Trusts 1 1 Background Conservative approach to investments - - PowerPoint PPT Presentation

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Investment Options for

Trusts

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Background

 Conservative approach to investments  Investible funds are donations from individuals,

institutions and government bodies

 Funds have to be used as per guidelines laid

down in trust deed

 Investments can be done as per the guidelines

laid down by governing body.

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Types of Trusts

• 1. Public Trust
• 1. Private Trust which includes Family Trust

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Public Trust

 Benefits the public at large or some

considerable portion of it. A public trust can be

• f two types, namely:

 Public charitable trust and  Public religious trust

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Investment Guidelines – Public Trust

• 1. Savings certificates as defined in clause (c) of sec. 2 of the Govt. Savings Certificates Act, 1959

(46 of 1959), and any other securities or certificates issued by the Central Govt. under the Small Savings Schemes of that Govt.;

• 2. Deposit in any account with the Post Office Savings Bank;
• 3. Deposit in any account with a scheduled bank or a co-operative society engaged in carrying on

the business of banking (including a co-operative land mortgage bank or a co-operative land development bank).

• 4. Investment in units of the UTI established under the Unit Trust of India Act, 1963 (52 of 1963);
• 5. Investment in any security for money created and issued by the Central Govt. or a State Govt.;
• 6. investment in debentures issued by, or on behalf of, any company or corporation both the

principal whereof and the interest whereon are fully and unconditionally guaranteed by the Central Govt. or by a State Govt.;

• 7. Investment or deposit in any public sector company;

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Investment Guidelines – Public Trust (cont’d)

• 8. Deposits with or investment in any bonds issued by a financial corp. which is engaged in

providing long-term finance for industrial development in India and which is eligible for deduction under clause (viii) of sub-sec. (1) of sec. 36;

• 9. Deposits with or investment in any bonds issued by a public co. formed and registered in India

with the main object of carrying on business of providing long-term finance for construction or purchase of houses in India for residential purposes and which is eligible for deduction under clause (viii) of sub-sec. (1) of sec. 36; 10. Deposits with or investment in any bonds issued by a public co. formed and registered in India with the main object of carrying on the business of providing long-term finance for urban infrastructure in India. 11. Investment in immovable property. 12. Deposits with the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964); 13. Any other form or mode of investment or deposit as may be prescribed.

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Investment Guidelines – Public Trust (cont’d)

Following mutual fund schemes have approval for trust investments:

• 1. HDFC Mutual Fund – HDFC Income Fund
• 2. Reliance Mutual Fund – Reliance Vision Fund & Reliance Income Fund
• 3. DSP Blackrock Mutual Fund – DSP BlackRock Bond Fund
• 4. Unit Trust of India

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Private Trust

 Beneficiaries are individuals or families.

Private Trusts are created and governed by Indian Trust Act, 1882.

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Investment Guidelines – Private Trust

Updated and notified via a gazette in April 2017:

• 1. Government securities;
• 2. Securities, the principal whereof and the interest whereon is fully and unconditionally

guaranteed by the Central Government or any State Government;

• 3. Units of debt mutual funds regulated by the SEBI established by Sec. 3 of the

Securities and Exchange Board of India Act, 1992 (15 of 1992);

• 4. Listed (or proposed to be listed on exchanges in case of fresh issue) debt securities

issued by any body corporate, including a bank and a public financial institution as defined in clause (72) of Sec 2 of the Cos. Act, 2013 (18 of 2013), which have a minimum residual maturity period of three years from the date of investment;

• 5. Basel III Tier-I bonds issued by a scheduled commercial bank under guidelines issued

by the RBI, which are either listed or are proposed to be listed on an exchange;

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Investment Guidelines – Private Trust (cont’d)

• 6. the infrastructure related debt instruments listed or proposed to be listed in case of

fresh issue:— (i) Issued by a body corporate engaged mainly in the business of development or

• peration and maintenance of infrastructure, or development, construction or finance
• f low cost housing;

