 Employee Benefit Trusts (EBT)

o Pension – defined benefit plan

o Provident – defined contribution plan
 Fund Management
o Corporate/Individual Portfolio Management
o Unit Investment Trust Fund Management (Common trust fund before)
 Equity investment fund - equity
 Peso money market fund - conservative
 Peso investment fund - balances
 Gold dollar fund
 Estate Planning
o Guardianship - To ensure proper management of funds of the Beneficiary while
the latter is considered to be not in the capacity to do so.
o Testimonial Trust - To ensure proper management and transfer of assets to a
beneficiary after the Trustees lifetime
o Living Trust - To ensure proper management and transfer of assets to a
beneficiary during the Trustees’ lifetime
 Special Corporate Services
o Escrow Agency - A system of document transfer in which a deed, bond,or funds
are delivered to a third person to hold until all conditions in a contract are
fulfilled.
o Mortgage Trust Indenture - A facility in which the Trustee shall hold certain
assets in behalf of a borrower (Trustor) under mortgage to cover certain loans.
This facility allows for the borrower to offer a pool of collaterals to various
creditors.

LIQUIDITY
The need for immediate cash conversion without the risk of principal loss
Sample Cases:
– Retirees with no other source of funds
• High liquidity needs to fund personal expenses
– Retirees with substantial diversified investments elsewhere
• Low liquidity needs assuming that the other investments are liquid
– Young single executive with high earning power
• Low liquidity requirements because of alternative cash source
– Young married entrepreneur fully invested in a high growth business
• High liquidity requirement because there may not be a steady source of
cash

BOND
“A debt instrument in which an investor loans money to an entity (corporate or government)
that borrows the funds for a defined period of time at a fixed interest rate.”
 • Certificate of indebtedness of a sovereign or a corporation to the public
• A promised rate is given upon launching of product
• Sold to either individuals or corporations
• Bought based on price (can be at par, at a premium or at a discount)
• Coupon payment is fixed either quarterly, semi annual or annual
• On maturity date, bond holder will receive last interest and face value
• Denomination can either be Peso or Dollar
Characteristics of Bonds
• Face value/ par value - The amount of money a holder will get back
once a bond matures.
• Coupon - rate of interest which the investor receives for holding onto the bond. (Fixed,
Floating or Non Coupon Bearing)
• Price - bonds can be bought by an investor at a price determined in a business day
• Maturity - fixed date on which the issuer promises to buy back or pay back the bond
holders their principal plus last interest payment
• Issuer - can either be a sovereign (government issued) or a corporation wanting to
borrow money from the public to finance projects or business ventures that they may
have.
Eurobonds
• A bond issued in a currency other than the currency of the country or market in which
it is issued.
• e.g.
– Philippine Corporate Issues outside the Philippines (USA) that is USD
Denominated
– An Australian Corporate Issues a bond in Japan that is USD denominated
• Eurobonds are attractive financing tools as they give issuers the flexibility to choose the
country in which to offer their bond according to the country's regulatory constraints.
They may also denominate their eurobond in their preferred currency. Eurobonds are
attractive to investors as they have small par values and high liquidity.
• As an Investment outlet to a Trust Account
– Does it fit the investment objective of the client?
– Investor should understand ALL the risks involved in investing in a particular bond

• Discuss the ff:

• Issuer
• Purpose of the Bond
• Other important features
• Risks (price, currency, etc)
• Term Sheet is provided that discloses all details about the Issuer and the
Bond features

CALL OPTION
Issuer may recall (pre-terminate) the bond on said date, at an agreed price
PUT OPTION
Bond-Holder may put the sell back to the issuer on said date, at an agreed price

Time Deposit
-issued by banks
-doesn’t have a price
-short term in nature
-interest rate repriced on maturity
-can be pre-terminated when investor needs funds
-subject to applicable witholding taxes
-PDIC coverage up to P500,000

Bonds
-issued by either a sovereign or corporation
-bears a price
-long term in nature
-usually has fixed coupon until maturity
-sold to the market when investor needs funds
-no PDIC

• Bonds are tradable in nature

• Their prices tend to go up and down (but for clients who intend to hold until maturity
fluctuations in price don’t bear a direct effect on them)
• They give better yields compared to time deposits
• Coupon is not necessarily the effective rate (buying price should also be considered)
• Risks are borne by the Investor and not the bank

Trust
Marketing – get funds
Trading - Management of funds
Operations – recording

Discretionary / Diversified – full management

Non - diversified – client’s discretion

Bonds – peso and dollar denominated funds, coupon payments

Capital preservation and growth

Investment management – ownership is with client

Personal management trust (previously living trust)
UITF – pooled fund, meant for retail

Secondary market, counterparties, presented to a trust committee, there is a LAM

Fixed income – bonds
Equities – common shares and preferred shares

approach in at once and allocate what was bought

Interest rate vs price

Volatile yung market

Economy of US

Short rated, if rates go up, easy to go out

BSP director will be stepping down – july

Top down approach – macro

Trader – speculative
Fundamental – looks at company’s growth

Risk disclosure statement

Letter of instruction
Investment policy statement

Factors to consider
Clients
1 risk profile (client suitability assessment form)
2 time horizon
3 exposure to financial instruements
4 liquidity
5 percentage in investible asset

Risk disclosure statement

- Greater risk, greater returns
- BSP safety precaution
- Cater more risk profiles

Yield/return
Fight off prevailing
- Inflation of a country
- WH tax
- Lower buying power
Letter of instruction (LOI)

PMMF – TD/ BSP SDA

PIF – preferred shares less volatile
EIF – stocks / TD

Premium --- coupon rate > YTD

OPERATIONS
Reports/monitor payments

Mktg – inform ops and trading

Usually the order is first

Trading – JET
First approval - TEK
2nd approval – OPS

- Recording of transactions once approved

- Acctngs
- To generate acctng entries

Posted at the end of day – for general ledger

NAVPU (UITF) base for investment price per unit

For gdf, pif, pmmf

NAVPU
Bal sheet
Income statement
Daily evaluation report
Mark to Market rport – market value to view proper loss or gain

Equity – outstanding investment in stocks

IMA has own f/s, UITF per fund, only SOA for transactions in UITF

Price us closing (if w/o closing)

if more than a month, latest bid price
if not, audited f/s the book value submitted by company to BSP

from branch through teller 360 – mktng assts – upload by mktg head then approve by ops

generate acctgn entries (end of day activity)

AMLA report to BSO through compliance
Txns above 500k covered on suspicious loans
Transaction advise given to client as proof of investment
If branch, branch prints

Quarterly reports – every 20th calendar days

Reevaluation of assets month end – marked to market

Posting interests, maturities daily

Client investment report (daily evaluation report)

Investment activity report
ROI
--- sent quarterly to clients

MTM – fixed income and securities

Ops- approval and posting of reports

If w/in the limit
Managing risk exposure

JET trading order – approval of TEK – approval of OPS

Bal sheet at month end