Oak Trust

Experienced proven advisors

Statement of Regulatory Capital and Related Risk

Financial Instruments

Foreign exchange risk

The Company is not exposed to risks from foreign exchange rate fluctuations as its cash and marketable securities are denominated in Canadian funds.

Credit risk

Substantially all of the Company’s accounts receivable consists of fees receivable based on Assets under Management and are received in the month after billing. The Company generally extends unsecured credit to these customers and, therefore, the collection of accounts receivable may be affected by changes in economic or other conditions. The Company has not experienced any material credit loss in the collection of receivables to date. As at December 31, 2016, the Company has no overdue accounts receivable (2015 - $Nil). As at December 31, 2016, the maximum exposure to credit risk on accounts receivable is $36,258 (2015 - $78,710).

The Company’s marketable securities consist of the following issuers:

  2016 $ 2015 $
Government of Canada (Moody’s - AAA) 5,778,554 5,732,514
Scotiabank - National Trust Company (Moody’s - Aa2) - 100,000
  5,778,554 5,832,514

The Company’s maximum credit exposure to credit risk on marketable securities is their carrying amounts. As at December 31, 2016, none of the marketable securities are past due or impaired.

Fair value

The fair value of marketable securities is determined directly by reference to published price quotations in an active market and are therefore included in Level 1 of the fair value hierarchy. Marketable securities consist of government bonds issued by the Government of Canada.

The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable, and accrued liabilities approximate their fair value due to their short-term nature.

Regulatory capital

The Company is subject to various externally imposed capital requirements and manages its capital in accordance with those requirements, including capital policies, procedures and controls to ensure compliance with these capital requirements is maintained. The company maintains a very low liquidity risk tolerance keeping regulatory capital invested primarily in Government of Canada issues.

As at December 31, 2016 and 2015 and for the years then ended, the Company was in compliance with the capital requirements which include the following;

Minimum paid-in capital

Under section 56(1) of the Trust and Loan Companies Act, the Company is required to maintain paid-in capital of at least $5,000,000. As at December 31, 2016 and 2015, the Company has capital stock in the amount of $5,879,850.

Capital Adequacy Requirements

Under the Capital Adequacy Requirements (CAR) as issued by OSFI, the Company is required to maintain certain capital ratios using an approach with risk weighted assets and defined formulas for determining those ratios. For both 2016 and 2015, the Company was required to maintain minimum Common equity tier 1 (CET1) ratio of 7.0%, a Tier 1 capital ratio of 8.5% and a Total capital ratio of 10.0%. The Company’s capital ratios have been calculated as follows for the years ending December 31, 2016 and 2015:

  2016
$000s
2015
$000s
Common Equity Tier 1 capital:
Total Equity $6,062 $6,198
Less: intangible assets $111 $111
  $5,951 $6,087
Tier 1 capital $5,951 $6,087
Total capital $5,951 $6,087
Risk-weight assets:
Credit risk $69 $139
Market risk
Operational risk $1,349 $1,345
Total risk-weighted assets $1,418 $1,484
 
Capital ratios:
Common Equity Tier 1 capital 419.7% 410.2%
Tier 1 capital 419.7% 410.2%
Total capital 419.7% 410.2%
Assets-to-capital multiple N/A N/A

As at December 31, 2016 and December 31, 2015, the Company was in compliance with the minimum regulatory capital requirement prescribed by Part X of the Trust and Loan Companies Act, Adequacy of Capital and Liquidity. For 2016 and 2015 fiscal years, the Company was required to maintain a 4% tier 1 capital ratio and an 8% total capital ratio.

Frequency of disclosure

As a smaller less complex institution with a stable risk profile, Oak Trust reports these qualitative and quantitative disclosures annually, as at its fiscal year end.


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