Tutorial Computer UnitTrust Exam-EnGLIS 010808

7/30/2019 Tutorial Computer UnitTrust Exam-EnGLIS 010808

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Comprehensive

CUTE 0108081

CUTE


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Gentle RemindersGentle RemindersGentle RemindersGentle Reminders

Session Duration: 1 full day

Required to sign in TWICE.

CUTE 010808

ec ame o. Failure to sign will result in

non-attendance.

Agency DevelopmentAgency Development

& Trainin

g& Training


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Gentle RemindersGentle RemindersGentle RemindersGentle Reminders

CUTE 010808

Agency DevelopmentAgency Development

& Trainin

g& Training


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PROGRAMME OUTLINEChapter 1 : Understanding Unit Trusts

Chapter 2 : Regulation of The Unit Trust

Industry

Chapter 3 : Servicing Clients and Marketing

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n rus sChapter 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

CUTE 0108085

Replace PDUT with UTC

New Abbreviations CUTA : Corporate Unit Trust Advisers

CMSA : Capital Markets and Services Act,

2007


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Basic Features Of UTS

Collective Investment Scheme

Ownership of fund - divided into units

Chapter 1

Page 2

CUTE 0108086

Returns distribution & capital appreciation

Investment opportunity for small investor


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Benefits Of UTS

Diversification

Ready access to funds / liquidity

Chapter 1

Page 3

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Investment exposure

Lower investment costs


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Disadvantages Of UTS

Risk

Loss of Control

Fees and Char es

Chapter 1

Page 5

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Opportunity Cost


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Methodof

Lump Sum

Reinvestment of income

Chapter 1

Page 5-6

CUTE 0108089

Regular Savings


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Leveraging / Gearing Max loan-to-valuation ratio is 67%

UTC must not directly/ indirectly encourage

sales through loans

Chapter 1

Page 6-8

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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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RISK DISCLOSURE STATEMENT

Outlines main risks involved in loan financing:

The higher the margin of financing, the greater

the potential losses/gains

Chapter 3

Page 23&37

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e serv c ng o oan repaymen s may ecomemore onerous if interest rates rise

Margin Calls may be requested in addition to

normal repayments

Returns are not guaranteed


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Risks Of Borrowing

Interest rate fluctuations Default in repayment of loan

Chapter 1

Page 7-8

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Premature repayment of loan

Margin call


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UITHOLDERSUITHOLDERS

MoneyPooled from

Investors

Possible

Distributions

Safeguard

(Mode of Operations Governed by the Deed)

Unit Trust Structure Chapter 1Page 9-11

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UTMCUTMCTRUSTEETRUSTEE

AUTHORIZEDAUTHORIZED

IVESTMETIVESTMET

UTSUTS

Possible

Capital Gain& Income Invests

s theAssets of

the UTS

theOperations

of the UTS


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Roles & ResponsibilitiesReports to trustee regarding UTSinvestments

Promotes & distributes UTS

Chapter 1

Page 10

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Distributes income, calculates unitprice

Provides repurchase facilities

Maintains registration of

unitholders

UTManager

UTManager


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Roles & ResponsibilitiesSafeguards UTS assets

Ensures funds are invested in

accordance with deed & objectives

Chapter 1

Page 10

CUTE 01080815

Supervises the operations

Approves & monitors all financial

transactionsCollects all incomes

TrusteeTrustee


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Roles & Responsibilities

Invest & responsible for fees thatearned by UTMC & trustee

Chapter 1

Page 10

CUTE 01080816

Reap the rewards of the fundUnit

HoldersUnit

Holders


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DEED Rights & obligations of UTMC

Rights & duties of Trustee Rights of Unitholders

Chapter 1

Page 10

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Authorised investment

Valuation of units

Outline way in which changes can be

made to the deed


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1. Units are not quoted on a

stock exchange

2. Unit prices are computed

based on the underlying

net asset value of the fund

Listed/Closed-End Funds

1. Units quoted and traded on

stock exchange

2. Prices determined by

market forces of demand and

supply

Unlisted/Open-End Funds

TYPES OF UTSChapter 1

Page 11-12

CUTE 01080818

.

within the same trading day

4. Size of fund would

increase with the creation

of units and decrease with

the cancellation of units5. Transacted directly with

UTMC

.

