What does 元本払戻金 mean?


I'm curious what 元本払戻金 means (in a financial/investment context), if there is
a corresponding single English word, and how it is pronounced.

Thanks!




# **元本払戻金【がん.ぽん.はらい.もどし.きん】（特別分配金【とくべつぶんぱいきん】）**

元本払戻金 is a technical term from the field of [投資信託【とうししんたく】, investment
funding.](http://en.wikipedia.org/wiki/Investment_fund). Formerly, it was
called 特別分配金, but the name got changed to avoid confusion relating to tax
exemption (see source 2 below).

In short, it refers to a special dividend that is tax free. Each investor has
got a 個別元本【こべつがんぽん】 (X), initially the cost basis, the value of the shares
when you bought it (or averaged if you bought more). Now suppose a divident
(value Y) is paid back. If the current value of the share is greater or equal
to your 個別元本, Z≧X, you need to pay taxes normally. If it smaller, the entire
dividend is tax free if X-Z≧Y; or only a part of it, ie. Y-(Z-X), otherwise.
Afterwards, the 個別元本 is reduced by the tax-free amount.

For example (taken from the third source below):

  * value of share when you buy it: X=10,500
  * value when divident is paid: Z=10,700
  * divident to be paid: Y=300

In this case, part of the divident is tax-free, ie.
Y-(X-Z)=300-(10700-10500)=100. You need to pay taxes for the remaining 200.
Afterwards, you 個別元本 is reduced to 10500-100=10400.

Sources, and some pages explaining it in detail.

  * [Nissay Asset Management Corporation](http://www.nam.co.jp/seminar/rescue/operation/dividends/b10.html)
  * [The Bank of Saga Ltd.](http://www.sagabank.co.jp/unyou/toushin/saginsensei/vol6.html)
  * [Kokusai Asset Management Co., Ltd.](http://www.kokusai-am.co.jp/simulation/calculator/bunpaikin/kaisetsu.html)

* * *

The closest equivalent in English I found is this: [Trade King, Mutual Funds
and Taxes](https://www.tradeking.com/education/mutual-funds/tax-guide).

> Nontaxable return of capital
>
> It's possible for a mutual fund to make a distribution to you without your
> having to pay tax on it. This generally occurs when a distribution involves
> recovery of all or a portion of your cost basis (i.e., the amount of your
> investment) in the fund. Such a distribution is not subject to taxation
> because it does not represent investment earnings. It still must be reported
> on your tax return, however.

Essentially, the 元本払戻金 is supposed to be a return of your investment (元本). So
my suggestion for a close English translation of 元本払戻金(特別分配金) would be `cost
basis distribution/return/dividend (special divident)`. 普通分配金 would be `normal
divident`. You should consult with a professional translation service if you
need this for legal purposes.

* * *

**Disclaimer** : This is not legal or financial advice. I know only what I
read on the net.

