7A.5 Unit Splits, Distributions and Their Effect on NAV

FIMM Combined Examination FCE

Track your progress as you read

Finished sections get a check mark.

1 Introduction: The FIMM Combined Examination (FCE)

0.1 FCE Exam Facts, Registration Rules and How to Use This Guide

2 Chapter 1: Understanding Collective Investment Schemes in Malaysia

1.1 What a Collective Investment Scheme Is and How Malaysian CIS Are Classified 1.2 Investment-Linked Funds Are Not UTS; Industry Growth and History 1.3 Participants in the CIS Ecosystem: Unit Holders, Managers, Trustees, Distributors and Regulators

3 Chapter 2: Introduction to UTS and PRS

2.1 UTS and PRS as Investments: Mechanics, Unit Calculations and How They Compare 2.2 Types of Funds: By Asset Class, Fund Structure and Investment Objective 2.3 Methods of Investing and Dollar Cost Averaging 2.4 Benefits and Disadvantages of Investing in UTS and PRS 2.5 Understanding Risk and the Risks of Investing in Schemes 2.6 Shariah-Compliant Schemes, Their Risks and the Role of the Shariah Advisory Council

4 Chapter 3: Regulatory Framework

3.1 The Regulatory Framework: The SC, Other Regulators and FIMM's Dual Role 3.2 Legislation, SC Guidelines and FIMM Rules Governing UTS and PRS 3.3 Regulation of Scheme Providers and Oversight Functions 3.4 The Deed, the Prospectus or Disclosure Document, and the Product Highlights Sheet 3.5 Portfolio Constraints: Permitted Investments, Liquidity, Borrowing and Exposure Limits 3.6 Regulations for Other CIS: Real Estate Investment Trusts and Exchange-Traded Funds 3.7 Regulation and Duties of the Scheme Trustee 3.8 Regulation of Marketing and Distribution: Distributor Categories, Collection Points and Agency Structure 3.9 Registration of Consultants: Eligibility, Fit and Proper, Duration, Variation and Revocation

5 Chapter 4 (Part 1): Marketing and Distribution — Disclosure and Transactions

4.1 Servicing Investors and the Contents of the Prospectus and Disclosure Document 4.2 The Product Highlights Sheet, Advertising Standards and Account Maintenance 4.3 The Purchase Process and Suitability Assessment Before Personal Advice 4.4 Cooling-Off Rights, Repurchase of Units, Suspension and Switching 4.5 Financing the Purchase of UTS: Process, Safeguards and the Risk Disclosure Statement 4.6 EPF Transfers and Withdrawals for Investment in Approved Unit Trust Funds

6 Chapter 4 (Part 2): Marketing and Distribution — Distributions, Reporting and Service

4.7 Distributable Income, Distributions and NAV, "Buying" a Distribution and Taxation 4.8 Reporting to Investors: Confirmations, Statements, and Semi-Annual and Annual Reports 4.9 Marketing Principles, Delivering Quality Service and Handling Complaints 4.10 The Effect of Inflation, Taxation and Investment Costs on Returns 4.11 Investment Alternatives to UTS and PRS

7 Chapter 5: Code of Ethics

5.1 Compliance, Ethics and the Structure of the FIMM Code of Ethics 5.2 Core Principle 1: Honesty and Integrity 5.3 Core Principle 2: Professionalism 5.4 Core Principles 3 to 5 and Non-Compliance: Conflicts, Disclosure, Confidentiality and Misconduct

8 Chapter 6: Personal Financial Planning

6.1 Personal Financial Planning: Definition, Features, Five Areas and the Six Steps 6.2 Financial Planner Credentials, Skills, Remuneration, and How a Planner Differs from a Consultant 6.3 The Consultant's Role in Investment Planning and Advising Clients Through the Life Cycle

9 Chapter 7A: Features and Operations of UTS

7A.1 Structure of a UTS, the Trust Deed, the Parties and Modifying the Deed 7A.2 UTS Fees, Charges and Expenses, and the Management Expense Ratio 7A.3 Dealing in Units, Valuation, NAV Calculation and Unit Prices 7A.4 Forward and Historical Pricing, and the UTMC's Holding of Units 7A.5 Unit Splits, Distributions and Their Effect on NAV 7A.6 Measuring UTS Performance: Returns, Performance Tables, Risk Measures and Qualitative Factors 7A.7 Operational Aspects of Shariah-Compliant UTS and PRS and the Shariah Contracts Between the Parties 7A.8 Borrowing to Invest in UTS and the Risks of Loan Financing

10 Chapter 7B (Part 1): The Pension Landscape and the PRS Framework

7B.1 The Malaysian Pension Landscape and the Adequacy of Retirement Savings 7B.2 The World Bank's Five-Pillar Pension Framework in the Malaysian Context 7B.3 Key Players: EPF, KWAP, LTAT, Employer-Sponsored Schemes and Annuities 7B.4 Why Malaysia Needs PRS: Ageing, Longevity Risk and the Benefits of PRS 7B.5 The PRS Framework and the Private Pension Administrator (PPA) 7B.6 PRS Structure, the Trust and Deed, Advantages over Other Products, Eligibility and Contributions

