Consultation

INDEX CONSULTATION

August 2013

S&P Dow Jones Indices’ Country Classification Consultation: Feedback Requested by October 1, 2013

Introduction

S&P Dow Jones Indices’ global equity indices are defined by three major country classifications – developed, emerging, and frontier. Currently, distinct country benchmarks exist within three larger index families: the S&P Global BMI and S&P Frontier BMI, the Dow Jones Global Index, and the Dow Jones Global Total Stock Market Index. S&P Dow Jones Indices intends to align country classifications across all benchmarks according to the same schedule and criteria.

S&P Dow Jones Indices is seeking feedback on certain countries for which we are considering reclassification. Please provide comments on the potential country classification changes, basing your opinion on the criteria we have presented, along with your view on the appropriate long-term classification of the countries.

Do not let concerns regarding implementation, transition and/or turnover arising from any potential reclassification, guide your response. Such issues, including timing of transition, potential phasing of implementation, etc., will be addressed by S&P Dow Jones Indices in a separate communication, providing ample time for client review and feedback.

Mode of Consultation If you would like to participate in this consultation, there are two options:

. Click on the link below to participate in the online survey www.surveymonkey.com/s/76FLCH8

. Contact S&P Dow Jones Indices Client Services: [email protected] with your feedback

List of Countries under Review

1. Bahrain 7. Qatar 2. Egypt 8. Saudi Arabia 3. Greece 9. South Korea 4. Kuwait 10. Taiwan 5. Morocco 11. United Arab Emirates (UAE) 6. Oman 12. China A-Share Market

Process

S&P Dow Jones Indices uses quantitative data to initially assess market eligibility for the developed, emerging, and frontier country classifications. Countries must meet certain criteria to be considered for the developed, emerging or frontier indices. They must then meet a number of additional criteria to be considered for the developed and emerging classifications, and must withstand a final measure of country economic status to be classified as developed.

S&P Dow Jones Indices’ Country Classification Requirements

Please review Appendix B at the end of this document for a detailed explanation of the criteria listed below. S&P Dow Jones Indices Country Classification Criteria Frontier Emerging Developed

Initial Eligibility Full domestic market capitalization of over US$ 2.5 billion A √ √ Domestic turnover value of over US$ 1 billion minimum √ √ Exchange development ratio of over 5% of two √ √ √

Additional Full domestic market capitalization of over US$ 15 billion √ √ Settlement period of T+3 or better √ Sovereign debt rating of BB+ or above A √ Non-occurrence of hyperinflation minimum √ No significant foreign ownership restrictions of three √ √ Freely-traded foreign currency √

GDP GDP (PPP) per capita of greater than US$ 15,000 √

√ - Required

Please refer to the S&P Dow Jones Indices’ Country Classification Methodology in the Resource Center Section of the S&P Dow Jones Indices’ Web site at www.spindices.com for further information.

S&P Frontier Markets

Unless there are significant data availability or accuracy issues, existing S&P Dow Jones Indices’ frontier market indices will continue to be calculated even if they fail to meet the requirements detailed above.

1. Bahrain

Bahrain is currently classified as a frontier market in all S&P Dow Jones Indices’ branded indices. Low liquidity and continued foreign ownership restrictions suggest no change in classification.

Investor considerations:

Taxes: Dividends, interest and capital gains are not subject to tax.

Regulatory Environment: The Central Bank of Bahrain (CBB) is the main regulatory body. A disciplinary committee is authorized to penalize members and issuing companies, although rules are not well defined. The securities market is supervised and regulated by the Central Bank of Bahrain.

Foreign Ownership Restrictions: GCC firms and GCC citizens can own up to 100% of listed Bahraini companies. Non-GCC firms or citizens may own up to 49% of listed Bahraini companies.

Investment Conditions: The World Bank’s “Doing Business 2013” report ranks Bahrain at number 42 out of 185 countries in the world for “ease of doing business” with foreign investors. There were significant foreign investment in-flows and out-flows throughout 2012 due to the direct outreach activities carried out by the Bahrain Economic Development Board (EDB).

Substantial Shareholder Reporting: Shareholders that own 5% or more of any listed security must conclude all transactions on such securities on a licensed exchange in Bahrain (Bahrain Bourse). Shareholders must obtain written approval from the CBB prior to executing any order that will increase their ownership to 10% or more in any listed security. Any further increase of 1% or more shall also be subject to CBB prior written consent.

Stock Exchange: Bahrain Stock Exchange operates from Sunday to Thursday, except for holidays declared by the Exchange in advance.

Settlement cycle and methods: The settlement cycle in Bahrain is T+2 for both equities and fixed income securities. Currently, clearing and settlement is done manually where transactions are cleared on a trade- to-trade basis (i.e. payment versus share certificates). It is mandatory for all settlements to be conducted through the Central Depository System (CDS), though securities may be withdrawn and rematerialized. Cash settlement is through the Bank of Bahrain and Kuwait which acts as settlement bank for the CDS.

Bahrain Weights (data as of June 30, 2013)

Index Current Weight Projected Weight S&P Frontier BMI 1.97% DJ Frontier TSM 2.10% S&P Emerging BMI 0.12% DJ Emerging 0.11% DJ Emerging TSM 0.15%

Should Bahrain be classified as a frontier or emerging market?

2. Egypt

Egypt is currently classified as an emerging market in all S&P Dow Jones Indices’ branded indices. Egypt currently satisfies the minimum criteria for emerging classification. However, recent political turmoil and its impact on financial market stability have compelled us to keep a close watch on the investment conditions in the country.

