Up to now you have probably never found it necessary to quantify what a lump of money might buy over a long period. After retirement, life is ruled by that factor. Read this and then take another look at your savings. Read the rest of this entry »
Endowment policies have become a major element in retirement planning for most people and form a large part of all business written by life insurance companies. Read the rest of this entry »
As the interest of the public is growing in financial matters, investment in unit trusts is rapidly gaining popularity in this country. The reasons for this are: Read the rest of this entry »
Property trusts are a very much neglected investment area for the average investor. Why this is the case is not exactly clear. While property trusts generally have not risen at the same pace as the other “glamour” sectors on the Johannesburg Stock Exchange, the property trust sector has outpaced the inflation rate by a comfortable margin. Read the rest of this entry »
For those who do not want the problems of storage or management, unit trusts or gold shares can offer another way to have an interest. Unit trusts will endeavor to make profits both on trading gold shares and (hopefully) by capital gain. Obviously this is a speculative investment but free of worry for those who want a bit of gamble without doing too much work themselves. Read the rest of this entry »
This is a popular pastime when the stock market is booming and investors feel that the market will never turn down. However, it is highly speculative due to the difference in nature of property and shares. Property is a stable investment which is not generally subject to sharp falls and rises. On the other hand some shares can rise and fall as much as 80% (or more) in a single year. Read the rest of this entry »
The conclusion from the foregoing discussion is that the trustee and the manager are not in partnership or in a general agency relationship. They are independent contracting parties to the unit trust deed. An examination of the terms of a typical trust deed of a non-authorized unit trust in detail reveals that the majority of the provisions are covenants made by either of them with unitholders or are provisions conferring powers or discretions on them by unitholders. When the regulations of the Financial Services (Regulated Schemes) Regulations 1991 are incorporated expressly into the trust deed of an authorized unit trust, it appears that they may be construed in the same manner. There are not many provisions that can operate as promises between these two parties.
Where provisions in the deed embody covenants made with unitholders, they can be enforced by unitholders as promisees. In respect of an exercise of power or discretion by the trustee which is without good faith or otherwise wrongful, unitholders can sue the trustee for breach of trust. In the case of the manager, unitholders may bring an action for an abuse of power on the basis of a breach of fiduciary duty. Thus, there is no problem of standing to sue for aggrieved unitholders. Read the rest of this entry »
In respect of the investment of the property of the unit trust, regulation 7.02.2 spells out clearly that it is not only a duty but also ‘a right’ of the manager to make decisions. Correspondingly, regulation 7.09 is drafted in negative terms so as to leave no doubt that the trustee’s obligation does not extend to a positive consideration on the merits of particular investments. In other words, the trustee has no ‘right’ to make an investment decision as its counterpart in an ordinary private trust. This is also echoed by regulation 7.03.1 which provides that ‘Nile manager may without the specific authority of the trustee give instructions to agents as to the acquisition or disposal of property of the scheme‘. But at the same time, regulation 7.03 requires the manager to restore the trust portfolio to its status quo if the trustee forms the opinion that the manager exceeds its power in a particular transaction. Read the rest of this entry »
It cannot be denied that by entering into the trust deed, both the manager and the trustee are entering into a venture that provides services to their `customers’ and that produces their income. This is cooperation in business, but is unlikely to constitute them a partnership. Basically, the test of the existence of a partnership is by reference to the definition of a partnership discussed and also by reference to the statutory rules regarding co-ownership of assets, sharing of gross return, and also sharing of profit.
There is no business in common. The demarcation of functions under the unit trust deed draws the line of business between them. In essence, the trustee is carrying on the business as a professional trustee and the manager is carrying on the business of investment management. Read the rest of this entry »
The conclusion from the foregoing discussion is that the trustee and the manager are not in partnership or in a general agency relationship. They are independent contracting parties to the unit trust deed. An examination of the terms of a typical trust deed of a non-authorized unit trust in detail reveals that the majority of the provisions are covenants made by either of them with unitholders or are provisions conferring powers or discretions on them by unitholders. When the regulations of the Financial Services (Regulated Schemes) Regulations 1991 are incorporated expressly into the trust deed of an authorized unit trust, it appears that they may be construed in the same manner. There are not many provisions that can operate as promises between these two parties. Read the rest of this entry »
It is important, first of all, to define a fiduciary. Despite voluminous literature, there is no ready answer and the fiduciary relationship remains ‘a concept in search of a principle’. In general terms, it is possible to divide fiduciaries into two categories, status-based fiduciaries and fact-based fiduciaries.
