Unit Trust Scheme

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UNIT TRUST SCHEME

A unit trust scheme is an arrangement made for thepurpose of providing facilities for the participation bypersons as beneficiary under a unit trust in profit or

income arising from the acquisition and managementof securities or any other property – S. 264 ISA



DEFINITION

• It is an investment scheme wherebypersons pool their resources togetherunder a trust deed.

• The scheme involves a managingcompany known as the Manager and aTrustee which is another company, often a

Bank



UNIT TRUST

• The Managing Company acquires somesecurities and transfers them to the trusteewho has the custody of the securities

• The block securities are divided into unitsand offered to the public for investment



REGULATION OF UNIT TRUST

• The Unit Trust Scheme is now regulatedby the Securities and ExchangeCommission.

• S. 125 ISA provides that a unit trustscheme must be authorised by andregistered with the Commission

• There must be a trust Deed between thecontributors, the manager and the trustee



REGISTRATION OF A UNHITTRUST SCHEME

• Application for registration is made onSEC Form 6A in duplicate together withthe application for the authorisation of the

Scheme.

• The application for registration of thescheme becomes effective on the 60th day

after filing the application or such earlierdate determined by SEC S. 126(3) ISA



PRICE OF UNIT

• The price of a unit in the Unit TrustScheme is bought and sold is determinedby the formula laid down by the

Commission in the SEC Rules andRegulations – S. 135 ISA



CONDITIONS FOR

AUTHORISATION OF A UNIT

TRUST SCHEME – S. 125(3) ISA• A unit trust scheme will be authorised andregistered by the Securities and ExchangeCommission if

• The Commission is satisfied that thetrustees and managers are suitablycompetent in respect of the objects of the

Unit Trust Scheme



CONDITIONS

• The Manager is a body Corporate with aminimum paid up capital of N20m

• The Trustee is a body corporate with a minimumpaid up capital of N40m

• The full control of the affairs of the scheme isvested in the manager without interference fromthe Trustee

• The trust deed is in compliance with the ISA as

well as the rules and regulations of SEC on UnitTrust Scheme• The name of the Scheme is not undesirable



THE TRUST DEED

• The Trust Deed is the main internaloperational document used in running theUnit Trust Scheme

• It contains the contractual duties andliabilities of the parties especially thetrustees and the manager.

• The Trust Deed is broken down into formalparts like any legal document



THE TRUST DEED

• The language of the trust deed must bekept simple to make construction easy

• For contents of a Trust Deed see Rule 247of the SEC Rules and Regulations

• Note that a Trust Deed must not beinconsistent with the ISA or any law inforce otherwise the Scheme may not beregistered by SEC.



ALTERATION OF THE TRUSTDEED

• After being registered, any alteration in theTrust Deed or in the name of theauthorised scheme must be done with

prior approval by SEC – S. 127(1) ISA;See also S. 139 ISA for procedure foralteration.



PROSPECTUS

• Where units are to be offered to the publicin the Unit Trust Scheme, a prospectusmust be prepared by the Manager,

approved by the trustee and submitted toSEC for approval before publication S.129(1)

• The information contained in theprospectus shall be as specified from timeto time by the Commission – S. 129(2)



PROSPECTUS

• The prospectus must be clear, containtrue statements, not misleading andcontain all relevant information



PERMITTED INVESTMENT

• The Manager of a UTS shall invest only in

• Securities specified under the TrusteeInvestments Act as amended Cap 449LFN

• Such other investments as theCommission may from time to timeapprove – S. 136 ISA



REDEMPTION OF A UNIT

• A unit holder may withdraw participation inthe Unit Trust Scheme by requesting theManager to buy his unit in the UTS – S.

131(1) ISA



REVOCATION OF A UNIT TRUSTSCHEME

• The commission may revoke a schemepreviously authorised in any of thecircumstances listed in S. 128 ISA.

• Whenever a unit is revoked the managermust buy such unit at the current price ofunit in the UTS.



INSPECTION ANDINVESTIGATION

• The commission has power to inspect thedocuments of the Unit Trust Scheme andinvestigate the administration of the UTS –

S. 137(1) & (2) ISA





FINANCIAL STATEMENT OFCOMPANIES

• COMPANY’S DUTY TO KEEPACCOUNTING RECORDS

• Every company has a statutory duty to

keep proper accounting records of itstransaction- S. 331 CAMA

• The purpose of keeping accounting

records is to ensure the accuratedisclosure at every point in time thecompany’s financial position



CONTENTS OF ACCOUNTINGRECORDS

• Entries from day to day of all sums ofmoney received and expended by thecompany and the matters in respect of

which they take place

• A record of the assets and liabilities of thecompany S. 331(3) CAMA



Contents of records

• Where the company deals in goods

• Statements of stocks held at the end of theyear of the company

• Statements of stock takings from whichthe annual statements of stocks in (a)above are prepared\statements of allgoods sold and purchased other than byretail trade S. 331(4)



ACCOUNTING RECORDS

• The accounting records must be kept at thecompany’s registered office or such other place

in Nigeria as the directors think fit and will at all

times be open to inspection by officers of thecompany S.332(1) CAMA

• The company is required to preserve theaccounting records for a period of six years from

the date they were made S. 332(2) CAMA



DIRECTORS DUTY TO PREPAREFINANCIAL STATEMENT

• The Directors of every company mustprepare financial statements for each year

–S. 334(1) CAMA

• The contents of the financial statementinclude the statement of accountingpolicies, balance sheet, profit and loss

account, notes on the accounts, auditorsreports, the directors report



CONTENT OF FINANCIALSTATEMENT

• Source and application of fund, a five yearfinancial summary and in the case of aholding company, the group financial

statements – S. 334(2) CAMA

• The duty to prepare the annual financialstatement is imposed in order to ensure

accountability on the part of the DirectorsS. 335 CAMA



FINANCIAL YEAR

• The directors must at the first meeting ofthe Board after incorporation determinewhat date each year financial statement

shall be made up and notify theCommission within 14 days of thedetermination S. 334(4)



DIRECTORS REPORT

• The Directors of a company shall preparea report in respect of each year stating

• A fair view of the development of thecompany and its subsidiaries during thefinancial year



DIRECTORS REPORT

• The amount, if any, which theyrecommend should be paid as dividendand as reserve S. 342(1) CAMA

• The report can be described as anaccount of the directors stewardship,stating how they fared during the year.

Documents

Unit Trust Scheme