Block Sales / Secondary Offerings (outsideof the US) consultation – revised proposal December 2014

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Agenda Summary feedback
 Initial Proposal
 Revised Proposal – revised thresholds
 Rationale/Benefits
 Questions

 Appendix
 Appendix I - Current Methodology
 Appendix II - Country specificities – post event float information
 Appendix III - Impact of the initial proposal versus the revised proposal©2014 MSCI Inc. All rights reserved.

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Summary feedback On September 18, 2014, MSCI proposed to remove distinction between
secondary offerings (outside of the US) and block sales definition tosimplify their treatment in the MSCI indexes and to reflect only thelargest impacts immediately using certain thresholds.
 While feedback from market participants is positive, it was highlighted
that the proposed thresholds were too high and requested to further
simplify the rules to implement such events at the time they occur.
 Consequently, MSCI is extending the consultation to a second proposal,
under which the thresholds are lowered and simplified.
 MSCI welcomes feedback from the investment community on theamended proposal through December 15, 2014.
 This consultation may or may not lead to any changes to the MSCI
Indexes©2014 MSCI Inc. All rights reserved.

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Initial Proposal
 Remove distinction between secondary offerings (outside of the US)* and block sales definition to simplify
their treatment in the MSCI indexes.
 Current thresholds as described in Appendix I would not be used anymore.

 Timing and implementation:
 When the event occurs ** if: The change in free float-adjusted market capitalization (including updates) is above 0.5 times theStandard Interim Cutoff
OR The absolute size of the FIF change is 0.25 or more.
announced at the time of the event and implemented 2 business days later Else at the following Index Review
announced with the Index Review announcement

Please note that these proposals may or may not lead to any changes to the MSCI indexes.
* The treatment of secondary offerings is different in the US compared to other countries. This document only concerns secondary offerings
treatment outside of the US.

** Once the event is completed and provided sufficient post event information is publicly available. If any uncertainty on the post event free float
information, MSCI may decide to postpone the event implementation to the next Index Review. Refer to Appendix II.

©2014 MSCI Inc. All rights reserved.

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Revised proposal
 Remove distinction between secondary offerings (outside of the US)* and block sales
definition to simplify their treatment in the MSCI indexes.
 Current thresholds as described in Appendix I would not be used anymore.

 Timing and implementation:
 When the event occurs ** if: The change in free float-adjusted market capitalization (including updates) is above
USD 500 million for Developed Markets and USD 200 million for Emerging Markets.
announced at the time of the event and implemented 2 business days later Else at the following Index Review
announced with the Index Review announcement

Please note that these proposals may or may not lead to any changes to the MSCI
indexes.
* The treatment of secondary offerings is different in the US compared to other countries. This document only concerns secondaryofferings treatment outside of the US.

** Once the event is completed and provided sufficient post event information is publicly available. If any uncertainty on the post event
free float information, MSCI may decide to postpone the event implementation to the next Index Review. Refer to Appendix II.

©2014 MSCI Inc. All rights reserved.

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Rationale/Benefits Clarification of the methodology and clearer definitions used for secondaryofferings and block sales aim to provide better transparency regarding
communication and implementation of these events.
 The purpose of the proposal is to simplify the current rules for implementationof secondary offerings (outside of the US) and block sales – refer to Appendix I
for more details on current rules.
 Large impacts to be reflected in a timely manner in the MSCI indexes Implementation timing will be based on the size of the change.
 Under the revised proposal, MSCI is changing the Size segment of 0.5 times theStandard Interim Cutoff and absolute size of FIF change thresholds as market
participants have a preference for fixed and simple thresholds.

©2014 MSCI Inc. All rights reserved.

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Questions
 Proposal / replicability:
 Do you agree with the new proposal?

 Thresholds / Float assumption:
 Are the new proposed thresholds for implementation at time of event - after the offering iscompleted - appropriate? Please refer to Appendix III.
 For offerings where post event float information is not sufficient, should MSCI assume free
float and implement changes accordingly giving two full business days notice, even if there is arisk of reverse turnover? Please refer to Appendix II.

 Other:
MSCI intends to continue to postpone implementations of missed offerings to the following Index
Review. What should be considered missed? Up until how many days after the offering has been
priced/completed should MSCI still consider implementing at time of event? One week or more?

©2014 MSCI Inc. All rights reserved.

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Appendix
I. Current Methodology
II. Country specificities – post event float information
III. Impact of the initial proposal versus the revised proposal©2014 MSCI Inc. All rights reserved.

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Appendix I: Current Methodology
MSCI currently differentiates between the following two types of offerings. The below offerings do not involve
issuance of new shares but involve the distribution of current shareholders’ existing shares, contrary to public or
private placements.

