preference share offer - Jamaica Stock Exchange

Transcription

PROSPECTUS
PREFERENCE
SHARE OFFER
O F F E R O P E N S : J A N UA RY 4 , 2 0 1 6 AT 9 : 0 0 a . m .
C LO S E S : J A N UA RY 1 4 , 2 0 1 6 AT 3 : 3 0 p . m .
A copy of this Prospectus, having attached thereto the documents specified in Section 19 entitled “Documents
Available for Inspection” was delivered to the Companies Office of Jamaica pursuant to Section 40 (2) of the
Companies Act, 2004 and was registered by the Companies Office of Jamaica on December 22, 2015. The
Companies Office of Jamaica accepts no responsibility whatsoever for the contents of the Prospectus.
The Financial Services Commission registered this Prospectus on December 22, 2015 pursuant to Section
26 of the Securities Act. The Financial Services Commission has neither approved the offered securities nor
has the Commission passed upon the accuracy or adequacy of this Prospectus. Any representation to the
contrary is a criminal offence.
PROSPECTUS
by
JMMB GROUP LIMITED
on its own behalf
for
9,000,000 Cumulative Redeemable 6.00% USD Preference Shares with no par value
At a fixed price of
US$1.00 per 6.00% USD Preference Share
AND
At a fixed price of
AND
1,500,000,000 Cumulative Redeemable 7.50% Variable Rate JMD Preference Shares with no par value
At a fixed price of
J$1.00 per 7.50% Variable Rate JMD Preference Share
AND
70,000,000 Cumulative Redeemable 7.25% Variable Rate JMD Preference Shares with no par value
At a fixed price of
Dated as of the 18th day of December, 2015
This Prospectus (herein the “Prospectus”) is intended for use in Jamaica and is not to be construed as
an offer of any of the Preference Shares outside of Jamaica.
The Directors whose names appear in Section 4 of this Prospectus accept full responsibility, collectively
and individually, for all the information in this Prospectus relating to JMMB Group Limited, its subsidiaries
and associated companies. The Directors have taken all reasonable care to ensure that, to the best of
their knowledge and belief, the information given herein or in those portions for which they have particular
responsibility is in accordance with the facts and does not omit anything likely to affect, in a material way, the
import of such information.
No person is authorised to provide information or to make any representation whatsoever in connection with
this Prospectus, which is not contained in this Prospectus.
PROSPECTUS
by
JMMB GROUP LIMITED
on its own behalf
for
At a fixed price of
AND
At a fixed price of
AND
1,500,000,000 Cumulative Redeemable 7.50% Variable Rate JMD Preference Shares with no par value
At a fixed price of
AND
70,000,000 Cumulative Redeemable 7.25% Variable Rate JMD Preference Shares with no par value
At a fixed price of
payable in full on application
II
JMMBGL PROSPECTUS
2016 PREFERENCE SHARE OFFER
This Prospectus contains important information for prospective investors in the Company. All prospective
investors should read this Prospectus carefully in its entirety before submitting an Application.
The application lists with respect to the 6.00% USD Preference Shares, the 5.75% USD Preference Shares, the
7.50% Variable Rate JMD Preference Shares and the 7.25% Variable Rate JMD Preference Shares will open at
9:00 a.m. on January 4, 2016 and will close at 3:30 p.m. on January 14, 2016. Applications submitted prior
to the Opening Date will be received, but not processed until the Opening Date. The Company reserves the
right to close any application list at any time without notice if Applications have been received for the full
amount of the respective Preference Shares offered, and the right to extend such closing beyond the date
above-mentioned and/or offer Preference Shares greater in number than originally offered. Applications for
Preference Shares should be made on the original Application Form provided at the end of this Prospectus or
on the Application Forms available for download at www.jmmb.com and www.jamstockex.com.
Each Application for the 6.00% USD Preference Shares and the 5.75% USD Preference Shares must be for
multiples of 500 Preference Shares subject to a minimum of 7,500 Preference Shares (in the relevant class of
Preference Shares).
