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Franklin Malaysia Sukuk Fund
INVESTORS ARE ADVISED TO READ AND UNDERSTAND THE CONTENTS OF THE PROSPECTUS. IF IN DOUBT, PLEASE CONSULT A PROFESSIONAL ADVISER.FOR INFORMATION CONCERNING CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, SEE “RISK FACTORS” COMMENCING ON PAGE 12.
Prospectus18 November 2016
Manager: Franklin Templeton GSC Asset Management Sdn. Bhd. (Company No. 866426-M)Trustee: Deutsche Trustees Malaysia Bhd. (Company No. 763590-H)The constitution date of the Franklin Malaysia Sukuk Fund is 18 November 2015.
PROSPECTUS OF THE FRANKLIN MALAYSIA SUKUK FUND
Manager : Franklin Templeton GSC Asset Management Sdn. Bhd. (Company No. 866426-M)
Trustee : Deutsche Trustees Malaysia Berhad (Company No.763590-H)
This Prospectus is dated 18 November 2016
The constitution date of the Franklin Malaysia Sukuk Fund is 18 November 2015 INVESTORS ARE ADVISED TO READ AND UNDERSTAND THE CONTENTS OF THE PROSPECTUS. IF IN DOUBT, PLEASE CONSULT A PROFESSIONAL ADVISER. FOR INFORMATION CONCERNING CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, SEE “RISK FACTORS” COMMENCING ON PAGE 12.
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Responsibility Statement This Prospectus has been reviewed and approved by the directors of Franklin Templeton GSC Asset Management Sdn. Bhd. and they collectively and individually accept full responsibility for the accuracy of the information contained in this Prospectus. Having made all reasonable enquiries, they confirm to the best of their knowledge and belief, that there are no false or misleading statements, or omission of other facts which would make any statement in this Prospectus false or misleading. Statements of Disclaimer The Securities Commission Malaysia has authorised the Franklin Malaysia Sukuk Fund and a copy of this Prospectus has been registered with the Securities Commission Malaysia. The authorisation of the Franklin Malaysia Sukuk Fund, and registration of this Prospectus, should not be taken to indicate that Securities Commission Malaysia recommends the Franklin Malaysia Sukuk Fund or assumes responsibility for the correctness of any statement made, opinion expressed or report contained in this Prospectus. The Securities Commission Malaysia is not liable for any non-disclosure on the part of Franklin Templeton GSC Asset Management Sdn. Bhd., the management company responsible for the Franklin Malaysia Sukuk Fund and takes no responsibility for the contents in this Prospectus. The Securities Commission Malaysia makes no representation on the accuracy or completeness of this Prospectus, and expressly disclaims any liability whatsoever arising from, or in reliance upon, the whole or any part of its contents. INVESTORS SHOULD RELY ON THEIR OWN EVALUATION TO ASSESS THE MERITS AND RISKS OF THE INVESTMENT. IF INVESTORS ARE UNABLE TO MAKE THEIR OWN EVALUATION, THEY ARE ADVISED TO CONSULT PROFESSIONAL ADVISERS. Additional Statements Investors should note that they may seek recourse under the Capital Markets and Services Act 2007 for breaches of securities laws including any statement in this Prospectus that is false, misleading, or from which there is a material omission or for any misleading or deceptive act in relation to this Prospectus or the conduct of any other person in relation to the Franklin Malaysia Sukuk Fund. The Franklin Malaysia Sukuk Fund has been certified as Shariah-compliant by the Shariah adviser appointed for the Franklin Malaysia Sukuk Fund. This Prospectus is not intended to and will not be issued and distributed in any country or jurisdiction other than in Malaysia (“Foreign Jurisdiction”). Consequently, no representation has been and will be made as to its compliance with the laws of any Foreign Jurisdiction. Accordingly, no offer or invitation to subscribe or purchase Units of the Fund to which this Prospectus relates, may be made in any Foreign Jurisdiction or under any circumstances where such action is unauthorised. The Fund is not registered in the United States of America under the Investment Company Act of 1940. The Units of the Fund have not been registered in the United States of America under the Securities Act of 1933. The Units of the Fund made available under this Prospectus may not be directly or indirectly offered or sold in the United States of America or any of its territories or possessions or areas subject to its jurisdiction or to or for the benefit of nationals or residents thereof, unless pursuant to an exemption from registration requirements available under the U.S. law, any applicable statute, rule or interpretation.
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The term “U.S. Person” and “U.S. Persons” shall mean any person that is a United States person within the meaning of Regulation S under the United States Securities Act of 1933 or as defined by the U.S. Commodity Futures Trading Commission for this purpose, as the definition of such term may be changed from time to time by legislation, rules, regulations or judicial or administrative agency interpretations. U.S. Persons are not eligible to invest in the Fund. Prospective investors shall be required to declare that they are not a U.S. Person and are not applying for Units on behalf of any U.S. Person. Franklin Templeton GSC Asset Management Sdn. Bhd. has the right to reject any application for Units if it has reasonable grounds to believe that any applicant is a U.S. Person or if any applicant is seeking to purchase Units on behalf of a U.S. Person. In the absence of written notice to Franklin Templeton GSC Asset Management Sdn. Bhd. to the contrary, if a potential investor provide a non-U.S. address on the application form for investment in the Fund, this will be deemed to be representation and warranty from such investor that he/she/it is not a U.S. Person and that such investor will continue to be a non-U.S. Person so long as such investor holds any Units of the Fund. The Manager and/or its delegates will restrict or prevent the ownership of Units by any U.S. Person and/or any person, firm or corporate body if in the opinion of the Manager and/or its delegates, such holding may be detrimental to the Fund, Unit Holders, the Manager and/or its delegates or may result in a breach of any applicable law or regulations whether in Malaysia or in a foreign jurisdiction or may expose the Fund or the Unit Holders to liabilities (to include, inter alia, regulatory or tax liabilities and any other tax liabilities that might derive, inter alia, from any breach of FATCA requirements) or any other disadvantages that it or they would not have otherwise incurred or been exposed to. Such persons, firms or corporate bodies (including U.S. Persons and/or persons in breach of FATCA requirements) are herein referred to as "Prohibited Persons". More specifically, the Manager shall have the power to impose such restrictions as it may think necessary for the purpose of ensuring that no Units are acquired or held directly or beneficially by any Prohibited Person and may: 1) decline to issue any Units and decline to register any transfer of Units, where it appears
to it that such issuance or transfer would or might result in beneficial ownership of such Units by a Prohibited Person;
2) at any time, require any person whose name is entered in, or any person seeking to
transfer Units on, the register of Unit Holders to furnish it with any representations and warranties or any information, supported by affidavit, which it may consider necessary for the purpose of determining whether or not, to what extent and under which circumstances, beneficial ownership of such Units held by the Unit Holders rests or will rest in a Prohibited Person, or whether the transfer of Units will result in beneficial ownership of such Units by a Prohibited Person;
3) where it appears to the Manager that any Prohibited Person, either alone or in
conjunction with any other person, is a beneficial owner of Units or is in breach of its representations and warranties or fails to make such representations and warranties in a timely manner as the Manager may require, compulsorily repurchase from any such Unit Holder all or part of the Units held by such Unit Holder; and
4) decline to accept the vote of any Prohibited Person at any meeting of Unit Holders of the
Fund.
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The Fund is not registered in any provincial or territorial jurisdiction in Canada and Units of the Fund have not been qualified for sale in any Canadian jurisdiction under applicable securities laws. The Units made available under this Prospectus may not be directly or indirectly offered or sold in any provincial or territorial jurisdiction in Canada or to or for the benefit of residents thereof, unless such Canadian resident is, and will remain at all times during their investment, a “permitted client” as that term is defined in Canadian securities legislation. Prospective investors may be required to declare that they are not a Canadian resident and are not applying for Units on behalf of any Canadian resident. If an investor becomes a Canadian resident after purchasing Units of the Fund, the investor will not be able to purchase any additional Units of the Fund. Automatic Exchange of Account Information On 27 January 2016, Malaysia signed the Multilateral Competent Authority Agreement (“MCAA”) on the implementation of global standard for automatic exchange of financial account information. By signing the MCAA, Malaysia has agreed to implement regulations to enable the adoption of automatic exchange of information with other signatory countries. The first exchange of information is anticipated to take place in year 2018 in relation to accounts held in year 2017. Investors are hereby notified that the Manager may be required under Malaysian laws and regulations to report details of specified accounts of a Unit Holder who is a resident in other MCAA signatory jurisdictions. The Malaysian tax authorities may share such account data in accordance with the MCAA with the tax authorities of other MCAA signatory jurisdictions where the Unit Holder is a tax resident. The information which may be reported includes the reportable person or entity’s name, address, tax identification number, date and place of birth (for an individual), account balance and the total gross proceeds pair or credited to the account during the relevant reporting period. If and when requested by the Manager or its delegate, in order to meet its obligations under future Malaysian law adopting the MCAA, Unit Holders must provide certification of their tax residence and status to the Manager. Notice on Personal Data Protection For the purposes of the notice below, the term “personal data” shall have the same meaning prescribed in the Personal Data Protection Act 2010 (“the PDPA”) and the term “processed” shall have the same meaning as “processing” as prescribed in the PDPA. All personal data of investors contained in the investment application form and all and any further personal data collected in the course of the business relationship with the Manager may be processed by the Manager or its delegates and other related companies of the Manager, including those established outside Malaysia, the Trustee or its delegates and any other intermediaries related to the Fund. Such data shall be processed for the purposes of account administration, development of business relationships, anti-money laundering requirements and counter-terrorist financing identification, tax identification (including for the purpose of compliance with FATCA or similar laws and regulations), processing of transaction(s) and/or any other general business purposes (including direct marketing and promotion of the Manager’s other products and services unless the Manager has been informed by the investor not to process his/her personal data for direct marketing and promotion) by the Manager. The investors have a right of access and of rectification of the personal data in cases where such data is incorrect or incomplete. Please refer to the investment application form for further details on the personal data protection requirements.
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The Manager and/or its delegates, for the purpose of FATCA compliance, may be required to disclose personal data relating to U.S. Persons and/or non-participant Foreign Financial Institutions (as defined in FATCA) to the Malaysian tax authorities which may transfer them, if any, to the Internal Revenue Service in the United States of America. Data shall not be held for longer than necessary with regard to the purpose of the data processing, subject always to the applicable legal minimum retention periods.
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TABLE OF CONTENTS
1. GLOSSARY ......................................................................................................................... 1 2. CORPORATE DIRECTORY .................................................................................................... 5 3. THE FUND .......................................................................................................................... 6
3.1 FUND INFORMATION ................................................................................................................. 6
3.2 INVESTMENT OBJECTIVE ............................................................................................................ 6
3.3 INVESTMENT POLICY AND STRATEGY ........................................................................................ 6
3.4 ASSET ALLOCATION .................................................................................................................... 7
3.5 PERFORMANCE BENCHMARK .................................................................................................... 8
3.6 PERMITTED INVESTMENTS ........................................................................................................ 8
3.7 INVESTMENT RESTRICTIONS AND LIMITS .................................................................................. 9
3.8 DISTRIBUTION POLICY .............................................................................................................. 10
3.9 POLICY ON GEARING FOR THE FUND ....................................................................................... 10
3.10 SHARIAH INVESTMENT GUIDELINES ADOPTED BY THE SHARIAH ADVISER ............................. 10 4. RISK FACTORS .................................................................................................................. 12
4.1 GENERAL RISKS OF INVESTING IN THE FUND .......................................................................... 12
4.2 SPECIFIC RISKS OF INVESTING IN THE FUND ............................................................................ 13
4.3 RISK MANAGEMENT STRATEGIES ............................................................................................ 18 5. FEES, CHARGES AND EXPENSES ........................................................................................ 19
5.1 SALES CHARGE ......................................................................................................................... 19
5.2 REDEMPTION CHARGE ............................................................................................................. 19
5.3 TRANSFER FEE .......................................................................................................................... 19
5.4 SWITCHING FEE ........................................................................................................................ 19
5.5 OTHER CHARGES ...................................................................................................................... 19
5.6 ANNUAL MANAGEMENT FEE ................................................................................................... 20
5.7 ANNUAL TRUSTEE FEE .............................................................................................................. 20
5.8 OTHER EXPENSES ..................................................................................................................... 20
5.9 POLICY ON REBATES AND SOFT COMMISSIONS ...................................................................... 21
5.10 GOODS AND SERVICES TAX ...................................................................................................... 21 6. TRANSACTION INFORMATION ......................................................................................... 22
6.1 COMPUTATION OF NAV AND NAV PER UNIT .......................................................................... 22
6.2 PRICING OF UNITS .................................................................................................................... 23
6.2.1 Bases for Valuation of the Assets of the Fund ........................................................... 23
6.2.2 Valuation of the Fund ................................................................................................ 24
6.2.3 Single Pricing Policy.................................................................................................... 25
6.2.4 Incorrect Pricing ......................................................................................................... 25
6.2.5 Illustration on how Units are allocated ...................................................................... 25
6.2.6 Illustration on how redemption proceeds are calculated .......................................... 26
6.3 MINIMUM INITIAL INVESTMENT, MINIMUM ADDITIONAL INVESTMENT, MINIMUM HOLDING TO MAINTAIN ACCOUNT AND MINIMUM AMOUNT FOR REDEMPTION OF UNITS 27
6.4 WHERE TO SUBSCRIBE AND REDEEM UNITS ........................................................................... 28
6.5 APPLICATION FOR UNITS ......................................................................................................... 28
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6.6 REDEMPTION OF UNITS ........................................................................................................... 29
6.7 COOLING‐OFF ........................................................................................................................... 29
6.8 SWITCHING OF UNITS .............................................................................................................. 30
6.9 TRANSFER OF UNITS ................................................................................................................ 30
6.10 MODE OF DISTRIBUTION ......................................................................................................... 30
6.11 UNCLAIMED MONEYS POLICY .................................................................................................. 31
6.12 ANTI‐MONEY LAUNDERING POLICIES AND PROCEDURES ....................................................... 31
6.13 HOLDING OF UNITS BY THE MANAGER ................................................................................... 31 7. SALIENT TERMS OF THE DEED .......................................................................................... 32
7.1 YOUR RIGHTS AND LIABILITIES AS A UNIT HOLDER ................................................................. 32
7.2 MAXIMUM FEES AND CHARGES PERMITTED........................................................................... 32
7.3 PROCEDURES TO INCREASE THE DIRECT AND INDIRECT FEES AND CHARGES ........................ 33
7.4 OTHER PERMITTED EXPENSES THAT MAY BE PAID OUT OF THE FUND .................................. 34
7.5 RETIREMENT, REMOVAL AND REPLACEMENT OF THE MANAGER AND THE TRUSTEE ........... 34
7.6 TERMINATION OF THE FUND OR A CLASS OF UNITS ............................................................... 35
7.7 PROVISIONS RELATING TO MEETINGS OF UNIT HOLDERS ...................................................... 37
7.8 SUSPENSION OF DEALING IN UNITS......................................................................................... 38 8. THE MANAGER ................................................................................................................ 39
8.1 BACKGROUND INFORMATION ................................................................................................. 39
8.2 ROLE OF THE MANAGER .......................................................................................................... 39
8.3 BOARD OF DIRECTORS ............................................................................................................. 40
8.4 MATERIAL LITIGATION ............................................................................................................. 40
8.5 INVESTMENT COMMITTEE MEMBERS FOR THE FUND ............................................................ 40
8.6 THE DESIGNATED FUND MANAGER ......................................................................................... 40
8.7 THE SHARIAH ADVISER ............................................................................................................. 41
8.7.1 Profile of the Shariah Adviser ..................................................................................... 41
8.7.2 Roles and Responsibilities of Amanie as the Shariah Adviser .................................... 41
8.7.3 Profile of the Shariah Team ....................................................................................... 41 9. THE TRUSTEE ................................................................................................................... 43
9.1 ABOUT DEUTSCHE TRUSTEES MALAYSIA BERHAD .................................................................. 43
9.2 EXPERIENCE IN TRUSTEE BUSINESS ......................................................................................... 43
9.3 DUTIES AND RESPONSIBILITIES OF THE TRUSTEE .................................................................... 43
9.4 TRUSTEE’S DISCLOSURE OF MATERIAL LITIGATION ................................................................. 43
9.5 TRUSTEE’S DELEGATE ............................................................................................................... 43
9.6 DISCLOSURE ON RELATED‐PARTY TRANSACTIONS OR CONFLICT OF INTERESTS .................... 44 10. RELATED PARTY TRANSACTIONS AND CONFLICT OF INTERESTS........................................ 45 11. ADDITIONAL INFORMATION ............................................................................................ 47
11.1 AVENUE FOR ADVICE ............................................................................................................... 47
11.2 DEED AND SUPPLEMENTAL DEED (IF ANY) .............................................................................. 47
11.3 FINANCIAL YEAR END ............................................................................................................... 47 12. DOCUMENTS AVAILABLE FOR INSPECTION ...................................................................... 48 13. TAX ADVISERS’ LETTER ..................................................................................................... 49 14. APPROVALS AND CONDITIONS ........................................................................................ 58
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1. GLOSSARY
“the Act” or “CMSA” : means the Capital Markets and Services Act 2007 as may be
amended from time to time. “Authorised Distributor”
: means any IUTA or CUTA that the Manager may appoint from time to time.
“BNM” : means Bank Negara Malaysia. “Base Currency” : means the base currency of the Fund which is RM. “Business Day” : means a day (excluding Saturdays, Sundays and public holidays
in Malaysia) on which banks in Kuala Lumpur are open for business.
“class(es) of Units” : means any class of Units representing similar interests in the
assets of the Fund although a class of Units may have different features from another class of Units.
“Class A (MYR)” : refers to the class of Units of the Fund which are denominated in
RM, which is targeted at retail investors. “Class I (MYR)” : refers to the class of Units of the Fund which are denominated in
RM, which is targeted at institutional investors. “Cooling-off Period” : means a period of six (6) Business Days from the date the
application for purchase of Units from a Unit Holder, who is qualified for Cooling-off Rights, is received by the Manager.
“Cooling-off Right” : means the right of a Unit Holder to obtain a refund of his
investment in the Fund, if the request is made within the Cooling-off Period. This right is only given to an individual Unit Holder (other than a staff and agents of the Manager, and a person registered with a body approved by the SC to deal in unit trusts) who is investing in any fund managed by the Manager for the first time.
“CUTA” : means a corporate unit trust adviser registered with the FIMM. “Deed”
: means the deed for the Fund dated 13 February 2015 entered into between the Manager and the Trustee, and any other supplemental deed that may be entered into between the Manager and the Trustee in respect of the Fund and registered with the SC from time to time.
“Emerging Market” : means countries whose economy, stock market, political
situation and regulatory framework are not fully developed.
“ETF” : means an exchange traded fund.
“FATCA” : refers to Foreign Account Tax Compliance Act, United States of America.
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“FIMM” : refers to Federation of Investment Managers Malaysia. “financial institution” : a) if the institution is in Malaysia:
(i) licensed bank; (ii) licensed investment bank; or (iii) licensed Islamic bank;
(b) if the institution is outside Malaysia, any institution that
is licensed / registered / approved / authorized by the relevant banking regulator to provide financial services.
“forward pricing”
: means the Selling Price and the Redemption Price is the NAV per Unit calculated at the next valuation point after an application for purchase or a redemption request, as the case may be, is received by the Manager.
“Fund” : means the Franklin Malaysia Sukuk Fund, which is a unit trust
fund offered through this Prospectus. “Guidelines”
: means the Guidelines on Unit Trust Funds issued by the SC as may be revised, updated or amended from time to time.
“GST” : means goods and services tax and includes any goods and services tax that is charged or levied in accordance with the Goods and Services Tax Act 2014.
“Initial Offer Period” : in respect of a class of Units, means the period described as such
for that class of Units in the Prospectus or supplemental or replacement prospectus (as the case may be) for the Fund; during this period, Units are created, cancelled, sold and redeemed at a fixed price per Unit;
“Initial Offer Price” : in respect of a class of Units, means the fixed price at which Units
are created, cancelled, sold and redeemed during the Initial Offer Period.
“IOSCO” : refers to International Organization of Securities Commissions. “IUTA” : means an institutional unit trust adviser registered with the
FIMM. “Launch Date” : means the date of the first prospectus of the Fund and is the date
on which sale of Units of the Fund may first be made; the Launch Date is also the date of constitution of the Fund.
“licensed bank” : has the same meaning as prescribed under the Financial
Services Act 2013. “licensed investment bank”
: has the same meaning as prescribed under the Financial Services Act 2013.
“licensed Islamic bank”
: has the same meaning as prescribed under the Islamic Financial Services Act 2013.
“long term” : means a period of more than 5 years.
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“MARC” : refers to Malaysian Rating Corporation Berhad. “Manager” or “FTGSC” : refers to Franklin Templeton GSC Asset Management Sdn. Bhd. “Net Asset Value” or “NAV”
: means the value of all the assets of the Fund less the value of all the liabilities of that Fund at a valuation point; solely for the purpose of computing the annual management fee and annual trustee fee, the NAV of the Fund is inclusive of the management fee and trustee fee for the relevant day; where the Fund has more than one class of Units, there shall be a Net Asset Value of the Fund attributable to each class of Units.
“NAV per Unit” : means the NAV of the Fund at a particular valuation point divided
by the number of Units in circulation at the same valuation point; where the Fund has more than one class of Units, there shall be a Net Asset Value per Unit for each class of Units; the Net Asset Value per Unit of a class of Units at a particular valuation point shall be the Net Asset Value of the Fund attributable to that class of Units divided by the number of Units in circulation for that class of Units at the same valuation point.
“Prospectus” : means this document which is registered with the SC in relation
to the Fund. “RAM” refers to RAM Rating Services Berhad. “Redemption Charge” : means a fee payable pursuant to a redemption request. “Redemption Price”
: means the price at which Units will be redeemed by a Unit Holder pursuant to a redemption request. The Redemption Price is equivalent to the Initial Offer Price during the Initial Offer Period, and the NAV per Unit after the Initial Offer Period. As such, any Redemption Charge, if applicable, is excluded from the calculation of the Redemption Price.
