Sagicor Select Funds Limited Manufacturing and Distribution Select Fund

Outlook and Recommendation

The Jamaican economy continues to make strides in its development. In 2018, both the Manufacturing and Distribution industries contributed 25.7% to real value added (which measures the purchasing power net of any price changes over time). The Distribution industry is the largest contributor to real value and the industry as the single largest employer accounting for 19.9% of the total employed labour force. Financing to both industries has been increasing. Expansion in loans to the productive sector will continue at what we anticipate to be even more affordable rates due to the fact that we are in a relatively low interest rate environment. Looking forward growth in both industries are expected to continue into the near term due to the increased domestic demand stemming from the overall improvement in economic activity.

The Manufacturing and Distribution Select Fund uses a replication strategy which means that the M&D Select Fund will invest in substantially all the securities represented in the Index in approximately the same proportions as the index. The Manufacturing and Distribution Select Fund will be heavily exposed to any shocks to the Jamaican M&D sector. Also, like the Financial Select Fund, investors have no direct control of the number or types of securities in the fund. On the other hand, the fund offers investors a convenient passive ownership instrument of the Jamaican Manufacturing and Distributing sectors while investors are only charged a one-time commission fee to buy and sell multiple securities in the fund. Like the Financial select Fund, by purchasing one security, the Fund offers liquidity, with a reasonable fee structure.

Though the Fund is seemingly being offered to investors at a premium to book value, we believe the stock may be a suitable alternative to attempting to replicate exposure to the Manufacturing & Distribution sectors given the 1%-2%+ cost of buying individual securities. We therefore believe the stock may be suitable for investors looking to receive passive exposure to the Jamaica Manufacturing and Distribution sector. Investors should however note the risks surrounding investing in the stock, to include the possibility that the M&D Select Fund could trade at a different price than its Book Value. Investors are therefore encouraged to consult their Barita Investments’ Investment Advisor to determine if this security is suited to their portfolio and ultimately their investment goals before making an investment.

Summary of Offer
Issuer: Sagicor Select Funds Limited
Securities: Sagicor Select Funds Limited Class C Shares: Manufacturing and Distribution Select Fund
Shares Offered: 2,500,000,000 Shares, with right to upsize by an additional 1,500,000,000 inclusive of 1,500,000,000 Reserved Shares*
Subscription Price: J$1.00 per Share, excluding the Sagicor Employee Shares, payable in full on application
Sagicor Employees Subscription Price: J$0.98 per Share for the Sagicor Employee Shares, payable in full on application
Minimum Purchase: 1,000 Shares, with incremental purchases of 1,000 Shares
Capital Raise: J$2.49 billion to J$3.99 billion
Use of Proceeds: It is the Company’s intention to use the proceeds of the public offering in order to purchase additional securities in order to match the securities that constitute the Index as closely as possible.
Opening Date: November 20th, 2019
Closing Date: December 4th , 2019

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