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2 MSCI A Clear View of Risk & Return A leading provider of world class, mission critical investment decision support tools to financial institutions worldwide, with over 40 years of experience Delivering Indexes, risk and return portfolio analytics, and corporate governance tools for use throughout the investment process Coveringmajor asset classes: equity, fixed income, hedgefunds funds, energy, commodities andreal estate First provider of global equity Indexes and multi factor risk models Large and experienced team of index, portfolio analytics and governance specialists Over 3,000 employees in 23 countries Supporting around 8,000 clients across 85 countries, including asset managers, banks, hedge funds and pension funds 2014 MSCI Inc. All rights reserved. msci.com 2

3 Leading Brands Worldwide MSCI products include the MSCI Global Equity Indices, MSCI ESG Indices and MSCI ESG Research products and services. Typically y used for asset allocation, benchmarking and performance measurement, MSCI indices are also licensed as the basis for around ETFs across all listings. MSCI ESG Research provides in depth research, ratings and analysis of environmental, social and governancerelated business practices to companies worldwide. Barra equity and multiasset class portfolio analytics products and services help institutional investors manage their portfolios more effectively. Robust analytics are powered by a range of industryleading Barra factor models, and combined with advanced quantitative tools. RiskMetrics multiasset, position based risk and wealth management products and services enable clients to measure and quantify portfolio risk across security types, geographies and markets. RiskMetrics is well known for its Value at Risk methodologies, as well as being a leading provider of credit and counterparty risk systems. IPD products and services provide critical business intelligence to the real estate industry worldwide, including analytical services, indices and market information regarding performance and risk. Clients include real estate owners, investors, managers, lenders and occupiers. FEA energy and commodity asset valuation products offer a variety of quantitative analytics tools for valuing and modeling physical assets and derivatives across a number of market segments. They are used by institutional clients including energy firms, money center banks, Fortune 500 companies, trading enterprises, and leading financial firms. ISS corporate governance research, data and outsourced proxy voting and reporting services help institutional investors and corporations around the world make more informed investment decisions on behalf of the owners of companies. InvestorForce is the leading supplier of performance reporting products and services to the institutional investment community, providing investment consultants and their clients with real time insight, transparency and deeper analysis into their investment portfolios. The InvestorForce platform is used by investment consultants to report on over USD 3.5 trillion of assets for over 3,500 institutional plans. 1. As of September MSCI Inc. All rights reserved. msci.com 3

4 MSCI Global Presence 3,000 employees in 23 countries MSCI Research and Data teams speak 15 languages MSCI is in dialogue with local authorities and market participants to best understand the reality and dynamics of local markets In addition to local presence, MSCI consults investors long BEFORE, not after making any methodology or country allocation changes 2014 MSCI Inc. All rights reserved. msci.com 4

5 MSCI: The Index That Leads 94 of top 100 global investment managers are 150, Approximately $7.5 trillion in assets is estimated to be benchmarked to MSCI indices 3 ETFs are based on MSCI indices, more than on any other index 4 MSCI clients 1 95% Indices calculated daily 99.96% Accuracy rate 2 of US pension fund assets invested in global equities are benchmarked to MSCI 5 9,000+ MSCI 5 in real time 1 As of March 2013, based on P&I and MSCI data 2 Accuracy calculated l dbased on number of corrections performed over total t number of securities or data dt points covered. 3 As of Marc 2013, 2012, as published by evestment, Lipper and Bloomberg on July 31, As of June As of December 31, 2012, according to Intersec LLC MSCI Inc. All rights reserved. msci.com

6 MSCI Index Families MSCI Country & Regional Indices MSCI Size Indices MSCI Style Indices MSCI Sector Indices MSCI Thematic Indices MSCI ESG Indices MSCI Strategy Indices Custom Indices All Country (DM+EM) Developed Markets (DM) Emerging Markets (EM) Frontier Markets (FM) Domestic US China Australia Tradable Asia APEX EM 50 FM 100 Large Cap Mid Cap Standard (Large + Mid) Small Cap SMID (Small + Mid) IMI (Large+ Mid + Small) Micro Cap (DM Only) Value Growth Sector Industry Sub industry Real Estate Commodity Producers Agriculture & Food Chain Infrastructure Faith Based Catholic Islamic Economic Exposure Best in Class Socially Responsible Ex Controversial Weapons Environmental Risk Premia Value Weighted Risk Weighted Equal Weighted GDP Weighted Minimum Volatility Factor High Div Yield Risk Control Quality Momentum Quality Mix Capped 10/40 25/50 Standard Capped Hedged & Currency Hedged FX Hedged Global Currency Equity Screening Custom Weighting Custom Currencies and Tax Rates Custom Delivery and File Format All Cap (DM Only) Short & Leveraged (Daily) 2014 MSCI Inc. All rights reserved. msci.com

