FIMM - Cover

02196
o FIMM
Federation of lnvestment Managers MalaySia (company No. 272577-p)
l9-07-3, 7th Floor, PNB Damansara,
.l9,
Lorong Dungun, Damansara Heights, 50490 Kuala Lumpur, Malaysia.
Iel: 603-20932600 Fax: 603-209327OO Email: info@fimm.com.my
FIMM
Copyright @ 2005 by Federation of lnvestment Managers Malaysia (FIMM).
All rights reserved. No part of this publication may be transmitted in any form or by means of electronic, mechanical, photocopying,
recording, or otherwise without the prior written permission of the FIMM.
This book Deating in tJnitlrusfs has been produced by the Federation of lnvestment Managers Malaysia
(FIMM), an association formed to enhance the professional standards and image of the unit trust industry.
The views expressed are not the official opinions of the Federation, its Council or any of its Committees. The
FIMM shall not be responsible or liable for any claims, loss, damages, cost or expenses arising in any way
out of or in connection with any person relying upon such views. Neither the FIMM nor any person involved
in the preparation of this book accepts any contractual, tortious or other form of liability for its contents or
any consequences arising from its use.
For significant recommendations concerning unit trust investments, reference should also be made to relevant
legislation, guidelines and circulars.
No part of this book may be used or reproduced in any mannerwhatsoever without written permission except
in the case of brief quotations embodied in critical articles and reviews. ln the latter, reference to same will
be appreciated.
This book Dealing in Unit Trusts may be purchased for educational, business, or unit trust industry promotional
use. For further information, please write to:
Executive Director
Federation of Investment Managers Malaysia
l9-07-3,7th Floor, PNB Damansara
19, Lorong Dungun, Damansara Heights
50490 Kuala Lumpur
Tel:603-2093 2600 Fax: 603-2093 2700
E-mail: info@fimm.com.my Website: www.fimm.com.rly:
Dealing in Unit Trusts
Second Edition published in December 2005
(previously published by the FIMM in 1998 as (Inderstanding Malaysian Unit Trusts)
Designed by LASERCOMdotcom Sdn Bhd
The National Library of Malaysia has catalogued the editions as follows:
First Edition: Understanding Malaysian Unit Trusts
lncludes glossary
ISBN: 983-99350-0-03
Second Edition: Dealing in Unit Trusts
lncludes glossary
ISBN: 983-99350-1-1
FIM]UI
CONTENTS
Abbreviations
Foreword
Federation of lnvestment Managers Malaysia
Dealing in Unit Trusts
Additional Reading
Cneprrn 1 . UNornsrANDrNG UNrr Tnusrs
Learning Objectives
1.1 Overview
PARTA
1.2 Basic Features of UTS
1.3 The Structure of UTS
1.4 Types of UTS
1.5 Size of the Malaysian Unit Trust lndustry
1.6 Collective lnvestments in Malaysia
1.7 History of UTS in Malaysia
PART B
1.8 UTS Prospectus
1.9 Fees and Charges
1.10 Measuring Performance
1.11 Unit Pricing
1.12 Unit Splits and NAV
1.13 Distributions and NAV
1.14 Summary
Self-Test Questions on Chapter 1
Appendix 1: UTS in Malaysia
Appendix 2: Extract from the State of Play of the Capital Market Masterplan:
lnvestment Management
vi
vii
viii
x
xi
1-1
1-2
1-2
1-9
1-11
1-16
1-17
1-18
1-24
1-29
1-33
1-39
143
1-45
1-46
1-47
148
149
CHeprsn 2 . RncurATroN oF THE UNrr Tnusr lNousrny
Learning Objectives
2.1 Overview of the Regulatory Framework
2.2 RegulatoryStructure
2.3 Regulation of the UTMC
2.4 Regulation of the Trustee
2.5 Regulation of Marketing and Distribution of Unit Trusts
2.6 Summary
Self-Test Questions on Chapter 2
Appendix 1: Eligibility Requirements for an Authorized Person Who is an lndividual
