WHAT IS A UNIT TRUST

A “Unit Trust” is a pooled investment plan where the capital contributions of investors are combined into a legally formed trust fund. The money is then invested by professional fund managers, acting on behalf of the investors, in a portfolio of marketable securities. A “Trustee” is appointed to safeguard the rights and interests of the investors. The investors receive “Units” (shares) in proportion to the amount of money they have contributed to the fund. The income derived by the fund by way of dividends, interests and capital gains are divided among the unit holders in proportion to their investments.
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ARE ALL THE UNIT TRUSTS THE SAME?No. There are 3 types of funds, which you can choose from to suit your investment needs.
Income FundsIncome funds invest in fixed income securities. Generally these funds have a lower level of risk in relation to equity funds and they pay a yearly dividend to unit holders.
Balanced FundsThese funds invest in a combination of equity and fixed income securities. They have a higher risk level than income funds but is expected to provide a higher return in the long term by way of capital appreciation and dividend payments from time to time.
Equity FundsThese funds primarily invest in the stock market. Equity funds carry very high level of risk and are expected to provide a high return in the long term. Growth Funds and Index Funds fall into this category of unit trusts
If you require further Investment guidance, Please contact us.
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WHAT ARE THE BENEFITS OF INVESTING IN A UNIT TRUST?
* An opportunity to diversity your risks which one may not be able to achieve through personal investments.
* Exempt from Capital Gain Tax from sale of units after one year
* Convenience of cashing your investments by merely submitting your certificate to the manager
* Ability to enjoy the services of professional Fund managers.
* Administrative producers normally you have to carry out in collecting interest, rights, bonuses and dividend on your personal investments are reduced to a minimum.
* Flexibility in changing the investment as your needs change
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DO THE PRICES OF UNITS FLUCTUATE?Unit prices could rise or fall due to value changes of the underlying securities owned by the Trust Fund. The value of equity fluctuates due to changes in the share prices in the Colombo Stock Exchange. Value of fixed income securities change due to change in interest rates in the market.
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WHO COULD INVEST IN UNITS?A. Citizens of Sri LankaB. Corporate bodies incorporated in Sri LankaC. Institutions and pension schemes established in Sri Lanka.D. Minors under the age of 18 years can make applications for units but a parent or a guardian on behalf of a minor should make the application.E. Non-nationals of Sri Lanka and companies incorporated outside Sri Lanka.
Investments in Unit Trust by Non-nationals of Sri Lanka
For the category (E) Investment is limited to Equity (Growth/Index) Funds and should be channeled through a “Share Investment External Rupee Account” (SIERA) as detailed out below.
The operational guideline for a “Share Investment External Rupee Account” (SIERA)
It is required that all unit trusts which offer units to non-nationals receive the investment through a “Share Investment External Rupee Account” (SIERA). These accounts can be opened at any Commercial Bank operating in Sri Lanka (Commercial Banks).
Investing in Unit Trust through SIERA has the following features
- Capital Gains from the sale of units are exempt, dividend are subject to a Withholding Tax of 15%. There are no other taxes levied as at present.
- Repatriation of sales proceeds and dividend in foreign currency is free of any encumbrances.
- Remittances could be effected through “Foreign Currency Banking Unit”(FCBU), “Non Residential Foreign Currency Account”, “Telegraphic Transfer” (TT), or Bank Drafts.
- Investments are not subject to any minimum holding period
- Investment and sale of units can only be denominated in Sri Lankan Rupees (LKR).
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HOW COULD I BUY OR SELL UNITS?You need to read the fund prospectus to decide if a fund is right for you
Write to: The Unit trust Association of Sri Lanka C/o Securities and Exchange Commission of Sri Lanka”11th Floor, World Trade Centre,Colombo –01,Sri Lanka.
To have a prospectus mailed to you.OrYou could also email
info@unittrust.lk
Prospectus Contains more complete information about each Unit Trust Fund including all charges and expenses. Please read the fund prospectus carefully before fill in your application or sending your money.
Having done so, simply send a duly filled “Application Form” along with your payment to the Management Company or hand over the same to the sales agent. You should receive the unit certificate within 21 days of realisation of your investment.
You could sell your units by simply handing over the completed “Redemption Form” at the back of your unit certificate to the fund Management Company. The Units will be redeemed at the prevailing buying price of the fund on date of receipt as detailed in the prospectus.
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WHAT IS THE ROLE OF THE MANAGEMENT COMPANY?The Management Company is the promoter of the fund and has the primary responsibility of investing the funds according to the objectives. The Management Company also acts as the Registrar of the fund maintaining the records of the unit holders.
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WHO IS A TRUSTEE OF A UNIT TRSUT?A trustee is generally reputable financial institution appointed by a deed of Trust to look after the interest of the unit holders.
As the legal owner of the assets of the fund, the trustee is responsible to ensure that the fund manager invests the funds according to the trust deed.
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WHAT IS THE ROLE OF THE SECURITIES AND EXCHANGE COMMISSION?Securities and Exchange Commission of Sri Lanka (SEC) has the responsibility of safe guarding the interests of the investors who make investments in unit trusts. SEC formulates regulations for the operation of unit trusts and has the necessary power to ensure the proper conduct of the business. It also has the power to license or suspend the licenses of Management Company to operate unit trusts.