Authorized investments
(1) A trustee may invest any trust funds in his hands, whether at the time in a state of investment or not, in manner following:
(a) in any of the securities of the Federal Government or the Government of the State of Sabah or the State of Sarawak or of the Republic of Singapore;
(b) in any securities the interest on which is or shall be guaranteed by Parliament or by the Federal Government;
(c) in or upon titles to immovable property in Malaysia, such titles being freehold titles or grants in perpetuity or leases (other than mining leases) for a term thereof sixty years at least is unexpired at the time of such investment:
Provided that—
(i) the land to which any such title relates shall be situate within the limits of any City, Municipality, Town Council or Town Board area; and
(ii) there be erected on the land to which such title relates houses or other buildings the gross rental whereof, together with the land appurtenant thereto, is at the time of such investment not less than seven per centum of the purchase price of the land, in the case of the purchase price, or of the value of such land, as ascertained under paragraph 12(1)(a), in the case of a charge.
(d) in fixed interest securities issued in Malaysia with the approval of the Treasury by any public authority established under federal or State law;
(e) in loans to an approved company;
(f) in loans the principal and interest on which is or shall be guaranteed by the Federal Government,
and may also from time to time vary any such investment as aforesaid.
(2) No trust funds shall be invested under paragraph (1)(e) unless—
(a) the paid up ordinary share capital of the approved company is not less than five million ringgit; and
(b) the approved company has paid a dividend at the rate of not less than five per centum upon such ordinary share capital during each of the last three years prior to the time of investment, and where the approved company is a company which has acquired the assets and liabilities of another approved company, payment of a dividend by that other company during each of the last three years prior to the time of such acquisition shall be treated as payment by the approved company; and
(c) the total amount of the borrowings of the approved company from all sources, whether trustee or not, accepted by the approved company on loan and deposit, and including interest due and thereon not repaid by the approved company, does not at any time exceed two thirds of the amount, excluding prospective interest, for the time being secured to the approved company from its borrowers.
(3) Paragraph (1)(e) shall not be taken to override the provisions of paragraph 4(2)(c) of the *Employees Provident Fund Act 1951 [Act 272] (which confer express powers on the Trustees of the Employees Provident Fund to invest in loans to an approved company).
*NOTE—All references to “West Malaysia” shall be construed as references to “Peninsular Malaysia”– see Interpretation (Amendment) Act 1997 [Act A996], subsection 5(2).
Further powers of investment of trustee
(1) The investments specified in section 4 shall include any security to which this section applies and any units, or any shares of the investments subject to the trust, of a unit trust scheme approved by the Yang di-Pertuan Agong by notification published in the Gazette.
(2) Subject to this section, this section applies to any securities issued by a company (whether incorporated in Malaysia or elsewhere) prices for which are quoted on the Stock Exchange of Malaysia.
(3) This section does not apply to securities of any company unless—
(a) the total issued and paid-up share capital of the company is, or if converted into ringgit from currency other than ringgit is, five million ringgit or more; and
(b) the company has in each of the five years immediately preceding the calendar year in which the investment is made paid a dividend on all the shares issued by the company, excluding any shares issued after the dividend was declared and any shares which by their terms of issue did not rank for the dividend for that year,
and the rate exchange in relation to the conversion of issued and paid-up share capital shall be that certified by a bank manager, as defined in paragraph 6(3)(b), to be appropriate on the day a trustee exercises his power to invest in such securities.
(4) For the purposes of paragraph 3(b), a company formed—
(a) to take over the business of another company or other companies; or
(b) to acquire the securities, or control, of another company or other companies; or
(c) for either of those purposes and for other purposes,
shall be deemed to have paid a dividend as mentioned in that paragraph in any year in which such a dividend has been so paid by the other company or all of the other companies, as the case may be.
(5) This section does not apply to shares or debenture stock not fully paid up, except shares or stock which by the terms of issue are required to be fully paid up within nine months of the date of issue.
(6) No provision relating the powers of the trustee contained in any instrument made before 30th day of June 1965 shall limit the powers conferred by this section, but those powers are exercisable only in so far as a contrary intention is not expressed in any instrument so relating which is made after 29th day of June 1965.
*NOTE—Employees Provident Fund Act 1951 [Act 272] has been repealed by Employees Provident Fund Act 1991 [Act 452]–see paragraph 75(a) of Act 452.
