Shareholders of Sterling Investments Limited (SIL) will vote at the company's extraordinary general meeting (EGM) on November 12 to consider the transfer of the company's portfolio to its wholly owned subsidiary Sterling Investments (Cayman) Limited.
In the EGM notice published on the Jamaica Stock Exchange (JSE) last Tuesday, it was said that the move is being done in response to changing regional and international regulations. The proposed change to its corporate structure was said to be focused on optimising shareholder value. The EGM will be held at 8:00 am at Bay Garden Inn, Rodney Bay, Gross Islet, St Lucia. Shareholders can join the proceedings via Zoom.
"The move is in response to changes in the regulations in St Lucia. The move will not affect or change the business strategy of Sterling Investments Ltd. In fact, the move will allow the company to comply with the new regulations in a cost-effective manner," said Sterling Investments Limited board member Marian Ross-Ammar via e-mail to the Jamaica Observer. Ross-Ammar is also the vice-president of trading and investment at Sterling Asset Management Limited.
Sterling Investments Limited, which is the investments manager for Sterling Asset Management, is a St Lucian international business company (IBC) which holds and trades securities and other investments. Sterling Investments Limited invests in corporate, municipal and sovereign bonds along with structured notes and unquoted ordinary shares. International business companies were grandfathered under amendments to St Lucia's IBC Act until June 30, 2021. However, income earned outside of St Lucia is not subject to income tax which is 30 per cent. Sterling Investments Limited assets are based in Europe, North America, the Caribbean and South America.
When asked how shareholder value will be optimised by moving the portfolio to the Cayman Islands, Ross-Ammar said, "It will reduce incurring additional costs which would be associated with keeping the portfolio in the St Lucian parent company. The process will be completed once the relevant resolutions are approved at the EGM."
Sterling Investments Limited had a dividend pay out ratio of 80 per cent in 2021 and recently paid a US$0.000643 per share dividend on September 20. Caricom (Caribbean Community) residents aren't subject to withholding tax due to the Caricom double taxation treaty. Thus, shareholders would still receive their tax-free dividends since Sterling Investments Limited would pay dividends it would receive from its subsidiary.
The EGM resolutions include the approval of the transfer of all interests in securities held in its [Sterling Investments Limited] portfolio investments to the Cayman subsidiary, the transfer be made from the broker accounts to the benefit of Sterling Investments (Cayman), the directors and secretary of the company be authorised to execute all steps and documents to execute all the steps and documents to transfer the interest of the investments and that the secretary be authorised to update the records of the company [Sterling Investments Limited] and provide notification to the JSE concerning all relevant transactions.
The EGM is being held before the company's annual general meeting (AGM) which is scheduled to be held at 8:30 am on the same day. The resolutions for that meeting include the audited accounts, reports of the directors and auditors being adopted and that KPMG's re-election as auditors of the company.
This is the second major jurisdictional rearrangement of a JSE listed company with Mayberry Investments Limited, a Jamaican securities dealer, aiming to reorganise under a court-approved scheme of arrangement. Under the proposed scheme, Mayberry Group Limited, a St Lucian IBC, would become the new parent company of Mayberry Investments which would become a wholly owned subsidiary, while St Lucian IBC's Mayberry Jamaican Equities Limited and Widebase Limited would become direct subsidiaries of the Mayberry Group. Mayberry Investments and Mayberry Jamaican Equities AGM's have not been held as yet since they are currently waiting on a date to include resolutions on the reorganisation.
St Lucia is currently not on the grey list for the Financial Action Task Force or European Union's list of non-cooperative jurisdictions for tax purposes.
Sterling Investments Limited's first half-year performance was significantly impacted by the appreciation of the Jamaican dollar (JMD) against the United States dollar (USD) which resulted in unrealised foreign exchange losses of $32.63 million. Despite Sterling Investments Limited's interest income increasing seven per cent to $75.97 million, total revenue was down 70 per cent to $48.87 million. As a result, net profit was down 93 per cent from $104.33 million to $7.14 million.
Due to the volatility experienced in the financial markets up to June, Sterling Investments Limited's total asset base shrunk 19 per cent year over year from $2.23 billion to $1.80 billion. The company's investment securities portfolio declined from $2.19 billion to $1.74 billion. Total liabilities decreased 17 per cent to $536.06 million as the company paid down $140.17 million on its margin loans. Shareholders equity is down 20 per cent to $1.27 billion due to the fair value reserve reflecting the drop in market prices of the financial assets.
Sterling Investments Limited's Jamaica dollar stock price is down one per cent to $2.83 while the US dollar stock price is up seven per cent to US$0.0220.