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

ETF

BALANCED

SYARIAH

Chapter 1

Page 13-16

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REIT GOVERNMENT-SPONSORED


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EQUITY UTS Aggressive Growth Funds

Index Fund

Chapter 1

Page 13

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Income fund

International fund


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FIXED INCOME UTS

Mainly invest in corporate bonds,

government securities & MM instruments

Generally provide regular income with

Chapter 1

Page 14

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less emphasis on capital growth

Usually more secure

Usually held as portfolio diversification


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MONEY MARKET UTS Operate in similar way to bank account -

unit price normally set at fixed amount Invest in low risk money market

Chapter 1

Page 14

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nstruments Highly liquid & ideal for use as a short

term parking place Income distributions to investors paid

regularly


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REAL ESTATE INVESTMENTTRUSTS Invest in real property

Returns- rental income and capital

Chapter 1

Page 14

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apprec a on

Most are listed on stock exchange

Units in listed REIT can be bought and

sold through stockbrokers


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EXCHANGE TRADED FUNDS Investment objective - to achieve same

return as a particular market index Primarily invest in all securities / a

Chapter 1

Page 15

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represen a ve samp e o e secur esthat 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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BALANCED UTS Generally has a portfolio comprising

equities, fixed income securities, cash &property

Chapter 1

Page 15

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asset class of UTS

Prospect of returns higher than money

market UTS, saving accounts and fixed

deposits


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SYARIAH UTS

Catered for Syariah concerned investors

Invest in a portfolio ofhalalcompanies,

Chapter 1

Page 15

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s am c e ecur es on s or o er securities in accordance ofSyariah principle

Returns will also avoid the incidence ofriba

orusury interest


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GOVERNMENT SPONSOREDUTS

E.g. ASN, managed by PNB

Generally invest on a balanced basis

althou h e uit -invested UTS are also

Chapter 1

Page 16

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available

Equity invested - may have fluctuating and

variable unit price Balanced basis - normally have fixed

RM1.00 unit price

C


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COLLECTIVE INVESTMENTS INMSIA

CIS in Msia includes: UTS

Chapter 1

Page 17

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Pension and provident funds

Insurance plan

Pilgrims funds

Investment-linked Funds

Ch t 1


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INVESTMENT-LINKED FUNDS Promoted by life insurance companies

Investor acquires life insurance policy,

which represents no. of units in

Chapter 1

Page 17

CUTE 01080829

investment pool

Single premium and regular premium

Not subject to scrutiny by SC or monitoredby Trustee

Ch t 1


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PROSPECTUS

Legal document containing legal accounting

and investment terms

No sales can be made without a prospectus

Chapter 1

Page 24-28

CUTE 01080830

Updated every 12 months

Purpose provide necessary information

make an informed investment

decision

Chapter 1


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Portfolio Turnover Ratio (PTR)

An indication of the approach of UTMC to

Chapter 1

Page 26-27

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PTR :

1/2 x [total investment acquisitions + total investment disposals]

Average Fund Size


Chapter 1


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DIRECT FEES & CHARGES Initial Service Charge

Service, sales, entry, up front Charged during purchase of units

Chapter 1

Page 29

CUTE 01080832

Transfer to other person, switching

Exit Fee or Repurchase Charge

Charged during units disposal

Alternative to Initial Service Charge

Chapter 1


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NON DISCRETIONARY FEES &CHARGES

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

Chapter 1

Page 30

CUTE 01080833

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 TopicsSean, 09/11/2007

Chapter 1


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MANAGEMENT EXPENSE RATIO(MER)