Each Application for the 7.50% Variable Rate JMD Preference Shares and the 7.25% Variable Rate JMD Preference
Shares must be for multiples of 1,000 Preference Shares subject to a minimum of 50,000 Preference Shares
(in the relevant class of Preference Shares).
The procedure for completing the Application Form and the terms and conditions of the Prospectus are set
out in Section 21 of this Prospectus and on the Application Form.
The Offers with respect to the 6.00% USD Preference Shares and the 7.50% Variable Rate JMD Preference
Shares are hereby made solely for the benefit of Clients (as defined in Section 1 of this Prospectus
entitled “Definitions”). Additionally, applications for the 6.00% USD Preference Shares and the 7.50%
Variable Rate JMD Preference Shares may be made by a Client as the primary applicant and jointly
with applicants who are not Clients. The Offers with respect to the 5.75% USD Preference Shares and
the 7.25% Variable Rate JMD Preference Shares are made solely for the benefit of persons who are not
Clients.
Completed Application Forms must be received by January 14, 2016 at 3:30 p.m. Each Application must be
accompanied/supported by payment for the full amount payable on subscription by an Approved Payment
Method in the required currency and/or delivered to any one of the locations listed in Section 3 of this
Prospectus entitled “Professional Advisors to the Offer”. Manager’s Cheques should be made payable to
“JMMB Preference Share Offer” and will be presented for payment on receipt.
It is the intention of JMMBGL to apply to the Jamaica Stock Exchange for all of the Preference Stock Units
to be listed on the Exchange. The applications with any class of Preference Shares as set forth in Section 5
of this Prospectus will be made as soon as conveniently possible following the closing of the Offer and the
allocation of Preference Shares, the same converted on issue to be Preference Stock Units. However, these
statements are not to be construed as a guarantee that any of the Preference Stock Units will be listed.
III
6 Haughton Terrace Kingston 10, Jamaica, W.I. • Tel: 876 998-JMMB/5662 • Fax: 876 926-3685
Email: [email protected] • Web: www.jmmb.com
CHAIRMAN’S LETTER TO PROSPECTIVE INVESTORS
Dear Prospective Investor,
In recent years we have made a number of strategic decisions that continue to contribute to our growth
locally and regionally.
At our extraordinary general meeting (EGM) held September 16, 2015, shareholders present and by proxy
voted unanimously in support of a special resolution to issue six billion (6,000,000,000) Redeemable Preference
Shares with terms to be determined by Directors of the Company or a Committee thereof.
Following this approval, we are pleased to announce the offer of a new tranche of Preference Shares, the
details of which are set out in this prospectus.
The Group intends to use the proceeds of the Offer to refinance existing debt and to support our continuing
thrust of regional expansion.
We are particularly pleased to announce this Offer as it is the first by the JMMB Group Limited, the holding
company of the JMMB group of companies, and is therefore a milestone in our history.
We invite you to diversify and grow your portfolio with us by taking full advantage of this attractive offer.
Yours sincerely,
Dr. Noel Lyon
Group Chairman
IV
JMMBGL PROSPECTUS
TABLE OF CONTENTS
SECTION
1
DEFINITIONS
2
2
DISCLAIMER AND NOTE ON FORWARD LOOKING STATEMENTS
5
3
PROFESSIONAL ADVISORS TO THE OFFER
7
4
DIRECTORS • COMPANY SECRETARY • SENIOR MANAGEMENT
9
5
SUMMARY OF KEY OFFER INFORMATION
13
6
REASONS FOR OFFER AND USE OF PROCEEDS
19
7
INFORMATION ABOUT THE COMPANY
20
8
SHARE CAPITAL, STRUCTURES AND SHAREHOLDINGS
22
9
LICENSES AND REGULATORY FRAMEWORK
23
10
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION, RESULTS OF OPERATIONS AND FUTURE PROSPECTS
26
11
FINANCIAL STATEMENTS - FOR PERIOD ENDED 30 SEPTEMBER 2015
37
12
CORPORATE GOVERNANCE
55
13
DIVIDEND POLICY
61
14
MATERIAL CONTRACTS
61
15
LITIGATION
61
16
RISK MANAGEMENT
62
17
RISK FACTORS
67
18
CONSENTS
69
19
DOCUMENTS AVAILABLE FOR INSPECTION
69
20
STATUTORY AND GENERAL INFORMATION
69
21
APPLICATION PROCEDURES AND CONDITIONS OF OFFER
73
22
DIRECTORS’ SIGNATURES
75
APPENDIX 1 - AUDITOR’S CONSENT
76
APPENDIX 2 - TERMS OF ISSUE
77
APPENDIX 3 - FINANCIAL STATEMENTS - FOR THE YEAR
ENDED 31 MARCH 2015
89
APPENDIX 4 - APPLICATION FORMS
1
1.
