Tutorial Computer UnitTrust Exam-EnGLIS 010808

Comprehensive CUTE
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Gentle Reminders
Session Duration: 1 full day Required to sign in TWICE. Check ame & IC o. Failure to sign will result in non-attendance.
Agency Development & Training
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Gentle Reminders
Agency Development & Training
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PROGRAMME OUTLINE
Chapter 1 : Understanding Unit Trusts Chapter 2 : Regulation of The Unit Trust Industry Chapter 3 : Servicing Clients and Marketing Unit Trusts Chapter 4 : Industry Code of Ethics and Standards of Professional Conduct Chapter 5 : Personal Financial Planning Chapter 6 : Operations of Syariah-Based UTS
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In all sections where applicable:

Replace Persons Dealing in Unit Trusts (PDUT) with Unit Trust Consultants (UTC) Replace Institutional Unit Trust Agents with Institutional Unit Trust Advisers Replace PDUT with UTC
New Abbreviations
CUTA : Corporate Unit Trust Advisers CMSA : Capital Markets and Services Act, 2007 5
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Chapter 1 Page 2
Basic Features Of UTS

Collective Investment Scheme Ownership of fund - divided into units Returns distribution & capital appreciation Investment opportunity for small investor
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Chapter 1 Page 3
Benefits Of UTS
Diversification Ready access to funds / liquidity Professional management Investment exposure Lower investment costs
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Chapter 1 Page 5
Disadvantages Of UTS
Risk Loss of Control Fees and Charges Opportunity Cost
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Chapter 1 Page 5-6
Lump Sum
Method of Investing
Reinvestment of income
Regular Savings
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Chapter 1 Page 6-8
Leveraging / Gearing
Max loan-to-valuation ratio is 67% UTC must not directly/ indirectly encourage sales through loans Unit Trust Loan Financing Risk Disclosure Statement Borrowers must be within 18-55 years of age
Formula 1:Chapter 1(Page 1)
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Chapter 3 Page 23&37
RISK DISCLOSURE STATEMENT

Outlines main risks involved in loan financing: The higher the margin of financing, the greater the potential losses/gains The servicing of loan repayments may become more onerous if interest rates rise Margin Calls may be requested in addition to normal repayments Returns are not guaranteed
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Chapter 1 Page 7-8
Risks Of Borrowing
Interest rate fluctuations Default in repayment of loan Premature repayment of loan Margin call
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Unit Trust Structure

U ITHOLDERS
Chapter 1 Page 9-11
(Mode of Operations Governed by the Deed)
Money Possible Pooled from Distributions Investors Safeguard s the Assets of the UTS Administers the Operations of the UTS Invests
TRUSTEE
UTS
UTMC
Possible Capital Gain & Income
AUTHORIZED I VESTME T
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Chapter 1 Page 10
Roles & Responsibilities

Reports to trustee regarding UTS investments Promotes & distributes UTS
UT Manager
Services the unit holders Distributes income, calculates unit price Provides repurchase facilities Maintains registration of unitholders
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Chapter 1 Page 10

Safeguards UTS assets Ensures funds are invested in accordance with deed & objectives Supervises the operations
Trustee
Approves & monitors all financial transactions Collects all incomes

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Chapter 1 Page 10
Invest & responsible for fees that earned by UTMC & trustee
Unit Holders
Reap the rewards of the fund
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DEED
Rights & obligations of UTMC Rights & duties of Trustee Rights of Unitholders Maximum fees payable Authorised investment Valuation of units Outline way in which changes can be made to the deed
Chapter 1 Page 10
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TYPES OF UTS
Unlisted/Open-End Funds
1. Units are not quoted on a stock exchange 2. Unit prices are computed based on the underlying net asset value of the fund 3. Prices remain unchanged within the same trading day 4. Size of fund would increase with the creation of units and decrease with the cancellation of units 5. Transacted directly with UTMC
Chapter 1 Page 11-12
Listed/Closed-End Funds
1. Units quoted and traded on stock exchange 2. Prices determined by market forces of demand and supply 3. Prices fluctuate throughout the day and from time to time 4. Size of fund remains unchanged until the next public issue 5. Investors can only sell their units through the exchange
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CLASSIFICATION OF UTS
EQUITY FIXED INCOME MONEY MARKET REIT ETF BALANCED SYARIAH GOVERNMENTSPONSORED
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Chapter 1 Page 13
EQUITY UTS
Aggressive Growth Funds Index Fund Income fund International fund
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FIXED INCOME UTS