11 Chapter 7B (Part 2): PRS Operations

7B.7 The PRS Default Option and Tax Incentives for Members and Employers 7B.8 The PRS Account Structure (Sub-Accounts A and B) and Vesting 7B.9 PRS Withdrawals: Pre-Retirement, Retirement, Permanent Departure, Incapacity and Death 7B.10 Switching Between Funds and Transferring Between PRS Providers (Portability) 7B.11 Unclaimed Monies, Death of a Member and PRS Nomination 7B.12 PRS Funds: Number, Core and Non-Core Funds, Objectives, Risk Profiles, Asset Classes, Authorisation and Naming 7B.13 PRS Fees, Charges and Expenses 7B.14 PRS Unit Creation, Forward Pricing, Valuation, Distributions, Performance Measurement and Electronic Communication

7A.5 Unit Splits, Distributions and Their Effect on NAV

Key Takeaways Explain This Topic AI

A unit split does not change a fund's NAV or the value of a unit holder's investment; it only increases the number of units and lowers the price per unit.

Under the UTF Guidelines, a unit split may be carried out only once in any financial year of the fund.

A unit split is allowed only when the fund's monthly average NAV per unit has shown sustainable appreciation over the six months before the split.

In a variable-price fund, paying a distribution reduces NAV per unit by exactly the amount distributed.

In a fixed-price UTS, income is accounted for separately from NAV, so paying a distribution does not change NAV per unit.

Last updated: October 2026

Unit Splits

A unit split divides each unit into more units. UTMCs sometimes wrongly call it a "bonus" issue , but no extra value is created.

Study guide example: ABC Growth Fund declares a 1:2 split (one additional unit for every two held).

Before the split After the split
Fund NAV RM180,000,000 RM180,000,000
Units in circulation 100,000,000 150,000,000
NAV per unit RM1.80 RM1.20
Investor's units 1,000 1,500
Value of holding RM1,800 RM1,800

The split affects neither the fund's NAV nor the value of any holding .

Why UTMCs split units

Psychology – investors seem to prefer holding more low-priced units than fewer high-priced ones.

Competitiveness – a lower price may attract new investors compared with competitors' high-priced units.

Margins – at a lower price, the UTMC's margin on selling units looks smaller in cents per unit.

The rules

Because UTMCs once declared "bonus" units several times a year, which could mislead investors about true returns, the UTF Guidelines now say:

Rule Detail
Frequency Once in any financial year of the fund

Pre-condition The fund's monthly average NAV per unit has shown sustainable appreciation over the 6 months before the split, meaning it rose from one month to the next throughout the period

Trustee verification The UTMC submits the Trustee's verification of compliance to the SC within 14 days after the split

Statement to unit holders Must explain the split ratio, NAV per unit before and after, and the reasons

SC guidance adds that the explanation should cover what a unit split is, why it is done and its effect on NAV per unit, units and values, and should state that the investment's value is the same whether made before or after the split and that the split does not affect future gains. The split is processed by closing the register, adjusting holdings and sending new statements.

Testing "sustainable appreciation"

SC guidance explains sustainable appreciation as the monthly average NAV per unit rising from each month to the next over the six months before the split. Two illustrative funds:

Month Fund P monthly average NAV Fund Q monthly average NAV
January RM1.10 RM1.10
February RM1.12 RM1.14
March RM1.15 RM1.13
April RM1.16 RM1.17
May RM1.20 RM1.21
June RM1.22 RM1.24
Eligible to split in July? Yes : every month higher than the last No : March fell below February

Fund Q ends higher overall, but the March dip breaks the month-to-month rise, so it must wait until it has six months of continuous appreciation (and has not already split in that financial year).

PRS funds too

The same arithmetic applies to PRS. The study guide's PRS example: a member holds one unit at RM2.10 ; after a 2-for-1 split she holds two units at RM1.05 , still worth RM2.10.

Retaining income instead

If a fund retains income rather than distributing it, the NAV (and holdings' value) is maintained and unit holders receive no income to declare for tax. Since gains on selling units are generally not taxed , this can maximise after-tax returns.

Distributions and NAV

In most UTS (prices that move with NAV), paying a distribution reduces NAV by exactly the amount paid . It is not a bonus.

Study guide example: ABC Growth Fund declares 10 sen per unit ; NAV RM180 million; 100 million units.

Before After
Fund NAV RM180,000,000 RM170,000,000
NAV per unit RM1.80 RM1.70
Investor with 1,000 units RM1,800 in units RM1,700 in units + RM100 cash = RM1,800
Listed and fixed-price UTS

Type Effect of a distribution

Listed UTS NAV should fall by the distribution and, in theory, so should the market price, but supply and demand may move the price more or less

Fixed-price UTS (RM1.00) Net income is accounted for separately from NAV , so paying a distribution does not change NAV per unit

Splits vs Distributions vs Reinvestment

Event Units held NAV per unit Total value to investor
Unit split Increase Falls proportionately Unchanged
Cash distribution Unchanged Falls by the distribution Unchanged (units plus cash)
Distribution reinvested in units Increase Falls by the distribution Unchanged
Income retained Unchanged Keeps rising with income Grows within NAV