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What is equalisation?

When you buy a fund between ex-dividend dates any income which has been generated, but not yet paid out, is included in the price you pay for each unit.

Because of this, the first income payment you receive is made up of two separate parts. The first part is the income generated after you purchased the fund. The second part is the income which had been generated before you invested and included in the price you paid for each unit. As far as you are concerned this is not really income at all, it is a return of some of your initial investment, and your cost figure will be adjusted to reflect this return of capital. This is known as an 'equalisation' payment.

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