FIN548

Investment
Analysis

Chap. 12

Unit Trust
Prepared by:
NOOR ZATY AIZAHERA BINTI SALLEH 2015872868
NOR SHAKIRA BINTI MUSA
2015856804
NORFITRAH BINTI CHE MAT 2015827096
NUR ALIZA BINTI MOKHTAR 2015249224
SITI NOR BAIZURA BINTI ZAKARIAH
2015217496
KBM 242 4B | Mac July 2016

From 1980 - 1990

Entry of government participation
Formation of a committee
Committee of Unit Trust Funds
Skim Amanah Saham Nasional
launched by Permodalan Nasinal
Berhad in 1981 obtain
overwhelming response
Emergence of more unit trust
management companies

The formative years: 1959 - 1979

Slow growth and lack of public
interest
Five unit trust management
company, 18 funds introduced
Regulated by several parties
including
Registrar of Companies
Public Trustee Malaysia
Bank Negara Malaysia

Development of Unit Trust

From 2000 till current

Keep growing double the digit for first 7
years
Unfortunately, strong growth has been
punctuated by extraordinary financial
crisis in 2008 involve the global credit
crunch, banking crisis and rapid fall of
share price globally
Unit trust industry drop is less severe than
the fall in share price in Bursa Malaysia
due to its diverse nature.

From 1991 - 1999

Fastest growth in terms of new
management companies, funds under
management
Establishment of Securities Commission
1993 with implementation SC ( Unit Trust
Scheme) Regulation in 1996
Extensive marketing strategies by
Amanah Saham Bumiputera play main
role
Greater product innovation and
deregulation
Maintained an upward trend even though
faces the financial crisis 1997-98

Development of Unit Trust

What is Unit Trust??

pooled the
financial resources
of individual and
corporate
investors that has
similar financial
goal

professional
management
company job is to
make decision on
the investment
fund

Return received in
term of dividend
and capital
appreciation

easy and efficient

way to enjoy
earning of large
scale investment,
with the risk
spread out among
investors

Openend fund

Closeend fund
Type of
Unit
Trust

DIFFERENCEs
Open end

Close end

Does not have restrictions on the

amount of share, buy back share
when investors wish to sell.

EFFECT OF TRADING

is a publicly traded investment

,fixed amount of capital through
an IPO, will not buy back through
unit holders.

Have an unlimited number of

share.

NUMBER OF SHARE ISSUE

Have a limited number of share

If demand is high enough, the

fund will continue to issue share
no matter how many investors
there are.

TRADING OF UNIT TRUST

The fund is structured, listed and

traded like a stock on a stock
exchange( open market)

Investor buy and sell shares

directly with the mutual fund
company without a secondary
market

Management company will issue

share through IPO in the primary
market. Investor can sell back the
share to the other investor in the
secondary market.

Purchase and selling price is

determine by the net asset value
(NAV) of the funds

PRICING

Purchase and selling price is

determined by supply and demand.
Generally sell at premium or
discount (usually discount ) to
NAV.

Example: ASB

EXAMPLE

Example: public mutual funds

Similarities
SIMILARITIES

OPEN-END FUND CLOSE-END FUND

Diversification

Like open-end funds

Close- end fund may minimize risk of an individual investment because invest
in many companies, industries, and markets.
For individual investors, achieving similar asset allocation would involve
building a portfolio of many different investments.

Professional
management

managed by portfolio managers who are assisted by a team of analysts.

they research the companies, industries, and markets in which the funds invest.
Few individual investors can match the time and effort put in by professionals
whose full-time job is to track investments and seek new opportunities.

Economies of scale

By pooling money from investors and buying and selling securities in large
quantities, fund costs may be considerably lower than they might be for an
individual investor.
In addition, bookkeeping, tax calculations, and other activities can be simplified
for the individual investor.

Type of Unit Trust Fund

1. Equity Funds
2. Fixed Income Funds
3. Money Market Fund
4. REITS
5. ETF
6. Balanced Funds
7. Shariah Funds

1. Equity Funds

These funds invest in stocks

Aim to grow faster than money market or fixed income funds
It is a very risky level because the fluctuation of share price
This suitable for risk taker investor

Type of Equity Funds

1. Aggressive growth funds
. These funds invest generally in companies with higher capital
growth potential but with associated higher risk
2. Index funds
. These funds invest in a range of companies that closely match
(or track) companies comprising a particular index.
3. International equity funds
. These funds invest primarily in overseas share markets.

2. Fixed Income Funds

These funds buy investments that pay a fixed rate of return
These funds invest mainly in Malaysian Government
Securities, corporate bonds, and money market instruments
Ex : Bankers acceptance and fixed deposits
The objective is to provide regular income

3. Money Market Funds

These funds invest in short term fixed income securities
Ex : government bonds, treasury bills, bankers acceptances,
commercial paper and certificates of deposit
Generally it is a safer investment
But it is lower potential return then other types of mutual funds
Offer ultimate safety and liquidity.