7 Assets Benchmarked to MSCI indices Approximately $7.5 trillion in assets are benchmarked to MSCI indices as of March 31, 2013, as reported on July 31, 2013 by evestment, Lipper and Bloomberg Assets Based on MSCI Indices as of March * $ billion Active Passive Total Institutional Funds 4, ,433 Retail Funds 1, ,979 ETFs TOTAL 6,451 1,255 7,707 Assets Benchmarked to Key MSCI Indices $ billion Sep 12 # Mar 13* Δ ACWI 1,116 1,364 22% EAFE 1,414 1,496 6% EM 1,313 1,434 9% World 1,886 2,161 15% US % Europe % Other % TOTAL 6,761 7,707 14% * As of March h31, 2013, as reported tdon July 31, 2013 by evestment, t Lipper and Bloomberg. Data excludes the assets benchmarked dto 22 Vanguard dfunds that transitioned to non MSCI benchmarks as of June 30, These assets constituted approximately $565B of AUM as of October 2, The institutional/retail split is based on evestment and Lipper database classification MSCI Inc. All rights reserved. msci.com

8 Objectives of the Index Methodology Seminar Describe selected provisions of the MSCI Global Investable Market Indexes ( GIMI )methodology This document is provided d for informational i purposes only in order to highlight key elements of the GIMI methodology The presentation does not contain nor purport to contain all elements of the GIMI methodology For a complete set of rules governing the MSCI GIMI, please refer to the full methodology book available at MSCI s web site 2014 MSCI Inc. All rights reserved. msci.com 8

9 Country Composition of the MSCI GIMI Global country coverage includes 23 Developed Markets (DM), 21 Emerging g Markets (EM) and 33 Frontier Markets (FM) Index Weight in the MSCI ACWI & FM 10.2% 0.5% 89.8% MSCI World Index MSCI Emerging Markets Index MSCI Frontier Markets Index As of Jan 21, 2014 Securities allocated to the MSCI Country Indices, are automatically allocated to the relevant tmsci Composite Indices 2014 MSCI Inc. All rights reserved. msci.com 9

11 MSCI Global Investable Market Indexes Main index segments with numbers of securities as of 31 Dec MSCI World Total: 1,610 Large: 726 Mid: 884 MSCI ACWI IMI Total: 8,498 MSCI Emerging Markets Total: 824 Large: 447 Mid: 377 MSCI All Country World (ACWI) MSCI World Small Cap Total: 4,251 MSCI Emerging Markets Small Cap Total: 1,831 MSCI All Country World Small Cap (ACWI SC) MSCI World IMI MSCI Emerging Markets IMI 2014 MSCI Inc. All rights reserved. msci.com 11

12 Size Segments of the MSCI GIMI MSCI Standard = MSCI Large Cap + MSCI Mid Cap (targets 85% of the index market capitalization) The MSCI IMI = MSCI Standard + the MSCI Small Cap (targets 99% of the index market capitalization) No Micro Cap Size Segment in Emerging and Frontier Markets MSCI Russia Index = MSCI Russia Large Cap Index + MSCI Russia Mid Cap Index MSCI Russia IMI = MSCI Russia Index + MSCI Russia Small Cap Index Large Cap Total Listed Equity Universe Investable Equity Universe Investable Market Indices Mid Cap All Cap Indices Large Cap Mid Cap Small Cap Micro Cap Small Cap Micro Cap Universe Micro Cap Indices Micro Cap Indices 2014 MSCI Inc. All rights reserved. msci.com 12

13 The Global Industry Classification Standard (GICS ) MSCI Russia Index Industry Groups Energy Banks Telecommunication Services Materials Food & Staples Retailing Utilities Diversified Financials 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% As of Jan 21, 2014 The MSCI GIMI can be further segmented by Sectors, Industry Groups, Industries and Sub Industries Securities allocated to the MSCI Country Indices are automatically allocated to the relevant subset indices based on the GICS classification 2014 MSCI Inc. All rights reserved. msci.com 13

14 Composition of the Selected MSCI Emerging Markets Indexes MSCI Emerging Market Indices MSCI Standard Country Indices Index Mkt Cap Weight # Sec. Index Mkt Cap MSCI Small Cap Country Indices Weight # Sec. Index Mkt Cap MSCI GIMI Weight # Sec. EM 3,681, % , % 1,802 4,210, % 2,624 EM Asia 2,334, % , % 1,477 2,737, % 2,017 China 732, % , % , % 484 Korea 588, % , % , % 422 Taiwan 438, % , % , % 480 India 234, % 68 27, % , % 214 EM EMEA 660, % , % , % 336 South Africa 273, % 50 40, % , % 113 Russia 224, % 22 5, % , % 37 Poland 63, % 22 9, % 20 73, % 42 Turkey 53, % 25 9, % 68 62, % 93 Greece 18, % 10 4, % 11 22, % 21 Hungary 9, % % 1 10, % 4 Czech Republic 9, % % 4 9, % 7 Egypt 7, % 4 4, % 15 12, % 19 EM Latin America 687, % , % , % 271 Brazil 381, % 75 30, % , % 158 Note: All market caps are in USD millions. Data as of the close of January 21, MSCI Inc. All rights reserved. msci.com 14

