Unit Trust Corporation (Cayman) SPC Limited Segregated Portfolios. (Cayman) SPC Limited

Transcription

1 Unit Trust Corporation (Cayman) C Limited (Cayman) C Limited 1

2 Unit Trust Corporation (Cayman) C Limited Contents Chairman and Management s Report 1 Independent Auditor s Report 4 Statement of Financial Position 5 Statement of Comprehensive Income 7 Statement of Changes In Equity 9 Statement of Cash Flows

3 Unit Trust Corporation (Cayman) C Limited CHAIRMAN AND MANAGEMENT S REPORT The past year has proved to be daunting for investors around the globe but through it all, we have followed our conservative approach to investing, disciplined risk management and purposeful diversification to preserve our Unitholders capital and deliver competitive market returns. In this annual report, we will review the global markets for 2010 as well as the Corporation s performance and our outlook for Global Markets While international markets eagerly anticipated recovery from the financial fallout of 2009, the year was also filled with trepidation as risk of double dip recession remained high. As the year progressed, emerging and developing countries showed themselves as the main drivers of economic growth. In contrast to the continuing malaise in North America and Europe, the economies of newly industrializing countries in the East and South East Asia, Africa and Latin America grew at healthy rates. Emerging economies expanded by 7.1 percent with the main impetus being domestic demand. This strong performance brought average global growth to 5.0 percent (up from negative 0.5 percent one year ago). In contrast, growth in advanced economies was a tepid 3.0 percent (up from negative 3.4 percent the year before), mainly due to inventory accumulation and fiscal stimuli. Prospects for North America and Europe were overshadowed by growing unemployment, fiscal imbalances and debt sustainability risks. Most financial markets remained fragile in 2010 suffering from the effects of subdued interest rates and sub-normal returns. Advanced economies continued to experience low interest rates. In the United States, Eurozone, United Kingdom and Japan, 2010 rates remained unchanged from their historically low 2009 levels. The United States pledged to maintain its rate in a range from zero to 0.25 percent. The European Central Bank (ECB) kept interest rates at a record low after the Federal Reserve embarked on a new round of quantitative easing and tensions increased on Europe s sovereign-debt markets. The Bank of Japan (BOJ) kept its target for its policy interest rate, the overnight call rate (OCR), at between zero percent and 0.1 per cent in 2010 and, even at these low levels, faced criticism for providing insufficient support to the economy. Notwithstanding the continuing vulnerabilities in the real estate and securities markets and bouts of turbulence upsetting financial markets during 2010, global financial conditions broadly improved as lending conditions eased and equity markets rose. Commotions within the markets were primarily related to technical stock market glitches and debt problems of Portugal, Italy, Spain, Greece and Dubai. These disturbances sparked prolonged debates on monetary and financial sector issues as well as a spate of sovereign credit risk rating downgrades for former investment-grade countries such as Portugal and Spain and a lowered credit rating to junk status for Greece. Given such uncertain conditions, market players remained discriminatory and generally risk averse with gains not shared across the board. The year 2010 was volatile for the commodity market. Grains outperformed soft and precious metals as severe weather conditions in Russia and Eastern Europe devastated a substantial portion of their wheat and barley crop, driving grain prices up by 43.9 percent. Floods in the Indian sub-continent affected the region s rice harvests, creating further upward pricing pressure on food supplies globally. The prices of precious metals also increased during 2010 by 34.4 percent. Gold and silver continued to be in strong demand as a safe-haven asset and by the growing middle and wealthy classes in emerging economic giants. Oil prices continued to gain momentum in 2010 after the recovery of Price improvement continued well into 2011 as unrest in the Middle East and North Africa in the early months of 2011 raised concerns about the security of supply. Natural gas prices have also strengthened. 1

4 Unit Trust Corporation (Cayman) C Limited CHAIRMAN AND MANAGEMENT S REPORT (continued) s Management In 2010 s challenging environment, we continued our risk-averse investment philosophy and strong diversification policy. These tenets maintained liquidity for our Unitholders during a difficult period when many investors in Trinidad and Tobago were unable to access their capital because of the high profile failure of a local financial institution. Our funds performances overall were predominately positive and only one fund experienced a small negative return. In 2011 and beyond, our back-to-basics conservative investment philosophy and strategic planning will ensure we continue safeguarding Unitholders capital while minimising volatility irrespective of the economic circumstances. Energy : The Energy s fund-size grew by 8.9 percent year-on-year from US4.9 million (TT30.2 million) to US5.3 million (TT32.9 million). The Net Asset Value (NAV) increased from US21.20 in 2009 to US22.68 over the same period. The net return to unitholders for 2010 was 6.98 percent, compared to 22.8 percent a year ago. The portfolio s cash and cash equivalent component of 16.1 percent and the fund s 83.6 percent international equity component produced results consistent with the market in Asia-Pacific : Total fund-size grew by 45.7 percent year-on-year from US1.5 million (TT9.4 million) to US2.2 million (TT13.7 million) by the end of The fund s offer and bid prices were US24.82 and US23.58 respectively by the end of 2010, compared to US22.82 and US21.68 a year prior. The net return generated by the Asia-Pacific for 2010 was 3.33 percent, up from 1.22 percent in The fund s cash and cash equivalent component comprised 19.8 percent of total assets as at year s end, while, its equity component, constituted 75.5 percent of the portfolio. European : The European grew by 4.7 percent from US1.0 million (TT6.4 million) in 2009 to US1.1 million (TT6.7 million) by the end of The fund s offer and bid prices were US21.43 and US20.36 respectively by the end of 2010, improved over their 2009 values of US20.61 and US The net return to Unitholders for 2010 was percent, down in relation to the 2009 return of 2.4 percent. Concerns about Europe s debt crisis negatively impacted investor confidence and was reflected in the subdued gains achieved in the major European stock markets for the year compared with double-digit returns in Global Bond : The Global Bond expanded by 8.1 percent year-on-year from US1.6 million (TT9.9 million) to US1.7 million (TT10.7 million) by the end of The fund s net asset value (NAV) stood at US20.16 as at December 31, 2010, slightly improved over the US19.42 NAV reported a year ago. The net return generated by the fund for 2010 was 3.81 percent, up from the 2009 return of 3.03 percent. Latin American : The Latin American s fund-size increased during 2010 by 20.9 percent, growing from TT6.7 million (US1.1 million) to TT8.1 million (US1.3 million). The fund s offer and bid prices were US25.12 and US23.86 respectively by the end of 2010, compared to their 2009 values of US22.65 and US The net return to Unitholders for 2010 was 5.34 percent, down from the 6.45 percent return posted in The s equity component comprised 84.4 percent of the portfolio as at the end of