“RM” or “MYR” : means Ringgit Malaysia, the official currency of Malaysia. “SACBNM” : means the Shariah Advisory Council of Bank Negara Malaysia. “SACSC” : means the Shariah Advisory Council of the Securities
Commission of Malaysia. “Sales Charge” : means a fee payable pursuant to an application for purchase of
Units. “SC”
: means the Securities Commission Malaysia established under the Securities Commission Act 1993.
“Selling Price” : means the price at which Units will be sold to a Unit Holder
pursuant to an application for purchase of Units. The Selling Price is equivalent to the Initial Offer Price during the
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Initial Offer Period, and the NAV per Unit after the Initial Offer Period. As such, any Sales Charge, if applicable, is excluded from the calculation of the Selling Price.
“Shariah” : means Islamic law comprising the whole body of rulings
pertaining to human conduct which are embodied in the Qur’an, the Sunnah of the Prophet Muhammad as well as the interpretations of the Muslim jurists.
“Shariah Adviser” : refers to Amanie Advisors Sdn Bhd, the Shariah adviser of the
Fund. “Shariah Principles” or “Shariah Requirements”
: is a phrase or expression which generally means making sure that any conduct or activity must not contravene Shariah principles and that in performing that conduct or activity, all the essential elements as stipulated in the Shariah that make up the conduct or activity must be present and each essential element must meet all the necessary conditions as stipulated in the Shariah.
“short term” : means a period of less than 2 years. “Special Resolution” : means a resolution passed at a meeting of Unit Holders duly
convened in accordance with the Deed by a majority of not less than three-fourths of the Unit Holders present and voting at the meeting in person or by proxy; for the avoidance of doubt, “three-fourths of the Unit Holders present and voting in person or by proxy” means three-fourths of the votes cast by the Unit Holders present and voting; for the purposes of winding-up the Fund or a class of Units, “Special Resolution” means a resolution passed at a meeting of Unit Holders duly convened in accordance with the Deed by a majority in number holding not less than three-fourths of the value of the votes cast by the Unit Holders present and voting at the meeting in person or by proxy.
“sukuk” : means Islamic fixed income securities that comply with Shariah
and where the holder owns an undivided exposure over an underlying asset.
“Trustee” : refers to Deutsche Trustees Malaysia Berhad, the trustee for the
Fund. “Unit(s)” : means a measurement of the right or interest of a Unit Holder in
the Fund; if the Fund has more than one class of Units, it means a Unit issued for each class of Units.
“Unit Holder” : means a registered holder of a Unit or Units of the Fund
including any jointholder whose name appears in the Manager’s register of Unit Holders.
“USD” : means United States dollars, the official currency of the United
States of America. “Zakat” : an obligation under Shariah to pay a certain amount on wealth
above a specified minimum for defined beneficiaries.
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2. CORPORATE DIRECTORY
THE MANAGER NAME : Franklin Templeton GSC Asset Management Sdn. Bhd. COMPANY NO. : 866426-M REGISTERED OFFICE AND BUSINESS OFFICE
: Suite 31-02, 31st Floor Menara Keck Seng No. 203, Jalan Bukit Bintang 55100 Kuala Lumpur Malaysia
TELEPHONE NO. : 603-2264 6699 FAX NO. : 603-2145 9071 WEBSITE ADDRESS : www.franklintempleton.com.my THE TRUSTEE NAME : Deutsche Trustees Malaysia Berhad COMPANY NO. : 763590-H REGISTERED OFFICE AND BUSINESS ADDRESS
: Level 20, Menara IMC No. 8, Jalan Sultan Ismail 50250 Kuala Lumpur Malaysia
TELEPHONE NO. : 603-2053 7522 FAX NO. : 603-2053 7526
THE SHARIAH ADVISER NAME : Amanie Advisors Sdn Bhd COMPANY NO. : 684050-H ADDRESS : Level 33, Menara Binjai
No. 2, Jalan Binjai Off Jalan Ampang 50450 Kuala Lumpur Malaysia
TELEPHONE NO. : 603-2181 8228 FAX NO. : 603-2181 8219 TAX ADVISERS NAME : Ernst & Young Tax Consultants Sdn. Bhd. (179793-K) ADDRESS : Level 23A, Menara Millenium
Jalan Damanlela Pusat Bandar Damansara 50490 Kuala Lumpur Malaysia
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3. THE FUND
3.1 FUND INFORMATION
Name of the Fund
Franklin Malaysia Sukuk Fund
Base Currency RM
Fund Category
Sukuk
Fund Type Growth and income 3.2 INVESTMENT OBJECTIVE
The Fund seeks to maximise total investment return consisting of profit income* and capital gains in the long term through investments primarily in RM-denominated sukuk.
*Distributions (if any) may be paid by cash or reinvested as additional Units of the Fund. Please refer to Section 6.10, Mode of Distribution for more information.
Any material change to the Fund’s investment objective will require the Unit Holders’ approval.
3.3 INVESTMENT POLICY AND STRATEGY
The Fund seeks to achieve its objective by investing a minimum of 70% of its NAV in RM-denominated sukuk which are issued or guaranteed by governments, quasi-government entities and/or government related entities, or issued by corporate entities which are incorporated or domiciled anywhere in the world. The Fund may also invest up to 20% of its NAV in non RM-denominated Islamic Instruments such as non RM-denominated sukuk, Islamic commercial papers, Islamic negotiable instruments, short term Islamic money market instruments, Islamic deposits and/or any other fixed income investments which comply with the Shariah Principles which are issued or guaranteed by governments, quasi-government entities and/or government related entities, or issued by corporate entities incorporated or domiciled in the Asian region (which includes, without limitation, Singapore, Indonesia, China, Hong Kong, Japan and Brunei). The fund manager may also invest the NAV of the Fund in any other countries worldwide (where the regulatory authority of the countries in which the Fund invests is an ordinary or associate member of the IOSCO) if the fund manager sees a potential in the Islamic fixed income market in those countries. The Fund’s maximum exposure to any single country other than Malaysia shall not exceed 15% of the Fund’s NAV at the time of purchase. In addition, the Fund’s investment in non RM-denominated Islamic Instruments may include non RM-denominated units of Shariah-compliant fixed-income collective investment schemes (including ETFs). The balance of the Fund’s NAV not invested in RM-denominated sukuk and non RM-denominated Islamic Instruments will be invested in Other RM-denominated Islamic Instruments such as RM-denominated Islamic commercial papers, RM-denominated Islamic negotiable instruments issued or guaranteed by governments, quasi-government entities and/or government related entities, or issued by corporate entities which are incorporated or domiciled anywhere in the world and RM-denominated Islamic Liquid Assets such as short term Islamic money market instruments, Islamic deposits and/or cash. At least 2% of the Fund’s NAV will comprise of RM-denominated Islamic Liquid Assets, for purposes of
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(including but are not limited to) meeting redemption requests, meeting liquidity needs and/or defraying Fund expenses. The Manager may adopt temporary defensive strategies by lowering the Fund’s exposure to RM-denominated sukuk below the stated minimum 70% of its NAV and by increasing the Fund’s exposure to RM-denominated Islamic Liquid Assets in adverse market conditions or if the fund manager is of the view that investments in RM-denominated Islamic Liquid Assets during such period may offer more attractive investment opportunities compared to investments in sukuk. The fund manager targets to build a portfolio of RM-denominated and non RM-denominated instruments which, at the time of purchase, have a minimum credit rating of BBB3 by RAM or have an equivalent credit rating by MARC or any other recognised credit rating agency. If an instrument is not rated, it may be added to the portfolio of the Fund if, at the time of purchase, the issuer of the instrument has a minimum credit rating of BBB3 by RAM or has an equivalent credit rating by MARC or any other recognised credit rating agency. If an instrument and its issuer are both unrated, the instrument may be added to the portfolio of the Fund if, at the time of purchase, the instrument is assigned an internal rating which in the opinion of the Manager is the equivalent of (or higher than) BBB3 by RAM or an equivalent credit rating by MARC or any other recognised credit rating agency in accordance with its internal guidelines.
If an instrument that the Fund invests in falls below the minimum credit rating stated above or goes into default, the Manager may either dispose of the instrument if the Manager is of the opinion that it is in the best interest of Unit Holders, or continue to hold on to the downgraded or defaulted instrument if the Manager is of the opinion that the immediate disposal of the instrument would not be in the best interest of Unit Holders.
While foreign exchange is not expected to be a primary source of returns for the Fund, it may potentially generate some returns as the Fund may invest up to 20% of its NAV in non RM-denominated Islamic Instruments. On the other hand, the value of the Fund’s investments in non RM-denominated Islamic Instruments may depreciate due to movements in the exchange rate between Ringgit Malaysia and the currency of the foreign countries that the Fund invests in. The performance and the NAV of the Fund may be adversely affected as a result of such currency loss. The Manager may also employ Shariah-compliant hedging instruments to reduce the Fund’s exposure to foreign exchange fluctuations and for efficient portfolio management from time to time. The hedging tools that the Manager may utilise include, but are not limited to, Islamic foreign exchange forwards and profit rate swaps.
The Manager’s investment process uses a mix of bottom up, top down and quantitative approaches.
3.4 ASSET ALLOCATION
The asset allocation of the Fund is as follows: A minimum of 70% of its NAV in RM-denominated sukuk;
Up to 20% of its NAV in non RM-denominated Islamic Instruments; At least 2% of its NAV in RM-denominated Islamic Liquid Assets; and The balance of its NAV, not invested in RM-denominated sukuk, non RM-denominated
Islamic Instruments or RM-denominated Islamic Liquid Assets, in Other RM-denominated Islamic Instruments;
where:
a. “non RM-denominated Islamic Instruments” include:
i) non RM-denominated sukuk;
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ii) non RM-denominated Islamic commercial papers; iii) non RM-denominated Islamic negotiable instruments; iv) non RM-denominated short term Islamic money market instruments; v) non RM-denominated Islamic deposits; vi) non RM-denominated units of Shariah-compliant fixed-income collective investment
schemes including ETFs); and/or vii) any other non RM-denominated fixed income investments which comply with the
Shariah Principles which are issued or guaranteed by governments, quasi-government entities and/or government related entities, or issued by corporate entities which are incorporated or domiciled in the Asian region (which includes, without limitation, Singapore, Indonesia, China, Hong Kong, Japan and Brunei), or in any other countries worldwide (where the regulatory authority of the countries in which the Fund invests is an ordinary or associate member of the IOSCO) if the fund manager sees a potential in the Islamic fixed income market in those countries.
b. “RM-denominated Islamic Liquid Assets” include RM-denominated short term Islamic
money market instruments, Islamic deposits and/or cash; and c. “Other RM-denominated Islamic Instruments” include:
i) RM-denominated Islamic commercial papers; ii) RM-denominated Islamic negotiable instruments; and/or iii) any other RM-denominated fixed income investments which comply with the
Shariah Principles.
3.5 PERFORMANCE BENCHMARK
Thomson Reuters Bond Pricing Agency Malaysia (BPAM) 3-7 year Sukuk Index. Source: Thomson Reuters – RIC code TRBPAMALL3YI.
Note: Please note that the risk profile of the Fund may be higher than the risk profile of the benchmark.
3.6 PERMITTED INVESTMENTS
Unless otherwise prohibited by the relevant authorities or any relevant laws and provided always that there are no inconsistencies with the objective of the Fund, the Fund is permitted to invest in the following:
1. Sukuk and Islamic commercial papers which are issued or guaranteed by governments,
quasi-government entities and/or government related entities; 2. Sukuk and Islamic commercial papers which are issued by corporate entities;
3. Islamic negotiable instruments and short term Islamic money market instruments issued
by financial institutions; 4. Islamic deposits with financial institutions; 5. Units of Shariah-compliant fixed-income collective investment schemes;
6. Shariah-compliant derivatives and hedging instruments such as Islamic foreign exchange
forwards and profit rate swaps; and
7. Any other form of Shariah-compliant investments as may be permitted by the SC and/or
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the Shariah Adviser and as may be agreed between the Manager and the Trustee from time to time.
3.7 INVESTMENT RESTRICTIONS AND LIMITS
The Fund will be managed in accordance with the following investment restrictions and limits: 1. The value of the Fund’s investments in unlisted Shariah-compliant securities must not
exceed 10% of the NAV of the Fund unless the investments are in sukuk traded on an organised over-the-counter (OTC) market.
2. The value of the Fund’s placement in Islamic deposits with any single institution must
not exceed 20% of the NAV of the Fund. 3. The aggregate value of the Fund’s investments in transferable Shariah-compliant
securities, Islamic money market instruments and Islamic deposits, issued by or placed with (as the case may be) any single issuer or institution must not exceed 25% of the NAV of the Fund.
4. The value of the Fund’s investments in units or shares of any Shariah-compliant
collective investment scheme must not exceed 20% of the NAV of the Fund. 5. The value of the Fund’s investments in sukuk issued by any single issuer must not
exceed 20% of the NAV of the Fund. The single issuer limit may be increased to 30% if the sukuk are rated by any domestic or global rating agency to be of the best quality and offer highest safety for timely payment of profit and principal. Where the single issuer limit is increased to 30%, the limit for the aggregate value of the Fund’s investment as set out under item 3 above must not exceed 30% of the NAV of the Fund.
6. The value of the Fund’s investments in sukuk issued by any one group of companies
must not exceed 30% of the NAV of the Fund. 7. The Fund’s investments in sukuk must not exceed 20% of the sukuk issued by any
single issuer. 8. The Fund’s investments in Islamic money market instruments must not exceed 10%
of the instruments issued by any single issuer. Note: This limit does not apply to Islamic money market instruments that do not have
a pre-determined issue size. 9. The Fund’s investments in Shariah-compliant collective investment schemes must not
exceed 25% of the units or shares in any one Shariah-compliant collective investment scheme.
10. Any other investments or restrictions imposed by the SC and/or the Shariah Adviser
or pursuant to the Guidelines, or any laws and/or regulations applicable to the Fund. The above limits and restrictions shall be complied with at all times based on the most up-to-date value of the Fund’s investments. However, a 5% allowance in excess of any limit or restriction shall be permitted where the limit or restriction is breached through the appreciation or depreciation of the NAV of the Fund. The Manager should not make any further acquisitions when the relevant limit or restriction is breached and the Manager should, within a reasonable period of not more than 3 months from the date of the breach, take all necessary steps and actions to rectify the breach. All the restrictions and limits as stated above do not apply to Shariah-compliant instruments issued or guaranteed by the Malaysian government or Bank Negara Malaysia.
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IN THE CASE OF BREACH OF REGULATORY RESTRICTIONS, WE SHALL TAKE ALL NECESSARY STEPS AND ACTIONS TO RECTIFY THE BREACH AS REQUIRED UNDER THE RELEVANT LAWS OR AS DIRECTED BY THE REGULATORS. IN THE CASE OF BREACH OF OTHER RESTRICTIONS SUCH AS RESTRICTIONS IMPOSED BY INTERNAL POLICIES, WE WILL TAKE STEPS AND ACTIONS TO RECTIFY THE BREACH WITHIN A REASONABLE PERIOD AS WE DEEM NECESSARY.
3.8 DISTRIBUTION POLICY
Class A (MYR)
Although the Deed provides that, subject to the availability of income, distribution is at least on a yearly basis, the Manager currently intends to distribute on a quarterly basis.
Class I (MYR)
Subject to the availability of income, distribution is at least on a yearly basis.
Please refer to Section 6.10 for information regarding the mode of distribution.
3.9 POLICY ON GEARING FOR THE FUND
The Fund is not permitted to seek cash financing or borrow other assets (including the borrowing of securities within the meaning of the Securities Borrowing and Lending Guidelines) in connection with its activities. However, the Fund may seek Shariah-compliant cash financing for the purpose of meeting redemption requests for Units and for short term bridging requirements. Such financings are subject to the following: the financing obtained by the Fund is only on a temporary basis and that borrowings are
not persistent; the financing period should not exceed a month; the aggregate financing obligation of th e Fund should not exceed 10% of its NAV at the
time the financing is obtained; and the Fund may only seek Shariah-compliant financing from financial institutions.
3.10 SHARIAH INVESTMENT GUIDELINES ADOPTED BY THE SHARIAH ADVISER
Shariah Investment Guidelines Sukuk and Islamic Money Market Instruments The Shariah Adviser will verify the sukuk and/or Islamic money market instruments based on the data available at Bond Info Hub (www.bondinfo.bnm.gov.my) and Fully Automated System For Issuing/Tendering (https://fast.bnm.gov.my). Any investments into non RM-denominated Islamic Instruments will be subject to the Shariah Adviser’s approval.
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Cleansing Process for the Fund Investment deemed non-Shariah compliant by the Shariah Adviser This refers to non Shariah-compliant investment made by the Manager. The said investment will be disposed of or withdrawn with immediate effect. If the investment resulted in gain (through capital gain and/or profit), the gain is to be channelled to baitulmal or any other charitable bodies of the Manager’s choice in consultation with the Shariah Adviser. If the disposal of the investment resulted in losses to the Fund, the losses are to be borne by the Manager.
Zakat (tithe) for the Fund The Fund does not pay zakat on behalf of Muslim individuals and Islamic legal entities who are Unit Holders of the Fund. Thus, Unit Holders are advised to pay zakat on their own.
The investment portfolio of the Fund comprises sukuk which have been classified as Shariah-compliant by the SACSC and Islamic fixed income instruments (other than sukuk) which have been classified as Shariah-compliant by the SACBNM. For sukuk not certified by the SACSC and Islamic fixed income instruments (other than sukuk) not certified by the SACBNM, the status of such instrument has been determined in accordance with the ruling issued by the Shariah Adviser.
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4. RISK FACTORS
This part of the Prospectus describes the general risks related to investing in the Fund, the specific risks related to investing in the Fund as well as the mitigating factors in relation to these risks. The Manager encourages Unit Holders to give careful consideration to the risks associated when investing in the Fund, and, accordingly to obtain independent financial and taxation advice before investing in the Fund.
4.1 GENERAL RISKS OF INVESTING IN THE FUND
Below are some of the general risks which potential investors should be aware of when investing in the Fund:
Fund management risk The performance of the Fund depends on the experience, knowledge and expertise of the management company for the Fund. Any error in the investment techniques and processes adopted by the management company may have an adverse impact on the Fund’s performance. The Manager seeks to mitigate this risk by implementing a consistent and structured investment process, systematic operational procedures and processes along with stringent internal controls. There is also a risk that the Manager may not adhere to the investment mandate of the Fund. Although it is the intention of the Manager to adhere to the investment mandate of the Fund, there is a risk that the Manager may not be able to do that due to an oversight on the part of the Manager. This risk is mitigated by the Manager as follows:
adherence to internal policies and procedures on investment limits and restrictions; monitoring by the Performance Analysis and Investment Risk (PAIR) and Global Investment
Adviser Compliance (GIAC) teams; and regular reporting to the senior management team and the board of directors of the Manager
and the investment committee for the Fund.
Inflation risk Inflation rate risk is the risk of potential loss in the purchasing power of investment due to a general increase of consumer prices. Inflation erodes the nominal rate of return giving a lower real rate of return. Inflation is thus one of the major risks over the long term that could also impact the short term in the event of a sudden shock such as a spike in oil prices, resulting in uncertainty over the future value of investments. Investors are advised to take note that the Fund is not designed with the objective of matching the inflation rate of Malaysia. Market risk Market risk arises because of factors that affect the market overall, and particularly the market where the Fund will be focusing its investments. Factors such as economic growth, financial market conditions, political stability and the social environment are some examples of conditions that have an impact on businesses, which in turn may impact the market value of the investment of the Fund positively or negatively depending on how the market values of the underlying investments held in the portfolio of the Fund are impacted. Investors who purchase Units of the Fund may not get back the full amount that they have invested if the NAV per Unit of the Fund falls below the investors’ purchase price due to adverse price movements of the Fund’s underlying investments. Operational risk This risk refers to the possibility of a breakdown in the Manager’s internal controls and policies. The breakdown may be a result of human error (for instance the keying of wrong details), system failure (causing unnecessary downtime) or even fraud (where employees of the Manager collude with one another). Whilst this risk may not necessarily cause monetary loss to the Fund, it will most certainly cause inconvenience to Unit Holders. The Manager will regularly review its internal policies and system capability to mitigate the occurrence of this
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risk. Additionally, the Manager maintains a strict segregation of duties to mitigate the occurrence of fraudulent practices amongst employees of the Manager. Performance risk The performance of the Fund depends on the Fund’s investments. If the investments of the Fund do not perform in accordance with expectations, there will be a negative impact on the performance of the Fund. This is where the experience and expertise of the Manager is important as highlighted in the fund management risk write-up above. In view of the aforesaid, there is never a guarantee that investing in the Fund will produce the desired investment returns.
Risk of non-compliance
There is a risk that the Manager may not be able to observe the rules governing the Fund. It is the intention of the Manager to observe all rules governing the Fund at all times. However, both external factors (adverse market conditions, natural disasters or political instability) and internal factors (oversight by the fund manager, a lapse in the compliance function, or a clerical error) could impact the ability of the Manager to observe rules governing the Fund. Whilst non-compliance with the rules governing the Fund will not necessarily result in losses to the Fund, Unit Holders cannot discount the risk that losses may be suffered by the Fund if the non-compliance with the rules is sufficiently serious.