DEFINITIONS
In this Prospectus, the following words and phrases shall, unless the context otherwise requires, be read
and construed as having the following meanings ascribed thereto:
“Act”
The Companies Act of Jamaica, 2004
“Allotment”
The allocation and issuance of Preference Shares to
successful Applicants
“Applicant” or “Applicants”
The person(s) or entity(ies) by whom an Application
is made
“Application” or “Applications”
The Application Form(s) completed by the
Applicant(s) for the subscription of Preference
Shares, duly delivered to any of the locations
listed at Section 3 of this Prospectus together with
payment in full of the subscription price for the
amount subscribed in the required currency, by an
Approved Payment Method
“Application Form”
The prescribed form set out in Appendix 3 which
shall also be available for download at www.jmmb.
com and www.jamstockex.com
“Approved Payment Method”
Any of the methods described at paragraph 2 of
Section 21 of this Prospectus.
“BOJ”
The Bank of Jamaica
“Client”
A person who is an account holder, ordinary
shareholder or preference shareholder of any
company within the JMMB Group as at December
24, 2015 and who, in the case of an individual, is at
least 18 years old.
“Closing Date”
With respect to any class of Preference Shares as
set forth in Section 5 of this Prospectus, the time of
closing of the Offer (subject to such extensions as
the Directors may determine)
“Company”
JMMB Group Limited
“Director” or “Directors”
The person(s) who is(are) a member(s) of the Board
of Directors of the Company
“Dividend”
The annual dividend of the Preference Stock Units,
being:
(i) in relation to the 6.00% USD Preference Shares,
the rate of 6.00% payable quarterly;
(ii) in relation to the 5.75% USD Preference Shares,
the rate of 5.75%, payable quarterly;
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JMMBGL PROSPECTUS
(iii) in relation to the 7.50% Variable Rate JMD
Preference Shares, the rate of 7.50% during
the Initial Fixed Rate Period and thereafter the
Variable Rate, all payable monthly; and
(IV) in relation to the 7.25% Variable Rate JMD
Preference Shares, the rate of 7.25% during
the Initial Fixed Rate Period and thereafter the
Variable Rate, all payable monthly
“FSC”
The Financial Services Commission of Jamaica
“Government” or “GOJ”
The Government of Jamaica
“Initial Fixed Rate Period”
The period commencing on the Closing Date and
ending on January 14, 2017
“Invitee”
A person or entity who has properly received
this Prospectus for the purpose of evaluating an
investment in the Offer
“J$” of “JMD”
The lawful currency of Jamaica
“JMMB” or “JMMB Limited”
Jamaica Money Market Brokers Limited a subsidiary
of the Company
“JMMBGL”
JMMB Group Limited
“JMMB Group” or “the Group”
The group of companies in which JMMBGL owns
either a controlling or significant equity interest
whether directly or indirectly
“JSE”
The Jamaica Stock Exchange
“Offer”
The offer of the Preference Shares for subscription
“Offer Price”
J$1.00 per 7.50% Variable Rate JMD Preference
Share
J$1.50 per 7.25% Variable Rate JMD Preference
Share
“Opening Date”
The time of opening of the Offer, as set forth in
Section 5 of this Prospectus
“Preference Shares”
All or any of the four classes of Preference Shares,
namely:
• 9,000,000 of 6.00% USD Preference Shares
• 2,000,000 of 5.75% USD Preference Shares
3
• 1,500,000,000 of 7.50% Variable Rate JMD
Preference Shares
• 70,000,000 of 7.25% Variable Rate JMD
Preference Shares
or such greater number with respect to any and
all classes of Preference Shares as may actually
be offered, each with no par value in the capital of
JMMBGL, the subject of this Offer
“Preference Stock Units”
All or any of the Preference Shares converted on
issue to preference stock units
“Registrar”
The Registrar whose name is set out in Section 3 of
this Prospectus or such other persons as may be
appointed by the Company from time to time to
provide the services of Registrar for the Company
“Terms of Issue of the Preference Shares”
The terms of the issue of the respective Preference
Shares set forth in Appendix 2 to this Prospectus
“US$” or “USD”
The lawful currency of the United States of America
“Variable Rate”
In relation to the 7.50% Variable Rate JMD
Preference Shares, means the rate equal to the
most recent of the GOJ’s 180-day Weighted Average
Treasury Bill Yield (WATBY) plus 1.00% per annum
to be reset annually on January 14 of each year until
maturity of the relevant Preference Shares in this
Offer.