To assess previous years cost of holdingunits in UTS and compare it to :

Chapter 1

Page 31

CUTE 01080834

,

MER of competitor UTS, and

costs of other investment opportunities

MERMER == (Fees + Recovered Expenses)

Average Fund Size

X 100

Chapter 1


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RM

Management Fee 31,764

Trustee Fee 6,078Auditors Fee 1,200

Bank Charges & Others 2,482

MManagementanagement EExpensexpense RRatioatio

E.g.

p

Page 31

CUTE 01080835

,

Ave. Fund Size RM3,122,250

MER = 41524

3,122,250

X 100

= 1.33%Exclude Syariah Fee


Chapter 1


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MEASURING PERFORMANCE

p

Page 32-37

Raw return

Compounded annual return

UTS Performance Table

Total Returns over various time periods

CUTE 01080836

Formula 4&5:Chapter 1(Page 2)

an ngs uar es

Funds under management

Benchmark

Risk measures Consistency

Qualitative Factors

Chapter 1


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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

Page 36-43

CUTE 01080837

single-pricing. All Buying & selling of units will be

transacted based on SINGLE PRICING,

i.e. NAV.

Creation & Cancellation price

Chapter 1


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UNIT PRICING

Calculation of NAV comprises of:

Investments at market value

Liquidity (cash available for investment)

Page 38-43

CUTE 01080838

Allowance

Creation and Cancellation Price

Creation Price = NAV + TCF

Cancellation Price = NAV - TCF


Chapter 1


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UNIT PRICINGPage 43

Forward Pricing

Transaction done based on the price

which will be determined at the end of

CUTE 01080839

Historic Pricing

Transaction done based on the pricewhich was determined previous day

UNIT SPLITS &Chapter 1

P 44 46


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UNIT SPLITS &

DISTRIBUTIONS UNIT SPLIT

A split is the division of a single unit inUTS into several units

Page 44-46

CUTE 01080840

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)

Chapter 2

P 1


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Regulation of unit trustindustry

The protection of investors interest

Pro er disclosure to investors

Page 1

CUTE 01080841

Control over market participants

The prevention of improper market

practices

Chapter 2

Page 2


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The Securities Commission (SC)- Securities Commission Act, 1993

- Capital Markets and Services Act, 2007

Regulatory Structure

Page 2

CUTE 01080842

Covering UTMC, UTS, IUTA, CUTA, UTCand fund managers

Chapter 2

Page 3


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Other Government Regulators

Companies Commission of Malaysia


Page 3

CUTE 01080843

Bursa Malaysia

Bursa Malaysia Securities Clearing Sdn.

Bhd

Chapter 2

Page 3


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FMUTM

Registering body for all UT distributorsand management companies


Page 3

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v - u u uindustry

Formulates sound & ethical business

practices Provides investor protection

Chapter 2

Page 3


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Laws & Regulations

Capital Market & Services Act 2007


Page 3

CUTE 01080845

Guidelines issued by the SC

Guidelines issued by the FMUTM

Chapter 2

Page 4


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Page 4

Capital Market & Services Act 2007

Introduces a single licensing regimeinstead of multiple separate licenses

Allow ca ital market intermediaries to hold

CUTE 01080846

one license to carry on any one or moreregulated activities

Any person carrying out any regulated

activity such as dealing in UT must bei) a holder of CMSL or

ii) a registered person

Chapter 2

Page 4


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Page 4

Regulated activity:

Dealing in securities (restricted dealing inUT), fund management, investmentadvice & financial planning

CUTE 01080847

eg stere persons nc u e :a) Pre-approved institutions (licensedbanks & finance company, etc)

b) Persons registered with a bodyapproved by SC i.e. FMUTM (UTC,

IUTA & CUTA)