Investor considerations:

Taxes: Egypt does not levy withholding tax on dividends paid to residents or nonresidents. Interest paid to a nonresident is subject to a 20% withholding tax, which may be reduced under a tax treaty.

Foreign Ownership Restrictions: Stock ownership is open to foreign and domestic investors. Although Egyptian law and regulations allow companies to adopt bylaws limiting or prohibiting foreign ownership of shares, very few companies listed on the stock exchange have such restrictions. One of these companies is Telecom Egypt, which applies a 20% limit. A significant number of the companies listed on the exchange are family-owned or dominated conglomerates. Free trading of shares in many of these ventures, while increasing, remains limited.

Investment conditions: Repatriation transactions need to go through custodian banks with transactions settling in less than two days. Stock lending and short selling currently are not allowed but are said to be forthcoming.

Stock Exchange: Egyptian Exchange (EGX) comprises two exchanges, Cairo and Alexandria, both governed by the same board of directors and sharing the same trading, clearing and settlement systems. Trading days are Sunday to Thursday.

Settlement cycle and methods: The settlement cycle is T+0 for the securities eligible for intra-day trading (Real Time Gross Settlement); T+1 for Treasury bonds traded according to the Primary Dealers system; T+2 for all other securities. Free of Payment (FOP) is not an available settlement method.

Egypt Weight in S&P Emerging BMI Since 2008

Weight in S&P Emerging BMI 2008 2009 2010 2011 2012 2013 Egypt 0.90% 0.77% 0.68% 0.47% 0.44% 0.31%

Egypt Weights (data as of June 30, 2013)

Index Current Weight Projected Weight S&P Emerging BMI 0.31% DJ Emerging 0.34% DJ Emerging TSM 0.45% S&P Frontier BMI 4.90% DJ Frontier TSM 5.97%

Should Egypt be classified as a frontier or emerging market?

3. Greece

Greece is currently classified as a developed market in all S&P Dow Jones Indices’ branded indices. Its precipitous decline in market value, diminished credit rating, and temporary ban on short-selling all suggest a possible change to emerging status. However, if these developments are seen as temporary, all other criteria suggest Greece remain classified as a developed market.

Investor considerations:

Taxes: No sales tax from 2012 onwards. The minimum transaction cost for an OTC trade is €151. Dividend distributions are subject to a 25% withholding tax. The rate for distributions after January 1, 2014 (including distributions between domestic companies) is 10%. If the condition for application of the EU parent-subsidiary directive (PSD) is satisfied, no withholding tax applies. Capital gains in Greece are added to regular income and are taxable at the same rate as regular income for a company, other than in specific instances as defined by the law. For individuals the capital gains tax is 20%.

Regulatory Environment: The primary stock exchange authorities are the Government Commissioner and the Capital Markets Commission (CMC). The Government Commissioner is appointed by the Ministry of National Economy and supervises the compliance of all trading parties with the existing rules and regulations. The CMC is an independent public entity, operating under the auspices of the Ministry of National Economy. Their primary roles are to protect investors and to provide adequate information for the proper functioning of the securities markets and the enforcement of the securities laws.

Foreign Ownership Restrictions: Foreign ownership restrictions apply to securities in the media, shipping, airline, and mining sectors.

Credit Rating: Greece’s current S&P Credit Rating of B- falls below the threshold for classification as a developed market (current threshold: BB+).

Investment Conditions: A short-selling ban on all stocks was introduced in August 2011 to protect investors from the fallout of the country's debt crisis. In April 2013, the European Securities and Markets Association (ESMA) extended the short-selling ban on bank shares to the end of July.

Substantial Shareholder Reporting: An investor must disclose when it initially reaches, exceeds, or falls below 5%, 10%, 15%, 20%, 25%, 33.3%, 50%, or 66.6% of a company’s total voting rights. An investor must apply for approval prior to reaching or exceeding 10%, 15%, 20%, 25%, 33%, or 50% of a bank’s total share capital or voting rights.

Stock Exchange: The Athens Exchange S.A. (ATHEX) is a subsidiary of Hellenic Exchanges S.A., whose shares are listed in ATHEX. There are no market entrance requirements for foreign investors.

Foreign Investor requirements: All investors must obtain a National Identification Number prior to trading. Each beneficial owner is allowed only one account at the Central Clearing and Registration department (CCR). Foreign investors must provide proof of legal existence and a power of attorney.

Settlement cycle and method: Settlement time for transactions at the ATHEX is T+3. Both DVP and Free of Payment (FOP) settlements are available.

Greece Weights (data as of June 30, 2013)

Index Current Weight Projected Weight S&P Developed BMI 0.05% DJ Developed 0.03% DJ Developed TSM 0.05% S&P Emerging BMI 0.45% DJ Emerging TSM 0.21% DJ Emerging TSM 0.51%

Should Greece be classified as a developed or emerging market?

4. Kuwait

Kuwait is currently classified as a frontier market in all S&P Dow Jones Indices’ branded indices. Despite meeting the basic criteria for emerging market status, Kuwait suffers from uncertainties over market accessibility, investor registration, and tax policy. Therefore, it is incompatible with our emerging market criteria, and seems best suited to remain classified as a frontier market.

Investor considerations:

Taxes: A 15% withholding tax is applicable for dividends and interest income. Listed securities are exempt from capital gains tax. Unlisted securities are subject to a 15% capital gains tax.

Regulatory Environment: The Ministry of Commerce and Industry (MOCI) is the main regulator of shareholding companies. The Kuwait Stock Exchange (KSE) Committee regulates all market participants and is responsible for all activities of the Kuwaiti securities market. The KSE grants listing approvals.