In relation to the 7.25% Variable Rate JMD
Preference Shares, means the rate equal to the
most recent of the GOJ’s 180-day Weighted Average
Treasury Bill Yield (WATBY) plus 1.00% per annum
to be reset annually on January 14 of each year until
maturity of the relevant Preference Shares in this
Offer.
In the event that there is no 180-day Weighted
Average Treasury Bill issued within the last 90 days
prior to a Reset Date, JMMBGL shall be permitted
to use the implied 180 day rate based on GOJ JMD
Yield curve as displayed on Bloomberg 2 days prior
to the revaluation date.
4
JMMBGL PROSPECTUS
2.
DISCLAIMER AND NOTE ON
FORWARD LOOKING
STATEMENTS
Neither the delivery of this Prospectus nor the
offering, sale or allotment of any Preference Shares
hereunder shall under any circumstances imply that
there has been no change in the business, results
of operations, financial condition or prospects of
JMMBGL since the date of this Prospectus.
This Prospectus has been reviewed and approved In making an investment decision, investors are
by all of the members of the Board of Directors expected to make their own assessment of JMMBGL
of JMMBGL and they collectively and individually and the terms of the Offer herein, including the
accept full responsibility for the accuracy of merits and risks involved.
the information given herein and confirm that,
after having made all reasonable enquiries, Neither the FSC nor any Governmental agency
and to the best of their knowledge and belief, or regulatory authority in Jamaica has made any
(i) the information is true and accurate in all determination on the accuracy or adequacy of
material respects and is not misleading in any this Prospectus.
material respect, (ii) any opinions, predictions
or intentions expressed herein on the part of No representation or warranty, expressed or implied,
JMMBGL are honestly held or made and are not is made by any affiliate of JMMBGL or by the legal or
deliberately misleading in any material respect, professional advisors to JMMBGL as to the accuracy
(iii) that insofar as reasonably possible, all proper or completeness of the information set forth herein
inquiries have been made to ascertain and to including, without limitation, information with
verify the foregoing, and (iv) this Prospectus does respect to JMMBGL and nothing contained in this
not contain any untrue statement of a material Prospectus is, or shall be relied upon, as a promise
fact or fail to state a material fact necessary in or representation, whether as to the past or future.
order to make the statements herein, in light of
the circumstances under which they are made, This Prospectus contains summaries believed to
be accurate with respect to certain terms of certain
not misleading.
documents, but reference should be made to the
Each Applicant and Invitee acknowledges and actual documents (copies of which will be available
agrees that (i) such Applicant or Invitee has been to prospective investors upon request made to
afforded a meaningful opportunity to review, and JMMBGL) for complete information with respect
has received, all additional information considered thereto, and all such summaries are qualified in their
by such Applicant or Invitee to be necessary to entirety by such complete information.
