Home' Trinidad and Tobago Guardian : November 21st 2013 Contents NOVEMBER 2013 • WEEK THREE www.guardian.co.tt BUSINESS GUARDIAN
COVER STORY | BG5
the mark to market adjustment in our
income statement vs. our balance sheet, with
a zero impact on our overall reserve position.
The UTC said that the $86 million impair-
ment for 2011 amounted to 4/1000th of a per
cent of the total funds under management
while the $20.3 million impairment for 2012
amounted to 9/10,000th of a percent of the
total funds under management for 2012.
Asked how many of the UTC s equities had
declined by 30 per cent or have declined below
cost for 12 months, the institution said: "Out
of a total of 222 equity securities, 14 equity
investments or six per cent have met our cri-
teria for impairment.
"We also wish to note that 153 equity invest-
ments, or 69 per cent of our 222 equity invest-
ment portfolio, have appreciated in value and
have unrealized gains since we have not sold
He said the UTC marks-to-market its equity
portfolio on a daily basis and the result is
reflected in the daily NAV.
He explained that previously unrecognised
gains and losses were recorded to the balance
Now, because UTC is adopting international
best practice and taking a prudent position,
unrecognised impairment losses will go to the
profit and loss account, if it meets the UTC s
enhanced criteria. But unrecognised gains will
only be recognised when the equity is sold.
He said that unrecognised gains are a significant
multiple of the unrecognised losses.
Redemptions vs. Subscriptions
The UTC acknowledged that redemptions
of $3.27 billion for the first nine months of
the year exceeded subscriptions of $2.87 billion,
but it said that this was because institutional
investors were taking advantage of the insti-
tutions redemption policy
According to the UTC: "A crucial part of
the Unit Trust Corporation s mission is ensur-
ing that we deliver the best possible returns
to our Unitholders by managing their Funds
in a professional manner.
"The over $7.5 billion in excess liquidity in
the financial system, has been contributing
to low returns, so much so, that short term
deposits for large sums are being routinely
turned away by banks and other financial
"Recently, our data has shown that insti-
tutional investors have been taking advantage
of our Income Fund s redemption features to
place funds for short periods of time, because
of the higher rates paid by the Fund in com-
parison to the market.
"This practice has the effect of depressing
the yield on the entire Fund s portfolio and is
therefore unfair to other investors, particularly,
individual and smaller investors.
"The Corporation has asked its institutional
investors to stop this practice in order to protect
the returns to investors already in the Fund.
We are currently in the process of developing
a new fund specifically for these large insti-
tutional investors to place their short term
The Central Government should allow the Tobago
House of Assembly to raise approximately $1.5 bil-
lion from the bond market if the THA fulfils certain
requirements, according to the former deputy Gov-
ernor of the Central Bank Dr Shelton Nicholls.
Dr Nichols said Tobago had received a shortfall in its budgetary
allocation of $1.5 billion and needed to look at alternative ways
for financing it.
He said: "There is a budget shortfall of 1.5 billion, sounds
like a lot of money but when you look at the overall GDP of
Trinidad and Tobago which is quite significant, 1.5 billion is
not very significant. You cannot do anything with that shortfall
in financing and so the THA needs to look at other sources
He argued that inter-governmental transfers will not do it
for Tobago and the island will have to walk on several legs.
Speaking at a business outlook conference hosted by the
THA s division of Finance at the Magdalena Grand, Nicholls
said: "As of March 2013, we had $5.8 billion in excess liquidity.
This is just funds sitting in the banking system that is not
being deployed. The overall debt for the country is about 51
per cent. This compares with countries in Europe with over
75 per cent to a 100 per cent debt to GDP ratio and some
countries in the Caribbean that are close to 100 per cent. So
there is room under your public debt to be able to actually
In a rare public appearance since leaving the Central Bank,
Dr Nichols said the case is further strengthened by the fact
that Tobago does not have any sub-national debt and is in
a better position than some state enterprises which have gov-
ernment-guaranteed debt. The THA also has a sub-sovereign
"WASA, T&TEC other elements in the national society can
actually raise that on the Bond Market and have successfully
done so in the past. So it is not a significant chunk of money
that you will necessarily despair about. But how one prepares
demonstrates how you will actually spend that money I think
is where part of the issue is and I think that is really what you
need to tackle."
He said the proposal has to be very professional and has to
identify the elements in detail and then will be in a position to
negotiate with the Central government.
Dr Nicholls told the conference that included the THA s Chief
Secretary Orville London and Finance Secretary Joel Jack: "You
have to be able to identify the main projects you want to do by
looking at project feasibility planning.
"One should not submit a project for expenditure without any
understanding of its feasibility and I think that should be greatly
discouraged. The projects that you want to fund are the things
that you have done some feasibility on understand what is involved
in the project and you can argue why these projects need to be
funded and the key test is the ability to estimate the likely rate
of return on the key projects."
He said you will have to tell the stream of revenues the THA
can expect from the projects and unless you put some numbers
in you cannot tall what impact the project is likely to have and
if the THA is going to do bond financing it is a critical piece of
Nicholls explained that in looking at bond financing one had
to consider the macro-economic situation of the country. He
argued that with liquidity still very high in the banking sector,
interest rates relatively low and the public sector debt to GDP
ratio still quite manageable, the cost of financing would be low.
The former Deputy Governor of the Central Bank said the
THA must also think about the absorptive capacity of the sister
isle s economy to handle the additional stimulus. He said it was
important because if there was no spare capacity it could lead
to an inefficient deployment of funds with Tobago not receiving
the desired results.
He argued that the THA will also have to look at its potential
effect on economic growth, employment and inflation and do
some macro modelling and debt specific modelling for the
sister isle before it approaches the Central government.
Nicholls said the THA will have to be able to establish some
measures, some indicators, some hard numbers as to what
exactly the position in Tobago is. Without that a discussion
with the Central Government doesn t start and it has to start
with those type of details was going nowhere.
He said there may also be a case for Public Private Part-
"I think there is a case for PPP particularly for infrastructure
projects. You don t want to necessarily fund those things from
your budget. You want to have some collaboration with the
private sector. Get some capital to fund things like Hospitals
and ports. Funding that from your budget is not necessarily
a feasible way to approach the funding," Nicholls said.
He added that the services sector, inclusive of tourism, was
the mainstay of the Tobago economy is now being complimented
by some value-added contribution from energy.
He pointed to exploration activities in the North Coast Marine
Area that takes place in Tobago waters was added to Tobago s
GDP by Dr Vanus James and the energy value to GDP in
Tobago is estimated around 47.7 per cent.
He said the outside of the energy sector, the largest contributor
to Tobago s GDP remains the Tobago House of Assembly while
financial and in particular real estate services is the fasting
growing aspect of the Tobago economy.
Dr Nicholls admitted that it was very difficult getting data
on Tobago s economy and that the figures he was working
with were the best available to him at this point in time. He
said when one looked at the THA s 2014 budget, its priorities
are in physical infrastructure development, business development
and entrepreneurship, social development and resilience and
human capital development.
Give THA borrowing authority says Nicholls
Continued from page 4
Chinapoo said the UTC, as a reporting
issuer, submitted quarterly statements
to the local Securities and Exchange
Commission for the first time for its
March this year. And it published its
quarterly statement for the first time,
on its website, for the June quarter.
"We do intend to continue publishing
our quarterly results as this is a
requirement of reporting issuers and
we are following that protocol since the
new Securities Industry Act, which
came into force this year," he said.
New fund coming for
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