So you have invested in a specific unit trust and now you receive half-yearly annual report from your fund manager. What do you do with it? It is full of financial figures including the fund manager reporting on the performance of the fund, analysis of the economic and market review, and outlook and strategy of the fund.
If you are like me who are really busy, tendency is that this activity of reading the report is furthest from your mind. Furthermore, there are too much financials that it would be too time-consuming to read from cover to cover.
At a minimum, I review quickly some information in the report.
1. Read the narrative portion of the report which takes up the first few pages of the report.
– Check whether the Fund’s % Growth outperformed the benchmark over the 6-month period (for the half-yearly report).
– Review the Top Ten Holdings of investments of the Fund.
– Review the comparative Expense Ratios (Note 1). Is it higher than the previous year’s comparative period?
– Review the comparative Turnover Ratio (Note 2).
Note 1 – The expense ratio compares how much money is spent in order to generate returns in a fund for a given period of time. A higher expense ratio means more money is being spent to generate returns.
Note 2 – The portfolio turnover is the rate of trading activity in a fund’s portfolio of investments. This means that, if the percentage change in the portfolio turnover is high, the fund manager is constantly changing the companies or financial instruments to invest in.
2. Statement of Total Return Report
Is the total return for the period higher than the corresponding period of the previous year?
3. Balance Sheet
Is the total assets amount increasing compared to the 6 months ago? Study the Portfolio of Investments. Is it higher in value compared to 6 months ago?
4. Notes to the Financial Statements
– Net assets attributable to unitholders per unit Has it gone up since 6 months ago?
– Units in issue Are the units created for the 6 months higher than the units cancelled (redeemed by unitholders)? Is the fund shrinking by more redemption?
– Is there any proposed distribution of income to unitholders?
Some of the above observations should alert you to re-look at continued investment in the unit trust.