Home' Trinidad and Tobago Guardian : December 4th 2014 Contents BG10 FEEDBACK
BUSINESS GUARDIAN www.guardian.co.tt DECEMBER 2014 • WEEK ONE
For the uninitiated, the Prae-
torian Property Mutual Fund
(the fund) is a T&T-based,
closed-end mutual fund,
established by trust deed for
the benefit of unitholders.
Essentially, it was established to provide
an avenue for investment in real estate and
other related securities in the Caribbean.
The fund was launched on November 22,
2002 and units were listed on the TTSE at
a price of $5.00 each. The total fund value
and net asset value per unit as at March 31,
2014 are $201.4 million and $5.037 respec-
tively. The fund's trustee and portfolio man-
ager is RBC Trust (T&T) Ltd.
According to the prospectus, the trustee
may distribute 60-80 per cent of the earn-
ings of the fund to unitholders in the form
of dividends. However, no dividends have
been paid to unitholders since 2012 with
the trustee citing challenges such as losses
due to a decline in property values and rental
income as the major reasons.
Interestingly though, unitholders are the
ones that are adversely impacted by these
"challenges" as the trustee and portfolio
manager continue to pay themselves man-
agement fees (of up to 2.0 per cent per
annum of the market value of the gross
assets of the fund) commissions and service
For instance, in 2012 the trustees reported
a net loss of $6.4 million based on gross
income of $11.4 million less total expenses
of $17.8 million of which $10.85 million or
60 per cent comprised management fees, commissions
and services charges. In 2013, the trustees reported
a loss of $14.51 million based on gross income of $11.7
million less total expenses of $26.2 million, of which
$10.35 million or 40 per cent comprised management
It therefore begs the question: who really benefits
from this fund?
It is noteworthy that since 2011, to date, there has
been a continuous decline in the net asset value
(NAV) of the fund's units for three consecutive years
from $5.68 (2011) to $5.427 (2012) and $5.064 (2013).
This decline continued in 2014 as evidenced by the
trustee's report of a further loss of $1.09 million for
the six months ended March 31, 2014.
The trustee report also advised unitholders that:
"Over the remainder of the year (2014), the fund
managers will focus on the continued disposal of the
fund's properties...As we move towards the windup
of the fund in the near future, we note that the fund's
constitution does not allow for a partial wind-up.
Hence we will invest the proceeds from prior property
sales very conservatively until such time as all the
properties are disposed."
However, this approach seems not to be in accor-
dance with Section 24 of the fund's Trust Deed under
the rubric Termination of the fund which states:
(A) The fund shall continue until terminated by
one of the ways provided in sub-clauses (B) and (C)
(B) The fund shall automatically terminate on
whichever is the earlier of:
(i) The redemption of all the Class A Units on the
Termination Date; and
(ii) The retirement of the trustee pursuant to Clause
21(B)(ii) hereof without a new trustee being appoint-
ed.Additionally, the Trust Deed defines "Termination
Date" as "any of the seventh to the 12th anniversary
of the date of the fund (November 22, 2002) or such
later date as maybe resolved by the Ordinary Res-
olution of Class B Unitholders in accordance with
Schedule 2 and Clause 24 hereof."
I am advised that the latter part of the definition
is not applicable in the present circumstances. Since
in accordance with Section 24 (D) of the trust deed,
the termination date can only be extended by Ordinary
Resolution of Class B unitholders on the advice of
the portfolio managers, having regard to the economic
climate and other market conditions.
Moreover, such a resolution would have had to be
passed at least three months prior to the termination
date of November 22, 2014. In any event, based on
the disclosure requirements of the TTSE and TTSEC,
both these regulators and the unitholders would have
had to have been advised of such a material devel-
opment. However, the records don't reflect same and
history simply cannot be rewritten.
What the above means is that in keeping with its
fiduciary responsibility, the trustee should have put
the necessary things in place to ensure that the fund
was wound up or that the sale of the underlying
assets of the fund were carried out and completed
in such a manner and within such period before the
termination date (November 22, 2014) of the fund
in order to enable the trustee to fulfill its obligations
under the trust deed.
As this has not happened, some may argue that
there has been some oversight by the trustees.
Nonetheless, I have every confidence that the trustee
will take the necessary action to ensure that this sit-
uation is corrected as quickly as possible in the best
interest of unitholders.
RBC oversight or breach
of unitholders trust?
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