.2% 4.7% 6.7% 5.2% -5.4% -9.2% -13.6% -0.8% 0.8% 1.7% -2.0%

MSCI EAFE 0.8% 3.7% 0.21 5.3% -8.1% -- 9 -2.3% 0.8% 5.3% 1.0% 4.5% 1.3% -2.8% -8.1% 3.2% 2.3% 3.2% 0.9%

Source: Lehman Brothers, FAME

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Recap: MSCI May 2007 Annual Review

MSCI Annual Review: Benchmark Analysis

The MSCI May 2007 Annual Review was effective at the close on May 31, 2007. MSCI announced thechanges after the close on May 3, 2007. We estimate index managers needed to trade more than $16billion cross the developed markets to rebalance their portfolios. On the rebalance date, the overall buys

less sells spread was up 0.71%, the EAFE spread was up 0.84% and the Kokusai spread was up 0.87%,from open to close.

There were a number of notable differences in this years annual review relative to prior years. First, inanticipation of the enhanced methodology changes to be implemented during the November 2007 andMay 2008 quarterly reviews, MSCI used the enhanced methodology market capitalization cut-offs forinclusion to reduce turnover during this annual review. Consequently, there were far fewer additions anddeletions in this years rebalance and the turnover was half of previous years. In addition, MSCIannounced the changes one week earlier this year, extending the inclusion period. Finally, there were aremarkable number of takeover offers for MSCI targets announced during this lengthened inclusionperiod, resulting in many of the targets trading upwards.

We can see the announcement effect as the EAFE adds opened 1.88% higher and the EAFE deletesopened 0.38% lower on the morning after the announcement of the changes. During the Inclusion Period

(from the open after the announcement to the close on the rebalance date), the buys went up and thesells also went up, but less in magnitude, resulting in a positive spread for the major MSCI benchmarksover the inclusion period of 3.65%, 2.70% in Europe, 3.93% in Kokusai, and 3.52% in World. Mostcategories performed in-line with indexer flows with the exception of the North American deletes, whichwere up over most of the inclusion period. On the rebalance date, the buys outperformed the sells inevery benchmark and we saw spreads around 70-85 bps, much lower than in the past four annualreviews.

Figure 14 shows the performance of the various rebalance categories by benchmark since theannouncement of the rebalance on May 3 and on the rebalance date, May 31.

Figure 14: Performance of MSCI Annual Review by BenchmarkMSCI EAFE MSCI Europe MSCI Kokusai MSCI World

PERFORMANCEUntrad. Gap

Inclusion

Period

Rebalance

DayUntrad. Gap

Inclusion

Period

Rebalance

DayUntrad. Gap

Inclusion

Period

Rebalance

DayUntrad. Gap

Inclusion

Period

Rebalance

DayAdditions 1.88% 8.89% 1.18% 1.63% 8.40% 1.07% 1.52% 9.57% 0.94% 1.53% 8.11% 0.74%Deletion -0.38% -3.12% 0.51% -1.13% -2.89% -0.07% -0.92% -3.54% -0.11% -0.37% -3.09% 0.48%Funding 0.28% 1.95% 0.20% -0.08% 2.06% 0.08% 0.06% 1.88% 0.05% 0.28% 1.92% 0.17%FIF/Sh. Increases 0.72% 2.48% 0.92% 0.51% 2.35% 0.86% 0.55% 2.27% 0.85% 0.69% 2.41% 0.89%FIF/Sh. Decreases -1.67% 1.35% 0.12% -3.39% 2.01% 0.09% -2.36% 1.37% 0.01% -1.41% 1.39% 0.06%All Buys 1.11% 4.67% 1.01% 0.86% 4.28% 0.93% 0.91% 5.01% 0.88% 1.01% 4.61% 0.83%All Sells -1.19% 1.02% 0.17% -2.50% 1.58% 0.07% -1.74% 1.08% 0.01% -1.01% 1.09% 0.12%Index 0.00% 1.97% 0.91% 0.00% 1.74% 0.79% 0.00% 1.78% 0.34% 0.00% 1.95% 0.44%Additions - Deletion 2.26% 12.02% 0.67% 2.76% 11.29% 1.15% 2.44% 13.11% 1.05% 1.90% 11.20% 0.25%All Buys - Sells 2.30% 3.65% 0.84% 3.36% 2.70% 0.86% 2.65% 3.93% 0.87% 2.02% 3.52% 0.71%

Note: Performance is trade-weighted and measured in USD. Untrad. Gap is the return between the close prior to announcement and the following days open. Inclusion

Period is the return between the open after announcement and the most recent close. Rebalance Day is the return from the open to the close on the rebalance day.

Source: Lehman Brothers, MSCI

12


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Performance on May 31

Asia PacificIn general, the rebalance in the Asia Pacific region moved in line with indexer flows, with the net buysoutperforming the net sells by 0.92%. The exceptions were the deletions.

In general, the

rebalance in the Asia

Pacific region moved

in line with indexer

flows, with the net

buys outperforming

the net sells by 0.92%.

The additions in the Asia Pacific region were up 1.64%, while the deletions were up 1.77%. The deletionsperformance was driven by the deletions in Japan (up 2.29% for the day). Eight of the nine Japanesedeletions had positive performance for the day, with Arrk Corp (7873 JP, up 4.55% for the day) and

Uniden (6815 JP, up 4.19% for the day) leading the way (by contrast the Topix index was up 1.26% forthe day).

The Singapore portion of the MSCI review was completed at the close on May 30 (Singapore markets areclosed on May 31). The buys outperformed the sells by 4.87% on the rebalance date, largely due tounderperformance in the two largest and most illiquid sells: Creative Technology (CREAF SP) andVenture Corp (VMS SP).

The Asia Pacific slice of the rebalance contributed 30.99 basis points to the outperformance of the overallrebalance spread. The spread opened up following the open of trading in Japan and continued tooutperform during the morning. However, the spread reverted in the early afternoon as was down by asmuch as 40 basis points before rallying at the close to finish in positive territory for the day.

