FAQS
FAQs on Business Trust
- What is a Business Trust? A Business Trust is defined as a unit trust scheme where the operation or management of the scheme and the scheme's property or asset is managed by a trustee-manager.
- What is the typical structure of a Business Trust?
- What are the general features of a Business Trust?
A Business Trust is a business enterprise set up as a trust pursuant to a deed, and managed by a trustee-manager. It is suitable for capital intensive businesses with stable cash flow such as infrastructure and telecommunications.
The Trustee Manager holds the assets on trust for the unit holders of the Business Trust. The Trustee Manager also manages and operates the Business Trust.
Unit holders can participate in the profits or income arising from the management of the assets in the Business Trust through receipt of distributions. The distributions can be paid out of cash flow without being constrained by accounting profits.
- What is the advantage of a Business Trust as compared to a company? A company is restricted to paying dividends out of accounting profits, while Business Trust can pay distributions to investors out of operating cash flows without being constrained by accounting profits.
- What are the benefits of a Business Trust to investors?
- A Business Trust provides a new alternative investment instrument with an element of equity and debt, i.e. high yield with stable growth.
- A Business Trust allows investors to have a direct exposure to cashflow-generating assets. The structure unitises big ticket assets into liquid and affordable units which are traded on the Exchange, giving investors a new alternative to existing yield.
- A Business Trust typically have high payout ratio because of its ability to distribute cash flows in excess of accounting profits and this imposes discipline on Trustee-Manager when considering acquisitions.
- In addition to maintaining the payout, Trustee-Manager as the responsible entity is also expected to actively manage the business for growth via acquisitions and expansion to enhance returns to investors. The incentives of Trustee-Managers are typically structured to align their interest with unitholders.
- A Business Trust provides a new alternative investment instrument with an element of equity and debt, i.e. high yield with stable growth.
- What rights would an investor have as a unit holder of a Business Trust?
Unit holders of a Business Trust would usually have the following rights :
- Participate in any increase in the value of units held by the unit holder.
- Receive any distribution of income from the Business Trust (whether in the form of cash or units in the Business Trust).
- Attend and vote at a general meeting of unit holders.
- Call for a general meeting of unit holders.
- At the unit holders general meeting, a unit holder may :
- appoint the auditor of the Business Trust.
- appoint a replacement trustee-manager.
- remove the trustee-manager.
- Right to participate in the distribution of the proceeds from a Business Trust during the winding-up of the Business Trust, after expenses of the winding-up and creditors of the Business Trust have been fully-paid.
- Unless otherwise provided in the deed of the Business Trust, there is no rights for investors to redeem units in the Business Trust. As the units of the Business Trust will be listed on the Main Market of Bursa Securities Malaysia Berhad, unit holders may sell their units or purchase additional units on the stock exchange, just as they would do for ordinary shares of a listed corporation.
- Other rights and privileges of a unit trust holder will be set out in the deed of the Business Trust.
- Participate in any increase in the value of units held by the unit holder.
- How does an investor buy a Business Trust? Investors can invest in Business Trusts during the initial public offering, or by buying Business Trust units listed on the exchange. Business Trusts are traded just like stocks, subject to the same trading, payment and settlement rules (T+3).
- How does an investor trade a Business Trust? Similar to trading in stocks, an investor will be required to have a Central Depository System (CDS) account and a trading account maintained with a broker. Investor may buy or sell Business Trust through the broker, remisier or via online trading during trading hours.
- What are the risks involved when investing in Business Trust? The risk of price fluctuation which is impacted by the demand and supply in the market.. Investors are advised to read the prospectus and other announcements made in relation to the Business Trust to find out about the risks of a particular Business Trust. If in doubt, please seek professional advice.