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lowed. In some states only general principles are laid down, while in several the matter is left to the discretion of the trustee. But in any

case the investments are subject to the approval of the court; and the trustee may be compelled to make good the loss and pay interest if investments have been made which the court cannot approve. In determining what securities the court will approve, where the classes of investments are not specified in the laws, the fiduciary may often be guided by the classes of investments permitted for savings banks. It sometimes happens that classes of investments are specified for guardians, but not for trustees; in which case the latter may be guided by the rules laid down for the former. It is usually possible, and in the case of guardians often obligatory, to obtain an order of court authorizing certain investments. The most common forms of investments authorized are United States, state and city bonds and first mortgages on productive real estate, and where there is doubt these may be relied upon. The field is gradually widening, however, and some states specifically authorize other forms of investments, including loans on collateral, land, bank stocks and railroad bonds and stocks.

A fundamental principle is that investments of trust funds must not be mingled with the assets of the company, and the investments belonging to each trust must be kept separate, so that the owner may be readily identified. The fiduciary is, of course, responsible for the safe-keeping of the securities. It is common to allow access to trust securities only to two officers of the company jointly, and removal of such securities from the vault only upon written requisition duly signed.

The troublesome problem of the investment of odd amounts and of amounts too small to permit of the purchase of a bond or a mortgage is being solved satisfactorily by giving the estate a participation in a mortgage or in a group of securities. By this means any amount that an estate may have in hand may be made to produce an income without great delay.

When securities are purchased at a premium over their face value, the interesting question arises whether the present beneficiary is entitled to the full income, or whether a portion of the income must be reserved as a sinking fund, so that at maturity of the security the principal will be intact. The question is of great importance where there is a life tenant to whom the income is to be paid, the principal at the death of the life tenant to go to another party. The question is sometimes settled in advance by the provisions of the instrument under which the fiduciary acts; but when it is not so settled, the safer plan is to withhold enough of the income to keep the principal intact.

CHAPTER XVII.

TRUST COMPANIES OUTSIDE OF THE UNITED STATES. HE trust company has attained its greatest development, by far, im

propriety be looked upon as peculiarly an American institution. The germ of the trust company idea, however, has not been altogether lacking in other parts of the world; and Australia has developed corporations which adhere strictly to the original and distinctive function of the trust company-fiduciary business.

As far back as the beginning of the nineteenth century, the idea of providing corporate agencies for the transaction of business as trustee and agent was put into practice in India by the "Agency Houses." "These were concerns organized to transact business for trustees or individuals, to receive moneys on deposit, and to administer estates;" and a knowledge of their operations inspired the undertaking of this class of business, as early as 1836, by one of the earliest of American trust com-panies.

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During their second occupation of Cape Colony, South Africa, at the beginning of the nineteenth century, it appears that the Dutch established public corporations for the management of the estates of deceased persons; an idea which the English adopted, after their reoccupation of the Cape, by the establishment of their first "Trustee and Executor Company" in 1832. This company had a capital of £29,400, divided into 168 shares of £175 each. "It combined a purely trust business with a form of banking, and apparently had power to allow interest on trust funds, and to trade with them.9 There are now four trust companies. in Johannesburg, South Africa, two of which also do a life insurance business, like the early trust companies of the United States."

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THE AUSTRALIAN TRUSTEE COMPANY.

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Trust companies, as corporations for the transaction of trustee business, pure and simple, are well established in Australia, and their business is steadily growing. They appear to have been uninfluenced by the trust companies of the United States, partaking of none of the characteristics of the "financial department store," but adhering to one general line of business.

The records of the first of these companies-The Trustees, Executors and Agency Co., Ltd., of Melbourne-show that its organization was

91 Sketch of The Pennsylvania Company for Insurance on Lives and Granting Annuities, Philadelphia, pp. 32-35.

92 The Age, Melbourne, Australia, January 21, 1907. See also "Dalgety's Review," Melbourne, August, 1906.

93 Ernest Heaton: The Trust Company Idea and Its Development, p. 34.

inspired by a knowledge of the success of the trustee and executor companies of South Africa. It was established in 1878, making progress rather slowly for the first few years, during which it had practically no competition. About 1885 the public began to awaken to the value of such institutions, and between that date and 1893 thirteen more companies were organized in various parts of the Commonwealth, all of which are still in existence, making a total of fourteen companies now doing business in Australia. Of these, seven are located in Victoria, two each in New South Wales and Tasmania, and one each in Queensland, South Australia and West Australia. The table presented herewith, taken from the Year Book of Australia for 1907, gives a list of these companies, with the latest available statistics. The amounts of the estates which are held under administration is published by only seven of the companies, the total for the seven being £21,429,246. The Year Book estimates the total for the other companies at from £8,000,000 to £10,000,000, making a probable total of estates held for administration by all the trustee companies of Australia of about £30,000,000. As will be seen from the table, the dividends ranged from 412 per cent. to 11 per cent.-averaging over 8 per cent.-while in some cases the excess of the net earnings over the amounts of the dividends permitted substantial additions to the "reserve funds" and undivided profits.

