Officials of the Unit Trust Corporation say the investment company has no money invested in Clico's controversial Executive Flexible Premium Annuity (EFPA)–the product that has thousands of local and foreign investors up in arms after the current regime revoked the guarantee on their principal given by the previous administration. "The money in the mutual funds is not at risk because the assets of the mutual funds are separate and distinct from the Corporation's assets," said the Corporation's chairman, Amoy Chang Fong and its executive director, Eutrice Carrington. And the executives, who were speaking on Tuesday evening in a room on the executive suite of the Unit Trust building in downtown Port-of-Spain, underlined the point that the UTC does not have any money invested in Clico or any of its products.
Asked whether the Clico policy outlined by the Minister of Finance in the 2011 budget might have an impact on the Corporation, Chang Fong and Carrington said: "As a result of the fact that we have no exposure to Clico or Clico Investment Bank, we do not expect the Government's actions with regard to Clico's executive annuity plans to have a material impact on the 2010 results." They confirmed information in the Corporation's 2009 financial report that the UTC had over $2 billion in exposure to the CL Financial group as at the end of August 2010. Of the over $2 billion of exposure, about $1.24 billion has been invested by the UTC's merchant bank in "fully secured investments in the CL FInancial Group." These "fully secured" investments include bond holdings in Lascelles de Mercado, the Jamaican conglomerate, and in One Woodbrook Place, CL Financial's showpiece upscale, urban high-rise apartments on the boundary between Woodbrook and St James.
"We feel confident that because our facilities are fully secured by real and financial assets and are being serviced, that we will be be repaid in full," they said. Of the $2 billion in exposure, UTC has Republic Bank shares and bonds valued at $515 million. Analysis of the UTC's 2009 financial report indicates that 70 per cent of its net income for 2009 came from its merchant banking and treasury divisions, while 15 per cent of its net income came from mutual fund services. It's also estimated that about 40 per cent of the merchant bank's assets, a sum of $1.24 million, is tied up in CL Financial. This is well above the 25 per cent concentration in the assets of one group outlined in the Financial Institutions Act.
Asked whether having such large exposure to one group could be considered prudent, Carrington said: "The large exposure would have been imprudent if we did not have that level of collateral coverage." Chang Fong, the retired deputy governor of the Central Bank, added: "In due course, we will aim to meet all the prudential criteria which limit lending to a single group to 25 per cent of a group's capital." In the 2011 budget presentation, Finance Minister Winston Dookeran said the current statutory arrangements for the UTC were "not consistent with the SEC guidelines for collective investment schemes." He said the Government's policy would ring-fence the Corporation's mutual fund assets from the assets of the Corporation.
He said, "this measure will further enhance the Corporation's governance framework and will safeguard its over 500,000 unit holders." The UTC is governed by its own enabling legislation that will have to be amended to accommodate the policy of the minister.