Foreign Ownership Restrictions: Kuwait is open to some types of foreign investment, subject to restrictions. Foreign investment in petroleum, gas, and real estate sectors is restricted. Maximum foreign ownership allowed in banks is 49% across all foreign holdings. Government bureaucracy is prevalent. Regulations are not transparent and can be biased in favor of domestic interests. Non-GCC citizens may not own land.

Residents and non-residents may hold foreign exchange accounts. There are no restrictions or controls on payments, transactions, transfers, or repatriation of profits.

As per Kuwait's Direct Foreign Capital Investment Law of 2001, foreign firms are permitted 100% foreign ownership in certain industries including infrastructure projects (water, power, waste water treatment, and communications), investment and exchange companies approved by the Central Bank, insurance companies, information technology and software development, hospitals and pharmaceuticals, air, land & sea freight, tourism, hotels & entertainment, and housing projects & urban development. Projects involving oil and gas exploration and production are not authorized for foreign investment and must be approved by a separate law.

Investment Conditions: Securities lending and short-selling are not allowed.

Substantial Shareholder Reporting: In terms of investment restrictions and shareholding disclosures, transparency of information is still a concern. Many companies are controlled by a large pool of individual shareholders, who may be members of the same family. Given the small size of the individual stakes these are not publicly disclosed potentially leading to an overstated float-adjusted market capitalization.

Stock Exchange: The Kuwait Stock Exchange is open Sunday through Thursday. Kuwait is a member state of the GCC. Market accessibility remains a concern.

New account registration: Registering new accounts is a lengthy and cumbersome process. The timeframe to open an account is 10 business days upon the sub-custodian’s receipt of acceptable documentation. Investors must provide proof of legal existence and a power of attorney in order to open cash and securities accounts. Foreign investors have cited registration issues as being one of the most challenging and difficult obstacles in this market.

Settlement cycle and methods: Settlement time for transactions at the KSE is T+2 trading days for foreign investors.

Kuwait Weights (data as of June 30, 2013)

Index Current Weight Projected Weight S&P Frontier BMI 17.15% DJ Frontier TSM 17.84% S&P Emerging BMI 1.03% DJ Emerging 0.95% DJ Emerging TSM 1.26%

Should Kuwait be classified as a frontier or emerging market?

5. Morocco

Morocco is currently classified as an emerging market in all S&P Dow Jones Indices’ branded indices. A consistent year-over-year decline in volume on the Casablanca Stock Exchange puts the trading conditions more in line with what is found in a frontier market. However, there have been no other major developments within the country that would suggest a change from its emerging status.

Investor considerations:

Taxes: Dividends paid to a non-resident are subject to a 10% withholding tax unless the rate is reduced under an applicable tax treaty. Interest on loans obtained from a non-resident is subject to a 10% withholding tax. Royalties paid to non-residents are subject to a 10% withholding tax unless the rate is reduced under an applicable tax treaty. Capital gains are treated as ordinary income and taxed at the normal corporate tax rate.

Regulatory Environment: The Moroccan Securities Ethics Council (CDVM) is the market regulator.

Foreign Ownership Restrictions: There are generally no restrictions on foreign ownership of Moroccan companies, but investors must get approval from regulators before directly investing in certain sectors such as agriculture, banking, mining, pharmaceuticals, etc. The requirement of approval does not apply to portfolio investment; only direct investments.

Investment Conditions: The law updated in November 2012 regulates and secures lending operations in Morocco, and subjects the loan of securities to the Code of Obligations and Contracts. It also lists the bodies authorized to perform the credit of securities who are also allowed to approve the list of securities. Information is not always available in English. Short selling is not allowed. Stock lending is allowed but is not the market practice due to the lack of regulation. Offshore foreign exchange transactions are not permitted. Onshore transactions must be related to a securities transaction. Transactions in foreign currency are monitored by the administration but generally not restricted.

Substantial Shareholder Reporting: The International Financial Reporting Standards (IFRS) is required for consolidated financial statements. Regulations limit consultancy services performed by external auditors.

Stock Exchange: The primary stock exchange in Morocco is the Casablanca Stock Exchange. Trading days are Monday to Friday. Additionally, there is an OTC market.

Liquidity: The Casablanca Stock Exchange has seen a significant decline in trading volume each year over the last five years.

2008 2009 2010 2011 2012 2013 Total Value Traded (US$ Millions) 12,922.60 5,809.63 4,245.00 4,059.10 3,948.88 3,046.10 Average Value Traded (US$ Millions) 192.87 85.44 62.43 57.99 54.09 41.73 % change -55.70% -26.93% -7.11% -6.71% -22.86%

Settlement cycle and method: Settlement time for transactions at the Casablanca Stock Exchange is T+3. The basic principle governing the trade settlement system is simultaneous delivery of securities against cash payment (DVP settlement). The settlement of trades between market participants is carried out by delivery of securities against cash payment on a reciprocal and simultaneous basis. In addition, this must occur within a standard period of time which runs from the trade date to that of theoretical settlement.

Morocco Weights (data as of June 30, 2013)

Index Current Weight Projected Weight S&P Emerging BMI 0.27% DJ Emerging 0.22% DJ Emerging TSM 0.29% S&P Frontier BMI 4.23% DJ Frontier TSM 3.91%

Should Morocco be classified as a frontier or emerging market?

6. Oman

Oman is currently classified as a frontier market in all S&P Dow Jones Indices’ branded indices. There have been no material changes in investment conditions over the past year.