Mainly invest in corporate bonds,
Chapter 1 Page 14
government securities & MM instruments Generally provide regular income with less emphasis on capital growth Usually more secure Usually held as portfolio diversification
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Chapter 1 Page 14
MONEY MARKET UTS

Operate in similar way to bank account unit price normally set at fixed amount Invest in low risk money market instruments Highly liquid & ideal for use as a short term parking place Income distributions to investors paid regularly
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Chapter 1 Page 14
REAL ESTATE INVESTMENT TRUSTS

Invest in real property Returns- rental income and capital appreciation Most are listed on stock exchange Units in listed REIT can be bought and sold through stockbrokers
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Chapter 1 Page 15
EXCHANGE TRADED FUNDS

Investment objective - to achieve same return as a particular market index Primarily invest in all securities / a representative sample of the securities that is included in a selected market index Often have low expense ratios Bought and sold through a stockbroker, on an exchange like listed shares
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Chapter 1 Page 15
BALANCED UTS
Generally has a portfolio comprising equities, fixed income securities, cash & property Exhibit lower volatility than most single asset class of UTS Prospect of returns higher than money market UTS, saving accounts and fixed deposits
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Chapter 1 Page 15
SYARIAH UTS
Catered for Syariah concerned investors Invest in a portfolio of halal companies, Islamic Debt Securities & bonds or other securities in accordance of Syariah principle Returns will also avoid the incidence of riba or usury interest
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GOVERNMENT SPONSORED UTS

E.g. ASN, managed by PNB Generally invest on a balanced basis although equity-invested UTS are also available
Chapter 1 Page 16
Equity invested - may have fluctuating and variable unit price Balanced basis - normally have fixed RM1.00 unit price
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Chapter 1 Page 17
COLLECTIVE INVESTMENTS IN MSIA

CIS in Msia includes: UTS Pension and provident funds Insurance plan Pilgrims funds Investment-linked Funds
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Chapter 1 Page 17
INVESTMENT-LINKED FUNDS
Promoted by life insurance companies Investor acquires life insurance policy, which represents no. of units in investment pool Single premium and regular premium Not subject to scrutiny by SC or monitored by Trustee
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PROSPECTUS
Legal document containing legal accounting and investment terms No sales can be made without a prospectus Each UTS must provide prospectus Updated every 12 months Purpose provide necessary information make an informed investment decision
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Portfolio Turnover Ratio (PTR)

An indication of the approach of UTMC to investment of the UTS portfolio PTR :
1/2 x [total investment acquisitions + total investment disposals] Average Fund Size
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Chapter 1 Page 29
DIRECT FEES & CHARGES

Initial Service Charge Service, sales, entry, up front Charged during purchase of units Fees for Specific Charges Transfer to other person, switching Exit Fee or Repurchase Charge Charged during units disposal Alternative to Initial Service Charge
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NON DISCRETIONARY FEES & CHARGES
Chapter 1 Page 30
Annual Management Fee Average around 1.5% p.a. to cover costs managing UTS Trustee Fee Min rate of 0.08% p.a. for Trustee operating expenses UTS expenses Other expenses directly related & necessary to the operation of UTS (Buy & Sell UTS Assets, Tax, Auditor, Legal, etc) Management Expense Ratio (MER) Measure of operating costs of UTS borne annually by unitholders on each unit held
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Slide 33 ST2 Details of Topics

Sean, 09/11/2007
Chapter 1 Page 31
MANAGEMENT EXPENSE RATIO (MER)

To assess previous years cost of holding units in UTS and compare it to : past and prospective returns, MER of competitor UTS, and costs of other investment opportunities MER
= (Fees + Recovered Expenses) X 100 Average Fund Size
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Management Expense Ratio