Europe

In general, the rebalance in Europe moved in the direction of indexer flows, with the buys outperformingthe sells by 0.86% for the day. Norway and the UK had the highest contributions to the performance of theEuropean spreads, as the net buys in both countries rallied. On the other hand, the Netherlands andSweden had a negative contribution to the overall performance of the European spread.

In general, the

rebalance in Europe

moved in the direction

of indexer flows, with

the buys

outperforming the sells

by 0.94% for the day.

The additions were up 1.81%, while the deletions were up 0.39%. The deletes had opened higher, butwere underperforming throughout the afternoon. The float increases were up 1.80%, the share increaseswere up 1.81%, the float decreases were up 1.14%, the share decreases were up 0.38%, and the fundingslice was up 0.79% on May 31.

The European slice of the trade contributed 51.13 basis points to the outperformance of the globalrebalance spread. The European spread rallied throughout the day and especially in the last hour oftrading. There was a small reversion at the close.

North AmericaThe buys less sells spread was up 0.10% for the North America region on May 31. In general, thedifferent rebalance categories moved in the direction of indexer flows, with the exception of the additions.The US portion of the trade had a negative contribution to the performance of the spread.

The buys less sells

spread was up 0.10%

for the North America

region on May 31. The additions were down 0.31% for the day, with Hertz (HTZ, down 3.51%) and Forest City (FCE/a, down2.95%) leading the way (by contrast, the S&P 500 was up 0.03%). The two deletions (both Canadiancompanies) were down 1.63% for the day, after starting the day in positive territory. A large portion of theunderperformance happened at or near the close.

The float increases were up 0.55%, the share increases were up 0.23%, the float decreases were down0.19%, the share decreases were down 0.27%, and the funding slice was up 0.09% on May 31.

The North America slice of the rebalance contributed 1.22 basis points to the outperformance of the globalbuys less sells spread. The North America spread opened higher and was up as much as 55 basis pointsin the early morning. However, the spread retreated throughout the day and was in negative territorybefore a turnaround at the close pushed the spread into positive territory for the day.

13


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Figure 15: Intraday Performance for MSCI EAFE Figure 16: Intraday Performance for MSCI WorldWorld Additions World Buys

98.50

99.00

99.50

100.00

100.50

101.00

101.50

102.00

102.50

Close5

/30

5/30/07

6:44

PM

5/30/07

7:31

PM

5/30/07

8:18

PM

5/30/07

9:05

PM

5/30/07

9:53

PM

5/30/07

10:40

PM

5/30/07

11:28

PM

5/31/07

12:15

AM

5/31/07

1:02

AM

5/31/07

1:50

AM

5/31/07

2:37

AM

5/31/07

3:24

AM

5/31/07

4:11

AM

5/31/07

4:59

AM

5/31/07

5:46

AM

5/31/07

6:33

AM

5/31/07

7:21

AM

5/31/07

8:12

AM

5/31/07

9:04

AM

5/31/07

9:53

AM

5/31/07

10:41

AM

5/31/07

11:29

AM

5/31/07

12:17

PM

5/31/07

1:04

PM

-0.40

-0.20

0.00

0.20

0.40

0.60

0.80

1.00

1.20

EAFE Additions EAFE Buys EAFE Sells EAFE Buys - Sells (Right Axis)

98.50

99.00

99.50

100.00

100.50

101.00

101.50

102.00

Close5/3

0

5/30/07

6:52

PM

5/30/07

7:47

PM

5/30/07

8:42

PM

5/30/07

9:38

PM

5/30/07

10:33P

M

5/30/07

11:29P

M

5/31/07

12:24A

M

5/31/07

1:20

AM

5/31/07

2:15

AM

5/31/07

3:10

AM

5/31/07

4:05

AM

5/31/07

5:01

AM

5/31/07

5:56

AM

5/31/07

6:51

AM

5/31/07

7:49

AM

5/31/07

8:51

AM

5/31/07

9:48

AM

5/31/07

10:44A

M

5/31/07

11:40A

M

5/31/07

12:3

6PM

5/31/07

1:32

PM

5/31/07

2:29

PM

5/31/07

3:26

PM

5/31/07

4:21

PM

-0.40

-0.20

0.00

0.20

0.40

0.60

0.80

1.00

World Sells World Buys - Sells (Right Axis)

Figure 17: Intraday Performance for MSCI Kokusai Figure 18: Intraday Performance for MSCI Asia PacificKokusai Additions Kokusai Buys

98.50

99.00

99.50

100.00

100.50

101.00

101.50

102.00

102.50

Close5/3

0

5/30/07

6:52

PM

5/30/07

7:47

PM

5/30/07

8:42

PM

5/30/07

9:38

PM

5/30/07

10:33P

M

5/30/07

11:29P

M

5/31/07

12:24

AM

5/31/07

1:20

AM

5/31/07

2:15

AM

5/31/07

3:10

AM

5/31/07

4:05

AM

5/31/07

5:01

AM

5/31/07

5:56

AM

5/31/07

6:51

AM

5/31/07

7:49

AM

5/31/07

8:51

AM

5/31/07

9:48

AM

5/31/07

10:44

AM

5/31/07

11:40

AM

5/31/07

12:36P

M

5/31/07

1:32

PM

5/31/07

2:29

PM

5/31/07

3:26

PM

5/31/07

4:21

PM

-0.20

0.00

0.20

0.40

0.60

0.80

1.00

1.20

Kokusai Sells Kokusai Buys - Sells (Right Axis) As ia Pac ifi c Addi ti ons As ia Pac ifi c Buys