4.2 SPECIFIC RISKS OF INVESTING IN THE FUND
Below are some of the specific risks when investing in the Fund; they may include, but are not limited to: Counterparty risk Counterparty risk is the risk to each party of a contract that the counterparty will fail to perform its contractual obligations and/or to respect its commitments under the term of such contract, whether due to insolvency, bankruptcy or other cause. When over-the-counter (“OTC”) or other bilateral contracts are entered into (inter alia, OTC derivatives, repurchase agreements, security lending, etc.), the Fund may find itself exposed to risks arising from the solvency of its counterparties and from their inability to respect the conditions of these contracts. Credit risk Credit risk, a fundamental risk relating to all sukuk as well as Islamic money market instruments, is the chance that an issuer will fail to make principal and/or profit payments when due. Issuers with higher credit risk typically offer higher yields for this added risk. Conversely, issuers with lower credit risk typically offer lower yields. Generally, sukuk issued by governments and Islamic money market instruments are considered to be the safer in terms of credit risk under normal market conditions, while corporate sukuk, especially those issued by companies with poorer credit ratings, have higher credit risk. Changes in the financial condition of an issuer, changes in economic and political conditions in general, or changes in economic and political conditions which may have specific effect on an issuer (particularly a sovereign or supranational issuer) are all factors that may have an adverse impact on an issuer’s credit quality and the values of sukuk and Islamic money market instruments. Related to credit risk is the risk of downgrade by a rating agency. Rating agencies such as RAM, MARC, among others, provide ratings for a wide array of Shariah-compliant fixed income securities (corporate, sovereign, or supranational) based on their creditworthiness. The rating agencies may change their ratings from time to time due to financial, economic, political, or other factors, which, if the change represents a downgrade, can adversely impact the value of the affected sukuk or Islamic money market instruments. Currency risk The base currency of the Fund is Ringgit Malaysia. As the Fund may invest up to 20% of its NAV in non RM-denominated Islamic instruments, the Fund may have exposures to
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currencies other than Ringgit Malaysia. Should Ringgit Malaysia strengthen against those currencies, the Fund’s investments may be subject to currency loss in addition to any capital gains or losses, which will affect the NAV of the Fund. Similarly, should Ringgit Malaysia weaken against those currencies, the Fund’s investments may see a currency gain in addition to any capital gain or losses, which will affect the NAV of the Fund. As a result, the performance of the Fund may be affected by movements in the exchange rate between Ringgit Malaysia and other currencies. The Manager may employ currency management strategies to reduce the Fund’s exposure to currency risks. Currency management strategies may change the Fund’s exposure to currency exchange rates and could result in losses to the Fund if the currencies that the Fund invests in do not perform as the Manager expects. In addition, currency management strategies, to the extent that they reduce the Fund’s exposure to currency risks, may also reduce the Fund’s ability to benefit from favourable changes in currency exchange rates. There is no assurance that the Manager’s use of currency management strategies will benefit the Fund or that they will be, or can be, used at appropriate times due to potentially unfavourable market conditions. Furthermore, the market value of securities in a particular currency may fluctuate such that the notional amount of forward foreign currency contracts intended to hedge that market value exposure (typically done using rolling one month forwards) may no longer exactly correspond on a day-to-day basis, resulting in an imperfect hedge. Derivative risk A derivative is a financial instrument whose value is derived from the value of another asset. In Islamic finance, derivative instruments may only be used for (i) Islamic hedging purposes, (ii) reduction of cost and/or (iii) generation of additional capital or return with a level of risk which is consistent with the risk profile of the Fund, and not for speculation which, like gambling, is a prohibited (Haram) activity. Subject to the above and the Fund’s investment policy and strategy, the Manager may engage, within the limits established by the investment restrictions and the Shariah Investment Guidelines (as set out in Section 3.10), in various portfolio strategies involving the use of Shariah-compliant derivative instruments in order to protect the Fund against market and currency risks. The use of derivative instruments and hedging transactions may or may not achieve its intended objective and involves specific risks, including the incurrence of transactions costs, the possibility of volatility or a leverage effect, counterparty risk, and liquidity risk, as is more fully described below. Performance and value of derivative instruments depend, at least in part, on the performance or value of the underlying asset. Derivative instruments involve cost, may be volatile, and may involve a small investment relative to the risk assumed (leverage effect). The successful use of derivative instruments may depend on the Manager’s ability to predict market movements. Risks include delivery failure, default by the other party (counterparty risk) or the inability to close out a position because the trading market becomes illiquid. Some derivative instruments are particularly sensitive to changes in interest rates. OTC derivative instruments involve a higher degree of risk as OTC markets are less liquid and less regulated. The risk of loss to the Fund for a swap transaction on a net basis depends on which party is obliged to pay the net amount to the other party. If the counterparty is obliged to pay the net amount to the Fund, the risk of loss to the Fund is the loss of the entire amount that the Fund is entitled to receive should the counterparty default; if the Fund is obliged to pay the net amount, the Fund’s risk of loss is limited to the net amount due. Emerging Market risk The investment of the Fund in sukuk and Islamic financial instruments issued by companies, governments, quasi-government entities and government related entities in different countries and denominated in different currencies involve certain risks. These risks are typically increased in Emerging Markets. Such risks, which can have adverse effects on portfolio
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holdings of the Fund, may include: (i) investment and repatriation restrictions; (ii) currency fluctuations; (iii) the potential for unusual market volatility as compared to more industrialised countries; (iv) government involvement in the private sector; (v) limited investor information and less stringent investor disclosure requirements; (vi) shallow and substantially smaller liquid securities markets than in more industrialised countries, which means the Fund may at times be unable to sell certain securities at desirable prices; (vii) certain local tax law considerations; (viii) limited regulation of the securities markets; (ix) international and regional political and economic developments; (x) possible imposition of exchange controls or other local governmental laws or restrictions; (xi) the increased risk of adverse effects from deflation and inflation; (xii) the possibility of limited legal recourse for the Fund; (xiii) custodial and/or the settlement systems that may not be fully developed; and (xiv) higher risk for default on the payment of principal and profit due to the potential for deterioration in the creditworthiness of the borrower as a result of financial, socioeconomic or political adversity, including, for government borrowers, weak monetary or fiscal policies.
Investors should be informed that the liquidity of sukuk and Islamic financial instruments issued by companies, governments, quasi-government entities and government related entities in the Emerging Markets may be substantially smaller than with comparable sukuk and Islamic financial instruments in industrialised countries. Hedging risk As the Fund may invest up to 20% of its NAV in non RM-denominated Islamic Instruments, the Manager may employ Shariah-compliant currency hedging strategies to reduce exchange rate fluctuations between Ringgit Malaysia and the currencies of the Fund’s investments that are denominated in currencies other than Ringgit Malaysia. To the extent that the Fund uses any such strategies to hedge or protect against currency exchange risk, there is no guarantee that the hedging or protection sought will be achieved. There is no requirement that the Manager should seek to hedge or protect the Fund against currency exchange risk in connection with any investment or transaction made in respect of the Fund. Interest rate risk As the Fund invests in sukuk and/or Islamic money market instruments, the Fund is subject to interest rate risk. Sukuk and/or Islamic money market instruments will generally increase in value when interest rates fall and decrease in value when interest rates rise. Interest rate risk is the chance that such movements in interest rates will negatively affect the value of sukuk or Islamic money market instruments. Sukuk with longer term maturities tend to be more sensitive to interest rate changes than shorter term sukuk or Islamic money market instruments. Changes in interest rates may adversely affect the Fund’s return and may positively or negatively affect the NAV of the Fund on a daily basis. The prevailing interest rate is a general indicator that will have an impact on the Fund. It does not, in any way, suggest that the Fund will invest in conventional financial instruments. Investment funds risk The Fund’s performance is directly impacted by the performance of any collective investment schemes including ETFs (collectively referred to as “Investment Funds”) held by it. The ability of the Fund to achieve its investment goal is directly related to, in part, the ability of the Investment Funds to meet their investment goal. Investing in other Investment Funds may be more costly to the Fund than if the Fund had invested in the underlying securities of the Investment Funds directly. Unit Holders of the Fund will indirectly bear the fees and expenses (including management and advisory fees and other expenses) of the underlying Investment Funds. As the Fund’s allocations among the Investment Funds change from time to time, or to the extent that the expense ratios of the underlying Investment Funds change, the expenses borne by the Fund from investing in the underlying Investment Funds may increase or decrease. In addition, the determination of net asset value of the shares of any particular Investment Fund held by the Fund may be suspended under certain conditions. The Fund’s investments in Investment Funds may subject the Fund to additional risks than if the Fund had invested directly in the Investment Funds’ underlying securities. These risks
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include the possibility that the Investment Funds may experience a lack of liquidity that can result in greater volatility for the Investment Funds than its underlying securities. In addition, an ETF may trade at a premium or discount to its net asset value, as shares of an ETF are bought and sold on exchanges based on market values and not at the ETF’s net asset value. Another risk of investing in Investment Funds is the possibility that one Investment Fund may buy the same securities that another Investment Fund sells. If this happens, an investor in the the Fund would indirectly bear the costs of these transactions without accomplishing the intended investment purpose. Also, the Fund or the Investment Funds may hold common portfolio securities, thereby reducing the diversification benefits to the Fund. Legal and regulatory risk The Fund must comply with various legal requirements, including requirements imposed by the securities laws and company laws in various jurisdictions which the Fund may invest in the Asian region.
The interpretation and application of legislative acts can be often contradictory and this may impact the enforceability of the various agreements entered into by the Fund. Legislation could be imposed retrospectively or may be issued by the regulatory authorities in the form of internal circulars or directives not generally available to the public. The interpretation and application of laws and regulations can be often contradictory and uncertain particularly in respect of matters relating to taxation.
Courts may interpret the law or a particular contract in a manner that the Manager does not expect and that is against the interests of the Fund. It cannot be guaranteed that any recourse or judgment obtained in a foreign court will be enforced in certain jurisdictions where the assets held by the Fund are located. Liquidity risk Liquidity risk takes two forms: asset side liquidity risk and liability side liquidity risk. Asset side liquidity risk refers to the inability of the Fund to sell a sukuk or financial instrument at its quoted price or market value due to factors such as a sudden change in the perceived value or credit worthiness of the sukuk, or due to adverse market conditions generally. Liability side liquidity risk refers to the inability of the Fund to meet a redemption request, due to the inability of the Fund to sell sukuk in order to raise sufficient cash to meet the redemption request. Reduced liquidity due to these factors may have an adverse impact on the NAV of the Fund. Certain sukuk are illiquid due to a limited trading market, financial weakness of the issuer, legal or contractual restrictions on resale or transfer, or that are otherwise illiquid in the sense that they cannot be sold within seven days at approximately the price at which the Fund values them. Sukuk that are illiquid involve greater risk than sukuk with more liquid markets. Illiquidity may have an adverse impact on the Fund’s ability to sell particular sukuk when necessary to meet the Fund’s liquidity needs or in response to a specific economic event. Low-rated or non-investment grade securities risk Notwithstanding the minimum credit rating requirements stated in the investment policy and strategy of the Fund, the Fund may hold higher-yielding securities which are rated lower than investment grade if the securities held by the Fund are downgraded to below investment grade and the Manager believes that it is in the best interests of the Fund to continue to hold such lower rated or even defaulted securities. Accordingly, an investment in the Fund is accompanied by a higher degree of credit risk. Below investment grade securities, for example, high yield or Emerging Market debt securities, may be considered a high risk strategy and can include securities that are unrated. Lower-quality, higher-yielding securities may also experience greater price volatility when compared to higher-quality, lower-yielding securities. Additionally, default rates tend to rise for companies with poorer rated securities during economic recessions or in times of higher interest rates. Companies issuing high yield debt securities are not as strong financially and their low creditworthness may increase the potential for their insolvency. These companies are more likely to encounter financial difficulties and are more vulnerable to changes in the economy, such as a recession or a
17
sustained period of rising interest rates that could affect their ability to make profit and/or principal payments. Mortgage and asset-backed securities risk The Fund may invest in Shariah-compliant mortgage and asset-backed securities. Mortgage-backed securities differ from conventional debt securities because principal is paid back over the life of the security rather than at maturity. The Fund may receive unscheduled prepayments of principal before the security’s maturity date due to voluntary prepayments, refinancing or foreclosure on the underlying mortgage financings. To the Fund, this means a loss of anticipated return, and a portion of its principal investment represented by any premium the Fund may have paid. Mortgage prepayments generally increase when interest rates fall. Mortgage-backed securities also are subject to extension risk. An unexpected rise in interest rates could reduce the rate of prepayments on mortgage-backed securities and extend their life. This could cause the price of the mortgage-backed securities to be more sensitive to interest rate changes. Issuers of asset-backed securities may have limited ability to enforce the security’s interest in the underlying assets, and credit enhancements provided to support the securities, if any, may be inadequate to protect investors in the event of default. Like mortgage-backed securities, asset-backed securities are subject to pre-payment and extension risks. Pre-payment risk Certain sukuk or Islamic financial instruments give an issuer the right to call its securities, before their maturity date. The possibility of such pre-payment risk may force the Fund to reinvest the proceeds of such investments in sukuk or Islamic financial instruments offering lower returns, thereby reducing the Fund’s income. Sukuk investment risk Price changes in sukuk are influenced predominantly by interest rate developments in the capital markets, which in turn are influenced by macro-economic factors. Sukuk could suffer when capital market interest rates rise, while they could increase in value when capital market interest rates fall. The price changes also depend on the term or residual time to maturity of the sukuk. In general, sukuk with shorter terms provide lower returns and have less price risks than sukuk with longer terms. Investment in sukuk with shorter terms would also result in higher re-investment costs because of the more frequent due dates of such sukuk. Sovereign sukuk are sukuk issued or guaranteed by governments or government-related entities. Investment in sovereign sukuk issued or guaranteed by governments or their agencies and instrumentalities (“governmental entities”) involves a high degree of risk. The governmental entity that controls the repayment of sovereign sukuk may not be able or willing to repay the principal and/or profit when due in accordance with the terms of such sukuk due to specific factors, including, but not limited to (i) their foreign reserves, (ii) the available amount of their foreign exchange as at the date of repayment, (iii) their failure to implement political reforms, and (iv) their policy relating to the International Monetary Fund. Sovereign sukuk holders may also be affected by additional constraints relating to sovereign issuers which may include: (i) the unilateral rescheduling of such sukuk by the issuer and (ii) the limited legal recourses available against the issuer (in case of failure or delay in repayment). The Fund, since it may invest in sovereign sukuk issued by governments or government related entities from countries in Emerging Markets, bears additional risks linked to the specifics of such countries (e.g., currency fluctuations, political and economics uncertainties, repatriation restrictions, etc). Unrated sukuk and Islamic money market instrument risk The Fund may invest in unrated sukuk or Islamic money market instruments if, at the time of purchase, the unrated sukuk or Islamic money market instrument is assigned an internal rating which in the opinion of the Manager is the equivalent of (or higher than) BBB3 by RAM or an equivalent credit rating by MARC or any other recognised credit rating agency in accordance with its internal guidelines.
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Unrated sukuk or Islamic money market instruments can be less liquid than rated sukuk or Islamic money market instruments. Many of the unrated sukuk or Islamic money market instruments are traded over the counter and/or do not trade frequently compared to rated sukuk or Islamic money market instruments. When the unrated sukuk or Islamic money market instruments do trade, their prices may be significantly higher or lower than expected. At times, it may be difficult to sell unrated sukuk or Islamic money market instruments promptly at an acceptable price, which may limit the Fund’s ability to sell these instruments in response to specific economic events. Unrated sukuk or Islamic money market instrument determined by the Manager to be the equivalent of (or higher than) BBB3 by RAM or an equivalent credit rating by MARC or any other recognised credit rating agency in accordance with its internal guidelines may pay higher profit rate than rated sukuk or Islamic money market instrument of comparable quality. As a result, unrated sukuk or Islamic money market instrument are subject to greater risk of illiquidity or sudden price changes. Public information on unrated sukuk and Islamic money market instruments or their issuers is typically less available as compared with rated sukuk and Islamic money market instruments.
4.3 RISK MANAGEMENT STRATEGIES
The risk management philosophy of the Franklin Templeton group (which includes the Manager) is to ensure risks are:
Recognised: The firm seeks to identify and understand risks at the security, portfolio, and
operational level.
Rational: The firm strives to ensure that risks are intended and a rational part of each portfolio’s strategy.
Rewarded: The firm applies its best effort to verify that risks assumed provide the potential to commensurate long term rewards.
Franklin Templeton’s approach is to use a dedicated team of risk management specialists who are independent of the portfolio managers and provide robust analytics and unbiased insight. These specialists are locally positioned in the main investment management offices, to work consultatively with portfolio teams around the globe.
Franklin Templeton has developed a rigorous structure to provide this independent oversight. Senior risk management specialists participate on various committees, dealing with issues such as counterparty risk, pricing and liquidity risk, the use of complex securities or investment techniques, and the vetting of new products. Supporting these efforts are Franklin Templeton’s centrally supported platforms for data analytics and modelling, portfolio compliance, and trade monitoring and execution.
IT IS IMPORTANT TO NOTE THAT AN INVESTMENT IN THE FUND CARRIES RISKS AND THE ABOVE LIST OF RISKS MAY NOT BE EXHAUSTIVE. WHILE EVERY CARE WILL BE TAKEN BY THE MANAGER TO MITIGATE THE RISK, INVESTORS ARE ADVISED THAT IT IS NOT ALWAYS POSSIBLE TO PROTECT INVESTMENTS AGAINST ALL RISKS.
INVESTORS ARE RECOMMENDED TO READ THE WHOLE PROSPECTUS TO ASSESS THE RISKS OF THE FUND AND IF NECESSARY, THEY SHOULD CONSULT THEIR ADVISERS, E.G. THEIR BANKERS, LAWYERS, TAX ADVISERS OR INDEPENDENT INVESTMENT ADVISERS FOR A BETTER UNDERSTANDING OF THE RISKS.
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The following describes the fees and charges that may be DIRECTLY incurred by Unit Holders of the Fund when purchasing or redeeming Units of the Fund.
5. FEES, CHARGES AND EXPENSES
5.1 SALES CHARGE
Class A (MYR)
Up to 3.00%^ of the NAV per Unit.
Class I (MYR)
The Manager does not intend to charge any Sales Charge.
^ the rate disclosed is exclusive of GST. The Manager reserves the right to waive or reduce the Sales Charge from time to time at its absolute discretion.
The above Sales Charge is applicable to all distribution channels. Subject to the maximum rate as stipulated above, investors can expect differing Sales Charge to be levied when buying Units from different distribution channels due to the different levels of services provided by each distribution channel and/or the size of the investment undertaken by the investors. Investment through different distribution channels shall be subject to their respective terms and conditions.
For details of computation of Sales Charge, kindly refer to Section 6.2.5 5.2 REDEMPTION CHARGE
The Manager does not intend to charge any Redemption Charge.
5.3 TRANSFER FEE
The Manager does not intend to charge any transfer fee.
5.4 SWITCHING FEE
Not applicable as switching of Units is not allowed.
5.5 OTHER CHARGES
Charges, for instance bank charges, telegraphic charges and courier charges in connection with the execution of transactions on behalf of the investor shall be borne by the investor.
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5.6 ANNUAL MANAGEMENT FEE
Class A (MYR)
0.95%^ per annum of the NAV of the Fund attributable to this class of Units.
Class I (MYR)
0.45%^ per annum of the NAV of the Fund attributable to this class of Units.
^ the rate disclosed is exclusive of GST.
For details of computation of annual management fee, refer to Section 6.1. 5.7 ANNUAL TRUSTEE FEE
0.06%^ per annum of the NAV of the Fund, subject to a minimum of RM18,000^ per annum (excluding foreign custodian fees and charges, if applicable).
^ the rate and amount disclosed is exclusive of GST.
The annual trustee fee applies to the Fund as a whole, irrespective of classes of Units. For details of computation of annual trustee fee, refer to Section 6.1. 5.8 OTHER EXPENSES
Only the expenses (or part thereof) which are directly related to or necessary for the operation
and administration of the Fund may be charged to the Fund. These would include (but are not limited to) the following:
(a) commissions or fees or taxes paid to dealers in effecting dealings in the Shariah-
compliant investments of the Fund, shown on the contract notes or confirmation notes; (b) taxes and other duties charged on the Fund by the government and/or other authorities,
including any GST charged in addition to any expenses which are directly related to or necessary for the operation and administration of the Fund;
(c) costs, fees and expenses properly incurred by the auditor for the Fund; (d) costs, fees and expenses incurred for the valuation of any Shariah-compliant
investment of the Fund by independent valuers for the benefit of the Fund; (e) costs, fees and expenses incurred for any modification of the Deed save where such
modification is for the benefit of the Manager and/or the Trustee; (f) costs, fees and expenses incurred for any meeting of the Unit Holders save where such
meeting is convened for the benefit of the Manager and/or the Trustee; (g) costs, commissions, fees and expenses of the sale, purchase, takaful and any other
dealing of any asset of the Fund; (h) costs, fees and expenses incurred in engaging any specialist approved by the Trustee
for investigating or evaluating any proposed Shariah-compliant investment of the Fund;
The following describes the fees and expenses that may be INDIRECTLY incurred by Unit Holders of the Fund when investing in the Fund.
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(i) costs, fees and expenses incurred in engaging any valuer, adviser or contractor (including but not limited to legal adviser and Shariah adviser) for the benefit of the Fund;
(j) costs, fees and expenses incurred in the preparation and audit of the taxation, returns
and accounts of the Fund; (k) costs, fees and expenses incurred in the termination of the Fund or the removal of the
Trustee or the Manager and the appointment of a new trustee or management company;
(l) costs, fees and expenses incurred in relation to any arbitration or other proceedings
concerning the Fund or any asset of the Fund, including proceedings against the Trustee or the Manager by the other for the benefit of the Fund (save to the extent that legal costs incurred for the defence of either of them are ordered by the court not to be reimbursed by the Fund);
(m) remuneration and out of pocket expenses of the independent members of the
investment committee, unless the Manager decides otherwise; (n) costs, fees and expenses deemed by the Manager to have been incurred in connection
with any change or the need to comply with any change or introduction of any law, regulation or requirement (whether or not having the force of law) of any governmental or regulatory authority;
(o) (where the custodial function is delegated by the Trustee) charges and fees paid to
custodians taking into custody any foreign investments of the Fund;
(p) costs and fees incurred on financing subject to the provisions of the Deed; (q) costs, fees and expenses incurred in relation to index licensing; and
(r) fees, charges, costs and expenses relating to the preparation, printing, posting,
registration and/or lodgment of documents and reports which the Manager and/or the Trustee may be obliged to prepare, print, post, register and/or lodge in relation to the Fund by virtue of any relevant law.
5.9 POLICY ON REBATES AND SOFT COMMISSIONS
The Manager will not retain any form of rebate or soft commission.
5.10 GOODS AND SERVICES TAX
The Manager, the Trustee and other service providers may impose GST in addition to any fees, charges and/or expenses in respect of any Units, and the Unit Holder and/or the Fund (as the case may be) shall pay all such GST as may be applicable.
THERE ARE FEES AND CHARGES INVOLVED AND INVESTORS ARE ADVISED TO CONSIDER THE FEES AND CHARGES BEFORE INVESTING IN THE FUND.