E.g. Management Fee Trustee Fee Auditors Fee Bank Charges & Others Total Expenses RM 31,764 6,078 1,200 2,482 41,524
Chapter 1 Page 31
Ave. Fund Size
RM3,122,250
MER =
41524 X 100 3,122,250

Exclude Syariah Fee
= 1.33%
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MEASURING PERFORMANCE
Raw return Compounded annual return UTS Performance Table Total Returns over various time periods Rankings & Quartiles Funds under management Benchmark Risk measures Consistency Qualitative Factors
Formula 4&5:Chapter 1(Page 2)
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UNIT PRICING
2 set of unit prices: Selling & Repurchase price
W.e.f. 1 July 2007, regime for pricing of UTS has changed from dual-pricing to single-pricing. All Buying & selling of units will be transacted based on SINGLE PRICING, i.e. NAV. Creation & Cancellation price
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UNIT PRICING
Calculation of NAV comprises of: Investments at market value
Liquidity (cash available for investment) Transaction Cost Factor (TCF) / Expense Allowance Creation and Cancellation Price Creation Price = NAV + TCF Cancellation Price = NAV - TCF
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UNIT PRICING
Forward Pricing Transaction done based on the price
Chapter 1 Page 43
which will be determined at the end of the day Historic Pricing Transaction done based on the price which was determined previous day
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UNIT SPLITS & DISTRIBUTIONS

UNIT SPLIT
A split is the division of a single unit in UTS into several units Distributions Payments made to unitholders out of the accounting income of UTS To be paid or reinvested
Formula 7&8:Chapter 1(Page 2&3)
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Chapter 2 Page 1
Regulation of unit trust industry

The protection of investors interest Proper disclosure to investors Control over market participants The prevention of improper market practices
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Chapter 2 Page 2
Regulatory Structure
The Securities Commission (SC)
- Securities Commission Act, 1993 - Capital Markets and Services Act, 2007 (CMSA) Covering UTMC, UTS, IUTA, CUTA, UTC and fund managers
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Chapter 2 Page 3
Other Government Regulators
Companies Commission of Malaysia Bank Negara Malaysia Bursa Malaysia Bursa Malaysia Securities Clearing Sdn. Bhd
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Chapter 2 Page 3
FMUTM
Registering body for all UT distributors and management companies Provides self-regulation for the unit trust industry Formulates sound & ethical business practices Provides investor protection
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Chapter 2 Page 3
Laws & Regulations
Capital Market & Services Act 2007 Securities Commission Act 1993 Guidelines issued by the SC Guidelines issued by the FMUTM
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Chapter 2 Page 4
Capital Market & Services Act 2007
Introduces a single licensing regime instead of multiple separate licenses Allow capital market intermediaries to hold one license to carry on any one or more regulated activities Any person carrying out any regulated activity such as dealing in UT must be i) a holder of CMSL or ii) a registered person
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Chapter 2 Page 4
Regulated activity:
Dealing in securities (restricted dealing in UT), fund management, investment advice & financial planning
Registered persons include :

a) Pre-approved institutions (licensed banks & finance company, etc) b) Persons registered with a body approved by SC i.e. FMUTM (UTC, IUTA & CUTA)
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Chapter 2 Page 3
Guidelines issued by the SC
Guidelines on UT Funds Prospectus Guidelines for Collective Investment Schemes Guidelines on Marketing & Distribution of UT Funds Guidelines on UT Advertisements and Promotional Materials
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Guidelines issued by the FMUTM
Chapter 2 Page 4
Guidelines for Registration of Institutional Advisers for the Marketing & Distribution of Unit Trust (IUTA) Guidelines for Registration of Corporate Advisers for the Marketing & Distribution of Unit Trust (CUTA) By-laws Relating To The Procedure For Disciplinary Proceedings (Chapter 4) Code of Ethics and Standards of Professional Conduct for Unit Trust Industry (Chapter 4) Investment Management Standards
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Regulation of the UTMC

