To what extent does the Price to Earnings Ratio affect the investment decisions of those who manage Trusteed Pension Funds in Canada? Secondly: What are the dangers of ignoring this index when trading in common stocks for pension plans? METHODOLOGY A complete study of Canadian pension funds and the methods of funding was made in order to get a thorough understanding of pensions in Canada. Trusteed pensions fall into two categories: - the Money Purchase Plans. - the Definite Benefit Plans. The Trusteed pension was studied from the point of view of costs and benefits, emphasizing the importance of investment yields. A study of the Price Earnings Ratio per se., was made. The study includes the examination of accounting methods used to determine earnings per share. The next step was to determine and understand the relationship of the Price Earnings Ratio to corporate growth. A further step was to determine the variables contributing to sustained corporate growth. A study of the usefulness of the Price Earnings Ratio as a valuation tool was made, based on the works of leading writers in this field. The use made of the Price Earnings Ratio by investment managers in practice was examined, as well as the whole decision making process. This was achieved through personal interviews and by questionnaires. From the information received, a summary was prepared on the decision making process and the role of the Price Earnings Ratio in that process. Various data concerning pension portfolio stocks, Price Earnings Ratios and performance, was collected and summarized in the appendices. CONCLUSIONS It was concluded that: - Considering the cost of a pension, the two most important variables are expense and earnings; of the two, investment yield or earnings has the greatest effect on reducing costs. - In determining earnings per share, not only primary E.P.S. but also fully diluted E.P.S. should be determined and compared. - The Price Earnings Ratio is a concept consistent with the present value formulae and assumes combinations of earnings, growth, duration, discount and dividend payouts. It is important that investment managers understand this. - Sustainable growth is dependent primarily on margin, turnover, leverage and taxes. - Statistical studies have shown that low Price Earnings Ratio stocks consistently outperform high Price Earnings Ratio stocks. - The decision making process places great emphasis on Fundamental Analysis and the Price Earnings Ratio. - When considering the Price Earnings Ratio, the analyst will study it in relation to the popular indices, other companies in the industry and in relation to the companies projected growth rates. RECOMMENDATIONS Unless there is strong evidence to the contrary, a stock with a low Price Earnings Ratio should be purchased in preference to a stock with a high Price Earnings Ratio, particularly if the stock meets these conditions: - A consistently high earnings record in past years. - There is no evidence of an earnings decline in future years. - The quality of management is high. - There is a relatively high margin and turnover. / Business, Sauder School of / Graduate

The purpose of this study is to empirically test the hypothesis that the aggregate activity of pension funds in the Canadian equity market has created a segmentation of that market. It is possible that this aggregate activity has a measurable impact on the market price of the stocks purchased. If it can be shown that pension funds do command a relatively strong position in the market for Canadian equities then a study of this nature would be justified. The importance of pension funds in recent years will be discussed and any trends of significance to the development of the Canadian equity market identified. The empirical study will cover the period 1964-72 and will determine whether the concentration of pension fund investments in a small number of Canadian common stocks has in fact had a measurable impact on the market prices of these stocks. If pension fund activity was bidding up the market price of these stocks one would expect this to be indicated in a significantly different rate of return for these stocks in comparison with other non-pension stocks. / Business, Sauder School of / Graduate

The taxation of trust income is subject to inherent problems due to the nature of the trust itself which allows the separation of the legal and equitable interests and the creation of differing equitable interests in income arising from property held in trust. Problematic areas include questions as to whom should be taxed on trust income, when and at what rate persons should be taxed, and on what they should be taxed. Taxation of trust income under Canadian law depends on the nature of the income as currently distributable or as accumulating, and on the nature of the trust as testamentary or inter vivos. Provision is made for the taxation of the trust or of the beneficiary. Certain types of income are permitted to retain their character in the hands of the beneficiary. An attempt to devise a logical system for the taxation of trust income reveals in detail the type of problems inherent in such a system. Conceptual and practical difficulties in determining the appropriate taxpayer, rate, and timing of taxation are considered as is the nature of the beneficial interest and its significance for tax purposes. The Canadian taxation of trust income does not completely resolve these problems. The proposals of the Royal Commission and the current law in the United States and the United Kingdom are compared and contrasted with Canadian law. Differences among the rules of the various systems, reflect differences in the way they deal with the problems inherent in the taxation of trust income. The problems and their Canadian solutions are reviewed in comparison with methods adopted elsewhere. Any change to the existing rules would require a number of interrelated changes. It is not clear that improvements which might be effected are justifiable given the increased complexity attendant on their introduction. / Law, Peter A. Allard School of / Graduate

