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  1. A PRIMER ON... UNIT INVESTMENT TRUST FUNDS Q: What is a Unit Investment Trust Fund (UITF)? A: UITF is a pooled investment fund that commingles the monies of investors into a single dynamic portfolio of investments and made available by units of participation. The units of participation will be based on the price of the fund on date of purchase. The UITF was created by the issuance of BSP Circular 447 to align the management of pooled investment funds with global standards. Q: How is the price of the fund computed? A: The price of the fund is the Net Asset Value Per Unit (NAVPU). The NAVPU is equal to Net Asset Value (NAV) divided by the outstanding units of participation in the fund. Q: What is Net Asset Value (NAV)? A: NAV is the total market value of the financial instruments of the fund less expenses such as taxes, fees and other qualified operating expenses. Q: Why is market price used for valuing the financial instruments of the fund? A: UITF employs global standards by using a mark-to-market (MTM) valuation method for all financial instruments of the fund. This means instruments are valued daily against end of day market prices. It provides equitable treatment to investors coming in and out of the fund because it offers a fair price for the purchase and redemption of units of participation. Q: Is investing in UITFs safe? A: Yes. Investments will be limited to high-grade and highly-liquid instruments such as time deposits government securities. However, because of the valuation method used, an investor may be exposed to price risk when he redeems, if interest rates are volatile. Client can defer redemption until market conditions become more favorable. It should be noted that exposure to price risk in UITFs is the same as in other long-term investments. Q: What are the benefits of participating in UITFs? A: A: Investors can enjoy several benefits: Ability to participate in high-yielding long-term financial instruments in the fund but will not necessarily lock up client's money. With a minimum required contribution, participants can enjoy a wide selection of financial instruments and thus minimizing risks. Clients have the opportunity to access different instruments not normally available to retail investors. Opportunity for higher returns due to possible capital gains on top of accrued income. Pool of funds can reduce transactional costs bringing potential savings. Q: What are the other global standards used by the UITF? A: An accredited BSP 3rd party custodian will safekeep the securities of the fund while an independent auditor acceptable to the BSP will audit each UITF annually. Q: How will an investor know where the fund is invested? A: A list of prospective and outstanding financial instruments of the fund will be made available at the Head Office of Asiatrust Bank. Q: How can an investor compare the performance of their trustee bank versus others? A: At least once a week, all trustee banks will publish in major dailies, the performance of the fund, which include the latest NAVPU and the Return on Investment. Q: Why cannot an indicative rate be quoted? A: Indicative rates cannot be quoted because of the valuation method used. Q: What will an investor receive to evidence his participation? A: An investor will be receiving a Confirmation of Participation that indicates the name of investor, value date, NAVPU, currency amount of investment and the number of units pruchased. Q: What is an ideal minimum investment horizon for UITF? A: We are encouraging a minimum investment horizon of at least one (1) year because the fund has opportunities for higher returns due to possible capital gains on top of accrued income. Q: When can an investor withdraw his investment? A: Investors may withdraw after the minimum holding period of the UITF has been met. The investor can still redeem his investment even before the required minimum holding period but subject to an exit fee. Q: Why is there a need to impose an exit fee? A: The exit fee will be used to defray the processing cost of the client's pretermination in the fund. You may post here or PM me for any questions. Thanks for looking.
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