FIMM - Chapter 7

FIMM
CHAPTER 7
GLOSSARY
ACTIVE PORTFOLIO MANAGEMENT
The management of funds where the investment manager chooses to buy and sell investments actively
based on changes in the potential returns. Opposite of Passive Portfolio Management.
ANNUAL fTIANAGEMENT FEE
A fee, calculated and accrued daily, based on the Gross Net Asset Value of the Fund paid by the trustee
from the assets of a UTS to the UTMC for ongoing management of the UTS. The Gross Net Asset Value
takes into account fees earned by (but not paid to) the UTMC up to the previous day. Annual management
fees reduce the income of a UTS [see also NetAsset Value (NAV)].
ANNUAL GROWTH RATE
Total return for a UTS over a year, or over a number of years, and averaged out to give an annual figure
. (usually as an annual compound rate of return).
APPLICATION FORM
Document accompanying a prospectus (or sometimes incorporated within a prospectus) of a UTS, which
is completed by an investor prior to being forwarded to the UTMC with the investor's application money.
The application form, which contains the personal and other data necessary to record the investor as a
unitholder in the register of unitholders of the UTS, is signed by the investor evidencing agreement to be
bound by the terms of the deed.
APPLICATION MONEY
The amount that an investor wishes to invest in units in a UTS. After dividing the application money by the
selling price of a unit in the UTS, an allotment of the number of units to which the investor has become entitled
can be made by the UTMC and an entry to this effect made in the register of unitholders of the UTS.
ASSETALLOCATION
The practice of spreading a portfolio of investments across a range of investment assets (i.e. asset classes),
e.g. cash, bonds (or fixed income securities), equities and real property, to reduce the level of risk to match
the risk tolerance of the investor.
-. ASSETCLASS
A group of securities or other investment assets, e.g. equities, real property, cash or even artworks and
antiques.
ASSETS OF A UTS
lnvestments, amounts receivable (e.9. debtors for securities sold, amounts due from a UTMC for unit
creations), dividends receivable, accrued income and cash.
AUDIT
An examination of the records and operations of a UTS by an independent person (an auditor) to assess
compliance with accounting and regulatory requirements (including those contained within the deed of the
urs).
AUDITOR
lndependent person or an approved audit firm appointed by the trustee of a UTS to complete an audit of the
UTS and to report its findings to unitholders.
FIMM
AUTHORISATION CARD
ldentification document held by a UTC. Evidence that the holder has met, and continues to meet, his or her
obligations as set out by securities laws, the SC and FIMM, and is authorised to distribute units in a UTS.
AUTHORISED INVESTMENT
An investment of a UTS that meets the restrictions on investment imposed under the terms of the deed. A
trustee will refuse to settle the purchase of an investment that is not an authorised investment.
AUTOMATIC REINVESTMENT
Distributions from a UTS may, at the election of the unitholder, be automatically reinvested in additional units
in the UTS by the UTMC. The UTMC may reduce the initial service charge payable by an investor on the
units acquired as a result of making such an election'
!fr'lf]1[ setting in the secondary market of debt certificates, securities, trade documents and papers that
conform to the Syariah. The trade documents are issued by debtors to creditors as evidence of indebtedness.
Only documents evidencing real debts arising from bona fide merchant transactions can be traded.
BEAR
A bear market is one where the general trend of the stock market keeps on falling and there are more sellers
than buyers and hence the prices of investments are falling. Opposite of Bull.
BLUE CHIPS
A generic description given to large and well-capitalised companies whose shares are listed on a stock
exchange.
BOND
Debt security issued as evidence of a loan by the bondholder to the bond issuer. A bond issuer may be a
government, government authority or corporation. The bondholder is entitled to repayment of the amount
of the loan at some future time plus interest payable during the period of the loan.
BULL
A bull market is one where the general trend of the stock market is rising rapidly and there are more buyers
than sellers and hence the prices of investments are rising. Opposite of Bear.
CANCELLATION OF UNITS
A cancellation (or liquidation) of units represents a decrease in the number of units in circulation of a UTS. A
unit is cancelled by the trustee at the request of the UTMC and the trustee pays an amount from the assets
of the UTS to the UTMC. The amount payable reflects the NAV of a unit, thereby maintaining the NAV of all
units in circulation following the act of cancellation.