97.50

98.00

98.50

99.00

99.50

100.00

100.50

101.00

101.50

102.00

102.50

Close5/3

0

5/30/07

6:25

PM

5/30/07

6:57

PM

5/30/07

7:27

PM

5/30/07

7:57

PM

5/30/07

8:27

PM

5/30/07

8:57

PM

5/30/07

9:28

PM

5/30/07

9:58

PM

5/30/07

10:28

PM

5/30/07

10:58P

M

5/30/07

11:29

PM

5/30/07

11:59

PM

5/31/07

12:29

AM

5/31/07

12:59

AM

5/31/07

1:30

AM

5/31/07

2:00

AM

5/31/07

2:30

AM

5/31/07

3:00

AM

5/31/07

3:30

AM

5/31/07

4:00

AM

5/31/07

4:31

AM

5/31/07

5:01

AM

5/31/07

5:31

AM

-0.60

-0.40

-0.20

0.00

0.20

0.40

0.60

0.80

1.00

1.20

As ia Pac ifi c Sel ls As ia Pac ifi c Buys - Sel ls (Righ t Axi s)

Figure 19: Intraday Performance for MSCI Europe Figure 20: Intraday Performance for MSCI North AmericaN. America Additions N. America BuysEurope Additions Europe Buys

98.50

99.00

99.50

100.00

100.50

101.00

101.50

102.00

102.50

5/31/07

3:00

AM

5/31/07

3:23

AM

5/31/07

3:46

AM

5/31/07

4:09

AM

5/31/07

4:33

AM

5/31/07

4:56

AM

5/31/07

5:19

AM

5/31/07

5:42

AM

5/31/07

6:05

AM

5/31/07

6:28

AM

5/31/07

6:51

AM

5/31/07

7:15

AM

5/31/07

7:39

AM

5/31/07

8:05

AM

5/31/07

8:32

AM

5/31/07

8:56

AM

5/31/07

9:19

AM

5/31/07

9:44

AM

5/31/07

10:08A

M

5/31/07

10:31A

M

5/31/07

10:54A

M

5/31/07

11:18A

M

5/31/07

11:41A

M

5/31/07

12:04

PM

5/31/07

12:28

PM

-0.40

-0.20

0.00

0.20

0.40

0.60

0.80

1.00

1.20

Europe Sells Europe Buys - Sells (Right Axis)

98.80

99.00

99.20

99.40

99.60

99.80

100.00

100.20

100.40

100.60

100.80

101.00

5/31/07

9:30

AM

5/31/07

9:48

AM

5/31/07

10:07

AM

5/31/07

10:25

AM

5/31/07

10:43

AM

5/31/07

11:01

AM

5/31/07

11:20

AM

5/31/07

11:38

AM

5/31/07

11:56

AM

5/31/07

12:15

PM

5/31/07

12:33

PM

5/31/07

12:51

PM

5/31/07

1:09

PM

5/31/07

1:27

PM

5/31/07

1:46

PM

5/31/07

2:04

PM

5/31/07

2:23

PM

5/31/07

2:43

PM

5/31/07

3:01

PM

5/31/07

3:19

PM

5/31/07

3:38

PM

5/31/07

3:56

PM

5/31/07

4:14

PM

-0.10

0.00

0.10

0.20

0.30

0.40

0.50

0.60

N. America Sells N. America Buys - Sells (Right Axis)

Note: Performance is trade-weighted, measured in local currency. Time is EDT.

Source: Lehman Brothers, MSCI, Bloomberg

Note: Performance is trade-weighted, measured in local currency. Time is EDT.


14


15/37


Regional Analysis

Asia PacificThe Asia Pacific portion of the trade performed in-line with indexer flows during the inclusion period andon the rebalance date. The 12 additions (nine in Japan, two in Hong Kong, and one in Australia)represented 19% of the trade in Asia Pacific. Overall, the additions were up 12.00% over the inclusionperiod and up on the rebalance date in Australia. Strength in the Australian addition, Fortescue MetalsGroup (FMG AU), over the inclusion period and on the rebalance date buoyed the performance of theAsia Pacific adds.

The FIF increases and decreases represented the largest portions of the Asia Pacific trade, 28% and37%, respectively. The FIF increases were up 3.87% since May 3. While the FIF decreases were also up1.61% during that same period due to market factors, the buys less sells spread ended up 5.75% sinceMay 3.

Figure 21 breaks down the performance of the different categories by country.

Figure 21: Performance of the MSCI Rebalance by Country: Asia Pacific

Country Time Period AddsShare

Incr.

FIF

Incr.Deletes

Share

Decr.

FIF

Decr.

Other Sells

(Funding)

Australia Untrad. Gap 4.04% 0.47% 0.89% 0.18% 0.63% 0.71%

Inclusion Period 60.54% -0.01% 3.55% -2.45% 4.95% 1.37%Rebalance Day 4.11% 0.73% 1.18% -0.20% 1.39% -0.10%

Hong Kong Untrad. Gap 3.76% 2.44% 1.58% 0.10% 2.22% 1.31% 1.12%

Inclusion Period 9.41% -6.75% 1.46% -4.45% -7.07% -5.47% -1.80%

Rebalance Day 4.00% 3.15% 1.79% 0.84% -0.73% 0.11% 0.92%

Japan Untrad. Gap 1.56% 2.18% 1.19% 0.80% 0.46% 1.16% 1.33%

Inclusion Period 3.23% 3.36% 2.96% -2.13% -10.23% 1.51% 2.13%

Rebalance Day 0.03% 0.90% 1.10% 1.73% 0.51% 0.19% 0.72%

New Zealand Untrad. Gap -0.04% -0.04% -0.05%

Inclusion Period 13.28% -4.85% 0.98%

Rebalance Day 0.98% 1.21% -0.02%

Singapore Untrad. Gap 1.63% 0.71% 0.55% -0.61% 1.01%

Inclusion Period -1.60% 1.25% -21.74% -6.79% 0.67%

Rebalance Day -1.08% 0.41% -6.49% -4.43% -1.71%

Note: Performance is trade-weighted and measured in Local Currency. Untrad. Gap is the return between the close

prior to announcement and the following days open. Inclusion Period is the return between the open after

announcement and the most recent close. Rebalance Day is the return between the close on the day prior torebalance to the close on the rebalance day.