15 Main Factors Impacting Potential Index Inclusion Type of security Eligible listed equity securities Company country classification Full company market capitalization Includes all eligible equity securities of a company, including the unlisted portion Used for segmentation Security free float adjusted d market capitalization i & free float Relevant only to listed securities, and takes into account free float and foreign ownership limits Determines eligibility of a security and its index weight Liquidity Annualized Traded Value Ratios (ATVRs) (12 months and 3 months) Frequency of Trading (3 month only) Timing of changes There is a number of date cutoff points in the methodology, which determine timing of implementation of a given change for a given data point Source of information Only publically available information is taken into account 2014 MSCI Inc. All rights reserved. msci.com 15

16 Equity Index Maintenance MAY SAIR Semi Annual Index Reviews (SAIRs) in May and November of the Size Segment Indices: FEB QIR Large Additions NOS/FIF changes Migrations Corporate Events Corporate Events Additions/Deletions NOS/FIF changes Migrations Rebalancing Cycles for Equity Indices NOV SAIR Additions/Deletions NOS/FIF changes Migrations Corporate Events Corporate Events AUG QIR Large Additions NOS/FIF changes Migrations Fully review the Equity Universe Fully reassess size classification Update Foreign Inclusion Factors (FIFs) and Number of Shares (NOS) for the whole equity universe Quarterly Index Reviews (QIRs) in February and August of the Size Segment Indices: Reflect only large newly eligible securities, such as IPOs Reassess size only for securities with very large size changes Reflect the impact of significant market events on FIFs and update NOS. Ongoing Corporate Events: Are monitored daily Are generally implemented as they occur Include large IPOs 2014 MSCI Inc. All rights reserved. msci.com 16

17 Regular Index Review Process Define the Equity Universe SAIR Select all eligible equity securities Review country of classification of securities QIR Add only large IPOs (1.8x of the Standard Size Segment Cutoff) Determine the Investable Equity Universe in Each Market Define Market Size Segments Apply investability screens to each company in Equity Universe (some difference in requirementsfor new andexisting constit.) Define a global size and market coverage range for each size segment Determine a number of companies and associated size cutoff ineach market segment Apply only short term liquidity requirements for existing constituents Keep the segment number of companies unchanged Re define the size cutoffs Assign Companies to Size Segments Assign companies using targeted number of companies, size cutoffs and buffer zones The same process as for the SAIR, but with wider buffer zones Apply Final Size Segment Investability Requirements Apply final screening on the basis of the free float adjusted market capitalization for new and existing constituents Apply final screening on the basis of the free float adjusted market capitalization for new constituents FINAL INDEX FINAL INDEX 2014 MSCI Inc. All rights reserved. msci.com 17

18 Defining the Equity Universe Eligibility of Security Types Identification of a set of eligible trading venues (qualitative assessment) Identification of eligible equity securities Eligible security classes include most of the listed equity securities Mutual funds, ETFs, equity derivatives, limited partnerships, and investment trusts are generally excluded Preferred shares may be included depending on the market Example of Russia Common Stock, Preferred Stock, ADRs or GDRs, including DRs passported to Moscow Exchange from other exchanges are eligible for inclusion in the MSCI Russia Equity Universe, provided other requirements are met RDRs are currently not eligible IMPORTANT: MSCI is currently discussingi with the investment t community on potential treatment of foreign listings and depositary receipts in the MSCI GIMI (announced on November 14, 2013). This may or may not result in any proposal for the change in the GIMI methodology 2014 MSCI Inc. All rights reserved. msci.com 18

19 Defining the Equity Universe Country Classification Each company and its securities is classified in one and only one country Generally country classification of a security is determined by the country where the company is incorporated and listed If a company does not have an eligible listing in the country of incorporation, additional factors need to be considered, such as revenue, asset, shareholder baseandinvestor view If additional factors point to a country different to the country of incorporation and the country of listing, then securities of such companies may not be allocated to any of the MSCI Country Indices IMPORTANT: MSCI is currently discussing with the investment community on the current methodology for country classification of securities (announced on November 14, 2013).Thismay or may not result in any proposal p for the changein the GIMI methodology 2014 MSCI Inc. All rights reserved. msci.com 19

20 Defining the Equity Universe Country Classification Examples: MSCI Russia Equity Universe Incorporation and eligible listing are in Russia => may be eligible for the MSCI Russia Equity Universe Applicable to all current constituents of the MSCI Russia Indexes Incorporation is outside Russia, while eligible liquid listing is in Russia and the business points to Russia => may be eligible forthe MSCIRussia Equity Universe Currently, there are no such cases in the MSCI Russia IMI Incorporation is outside Russia and there is no liquid listing in Russia, business points to Russia => may not be eligible for the MSCI Russia Equity Universe. Such companies are generally excluded from all countries of the MSCI GIMI Incorporation and listing are outside tid Russia and are in thesamecountry t => may be eligible for the Equity Universe of that country (example: MSCI UK Index) 2014 MSCI Inc. All rights reserved. msci.com 20

