The Financial Sector The Role of Stock

The Financial Sector & The Role of Stock Exchange in Nation Building

Defining Wealth § Positive net worth § Assets are greater than liabilities § Positive cash flow

How is Wealth Created? 1. Maximization of earnings from investments through various financial markets that are available. 2. What is the Financial Sector? Overall part of economy

How is Wealth Created? § Free Market – Producing product desired by people § Individuals, Companies, Government create wealth by the combination of material, land technology in such a way as to capture a profit in a Sustainable Manner

Players Necessary to Create Wealth –(Economy) Business Government Consumers Non. Governmental Organizations (NGOs) Regulators

Creating Wealth-Country Perspective –(Financial Measure) § Central to the elimination of Poverty is the Creation of Wealth § Measurement is the Country’s ability to encourage ‘value added’ § Measurement also by GDP § Jamaica’s Annual Real GDP growth 1% since 1991. Labour productivity declines by 1. 3% annually over the last 35 years

Our Challenges § Per Capita Income is below that of our Caribbean Partners § Public Debt – Debt to GDP Ratio averaged 130% § High Interest Rate ? ? ? § Fiscal and Monetary Stimulus required § Significant drop in private capital inflows

Our Current Challenges –Macro Level § Diversify into value added products § Define Marketing and Branding Strategies that will help crate new profitable businesses that produce sustainable jobs § Create the network of players joining forces e. g. Jampro, Scientific Research Councils, Universities, BOJ, JSE, FSC, Multilateral Agencies such as IDB

Our Current Challenge - Macro § Funds to Finance the productive process – IMF loan facility (cushion the devastating effect of decline in productive sectors).

Wealth Creation at the Micro Level § Finance Company through Equity and Low interest funding § Improve Governance and fiscal responsibility § Emphasis on export production of value added products § Investments, Investments & More Investments

What are the Financial Products sought after for Wealth Creation? § § § § Mutual Funds Certificate of Deposit Government of Jamaica Securities (LRS, Debentures) Treasury Bill Real Estate, (REIT) Stocks, Options and Exchange Traded Fund Unit Trusts etc.

New Initiatives - Jamaica § Expansion of the different investment products § The advantages for Investors & Companies Listed on the Junior Stock Market § The possibilities of trading of government of Jamaica Securities

Wealth Creation Summary 1. Proper Climate to Create Wealth – Government, or personal 2. Proper financial regulation 3. Importance of Innovation 4. Determination of Risk and Reward 5. Vibrant Financial Sector

THE STOCK MARKET – ‘IT’S ROLE IN THE ECONOMY’ The MARKET acts as the conduit to: Ø Rein in primary capital by rechanneling cash resources into ‘productive’ economic activities thus build up the economy. Ø Enhance job opportunities and wealth creation. Ø Provide the option of equity financing rather than debt financing. Ø Provide new product offerings to investors

THE STOCK MARKET ‘It’s Role in the Economy’ Ø Provides investors with a market where shares traded (capital raising and as investment) and other financial securities are bought and sold Ø Gather the savings of the nation by bringing potential buyers & sellers together Ø Pass the capital on efficiently and securely to the user

THE JAMAICA STOCK EXCHANGE ‘Functions of the Exchange’ Ø The mandate of the JSE is to provide a fair and efficient and transparent stock market. Ø Provide the facilities to enable companies to list and raise capital for financing of new & existing business. Ø Provide an efficient electronic platform which facilitate Secondary Market Activities- Trading of the securities.

THE JAMAICA STOCK EXCHANGE ‘Systems -Technology’ The Electronic system is structured and provides : Ø Continuous order-driven process with central market principles. Ø Trading platform which is tightly coupled to a settlement platform.

THE JAMAICA STOCK EXCHANGE ‘Protecting & Regulating’ The Exchange’s Regulatory Requirements enables a high level of transparency for investors which promotes: Ø Increased confidence in the equities market resulting in greater interest in the market. Ø Member dealers and listed companies are regulated.

THE JAMAICA STOCK EXCHANGE ‘Relationship with Investors’ Ø The stock market provides for investors in the medium and long-term a means to invest in corporate companies in Jamaica. Ø Capital appreciation of holdings over a period of time often exceeds the rate of inflation. Ø Consistently the Exchange conducts public outreach such as this to advise person on new developments in the market and to get feed back from investors on their concerns.

THE JAMAICA STOCK EXCHANGE ‘Relationship with Investors’ Ø Host workshops on different aspect of investor education. Ø Provide a Website which is updated daily. Ø Provide Quarterly and Annual Stock Market Performance Reviews.

THE JAMAICA STOCK EXCHANGE ‘JCSD- Promoting efficient clearance & Settlement’ Ø Securities must be lodged in the JCSD prior to the transactions in shares (buy/sell) Ø Through the tightly coupled system (horizon/equity) platforms shares are transferred from one participant to another by a double entry system of accounting Ø Brokers must settle transactions on a T+3 basis. There has never been a failed settlement.