Chapter 2

Page 3


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Guidelines issued by the SC

Guidelines on UT Funds Prospectus Guidelines for CollectiveInvestment Schemes


g

CUTE 01080848

Guidelines on Marketing & Distribution ofUT Funds

Guidelines on UT Advertisements and

Promotional Materials

R l t St t

Chapter 2

Page 4


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Regulatory Structureg

Guidelines issued by the FMUTM Guidelines for Registration of Institutional

Advisers for the Marketing & Distribution of UnitTrust (IUTA)

Guidelines for Re istration of Cor orate

CUTE 01080849

Advisers for the Marketing & Distribution of UnitTrust (CUTA)

By-laws Relating To The Procedure ForDisciplinary Proceedings (Chapter 4)

Code of Ethics and Standards of ProfessionalConduct for Unit Trust Industry (Chapter 4)

Investment Management Standards

R l ti f th UTMCChapter 2

Page 4


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Key requirements of a UTMC To safeguard unitholders interest

Manage & administer in accordance with thedeed, guidelines and laws

Keep proper records of a UTS

Regulation of the UTMC

CUTE 01080850

Provide UTS reports Interim & Annual Call for unitholders meeting

Keep register of unitholders

Ensure that information acquired is notimproperly used

To set up a compliance unit and internal auditunit

R l ti f th UTMCChapter 2

Page 5


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Regulation of the UTMC Approval of UTMC

- UTS must be managed by UTMC that are

approved by the SC

- To be eligible to act as a UTMC, anapplicant must:

CUTE 01080851

be an entity incorporated in Malaysia

be a license holder under CMSA

comply with Bumiputra and foreignownership requirements

satisfied a minimum shareholdersfunds at all times as prescribed by the

Act

Chapter 2

Page 6


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Approval of UTMC

- Directors of a UTMC comprise at least 2independent members while

CUTE 01080852

least one-third independent members atall times

- Chief Executive Officer of UTMC mustbe registered with the SC as a full-timeofficer

Chapter 2

Page 6


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Requirements of UTS

- Approval of SC

i) Establishment of new UTSii) Registration for the appointment of UTMCs

directors, key personnel, members of UTS

CUTE 01080853

investment committee, syariah committee &panel of advisers

iii) Registration of deed

iv) Post vetting & registration of prospectus

v) Increase in fund sizevi) Investment in foreign markets

l i f h

Chapter 2

Page 7


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Prospectus of a UTS

- Important legal document & must beauthorized by the directors of UTMC

-

CUTE 01080854

- SC may for public information publish aregisterable prospectus beforeregistration

- Publication or registration does notmean SC recommends investment ortake responsibility for the prospectus

Chapter 2

Page 8


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Regulation of the UTMC Advertising of a UTS

- Advertisement must be accurate & honest- Reference to risks involved in investing in

CUTE 01080855

- Display warning statements- Any A&P material by UTMC are subject to

vetting by the SC

- UTC is only allowed to use A&P materialsproduced by UTMC, IUTA or CUTA

R l ti f th UTMC

Chapter 2

Page 9


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The Investment Committee

- to oversee the prudent and efficientinvestment of each UTS

CUTE 01080856

- mus e reg s ere w e

- the role of investment committee is toformulate, implement and monitor the

investment management policies of theUTS

R l ti f th UTMC

Chapter 2

Page 10-12


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General Characteristic of UTS Investment

UTS may invest in the following that are

consistent with its objectives:- transferable securities


CUTE 01080857

- ,

instruments- unit/shares in collective investments

- derivatives

Investment restrictions and limits(refer to page 2-12)

Chapter 2

Page 14-16


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Regulation of the Trustee

Key requirements of a Trustee

- A Trust Company registered under

CUTE 01080858

,

Trust Corporation Act, 1995

- Appointment Approved by SC

- Registered with SC- Independent of UTMC & UTS

Chapter 2

Page 14-16


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Regulation of the Trustee Custody of the assets of a UTS

