Dealing in Shares

5 July 2005 Dealing in Shares

GASCI THE GUYANA ASSOCIATION OF SECURITIES COMPANIES AND INTERMEDIARIES INC.

Dealing in Shares

Patrick van BeekDirector/Consultant

5 July 2005



Introduction

• What are Shares• Shareholders Rights and Obligations• How shares are traded• Benefits to Shareholders• Benefits to the Company of Issuing 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



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

Proportion of Company owned

Mr AMr BMr COthers



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



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



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



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



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



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



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



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



Types of Trading

• Quote 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



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



Benefits (2)

• Superior Returns– By way of Dividends

• 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



Capital Returns

van Beek Index (vBI) - % change since inception

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

Jul-03 Oct-03 Jan-04 May-04 Aug-04 Nov-04 Feb-05 Jun-05

(C) CAFS 2005



InformationStock Symbol Last

TradeEPS P/E Ratio Dividends paid

in last 12 months

Dividend Yield

Notes

NBI 21.9 2.1 10.4 0.83 3.80% 1BTI 40 6.44 6.2 2.5 6.30% CBI 13.3 5.7 2.3 0.9 6.80% 1DIH 11 0.97 11.3 0.35 3.20% 1,3JPS 4.47 1.5 CCI -2.23 0

DTC 175 23.1 7.6 21.9 12.50% GSI 15 1.56 9.6 0.68 4.50% 2SPL 46.5 3.8 12.2 3.3 7.10% DBL 3 0.36 8.3 0.12 4.00% 1DDL 8 1.04 7.7 0.36 4.50%

PHI 6 -0.03 1 16.70% GTI 5.38 0



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



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



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



Questions?



Dealing in Shares

Patrick van BeekDirector/Consultant

5 July 2005

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