Dear Sir,

Sorry, my question got truncated.  The full text is there now.

I am a do-it-yourself investor.  A friend recently talked to me about
the "embedded tax" that occurs when you buy into a mutual fund.  This
is a matter of deep interest to me since I am thinking of buying into
several international funds.  Below I have tried to calculate the
embedded tax for a particular fund, DODFX Dodge and Cox International
Stock Fund.  I would like someone to evaluate and get back to me about
whether I am doing it correctly.

Looking on the Dodge and Cox website I see that DODFX does a
distribution only once a year at the beginning of December.  Last year
the distribution was 24 cents per share in dividends, 12 cents per
/share in short term capital gains, and 10 cents per share in long
term capital gains.

CASE 1.  Suppose I buy 1,325 shares BEFORE the distribution.  This
costs me $43,234.75 at $32.63 per share.  When the distribution
occurs, I gain $318.00 in dividends but my tax is (say) $92.00.  At
the same time, the value of each share is lowered by 24 cents because
of the dividend, with the result that the 1,325 shares are worth only
$42,916.75.  So the net value of my investment is $318.00 - 92.00 +
$42,916.75 = $43,142.75.

CASE 2.  Suppose I buy  $43,234.75 AFTER the distribution.  Each share
costs $32.39 so I get 1,334.88 shares instead of 1,325 shares.  The
net value of my investment is $43,234.75.

CONCLUSION.  The difference between $43,234.75 and $43,142.75 is
$92.00, i.e. exactly the same as my tax.  Two questions:

1.  Is it true that the dividend per share equals the lowering of the
value per share, so that they balance each other out exactly?

2.  Is it accepted that it is generally or always better to buy after
the distribution date?

I would greatly appreciate answers to these questions.

Wow - thats an interesting question I hadn't really thought about.

I found some resources that you should take a look at:
http://www.jpmorganfunds.com/UndiscoveredManagers/Research/pdf/MutualFundsTaxes.pdf

"By selecting the wrong point in a fund's tax life cycle at which to
invest, an individual will likely inherit a portion of earlier
share-holder's capital gains, which in turn will, accelerate his
payment of taxes an lower his after-tax returns"

In response to your questions:

1- Yes - A mutual fund has something called a Net Asset Value:
From http://mutualfunds.about.com/cs/calculators/l/aa082502a.htm
"Calculating mutual fund net asset values is easy. Simply take the
current market value of the fund's net assets (securities held by the
fund minus any liabilities) and divide by the number of shares
outstanding. So if a fund had net assets of $50 million and there are
one million shares of the fund, then the price per share (or NAV) is
$50.00."

The price of a share of a mutual fund is to take the net assets
divided by the number of shares.  If you lower the net assets, the
price will drop accordingly.

2-Based on the first article I posted - 
"If an investor can find a means of deferring the payment of taxes,
his after tax returns will soar.  However if an investor buys shares
in a mutual fund that has large embedded gains, it is more than likely
he will have to pay capital gains taxes sooner, rather than later"

Here's a link which explains it pretty clearly.

http://www.moneysense.ca/investing/mutual_funds/article.jsp?content=100256

So you want to loook at buying funds which do not have too many
holdings with large unrealised capital gains on the.