- all assets of a UTS are held in thetrustees name for safekeeping

CUTE 01080859

nves men po c es an ransac ons

- must be aware of the investment

policies of a UTS and be satisfied that

the investment policies are sound andin the interests of unitholders


Chapter 2

Page 14-16


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Dealing in units

- the trustee will create and cancel unitsin a UTS when the UTMC requests

CUTE 010808

ccoun s an au

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

60

Chapter 2

Page 14-16


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Regulation of the Trustee Reports to unitholders- Trustee Report is included in the annual report

of the UTS- The trustee states whether, in its opinion:

CUTE 01080861

e as manage e accor ng

to the deed, guidelines, act

the valuation/pricing and the creation &

cancellation of units is carried out inaccordance with the deed & regulatory

requirement


Chapter 2

Page 14-16


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Report to the SC- must report to the SC if it is of the view

CUTE 01080862

acted in the interest of unitholders, orin accordance with the deed or

guidelines

Regulation of Marketing andChapter 2

Page 17-18


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g g

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

CUTE 01080863

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.

Regulation of Marketing andChapter 2

Page 18-19


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Distribution of UT Dealing in UTS

UTMC, IUTA & CUTA are responsible forensuring that all person involved in themarketing and distribution of UT are UTC

CUTE 01080864

reg s ere w an au or ze y e

Eligibility Requirement for an Authorized Personwho is an Individual

- Refer to Appendix 1 (page 2-22)

Authorization Card by FMUTM

Agency Structure

Chapter 2

Page 24


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Tiers in Agency Structure It is standardized and not exceed 4 tiers:

Group agency manager Agency manager

CUTE 01080865

Agency supervisor Agent

UTMC encouraged to reduce number oftiers for the interest of investors

Size of Agency Unit

Chapter 2

Page 24


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Size of Agency Unit

Should not exceed 50 persons atall times

CUTE 01080866

A unit comprises supervisor andhis direct downlines

Agent is not allowed to recruit

COOLING OFF RIGHT

Chapter 3

Page 6


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COOLING OFF RIGHT

Opportunity for investors to reconsider their

investment purchase

Within 6 BUSINESS DAYS

CUTE 01080867

Full refund

Given to a first time investor EXCEPT:

a corporation or institution

a staff of UTMC; and

UTC

REPURCHASE OF UNITSChapter 3

Page 6-8


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Unitholder has the right to withdraw from UTS

any time

Within 10 CALENDAR DAYS

CUTE 01080868

Repurchase Request Form

Complete payment instruction

Suspension by Trustee (approved by SC)/21

days

SWITCH

Chapter 3

Page 6-8


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SWITCH

UTS AUTS A UTS BUTS B

CUTE 01080869

Change of market conditions Personal circumstances

Chapter 3

Page 9


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REPORTING TO UNITHOLDERS On Acquisition of Units

During Period Units in UTS Are Held

INTERIM REPORT

CUTE 01080870

ANNUAL REPORT

On Disposal of Units

REPORTING TO UNITHOLDERS

Chapter 3

Page 10


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REPORTING TO UNITHOLDERS

ANNUAL REPORT

Key performance data

CUTE 01080871

Trustees Report

Financial Statement of UTS and AuditorsReport

Chapter 3

Page 10


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REPORTING TO UNITHOLDERS INTERIM REPORT

Minimum contents: Managers Report

CUTE 01080872

Trustee Report, and Financial Statement

should be endorsed by Directors

Need not be audited

INCOME DISTRIBUTION

Chapter 3

Page 11-13


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INCOME DISTRIBUTION

Buying Distributions- buy a distribution

by acquiring units just before ex-D date

CUTE 01080873

Distribution Equalisation a portion of

money set aside from investments to

equalize unitholders distribution income

Formula 1&2:Chapter 3(Page 3)

Chapter 3

Page 17


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EPF TRANSFERS W.E.F. 1 January 2007, A/C 3 no longer

exists.

All existing savings previously accumulated in

CUTE 01080874

are merge n o .

