Warburg's Japan Funds Plan the Mothra of All Tax Hits

Two Warburg Pincus Japan funds will distribute huge taxable capital gains Monday.

At the close of business, the New York-based shop will distribute outsize capital gains to shareholders of the (WPJPX Quote)Warburg Pincus Japan Small Company and the (WPJGX Quote)Warburg Pincus Japan Growth funds, as well as the "Advisor" version of each fund. The gains are equal to some 55% and 22% of the funds' NAVs, or net asset value, according to company officials. Capital-gains distributions, which are taxable, are considered big when they're around 10% of a fund's NAV. NAV is the value of one of the fund's shares.

"This is enormous," says Morningstar senior fund analyst Scott Cooley. "At 10%, we start taking notice. At 20% it's large and at 50% we break out the record books. In the years that Morningstar has been covering funds, which goes back to 1984, there have only been six bigger distributions." ...