 Secondary offerings(outside of the US) are usually pre-announced by the company or by a company’s
shareholder and open for public subscription during a pre-determined period. These existing shares are
generally placed by underwriters to institutional or other non-strategic investors. => implemented shortly after
results of subscription are known, if captured on time, otherwise at Index Reviews
 Block sales of existing shares or large market transaction done by way of immediate book building involving
change in strategic ownership are generally announced only when effective or with short advance notice andgenerally do not include an offer prospectus. => implemented at Index Reviews
Block sales or large transactions will be implemented during the Index Review following the completion of theevent provided they satisfy one of the following conditions when the event, including potential updates, iscompleted:
The absolute size of the FIF change is 0.15 or more, or
The change in free float-adjusted market capitalization resulting from the FIF change represents at least:-

USD 1billion for securities classified in the US.

-

USD 500 million for securities classified in Developed Markets other than the US.

-

USD 200 million for securities classified in the Emerging Markets.

Changes that do not meet the above conditions will be implemented as part of the May Semi-Annual Index
Review.

©2014 MSCI Inc. All rights reserved.

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Appendix II: Country specificities – post event float
information
As per MSCI’s proposal, if uncertainty on the post event information (i.e. float) still
remains, MSCI may decide to postpone the event implementation till the next
Index Review.
In order to minimize the risk of reverse turnover, where MSCI can not gather
sufficient public post event float information to implement the event, MSCI
proposes to wait for complete public disclosures. For countries such as Hong Kongand India, for example, where complete post event float is publicly disclosed aftera few weeks, MSCI would send an “Acknowledged” or “Undetermined”
announcement to let clients know MSCI intends to implement changes intra
quarter but with a delay.

©2014 MSCI Inc. All rights reserved.

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Appendix III - Impact of the initial proposal versus the revised
proposal
Analysis conducted on past cases (from Mar 1 2013 till July 14 2014): 57 Standard
Index constituents and 40 Small Cap Index constituents.
Breakdown by Event type

Current Methodology

Initial proposal

Revised proposal

Block sales

66 cases implemented at Index
Review

1)

1)

Secondary offerings (outside of
the US)

31 cases implemented at timeof event (giving 2 full businessdays notice)2)

Breakdown by Index Family

Current Methodology

Initial proposal

Revised proposal

Block sales

66 cases implemented at Index
reviews (45 Standard Index and
21 Small Cap Index
constituents)

1) At Index reviews: 34
Standard + 12 Small Cap
2) At time of event : 11
Standard + 9 Small Cap

1) At Index reviews: 5Standard + 15 Small Cap
2) At time of event : 39
Standard + 7 Small Cap

Secondary offerings (outside of
the US)

31 cases implemented at timeof event – giving 2 full businessdays notice (12 Standard Index
and 19 Small Cap Index
Constituents1) At Index reviews: 8Standard + 18 Small Cap
2) At time of event : 4
Standard + 1 Small Cap

1) At Index reviews: 3Standard + 18 Small Cap
2) At time of event : 9Standard + 1 Small Cap

72 cases deferred to
Index Reviews (46 block
sales and 26 secondaryofferings)
25 cases implemented attime of event (20 block
sales and 5 secondaryofferings)

2)

41 cases deferred to
Index Reviews (20 block
sales and 21 secondaryofferings)
56 cases implemented attime of event (46 block
sales and 10 secondaryofferings)©2014 MSCI Inc. All rights reserved.

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Appendix III - Impact of the initial proposal versus the revised proposal – Developed
Markets – cases qualifying to be implemented at event time (continued)
Region
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM
DM

MSCI Security code
Country: Security Name
17361.01JP: JAPAN TOBACCO
23744.01FR: EADS
67619.01HK: AIA GROUP
18570.01GB: LLOYDS BANKING GROUP
22576.01SE: NORDEA BANK
10695.01DE: COMMERZBANK
23552.02CA: CI FINANCIAL
67609.01SG: GLOBAL LOGISTIC PROP
35837.01JP: AOZORA BANK
24936.01JP: DENTSU
70291.01NL: ZIGGO
24938.01IT: SNAM
23744.01FR: EADS
37817.01FR: REXEL
22470.01DE: PROSIEBEN SAT1 MEDIA
64292.01FR: EDENRED
10295.01ES: BANKINTER
71456.01GB: DIRECT LINE INS GRP
71275.01DE: LEG IMMOBILIEN
67496.01DK: PANDORA
72261.01ES: LIBERBANK
12575.01FI: SAMPO A
12566.01FR: SAINT-GOBAIN
24939.01JP: RESONA HOLDINGS
23523.01JP: SUMITOMO MITSUI TRUST
67631.01AU: AURIZON HOLDINGS
35618.01JP: NOMURA REAL ESTATE HLD
69991.01NZ: TRADE ME
12561.01FR: SAFRAN
29360.01IT: TERNA
27524.01CA: ALIMENTATION COUCHE-T. B
10423.01DE: HUGO BOSS
70291.01NL: ZIGGO
63547.01NL: DELTA LLOYD
29873.01FR: ILIAD
15859.01PT: JERONIMO MARTINS SGPS
62864.01DK: TDC
20278.01ES: NH HOTELES
18186.01NO: STOREBRAND
65548.01CA: DHX MEDIA

