Consultation on Proposed
Implementation Schedule for theReclassification of Kuwait in theMSCI Frontier Markets 100 Index
October 2020

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

Proposed Treatment in the Context of the Kuwait
Reclassification• As announced on April 8, 2020, the MSCI Kuwait Index will be reclassified from theMSCI Frontier Markets Index to the MSCI Emerging Markets Index in one stepcoinciding with the November 2020 Semi-Annual Index Review (SAIR).

• In order to alleviate potential implementation concerns for the MSCI Frontier Markets
100 Index MSCI proposes to:
1. Phase the deletion of securities classified in Kuwait from the MSCI FrontierMarkets 100 Index, targeting equal steps over five successive Index Reviews
starting from the November 2020 Semi-Annual Index Review (SAIR).
2. Due to currently observed accessibility issues in Bangladesh, Lebanon andNigeria, keep unchanged the index weights of securities classified inBangladesh, Lebanon and Nigeria, subject to maintaining compliance withdiversification rules and guidance in the MSCI Frontier Markets 100 Index
methodology.1• This proposal does not, in any way, affect the reclassification of Kuwait from the MSCIFrontier Markets Index to the MSCI Emerging Markets Index, which will take place inone step as part of the November 2020 SAIR, as of the close of November 30, 2020
(effective December 1, 2020).

• MSCI welcomes feedback from market participants on this topic on or before October30, 2020. MSCI will communicate the results of the consultation by November 9, 2020.

1 See Section 2.5 of the MSCI Frontier Markets 100 Index methodology. An excerpt is available in the Appendix to thispresentation.

2

Detailed Treatment at Each Phase
StepStep

Step

Step

1

2
Revert weights ofBangladesh,
Lebanon andNigeria securities

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Apply Phasing
Factors

ApplyDiversification
Rules❖ For each security,
determine the Weight
Difference between thePost-Reclassification
Weight and the Current
Weight.
❖ Apply phasing factors
to the Weight
Difference per thePhasing Schedule (seeSlide 5) to arrive at PreDiversification Capping
Weights.

❖ Apply Diversification
Rules and Guidancefrom the MSCI FrontierMarkets 100 Index
methodology to thePre-Diversification
Capping Weights.
❖ This results in final ProForma Weights foreach phase.

Apply FM 100
Index
Maintenancemethodology❖ Apply regular Index
Maintenance Rules2(SAIR rules at Phases 1,3 and 5 or QIR rules atPhases 2 and 4). Thiswill include:• Updating the List ofConstituents (whichexcludes Kuwait
starting from theNovember 2020SAIR), and applying
Country Capping atSAIRs.
• Additions andDeletions at QIRs
❖ This results in
Preliminary Weights.

❖ Revert weights of
Bangladesh, Lebanon
and Nigeria securities
to their Current
Weights (prerebalance).
❖ Reallocate reverted
weight changes toother securities on apro rated basis basedon PreliminaryWeights.
❖ This results in PostReclassification
Weights.

2 See Sections 3.1 and 3.2 of the MSCI Frontier Markets 100 Index methodology for SAIR and QIR maintenance rules

respectively.

3Application of Phasing Factors to Calculate PreDiversification Capping Weights
For each phase, the Pre-Diversification Capping Weights for the MSCI Frontier Markets 100 Indexprior to the application of Diversification Rules and Guidance are determined as follows (Step 3):• For each security, determine the Weight Difference between the Post-Reclassification Weightsand the Current Weights.

• Apply phasing factors to the Weight Difference and calculate the Pre-Diversification Capping

Weights per the below Phasing Schedule. Kuwait security weights at this point will be non-zero(unless at Phase 5).
‒ Please note that weights calculated in this Step are potentially subject to further change per
the Diversification Considerations in the MSCI Frontier Markets 100 Index methodology (seeStep 4)

Phasing Schedule
PhaseIndex Review

Calculation of Pre-Diversification Capping WeightPhase 1

November 2020 SAIR

Pre-Diversification Capping Weight = Current Weight + (Weight Difference * 20%)

Phase 2February 2021 QIRPre-Diversification Capping Weight = Current Weight + (Weight Difference * 25%)

Phase 3

May 2021 SAIR

Pre-Diversification Capping Weight = Current Weight + (Weight Difference * 33%)

Phase 4

August 2021 QIRPre-Diversification Capping Weight = Current Weight + (Weight Difference * 50%)

Phase 5

November 2021 SAIR

Pre-Diversification Capping Weight = Current Weight + (Weight Difference * 100%)

Click to add footnotes or disclosures.