Investor considerations:

Taxes: Dividends and capital gains are not subject to taxation.

Regulatory Environment: The Muscat Securities Market (MSM) regulates the market via its board of directors under the chairmanship of the Minister of Commerce and Industry. The board plans the general policies and strategies of the market; regulates the listing and trading of shares; and grants licenses to brokers and market-makers. The MSM applies trading, clearing and settlement rules. It also monitors stock movements, registers prices, and regulates the affairs of exchange members. The Capital Market Authority (CMA) and the MSM regulate the depository’s activities.

Foreign Ownership Restrictions: The current Foreign Capital Investment Law allows up to 70% foreign ownership. 100% foreign equity could be permitted by the Government if a project is considered vital to the development of the national economy.

Substantial Shareholder Reporting: An investor is required to advise the CMA when it acquires 10% of a bank or financial institution, 15% of a brokerage company, and 25% of any other public limited joint stock company and of any increase over these levels.

Stock Exchange: The Oman Exchange is open Sunday through Thursday. Oman is a member state of the GCC.

Foreign Investor requirements: Foreign investors must provide proof of legal existence and sign a power of attorney.

Settlement cycle and methods: Settlement time for transactions at the MSM is T+3 trading days. Free of Payment (FOP) settlement is not available.

Oman Weights (data as of June 30, 2013)

Index Current Weight Projected Weight S&P Frontier BMI 2.76% DJ Frontier TSM 3.19% S&P Emerging BMI 0.17% DJ Emerging 0.17% DJ Emerging TSM 0.23%

Should Oman be classified as a frontier or emerging market?

7. Qatar

Qatar is currently classified as a frontier market in all S&P Dow Jones Indices’ branded indices. Although the foreign ownership limit for companies is still set below a desirable level, recent efforts to raise it, as well as improvements to the general settlement process give reason to consider promotion of Qatar to emerging market status. Qatar currently meets all quantitative criteria for emerging markets status.

Investor considerations:

Taxes: Dividends and capital gains are not subject to tax.

Regulatory Environment: The Qatar Exchange (QE), a self-regulated entity under the jurisdiction of the Ministry of Business and Trade, is responsible for monitoring all securities market laws and ensuring that entities comply with the rules and regulations. The Qatar Central Bank acts as the government’s agent to exercise monetary policy and monitor the banking system. The Qatar Financial Market Authority, a new market regulator, has been legally established; however, the rules by which it will govern are currently only in draft form.

Foreign Ownership Restrictions: Non-resident foreign investors in aggregate may own up to 25% of a listed company that allows such ownership. Investors who hold 25% of the shares of a company must notify the QE prior to purchasing future shares. There are company-imposed individual ownership limits. With approval, listed companies can increase foreign ownership levels to 100%. Qatar financial market authorities are working to create regulation that would relax the foreign ownership restriction. The Minister of Business and Trade is trying to issue a resolution to allow the foreign ownership limit to exceed 49% in the sectors of business consulting, technical services, information technology, distribution services and cultural, sports and leisure services.

Investment Conditions: In June 2012, the Qatar Financial Markets Authority (the "QFMA") adopted four new regulations aimed at strengthening the legal infrastructure of the Qatari financial markets, encouraging investment and providing more attractive financial opportunities. These new regulations cover (I) liquidity providers’ activities, (II) guaranteed entry to the market, (III) the lending and borrowing of securities, and (IV) the listing of units of investment funds. Securities lending and borrowing facilities have been launched at the Qatar Exchange. The facilities are currently only available for use by liquidity providers and as a mechanism to prevent settlement failures.

Substantial Shareholder Reporting: Any investor must notify the QE and apply for its approval prior to any transaction resulting in ownership that will exceed the 10% threshold.

Stock Exchange: The Qatar Exchange (QE) is open Sunday through Thursday. Qatar is a member state of the GCC.

Settlement cycle and method: Settlement time for transactions at the QE is T+3 trading days. DVP (Delivery Versus Payment) settlement system was introduced in 2011 and enhanced twice in 2012 to ensure full protection of investors’ assets in case of rejection by the seller.

Qatar Weights (data as of June 30, 2013)

Index Current Weight Projected Weight S&P Frontier BMI 9.65% DJ Frontier TSM 11.10% S&P Emerging BMI 0.58% DJ Emerging 0.58% DJ Emerging TSM 0.79%

Should Qatar be classified as an emerging or frontier market?

8. Saudi Arabia

Due to stringent foreign investment limits placed on investors located outside of the GCC, Saudi Arabia will remain classified as a stand-alone market in all S&P Dow Jones Indices’ branded indices. Because of prospects for relaxation of foreign investment restrictions, S&P Dow Jones Indices would like to gather feedback from institutional investors regarding their participation in this market and its potential future inclusion in S&P Dow Jones Indices’ Global Equity Indices.

Investor considerations:

Taxes: A 5% withholding tax is levied on dividends and interest paid to non-residents, unless the rate is reduced under a tax treaty.

Regulatory Environment: Saudi Arabia is taking steps to improve the investment regulation environment in an effort to support foreign investment. As of May 2013, the Capital Market Authority was finalizing a regulatory framework which will allow foreigners to directly own stocks in Saudi Arabia, though the market has no need for liquidity from international investors, according to its Chairman Mohammed bin Abdulmalik Al-Sheikh.

Foreign Ownership Restrictions: The Saudi Arabian market is closed to foreign (non-GCC) investors. Currently foreign investors have limited opportunities to invest using equity swaps or via a small number of exchange-traded funds. Currently, government entities of Saudi Arabia are working on a regulatory framework to allow direct foreign ownership of stocks.