21 Determination of the Investable Equity Universe in Each Market Apply the following criteria to securities in the Equity Universe: 1. Equity Universe Minimum Size Requirement (full company market cap cutoff, USD 162 mln at the time of the November 2013 SAIR). Targets 99% coverage of the MSCI Equity Universe. 2. Equity Universe Minimum Free Float Adjusted Market Capitalization Requirement (1/2 of the Equity Universe Minimum Size Requirements and applicable at security level) 3. Minimum Liquidity Requirement (Long term and short term liquidity measures) 4. Global Minimum Foreign Inclusion Factor (FIF) Requirement 5. Minimum Length of Trading Requirement (3 months before the implementation of a Semi Annual Index Review) 2014 MSCI Inc. All rights reserved. msci.com 21

22 Minimum Liquidity Requirements Liquidity Measures Annualized Traded Value Ratio (ATVR): estimates average annual traded value for a security relative to its free float adjusted market capitalization Long term: 12 month ATVR Short term: 3 month ATVR Frequency of trading: the proportion of days a given security traded relative to the total number of trading days in a given market Liquidity Requirements for new companies 12 month ATVR: DM: 20%, EM: 15%, FM: 15% or 5% or 2.5% 3 month ATVR/Frequency of Trading for 4 consecutive quarters: DM: 20%/90%, EM: 15%/80% Liquidity Requirements for existing companies 12 month ATVR: 2/3 buffer applied: DM: 13.33%, EM: 10%, FM: 10% or 3.33% or 1.67% (SAIRs only) 3 month ATVR/Frequency of Trading: DM: 5%/80%, EM: 5%/70%, FM: None In instances when a security does not meet the above criteria, the security may be represented by a relevant liquid Depository Receipt if trading in the same geographic region. Exceptionally, some securities of the MSCI Russia Index are represented by ADRs traded in the US 2014 MSCI Inc. All rights reserved. msci.com 22

23 Free Float Requirements Free Float Requirement Generally, a minimum Foreign Inclusion Factor (FIF) of 15% is required Exception may be applied for large securities (above 1.8x ofthe relevant size cutoffs) Defining free float MSCI s estimation of free float is based solely on publicly available shareholder information obtained from multiple information sources MSCI defines the free float of a security as the proportion of tradable shares outstanding that are deemed to be available for purchase in the public equity markets by foreign investors In practice, limitations on free float available to domestic investors include strategic and other shareholdings, such as governments, companies, officers and board members, employees, and banks Shares subject to lock up period are considered non free float More granular definition of free float is provided in the GIMI methodology Foreign Inclusion Factor (FIF) Round to nearest 1% if free float <15% Round up to nearest 5% if free float >15% 2014 MSCI Inc. All rights reserved. msci.com 23

24 Defining Market Size Segments for Each Market Size Segmentation Approaches and Objectives Size segmentation involves determining a number of companies and an associated market capitalization cutoff to define each size segment in each market while considering i Global size integrity: Only companies of comparable and relevant sizes are included in a given size segment across all markets. Consistent tmarket ktcoverage: Each market s kt size segment is represented tdin its proportional weight in the composite index. The objectives above are often mutually exclusive 2014 MSCI Inc. All rights reserved. msci.com 24

25 Defining Market Size Segments for Each Market Description of the Size Segmentation Approach. To balance the size and coverage objectives, the MSCI Global Investable Market Indices methodology specifies: A size range for all markets, referred to as the Global Minimum Size Range, together with Atargetfreefloat adjusted market coverage range within each individual market, referred to as market Coverage Target Range The intersection of these two ranges then specifies a Size and Coverage Target Area for a size segment across all markets Full Market Capitalization Size Range Size and Coverage Target Area Cumulative market coverage Coverage Range This Size and Coverage Target Area is used to determine the number of companies and the associated size cut off that will define a size segment within each market In the markets where both size and coverage objectives (as defined above) cannot be met, the size objective is assigned higher priority, i.e. the size objective can be reached at the expense of breaching the coverage objective 2014 MSCI Inc. All rights reserved. msci.com 25

26 Defining Market Size Segments for Each Market Defining Coverage and Size Ranges. To define the Size Segment Indices for a market, the following free float adjusted market capitalization market Coverage Target Ranges are applied to the market Investable Equity Universe : 65% to 75% in each market for the Large Cap Index. 80% to 90% in each market for the Standard Index. 98.5% to 100% in each market for the Investable market Index. The global minimum company size range for each segment is defined by: First determining a Global Minimum Size Reference. Thenspecifyinga rangeof 0.5 X to 1.15 X the Global Minimum Size Reference. Full Market Capitalization Standard Index 1.15 X 1 X Global Minimum Size Reference Size and Coverage Target Area 0.50 X 80% 85% 90% Coverage Range Cumulative market coverage 2014 MSCI Inc. All rights reserved. msci.com 26

