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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
CUTE 0108084
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
CUTE 0108087
Investment exposure
Lower investment costs
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Disadvantages Of UTS
Risk
Loss of Control
Fees and Char es
Chapter 1
Page 5
CUTE 0108088
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
CUTE 01080810
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
CUTE 01080811
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
CUTE 01080812
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
CUTE 01080813
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
CUTE 01080814
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
CUTE 01080817
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
CUTE 01080819
REIT GOVERNMENT-SPONSORED
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EQUITY UTS Aggressive Growth Funds
Index Fund
Chapter 1
Page 13
CUTE 01080820
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
CUTE 01080821
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
CUTE 01080822
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
CUTE 01080823
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
CUTE 01080824
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
CUTE 01080825
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
CUTE 01080826
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
CUTE 01080827
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
CUTE 01080828
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
CUTE 01080831
PTR :
1/2 x [total investment acquisitions + total investment disposals]
Average Fund Size
Formula 2:Chapter 1(Page 1)
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
Formula 3:Chapter 1(Page 1)
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
Formula 6:Chapter 1(Page 2)
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
Regulatory Structure
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
Regulatory Structure
Page 3
CUTE 01080844
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
Regulatory Structure
Page 3
CUTE 01080845
Guidelines issued by the SC
Guidelines issued by the FMUTM
Chapter 2
Page 4
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Regulatory Structure
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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Regulatory Structure
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
Regulatory Structure
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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Regulation of the UTMC
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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Regulation of the UTMC
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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Regulation of the UTMC
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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Regulation of the UTMC
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
Regulation of the UTMC
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
Regulation of the Trustee
Chapter 2
Page 14-16
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Regulation of the Trustee
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
Regulation of the Trustee
Chapter 2
Page 14-16
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Regulation of the Trustee
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
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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%)
Formula 3:Chapter 3(Page 4)
BASIC PRINCIPLES OFChapter 3
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MARKETING UTS Why Marketing of UTS Fail?
Product Awareness
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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
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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
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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
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Diversifies across asset classes e.g.
shares, fixed income securities, property &
cash
PROFESSIONAL FUND
Chapter 3
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MANAGEMENT All customers benefit from investment
advice
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investments
Access to a wide range of resources and
information, specialized research andmarket analysis
LIQUIDITY
Chapter 3
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A measurement of how long it takes tosell investment
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UTMC are obliged to repurchase units
Normally within 10 days
EASE OF PURCHASE
Chapter 3
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Investors can easily buy units
Onl call UTMC IUTA or UTC to obtain a
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prospectus and all information needed to
make investment decision
MEETING INVESTORS
Chapter 3
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LONGER TERM NEEDS
longer term needs, e.g.:
home purchase or overseas holiday
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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
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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
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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
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Currency risk
Country risk Market risk
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Liquidity risk
Credit/default risk
Inflation risk
Interest rate risk
COMPLIANCEChapter 4
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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
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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
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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
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Conflict of Interest
STANDARDS OF PROFESSIONAL
CONDUCT
Compliance with laws
Breach of laws
UTC
CODE OF ETHICS
Chapter 4
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CODE OF ETHICS Honesty, Dignity & Integrity
Fair Dealing
Good Faith
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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
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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
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, 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
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the individuals present andfuture finances.
The Purpose of
Financial Planning
Chapter 5
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Financial Planning
Help fight inflation
Ensure adequate income in times of need
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Provide roadmap of financial objective
Improve present & future lifestyles
Peace of mind
Areas in Financial Planning
Chapter 5
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Cash Management Risk Management & Insurance Planning
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Investment Planning
Tax Planning
Retirement & Estate Planning
94
Common Approach in
Financial Planning
Chapter 5
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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
Page 7
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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
Page 8
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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
Chapter 5
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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
Formula 2:Chapter 5(Page 5)
Rule of 72
Chapter 5
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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
Formula 3:Chapter 5(Page 5)
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
Chapter 5
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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
Chapter 6
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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
Chapter 6
Page 4-5
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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
Chapter 6
Page 4-5
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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
Page 4-5
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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
Chapter 6
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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
Relationship Between Parties
in A Syariah-Based UTS
Chapter 6
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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
Relationship Between Parties
in A Syariah-Based UTS
Chapter 6
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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
Relationship Between Parties
in A Syariah-Based UTS
Chapter 6
Page 7
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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
Chapter 6
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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
Chapter 6
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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
Chapter 6
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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
Chapter 6
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SC publishes booklet - 6-monthly basis (last Friday
of April and October each year)
CUTE 010808116
. .
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
Chapter 6
Page 14
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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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120
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