Clico Investment Fund launches today

Republic Bank yesterday announced that the Clico Investment Fund (CIF) would be launched today, in accordance with the schedule outlined by Finance Minister Larry Howai in the 2013 budget on October 1. In a statement, Republic Bank said that the CIF would comprise “in part,” a total of 40,072,299 Republic Bank Ltd shares having a nominal value of $4,397,133,269.27 (at current market prices).

The Republic Bank shares in the fund represent 25 per cent of the total issued share capital of Republic Bank Limited. Clico owns 32.3 per cent of Republic Bank, which is equal to about 51.68 million shares, the value of which at yesterday’s trading was $5.6 billion. There was no explanation in the statement of why more of Clico’s shares in Republic bank were not vested in CIF.

The Republic Bank shares were transferred from Clico to the fund sponsor, the Government, and subsequently transferred to the fund trustee, Clico Trust Corporation Limited, as part of the initial assets of the Fund. The statement did not explain whether any other shares would be vested in the CIF, which is an initiative of the Government to partly settle the amounts owed to holders of short-term investment products issued by Clico.

People who invested more than $75,000 in Clico’s short-term investment products received $75,000 plus 20, one-year, zero-coupon bonds for the balance of the money owed to them. The holders of the short-term investment products—Executive Flexible Premium Annuities as well as the CORE mutual funds—have the option swapping years 11 to 20 of their zero-coupon bonds for units in the Clico Investment Fund.

The Republic Bank shares are being held in trust solely for the benefit of subscribing unitholders in the Fund. Republic Bank Limited is the fund administration agent as well as one of the distributors of the fund. According to the bank: “The Fund is an independent entity and the units in the Fund will be tradeable on the Trinidad and Tobago Stock Exchange at a date to be advised,”

In delivering the 2013 budget, Howai said that the Government would launch the Clico Investment Fund on November 1 and that the units of the Fund would begin trading on the T&T Stock Exchange on January 2, 2013. Howai also announced that in the budget that the income generated by the Fund to be tax-exempt in the hands of investors.

The constitution of the Fund and the transfer of the Republic Bank Shares into the Fund will result in no change to the management and or the operation of the Republic Bank Group, according to the bank’s statement.

The Clico Policyholders Group, in a statement following the announcement by the bank, said that it welcomed the establishment of the Clico Investment Fund and it confirmed that the transfer of the Republic Bank shares into the Fund will result in no change to the management and or the operation of the Republic Bank Group.

The policyholders’ group, in a statement by its chairman, Peter Permell, said while the performance of Republic Bank shares would have an impact on the share price of the units in the Fund, the price of the units would have no impact whatsoever on the price of the Republic Bank shares.  

Moreover whilst there is likely to be a direct relation between the performance of the Republic Bank and by extension its share price and the price of the units of the Fund, the converse is not true or put another way the price of the units will have no impact whatsoever on the price of the Republic Bank shares.

“This is because the Republic Bank shares held in the Fund are ringfenced by the trust that has been created between the GORTT and the unitholders for a specific period of time and as such those shares will not be directly accessible by the unitholders until the trust is extinguished and the Fund is dissolved,” said Permell.

The Ministry of Finance is hosting a news conference this morning to explain the establishment of the Clico Investment Fund.