27 Defining Market Size Segments for Each Market The Global Minimum Size References are derived in a following manner: First, the companies in the DM Investable Equity Universe are sorted in descending order of full market capitalization. The references are the respective full market capitalizations of the companies that provide the following cumulative free float adjusted d market capitalization i coverage of the DM Investable Equity Universe: DM Large Cap Index: 70% coverage DM Standard Index: 85% coverage DM Investable market Index (IMI): 99% coverage The Emerging markets and Smaller Frontier markets Global Minimum Size References are set at one half and one quarter the corresponding level used for the Developed markets respectively. Example: Percent of Free Float Adjusted Market Coverage Developed Markets Investable Equity Universe Universe Developed Markets Global Minimum Size Reference Emerging & Larger Frontier Markets Global Minimum Size Smaller Frontier Markets Global Minimum Size Reference (50% Reference (50% of DM) of EM) Nov-13 May-13 % chg Nov-13 May-13 Nov-13 May-13 Large Cap 70% 13,366 11, % 6,683 5,893 3,341 Mid Cap 85% 4,816 4, % 2,408 2,065 1,204 Small Cap 99% % Micro Cap 99.8% % Equity Universe Min Size % 2,947 1, All market caps are in USD millions. Data as of the close of October 18, 2013 and April 17, 2013 for the November 2013 Semi-Annual Index Review and May 2013 Semi-Annual Index Review, respectively MSCI Inc. All rights reserved. msci.com 27

28 Defining Market Size Segments for Each Market a) Both Size and Coverage Constraints are not Breached Companies are counted in descending order of 6,000 and full market capitalization starting with the Higher largest company. 5,000 Whenthecumulativefreefloat adjusted market coverage reaches 85%, the full market 4,000 capitalization of the last company counted is checked to see if it is within the Global 3,000 Minimum Size Range, which it is in this case. The rank of this company in the US market Investable equity Universe is 645 and its market cap is USD 4.1 Billion. 1,000 Thus, the top 645 companies define the large andmidsegmentintheusainthisexampleand 0 the cutoff bt between the mid and the small cap segment is set at USD 4.1 Billion for this market. The USA Standard Size Segment, balances size integrity and market coverage, as the company at the 85 th percentile coverage falls within the Size and Coverage Target Area. Market Capitalization Company Full USA (80%,4.67 B) (90%,4.67 B) nge Global Minimum Size Ran Standard Index Size and Coverage Target Area 2,000 (80%,2.03 B) (90%,2.03 B) c 28.6% 50.3% 63.2% Standard Index 71.6% 77.1% 80.8% Market Coverage Target Range 83.8% 86.0% 87.9% Cumulative Free-Float Adjusted Market Capitalization Small Cap Index 89.6% Smallest Company in the Standard Index 90.9% 92.1% 93.0% 93.9% 2014 MSCI Inc. All rights reserved. msci.com 28

29 Global Minimum Size and Market Coverage Range for Developed Markets Size Segmentation in all Developed markets except New Zealand achieves a balance between Size Integrity and market Coverage 5, X Minimum Size Reference, USD 5,539 US 5,000 EU 4,500 Minimum Size Reference, USD 4,816 4,000 HK 3,500 CA 3,000 2,500 2, X Minimum Size Reference, USD 2,408 IL SG JP AU 1,500 1,000 70% 75% 80% 85% 90% 95% As of Oct 18, MSCI Inc. All rights reserved. msci.com 29

30 Global Minimum Size and Market Coverage Range for Emerging Markets Size Segmentation in many Emerging markets achieves a balance between Size Integrity and market Coverage. There is a number of concentrated markets, where the coverage is above the upper bound of the coverage range 4, ,500 HU PE 3, X Minimum Size Reference, USD 2,769 RU 2,500 2,000 1,500 Minimum Size Reference, USD 2, X Minimum Size Reference, USD 1,204 GR TH ID MY TR PH ZA KR PL CN CL IN BR MX 1,000 TW % 75% 80% 85% 90% 95% 100% As of Oct 18, MSCI Inc. All rights reserved. msci.com 30

31 Assigning Companies to Size Segments Turnover is managed by the use of buffer zones to control the migration of companies between size segments while reflecting the investment process and allowing for timely representation of market developments An existing constituent is generally allowed to remain in its current size segment even if its full market capitalization falls crosses the market Size Segment Cutoff but is still within the Buffer Zones BufferzonesatQIRswillbewider(+80%, 50%) to capture only large moves as opposed to (+50%, 33%) in an SAIR SAIRbuffers zones and the Market Size SegmentS Cutoff forthe MSCI Russia Indices areshown below: Large Cap Large Cap Lower Buffer (-33%) Mid Cap Upper Buffer (+50%) USD 7,685 mln Mid Cap Mid Cap/Standard Lower Buffer (-33%) Small Cap Small Cap UpperBuffer(+50%) USD 2,769 mln Small Cap Lower Buffer (-33%) Small Cap Entry Buffer (+50%) USD 271 mln As of Oct 18, MSCI Inc. All rights reserved. msci.com 31