verify the accuracy of the information contained in
this Prospectus, (ii) such Applicant or Invitee has not
relied on JMMBGL nor any persons affiliated with
JMMBGL or the legal or other professional advisor
to JMMBGL in connection with its investigation of
the accuracy of such information or its investment
decision, and (iii) no person has been authorized
to give information or to make any representation
concerning JMMBGL or the Offer for subscription or
the Preference Shares issued pursuant thereto or to
provide information or to make any representation
whatsoever in connection with this Prospectus other
than as contained in this Prospectus and information
given by duly authorized officers and employees of
JMMBGL in connection with the investors’ verification
of the information contained in this Prospectus and
that, if given or made, such other information or
representation should not be relied upon as having
been authorized by JMMBGL or any affiliate.
Each Applicant and Invitee should consult with his or
her own advisors as to the legal, tax, business, financial
and related aspects of subscribing for the Preference
Shares. Neither JMMBGL, nor any of its respective
representatives is making any representation to any
Invitee or Applicant regarding legal, tax, business,
financial or related aspects concerning subscription
for Preference Shares, and Invitees should not
consider this Prospectus as a recommendation by
JMMBGL that they should subscribe for or purchase
any Preference Shares. Each Invitee must make his
or her own investigation and evaluation of JMMBGL
and this Prospectus.
This Prospectus is intended for use in Jamaica only
and is not to be construed as making an offer to
persons outside of Jamaica to subscribe for any of the
Preference Shares. The distribution or publication of
this Prospectus and the offering of the Preference
Shares outside of Jamaica is prohibited by law.
5
JMMBGL requires that anyone who receives this Prospectus shall inform himself/herself about and observe
such restrictions. This Prospectus does not constitute, and may not be used for or in connection with, any
offer to, or solicitation by, anyone in any jurisdiction other than Jamaica.
Forward Looking Statements
Except for the historical information concerning the Company contained in this Prospectus, certain matters
discussed in this Prospectus, including without limitation the discussions of future plans and financial
projections, contain forward looking statements. Forward looking statements are statements made based
on assumptions or predictions of the future which may not necessarily come true. Although JMMBGL believes
that in making any such statement its expectations are based on reasonable assumptions, any such statement
may be influenced by factors that could cause actual outcomes and results to be materially different from
those projected. Invitees are cautioned not to place undue reliance on these forward looking statements,
which speak only as of their dates. Future events or circumstances could cause actual results to differ
materially from historical or anticipated results.
When used in this Prospectus, the words “anticipates”, “believes”, “expects”, “intends” and similar expressions,
as they relate to the JMMB Group and its businesses, are intended to identify those forward looking statements.
These forward looking statements are subject to numerous risks and uncertainties. Once this Prospectus has
been signed by or on behalf of JMMBGL, JMMBGL undertakes no obligation to update publicly or revise any of
the forward looking statements in light of new information or future events, including changes in JMMBGL’s
financial or regulatory position, or to reflect the occurrence of unanticipated events. There are important
factors that could cause actual results to differ materially from those in forward looking statements, certain
of which are beyond JMMBGL’s control. These factors include, without limitation, the following:
• economic, social and other conditions of Jamaica and any other jurisdiction in which JMMBGL may invest,
including actual rates of growth of such economies, instability, interest rate changes or exchange rate
volatility;
• adverse climatic events and natural disasters;
• unavailability of regulatory approval to launch new financial products, or unfavourable market receptiveness
to new products;
• changes in regulatory policy adversely affecting the revenues or expenses of JMMBGL or other companies
within the JMMB Group;
• any other factor(s) negatively impacting on the realisation of the assumptions on which JMMBGL’s financial
projections are based; and
• other factors identified in this Prospectus.
6
JMMBGL PROSPECTUS
3.
