Proposal on Selected Changes
to the MSCI Equity Universe
March 2014

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Potential Exclusion of Business
Development Companies from the MSCIUSA Equity Universe©2014 MSCI Inc. All rights reserved.

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Background & Proposal Following feedback from selected market participants, MSCI proposes toexclude Business Development Companies (BDCs) from the MSCI USA Equity
Universe startingg from the Mayy 2014 Semi‐Annual Index Review.
 BDCs are a category of closed‐end funds that are operated for the purpose ofmaking investments in small and developing businesses as well as financiallytroubled businesses.
 MSCI welcomes feedback from the investment community on the potential
exclusion of BDCs from the MSCI Global Investable Market Indices before April
4, 2014 and will announce its final decision shortly thereafter.
 This proposal may or may not result in changes to the Global Investable MarketIndices.

©2014 MSCI Inc. All rights reserved.

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Impact on the MSCI Global Investable Indices The exclusion of BDCs from the MSCI USA Equity Universe may result in thedeletion of the following securities from the MSCI USA All Cap Indices*:
Small‐Cap Segment
American Capital
Apollo Inv Corp
Ares Capital Cor
Blackrock Kelso Cap
C it l SouthwestCapital
S thtCCorp
Fifth Street Fin Corp
Golub Capital Bdc
Hercules Technology Grow
Kcap Financial
Main Street Capital Corp
Mcg Capital Corp
Medley Capital
Mvc Capital Inc

Micro‐Cap Segment
Fidus Investment Corp
Firsthand Technology Val
Full Circle Capital Corp
Garrison CapitalGl d tGladstone
CCap CCo
Gladstone Invest
Gsv Capital Corp
Harris & Harris Group
Harvest Capital Credit
Horizon Tech Finance
Keating Capital
Medallion Financial Corp
Monroe Capital Corp

New Mountain Fin Corp
Pennantpark Invest.
InvestProspect Capital Corp
Solar Capital
Tcp Capital Corp
Thl Credit
Ticc Capital
pTriangle Capital Corp

Ngp Cap Res Co
Ofs Capital Corp
Pennantpark Floating
Saratoga Investment
Solar Senior Capital
Stellus Capital Invt
Whitehorse Finance

Small
Micro
TOTAL

# ofSecsIndex Mcap
21
26,944
26944
20
3,159
41

Index Weight
0 91%
0.91%
2.79%

As of January 21, 2014

The final list of BDCs will be provided as part of the May 2014 SAIR

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Potential Exclusion of Selected Alert
Boards from the MSCI Equity Universe©2014 MSCI Inc. All rights reserved.

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Background and Proposal
 Since May 2008, MSCI has been excluding securities with the *ST/ST status fromthe MSCI China Equity Universe. In May 2013, MSCI also started excluding() in Taiwan.*
securities tradingg under the Altered Tradingg Method (ATM) The purpose of these exchange boards is to provide a list of companies that may
be experiencing issues and that may result in their subsequent long termsuspension or delisting. There may be also additional issues associated withtrading such securities, such as prefunding.
 MSCI proposes to extend this treatment to other similar exchange boards
globally.
 MSCI welcomes feedback from the investment community on the potential
exclusion of such trading boards from the MSCI Global Investable Market
Indices. MSCI is requesting feedback by April 4, 2014 and will announce its final
d i i shortly
decisionh tl ththereafter.
ft This proposal may or may not result in changes to the Global Investable Market
Indices.
* More background information is provided in the appendix.