EuropeIn Europe, most of the different categories performed in-line with indexer flows (the buys outperformed thesells) over the inclusion period and on the rebalance date. The 7 additions represented 16% of the MSCIEurope trade (two each in France and Spain, and one each in Switzerland, Italy, and Norway) and wereup in every European country on the rebalance date.

In general, the 12 deletes in Europe were down during the inclusion period, but the performance wasmixed on the rebalance date. The most illiquid delete, Technical Olympic (OLYMP GA), was up 25.79%over the inclusion period and down the most in the region, 6.10%, on the rebalance date. Similar to theAsia Pacific trade, all the buy and sell categories were up on the rebalance date, however, the buys less

sells spread ended up on the rebalance date (and 3.65% since May 3). Figure 22 breaks down theperformance of the different categories by country.

15


16/37


Figure 22: Performance of the MSCI Rebalance by Country: Europe


Incr.

FIF

Incr.Deletes

Share

Decr.

FIF

Decr.

Other

Sells

(Funding)Austria Untrad. Gap -0.20% -0.04% 0.02%

Inclusion Period 5.75% 6.67% 2.82%

Rebalance Day 2.36% -1.80% 0.41%Belgium Untrad. Gap 0.03% 0.59% 0.06% 0.00% 0.28%

Inclusion Period -0.98% -4.31% 0.72% -1.37% 3.30%Rebalance Day 0.74% -0.30% 0.09% 0.46% 1.24%

Denmark Untrad. Gap 0.97% 1.13% 0.56% 0.44%

Inclusion Period 7.69% -4.97% -3.14% 3.24%

Rebalance Day 0.95% 0.08% -0.97% 0.49%Finland Untrad. Gap 0.35% 0.20% -0.04% -1.28%

Inclusion Period 1.30% 3.39% -0.96% 7.01%Rebalance Day 0.71% 0.31% 1.11% 0.24%

France Untrad. Gap 1.24% 0.01% 1.51% 0.16% -12.63% 0.09%Inclusion Period 15.54% 1.43% 5.22% 0.99% 0.03% 2.22%Rebalance Day 1.21% 0.94% 1.72% 0.04% 0.40% 0.12%

Germany Untrad. Gap -0.50% 1.15% -0.35% -0.64%

Inclusion Period 13.80% 3.84% 7.03% 2.90%Rebalance Day 0.45% 1.24% 1.09% 0.40%

Greece Untrad. Gap 0.60% 0.31% 0.00% -0.15% -0.29%Inclusion Period 1.78% 6.33% 3.21% -10.37% 4.73%Rebalance Day 0.41% 1.51% -4.65% -3.34% -0.36%

Ireland Untrad. Gap 0.00% 0.29% -1.22% 0.28% -0.28% -0.06%Inclusion Period 33.52% -1.86% -6.17% -1.80% 5.00% -1.96%

Rebalance Day 2.97% -0.42% 1.33% -0.69% -0.53% -1.29%Italy Untrad. Gap 1.01% 0.03% -1.01% -0.02% 0.20%

Inclusion Period 0.30% -4.40% -3.08% 0.30% -0.65%Rebalance Day 0.61% -0.31% -0.29% -0.54% -0.32%

Netherlands Untrad. Gap 0.00% 1.14% -0.48% -0.14% -0.10% 0.02%Inclusion Period -6.17% 2.93% -10.14% 5.52% -4.18% 1.74%

Rebalance Day -0.32% 0.70% 0.36% -0.08% 0.21% 0.65%Norway Untrad. Gap 1.81% 0.06% -0.35% 0.13% -0.63%

Inclusion Period 13.35% 2.25% 1.75% 3.30% -0.53%Rebalance Day 2.14% 0.76% 1.40% 0.29% 0.43%

Portugal Untrad. Gap 1.90% 0.99% 0.25%Inclusion Period 2.34% 7.14% 7.69%

Rebalance Day -0.11% 0.32% 1.30%Spain Untrad. Gap 1.92% 0.01% -0.98% -0.07% 0.18% 0.30%

Inclusion Period 13.69% 7.72% 0.87% 2.23% 6.71% 4.44%

Rebalance Day 2.08% 2.05% 1.18% -1.08% -0.32% 0.03%Sweden Untrad. Gap -0.77% 0.24% -1.72% 0.00% 0.19% -0.32%

Inclusion Period 6.77% 2.90% 1.17% 4.07% 3.75% 2.34%Rebalance Day 4.15% 0.79% -0.57% -0.78% 0.25% 0.31%

Switzer land Untrad. Gap 2.07% 1.13% -1.52% 0.43% -0.03% 0.03%Inclusion Period 3.05% -0.25% -1.35% -1.99% -0.78% 0.98%Rebalance Day -0.15% 0.24% -0.39% -0.40% 0.96% -0.08%

United Kingdom Untrad. Gap -0.63% 0.32% -1.81% 0.36% 0.75% 0.12%Inclusion Period -0.35% 1.83% -5.26% 2.41% -0.97% 1.41%Rebalance Day 0.60% 1.33% 0.72% -0.34% 0.35% -0.54%



announcement and the most recent close. Rebalance Day is the return between the close on the day prior to

rebalance to the close on the rebalance day.


North AmericaIn North America, the share decreases and additions dominated 37% and 36% of the trade, respectively.The 14 additions (11 in the U.S. and three in Canada) were up 5.66% since May 3 and down 0.32% onthe rebalance date.

The performance of the North America trade was the weakest of the three regions due to strength in thedeletes (two in Canada). The two deletes, Angiotech Pharm (ANP CT) and QLT Inc (QLT CT), are bothpharmaceutical names and were both up as much as 8.23% and 7.77%, two weeks after the May 3announcement. The share decrease and funding portions of the trade were also up over the inclusion

16


17/37


period, contributing negatively to the buys less sells spread. The spread ended up 2.51% over theinclusion period and up 0.10% on the rebalance date. Figure 23 breaks down the performance of thedifferent categories by country.