5 Unit Trust Corporation (Cayman) C Limited CHAIRMAN AND MANAGEMENT S REPORT (continued) Outlook for 2011 Continuing in the same vein as last year, our view is that global economic recovery will be two-pronged, with buoyant activity for emerging and developing countries and relatively slower growth prospects for the advanced economies. Factors weighing down expansion include downside risks from continued uncertainties regarding debt crises faced by some European countries, civil unrest in the Middle East and the recent natural disasters in Japan. The importance of emerging economies in sustaining global growth going forward cannot be overstated. They account for 40 percent of global consumption and over two-thirds of global growth. In 2011, emerging and developing countries are expected to grow at a rate of 6.5 percent, while advanced economies are expected to expand by 2.4 percent. Leading the way is developing Asia (8.4 percent) and sub-saharan Africa (5.5 percent). However, rapid economic growth in these countries is beginning to result in overheating and rising inflation. Given the significant contribution to world demand and growth, these downside risks will be carefully monitored by us. We do not foresee a rise in interest rates in the near term, as the European economies continue to struggle with high unemployment rates, slow growth in output and increasing debt profiles. Tightening market conditions have pushed up oil prices, which will continue trending upwards driven by increasing global demand and rising political turmoil in the Middle East and North Africa. The full impact of the natural disasters in Japan will only be understood as the reconstruction effort begins. The current focus on stabilizing the area could negatively affect world output and trade during this quarter and the next. Latin America and the Caribbean region are expected to grow by 4.7 percent in Growth in most of the Caribbean countries will be subdued amid moderate prospects for tourism and remittances with limited room for policy support in light of chronic public debt burdens. Given the varying strengths of macroeconomic policy frameworks throughout the Latin American region, the outlook for Latin America is projected to be diverse. Domestic demand and capital inflows have thus far fueled the region s expansion. Yet, the downside risks of overheating, inequitable distribution of wealth and inflation remain and will be watched closely. Conclusion With a sound mandate of world-class investment principles and operational excellence that delivers consistent returns over the long term, we will continue to seek out and execute investment opportunities with the right risk profiles and competitive returns for you, our most valued Unitholders. 3

6 Independent Auditor s Report To the Energy Segregated Portfolio, Asia-Pacific Segregated Portfolio, European Segregated Portfolio, Latin American Segregated Portfolio and Global Bond Segregated Portfolio Shareholders and Board of Directors of Unit Trust Corporation (Cayman) C Limited Report on the financial statements We have audited the accompanying financial statements of each of Energy Segregated Portfolio, Asia-Pacific Segregated Portfolio, European Segregated Portfolio, Latin American Segregated Portfolio and Global Bond Segregated Portfolio (each a separate portfolio of Unit Trust Corporation (Cayman) C Limited (the Company ), and referred to individually or collectively as the ( Segregated Portfolios ) which comprise the statements of financial position as at 31 December 2010 and the related statements of comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s responsibility for the financial statements Management is responsible for the preparation and the fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the as at 31 December 2010 and the results of each of their financial performance and each of their cash flows for the year then ended in accordance with International Financial Reporting Standards. PricewaterhouseCoopers Cayman Islands 31 March

7 Unit Trust Corporation (Cayman) C Limited Statement of Financial Position 31 December 2010 Notes Energy Asia- Pacific European Latin American Global Bond Financial assets available for sale 4 4,435,679 1,771, ,450 1,099,686 1,320,382 Income receivable 2,659 1,571 1,108 3,946 14,272 Other receivables 88 1, ,548 Cash and cash equivalents 1,131, , , , ,600 Total Assets 5,569,727 2,245,565 1,093,983 1,330,807 1,741,802 Equity Equity 5,282,268 2,207,444 1,075,102 1,307,990 1,727,335 Total Equity 5,282,268 2,207,444 1,075,102 1,307,990 1,727,335 Liabilities Management and administration fees payable 7 72,417 32,479 16,360 19,516 10,620 Other payables 215,042 5,642 2,521 3,301 3,847 Total Liabilities 287,459 38,121 18,881 22,817 14,467 Total Liabilities and Equity 5,569,727 2,245,565 1,093,983 1,330,807 1,741,802 The notes on pages 12 to 37 form an integral part of these financial statements. On 31 March 2011, the Board of Directors of Unit Trust Corporation (Cayman) C Limited authorised these financial statements of issue. Director For and on behalf of Unit Trust Corporation (Cayman) C Limited Director For and on behalf of Unit Trust Corporation (Cayman) C Limited 5

8 Unit Trust Corporation (Cayman) C Limited Statement of Financial Position Energy 31 December 2009 Asia- Pacific European Latin American Global Bond Notes Assets Financial assets available for sale 4 3,847, , , ,398 1,215,835 Income receivable 24,182 3,858 2,374 3,153 6,125 Other receivables 7,865 1,895 Cash and cash equivalents 974, , , , ,997 Total Assets 4,854,550 1,531,498 1,039,336 1,092,524 1,604,852 Equity Equity 4,850,665 1,511,033 1,027,060 1,078,716 1,593,248 Total Equity 4,850,665 1,511,033 1,027,060 1,078,716 1,593,248 Liabilities Management and administration fees payable 7 14,876 9,758 10,513 7,766 Other payables 3,885 5,589 2,518 3,295 3,838 Total Liabilities 3,885 20,465 12,276 13,808 11,604 Total Liabilities and Equity 4,854,550 1,531,498 1,039,336 1,092,524 1,604,852 The notes on pages 12 to 37 form an integral part of these financial statements. 6

9 Unit Trust Corporation (Cayman) C Limited Statement of Comprehensive Income Year ended 31 December 2010 Energy Asia- Pacific European Latin American Global Bond Income Interest income 23,832 7, ,777 43,345 Dividend income 69,718 32,669 23,474 27,417 17,209 Other income Net foreign exchange loss on financial asset available for sale (995) Net realised (loss)/gain on financial assets available for sale (63,521) (27,373) (24,416) 7,975 (32,742) Total income 29,142 12,651 5,098 42,193 27,812 Expenses Management and administration fees (93,444) (32,479) (16,360) (19,516) (10,620) Other expenses (848) (235) (214) (114) (346) Impairment of financial assets available for sale (16,004) Total expenses (94,292) (48,718) (16,574) (19,630) (10,966) (Loss)/profit before tax (65,150) (36,067) (11,476) 22,563 16,846 Withholding taxes (14,310) (7,840) (5,179) (4,769) (1,740) (Loss)/profit for the year (79,460) (43,907) (16,655) 17,794 15,106 Other comprehensive income Financial assets available for sale: - Fair value gains arising during the year 611, ,895 41, ,372 23,504 - Fair value losses/(gains) transferred to income 64,516 27,373 24,416 (7,975) 32,742 - Impairment losses transferred to income 16,004 Other comprehensive income for the year 675, ,272 66, ,397 56,246 Total comprehensive income for the year 596, ,365 49, ,191 71,352 The notes on pages 12 to 37 form an integral part of these financial statements. 7

10 Unit Trust Corporation (Cayman) C Limited Statement of Comprehensive Income Year ended 31 December 2009 Energy Asia- Pacific European Latin American Global Bond Income Interest income 158,665 20,887 7,975 15,494 81,220 Dividend income 26,733 4,508 8,755 5,871 1,762 Other income 769 Net foreign exchange (loss)/gain on financial assets available for sale (762) (1,619) Net realised gain/(loss) on financial assets available for sale 12,644 23,354 (23,306) (37,588) (5,963) Total income 198,049 48,812 (6,513) (16,160) 75,400 Expenses Management and administration fees (14,876) (9,758) (10,513) (7,766) Other expenses (492) (130) (84) (308) Impairment of financial assets available for sale (116,893) (9,521) (6,346) (12,695) Total expenses (116,893) (24,889) (9,888) (16,943) (20,769) Profit/(loss) before tax 81,156 23,923 (16,401) (33,103) 54,631 Withholding taxes (4,612) (663) (1,830) (1,114) Profit/(loss) for the year 76,544 23,260 (18,231) (34,217) 54,631 Other comprehensive income Financial assets available for sale: - Fair value gains arising during the year 573,079 71, ,365 96,854 91,459 - Fair value (gains)/losses transferred to income (11,882) (23,417) 23,373 37,525 7,582 - Impairment losses transferred to income 116,893 9,521 6,346 12,695 Other comprehensive income for the year 678,090 57, , , ,736 Total comprehensive income for the year 754,634 81, , , ,367 The notes on pages 12 to 37 form an integral part of these financial statements. 8