The statistics given in the table reflect the different character of the Australian trustee company as compared with the American trust company in one important particular-there are no deposits. The Australian trustee company does not receive deposits, and does neither a commercial nor a savings banking business. Nor does it exercise any of the other auxiliary powers common to trust companies in the United States, except that in a few cases safe deposit vaults are maintained, which are found unprofitable because the banks do such business free of charge. As will be seen below, the functions of these companies are practically limited to those exercised by the probate division of the trust department of the American trust company.

The fourteen companies are chartered and their powers and limitations are defined in every case by private act; but in Victoria there is also some general legislation designed to regulate the business. The acts are all essentially the same, and their general character may be seen from an outline of the act conferring powers upon the original company -The Trustees, Executors and Agency Company, Limited, of Melbourne, which is also the largest Australian trustee company, and probably the largest company in the world carrying on exclusively the administration. of estates. It has a paid-up capital of £90,000, reserve fund and undivided profits of £26,826, and the amount at credit of estates, trusts and clients on December 31, 1906, was £8,754,551.

The act conferring powers upon this company starts with a preamble setting forth that, "Whereas, from the uncertainty of human life and from other causes great difficulty often arises in securing the services of suit

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Sandhurst and Northern District Trustees, Exe

Permanent Trustee Co. of N.S.W., Ltd., Sydney
Perpetual Trustee Co., Ltd., Sydney

Executor, Trustee & Agency Co. of Sth. Australia, Ltd., Adelaide

Queensland Trustees, Ltd., Brisbane

Perpetual Trustees, Executors and Agency Co. of
Tasmania, Ltd., Hobart

Tasmanian Permanent Executors and Trustees Association, Ltd., Launceston

West Australian Trustee, Executor and Agency Co., Ltd., Perth

+ Loans on mortgage and other investments, fixed deposits, and debentures. with the State Treasurer. § Including "secured loans, investments, and sundry debtors, £5,435," STATEMENT OF CONDITION OF THE AUSTRALIAN TRUST COMPANIES,

able persons for the office of trustee, executor and other similar offices; and whereas, in order to secure the more certain discharge of the duties of such offices a company has been formed and incorporated," etc.

The powers granted in this and succeeding acts or by the general statutes of Victoria are (as stated in the company's circular) to act as executor under wills alone or jointly, as administrator in intestate estates, as administrator with the will annexed, as trustee under marriage and other settlements, as trustee in cases of settlement of property for the benefit of women and children, as temporary executor, administrator or trustee, as receiver and committee of estates under the Lunacy Statute, as agent for absentees or others, as guarantor or surety for the proper administrator of estates; to take over existing trusts from individual trustees, to collect income, invest funds, manage or realize estates and perform general agency business, and to invest its own funds on clearly defined lines. To the powers specifically granted the company is strictly held by the Trustee Companies Act of 1890, which says (section 385) that a trustee company "Shall not engage in, carry on or be concerned in any business trade venture or undertaking of any kind whatsoever other than such as is expressly authorized by the special act or acts relating to such trustee company, and other than general agency business, and other than the deposit of its own funds with a company or person carrying on the business of a bank of deposit, and other than the investment of such funds in the stock debentures or marketable securities of any Government corporation or company or on mortgage of real property or Crown leasehold. Provided, that any such company may guarantee the safety of the principal and the regular payment of the interest of trust funds committed to its management as executor, administrator or trustee, and provided that any such company may give or enter into any bond or guarantee for the purpose of enabling any person or persons to obtain administration of the estate of any deceased person or persons in any case where such estate shall be placed under the management or control of such company by the administrator." The section closes with these words: "Any director, member (stockholder) or officer of a trustee company who is shown to be concerned in or a party to any wilful breach of the provisions of this section shall be guilty of a misdemeanor."

The special act provides that £10,000 of the capital of the company shall be invested in debentures or inscribed stock of the colony, to stand in the name of the Treasurer of the colony in trust for said company, but transferable only upon the joint consent of the Treasurer of the Colony and the said company, or upon the order of the Supreme Court or of a judge of said Court. This fund, together with the balance of the capital, "both paid and unpaid," and the other assets of the company, stand in lieu of special bonds in cases of administration. The amount of this deposit for the other companies varies from £5,000 to £20,000, according to the size of the company. The stockholders are subject to double liability.

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