Figure 23: Performance of the MSCI Rebalance by Country: North America


Incr.

FIF

Incr.Deletes

Share

Decr.

FIF

Decr.

Other

Sells

(Funding)Canada Untrad. Gap 0.01% 0.02% -0.62% 0.27% 0.35% 0.22% 0.50%

Inclusion Period 12.45% -0.33% 1.57% 0.01% 8.44% -3.01% 0.58%Rebalance Day 1.09% -0.27% -0.07% -1.44% -0.92% -1.31% 0.04%

United States Untrad. Gap 0.36% 0.20% 0.35% 0.35% 0.23% 0.29%

Inclusion Period 4.49% 3.15% 0.60% 1.27% 3.16% 1.78%Rebalance Day -1.10% 0.30% 0.52% -0.29% 0.24% -0.05%



announcement and the most recent close.


Stock Level Analysis

Figure 24 to Figure 29 show the performance of the buys and sells for the different regions between theopen and close on May 31. We show the performance of the five best and worst performing buys andsells, the performance of the five biggest buys and sells by value to trade and the performance of themost illiquid buys and sells. In general, the biggest buys performed in the direction of the estimated flowson the rebalance day in Asia Pacific and Europe (not in North America).

Figure 24: Performance of Asia Pacific Buys Figure 25: Performance of Asia Pacific SellsTicker Issuer CTY Category

Est. Value to

Trade

Est.

Liquidity

Rebalance

Day Return

Best Performing BuysMGR AU MIRVAC GROUP AU Sh. Incr. $3.3 17% 7.48%700 HK TENCENT HOLDINGS LI

Ticker Issuer CTY CategoryEst. Value to

Trade

Est.

Liquidity

Rebalance

Day Return

Best Performing Sells2873 JT KATOKICHI CO JP Deletion -$31.0 -204% 5.41%709 HK GIORDANO INTERNATIHK Addition $129.6 784% 6.98%

DRT AU DB RREEF TRUST AU FIF Incr. $7.7 59% 5.35%148 HK KINGBOARD CHEM. HO

O HK Funding -$0.1 -2% 4.96%9427 JT EACCESS JP Funding -$0.1 -2% 4.64%2212 JT YAMAZAKI BAKING CO JP Funding -$0.2 -2% 3.90%

4521 JT KAKEN PHARMACEUTIC

L HK Sh. Incr. $5.8 84% 4.15%

FMG AU FORTESCUE METALS G AU Addition $87.7 1570% 4.11%Worst Performing Buys4817 JQ JUPITER TELECOM JP Addition $76.5 2738% -4.72%4680 JT ROUND ONE CORP JP Sh. Incr. $0.1 0% -2.86%AG SP ALLGREEN PROPERTIE

JP Deletion -$27.0 -1347% 3.77%Worst Performing SellsCREAF S CREATIVE TECHNOLOG SG Deletion -$13.1 -1555% -6.49%VMS SP VENTURE CORP SG FIF Decr. -$6.2 -95% -4.43%NOL SP NEPTUNE ORIENT LINESG FIF Incr. $3.8 84% -2.70%

6703 JT OKI ELECTRIC INDUSTRS SG Funding -$0.1 -1% -4.24%

OLAM SP OLAM INTERNATIONAL SG Funding -$0.2 -1% -4.07%

UOL SP UNITED OVERSEAS LAN SG Funding -$0.3 -3% -3.77%Largest Values to Sell7203 JT TOYOTA MOTOR CORP JP FIF Decr. -$451.4 -73% 0.27%8306 JT MITSUBISHI UFJ FIN GR

JP Sh. Incr. $2.1 11% -2.18%8267 JT AEON CO JP Sh. Incr. $1.0 1% -2.15%Largest Values to BuyPBL AU PUBLISHING BROADCAS AU FIF Incr. $204.4 484% 1.64%700 HK TENCENT HOLDINGS LI HK Addition $129.6 784% 6.98%8766 JT MILLEA HOLDINGS JP FIF Incr. $118.6 127% 0.83%8359 JT HACHIJUNI BANK JP Addition $116.1 1794% 0.65%8379 JT HIROSHIMA BANK JP Addition $107.3 935% 1.24%Most Illiquid Buys4817 JQ JUPITER TELECOM JP Addition $76.5 2738% -4.72%8359 JT HACHIJUNI BANK JP Addition $116.1 1794% 0.65%322 HK TINGYI HOLDING CORP HK Addit ion $70.0 1748% -1.41%FMG AU FORTESCUE METALS G

JP FIF Decr. -$234.5 -80% 0.00%9437 JT NTT DOCOMO JP FIF Decr. -$163.5 -87% -0.48%2 HK CLP HOLDINGS HK FIF Decr. -$145.5 -718% 0.46%4502 JT TAKEDA PHARMACEUTI JP FIF Decr. -$121.1 -85% 1.49%Most Illiquid SellsTWR NZ TOWER NZ Deletion -$9.6 -1617% 2.62%CREAF S CREATIVE TECHNOLOG SG Deletion -$13.1 -1555% -6.49%321 HK TEXWINCA HOLDINGS HK Delet ion -$17.2 -1390% 3.70%4521 JT KAKEN PHARMACEUTICAU Addition $87.7 1570% 4.11%

8379 JT HIROSHIMA BANK JP Addition $107.3 935% 1.24%JP Deletion -$27.0 -1347% 3.77%

WHS NZ WAREHOUSE GROUP NZ Deletion -$21.8 -1207% 0.48%

Note: Performance is measured in local currency.




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Figure 26: Performance of Europe Buys Figure 27: Performance of Europe SellsTicker Issuer CTY Category

Est. Value to

Trade

Est.

Liquidity

Rebalance

Day Return

Best Performing BuysKCR1V F


Trade

Est.