Stock Exchange: The Saudi Arabia Tadawul Exchange is open Sunday through Thursday except official holidays. Saudi Arabia is a member state of the GCC.

Settlement cycle and methods: Settlement time for transactions at Tadawul is T+0. Settlement is handled on a multilateral net basis with final settlement taking place over the SARIE RTGS system

Saudi Arabia Weights (data as of June 30, 2013)

Index Current Weight Projected Weight DJ Emerging TSM 4.76% DJ Emerging 3.57% S&P Emerging BMI 4.30%

Comments:

9. South Korea

South Korea is currently classified as an emerging market in the Dow Jones Global Index, and as a developed market in the Dow Jones Global Total Stock Market and S&P Global BMI indices. South Korea currently satisfies all criteria for classification as a developed market.

Investor considerations:

Taxes: Dividends and capital gains are subject to taxation. Dividends paid to a non-resident company or individual are subject to 20% withholding tax, plus local surtax.

Foreign Ownership Restrictions: Foreign ownership is restricted in sectors that include: aviation, broadcasting/newspaper, news agencies, public utilities and telecommunications. The restrictions vary from 25% to 50% depending on the sector. In recent years, foreign portfolio investment has continued to increase. At the end of 2012, foreign shareholders owned 34.7% of Korean Stock Exchange stocks and 8.2% of the tech-heavy KOSDAQ Index shares.

Stock Exchange: Korea Exchange (KRX) has normal trading sessions from 09:00 am to 03:15 pm local time Monday to Friday. To participate in stock lending/borrowing, the investor has to apply and open an account with KSD (Korea Securities Depository). Short selling is allowed.

Settlement cycle and methods: The settlement cycle is T+2 for stock transactions. The Securities Settlement Systems (SSSs) in Korea is operated by KSD, and the clearing systems are operated by the KRX. KSD employs DVP Model 3 (Netting of Securities and Cash).

South Korea Weights (data as of June 30, 2013)

Index Current Weight Projected Weight S&P Developed BMI 1.98% DJ Emerging 14.88% DJ Developed TSM 1.97% S&P Emerging BMI 14.90% DJ Developed 2.01% DJ Emerging TSM 17.22%

Should South Korea be classified as a developed or emerging market?

10. Taiwan

Taiwan is currently classified as an emerging market in the Dow Jones Global & S&P Global BMI indices, and as a developed market in the Dow Jones Global Total Stock Market Index. The continued burdensome regulation of foreign exchange points Taiwan toward remaining classified as an emerging market. However, outside of these specific regulations, all other criteria are met in order to classify Taiwan as developed.

Investor considerations:

Taxes: There is a 30% withholding tax for individuals and 25% withholding tax for corporate beneficiaries. There is a 20% withholding tax where approval is obtained, in accordance with the Statute for Investment by overseas Chinese or the statute for investment by foreign nationals.

Foreign Ownership Restrictions: A number of sectors are subject to foreign ownership restrictions: gas 49.99%, civil aviation 49.99% with each individual foreign investor subject to an ownership limit of 25%, telecommunications 60%, cable television broadcasting services 20%, and Chunghwa Telecom 49%.

Investment conditions: Foreign investors are required to register with the Taiwan Stock Exchange (TWSE) to obtain an “Investor ID” and tax ID simultaneously before opening a trading account. There are two types of investor status: FINI (Foreign Institutional Investors) and FIDI (Foreign Individual Investors). Investors can register via the Internet.

Short-selling is allowed with ceilings. TWSE operates a centralized Borrowing and Lending System (SBL) to meet the needs of qualified institutional investors. SBL participants are required to apply through securities firms that handle the linkage with the TWSE SBL System.

Stock Exchange: Taiwan Stock Exchange Foreign Investor requirements: Foreign investors cannot repatriate income or gains without using a tax filing agent or obtaining a tax clearance certificate. Offshore transactions are not allowed. For foreign investors, outward remittances of capital gains and stock dividends may be made from realized earnings only.

Settlement cycle and methods: Same-day clearing and T+2 DVP settlement cycle.

Taiwan Weights (data as of June 30, 2013)

Index Current Weight Projected Weight S&P Emerging BMI 14.66% DJ Emerging 11.98% DJ Developed TSM 1.59% S&P Developed BMI 1.63% DJ Developed 1.62% DJ Emerging TSM 14.38%

Should Taiwan be classified as a developed or emerging market?

11. United Arab Emirates (UAE)

The UAE is currently classified as a frontier market in all S&P Dow Jones Indices’ branded indices. Recent positive developments relating to the relaxation of foreign ownership limits and an improved regulatory climate suggest that the country may be more appropriately classified as an emerging market. However, the recent nature of these developments and the existence of registration procedures that still prove cumbersome may provide reason to exhibit patience in reclassifying the country.

Investor considerations:

Taxes: Dividends and capital gains are tax-exempt.

Regulatory Environment: The Supreme Federal Council, the UAE’s highest legal authority, establishes general policies and sanctions federal legislation. In addition, the Emirates Securities and Commodities Authority (ESCA) has financial and administrative autonomy, and is responsible for monitoring and regulating the financial markets. UAE’s first Competition Law governing anti-competitive behavior and monopoly practices became effective February 23, 2013. The law is to create a “competitive market in the UAE, governed by the market mechanisms in accordance with the economic freedom principle.”

Foreign Ownership Restrictions: Foreign investors are entitled to 49% ownership in companies that are registered outside the free zones. The Ministry of Economy is working on having the new investment law passed before end of 2013 to allow full foreign ownership. There is a cumbersome one-time registration requirement for all foreign investors.