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6. TRANSACTION INFORMATION 6.1 COMPUTATION OF NAV AND NAV PER UNIT
The NAV of the Fund is equal to the value of all assets less the value of all liabilities of the Fund as at each valuation point. As the Fund is a multi-class fund, there will be a NAV of the Fund attributable to each of the classes of Units. Illustration on Computation of NAV
Fund Class A Class I
All amounts are in MYR
Opening NAV 181,500,000.00 176,000,000.00 5,500,000.00Opening Units in circulation 160,000,000.00 5,000,000.00
Add/Less: Net creation/cancellation 1,166,100.00 550,000.00 616,100.00New Units subscription 500,000.00 560,090.91
NAV before income & expenses 182,666,100.00 176,550,000.00 6,116,100.00
MCF Ratio (%)1 100.00 96.6517596861 3.3482403139
Market movement for the day 54,000.00 52,191.95 1,808.05
NAV before management fee & trustee fee 182,720,100.00 176,602,191.95 6,117,908.05
@ 0.95% p.a @ 0.45% p.a Management fee for the day 4,671.93 4,596.50 75.43GST (@ 6% of management fee) 280.32 275.79 4.53
Trustee fee (@ 0.06% p.a) for the day 300.36 290.30 10.06GST (@ 6% of trustee fee) 18.02 17.42 0.60
Total net assets for the day 182,714,829.37 176,597,011.94 6,117,817.43
Closing Units in circulation 160,500,000.00 5,560,090.91NAV per Unit in Base Currency 1.1003 1.1003
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1 Multi-Class Fund (“MCF”) Ratio: MCF Ratio is the ratio used to apportion the Fund level income and expenses of the Fund into different classes of Units. The MCF ratio shown is for illustration purposes only. Actual number of decimal places used may differ. The MCF ratio for each class of Units is derived by dividing the NAV before income and expenses of each class of Units over the total NAV before income and expenses of the Fund. The NAV before income and expenses is derived by adding the capital movement for the day to the opening NAV. Class specific expenses (e.g. management fee) are charged directly to each class of Units. Note: The above example is a general illustration of the accounting methodology used across all classes of Units of the Fund. Please note that the management fee is charged directly to each class of Units and such fee may differ from one class of Units to another class of Units. Policy on rounding adjustment
In calculating your investments with the Manager, the Units allocated to Unit Holders will be
calculated based on the NAV per Unit of the Fund which is also the Selling Price and Redemption Price of the Fund that has been rounded to 4 decimal places (with 0.00005 and above rounded upwards). When Unit Holders invest in the Fund, the investment amount payable by Unit Holders will be rounded to 2 decimal places (with 0.005 and above rounded upwards). The Manager will allocate Units in a Unit Holder’s account by rounding off to the nearest 2 decimal places (with 0.005 and above rounded upwards).
6.2 PRICING OF UNITS
6.2.1 Bases for Valuation of the Assets of the Fund
In undertaking any of the Fund’s investments, the Manager will ensure that all the assets of the Fund will be valued appropriately, that is, at market value, failing which, such assets will be valued at fair value and at all times in compliance with the relevant laws (including the Guidelines and approved accounting standards). Accordingly, where applicable: (i) Listed local and foreign Shariah-compliant securities will be valued based on the last
available market price on each valuation day. However, if:-
(a) a valuation based on the market price does not represent the fair value of the securities, for example during abnormal market conditions; or
(b) no market price is available, including in the event of a suspension in the
quotation of securities for a period exceeding 14 days or such shorter period as agreed by the Trustee,
then the securities would be valued at fair value, as determined in good faith by the Manager based on methods or bases approved by the trustee after appropriate technical consultation.
(ii) Investments in unlisted sukuk denominated in Ringgit Malaysia will be valued on a
daily basis by reference to the fair value prices quoted by a bond pricing agency (BPA) registered with the SC. In a case where the Manager is of the view that the price quoted by BPA or the other assigned vendor price exceeds the vendor-to-vendor tolerance percentage or differs from the market price by more than 20 basis points, the Manager may use the market price, provided that the Manager records its basis for using a non BPA price in accordance with the requirements stipulated in the Guidelines.
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Investments in unlisted sukuk denominated in foreign currencies will be valued on a daily basis by reference to the prices quoted by Thomson Reuters. If Thomson Reuters’ prices are not available, unlisted sukuk denominated in foreign currencies will be valued using fair value by reference to the average indicative yield quoted by 3 independent and reputable institutions. If the Manager, after taking all reasonable efforts, is unable to obtain quotations from a third party, unlisted sukuk (denominated in Ringgit Malaysia or denominated in foreign currencies) will be valued according to an alternative method determined in good faith by the Manager, which has been verified by the auditor of the Fund and approved by the Trustee provided that the Manager records its basis for using the alternative method, has obtained the necessary internal approvals to use the alternative method and keeps an audit trail of all decisions and basis for adopting the alternative method. Any alternative method shall be consistently applied unless advised otherwise by the auditor of the Fund and the Trustee.
(iii) Shariah-compliant collective investment schemes (including ETFs) which are quoted on an approved exchange shall be valued in the same manner as listed securities as described above. When investing in unlisted Shariah-compliant collective investment schemes, the value shall be determined by reference to the last published redemption price of a unit for that unlisted Shariah-compliant collective investment scheme.
(iv) Shariah-compliant financial derivatives positions will be “marked to market” at the close of each valuation day.
(v) Cash and Islamic deposits placed with financial institutions will be valued each day by
reference to the principal value of such investments and the profits accrued thereon for the relevant period.
(vi) Islamic money market instruments (including Islamic commercial papers and Islamic
negotiable instruments) will be valued each day based on the accretion of discount or amortisation of premium or on a yield to maturity basis.
6.2.2 Valuation of the Fund
The Fund will be valued at least once every Business Day. The Fund adopts a forward pricing basis which means that the price of a Unit will be calculated based on the NAV of the Unit by the next valuation point after a purchase request or a redemption request is received by the Manager. As the value of the Fund’s investments at the close of a Business Day will only be determined the following Business Day (because the Fund may invest in foreign markets), the valuations of the Units in respect of a particular Business Day can only be carried out on the following Business Day by the close of the last relevant market to close in respect of that Business Day. (“the valuation point”). Accordingly, if applications for Units or requests for redemption are received before the cut-off time of 4.00 p.m. on a Business Day, for example, Tuesday, the price of the Units in respect of those applications and requests will be calculated based on the valuation of the Units done on Wednesday (if this is the following Business Day). Similarly, applications for Units or requests for redemption received after 4.00 p.m. on Tuesday will be taken as transactions received on Wednesday as the dealing cut-off time on a Business Day is 4.00 p.m. . Therefore, the price of the Units in respect of those applications and requests will be calculated based on the valuation of the Units done on Thursday.
The NAV per Unit will be available on the day following the valuation which resulted in the said prices. Accordingly, if applications for Units or requests for redemption are received before the cut-off time of 4.00 p.m. on the Business Day of, for example, Tuesday, the
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applicable price for those applications and requests will be the price calculated on Wednesday whereas if applications for Units or requests for redemption are received after the cut-off time of 4.00 p.m. on the Business Day of, for example, Tuesday, the applicable price for those applications and requests will be the price calculated on Thursday (assuming Wednesday is a Business Day).
Unit Holders may contact the Manager directly during business hours to obtain the latest price of the Fund.
6.2.3 Single Pricing Policy
The Manager adopts a single pricing policy in calculating your application for and redemption of Units. Single pricing equates to sales and redemptions quoted and transacted on a single price (i.e., NAV per Unit).
The daily NAV per Unit is valued at the next valuation point on a forward pricing basis.
6.2.4 Incorrect Pricing
The Manager shall take immediate action to rectify any incorrect valuation and/or pricing of the Fund and/or the Units and to notify the Trustee and the relevant authorities of the same unless the Trustee considers the incorrect valuation and/or pricing of the Fund and/or the Units is of minimal significance. An incorrect valuation and/or pricing of the Fund and/or the Units shall result in a reimbursement of moneys unless the Trustee considers that such incorrect valuation and/or pricing of the Fund and/or the Units is of minimal significance.
The Trustee shall not consider an incorrect valuation and/or pricing of the Fund and/or the Units to be of minimal significance if the error involves a discrepancy of 0.5% or more of the NAV per Unit unless the total impact on a Unit Holder’s account is less than RM10.00 or an equivalent denomination in the currency that a particular class of Units is denominated. An incorrect valuation and/or pricing not considered to be of minimal significance by the Trustee shall result in reimbursement of moneys in the following manner: (a) if there is an over valuation and/or pricing in relation to the purchase and creation of Units,
the Fund shall reimburse the Unit Holder; (b) if there is an over valuation and/or pricing in relation to the redemption of Units, the
Manager shall reimburse the Fund; (c) if there is an under valuation and/or pricing in relation to the purchase and creation of
Units, the Manager shall reimburse the Fund; and (d) if there is an under valuation and/or pricing in relation to the redemption of Units, the Fund
shall reimburse the Unit Holder or former Unit Holder.
6.2.5 Illustration on how Units are allocated
Assuming a Unit Holder wants to invest RM10,000 in the Fund, whereby the NAV per Unit of the Fund is RM1.0000, the Sales Charge is 3.00% of the NAV per Unit and GST is 6.00% of the Sales Charge. Sales Charges = 3.00% x (amount to be invested) = 3.00% x RM10,000 = RM300 GST on Sales Charges = 6% x Sales Charges = 6% x RM300 = RM18
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Total amount the Unit Holder will have to pay Amount to be invested + Sales Charge + GST on Sales Charge
= RM10,000 + RM300 + RM18
= RM10,318 Number of Units allocated to the Unit Holder Amount to be invested / NAV per Unit = RM10,000 / RM1.0000 (rounded up to four
decimal places) = 10,000 Units
6.2.6 Illustration on how redemption proceeds are calculated
The Units will be redeemed at the Redemption Price which is the NAV per Unit of the class of Units of the Fund. For illustration purposes, it is assumed that the Redemption Price is RM1.0000 but no Redemption Charge is imposed and the prevailing GST at standard-rate is 6%. For example, a Unit Holder wants to redeem 10,000 Units, the amount that the Unit Holder will have to pay as Redemption Charge will therefore be:
Redemption Charge = 0.00% x (amount to be redeemed) = 0.00% x RM10,000 = RM0 GST on Redemption Charge = 6% x Redemption Charge = 6% x RM0 = RM0 Total amount the Unit Holder (redemption proceeds) will receive: Amount to be redeemed – Redemption Charge – GST on Redemption Charge = RM10,000 – RM0 – RM0 = RM10,000 The Manager shall despatch the redemption proceeds to you within 10 days of the date of acceptance of redemption request. If you make a redemption request immediately after the purchase of Units, the Manager shall have the right to withhold the redemption request until sufficient time has elapsed to ensure that the amount remitted by you (for purchase of Units) is realised and the amount invested has been credited to our principal bank account. The NAV per Unit of the classes of Units of the Fund (i.e., the Selling Price and the Redemption Price) will be available in Bloomberg at www.bloomberg.com, and in Morningstar at my.morningstar.com. Note that this price is made available one day after the applicable valuation point. If you want to know the latest prices of the Units, please contact the Manager directly. For more details on application and redemption of Units, please refer to Sections 6.5 and 6.6 respectively. SHOULD THERE BE ANY INCONSISTENCY BETWEEN THE PRICES PUBLISHED IN THE AFORESAID WEBSITES AND THE PRICES MADE AVAILABLE BY THE MANAGER, THE PRICES MADE AVAILABLE BY THE MANAGER SHALL BE ADOPTED INSTEAD OF THE PRICES PUBLISHED IN THE AFORESAID WEBSITES. WHILE THE MANAGER CAN ENSURE THAT THE PRICES FORWARDED TO THE AFORESAID WEBSITES ARE ACCURATE, IT CANNOT ASSUME ANY RESPONSIBILITY OR BE LIABLE FOR ANY ERROR IN PRICES FINALLY PUBLISHED IN THE AFORESAID WEBSITES.
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6.3 MINIMUM INITIAL INVESTMENT, MINIMUM ADDITIONAL INVESTMENT, MINIMUM HOLDING TO MAINTAIN ACCOUNT AND MINIMUM AMOUNT FOR REDEMPTION OF UNITS
Minimum Initial Investment#
Class A (MYR)
RM1,000 or such other lower amount as the Manager may from time to time prescribe.
Class I (MYR)
RM1,000,000 or such other lower amount as the Manager may from time to time prescribe.
Minimum Additional Investment#
Class A (MYR)
RM500 or such other lower amount as the Manager may from time to time prescribe.
Class I (MYR)
RM100,000 or such other lower amount as the Manager may from time to time prescribe.
Minimum Amount for Redemption of Units
Class A (MYR)
500 Units or such other lesser number of Units as the Manager may from time to time prescribe.
Class I (MYR)
500,000 Units or such other lesser number of Units as the Manager may from time to time prescribe.
In the case of a partial redemption, if a redemption request results in a Unit Holder holding less than the applicable minimum holdings requirements of the particular class of Units, that Unit Holder will be required to redeem all the remaining Units held by that Unit Holder in that particular class of Units.
Minimum Holdings to Maintain an Account
Class A (MYR)
1,000 Units or such other lesser number of Units as the Manager may from time to time prescribe
Class I (MYR)
1,000,000 Units or such other lesser number of Units as the Manager may from time to time prescribe.
# Please note that the minimum initial and additional investment amounts stated above include any applicable fees and charges payable by investors, including sales charge and GST (if any). In other words, the amount is gross of fees and charges payable by investors.
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6.4 WHERE TO SUBSCRIBE AND REDEEM UNITS
Details on the procedures on how to invest in the Fund, how to redeem, switch and transfer Units that you hold are provided below. You may be required to forward to the Manager additional documents to authenticate your identification when transacting Units of the Fund. Note that the Manager reserves the right to reject any application without providing any reason.
The Manager reserves the right to vary the procedures and terms and conditions for subscription and redemption of Units from time to time, which shall be communicated to Unit Holders in writing. This may apply either generally (for all investors) or specifically (for any particular investor) at our discretion. Units of the Fund may be purchased through the Authorised Distributors. Investors may contact the Manager for details of the Authorised Distributors. Please note that investors who subscribe for Units through Authorised Distributors may be subject to additional terms and conditions imposed by the Authorised Distributors.
Keeping Track of your Investments
The annual report and interim reports with information on the performance and investments of the Fund are issued to you as Unit Holder of the Fund within two (2) months of the Fund’s financial year-end or the period covered. Updates, information or queries relating to your investment in the Fund may be directed at the Manager or Authorised Distributors. THE FUND’S ANNUAL REPORT IS AVAILABLE UPON REQUEST.
6.5 APPLICATION FOR UNITS
Application for Units made on or before the cut-off time of 4.00 p.m. on any Business Day will, if accepted, be issued at the Selling Price calculated at the next valuation point (i.e. “forward pricing”). The cut-off time will be determined based on the time and date stamp made by the Manager. Payment for an application of Units must be made in the currency designation of the class of Units that an investor intends to invest in. Where an application is received after the cut-off time, as above, the request will be deemed to have been received on the next Business Day. The Manager reserves the right to vary the terms and conditions of investment and payment modes from time to time, which shall be communicated to you in writing. Note that the Manager reserves the right to reject any application without providing any reason. The Manager may also reject any application that is not complete and/or not accompanied by the required documents and those applications will only be processed upon the documentation being satisfactorily completed. Payment Methods Payment for application for Units should be made by crossed cheque, banker’s draft or telegraph transfer to be deposited into the account as specified in the application form.
INVESTORS MUST NOT MAKE PAYMENT IN CASH IN RESPECT OF THEIR INVESTMENTS TO ANY INDIVIDUAL AGENT WHEN PURCHASING UNITS OF THE FUND.
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6.6 REDEMPTION OF UNITS
You may redeem some or all of the Units (subject to the requirements on minimum holdings being satisfied) held by you on any Business Day by completing a transaction form. Redemption requests received by the Manager on or before 4.00 p.m. on any Business Day will be transacted at the Redemption Price calculated at the next valuation point on which the request was received (i.e. “forward pricing”). The cut-off time will be determined based on the time and date stamp made by the Manager. Where the redemption request is received after the cut-off time, i.e. after 4.00 p.m., the request will be deemed to have been received on the next Business Day. The Manager reserves the right to vary the terms and conditions of redemption made from time to time, which shall be communicated to you in writing. In case the Units are standing in the names of more than one Unit Holder, where mode of holding is specified as “Joint Application”, redemption requests will have to be signed by all the joint holders. However, in cases where the mode of holding is specified as “Either Applicant to sign”, any person who is registered as a joint holder will have the power to make redemption requests, without it being necessary for all the other joint holders to sign. In all cases, the proceeds of the redemption will be paid only to the first-named joint holder in the register. Any correspondence and cheques will only be sent to you at the correspondence address that is registered by the Manager or its delegate as provided in your application form. Such redemption proceeds shall be paid to you within 10 days of receipt of your redemption request. The Manager may, with the consent of the Trustee, reserve the right to defer redemption requests if such requests would adversely affect the interests of Unit Holders of any class of Units offered by the Fund.
6.7 COOLING-OFF
A Cooling-off Right is only given to qualified investor(s). A qualified investor is an individual person who is investing in any of the unit trust funds managed by the Manager for the first time but shall not include the following persons:
a staff member of the Manager; and a person registered with a body approved by the SC to deal in unit trusts funds.
If you are eligible for the Cooling-off Right and you change your mind about an investment that you have made in the Fund, you may exercise the Cooling-off Right within six (6) Business Days of the date your application for Units is accepted by the Manager. A refund for every Unit held if you exercise the Cooling-off Right would be the sum of: (a) the NAV per Unit on the day the Units were first purchased; and (b) the Sales Charge (if any), including GST (if any), originally imposed on the day the
Units were purchased. All such requests must be received by the Manager on or before 4.00 p.m. on a Business Day. Requests received after 4.00 p.m. will be treated as having been received on the following Business Day. The cut-off time will be determined based on the time and date stamp made by the Manager. Cooling-off proceeds will only be paid after the Manager receives cleared funds for the original investment. Such proceeds shall be refunded to you within 10 days of receipt of your application for cooling-off.
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6.8 SWITCHING OF UNITS
Switching of Units is not allowed.
6.9 TRANSFER OF UNITS
The investor may transfer some or all of his/her Units in the Fund to another investor from the same Class by completing a transaction form. A transfer will be effected subject to the minimum balance and the terms and conditions applicable for the Fund.
Minimum Number of Units for Transfer:
Class A (MYR)
500 Units or such other lesser number of Units as the Manager may from time to time prescribe.
Class I (MYR)
500,000 Units or such other lesser number of Units as the Manager may from time to time prescribe.
In the case of a partial transfer, if a transfer request results in a Unit Holder holding less than the applicable minimum holdings requirements of the particular class of Units, that Unit Holder will be required to transfer or redeem all the remaining Units held by that Unit Holder in that particular class of Units.
6.10 MODE OF DISTRIBUTION
The following modes of distributions are available for the Fund. Unit Holders may specify their distribution preferences:
Pay-out Option: Distribution proceeds to be paid directly to Unit Holders; or Reinvestment Option: Unit Holders may opt for distribution proceeds to be reinvested as
additional Units at the NAV per Unit on the ex-entitlement date, being the Business Day immediately after the distribution declaration date where Unit Holders on record will be entitled to the distribution at no costs.
If Unit Holders do not indicate their preferred mode of distribution, distribution proceeds will be automatically reinvested as additional Units of the Fund at the NAV per Unit on the ex-entitlement date as mentioned above at no costs.
Distribution proceeds will be paid in the currency in which a class of Units is denominated.
Please note that if a Unit Holder has instructed the Manager to pay out the distribution proceeds instead of reinvesting it into additional Units, that Unit Holder would receive the income distributed in the form of a cheque or via telegraphic transfer. If Unit Holders do not deposit the cheque or cash the cheque within 6 months of issue, the Manager will automatically reinvest the distribution proceeds into additional Units of the Fund at the NAV per Unit on the day immediately after the expiry date of the cheque provided always that the Unit Holder still has an account with the Manager. UNIT PRICES AND DISTRIBUTIONS PAYABLE, IF ANY, MAY GO DOWN AS WELL AS UP.
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6.11 UNCLAIMED MONEYS POLICY
Income distribution proceeds payable to the Unit Holders, if any, which remain unclaimed for 6 months will automatically be reinvested into the Fund based on the NAV per Unit on the day immediately after the end of the expiry date of the cheque provided always that the Unit Holder still has an account with the Manager. Redemption proceeds payable to Unit Holders who have requested for full or partial redemption of their investments in the Fund that remain unclaimed after 12 months as prescribed by the Unclaimed Moneys Act, 1965 (revised 1989), shall be lodged with the Registrar of Unclaimed Moneys in accordance with the provisions of the Unclaimed Moneys Act, 1965.
6.12 ANTI-MONEY LAUNDERING POLICIES AND PROCEDURES
The Manager has anti-money laundering policies in place where the Manager will perform checks on all customers without exception. Application for Units must be accompanied by proper identification documents for our verification. All customers will be checked against various reliable sources for money laundering information. Any cases which are suspicious will be reported to our internal Money Laundering Reporting Officer who is the compliance officer of the Manager, who will then report the matter to the SC and BNM.
Money laundering is a process intended to conceal the benefits derived from unlawful activities which are related, directly or indirectly, to any serious offence so that they appear to have originated from a legitimate source.
The Anti–Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (formerly known as Anti–Money Laundering and Anti-Terrorism Financing Act 2001) (AMLATFPUAA) was passed by Parliament in 2001. The Financial Intelligence and Enforcement Department of BNM has been established to carry out the functions as the competent authority under the AMLATFPUAA. All market intermediaries under the CMSA are obliged to comply with the provisions of the AMLATFPUAA.
In the event that the Manager believes that the client information identification has not been verified or believe the transactions to be suspicious, the Manager may: (a) refuse to process the application; and/or (b) cease or suspend the dealings; until such information or suspicions have been properly verified in accordance with the requirements as set out in the AMLATFPUAA.
6.13 HOLDING OF UNITS BY THE MANAGER
The Manager will not hold any Units in the Fund, other than when complying with redemption requests and/or creating new Units to meet requests for Units by investors, subject to a maximum of 3 million Units or 10% of the Units in circulation, whichever is lower.
