(Trinidad Express) Some 15,794 people, formerly short-term investment products (STIPs) policyholders of CLICO and British American Insurance, are expected to benefit from participation in Government’s CLICO Investment Fund (CIF), which was officially launched yesterday at the Ministry of Finance and the Economy, Eric Williams Finance Building, Port of Spain.
The TT$5.1 billion fund (known as NEL 2) is comprised of Republic Bank Ltd shares and Government bonds.
Finance Minister Larry Howai identified Jerry Hospedales as the fund’s chairman, who will work alongside the ministry’s permanent secretary, Maurice Suite, and its senior business analyst, Sharon Molane, to manage the fund.
The CIF is an initiative of the Government to settle, through the issue of units in the fund, amounts due to STIPs policyholders.
Howai signalled this intent in last month’s budget speech as the first of two steps in winding up the Clico issue, which came to a head in January 2009 with a Government bailout of businessman Lawrence Duprey’s insolvent insurance company.
His second step is the creation of a new insurance company in January 2013 to transfer the policies of Clico and British American.
The Government had offered a cash settlement for policyholders of less than TT$75,000 and an initial payment of TT$75,999, with 20 zero-coupon bonds with maturities for years 1-10 and 11-20.
The CIF is applicable for the 11-20-year bonds, and policyholders have a December 14, 2012 deadline to redeem the bonds for units in the fund.
The ministry, Howai observed, had also made special arrangements for bondholders who are not residents of Trinidad and Tobago.
Howai said the Government’s intention was to have the fund fully capitalised with Republic Bank shares. Following the bailout, Clico’s 32.3 per cent in Republic Bank shares had been placed in the company’s starved Statutory Fund, but Howai explained that the shares were transferred to CIF, with Government bonds being used to replace the shares in the Statutory Fund.
“In the event that additional Republic Bank shares become available, these Government bonds in the fund will be used to purchase additional shares at fair market value at that time,” he said yesterday.
The fund comprises, in part, 40,072,299 Republic Bank Ltd shares, with a nominal value of nearly TT$4.4 billion, which represents 86 per cent of CIF’s assets.
The Republic Bank shares in the fund represent 25 per cent of the total issued share capital of Republic.
Howai said the valuation of the shares was taken from October 26 when the shares were priced at TT$109.73 a share.
“We considered a number of options and came to the conclusion that we wanted Republic Bank Ltd to continue to operate independently and, also, we wanted to ensure that the business of the bank is not negatively affected in any way,” said Howai.
The Government bonds of TT$702 million for 25 years at 4.25 per cent represents the remaining 14 per cent of the assets of the fund.
He said 95 per cent of all dividends and interest earned on the fund would be credited to the fund. The other five per cent, he said, would be use d for administrative expenses and leave “some room to buffer” expenses such as auditor’s fees, director’s fees and legal expenses.
Howai is also optimistic that the fund energises the local stock market when it begins trading in January 2013 as it has had limited success in bringing new business to trade.
“All potential applicants are encouraged to discuss their participation with their broker or financial adviser, keeping in mind that the units are not redeemable, may trade on the Stock Exchange at a different value than the net asset value and may only be sold if there is a buyer in the market,” he stated.
CLICO Investment Fund (CIF) highlights: 1. The fund is a closed-end mutual fund, and the units issued by the fund will be traded on the Trinidad and Tobago Stock Exchange 2. The fund’s unitholders will not pay tax on related income and capital gains received nor will stamp duty apply to the transfer of Government 11-20-year bonds or units 3. For each $1,000 per unit of Government 11-20 bonds, a bondholder will receive 40 units in the fund 4. Opening value of per unit is $25 at the beginning of trade, with the price of the unit being subject to demand and supply conditions 5. Clico Trust Corporation is the trustee of the fund and Republic Bank is the administrator of the fund 6. Unitholders will receive distribution payments on February 21 and August 21, starting on February 21, 2013.
