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Clico Investment Fund and the Clico bonds update

This week, we at Bourse review the performance of the CIF fund, update on any recent developments and briefly consider the options available to ZCB policy holders.

CIF performance and review
The CIF closed-ended mutual fund has an estimated total asset value of $5.54B (204 million units at a Net Asset Value (NAV) of $27.10, as calculated by Bourse as at 9th May 2014. The traded value of CIF Units closed at a price of $21.84 on the Trinidad and Tobago Stock Exchange as at May 9th 2014, representing a discount of 19.4 per cent. The underlying investments of the Fund are over 40.07 million Republic Bank shares and Government of Trinidad and Tobago (GORTT) bonds of 703 million par value.
Eligible unit holders are paid distributions of not less than 95 per cent of distributable trust income (interest and dividends received on the deposited property and any undistributed Fund Income) less expenses, payable semi-annually on February 21 and August 21. Payment of dividends is dependent on the receipt of said income.
In February 2014, CIF unit holders collected their semi-annual dividend payment of $0.64 per unit (up from $0.56 in February 2013). These payments bring the total dividend paid for last 12 months to $0.96, representing a trailing 12-month dividend yield of 4.39 per cent on its May 9th closing price of $21.84 YTD
The latest data released on the Clico Investment Fund from the Clico Trust Corporation state the NAV was at $27.04 as at 30th April. This represents an increase of about 1.1 per cent from its $26.74 value ended 31st December 2013. Bourse has calculated the NAV based on a sum-of-parts approach in determining the total assets of the fund. The NAV of the fund is sensitive to its components; as the price of the Republic Bank shares (RBL),the Government Securities, and other significant assets fluctuate, so too will the value of the NAV. RBL stock presently trades at a price of $120.60, the estimate for CIF’s NAV is $27.14. At a listed price of $21.84, the CIF is trading at a discount to its NAV as mentioned before. Implicit therefore, investors holding CIF units are indirectly gaining RBL exposure at a discounted price when compared to the current market price of RBL. Investors also have the future benefit of an explicit claim to RBL shares upon closure of the CIF structure in January 2023.


Recent developments
RBL dividend flows into the CIF
RBL declared an interim dividend on 9th May to be paid on 29th May 2014 of $1.25 per share. CIF currently holds 40,072,229 RBL shares, resulting in dividend receipts of over $50 million to the Fund. This translates to approximately $0.25 per CIF unit, taking into account the dividend policy of the fund while excluding any coupon received from the government bonds held and any fund expenses.
Since our last article on December 12th 2013 relating to Clico Investment Fund and Clico bonds, there have been no further developments concerning 11-20 year (2022-2031 tranche) policy holders. Holders of the years 11-20 ZCBs have the option to either sell their holdings or convert to the CIF. For non-resident 11-20 Clico bondholders (other than residents of Guyana, the Eastern Caribbean Countries and the Cayman Islands), the Ministry of Finance has not altered its advisory to policy holders the options of either holding the bonds to maturity or cashing in at market, with players licensed to undertake such activities.

Investor considerations
The Clico Investment Fund remains an attractive dividend yield option in a low interest environment, with a trailing twelve month dividend yield of 4.39 per cent at its current trading price of $21.84. This compares favourably to the Trinidad and Tobago Composite Index’s (TTCI) dividend yield of around three per cent. The CIF has also maintained a reasonably narrow 52-week trading range ($21.00-$23.00) with an average trading price of around $21.75, as would be expected for a fund whose underlying assets are relatively stable. Accordingly, the CIF should likely continue to appeal to investors seeking an income generating stock with a history of price stability.
The options available to the holders of the 3-10 year (2014-2021 tranches) bonds remain either holding the bonds to maturity or selling at current market rates. The alternative of selling allows bond holders to receive cash payment for their bonds within a few days, at a discount to the face value. The benefit to the investor is the freeing up of capital for reinvestment and other uses. This may appeal to investors, in light of other opportunities which are on the local investment horizon. For resident bondholders of the 11-20 year (2022-2031 tranche) the options are either holding to maturity or converting to CIF. In the case of non-resident bond holders who are not eligible for CIF conversion, the options remain either to hold to maturity or sell the bonds at prevailing market rates.

For more information on the options available to Clico bond holders, please contact Bourse Securities Limited, at 628-9100, email us at fixed.income@boursefinancial.com or visit us at any one of our three offices located in Port-of-Spain, Chaguanas and San Fernando. Investors can also visit our website at www.bourseinvestment.com or Bourse Securities Limited Facebook page.
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