Re-shuffled as follows:

A/C 1 Retirement (70%)

A/C 2 Housing loan, education, pre-retirementwithdrawal at age 50 and/or medical expenses (30%)


BASIC PRINCIPLES OFChapter 3

Page 24


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MARKETING UTS Why Marketing of UTS Fail?

Product Awareness

CUTE 01080875

UTS performance

Risk elements

Previous bad experience

Other investment alternatives

OTHER INVESTMENTChapter 3

Page 25,27&38


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ALTERNATIVES Cash and FD

Direct Share Investment

CUTE 01080876

rec nves men n roper y

International investment

Financial derivatives products

ADVANTAGES INVESTING IN

Chapter 3

Page 28-32


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UT

Diversification

Professional Fund Management

CUTE 01080877

qu y

Ease of Purchase

Meeting Investors Longer Term Needs

Dollar Cost Averaging

DIVERSIFICATION

Chapter 3

Page 28-29


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Generally invested in a wide range of

securities

CUTE 01080878

Diversifies across asset classes e.g.

shares, fixed income securities, property &

cash

PROFESSIONAL FUND

Chapter 3

Page 29


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MANAGEMENT All customers benefit from investment

advice

CUTE 01080879

investments

Access to a wide range of resources and

information, specialized research andmarket analysis

LIQUIDITY

Chapter 3

Page 30


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A measurement of how long it takes tosell investment

CUTE 01080880

UTMC are obliged to repurchase units

Normally within 10 days

EASE OF PURCHASE

Chapter 3

Page 30


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Investors can easily buy units

Onl call UTMC IUTA or UTC to obtain a

CUTE 01080881

prospectus and all information needed to

make investment decision

MEETING INVESTORS

Chapter 3

Page 30


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LONGER TERM NEEDS

longer term needs, e.g.:

home purchase or overseas holiday

CUTE 01080882

childrens future education costs a retirement fund to complement EPF

Regular savings plan may help to build asubstantial sum of capital

Chapter 3

Page 30-32


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DOLLAR COST AVERAGING systematic and regular investment

fixed amount of money

if rices are movin down more units

CUTE 01080883

purchased and can reduce average costof entire investment portfolio

used over long periods to maximise its

benefits

RISKS INVESTING IN UT

Chapter 3

Page 32-34

Chapter 6


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Page 10

Investment Risk e.g. volatility

Risk of UTMC go out of business

Risk of changes in legislation

CUTE 01080884

policy Financing/loan/borrowing risk

Returns are not guaranteed Managers/management risk

Risk of non-compliance

RISKS INVESTING IN UT

Chapter 3,

Page 32-34

Chapter 6

Page 10


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Currency risk

Country risk Market risk

CUTE 01080885

Liquidity risk

Credit/default risk

Inflation risk

Interest rate risk

COMPLIANCEChapter 4

Page 3


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A form of control against risks & consequences of

breeching law or other internal/external obligations

Benefits to UTC from compliance: reduction in client complaints

CUTE 010808 86

reduced risk of litigation by clients

an enhanced reputation

opportunity for UTC to update knowledge

assurance on continuing career

ETHICS

C

Chapter 4

Page 4-12

Appendix 1

Page 16-30


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FMUTM Code :

Part A Code of Conduct for Ordinary Members

of FMUTM Part B Code of Conduct for organisations

Appendix 2

Page 31-34

CUTE 010808 87

reg s ere as

Part C Code of Conduct for persons registered

as UTC

2 sections: A code of Ethics

Standard of Professional Conduct

UTMC & IUTA

CODE OF ETHICS

Chapter 4

Page 6-7


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CODE OF ETHICS Professionalism

Integrity Confidentiality

CUTE 010808 88

Conflict of Interest

STANDARDS OF PROFESSIONAL

CONDUCT

Compliance with laws

Breach of laws

UTC

CODE OF ETHICS

Chapter 4

Page 7


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CODE OF ETHICS Honesty, Dignity & Integrity