11 Unit Trust Corporation (Cayman) C Limited Statement of Changes in Equity Energy Asia- Pacific European Latin American Global Bond Year ended 31 December 2010 Balance at beginning of year 4,850,665 1,511,033 1,027,060 1,078,716 1,593,248 Subscriptions 3,380, ,657 27,245 76,806 90,155 Redemptions (3,544,787) (49,611) (28,800) (4,723) (27,420) 4,686,039 2,035,079 1,025,505 1,150,799 1,655,983 Total comprehensive income for the year 596, ,365 49, ,191 71,352 Balance at end of year 5,282,268 2,207,444 1,075,102 1,307,990 1,727,335 Year ended 31 December 2009 Balance at beginning of year 4,412,786 1,513, , ,355 1,427,588 Subscriptions 677,551 52,869 13,543 19,342 21,327 Redemptions (994,306) (136,870) (46,812) (45,489) (22,034) 4,096,031 1,429, , ,208 1,426,881 Total comprehensive income for the year 754,634 81, , , ,367 Balance at end of year 4,850,665 1,511,033 1,027,060 1,078,716 1,593,248 The notes on pages 12 to 37 form an integral part of these financial statements. 9

12 Unit Trust Corporation (Cayman) C Limited Statement of Cash Flows Energy Asia- Pacific European Latin American Global Bond Cash Flows From Operating Activities (Loss)/profit before tax (65,150) (36,067) (11,476) 22,563 16,846 Adjustments for: Impairment of financial assets available for sale 16,004 Net realised exchange loss on financial assets available for sale 995 Net realised losses/(gains) on financial assets available for sale 63,521 27,373 24,416 (7,975) 32,742 Withholding taxes (14,310) (7,840) (5,179) (4,769) (1,740) (Loss)/profit before changes in operating assets and liabilities (14,944) (530) 7,761 9,819 47,848 Changes in operating assets and liabilities: Decrease/(increase) in receivables 29,300 1, (793) (7,800) Increase in payables 283,574 17,656 6,605 9,009 2,863 Cash Generated From Operating Activities 297,930 18,354 14,682 18,035 42,911 Cash Flows From Investing Activities Purchase of financial assets available for sale (2,934,065) (1,334,211) (698,508) (720,178) (642,841) Disposal of financial assets available for sale 2,957, , , , ,798 Net Cash Generated From/(Used In) Investing Activities 23,420 (672,569) (315,598) (273,916) (81,043) Cash Flows From Financing Activities Subscriptions 3,380, ,657 27,245 76,806 90,155 Redemptions (3,544,787) (49,611) (28,800) (4,723) (27,420) Net Cash (Used In)/Generated From Financing Activities (164,626) 524,046 (1,555) 72,083 62,735 Net (Decrease)/Increase in Cash and Cash Equivalents 156,724 (130,169) (302,471) (183,798) 24,603 Cash And Cash Equivalents At Beginning Of Year 974, , , , ,997 Cash And Cash Equivalents at End of Year 1,131, , , , ,600 Supplementary Information: Interest income received 56,882 9,957 6,183 9,934 41,914 Dividends received 57,426 24,671 18,327 19,317 14,705 The notes on pages 12 to 37 form an integral part of these financial statements. Year ended 31 December

13 Unit Trust Corporation (Cayman) C Limited Statement of Cash Flows Energy Year ended 31 December 2009 Asia- Pacific European Latin American Global Bond Cash Flows From Operating Activities Profit/(loss) before tax 81,156 23,923 (16,401) (33,103) 54,631 Adjustments for: Impairment of financial assets available for sale 116,893 9,521 6,346 12,695 Net realised exchange loss/(gain) of financial assets available for sale 762 (63) (63) (63) 1,619 Realised (gains)/losses of financial assets available for sale (12,644) (23,354) 23,306 37,588 5,963 Withholding taxes (4,612) (663) (1,830) (1,114) Profit before changes in operating assets and liabilities 181,555 9,364 5,012 9,654 74,908 Changes in operating assets and liabilities: Decrease/(increase) in receivables 21,908 (2,638) (1,837) 1,203 20,678 (Decrease)/increase in payables (73,028) 14,913 9,655 10,411 5,716 Cash Generated From Operating Activities 130,435 21,639 12,830 21, ,302 Cash Flows From Investing Activities Purchase of financial assets available for sale (1,097,568) (696,877) (385,141) (379,505) (601,400) Disposal of financial assets available for sale 1,246, , , , ,769 Net Cash Generated From/(Used In) Investing Activities 148,749 (394,397) 26,023 (102,500) 147,369 Cash Flows From Financing Activities Subscriptions 677,551 52,869 13,543 19,342 21,327 Redemptions (994,306) (136,870) (46,812) (45,489) (22,034) Net Cash Used In Financing Activities (316,755) (84,001) (33,269) (26,147) (707) Net (Decrease)/Increase in Cash and Cash Equivalents (37,571) (456,759) 5,584 (107,379) 247,964 Cash And Cash Equivalents At Beginning Of Year 1,012,148 1,058, , , ,033 Cash And Cash Equivalents at End of Year 974, , , , ,997 Supplementary Information: Interest income received 182,514 18,800 6,344 17,679 93,428 Dividends received 25,827 3,844 6,719 4,142 1,199 The notes on pages 12 to 37 form an integral part of these financial statements. 11

14 Unit Trust Corporation (Cayman) C Limited 1 General information Unit Trust Corporation (Cayman) C Limited is a subsidiary of the Trinidad and Tobago Unit Trust Corporation, who is the sponsor and manager of the Unit Trust Corporation (Cayman) C Limited. Unit Trust Corporation (Cayman) C Limited was incorporated as an exempted segregated portfolio Company with limited liability under the provisions of the Companies Law (Revised) (Cayman Islands) on 31 July, Its registered office is situated at Campbell Corporate Services Limited, 4th Floor Scotia Centre, Albert Panton Street, George Town, Grand Cayman, Cayman Islands. The Company was licensed as a mutual fund under Section 4(1) (1a) of the Mutual s Law (Revised). Unit Trust Corporation (Cayman) C Limited operates as an open-ended mutual fund regulated under the Mutual s Law (Revised) of the Cayman Islands and issues shares in a number of different classes each designated to a separate segregated portfolio (a ). At 31 December 2010, the following segregated portfolios were in existence: - Energy Segregated Portfolio - Latin American Segregated Portfolio - European Segregated Portfolio - Global Bond Segregated Portfolio - Asia-Pacific Segregated Portfolio The respective are referred to as the s in the financial statements. The financial statements have been prepared for each of the segregated portfolios of Unit Trust Corporation (Cayman) C Limited (the Company ) comprising Energy Segregated Portfolio, Latin American Segregated Portfolio, European Segregated Portfolio, Global Bond Segregated Portfolio and Asia-Pacific Segregated Portfolio. The Company commenced operations on 1 August, Unit Trust Corporation (Cayman) C Limited is authorised to issue two classes of shares management shares and segregated portfolio shares. The management shares are voting non-participating shares of US100 nominal value each. The segregated portfolio shares are non-voting redeemable shares which were initially issued at US1 each. The authorised share capital of the Company is US5,000,000,000 divided into 100 management shares and 4,999,990,000 segregated portfolio shares. The s aim to generate long term capital growth with the exception of the Global Bond, which seeks to generate income while maintaining capital stability. The Asia-Pacific will invest in equities and fixed income securities located in the Asia-Pacific Region; the European will invest in equities and fixed income securities located in the European Region; The Latin American will invest in equities and fixed income securities located in the Latin American Region; The Energy will invest in equities and fixed income securities issued by energy and energy related corporations globally, including alternative energy companies; the Global Bond will invest primarily in fixed income securities issued by corporations and sovereigns globally. These objectives will be achieved by investing in highly diversified portfolios of listed and unlisted equity and debt securities, including deposits with banks, predominantly in US dollars. Subscriptions Subscriptions are made for the specific segregated portfolio shares (participating shares) being offered. Subscriptions are made by investors at a price per participating share (subscription price) based on the net asset value per unit. The minimum initial subscription is US and the minimum subsequent 12