CASH
Money market instruments (i.e. loans) repayable at short notice, e.g. bankers acceptances, call deposits
(or equivalent lslamic products for Syariah-based UTS). ln a UTS, notes and coins do not generally form
part of the assets of the UTS.
CERTIFICATE
After the purchase of units in a UTS, a unitholder may receive a certificate (or scrip). This is evidence of
ownership. The certificate will show the number of units the unitholder holds in the UTS and will be signed by
the trustee and the UTMC. Now commonly replaced by statements of units held in a UTS printed on request.
Units of a UTS for which certificates are not issued are sometimes referred to as non-certificated units.
FIIf,M
CHARGES
Various fees and costs are paid by unitholders in a UTS as a result of buying and holding units. These include
initial service charges, annual management fees and exit fees.
CLOSED.END FUND
A UTS (or other collective investment vehicle) that does not offer a regular opportunity to attract investors
through the issue of new interests in the UTS. An existing investor in a closed-end fund is usually required
to sell his or her interests through a secondary market. Commonly associated with a UTS that invests in
illiquid assets such as real property. The number of units in circulation of a closed-end fund is fixed at launch
and sold over a short period. Opposite of Open-End Fund.
CLOSED TRUST
A UTS that has a limited number of units available. After those units are sold (which may take several years),
the UTS is'closed'and only units repurchased by a UTMC can be sold on to new investors.
COLLECTIVE INVESTMENT
Ageneric term for pooled investment products, such as a UTS, where a professional fund manager manages
the investments on behalf of the investors, who are entitled to a share of the total return generated in
proportion to the amount each contributed (usually measured in the form of units).
coilMtssroN
Amount payable by a UTMC to UTC for selling units in a UTS to clients and calculated as a percentage
of the application amount (known as initial commission); or for continuing to provide service to clients who
remain as unitholders in the UTS and calculated as a percentage of the value of the unitholder's units paid
at regular intervals (known as a trail commission).
COMPLIANCE
A series of procedures and practices designed to ensure that both external laws and regulations applicable
to an entity (such as a UTMC, trustee, UTS) and its internal rules are complied with.
COMPLIANCE MANUAL
A UTMC must maintain a Compliance Manual setting out how the UTMC will ensure compliance with its
obligations.
COMPLIANCE UNIT
Group of individuals (headed by a Senior Compliance Officer reporting to the Board of Directors of a
UTMC) responsible for compliance by a UTMC with all the obligations imposed by the deed, securities laws,
Guidelines, Compliance Manual, etc.
GOOLTNGOFF RIGHT
The requirement imposed by the SC on a UTMC to offer a unitholder in a UTS the opportunity to reconsider,
in not fewer than six business days of the date of purchase, his or her purchase of units in the UTS and
receive a refund as per the Guidelines on Unit Trust Funds.
COVENANTS
Conditions under the deed of a UTS pledged by the parties, particularly the UTMC and trustee, either to
each other or to the unitholders, e.g. a UTMC is required to repurchase the units of a unitholder on request
of the unitholder.
CREATION OF UNITS
A creation of units represents an increase in the number of units in circulation of a UTS. A unit is created in
exchange for cash payable by the UTMC to the trustee for the account of the UTS. The amount payable reflects
the NAV of a unit, thereby maintaining the NAV of all units in circulation following the act of creation.
FIMM
CUM DISTRIBUTION
The selling price of a unit in a UTS is cum distribution when it includes an entitlement to the next declared
distribution. Opposite of Ex Distribution.
CUSTODIAN
Usually the trustee (or a trustee-appointed bank or other financial institution responsible to the trustee), who
has custody or safekeeping of securities and other assets of a UTS. Term is sometimes used interchangeably
with 'trustee'. A custodian has, however, fewer fiduciary responsibilities than a trustee.
DEALINGS
The term used to describe the purchase and sale of units in a UTS by an investor through the UTMC of the
UTS. Most unit trusts can be dealt daily, i.e. each business day.
