p17n63qg7jmbh1r4fin71pds1p454.pdf

A24
A24
| FInAnCIAL RISk MAnAGEMEnT|
Unit Trust Corporation Annual Report 2012
Trinidad and Tobago Unit Trust Corporation
Notes
to the Consolidated
Financial Statements
S&P 500
Composite Index
Growth & Income
Fund
Universal
Retirement Fund
31 December,
2012
31 December,
2011
$35.3 million (1.0%) $30.2 million
(0.9%)
$1.8 million (0.9%) $0.8 million (0.4%)
Collective Investment Schemes – Registered overseas as
subsidiary open ended investment companies
The equity price risk exposure of the fund portfolios in the
overseas subsidiary companies is also monitored and measured
via categorization of the stocks by their historical price sensitivity
to the overall market. The categorization of the portfolios’
equity holdings is provided below both in dollar terms and as a
percentage of total equity holdings in the relevant Fund:
At 31 December, 2012
LOWER
THAN
MARKET
COMPARABLE
TO
MARKET
FOR THE YEAR ENDED
31 DECEMBER, 2012
Expressed in
Trinidad and Tobago dollars
HIGHER
THAN
MARKET
$’000 $’000 $’000
UTC Energy Fund 1,661 18,077 10,008
5.6% 60.8% 33.6%
UTC European Fund 1,502 3,896 115
27.2% 70.7% 2.1%
UTC Asia Pacific Fund 2,735 8,138 98
24.9% 74.2% 0.9%
UTC Latin American Fund 863 4,587 1,320
12.7% 67.8% 19.5%
UTC north American Fund 67,582 50,533 15,241
50.7% 37.9% 11.4%
At 31 December, 2011
LOWER
THAN
MARKET
COMPARABLE
TO
MARKET
HIGHER
THAN
MARKET
$’000 $’000 $’000
UTC Energy Fund
663 6,178 18,291
2.6% 24.6% 72.8%
UTC European Fund 1,383 692 3,207
26.2% 13.1% 60.7%
UTC Asia Pacific Fund 8,091 1,432 1,336
74.5% 13.2% 12.3%
UTC Latin American Fund 839 2,992 2,812
12.6% 45.1% 42.3%
UTC north American Fund 97,711 30,207 16,919
67.2% 21.0% 11.8%
As at 31 December 2012 and 31 December 2011, using the S&P
500 Index, had US equity securities prices changed as a whole by
5% (with all other variables held constant), the respective net asset
values would have changed in both dollar and percentage terms
as follows:
2012 2011
$’000 % $’000 %
UTC Energy Fund 1,656 5.6 1,540 6.1
UTC European
Fund
UTC Asia Pacific
Fund
UTC Latin
American Fund
UTC north
American Fund
257 4.2 292 5.5
506 4.6 484 4.5
341 5.1 353 5.3
5,781 1.9 859 3.8
The Global Bond Fund does not hold equity positions.
Proprietary Investments
The Corporation holds shares/units in the Collective Investment
Schemes that it has registered as overseas investment companies.
This aggregate shareholding was valued at the equivalent of
TT$260.9 million and as such the exposure to equity price risk is
proportionate to that disclosed in the preceding section.
In addition, the Corporation holds strategic positions in eight (8)
unquoted equities with a total book value equivalent to TT$73.3
million. These positions are assumed to be uncorrelated with
recognised stock exchanges and as such equity price risk is
deemed immaterial for these positions.
Interest rate risk
Collective Investment Schemes – Registered locally as
unit trusts
The Collective Investment Schemes’ holdings of listed and unlisted
debt instruments are exposed to movements in market rates of
interest. In general, rising interest rates expose the portfolios to
deterioration in net assets arising out of lower carrying values for
bonds (fair value interest rate risk). Conversely, falling interest rates
can expose the portfolios to potential diminution in earnings on
variable rate instruments (cash flow interest rate risk).
Given the general offsetting effect of exposures to fair value
interest rate risk and cash flow interest rate risk, the overall interest
rate risk is managed by making judicious adjustments of the
overall weighted average term to maturity (i.e. duration) based on
the relevant economic and financial market outlook.