PROFESSIONAL ADVISORS TO THE OFFER
LEGAL ADVISORS TO THE OFFER
Harrison & Harrison
Attorneys-at-law
Suite # 1, 16 Hope Road
Kingston 10
REGISTRAR TO THE OFFER
KPMG Regulatory & Compliance Services
The Victoria Mutual Building
6 Duke Street
Kingston
BROKER
JMMB Securities Limited
6 Haughton Terrace
Kingston 10
SELLING AGENTS:
Jamaica Money Market Brokers Limited
6 Haughton Terrace
Kingston 10
JMMB Merchant Bank Limited
6-8 Grenada Way
Kingston 5
LOCATIONS WHERE APPLICATIONS MAY BE SUBMITTED:
JAMAICA MONEY MARKET BROKERS LIMITED
HAUGHTON AVENUE
5 Haughton Avenue
Kingston 10
Tel: (876) 998 5662
Fax: (876) 920 7281 / 998 9380
KNUTSFORD BOULEVARD
11 Knutsford Boulevard
Kingston 5
Tel: (876) 998 5662
Fax: (876) 960 3927 / 960 4455
PORTMORE
47- 48 West Trade Way
Portmore Town Centre
Portmore, St. Catherine
Tel: (876) 998 5662
Fax: (876) 939 3207
MANDEVILLE
23 Ward Avenue
Mandeville, Manchester
Tel: (876) 625 2351 / 625 4450-2
Fax: (876) 625 2352
MONTEGO BAY
Suite 1
Fairview Office Park
Alice Eldemire Drive
Montego Bay, St. James
Tel: (876) 998 5662
Fax: (876) 979 1566
MAY PEN
Shop 28B, Bargain Village Plaza
35 Main Street
May Pen, Clarendon
Tel: (876) 998 5662
Fax: (876) 786 3660
OCHO RIOS
Guardian Life Building
2 Graham Street
Ocho Rios, St. Ann
Tel: (876) 795 3627 / 795 3542
Fax: (876) 795 3886
SANTA CRUZ
Shop #2, Oasis Plaza
Coke Drive
Santa Cruz, St. Elizabeth
Tel: (876) 998 5662
Fax (876) 966 9816
7
JUNCTION AGENCY
Shop 2, Roye’s Plaza
Main Street, Junction
St. Elizabeth
Tel: (876) 965 8005
JMMB MERCHANT BANK LIMITED
KNUTSFORD BOULEVARD
11 Knutsford Boulevard
Kingston 5
Tel: (876) 998 5662
Fax: (876) 960 3927 / 960 4455
MONTEGO BAY
25 Church Street
Montego Bay, St. James
Tel: (876) 979 1707
Fax: (876) 952-4647
8
OCHO RIOS
Guardian Life Building
2 Graham Street
Ocho Rios, St. Ann
Tel: (876) 795 3627 / 795 3542
Fax: (876) 795 3886
JMMBGL PROSPECTUS
4.
member at his alma mater and is its Chief Financial
Officer/University Bursar with regional oversight of
the institution.
DIRECTORS •
COMPANY SECRETARY •
SENIOR MANAGEMENT
KEITH DUNCAN
Board Of Directors Profiles
NOEL LYON, Ph.D – CHAIRMAN
Noel is Chairman of JMMB Group Limited and
currently chairs subsidiaries, including JMMB
Insurance Brokers Limited, JMMB Securities Limited,
JMMB Money Transfer Limited, JMMB Fund Managers
Limited, Capital & Credit Securities Limited, JMMB
Puesto de Bolsa, S.A., Intercommercial Bank Limited,
and Intercommercial Trust and Merchant Bank
Limited, JMMB Investments (Trinidad and Tobago)
Ltd. and JMMB Securities (T&T) Limited. Dr. Lyon
is also a director on the Board of JMMB Merchant
Bank Limited.
He has served on the Boards of several private and
public entities including the National Development
Bank of Jamaica Limited, Jamaica Venture Fund
Limited, Bank of Jamaica, Frome Monymusk Land
Company Limited, Jamaica Bauxite Mining Co.
Limited, Jamaica Stock Exchange Limited, Jamaica
Unit Trust Services Limited, Clarendon Alumina
Production Limited, and Braco Resorts Limited.
Dr. Lyon attended Kingston College, University of
Guelph (B.S.A., M.Sc.), Harvard University (Ph.D.
Economics) and Harvard Business School.