Appendix 2: Agency Structure and Size
CHeprsn 3 . SrnvrcrNc CLTENTS AND M^e,nrcrrNc UNrr Tnusrs
Learning Objectives
3.1 Overview
PARTA
3.2 Purchase of Units in UTS
3.3 Repurchase of Units in UTS
3.4 Reporting to Unitholders
3.5 lncomeDistributions
3.6 AccountMaintenance
3.7 Client Queries and Complaints
3.8 EPF Transfers
3.9 Financing the Purchase of Units
PART B
3.10 Basic Principles of Marketing UTS
3.11 lnvestmentAlternatives to UTS
3j2 Unit Trusts as an lnvestment
3.13 Summary
Self-Test Questions on Chapter 3
Appendix 1: SC's Unit Trust Loan Financing Risk Disclosure Statement
Appendix 2: Six Ways to Turn Savings into lnvestments
FIMM
2-1
2-1
2-2
2-5
2-16
2-19
2-22
2-23
2-24
2-25
3-1
3-3
3-6
3-9
3-11
3-1 5
3-16
3-17
3-21
3-25
3-26
3-29
3-36
3-37
3-1
3-38
3-39
FIMM
CHeprsn 4 . INousrnv Coon or Ermcs aNo STINDARDS or PnornssroNAl CoNnucr
Learning Objectives
4.1 Overview
4.2 Basic Principles
4.3 Whatis'Compliance'?
4.4 What do we mean by'Ethics'?
4.5 FIMM Code of Ethics and Standards of Professional Conduct for the Unit Trust lndustry
4.6 FIMM Disciplinary Proceedings
4.7 Summary
Self-Test Questions on Chapter 4
Appendix 1: FIMM Code of Ethics and Standards of Professional Conduct for the Unit Trust
lndustry
Appendix 2: SC's Guidelines on Marketing and Distribution of Unit Trusts : Code of Ethics and
Standards of Professional Conduct
Appendix 3: FIMM Flowchart Showing Structure for Disciplinary Proceedings
CHeprsn 5 - PnnsoNAL FTNANcTAL PLANNTNG
Learning Objectives
5.1 Overview
5.2 What is'Personal Financial Planning'?
5.3 Areas in Financial Planning
5.4 Steps in Financial Planning
5.5 Skills Required of a Financial Planner
5.6 Personal Financial Planning and the UTC
5.7 Client Types
5.8 Difference Between a Financial Planner and UTC
5.9 Remuneration of a Financial Planner
5.10 Summary
Self-Test Questions on Chapter 5
Appendix 1: Effect of lnflation, Taxation and Costs on lnvestment Returns
4-1
4-1
4-2
4-2
44
44
4-10
4-12
4-13
4-14
4-31
4-35
5-1
5-1
5-2
5-3
54
54
5-5
5-6
5-B
5-8
5-9
5-10
5-11
FIMM
FOREWORD
With investors becoming better educated and increasingly sophisticated, the demands on Unit Trust
Consultants (UTC) to provide professional and quality service are greater. Thus, the need for UTC to be
examined on their knowledge and understanding of unit trusts and the requirement that they be registered
with the Federation of lnvestment Managers Malaysia (FIMM).
The FIMM has published this second edition of Dealing in Unit lrusts to help UTC in fulfilling the requirements
of the Unit Trust Examination for Unit Trust Consultants (UTE). The first edition was published in June 1 998.
The publication of both editions of this book has been possible due to the collaborative effort of many, and
in this regard, I wish to acknowledge and thank the following:
. CouncilMembers . Chairman of the Distribution Standards Committee . Kathy Tan, the previous Executive Director of FIMM . Lee Siew Hoong, the current Executive Director of FIMM . Richard Stokes, Stokes Partners lnternational, Sydney, Australia . lslamic Banking and Finance lnstitute Malaysia . Volunteers from the various member companies in the working committee:
- Amanah Saham Kedah Bhd
- Amlnvestment Services Bhd
- Apex lnvestment Services Bhd
- ASM Mara Unit Trust Management Bhd
- BIMB Unit Trust Management Bhd
- HLG Unit Trust Management Bhd
- MAAKL Mutual Bhd
- OSK-UOB Unit Trust Management Bhd
- Prudential Unit Trusts Bhd
- Public Mutual Bhd
- SBB Mutual Bhd . FIMM Secretariat, in particular Research & Development Department
The Council and I wish each of you success in the UTE. We look forward to working with you to make unit
trusts the preferred choice for savings and retirement planning.