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7. SALIENT TERMS OF THE DEED 7.1 YOUR RIGHTS AND LIABILITIES AS A UNIT HOLDER
Your Rights
As a Unit Holder of the Fund, and subject to the provisions of the Deed, you have the right: (a) to receive distributions, if any, of the Fund; (b) to participate in any increase in the value of the Units of the Fund; (c) to call for Unit Holders’ meetings and to vote for the removal of the Trustee or the
Manager through a Special Resolution; (d) to exercise the Cooling-off Right (only for qualified investors); (e) to receive annual and interim reports of the Fund; and (f) to exercise such other rights and privileges as provided for in the Deed. However, you will not have the right to require the transfer to you any of the Shariah-compliant investments or assets of the Fund. Neither will you have the right to interfere with or to question the exercise by the Trustee (or the Manager on the Trustee’s behalf) of the rights of the Trustee as the registered owner of the Shariah-compliant investments and assets of the Fund. Your Liabilities As a Unit Holder of the Fund, and subject to the provisions of the Deed, your liabilities will be limited to the following: (a) you will not be liable for any amount in excess of the purchase price paid for the Units
of the Fund as set out in this Prospectus and the Deed. (b) you will not be liable to indemnify the Manager and/or the Trustee in the event that the
liabilities incurred by the Manager and/or the Trustee in the name of or on behalf of the Fund exceed the NAV of the Fund.
7.2 MAXIMUM FEES AND CHARGES PERMITTED
The maximum rate of direct fees and charges allowed by the Deed are as follows: (a) Sales Charge: 5.00% of the NAV per Unit.
(b) Redemption Charge: 5.00% of the NAV per Unit. Note: The maximum amount of Sales Charge and Redemption Charge is applicable to all classes of Units of the Fund. The maximum rate of indirect fees and charges allowed by the Deed are as follows: (a) Annual management fee: 3.00% per annum of the NAV of the Fund.
(b) Annual trustee fee: 0.20% per annum of the NAV of the Fund, subject to a minimum
fee of RM18,000 per annum (excluding foreign custodian fees and charges, if applicable).
Note: The maximum amount of annual management fee is applicable to each of the classes of Units of the Fund and the maximum amount of annual trustee fee is applicable to the Fund as a whole, irrespective of the classes of Units. In addition to the annual trustee fee, the Trustee may be reimbursed by the Fund for any expense properly incurred by it in the performance of its duties and responsibilities. The
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Trustee may also charge to the Fund a custodian fee in respect of its taking into custody any foreign assets of the Fund. The above fees and charges are subject to GST at the prevailing standard-rate, where applicable.
7.3 PROCEDURES TO INCREASE THE DIRECT AND INDIRECT FEES AND CHARGES
Sales Charge
A higher Sales Charge than that disclosed in the Prospectus may only be imposed if: (a) the Manager has notified the Trustee in writing of the higher charge and the effective
date for the higher charge; (b) a supplemental or replacement prospectus in respect of the Fund setting out the
higher rate is issued; and (c) such time as may be prescribed by any relevant law shall have elapsed since the effective date of the supplemental or replacement prospectus.
Redemption Charge A higher Redemption Charge than that disclosed in the Prospectus may only be imposed if: (a) the Manager has notified the Trustee in writing of the higher charge and the effective
date for the higher charge; (b) a supplemental or replacement prospectus in respect of the Fund setting out the
higher charge is issued; and (c) such time as may be prescribed by any relevant law has elapsed since the effective date of the supplemental or replacement prospectus. Annual Management Fee The Manager may not charge an annual management fee at a rate higher than that disclosed in the Prospectus unless: (a) the Manager has come to an agreement with the Trustee on the higher rate; (b) the Manager has notified the Unit Holders of the higher rate and the date on which
such higher rate is to become effective; such time as may be prescribed by any relevant law shall have elapsed since the notice is sent;
(c) a supplemental or replacement prospectus stating the higher rate is issued thereafter; and
(d) such time as may be prescribed by any relevant law shall have elapsed since the supplemental or replacement prospectus is issued. Annual Trustee Fee The Trustee may not charge an annual trustee fee at a rate higher than that disclosed in the Prospectus unless: (a) the Manager has come to an agreement with the Trustee on the higher rate; (b) the Manager has notified the Unit Holders of the higher rate and the date on which
such higher rate is to become effective; such time as may be prescribed by any relevant law shall have elapsed since the notice is sent;
(c) a supplemental or replacement prospectus stating the higher rate is issued thereafter; and
(d) such time as may be prescribed by any relevant law shall have elapsed since the supplemental or replacement prospectus is issued.
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Resolution to Increase the Maximum Rate of the Direct and Indirect Fees and Charges in the Deed The maximum Sales Charge, Redemption Charge (if applicable), annual management fee or annual trustee fee set out in the Deed is not allowed to be increased unless a Unit Holders’ meeting has been held in accordance with the Deed. A supplemental deed proposing a modification to the Deed to increase such charges is required to be submitted for registration with the SC accompanied by a resolution of not less than two-thirds (2/3) of all Unit Holders at the Unit Holders’ meeting sanctioning the proposed modification to the Deed.
7.4 OTHER PERMITTED EXPENSES THAT MAY BE PAID OUT OF THE FUND
Kindly refer to Section 5.8, Other Expenses, for the list of permitted expenses which may be paid out of the Fund.
7.5 RETIREMENT, REMOVAL AND REPLACEMENT OF THE MANAGER AND THE TRUSTEE
Manager’s Right to Retire The Manager have the power to retire in favour of some other corporation and as necessary under any relevant law upon giving to the Trustee twelve (12) months' (or such other period as the Manager and the Trustee may agree upon) notice in writing of its desire so to do, and subject to the fulfilment of the following conditions: (a) the Manager shall appoint such corporation by writing under the seal of the Manager
as the management company of the Fund in its stead and assign and transfer to such corporation all its rights and duties as management company of the Fund;
(b) such corporation shall enter into such deed or deeds as the Trustee may consider to
be necessary or desirable to secure the due performance of its duties as management company for the Fund; and
(c) upon the payment to the Trustee of all sums due from the Manager to the Trustee at
the date of such retirement, the Manager shall be absolved and released from all further obligations hereunder but without prejudice to the rights of the Trustee or any Unit Holder or other person in respect of any act or omission on the part of the Manager prior to such retirement and the new management company may and shall thereafter exercise all the powers and enjoy all the rights and shall be subject to all the duties and obligations of the Manager as fully as though such new management company had been originally a party to the Deed.
Manager’s Power to Remove or Replace Trustee
The Manager acts on your behalf and in your interests in consultation with the Trustee and the relevant authorities and/or with your approval. The Manager is obliged to give you notice in writing to consider the removal of the Trustee if the Trustee fails or neglects to carry out its duties as stipulated in the Deed and under the Act. The Manager shall take all reasonable steps to replace the Trustee as soon as practicable after becoming aware that: (a) the Trustee has ceased to exist; (b) the Trustee has not been validly appointed; (c) the Trustee is not eligible to be appointed or act as a trustee under the Act; (d) the Trustee has failed or refused to act as trustee in accordance with the provisions and covenants of the Deed and the provisions of the Act;
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(e) a receiver has been appointed over the whole or a substantial part of the assets or undertaking of the Trustee and has not ceased to act under the appointment,
(f) a petition has been presented for the winding up of the Trustee (other than for the purpose of and followed by a reconstruction, unless during or following such reconstruction the Trustee becomes or is declared to be insolvent); or
(g) the Trustee is under investigation for conduct that contravenes the Trust Companies Act 1949, the Trustee Act 1949, the Companies Act 1965 or any securities law. The Trustee may be removed and another trustee may be appointed by Special Resolution of the Unit Holders at a duly convened meeting of which notice has been given to the Unit Holders in accordance with the Deed.
Trustee’s Right to Retire Provided always that the Manager has in place a corporation approved by the relevant authorities to act as the trustee of the Fund, the Trustee may retire upon the expiration of twelve (12) months' (or such other period as the Manager and the Trustee may agree upon) notice in writing to the Manager of its desire to do so.
Power of Trustee to Remove or Replace the Manager
Subject to the provisions of the Act, the Trustee may take reasonable steps to remove the Manager: (a) if the Manager has failed or neglected to carry out its duties to the satisfaction of the
Trustee and the Trustee considers that it would be in your interest to do so after the Trustee has given notice that it is of that opinion and the reasons for that opinion, and has considered any representations made by the Manager in respect of that opinion, and after consultation with the relevant authorities and with the approval of the Unit Holders by way of a Special Resolution;
(b) unless expressly directed otherwise by the relevant authorities, if the Manager is in breach of any of its obligations or duties under the Deed or the relevant laws, or have ceased to be eligible to be a management company under the relevant laws; or
(c) if the Manager has gone into liquidation, except for the purpose of amalgamation or reconstruction or some similar purpose, or has had a receiver appointed or has ceased to carry on business.
If any of the above occurs, the Manager shall upon receipt of a written notice from the Trustee cease to be the management company of the Fund by the mere fact of the Manager’s receipt of the notice. The Trustee shall, at the same time, by writing appoint some other corporation already approved by the relevant authorities to be the management company of the Fund; such corporation shall have entered into such deed or deeds as the Trustee may consider to be necessary or desirable to secure the due performance of its duties as management company for the Fund.
7.6 TERMINATION OF THE FUND OR A CLASS OF UNITS
Termination of the Fund The Fund may be terminated or wound up should the following events occur:
(a) The SC’s authorisation has been withdrawn; (b) A Special Resolution is passed at a Unit Holders’ meeting to terminate or wind up the
Fund; or (c) The effective date of an approved transfer scheme (if any) has resulted in the Fund,
which is the subject of the transfer scheme, being left with no asset or property. Upon the termination of the Fund, the Trustee shall:
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(a) sell all the Shariah-compliant assets of the Fund then remaining in its hands and pay out of the Fund any liabilities of the Fund; such sale and payment shall be carried out and completed in such manner and within such period as the Trustee considers to be in the best interests of the Unit Holders; and
(b) from time to time distribute to the Unit Holders, in proportion to the number of Units held by them respectively : (i) the net cash proceeds available for the purpose of such distribution and derived
from the sale of the Shariah-compliant investments and assets of the Fund less any payments for liabilities of the Fund; and
(ii) any available cash produce; provided always that the Trustee shall not be bound, except in the case of final distribution, to distribute any of the moneys for the time being in his hands the amount of which is insufficient for payment to the Unit Holders of Ringgit Malaysia One (RM1.00) or its foreign currency equivalent, if applicable, in respect of each Unit and provided also that the Trustee shall be entitled to retain out of any such moneys in his hands full provision for all costs, charges, taxes, expenses, claims and demands incurred, made or anticipated by the Trustee in connection with or arising out of the winding-up of the Fund and, out of the moneys so retained, to be indemnified against any such costs, charges, taxes, expenses, claims and demands; each such distribution shall be made only against the production of such evidence as the Trustee may require of the title of the Unit Holder relating to the Units in respect of which the distribution is made. In the event of the Fund being terminated, the Trustee shall be at liberty to call upon the
Manager to grant the Trustee, and the Manager shall so grant, a full and complete release from the Deed. Depending on the circumstances in which the Fund is terminated, either the Manager or the
Trustee will inform the relevant authorities of the termination. In any of the following events:
(a) if the Manager has gone into liquidation, except for the purpose of reconstruction or amalgamation upon terms previously approved in writing by the Trustee and the relevant authorities;
(b) if, in the opinion of the Trustee, the Manager has ceased to carry on business; or (c) if, in the opinion of the Trustee, the Manager has to the prejudice of Unit Holders failed
to comply with the provisions of the Deed or contravened any of the provisions of any relevant law;
the Trustee shall summon a Unit Holders’ meeting in accordance with the provisions of the Deed for the purpose of seeking directions from the Unit Holders and also arrange for a final review and audit of the final accounts of the Fund by the auditor of the Fund.
The Manager and the Trustee shall as soon as they are aware that the Fund is to be terminated or wound up, and after the completion of the termination and winding up of the Fund, inform the relevant authorities of the same in such manner as may be prescribed by any relevant law.
In all other cases of termination of the trust and winding-up of the Fund, such final review and audit by the auditor of the Fund shall be arranged by the Manager.
Termination of a Class of Units A class of Units may be terminated if a Special Resolution is passed at a meeting of Unit Holders of that class of Units to terminate the class provided always that such termination does not prejudice the interests of Unit Holders of any other class of Units. If at a meeting of Unit Holders to terminate a class of Units, a Special Resolution to terminate
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a particular class of Units is passed by the Unit Holders: (a) the Trustee shall cease to create and cancel Units of that class of Units; (b) the Manager shall cease to deal in Units of that class; (c) the Trustee and the Manager shall notify the relevant authorities in writing of the
passing of the Special Resolution; (d) the Trustee or the Manager shall as soon as practicable inform all Unit Holders of the
Fund of the termination of that class of Units; and (e) the Trustee or the Manager shall publish a notice on the termination of that class of
Units in one national Bahasa Malaysia newspaper and one national English newspaper, if those Units are sold in Malaysia.
The Trustee shall then arrange for a final review and audit of the final accounts of the Fund attributable to that class of Units by the Auditor. Upon the completion of the termination of that class of Units, the Trustee and the Manager shall notify the relevant authorities of the completion of the termination of that class of Units.
7.7 PROVISIONS RELATING TO MEETINGS OF UNIT HOLDERS
Meetings of Unit Holders The Deed provides that the Trustee, Unit Holders or the Manager may convene Unit Holders’ meetings. A resolution of Unit Holders may be required pursuant to the Deed for specific purposes, e.g. making certain amendments to the Deed, increasing the maximum fees payable to the Trustee or the Manager in the Deed, or removing the Trustee or the Manager. Quorum Required for Convening a Unit Holders’ Meeting The quorum required for a meeting of the Unit Holders shall be five (5) Unit Holders, whether present in person or by proxy, provided that if the Fund or a class of Units has five (5) or less Unit Holders, the quorum required for a meeting of the Unit Holders of the Fund or a class of Units shall be any number of Unit Holders, whether present in person or by proxy; if the meeting has been convened for the purpose of voting on a Special Resolution, the Unit Holders present in person or by proxy must hold in aggregate at least twenty five per centum (25%) of the Units in circulation of the Fund or the applicable class of Units, as the case may be, at the time of the meeting.
Unit Holders’ Meeting Convened by Unit Holders Unless otherwise required or allowed by the relevant laws, the Manager shall, within twenty-one (21) days of receiving an application from not less than fifty (50) or one-tenth (1/10), whichever is less, of all the Unit Holders of the Fund or of a particular class of Units, as the case may be, summon a meeting of the Unit Holders by: a) sending by post at least seven (7) days before the date of the proposed meeting a
notice of the proposed meeting to all the Unit Holders or the Unit Holders of that class of Units;
b) publishing at least fourteen (14) days before the date of the proposed meeting an advertisement giving notice of the proposed meeting in one national language national daily newspaper and one other newspaper as may be approved by the relevant authorities; and
c) specifying in the notice the place and time of the meeting and the terms of the resolutions to be proposed at the meeting.
The Unit Holders may direct the Manager to summon a meeting for any purpose including, without limitation, for the purpose of:
a) requiring the retirement or removal of the Manager; b) requiring the retirement or removal of the Trustee;
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c) considering the most recent financial statements of the Fund; d) giving to the Trustee such directions as the meeting thinks proper; or e) considering any matter in relation to the Deed provided always that the Manager shall not be obliged to summon such a meeting unless direction has been received from not less than fifty (50) or one-tenth (1/10), whichever is less, of all the Unit Holders of the Fund or all the Unit Holders of a particular class of Units, whichever may be applicable.
Unit Holders’ Meeting Convened by the Manager or Trustee Unless otherwise required or allowed by the relevant laws and the Deed, the Manager or the Trustee may convene a Unit Holders’ meeting by giving Unit Holders a 14 days written notice specifying in the notice the place, time of the meeting and the terms of the resolutions to be proposed at the meeting. The Manager or Trustee may convene a Unit Holders’ meeting by giving Unit Holders a written notice in the manner prescribed by the Deed or the relevant laws.
7.8 SUSPENSION OF DEALING IN UNITS The suspension of sale and/or redemption of Units shall only be carried out if the interests of the Unit Holders would, in so far as the Trustee is concerned, be materially affected if the sale and/or redemption of Units were not suspended. If the Fund has more than one class of Units, a suspension of dealing in Units can apply to one or more classes of Units without being applied to the other classes if it is in the interests of the Unit Holders of a particular class of Units. Other than this situation, the Trustee may, without the consent of the Unit Holders, suspend the sale and/or redemption of Units in exceptional circumstances when there is good and sufficient reason to do so having regard to the interests of the Unit Holders and potential investors of the Fund. In such a case, the period of the suspension shall not exceed such time as may be prescribed by any relevant law unless the consent of the Unit Holders has been obtained.
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Templeton Worldwide, Inc. “TWI”
(incorporated in Delaware)
Franklin Resources, Inc. “FRI”
(incorporated in Delaware)
100%
100%
Templeton International Inc. “TII”
(incorporated in Delaware)
Franklin Templeton Capital Holdings Pte Ltd "FTCH"
(incorporated in Singapore)
100%
Franklin Templeton GSC Asset Management Sdn. Bhd. “FTGSC”
100%
8. THE MANAGER 8.1 BACKGROUND INFORMATION
Franklin Templeton has built its presence in Malaysia through Franklin Templeton Asset Management (Malaysia) Sdn Bhd (FTAM). A separate entity, Franklin Templeton GSC Asset Management Sdn Bhd (FTGSC), which was incorporated for our entry into Islamic fund management in Malaysia, was granted approval by the Securities Commission Malaysia on 6 January 2010 and subsequently became licensed to carry on the regulated activity of Islamic fund management under the CMSA. On 21 August 2013, FTGSC’s application to vary its Capital Markets Services Licence to include dealing in securities restricted to unit trusts was also approved by the Securities Commission, subject to various conditions. FTGSC manages unit trust fund(s) and provides investment management services for institutional clients; FTGSC has its own staff force and its back office, internal audit and compliance functions are supported from within the Franklin Templeton Investments group of companies. Both FTAM and FTGSC are wholly owned subsidiaries of Franklin Resources, Inc. Franklin Resources, Inc. (NYSE: BEN), is a global investment management organisation operating as Franklin Templeton Investments. Franklin Templeton Investments provides global and domestic investment management solutions under its Franklin, Templeton, Mutual Series, Bissett, Fiduciary Trust, Darby, Balanced Equity Management and K2 brand names. The San Mateo, California-based company has more than 65 years of investment management experience.
Shareholding Structure of the Manager
8.2 ROLE OF THE MANAGER
The Manager is responsible for the operation and administration of the Fund, investment management and marketing of the Fund, servicing Unit Holders’ needs, keeping proper administration records of Unit Holders and accounting records of the Fund, ensuring that the
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Units are correctly priced, ensuring compliance with stringent internal procedures and guidelines of relevant authorities and relevant laws.
8.3 BOARD OF DIRECTORS
Stephen Ernest Grundlingh (non-independent director) Sandeep Singh (non-independent director and Chief Executive Officer) Nor Hanifah binti Hashim (non-independent director) Lim Seh Kuan (non-independent director) Wan Hanisah binti Wan Ibrahim (independent director) Dr Chak Choy Sim (independent director)
8.4 MATERIAL LITIGATION
As at 30 September 2016, the Manager is not engaged in any material litigation and arbitration, including those pending or threatened, and is not aware of any facts likely to give rise to any proceedings which might materially affect the business or financial position of the Manager and any of its delegates.
8.5 INVESTMENT COMMITTEE MEMBERS FOR THE FUND
The Investment Committee formulates, establishes and implements investment strategies and policies. The Investment Committee will continually review and monitor the success of these strategies and policies as well as ensure investment guidelines and regulations are complied with. The Investment Committee will meet at least once every quarter. The Investment Committee Members: Nor Hanifah binti Hashim (non-independent member) Sandeep Singh (non-independent member) Wan Hanisah binti Wan Ibrahim (independent member) Dr Chak Choy Sim (independent member)
8.6 THE DESIGNATED FUND MANAGER Nor Hanifah binti Hashim
Executive Director and Head of Malaysia Fixed Income & Sukuk Ms. Hanifah was appointed as a director of the Manager on 14 March 2012. Ms. Hanifah, executive director and head of Malaysia fixed income & sukuk joined FTGSC in 2011. She is overseeing the local fixed income business in Malaysia and manages the Institutional and retail portfolios of local fixed income and sukuk. She also work closely with the fixed income team in the Middle East for global sukuk mandates and also support Franklin Templeton's global fixed income team. Ms. Hanifah has over 20 years of experience in the financial industry including 18 years with CIMB Banking Group. Prior to joining Franklin Templeton Investments, Ms. Hanifah was an executive vice president - head of fixed income, CIMB - Principal Asset Management Berhad where she was responsible for the investment of fixed income assets in Malaysia and provided investment oversight for the group's fixed income business in Indonesia and Thailand. Ms. Hanifah holds a Bachelor of Science in economics and international relationships from University of Wisconsin Madison, USA. She is a national member of Financial Market Association - Malaysia and obtained her Capital Markets Services Representative License (CMSRL) with the Securities Commission on 23 December 2004.
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Ms Hanifah is the designated fund manager for the Fund.
8.7 THE SHARIAH ADVISER
8.7.1 Profile of the Shariah Adviser
Amanie Advisors Sdn Bhd (''Amanie'') is a Shariah advisory, consultancy, training and research and development boutique for institutional and corporate clientele focusing on Islamic financial services. Amanie is a registered Shariah advisory company for Islamic unit trust with the SC. It has been established with the aim of addressing the global needs for experts' and Shariah scholars' pro-active input. This will ultimately allow the players in the industry to manage and achieve their business and financial goals in accordance with the Shariah Requirements. Amanie also focuses on organizational aspect of the development of human capital in Islamic finance worldwide through providing updated quality learning embracing both local and global issues on Islamic financial products and services. The company is led by Datuk Dr. Mohd Daud Bakar and teamed by an active and established panel of consultants covering every aspect related to the Islamic banking and finance industry both in Malaysia and the global market. The team is comprised of dynamic and experienced professionals with a mixture of corporate finance, accounting, product development, Shariah law and education. Amanie meets the fund manager every quarter to address Shariah advisory matters pertaining to our Shariah funds.