Duty of trustees in choosing investments
(1) In the exercise of any of his powers of investment a trustee shall have regard—
(a) to the need for diversification of the investments of the trust, in so far as is appropriate to the circumstances of the trust, and to the degree of risk attaching to the holding of any particular investment or of investments of any particular description; and
(b) to the suitability to the trust of investment of the description of investment proposed and of the investment proposed as an investment of that description.
(2) A trustee whose power of investment is restricted to the making of investments specified in section 4, shall, before exercising any power to invest in such securities, units or shares as are mentioned in section 5, obtain proper advice on the question whether
the investment is satisfactory having regard to the matters mentioned in paragraph (1)(a) and (b), and shall consider the advice obtained: Provided that this subsection shall not apply to the Public Trustee* and to trust companies defined in the Trust Companies Act 1949.
(3) (a) For the purposes of subsection (2) proper advice is either the advice of a stock broker obtained through the trustee’s bank manager or the advice of an authorized accountant.
(b) In this subsection “bank manager” means the manager of a bank (including a branch of a bank) licensed under section 3 of the Banking Act 1973 [Act 102]**, and “authorized accountant” means a person authorized in writing under any written law relating to companies, to be an auditor of companies generally.
(4) A trustee retaining any such security, unit or part as is mentioned in section 5 shall determine at what intervals the circumstances, and in particular the nature of the investment, make it desirable to obtain such advice as aforesaid, and shall obtain and consider such advice accordingly.
(5) A trustee shall not be treated as having complied with subsections (2) to (4) unless the advice was given, or has been subsequently confirmed, in writing.
(6) Subsections (2) to (4) shall not apply to one of two or more trustees where he is the person giving the advice required by this section to his co-trustee or co-trustees.
Statutory powers of investment
(1) In the case of trustees constituted under any written law, section 5 shall apply only in so far as the Minister may direct.
(2) Where any body of persons, not being trustees, have under any written law power (however expressed) to make the like investments as trustees are for the time being authorized by law to make, section 5 shall not apply to the body except in so far as the Minister may direct.
(3) The Minister may direct that any specified body of persons, not being trustees constituted under any written law, which apart from this subsection would not have the like power of investment as is conferred by section 5, shall have that power to such extent as may be specified in the direction.
(4) Any direction under this section may be given generally or in a particular case, and unconditionally or subject to conditions.
*NOTE—The words “Public Trustee” is now refered to as “corporation” under the name of Amanah Raya Berhad incorporated under the Companies Act 1965 [Act 125] pursuant to section 3–see section 2 and subsection 43(3) of the Public Trust Corporation Act 1995 [Act 532]. **NOTE—Banking Act 1973 [Act 102] has been repealed by Banking and Financial Institutions Act 1989 [Act 372]–see subsection 128(1) of Act 372.
Purchase at premium of redeemable stocks; change of character of investments
(1) A trustee may under the powers of this Act invest in any of the securities mentioned or referred to in section 4, notwithstanding that the same may be redeemable, and that the price exceeds the redemption value.
(2) A trustee may retain until redemption any redeemable stock, fund, or security which may have been purchased in accordance with the powers of this Act, or any written law replaced by this Act.
Discretion of trustees
Every power conferred by sections 4 and 8 shall be exercised according to the discretion of the trustee, but subject to any consent or direction, with respect to the investment of the trust funds, required by the instrument, if any, creating the trust or by any written law.
Power to retain investment which has ceased to be authorized
A trustee shall not be liable for breach of trust by reason only of his continuing to hold an investment which has ceased to be an investment authorized by the trust instrument or by this Act.
Investment in bearer securities
(1) A trustee may, unless expressly prohibited by the instrument creating the trust, retain or invest in securities payable to bearer which, if not so payable, would have been authorized investments.
(2) Securities payable to bearer retained or taken as an investment by a trustee shall, until sold, be deposited by him for safe custody and collection of income with a banker or banking company.
(3) A direction that investments shall be retained or made in the name of a trustee shall not, for the purposes of this section, be deemed to be such an express prohibition as aforesaid.
(4) A trustee shall not be responsible for any loss incurred by reason of such deposit, and any sum payable in respect of such deposit and collection shall be paid out of the income of the trust property.
Loans and investments by trustees not chargeable as breaches of trust
(1) A trustee lending money on the security of any property on which he can properly lend shall not be chargeable with breach of trust by reason only of the proportion borne by the amount of the loan to the value of the property at the time when the loan was made, if it appears to the Court—
(a) that in making the loan the trustee was acting upon a report as to the value of the property made by a person whom he reasonably believed to be an able practical surveyor or valuer instructed and employed independently of any owner of the property, whether such surveyor or valuer carried on business in the locality where the property is situate or elsewhere;
(b) that the amount of the loan does not exceed two third parts of the value of the property as stated in the report; and
(c) that the loan was made under the advice of the surveyor or valuer expressed in the report.