15 Unit Trust Corporation (Cayman) C Limited 1 General information (continued) Subscriptions (continued) subscription is US20.00 which may be increased at any time at the discretion of the Directors. There is a sales charge with the exception of the Energy and the Global Bond, equal to 5% payable to the sponsor, which is deducted directly from the subscription amount. The net subscription fee is invested in the specific segregated portfolio. Redemptions All participating shares, with the exception of participating shares in the Global Bond, are redeemed without charge at the bid price based on the net asset value per participating share on the valuation day which immediately precedes the redemption day. A redemption fee of up to 5% of the amount redeemed will be charged by the s for redemptions of participating shares in the Global Bond. This fee may be waived at the discretion of the Directors. Distributions Dividends may be declared and paid on the participating shares at the discretion of the Directors. Dividends may be declared and paid on a semi-annual basis on the Participating Shares in issue on June 30 and December 31 of each year (the Record Dates ). Dividends will be declared five business days after each Record Date (the Declaration Date ) and paid two business days after the Declaration Date. Taxation Under the current laws of the Cayman Islands, there is no income, estate, transfers, sales or other Cayman Island taxes payable by the s. As a result, no provision for income taxes has been made in the financial statements. Dividend income earned is generally subject to foreign withholding tax at source. Withholding taxes on dividends (if any) are shown as a separate line item in the statement of comprehensive income. 2 Summary of significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. 2.1 Basis of preparation The financial statements of the Energy, Latin American, European, Global Bond and Asia-Pacific have been prepared in accordance with International Financial Reporting Standards (IFRS). The financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets available for sale. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires the Board of Directors to exercise its judgment in the process of applying the accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3. 13

16 Unit Trust Corporation (Cayman) C Limited 2 Summary of significant accounting policies (continued) 2.1 Basis of preparation (continued) New standards, amendments and interpretations (a) New and amended standards adopted by the s Improvements to IFRS were issued in 2008 and They contain numerous amendments to IFRS that the International Accounting Standards Board (IASB) considers non-urgent but necessary. Improvements to IFRS comprise amendments that resulted in accounting changes for presentation, recognition or measurement purposes, as well as terminology or editorial amendments related to a variety of individual IFRS. Some of these amendments are effective for annual periods beginning on or after 1 January There were no material changes to the s accounting policies and disclosures as a result of these amendments. (b) (c) New and amended standards, and interpretations mandatory for the first time for the financial year beginning 1 January 2010 but not currently relevant to the s (although they may affect the accounting for future transactions and events) IFRS 3 (revised), Business combinations, and consequential amendments to IAS 27, Consolidated and separate financial statements, IAS 28, Investments in associates, and IAS 31, Interests in joint ventures ; IFRIC 17, Distribution of non-cash assets to owners ; IFRIC 18, Transfers of assets from customers ; IFRIC 9, Reassessment of embedded derivatives and IAS 39, Financial instruments: Recognition and measurement ; IFRIC 16, Hedges of a net investment in a foreign operation IAS 1 (amendment), Presentation of financial statements. (The amendment clarifies that the potential settlement of a liability by the issue of equity is not relevant to its classification as current or non-current); IAS 36 (amendment), Impairment of assets (This amendment clarifies the allocation of goodwill to cash generating units for impairment testing), IFRS 2 (amendments), Group cash-settled share-based payment transactions ; IFRS 5 (amendment), Non-current assets held for sale and discontinued operations. New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2010 and not early adopted IFRS 9, Financial instruments, issued in November This standard is the first step in the process to replace IAS 39, Financial instruments: recognition and measurement. IFRS 9 introduces new requirements for classifying and measuring financial assets. The standard is not applicable until 1 January 2013 but is available for early adoption. The standard is not expected to have a material impact on the s financial statements. Revised IAS 24 (revised), Related party disclosures, issued in November It supersedes IAS 24, Related party disclosures, issued in IAS 24 (revised) is mandatory for periods beginning on or after 1 January Earlier application, in whole or in part, is permitted. The revised standard clarifies and simplifies the definition of a related party and removes 14

17 Unit Trust Corporation (Cayman) C Limited 2 Summary of significant accounting policies (continued) 2.1 Basis of preparation (continued) New standards, amendments and interpretations (continued) (c) New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2010 and not early adopted (continued) the requirement for government related entities to disclose details of all transactions with the government and other government-related entities. The s will apply the revised standard from 1 January The standard is not expected to have a material impact on the s related party disclosures. Classification of rights issues (amendment to IAS 32), issued in October The amendment applies to annual periods beginning on or after 1 February Earlier application is permitted. The amendment addresses the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. Provided certain conditions are met, such rights issues are now classified as equity regardless of the currency in which the exercise price is denominated. Previously, these issues had to be accounted for as derivative liabilities. The amendment applies retrospectively in accordance with IAS 8 Accounting policies, changes in accounting estimates and errors. The s will apply the amended standard from 1 January The amendment is not expected to have any impact on the s financial statements. IFRIC 19, Extinguishing financial liabilities with equity instruments, effective 1 July The interpretation clarifies the accounting by an entity when the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial liability (debt for equity swap). It requires a gain or loss to be recognised in profit or loss, which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued. If the fair value of the equity instruments issued cannot be reliably measured, the equity instruments should be measured to reflect the fair value of the financial liability extinguished. The s will apply the interpretation from 1 January It is not expected to have any impact on the s financial statements. Prepayments of a minimum funding requirement (amendments to IFRIC 14). The amendments correct an unintended consequence of IFRIC 14, IAS 19 The limit on a defined benefit asset, minimum funding requirements and their interaction. Without the amendments, entities are not permitted to recognise as an asset some voluntary prepayments for minimum funding contributions. This was not intended when IFRIC 14 was issued, and the amendments correct this. The amendments are effective for annual periods beginning 1 January Earlier application is permitted. The amendments should be applied retrospectively to the earliest comparative period presented. The s will apply these amendments for the financial reporting period commencing on 1 January It is not expected to have any impact on the s financial statements. 15