\-
TUNKu DATo'yA'AcoB TUNKU ABDuLLAH
PRESIDENT, FIMM
Kuala Lumpur
December 2005
FIMIUI
FEDERATION OF INVESTMENT MANAGERS
MALAYSIA
The Federation of lnvestment Managers Malaysia (FIMM) was formed on TAugust 1993 as a company limited
by guarantee and not having a share capital.
As at 31 December 2005, the FIMM had 37 Ordinary Members (all UTMC are Ordinary Members of the
FIMM) and 23 Associate Members.
The FIMM provides a common platform for UTMC to discuss issues relating to the unit trust industry. lt
works closely with the Securities Commission (SC) and other regulators in the development and groMh of
the unit trust industry.
The FIMM's principal functions are to conduct its affairs in the best interests of unitholders and the unit trust
industry to encourage and foster amongst its members conduct, ethics and standards of practice that will
best serve, maintain further and protect the interests of unitholders and the unit trust industry.
(A) F|MM'S VtStON, M|SS|ON AND OBJECTTVES
VISION
To develop the unit trust industry so that unit trusts become the preferred vehicle for savings and
retirement.
MrssroN
To educate and develop awareness of the investing public on unit trusts and to further enhance the prestige
and reputation of member companies, both locally and internationally.
OBJECTIVES
. To improve the regulatory fiscal and legal environment for unit trusts
' To formulate sound and ethical business practices towards promoting the interests of the unit trust
industry and providing investor protection
. To provide information, assistance and other services to its members
' To promote public awareness of the benefits and risks of investing in unit trusts.
(B) FIMM'S VALUES
. Professionalism
. lntegrity
. Consistency
Cneprrn 6 . OprnerroNs oF SyanhH.sesro UTS
Learning Objectives
6.1 Overview
6.2 Capital Market Masterplan
6.3 Development and Key Milestones of the lslamic Capital Market in Malaysia 6.4 What is a Syariah-based UTS?
6.5 The Regulatory Framework
6.6 Relationship Between Parties in a Syariah-based UTS 6.7 lnvestmentPortfolio
6.8 Potential Risks
6.9 Appointment of the Syariah Committee/Syariah Adviser
6.10 Syariah Compliance Review
6.11 Procedures for Disposal of Syariah Non-compliant Securities
612 Summary
Self-Test Questions on Chapter 6
Appendix 1: Syariah Adviser's Report
Cneprpn 7 - Grosseny
FTMM
6-1
6-1
6-1
6-3
64
6-6
6-7
6-8
6-10
6-11
6-13
6-14
6-15
6-16
6-17
7-1
FITIM
ABBREVIATIONS
ASB
ASN
BNM
Bursa Malaysia
crc
CMSA
CUTA
EPF
ETF
FIMM
IUTA
KLCI
NAV
PNB
PTR
REIT
SC
SRO
UTC
UTE
UTMC
UTS
Amanah Saham Bumiputra
Amanah Saham Nasional
Bank Negara Malaysia
Bursa Malaysia Securities Berhad
Capital lssues Committee
Capital Markets and Services Act, 2007
Corporate Unit Trust Adviser(s)
Employees Provident Fund
Exchange Traded Fund(s)
Federation of lnvestment Managers Malaysia
lnstitutional Unit Trust Adviser(s)
Kuala Lumpur Composite lndex
Net Asset Value
Permodalan Nasional Berhad
Portfol io Tu rnover Ratio
Real Estate lnvestment Trust(s)
Securities Commission
Self-Reg u latory Organisation
Unit Trust Consultant(s)
Unit Trust Examination for Persons Unit Trust Consultants
Unit Trust Management Company (Companies)
Unit Trust Scheme(s)
FtlUuUl
These values are important to the growth and image of the unit trust industry. lt is critical for UTC to uphold
these values in their relationships with their clients and others within and outside the industry.
(c) STRUCTURE OF THE F|MM COUNCTL
The members of the FIMM Council consist of a President, a Vice-President, eight elected Councillors and a
maximum of three other Councillors appointed by the President in accordance with Article 56Aof theAr16es
of Association of the FIMM and approved by the SC.
