MSCI EAFE Index

The index measures the performance of large- and mid-cap companies across 21 developed markets countries. As of January 31, 2023, the MSCI EAFE Index FAQ counts 23 developed markets globally. The USA and Canada are not included in the index, but revenues from these two markets are significant. Rather than a fixed number of names, MSCI constructs the index using a mix of large- and mid-cap companies.

How MSCI Classifies Markets

MSCI evaluates equity markets around the world each year to determine whether they should be classified as a developed, emerging, frontier or standalone market. The classification framework uses three criteria:

Economic development. This criterion considers economic development sustainability and applies only to developed markets.

Size and liquidity requirements. This criterion determines which securities meet the minimum investability requirements of the MSCI Global Standard Indexes.

Market accessibility. This criterion aims to reflect international institutional investing experiences, based on five accessibility criteria.

Every June, MSCI first announces the results of the Annual Market Accessibility Review. Shortly after, MSCI announces the results of the Annual Market Classification Review.

How the Index Is Built

In the MSCI brochure EAFE: The Modern Index Strategy, with data as of December 31, 2018, the MSCI EAFE Index is built using MSCI's Global Investable Market Index methodology. The MSCI Global Investable Market Indexes methodology dated August 2026 builds the indexes in steps. The steps include defining the equity universe for each market, determining the market investable equity universe for each market, and determining market capitalization size-segments for each market. The indexes also apply minimum free float requirements for eligibility and free float-adjusted capitalization weighting.

Each company and its securities, meaning its share classes, is classified in one and only one country. Listed equity securities are eligible, including real estate investment trusts. Preferred shares are eligible if they exhibit characteristics of equity securities. Mutual funds, exchange-traded funds, equity derivatives, and most investment trusts are not eligible for inclusion in the equity universe.

Several requirements apply to the market investable equity universe:

Minimum size. A company must have the required minimum full market capitalization.

Foreign inclusion factor. In general, a security must have a foreign inclusion factor equal to or larger than 0.15. The foreign inclusion factor is the proportion of shares outstanding that is available for purchase in the public equity markets by international investors.

Minimum length of trading. For small new issues in all markets, the new issue must have started trading at least three months before the implementation of an index review.

Foreign room. For a security subject to a foreign ownership limit, the proportion of shares still available to foreign investors relative to the maximum allowed must be at least 15 percent.

Free float. A security must have a free float-adjusted market capitalization equal to or higher than 50 percent of the equity universe minimum size requirement.

Size Segments and Coverage

The methodology sets the following market coverage targets: Standard Index, 85 percent plus or minus five percent. Large Cap Index, 70 percent plus or minus five percent. The Mid Cap Index market coverage in each market is derived as the difference between the Standard Index and the Large Cap Index coverage.

The methodology adds that two or more Market Indexes can be combined to form Composite Indexes, such as the MSCI Asia Pacific Index and the MSCI North America Index.

Reviews and Changes

Quarterly index reviews take place in February, May, August and November of the size-segment indexes.

For the February index review, the equity universe cutoff date is the last business day of November, the liquidity cutoff date is the last business day of December, and the price cutoff date is any one of the last ten business days of January. Changes after the price cutoff date are generally postponed to the next closest index review, and MSCI may implement the changes as part of a given index review even if they are effective after the price cutoff date.

Buffer zones control the migration of companies between size-segment indexes. An existing constituent is generally allowed to remain in its current size-segment as long as its company full market capitalization falls within a buffer zone below (above) the market size-segment cutoff. At regular index reviews, the boundaries are two-thirds of and 1.5 times the market size-segment cutoff between two size-segments.

Changes in free float estimates and corresponding foreign inclusion factors are reflected in the indexes on a quarterly basis. For securities with free float above 25 percent, a change is implemented only if the absolute change in free float is at least 2.5 percent. For securities with free float between 5 percent and 25 percent, the threshold is 0.5 percent. For securities with free float less than 5 percent, the threshold is 0.1 percent. The thresholds do not apply in some cases, such as additions to the Standard and Small Cap size-segments and foreign ownership limit changes that result in a foreign inclusion factor change.

How Returns Are Calculated

In the MSCI Index Calculation Methodology dated February 2026, price indexes measure the market prices performance for a selection of securities. A gross total return index approximates the maximum possible reinvestment of regular cash distributions. A net total return index approximates the minimum possible reinvestment of regular cash distributions, reinvesting dividends after withholding tax.