THE JAMAICA STOCK EXCHANGE ‘The Relationship with Investors’ JSE provides: Ø A mechanism for the disclosure of information to the public. Ø A channel for aggrieved clients to lodge complaints against broker members Ø Protection for minority share holders Ø Compensation Fund which allows for compensation of aggrieved investors in respect of brokers conduct.

THE JAMAICA STOCK EXCHANGE ‘Links listed companies and investors’ Ø Provides a safe and easy process for the transfer of securities Ø Monitors and liaise with listed companies and registrar to ensure ‘ 5 -days’ turn around of securities. Ø Provides statements to clients in order that customer can monitor their transactions and the value of their investment.

JAMAICA STOCK EXCHANGE ‘The Role of Member/Dealers’ Ø Promote growth of the market Ø Promote and Understanding of the Market and Provide Market Information Ø Provide Access to the Market for clients wanting to invest and Companies wishing to list Ø Listed Companies shares are traded through Authorized brokers Ø Investors buy/sell shares listed on the Exchange through Member dealers who open segregated accounts on behalf of their clients.

THE JAMAICA STOCK EXCHANGE ‘Role of Member Dealer’ Ø Member Dealers opens with client a discussion on proposed investment Ø Member Dealers examines the fundamental of shares such as P. E. Ratio, quality of Companies and provide advice

THE JAMAICA STOCK EXCHANGE ‘Advocacy Role’ Discussions with Government and Other Regulatory Authorities is a key function of the JSE which has resulted in: Ø Removal of Taxation on Dividends Ø The Establishment of the Junior Market Ø The approval of Caribbean Stock Exchange network

The Junior Market Experience v 100+ companies canvassed sinception in 2009 v MOU and joint promotions with Jam. Pro, PSOJ, brokers v 14 listings to date § All compliant with JSE rules § All show financial and other improvements § Paying additional taxes v 10+ companies ready for listing v Many getting ready to be listed

Junior Market Performance 2011 vs. YTD 2012 *YTD 2012: January to October 2012

Junior Market Performance 2011 vs YTD 2012 *YTD 2012: January to October 2012

Junior Market Performance Year Number of Transactions Volume Value Year End Market Year End Number of Market Capitalization Junior Market Companies at Capitalization (US$ Millions) Index Year End (JA$ Millions) 2009 14 62, 248 $1, 531, 915 755. 17 8. 40 150. 01 1 2010 1, 192 50, 331, 871 $206, 559, 980 8, 466. 81 94. 16 379. 92 8 2011 7, 883 306, 220, 533 $1, 247, 948, 069 23, 595. 00 262. 40 748. 86 12 YTD 2012 4, 336 108, 103, 695 $563, 496, 892 21, 975. 43 241. 35 668. 51 14 *YTD 2012: January to October 2012

JM Companies: Financial Performance Average increase in Pre-Tax Profit of 332% over the previous year. 600, 000 Pre-Tax Profit 500, 000 Post Listing Pre-Tax Profit 400, 000 Pre Listing Pre-tax Profit 300, 000 200, 000 ac t ur in g ia l uf an o M sc o sc La D o sc La La is tr Fi ib u na nc to rs as Te m ai Ja 2) 98 (1 n Bu ey on H ca n m ite Li n ph i ol D an H o Ca rg d e Co v rs dl e w Po ue Bl Co & ng ck ag i Pa G AM Ac ce ss Fi na nc ia l Se Pa pe r rv i ce s 0 er m pa ny 100, 000

JM Companies: Financial Performance Average revenue increase of 238% over the previous financial year

Additional Taxes Paid Company AFS GCT Post listing PAYE % change Post listing Pre-listing % change 6, 787, 207 5, 442, 376 25% 16, 282, 369 15, 865, 726 3% 16, 518, 868 9, 587, 552 72% 13, 973, 822 9, 245, 039 51% 0 0 0 15, 338, 179 13, 558, 387 13% DCOVE 62, 368, 682 34, 106, 917 83% 58, 845, 536 47, 915, 148 23% JAMT 84, 256, 260 52, 122, 877 62% 15, 763, 748 9, 128, 072 73% LASD 8, 469, 385 2, 456, 205 245% 166, 818, 202 141, 636, 903 18% LASF 22, 100, 000 9, 900, 000 123% 2, 700, 000 1, 800, 000 50% LASM 8, 232, 783 5, 629, 320 46% 34, 053, 634 18, 147, 641 88% 75% 323, 775, 490 257, 296, 916 26% BPOW CHL 208, 733, 185 119, 245, 247

JMC Contribution to Economic Growth Junior Market companies have employed over 230 full time workers and 100 temporary workers since listing. 80 52 AMG Packaging & Paper 90 7 40 30 6 20 10 0 Po w er ph H id in on en Co ey t. I ns ve Bu ur n an (1 ce 98 2) Ja Li m Ja ite m d* ai La ca sc n o Te D as is tr ib La ut sc or La o s sc Fi o na M nc an ia uf l ac tu rin g ol Co m ce & ra l. A ka gi cc ng Fi na n ss Pa c ce 3 G Lasco Manufacturing Ac 7 AM Lasco Financial er Pa p 21 al Se r Lasco Distributors vi 20 ci Jamaican Teas D 5 s General Accident Ins Honey Bun (1982) Limited* 100 50 pa ny Dolphin Cove 10 60 Bl ue Blue Power 70 New Employees Access Financial Services 100 en e Companies New Employees Since Listing G Junior Market New Employees Since Listing

