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Questions and Answers
For every unit sold, how much will be set aside to equalize the earlier taxable income for unitholders' distribution?
RM0.0025
What is the total amount allocated to equalize the earlier taxable income for 12,000 units sold?
RM30.00
What is the NAV per unit after the split for a UTMC that declared a unit split of 1:10 with a pre-unit split NAV of RM 32,000?
RM 1.70
Calculate the amount Mr. B will receive if he sells 15,000 units of Fund XYZ with a NAV of RM 0.271 (3 decimal points).
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Which of the following UTS best suits the eligibility requirements stated?
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What are the major contents of the Annual Report of UTS B that Unitholder Z will NOT come across?
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Before 1 January 2007, Azmi has RM189,345 in A/C 1, RM94,672.50 in A/C 2, and RM31,557.50 in A/C 3. After 1 January 2007, each sub-account has: Account 1 : ______ ; Account 2 : ______
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An investor can obtain a loan from a financial institution for the purpose of investing in UT. Mr. B wants to invest RM 80,000 in Equity UTS. Assuming he has borrowed up to the maximum margin of financing, what would be the amount he needs to invest on his own?
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The following are the roles of UTC, except:
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Which of the following can be used to measure UTS in Malaysia?
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The statements below are about Management Expense Ratio (MER) of a particular fund in UTS, except
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Match the following terms to their definitions:
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Which of the following is realised income/gains?
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What documents does Azmi have to provide when agreeing to transfer his amount from Account 1 balance to UTS C?
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Identify the key elements in relation to the concept of personal financial planning.
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Which of the following are the benefits of an effective financial planning? (Select all that apply)
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Disclosure Statement is not needed as an investor is investing through the EPF Investment Scheme and not loan financing.
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An investment in UTS can be used to meet longer term needs except __________.
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What is the effective rate of return after tax and inflation? $\text{Rate of return} - (\text{Rate of return} \times \text{Tax rate})$
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What is the difference between the value of RM135,500 in 4 years’ and 5 years’ time with an inflation of 4.5% pa.? Answer in RM.
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If a customer is unsatisfied with UTC’s marketing ethics, to whom can they direct their complaints?
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What is the value of the investment after 5 years?
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What is the appropriate time frame for the FMUTM Council to refer a complaint to an appointed Investigating Committee?
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Why is compliance an advantage to UTC?
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Assumed that the on-going management fee is 1.5% instead of 1.4%, what is the value of investment after 5 years?
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What SHOULD NOT be the UTC’s role in order to reduce clients' confusion and concern about investment decisions?
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Which strategies are undertaken to develop the Islamic capital market?
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Which of the following statement is false regarding Syariah-based UTS?
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Which of the following statement regarding 'Syariah-non compliance risk' is valid?
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Which is/are the risk(s) that will impact only for Syariah-based UTS rather than conventional UTS?
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When was the first Islamic bond launched in Malaysia?
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What is the meaning of Musyarakah in Syariah contracts?
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What is the major duty of Syariah Committee/Adviser?
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Which of the following items is not the responsibility for Syariah Committee/Syariah Adviser in order to ensure that the management of the Syariah-based UTS complies with Syariah requirement?
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What is the Syariah contract - BAI means in relation to unitholders and UTMC?
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Calculate the Distribution Equalisation (a) amount if Undistributed Income for DEF Balanced Fund is RM175,000 and NAV of the Fund is RM70,000,000.
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Calculate the Net Payable (b) which will be received by Ms.Alyssa.
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Study Notes
UTMC and EPF
- A person has RM20,000 in Account 1 and wants to invest in UTS C.
- The maximum amount that can be invested from EPF is RM6,000 (30% of eligible amount).
- The eligible amount is RM20,000 - RM14,000 = RM6,000.
- Documents required to transfer amount to UTS C include:
- Completed EPF application form [Form KWSP 9F (AHL)].
- One certified true copy of the client's identity card (IC) photocopied on A4-sized paper, with both the front and reverse of the IC photocopied on the same face of the paper.
- Client's right and left thumbprints affixed on the above photocopy.
- Completed application form from UTMC Z for UTS C.
- Risk Disclosure Statement signed by investor.
Investment Options
- Cash and Fixed Deposits:
- Not suitable for medium to long-term investment.
- Offers lower relative returns due to lower risk.
- Direct Share Investment:
- Requires sound financial knowledge and time to gain profit.
- Direct Investment in Property:
- Small investors may have difficulty gaining exposure due to large capital requirements.
- International Investments:
- Affected by tax and other regulations, costs of managing and accounting for currency exposure.
- Financial Derivative Products:
- An avenue to earn potentially high returns (or losses) without large capital outlays but requires sound knowledge and understanding.
UTS and EPF
- Proceeds from the disposal of units will be repaid to investor.
- Azmi can sell his units in UTS C after a few years of investment.
- The repurchase proceeds paid by UTMC Z will be directly credited into member's Account 1.
Compliance and Ethics
- Compliance is the responsibility of everyone in the organization.
- Benefits of compliance include:
- Enhanced reputation.
- Reduced risk of litigation.
- Increased business.
- The UTC Code of Ethics includes:
- Honesty, Dignity, and Integrity.
- Appropriate Designation or Title.
- Advertisements and Promotional Materials.
- Appointment of qualified persons.
- Fair Dealing.
SC Requirements
- The annual report of UTS should include:
- Financial Statements of UTS.
- Manager's Report.
- Auditor's Report.
- Unitholder's right is not a required content in the annual report.
FMUTM and Complaints
- A customer can direct their complaints through FMUTM or SC.
- FMUTM's Executive Director can refer the complaint to the FMUTM Council within 14 business days.
- The Council may refer the complaint to an appointed Investigating Committee to ascertain if the complaint is valid or has any substance.
