206/14/13Learning Outcome To understand that trust is also a tool forcapital investment To learn the concept of unit trust. To apply the relevant principles of trust inbusiness
306/14/13What is Unit Trust A trust which is set up under a trust deedmade between parties known as trusteeand the manager. A kind of deed of settlement companywhich is previously known as amanagement trust – (19thCentury)
406/14/13Sykes v Beadon (1879)11 Ch D 170 Management trust was held to beillegal Result : all management trust werewound up or registered as companiesunder Companies Act.
506/14/13Smith v Anderson (1880)15 Ch D 247 One (Submarines’ Cable Trust)continued in existence and contendedthe decision of illegality and succeed. Court of Appeal held that Sykes vBeadon had been wrongly decided.
606/14/13 1930 : the institution wasreintroduced as Unit Trust
706/14/13General principles Securities are vested in the trustee underthe trust deed, on trust for manager. Manager held beneficial interest which isdivided into a large number of units, sub-units or shares. These will be offered to the public at aprice based on market value of thesecurities plus service charges.
806/14/13 Investors = beneficial owner of anundivided share of securities proportion tothe number of units that he holds. Trust deed plays an important roles asmany matters are dealt in it.
906/14/13Matters in trust deedProvisions for: Remuneration of trustee and the manager Managers to repurchase shares from unitholders who wish to dispose of theirinvestment. Resale by manager to new investors. Duration of trust Extension of trust ( if unit holder so desire)
1006/14/13Types 1) Fixed Unit trust.- The portfolio of investments remain unaltered 2) Flexible- Managers are given power to switch securities- Unit holder can benefit the manager financialskill.- Problem: depends on the manager’s ability andintegrity.
1106/14/13Malaysia-Unit Trust Begins in 1959 Malaysian Unit Trust managed byMalaysian Unit Trust Limited,established in August 1959 by a groupof Australian investors Asia Unit Trust Berhad Examples-ASN April 20th1981 Indians-Amanah Saham Dana Permata
1206/14/13SECURITIES COMMISSION ACT1993 Regulatory developments-March 1st1993 One-step regulatory agency Greater scope to develop unit trust,while ensuring protection for theinvestors
1306/14/13 means any arrangement made forthe purpose or having the effect ofproviding facilities for the participationof persons as beneficiaries under atrustin profits or income arising fromthe acquisition, holding, managementor disposal of- (i) securities;(ii) futures contracts; or(iii) any other property;unit trust schemeunit trust scheme
1406/14/13 in relation to a unit trust scheme orprescribed investment scheme, means any right or interest thereinby whatever name called and includes any sub-unit thereofunitunit
1506/14/13unit holder means the unit holder of a unittrust scheme or prescribedinvestment scheme, as thecase may be
1606/14/13WHAT IS UNIT TRUST Unit trusts are collective investmentschemes that allow investors topool their money together in a fund. managed by a professional fundmanager ,who will buy variety ofdifferent holdings. This spreads the investment andresults in lower dealing costs.
1706/14/13 Unit trusts are collective funds which allow private investors to pooltheir money in a single fund, getting the benefit of professional fundmanagement, and reducing their risk
1806/14/13So What is the definition? Collective scheme investment Trust fund Any individual purchasers the units Pool the resources with those of otherinvestors Fund manager must invest in a variety ordiversified types of investment
1906/14/13WHY UNIT TRUSTInterested to invest in share markets rather thansaving in the bankFeel better protected against the ravages ofinflationinvestment is smallCollectively can spread their investment across themarket – wider portfolio-diversification of the scheme’s investment.Low riskLack of experience, no confidenceLow tax
2006/14/13Who is Fund manager A fund Manager hired by the FinancialServices Company, or Banks, Who will manage the investmentscollectively on behalf of a number ofinvestors supervised and monitored by thefinancial services company
2106/14/13Types of Unit Trust Two types:- Fixed Unit Trust- non-authorised unit trust, thecategories which the managers are permitted toacquire are rigidly defined in the trust document-land Managed Unit Trust- flexible/ authorised unittrust- grants the managers authorisation toacquire an almost unlimited power ofinvestment.
2206/14/13How does it workA buys units from a Affin Bank or HLA buys units from a Affin Bank or HLBankBankThe Bank takes subscriptions from AThe Bank takes subscriptions from Aand other individual investors,and other individual investors,B,C,D,EB,C,D,E
2306/14/13How it worksA and other purchasers are allocatedunits in the trust assets in proportionto the sums which they havecontributed.The subscriptions are pooled andused to purchase shares or to makeother investments.
2406/14/13Duration? Withdrawal?A may invest / subscribe for whateverdurationA will be receiving annual profitsA may withdraw from the unit trust by beingpaid back a sum which represents theproceeds of his initial investment plus profit.New investors will buy into the unit trust at aprice which reflects the current value ofunits
2506/14/13Is Unit a Trust? It is a form of equitable ownership Fund-purchase of investments in thename of the fund trustee Investments being held upon trust forthe subscribers
2606/14/13 The fund manager will do the investment The fund manager and the fund trusteemake an annual charge for theadministration of the investment fund
2706/14/133 Certainties Knight v Knight-The rule of 3 Certaintiesdoes it apply? Certainty of Intention Certainty of SM Certainty of Object Answer : Yes
2806/14/13Relationship purchaser/ Beneficiary Trust Company-Trustee Fund Manager- The Investor/Settlor There is a trust deed between theTrustee and the Fund Manager Fiduciary Relationship betweenTrust Company and FundManager.
2906/14/13Responsibilities The trustee –custodian –passive trustee Little role to be played-maintenance-passive Relying on the good faith of the manager The Fund manager-plays an active role
3006/14/13Islamic Unit Trust The Trustee The Fund Manager The Syariah Adviser Includes : The unit holders Capital-fund Subject matter of the business-the investment activities Profit the offer the acceptance