Patrick van Beek Director/Consultant 5 July 2005 Dealing in Shares Patrick van Beek Director/Consultant 5 July 2005 5 July 2005 Dealing in Shares

Introduction What are Shares Shareholders Rights and Obligations How shares are traded Benefits to Shareholders Benefits to the Company of Issuing Shares 5 July 2005 Dealing in Shares

What are Shares Ordinary Shares are also known as common stock or equities A security evidencing ownership interest in a company Literally a share in the ownership of a Company A security is an instrument issued by a corporation, government, or other organization which offers evidence of debt or equity 5 July 2005 Dealing in Shares

Shares - Example A company has issued 1,000,000 shares Mr A owns 1,000 shares Mr B owns 10,000 shares Mr C owns 100,000 shares 5 July 2005 Dealing in Shares

Rights of Shareholders Entitled to vote at shareholder’s meetings Typically one vote per share Elect board of directors Common shareholders also receive voting rights regarding other company matters such as stock splits and company objectives The board of directors is the group of individuals that represents the owners of the corporation and oversees major decisions for the company 5 July 2005 Dealing in Shares

Rights of Shareholders Entitle the holder to a share of the company's success through dividends and/or capital appreciation. In the event of liquidation, common shareholder have rights to a company's assets only after bondholders, other debt holders, and preferred stockholders have been satisfied 5 July 2005 Dealing in Shares

Pre-emptive Rights Shareholders sometimes enjoy "pre-emptive rights". Pre-emptive rights allow shareholders to maintain their proportional ownership in the company in the event that the company issues another offering of stock. This means that shareholders with pre-emptive rights have the right but not the obligation to purchase as many new shares of the stock as it would take to maintain their proportional ownership in the company Somewhat confusingly the term pre-emptive rights is sometimes also used to refer to the case where existing shareholders are restricted from transferring their shares eg other shareholders must be offered the shares before they can be sold to anyone else 5 July 2005 Dealing in Shares

Information Shareholders generally have the right to certain information Under Companies Act must receive annual return twenty-one days prior to annual general meeting (Section 155) The Securities Industry Act greatly expands on information which must be sent to shareholders of public companies A company must hold an annual general meeting every calendar year and within 15 months of the previous meeting (Section 107). Accounts must not be more than 6 months out of date when presented (Section 157) 5 July 2005 Dealing in Shares

SIA Information (1) Financial Statements as prescribed by the Council must be sent within 4 months to security holders Disclosure by Reporting Issuers Regulations annual accounts, auditor’s report, director’s report within 6 months Interim reports for first six months of year within 6 months 5 July 2005 Dealing in Shares

SIA Information (2) Disclosure by Reporting Issuers Regulations – notify every holder of securities without delay Major new developments Significant acquisition/disposal of assets Certain related party transactions Substantial Shareholdings Other information to GSC and GASCI Major New developments which are not public knowledge and which information – is necessary to enable them and the public to appraise the financial position of the issuer and its subsidiaries; is necessary to avoid a false market in its securities; or would be likely to bring about a material change in the price of its securities. A person has a substantial shareholding in a company if they hold shares which entitles them to vote at least 10 percent of the unrestricted voting rights of the company. 5 July 2005 Dealing in Shares

Obligations Generally obligations of shareholders are limited Must abide by articles and by-laws Pay for shares which have been subscribed to Agree to be abide by relevant laws and regulations 5 July 2005 Dealing in Shares

Share Trading Shares are traded in a variety of markets Informal, private deals Other the counter Regulated exchange In Guyana regulated exchange is operated by GASCI All public companies are eligible for trading provided they are registered with the GSC Following presentation will deal with the mechanics of trading 5 July 2005 Dealing in Shares

Types of Trading Quote driven Order Driven Prices are set with respect to the prices market makers are prepared to deal at Market markers will quote bid (price they will buy) and offer or ask (price they will sell) as well as volumes they are prepared to deal at Order Driven Prices are set with respect to trade prices Trinidad was quote driven market until recently – prices could move without there being a trade 5 July 2005 Dealing in Shares

Disclaimer GASCI nor any of its affiliates or any of their officers, directors, employees or agents makes any recommendation regarding any securities issued by any of the companies identified nor the advisability of investing in securities generally for any particular individual 5 July 2005 Dealing in Shares

Benefits (2) Superior Returns By way of Dividends Capital Returns Current dividend yields of regularly traded companies range from 3.2% to 12.5% Capital Returns Not known in advance – hence shares are a risky investment Over long periods most stock markets have shown positive real returns Caribbean Markets exceptional over last two years 5 July 2005 Dealing in Shares

Capital Returns 5 July 2005 Dealing in Shares Changes in market capitalisation of every share that has traded on GASCIs market 5 July 2005 Dealing in Shares

Dividends paid in last 12 months Information Stock Symbol Last Trade EPS P/E Ratio Dividends paid in last 12 months Dividend Yield Notes NBI 21.9 2.1 10.4 0.83 3.80% 1 BTI 40 6.44 6.2 2.5 6.30%   CBI 13.3 5.7 2.3 0.9 6.80% DIH 11 0.97 11.3 0.35 3.20% 1,3 JPS 4.47 1.5 CCI -2.23 DTC 175 23.1 7.6 12.50% GSI 15 1.56 9.6 0.68 4.50% 2 SPL 46.5 3.8 12.2 3.3 7.10% DBL 3 0.36 8.3 0.12 4.00% DDL 8 1.04 7.7 PHI 6 -0.03 16.70% GTI 5.38 5 July 2005 Dealing in Shares

Issuing New Shares Companies may be reluctant to issue shares because they may think that it dilutes the ownership it requires them to disclose information about their business that they would not otherwise have to reveal 5 July 2005 Dealing in Shares

Benefits of Issuing Obtain additional capital and increase the value of their business through public issue; May be able to issue new shares to merge with or acquire other businesses. Most important of all, they can reduce over dependence on bank borrowing which can be very risky DIH share issue joint venture with Banks Holdings. Many private companies in receivership 5 July 2005 Dealing in Shares

Market Ready Over 250 million Guyana Dollars traded on average each year in secondary market Investors are looking for opportunities to invest Companies are trading at between 6 and 12 times earnings after tax Opportunity to unlock value to existing shareholders or raise new capital One Energy – IPO followed by Rights issue – extremely high risk yet well received by the market 5 July 2005 Dealing in Shares

Questions? 5 July 2005 Dealing in Shares

Patrick van Beek Director/Consultant 5 July 2005 Dealing in Shares Patrick van Beek Director/Consultant 5 July 2005 5 July 2005 Dealing in Shares