DEED
The legal document executed between the trustee of a UTS and the UTMC, which lays down the framework
within which all the parties, including the unitholders, must operate. lt specifies in detail how the UTS is to
operate and be managed and how fees are to be charged. The investor agrees to be a party to the deed by
completing and signing an application form for units in the UTS
DERIVATIVES
Afinancial instrument with characteristics and value that are dependent on the underlying investment products
- e.g. commodity, bond, equity or currency. Examples include futures and options.
DISTRIBUTIONS
Payments made to unitholders out of the accounting income of a UTS. Distributions are paid with an income
tax credit reflecting tax payable on the income of the UTS. A unitholder can offset the credit against his or
her tax liability or, if no tax liability exists, can reclaim the tax paid. A tax voucher issued to each unitholder
by the UTMC contains the required information. At the investor's request, the distribution can be paid or
reinvested in additional units in the UTS (see Automatic Reinvestment).
DISTRIBUTION DATE
The date when a distribution is paid to (or reinvested on behalf of) a unitholder in a UTS. This date is usually
several weeks after the distribution has been announced. Most UTS pay distributions once a year.
DISTRIBUTION WARRANT
Document provided to a unitholder who is entitled to a distribution from a UTS. Sets out the unitholder's
details, the number of units, the income entitlement, details of each part of the total distribution, and the
amount paid or reinvested in additional units in the UTS.
DIVERSIFICATION
A UTS will spread its assets among a number of investments (or asset classes) in order to reduce portfolio
risk. Thus, the impact of losses incurred on some investments is expected to be offset by gains on those
increasing in value. One of the major benefits of investment in a UTS.
DOLLAR COSTAVERAGING
An investment strategy whereby an investor invests the same amount of application money each period in
a UTS, such that when unit selling prices are high fewer units are bought, and when unit selling prices are
low more units are bought. By investing in such away, the investor avoids placing all his or her funds in the
market at either the top or the bottom of the market cycle, thereby reducing risk.
EXIT FEE
A fee charged by a UTMC to an investor in a UTS who sells his or her units in the UTS. Also called a
redemption fee, repurchase charge or back-end load. The amount payable is usually a percentage of the
NAV peir unit from the sale of units, which is deducted from the proceeds prior to payment to the investor.
FIMM
EQUALISATION
The part (in ringgit) of a creation or cancellation of units in a UTS by a UTMC, which is represented by the
accumulated net income of the UTS in the accounting period to the date of the creation or cancellation
(and which is included within the NAV of a unit on that date). The total of such equalisation amounts over
an accounting period is added to the accumulated income of the UTS and may be returned to unitholders
as a (non-taxable) refund of capital as part of the next distribution. The objective of separately accounting
for equalisation on creation and cancellation of units in a UTS is to ensure that the distribution of income
returned to unitholders (sen per unit) is not diluted (reduced) by increases or decreases in the number of
units in circulation during the accounting period to which the distribution relates.
EQUITY TRUST
A UTS that predominantly invests in equities or shares. There are various types of equity trust classified
according to the category of equities in which each invests, e.g. growth, income, international, small cap,
etc.
EX DISTRIBUTION
Unit selling price of a UTS is quoted 'ex distribution'following the last day (record date) on which entiflement
to a declared distribution of a UTS is available to investors. An investor buying units during the ex distribution
period (which ends on the payment date) is not entitled to the distribution subsequently paid. An investor
whose units are repurchased during that period is, however, entitled to receive that distribution.
FIDUCIARY RESPONSIBILITIES
Obligations to act in the best interests of another person or persons. A fiduciary must, for example, avoid
any conflict of interest situation and should not make a 'secret' profit from his or her position. A UTMC and
trustee of a UTS have fiduciary responsibilities to the holders of units in a UTS.
FORWARD PRICING
Method by which the price of units in a UTS (calculated from NAV determined at a specific valuation point)
is applied by the UTMC to an investor's application money to calculate the number of units allotted or to
determine the proceeds from the investor's sale of units. Under forward pricing, the price applied to an
application for units or a repurchase of units is that determined at the next valuation point following receipt
of the application form or repurchase request. Forward pricing is the SC's preferred method for applying
unit prices to dealings in units. Opposite of Historic Pricing.
FORWARD RATE AGREEMENT
A contract for the loan at some future time of a sum of money at an agreed rate of interest for a specified
period. A hedge instrument used by a UTS to protect against future movements in interest rates.
