Mutual Fund Terms & Definitions

Adjusted cost base (ACB)

In general terms, it is the total price you paid for all the units of a series of a fund in your account, including reinvested distributions and less any return of capital. The adjusted cost base per unit of a series is the weighted average price paid per unit.


Capital gaiN

You have a capital gain when you sell, or are considered to have sold, an investment for more than your adjusted cost base.


Capital losS

You have a capital loss when you sell, or are considered to have sold, an investment for less than your adjusted cost base.



A distribution of after-tax profits to the shareholders of a corporation.


Interest income

Income earned from investments such as treasury bills and bonds.


Management Expense Ratio (MER)

The total fees and expenses a fund paid during a year divided by its average assets for that year.


Marginal tax rate

The additional tax which someone pays on each $1 increase of their taxable income. As income increases, so does a person’s marginal tax rate.


Mutual fund

A type of investment that pools money from many individuals and invests it according to a stated investment objective. Professional money managers oversee investment decisions within the fund by buying and selling investments such as money market investments, stocks and bonds.

Return of capital

Commonly seen in mutual funds that pay a regular set monthly distribution to investors. Return of capital is a tax term used to describe the portion of a distribution that is not classified as interest, dividends or capital gains. Return of capital distributions are not taxable in the year they are received, but they reduce the adjusted cost base of an investment.


T3 (Statement of Trust Income Allocation and Designations)

A tax document showing the amount and type of investment income distributed by the mutual funds you owned in the previous year.


Tax-Free Savings Account (TFSA)

A registered account that was introduced by the Federal Government effective January 1, 2009. With this account, all investment earnings – interest, dividends and capital gains – grow tax-free.



An investor in a mutual fund.