Legal Definitions - ex distribution

The term ex distribution describes a situation where a financial security, such as a stock or a mutual fund unit, is traded without the right to receive a specific, upcoming payment or allocation of assets. This means that if you buy the security on or after its designated "ex distribution" date, you will not receive the announced distribution; the seller of the security will receive it instead. The term is often abbreviated as X or XDIS.

Here are some examples to illustrate this concept:

• Common Stock Dividend: Imagine a company, "Green Energy Solutions Inc.," announces a cash dividend of $0.75 per share to its shareholders. They set an "ex-dividend date" (which is a specific type of ex distribution date) for October 15th. If an investor sells their shares of Green Energy Solutions Inc. on October 14th, they will still receive the $0.75 dividend. However, if they sell their shares on or after October 15th, the buyer of those shares will not receive the dividend; the seller (the original owner before the ex-dividend date) will. This illustrates "ex distribution" because the shares are trading without the right to that specific $0.75 dividend for anyone who purchases them on or after October 15th.

• Mutual Fund Capital Gains Distribution: Consider a mutual fund, "Global Horizons Fund," which plans to distribute its annual capital gains to its unit holders. The fund declares an ex-distribution date for this payout as December 1st. If an investor owns units of Global Horizons Fund before December 1st, they are entitled to receive their share of the capital gains. However, if another investor purchases units of Global Horizons Fund on or after December 1st, those newly acquired units are considered ex distribution. The buyer will not receive the recently declared capital gains distribution; that payment will go to the person who owned the units before the ex-distribution date.

• Real Estate Investment Trust (REIT) Distribution: A Real Estate Investment Trust (REIT) called "Urban Properties REIT" announces a quarterly distribution to its investors. An ex-distribution date is established for this payment on March 10th. If Mr. Davies sells his shares of Urban Properties REIT on March 10th, the buyer of his shares will not be entitled to that specific quarterly distribution. Instead, Mr. Davies, as the owner of record before the ex-distribution date, will receive the payment. The shares are trading "ex distribution" because the right to that particular quarterly payment has been separated from the shares for any new purchasers.