Liquidity

Rebalance

Day Return

Best Performing SellsFABG SS FABEGE SE FIF Decr. -$5.6 -25% 6.55%RCEA NA RODAMCO EUROPE NL Funding -$1.5 -2% 5.51%OERL VX OC OERLIKON CORP N

KONECRANES FI FIF Incr. $5.1 26% 5.60%FKI LN FKI GB Sh. Incr. $0.2 2% 5.34%UL FP UNIBAIL HOLDING FR Sh. Incr. $0.1 0% 5.31%EXAE GA HELLENIC EXCHANGES GR FIF Incr. $14.4 268% 5.27%LUPE SS LUNDIN PETROLEUM SE FIF Incr. $7.1 31% 5.05%

Worst Performing BuysAGS LN AEGIS GROUP GB Sh. Incr. $0.1 0% -2.81%BAY LN BRITISH AIRWAYS GB Sh. Incr. $1.0 1% -2.08%MKS LN MARKS & SPENCER GR

A CH Funding -$0.6 -1% 5.43%INB BB INBEV BE Funding -$2.7 -3% 4.52%CAST SS CASTELLUM SE Funding -$0.4 -5% 3.85%

Worst Performing SellsOLYMP GTECHNICAL OLYMPIC GR Delet ion -$7.3 -1712% -6.10%INTRK G INTRACOM GR Deletion -$20.3 -716% -3.94%BIOX GA VIOHALCO COPPER CO GR FIF Decr. -$7.7 -189% -3.34%KGF LN KINGFISHER GB Sh. Decr. -$6.6 -3% -3.22%BKIR ID BANK IRELAND IE Funding -$1.5 -2% -3.20%Largest Values to SellELE SQ ENDESA ES FIF Decr. -$252.7 -57% -0.20%BN FP DANONE (GROUPE) FR FIF Decr . -$230.4 -113% -0.91%CSGN V

GB Sh. Incr. $2.3 1% -1.89%VOE AV VOESTALPINE AT FIF Incr. $67.4 243% -1.89%HUSQB S HUSQVARNA B SE FIF Incr. $8.2 34% -1.87%Largest Values to BuySLHN VX SWISS LIFE HOLDING CH Addit ion $368.9 550% -0.15%PLT IM PARMALAT IT Addition $293.4 1044% 0.61%SAN SQ BSCH BCO SANTANDER ES FIF Incr. $216.9 13% 2.22%REC NO RENEWABLE ENERGY

X CREDIT SUISSE CH FIF Decr. -$215.7 -47% 0.92%CS FP AXA FR FIF Decr. -$215.7 -55% 0.93%OR FP LOREAL FR FIF Decr. -$192.3 -111% 0.34%Most Illiquid SellsOLYMP

C NO Addition $202.4 275% 2.14%F IM FIAT ORD IT FIF Incr. $200.2 28% 0.81%Most Illiquid BuysZOT SQ ZARDOYA OTIS ES Addition $171.9 2367% 2.77%ICA FP ICADE FR Addition $108.9 1563% 1.06%ADP FP ADP FR Addition $145.8 1071% 1.31%PLT IM PARMALAT IT Addition $293.4 1044% 0.61%ELN ID ELAN CORP IE Sh. Incr. $22.2 715% 2.97%

GTECHNICAL OLYMPIC GR Deletion -$7.3 -1712% -6.10%TOT ID TOTAL PRODUCE IE Deletion -$14.9 -1301% 1.33%MASN SEMICRONAS SEMICONDU CH Deletion -$30.0 -1172% -0.39%INTRK G INTRACOM GR Deletion -$20.3 -716% -3.94%CLST LN COLLINS STEWART GB Deletion -$44.6 -619% 2.62%

Figure 28: Performance of North America Buys Figure 29: Performance of North America SellsTicker Issuer CTY Category

Est. Value to

Trade

Est.

Liquidity

Rebalance

Day Return

Best Performing BuysLSI UN LSI LOGIC US Sh. Incr. $0.1 0% 3.46%HOT UN STARWOOD HOT.&RES. US Sh. Incr. $1.0 1% 2.96%AKAM U


Trade

Est.

Liquidity

Rebalance

Day Return

Best Performing SellsAEM CT AGNICO-EAGLE MINES CA Funding -$0.2 -1% 4.62%TDS/S UATELEPHONE & DATA SY US Funding -$0.1 -5% 4.32%K CT KINROSS GOLD CORP CA Funding -$0.3 -1% 4.16%NVT UN NAVTEQ CORP US Funding -$0.1 0% 4.03%BMC UN BMC SOFTWARE US Sh. Decr. -$0.5 -1% 3.98%Largest Values to SellADCT U

WAKAMAI TECHNOLOGIE US FIF Incr. $6.5 3% 2.84%ATI UN ALLEGHENY TECHNOLO US FIF Incr. $4.0 2% 2.65%CDNS UWCADENCE DESIGN SYST US Sh. Incr. $0.2 0% 2.62%Worst Performing BuysHTZ UN HERTZ GLOBAL HOLDIN US Addition $16.6 83% -3.64%HES UN HESS US Addition $117.3 76% -3.49%FCE/A U

WADC TELECOMMUNICAT US Funding -$0.1 0% -5.58%A CT ABITIBI-CONSOLIDATED CA Funding $0.0 0% -4.04%MCO UN MOODYS CORP US Funding -$0.6 0% -4.02%TIF UN TIFFANY & CO US Sh. Decr. -$1.3 -2% -3.98%ACI UN ARCH COAL US Funding -$0.2 0% -3.51%Largest Values to SellXOM UN EXXON MOBIL CORP US Sh. Decr. -$84.2 -5% -0.99%TWX UN TIME WARNER US Sh. Decr. -$29.5 -6% -0.79%