18 Unit Trust Corporation (Cayman) C Limited 2 Summary of significant accounting policies (continued) 2.2 Foreign currency translation (a) Functional and presentation currency The financial statements are presented in United States dollars which is each Segregated Portfolio s functional currency. See Note 3 for additional information. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Translation differences on non-monetary financial assets, such as equities classified as available for sale, are included in other comprehensive income. Changes in the fair value of monetary securities denominated in foreign currency and classified as available for sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in other comprehensive income. Translation differences on non-monetary financial assets such as equities classified as available for sale are included in the available for sale reserve in other comprehensive income. 2.3 Financial assets available for sale Classification The s classify its investments as financial assets available for sale. Management determines the classification of its financial assets at initial recognition. Financial assets available for sale are those that are intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices. Recognition/de-recognition All purchases and sales of financial assets available for sale are recognised on the trade date the date on which each Segregated Portfolio commits to purchase or sell the investment security. Financial assets available for sale are de-recognised when the rights to receive cash flows have expired or the s have transferred substantially all risks and rewards of ownership. Measurement Financial assets available for sale are initially recognised at fair value plus transaction costs. Subsequent to initial recognition financial assets available for sale are carried at fair value. Gains and losses arising from changes in the fair value of financial assets available for sale are recognised 16

19 Unit Trust Corporation (Cayman) C Limited 2 Summary of significant accounting policies (continued) 2.3 Financial assets available for sale (continued) Measurement (continued) in other comprehensive income, until the investment security is de recognised or impaired. At this time, the cumulative gain or loss previously recognised in other comprehensive income is recognised in profit or loss. Fair value estimation The fair values of quoted investments in active markets are based on current bid prices. If there is no active market for a financial asset, each Segregated Portfolio establishes fair value using various valuation techniques. These include the use of recent arm s length transactions, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants. 2.4 Impairment of financial assets available for sale The s assess at each statement of financial position date whether there is objective evidence that a financial asset is impaired. Objective evidence that a financial asset available for sale is impaired includes observable data that comes to the attention of the about the following loss events: (i) a significant financial difficulty of the issuer or debtor; (ii) a breach of contract, such as default or delinquency in payment; (iii) it becoming probable that the issuer or debtor will enter bankruptcy or other financial reorganisation; (iv) the disappearance of an active market for the financial asset because of financial difficulties; (v) observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of individual assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group including : - adverse changes in the payment status of issuers or debtors in the group; or - national or local economic conditions that correlate with defaults on assets in the group. In the case of equity financial assets classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is also considered in determining whether the assets are impaired. The considers a 20% decline as significant and a period of greater than twelve months as prolonged. If any such evidence of impairment exists, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss is removed from other comprehensive income and recognised in profit or loss. Impairment losses recognised in profit or loss on equity instruments are not reversed through the profit or loss. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through profit or loss. 17

20 Unit Trust Corporation (Cayman) C Limited 2 Summary of significant accounting policies (continued) 2.5 Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term investments in an active market with original maturities of three months or less and bank overdrafts. 2.6 Sponsor contributions Sponsor contributions are contributions received from the Trinidad and Tobago Unit Trust Corporation to establish the initial portfolios for each segregated portfolio. Sponsor contributions are accounted for when received and are classified as financial liabilities. These contributions were converted to participating shares of the respective segregated portfolio at the end of the Initial Offer Period. 2.7 Provisions Provisions are recognised when each Segregated Portfolio has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. 2.8 Equity Equity (segregated portfolio shares) are redeemable at the unit holder s option as identified in Note 1, and are classified as equity. The shares are carried at the redemption amount that is payable at the balance sheet date if the holder exercises the right to put the shares back to the respective. The shares can be put back into the s at each dealing day for cash equal to a proportionate share of the s net asset value as determined in the prospectus. The net asset value per share of each is calculated by dividing total assets of the respective, including all cash, cash equivalents, instruments and securities, less total liabilities at the close of the business day with the total number of outstanding shares (segregated portfolio shares) of the particular. The distribution on these shares is recognised in the statement of changes in equity as dividends. 2.9 Interest income and dividend income Interest income is recognised on a time-proportionate basis using the effective interest method and is included in profit or loss. It includes interest income from cash and cash equivalents and debt securities available for sale. The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or interest expense over the relevant period. 18

21 Unit Trust Corporation (Cayman) C Limited 2 Summary of significant accounting policies (continued) 2.9 Interest income and dividend income (continued) The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial instrument, or, when appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Dividends on available for sale equity instruments are recognised in profit or loss when the s right to receive payment is established Expenses Expenses are accounted for on the accrual basis Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously Subscriptions and redemptions Subscriptions and redemptions are accounted for on the accruals basis Comparative information Where necessary comparatives have been adjusted to improve the presentation in the current year. The following are the details of the changes made to comparative information: Dividend Income As Previously Reported Withholding Tax Reclassified Dividend Income As Adjusted Energy 22,121 4,612 26,733 Asia-Pacific 3, ,508 European 6,925 1,830 8,755 Latin American 4,757 1,114 5,871 The above reclassifications were necessary to improve overall presentation. 19

22 Unit Trust Corporation (Cayman) C Limited 3 Critical accounting judgments in applying accounting principles Management makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equate to the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are outlined below. (i) Impairment losses on financial assets available for sale The s follow the guidance of IAS 39 Financial Instruments: Recognition and Measurement to determine when an available for sale financial asset is impaired. This determination requires significant judgment. In making this judgment, the Company evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost; and the financial health of and near-term business outlook for the investee, including factors such as industry and sector performance, changes in technology, and operational and financing cash flow. If all of the declines in fair value below cost were considered significant or prolonged, the s would suffer an additional loss as outlined in the analysis below, being the transfer of the accumulated fair value adjustments recognised in other comprehensive income on the impaired available for sale financial assets to profit or loss. Energy Asia- Pacific European Latin American Global Bond 31 December 2010 Additional loss 58,708 2,219 4,723 12,370 10, December 2009 Additional loss 213,103 34,938 8,504 1,170 (ii) Fair value of financial assets not quoted in an active market The fair value of securities not quoted in an active market may be determined by the s using reputable pricing sources (such as pricing agencies) or indicative prices from bond/debt market makers. Broker quotes as obtained from the pricing sources may be indicative and not executable or binding. The s would exercise judgement and estimates on the quantity and quality of pricing sources used. Where no market data is available, the s may price positions using its own models, which are usually based on valuation methods and techniques generally recognised as standard within the industry. The inputs into these models are primarily earning multiples and discounted cash flows. The models used to determine fair values are validated and periodically reviewed by experienced management personnel, independent of the party that created them. The models used for private equity securities are based mainly on earnings multiples (based on the historical earnings of the issuer over the past decade) and discounted cash flows. The models used for debt securities are based on net present value of estimated future cash flows, adjusted as appropriate for liquidity, credit and market risk factors. 20

23 Unit Trust Corporation (Cayman) C Limited 3 Critical accounting judgments in applying accounting principles (continued) (ii) Fair value of financial assets not quoted in an active market (continued) Models use observable data, to the extent practicable. However, areas such as credit risk (both own and counterparty), volatilities and correlations require management to make estimates. Changes in assumptions about these factors could affect the reported fair value of financial instruments. The determination of what constitutes observable requires significant judgement by the s. The s consider observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. (iii) Functional currency Subscriptions and redemptions of segregated portfolio shares are denominated in United States dollars (US dollars). While the s are international and represent investment opportunities across the globe, the primary activity of all the s is to invest in US dollar securities. The performance of the s is measured and reported to the investors in US dollars. The Board of Directors considers the US dollar as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions and hence has determined the US dollar to be the functional currency of the s. (iv) Income taxes The invest in securities issued by entities which are virtually all domiciled in countries other than the Cayman Islands. Many of these foreign countries have tax laws which indicate that capital gains taxes may be applicable to non residents, such as the. Typically, these capital gains taxes are required to be determined on a self assessment basis and, therefore, such taxes may not be deducted by the brokers on a withholding basis. In accordance with IAS 12 - Income Taxes, the are required to recognise a tax liability when it is probable that the tax laws of foreign countries require a tax liability to be assessed on the capital gains sourced from such foreign country, assuming the relevant taxing authorities have full knowledge of all the facts and circumstances. The tax liability is then measured at the amount expected to be paid to the relevant taxation authorities using the tax laws and rates that have been enacted or substantively enacted by the end of the reporting period. There is sometimes uncertainty about the way enacted tax law is applied to offshore investment funds. This creates uncertainty about whether or not a tax liability will ultimately be paid by the. Therefore when measuring any uncertain tax liabilities management considers all of the relevant facts and circumstances available at the time which could influence the likelihood of payment, including any formal or informal practices of the relevant tax authorities. At December 31, 2009 and 2010, the have measured uncertain tax liabilities with respect to foreign capital gains taxes at nil and while this represents management s best estimate the estimated value could differ significantly from the amount ultimately payable. 21

