About the Index

The KLD Large Cap Social SM Index (LCS) is a float-adjusted market capitalization weighted index designed to represent the large-cap segment of the U.S. equity market available to social investors. The LCS includes the best environmental, social and governance (ESG) performers in each sector of the Russell 1000 while approximating the sector diversification of the Russell 1000.The LCS holds a subset of companies from the Russell 1000 Index, which represents 90% of the capitalization of the US equity market.

Index Construction

The Russell 1000 Index, a float-adjusted market capitalization weighted index representing the 1,000 largest publicly traded US companies, serves as the baseline universe for the LCS. Only constituents of the Russell 1000 are eligible for inclusion in the LCS.

The LCS selection process involves three stages.  First, companies engaged beyond specific levels of involvement in certain types of business activities are automatically disqualified from consideration for the Index. These include:

	Adult Entertainment
	Alcohol
	Firearms
	Gambling
	Military

Nuclear Power

Tobacco

KLD then uses an internal ratings system based on ESG scores to rank the remaining Russell 3000 companies in relation to their sector peers. The ESG scores are based on company performance in the following issue areas:

	Community
	Corporate Governance
	Diversity
	Employee Relations
	Environment

Product Quality

Product Safety

Human Rights

Finally, KLD selects the top ESG performers that make up 65-75% of the market capitalization of each sector.  Due to certain screens some sectors may have less than 65% market capitalization representation.

Index Maintenance

The KLD LCS Index Committee reconstitutes the LCS every year on the last business day in June in conjunction with the reconstitution schedule of the Russell 1000. KLD follows Russell's rules for removing and adding companies due to corporate actions.  KLD may remove a company at any time for reasons related to its ESG performance. KLD does not replace companies removed from the LCS between reconstitutions and can only add companies to the index at reconstitution. The LCS Index Committee makes the final decision on all changes to the Index related to ESG screens.