Fair Dealing

Good Faith

CUTE 010808 89

Confidentiality

Professionalism

Acting with due care, skill & diligence Prompt, efficient and continuous service

UTCSTANDARD OF PROFESSIONAL CONDUCT

Chapter 4

Page 8-10


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STANDARD OF PROFESSIONAL CONDUCT

Compliance with laws

use of authorisation card

appropriate designation or title

marketin and distribution with ros ectus

CUTE 010808 90

adequate explanation advertisements and promotional materials

appointment of qualified persons

duty to supervise and monitor keeping abreast with industry

disciplinary proceedings

FMUTM DISCIPLINARYPROCEEDINGS

Chapter 4

Page 10-12

Appendix 3

Page 35-38


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PROCEEDINGS

Complaint normally handled by UTMC or

CUTE 010808 91

, u may e re erre o or

disciplinary proceedings

Complaint to FMUTM- must be in writing

Financial Planning

Chapter 5

Page 1


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A process of meeting an individualslife goals within a certain time framethrou h the ro er mana ement of

CUTE 010808 92

the individuals present andfuture finances.

The Purpose of

Financial Planning

Chapter 5

Page 2


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Financial Planning

Help fight inflation

Ensure adequate income in times of need

CUTE 010808 93

Provide roadmap of financial objective

Improve present & future lifestyles

Peace of mind

Areas in Financial Planning

Chapter 5

Page 2


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Cash Management Risk Management & Insurance Planning

CUTE 010808

Investment Planning

Tax Planning

Retirement & Estate Planning

94

Common Approach in

Financial Planning

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Financial Planning Key Steps:

Understanding the client Data gathering

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Analysing data Preparing the plan

Implementing the plan

Reviewing the plan


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CLIENT TYPES

Chapter 5

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Stage 1: Approximately 21-30 years

Stage 2: Approximately 31-44 years

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-

Stage 4: Approximately Age 61 years

and above

Financial Planner vs UTC

Chapter 5

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Financial Planner vs UTCSimilarities

Do a need analysis

for clients.

Differences Financial planner

need to have a IA

license.

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Understand clients

investment objectives

Need a UTC license.

Financial planner

uses the financial

planning skills.


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THE IMPACT OF INFLATION ON

INVESTMENT OBJECTIVES

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INVESTMENT OBJECTIVESA house costs RM150,000 today, how much will it costs for, say,

10 years time with the inflation rate of 4%, 4.8% or 5%?

Compounding factor for a sum of money

= ( 1+i)n

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Where i = Inflation rate

n = no. of years

RMRMRM239,720

4.8%

222,037

4%

Inflation rate

5%End of Year

244,33410


Rule of 72

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72

Given interest rate = Years to doubledouble givensum of money

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72

Given inflation rate =

Years to halvehalve a real

value of a given sum ofmoney


The effect of charges on investment returns:

Assume an investor invested RM100,000 in a UTS that

has initial entry cost of 7% with an MER of 2% for 5 years

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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%

has initial entry cost of 7% with an MER of 2% for 5 years

and 12% of return every year.

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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

Future ValueFuture Value = RM93,457.94 x 1.6105= RM93,457.94 x 1.6105

= RM150,514.01= RM150,514.01Formula 4:Chapter 5(Page 6)

What is Syariah-based UTS?

O l i t i i t t th t l ith

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Only invest in instruments that comply withSyariah requirements.