Each index captures the market capitalization weighted return of all constituents included in the index. For an index calculated in US dollars, known as USD, the price index level is computed as the ratio of index adjusted market cap to index initial market cap, multiplied by the prior index level.

The methodology reinvests regular cash distributions in indexes on the ex-date of such distributions. If a security does not trade on the ex-date or on the scheduled reinvestment date of the regular cash distribution, reinvestment is postponed to the day when the security resumes trading. In a stock dividend, the company issues shares at no direct cost to the shareholders, and a price adjustment factor is applied to the security. Since December 1, 2009, regular cash dividends are reinvested after deduction of withholding tax by applying the maximum rate of the company's country of incorporation applicable to institutional investors. For index calculations, all dividends are converted into USD at the spot rate of the ex date. Indexes are calculated five days a week, from Monday to Friday, with the exception of a selection of indexes that have Sunday calculations available.

The September 30, 2026 factsheet for the MSCI EAFE Index shows performance as net returns in USD.

Launch and History

The factsheet dated September 30, 2026 notes that the index was launched on March 31, 1986, and that data prior to the launch date is back-tested.

Composition on September 30, 2026

The factsheet dated September 30, 2026 shows 656 constituents. ASML is the largest constituent at 3.28 percent. Country weights are Japan 24.87 percent, the UK 14.35 percent, France 9.42 percent, Switzerland 9.01 percent, Germany 8.67 percent, and other countries 33.68 percent.

Sector weights are Financials 26.33 percent, Industrials 18.88 percent, Information Technology 11.18 percent, Health Care 10.05 percent, Consumer Discretionary 8.06 percent, Consumer Staples 6.45 percent, Materials 6.02 percent, Communication Services 3.94 percent, Energy 3.93 percent, Utilities 3.69 percent, and Real Estate 1.46 percent.

Risks of Investing in Non-US Markets

The Investor Bulletin on international investing, dated December 8, 2016, names diversification and growth as two of the chief reasons individual investors invest in international investments. International investment returns may move in a different direction, or at a different pace, than US investment returns.

A foreign investment also has foreign currency exchange risks. It is possible that a foreign investment may increase in value in its home market but, because of changing exchange rates, the value of that investment in US dollars is actually lower.

Depending on the country or region, it can be more difficult for individual investors to obtain information about and comprehensively analyze all the political, economic and social factors that influence a particular foreign market. Foreign companies' financial statements may be prepared using a different set of accounting standards, and the nature, amount and frequency of disclosures required under foreign law may also be different. Where these factors exist, a market may have less liquidity, which may make it more difficult to find a buyer when investors want to sell their securities.

The bulletin lists international funds, which invest in companies outside of the United States; global funds, which invest primarily in foreign companies but may also invest in US companies; regional or country funds, which invest primarily in a particular region or country; and international index funds, which seek to track the results of a particular foreign market or international index. In some countries there may be unexpected taxes, such as withholding taxes on dividends, and transaction costs such as fees, broker's commissions and taxes may be higher than in US markets.

The stocks of most foreign companies that trade in US markets are traded as American depositary receipts, known as ADRs. Each ADR represents one or more shares of a foreign stock or a fraction of a share.

Uses of the Index as a Benchmark

In the MSCI EAFE brochure, with data as of September 2017, the MSCI Global Equity Indexes support the creation of a wide range of index derivatives, funds, exchange-traded funds and structured products and are used by professional investors worldwide.

In the investor insights article Get Off the Bench: A Look at Benchmarks, on the website of the Financial Industry Regulatory Authority, known as FINRA, benchmarks are indexes or averages that track a particular stock market or market segment, and it is important to choose the appropriate benchmark as a point of comparison. The article names the Dow Jones Industrial Average, S&P 500 and Russell 2000 as benchmarks. It does not name the MSCI EAFE Index.

Under Item 4(b)(2)(iii) of Form N-1A, the table of average annual total returns also should show the returns of an appropriate broad-based securities market index.

A Fund That Tracks the Index

The iShares MSCI EAFE ETF seeks to track the investment results of an index composed of large- and mid-capitalization developed market equities, excluding the U.S. and Canada. In the summary prospectus dated November 28, 2025, the MSCI EAFE Index is a free float-adjusted, market capitalization-weighted index designed to measure large- and mid-capitalization equity market performance of developed markets outside of the U.S. and Canada.

