p17n63qg7jmbh1r4fin71pds1p454.pdf

A32
A32
| FInAnCIAL RISk MAnAGEMEnT|
Unit Trust Corporation Annual Report 2012
Trinidad and Tobago Unit Trust Corporation
Notes
to the Consolidated
Financial Statements
Proprietary Investments
The proprietary foreign currency assets and liabilities of the
Corporation as at 31 December, 2012 and as at 31 December,
2011 are provided below.
At 31 December, 2012 US$ Other
(Presented
in TT$)
FOR THE YEAR ENDED
31 DECEMBER, 2012
Expressed in
Trinidad and Tobago dollars
(Presented
in TT$)
$’000 $’000
Assets
Cash & Cash Equivalents 374,400 -
Money Market Instruments 995 -
Fixed Income Securities 941,637 -
Equities & Mutual Funds 334,208 -
Liabilities
Financial Instruments (912,678) -
Other liabilities (13,587) -
Total 724,975 -
At 31 December, 2011 US$ Other
(Presented
in TT$)
(Presented in
TT$)
$’000 $’000
Assets
Cash & Cash Equivalents 86,096 -
Money Market Instruments 52,510 -
Fixed Income Securities 1,700,569 -
Equities 248,950 -
Liabilities
Financial Instruments (1,802,843) -
Other liabilities (7,805) -
Total 277,477 -
A 1% change in the TT dollar relative to the US dollar as at
that date would have affected the net income position of the
Corporation by TT$7.25 million as at 31 December, 2012 and by
TT$2.77 million as at 31 December, 2011.
Credit risk
Collective Investment Schemes - Registered as local
unit trust schemes
The Funds’ holdings of debt instruments expose them to the
risk that issuers or counterparties may default on their financial
obligations, that is, fail to make full timely payments of scheduled
interest and/or principal sums. Default risk has the potential to
lower net asset value or fund earnings in the event that part or
all of the scheduled cash flows become uncollectible after being
past due for an extended period of time. This risk of loss may be
tempered by the availability of realizable collateral that enhances
the potential recovery value on the debt instrument.
Default risk is managed at the outset by subjecting all issuers/
counterparties to a robust credit risk assessment process
that results in the assignment of a credit score or rating. The
acquisition or retention of a debt issue is subject to the credit
rating limits and constraints contained in each Fund’s investment
policy statement, and any other relevant factors. It is the
Corporation’s policy that a credit rating review of each issuer/
counterparty be performed at least annually.
The overall Fund exposure to default risk is measured by
monitoring the relative credit quality of the issuers making up
the fixed income portfolio. Issuers/counterparties that are rated
at least BBB- equivalent by international credit rating agencies or
that have an internally determined credit score consistent with
such a credit rating are deemed to have a high credit quality.
Issuers/counterparties that are rated CCC equivalent and below
by international agencies or have an internally determined score
consistent with such a rating or that are past due or otherwise
distressed or that are exposed to considerable short-term
economic/industry/project risk are all deemed low credit quality.
All other issuers/counterparties are considered to be of moderate
credit quality.
The internal credit quality rating is mapped to comparable
external rating grades as per the following table: