Capital Gains Distribution

What Does Capital Gains Distribution Mean?
Distributions that are paid to a mutual fund's shareholders out of the capital gains of the company's investment portfolio.

Investopedia explains Capital Gains Distribution
Mutual fund capital gains distributions typically occur near the end of the calendar year and are taxable to the fund's shareholders. 

This poses a problem for some mutual fund investors who make initial purchases of mutual funds near the end of a calendar year. Because they receive a capital gains distribution, they immediately receive taxable income and face a mutual fund NAV that is reduced from the distribution.