4. Real Estate Investment Trusts

(REITS)
Funds that invests in real estate through property or
mortgages.
Opportunity for investors to participate in property market
Example : warehouse, office building, hospitals
Prefer by income-seeking investors high dividend yields
Special tax considerations

5. Exchange Traded Funds (ETF)

Funds which owns the underlying assets example ?
Traded like common stock on a stock exchange easily be
bought, sold or transferred
Price changes throughout the day
Shareholders do not directly own any claim to the underlying
investments get dividends
Benefits : lower cost, higher liquidity, better transparency

6. Balanced Funds

Hold balanced portfolio of both stocks & bonds

Purpose generate a well balanced return
Bonds provide current income
Stocks long term capital gains
Tend to invest in high grade securities example ?
Relatively safe earn return without have to endure price
volatility

7. Shariah Funds
Funds that meets all the requirements of Shariah law
Variety of rules examples : invest only in Shariah-compliant
companies & prohibited of interest
Allows for a small portion of investments income come from
prohibited sources but it cannot profit from this income
separate account & donate to charity

Parties Involved In Unit Trust

Investor @ Unit Holder
A person who buy the unit trust from Unit Trust Management Company
Unit Trust Management Company
Responsible to collect fund from investors and manage the investors
money. For eg : Perbadanan Nasional Berhad (PNB)
Trustee
3rd party of agreement between unit holder and Unit Trust
Management Company in order to protect the investors interest(Unit
Holder) and monitor Unit Trust Mgt Com. to make sure that the com.
Follow the requirement, policy and rule provided by SC. For eg : Post
Malaysia, Maybank.
Trust Deed
A formal document & outline for trust agreement, operation of funds,
powers & responsibility of the Unit Trust Company.

Additional Information From SC

TRUST DEED
Roles and Responsibilities of Management Company
I. Act in the best interests of unit holders.
II. Observe high standards of integrity and fair dealing.
III. Exercise the degree of care and diligence.
Roles and Responsibilities of Trustee
IV. A trustee should actively monitor the operation and
management of the fund.
V. Ensure that the fund is managed in accordance with
principles.
VI. Should exercise reasonable diligence in monitoring the
management companys functions.

High
High Liquidity
Liquidity

Professional
Professional
Management
Management

Record
Record
Keeping
Keeping

Diversification
Diversification

Affordability
Affordability

Advantages
Investing in
Unit Trust

Variety
Variety
objective
objective

Lower return

Load fee

Disadvantages
Investing in
Unit Trust

High annual
expenses

Transaction
cost

Advantages of Issuing Unit Trust

Raise
fund

Reduce
risk

Disadvantages of Issuing Unit Trust

When losses
happened, priority
is to the investors.

Less liquid

1. DEC 2015 QUESTION 5 (b)

Differentiate between open-end and close-end unit trust funds.(4 marks)
2. JUNE 2015 QUESTION 3 (a)
The investment in mutual fund is based on the concept of pooled diversification. Explain. (4marks)
3. DEC 2014 QUESTION 5 (b)
State and discuss any three (3) benefits of investing in unit trust funds.(6 marks)
4. JUNE 2014 QUESTION 2 (d)
Explain briefly the reason why an open-end unit trust is not practical to be listed in the stock
exchange. (3 marks)
5. DEC 2013 QUESTION 5 (a)
Over the years, the unit trust industry in Malaysia has recorded significant growth. Describe the
characteristic of five (5) types of unit trust funds available in Malaysia. suggest the groups of
investors which are suitable to invest in each types of funds you have discussed. (10 marks)
6. JUNE 2013 QUESTION 6 (b)
Explain the reason that close-end funds can sell an price other than the funds NAV(4 marks)

PAST YEAR QUESTIONs

7. JAN 2013 QUESTION 5 (d)

Discuss the sources of return from unit trust investment.(4 marks)
8. APR 2011 QUESTION 1 (a),(c)
Distinguish between closed-end and open-end fund(5 marks)
Explain the concept of diversification in a unit trust investment. (5marks)
9. OCT 2010 QUESTION 4
Short notes (b)
Real estate investment trust (REIT) as an investment alternative.(4 marks)
QUESTION 5 ( c)
NAV is used in the valuation of a unit trust fund. Why does NAV of a unit trust fund change almost
everyday?(3 marks)
10. APR 2010 QUESTION (b), (c ), (d)
b) Unit trust may not be attractive to some investor. Explain any three disadvantages of investing in unit
trust.(6 marks)
c) Unit trust is a three parties relationship investment scheme comprising unit holders, manger and trustee.
Briefly explain the role of trustee.(3 marks)
d) Explain why are small investor encouraged to participated in unit trust.(4 marks).

PAST YEAR QUESTIONs

10. OCT 2009 QUESTION 1 (b)

Briefly explain the investment objective of each of the
following categories:
i. Aggressive growth funds
ii. Equity-income funds
iii. Balanced funds. (6 marks)
11. APR 9 QUESTION 5(b)
Briefly discusses the risk-return relationship of unit trust
funds including the ASB. (4 marks).

PAST YEAR QUESTIONs

THANK YOU .