Event type
SEC_OFF
BLK_SALE
BLK_SALE
BLK_SALE
BLK_SALE
BLK_SALE
SEC_OFF
BLK_SALE
SEC_OFFSEC_OFF
BLK_SALE
BLK_SALE
BLK_SALE
BLK_SALE
BLK_SALE
BLK_SALE
BLK_SALE
BLK_SALE
BLK_SALE
BLK_SALE
BLK_SALE
BLK_SALE
BLK_SALE
BLK_SALE
SEC_OFF
BLK_SALE
SEC_OFF
BLK_SALE
BLK_SALE
BLK_SALE
BLK_SALE
BLK_SALE
BLK_SALE
BLK_SALE
BLK_SALE
BLK_SALE
BLK_SALE
BLK_SALE
BLK_SALE
SEC_OFF

FamilyStandard
Standard
Standard
Standard
Standard
Standard
Standard
Standard
Standard
Standard
Standard
Standard
Standard
Standard
Standard
Standard
Small Cap
Standard
Small Cap
Standard
Small Cap
Standard
Standard
Standard
Standard
Standard
Standard
Small Cap
Standard
Standard
Standard
Standard
Standard
Standard
Standard
Standard
Standard
Small Cap
Small Cap
Small Cap

Current Methodology
Yes

Yes
Yes
Yes

Initial Proposal
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes*
Yes*

Yes*
Yes*
Yes*

Yes
Yes
Yes
Yes*

Yes*
Yes*
Yes

Revised Proposal
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes

Impact in Free-float
Adjusted Market Cap
above USD 2 bln
above USD 2 bln
above USD 2 bln
above USD 2 bln
above USD 2 bln
above USD 2 bln
above USD 2 bln
above USD 1 bln
above USD 1 bln
above USD 1 bln
above USD 1 bln
above USD 1 bln
above USD 1 bln
above USD 1 bln
above USD 1 bln
above USD 1 bln
above USD 1 bln
above USD 1 bln
above USD 1 bln
above USD 1 bln
above USD 1 bln
above USD 1 bln
above USD 1 bln
above USD 1 bln
above USD 500 mln
above USD 500 mln
above USD 500 mln
above USD 500 mln
above USD 500 mln
above USD 500 mln
above USD 500 mln
above USD 500 mln
above USD 500 mln
above USD 500 mln
above USD 500 mln
above USD 500 mln
above USD 500 mln
above USD 500 mln
above USD 500 mln
above USD 500 mln* Qualified as absolute size of FIF change is 0.25 or more©2014 MSCI Inc. All rights reserved.

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Appendix III - Impact of the initial proposal versus the revised proposal – Emerging
Markets – cases qualifying to be implemented at event time (continued)

Region
EM
EM
EM
EM
EM
EM
EM
EM
EM
EM
EM
EM
EM
EM
EM
EM
EM

MSCI Security
Impact in Free-float
codeCountry: Security Name
Event type Family
Current Methodology Initial Proposal Revised Proposal Adjusted Market Cap
71313.01PL: BANK ZACHODNI WBK
SEC_OFF Standard
Yes
Yes
Yes
above USD 2 bln
30079.01PL: PKO BANK POLSKI
BLK_SALE Standard
Yes
Yes
above USD 1 bln
19124.01BR: PAO DE ACUCAR PN
BLK_SALE Standard
Yes
Yes
above USD 1 bln
38340.02CN: CHINA PACIFIC INS GRP H
BLK_SALE Standard
Yes
Yes
above USD 1 bln
22711.01PL: BANK PEKAO
BLK_SALE Standard
Yes
above USD 500 mln
69217.01BR: QUALICORP
BLK_SALE Standard
Yes
above USD 500 mln
22606.02MX: GRUPO FIN INBURSA O
SEC_OFF Standard
Yes
Yes
above USD 500 mln
60815.01CN: HAIER ELCTRNCS GRP(CN)BLK_SALE Standard
Yes
above USD 500 mln
25170.01CL: BANCO DE CHILE
SEC_OFF Standard
Yes
Yes
above USD 500 mln
37867.01BR: KROTON EDUCACIONAL
BLK_SALE Standard
Yes
above USD 200 mln
28187.01CN: GEELY AUTOMOBILE HLDGS BLK_SALE Standard
Yes
above USD 200 mln
15518.01TW: ASIA CEMENT CORP
BLK_SALE Standard
Yes
above USD 200 mln
63613.01KR: HANWHA LIFE INSURANCE
BLK_SALE Standard
Yes
above USD 200 mln
69839.02CN: NEW CHINA LIFE INSUR H
BLK_SALE Standard
Yes
above USD 200 mln
61632.01PL: GRUPA AZOTYBLK_SALE Standard
Yes
above USD 200 mln
36018.01MX: GRUPO AERO CENTRO NOR. B SEC_OFF Small Cap
Yes
below USD 200 mln
69800.01TW: CLEANAWAY
BLK_SALE Small Cap
Yes*
below USD 200 mln* Qualified as absolute size of FIF change is 0.25 or more©2014 MSCI Inc. All rights reserved.

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