32 Assigning Companies to Size Segments Companies are assigned with the following priority to the Size Segments until the Segment Number of Companies is achieved: 1. Current constituents of a given Size Segment Index, as well as companies assigned to this Size Segment during last Index Review that failed the Final Size Segment Investability Requirements, greater than the market Size Segment Cutoff. 2. Newly investable companies with a full market capitalization greater than the market Size Segment Cutoff. 3. Companies in the lower Size Segment Index, as well as companies assigned to this Size Segment during last Index Review and failed the Final Size Segment Investability Requirements, greater than the upper buffer threshold of the lower size segment. 4. Current constituents of a given Size Segment Index, as well as companies assigned to this Size Segment during the last Index Review thatt failed the Final Size SegmentS Investability Requirements, in the lower buffer of the Size Segment in descending capitalization order, until the threshold of the buffer is reached. 5. The largest companies form the upper buffer of the next lower size segment MSCI Inc. All rights reserved. msci.com 32

33 Apply Final Size Segment Investability Rules Minimum Free Float Adjusted market Capitalization Requirement a) New companies For IMI/Standard Size Segments, the Free Float Adjusted market Capitalization must be above 50% of the Market Size Segment Cutoff for the IMI/Standard Size Segments Securities missing these requirements are not included in any Size Segments of the MSCI GIMI For a security with FIF lower than 0.15 to be included in the Standard Index, they need to have at least 1.8 times the Minimum Free Float market Capitalization Required for the Standard Index b) Existing companies at SAIRs 2/3 of the threshold for the new companies Additional Sizeand Investability Requirements for the Standard Indices (November 2013) Minimum Free Float market Capitalization of at least 50% of the relevant Size Segment Cutoff of the Country MSCI Russia: USD 1,385 mln MSCI Russia Small Cap: USD 136 mln 2014 MSCI Inc. All rights reserved. msci.com 33

34 Additions of Newly Eligible Companies Outside SAIRs Outside SAIRs only large additions to the MSCI Standard Indices may be added to the MSCI GIMI Those could be added either as part of smaller index reviews, i.e. QIRs or at the time of an IPO Securities may be eligible for inclusion in the MSCI GIMI outside SAIR if: Full market capitalization exceeds 1.8 times of the relevant Market Size Segment Cutoff for the MSCI Standard Index Free Float Adjust market Capitalization exceeds 1.8 times of one half of the relevant Market Size Segment Cutoff for the MSCI Standard Index In order to assess potential eligibility of IPOs outside regular index review, MSCI calculates Interim Market Size Segment Cutoffs on a daily basis As of February 17, 2014 the Interim Market Size SegmentSegment Cutoffs for the MSCI Russia Index was: USD 2,737 mln, making the early inclusion threshold for the full company market capitalization 1.8x USD 2,737 mln = USD 4,927 mln and free float adjusted market capitalization cutoff USD 2,463 mln 2014 MSCI Inc. All rights reserved. msci.com 34

35 Important Dates for the Index Maintenance Process Important Dates* Feb Review May Review Aug Review Nov Review Equity Universe Cutoff** Last business day of November Last business day of February Last business day of May Last business day of August Freefloat & NOS Last business day of Last business day of Last business day of Last business day of Cutoff*** November February May August Liquidity Cutoff Last business day of December Last business day of March Last business day of June Last business day of September Pi Price Cutoff Within last 10 Within last 10 Within last 10 Within last 10 business days of business days of business days of business days of January April July October Announcement Mid February Mid May Mid August Mid November Effective Date First business day of March First business day of June First business day of March First business day of December *These dates may change under special circumstances **Large IPOs or securities that underwent large public offering may be added as part of an index review if the event took place after the Equity Universe Cutoff Date but prior to the Market Cap Cutoff Date ***Free float and NOS changes captured as part of the corporate events process, which are deferred to an index review may be implemented as part of that index review even if they take place after the Equity Universe Cutoff Date provided it does not happen after the Market Cap Cutoff Date (more details can be found in the Corporate Events methodology book) 2014 MSCI Inc. All rights reserved. msci.com 35

36 Index Review Data Cutoffs May SAIR Illustration La Pr Start of Ju n Effective Date Mid May Announcem ment st 10 days of Apr ice Cutoff End of Mar Liquidity Cu utoff End of Feb Universe Cu utoff Pre SAIR Universe & Data Review Liquidity Data Review Index Review Analysis Post Announcement Post SAIR IPOs Large IPOs Large IPOs Float Updates NOS Updates Corp Events Coinciding with the Index Review Implemented Corp Events Corp Events Coinciding with the Index Review Implemented Corp Events Corp Events Coinciding with the Index Review Implemented Corp Events The table provides an indicative illustration on what changes may be reflected in the data used for a May SAIR 2014 MSCI Inc. All rights reserved. msci.com 36

