MSCI Inc. (NYSE: MSCI), a leading provider of investment decision support tools worldwide, including indices, portfolio risk and performance analytics and corporate governance services, announced that following the feedback received from the investment community, it will change its treatment of special cash dividends for the MSCI Net Daily Total Return (DTR) Indices, effective March 14, 2011.
As a reminder, currently, according to the MSCI Corporate Events Methodology, special cash dividends that are greater than or equal to 5% of the market price of the underlying security are reflected in the MSCI Indices through an adjustment on the ex-date. A Price Adjustment Factor (PAF) using the gross dividend amount is applied for the MSCI Price Indices, the MSCI Gross DTR Indices and the MSCI Net DTR Indices regardless of the withholding tax applied to the special cash dividend, if any.
Effective March 14, 2011, MSCI will enhance its treatment of special cash dividends in the MSCI Net DTR Indices only, by reflecting the net dividend amount instead of the gross dividend amount in the MSCI Net DTR Indices for special cash dividends subject to withholding taxes. In order to do so, MSCI will reinvest a negative amount corresponding to the withholding tax in the MSCI Net DTR Indices only. This negative reinvestment will be reflected simultaneously with the PAF on the ex-date of the special cash dividend.
Please note that the amount of these negative reinvestments will be announced in the Security Advanced Dividend Files (or in the MSCI Intraday Dividend announcements when applicable) and reflected in the Security Official DTR Security Files.
The section 2.2.4 of the MSCI Index Calculation Methodology will be updated for this new implementation.
This decision does not affect the current treatment of special cash dividends in the MSCI Gross DTR Indices and in the MSCI Price Indices.