GS UN GOLDMAN SACHS GRO

NFOREST CITY ENT. A US Addition $33.1 176% -3.38%ICE UN I NTERCONTINENTAL US Addition $44.4 12% -2.63%AMZN UWAMAZON.COM US Sh. Incr. $0.3 0% -2.26%Largest Values to BuyHES UN HESS US Addition $117.3 76% -3.49%MIR UN MIRANT CORP US Addition $92.8 67% -1.09%

NMX UN NYMEX HOLDING US Addition $76.8 119% -0.43%MA UN M ASTERCARD A US Addition $72.7 24% 0.38%WSH UN WILLIS GROUP HLDGS US Addition $52.8 218% 1.89%Most Illiquid BuysCU CT CANADIAN UTILITIES A CA Addit ion $16.7 649% 1.92%WSH UN WILLIS GROUP HLDGS US Addition $52.8 218% 1.89%REI-U CT RIOCAN REIT CA Addition $18.8 210% 0.08%FCE/A U

U US Sh. Decr. -$23.7 -2% -0.54%BAC UN BANK OF AMERICA COR US Sh. Decr. -$22.0 -3% -0.49%GE UN GENERAL ELECTRIC CO US Sh. Decr . -$21.9 -1% -0.32%Most Illiquid SellsQLT CT QLT CA Deletion -$4.3 -334% -2.47%ANP CT ANGIOTECH PHARM CA Dele tion -$4.3 -172% -0.42%BAM/A C BROOKFIELD ASSET MA CA FIF Decr. -$10.1 -33% -1.64%

LINTA UNFOREST CITY ENT. A US Addition $33.1 176% -3.38%BF/B UN BROWN-FORMAN CORP US Addit ion $27.3 128% -0.38%

LIBERTY INTERACTIVE A US Sh. Decr. -$10.4 -21% 0.71%NXY CT NEXEN CA FIF Decr. -$13.2 -20% -1.48%





Reversion

Figure 30 shows the performance of the different rebalance categories by region on the rebalance date

(May 31) and the following day. The additions and the deletes both went up on the rebalance day.However, both the additions and deletions categories experienced reversion one day after the rebalanceday (the adds went down and deletes went up). Although the buys less sells spread was negative on June1, reversion less apparent in the other buys and sells categories.

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Figure 30: MSCI Rebalance Performance on May 31 and June 1, 2007Performance in Local Currency 1-Day Return (May 31) 1-Day Return (June 1)

Weight in

Total

Trade

Number

of NamesEAFE

Asia

PacificEurope

North

AmericaKokusai World EAFE

Asia

PacificEurope

North

AmericaKokusai World

Addition 19.1% 33 1.73% 1.63% 1.81% -0.32% 1.63% 1.29% -0.27% -0.11% -0.39% 0.54% -0.09% -0.10%

FIF Increase 27.3% 201 1.79% 1.74% 1.82% 0.55% 1.73% 1.74% 0.37% 0.28% 0.42% 0.22% 0.26% 0.36%

Share Increase 3.6% 170 1.92% 2.09% 1.84% 0.30% 1.63% 1.72% 0.95% 1.06% 0.90% 0.29% 0.65% 0.87%

Deletion 4.6% 28 1.10% 1.78% 0.61% -1.63% 0.49% 1.07% 1.70% 0.53% 2.57% 1.61% 2.42% 1.70%FIF Decrease 27.5% 128 0.90% 0.59% 1.14% -0.18% 1.05% 0.88% 1.10% 1.03% 1.15% 0.58% 1.08% 1.09%

Share Decrease 9.3% 246 0.31% 0.25% 0.31% -0.27% 0.03% 0.03% 0.68% -0.30% 0.74% 0.34% 0.52% 0.52%

Funding 8.6% 1106 1.03% 1.24% 0.95% 0.08% 0.80% 0.90% 0.71% 0.55% 0.76% 0.58% 0.71% 0.69%

Illiquid Buys 31.1% 105 1.70% 1.66% 1.74% -0.80% 1.71% 1.48% -0.11% -0.02% -0.18% 0.76% -0.11% -0.03%

Illiquid Sells 25.1% 94 0.83% 0.82% 0.83% -1.63% 0.77% 0.82% 1.08% 0.97% 1.18% 1.61% 1.13% 1.08%

Illiquid Buys - Sells 56.2% 199 0.88% 0.83% 0.91% 0.83% 0.94% 0.66% -1.19% -0.99% -1.36% -0.86% -1.24% -1.12%

All Buys 50.0% 404 1.78% 1.72% 1.82% -0.10% 1.68% 1.56% 0.18% 0.17% 0.19% 0.46% 0.15% 0.21%

All Sells 50.0% 1508 0.87% 0.80% 0.91% -0.21% 0.70% 0.74% 1.04% 0.89% 1.13% 0.41% 0.98% 0.97%

Buys - Sells 100.0% 1912 0.91% 0.92% 0.91% 0.10% 0.99% 0.82% -0.86% -0.72% -0.95% 0.05% -0.82% -0.75%

Note: Performance is trade-weighted. Illiquid buys and sells are names with expected shares to trade representing over one days average volume.

Source: Lehman Brothers, Bloomberg, MSCI

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Topic: S&P/ASX June Quarterly Rebalance Additions and Deletions -- Effective at theclose on June 15, 2007

On June 1, S&P announced that it will make a number of additions and deletions during the upcomingS&P/ASX quarterly rebalance, effective at the close on June 15, 2007. We highlight the changes to theS&P/ASX 200 (AS51) below and project weight changes and indexer flows.

S&P announced that it

will make a number of

additions and

deletions during theupcoming S&P/ASX

quarterly rebalance,

effective at the close

on June 15, 2007.

In accordance with the S&P/ASX methodology changes that extend index eligibility to foreign domiciledstocks, News Corporation (NWS) was considered for inclusion based upon the aggregate market value ofits CHESS Depository Interests (CDIs) traded on the ASX. S&P has combined the Australian equitycapital of NWS (voting shares) and NWSLV (non-voting shares) into NWS, in line with S&P globalpractice.

