7A.2 UTS Fees, Charges and Expenses, and the Management Expense Ratio

FIMM Combined Examination FCE

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1 Introduction: The FIMM Combined Examination (FCE)

0.1 FCE Exam Facts, Registration Rules and How to Use This Guide

2 Chapter 1: Understanding Collective Investment Schemes in Malaysia

1.1 What a Collective Investment Scheme Is and How Malaysian CIS Are Classified 1.2 Investment-Linked Funds Are Not UTS; Industry Growth and History 1.3 Participants in the CIS Ecosystem: Unit Holders, Managers, Trustees, Distributors and Regulators

3 Chapter 2: Introduction to UTS and PRS

2.1 UTS and PRS as Investments: Mechanics, Unit Calculations and How They Compare 2.2 Types of Funds: By Asset Class, Fund Structure and Investment Objective 2.3 Methods of Investing and Dollar Cost Averaging 2.4 Benefits and Disadvantages of Investing in UTS and PRS 2.5 Understanding Risk and the Risks of Investing in Schemes 2.6 Shariah-Compliant Schemes, Their Risks and the Role of the Shariah Advisory Council

4 Chapter 3: Regulatory Framework

3.1 The Regulatory Framework: The SC, Other Regulators and FIMM's Dual Role 3.2 Legislation, SC Guidelines and FIMM Rules Governing UTS and PRS 3.3 Regulation of Scheme Providers and Oversight Functions 3.4 The Deed, the Prospectus or Disclosure Document, and the Product Highlights Sheet 3.5 Portfolio Constraints: Permitted Investments, Liquidity, Borrowing and Exposure Limits 3.6 Regulations for Other CIS: Real Estate Investment Trusts and Exchange-Traded Funds 3.7 Regulation and Duties of the Scheme Trustee 3.8 Regulation of Marketing and Distribution: Distributor Categories, Collection Points and Agency Structure 3.9 Registration of Consultants: Eligibility, Fit and Proper, Duration, Variation and Revocation

5 Chapter 4 (Part 1): Marketing and Distribution — Disclosure and Transactions

4.1 Servicing Investors and the Contents of the Prospectus and Disclosure Document 4.2 The Product Highlights Sheet, Advertising Standards and Account Maintenance 4.3 The Purchase Process and Suitability Assessment Before Personal Advice 4.4 Cooling-Off Rights, Repurchase of Units, Suspension and Switching 4.5 Financing the Purchase of UTS: Process, Safeguards and the Risk Disclosure Statement 4.6 EPF Transfers and Withdrawals for Investment in Approved Unit Trust Funds

6 Chapter 4 (Part 2): Marketing and Distribution — Distributions, Reporting and Service

4.7 Distributable Income, Distributions and NAV, "Buying" a Distribution and Taxation 4.8 Reporting to Investors: Confirmations, Statements, and Semi-Annual and Annual Reports 4.9 Marketing Principles, Delivering Quality Service and Handling Complaints 4.10 The Effect of Inflation, Taxation and Investment Costs on Returns 4.11 Investment Alternatives to UTS and PRS

7 Chapter 5: Code of Ethics

5.1 Compliance, Ethics and the Structure of the FIMM Code of Ethics 5.2 Core Principle 1: Honesty and Integrity 5.3 Core Principle 2: Professionalism 5.4 Core Principles 3 to 5 and Non-Compliance: Conflicts, Disclosure, Confidentiality and Misconduct

8 Chapter 6: Personal Financial Planning

6.1 Personal Financial Planning: Definition, Features, Five Areas and the Six Steps 6.2 Financial Planner Credentials, Skills, Remuneration, and How a Planner Differs from a Consultant 6.3 The Consultant's Role in Investment Planning and Advising Clients Through the Life Cycle

9 Chapter 7A: Features and Operations of UTS

7A.1 Structure of a UTS, the Trust Deed, the Parties and Modifying the Deed 7A.2 UTS Fees, Charges and Expenses, and the Management Expense Ratio 7A.3 Dealing in Units, Valuation, NAV Calculation and Unit Prices 7A.4 Forward and Historical Pricing, and the UTMC's Holding of Units 7A.5 Unit Splits, Distributions and Their Effect on NAV 7A.6 Measuring UTS Performance: Returns, Performance Tables, Risk Measures and Qualitative Factors 7A.7 Operational Aspects of Shariah-Compliant UTS and PRS and the Shariah Contracts Between the Parties 7A.8 Borrowing to Invest in UTS and the Risks of Loan Financing

10 Chapter 7B (Part 1): The Pension Landscape and the PRS Framework

7B.1 The Malaysian Pension Landscape and the Adequacy of Retirement Savings 7B.2 The World Bank's Five-Pillar Pension Framework in the Malaysian Context 7B.3 Key Players: EPF, KWAP, LTAT, Employer-Sponsored Schemes and Annuities 7B.4 Why Malaysia Needs PRS: Ageing, Longevity Risk and the Benefits of PRS 7B.5 The PRS Framework and the Private Pension Administrator (PPA) 7B.6 PRS Structure, the Trust and Deed, Advantages over Other Products, Eligibility and Contributions

11 Chapter 7B (Part 2): PRS Operations

7B.7 The PRS Default Option and Tax Incentives for Members and Employers 7B.8 The PRS Account Structure (Sub-Accounts A and B) and Vesting 7B.9 PRS Withdrawals: Pre-Retirement, Retirement, Permanent Departure, Incapacity and Death 7B.10 Switching Between Funds and Transferring Between PRS Providers (Portability) 7B.11 Unclaimed Monies, Death of a Member and PRS Nomination 7B.12 PRS Funds: Number, Core and Non-Core Funds, Objectives, Risk Profiles, Asset Classes, Authorisation and Naming 7B.13 PRS Fees, Charges and Expenses 7B.14 PRS Unit Creation, Forward Pricing, Valuation, Distributions, Performance Measurement and Electronic Communication

7A.2 UTS Fees, Charges and Expenses, and the Management Expense Ratio

Key Takeaways Explain This Topic AI

Direct UTS charges are the initial service charge, fees for specific services and the exit fee, while indirect charges are the annual management fee, the trustee fee and fund expenses.