ARCHIBALD
CHAIRMAN
CAMPBELL
–
GROUP
DEPUTY
Archibald is the Deputy Chairman of JMMB Group
Limited and is Chairman of the Board of Trustees
of the JMMB Pension Fund and the Risk, Audit and
Finance committees of JMMB Board, a Director of
JMMB Merchant Bank Limited and a Director of the
Bank’s Credit Committee. He is a past president of
the Institute of Chartered Accountants of Jamaica
and has served as an accounting expert in arbitration
as well as a Director of several companies.
He read for both his Masters and Bachelor of
Science degrees in Accounting at the University of
the West Indies. Mr. Campbell served as a faculty
A true visionary and strategist, he has built one
of the strongest trading teams in Jamaica. His
financial expertise has not only benefited the JMMB
Group, but also the Jamaican financial sector. A
former president of the Jamaica Securities Dealers’
Association, he was involved in the partnership
with the Financial Services Commission (FSC) in
designing and implementing new structures and
models to enhance the effectiveness of Jamaica’s
market players.
Keith served as a Vice-President of the Private
Sector Organization of Jamaica during the period
2012 – 2014 and continues to contribute to Jamaica
through various roles including his membership on
the Economic Programme and Oversight Committee
(EPOC).
He is a Chartered Financial Analyst and holds a B.A.
(Economics) from the University of Western Ontario
in Canada.
DONNA DUNCAN-SCOTT
Donna is guided by the philosophy that: “We
were born to manifest the glory of God. It is not
just in some of us; it is in every one of us”. She is
committed to sharing this fundamental truth in all
aspects of her life. Currently she leads the design
and development of programmes and practices to
deepen JMMB’s unique culture of being in the world
of team members and clients and having their best
interest at heart.
Donna has a B.Sc. in Engineering, as well as an MBA
from the Richard Ivey School of Business at the
University of Western Ontario in Canada. She also
holds the distinguished Certified Financial Analyst
accreditation.
HUGH DUNCAN
Hugh brings to the JMMB Group a wealth of
knowledge, financial management expertise and
valuable experience, having held senior positions
at Citibank (Trinidad) from 1989 to 1998. His
international postings include Manila, Philippines,
where he served for five years as a senior executive
9
member of Citibank’s international staff. Hugh
also held the position of Director, Capital Markets
at FirstCaribbean International Bank for the North
Caribbean region and subsequently was Managing
Director of Intercommercial Bank Group Limited
from 2006 to 2011. His career includes tenure in
the energy sector, having worked with the Jamaica
Bauxite Mining Company and subsequently Trinidad
and Tobago Oil Company.
Hugh holds an MBA from Concordia University and
a Bachelor of Commerce degree from Montreal’s
George Williams University.
WAYNE SUTHERLAND
Wayne is the Managing Director of Jamaica Venture
Fund Limited, a company that makes venture
capital investments. He serves as a Director of
Intercommercial Bank Limited, JMMB Investments
(Trinidad and Tobago) Limited, JMMB Securities
(T&T) Limited and Intercommercial Trust and
Merchant Bank Limited. He is the Chairman of JMMB
Group Information Systems Committee and also
sits on the Nominations and Corporate Governance
Committee. A former director of Jamaica’s
Securities Commission, (now the Financial Services
Commission), he is currently Chairman of Kencasa
Construction & Project Management Limited and
the St. Hugh’s Preparatory School Board.
council of the Jamaica Customer Service Association
and is an Honorary Fellow of the Jamaica Institute of
Management.
She is also a Senior Lecturer at UWI and a former
Associate Dean and former Head of Department for
the Centre of Hospitality and Tourism Management
(Nassau) and the Department of Management
Studies (Mona).
Anne holds a B.Sc. in Hotel Management from the
University of the West Indies, a M.Sc with Honours
from Pennsylvania State University and a Ph.D in
Organizational Management from Rutgers State
University.