FUND MANAGER
An organisation or individual (or group of individuals) responsible for the investment management of the
assets of a UTS. A UTMC may internalise its funds management by appointing its own staff to act as fund
manager, utilise the services of a fund manager within another part of the corporate group of which it forms
part, or appoint an external fund manager operating independently of the UTMC.
FUTURES
Financial contracts (or derivatives) that give the holder the obligation to buy or sell a certain commodity or
financial instrument at a fixed price at a specified date in the future. A UTS may invest in futures contracts
(within strict guidelines imposed by the SC) for hedging purposes only.
GEARING
A method of acquiring units in a UTS with borrowed money. The lender usually takes security for the loan
against the units acquired. The borrower (i.e. the investor) expects to earn a total return from the units
acquired that is in excess of the cost of borrowing. Gearing considerably increases the investor's risk.
FIMM
GROWTH FUND
AUTS which expects to pay a very low annual distribution (if any) and concentrates on investing with a view
to increasing the price of the units by focusing on growth assets such as shares and real property.
GUIDELINES
Document that provides UTMC with the SC's interpretation of securities laws. Also a method by which the
SC communicates its other requirements of UTMC. The FIMM adopts this term to communicate its rules
and requirements of members (see Practice Note).
HEDGING
Term used to describe investment transaclions taken by a UTMC to protect an existing portfolio of a UTS
against adverse fluctuations in the prices of those investments. Fund managers can choose between various
methods including futures, options and forward rate agreements.
HISTORIG PRICING
Method by which the price of units in a UTS (calculated from NAV determined at a specific valuation point)
is applied by the UTMC to an investor's application money to calculate the number of units allotted or to
determine the proceeds from the investor's sale of units. Under historic pricing, the price applied to an
application for units or a repurchase of units is that determined at the last (most recent) valuation point prior
to receipt of the application form or repurchase request. Historic pricing is not the SC's preferred method
for applying unit prices to dealings in units and can only be used when variations to NAV are within SCdetermined
limits. Opposite of Forward Pricing.
IJARAH
A sale or purchase of the use of another person's property. The ownership of the property remains with the
lessor while the lessee only owns the right of the use of the property.
INCOME ENTITLEMENT
Amount of income of a UTS for an accounting period from which the directors of the UTMC of the UTS
decide (with the approval of the trustee) the amount of the distribution that is to be payable to, and divided
equitably amongst, unitholders in the UTS. The income entitlement of each unitholder in a UTS is determined
in accordance with the deed. Most commonly, a distribution amount (in sen per unit) is applied to the number
of units each unitholder holds on the record date. Alternatively, a unitholder's income entitlement may be
determined on a unit day entitlement basis. Other methodologies of determining a unitholder's income
entitlement may be described within a deed of a UTS. The difference between the amount of income of a
UTS and the distribution to unitholders is carried forward to future years.
INCOME OF A UTS
Amount of dividends, interest, rents, realised net capital gains, etc derived from the assets of a UTS, less
expenses included within the Management Expense Ratio and taxation, and plus equalisation that is available
for distribution to unitholders in a UTS.
INCOME FUND
A UTS whose main aim is to produce income rather than capital growth for unitholders. The UTS would invest
in assets, such as shares that pay a high dividend and fixed income investments. lncome funds expect to
pay a high level of regular distributions to investors.
INDEX FUND
A passively managed UTS that attempts to capture the returns of a stock exchange index comprising shares
(or bonds) by holding shares (or bonds) in the same composition as that of the index. This allows the total
return of the UTS to closely track the performance (total return) of the index.
FIIUIM
INITIAL OFFER PRICE
This is normally associated with the launch of a UTS. When a UTMC decides to launch a UTS, it normally
sets aside about three weeks as the initial offer or selling period. During this period, it will sell units at a
fixed price, usually at an initial offer price of RM1.00 per unit. Following the close of the initial offer period,
the selling price of units may fluctuate in line with the NAV of the UTS.
INITIAL SERVICE CHARGE
A sales charge or entry fee levied by a UTMC on the initial purchase of a UTS. The charge is sometimes
called a 'load', 'front end load', sales or entry charge. The charge can be expressed either as a fixed amount
or calculated as a percentage of the NAV of a unit.