Importance of Compliance
- Compliance is an advantage to UTC as it enables them to update their knowledge and further enhance their reputation.
Financial Planning
- Financial planning can:
- Protect an individual's assets from the effects of inflation.
- Ensure an adequate income, when it is needed.
- Give an individual "peace of mind" in regard to their financial situation.
UTC's Role
- UTC's role is to educate clients on investment strategies that meet their financial goals within a certain time frame.
- UTC should not advise clients to invest by loan financing if they have no money.### Unit Trust Calculation
- To calculate the Trustee Fee, use the formula: MER = [fees + recovered expenses] x 100 / Average Fund Size
- For example, if the fees are RM 21,200, and the Average Fund Size is RM 1,500,000, the MER is 1.47%
Unit Split
- When a UTMC declares a unit split, the NAV per unit before the split is divided by the split ratio to get the new NAV per unit
- For example, if the NAV per unit before the split is RM 2.00, and the split ratio is 1:10, the new NAV per unit is RM 0.20
Trustee Fee
- The Trustee Fee is calculated by subtracting the other fees from the total fees
- For example, if the total fees are RM 22,050, and the other fees are RM 21,200, the Trustee Fee is RM 850
NAV Calculation
- The NAV (Net Asset Value) is calculated by dividing the total value of the assets by the total number of units in circulation
- For example, if the total value of the assets is RM 500,000,000, and the total number of units in circulation is 250,000,000, the NAV is RM 2.00 per unit
Repurchase Amount
- The Repurchase Amount is calculated by multiplying the number of units repurchased by the NAV per unit
- For example, if the number of units repurchased is 15,000, and the NAV per unit is RM 0.271, the Repurchase Amount is RM 4,065
Eligibility Requirements
- To be an authorized person, an individual must:
- Be at least 21 years of age
- Have attained at least Grade 3 in SPM (or its equivalent)
- Obtain a pass on a qualifying examination conducted by a body approved by the SC or a recognized self-regulatory organization
- Not be an insurance agent or life insurance agent
Cooling-Off Right
- The Cooling-Off Right is an opportunity for an investor to reconsider their purchase within a certain period
- This right is provided as a safeguard to investors who may have purchased units without fully understanding the UTS or who may have been misled by the UTC
Annual Report
- The Annual Report of a UTS includes:
- Average Annual Return over one, three, and five years, and since launch
- The UTS's investment objectives and policies
- Auditor's Report
- Risk Disclosure Statement
Realised Income or Gains
- Realised income or gains comprise:
- Dividend income received
- Interest income received
- Other income received
- Realised capital gains from the sale of investments### Unit Trusts (UTs)
- An investor can obtain a loan from a financial institution to invest in UTs, with a maximum margin of financing (e.g., 67% of the investment amount).
- The balance of the investment amount (e.g., 33%) must be paid by the investor themselves.
- The investor's own money is used to invest in UTs, and the loan is used to finance the remaining amount.
Roles of Unit Trust Consultants (UTCs)
- Inform investors about the structure of UTs and their rights as unitholders.
- Be responsible to customers' requests with honesty and dignity.
- Fine-tune their product knowledge.
- Not engage in force-selling to customers.
Measuring Unit Trust Performance
- Benchmarks can be used to measure UT performance.
- Total Return over Various Time Periods can be used to measure UT performance.
- Performance tables can be used to measure UT performance.
- Asset allocation is not a measure of UT performance.
Marketing and Distribution of Unit Trust Funds
- All those entering the unit trust industry must meet the requirements of the Fund Managers and Trustees (FMUTM).
- Persons registered with FMUTM must bring their authorization card when marketing or distributing unit trust funds.
- Persons must be at least 21 years old to market and/or distribute unit trust funds.
Investment Restrictions
- The Securities Commission specifies the maximum exposure of a UT's portfolio to specific investments.
- The limit can be in the form of exposure to a single issuer, class of securities, or group of companies.
- Investment restrictions are in place to limit the downside of investing in any one single stock.
Leveraging Investment
- Leveraging investment means borrowing funds to invest, expecting the rate of return to exceed the borrowing cost, thus gaining additional profit.
- This involves using debt to increase the potential return on investment.
Syariah Unit Trusts (UTS)
- The main objective of Syariah UTS is to provide an alternative investment option for investors sensitive to Syariah principles.
- Returns will avoid the incidence of riba or usury interest.
- Stocks will exclude companies involved in activities, products, or services related to conventional banking, insurance, financial services, gambling, and non-halal food products.
- Syariah fee is borne by the Management, not the investors.
Management Expense Ratio (MER)
- MER shows the fees and expenses incurred by the fund in a year.
- The formula for MER is (fees + recovered expenses) X 100% / Average Fund Size.
- A lower MER indicates that the UTMC may be managing its operating costs efficiently for its fund size.
Compounded Annual Return
- Compounded annual return is an annual compound rate of return achieved by an investment over its holding period.
- It can be calculated using the formula FV = PV (1 + i) n, where FV is the future value, PV is the present value, i is the rate of return, and n is the period.
Pricing and NAV Calculation
- The unit trust manager is entitled to receive an annual management fee based on the Gross Net Asset Value of the fund.
- The fee is paid by the unit holder to the unit trust manager for ongoing management of the unit trust fund.
- Net Asset Value (NAV) per unit is calculated by dividing the total NAV by the number of units in circulation.
Other Key Concepts
- Portfolio Turnover Ratio (PTR) is a measure of the fund's trading activity.
- PTR is calculated as ½ x [total investment acquisitions + total investment disposal] / Average Fund Size.
- PTR can be used to evaluate the fund's performance.
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Description
Quiz questions related to finance and investment, including borrowing for investment purposes. Topics include UT, Equity UT, and more.