24 Unit Trust Corporation (Cayman) C Limited 4 Financial assets available for sale Energy Asia- Pacific European Latin American Global Bond As at 31 December 2010 Equities quoted 3,938,050 1,666, ,256 1,068, ,237 Equities unquoted 475,808 24,640 30,800 Debt instruments - unquoted 21, ,270 81, ,917 Mutual funds 363,228 Total 4,435,679 1,771, ,450 1,099,686 1,320,382 As at 31 December 2009 Equities quoted 1,682, , , ,159 Equities unquoted 340,157 16,632 20,790 Debt instruments unquoted 1,116, , , , ,146 Mutual funds 258, ,689 Promissory notes 120,000 Commercial paper 450, , ,000 Total 3,847, , , ,398 1,215,835 5 Investment revaluation reserve Energy Asia- Pacific European Latin American Global Bond Year ended 31 December 2010 Balance at beginning of year (169,244) 32,346 17,806 55,294 (43,449) Other comprehensive income for the year 675, ,272 66, ,397 56,246 Balance at end of year 506, ,618 84, ,691 12,797 Year ended 31 December 2009 Balance at beginning of year (847,334) (25,495) (138,932) (85,431) (155,185) Other comprehensive income for the year 678,090 57, , , ,736 Balance at end of year (169,244) 32,346 17,806 55,294 (43,449) 22

25 Unit Trust Corporation (Cayman) C Limited 6 Number of units Energy Asia- Pacific European Latin American Global Bond As at 31 December 2010 Number of units at beginning of year 231,684 70,249 52,718 50,625 83,907 Subscriptions 159,173 25,798 1,392 3,570 4,521 Redemptions (158,770) (2,526) (1,450) (213) (1,327) Number of units at end of year 232,087 93,521 52,660 53,982 87,101 Equity 5,282,268 2,207,444 1,075,102 1,307,990 1,727,335 Net asset value per unit As at 31 December 2009 Number of units at beginning of year 250,325 74,417 54,633 52,034 83,984 Subscriptions 34,795 2, ,096 Redemptions (53,436) (6,659) (2,651) (2,320) (1,173) Number of units at end of year 231,684 70,249 52,718 50,625 83,907 Equity 4,850,665 1,511,033 1,027,060 1,078,716 1,593,248 Net asset value per unit Related-party transactions Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. Unit Trust Corporation (Cayman) C Limited is a subsidiary of the Trinidad and Tobago Unit Trust Corporation, who is the sponsor and manager of the Unit Trust Corporation (Cayman) C Limited. Unit Trust Corporation (Cayman) C Limited was incorporated as an exempted segregated portfolio Company with limited liability under the provisions of the Companies Law (Revised) (Cayman Islands) on 31 July, Each pays the Investment Advisor a management fee up to 1.5% of the average net asset value for the year at the discretion of the Investment Advisor (Trinidad and Tobago Unit Trust Corporation). In addition the Investment Advisor is paid an administrative fee up to 0.5% of the average net asset value at the discretion of the investment advisor. The Investment Advisor has agreed to bear all other expenses incurred on behalf of the s at this time. The Investment Advisor waived the management fee for the Energy in the amount of 93,307 in

26 Unit Trust Corporation (Cayman) C Limited 7 Related-party transactions (continued) The following are details of related party transactions: 7.1 Balances with Investment Advisor (i) (ii) (iii) Management and administration fees payable: Energy 72,417 Asia-Pacific 32,479 14,876 European 16,360 9,758 Latin American 19,516 10,513 Global Bond 10,620 7, ,392 42,913 Value of units held: Energy 968, ,830 Asia-Pacific 987, ,865 European 721, ,991 Latin American 898, ,028 Global Bond 1,044,812 1,005,942 4,620,612 4,238,656 Other payables: Energy 214, Transactions with Investment Advisor (i) Carrying value of financial assets sold during the year: Energy 22,000 Asia-Pacific 131,535 Latin American 162,241 Global Bond 295,605 No gains or losses were recorded on the above disposals as the assets were sold at their carrying values. The Investment Advisor has confirmed its intention to purchase all unquoted equity securities held by the s at the values as stated in these financial statements on or before June 30,

27 Unit Trust Corporation (Cayman) C Limited 7 Related-party transactions (continued) 7.2 Transactions with Investment Advisor (continued) (ii) Management and administration fees: Energy 93,444 Asia-Pacific 32,479 14,876 European 16,360 9,758 Latin American 19,516 10,513 Global Bond 10,620 7, ,419 42, Values of units held by key management: Energy 11,989 10,217 Asia-Pacific European Latin American Global Bond Financial risk management 8.1 Strategy in using financial instruments The s activities expose it to a variety of financial risks and those activities involve the analysis, evaluation, acceptance and management of some degree of risk or combination of risks. Taking risk is core to the financial business and operational risks are an inevitable consequence of being in business. Management s aim is therefore to achieve an appropriate balance between risk and return and minimise potential adverse effects in the s financial performance by focusing on the unpredictability of financial markets. Management s risk management policies are designed to identify and analyse these risks, to set appropriate risk limits and controls and to monitor the risks and adherence to limits by means of reliable and up to date information systems. The most important types of risks to the s are liquidity risk, market risk, and credit risk. Market risks include currency risk, interest rate risk and other price risk. There are several bodies responsible for managing and monitoring risks as follows: 25

28 Unit Trust Corporation (Cayman) C Limited 8 Financial risk management (continued) 8.1 Strategy in using financial instruments (continued) (a) Board of Directors The Board of Directors (the Board) is responsible for all financial risks arising out of the investment activity of the s. The Board appoints an Investment Advisor for the s (Trinidad and Tobago Unit Trust Corporation) for all the segregated portfolios with day-to-day responsibility for all aspects of the fund management process, including financial risk management. The Board sets the risk reporting guidelines for the Investment Advisor and considers the Advisor s recommendations for the format of said risk reports. The Board possesses ultimate control over the financial risk management process as it reserves the right to change the Investment Advisor for one or more of its s at any time subject to the applicable notice period. (b) Investment Advisor The Investment Advisor for all the segregated portfolios is responsible for providing the Board with timely, concise, relevant and accurate information on the risk exposures faced by the s and how they are being managed or controlled. The Advisor also presents the risk measurement methodology and any subsequent changes to said methodology to the Board for their approval. 8.2 Analysis of financial assets available for sale by fair value hierarchy All financial assets available for sale held by the s are carried at fair value. The hierarchy of fair value is applied as follows: Level 1: This refers to instruments whose fair values are determined directly by reference to published price quotations in an active market. In the case of quoted equities, fair values reflect closing quotations on recognised securities exchanges including the New York Stock Exchange and the National Association of Securities Dealers (Automated Quotes). Substantially all of the s equity instruments fall into this category. Level 2: This refers to debt instruments, equities and mutual funds which are not quoted in an active market. The fair value of debt instruments in this category reflect bid quotations from at least two recognised market makers where available and those that are determined by a valuation technique that makes use of observable market inputs. Valuation techniques are applied in the absence of market makers for various fixed income instruments with remaining term to maturity in excess of 365 days. These are valued in order of priority via market reads from fellow bondholders, via comparison with similar bond issues or via observable changes in credit spreads for bonds of similar quality. The fair value of equities and mutual funds in this category reflect the underlying net asset values (NAVs) at year end which are considered observable due to the level of capital activity. The following tables analyses the financial assets available for sale held by the s according to their fair value hierarchy: 26