INSIDER TRADING
The practice of buying or selling securities as a result of knowledge acquired by the purchaser or seller
(usually as a result of the purchaser's or seller's privileged position as someone working within or inside an
organisation) that is not yet available to public investors.
INSTITUTIONAL INVESTOR
An organisation (such as a UTMC, insurance company, pension or provident fund, or a fund manager who
invests on behalf of such investors) that invests either its own assets or the assets of others (which are
usually held on trust).
INVESTMENT
An asset held purely for the purpose of generating income and/or capital groMh.
INVESTMENT COMMITTEE
Group of individuals (minimum of three) whose role is to formulate, implement and monitor investment
management policies of a UTS in accordance with the objectives of the UTS and in compliance with the
deed, securities laws, Guidelines, regulations and internal rules, and to ensure that the investments are
properly managed. A UTS must appoint an lnvestment Committee of which at least onethird of the members
must be independent of the UTMC.
LIABILITIES OF A UTS
Amounts payable (e.9. creditors for securities purchased, amounts due to the UTMC for cancellations of
units, taxation), accrued expenses (e.9. UTMC and trustee fees, audit fees).
LIQUIDITY
The amount of a UTS' assets that is not invested. Liquidity is also referred to as 'cash' or 'cash available
for investment'.
LUMP SUM INVESTMENT
A one-off receipt of application money for investment into a UTS (see Regular Savings Plan).
MANAGEMENT EXPENSE RATTO (MER)
The sum of the expenses charged to, or paid by, a UTS during an accounting period (excluding certain costs
such as brokerage on acquisitions and disposals of investments, and taxation), divided by the average NAV
of the UTS during that period. Usually expressed as a percentage. The MER is a summary of the ongoing
expenses incurred by a UTS, which act as a drag on the investment performance of the UTS. Calculated by
the UTMC, usually each year in arrears, and disclosed to investors in a prospectus for the UTS.
MANAGER'S STOCK
Units in a UTS held by a UTMC. The manager's stock of units may originate from a previous creation of units
not yet sold, or from repurchases of units awaiting sale or cancellation. Sales of units to investors reduce
the manager's stock. Excess manager's stock may be cancelled. Whilst owning units, a UTMC is entifled to
all the benefits of a unitholder, including holding gains and losses as unit prices fluctuate. The SC imposes
limits on the quantum of manager's stock at any point.
FIMM
MASTER PROSPECTUS
A single prospectus containing an invitation to investors to acquire units in more than one UTS.
MONEY MARKET FUND
A UTS in which assets are held entirely as cash (i.e. money market instruments with a maturity of less than
12 months). Objective of the UTS is to offer investors access to higher rates of interest usually available in the
institutional money market compared to those obtainable from retail banks and similar financial institutions.
Also known as a 'cash management trust'or'money fund'.
MUDHARABAH
An agreement between a provider of funds who provides 1 00% capital for the financing and an entrepreneur
who manages the business applying his expertise. Profit is to be shared between them according to an
agreed ratio, while loss is to be borne solely by the provider of the capital.
MUSHARAKAH
An agreement between two or more parties whereby all parties contribute capital either in the form of cash or
kind to form a company to carry on commercial activities. The profit is shared based on equity participation
or as agreed between the parties; loss is shared according to equity participation.
MUTUAL FUND
A collective investment vehicle commonly found in the United States. Similar to a UTS but usually structured
as an open-end investment company.
NET ASSET VALUE (NAV)
The value of the underlying investments held in the portfolio of a UTS (based on quoted last sale or midmarket
prices), together with other assets, less liabilities. When divided by the number of units in circulation,
the result is the NAV of the UTS per unit (quoted in ringgit). lt is the starting point in the determination of
unit selling and repurchase prices.
OFFSHORE FUND
A collective investment vehicle operated outside the jurisdiction of the Malaysian authorities.
OPEN.END FUND
A UTS (or other collective investment vehicle) that offers regular (often daily) opportunities to invest through
the issue of interests in the fund. An investor is normally required to apply on the basis of a prospectus,
which must meet regulatory requirements, issued by the promoter of the fund. An investor is able to sell
back his or her interests in the fund to or through the promoter and hence, the fund invests predominantly
in assets that are traded on secondary markets or which are otheruvise readily liquid. The number of units
in circulation of an open-end fund is not fixed. Opposite of Closed-End Fund.