4Application of Phasing Factors to Calculate PreDiversification Capping Weights (Examples)• Illustration for Phase 1 (20% of the Weight Difference):
Current Weight (A)Post-Reclassification
Weight(B)Weight Difference(C) = (B) - (A)Pre-Diversification
Capping Weight(D) = (A) + 20% * (C)Final Pro Forma
WeightAddition

0.0%

5.0%

5.0%

1.0%

1.1%

Deletion
Weight Increase
Weight Decrease

3.0%
8.0%
7.0%

0.0%
9.0%
5.0%

-3.0%
1.0%
-2.0%

2.4%
8.2%
6.6%

2.2%
8.2%
6.5%

Security Change Type• Illustration for Phase 2 (25% of the Weight Difference):
Security Change Type

Addition
Deletion
Weight Increase
Weight Decrease

Current Weight (A)Post-Reclassification
Weight(B)Weight Difference(C) = (B) - (A)Pre-Diversification
Capping Weight(D) = (A) + 25% * (C)Final Pro Forma
Weight

1.1%
2.2%
8.2%
6.5%

5.0%
0.0%
9.0%
5.0%

3.9%
-2.2%
0.8%
-1.5%

2.1%
1.7%
8.4%
6.1%

2.0%
1.7%
8.5%
6.0%

Final Pro Forma Weights are derived by applying diversification rules and guidance on the Pre -Diversification Capping Weights.
Current Weights in subsequent phases may differ from Pro Forma Weights in prior phases due to price movements andcorporate events.
Post Reclassification Weights in subsequent phases may differ from those in prior phases due to price movements and theapplication of the regular Index Maintenance methodology at each phase.

5Summary of Simulated Results• The tables below show simulated results of the proposed treatment, which includes:
1. The application of the FM 100 Index Maintenance methodology to arrive at Preliminary
Security Weights,

2.

The reversion of Bangladesh and Nigeria weights to arrive at Post-Reclassification Weights(note that there are no Lebanon securities in the MSCI Frontier Markets 100 Index currently),

3.
4.

The application of phasing factors to arrive at Pre-Diversification Capping Weights, andThe application of Diversification Rules and Guidance to arrive at final Pro Forma Weights.

Current versus simulated final Pro Forma
Weights after Phase

Current versus simulated final Pro Forma
Weights after full reclassification

Country

Current
WeightFinal Pro
Forma
WeightCountry

Current
WeightFinal Pro
Forma
WeightBANGLADESH

6.29%

6.35%

BANGLADESH

6.29%

6.37%

NIGERIA

7.80%

7.78%

NIGERIA

7.80%

7.80%

KUWAIT

26.29%

21.14%KUWAIT

26.29%

0.00%

OTHERS59.63%

64.73%OTHERS59.63%

85.84%

Data as of the August 2020 QIR.
Diversification rules and guidance were not triggered in this simulation.
Pro forma weights for Bangladesh and Nigeria differ from current weights
due to price movement.

Data as of the August 2020 QIR.
Diversification rules and guidance were triggered in this simulation.
Pro forma weights for Bangladesh and Nigeria differ from current weights
due to price movement and diversification capping.

A full simulated list of constituents and weights is available at https://www.msci.com/index-consultations

6Discussion Points• Is it warranted to phase the deletion of securities classified in Kuwait
from the MSCI Frontier Markets 100 Index?
‒ Do you agree with the proposed phasing schedule (targetingequal steps over five successive Index Reviews starting from theNovember 2020 SAIR)?

• Do you agree with the proposal to keep unchanged the index weightsof securities classified in Bangladesh, Lebanon and Nigeria, subject
to the diversification rules and guidance in the MSCI Frontier Markets
100 Index methodology?

5 Simulations use data as of August 2020 QIR.

7

Appendix
SECTION SUBTITLE GOES HERE

8MSCI Frontier Markets 100 Methodology –Diversification Rules and Guidance

9Simulated Country Weights Resulting From Kuwait
Reclassification
VIETNAM
MOROCCOROMANIAKENYA
BAHRAIN
NIGERIABANGLADESHOMANKAZAKHSTANSRI LANKA
JORDANESTONIA
CROATIA
MAURITIUS
LITHUANIAKUWAIT

Simulated Index Weightafter Phase 1

Simulated Index Weightafter Full impementation

15.76%
11.79%
8.75%
7.89%
8.30%
7.78%
6.35%
4.37%
3.37%
1.33%
1.56%
0.81%
0.39%
0.36%
0.06%
21.14%

28.76%
12.47%
10.26%
9.49%
9.46%
7.80%
6.37%
5.08%
3.88%
2.19%
1.83%
1.19%
0.46%
0.41%
0.34%
0.00%

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