Eafe index

The EAFE® Free Index is a trademark, service mark and the exclusive property of Morgan Stanley Capital International, Inc. (also referred to as MSCI) and its affiliates. The State Farm Mutual Fund Trust has the license to use it. The State Farm International Index Fund, which is based on the EAFE® Free Index has however not been passed on by MSCI as to its legality or suitability and is not issued, sponsored, endorsed, sold or promoted by Morgan Stanley Capital. Actually, MSCI makes no warranties and bears no liability with respect to the Fund. MSCI has no responsibility for and does not even participate in the management of the Fund assets or sale of the Fund shares. For more detailed description of the limited relationship MSCI has with the Trust and the Fund, you should go through the prospectus of the trust.

EAFE Index is actually a Europe, Australasia and far East Index. It is the most widely used measurement of international stock market performance. This index represents the performance of approximately 20,000 securities from more than 20 countries. But it is more than that. It is actually an unmanaged, market value weighted index designed to measure the overall condition of overseas markets.

Now what exactly is a market value weighted index? It is a stock index in which each stock affects the index in proportion to its market value. A few examples include NASDAQ Composite Index, S&P 500, Wilshire 5000 Equity Index, Hang Seng Index and EAFE Index.

You will also need to know about the market value-weighted method. What is it? In this method, each stock is given a weighting proportional to its market capitalization. For example, in this method, a company that is worth $100 Million is given twice the importance (or weight) than a company that is worth $50 Million. By giving bigger companies more weight, this method shows that any change at bigger companies will have a larger effect on economic activity and the market than a similar change in a smaller company.