OPTION
A financial contract (or derivative) that gives the holder the right but not the obligation to buy (i.e. receive) or
sell (i.e. deliver) a certain commodity or financial instrument at a fixed price at a specified date in the future.
An amount paid for an option that is not exercised is lost. Exchange Traded Options are options over listed
equities, which are usually bought and sold on an exchange priorto the expiry date to close an existing position
(rather than be exercised). A UTS may invest in options (within strict guidelines imposed by the SC).
PASSIVE PORTFOLIO MANAGEMENT
The management of funds where the investment manager buys and sells investments comprising an index
without regard to their potential, and with a view to achieving total returns equal to that of an index. Generally,
the investment manager makes no judgement on the merits or otherwise of individual investments held in
the portfolio. Opposite to active portfolio management.
FIMM
PORTFOLIO
A holding of various investments structured in such a way as to meet the owner's (for example, a UTS)
investment objectives, e.g. by asset class or by investment sector within an asset class.
PORTFOLIO TURNOVER RATIO
The result derived from adding total purchases of investments to total sales of investments in a UTS for a
period and dividing by two, and further dividing the quotient by the average value of the UTS for that period.
A Portfolio Turnover Ratio of one means that 100% of the portfolio of the UTS has been turned over or 'sold'
that period. A measure designed to indicate the relative degree to which a UTS is aggressively managed
or traded.
PRACTICE NOTE
Document issued by the SC clarifying and/or amending its previously issued Guidelines.
PROPERTYTRUST
A UTS that invests in real property. Various types of properg trust exist, usually classified (especially
overseas) according to the categories of proper$ in which each invests (eg. commercial, retail). However,
many do invest more generally, i.e. in several categories. A property trust is usually listed, since the illiquidity
and non-divisibility of real property makes it othenrvise difficult for unitholders to sell units to the UTMC prior
to cancellation with the trustee and the release of UTS assets. ln the United States, referred to as a Real
Estate lnvestment Trust (REIT).
PROSPECTUS
The legal document (lodged and approved by the SC) that describes the investment objectives, risks,
investment limitations, policies, services and fees of a UTS. lt must be made available to all investors who
wish to invest in UTS and must comply with the securities laws and the SC's Guidelines prior to issue. lssued
by a UTMC whose directors take sole responsibility for its content. Has a life of no more than 12 months
from the date of issue.
REAL PROPERW
Land and buildings held by a property trust for the benefit of unitholders. Returns generally include rent (net
of expenses) and capital appreciation as the value of the land and buildings grows or as development of
the land and buildings occurs.
REGULAR SAVINGS PLAN
A periodical payment (usually monthly or per pay period) of application money for investment into a UTS.
Usually payments are made by direct debit, standing order, or by payroll deduction to the UTMC for investment
on the applicant's behalf (see Lump Sum lnvestment).
REPURCHASE PRICE
The unit price at which a UTMC buys back units in a UTS from a unitholder who wishes to sell his or her
units. Sometimes referred to as the'bid price'or'buying price'.
RETAIL INVESTORS
lndividuals who invest their savings either directly in the financial markets, or indirectly through collective
investments such as a UTS. Retail investors are the major target market for most UTMC. The major
advantages of indirect investment are the ability to spread risk across a range of investments or asset classes
and the professional management of those investments at a reasonable cost, given the smaller investment
amounts contributed by retail investors.
RIBA
ln lending, it is the extra payment imposed by the lender or promised by the borrower over and above the
loan. ln trading, it is mostly the difference in weight in the exchange of gold of different measures of purity,
e.g. 1Ogm of 750 gold with the 8gm of 835 gold; or the difference in time between payment and delivery in
foreign currency exchange, e.g. payment of RM10,000 at 10.00am and delivery of USD3,800 at 3.00pm on
the same date.
