Ch.7 · Total Expense Ratio Limits · hard
What happens to NAV when a scheme receives a rights issue or bonus shares from a portfolio company?
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EXPLANATION
Corporate actions require careful NAV treatment: For bonus shares, the company's stock price falls proportionally (more shares at lower price = same total value). For rights issues, the scheme must decide whether to subscribe; if subscribed at a discount to market price, it benefits NAV. If rights are not subscribed, they may be sold in the market. In all cases, proper valuation prevents artificial NAV changes.
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