Investment Conditions: The board of directors of the United Arab Emirates Securities and Commodities Authority (SCA) approved a market-maker regulation along with related regulations for securities lending and borrowing, short selling, and liquidity in October 2012.

Substantial Shareholder Reporting: Upon purchase of 5% or more of a company, the exchange will notify the issuer and market participants that a substantial holding has been purchased. The exchange requires beneficial ownership disclosure for all account holders, and will halt any transaction in which ownership of a company surpasses the company limits. All trading activity in the market must be carried out in the name of the beneficial owner’s account.

Stock Exchanges: Dubai Financial Markets (DFM), Abu Dhabi Securities Exchange (ADX), and NASDAQ Dubai (formerly known as Dubai International Financial Exchange, or DIFX). The trading schedule at all three exchanges is Sunday through Thursday.

Settlement cycle and method: Settlement time for transactions at the DFM, ADX and DIFX is T+2 trading days. All three UAE exchanges use DVP (Delivery Versus Payment) settlement. DFM and ADX have enhanced the new procedure on DVP settlement and started to implement the new procedures of Buyer Cash Settlement for trades starting May 5, 2013. The new procedure means that a buying investor will be paid cash compensation in an unlikely event where securities are unavailable for delivery to the buying investor.

UAE Weights (data as of June 30, 2013)

Index Current Weight Projected Weight S&P Frontier BMI 10.32% DJ Frontier TSM 10.32% S&P Emerging BMI 0.61% DJ Emerging 1.67% DJ Emerging TSM 0.73%

Should the UAE be classified as an emerging or frontier market?

12. China A-Share Market

Because of stringent foreign investment restrictions, China’s A-share market currently does not account for any float market cap weight in the S&P Dow Jones Indices’ Global Benchmark indices. However, over the past year, several positive regulatory developments have taken place involving the relaxation of limits on foreign investment in the Chinese A-share market. As a result, S&P Dow Jones Indices is initiating a review of the Chinese A-share market and would like to gather feedback from institutional investors regarding their participation in this market and its potential future inclusion in S&P Dow Jones Indices’ Global Equity Indices.

Investor considerations: Taxes: Dividends are taxed on a sliding scale: dividends from shares held less than one month are taxed at 20%, between one month and one year at 10%, and over one year at 5%.

Investment Conditions: China A-shares are currently not eligible for any S&P Dow Jones Indices global benchmark indices. China A-shares are issued by mainland China-based companies and trade on the Shanghai Stock Exchange and the Shenzhen Stock Exchange in local currency. These stocks are not freely convertible.

A-shares are generally only available for purchase by mainland citizens. Foreign investment is only allowed through a tightly-regulated structure known as the Qualified Foreign Institutional Investor (QFII). As an ongoing attempt to further liberate the Chinese domestic capital markets, China’s securities authority has been raising QFII quota at an accelerated pace and making proposals to lower the entry criteria for QFII status. This is seen as very encouraging news to foreign institutional investors. The approved annual QFII quota was US$ 21.64 billion in 2011, US$ 37.44 billion in 2012, and US$ 43.46 billion by the end of June 2013, which is about 4% of the current float-adjusted market capitalization of A-shares (about US$ 1.1 trillion). Different institutions in the same group can apply for QFII status separately but are required to report ownership as one group. Chinese securities laws require shareholders file a report disclosing securities ownership within three days of when ownership reaches 5% of the issuer.

In December 2011, the RQFII (Renminbi Qualified Foreign Institutional Investor) program was launched with an initial quota of RMB 20 billion. An important extension of QFII, RQFII allows Chinese asset managers to offer RMB-denominated funds and ETFs in Hong Kong for direct investment into the A- share market. In March 2013, the RQFII program was expanded to non-Chinese asset managers and the quota was increased to RMB 270 billion. In June 2013, the RQFII program was expanded to include products domiciled in London, Singapore and Taiwan.

Uncertainties that exist in the QFII scheme and taxation on capital gains remain the biggest concerns. There has been news about Chinese authorities considering application of tax laws on QFII but no final details are published.

Foreign Ownership Restrictions: In 2011, the Chinese government released a draft revised version of the Catalogue Guiding Foreign Investment in Industry which categorizes foreign investment in various products or sectors as “encouraged,” “restricted,” or “prohibited.” Ownership restrictions are imposed in many sectors, including those in the “encouraged” category.

Stock Exchanges: Shanghai Stock Exchange and Shenzhen Stock Exchange

Settlement cycle and methods: A-shares are settled on T+1, different from B-shares’ T+3. No DVP settlement for transactions in A-shares, B-shares and bonds. It’s a combination of tiered settlement, multilateral netting and central counterparty and handled by Securities Depository Trust & Clearing Corporation.

Comments:

Appendix A

The following markets are also on S&P Dow Jones Indices’ watch list for possible removal, inclusion or potential future reclassifications. We welcome any comments you may have on these countries.