The purpose of this thesis is to study the feasibility of using a trust as an alternative to the will in the jurisdiction of British Columbia. The genesis of the study lies in the liberal interpretation and application of the Wills Variation Act by the courts in this province. Assuming that the free alienation of property upon death is a sound principle, it is incumbent upon the legal community to find methods of avoiding the interference of the judiciary in testamentary matters. To properly assess the trust as an alternative to the will, a brief overview of both is provided. The historical context of the trust is examined, followed by a review of its use in the United States as a wills substitute. The particular trust popular in the United States is one containing a power to revoke by the settlor, a life interest with power to encroach upon capital in favor of the settlor, and powers of modification and control retained by the settlor. It is hereinafter referred to as the revocable trust. Whether the revocable trust would be acceptable to the commonlaw of British Columbia is examined, and the conclusion reached is that there is nothing in theory to prevent its use as an alternative to the will. However, careful drafting must be used at all times to prevent attacks upon the validity of the trust itself. Certain practical considerations in using the revocable trust as an alternative to the will are reviewed, including income tax laws, provincial tax laws, and possible claims by beneficiaries. The more philosophical issue of whether the use of a trust should be permitted to avoid claims by surviving spouses and children is also examined. Conflicting doctrines in the United States are reviewed in light of existing caselaw in British Columbia. The tentative conclusion is that our own courts will permit a settlor to avoid succession claims by employing the trust. Again, however, careful drafting is crucial, and the facts in each case must be reviewed. The study establishes that the revocable trust can be used as an alternative to the will in British Columbia. The popularity of such use may, however, be limited by Canada's income tax laws as well as provincial tax laws. The resistance of the legal community to new ideas may also reduce the possible use of the revocable trust as an alternative to the will. / Law, Peter A. Allard School of / Graduate

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The rule in Re Hastings-Bass is an equitable control on the exercise of powers by trustees. It has developed without satisfactory explanation of its doctrinal basis, resulting in uncertainty as to its scope and application. In Pitt v Holt [2011] EWCA Civ 197 the Court of Appeal began to remedy these defects by deciding that the rule is founded on a trustee’s duty properly to consider the exercise of a power. This thesis argues, first, that Pitt is right to understand the Re Hastings-Bass rule as premised on the duties of trustees, and not on the exercise of a power producing an unintended result. This accords with the reasoning of earlier cases on the rule, and is also consistent with House of Lords authority on fiduciary powers and judicial non-interference in trustees’ decision-making. This duty is not a ‘fiduciary’ duty, or an aspect of the trustee’s duty of care, but is an independent incident of the office of trustee. Secondly, this analysis of the Re Hastings-Bass rule facilitates exposition of its important features: the concept of ‘relevant consideration’ must be carefully circumscribed; the purported exercise of a power in breach of the rule is voidable, not void; the rule does not apply to purely personal powers, or to administrative powers; there are no special rules for pension trusts or the use of the rule to mitigate liability to taxation; trustees can usually avoid a breach of duty by taking professional advice; and in some circumstances, those professional advisers can incur liability to the trust beneficiaries. Finally, the relationship between the Re Hastings-Bass rule and fraud on a power is examined. It is argued that the analogy between the two doctrines is not sound, and that there is reason to doubt aspects of the orthodox account of fraud on a power.