8.7.2 Roles and Responsibilities of Amanie as the Shariah Adviser
(1) To review the Fund’s investments once every quarter to ensure that the Fund is managed
and administered in accordance with Shariah Requirements or any other relevant principle at all times. The Shariah Adviser will also meet with the Manager once every quarter to discuss Shariah matters relating to the Fund.
(2) To provide expertise and guidance in all matters relating to Shariah Requirements, including on the Fund’s deed and prospectus, its structure and investment process, and other operational and administrative matters.
(3) To consult with SC where there is any ambiguity or uncertainty as to an investment, instrument, system, procedure and/or process.
(4) To act with due care, skill and diligence in carrying out its duties and responsibilities. (5) Responsible for scrutinizing the Fund's compliance report as provided by the compliance
officer, and investment transaction reports provided by, or duly approved by, the Trustee to ensure that the Fund’s investments are in line with Shariah Requirements.
(6) To prepare a report to be included in the Fund’s interim and annual reports certifying whether the Fund has been managed and administered in accordance with Shariah Requirements for the period concerned.
8.7.3 Profile of the Shariah Team
The designated persons responsible for Shariah matters relating to the Fund are:
Datuk Dr. Mohd Daud Bakar Shariah adviser Datuk Dr. Mohd Daud Bakar is the founder and group chairman of Amanie Advisors, a global boutique Shariah advisory firm with offices located in Kuala Lumpur, Dubai, Luxembourg, Cairo, Kazakhstan, Oman, Australia, South Korea and Dublin. He is also the founder and chairman of Amanie Nexus Sdn Bhd (Kuala Lumpur). Prior to this, he was the deputy vice-chancellor at the International Islamic University Malaysia. He received his first degree in Shariah from University of Kuwait in 1988 and obtained his PhD from University of St. Andrews, United Kingdom in 1993. In 2002, he went on to complete his external Bachelor of Jurisprudence at University of Malaya. He has published a number of articles in various academic journals and has made many presentations in various conferences both local and
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overseas. Datuk Dr Mohd Daud is currently the chairman of the Shariah Advisory Council of the Central Bank of Malaysia, the SACSC and the Shariah Supervisory Council of Labuan Financial Services Authority. He is also a member of the Shariah Board of Dow Jones Islamic Market Index (New York), Oasis Asset Management (Cape Town, South Africa), The National Bank of Oman, Financial Guidance (USA), BNP Paribas (Bahrain), Morgan Stanley (Dubai), Jadwa-Russell Islamic Fund (Kingdom of Saudi Arabia), Bank of London and Middle East (London), Noor Islamic Bank (Dubai), Islamic Bank of Asia (Singapore), and in other financial institutions both local and abroad. Apart from that, Datuk Dr Mohd Daud is also actively advising, locally and overseas, on capital markets product structuring such as sukuk. Mohd Zikri bin Mohd Shairy Chief Executive Officer Mohd Zikri bin Mohd Shairy holds a Bachelor of Laws (LL.B) and Master of Comparative Laws (MCL) from International Islamic University Malaysia in 2006 and 2013 respectively. He starts his journey in the Islamic banking industry in January 2007. He served Bank Muamalat Malaysia Berhad and RHB Islamic Bank Berhad as financing executive based at several branches of the banks. During such period, he primarily deals with retail products of the banks such as Islamic mortgage, Islamic hire purchase, bancatakaful, Islamic wills and deposit. He later joined Shariah Division of Bank Islam Malaysia Berhad in September 2009 and led Shariah Risk Management Department since 2011 until January 2015. By leading Shariah Risk Management Department of Bank Islam, it made him involved in every lines of businesses of the bank to ensure a sound and robust Shariah risk management implementation bank-wide. He later joined Amanie Advisors Sdn. Bhd. in February 2015 as a consultant where he is primarily involved in Shariah advisory and Shariah audit for local and international clients covering conversion to Islamic finance, private equity fund, sukuk and many others. He is an Accredited Training Professional and actively delivers training on Shariah governance as well as Shariah application in Islamic banking for local and international institutions. Benjamin Clarehugh Consultant Benjamin Clarehugh is a consultant responsible for Shariah screening of equity & fixed income securities, Shariah monitoring & compliance review of unit trust funds and the operation of asset management companies. Benjamin is also assisting the Shariah advisory team in structuring and developing Islamic Capital Market products. Prior to joining Amanie Advisors Sdn Bhd, he worked with Kuwait Finance House Research Ltd. as a manager in the Islamic Capital Markets department. He completed various research, advisory and consultancy projects with various global Islamic finance institutions and partners. INVESTORS MAY VISIT THE MANAGER’S WEBSITE AT www.franklintempleton.com.my FOR FURTHER INFORMATION ON THE MANAGER AND ITS DELEGATES, SHARIAH ADVISER, INVESTMENT COMMITTEE, CHIEF EXECUTIVE OFFICER, COMPLIANCE OFFICER AND FUND MANAGER(S) (INCLUDING BUT NOT LIMITED TO THE QUALIFICATION OF THE SHARIAH ADVISER AND ITS MEMBERS, EXPERIENCE OF THE INVESTMENT COMMITTEE MEMBERS, CHIEF EXECUTIVE OFFER, COMPLIANCE OFFICER AND FUND MANAGER(S), AND OTHER CORPORATE INFORMATION).
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9. THE TRUSTEE
9.1 ABOUT DEUTSCHE TRUSTEES MALAYSIA BERHAD
Deutsche Trustees Malaysia Berhad (“DTMB”) (Company No. 763590-H) was incorporated in Malaysia on 22 February 2007 and commenced business in May 2007. The Company is registered as a trust company under the Trust Companies Act 1949, with its business address at Level 20, Menara IMC, 8 Jalan Sultan Ismail, 50250 Kuala Lumpur. DTMB is a member of Deutsche Bank Group (“Deutsche Bank”), a global investment bank with a substantial private client franchise. With more than 100,000 employees in more than 70 countries, Deutsche Bank offers financial services throughout the world.
9.2 EXPERIENCE IN TRUSTEE BUSINESS
DTMB is part of Deutsche Bank’s Securities Services, which provides trust, agency, depository, custody and related services on a range of securities and financial structures. DTMB’s trustee services are supported by Deutsche Bank (Malaysia) Berhad (“DBMB”), a subsidiary of Deutsche Bank, financially and for various functions, including but not limited to financial control and internal audit.
9.3 DUTIES AND RESPONSIBILITIES OF THE TRUSTEE
DTMB’s main functions are to act as trustee and custodian of the assets of the Fund and to safeguard the interests of Unit holders of the Fund. In performing these functions, the Trustee has to exercise due care and vigilance and is required to act in accordance with the relevant provisions of the Deed, the CMSA and all relevant laws and regulations.
9.4 TRUSTEE’S DISCLOSURE OF MATERIAL LITIGATION
As at 30 September 2016, neither the Trustee nor its delegate is (a) engaged in any material litigation and arbitration, including those pending or threatened, nor (b) aware of any facts likely to give rise to any proceedings which might materially affect the business or financial position of the Trustee and any of its delegate.
9.5 TRUSTEE’S DELEGATE
The Trustee has appointed DBMB as the custodian of the assets of the Fund. DBMB is a wholly-owned subsidiary of Deutsche Bank AG. DBMB offers its clients access to a growing domestic custody network that covers over 30 markets globally and a unique combination of local expertise backed by the resources of a global bank. In its capacity as the appointed custodian, DBMB’s roles encompass safekeeping of assets of the Fund; trade settlement management; corporate actions notification and processing; securities holding and cash flow reporting; and income collection and processing. All investments of the Fund are registered in the name of the Trustee for the Fund, or where the custodial function is delegated, in the name of the custodian to the order of the Trustee for the Fund. As custodian, DBMB shall act only in accordance with instructions from the Trustee.
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9.6 DISCLOSURE ON RELATED-PARTY TRANSACTIONS OR CONFLICT OF INTERESTS
As the Trustee for the Fund, there may be related party transactions involving or in connection with the Fund in the following events: (1) Where the Fund invests in the products offered by Deutsche Bank AG and any of its
group companies (e.g. money market placement, etc.); (2) Where the Fund has obtained financing from Deutsche Bank AG and any of its group
companies, as permitted under the Securities Commission’s guidelines and other applicable laws;
(3) Where the Manager appoints DBMB to perform its back office functions (e.g. fund
accounting and valuation); and (4) Where DTMB has delegated its custodian functions for the Fund to DBMB. DTMB will rely on the Manager to ensure that any related party transactions, dealings, investments and appointments are on terms which are the best that are reasonably available for or to the Fund and are on an arm’s length basis as if between independent parties. While DTMB has internal policies intended to prevent or manage conflicts of interests, no assurance is given that their application will necessarily prevent or mitigate conflicts of interests. DTMB's commitment to act in the best interests of the unit holders of the Fund does not preclude the possibility of related party transactions or conflicts.
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10. RELATED PARTY TRANSACTIONS AND CONFLICT OF INTERESTS
The Manager may from time to time deal with competing or conflicting interests of the Fund with other funds managed by the Manager. For example, the Manager may make a purchase or sale decision on behalf of some or all of the other funds managed by them without making the same decision on behalf of the Fund, as a decision whether or not to make the same investment or sale for the Fund depends on factors such as the cash availability and portfolio balance of the Fund. However, the Manager will use reasonable endeavours at all times to act fairly and in the interests of the Fund. In particular, after taking into account the availability of cash and relevant investment guidelines of the other funds managed by the Manager and the Fund, the Manager will endeavour to ensure that investments bought and sold will be allocated proportionately as far as possible among the Fund and the other funds managed by the Manager. To the extent that another fund managed by the Manager intends to purchase substantially similar assets, the Manager will ensure that the assets are allocated fairly and proportionately between the Fund and the other funds. Directors, investment committee members (if any) and employees of the Manager are required to conduct themselves with ethics and integrity and to avoid a conflict, particularly where their personal interests (including family members) could interfere with the interests of the Manager and/or the Fund. The Manager has a policy which spells out requirements pertaining to code of conduct and personal transactions by directors, investment committee and employees, and their immediate family where applicable, including any monitoring and sanctions on such transactions. The Manager and the Trustee shall conduct all transactions with or for the Fund on an arm’s length basis. Associates of the Trustee may be engaged to provide financial, banking and brokerage services to the Fund. Such services where provided, will be on an arm’s length basis. Associates of the Manager may be engaged to provide services such as financial, banking or brokerage services, to the Fund. Such services where provided, will be on an arm’s length basis. As at 30 September 2016, save for the following, none of the Manager’s directors or sole shareholder have any direct or indirect interests in other corporations in Malaysia carrying on a similar business as the Manager:
Name of Sole Shareholder
Name of Corporation or Business
Interests
(Direct/ Indirect)
Franklin Templeton Capital Holdings Pte Ltd
Franklin Templeton Asset Management (Malaysia) Sdn. Bhd.
Direct
Name of Director Name of Corporation or
Business
Interests
(Direct/ Indirect)
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Nor Hanifah binti Hashim
Franklin Templeton Asset Management (Malaysia) Sdn. Bhd.
Indirect
Stephen Ernest Grundlingh
Franklin Templeton Asset Management (Malaysia) Sdn. Bhd.
Indirect
Sandeep Singh
Franklin Templeton Asset Management (Malaysia) Sdn. Bhd.
Indirect
Lim Seh Kuan
Franklin Templeton Asset Management (Malaysia) Sdn. Bhd.
Indirect
Each of the directors and the sole shareholder named above is affiliated with Franklin Templeton Investments and has an indirect interest in non-Malaysian corporations within the Franklin Templeton Investments group of companies that carry on a similar business as the Manager. In addition, Ms. Hanifah holds shares of CIMB Group Holdings Bhd and has an indirect interest in corporations within the CIMB group of companies that carry on a similar business as the Manager, and Mr Grundlingh and Mr Sandeep are both directors of Franklin Templeton Asset Management (Malaysia) Sdn. Bhd. . None of the advisers (i.e., the tax advisers and Shariah Adviser) has any existing or potential conflicts of interest in an advisory capacity with the Fund and/or the Manager.
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11. ADDITIONAL INFORMATION
11.1 AVENUE FOR ADVICE
Investors may contact our customer service at 03-2264 6699 or fax to 03-2145 9071 or email us at [email protected] or contact the Authorised Distributors for further information relating to the Fund or this Prospectus.
11.2 DEED AND SUPPLEMENTAL DEED (IF ANY)
The Deed dated 13 February 2015 in respect of the Fund entered into between the Manager and the Trustee.
11.3 FINANCIAL YEAR END
30 September of every calendar year except that the first financial year of the Fund shall commence on the Launch Date and end on a date which shall not exceed 18 months from the Launch Date.
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12. DOCUMENTS AVAILABLE FOR INSPECTION
For a period of at least 12 months from the date of this Prospectus, a copy of the following documents, where applicable, may be inspected at our office and/or the office of the Trustee without charge: (a) the Deed; (b) this Prospectus and supplementary or replacement prospectus, if any; (c) the latest annual and interim reports of the Fund; (d) any material contract or document referred to in this Prospectus and, in the case of a
contract not reduced into writing, a memorandum which gives full particulars of the contract;
(e) all reports, letters or other documents, valuations and statements by any expert, any part of which is extracted or referred to in this Prospectus;
(f) where applicable, the audited financial statements of the Manager and the Fund for the current financial year and for the last 3 financial years or if the Fund has been established for a period of less than 3 years, from the date of commencement of the Fund;
(g) writ and relevant cause papers for all material litigation and arbitration disclosed in this Prospectus; and
(h) any consent given by experts disclosed in this Prospectus.
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13. TAX ADVISERS’ LETTER
Taxation adviser’s letter in respect of the taxation of the unit trust and the unit holders
(prepared for inclusion in this prospectus) The Board of Directors 17 October 2016 Franklin Templeton GSC Asset Management Sdn Bhd Suite 31-02, 31st Floor Menara Keck Seng No. 203, Jalan Bukit Bintang 55100 Kuala Lumpur Dear Sirs Taxation of the unit trust and unit holders This letter has been prepared for inclusion in this prospectus dated 18 November 2016 in connection with the offer of units in the unit trust known as Franklin Malaysia Sukuk Fund (hereinafter referred to as “the Fund”).
The purpose of this letter is to provide prospective unit holders with an overview of the impact of taxation on the Fund and the unit holders.
Taxation of the Fund The taxation of the Fund is subject to the provisions of the Malaysian Income Tax Act 1967 (MITA), particularly Sections 61 and 63B. Subject to certain exemptions, the income of the Fund comprising profits and other investment income derived from or accruing in Malaysia after deducting tax allowable expenses, is subject to Malaysian income tax at the rate of 24% with effect from year of assessment 2016. Under Section 2(7) of the MITA, any reference to interest shall apply, mutatis mutandis, to gains or profits received and expenses incurred, in lieu of interest, in transactions conducted in accordance with the principles of Syariah. The effect of this is that any gains or profits received (hereinafter referred to as “profits”) and expenses incurred, in lieu of interest, in transactions conducted in accordance with the principles of Syariah, will be accorded the same tax treatment as if they were interest.
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The Board of Directors Franklin Templeton GSC Asset Management Sdn Bhd 17 October 2016
2
Tax allowable expenses would comprise expenses falling under Section 33(1) and Section 63B of the MITA. Section 33(1) permits a deduction for expenses that are wholly and exclusively incurred in the production of gross income. In addition, Section 63B allows unit trusts a deduction for a portion of other expenses (referred to as ‘permitted expenses’) not directly related to the production of income, as explained below.
“Permitted expenses” refer to the following expenses incurred by the Fund which are not deductible under Section 33(1) of the MITA:
the manager's remuneration, maintenance of the register of unit holders, share registration expenses, secretarial, audit and accounting fees, telephone charges, printing and stationery costs and
postage.
These expenses are given a partial deduction under Section 63B of the MITA, based on the following formula:
A x B 4C where A is the total of the permitted expenses incurred for that basis period;
B is gross income consisting of dividend1, interest and rent chargeable to tax for that basis period; and
C is the aggregate of the gross income consisting of dividend1 and interest (whether
such dividend or interest is exempt or not) and rent, and gains made from the realisation of investments (whether chargeable to tax or not) for that basis period,
provided that the amount of deduction to be made shall not be less than 10% of the total permitted expenses incurred for that basis period.
1 Pursuant to Section 15 of the Finance Act 2011, with effect from the year of assessment 2011, dividend
income is deemed to include income distributed by a unit trust which includes distributions from Real Estate Investment Trusts.
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The Board of Directors Franklin Templeton GSC Asset Management Sdn Bhd 17 October 2016
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Exempt income The following income of the Fund is exempt from income tax: Malaysian sourced dividends
All Malaysian-sourced dividends should be exempt from income tax. Malaysian sourced interest (profits)
(i) interest from securities or bonds issued or guaranteed by the Government of Malaysia;
(ii) interest from debentures or sukuk, other than convertible loan stock, approved or authorized by, or lodged with, the Securities Commission;
(iii) interest from Bon Simpanan Malaysia issued by Bank Negara Malaysia; (iv) interest derived from Malaysia and paid or credited by banks or financial institutions
licensed under the Banking and Financial Institutions Act 1989 or the Islamic Banking Act 19832;
(v) interest derived from Malaysia and paid or credited by any development financial
institution regulated under the Development Financial Institutions Act 2002;
(vi) interest from sukuk originating from Malaysia, other than convertible loan stock issued in any currency other than Ringgit and approved or authorized by, or lodged with, the Securities Commission or the Labuan Financial Services Authority (LFSA); and
(vii) interest which is specifically exempted by way of statutory orders or any other specific
exemption provided by the Minister.
2 The Banking and Financial Institutions Act 1989 and the Islamic Banking Act 1983 were repealed and replaced
with the Financial Services Act 2013 and the Islamic Financial Services Act 2013, respectively, with effect from 30 June 2013. Pursuant to Section 272(h) of the Financial Services Act 2013 and Section 283(h) of the Islamic Financial Services Act 2013, any reference to the Banking and Financial Institutions Act 1989 and the Islamic Banking Act 1983 in any written law shall generally be construed as a reference to the Financial Services Act 2013 or the Islamic Financial Services Act 2013, respectively.
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The Board of Directors Franklin Templeton GSC Asset Management Sdn Bhd 17 October 2016
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Discount
Tax exemption is given on discount paid or credited to any unit trust in respect of investments as specified in items (i), (ii) and (iii) above.
Foreign sourced income Dividends, profits and other income derived from sources outside Malaysia and received in Malaysia by a resident unit trust is exempt from Malaysian income tax. However, such income may be subject to tax in the country from which it is derived.
Gains from the realisation of investments
Pursuant to Section 61(1) (b) of the MITA, gains from the realisation of investments will not be treated as income of the Fund and hence, are not subject to income tax. Such gains may be subject to real property gains tax (RPGT) under the Real Property Gains Tax Act 1976 (RPGT Act), if the gains are derived from the sale of chargeable assets, as defined in the RPGT Act. Goods and Services Tax (GST) On 1 April 2015, GST was implemented at the standard rate of 6% to replace the existing sales tax and service tax systems. Based on the Goods and Services Tax Act 2014 which was gazetted on 19 June 2014, the Fund, being collective investment vehicles, will be making exempt supplies. Hence, the Fund is not required to be registered for GST purposes. The Fund will incur expenses such as management fees, trustee fees and other administrative charges which will be subject to 6% GST. The 6% input tax which may be incurred on such expenses will generally not be claimable by the Fund. Taxation of unit holders For Malaysian income tax purposes, unit holders will be taxed on their share of the distributions received from the Fund.
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The Board of Directors Franklin Templeton GSC Asset Management Sdn Bhd 17 October 2016
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The income of unit holders from their investment in the Fund broadly falls under the following categories: 1. taxable distributions; and 2. non-taxable and exempt distributions. In addition, unit holders may also realise a gain from the sale of units. The tax implications of each of the above categories are explained below: 1. Taxable distributions
Distributions received from the Fund will have to be grossed up to take into account the underlying tax paid by the Fund and the unit holder will be taxed on the grossed up amount.
Such distributions carry a tax credit, which will be available for set-off against any Malaysian income tax payable by the unit holder. Should the tax deducted at source exceed the tax liability of the unit holder, the excess is refundable to the unit holder.
Please refer to the paragraph below for the income tax rates applicable to the grossed up distributions.
2. Non-taxable and exempt distributions
Tax exempt distributions made out of gains from the realisation of investments and other exempt income earned by the Fund will not be subject to Malaysian income tax in the hands of the unit holders.
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The Board of Directors Franklin Templeton GSC Asset Management Sdn Bhd 17 October 2016
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Rates of tax The Malaysian income tax chargeable on the unit holders depends on their tax residence status and whether they are individuals, corporations or trust bodies. The relevant income tax rates are as follows:
Unit holders Malaysian income tax rates
Malaysian tax resident: Individual and non-corporate unit holders
(such as associations and societies)
Co-operatives3 Trust bodies
Progressive tax rates ranging from 0%
to 28% Progressive tax rates ranging from 0%
to 24%
24%
3 Pursuant to Paragraph 12(1), Schedule 6 of the MITA, the income of any co-operative society—
(a) in respect of a period of five years commencing from the date of registration of such co-operative society; and
(b) thereafter where the members’ funds [as defined in Paragraph 12(2)] of such co-operative society as at the first day of the basis period for the year of assessment is less than seven hundred and fifty thousand ringgit
is exempt from tax.
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The Board of Directors Franklin Templeton GSC Asset Management Sdn Bhd 17 October 2016
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Unit holders Malaysian income tax rates
Malaysian tax resident: Corporate unit holders
(i) A company with paid up capital in respect of ordinary shares of not more than RM2.5 million (at the beginning of the basis period for the year of assessment) 4
(ii) Companies other than (i) above
First RM500,000 of chargeable income
@ 19% Chargeable income in excess of
RM500,000 @ 24% 24%
Non-Malaysian tax resident (Note): Individual and non-corporate unit holders Corporate unit holders and trust bodies
28% 24%
Note: Non-resident unit holders may be subject to tax in their respective countries depending on the provisions of the tax legislation in the respective countries and any existing double taxation arrangements with Malaysia.
