What is a Unit Trust?

A Unit Trust is a vehicle, which pools funds of investors to invest in a diversified portfolio of securities. A Unit Trust provides investors access to professional investment management. Unit Trusts are also tax-free vehicles for capital gains and income distributions.

How to make money from a Unit Trust Fund ?

Unit holders receive a return on their investment in two ways:

1. Appreciation of the unit price
2. Dividend distribution

Who can invest ?

Citizens of Sri Lanka, companies and institutions incorporated in Sri Lanka can invest in all funds. Foreign citizens and companies can invest only in the Ceylon Index Fund, Ceylon Tourism Fund & Ceylon Financial Sector Fund via a Securities Investment Account (IIA). A IIA account enables foreign investors to convert and repatriate capital and profits back into any foreign currency. The IIA account is designed to avoid domestic exchange control restrictions of the Central Bank.

How much money is needed?

You can begin your Unit Trust investment with as little as Rs 10,000/- (Approx USD 100).

What if I want my money back ?

You can turn your units into cash at any time. All you have to do is hand over the signed certificate with redemption instructions to us on or before 4 pm to get the day’s unit price. You will receive a bank cheque issued in favor of your name within 3 working days. The prices are published in the daily Sri Lankan newspapers and our website.

What safeguards do I have ?

You can turn your units into cash at any time. All you have to do is hand over the signed certificate with redemption instructions to us on or before 4 pm to get the day’s unit price. You will receive a bank cheque issued in favor of your name within 3 working days. The prices are published in the daily Sri Lankan newspapers and our website.

What are the tax benefits for investing in Unit Trust Funds?

Both income distributions and capital gains are exempted from tax.

Are units transferable?

Units are transferable by a request in writing to us. We will then execute the transfer in the unit holders register.

Can I buy jointly with another person?

You can purchase units either by yourself or jointly with another person.

Can a minor buy units?

Units may be purchased in the name of a minor by the parents or a guardian. Nevertheless, such units may be redeemed only when the minor attains the age of 18.

What role does trustee & custodian perform?

They are an institution independent from managers who monitor the manager’s conformance with the trust deed and regulatory requirements. They also create and cancel units at the request of managers, have custody of trust assets, and also ensure the registration of unit holders.

What role does Ceylon Asset Management Co Ltd perform?

The main responsibility of CAM is to manage the funds’ investments according to its objectives. It is also involved in the daily administration and selling units to investors and canceling units when investors divest them.

What is an Information Memorandum?

It is a document which provides investors with important information about the fund. Investors should read it carefully before investing. A prospectus contains descriptions of:

• Nature of the Fund
• Fees and charges
• Investment Objective of the Fund
• Information on the Manager, Trustee and Custodian
• Investment Strategies and Restrictions
• Income Distributions
• Rights of the Unitholders
• Other Services

What is the Net Asset Value (NAV)?

The Net Asset Value (NAV) is the market value of the Funds’ assets net of all costs. It is calculated at the end of each trading day. This total fund value is divided by the number of units issued to calculate the NAV of a unit. The price (value) of a unit is calculated based on the NAV and published daily. Units are bought and sold based on these prices.

How is the fund regulated?

As the Fund Manager, CAM is licensed by the Securities and Exchange Commission of Sri Lanka (SEC). The Fund complies with the Unit Trust Code of the SEC. Directives and guidelines issued by the SEC from time to time and the terms outlined in the Unit Trust Deed of each fund. Deutsche Bank acts as Trustee and Custodian of the funds on your behalf.

What is an Index Fund?

An “index” is a selection of companies used to measure the performance of a stock market, e.g. ASPI, BSE30, DJIA. An Index Fund is a collective investment pool that aims to track the performance of the portfolio of companies listed on the stock exchange that comprises an Index.

Tracking can be achieved by holding all of the securities in the index, in the same proportions of each company in relation to the total value (Market Capitalization) of the index. An Index Fund earns market returns without the risk of trading and speculation.

Advantages of investing in the Ceylon Index Fund ?

• The Index Fund management style earns market returns without the trading risk or fund manager risk
• Tax-Free – All distributions are in the hands of both individual investors and corporate clients. Corporate Bodies that invest in the Treasury Savings Fund, gain a 25% tax saving on Interest income. Companies, normally liable for Corporate Tax of 35% on interest income in their Profit & Loss Account, can reduce their tax burden by investing with the Treasury Savings Fund that incurs a maximum tax burden of 10% (charged net of expenses).
• Diversification- The golden rule of investing, for both large and small investors, is diversification. By investing in the Ceylon Index Fund, you are provided with the benefit of instant diversification and asset allocation without the large amounts of cash needed to create individual portfolios.
• Liquidity – Another advantage of our index fund is the ability to get in and out with relative ease. In general, you are able to sell your units at any time, at the published price, and get a bank cheque in your name.
• Professional money manager – When you choose us, you are also choosing a Professional money manager. We use the money that you invest to buy and sell stocks that we have carefully researched and selected into the Top10 index. Therefore, rather than having to thoroughly research every investment before you decide to buy or sell, you have us to handle it for you.

Advantages of investing in a Ceylon Index Fund ?

• Tracking Error – When using an indexing or any other benchmarking strategy, the amount by which the performance of the portfolio differed from that of the benchmark index is defined as the Tracking Error. In reality, no indexing strategy can perfectly match the performance of the index and this is true to the Ceylon Index Fund. The expenses, fees and regulatory requirements (SEC) like keeping a certain percentage of assets in cash for redemptions (5% in the case of Ceylon Index Fund) is a major source of the Tracking Error.
• Active Fund Management versus Index Fund Management – Some investors and fund managers feel they can research, select, and trade shares to beat the market indices. These investors would argue that if you invest in index funds, your returns will never be higher than the index being tracked. Believers in index funds would argue the odds are low of finding a professional manager that can equal the index year after year. Some investors feel they can identify sectors of the economy that will outperform the general market indexes. Believers in index funds would argue the odds are so low of predicting winning sectors year after year and it is not worth the risk.

What are the risks of an Index Fund?

Unit prices will rise and fall according to the stock market movements and the fund earns market returns at market risk. However, unlike an active fund manager, the index fund avoids trading risks, speculation, and the risk of the fund manager’s judgement.