On January 26th, Standard & Poor's and the Toronto Stock Exchange announced their intention to include Income Trusts in the S&P/TSX Composite Index, while continuing to provide a real-time, equity-only index for market participants who do not wish to invest in income trusts. Following additional consultation with the Canadian Index Advisory Panel and other index users, Standard & Poor's is announcing the following implementation plan and transition schedule for including Income Trusts in the S&P/TSX Composite Index:
- May 2005 - Publication of the plan to bring Income Trusts into the S&P/TSX Composite
- June 2005 - Publication of revised rules for the S&P/TSX Indices covering changes related to Income Trusts in the Composite
- June 2005 Quarterly Rebalance - Continuation of the current indices
- September 2005 Quarterly Rebalance - Introduction of two provisional indices: the Provisional S&P/TSX Composite (which will include Income Trusts at full float adjusted weight) and the Provisional S&P/TSXIncome Trust Index. Both indices will be published on an end-of-day basis.
- December 2005 Quarterly Rebalance - The S&P/TSX Composite will include Income Trusts at 50% of the full float adjusted weight. The S&P/TSX Income Trust Index will add those Trusts that are in the Composite, but were not already in the old Income Trust Index, at 50% of full float adjusted weight. Income Trusts in the S&P/TSX Income Trust Index, which do not qualify for inclusion in the Composite, will be removed from the Income Trust index. Publication of the S&P/TSX Equity Index, including all the equities in the S&P/TSX Composite, will begin.
- March 2006 Quarterly Rebalance - The S&P/TSX Composite and the S&P/TSX Income Trust Index will include Income Trusts at full float adjusted weight. The transition will be complete. The two provisional indices will terminate.
Evolution of the S&P/TSX Composite Index
The precursor of the S&P/TSX Composite, the TSE 300 Composite Index, was launched in early 1977. It had 14 industry groups, and 43 sub-groups, designed to conform to the Standard Industrial Classification system used by Statistics Canada. In 1998, the Toronto Stock Exchange and Standard & Poor's entered into a partnership under which S&P assumed responsibility both for the management of the TSE 300, and for the creation and management of a new series of equity indices for the Canadian market. In May 2002 the TSE 300 Composite Index became the S&P/TSX Composite Index and the number of index constituents was permitted to float, based on the number of TSX-listed stocks meeting certain liquidity, market cap and other criteria. In February 2004, S&P ceased using the original 14 industry groups in favour of the GICS (Global Industry Classification Standard) sector classification system that S&P manages in partnership with Morgan Stanley Capital International.
About the S&P/TSX Composite Index
The S&P/TSX Composite is the premier indicator of market activity for Canadian equity markets going back to its original incarnation in 1977. With approximately 95% coverage of the Canadian equities market, it is the primary gauge for Canadian-based, TSX-listed companies. It addresses the needs of investment managers who require a portfolio benchmark characterized by sufficient size and liquidity. The size of the S&P/TSX Composite and its broad economic sector coverage has made the S&P/TSX Composite Index the primary benchmark for Canadian pension funds and mutual market funds.
About Standard & Poor's
Standard & Poor's, a division of The McGraw-Hill Companies (NYSE:MHP), is the world's foremost provider of independent credit ratings, indices, risk evaluation, investment research, data and valuations. With 6,000 employees located in 21 countries, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit www.standardandpoors.com.