4 A company would not be eligible for the lower tax rate on the first RM500,000 of chargeable income if:-
(a) more than 50% of the paid up capital in respect of the ordinary shares of the company is directly or indirectly owned by a related company which has paid up capital in respect of ordinary shares of more than RM2.5 million at the beginning of a basis period for a year of assessment;
(b) the company owns directly or indirectly more than 50% of the paid up capital in respect of the ordinary shares of a related company which has paid up capital in respect of ordinary shares of more than RM2.5 million at the beginning of a basis period for a year of assessment;
(c) more than 50% of the paid up capital in respect of the ordinary shares of the company and a related company which has a paid up capital in respect of ordinary shares of more than RM2.5 million at the beginning of a basis period for a year of assessment is directly or indirectly owned by another company.
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The Board of Directors Franklin Templeton GSC Asset Management Sdn Bhd 17 October 2016
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Gains from sale of units Gains arising from the realisation of investments will not be subject to income tax in the hands of unit holders unless they are insurance companies, financial institutions or traders / dealers in securities. Unit splits and reinvestment of distributions Unit holders may also receive new units as a result of unit splits or may choose to reinvest their distributions. The income tax implications of these are as follows: Unit splits – new units issued by the Fund pursuant to a unit split will not be subject to income tax
in the hands of the unit holders. Reinvestment of distributions – unit holders may choose to reinvest their income distribution in
new units by informing the Manager. In this event, the unit holder will be deemed to have received the distribution and reinvested it with the Fund.
********************************************** We hereby confirm that, as at the date of this letter, the statements made in this letter correctly reflect our understanding of the tax position under current Malaysian tax legislation and the related interpretation and practice thereof, all of which are subject to change, possibly on a retrospective basis. We have not been retained (unless specifically instructed hereafter), nor are we obligated to monitor or update the statements for future conditions that may affect these statements.
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The Board of Directors Franklin Templeton GSC Asset Management Sdn Bhd 17 October 2016
9
The statements made in this letter are not intended to be a complete analysis of the tax consequences relating to an investor in the Fund. As the particular circumstances of each investor may differ, we recommend that investors obtain independent advice on the tax issues associated with an investment in the Fund. Yours faithfully Ernst & Young Tax Consultants Sdn Bhd Julie Thong Partner Ernst & Young Tax Consultants Sdn Bhd has given its consent to the inclusion of the Taxation Adviser's Letter in the form and context in which it appears in this prospectus and has not withdrawn such consent before the date of issue of this prospectus.
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14. APPROVALS AND CONDITIONS Variation to Schedule B (valuation of other unlisted bonds) of the Guidelines Schedule B (valuation of other unlisted bonds) of the Guidelines provides that other unlisted bonds shall be valued according to their fair value by reference to the average indicative yield quoted by 3 independent and reputable institutions. On 6 August 2015, the Manager has obtained the approval of the SC for a variation to Schedule B (valuation of other unlisted bonds) of the Guidelines. The approval of the SC allows the Fund’s investment in unlisted sukuk denominated in foreign currencies to be valued by reference to the prices quoted by Thomson Reuters subject to the Manager continuously keeping abreast of: (a) the developments in Thomson Reuter’s pricing methodology; and (b) the acceptability of Thomson Reuter’s prices in the market place.
Note: With effect from 19 July 2016, the aforesaid Schedule B has been amended as Schedule C of the Guidelines.
Franklin Templeton GSC Asset Management Sdn. Bhd.Suite 31-02, 31st Floor, Menara Keck Seng 203, Jalan Bukit Bintang 55100 Kuala Lumpur, Malaysia tel +60 (3) 2264 6699fax +60 (3) 2145 9071www.franklintempleton.com.my
FTIFMY SP 10/16
THIS IS A SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
SUPPLEMENTAL PROSPECTUS OF THE FRANKLIN MALAYSIA SUKUK FUND
Manager : Franklin Templeton GSC Asset Management Sdn. Bhd. (Company No. 866426-M)
Trustee : Deutsche Trustees Malaysia Berhad (Company No.763590-H)
This Supplemental Prospectus is dated 14 July 2017
The constitution date of the Franklin Malaysia Sukuk Fund is 18 November 2015 INVESTORS ARE ADVISED TO READ AND UNDERSTAND THE CONTENTS OF THE PROSPECTUS DATED 18 NOVEMBER 2016 AND THIS SUPPLEMENTAL PROSPECTUS. IF IN DOUBT, PLEASE CONSULT A PROFESSIONAL ADVISER.
THIS IS A SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
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Responsibility Statement This Supplemental Prospectus has been reviewed and approved by the directors of Franklin Templeton GSC Asset Management Sdn. Bhd. and they collectively and individually accept full responsibility for the accuracy of the information contained in this Supplemental Prospectus. Having made all reasonable enquiries, they confirm to the best of their knowledge and belief, that there are no false or misleading statements, or omission of other facts which would make any statement in this Supplemental Prospectus false or misleading. Statements of Disclaimer The Securities Commission Malaysia has authorised the Franklin Malaysia Sukuk Fund and a copy of this Supplemental Prospectus has been registered with the Securities Commission Malaysia. The authorisation of the Franklin Malaysia Sukuk Fund, and registration of this Supplemental Prospectus, should not be taken to indicate that Securities Commission Malaysia recommends the Franklin Malaysia Sukuk Fund or assumes responsibility for the correctness of any statement made, opinion expressed or report contained in the Prospectus and this Supplemental Prospectus. The Securities Commission Malaysia is not liable for any non-disclosure on the part of Franklin Templeton GSC Asset Management Sdn. Bhd., the management company responsible for the Franklin Malaysia Sukuk Fund and takes no responsibility for the contents in this Supplemental Prospectus. The Securities Commission Malaysia makes no representation on the accuracy or completeness of this Supplemental Prospectus, and expressly disclaims any liability whatsoever arising from, or in reliance upon, the whole or any part of its contents. INVESTORS SHOULD RELY ON THEIR OWN EVALUATION TO ASSESS THE MERITS AND RISKS OF THE INVESTMENT. IF INVESTORS ARE UNABLE TO MAKE THEIR OWN EVALUATION, THEY ARE ADVISED TO CONSULT PROFESSIONAL ADVISERS. Additional Statements Investors should note that they may seek recourse under the Capital Markets and Services Act 2007 for breaches of securities laws including any statement in this Supplemental Prospectus that is false, misleading, or from which there is a material omission or for any misleading or deceptive act in relation to this Supplemental Prospectus or the conduct of any other person in relation to the Franklin Malaysia Sukuk Fund. The Franklin Malaysia Sukuk Fund has been certified as Shariah-compliant by the Shariah adviser appointed for the Franklin Malaysia Sukuk Fund. This Supplemental Prospectus is not intended to and will not be issued and distributed in any country or jurisdiction other than in Malaysia (“Foreign Jurisdiction”). Consequently, no representation has been and will be made as to its compliance with the laws of any Foreign Jurisdiction. Accordingly, no offer or invitation to subscribe or purchase Units of the Fund to which this Supplemental Prospectus relates, may be made in any Foreign Jurisdiction or under any circumstances where such action is unauthorised. The Fund is not registered in the United States of America under the Investment Company Act of 1940. The Units of the Fund have not been registered in the United States of America under the Securities Act of 1933. The Units of the Fund made available under this
THIS IS A SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
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Supplemental Prospectus may not be directly or indirectly offered or sold in the United States of America or any of its territories or possessions or areas subject to its jurisdiction or to or for the benefit of nationals or residents thereof, unless pursuant to an exemption from registration requirements available under the U.S. law, any applicable statute, rule or interpretation. The term “U.S. Person” and “U.S. Persons” shall mean any person that is a United States person within the meaning of Regulation S under the United States Securities Act of 1933 or as defined by the U.S. Commodity Futures Trading Commission for this purpose, as the definition of such term may be changed from time to time by legislation, rules, regulations or judicial or administrative agency interpretations. U.S. Persons are not eligible to invest in the Fund. Prospective investors shall be required to declare that they are not a U.S. Person and are not applying for Units on behalf of any U.S. Person. Franklin Templeton GSC Asset Management Sdn. Bhd. has the right to reject any application for Units if it has reasonable grounds to believe that any applicant is a U.S. Person or if any applicant is seeking to purchase Units on behalf of a U.S. Person. In the absence of written notice to Franklin Templeton GSC Asset Management Sdn. Bhd. to the contrary, if a potential investor provide a non-U.S. address on the application form for investment in the Fund, this will be deemed to be representation and warranty from such investor that he/she/it is not a U.S. Person and that such investor will continue to be a non-U.S. Person so long as such investor holds any Units of the Fund. The Manager and/or its delegates will restrict or prevent the ownership of Units by any U.S. Person and/or any person, firm or corporate body if in the opinion of the Manager and/or its delegates, such holding may be detrimental to the Fund, Unit Holders, the Manager and/or its delegates or may result in a breach of any applicable law or regulations whether in Malaysia or in a foreign jurisdiction or may expose the Fund or the Unit Holders to liabilities (to include, inter alia, regulatory or tax liabilities and any other tax liabilities that might derive, inter alia, from any breach of FATCA requirements) or any other disadvantages that it or they would not have otherwise incurred or been exposed to. Such persons, firms or corporate bodies (including U.S. Persons and/or persons in breach of FATCA requirements) are herein referred to as "Prohibited Persons". More specifically, the Manager shall have the power to impose such restrictions as it may think necessary for the purpose of ensuring that no Units are acquired or held directly or beneficially by any Prohibited Person and may: 1) decline to issue any Units and decline to register any transfer of Units, where it appears
to it that such issuance or transfer would or might result in beneficial ownership of such Units by a Prohibited Person;
2) at any time, require any person whose name is entered in, or any person seeking to
transfer Units on, the register of Unit Holders to furnish it with any representations and warranties or any information, supported by affidavit, which it may consider necessary for the purpose of determining whether or not, to what extent and under which circumstances, beneficial ownership of such Units held by the Unit Holders rests or will rest in a Prohibited Person, or whether the transfer of Units will result in beneficial ownership of such Units by a Prohibited Person;
3) where it appears to the Manager that any Prohibited Person, either alone or in
conjunction with any other person, is a beneficial owner of Units or is in breach of its representations and warranties or fails to make such representations and warranties in a
THIS IS A SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
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timely manner as the Manager may require, compulsorily repurchase from any such Unit Holder all or part of the Units held by such Unit Holder.
The Fund is not registered in any provincial or territorial jurisdiction in Canada and Units of the Fund have not been qualified for sale in any Canadian jurisdiction under applicable securities laws. The Units made available under this Prospectus may not be directly or indirectly offered or sold in any provincial or territorial jurisdiction in Canada or to or for the benefit of residents thereof, unless such Canadian resident is, and will remain at all times during their investment, a “permitted client” as that term is defined in Canadian securities legislation. Prospective investors may be required to declare that they are not a Canadian resident and are not applying for Units on behalf of any Canadian resident. If an investor becomes a Canadian resident after purchasing Units of the Fund, the investor will not be able to purchase any additional Units of the Fund. Automatic Exchange of Account Information On 27 January 2016, Malaysia signed the Multilateral Competent Authority Agreement (“MCAA”) on the implementation of global standard for automatic exchange of financial account information. By signing the MCAA, Malaysia has agreed to implement regulations to enable the adoption of automatic exchange of information with other signatory countries. The first exchange of information is anticipated to take place in year 2018 in relation to accounts held in year 2017. Investors are hereby notified that the Manager may be required under Malaysian laws and regulations to report details of specified accounts of a Unit Holder who is a resident in other MCAA signatory jurisdictions. The Malaysian tax authorities may share such account data in accordance with the MCAA with the tax authorities of other MCAA signatory jurisdictions where the Unit Holder is a tax resident. The information which may be reported includes the reportable person or entity’s name, address, tax identification number, date and place of birth (for an individual), account balance and the total gross proceeds paid or credited to the account during the relevant reporting period. If and when requested by the Manager or its delegate, in order to meet its obligations under future Malaysian law adopting the MCAA, Unit Holders must provide certification of their tax residence and status to the Manager. Notice on Personal Data Protection For the purposes of the notice below, the term “personal data” shall have the same meaning prescribed in the Personal Data Protection Act 2010 (“the PDPA”) and the term “processed” shall have the same meaning as “processing” as prescribed in the PDPA. All personal data of investors contained in the investment application form and all and any further personal data collected in the course of the business relationship with the Manager may be processed by the Manager or its delegates and other related companies of the Manager, including those established outside Malaysia, the Trustee or its delegates and any other intermediaries related to the Fund. Such data shall be processed for the purposes of account administration, development of business relationships, anti-money laundering requirements and counter-terrorist financing identification, tax identification (including for the purpose of compliance with FATCA or similar laws and regulations), processing of transaction(s) and/or any other general business purposes (including direct marketing and promotion of the Manager’s other products and services unless the Manager has been informed by the investor not to process his/her personal data for direct marketing and promotion) by the Manager.
THIS IS A SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
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The investors have a right of access and of rectification of the personal data in cases where such data is incorrect or incomplete. Please refer to the investment application form for further details on the personal data protection requirements. The Manager and/or its delegates, for the purpose of FATCA compliance, may be required to disclose personal data relating to U.S. Persons and/or non-participant Foreign Financial Institutions (as defined in FATCA) to the Malaysian tax authorities which may transfer them, if any, to the Internal Revenue Service in the United States of America. Data shall not be held for longer than necessary with regard to the purpose of the data processing, subject always to the applicable legal minimum retention periods.
THIS IS A SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
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Unless otherwise provided in this Supplemental Prospectus dated 14 July 2017, all capitalized terms used herein shall have the same meaning as ascribed to them in the Prospectus dated 18 November 2016. EXPLANATORY NOTE This Supplemental Prospectus has been issued to inform investors of:
the resignation of Mr Sandeep Singh as the Chief Executive Officer of the Manager with effect from 24 January 2017 and the appointment of Ms Nor Hanifah binti Hashim to replace Mr Sandeep Singh with effect from 1 June 2017; her appointment as the Chief Executive Officer has been approved by the Securities Commission Malaysia on 12 May 2017; and
a change in the Manager’s board of directors pursuant to the resignation of Mr Stephen Ernest Grundlingh and the appointment of Mr Adam Julian Quaife as a non-independent director of the Manager with effect from 3 March 2017.
In respect of the aforesaid resignation of Mr Sandeep Singh and change in non-independent director, we have notified the investors of such changes in the interim report of the Fund for the financial period ended 31 March 2017. A. CHAPTER 8 – THE MANAGER 8.3 Board of Directors
Page 40 of the Prospectus To delete the board of directors in the Prospectus in its entirety and replaced by the following board of directors:
“Sandeep Singh (non-independent director and Chairman) Nor Hanifah binti Hashim (non-independent director and Chief Executive Officer) Adam Julian Quaife (non-independent director) Lim Seh Kuan (non-independent director) Wan Hanisah binti Wan Ibrahim (independent director) Dr Chak Choy Sim (independent director)”
8.6 The Designated Fund Manager
Page 40 of the Prospectus To delete the profile of the designated fund manager in the Prospectus in its entirety and replaced by the following profile:
“Nor Hanifah binti Hashim Chief Executive Officer Ms Hanifah has over 23 years of experience in the financial industry including 18 years with CIMB Banking Group. Ms Hanifah’s roles as the Chief Executive Officer of Franklin Templeton GSC Asset Management Sdn. Bhd. (“FTGSC”) involve overseeing the implementation of business strategy of the company, planning and assisting with the strategies and activities to increase asset under management, forging strong relationship with clients and potential clients, regulators, industry players and other business functions within Franklin Templeton Investments as well as to further build the profile and branding of the Manager in Malaysia. Ms Hanifah joined FTGSC in 2011 as the head of Malaysia fixed income and sukuk. She oversees fixed income in Malaysia, including conventional fixed income and domestic Sukuk strategies. She continues to manage domestic Sukuk funds and develops investment policies for the Malaysian market while working closely with the Franklin Templeton Fixed Income
THIS IS A SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
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team in the Middle East on global Sukuk mandates and supports Franklin Templeton's global fixed income capabilities. Prior to joining Franklin Templeton Investments, Ms Hanifah held the position of executive vice president - head of fixed income, CIMB - Principal Asset Management Berhad, and before that senior vice president and head of fixed income services in the treasury department of CIMB Investment Bank. Ms Hanifah holds a Bachelor of Science in economics and international relations from University of Wisconsin-Madison. She is a national member of Financial Market Association - Malaysia and obtained her Capital Markets Services Representative License (CMSRL) in 2004. Ms Hanifah is the designated fund manager of the Fund.”
B. CHAPTER 10 - RELATED PARTY TRANSACTIONS AND CONFLICT OF INTERESTS Pages 45-46 of the Prospectus 1. To amend the reference of the sole shareholder of the Manager, “Franklin Templeton Capital
Holdings Pte Ltd” to “Franklin Templeton Capital Holdings Private Limited” in the first table of this Chapter.
2. To delete the reference to Stephen Ernest Grundlingh and his indirect interest in Franklin
Templeton Asset Management (Malaysia) Sdn. Bhd. in the second table of this Chapter. 3. To include the following immediately after the second table of this Chapter:
“As at 1 May 2017, save for the following, Adam Julian Quaife does not have any direct or indirect interests in other corporations in Malaysia carrying on a similar business as the Manager:
Name of Director Name of Corporation or
Business
Interests
(Direct/ Indirect)
Adam Julian Quaife
Franklin Templeton Asset Management (Malaysia) Sdn. Bhd.
Indirect
4. To amend the 8
th paragraph of this Chapter to read as follows:
“Each of the directors and the sole shareholder named above is affiliated with Franklin Templeton Investments and has an indirect interest in corporations within the Franklin Templeton Investments group of companies that carry on a similar business as the Manager. In addition, Ms. Hanifah holds shares of CIMB Group Holdings Bhd and has an indirect interest in corporations within the CIMB group of companies that carry on a similar business as the Manager, and Mr Adam and Mr Sandeep are directors of Franklin Templeton Asset Management (Malaysia) Sdn. Bhd.”
THIS IS A SECOND SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 AND THE SUPPLEMENTAL PROSPECTUS DATED 14 JULY 2017 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
SECOND SUPPLEMENTAL PROSPECTUS OF THE FRANKLIN MALAYSIA SUKUK FUND
Manager : Franklin Templeton GSC Asset Management Sdn. Bhd. (Company No. 866426-M)
Trustee : Deutsche Trustees Malaysia Berhad (Company No.763590-H)
This Second Supplemental Prospectus is dated 18 December 2018
The constitution date of the Franklin Malaysia Sukuk Fund is 18 November 2015 INVESTORS ARE ADVISED TO READ AND UNDERSTAND THE CONTENTS OF THE PROSPECTUS DATED 18 NOVEMBER 2016, THE SUPPLEMENTAL PROSPECTUS DATED 14 JULY 2017 AND THIS SECOND SUPPLEMENTAL PROSPECTUS. IF IN DOUBT, PLEASE CONSULT A PROFESSIONAL ADVISER.
THIS IS A SECOND SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 AND THE SUPPLEMENTAL PROSPECTUS DATED 14 JULY 2017 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
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Responsibility Statement This Second Supplemental Prospectus has been reviewed and approved by the directors of Franklin Templeton GSC Asset Management Sdn. Bhd. and they collectively and individually accept full responsibility for the accuracy of the information contained in this Second Supplemental Prospectus. Having made all reasonable enquiries, they confirm to the best of their knowledge and belief, that there are no false or misleading statements, or omission of other facts which would make any statement in this Second Supplemental Prospectus false or misleading. Statements of Disclaimer The Securities Commission Malaysia has authorised the Franklin Malaysia Sukuk Fund and a copy of this Second Supplemental Prospectus has been registered with the Securities Commission Malaysia. The authorisation of the Franklin Malaysia Sukuk Fund, and registration of this Second Supplemental Prospectus, should not be taken to indicate that Securities Commission Malaysia recommends the Franklin Malaysia Sukuk Fund or assumes responsibility for the correctness of any statement made, opinion expressed or report contained in the Prospectus dated 18 November 2016, the Supplemental Prospectus dated 14 July 2017 and this Second Supplemental Prospectus. The Securities Commission Malaysia is not liable for any non-disclosure on the part of Franklin Templeton GSC Asset Management Sdn. Bhd., the management company responsible for the Franklin Malaysia Sukuk Fund and takes no responsibility for the contents in this Second Supplemental Prospectus. The Securities Commission Malaysia makes no representation on the accuracy or completeness of this Second Supplemental Prospectus, and expressly disclaims any liability whatsoever arising from, or in reliance upon, the whole or any part of its contents. INVESTORS SHOULD RELY ON THEIR OWN EVALUATION TO ASSESS THE MERITS AND RISKS OF THE INVESTMENT. IF INVESTORS ARE UNABLE TO MAKE THEIR OWN EVALUATION, THEY ARE ADVISED TO CONSULT PROFESSIONAL ADVISERS. Additional Statements Investors should note that they may seek recourse under the Capital Markets and Services Act 2007 for breaches of securities laws including any statement in this Second Supplemental Prospectus that is false, misleading, or from which there is a material omission; or for any misleading or deceptive act in relation to this Second Supplemental Prospectus or the conduct of any other person in relation to the Franklin Malaysia Sukuk Fund. The Franklin Malaysia Sukuk Fund has been certified as Shariah-compliant by the Shariah adviser appointed for the Franklin Malaysia Sukuk Fund. This Second Supplemental Prospectus is not intended to and will not be issued and distributed in any country or jurisdiction other than in Malaysia (“Foreign Jurisdiction”). Consequently, no representation has been and will be made as to its compliance with the laws of any Foreign Jurisdiction. Accordingly, no offer or invitation to subscribe or purchase Units of the Fund to which this Second Supplemental Prospectus relates, may be made in any Foreign Jurisdiction or under any circumstances where such action is unauthorised. The Fund is not registered in the United States of America under the Investment Company Act of 1940. The Units of the Fund have not been registered in the United States of America under the Securities Act of 1933. The Units of the Fund made available under this Second Supplemental Prospectus may not be directly or indirectly offered or sold in the United States of America or any of its territories or possessions or areas subject to its jurisdiction or to or for the benefit of nationals or residents thereof, unless pursuant to an exemption from registration requirements available under the U.S. law, any applicable statute, rule or interpretation.
