Unit Trust Schemes (UTS)
Unit Trust Schemes (UTS)
The UTS domain tests how a Malaysian unit trust scheme is structured, valued, sold and disclosed. Expect questions on the roles of the management company and trustee, NAV and forward pricing, charges, and the conduct expected of a unit trust consultant (UTC) under the CMSA 2007 and SC guidelines.
Core rules
- A unit trust scheme pools investors' money. The management company operates the scheme; the trustee holds scheme assets and safeguards unit holders. Units represent a proportional beneficial interest in the scheme's assets.
- NAV per unit = (total assets minus liabilities) divided by units in issue. Dealing is forward-priced: the price is struck at the next valuation point, not the last published price.
- The prospectus or master prospectus and product highlights sheet disclose investment objective, risks, fees and charges. A UTC must know the client, assess suitability and explain risks; returns are not guaranteed.
- Charges usually include a sales charge, annual management fee and trustee fee. A repurchase or switching charge may also apply. Fees reduce the investor's net return.
Worked example
An investor pays RM10,000. The sales charge is 5% of NAV per unit and the NAV at the next valuation point is RM0.5000. Because the charge is a percentage of NAV, net investment = RM10,000 divided by 1.05 = RM9,523.81. Sales charge = RM476.19. Units = RM9,523.81 divided by RM0.5000 = 19,047.62. If NAV later rises to RM0.5500, holding value = 19,047.62 x RM0.5500 = RM10,476.19 before other fees.
Traps
- Calculating 5% as RM500 on RM10,000 when the charge is expressed as a percentage of NAV; that changes units.
- Using an old NAV instead of the next valuation point.
- Treating a distribution as free extra return; NAV falls after income is distributed.
- Confusing the trustee with the management company, or saying capital or returns are guaranteed.