The fund generally will invest at least 80 percent of its assets in the component securities of its underlying index. The fund uses a representative sampling indexing strategy. The underlying index is sponsored by MSCI, which is independent of the fund and its investment adviser. The components of the underlying index are likely to change over time.

The summary prospectus lists the following among its principal risks. Risk of Investing in Developed Countries subjects the fund to legal, regulatory, political, currency, security, economic and other risks. Non-U.S. Securities Risk means that securities of non-U.S. issuers are subject to different legal, regulatory, political, economic, and market risks than securities issued by U.S. issuers. Equity Securities Risk means that equity securities are subject to changes in value, and their values may be more volatile than those of other asset classes. Market Risk means that the fund could lose money over short periods due to short-term market movements.

Currency Risk means that the net asset value could decline if the currency of a non-U.S. market in which the fund invests depreciates against the U.S. dollar. Concentration Risk means that the fund may be susceptible to an increased risk of loss to the extent that its investments are concentrated in particular issuers, countries, markets, industries or asset classes. Large-Capitalization Companies Risk means that large-capitalization companies may be less able than smaller-capitalization companies to adapt to changing market conditions.

Market Trading Risk means that the fund faces numerous market trading risks, including the potential lack of an active market for fund shares. Fund shares may trade at a premium or discount to net asset value. Tracking error is the divergence of the fund's performance from that of the underlying index.

The iShares Core MSCI EAFE ETF tracks a different index. In its summary prospectus dated November 28, 2025, the fund seeks to track the investment results of an index composed of large-, mid- and small-capitalization developed market equities, excluding the U.S. and Canada, and the underlying index is the MSCI EAFE IMI Index. MSCI also publishes separate index factsheets for the MSCI EAFE All Cap Index, the MSCI EAFE Value Index, the MSCI EAFE Equal Country Weighted Index and the MSCI EAFE Micro Cap Index.

Exam Relevance

The Securities Industry Essentials examination content outline lists Benchmarks and indices as the sixth topic of Topic 3.1.2, Investment Returns, under 3.1, Trading, Settlement and Corporate Actions, in Section 3, Understanding Trading, Customer Accounts and Prohibited Activities. Topic 3.1.2 lists components of return, with interest, dividends, realized/unrealized gains and return on capital named in parentheses; different types of dividends, with cash and stock named in parentheses; dividend payment dates, with record date, ex-dividend date and payable date named in parentheses; concepts of measurement, with yield, yield to maturity, yield to call, total return and basis points named in parentheses; cost basis requirements; and benchmarks and indices. The outline does not name the MSCI EAFE Index. Candidates should check the current outline before the examination.

Common Misunderstandings

The index includes US stocks. The index excludes the US and Canada.

The index covers only Europe. The 21 countries include Australia, Hong Kong, Israel, Japan, New Zealand and Singapore.

The index holds every company in each country. The index covers approximately 85 percent of the free float-adjusted market capitalization in each country, and the index is composed of large and mid cap companies.

The index weights each company equally. In the iShares MSCI EAFE ETF summary prospectus, the index is a free float-adjusted, market capitalization-weighted index.

A US investor earns the local market return. A foreign investment may increase in value in its home market while, because of changing exchange rates, the value of that investment in US dollars is lower.

A fund that tracks the index earns the index return. Tracking error is the divergence of the fund's performance from that of the underlying index.

The fund controls the index. The underlying index is sponsored by MSCI, which is independent of the fund and its investment adviser.

Every fund with EAFE in its name tracks the same index. The iShares MSCI EAFE ETF tracks the MSCI EAFE Index, and the iShares Core MSCI EAFE ETF tracks the MSCI EAFE IMI Index.

Key Points to Retain

The MSCI EAFE Index captures large and mid cap representation across 21 Developed Markets countries, excluding the US and Canada.

EAFE stands for Europe, Australasia, and the Far East.

The index covers approximately 85 percent of the free float-adjusted market capitalization in each country.

A foreign investment also has foreign currency exchange risks.

The Securities Industry Essentials examination content outline lists Benchmarks and indices in Topic 3.1.2, Investment Returns.