THIS IS A SECOND SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 AND THE SUPPLEMENTAL PROSPECTUS DATED 14 JULY 2017 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
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The term “U.S. Person” and “U.S. Persons” shall mean any person that is a United States person within the meaning of Regulation S under the United States Securities Act of 1933 or as defined by the U.S. Commodity Futures Trading Commission for this purpose, as the definition of such term may be changed from time to time by legislation, rules, regulations or judicial or administrative agency interpretations. U.S. Persons are not eligible to invest in the Fund. Prospective investors shall be required to declare that they are not a U.S. Person and are not applying for Units on behalf of any U.S. Person. Franklin Templeton GSC Asset Management Sdn. Bhd. has the right to reject any application for Units if it has reasonable grounds to believe that any applicant is a U.S. Person or if any applicant is seeking to purchase Units on behalf of a U.S. Person. In the absence of written notice to Franklin Templeton GSC Asset Management Sdn. Bhd. to the contrary, if a potential investor provides a non-U.S. address on the application form for investment in the Fund, this will be deemed to be representation and warranty from such investor that he/she/it is not a U.S. Person and that such investor will continue to be a non-U.S. Person so long as such investor holds any Units of the Fund. The Manager and/or its delegates will restrict or prevent the ownership of Units by any U.S. Person and/or any person, firm or corporate body if in the opinion of the Manager and/or its delegates, such holding may be detrimental to the Fund, Unit Holders, the Manager and/or its delegates or may result in a breach of any applicable law or regulations whether in Malaysia or in a Foreign Jurisdiction or may expose the Fund or the Unit Holders to liabilities (to include, inter alia, regulatory or tax liabilities and any other tax liabilities that might derive, inter alia, from any breach of FATCA requirements) or any other disadvantages that it or they would not have otherwise incurred or been exposed to. Such persons, firms or corporate bodies (including U.S. Persons and/or persons in breach of FATCA requirements) are herein referred to as "Prohibited Persons". More specifically, the Manager shall have the power to impose such restrictions as it may think necessary for the purpose of ensuring that no Units are acquired or held directly or beneficially by any Prohibited Person and may: 1) decline to issue any Units and decline to register any transfer of Units, where it appears to it that
such issuance or transfer would or might result in beneficial ownership of such Units by a Prohibited Person;
2) at any time, require any person whose name is entered in the register of Unit Holders, or any person
seeking to transfer his/her/its Units to furnish the Manager with any representations and warranties or any information, supported by affidavit, which it may consider necessary for the purpose of determining whether or not, to what extent and under which circumstances, beneficial ownership of such Units held by the Unit Holders rests or will rest in a Prohibited Person, or whether the transfer of Units will result in beneficial ownership of such Units by a Prohibited Person;
3) where it appears to the Manager that any Prohibited Person, either alone or in conjunction with any
other person, is a beneficial owner of Units or is in breach of its representations and warranties or fails to make such representations and warranties in a timely manner as the Manager may require, compulsorily repurchase from any such Unit Holder all or part of the Units held by such Unit Holder; and
4) decline to accept the vote of any Prohibited Person at any meeting of Unit Holders of the Fund. The Fund is not registered in any provincial or territorial jurisdiction in Canada and Units of the Fund have not been qualified for sale in any Canadian jurisdiction under applicable securities laws. The Units made available under this Second Supplemental Prospectus may not be directly or indirectly offered or sold in any provincial or territorial jurisdiction in Canada or to or for the benefit of residents thereof, unless such Canadian resident is, and will remain at all times during their investment, a “permitted client” as that term is defined in Canadian securities legislation. Prospective investors may be required to declare that they are not a Canadian resident and are not applying for Units on behalf of any Canadian resident. If an investor becomes a Canadian resident after purchasing Units of the Fund, the investor will not be able to purchase any additional Units of the Fund.
THIS IS A SECOND SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 AND THE SUPPLEMENTAL PROSPECTUS DATED 14 JULY 2017 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
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Automatic Exchange of Account Information On 27 January 2016, Malaysia signed the Multilateral Competent Authority Agreement (“MCAA”) on the implementation of global standard for automatic exchange of financial account information. By signing the MCAA, Malaysia has agreed to implement regulations to enable the adoption of automatic exchange of information with other signatory countries. The first exchange of information is anticipated to take place in year 2018 in relation to accounts held in year 2017. Investors are hereby notified that the Manager may be required under Malaysian laws and regulations to report details of specified accounts of a Unit Holder who is a resident in other MCAA signatory jurisdictions. The Malaysian tax authorities may share such account data in accordance with the MCAA with the tax authorities of other MCAA signatory jurisdictions where the Unit Holder is a tax resident. The information which may be reported includes the reportable person or entity’s name, address, tax identification number, date and place of birth (for an individual), account balance and the total gross proceeds paid or credited to the account during the relevant reporting period. If and when requested by the Manager or its delegate, in order to meet its obligations under future Malaysian law adopting the MCAA, Unit Holders must provide certification of their tax residence and status to the Manager. Notice on Personal Data Protection For the purposes of the notice below, the term “personal data” shall have the same meaning prescribed in the Personal Data Protection Act 2010 (“the PDPA”) and the term “processed” shall have the same meaning as “processing” as prescribed in the PDPA. All personal data of investors contained in the investment application form and all and any further personal data collected in the course of the business relationship with the Manager may be processed by the Manager or its delegates and other related companies of the Manager, including those established outside Malaysia, the Trustee or its delegates and any other intermediaries related to the Fund. Such data shall be processed for the purposes of account administration, development of business relationships, anti-money laundering requirements and counter-terrorist financing identification, tax identification (including for the purpose of compliance with FATCA or similar laws and regulations), processing of transaction(s) and/or any other general business purposes (including direct marketing and promotion of the Manager’s other products and services unless the Manager has been informed by the investor not to process his/her personal data for direct marketing and promotion) by the Manager. The investors have a right of access and of rectification of the personal data in cases where such data is incorrect or incomplete. Please refer to the investment application form for further details on the personal data protection requirements. The Manager and/or its delegates, for the purpose of FATCA compliance, may be required to disclose personal data relating to U.S. Persons and/or non-participant Foreign Financial Institutions (as defined in FATCA) to the Malaysian tax authorities which may transfer them, if any, to the Internal Revenue Service in the United States of America. Data shall not be held for longer than necessary with regard to the purpose of the data processing, subject always to the applicable legal minimum retention periods.
THIS IS A SECOND SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 AND THE SUPPLEMENTAL PROSPECTUS DATED 14 JULY 2017 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
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Unless otherwise provided in this Second Supplemental Prospectus dated 18 December 2018, all capitalized terms used herein shall have the same meaning as ascribed to them in the Prospectus dated 18 November 2016 as amended by the Supplemental Prospectus dated 14 July 2017. EXPLANATORY NOTE This Second Supplemental Prospectus has been issued to inform investors of:
a reduction in the management fee for Class A (MYR) with effect from 1 October 2018;
a change in the Manager’s board of directors pursuant to the resignation of Ms. Lim Seh Kuan and the appointment of Mr. Avinash Satwalekar as a non-independent director of the Manager with effect from 8 September 2017;
a change in the investment committee members for the Fund pursuant to the appointment of Mr. Avinash Satwalekar as a non-independent member with effect from 8 September 2017; the list of investment committee members for the Fund will be deleted from the Prospectus and such information will be available in the Manager’s website;
a change in the Manager’s service provider performing the back office functions (e.g. fund
accounting and valuation) from Deutsche Bank (Malaysia) Berhad to the Trustee with effect from 5 March 2018;
the deletion of the references to “GST” or “goods and services tax”;
a change in the Shariah Adviser’s profile;
an update to the Trustee’s information;
the insertion of the Manager’s cross trades policy; and
the introduction of Sales and Service Tax to replace the Good and Services Tax with effect
from 1 September 2018. Hence, the Taxation Adviser’s Letter on Taxation of the Fund and Unit Holders is revised.
A. CHAPTER 1 – GLOSSARY Page 2 of the Prospectus To delete the definition of “GST” in the Prospectus in its entirety. B. CHAPTER 5 – FEES, CHARGES AND EXPENSES 5.1 Sales Charge
Page 19 of the Prospectus To delete the information relating to sales charge in the Prospectus in its entirety and replaced by the following:
Class A (MYR)
Up to 3.00% of the NAV per Unit.
Class I (MYR)
The Manager does not intend to charge any Sales Charge.
The Manager reserves the right to waive or reduce the Sales Charge from time to time at its absolute discretion.
THIS IS A SECOND SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 AND THE SUPPLEMENTAL PROSPECTUS DATED 14 JULY 2017 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
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The above Sales Charge is applicable to all distribution channels. Subject to the maximum rate as stipulated above, investors can expect differing Sales Charge to be levied when buying Units from different distribution channels due to the different levels of services provided by each distribution channel and/or the size of the investment undertaken by the investors. Investment through different distribution channels shall be subject to their respective terms and conditions. For details of computation of Sales Charge, kindly refer to Section 6.2.5.
5.6 Annual Management Fee
Page 20 of the Prospectus To delete the information relating to annual management fee in the Prospectus in its entirety and replaced by the following:
Class A (MYR)
0.65% per annum of the NAV of the Fund attributable to this class of Units.
Class I (MYR)
0.45% per annum of the NAV of the Fund attributable to this class of Units.
For details of computation of annual management fee, refer to Section 6.1.
5.7 Annual Trustee Fee
Page 20 of the Prospectus To delete the information relating to annual trustee fee in the Prospectus in its entirety and replaced by the following:
0.06% per annum of the NAV of the Fund, subject to a minimum of RM18,000 per annum (excluding foreign custodian fees and charges, if applicable).
The annual trustee fee applies to the Fund as a whole, irrespective of classes of Units. For details of computation of annual trustee fee, refer to Section 6.1.
5.8 Other Expenses
Page 20 of the Prospectus To delete item (b) in the Prospectus in its entirety and replaced by the following:
(b) taxes and other duties charged on the Fund by the government and/or other authorities, including any tax charged in addition to any expenses which are directly related to or necessary for the operation and administration of the Fund;
5.10 Goods and Services Tax
Page 21 of the Prospectus To delete Section 5.10 in the Prospectus in its entirety and replaced by the following:
5.10 TAX
The Manager, the Trustee and other service providers may impose any tax in addition to any fees, charges and/or expenses in respect of any Units, and the Unit Holder and/or the Fund (as the case may be) shall pay all such tax as may be applicable.
THIS IS A SECOND SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 AND THE SUPPLEMENTAL PROSPECTUS DATED 14 JULY 2017 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
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C. CHAPTER 6 – TRANSACTION INFORMATION 6.1 Computation of NAV and NAV Per Unit
Pages 22 - 23 of the Prospectus To delete the illustration on computation of NAV in the Prospectus in its entirety and replaced by the following:
Fund Class A Class I
All amounts are in MYR
Opening NAV 181,500,000.00 176,000,000.00 5,500,000.00 Opening Units in circulation
160,000,000.00
5,000,000.00
Add/Less: Net creation/cancellation
1,166,100.00
550,000.00
616,100.00
New Units subscription
500,000.00
560,090.91
NAV before income & expenses
182,666,100.00
176,550,000.00
6,116,100.00
MCF Ratio (%)1 100.00 96.6517596861 3.3482403139
Market movement for the day
54,000.00
52,191.95
1,808.05
NAV before management fee & trustee fee
182,720,100.00
176,602,191.95
6,117,908.05 @ 0.65% p.a @ 0.45% p.a Management fee for the day
3220.40
3,144.97
75.43
Trustee fee (@ 0.06% p.a) for the day
300.36
290.30
10.06 Total net assets for the day
182,716,579.24
176,598,756.68
6,117,822.56
Closing Units in circulation
160,500,000.00
5,560,090.91
NAV per Unit in Base Currency
1.1003
1.1003
1 Multi-Class Fund (“MCF”) Ratio: MCF Ratio is the ratio used to apportion the Fund level income and expenses of the Fund into different classes of Units. The MCF ratio shown is for illustration purposes only. Actual number of decimal places used may differ.
The MCF ratio for each class of Units is derived by dividing the NAV before income and expenses of each class of Units over the total NAV before income and expenses of the Fund. The NAV before income and expenses is derived by adding the capital movement for the day to the opening NAV.
THIS IS A SECOND SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 AND THE SUPPLEMENTAL PROSPECTUS DATED 14 JULY 2017 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
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Class specific expenses (e.g. management fee) are charged directly to each class of Units.
Note: The above example is a general illustration of the accounting methodology used across all classes of Units of the Fund. Please note that the management fee is charged directly to each class of Units and such fee may differ from one class of Units to another class of Units.
6.2.5 Illustration on how Units are allocated
Pages 25 - 26 of the Prospectus To delete the illustration on how Units are allocated in the Prospectus in its entirety and replaced by the following:
Assuming a Unit Holder wants to invest RM10,000 in the Fund, whereby the NAV per Unit of the Fund is RM1.0000 and the Sales Charge is 3.00% of the NAV per Unit. Sales Charges = 3.00% x (amount to be invested)
= 3.00% x RM10,000 = RM300
Total amount the Unit Holder will have to pay:
Amount to be invested + Sales Charge = RM10,000 + RM300
= RM10,300
Number of Units allocated to the Unit Holder
Amount to be invested / NAV per Unit = RM10,000 / RM1.0000 (rounded up to four decimal places)
= 10,000 Units 6.2.6 Illustration on how redemption proceeds are calculated
Page 26 of the Prospectus To delete the illustration on how redemption proceeds are calculated in the Prospectus in its entirety and replaced by the following:
The Units will be redeemed at the Redemption Price which is the NAV per Unit of the class of Units of the Fund. For illustration purposes, it is assumed that the Redemption Price is RM1.0000 but no Redemption Charge is imposed. For example, a Unit Holder wants to redeem 10,000 Units, the amount that the Unit Holder will have to pay as Redemption Charge will therefore be: Redemption Charge = the applicable redemption charge if any (%) x (amount to be
redeemed) = 0% x RM10,000 = RM0 Total amount the Unit Holder (redemption proceeds) will receive:
Amount to be redeemed – Redemption Charge = RM10,000 - RM0
= RM10,000 6.3 Minimum Initial Investment, Minimum Additional Investment, Minimum Holding to
Maintain Account and Minimum Amount for Redemption of Units Page 27 of the Prospectus
To delete the note immediately after the table in the Prospectus in its entirety and replaced by the following:
THIS IS A SECOND SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 AND THE SUPPLEMENTAL PROSPECTUS DATED 14 JULY 2017 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
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# Please note that the minimum initial and additional investment amounts stated above include any applicable fees and charges payable by investors, including sales charge (if any). In other words, the amount is gross of fees and charges payable by investors.
6.7 Cooling-Off
Page 29 of the Prospectus To delete the second paragraph in the Prospectus in its entirety and replaced by the following:
If you are eligible for the Cooling-off Right and you change your mind about an investment that you have made in the Fund, you may exercise the Cooling-off Right within six (6) Business Days of the date your application for Units is accepted by the Manager. A refund for every Unit held if you exercise the Cooling-off Right would be the sum of: (a) the NAV per Unit on the day the Units were first purchased; and (b) the Sales Charge (if any), originally imposed on the day the Units were purchased.
D. CHAPTER 8 – THE MANAGER 8.3 Board of Directors
Page 40 of the Prospectus To delete the board of directors in the Prospectus in its entirety and replaced by the following:
Sandeep Singh (non-independent director and Chairman) Nor Hanifah binti Hashim (non-independent director and Chief Executive Officer) Adam Julian Quaife (non-independent director) Avinash Satwalekar (non-independent director) Wan Hanisah binti Wan Ibrahim (independent director) Dr Chak Choy Sim (independent director)
8.5 Investment Committee Members for the Fund
Page 40 of the Prospectus To delete the investment committee members for the Fund in the Prospectus in its entirety and replaced by the following: 8.5 Roles and Duties of the Investment Committee Members for the Fund
The Investment Committee formulates, establishes and implements investment strategies and policies. The Investment Committee will continually review and monitor the success of these strategies and policies as well as ensure investment guidelines and regulations are complied with. The Investment Committee will meet at least once every quarter.
8.7.1 Profile of the Shariah Adviser
Page 41 of the Prospectus To delete the profile of the Shariah Adviser in the Prospectus in its entirety and replaced by the following:
Amanie Advisors Sdn Bhd (“Amanie”) is an independent global Shariah advisory company which specializes in offering Shariah advisory services and training for the global market in all Islamic finance products and services covering banking, takaful, funds and sukuk, risk management, IT solutions, conversion of conventional financial institutions into Islamic financial institutions, etc, with special focus on emerging markets covering Central Asia, Europe, North Africa, Far East. Amanie was founded in 2005 by Datuk Dr. Mohd Daud Bakar, a globally renowned Shariah scholar.
THIS IS A SECOND SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 AND THE SUPPLEMENTAL PROSPECTUS DATED 14 JULY 2017 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
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Currently, Amanie comprises of a team of professionals from diverse background (Shariah, investment banking, commercial banking, legal, economics, capital market, fund management etc.) across offices in South East Asia, United Arab Emirates, United Kingdom, and Kazakhstan that focuses on Shariah structuring and advisory. Amanie’s uniqueness is its independence and relationship-driven business focus. Amanie currently serves regulatory bodies, institutional, corporate and financial institution clients, among others. Since 2005, Amanie has acquired thirteen (13) years of experience in the advisory role of funds. As at 1 November 2018 there are more than 170 funds that Amanie acts as Shariah adviser which comprise of 20 fund managers of local and international level. Amanie meets the Manager every quarter to address Shariah advisory matters pertaining to their Shariah funds.
8.7.3 Profile of the Shariah Team
Pages 41 - 42 of the Prospectus 1. To delete the designation of Datuk Dr. Mohd Daud Bakar in the Prospectus in its entirety and
replaced by the following:
Datuk Dr. Mohd Daud Bakar Chief Executive Officer and Shariah adviser
2. To delete the profile of Mohd Zikri bin Mohd Shairy in its entirety. E. CHAPTER 9 – THE TRUSTEE 9.1 About Deutsche Trustees Malaysia Berhad
Page 43 of the Prospectus To delete the second paragraph in the Prospectus in its entirety and replaced by the following:
“DTMB is a member of Deutsche Bank Group (“Deutsche Bank”). Deutsche Bank provides commercial and investment banking, retail banking, transaction banking and asset and wealth management products and services to corporations, governments, institutional investors, small and medium-sized businesses, and private individuals.”
9.4 Trustee’s Disclosure of Material Litigation Page 43 of the Prospectus
To delete the paragraph in the Prospectus in its entirety and replaced by the following:
As at 1 October 2018, neither the Trustee nor its delegate is (a) engaged in any material litigation and arbitration, including those pending or threatened, nor (b) aware of any facts likely to give rise to any proceedings which might materially affect the business or financial position of the Trustee and any of its delegate.
9.6 Disclosure on Related-Party Transactions or Conflict of Interests
Page 44 of the Prospectus To delete the first paragraph in the Prospectus in its entirety and replaced by the following:
As the Trustee for the Fund and the Manager’s delegate for the fund accounting and valuation services, there may be related party transactions involving or in connection with the Fund in the following events: (1) Where the Fund invests in the products offered by Deutsche Bank AG and any of its
group companies (e.g. money market placement, etc.);
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(2) Where the Fund has obtained financing from Deutsche Bank AG and any of its group companies, as permitted under the Securities Commission’s guidelines and other applicable laws;
(3) Where the Manager appoints the Trustee to perform its back office functions (e.g. fund accounting and valuation); and
(4) Where DTMB has delegated its custodian functions for the Fund to DBMB. F. CHAPTER 10 - RELATED PARTY TRANSACTIONS AND CONFLICT OF INTERESTS Pages 45 - 46 of the Prospectus 1. To delete the reference to Lim Seh Kuan and her indirect interest in Franklin Templeton Asset
Management (Malaysia) Sdn. Bhd. in the second table of this Chapter. 2. To insert the following immediately after the sixth paragraph of this Chapter:
CROSS TRADES The Manager may conduct cross trades between funds that the Manager is currently managing provided that all criteria imposed by the regulators are met. Notwithstanding the above, cross trades between the personal accounts of the Manager’s employees and the Manager’s fund accounts, and cross trades between the Manager’s proprietary trading accounts and the Manager’s fund accounts are strictly prohibited.
3. To insert the following immediately after the third table of this Chapter:
As at 8 September 2017, save for the following, Avinash Satwalekar does not have any direct or indirect interests in other corporations in Malaysia carrying on a similar business as the Manager:
Name of Director
Name of Corporation or
Business
Interests
(Direct/ Indirect)
Avinash Satwalekar Franklin Templeton Asset Management (Malaysia) Sdn. Bhd.
Indirect
4. To amend the paragraph immediately after the third table of this Chapter to read as follows:
“Each of the directors and the sole shareholder named above is affiliated with Franklin Templeton Investments and has an indirect interest in corporations within the Franklin Templeton Investments group of companies that carry on a similar business as the Manager. In addition, Ms. Hanifah holds shares of CIMB Group Holdings Bhd and has an indirect interest in corporations within the CIMB group of companies that carry on a similar business as the Manager, and Mr Adam, Mr Sandeep and Mr Avinash are directors of Franklin Templeton Asset Management (Malaysia) Sdn. Bhd.
G. CHAPTER 13 – TAX ADVISERS’ LETTER Pages 49 - 57 of the Prospectus
To delete the Tax Advisers’ letter in its entirety and replaced by the following:
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THIS IS A SECOND SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 AND THE SUPPLEMENTAL PROSPECTUS DATED 14 JULY 2017 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
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THIS IS A SECOND SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 AND THE SUPPLEMENTAL PROSPECTUS DATED 14 JULY 2017 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
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THIS IS A SECOND SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 AND THE SUPPLEMENTAL PROSPECTUS DATED 14 JULY 2017 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
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THIS IS A SECOND SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 AND THE SUPPLEMENTAL PROSPECTUS DATED 14 JULY 2017 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
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THIS IS A SECOND SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 AND THE SUPPLEMENTAL PROSPECTUS DATED 14 JULY 2017 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
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THIS IS A SECOND SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 AND THE SUPPLEMENTAL PROSPECTUS DATED 14 JULY 2017 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
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THIS IS A SECOND SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 AND THE SUPPLEMENTAL PROSPECTUS DATED 14 JULY 2017 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
15
THIS IS A SECOND SUPPLEMENTAL PROSPECTUS WHICH HAS TO BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED 18 NOVEMBER 2016 AND THE SUPPLEMENTAL PROSPECTUS DATED 14 JULY 2017 IN RESPECT OF THE FRANKLIN MALAYSIA SUKUK FUND
16
