OCT 2008 QUESTION 4

a) What is an Islamic Unit Trust? (5 marks)

b) Explain 4 advantages of investments in unit

trust.(10 marks) c) Discuss briefly any 4 ancillary services unit trust offer. (10 marks)

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ANSWER
a)

The Islamic unit trust schemes are collective investment funds which offer investors the opportunity to invest in a diversified portfolio of Shariah-compliant securities which are managed by professional managers in accordance with the Shariah. The Islamic unit trust schemes are required to additionally appoint a Shariah committee or a Shariah adviser to ensure that their operations are in accordance with Shariah.

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b) ADVANTAGES:

Diversification The spreading of risks over a wide variety of securities in different sectors. Normally to do this, investors need a substantial amount of money to buy a diversity of stocks. However, unit trust funds facilitate this by providing small investors with an opportunity to pool their savings to invest in a diversified portfolio of investment. Investment risk is spread or diversified among a large number of securities or other assets. Professional Management Access to professional investment managers, which is not generally available to the individual investor with a small amount of money to invest, or if the individual investor invests in fixed-deposits or makes direct 4/2/2012 investment in the stock market.

 Convenience

- Simplification of and savings in administration of buying, selling and holding investment as compared with you holding a portfolio of investment on the capital market yourself.
Affordability

- You only need a small amount of money to participate in a professionally managed portfolio of investment and enjoy the same benefits accorded to others when investing in high-priced securities. At the same time, you can also obtain returns from a portfolio of investment as opposed to the limited number of securities when one invests in the market directly
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c) Four ancillary services unit trust offer: a) Saving schemes for regular monthly investment in units b) Some life insurance scheme whereby investment in units is linked to the regular, monthly or quarterly payment of premiums on a life policy c) A share exchange scheme d) A personal loan scheme e) An automatic reinvestment of income distributions

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APRIL 2009 QUESTION 3

b) What is an Islamic Unit Trust? (5 marks) The Islamic unit trust schemes are collective investment funds which offer investors the opportunity to invest in a diversified portfolio of Shariah-compliant securities which are managed by professional managers in accordance with the Shariah. The Islamic unit trust schemes are required to additionally appoint a Shariah committee or a Shariah adviser to ensure that their operations are in accordance with Shariah.
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OCT 2010 QUESTION 5

a) Explain the features of the following instruments:

i) Government Investment Issues (GII) ii) Malaysian Islamic Treasury Bills (MITB) b) Briefly explain any 3 benefits of investing in a unit trust.(9 marks)

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Government Investment Issues - 1983- with the establishment of the Islamic bank- not allowed to hold interest bearing government securities - issued by the government of Malaysia to finance the country's development program - to meet the special needs of the bank and other corporations who are interested in securities - a 3-years GII issued under a new concept of Bai al-Inah, and it is now tradable in the secondary market via the concept of Bay alDayn - is assigned with no credit risk as it is issued by the government. 4/2/2012

Malaysian Islamic Treasury Bills (MITB) - also known as Islamic Treasury Bills (i-TB) - issued by BNM on behalf of Government and traded on a discounted basis - payable at face value on maturity - tenure less then one year - high quality in secondary market - no credit risk as issued by government

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1) Diversification
-the spreading of risks over a wide variety of securities in different sectors. Normally to do this, investors need a substantial amount of money to buy a diversity of stocks. However, unit trust funds facilitate this by providing small investors with an opportunity to pool their savings to invest in a diversified portfolio of investment. Investment risk is spread or diversified among a large number of securities or other assets.

2) Professional Management
- Access to professional investment managers, which is

not generally available to the individual investor with a small amount of money to invest, or if the individual investor invests in fixed-deposits or makes direct investment in the stock market.

3) Convenience
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- Simplification of and savings in administration of buying, 4/2/2012 selling and holding investment as compared with you holding

APRIL 2011 QUESTION 5

a) There are 2 categories of Islamic Unit Trust;

namely open-ended and closed ended funds. Describe these 2 types of funds.(20 marks) b) Define unit trust? Explain the differences between Islamic unit trust and conventional unit trust.(5 marks)

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Open -ended a collective investment scheme which can issue and redeem units at any time funds which stay open; there is no fixed number of shares and are usually not traded on exchanges

Closed-ended a collective investment scheme with a limited number of units have fixed number of shares and are traded through exchanges just like stocks

An investor will generally purchase shares in the fund directly from the fund itself rather than from the existing shareholders
Priced at their NAV which are computed on a daily basis Investors can buy or sell units at NAVrelated prices from and to the mutual fund on any business day

typically issues all the shares it will issue at the outset, with such shares usually being tradeable between investors thereafter
Price determine by market demand which is often higher or lower than NAV Investors can buy into these funds during the period when these funds are open in the initial issue

 b) Unit trust is an unincorporated mutual fund

structure that allows funds to hold assets and pass profits through to the individual owners, rather than reinvesting them back into the fund. The investment fund is set up under a trust deed. The investor is effectively the beneficiary under the trust.
Comparison between conventional and Islamic

unit trust funds Shariah-based unit trust funds are restricted to investment in Shariah compliant securities approved by the Securities Commission Malaysia while conventional fund investments are not restricted

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