1. 05/14/14 1
UNIT TRUST

2. 205/14/14
Learning Outcome
 To understand that trust is also a tool for
capital investment
 To learn the concept of unit trust.
 To apply the relevant principles of trust in
business

3. 305/14/14
What is Unit Trust
 A trust which is set up under a trust deed
made between parties known as trustee
and the manager.
 A kind of deed of settlement company
which is previously known as a
management trust – (19th
Century)

4. 405/14/14
Sykes v Beadon (1879)
11 Ch D 170
 Management trust was held to be
illegal
 Result : all management trust were
wound up or registered as companies
under Companies Act.

5. 505/14/14
Smith v Anderson (1880)
15 Ch D 247
 One (Submarines’ Cable Trust)
continued in existence and contended
the decision of illegality and succeed.
 Court of Appeal held that Sykes v
Beadon had been wrongly decided.

6. 605/14/14
 1930 : the institution was
reintroduced as Unit Trust

7. 705/14/14
General principles
 Securities are vested in the trustee under
the trust deed, on trust for manager.
 Manager held beneficial interest which is
divided into a large number of units, sub-
units or shares.
 These will be offered to the public at a
price based on market value of the
securities plus service charges.

8. 805/14/14
 Investors = beneficial owner of an
undivided share of securities proportion to
the number of units that he holds.
 Trust deed plays an important roles as
many matters are dealt in it.

9. 905/14/14
Matters in trust deed
Provisions for:
 Remuneration of trustee and the manager
 Managers to repurchase shares from unit
holders who wish to dispose of their
investment.
 Resale by manager to new investors.
 Duration of trust
 Extension of trust ( if unit holder so desire)

10. 1005/14/14
Types
 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 financial
skill.
- Problem: depends on the manager’s ability and
integrity.

11. 1105/14/14
Malaysia-Unit Trust
 Begins in 1959
 Malaysian Unit Trust managed by
Malaysian Unit Trust Limited,
established in August 1959 by a group
of Australian investors
 Asia Unit Trust Berhad
 Examples-ASN April 20th
1981
 Indians-Amanah Saham Dana Permata

12. 1205/14/14
SECURITIES COMMISSION ACT
1993
 Regulatory developments-March 1st
1993
 One-step regulatory agency
 Greater scope to develop unit trust,
while ensuring protection for the
investors

13. 1305/14/14
 means any arrangement made for
the purpose or having the effect of
providing facilities for the participation
of persons as beneficiaries under a
trustin profits or income arising from
the acquisition, holding, management
or disposal of-
 (i) securities;
(ii) futures contracts; or
(iii) any other property;
unit trust schemeunit trust scheme

14. 1405/14/14
 in relation to a unit trust scheme or
prescribed investment scheme,
 means any right or interest therein
by whatever name called
 and includes any sub-unit thereof
unitunit

15. 1505/14/14
unit holder
 means the unit holder of a unit
trust scheme or prescribed
investment scheme, as the
case may be

16. 1605/14/14
WHAT IS UNIT TRUST
 Unit trusts are collective investment
schemes that allow investors to
pool their money together in a fund.
 managed by a professional fund
manager ,who will buy variety of
different holdings.
 This spreads the investment and
results in lower dealing costs.

17. 1705/14/14
 Unit trusts are collective funds
 which allow private investors to pool
their money in a single fund,
 getting the benefit of professional fund
management,
 and reducing their risk

18. 1805/14/14
So What is the definition?
 Collective scheme investment
 Trust fund
 Any individual purchasers the units
 Pool the resources with those of other
investors
 Fund manager must invest in a variety or
diversified types of investment

19. 1905/14/14
WHY UNIT TRUST
Interested to invest in share markets rather than
saving in the bank
Feel better protected against the ravages of
inflation
investment is small
Collectively can spread their investment across the
market – wider portfolio
-diversification of the scheme’s investment.
Low risk
Lack of experience, no confidence
Low tax

20. 2005/14/14
Who is Fund manager
 A fund Manager hired by the Financial
Services Company, or Banks,
 Who will manage the investments
collectively on behalf of a number of
investors
 supervised and monitored by the
financial services company


21. 2105/14/14
Types of Unit Trust
 Two types:-
 Fixed Unit Trust- non-authorised unit trust, the
categories which the managers are permitted to
acquire are rigidly defined in the trust document-
land
 Managed Unit Trust- flexible/ authorised unit
trust- grants the managers authorisation to
acquire an almost unlimited power of
investment.

22. 2205/14/14
How does it work
A buys units from a Affin Bank or HLA buys units from a Affin Bank or HL
BankBank
The Bank takes subscriptions from AThe Bank takes subscriptions from A
and other individual investors,and other individual investors,
B,C,D,EB,C,D,E

23. 2305/14/14
How it works
A and other purchasers are allocated
units in the trust assets in proportion
to the sums which they have
contributed.
The subscriptions are pooled and
used to purchase shares or to make
other investments.

24. 2405/14/14
Duration? Withdrawal?
A may invest / subscribe for whatever
duration
A will be receiving annual profits
A may withdraw from the unit trust by being
paid back a sum which represents the
proceeds of his initial investment plus profit.
New investors will buy into the unit trust at a
price which reflects the current value of
units

25. 2505/14/14
Is Unit a Trust?
 It is a form of equitable ownership
 Fund-purchase of investments in the
name of the fund trustee
 Investments being held upon trust for
the subscribers

26. 2605/14/14
 The fund manager will do the investment
 The fund manager and the fund trustee
make an annual charge for the
administration of the investment fund

27. 2705/14/14
3 Certainties
 Knight v Knight-The rule of 3 Certainties
does it apply?
 Certainty of Intention
 Certainty of SM
 Certainty of Object
 Answer : Yes

28. 2805/14/14
Relationship
 purchaser/ Beneficiary
 Trust Company-Trustee
 Fund Manager- The Investor/
Settlor
 There is a trust deed between the
Trustee and the Fund Manager
 Fiduciary Relationship between
Trust Company and Fund
Manager.

29. 2905/14/14
Responsibilities
 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

30. 3005/14/14
Islamic 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