Announcement for September 30, 2024 at 08:33 PM GMT

THIS IS AN ANNOUNCEMENT FOR THE MSCI GLOBAL STANDARD INDEXES

CONCLUSIONS OF THE CONSULTATION ON METHODOLOGY ENHANCEMENT TO THE MSCI ISLAMIC INDEX SERIES AND THE MSCI ISLAMIC INDEX M-SERIES

MSCI announced today the conclusions of its recent consultation on methodology enhancements to the MSCI Islamic Index Series and the MSCI Islamic Index M-Series.

Following feedback from the investment community, MSCI will apply the following enhancements to the Financial Screening for the MSCI Islamic Index Series:

- Enhancement 1: To introduce an "Exit Buffer" for financial ratios based on 'total debt' and 'sum of a company's cash and interest-bearing securities' for existing constituents:
* A security that would otherwise be deleted due to not meeting the financial ratio threshold(s) of 33.33% would be retained in the index as long as the following conditions are met: 1) it remains within the Exit Buffer of 35% and 2) its 4-quarter rolling average (including current index review) remains equal to or below the Financial Ratio Threshold of 33.33%.
* The security would be deleted from the index if its financial ratio breaches the Financial Ratio Threshold of 33.33% for 3 consecutive index reviews even if it continues to meet the above conditions.
- Enhancement 2: To extend the Entry Buffer and the Financial Ratio Threshold of financial ratio based on 'sum of a company's accounts receivables and cash':
* The Entry Buffer will increase from 30% to 46%.
* The Financial Ratio Threshold will increase from 33.33% to 70%.

These enhancements aim to increase the stability of index constituents by reducing index turnover driven by reversed index additions and deletions, as well as to reduce the index concentration by increasing the index coverage.

Following feedback from the investment community, MSCI will not apply these enhancements to the Financial Screening for the MSCI Islamic Index M-Series due to the following reasons:

- The financial ratios used in the MSCI Islamic Index M-Series are based on 36-month average issuer market capitalization and generally resulted in higher index stability compared to the MSCI Islamic Index Series.
- The current differences in financial ratios as well as the higher thresholds for financial ratio based on 'sum of a company's accounts receivables and cash' led to higher coverage for MSCI Islamic Index M-Series compared to the MSCI Islamic Index Series.
- A 5% issuer capping is set in place for the MSCI Islamic Index M-Series to mitigate the concentration risk.

Finally, during the consultation, some market participants expressed their concerns on the concentration risk in the MSCI Islamic Index Series. While the methodology enhancements may partially address these concerns by increasing the index coverage, a capping methodology may still be warranted. Consequently, MSCI proposes to introduce a 10% issuer level capping for the MSCI Islamic Index Series. MSCI welcomes comments on other capping mechanisms and levels, as well as the implementation schedule until October 31, 2024. The details are available on https://www.msci.com/index-consultations.

The implementation date of the changes will be announced with the conclusion of the follow-up consultation on constituent weighting and capping methodology no later than November 29, 2024.

Details of the current methodology, including the current financial ratio definitions, are available on: https://www.msci.com/index-methodology.

THIS IS AN ANNOUNCEMENT FOR THE MSCI GLOBAL STANDARD INDEXES

                                     End of announcement.
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