FIMM FCE flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Unit trust definition

A collective investment scheme where investors pool money into a fund managed by a professional management company; the fund is divided into units, each representing a proportional share of the fund's assets.

NAV per unit formula

Net asset value per unit equals total fund assets minus total fund liabilities, divided by the number of units in circulation; it is the price used for subscriptions and redemptions under forward pricing.

Forward pricing rule

Subscription and redemption requests are priced at the next NAV calculated after the request is received, not at the previously published price; this protects existing unitholders from dilution.

Role of the trustee

The trustee holds the scheme's assets on trust for unitholders, monitors the management company's compliance with the deed and prospectus, and safeguards unitholders' interests independently of the manager.

Management fee treatment

An ongoing fee paid to the management company for managing the fund; it is accrued daily and reflected in the NAV, so investors do not pay it separately as a transaction charge.

Sales charge

A charge levied on subscription for units, usually expressed as a percentage of the NAV per unit; it is deducted from the amount invested and disclosed in the fund's prospectus.

Redemption charge

A charge levied when an investor exits a fund by redeeming units; it is deducted from the redemption proceeds and its rate is stated in the prospectus.

Unit split effect

A unit split increases the number of units and reduces NAV per unit proportionally; the investor's total holding value is unchanged because the total fund value is unchanged.

Distribution effect on NAV

When a fund distributes income to unitholders, NAV per unit falls by the distribution amount per unit; the unitholder receives cash or reinvested units of equal value.

Cooling-off right

A statutory right allowing an investor to cancel a subscription within a set period after receiving the prospectus and applying, receiving a refund of the investment less permitted charges.

Prospectus requirement

A unit trust must have a prospectus registered with the Securities Commission Malaysia disclosing the fund's objective, policy, risks, fees and charges before units can be offered to the public.

Product highlights sheet

A short disclosure document accompanying the prospectus that summarises the fund's key features, risks, fees and charges in a standardised, easy-to-read format for investors.

Fund benchmark

A reference index or measure against which a fund's performance is compared; the prospectus states the benchmark and the fund's investment policy must be consistent with it.

Separate legal estate

Fund assets are held separately from the management company's own assets, so unitholders are protected if the manager becomes insolvent; the trustee holds the assets for them.

Closed-end versus open-end

Open-end funds issue and redeem units continuously at NAV, while closed-end funds have a fixed number of units that trade on an exchange and are not redeemed by the manager.

PRS definition

A voluntary long-term savings scheme regulated by the Securities Commission Malaysia, designed to supplement retirement savings through approved providers offering sub-schemes with different risk profiles.

PRS provider approval

Only institutions approved by the Securities Commission Malaysia may establish and manage private retirement schemes; providers must meet capital, governance and disclosure requirements under the PRS framework.

Account A and Account B

PRS contributions are split 70% into Account A, which is locked until retirement age, and 30% into Account B, which may be withdrawn earlier subject to conditions and tax treatment.

PRS contribution tax relief

Members may claim tax relief on voluntary PRS contributions up to RM3,000 per year of assessment; this relief is separate from relief for life insurance premiums and EPF contributions.

Pre-retirement withdrawal

Withdrawal from Account A before retirement age is restricted to permitted grounds such as death, permanent total disability or emigration; other premature withdrawals attract a penalty on the amount withdrawn.

PRS sales charge cap

The maximum sales charge for a PRS sub-scheme is capped by regulation at 3% of NAV per unit, limiting the upfront cost charged to members when they contribute.

PRS management fee cap

The annual management fee for a PRS sub-scheme is capped by regulation at 1.5% of NAV per year, and it is accrued in the NAV rather than billed separately to members.

PRS trustee fee

A fee paid to the trustee for safekeeping scheme assets and monitoring compliance; it is disclosed in the PRS disclosure document and forms part of the scheme's ongoing costs.

Default and non-default sub-schemes

PRS providers offer default (core) sub-schemes for members who do not choose, and non-default (non-core) sub-schemes with different asset allocations and risk levels that members may select.

PRS switching

Members may switch between sub-schemes of the same provider or to another provider, subject to the provider's minimum amounts, switching terms and any applicable switching fees.

Retirement age withdrawal

At retirement age, a PRS member may withdraw savings as a lump sum, in stages, or use them to purchase an annuity; PRS savings are separate from EPF savings.

Scheme Governing Committee

A committee established for a PRS to oversee the scheme's operation and governance, including reviewing the provider's conduct and protecting members' interests independently.

PRS disclosure document

A document that must be issued for a PRS sub-scheme, disclosing its objective, asset allocation, risk profile, fees, charges and performance, so members can make informed choices.

PRS risk profile

Each sub-scheme is classified by risk level based on its asset allocation and volatility; conservative sub-schemes hold more fixed income, aggressive ones hold more equities.

Employer PRS contribution

Employers may make voluntary contributions to a PRS on behalf of employees as an additional retirement benefit; such contributions follow the same account split and withdrawal rules.

PRS penalty on early exit

Premature withdrawal from Account A outside permitted grounds attracts a penalty, commonly 8% of the withdrawn amount, which is deducted before the balance is paid to the member.

PRS versus EPF

PRS is a voluntary, privately managed supplement to the mandatory EPF scheme; PRS savings sit with approved providers and are governed by SC rules, not EPF withdrawal rules.