FIMM
RISK
The volatility of an investment, or the probability that the investment will lose value. A UTS investing in bonds
(where the regular interest receipts and capital return at maturity are more predictable) is likely to be less
volatile than a UTS investing in equities (where the dividends and ultimate value on disposal are considerably
less predictable). The probability of an investor losing all or part of his or her investment when investing in
an equity UTS is therefore likely to be greater than when investing in a bond UTS. By contrast, a fixed term
deposit with a major bank is an investment with no capital volatility and low repayment risk, and therefore
is an investment with negligible risk.
RISK TOLERANCE
The ability of an investor to accept the risk of loss, either temporarily or permanently (i.e. total loss), of his
or her investment capital. The risk tolerance of an investor depends on a number of factors, including the
period of time for which the investment can be retained before disposal.
SELF.REGULATION
A system used in regulating capital markets where the government regulator (e.9. the SC) delegates some
of its duties and powers (e.9. to discipline) in relation to a section of the capital market to an organisation
(e.9. an industry body), which is permitted to regulate itself (at least partly).
SELLING PRICE
The price at which units in a UTS are sold to the public by the UTMC. lt should be the NAV per unit of the
UTS and sometimes referred to as the'offer price'or'sell price'.
SPLIT
Division of a single unit of a UTS into several units, the total value of which is exactly equal to the value of
the unit prior to the split. A unit valued at RM2 would become two units of RM1 each following a2 for 1 split.
The objective of a split is to make the selling price of a unit more attractive to potential investors; a lower
selling price following the split means an investor would be allotted a greater number of units in the UTS
for a given amount of application money. A split does not increase or decrease the NAV of the UTS or the
value of unitholders' interests in the UTS.
SUPPLEMENTARY PROSPECTUS
Addition to a current prospectus required by law to be issued by the directors of a UTMC to ensure that the
original prospectus continues to be compliant with the law Changes during the life of a prospectus may
have the effect of making the prospectus misleading to potential investors and therefore non-compliant with
the law. A supplementary prospectus must accompany the original prospectus but cannot extend the life of
the original prospectus.
SUSPENSION
A period of time during which the trustee, with approval of the SC, determines that it is not in the interests of
investors to allow investments of a UTS to be sold, e.g. where those investments cannot be liquidated or sold
at an appropriate price or on adequate terms, and therefore unit prices cannot be calculated. No creations,
cancellations, sales or repurchases of units are allowed during such a period. Suspensions are rare but could
occur, for example, during periods when stock markets in which a UTS invests are temporarily closed.
SYARIAH
Fiqh or lslamic Law comprising the whole body of rulings pertaining to human conduct derived from the
rulings'respective particular evidences. The respective particular evidences are the sources of the Syariah,
the primary sources being the Quran, Sunnah, ijma and qiyas, and the secondary sources being the method
of reasoning applied by Muslim jurists in their ijtihad (personal reasoning).
SYARIAH COMMITTEE
Group gf individuals (minimum of three) who ensure that a UTS is managed and administered in accordance
with Syariah principles. A UTS managed in accordance with Syariah principles must appoint a Syariah
Committee. These individuals must be approved by the SC before they can be appointed.
FIMM
SUKUK (rsLAMlC BOND)
Plural of sok, it is being used in the singular to refer to a document or certificate evidencing an undivided
pro-rate ownership of an underlying asset. lt is a capital market financial instrument traded in the secondary
market.
swtTcH
A repurchase of units in a UTS by a UTMG at the request of a unitholder and the immediate reinvestment of
the repurchase proceeds as application money into a different UTS managed by the same UTMC. Depending
on the type of funds, a UTMC may reduce or increase the initial service charge in relation to an application
that is part of a switch.
TAKAFUL
An lslamic insurance protection plan based on Syariah principles. A person becomes a participant by
undertaking a contract of tabarru' and paying a participative contribution (tabarru') to a common takaful
fund, whereby he allows his contributions to be used to help other participants whenever they suffer defined
losses. The commercial contracts of Mudharabah and Wakalah are incorporated into tabarru'contracts to
increase the size of the takaful fund.
TIED-AGENT
Atied-agent is a UTC who distributes units in one or more UTS managed by a single UTMC, and who is paid
commission by the UTMC. The tied agent is obligated to the UTMC (the tied-agent's principal).
