What is a Notional Distribution | ETF Basics

March 31, 2022

While investors often focus on the monthly distributions paid by Harvest equity income ETFs, there is another sort of distribution that Harvest ETFs may pay once a year. This is the “notional” distribution, also known as the “non-cash reinvested distribution”.

At the end of each tax year,  a Harvest ETF may pay a special annual notional distribution in units, and the outstanding units will be immediately consolidated with the units held prior to the distribution. The number of units held and the net asset value of those units do not change versus a cash distribution which reduces the net asset value.

Although taxed in the year such a distribution is made, in a non-registered account the result is an increase in the Adjusted Cost Base (ACB) of the units, which is the average of what a unitholder paid to invest in the ETF over the life of their investment. Buying more units at different market prices over time will impact a unitholder’s ACB. ACB is key to capital gains tax calculations. The value of the assets at sale are compared with the ACB to calculate the amount gained or lost on an investment. That amount is then taxed if there is a realized gain on the sale.

If a unitholder keeps their Harvest ETFs in a registered or otherwise tax-sheltered account, then the notional distribution has no impact. It can be seen as ‘neutral’ and has no impact on the growth opportunity of the Harvest ETF held.

You can see the most recent Harvest notional distributions listed here under “Non-cash Re-invested Distributions.”

The following Harvest ETFs paid a notional distribution in the last fiscal year

You can learn about other ETF and investment fundamentals here.

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Disclaimer

For Information Purposes Only. Commissions, management fees and expenses all may be associated with investing in HARVEST Exchange Traded Funds (managed by Harvest Portfolios Group Inc.) Please read the relevant prospectus before investing. The funds are not guaranteed, their values change frequently and past performance may not be repeated. This communication should not be considered as advice and/or a recommendation to purchase or sell the mentioned securities or used to engage in personal investment strategies. Tax, investment and all other decisions should be made with guidance from a qualified professional.

Certain statements in the Harvest Blog are forward looking Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or  “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS.

FLS are not guarantees of future performance and are by their nature based on numerous assumptions, which include, amongst other things, that (i) the Fund can attract and maintain investors and have sufficient capital under management to effect their investment strategies, (ii) the investment strategies will produce the results intended by the portfolio managers, and (iii) the markets will react and perform in a manner consistent with the investment strategies. Although the FLS contained herein are based upon what the portfolio manager believe to be reasonable assumptions, the portfolio manager cannot assure that actual results will be consistent with these FLS.

Unless required by applicable law, Harvest Portfolios Group Inc. does not undertake, and specifically disclaim, any intention or obligation to update or revise any FLS, whether as a result of new information, future events or otherwise.

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