29 Unit Trust Corporation (Cayman) C Limited 8 Financial risk management (continued) 8.2 Analysis of financial assets available for sale by fair value hierarchy (continued) Energy Asia- Pacific European Latin American Global Bond As at 31 December 2010 Fair value Level 1 Equities - quoted 3,938,050 1,666, ,256 1,068, ,237 Fair value Level 2 Equities - unquoted 475,808 24,640 30,800 Debt instruments - unquoted 21, ,270 81, ,917 Mutual funds 363,228 Total 4,435,679 1,771, ,450 1,099,686 1,320,382 As at 31 December 2009 Fair value Level 1 Equities - quoted 1,682, , , ,159 Fair value Level 2 Equities - unquoted 340,157 16,632 20,790 Debt instruments - unquoted 1,116, , , , ,146 Mutual funds 258, ,689 Promissory notes 120,000 Commercial paper 450, , ,000 Total 3,847, , , ,398 1,215, Liquidity risk i) Definition Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. ii) Management of risk In accordance with the Board of Directors policy, the Investment Advisor monitors the s liquidity position on a daily basis. Liquidity risk is managed by maintaining an adequate liquidity 27

30 Unit Trust Corporation (Cayman) C Limited 8 Financial risk management (continued) 8.3 Liquidity risk (continued) ii) iii) Management of risk (continued) position through appropriate cash, near cash and other short term investments. The liquidity position is also reviewed on a monthly basis by the Investment Advisor. Segregated portfolio shares in general are redeemable on demand on any business day i.e. any day other than a Trinidad & Tobago holiday at the bid price. The Board however may in its sole and absolute discretion and in such circumstances as it deems appropriate suspend the determination of the Net Asset Value per Participating Share. Consequently, the rights to redeem segregated portfolio would be suspended in such circumstances. In addition, the Board may elect to settle payments due in respect of the redemption of Participating Shares by the transfer of assets of the to the redeeming Shareholder. Maturity analysis of financial liabilities The s financial liabilities comprise management fees and other payables. Segregated portfolio shares are classified as equity. All balances are due within twelve months and equal their carrying values as the impact of discounting is not significant. iv) Expected liquidity of financial assets available for sale The s manage their liquidity risk by investing in quoted securities that are readily tradable. These securities are generally listed on recognised securities exchanges or trade in reasonably active broker-dealer markets. Typically, the s would expect to liquidate such securities in less than two weeks under most market conditions. Commercial paper and other unquoted money market investments maturing within one year tend to require significant lead time for disposal given the bilateral nature of the contracts. All other unquoted debt securities are assumed to take beyond one year to liquidate and are typically not disposed of prior to maturity. The following table provides an analysis of the expected liquidation period for the s assets as at 31 December 2010 and as at 31 December 2009: Less than two weeks Between two weeks and one year More than one year Total 31 December 2010 Energy 3,938,050 21, ,808 4,435,679 Asia-Pacific 1,771,361 1,771,361 European 912,540 35,270 24, ,450 Latin American 1,068,886 30,800 1,099,686 Global Bond 1,095, ,746 68,025 1,320,382 28

31 Unit Trust Corporation (Cayman) C Limited 8 Financial risk management (continued) 8.3 Liquidity risk (continued) iv) Expected liquidity of financial assets available for sale (continued) 8.4 Market risk Less than two weeks Between two weeks and one year More than one year Total 31 December 2009 Energy 3,067, , ,317 3,847,926 Asia-Pacific 768, ,000 57, ,897 European 537,180 77, ,016 Latin American 598,267 80, ,398 Global Bond 747, , ,288 1,215,835 Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk. Market risks arise from open positions in interest rate, currency and equity products, all of which are exposed to general and specific market movements in interest rates, credit spreads, foreign exchange rates and equity prices. a) Currency risk i) Definition Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The s may hold financial assets and liabilities in currencies other than the United States dollars. It is therefore exposed to currency risk as the value of securities denominated in other currencies will fluctuate due to changes in exchange rates. ii) Management of risk In accordance with the Board of Director s policy, the Investment Advisor monitors the s currency position on a daily basis. The currency position is also reviewed periodically by the Board of Directors. iii) Concentration of currency risk exposure and sensitivity analysis The s are not significantly exposed to currency risk as its financial assets and liabilities are substantially denominated in US dollars. The s financial assets and liabilities (both monetary and non-monetary) were all denominated in US dollars as at 31 December At 31 December 2009, the Energy fund held an open currency position in the Trinidad & Tobago dollar of 49,023. The valuation exchange rate relative to the US dollar was as of that date. A 1% increase/decrease in the TT dollar relative to the US dollar as of that date would have increased/decreased the Energy s total comprehensive income for the year (with all other variables being held constant) by

32 Unit Trust Corporation (Cayman) C Limited 8 Financial risk management (continued) 8.4 Market risk (continued) b) Interest rate risk i) Definition Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The s take on exposure to the effects of fluctuations in prevailing levels of market interest rates on both its fair value and cash flow risks. Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate because of changes in market interest rates. ii) Management of risk The s manage interest rate risk in line with their individual investment objectives. s with pure capital growth objectives manage their exposure to fixed rate bonds by limiting their exposure to this asset class to a fixed percentage of net assets. s with an income objective actively manage their effective duration in order to balance the counteracting effects on cash flow and fair value from changes in interest rates. iii) Sensitivity analysis Sensitivity analysis was conducted to determine the effect had US interest rates changed by 100 basis points. With all other variables held constant, total comprehensive income for the year would have increased/(decreased) as follows: c) Price risk bps -100 bps Energy (95) (46,341) ,654 Asia-Pacific (4,331) (8,106) 4,550 10,479 European (1,709) (2,968) 1,786 4,126 Latin American (371) 2,596 Global Bond (9,330) (13,006) 9,834 18,580 i) Definition Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instruments or issuer, or factors affecting all similar financial instruments traded in the market. The s are exposed to equity securities price risk. It is not exposed to commodity price risk. 30