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Details of the Proposal
 MSCI has conducted a broad review of all markets covered by the MSCI Global Investable
Market Indices and has identified exchange boards listing companies with potential
financial or operational issues.
 MSCI proposes to exclude the securities listed on the boards in the table below from theMSCI Equity Universe.
 Securities placed on these boards may potentially be delisted or undergo long‐termsuspension.
pIn some cases, tradingg restrictions mayy also be imposed.
p By deleting a security from the MSCI Index before it gets suspended, asset managers may be able to unwind
their position in the security instead of writing‐off the suspended security at the lowest price at which asecurity can trade.
 Creatingg or unwindingg a p
position in a securityy that trades differentlyy comparedpto other securities in theexchange can be more difficult and, therefore, may pose a replicability issue.
Country

Exchange

Segment

Trading
Restrictions

Estonia

Talinn Stock Exchange

Watch Notation

LithuaniaVilnius Stock Exchange

Observation Status

Malaysia

Bursa Malaysia

PN17 Companies

Singapore

Singapore Exchange

Watch ListThailand

Stock Exchange of Thailand

Companies Facing Delisting

Yes

VietnamHo Chi Minh Stock Exchange

Controlled Securities

Yes©2014 MSCI Inc. All rights reserved.

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Impact on the MSCI Indices Based on the information gathered from the exchanges, the exclusion of theseboards may lead to the deletion of the following securities from the MSCI All
p Indices:
CapCountryCompany

Size Segment

Index
MCapIndex
Weight*

SGNEXT‐GENNEXT
GEN SATELLITE COMM LTD

Micro25.070.20%

SG

DIGILAND INTERNATIONAL LTD

Micro

24.01

0.19%

SG

FEDERAL INT (2000) LTD

Micro

66.63

0.53%

SG

MIYOSHI PRECISION LTD

Micro

17.11

0.14%

SG

PACIFIC HEALTHCARE HOLDINGS LTD

Micro

18.40

0.15%

* Index weights are relative the MSCI Singapore Micro Cap Index©2014 MSCI Inc. All rights reserved.

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Proposed Implementation Policy
 MSCI proposes implementation rules, which would be consistent with thecurrent treatment of securities on*ST/ST and ATM boards:
 MSCI would delete securities of companies that enter ineligible exchange boards specified in thisdocument as of the close of the last business day of each month with a notice period of at least
two full business days.
 In order to minimize potential reverse turnover, securities deleted due to inclusion on suchboards would not be added back to the index for a period of 12 months from their deletion.

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Discussion Points
 Should MSCI exclude securities listed on exchange boards indicating potential
future delisting or long‐term suspension?
 Are there other similar boardsboards, not covered in this consultation
consultation, whosesecurities MSCI should exclude from the MSCI Equity Universe?

©2014 MSCI Inc. All rights reserved.

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Appendix©2014 MSCI Inc. All rights reserved.

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Background: *ST/ST and ATM Securities
Securities that are placed under the ATM or are designated the *ST/ST status are generally companies withfinancial or operational issues. These securities are excluded from the MSCI Equity Universe.

China: *ST* / ST Securities
The Delisting Risk Warning (*ST)

Other Special Treatment (ST)1) Net losses over the past 2 years
2) Negative net asset value for the past 1 year
3) Most recent annual operating revenue is lessthan CNY 10m4) Disclaimer of opinion by a CPA firm
5) Inaccurate financial reports with 2m ofsuspension,6) Non‐disclosure of financial reports with 2msuspensions7) Likely to be dissolved8) Bankruptcy
9) Not meeting the stock exchange requirements10) Other circumstances as recognized by the stockexchange

1) Company business is seriously impacted and not
likely to return to normal business within 3 months
2) Main corporate bank account has been frozen
3) Board meeting cannot be held on a normal basis
4) Illegal activities conducted by controllingshareholders5) Other circumstances as determined by the CSRC or
the Stock Exchange

Impact1) 5% Daily Price Change Limit
2) “ST” is added before the share nameTaiwan: ATM Securities
Altered Trading Method1)
2)
3)
4)
5)

Net worth of the company is less than 50% of its share capital
Shareholding meeting is not held regularly
Qualified opinion is expressed by auditors
Reporting false material information
Unable to meet debt payments

Impact1) Pre‐delivery is required for Sell Transactions
2) Pre‐funding is required for Buy Transactions
3) Settlement cycle is effectively changed fromT+0 to T+2©2014 MSCI Inc. All rights reserved.

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