The status-based category includes a core of well established relationships such as trustee-beneficiary, guardian-ward, director-company, principal- agent, solicitor-client, employer-employee, and partner-partner. They are relationships which are regarded by equity as fiduciary per se. It is debatable as to what is the common denominator behind these relationships but it is not a matter of concern here. Read the rest of this entry »
In Parkes Management Ltd. v. Perpetual Trustee Co. Ltd. , the manager of a unit trust was aggrieved by the trustee’s issue of a certificate that it was in the interest of the unitholders that the manager should be dismissed. On the question of the manager’s locus standi, Hope JA said:
It is submitted for the Trustee that it is only a beneficiary who can challenge the exercise by a trustee of a power . . . There would appear to be three answers to this submission. Firstly, that the Manager was a beneficiary; secondly, that the provisions of cl. 20(1) of the Deed entitled the Manager to ensure that the Trustee exercised any power under the Deed bona fide without indirect motive, and with a fair consideration of the issues; and thirdly that being a party to the Deed the Manager was entitled to challenge the certificate . . . Read the rest of this entry »
By now, the law must have developed a distinct body of company law. The fact that two institutions have the same origin should not per se lead to the conclusion that the same body of principles applies. Brothers, despite their common parents, are not twins automatically. Directors’ duties, despite their origin in the trust, are not trustees’ duties. Latham CJ stated that ‘the power [to alter articles] must be exercised bona fide for the benefit of the company as a whole‘. Malcom CJ said: ‘It cannot be said that the alteration was made otherwise than bona fide for the benefit of the unitholders as a whole.’ The apparent similarity of these two formulations is deceptive. If the unitholders are not associating, as Smith v. Anderson has suggested, is it right to look at all unitholders as a whole? Read the rest of this entry »
Unitholders cannot be characterized as partners. Actions done and decisions made by them through meetings can be regarded as the acts of owners of the rights constituted by the units. They are analogous to assents by beneficiaries of trusts.
Of course, as in companies, in order for actions to be taken by a large aggregate of individuals, meetings and rules for majority decisions are necessary. Voting rights simply are parts of the rights constituting units. Once the majority in a meeting is given the power to bind the minority, there emerges the tension between voting powers as property rights and the notion of fairness in the exercise of those powers. Read the rest of this entry »
In crude terms, in a unit trust, the manager performs all the functions of management of the trust assets that would have been carried out by the trustee if the trust were a private trust used as a means of disposition of properties. This leads to the question whether the manager can be considered as a trustee, by analogy to the statutory scheme contained in the Public Trustee Act 1906 that allows the simultaneous appointment of a custodian trustee and a managing trustee. A custodian trustee under this Act is one who gets in and holds the title to the trust property. The management of the trust property and the exercise of any power or discretion are vested in the managing trustee. As between the custodian trustee and the managing trustee, a custodian trustee has the custody of all securities and documents of title relating to the trust property, but the managing trustee is permitted free access to them and is entitled to take copies or extracts. A custodian has to concur in and perform all acts.’” Read the rest of this entry »
A unit trust deed typically has provisions for (a) a primary trust to the effect that whilst the unit trust is a going concern the trustee will hold the unit trust assets for the unitholders ’subject to the terms and conditions of the trust deed‘ and, in the case of an authorized unit trust, ‘all regulations made under section 81 of the Financial Services Act 1986′ and (b) a secondary trust for realization of assets and division of its proceeds upon the termination of the trust by the trustee.There is thus no question that the trustee holds the assets in the capacity as a trustee of an express trust. However, it has often been said that the trustee’s function in a unit trust is merely to hold the trust assets for the unitholders and that it does not actively manage them like ordinary trustees. The question therefore is in what character does the trustee hold assets: a custodial agent, a bare trustee or an active trustee?”‘ Read the rest of this entry »
The trust has achieved a separation of the legal and equitable ownership by imposing on the legal owner, the trustee, an obligation to hold the trust properties for the benefit of the beneficiaries. That obligation is a characteristic feature of the trust. The unit trust involves a split of that trust obligation into the custody of the trust corpus and the management of that corpus. If the trust is a manipulation of the facets of ownership’ resulting in a two-party relationship, the unit trust is a furtherance of that manipulation which results in a tripartite relationship. Read the rest of this entry »
In respect of the manager, the following functions and duties are conferred explicitly or implicitly by the statutory provisions or trust deeds:
One of the attractions of a unit trust is liquidity. The manager has since the early days of the unit trust been the provider of a ready market for the acquisition and disposal of units of schemes under its management. Under the Financial Services (Regulated Schemes) Regulations 1991, the manager must at all times during the dealing day be willing to issue units and be willing to redeem units. Similar provisions may also be found in trust deeds of non-authorized unit trusts. Read the rest of this entry »
Against this background, a structure of dual administration in the unit trust is a logical step in the functional specialization of the powers and responsibilities previously found in the single person of the trustee. The unit trust was in the forefront of this development. The first regulation of unit trusts in the United Kingdom in 1939 made the trustee-manager structure a model for the management of unit trusts. This model was adopted by many statutes of common law countries and was followed closely by unregulated schemes. Read the rest of this entry »
There is no question that the distinction between this case and those cases where the retirement of trustees was with a view to purchase is a valid one. Implicit in this judgment is the recognition that there is no absolute rule against self-dealing. The willingness of his Lordship to look at the reality is consistent with the approach of the court in Holder and the recent application of the no-conflict rule in other contexts.
If the broader approach of Holder is adopted, it must be a question of fact whether a trustee in a unit trust can purchase. The court may take into account the fact the trustee does not participate in the decision to make the sale. Read the rest of this entry »
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