JMC Contribution to Economic Growth Financial Services § § § Oct 2009: Listed on the JSE Junior Stock Market December 2009: Opened 3 new branches - Santa Cruz, Linstead & Portmore August 2010: Opened 2 new branches - Old Harbour & Brown's Town Feb 2012: Opened new branch in Downtown, Kingston. Total branches to 14. Has employed over 50 persons since listing on the Junior Market AMG Packaging and Paper Company July 2011: Listed on the JSE Junior Stock Market Purchased new property costing J$43 M that will add 10, 000 square feet of warehouse and manufacturing space to expand output Has hired 7 employees since listing

JMC Contribution to Economic Growth Blue Power Group § § April 2010: Listed on the JSE Junior Stock Market Expanded building complex to 8, 500 square feet, new machines and mills. Increased manufacturing capacity by 50 per cent, launched new soaps Has employed 10 persons since listing Caribbean Producers July 2011: Listed on the JSE Junior Stock Market 2011: Acquired additional 10, 000 sq. ft. for food processing plant in Montego Bay Constructing a store in Kingston costing J$80 M Has hired 25 workers since listing

JMC Contribution to Economic Growth C 2 W Music May 2012: Listed on the JSE Junior Stock Market § The first startup company to list on the Junior Stock Exchange. § The company has acquired 550 copyrights since listing. This is above its projections. § The company has six songwriters and is expected to increase the number o songwriters to ten by the end of 2012. § The company is expected to generate revenue during its 4 th quarter ending December 2012. § In November 2012, C 2 W Music announced that it has signed a multi‐year partnership with music publishing giant BMG Chrysalis and ‘We Want Drinkz’ is the first C 2 W track to be featured on the i. Tunes i. OS game called Tap Revenge.

JMC Contribution to Economic Growth Dolphin Cove Limited § § Dec 2010: Listed on the JSE Junior Market 2011: Opened a second marine park in Lucea, Hanover. 2011: Purchased additional 3 acres to the 7 -acre Ocho Rios marine park facility to widen its attraction offerings. Over J$155 M on capital expenditure. Has employed more than 100 persons since listing on the Junior Market Honey Bun (1982) Limited June 2011: Listed on the JSE Junior Market Purchased new equipment & vehicles – improved manuf. and distrib. efficiencies Expanded product line and marketing Has employed 5 permanent persons and 100 temporary workers since listing

JMC Contribution to Economic Growth Jamaican Teas Limited § § § § July 2010: Listed on the JSE Junior Market Nov 2010: Acquired 50% interest in Bay City Foods Limited. June 2011: Entered water bottling business 2011: Doubled warehouse, factory and admin office space Dec 2011: Purchased a supermarket in Kingston Feb 2012: Purchased assets of former Hilo supermarket in Savanna-La-Mar Now building 2, 000 sq ft warehouse on Port Royal street in Kingston to expand productive capacity Has employed more than 20 persons since listing on the Junior Market Lasco Distributors Limited § § § Oct 2010: Listed on the Junior Merket Expanded its logistics business and technology platform In the process of expanding product lines as well as plant and machinery § 21 employees hired since listing

JMC Contribution to Economic Growth Lasco Manufacturing Limited § § Oct 2010: Listed on JSE Junior Market Building modern facility costing J$2. 1 B in White Marl, adding 100, 000 sq ft. to: • Significantly reduce imports and make use of more local resources • Enable launch of new products, increases exports and double sales by 2014 Has employed 3 persons permanently since listing Factory expansion projected to provide 250 new jobs in the first phase alone § § Lasco Financial Services Limited Oct 2010: Listed on JSE Junior Market Expanded product range, e. g. education loans Acquired Supreme Ventures Money Gram business for J$38 M Quadrupled payday loans since listing Has hired 7 persons since listing

Quotes from Warren Buffett Ø ‘Today people who hold cash equivalents feel comfortable – they shouldn’t. They have opted for a terrible long term asset, one that pays virtually nothing and is certain to depreciate in value’ Ø ‘ The investor of today does not profit from yesterday’s growth’

Summary The Jamaica Stock Exchange provides: Ø Regulation of members & listed companies through Rules & Directives Ø Electronic Trading- ensuring transparency & Efficiency Ø Electronic Settlement System Ø Dissemination of price sensitive information Ø Surveillance system – monitoring of the market Ø The platform for reviving the economy

Sources of Stock Market Information The general public can receive information on the market through the following channels: Ø Radio & Television Ø Financial Magazines Ø Stock Brokers Ø JSE Website Ø Stock Market Brochures Ø Companies Publications Ø Annual Reports Ø Daily Trade Sheets

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