In accordance with the new S&P/ASX index methodology, Singapore Telecommunications Limited (SGT)was considered for inclusion based upon the aggregate market value of its CHESS Depository Interests(CDIs) traded on the ASX, on which basis it ranked within the top 200 eligible securities and will be addedto the S&P/ASX 200.

Figure 31: S&P/ASX 200 Quarterly Rebalance Additions and Deletions Projected Flows

Ticker Name Index Action

USD

Price

(6/1)

Current

Wgt (bps)

Projected

Wgt (bps)

USD Value to

Trade

Shares to

Trade

20D Avg

Volume

Liquidity

AdditionsNWS AU News Corp S&P/ASX 50, 100, 200, 300 23.70 0.00 54.68 $311,964,088 13,160,878 16,814,202 * 78%

BLY AU Boart Longyear Group S&P/ASX 100, 200, 300 1.81 0.00 25.86 $120,605,860 66,539,200 17,664,336 377%

SGT AU SingTel S&P/ASX 200, 300 2.33 0.00 8.60 $32,220,199 13,854,000 22,795,413 * 61%QGC AU Queensland Gas Co Ltd S&P/ASX 200 1.99 0.00 6.98 $20,342,797 10,241,244 1,424,533 719%

SMY AU Sally Malay Mining Ltd S&P/ASX 200 3.85 0.00 6.76 $19,702,187 5,119,349 1,259,513 406%

MCR AU Mincor Resources NL S&P/ASX 200 3.53 0.00 6.44 $18,785,926 5,328,148 1,340,486 397%

DeletionsAPI AU Australian Pharm Industries S&P/ASX 200 1.98 3.50 0.00 ($10,119,970) (5,116,048) 588,434 -869%

KCN AU K ingsgate Consolidated Ltd S&P/ASX 200 4.41 3.44 0.00 ($9,941,262) (2,253,552) 273,826 -823%

ARQ AU ARC Energy Ltd S&P/ASX 200 1.29 2.78 0.00 ($8,028,581) (6,218,240) 1,878,524 -331%TWR AU Tower Ltd S&P/ASX 200 1.75 2.56 0.00 ($7,403,824) (4,239,620) 976,430 -434%

KIM AU Kimberley Diamond Co NL S&P/ASX 200 0.60 2.35 0.00 ($6,778,954) (11,375,840) 2,893,962 -393%

BDG AU Bendigo Mining Ltd S&P/ASX 200 0.28 1.33 0.00 ($3,841,518) (13,651,400) 2,743,017 -498%

Note: We assume that index managers own 2.80% of the float-adjusted shares of each company in the S&P/ASX 200, 1.00% of the float-adjusted shares of eachcompany in the S&P/ASX 50, 0.88% of the float-adjusted shares of each company in the S&P/ASX 100, and 0.80% of the float-adjusted shares of each company in the

S&P/ASX 300.

Source: Lehman Brothers, S&P, Bloomberg, ASX

Background: On May 18, 2006, S&P and the Australian Stock Exchange announced the undertaking of aconsultation process with interested index stakeholders, focusing on the issue of foreign-domiciledcompanies and the domestic suite of S&P/ASX indices. On February 27, 2007, S&P and ASX confirmedthe changes will become effective during the June 2007 rebalance.

The S&P/ASX index treatment of foreign-domiciled companies will be changed. Foreign companies onthe ASX will be considered for inclusion within the S&P/ASX indices subject to meeting capitalizationand liquidity hurdles. Foreign-domiciled companies will be considered for index inclusion based ontheir ASX-quoted securities or based on the market value of CDIs quoted on ASX.

The S&P/ASX 50 index will no longer be included in the S&P Global 1200 index. It will continue as partof the Australian index suite, however.

S&P will develop a new index that will consist of Australian- and New Zealand-domiciled companiesand exclude foreign-domiciled companies specifically for the S&P Global 1200 index.

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21

- -

Topic: MSCI U.S. Names Involved in Russell Reconstitution -- Effective at the close onJune 22, 2007

The annual Russell Reconstitution will take place at the close on June 22, 2007. We estimate Russellmanagers will need to trade $59.0 billion to rebalance their portfolios. A large slice of the MSCI StandardU.S. securities will be involved in the reconstitution and we highlight the top names in Figure 32. Aspreadsheet with our full reconstitution projection list is available on Gabi Baezs analyst page on ourwebsite at www.lehmanlive.com.

Figure 32: MSCI Standard U.S. Securities Involved in the Russell Reconstitution Projected Flows

Source:

Ticker Sedol Name GICS SectorUSD Price

(31May07)

World

Wgt

Kokusai

Wgt

Projected Russell

Category

Projected

Russell

Trade Value

(MM USD)

Projected

Russell

Shares to

Trade

Liquidity

Largest Weight in MSCI World/KokusaiXOM 2326618 EXXON MOBIL CORP Energy 83.17 1.6428% 1.8294% stay in r1 ($1,030) (12,379,085) -61%GE 2380498 GENERAL ELECTRIC CO Industrials 37.58 1.3238% 1.4742% stay in r1 ($176) (4,678,684) -16%MSFT 2588173 MICROSOFT CORP Info Tech 30.67 0.9212% 1.0259% stay in r1 ($144) (4,701,839) -8%C 2297907 CITIGROUP Financials 54.49 0.9039% 1.0066% stay in r1 ($381) (6,991,506) -28%

T 2831811 AT&T Telecom Svcs 41.34 0.8695% 0.9683% stay in r1 ($501) (12,128,171) -60%BAC 2295677 BANK OF AMERICA CORP Financials 50.71 0.7719% 0.8595% stay in r1 ($521) (10,280,292) -70%PG 2704407 PROCTER & GAMBLE CO Cons. Staples 63.55 0.6789% 0.7560% stay in r1 ($689) (10,837,381) -93%PFE 2

Lehman Global May 2007

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