Transition Plan
The transition occurred in two phases. The details of the transition plan are available in the MSCI Global Investable Market Indices Methodology Book. The transition was synchronized for all market and composite indices with the exception of the MSCI Euro and Pan-Euro Indices which transitioned in one phase as of the close of November 30, 2007.
Timeline
The first phase of the transition of the current Standard Index and Small Cap Indices occurred as of the close of November 30, 2007. The second and final phase occured as of the close of May 30, 2008.
The final additions and deletions of constituents for each phase were announced four weeks in advance of their implementation in the Standard and Small Cap Indices. Click here for a list of changes of the final transition phase.
Provisional Indices
In order to add transparency to the transition process and to assist clients in planning and implementing their individual transition strategies, MSCI Barra provided Provisional Indices for the Standard and Small Cap Indices constructed and maintained according to the MSCI Global Investable Market Indices Methodology.
Transition Methodology
In the first phase of the transition in November 2007, half of the differences between the Provisional Standard and the Standard Indices were implemented. That is, all companies in the Provisional Standard Index not in the Standard Index were added to the Standard Index at half of their free float-adjusted market capitalization, and companies in the Standard Index and not in the Provisional have had half of their free float-adjusted market capitalization removed.
In the second and final phase of the transition in May 2008, after the rebalancing of the Provisional Indices, any and all differences between the MSCI Standard and the MSCI Provisional Standard Indices were fully reflected in the MSCI Standard Index.
The transition of the Small Cap Indices followed the same approach.
Maintenance of the Current Standard and Small Cap Indices during the Transition
MSCI Barra maintained its schedule of regular index reviews for its current Standard and Small Cap Indices.
During the period from the announcement of the pro forma constituents to the end of the transition (May 3, 2007 through May 30, 2008), MSCI Barra sought to minimize changes in the current indices not related to the transition.
In order to minimize reverse turnover, starting with the May 2007 Index Review for the Standard Indices, MSCI Barra used the same minimum size and other investability requirements that were applied in the construction of the Provisional Standard Indices.
MSCI Global Value and Growth Indices
The MSCI Global Value and Growth Indices continued to be derived from the Standard Indices and followed the two-phase transition of the Standard Indices. Starting with the first phase of the transition in November 2007, the constituents of the Global Value and Growth Indices adopted the style inclusion factors of the Provisional Standard Indices.
MSCI Euro and MSCI Pan-Euro Indices
Following a one phase transition to the MSCI Global Investable Market Indices Methodology as of the close of November 30, 2007, the constituents of the MSCI Euro and MSCI Pan-Euro Indices became the same as those of the MSCI EMU Large Cap and MSCI Europe Large Cap Indices, respectively, by evolving to the methodology of the Large Cap Index.
Indices based on the Standard Indices
Indices constructed with the Standard Indices as their basis, such as the High Dividend Yield Indices, GDP-weighted Indices, 10/40 Indices and other custom indices, continued to be derived from the Standard Indices throughout the transition.
Stand-alone Country Indices:
MSCI Barra also applied the general framework used to create the MSCI Global Investable Market Indices to the MSCI stand-alone country indices.
This approach targeted broader coverage of those markets while satisfying investability requirements that were reasonable and relevant for these countries and offered non-overlapping size segmentation with exhaustive coverage of the size segments.