Areas different with conventional UTS:Objectives of the funds

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Investment strategy

Operations and management of the fund

Documentation

Investment avenues and activities

Accounts and reporting

Syariah vs Conventional UTS

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ConventionalSyariah

Income can be derived

from an sources as

Achieve both capital and

income rowth within

Objectives of the funds

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Aligned with theobjective of

conventional fund

Aligned with theobjective of Syariah-

based fund

Investment strategy

accordance to deed

the scope of Syariah

Syariah vs Conventional UTSSyariah Conventional

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y

Operations and

management of thefund

UTMC ensure excess

fund invested inSyariah-based

instrument

Daily operations

comply with SCrequirement

No other restrictions

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Daily operations

comply with SC and

Syariah requirement

Required to appoint a

Syariah

Committee/Adviser

Registered with SC &

renewable every 3

years

Syariah vs Conventional UTS

Chapter 6

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Syariah Conventional

Documentation Deed and prospectus

drafted in accordance

Deed and prospectus

drafted in accordance

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with Syariah

requirements

with the guidelines of

the SCAccounts and

reporting

Syariah Committee

/Adviser report is

added in Interim and

Annual report

No need to include

Syariah Committee/

Adviser report in any

report

Securities Laws & Regulations

Empower

THE REGULATORY FRAMEWORKChapter 6

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Securities

Commission

Syariah Advisory

Council

Regulates

Independent of each other

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Trustee UTMC

DeedSyariah Committee/

Syariah AdviserProspectus

Unitholders

Executes

Issues

Relationship Between Parties

in A Syariah-Based UTS

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in A Syariah Based UTS

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share among the profit derived

any other agreed profit-sharing ratio.

or

Musyarakah Contract

HoldersHolders HoldersHolders



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in A Syariah Based UTS

UnitHolders

UnitHolders

UTManager

UTManager

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Wakalah (agency)

UTMC act on behalf of unitholders to invest and manage UTS

Contract of sale and purchase between unitholders and UTMC

Bai

Owners of the units are unitholders, custodian is UTMCWadiah Yad-Dhamanah (guaranteed custody)

Contract takes place when UTMC receive payment but prior the

creation of units



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Sya a ased U S

UTUT

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No direct relationship

Both are agents for unitholders

ManagerManager rus eerus ee



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y

UnitHolders

UnitHolders TrusteeTrustee

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Owners of the unit s are unitholders, the custodian is trustee.

Wadiah Yad-Dhamanah(after the units created)

Trustee acts for and on behalf to be the custodian of the fund

Safeguard the interest of unitholders

Wakalah (agency)

Investment PortfolioChapter 6

Page 8

Excess cash/liquid assets -kept/invested in Syariah-


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cess cas / qu d assets ept/ ested Sya a

based instruments, i.e. Islamic current account or

investment account. Eg.

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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

Appointment of Syariah

Committee/Syariah AdviserSC

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/ y Registered with SC

At least 3 independent members

-

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Notified SC on resignation

Vacates positions immediately if subject to

disqualification or unfit to hold office

Roles, Power & Duties

Ensure funds managed according to

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Syariah principles

Provide expertise and guidelines

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Act with due care, skill and diligence

Responsible for scrutinising the funds

compliance report (by compliance officer)

SYARIAH

ADVISER

SYARIAH

ADVISER

Roles, Power & Duties

Ensure the following items complies

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with Syariah requirements:

UTF reports, transactions, etc

Annual and interim re orts

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DeedProspectus

Promotional materials

SYARIAH

ADVISER

SYARIAH

ADVISER

Syariah Compliance Review

Syariah Advisory Council gathers information

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SC publishes booklet - 6-monthly basis (last Friday

of April and October each year)

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. .

newly classified Syariah-compliant securities

newly classified Syariah non-compliant securities

benchmark determining Syariah status and etc.

Syariah Compliance Review

companies will be classified as NON-COMPLIANT

SECURITIES if involved in core activities:

Chapter 6

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SECURITIES if involved in core activities:

Financial services based on riba(interest)

Gambling

-

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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

Disposal of Syariah-Non

Compliant Securities Compliant Securities to Non Compliant

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p p

Securities

To liquidate when value of securities exceedsoriginal investment cost

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-

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 andmarket value equals original cost

Disposal of Syariah-Non

Compliant Securities

Chapter 6

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Non-compliant Securities

Investors who invest based on Syariah principles are

-

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119

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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