A mutual fund's turnover ratio indicates the percentage of a portfolio's holdings that have been replaced in a given year. A high turnover ratio implies frequent trading by the fund manager. This frequent buying and selling can lead to the realization of short-term capital gains, which must be distributed to shareholders annually. These distributions are taxable events for the investor, often at less favorable ordinary income tax rates, thereby reducing the fund's tax efficiency. The turnover ratio is a required disclosure in the fund's prospectus, allowing investors to assess this potential tax impact.

B. Sales charges and breakpoint discounts relate to the cost of purchasing shares (the load), not the ongoing tax efficiency of the fund's internal portfolio management.

C. Commissions are internal fund operating expenses that reduce the Net Asset Value (NAV) but are not a direct measure of taxable events passed through to the shareholder.

D. Projecting or guaranteeing future investment results, including future dividend or capital gains distributions, is a violation of securities regulations.

1. U.S. Securities and Exchange Commission (SEC). Investor Bulletin: Mutual Funds. "The prospectus contains detailed information... including... its portfolio turnover rate. A high portfolio turnover rate may result in higher taxes for you." (SEC Publication, Updated February 26, 2021).

2. FINRA Rule 2210(d)(1)(F). Communications with the Public. This rule prohibits communications that "predict or project performance, imply that past performance will recur or make any exaggerated or unwarranted claim, opinion or forecast." This directly invalidates option D.

3. Bodie, Z., Kane, A., & Marcus, A. J. (2021). Investments (12th ed.). McGraw-Hill Education. In Chapter 4, "Mutual Funds and Other Investment Companies," the text explains that high portfolio turnover leads to greater tax liability for investors due to the realization of capital gains. This is a standard textbook in university-level finance courses. (See Section 4.4, "Taxation of Mutual Fund Income").