37 Ongoing Consultation On November 14, 2013 MSCI launched a consultation with the investment community on the following topics Country classification of securities and the choice of listings Market classification framework Harmonization of size and liquidity requirements across Developed and Emerging Markets Combining liquidity from the main exchanges with the liquidity observed on alternative trading venues Inclusion criteria for IPOs Potential introduction of minimum standards of corporate governance for index inclusion Index correction policy Currently there is no official closing date for this consultation. This may or may not result in any proposals for potential change in the GIMI methodology 2014 MSCI Inc. All rights reserved. msci.com 37

38 Inclusion in the Composite and Sector Indices Q&A Q: What are the requirements for inclusion in the MSCI Emerging Markets Index? Is it necessary to be included in relevant MSCI Country Index? A: The MSCI GIMI are built at a country level (except European Developed Markets). The MSCI Composite Indices, such as the MSCI Emerging MarketsIndex Index, are constructed as an aggregationof of the relevant MSCI Country Indices. If a security is included in the MSCI Russia Index, it would be also automatically included in the MSCI Emerging MarketsIndex Index, aslongasthemscirussiaindexis Index is classifiedasemerging Market Q: If a company is included in the MSCI Country Index of the MSCI GIMI, is it also included in the relevant industry indices? A: Yes. Each company allocated to the MSCI GIMI is also automatically allocated into a relevant sector, industry group and industry. This ensures automatic inclusion in the relevant industry level indices 2014 MSCI Inc. All rights reserved. msci.com 38

39 Eligibility of Security Types Q&A Q: Does MSCI have any plans to include GDRs of Russian and international companies in the MSCI Russia Indexes? A: GDRs are already eligible for inclusion in the MSCI Russia Equity Universe, provided other methodological requirements are met, such as country classification requirements (including GDRs listed on Moscow Exchange). Please note that RDRs are currently not eligible Q: Which listing would be considered for inclusion? The one where the company first listed? The most liquid? Any listing, provided it satisfies the requirements? A: At the time of assessment of a newly eligible companies, MSCI would, generally, include a local listing, provided it meets the liquidity requirements, otherwise a liquid depositary receipt may be considered instead. The listing, initially included in the MSCI GIMI would continue to be included, unless its liquidity of this listing drops below the threshold for existing constituents. In such instances, MSCI may consider switching to another sufficiently liquid listing 2014 MSCI Inc. All rights reserved. msci.com 39

40 Defining the Equity Universe Country Classification Q&A Q: Is country of eligibility based on incorporation, listing and operations? What if all three are different? What if only two of the three are different? A: As mentioned in the MSCI GIMI methodology, the vast majority of companies in the MSCI GIMI are allocated on the basis of country of incorporation and listing, without any consideration of operations. Hence there can be cases when country of operations differ from the country of classification of a company A: If a country of incorporation is different from a country of listing, then additional analysis, including analysis of operations, may be conducted. If this analysis points to the country of listing, the company may be attributed to such country A: If all three criteria are pointing to a different country, then such companies are generally excluded from all MSCI Country Indices of the MSCI GIMI 2014 MSCI Inc. All rights reserved. msci.com 40

41 Defining the Equity Universe Country Classification Q&A Q: Are there any specific quantitative guidelines for distribution of the shareholder base or for distribution of company operations? Q: If a company is incorporated in the offshore jurisdiction, what headquarters will be considered? Q: How investors consideration regarding the country classification are taken into account? What sources are used? A: Vast majority of companies are assigned to countries on the basis of the simple and transparent rules based on the country of incorporation and listing, as described in the MSCI GIMI methodology. In some cases when additional analysis is required, it is performed on a case by case basis using various public sources. Currently, there are no publically available thresholds used during this additional analysis Q: Would Cyprus be one of the jurisdictions, issuers of which could be considered for inclusion in the MSCI Russia Index? A: A company incorporated in Cyprus may be considered for inclusion in the MSCI RussiaEquity Universe, provided it meets all other necessaryrequirements requirements Q: Does MSCI plan to change its methodology on the country of classification? A: On November 14, 2013, MSCI launched a consultation with the investment community on a number of topics, including country classification of securities. This may or may not result in any specific proposals or changes in the GIMI methodology 2014 MSCI Inc. All rights reserved. msci.com 41

42 Defining the Equity Universe Country Classification Q&A Q: How would a company be treated in relation to MSCI index eligibility (DM vs EM) if 70% of the business is coming from EM, 30% from DM and the legal headquarters are in one of the EU countries (also the same question for a 50%/50% split)? A: DM vs EM classification is determined automatically based on the country classification. If a security is attributed to a country, classified as EM (such as Russia), then such security would be part of EM A: If a security is listed and incorporated in the same country, then it is, generally, attributed to this country. In other instances, additional analysis is conducted which is based on, among others, company listings, distribution of operations, shareholder h base, location of headquarters and investors perception. Currently, there are no publically available thresholds used during this additional analysis Q: If a company lists an ADR on MoEx, would it be eligible for the MSCI Russia Index? A: Companies incorporated outside Russia, may be potentially included in the MSCI Russia Index, if they have liquid listing on MoEx (including ADRs) and other inclusion conditions aremet 2014 MSCI Inc. All rights reserved. msci.com 42