COUNTRIES Current Status Suggested Status Bangladesh FRONTIER EMERGING Barbados Not covered FRONTIER Cyprus FRONTIER INELIGIBLE Czech Republic EMERGING DEVELOPED Estonia FRONTIER INELIGIBLE Jordan FRONTIER EMERGING Kazakhstan FRONTIER EMERGING Latvia FRONTIER INELIGIBLE Macedonia Not Covered FRONTIER Malta Not Covered FRONTIER Nigeria FRONTIER EMERGING Palestine Not Covered FRONTIER Pakistan FRONTIER EMERGING Papua New Guinea Not covered FRONTIER Romania FRONTIER EMERGING Serbia Not Covered FRONTIER Slovakia FRONTIER INELIGIBLE Sri Lanka FRONTIER EMERGING Ukraine FRONTIER EMERGING Venezuela Not covered FRONTIER Vietnam FRONTIER EMERGING Zimbabwe Not covered FRONTIER

Appendix B

Initial Criteria for S&P Dow Jones Indices’ Global Equity Index Series Eligibility Countries must meet a minimum of two of the following three criteria to be considered for inclusion in the S&P Dow Jones Indices’ country indices: • Full domestic market capitalization over US$ 2.5 billion Market size is important. S&P Dow Jones Indices uses the full market capitalization of an exchange’s primary market as its measure. Float-adjusted capitalization is not used, as the availability of float information for smaller markets is not of the required standard. Thus, we do not have consistency of float information across all markets. • Annual turnover value over US$ 1 billion An exchange must have significant turnover so that trading is unlikely to be characterized by a particular difficulty in trading. S&P Dow Jones Indices ascertains the total value of trading in a market’s domestic companies over the calendar year prior to the review. • A market development ratio over 5% Many countries have very small markets that do not provide a sufficiently robust representation of the domestic market economy. To ensure only markets that have developed sufficiently are used, S&P Dow Jones Indices calculates a “market development ratio” by dividing the full domestic market capitalization of the exchange by the country’s GDP at purchasing power parity, sourced from the IMF. To be considered for the S&P country indices, this figure must be over 5%.

Additional Requirements for S&P Emerging Market Status Countries must meet all three of the baseline criteria as well as have a full market capitalization over US$ 15 billion, and must meet a minimum of three of the following five criteria to be considered for emerging market status: • Settlement period of T+3 or better Efficient, rapid settlement of trades is necessary for investors to be able to trade with confidence. S&P Dow Jones Indices requires markets to settle trades on a T+3 timescale or sooner. Settlement information is always publicly available; S&P Dow Jones Indices sources it from the State Street Global Market Information Database. • Major Ratings Agencies rating Sovereign Debt at BB+ or above A company’s ability to operate is directly affected by its home country’s financial situation. Standard & Poor’s Ratings Services has a team devoted to the analysis of country risk, and its rating of each country’s sovereign debt is used to ensure an appropriate level of risk. • Non-occurrence of hyperinflation Hyperinflation is defined here as an annual average consumer price index rate of over 15% at the time of the review. • No significant foreign ownership restrictions Foreign ownership restrictions cause issues in achieving the required exposure to stocks in a given market. While S&P Dow Jones Indices recognizes that stocks in industries such as defense are commonly restricted, it uses the State Street Global Market Information Database to assess whether additional restrictions might cause investing issues.

• The country’s currency should be freely traded Difficulties buying or selling a domestic currency or repatriating capital from a market greatly complicates the process of investing in a given market. S&P Dow Jones Indices uses the State Street Global Market Information Database to assess whether there any currency restrictions in place in each market.

Further Requirements for S&P Developed Market Status To be considered for developed market status, countries must meet all eight of the initial and additional criteria and have a Gross Domestic Product per capita, at Purchasing Power Parity, greater than US$ 15,000.

Deviations from Baseline Where this assessment indicates a possible change of classification, a more in-depth study is undertaken which covers both the primary and additional criteria, as well as the following quantitative and qualitative areas: • Economic & Political

o Further macroeconomic measures, such as the rate and variability of real GDP growth and the overall size of the economy.

o Macroeconomic information is available from many sources; however S&P Dow Jones Indices focuses on the IMF as a definitive source of consistent data across countries.

o Political factors including war, civil disruption, and disturbance, as well as the risk of war or civil unrest.

o Information on political factors is available from many sources. The CIA World Factbook provides a valuable assessment.

o Restrictions imposed by other governments, such as the U.S. government’s restrictions on investing in Cuba or North Korea. • Related Investment Conditions

o Settlement procedures. o Foreign exchange (FX) access and procedures. o Rules on short sales, availability of futures contracts, etc. o S&P Dow Jones Indices uses the State Street Global Market Information Database as its primary source for information concerning areas of difficulty trading in individual markets.

o Availability of alternative means of investment in the country’s stocks, such as DRs or a large number of listings on other markets in other countries.

o The number of domestic listings. • Market Consensus

o There must be a market consensus desiring the addition of the country.

o S&P Dow Jones Indices’ staff is in constant contact with the investor community, and regularly canvases opinions concerning new countries of interest and issues of concern regarding existing S&P Dow Jones Indices’ global equity index countries.

o The actions of other index providers are relevant. All index providers attempt to incorporate the views of the investor community when assessing markets for country classification purposes. Changes in any index provider’s country classifications are of relevance, as they reflect changes in the sentiment of both that provider’s customers and the broader market.

Sources: State Street’s Guide to Custody in World Markets S&P Sovereign Debt Ratings IMF World Economic Outlook Database Homepage World Bank Stock Exchange websites

Appendix C

Tables with weights for S&P Dow Jones Indices’ Global Benchmark Indices Below please find the float market cap weights by country as of the open on Monday, July 1st, 2013.

