Trinidad and Tobago Unit Trust Corporation
Notes
to the Consolidated
Financial Statements
FOR THE YEAR ENDED
31 DECEMBER, 2012
Expressed in
Trinidad and Tobago dollars
A49
Concentration risk
Collective Investment Schemes –
Registered as local unit trust schemes
During the normal course of investment activity, the Funds may
build up concentrations in single entities, groups of related/
affiliated entities, sectors/industries and countries. Domination of
the Funds individually and collectively in any one security, entity/
group of entities, industry/sector or country/geographic region has
the potential
inter alia
to magnify the impact of idiosyncratic events
on net assets or earnings. In some cases, such concentrations may
restrict the ability of the Funds to exit security positions without
sustaining substantial loss.
Statutory restrictions limit the exposure of the Funds to any issuer
to: (i) a maximum of 10% of the Fund’s combined net assets; and (ii)
a maximum of 10% of securities in issue. This prevents the undue
build-up of issuer, sector and country concentrations in the Funds.
As at 31 December, 2012 there were no exposures to any single
entity or group of related entities exceeding 10% of the Funds’
combined net assets.
Collective Investment Schemes –
Registered as overseas subsidiary companies
The Collective Investment Scheme products issued by overseas
subsidiary companies contain significant geographic, industry
sector and/or asset class concentrations in compliance with
regulatory prescriptions on fund nomenclature. In general,
concentrations higher than 80% are usual in these Funds. As such
there is significant concentration risk in the Fund portfolios of the
overseas subsidiary companies.
Proprietary Investments
With respect to its proprietary financial assets, the Corporation is
significantly exposed to TT government and government-owned
entities. As at 31 December 2012, its exposure to such entities
totalled approximately TT$1.6 billion. This exposure is deemed
manageable by the Corporation.
29) FINANCIAL RISK MANAGEMENT
(continued)
Unit Trust Corporation
Annual Report 2012