Key requirements of a UTMC
Chapter 2 Page 4
To safeguard unitholders interest Manage & administer in accordance with the deed, guidelines and laws Keep proper records of a UTS Provide UTS reports Interim & Annual Call for unitholders meeting Keep register of unitholders Ensure that information acquired is not improperly used To set up a compliance unit and internal audit unit
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Approval of UTMC - UTS must be managed by UTMC that are approved by the SC - To be eligible to act as a UTMC, an applicant must: be an entity incorporated in Malaysia be a license holder under CMSA comply with Bumiputra and foreign ownership requirements satisfied a minimum shareholders funds at all times as prescribed by the Act
Chapter 2 Page 5
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Chapter 2 Page 6

Approval of UTMC
- Directors of a UTMC comprise at least 2 independent members while maintaining a minimum ratio of at least one-third independent members at all times - Chief Executive Officer of UTMC must be registered with the SC as a full-time officer
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Chapter 2 Page 6

Requirements of UTS - Approval of SC i) Establishment of new UTS ii) Registration for the appointment of UTMCs directors, key personnel, members of UTS investment committee, syariah committee & panel of advisers iii) Registration of deed iv) Post vetting & registration of prospectus v) Increase in fund size vi) Investment in foreign markets
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Chapter 2 Page 7

Prospectus of a UTS
- Important legal document & must be authorized by the directors of UTMC - Must be registered with SC - SC may for public information publish a registerable prospectus before registration - Publication or registration does not mean SC recommends investment or take responsibility for the prospectus
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Chapter 2 Page 8

Advertising of a UTS - Advertisement must be accurate & honest - Reference to risks involved in investing in UTS - Display warning statements - Any A&P material by UTMC are subject to vetting by the SC - UTC is only allowed to use A&P materials produced by UTMC, IUTA or CUTA
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Chapter 2 Page 9

The Investment Committee
- to oversee the prudent and efficient investment of each UTS - must be registered with the SC - the role of investment committee is to formulate, implement and monitor the investment management policies of the UTS
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General Characteristic of UTS Investment UTS may invest in the following that are consistent with its objectives: - transferable securities - cash, deposit & money market instruments - unit/shares in collective investments - derivatives Investment restrictions and limits (refer to page 2-12)
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Regulation of the Trustee

Key requirements of a Trustee
- A Trust Company registered under Trust Companies Act, 1949 or Public Trust Corporation Act, 1995 - Appointment Approved by SC - Registered with SC - Independent of UTMC & UTS
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Custody of the assets of a UTS - all assets of a UTS are held in the trustees name for safekeeping Investment policies and transactions - must be aware of the investment policies of a UTS and be satisfied that the investment policies are sound and in the interests of unitholders
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Dealing in units - the trustee will create and cancel units in a UTS when the UTMC requests Accounts and audit
the accounts of a UTS are required to be audited at the end of each financial year of the UTS by an approved auditor appointed by the trustee
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Reports to unitholders - Trustee Report is included in the annual report of the UTS - The trustee states whether, in its opinion: the UTMC has managed the UTC according to the deed, guidelines, act the valuation/pricing and the creation & cancellation of units is carried out in accordance with the deed & regulatory requirement
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Report to the SC
- must report to the SC if it is of the view that the UTMC of a UTS has not acted in the interest of unitholders, or in accordance with the deed or guidelines
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Regulation of Marketing and Distribution of UT

UTMC - Designated Distributors UTC who are tied-agent attached to the UTMC A staff of the UTMC IUTA - Designated Distributors UTC who are attached to the IUTA A staff of the IUTA CUTA - Designated Distributors UTC who are attached to CUTA Must first be licensed by the SC as Financial Planning Representative before applying to be a UTC
An IUTA & CUTA must ensure that a minimum of 2 UTCs are stationed at each Distribution Point at all times.
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Regulation of Marketing and Distribution of UT

Dealing in UTS
UTMC, IUTA & CUTA are responsible for ensuring that all person involved in the marketing and distribution of UT are UTC registered with and authorized by the FMUTM Eligibility Requirement for an Authorized Person who is an Individual - Refer to Appendix 1 (page 2-22) Authorization Card by FMUTM Agency Structure
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Chapter 2 Page 24
Tiers in Agency Structure

It is standardized and not exceed 4 tiers:
Group agency manager Agency manager Agency supervisor Agent
UTMC encouraged to reduce number of tiers for the interest of investors

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Chapter 2 Page 24
Size of Agency Unit

Should not exceed 50 persons at all times A unit comprises supervisor and his direct downlines Agent is not allowed to recruit
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COOLING OFF RIGHT

Opportunity for investors to reconsider their investment purchase Within 6 BUSINESS DAYS Full refund Given to a first time investor EXCEPT: a corporation or institution a staff of UTMC; and UTC
Chapter 3 Page 6
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REPURCHASE OF UNITS
any time Within 10 CALENDAR DAYS Repurchase Notice Documents Repurchase Request Form Complete payment instruction
Chapter 3 Page 6-8
Unitholder has the right to withdraw from UTS
Suspension by Trustee (approved by SC)/21 days

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Chapter 3 Page 6-8
SWITCH
UTS A
UTS B
Change of market conditions Personal circumstances

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Chapter 3 Page 9
REPORTING TO UNITHOLDERS
On Acquisition of Units During Period Units in UTS Are Held INTERIM REPORT ANNUAL REPORT On Disposal of Units
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Chapter 3 Page 10
ANNUAL REPORT Key performance data Managers Report Trustees Report Financial Statement of UTS and Auditors Report
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Chapter 3 Page 10
INTERIM REPORT Minimum contents: Managers Report Trustee Report, and Financial Statement should be endorsed by Directors Need not be audited
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INCOME DISTRIBUTION
Buying Distributions- buy a distribution by acquiring units just before ex-D date Distribution Equalisation a portion of money set aside from investments to equalize unitholders distribution income
Formula 1&2:Chapter 3(Page 3)
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Chapter 3 Page 17
EPF TRANSFERS
W.E.F. 1 January 2007, A/C 3 no longer exists. All existing savings previously accumulated in A/C 3 are merged into A/C 2. Re-shuffled as follows:
A/C 1 Retirement (70%) A/C 2 Housing loan, education, pre-retirement withdrawal at age 50 and/or medical expenses (30%)
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BASIC PRINCIPLES OF MARKETING UTS

Why Marketing of UTS Fail? Product Awareness Not for me UTS performance Risk elements Previous bad experience Other investment alternatives
Chapter 3 Page 24
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OTHER INVESTMENT ALTERNATIVES

Cash and FD Direct Share Investment Direct Investment in Property International investment Financial derivatives products
Chapter 3 Page 25,27&38
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ADVANTAGES INVESTING IN UT
Diversification Professional Fund Management Liquidity Ease of Purchase
Meeting Investors Longer Term Needs Dollar Cost Averaging

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DIVERSIFICATION
Generally invested in a wide range of securities Diversifies across asset classes e.g. shares, fixed income securities, property & cash
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Chapter 3 Page 29
PROFESSIONAL FUND MANAGEMENT

All customers benefit from investment advice Years of experience in handling investments Access to a wide range of resources and information, specialized research and market analysis
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Chapter 3 Page 30
LIQUIDITY
A measurement of how long it takes to sell investment UTMC are obliged to repurchase units Normally within 10 days
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Chapter 3 Page 30
EASE OF PURCHASE
Investors can easily buy units Only call UTMC, IUTA or UTC to obtain a prospectus and all information needed to make investment decision
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Chapter 3 Page 30
MEETING INVESTORS LONGER TERM NEEDS

longer term needs, e.g.: home purchase or overseas holiday childrens future education costs a retirement fund to complement EPF Regular savings plan may help to build a substantial sum of capital
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DOLLAR COST AVERAGING