S&P Developed BMI S&P Emerging BMI S&P Frontier BMI Index Index Index Country Weight Country Weight Country Weight Austria 0.13% Brazil 12.57% United Arab Emirates 10.32% Australia 3.12% Chile 2.56% Argentina 4.76% Belgium 0.46% China 21.20% Bangladesh 1.76% Canada 4.20% Colombia 1.49% Bulgaria 0.25% Switzerland 3.38% Czech Republic 0.25% Bahrain 1.97% Germany 3.24% Egypt 0.31% Botswana 0.67% Denmark 0.48% Hungary 0.29% Cote d'Ivoire 0.61% Spain 1.05% Indonesia 3.84% Cyprus 0.33% Finland 0.38% India 8.31% Ecuador 0.55% France 3.51% Morocco 0.27% Estonia 0.39% United Kingdom 8.33% Mexico 5.73% Ghana 0.73% Greece 0.05% Malaysia 4.19% Croatia 1.75% Hong Kong 1.30% Peru 0.74% Jamaica 0.45% Ireland 0.20% Philippines 1.78% Jordan 3.03% Israel 0.24% Poland 1.57% Kenya 3.09% Italy 0.90% Russia 6.57% Kuwait 17.15% Japan 10.05% Thailand 3.43% Kazakhstan 3.15% South Korea 1.98% Turkey 2.34% Lebanon 2.09% Luxembourg 0.10% Taiwan 14.66% Sri Lanka 2.03% Netherlands 1.05% South Africa 7.91% Lithuania 0.24% Norway 0.40% Grand Total 100.00% Latvia 0.06% New Zealand 0.09% Mauritius 1.51%

Portugal 0.09% Namibia 0.21%

Sweden 1.28% Nigeria 13.58%

Singapore 0.72% Oman 2.76%

United States 53.30% Panama 3.95%

Grand Total 100.00% Pakistan 4.48%

Qatar 9.65%

Romania 0.92%

Slovenia 1.51%

Slovakia 0.33%

Tunisia 0.80%

Trinidad and Tobago 1.08%

Ukraine 1.03%

Vietnam 2.54%

Zambia 0.29%

Grand Total 100.00%

Source: S&P Dow Jones Indices

S&P/IFCI Composite Dow Jones Developed Dow Jones Emerging Index Index Index Country Weight Country Weight Country Weight Brazil 10.94% Austria 0.12% Brazil 10.25% Chile 2.11% Australia 3.21% Chile 2.14% China 18.08% Belgium 0.46% China 17.74% Colombia 1.31% Canada 4.32% Colombia 1.24% Czech Republic 0.22% Switzerland 3.51% Czech Republic 0.21% Egypt 0.26% Germany 3.31% Egypt 0.34% Hungary 0.26% Denmark 0.49% Hungary 0.24% Indonesia 3.20% Spain 1.09% Indonesia 3.45% India 7.12% Finland 0.36% India 7.57% South Korea 14.96% France 3.64% South Korea 14.88% Morocco 0.19% United Kingdom 8.64% Morocco 0.22% Mexico 5.00% Greece 0.03% Mexico 4.71% Malaysia 3.49% Hong Kong 1.38% Malaysia 3.87% Peru 0.57% Ireland 0.20% Peru 0.64% Philippines 1.54% Israel 0.27% Philippines 1.64% Poland 1.30% Italy 0.89% Poland 1.48% Russia 5.68% Japan 10.45% Russia 5.60% Thailand 2.89% Luxembourg 0.10% Thailand 3.15% Turkey 1.92% Netherlands 1.11% Turkey 2.06% Taiwan 12.16% Norway 0.37% Taiwan 11.98% South Africa 6.82% New Zealand 0.10% South Africa 6.60% Grand Total 100.00% Portugal 0.07% Grand Total 100.00% Sweden 1.28%

Singapore 0.77%

United States 53.84%

Grand Total 100.00%

Source: S&P Dow Jones Indices

Dow Jones DJ Developed Dow Jones DJ Emerging Dow Jones DJ Frontier TSM TSM TSM Index Index Index Country Weight Country Weight Country Weight Austria 0.13% Brazil 13.84% United Arab Emirates 10.32% Australia 3.06% Chile 2.91% Argentina 6.51% Belgium 0.45% China 24.41% Bangladesh 2.87% Canada 4.14% Colombia 1.67% Bulgaria 0.21% Switzerland 3.27% Czech Republic 0.29% Bahrain 2.10% Germany 3.16% Egypt 0.45% Cyprus 0.24% Denmark 0.48% Hungary 0.33% Estonia 0.38% Spain 1.02% Indonesia 4.67% Croatia 1.60% Finland 0.37% India 10.23% Jordan 2.95% France 3.43% Morocco 0.29% Kenya 3.18% United Kingdom 8.15% Mexico 7.09% Kuwait 17.84% Greece 0.05% Malaysia 5.24% Kazakhstan 2.76% Hong Kong 1.32% Peru 0.86% Lebanon 1.77% Ireland 0.19% Philippines 2.22% Sri Lanka 2.45% Israel 0.26% Poland 2.00% Lithuania 0.24% Iceland 0.005% Russia 7.55% Latvia 0.06% Italy 0.89% Thailand 4.26% Macedonia 0.09% Japan 9.94% Turkey 2.79% Malta 0.37% South Korea 1.97% South Africa 8.91% Mauritius 1.34% Luxembourg 0.10% Grand Total 100.00% Nigeria 13.41% Netherlands 1.04% Oman 3.19% Norway 0.40% Pakistan 5.85% New Zealand 0.09% Qatar 11.10% Portugal 0.08% Romania 0.96% Sweden 1.25% Serbia 0.20% Singapore 0.74% Slovenia 1.35% Taiwan 1.59% Slovakia 0.31% United States 52.43% Tunisia 0.80% Grand Total 100.00% Ukraine 0.79% Vietnam 4.77%

Grand Total 100.00%

Source: S&P Dow Jones Indices

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