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Understanding Mutual Fund Distributions

When one of our Qwest Funds Corp’s mutual funds (the “Fund”) distributes income to shareholders of the Fund (i.e. capital gains or other forms of income), this action does not affect the investment value or investment performance of the Fund.

To better illustrate this point, let’s look at an example of an investor who owns 1,000 shares of the Fund with a value of $3.50 per share and what happens when the Fund makes a $0.25 distribution.

Investment & NAV Assumption:

1) Total shares owned in the Fund: 1,000
2) Net asset value (NAV) per share: $3.50
3) Investment value: $3,500
 

Example of when a $0.25 distribution is reinvested into new Fund shares:

1) Distribution value (1,000 shares x $0.25 distribution per share): $250
2) Adjusted NAV per share ($3.50 NAV – $0.25 distribution per share): $3.25
3) New shares distributed ($250 distribution divided by $3.25 per share): 76.92
4) New total shares owned: 1,076.92
5) Adjusted NAV per share: $3.25
6) Investment value (1076.92 shares x $3.25 per share): $3,500
 

Example of when a $0.25 distribution is paid in cash and not reinvested into new Fund shares::

1) Total shares owned in the Fund: 1,000
2) Adjusted NAV per share ($3.50 NAV – $0.25 distribution per share): $3.25
3) Investment value: $3,250
4) Cash distribution (1,000 shares x $0.25 per share): $250
5) Investment value plus cash distribution ($3,250 + $250): $3,500