RRB return is due to two components absent valuation change: the coupon (which is taxable) and the CPI adjustment (which is taxable each year in a non-registered account). An ETF has to distribute the appreciation from the CPI change because the ETF may be in a taxable account. A mutual fund need not do so if it is only allowed in registered accounts, otherwise it too will distribute the CPI change. The amount of the CPI change can be reinvested or consolidated, but must count towards taxable distributions.
the following distributions for XRB:
- Code: Select all
x-Date1 * Record Date Payable Date Distributions per Unit
Cash * Reinvested2 * Total *
24-Jun-2011 28-Jun-2011 30-Jun-2011 0.21320 0.00000 0.21320
24-Dec-2010 30-Dec-2010 31-Dec-2010 0.24326 0.42108 0.66434
25-Jun-2010 29-Jun-2010 30-Jun-2010 0.22801 0.00000 0.22801
24-Dec-2009 30-Dec-2009 31-Dec-2009 0.24656 0.01578 0.26234
(2) Reinvested distributions are not paid in cash but instead remain invested in the Fund. To recognize that these distributions have been allocated to investors for tax purposes, the amounts of these distributions should be added to the adjusted cost base of the units held.
which indicates that the CPI change (0.42108 in December 2010) is being reinvested (i.e. consolidated in the XRB price). Nonetheless, it will count as taxable income in a taxable account.
Added: the CPI change Nov 09-Nov 10 was 2% and the price $22, giving about $0.44 for the distribution. They may have used the average CPI change for the previous 12 months to get the actual value of about $0.42, which although slightly different would even out in the long run.
“Never appeal to a man's better nature. He may not have one. Invoking his self-interest gives you more leverage.” -- R.A. Heinlein, Time Enough for Love.