CONSULTATION ON PROPOSEDCHANGES TO THE CORPORATEEVENTS METHODOLOGY
November 2020

This consultation may or may not lead to the implementation of any or all of the proposed changes in thehighlighted or any other MSCI indexes. Consultation feedback will remain confidential. MSCI may publicly
disclose feedback if specifically requested by specific market participants. In that case, the relevant
feedback would be published together with the final result of the consultation.

© 2020 MSCI Inc. All rights reserved.
Please refer to the disclaimer at the end of this document.

SUMMARY OF PROPOSALSMSCI opens a consultation with proposals for changes to the Corporate Event Methodology
for the following topics:

1. IMPLEMENTATION OF PARTIAL ACQUISITION AND FIXED PRICE BUYBACKS
2. DELETION PRICE OF THE RIGHTS LINE FOR HIGHLY DILUTIVE RIGHTS ISSUE
3. IMPLEMENTATION OF RIGHTS ISSUE WITH SUBSCRIPTION PERIOD BEFORE EX-DATE
4. DOWNWARD MIGRATION FOLLOWING A RIGHTS ISSUEMSCI invites feedback from market participants on or before December 04,
2020 and will announce the results of the consultation on or before
December 31, 2020. Changes if any would be implemented with sufficientadvance notification.

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Topic 1 - Implementation ofPartial Acquisition and Fixed
Price Buybacks

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BACKGROUND AND OBJECTIVE• Current MSCI methodology:‒ Price Adjustment factor (PAF) is applied on ex-date and where the ex-date is notavailable, the PAF is applied on the first business day after the end of the offer.

‒ PAF other than 1 is applied if, Premium* > 20% And Estimated Gain per Share > 5%.
‒ Number of Shares (NOS) and/or Foreign Inclusion Factor (FIF) change is implemented
once the results of the offer are officially announced.

• Objective of the proposal:‒ To eliminate the uncertainty associated with premium and estimated gain per sharebased on cum-date price for application of PAF.

‒ To eliminate the potential tracking error resulting from price movements between theapplication of PAF and implementation of results.

‒ The following table provides details of such events over the past 4 years.
Constituents of ACWI** Index

Partial Acquisition

Buyback

PAF other than 1

3 events (Total 94)

2 events (Total 140)

Average gap between implementation of results andex-date (includes all cases irrespective of PAF value)

7 days8 days* [(Offer price – Cum Date Price) / Cum Date Price] * 100* * All Country World Index

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METHODOLOGY CHANGE PROPOSAL• Proposed Implementation:‒ Always apply a PAF of 1 on the ex-date or first business day after the end of the offer
irrespective of the premium and estimated gain per share.

‒ If the results* of the offer are at least 5%, 10% or 25% of the security’s pre-event
number of shares for Standard, Small and Micro-cap (as well as listed securities not
assigned to any size segment) respectively:• Implement the changes in the NOS and/or FIF of the security due to the event

after the results of the offer have been publicly announced by giving two
business days notice.

‒ If the results of the offer are below the 5%, 10% or 25% threshold as explained above:• Changes to be implemented at a subsequent Index reviews subject to the rules
applicable for the Index Reviews in accordance with the section 3.2.5 of the MSCI
Global Investable Market (GIMI) methodology.

‒ The proposed methodology will also be applicable for implementation of split-

off/exchange offer (PAF, NOS and/or FIF change, if above threshold) and Dutch
auction offer (NOS and/or FIF change, if above threshold).

* Total number of shares accepted under the offer

5Topic 2 – Deletion price ofRights Line for Highly Dilutive
Rights Issue

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BACKGROUND AND OBJECTIVE• Current MSCI methodology:‒ MSCI adds, maintains and deletes rights line in “Highly Dilutive Rights Issues*”using
following prices:• Addition: Using Market price if available, else intrinsic value• Maintenance: Market price when trading. Carry forward last traded price once
stops trading. Intrinsic value if not trading• Deletion: Carried forward last traded price if available, else intrinsic value‒ Subscription cash is added, maintained and deleted using subscription price.

• Objective of the proposal:‒ To address cases where the rights line trades but not all the way till the pay date.
‒ For such cases switch to the intrinsic value when the rights line ceases to trade andthereby eliminate potential replicability issues.

• Note – In order to address potential replicability concerns associated with such events,
MSCI implemented four recent rights issues using the proposed approach.

‒ FINNAIR (FI), SEMBCORP MARINE (SG), HAMMERSON (GB), SAS (SE)* MSCI defines highly dilutive or large rights Issues as rights issues with terms 5 for 1 or more or that trigger an upward size segment migration.

