Why do unit prices fluctuate?

When you invest, you are allocated a number of units in each fund you have selected. Each of these units represents an equal part of the market value of the portfolio of investments that the fund holds. As a result, each unit has a dollar value, or ‘unit price’.

This unit price is calculated by taking the total market value of all of a fund’s assets on a particular day, adjusting for any liabilities, and then dividing the net fund value by the total number of units held by all investors on that day. Although your unit balance in a fund will stay constant (unless there is a transaction on your account), the unit price will change according to changes in the market value of the investment portfolio, or the total number of units issued for the fund. We determine the market value of each fund based on the information we have most recently available.

What are distributions and how do they affect unit prices?

During the year, the fund you’re invested in will earn income in the form of dividends and interest. It may also make profits on investments sold. Under current tax law, the fund must pay all of this income and realised capital gains to investors as a ‘distribution’. These distributions usually occur at the end of June and December. Investors who have elected to reinvest their distributions are allocated additional units in the fund. Alternatively, investors may choose to receive their distributions as a deposit to their bank account. The unit price of a fund will fall by the amount of any distribution immediately after the distribution is paid. Those who reinvest receive additional units in the fund instead of cash, so their investment is worth exactly the same after the distribution as it was immediately before the distribution.

The information contained in this document is based on the understanding Colonial First State Investments Limited ABN 98 002 348 352 AFS Licence 232468 has of the relevant Australian laws as at 1 July 2009. This document is not advice and is intended to provide general information only. It does not take into account your individual needs, objectives or personal circumstances. You should assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. Product Disclosure Statements (PDS) for products offered by Colonial First State are available from colonialfirststate.com.au or by contacting us on 13 13 36. You should read the relevant PDS and consider whether the product is right for you. Past performance and awards are no indication of future performance.