systematic and regular investment fixed amount of money if prices are moving down, more units purchased and can reduce average cost of entire investment portfolio used over long periods to maximise its benefits
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RISKS INVESTING IN UT
Investment Risk e.g. volatility Risk of UTMC go out of business Risk of changes in legislation Risk of changing fees and investment policy Financing/loan/borrowing risk Returns are not guaranteed Managers/management risk Risk of non-compliance
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Chapter 3, Page 32-34
RISKS INVESTING IN UT
Currency risk Country risk Market risk Liquidity risk Credit/default risk Inflation risk Interest rate risk
Chapter 6 Page 10
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COMPLIANCE
Chapter 4 Page 3
A form of control against risks & consequences of breeching law or other internal/external obligations Benefits to UTC from compliance: reduction in client complaints reduced risk of litigation by clients an enhanced reputation opportunity for UTC to update knowledge assurance on continuing career
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ETHICS
FMUTM Code :
Chapter 4 Page 4-12 Appendix 1 Page 16-30 Appendix 2 Page 31-34
Part A Code of Conduct for Ordinary Members of FMUTM Part B Code of Conduct for organisations registered as IUTA Part C Code of Conduct for persons registered as UTC
2 sections:
A code of Ethics Standard of Professional Conduct
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UTMC & IUTA

CODE OF ETHICS
Professionalism Integrity Confidentiality Dignity Conflict of Interest
Chapter 4 Page 6-7
STANDARDS OF PROFESSIONAL CONDUCT

Compliance with laws Breach of laws
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UTC
CODE OF ETHICS
Honesty, Dignity & Integrity Fair Dealing Good Faith Competence Confidentiality Professionalism Acting with due care, skill & diligence Prompt, efficient and continuous service
Chapter 4 Page 7
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UTC
STANDARD OF PROFESSIONAL CONDUCT Compliance with laws use of authorisation card appropriate designation or title marketing and distribution with prospectus adequate explanation advertisements and promotional materials appointment of qualified persons duty to supervise and monitor keeping abreast with industry disciplinary proceedings
Chapter 4 Page 8-10
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FMUTM DISCIPLINARY PROCEEDINGS
Appendix 3 Page 35-38
Complaint normally handled by UTMC or IUTA, but may be referred to FMUTM for disciplinary proceedings Complaint to FMUTM- must be in writing
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Financial Planning
Chapter 5 Page 1
A process of meeting an individuals life goals within a certain time frame through the proper management of the individuals present and future finances.
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The Purpose of Financial Planning

Help fight inflation
Chapter 5 Page 2
Ensure adequate income in times of need Provide roadmap of financial objective Improve present & future lifestyles Peace of mind
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Chapter 5 Page 2
Areas in Financial Planning

Cash Management Risk Management & Insurance Planning Investment Planning Tax Planning Retirement & Estate Planning
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Common Approach in Financial Planning

Key Steps:
Understanding the client Data gathering Analysing data Preparing the plan Implementing the plan Reviewing the plan
Chapter 5 Page 4
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UTCS Role in Investment Planning

Educating investment strategies Educating risk, liquidity, tax and management characteristics
Chapter 5 Page 5
Advice use of credit risks, costs involved, investment strategies such as DCAP & etc. Discuss & recommend investment classes or specific investments.
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Chapter 5 Page 7
CLIENT TYPES
Stage 1: Approximately 21-30 years Stage 2: Approximately 31-44 years Stage 3: Approximately 45-60 years Stage 4: Approximately Age 61 years and above
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Chapter 5 Page 8
Financial Planner vs UTC

Similarities Do a need analysis for clients. Understand clients investment objectives Need a UTC license.
Differences
Financial planner need to have a IA license. Financial planner uses the financial planning skills.
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Chapter 5 Page 11
TAXATION & INFLATION

How it impacts INCOME RETURN
Tax rate % (a)
10
Actual Return after tax Inflation Return after tax (d) % Investment % (c) & inflation % return % (b) =(b)-[(a)x(b)] =(c) (d)
5.0 10.0 12.0 4.5 9.0 10.8 4.8 -0.3 +4.2 +6.0
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THE IMPACT OF INFLATION ON INVESTMENT OBJECTIVES

10 years time with the inflation rate of 4%, 4.8% or 5%? Compounding factor for a sum of money = ( 1+i)n Where i = Inflation rate n = no. of years
Inflation rate End of Year
10
Chapter 5 Page 12
A house costs RM150,000 today, how much will it costs for, say,
4%
RM 222,037
4.8%
RM 239,720
5%
RM 244,334
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Chapter 5 Page 12
Rule of 72
72 Given interest rate Years to double given sum of money
72 Given inflation rate
Years to halve a real value of a given sum of money