(2) A trustee lending money on the security of any leasehold property shall not be chargeable with breach of trust only upon the ground that in making the loan he dispensed either wholly or partly with the production or investigation of the lessor’s title.
(3) A trustee shall not be chargeable with breach of trust only upon the ground that in effecting the purchase, or in lending money upon the security, of any property he has accepted a shorter title than the title which a purchaser is, in the absence of a special
contract, entitled to require, if in the opinion of the Court the title accepted be such as a person acting with prudence and caution would have accepted.
(4) This section applies to transfers of existing securities as well as to new securities and to investments made before as well as after the commencement of this Act.
Liability for loss by reason of improper investment
(1) Where a trustee improperly advances trust money on the security of a charge which would at the time of the investment be a proper investment in all respects for a smaller sum than is actually advanced thereon, the security shall be deemed an authorized investment for the smaller sum, and the trustee shall only be liable to make good the sum advanced in excess thereof with interest.
(2) This section applies to investments made before as well as after the commencement of this Act.
Powers supplementary to powers of investment
(1) Trustees lending money on the security of any property on which they can lawfully lend may contract that such money shall not be called in during any period not exceeding five years from the time when the loan was made, provided interest be paid within a specified time not exceeding ten days after every monthly or other day on which it becomes due, and provided there be no breach of any covenant by the chargor contained in the instrument of charge for the maintenance and protection of the property.
(2) On a sale by trustees of land the trustees may, where the proceeds are liable to be invested, contract that the payment of any part, not exceeding two-thirds, of the purchase money shall be secured by charge of the land sold, with or without the security of any other property, but the charge, if any buildings are comprised therein, shall contain a covenant by the chargor to keep the buildings insured against loss or damage by fire to the full value thereof.
(3) The trustees shall not be bound to obtain any report as to the value of the land or other property to be comprised in such charge, or any advice as to the making of the loan, and shall not be liable for any loss which may be incurred by reason only of the security being in sufficient at the date of the charge.
(4) Where any securities of a company are subject to a trust, the trustees may concur in any scheme or arrangement—
(a) for the reconstruction of the company;
(b) or the sale of all or any part of the property and undertaking of the company to another company;
(c) for the acquisition of the securities of the company, or of control, by another company;
(d) for the amalgamation of the company with another company;
(e) for the release, modification, or variation of any rights, privileges or liabilities attached to the securities or any of them,
in like manner as if they were entitled to the securities beneficially, with power to accept any securities of any denomination or description of the reconstructed or purchasing or new company in lieu of or in exchange for all or any of the first-mentioned securities; and the trustees shall not be responsible for any loss occasioned by any act or thing so done in good faith, and may retain any securities so accepted as aforesaid for any period for which they could have properly retained the original securities.
(5) If any conditional or preferential right to subscribe for any securities in any company is offered to trustees in respect of any holding in the company, they may as to all or any of those securities, either exercise such right and apply capital money subject to the trust in payment of the consideration, or renounce such right, or assign for the best consideration that can be reasonably obtained the benefit of such right or the title thereto to any person, including any beneficiary under the trust, without being responsible for any loss occasioned by any act or thing so done by them in good faith:
Provided that the consideration for any such assignment shall be held as capital money of the trust.
(6) The powers conferred by this section shall be exercisable subject to the consent of any person whose consent to a change of investment is required by law or by the instrument, if any, creating the trust.
(7) Where the loan referred to in subsection (1), or the sale referred to in subsection (2), is made under the order of the Court, the powers conferred by those subsections respectively shall apply if and as far as the Court may by order direct.
Power to deposit at bank and to pay calls
(1) Trustees may, pending the negotiation and preparation of any charge, or during any other time while an investment is being sought for, pay any trust money into a bank to a deposit or other account and all interest, if any, payable in respect thereof shall be applied as income.
(2) Trustees may apply capital money subject to a trust in payment of the calls on any shares subject to the same trust.
Source: Laws of Malaysia, Attorney General's Chambers of Malaysia (lom.agc.gov.my). Not a copy of the Gazette printed by the Government Printer (Interpretation Acts 1948 and 1967, s 61).