33 Unit Trust Corporation (Cayman) C Limited 8 Financial risk management (continued) 8.4 Market risk (continued) c) Price risk (continued) ii) Management of risk The s manage equity price risk through careful asset allocation and security selection within specified limits. The security selection decision is typically influenced by consideration of fundamental and technical valuation factors as well as by the instrument s historical price sensitivity to the market. Overall price risk in the s is controlled by monitoring the weighted price sensitivity of the equity portfolio to movements in the relevant market, which is typically represented by the S&P 500. iii) Sensitivity analysis As at 31 December 2010 and 31 December 2009, using the S&P 500 Index, had US equity securities prices increased/decreased as a whole by 5% (with all other variables held constant), total equity would have increased/decreased as follows for the following s: Energy 219, ,038 Asia-Pacific 83,305 28,070 European 44,545 23,673 Latin American 54,984 20,997 Global Bond 42, Concentrations of risk by geography and industry sector The s manage concentrations of financial assets available for sale by geography and industry sector. Geography is generally represented by the major regions reflecting fund nomenclature in addition to the United States. Residual positions in countries not belonging to the major geographical regions corresponding to fund nomenclature are grouped in the other category. Industry sector is generally divided by Sovereign, Financial Institutions and Energy representing the typical major specific sector exposures for the funds. Residual positions in other economic sectors as well as substantial positions in financial instruments that replicate exposure to a broad market classification are included in the other category. 31

34 Unit Trust Corporation (Cayman) C Limited 8 Financial risk management (continued) 8.5 Concentrations of risk by geography and industry sector (continued) The s exposure to financial risks by geography and industry sector is provided as follows: As at 31 December 2010 Country United States Europe Asia-Pacific Latin America Other Total Sovereign Energy Asia-Pacific European Latin American Global Bond 151,666 52,325 68, ,016 Financial Institutions Energy Asia-Pacific 19,100 19,100 European 57,060 17,790 74,850 Latin American 47,985 47,985 Global Bond 46,000 46, , ,477 Energy Energy 3,448, , , ,937 3,986,666 Asia-Pacific 57,044 57,044 European 47,345 47,345 Latin American 30, , ,978 Global Bond 24,589 24,589 Other Energy 336, , ,013 Asia-Pacific 21,269 1,673,948 1,695,217 European 118, , ,255 Latin American 920, ,723 Global Bond 677,407 56,570 27,391 63, ,300 Total Energy 3,785, , , ,091 4,435,679 Asia-Pacific 21,269 1,750,092 1,771,361 European 175, , ,450 Latin American 30,800 1,068,886 1,099,686 Global Bond 875, ,385 79,716 63, ,276 1,320,382 32

35 Unit Trust Corporation (Cayman) C Limited 8 Financial risk management (continued) 8.5 Concentrations of risk by geography and industry sector (continued) As at 31 December 2009 Country Trinidad & Tobago United States Europe Asia- Pacific Latin America Other Sovereign Energy Asia-Pacific European 77,476 77,476 Latin American 51, , ,634 Global Bond Total Financial Institutions Energy 398, ,181 Asia-Pacific 18,700 18,700 European 63,729 63,729 Latin American 117, ,478 Global Bond 120,000 50,000 50, , , ,024 Energy Energy 1,548, , , ,828 2,907,428 Asia-Pacific 13, , ,260 European 118,316 41, ,079 Latin American 20,790 50,064 41, ,617 Global Bond 106, ,889 Other Energy 450,309 92, ,317 Asia-Pacific 100,000 19, ,780 57, ,937 European 36, , ,208 Latin American 11, ,182 38, ,827 Global Bond 120, ,298 56,249 76, ,288 Total Energy 450,309 1,640, , , ,009 3,847,926 Asia-Pacific 100,000 19,601 13, ,338 57, ,897 European 36, ,179 41, ,016 Latin American 11,274 20, ,200 80, ,398 Global Bond 240,000 50, ,298 51, , ,962 1,215,835 33

36 Unit Trust Corporation (Cayman) C Limited 8 Financial risk management (continued) 8.6 Credit risk a) Definition Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Credit exposures arise principally in investment activities that bring debt and other securities into the s investment portfolio. b) Management of risk The Investment Advisor manages default risk by subjecting potential issuers/counterparties to a robust credit risk assessment process that results in the assignment of a credit score or rating. The level of exposure to the issuer/counterparty is then set based on its credit score or rating. For existing issuers/counterparties, the Investment Advisor performs a credit review on at least an annual basis. Based on the outcome of the review, exposure limits to the issuer or counterparty may be increased, decreased or maintained going forward. The ratings of the major rating agencies shown below are mapped to the rating classes or credit scores based on the long-term average default rates of each external grade. The s use the external ratings where available to benchmark the internal credit risk assessment. Observed defaults per rating category vary year on year, especially over an economic cycle. s credit rating Description of the grade External rating: 1 High At least BBB- 2 Moderate From B- to BB+ 3 Low Below B- or unrated 34

37 Unit Trust Corporation (Cayman) C Limited 8 Financial risk management (continued) 8.6 Credit risk (continued) c) Maximum exposure to credit risk before collateral held or other credit enhancements The following table represents a worst case scenario of credit risk exposure to the s as at 31 December, 2010: Energy Asia- Pacific European Latin American Global Bond 31 December 2010 Corporate debt securities 21, ,270 81, ,917 Other assets 2,747 2,630 2,058 3,946 15,820 Cash and cash equivalents 1,131, , , , ,600 1,155, , , , , December 2009 Corporate debt securities 1,116, , , , ,146 Promissory notes 120,000 Commercial paper 450, , ,000 Other assets 32,047 3,858 2,374 3,153 8,020 Cash and cash equivalents 974, , , , ,997 2,573, , , ,575 1,393,163 35

38 Unit Trust Corporation (Cayman) C Limited 8 Financial risk management (continued) 8.6 Credit risk (continued) d) Analysis of financial assets exposed to credit risk The credit quality of the financial assets available for sale that are neither past due nor impaired can be assessed by reference to the internal rating system adopted by the s. The following is an analysis of the s financial assets that are exposed to credit risk. As at 31 December 2010 Neither past due nor impaired s Credit Rating 1 2 Impaired 3 Total Corporate debt Securities Energy 2,103 19,718 21,821 Asia-Pacific 105, ,270 European 81,554 81,554 Latin American Global Bond 225, , , ,917 As at 31 December 2009 Corporate debt Securities Energy 456, ,292 21,980 1,116,860 Asia-Pacific 206,952 57, ,506 European 99,785 41, ,548 Latin American 77,476 41, ,841 38, ,449 Global Bond 208, , ,771 76, ,146 Promissory notes Energy Asia-Pacific European Latin American Global Bond 120, ,000 Commercial paper Energy 150, , ,309 Asia-Pacific 100, ,000 European Latin American Global Bond 120, ,000 36

39 Unit Trust Corporation (Cayman) C Limited 8 Financial risk management (continued) 8.6 Credit risk (continued) d) Analysis of financial assets exposed to credit risk (continued) Interest income receivable, other assets and cash and cash equivalents each have a fund s credit rating of 1. (ii) Past due/impaired debt instruments The following schedule details the carrying value and fair value of impaired debt securities as at 31 December Carrying Value Before Impairment Impairment provision After impairment Fair value of collateral Energy 116,893 (116,893) Asia-Pacific 67,626 (10,072) 57,554 57,554 Latin American 45,084 (6,715) 38,369 38,869 Global Bond 90,168 (13,431) 76,737 76,737 No impairment provision existed for financial assets available for sale as at 31 December Capital management The s objectives when managing capital are to safeguard the s ability to continue as a going concern so that it can continue to provide returns for shareholders of redeemable shares. It will manage the investment portfolios to achieve growth by diversifying portfolios and managing risk exposures. 10 Events after the Balance Sheet Date There are no significant post-balance sheet date events. 37

40 Unit Trust Corporation (Cayman) C Limited 38