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The effect of charges on investment returns:
Chapter 5 Page 14
Assume an investor invested RM100,000 in a UTS that has initial entry cost of 7% with an MER of 2% for 5 years and 12% of return every year.
Working Money : RM100K/(1+7%) = RM93,457.94 MER : 2% p.a. Rate of Return : 12% p.a. Effective Rate of Return = 12% - 2% = 10% Compounding Factor For Lump Sum Investment := (1+i)n where i = rate of return n = no. of years Compounding Factor =( 1+10%)5 = (1+0.1)5 =1.6105 = RM93,457.94 x 1.6105 = RM150,514.01
Future Value
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Chapter 6 Page 5
What is Syariah-based UTS?

Only invest in instruments that comply with Syariah requirements. Areas different with conventional UTS: Objectives of the funds Investment strategy Operations and management of the fund Documentation Investment avenues and activities Accounts and reporting
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Chapter 6 Page 4-5
Syariah vs Conventional UTS

Syariah
Objectives of the funds
Conventional
Achieve both capital and Income can be derived income growth within from any sources as the scope of Syariah accordance to deed Aligned with the objective of Syariahbased fund Aligned with the objective of conventional fund
Investment strategy
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Chapter 6 Page 4-5

Syariah
Operations and management of the fund UTMC ensure excess fund invested in Syariah-based instrument Daily operations comply with SC and Syariah requirement Required to appoint a Syariah Committee/Adviser Registered with SC & renewable every 3 years
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Conventional
Daily operations comply with SC requirement No other restrictions
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Chapter 6 Page 4-5

Syariah
Documentation Deed and prospectus drafted in accordance with Syariah requirements Syariah Committee /Adviser report is added in Interim and Annual report
Conventional
Deed and prospectus drafted in accordance with the guidelines of the SC No need to include Syariah Committee/ Adviser report in any report
Accounts and reporting
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THE REGULATORY FRAMEWORK

Securities Laws & Regulations
Empower
Chapter 6 Page 6
Securities Commission
Regulates Independent of each other
Syariah Advisory Council
Trustee
Executes
UTMC
Deed
Issues
Syariah Committee/ Prospectus Unitholders

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Syariah Adviser
Relationship Between Parties in A Syariah-Based UTS
Chapter 6 Page 7
Unit Holders
Unit Holders
Musyarakah Contract
share among the profit derived or any other agreed profit-sharing ratio.
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Unit Holders UT Manager
Chapter 6 Page 7
Wakalah (agency)
UTMC act on behalf of unitholders to invest and manage UTS
Bai
Contract of sale and purchase between unitholders and UTMC
Wadiah Yad-Dhamanah (guaranteed custody)

Owners of the units are unitholders, custodian is UTMC Contract takes place when UTMC receive payment but prior the creation of units 109
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Chapter 6 Page 7
UT Manager
Trustee
No direct relationship Both are agents for unitholders

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Chapter 6 Page 7
Unit Holders
Trustee
Wakalah (agency)
Trustee acts for and on behalf to be the custodian of the fund Safeguard the interest of unitholders
Wadiah Yad-Dhamanah(after the units created)

Owners of the unit s are unitholders, the custodian is trustee.
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Investment Portfolio
Chapter 6 Page 8
Excess cash/liquid assets -kept/invested in Syariahbased instruments, i.e. Islamic current account or investment account. Eg.
Syariah-based units/shares of other collective investment schemes Islamic Securities and Corporate Islamic Bonds Government investment issues Islamic Accepted Bills Bank Negara Negotiable Notes
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Appointment of Syariah Committee/Syariah Adviser

Registered with SC At least 3 independent members Minimum 1 full-time officer Notified SC on resignation
Chapter 6 Page 11
Vacates positions immediately if subject to disqualification or unfit to hold office