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METHODOLOGY CHANGE PROPOSAL• Below table summarizes the current and proposed methodology for addition, maintenanceand deletion of rights and cash line.

• It also highlights the scenarios where implementation will change.
Rights Line

Scenario

Current

Proposed

StatusRights Trading on ex-dateMarket Price of Rights

Market Price of Rights

No Change

Rights Not Trading on ex-date

Intrinsic Value of Rights

Intrinsic Value of Rights

No Change

Rights trading on at least one
day between ex-date and paydate

Market Price when trading. Last
traded price of rights carriedforward once stops trading

Market Price when trading, switch to
Intrinsic Value once stops trading

ChangeRights not trading even once
between ex-date and pay-date

Intrinsic Value of Rights

Intrinsic Value of Rights

No Change

Rights trading on at least one
day between ex-date and paydate

Last traded (carried forward)
price of rights

Intrinsic Value of Rights

ChangeRights not trading even once
between ex-date and pay-date

Intrinsic Value of Rights

Intrinsic Value of Rights

No Change

Cash Line

Scenario

Current

Proposed

StatusAddition

Subscription Price is lower
than the market price

Subscription Price

Subscription Price

No Change

Subscription Price is lower
than the market price

Subscription Price

Subscription Price

No Change

Subscription Price is higher
than the market price

Subscription Price

Subscription Price adjusted (down)* toreflect negative Intrinsic Value of Rights

ChangeAddition

Maintenance

Deletion

Maintenance
And Deletion*Cash line price will be adjusted by the difference of Subscription Price and Market Price

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EXAMPLE: SEMBCORP INDUSTRIES RIGHTSISSUESEMBCORP MARINE

Current Methodology

Proposed methodology (followed for this case)Cash Line Rights Line
0.2
0.045
0.2
0.025
0.2
0.02
0.2
0.02
0.2
0.002
0.2
0.002
0.2
0.001
0.2
0.001
0.2
0.001
0.2
0.001
0.2
0.001

Cash Line
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2

Rights Line
0.045
0.025
0.02
0.02
0.002
0.002
0.001
0.001
0.001
0.001
0.001

Date
Aug 13 2020
Aug 14 2020
Aug 17 2020
Aug 18 2020
Aug 19 2020
Aug 20 2020
Aug 21 2020
Aug 24 2020
Aug 25 2020
Aug 26 2020
Aug 27 2020

Price
0.245
0.225
0.22
0.22
0.21
0.205
0.205
0.205
0.215
0.225
0.21

Subscription Price
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2

Intrinsic Value
0.045
0.025
0.02
0.02
0.01
0.005
0.005
0.005
0.015
0.025
0.01

Aug 28 2020

0.21

0.2

0.01

0.2

0.001

0.2

0.01

Aug 31 2020

0.205

0.2

0.005

0.2

0.001

0.2

0.005

Sep 01 2020

0.2

0.2

0

0.2

0.001

0.199

0.00001

Sep 02 2020
Sep 03 2020
Sep 04 2020
Sep 07 2020
Sep 08 2020
Sep 09 2020
Sep 10 2020
Sep 11 2020

0.2
0.198
0.197
0.199
0.193
0.19
0.182
0.163

0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2

0
-0.002-0.003-0.001-0.007-0.01-0.018-0.037

0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2

0.001
0.001
0.001
0.001
0.001
0.001
0.001
0.001

0.199
0.198
0.197
0.199
0.193
0.19
0.182
0.163

0.00001
0.00001
0.00001
0.00001
0.00001
0.00001
0.00001
0.00001

Notes

Ex-dateRights Start Trading

Rights Stop Trading
Rather than Last traded price,using Intrinsic Value
Intrinsic Value negative or zero,hence adjusting* cash line price• As highlighted above, the key difference between old and proposed methodology will be:
1. Switching to intrinsic value once rights stops trading on Aug 27, 2020
2. Adjusting cash line on days when intrinsic value is zero or negative*Cash line price will be adjusted by the difference of Subscription Price and Market Price

9Topic 3 - Implementation of
Rights Issue With Subscription
Period Before Ex-date

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BACKGROUND AND OBJECTIVE• Current MSCI methodology:‒ Price Adjustment factor (PAF) is applied on the ex-date. In cases where the security

is suspended on ex-date, the PAF is applied on the day the security resumes
trading.

‒ MSCI increases the number of shares (NOS) of the security as of the close of exdate. If the security is suspended, then NOS is increased as of close of the day whensecurity resumes trading.

• Objective of the proposal:‒ To address replication concerns for Rights Issues, where the subscription period
ends before the security starts to trade on an “ex-rights” basis and is generally
suspended during the subscription period.

• Note – Such rights issue are common in Australia, New Zealand, and China.