TOTAL RETURN
The return accruing to a unitholder in a UTS from distribution entitlements (if any) plus or minus the difference
between the price per unit paid for units (selling price) and the price obtainable on selling units (repurchase
price) during the period of ownership. As a better indicator of investment performance of a UTS (e.9. for
comparison with a benchmark), it is common to exclude any entry fee paid by an investor by taking the buy
price on both the date of purchase and the date of sale.
TRANSACTION COST FACTOR
An amount added to the NAV of a unit in a UTS to prevent dilution of the interests of the existing unitholders in
the UTS. lncoming investors will otherwise benefit from the brokerage and other transaction costs previously
incurred by a UTS (and therefore by existing unitholders) in acquiring the portfolio of investments forming
part of the NAV of the UTS. Sometimes referred to as an 'expense allowance''
TRUSTEE
An organisation (such as a subsidiary of a bank or other financial institution) approved by the SC to act on
behalf of unitholders in a UTS. The role of the trustee is to ensure that the UTMC adheres to the conditions
laid down in the deed (and securities laws and regulations) and to protect unitholders'interests. The trustee
holds the assets of a UTS in its own name or under its control through a custodian.
UNIT
A single interest in a UTS. Each unit in a UTS is equivalent to any other unit (especially in value) and has
the same rights and entitlements, e.g. to vote and to share in the income and capitalof the UTS. ln many
respects, but not all, similar to a share in a limited liability company.
UNIT DAY
Period of ownership by a unitholder of a single unit in a UTS. 100 units held for 10 days represents 1000
unit days.
UNIT DAY ENTITLEMENT
Method of determining distribution entitlements of unitholders of some UTS (particularly one with an income
objective). Each unitholder in the UTS receives a distribution for an accounting period reflecting not only the
number of units held but also the number of days during the accounting period for which those units were
owned. Alternative to distribution entitlement based on the number of units held on a record date.
FIMM
UNITHOLDER
lnvestor in a UTS and owner of interests in the UTS. The number of units held represents the extent of
an investor's interest in the UTS. ln some, but not all respects, similar to a shareholder of a limited liability
company.
UNITS IN CIRCULATION
The total number of units in a UTS at a point in time. The SC approves the maximum number of units in a
UTS that a UTMC may have in circulation. As the number of units issued to investors in the UTS approaches
the maximum, the UTMC may apply to the SC for an increase in the maximum. Method by which the SC
monitors the growth of the industry and, more significantly, UTMC with a view to protecting investors from
the effects of unbridled expansion beyond the capacity and capabilities of a UTMC.
UNIT TRUST
Type of collective investment vehicle established under a deed. The preferred structure of investors,
particularly retail investors, in Malaysia for the benefits of pooled investment.
UNLISTED TRUST
A UTS, the units of which are not listed on a recognised market. An investor may buy units in an unlisted
UTS through a UTC or directly from the UTMC or IUTA. The UTMC sells units in a UTS to, and repurchases
units from, investors as principal.
VALUATION
The market or assessed value of an investment held by a UTS used to determine the NAV of the UTS.
The market value of an investment is usually obtained from an external pricing service that obtains actual
prices at which trades have been transacted on a market such as Bursa Malaysia. The assessed value of
an investment is a 'fair'value as determined by a skilled valuation specialist such as a real estate valuer,
fixed interest dealer or, less commonly, by the auditor of a UTS.
VALUATION POINT
The point in time at which the NAV of a UTS is determined by reference to market prices and from which
the selling price and repurchase price of a UTS are calculated.
WADIAH YAD DHAMANAH
Goods or deposits that have been deposited with another person, who is not the owner, for safekeeping. As
wadiah is a trust, the depository becomes the guarantor and therefore guarantees repayment of the whole
amount of the deposits, or any part thereof, outstanding in the account of depositors when demanded. The
depositors are not entitled to any of the profits but the depository may provide returns to the depositors as
a token of appreciation.
WAKALAH
A contract of appointment as an agent where a person appoints another as his agent to act on his behalf
YIELD
The current yield of a UTS is the amount of the most recent distribution for an accnunting period of 12
months generated by the UTS (in sen per unit) divided by the selling price of a unit in the UTS. lt is usually
quoted gross (i.e. before the investor is subject to income tax on the distribution). The distribution amount
used in the calculation is after all fees included in the MER have been deducted from the gross income of
the UTS (see also Total Return).