Home' Trinidad and Tobago Guardian : August 15th 2013 Contents BG12 FEEDBACK
BUSINESS GUARDIAN www.guardian.co.tt AUGUST 2013 • WEEK THREE
The Clico Policyholders Group (CPG)
is pleased to note that the Clico Investment
Fund (CIF) enjoyed a very positive quarter
for the period ending June 30, 2013, net
assets attributable to unitholders increased
from $5.084 billion to $5.186 billion, an
increase of $101.5 million over the previous
quarter ending March 31.
The net asset value (NAV) now stands
at $25.42 per unit compared to $24.92 per
unit as at the end of the last quarter. This
increase is primarily due to two main fac-
tors, firstly, revaluation gains of $44.9 mil-
lion on the Fund s major asset, Republic
Bank Ltd (RBL) shares, and an increase in
undistributed income of $56.6 million.
The CIF has declared a final dividend
of $0.32 per share payable on August 21,
which, when added to the $0.56 paid in
February, brings the total dividends paid
for the year to $0.88. This amount is to
be paid from cash generated by the div-
idends and interest the CIF receives from
its RBL shares and GORTT securities col-
lectively referred to as its investment
Total investment income was $57.5 mil-
lion compared $7.4 million in the previous
quarter, an increase of 577 per cent, mainly
due to receipt of the RBL interim dividend
payment of $50.1 million.
Total expenses also increased to
$939,986, up from $98,281 in the previous
quarter, an increase of $841,705.00 or 856
per cent. A closer examination of these
numbers reveal that the second largest
spend after the fund administration fee
of $501,531 is $264,621 on directors fees
or 28 per cent of total expenses for the
quarter (that is, a three-month period).
It is difficult to find fault with the "fund
administration fee," which is payable to
RBL as this works out to be about one per
cent of total investment income and seems
to be consistent with industry norms.
However, expenses of $264,621 of
unitholders funds on "directors fees" (for
the quarter) without their approval raises
some red flags. Since at this rate of expen-
diture, with the third and fourth quarters
still to go, by my calculation (264,621 x
3), it means if left unchecked, the directors
are likely to pay themselves approximately
$793,863.00 by the financial year-end.
It therefore begs the question: is this
good corporate governance or an extension
of the ubiquitous "eat-ah-food" culture,
which seems to be pervading the socioe-
conomic landscape today?
The following questions also need to be
• How many directors are to share in
• Who are they?
• What precisely is their remit to justify
• Has this payment been sanctioned by
Finance Minister Larry Howai?
• Will unitholders be adversely impacted
According to the CIF prospectus the
Clico Trust Corporation is the trustee of
the CIF and its sole shareholder is the
Government. Its directors initially com-
prised three persons, Jerry Hospedales
(adviser), Maurice Suite (permanent sec-
retary) and Sharon Mohammed (senior
business analyst) all of whom are employ-
ees in the Ministry of Finance and the
On January 8, interestingly, the total
number of directors was increased from
three to five persons with the addition of
Alvin Bridglal, Karen Smith and Kenneth
Daniell, who replaced Hospedales as chair-
Now that we have established that there
are only five directors, if the spend on
directors fees continues, it means that
each director will receive a total of about
$159,000 by year-end.
According to the CIF prospectus, the
sole shareholder of the trustee is the Gov-
ernment. The trustee has a fiduciary
responsibility to the unitholders to act as
custodian of the CIF s assets and to ensure
that the rights of the unitholders are in
no way infringed. This means that at all
times directors of the trustee are expected
to place the interests of the unitholders
before their own personal interests.
The CIF is not a performance-driven
fund, hence this investment objective of
holding its initial assets (RBL shares and
GORTT securities), for a period of ten
years will not change regardless of the
performance of these assets.
The CIF shall not borrow cash or provide
a security interest over any of its assets.
This simply means the directors, in a real
sense, are "glorified watchmen" with very
little or nothing to do, relative to the active
management of the CIF s assets. Since the
assets cannot be changed and there are
no predetermined performance targets to
Additionally, 95 per cent of all income
received by the CIF, less expenses, shall
be used to pay distributions (dividends)
to its unitholders, which means the higher
the expenses the less income is available
for payment to them.
The CPG is therefore persuaded that it
is incumbent upon chairman Daniell or,
failing him, the line minister Larry Howai
to explain that CIF $264,621 expenditure
on directors fees for the three-month
period ending June 30, 2013, at his earliest
chairman, Clico Policyholders Group
Sir Shridath Ramphal laments that the leaders of the
region have put the Caricom Single Market gear into
neutral and the Single Economy into reverse.
Former prime minister of Jamaica, PJ Patterson, says
that the Caribbean integration has its pitfalls and if it
does not change it will disappear. Winston Dookeran,
Minister of Foreign Affairs, T&T, claims that the issue
is not whether Caricom integration has failed or disap-
pearing; it is about fresh thinking and innovative ways
of moving beyond this to Caribbean Sea Convergence;
a response to emerging global challenges to capture new
There are calls for a greater role for public-private
partnerships driven by non-state entities. ECLAC rec-
ommends a broader regional forum to foster co-operation
including expanding Caricom market to 40 million via
the Dominican Republic, the Dutch and French Islands
and French Guyana, etc.
Even though Caricom (Single Market and Single Econ-
omy) has tariff barriers to protect and encourage regional
trade, commodity business with the rest of the world
is key to the region s survival. When the last recession
hit the US and the EU, the region s economies also col-
lapsed, some more than others.
But the IMF has been complaining for some 50 years
that the region has refused to diversify its economies -
they looked towards infrastructural projects and internal
market demand. Many of the countries chose to rely on
the vagaries of tourism and remittances, which are inex-
tricably linked to the advanced economies that the reces-
sion put into the economic doldrums. Today, most of
the region is in the hands of the IMF; an area of high
debt/GDP in the world.
But the problem is not when the good times will return.
The EU has stopped preferential treatment for the region s
agricultural produce; in T&T gas prices are threatened
by shale gas and the high risk of petroleum s early deple-
tion; demand for alumina from Jamaica has fallen.
Patterson reminds us that the region needs to formulate
a common foreign economic policy to take into account
the profound changes on the global landscape. One of
these concerns is the price of oil (now over US$100/bbl,
given that the last recession was precipitated by US$147
oil). Apparently peak oil is no more since we have found
more oil in Africa, etc.
The new oil being found is in ultra deep waters, in
sands that must be heated to get to it or trapped in shale
or tight rock that requires continued drilling to maintain
production; costs are high and rising.
Economic growth, wealth generation in the world and
even its scientific progress depended on cheap and abun-
dant resources that are now no more---oil, iron ore,
copper, food etc---added is the rapid increase in population
(two billion to seven billion from the 1900 to 2000). The
world/region will not continue as before unless new and
cheap resources are found and this is not likely. This
global paradigm shift will usher in an age of efficiency,
effectiveness and not the accustomed growth.
Caribbean countries with commodities will fare better
than their counterparts; the latter will have a difficult
time. The tourist trade will suffer because of high transport
costs and reduced wealth in the developed world. The
region has to respond and a larger under developed
market is not the answer.
Patterson tells us: "Now more than ever knowledge
is power. No one suggests that we disregard our natural
resources or abandon our primary commodities. But no
one can question that building a knowledge economy
holds the key to our survival and future prosperity of
the entire Caribbean."
The cri de coeur for the Caricom then is to build a
regional innovation system. Caribbean Sea convergence
needs to now focus on the details.
Mary K King
the new global
Does CIF need to spend
$264,621 on directors' fees
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