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Roles, Power & Duties

Syariah principles Provide expertise and guidelines
SYARIAH ADVISER
Chapter 6 Page 12
Ensure funds managed according to
Consult SC on any ambiguity Act with due care, skill and diligence Responsible for scrutinising the funds compliance report (by compliance officer)
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Roles, Power & Duties

with Syariah requirements: UTF reports, transactions, etc Annual and interim reports
SYARIAH ADVISER
Chapter 6 Page 12
Ensure the following items complies
Deed Prospectus Promotional materials
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Syariah Compliance Review

Syariah Advisory Council gathers information
Chapter 6 Page 13
SC publishes booklet - 6-monthly basis (last Friday of April and October each year) Booklet highlights areas e.g.: newly classified Syariah-compliant securities newly classified Syariah non-compliant securities benchmark determining Syariah status and etc.
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Syariah Compliance Review

companies will be classified as NON-COMPLIANT SECURITIES if involved in core activities: Financial services based on riba(interest) Gambling
Chapter 6 Page 13
Non-halal products or related products manufacturing Conventional insurance entertainment activities that non permissible by Syariah manufacture or sale of tobacco-based products or related products stockbrocking or share trading in Syariah non-compliant securities
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Disposal of Syariah-Non Compliant Securities

Compliant Securities to Non Compliant Securities
Chapter 6 Page 14
To liquidate when value of securities exceeds original investment cost Capital gain at the time of announcement - can be kept by the investors Capital gain after announcement day should be channeled to charitable bodies Investors are allowed to hold investments if Market Price < Investment cost until dividends received and market value equals original cost
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Disposal of Syariah-Non Compliant Securities

Non-compliant Securities Investors who invest based on Syariah principles are to dispose any non-compliant securities currently hold, within a month Gain made during or after disposal must be channeled to charitable bodies Investor has a right to retain original investment cost
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Tutorial Computer UnitTrust Exam-EnGLIS 010808

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Tutorial Computer UnitTrust Exam-EnGLIS 010808

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Comprehensive CUTE

Agency Development & Training

Agency Development & Training

In all sections where applicable:

Basic Features Of UTS

Chapter 1 Page 5-6

Chapter 1 Page 6-8

Chapter 3 Page 23&37

RISK DISCLOSURE STATEMENT

Chapter 1 Page 7-8

Unit Trust Structure

Chapter 1 Page 9-11

(Mode of Operations Governed by the Deed)

Possible Capital Gain & Income

Roles & Responsibilities

Roles & Responsibilities

Approves & monitors all financial transactions Collects all incomes

Roles & Responsibilities

Reap the rewards of the fund

Chapter 1 Page 11-12

Chapter 1 Page 13-16

FIXED INCOME UTS

MONEY MARKET UTS

REAL ESTATE INVESTMENT TRUSTS

EXCHANGE TRADED FUNDS

GOVERNMENT SPONSORED UTS

COLLECTIVE INVESTMENTS IN MSIA

Chapter 1 Page 24-28

Chapter 1 Page 26-27

Portfolio Turnover Ratio (PTR)

Formula 2:Chapter 1(Page 1)

DIRECT FEES & CHARGES

NON DISCRETIONARY FEES & CHARGES

Slide 33 ST2 Details of Topics

MANAGEMENT EXPENSE RATIO (MER)

Management Expense Ratio

Ave. Fund Size

41524 X 100 3,122,250

Chapter 1 Page 32-37

Chapter 1 Page 36-43

Chapter 1 Page 38-43

UNIT SPLITS & DISTRIBUTIONS

Chapter 1 Page 44-46

Regulation of unit trust industry

Registered persons include :

Regulation of the UTMC

Regulation of the UTMC

Regulation of the UTMC

Regulation of the UTMC

Regulation of the UTMC

Regulation of the UTMC

Regulation of the UTMC

Chapter 2 Page 10-12

Regulation of the UTMC

Chapter 2 Page 14-16

Regulation of the Trustee

Chapter 2 Page 14-16

Regulation of the Trustee

Chapter 2 Page 14-16

Regulation of the Trustee

Chapter 2 Page 14-16

Regulation of the Trustee

Chapter 2 Page 14-16