Under the single pricing regime in force since 1 July 2007, the maximum service charge of each distribution channel must be disclosed in the prospectus.

The annual management fee is the UTMC's only remuneration for managing a UTS; it is accrued daily on the fund's gross NAV and must be permitted by the deed and disclosed in the prospectus.

A higher management fee can apply only after unit holders are notified and a supplementary or replacement prospectus is issued, with at least 90 days before the new rate takes effect.

MER equals the fund's fees plus recovered expenses divided by its average value calculated daily, times 100; the study guide's example gives RM41,524 divided by RM3,122,250, or 1.33%.

Last updated: October 2026

Two Classes of Cost

Class Borne by Items

Direct The individual investor, at the time of the transaction Initial service charge; fees for specific services (switching, transfers, certificates); exit fee

Indirect All unit holders through the fund's assets, in proportion to units held Annual management fee; trustee fee; fund expenses

Investors must understand these costs to make informed decisions.

Direct Charges
Initial service charge (sales, entry or "up-front" charge)

Covers the UTMC's costs of marketing and distributing the UTS and opening the account; it is based on the NAV .

Must not exceed the maximum in the prospectus and allowed by the deed.

Since the single pricing regime of 1 July 2007 , the maximum service charge of each distribution channel must be disclosed so investors can compare channels.

Distributors and Consultants must tell investors the actual rate at the point of investment; charges paid appear separately on purchase and sale statements.

Quoting a higher rate but charging a lower one (a disguised discount or rebate) is prohibited .

With an illustrative 5–7% charge, every RM1,000 invested costs RM50–RM70, much like a broker's commission. Most UTS are therefore not short-term investments : frequent buying and selling erodes capital.

UTMCs may reduce charges during a launch period (for example free units in a 21-day offer period) or on switches .

Fees for specific services

Separate fees, paid directly to the UTMC, for services such as issuing a unit certificate , transferring units to another holder or switching (sometimes a fixed fee). They can be deducted from transaction proceeds.

Exit fee (repurchase charge)

Deducted from repurchase proceeds. It may be charged instead of an initial service charge, though UTMCs rarely do this.

Indirect Charges
Annual management fee

Rule Detail

Only remuneration The UTF Guidelines allow a UTMC to be paid only by an annual fee charged to the fund for managing it

Basis Permitted by the deed, disclosed in the prospectus, accrued daily and calculated on the fund's gross NAV
Typical level Around 1.5% a year on average; lower for fixed income and money market funds
Approval Approved by the Trustee before payment; reduces NAV (or, in fixed-price funds, the distribution)
Maximum Stated in the deed; a lower fee needs the Trustee's agreement

Increase Within the deed maximum, with Trustee agreement, after notice to unit holders , with a supplementary or replacement prospectus; the new rate applies at least 90 days later

Reasonableness The Trustee checks the fee is reasonable given the services, fund size, investments and performance, and acts (possibly calling a meeting) if not

Management fees may include a performance fee , which must be fair to all unit holders, crystallised no more than once a year , independently verifiable, measured against a suitable benchmark (or a high-water mark of the NAV at which it was last paid), payable only on excess performance , with cumulative losses offset by gains, and fully disclosed with illustrations.

Trustee fee

Must be reasonable, considering the Trustee's role, unit holders' interests, the maximum rate in the deed and the fund's size and composition. No other fees may be charged by the Trustee for its operating costs, though it may recover expenses properly incurred (for example external legal advice). It must be disclosed in the prospectus.

Fund expenses

Other expenses directly related to and necessary for running the fund may be paid from its assets:

transaction costs of buying and selling assets;
income tax and other duties;
auditor's fees;
investment valuation fees;
legal costs of amending the deed (unless for the UTMC's benefit);
costs of unit holders' meetings (unless for the UTMC's benefit); and

the cost of issuing a prospectus, only where the selling price includes no initial service charge .

The UTMC's own management and administration costs come out of its management fee, not the fund. The Trustee ensures reimbursed costs are legitimate and reasonable.

The Management Expense Ratio (MER)

The MER summarises a fund's annual operating costs per unit and must be disclosed in the annual report . MER = Fees + Recovered expenses Average value of the fund (daily) × 100 \text{MER} = \frac{\text{Fees} + \text{Recovered expenses}}{\text{Average value of the fund (daily)}} \times 100 MER = Average value of the fund (daily) Fees + Recovered expenses × 100

Fees : all ongoing fees charged to the fund (management fee, trustee fee and others), calculated daily.

Recovered expenses : operating expenses charged to the fund, excluding costs an investor would bear anyway, such as brokerage, taxes and levies.

Average value : the fund's NAV (including net income, less accrued expenses), calculated daily over the period.

Study guide example – ABC Growth Fund, year ended 30 November:

Expense RM
Management fee 31,764
Trustee fee 6,078
Auditor's fee 1,200
Bank charges and other expenses 2,482
Total 41,524

Average fund size RM3,122,250, so MER = 41,524 ÷ 3,122,250 × 100 = 1.33% .

MER lets investors compare a fund's cost with past and expected returns, competitor funds and other investments. A gradually falling MER suggests the UTMC is managing costs efficiently, and larger funds generally have lower MERs through economies of scale, though not always.