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T. Rowe Price New Horizons Message Board

  • madhavev madhavev Dec 17, 2012 8:24 PM Flag

    Did PRNHX go down 7% really?

    I see the same everywhere (TD, Yahoo Finance, Google Finance etc)...what's happening?

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    • The value of the distribution is in the future. Since you are paid by the number of shares you own, the more shares you own the more you can earn in future rises in the share price. Of course the reverse is also true. If the fund price per share declines the more you loose. But nobody invests in funds where the share price is expected to decline. There may also be tax considerations for the fund. I'm no tax expert so I am not sure.

    • What Is the Economic Value of the Distribution?

      While it might seem like a positive to receive a capital gains distribution, there is actually no positive economic value to the distribution.

      For instance, looking further at the XYZ Mutual Fund distribution:
      •You own 1,000 shares of the XYZ Mutual Fund. The fund has a net asset value (NAV) of $10 per share. Your investment in the fund equals $10,000.
      •The total value of your holding in the fund is $10,000 (1,000 shares at $10 per share) and you reinvest all capital gains and dividends.
      •The fund distributes long-term capital gains as described in the previous example. The long-term capital gain upon the sale of stock in the previous example is 10% of the fund’s total net asset value or $1 per share.
      •Shareholders of record on the record date will receive $1 for each share they own and the NAV of the fund will be reduced by $1 on the ex-dividend date.
      •As a result, you receive $1,000, which is automatically reinvested in the fund.
      •Assuming no change in the market value, you still own $10,000 of the fund.

      How? The fund’s NAV was reduced to $9 by the capital gains distribution of $1 and you reinvested the gain to give you a total of 1,111.11 shares ($1,000 reinvested in at the new NAV of $9 buys 111.11 shares). If you did not reinvest the gain, you would have 1,000 shares at $9 and $1,000 cash. Either way, you have $10,000.

      • 1 Reply to bhttsl
      • The capital gains distribution is taxable to the fund shareholders unless the fund is owned in a tax-deferred account (IRA, 401k, etc.).

        For example, let's say XYZ Mutual Fund purchased 100,000 shares of a stock 20 years ago for $1. The fund sells the 100,000 shares today for $50, which results in a long-term capital gain of $49 per share. The fund must distribute the gains to current shareholders and the shareholders must report the gain on their tax return.

    • The dividend paid will be reflected in more shares in your account.

      Last year's dividend:
      Dec 15, 2011
      4.54 Dividend

    • monroe74 Dec 17, 2012 9:17 PM Flag

      I am 99.999% sure, fund paid a dividend and/or capital gains distribution.

      • 1 Reply to monroe74
      • You're absolutely correct. Capital gains distribution is a better description.

        This gentleman is a real smart summabich and beat the benchmarks handily:
        Portfolio Manager(s)
        Henry Ellenbogen. M.B.A., Harvard University. J.D., Harvard
        University. B.A., Harvard University.
        Henry Ellenbogen has been the manager since March 2010. Previously, Jack Laporte had run the fund. Says Morningstar: "Although Ellenbogen had a solid record at T. Rowe Price Media & Telecommunications, he has big shoes to fill, as Laporte became one of T. Rowe's most respected managers in his 23 years with the firm and was a Morningstar Manager of the Year in 1995."

        In the annual Lipper/Barron's Fund Families Survey of 2009, T. Rowe Price ranks 2 out of 61 fund families surveyed.

        Morningstar gives this fund a stewardship rating of A on a scale of A to F, saying: "On most fronts, this fund features strong stewardship, benefiting from a top-rate investment culture, low fees, a manager with skin in the game, and a spotless regulatory history."

46.32-0.35(-0.75%)Jul 25 6:24 PMEDT

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