(ii) Issued by an infrastructure debt fund operating as a non-banking financial company and regulated by the RBI; or (iii) Issued by an infrastructure Debt Fund operating as a Mutual Fund and regulated by the SEBI;

• 7. Shares of body corporates listed on any recognised stock exchange which has a

market capitalisation of not less than Rs.5,000 crores as on the date of investment;

• 8. Units of mutual funds regulated by the SEBI, which have minimum 65% of their

investment in shares of body corporates listed on a recognised stock exchanges;

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• 9. Exchange traded funds or index funds regulated by the SEBI which replicate

the portfolio of the BSE Sensex or the NSE Nifty, or those constructed specifically for disinvestment of shareholding of the GOI in a body corporate; Provided that the investment under clauses (4), (5) and (6) shall be made only in such securities which have minimum AA rating or equivalent in the applicable rating scale from at least two credit rating agencies registered with the SEBI under the SEBI (Credit Rating Agency) Regulations, 1999; Provided further that in case of investment under sub-clause (ii) of clause (6), the ratings shall relate to the non-banking financial company and for that sub- clause, the ratings shall relate to the investment in eligible securities rated above investment grade of the scheme of the fund; Provided also that if the securities or entities have been rated by more than two rating agencies, the two lowest of all the ratings shall be considered.

Investment Guidelines – Private Trust (cont’d)

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Details of Perpetual Bonds

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9.37% SBI Perpetual

 Issued by State Bank of India  India’s largest bank in terms of branch network & asset size  Face Value of bond: Rs.10 Lakhs  Nature of bond: Perpetual bond with call date  Interest payable: 9.37% p.a.  Interest Payable date: Annual - December 21st  Call Date: December 21st, 2023  Rating: CRISIL 'AA+', CARE 'AA+'

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8.85% HDFC Bank Perpetual

 Issued by HDFC Bank Ltd.  India’s largest bank in terms of market capitalization  Face Value of bond: Rs.10 Lakhs  Nature of bond: Perpetual bond with call date  Interest payable: 8.85% p.a.  Interest Payable date: Annual - May 12  Call Date: May 12, 2022  Rating: CRISIL 'AA+', CARE 'AA+'

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9.90% ICICI Bank Perpetual

 Issued by ICICI Bank Ltd.  India’s 2nd largest bank in terms of market cap and assets  Face Value of bond: Rs.10 Lakhs  Nature of bond: Perpetual bond with call date  Interest payable: 9.90% p.a.  Interest Payable date: Annual - Dec 28  Call Date: Dec 28, 2023  Rating: ICRA 'AA+', CARE 'AA+'

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8.75% AXIS Bank Perpetual

 Issued by AXIS Bank Ltd.  India’s 3rd largest private sector bank in India  Face Value of bond: Rs.10 Lakhs  Nature of bond: Perpetual bond with call date  Interest payable: 8.75% p.a.  Interest Payable date: Annual - June 28  Call Date: June 28, 2022  Rating: CRISIL 'AA+', ICRA 'AA+'

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Details of Fixed Term Bonds

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8.90% State Bank of India 2028

 India’s largest bank in terms of branch network & asset size  Face Value of bond: Rs.10 Lakhs  Nature of bond: Fixed term bond with call date (Tier II)  Interest payable: 8.90% p.a.  Interest Payable date: Annual - November 2nd  Call Date: November 2nd, 2023  Maturity Date: November 2nd, 2028  Rating: CRISIL 'AAA', CARE 'AAA'

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8.44% HDFC Bank 2028

 India’s largest bank in terms of market capitalization  Face Value of bond: Rs.10 Lakhs  Nature of bond: Fixed term bond (Tier II)  Interest payable: 8.44% p.a.  Interest Payable date: Annual - December 28th  Call Date: N.A.  Maturity Date: December 28th, 2028  Rating: CRISIL 'AA+', CARE 'AA+'

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