(i) Council Presidents
1993 - 1994: Steven Soh Teck Toh (Protem Council)
1994 - 1995: Dato'Malek Merican
1996 - 1997: Dato'Kamaruddin Mohamed
't998 - 2003: Dato'AbdulAzim Mohd Zabidi
2004 - Present: Tunku Dato'Ya'acob Tunku Abdullah
(ii) Executive Directors
1995 - 1998: Jacob Thomas
1998 - 2004: Kathy Tan Chai Fong
2004 - Present: Lee Siew Hoong
FIIUM
DEALING IN UNIT TRUSTS
OBJECTIVES
The FIMM has developed Dealing in Unit lrusfs primarily to enable prospective UTC to acquire a basic
knowledge and understanding of unit trusts in preparation for the UTE.
All persons involved in the marketing and distribution of UTS are required to sit for and pass the UTE before
obtaining authorisation from the FIMM to market and distribute units in UTS. As at 31 December 2005, the
total number of registered UTC was 34,439.
This book deals with the fundamental skills required of those intending to pursue a career in unit trust
marketing and selling. The unit trust industry is a rapidly growing industry and it is crucial that those responsible
for marketing and distributing UTS have a high level of knowledge and skill so as to provide their clients
with professional service.
Dealing in Unit lrusfs, covers the syllabus developed by the SC for the UTE. The examination is conducted
in three languages: English, Bahasa Melayu and Chinese at UTE centres that are set up throughout
Malaysia.
This book will also be useful to others with an interest in the unit trust industry in Malaysia as it:
' provides an overall understanding of the unit trust industry including the regulatory environment within
which it operates
' explains the principles and mechanics of UTS, together with the benefits and risks of investing in
UTS . describes the operations, management and administration of UTS
' emphasises the need for prospective UTC to be professional by practising ethical practices in order
to build long-term relationships between UTMC, IUTA, CUTA, UTC and clients.
STRUCTURE
Dealing in Unit lrusfs, which was previously published as Understanding Malaysian lJnit lrusfs, has been
extensively updated, revised and restructured. Each Chapter begins with objectives and ends with self-test
questions to assist prospective UTC in assessing understanding of the key points covered.
The FIMM may issue Addenda to Dealing in Unit lrusfs to reflect significant changes since the book
went to print. Prospective UTC should ensure, prior to attending the UTE, that they have the most recent
Addendum.
EXAMINABLE AND NON.EXAMINABLE MATERIAL
The UTE syllabus will cover Chapters 1 to 7. Materials that are covered before Chapter 1 and underAdditional
Reading on Legislation, Guidelines & Regulations as rrrell as industry overview and development are nonexaminable.
However, candidates are encouraged to read these materials to get a better understanding of
the unit trust industry.
OTHER RESOURCES
Prospective UTC should ensure that: . they possess a calculator . they read the financial press on a regular basis each day . they access relevant websites, including those of the FIMM and the SC.
FIMM
ADDITIONAL READING
(A) LEGTSLATTON
. CompaniesAct, 1965 . Securities Commission Act, 1993 . Securities lndustryAct, 1983 . Trust CompaniesAct, 1949
(B) GUTDELTNES & REGULATTONS
(i) lssued by the SC:
The most relevant Guidelines are: . Guidelines on Unit Trust Funds . Guidelines on Marketing and Distribution of Unit Trusts . Guidelines on Loan Financing in the Sale of Unit Trust Funds . Guidelines on Unit TrustAdvertisements and Promotional Materials . Guidelines on Real Estate lnvestment Trust . Prospectus Guidelines for Unit Trust Funds . Guidelines on Exchange Traded Funds
Practice Notes to the Guidelines on Unit Trust Funds, Real Estate lnvestment Trusts and Exchange Traded
Funds.
(ii) lssued by the FIMM:
' Guidelines for Registration of lnstitutionalAdvisers for the Marketing and Distribution of Unit Trusts
' Code of Ethics and Standards of Professional Conduct for the Unit Trust lndustry . By-Laws Relating to the Procedure for Disciplinary Proceedings
(c) TNDUSTRY OVERVTEW AND DEVELOPMENT
Capital Market Masterplan (SC, 2001)
Note: Additional Reading is non-examinable but UTC should be familiar with the contents. A non-examinable extract from the Capital
Market Masterplan is included in this book (Chapter 1).