Q&A

Q&A
Results of the Unequal Voting Structures Consultation

October 2018

OCTOBER 2018

Q&A | OCTOBER 2018

CONTENTS

Introduction ....................................................................................... 3
Q&A on the Results of the Unequal Voting Structures Consultation .. 4
MSCI Global Investable Market Indexes ............................................................. 4
New Index Series................................................................................................. 5Consultation ........................................................................................................ 6© 2018 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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Q&A | OCTOBER 2018

INTRODUCTION
The purpose of this document is to address commonly asked questions regarding the resultsof the consultation on the treatment of unequal voting structures in the MSCI EquityIndexes, which were released on October 30, 2018. The content of this Q&A may be revised
as new information becomes available.
Following the consultation, MSCI announced that it will retain the MSCI Global Investable
Market Indexes unchanged and launch a new index series reflecting the preferences ofinvestors on unequal voting structures.
The Press Release is available at:https://www.msci.com/index-consultations© 2018 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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Q&A | OCTOBER 2018

Q&A ON THE RESULTS OF THE UNEQUAL VOTING STRUCTURES
CONSULTATIONMSCI GLOBAL INVESTABLE MARKET INDEXESWill there be any changes to the MSCI Global Investable Market Indexes methodology
following the consultation?
The methodology for the MSCI Global Investable Market Indexes will remain unchanged.
Therefore, there will be no update to the MSCI Global Investable Market Indexes
methodology book.
Will all companies with unequal voting structures be eligible for inclusion in the MSCI
Global Investable Market Indexes, including companies with zero voting power such as
Snap Inc (NYSE: SNAP)?
Yes, all companies with unequal voting structures will be eligible for inclusion in the MSCI
Global Investable Market Indexes.
When will MSCI start adding unequal voting structures to the MSCI ACWI IMI?
Securities of companies exhibiting unequal voting structures will be eligible for addition tothe MSCI ACWI IMI and other relevant indexes effective March 1, 2019. Therefore, potential
addition of such securities during Index Reviews will resume at the February 2019 Quarterly
Index Review (QIR), while early inclusion of such securities due to initial public offerings(IPOs) will resume on March 1, 2019.
Since November 2, 2017, MSCI has exceptionally treated any securities of companies
exhibiting unequal voting structures as ineligible for addition to certain MSCI Equity Indexes
such as the MSCI ACWI IMI. A document with more details on this temporary treatment isavailable athttps://www.msci.com/documents/1296102/5603800/TemporaryTreatment
What rules will be used to assess potential addition of unequal voting structures to theMSCI ACWI IMI at the February 2019 Quarterly Index Review (QIR)?
To be added to the MSCI ACWI IMI at the February 2019 QIR, unequal voting structures willneed to meet all the relevant requirements for addition to the MSCI Standard equity
indexes.

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Q&A | OCTOBER 2018

As described in section 3.2.2 of the MSCI Global Investable Market Indexes, during QIRs,
securities that are currently not constituents of the IMI are added to the Standard Index ifthey meet the following requirements:•All investability requirements described in section 2.2 (except for the Minimum
Length of Trading Requirement)•A full market capitalization that exceeds 1.8 times the Interim Market Size-SegmentCutoff•

A free float-adjusted market capitalization that exceeds 1.8 times one-half theInterim Market Size-Segment Cutoff

What rules will be used to assess potential addition of unequal voting structures to theMSCI ACWI IMI at the May 2019 Semi-Annual Index Review (SAIR)?
At the May 2019 SAIR, securities of companies with unequal voting structures which are notincluded in the MSCI ACWI IMI will be assessed using the same requirements as any other
newly eligible securities.
Please refer to section 3.1 of the MSCI Global Investable Market Indexes for details on themaintenance rules applicable to the MSCI Global Investable Market Indexes during SAIRs.

NEW INDEX SERIESWhen will the new index series be launched?
MSCI plans to launch the new index series in Q1 2019. The exact launch date will becommunicated in advance of the launch.
What will be the set of indexes offered at launch?
The indexes will initially be available for the ACWI index series in the Standard Size-Segment(Large Cap and Mid Cap securities). The list of indexes that will be offered will be provided inadvance of the launch.
What are the key methodological rules used for the construction and maintenance of theNew Index Series?
The new indexes will be similar in all respects to the MSCI Global Investable Market Indexes,except that the weights of unequal voting structures will reflect company level listed voting© 2018 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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Q&A | OCTOBER 2018

power in addition to free float. The new indexes will generally follow the methodology
described in the last consultation proposal available athttps://www.msci.com/index-consultations
How will MSCI adjust the weight of companies with unequal voting structures in the New
Index Series?
When the voting power available to the free float shareholders (i.e., company level listedvoting power) is lower than the corresponding economic interest (i.e., company free float),
the weight of the company’s securities will be adjusted down to reflect the misalignment.
In case the voting power is zero, the company will not be eligible for inclusion in the New
Index Series.
When will MSCI publish the methodology book for the New Index Series?
The methodology book will be released on or before the launch.

CONSULTATION
Can you summarize how this decision was made?
The decision to retain the MSCI Global Investable Market Indexed unchanged and create a
new index series incorporating voting rights considerations follows an extensive, global 18month long consultation which highlighted the divide in opinions among international
institutional investors.
While the one share one vote principle gathered overwhelming support from participants inthe consultation, the treatment of unequal voting structures in equity benchmarks, has
proven to be a polarizing question among international institutional investors. For instance,
while many participants felt strongly that benchmarks should be adjusted to reflect unequal
voting structures, other participants highlighted that the question of unequal voting rights
should be addressed holistically by the stakeholders that are responsible for operating,regulating and investing in equity markets.
MSCI continues to believe that global market benchmarks, such as the MSCI Global
Investable Market Indexes, should aim to represent the broadest investment opportunity
set available to international institutional investors based solely on the investability of theunderlying markets. Investable market benchmarks should not be constrained by specificinvestor opinions, preferences or constraints including governance issues.

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Q&A | OCTOBER 2018

Recognizing the increasing importance of voting rights for many equity investors, MSCI will
create an additional index series that will specifically include voting rights in the eligibility
criteria and construction methodology as described in the last consultation proposal.
What sort of market participants have you consulted with during the process?
MSCI always consults with a broad and global market participant base that includes Asset
Owners, Passive and Active Managers, Broker/Dealers and Consultants.
What do you say to investors who are concerned about continued inclusion of unequal
voting structures in the MSCI Global Investable Market Indexes?
As of today, we do not believe that preferences and constraints on voting rights, among
other governance considerations, should impact the definition of the investable universe
underpinning these benchmarks as equity securities with no or unequal voting rights are still
investable for most investors.
Recognizing the increasing importance of voting rights for many equity investors, MSCI will
create an additional index series that will specifically include voting rights in the eligibility
criteria and construction methodology as described in the last consultation proposal. This
new series could be used as a substitute to the MSCI Global Investable Market Indexes andoffer choice and flexibility to international institutional investors who wish to reflect voting
rights in their equity benchmarks. MSCI plans to launch the new index series in Q1 2019.
MSCI recognizes that the investment community will need more time to agree on a single
approach to address the divisive question on the treatment of unequal voting structures.
The views of market participants on this topic will continue to evolve over time and MSCI
will actively seek feedback from market participants on this issue. More information on this
topic will be shared as and when appropriate.

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Q&A | OCTOBER 2018CONTACT US
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