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METHODOLOGY CHANGE PROPOSAL• Proposed Implementation:‒ To not wait for security to resume trading for application of PAF and to increase
NOS.

‒ To apply a PAF on effective date* using the intrinsic value of rights, no later thanthe last day of subscription.

• Since the security will be suspended during subscription period, MSCI will
always give two business days notice unless the subscription close is earlier.

‒ To maintain the security using theoretical ex-price from the effective date of rights
issue till the date security resumes trading.

‒ Post application of PAF, MSCI will follow the current process of Highly Dilutive
Rights Issue** for implementing such rights issue.

* Effective date – day when MSCI will apply PAF** As of close of effective date, addition of rights and subscription cash line. The rights and the cash line will be deleted as of close of paydate. Simultaneously, number of shares (NOS) of the parent security will be increased.

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EXAMPLE: PROPOSED METHODLOGY IMPLEMENTATION
Current

Notes

Proposed

Notes

10-Aug-20

Implementation
Dates
MSCI Announcement Date

10-Aug-20-

10-Aug-20-

Suspension start date

11-Aug-20

Effective date

17-Aug-20-

13-Aug-20*

Security is suspended
on this date.

Subscription period Starts
Subscription period Ends
Suspension end dateTrading Resumption Date
Listing date of new shares

11-Aug-20
14-Aug-20
14-Aug-20
17-Aug-20
24-Aug-20

5.39
5.39
5.39
5.39
5.39
5.31

Market Price
Carried forward
Carried forward
Carried forward
Carried forward
Market Price

5.39
5.39
5.39
5.26
5.26
5.31

Market Price
Carried forward
Carried forward
Theoretical price
Theoretical priceMarket Price

17-Aug-20
If Issue P is < P(t) then[(P(t) * (Shares Before +Shares Issued) – Shares
Issued * Issue P) / Shares
Before] / [P(t)]else PAF=1
1.027425-

13-Aug-20*--[P(t) + Right per
Share P(t)] / [P(t)]Same as Highly
Dilutive Rights Issue

Event Details
Event Timeline
Rights Announcement Date

Terms
Shares Before
Shares Acquired

5.15
1.00

Price
Price on 10th Aug 2020
Price on 11th Aug 2020
Price on 12th Aug 2020
Price on 13th Aug 2020
Price on 14th Aug 2020
Price on 17th Aug 2020
PAF
PAF Date

Subscription Price

4.56

PAF formula

Theoretical Price Computation
Market Price: 10-Aug-2020

5.39

Market Price: 17-Aug-2020
Theoretical Price
Intrinsic Value of Right

5.31
5.26
0.70

PAF Value
1.025681
Other points
Like all Highly Dilutive Rights (HDRTS), MSCI will be adding Rights and Cash line as of the close of the ex-date (13th
Aug in this example)
Rights line to be added and maintained using intrinsic value of rights
Cash line to be added and maintained using fixed price based on subscription priceLike all HDRTS, MSCI will be deleting Rights and Cash line as of the close of the pay-date (24th Aug in this example)• As highlighted above, the key difference between old and proposed methodology will be:
1. The effective date will be during suspension period
2. Usage of Theoretical price for PAF and Index Calculation
3. PAF formula will be the one used for Highly Dilutive Rights Issue*under the proposed methodology any date between 11 th Aug and 14th Aug 202013

Topic 4 –Downward Migration
Following A Rights Issue

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BACKGROUND AND OBJECTIVE• Current MSCI methodology:‒ Rights Issue are analyzed for size segment migration when the change in fullmarket capitalization of the company is +50%/-33% compared to the pre-event
market capitalization. Resultant downward migrations, if any, are implemented asfollows:• as of close of cum date, if 2 business days’ notification can be given.
• as of close of ex-date, if 2 business days’ notification cannot be given.
• Objective of the proposal:‒ To eliminate potential tracking error caused because of gap between close of exdate (when security is downward migrated) and pay-date.

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METHODOLOGY CHANGE PROPOSAL• Proposed Implementation:‒ For downward migrations wherein the security cannot be migrated as of the closeof the cum-date:• The security migration will be evaluated as part of the index review following

the ex-date of the rights issue in accordance with the index review rules
stated in the MSCI Global Investable Market Indexes methodology.

‒ Example:• If ex-date (2nd July) is prior to price cut-off date (23rd July) for August
Quarterly Index review (QIR), then security will be reviewed for downward
migration (if any) as part of August QIR.

• If ex-date (25th July) is after price cut-off date (23rd July) for August QIR, thensecurity will be reviewed for downward migration (if any) as part of November
Semi Annual Index Review (SAIR).

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process. To learn more, please visit www.msci.com.

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