43 Minimum Liquidity Requirements Q&A Q: Does MSCI calculate a quarterly trading volume on a calendar quarter or on the basis of the last 90 days at the time of the measurement? A: As mentioned din the GIMI methodology, the liquidity idi inputs are calculated as of the latest end of month as of the time of the analysis. For example, May Index Review is typically conducted using the prices as of the secondhalf of April and liquidity data as of the end of March Q:In the case if a company already listed on a foreign exchange gets admitted for trading on Moscow Exchange, would MSCI sum up the volumes from both venues? A: No, MSCI takes into account only volumes observed on the listing considered for inclusion in the MSCI Russia Index 2014 MSCI Inc. All rights reserved. msci.com 43

44 Free Float Q&A Q: In case of primary and secondary listings (US and Russia) would it be considered on combined basis or on both exchanges or separately? A: If the primary listing i is in the form of a common stock, while the secondary listing is in the form of Depositary Receipts, the free float is considered on combined basis. Shares deposited to back the issuance of DepositaryReceipts are generally consideredas free float A: If both primary and secondary listings are in a form of common stock, then each security is considered separately Q: There are three different levels of asset ownership in Russia (federal, regional and local). Which of them is considered as free float? A: As per the GIMI methodology, shareholdings owned by Governments and affiliated entities are generally classified as non free float 2014 MSCI Inc. All rights reserved. msci.com 44

45 Market Size Segment Cutoffs Q&A Q: Which approach does MSCI follow for setting the minimum market cap requirements? A: MSCI targets a specific coverage for each segment of the MSCI Country Indexes, while taking into consideration size integrity across markets. For example the MSCI Standard Size Segment targets 85% coverage of the MSCI Investable Universe, subjectto to the Global Minimum Size constraints. The companies are segmented on the basis their full company market capitalization Q: Are there any plans to harmonize the minimum i size and minimum i liquidity requirements applied to Developed and Emerging Markets? A: On November 14, 2013, MSCI launched a consultation on a number of topics for discussion, including a discussion point on the potential harmonization of the size and liquidity requirements between Developed and Emerging Markets. The discussions are still ongoing 2014 MSCI Inc. All rights reserved. msci.com 45

46 Early Inclusions Q&A Q: What is the minimum free float adjusted market capitalization required for an IPO to be considered for an early inclusion? A: In order to assess potential eligibility ibili of IPOs outside regular index review, MSCI calculates Interim Market Size Segment Cutoffs on a daily basis. As of February 17, 2014 the Interim Market Size Segment Cutoffs for the MSCI Russia Index was: USD 2,737 mln, making the early inclusion threshold for the full company market capitalization 1.8x USD 2,737 mln = USD 4,927 mln and free float adjusted market capitalization cutoff USD 2,463 mln 2014 MSCI Inc. All rights reserved. msci.com 46

47 Implementation of Offerings Q&A Q: How are additional offerings reflected? What are the cutoff dates? How is additional free float reflected? A: Additional offerings of 5% of the security ss number of shares or higher, generally, implemented as of the close of the first trading day of the new shares, if all the relevant information is available. Else it is implemented as soon as practicable after the relevant information is made available A: A secondary public offering of 5% or higher h are implemented shortly after the results of the subscription are announced. Else they can be deferred to the regular Index Reviews A: Block Sales which are publically announced and made by way of immediate book building and/or in the absence of an offer prospectus are generally implemented as part of the next regular Index Review (subject to the relevant thresholds mentioned in the Corporate Events methodology book). The relevant Index Review date cutoffs are explained on slides 35 and 36 A: In order to determine a post event free float, MSCI analyses the post event shareholder structure when available. Public offerings to institutional investors are usually treated as free float 2014 MSCI Inc. All rights reserved. msci.com 47

48 MSCI Russia 10/40 Index Q&A Q: What are the key difference/similarities between the MSCI Russia Index and the MSCI Russia 10/40 Index? A: MSCI Russia 10/40 Index is based on constituents of the MSCI Russia Index. The weights of securities are adjusted using additional factors in order to reflect the 10/40 constraints A: The methodology is based on UCITS directive according to which: a weight of any single group entity must not be more than 10% of a fund s total assets and the sum of the weights of all group entities representing more than 5% of the fund must not exceed 40% Q: What is a group entity? A: Group entity is defined by UCITS directive on the basis of controlling stakes. In order to determine if companies should belong to the same group entity MSCI analyses financial i accounts of listed companies with the purpose of identification of controlling stakes. Under International Accounting Standards, a parent company is required to consolidate its investment in subsidiaries, defined as companies it controls 2014 MSCI Inc. All rights reserved. msci.com 48

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