RODGER BRAHAM
Rodger was appointed to the Board in July 2008
and sits on the Group’s Risk, Nominations and
Governance Committees, as well as the JMMB
Merchant Bank Credit Committee. He also chairs the
Credit Committee of Intercommercial Bank Limited
and is a member of their Risk Committee. In addition
he is a director of the Joan Duncan Foundation. He is
a former director of the National Housing Trust and
is an approved mentor for companies listed on the
Junior Stock Exchange.
Wayne holds a Bachelor of Science degree from UWI
and an MBA from the Columbia University Graduate
School of Business.
He holds a BBA from the University of Technology,
Jamaica, the Associate of Chartered Institute of
Bankers designation from the Institute of Bankers of
London and has participated in Harvard University’s
Programme for Management Development.
V. ANDREW WHYTE
DENNIS HARRIS
Andrew chairs JMMB Merchant Bank Audit
Committee and sits on the Group’s Audit, Finance,
Risk and Nominations and Corporate Governance
Committees. He is the Group Treasurer at Jamaica
Producers Group (JPG) and chairs the Board of
Trustees of the JPG Pension Plan. Mr Whyte also
chairs the Board of Management of Emmanuel
Christian Academy.
Dennis is the chairman of JMMB Merchant Bank
Limited and sits on the Group’s Human Resources,
Audit, Finance, Risk, Nominations and Corporate
Governance committees.
Andrew holds an MBA in Finance and Economics
and a BSc. in Chemical Engineering.
ANNE CRICK, Ph.D
Anne chairs the Human Resources and
Compensation, Nominations and Corporate
Governance Committees. She is on the advisory
10
In 2011, he assumed the position of Managing
Director of Unicomer Jamaica (Courts), building on
the strong track record established while he was
the Regional Finance Director for Courts Jamaica
Limited’s operations in the Caribbean with specific
responsibility for Finance, Treasury, Credit and
Information Technology. He also serves as a director
on the Board of Unicomer Jamaica Limited and
CGM Gallagher Group Limited and is a Chartered
Accountant.
JMMBGL PROSPECTUS
ANDREW COCKING
AUDREY WELDS
Andrew Cocking is currently an independent
financial consultant. His financial journey includes
senior management positions at the former Capital
& Credit Financial Group (CCFG), which he cofounded with other shareholders.
Audrey has had a distinguished legal career
encompassing both the private and public sector.
She is now an academic boasting over a decade
of experience in teaching legal courses at both the
undergraduate and graduate levels at UWI, Mona.
In her academic capacity, Welds has contributed to
growing the body of knowledge in the field through
several publications and participation in local and
regional conferences.
A trained engineer, he received a Bachelor of Science
degree from Howard University and later pursued a
Master of Science in Management and Public Policy
from Carnegie Mellon University.
Andrew has served as a director on numerous
boards including: JMMB Money Transfer Limited,
CAC2000 (Carrier Air Conditioning Local Distributor)
and Kidney Kids Foundation.
AUDREY DEER-WILLIAMS
Audrey currently holds the position of Senior
Director, Investments at the National Insurance
Fund where she is responsible for developing
and executing strategies to grow the investment
portfolio, currently valued over $70 Billion.
She serves as a director on several Boards including:
Joan Duncan Foundation, Sweet River Abbatoir and
Supplies Limited, National Insurance Fund and a
number of its subsidiaries.
She holds a Masters in Business Administration
from Manchester Business School and a Bachelor of
Science degree with a double major in Economics
and Accounting from the University of the West
Indies, Mona.
REECE KONG
With over two decades of experience as an
information technology professional, Reece is
the Managing Director and founder of RMP &
Associates Limited, an information technology
company that provides technological expertise to
various government agencies, financial institutions
and other corporate entities. Reece has held
several senior positions at Advanced Integrated
Systems (AIS) and was also a part of the technical
team at Kingston Terminal Operators Limited. He
sits on the JMMB Group Information Systems Board
Committee.
She holds a Bachelor of Law (LL.B) degree from
UWI, Mona, a Certificate of Legal Education from the
Norman Manley Law School and a Master of Law
(LL.M) from the University of London.
An active member of the legal fraternity, she is a
member of several sub committees of the Jamaican
Bar Association.
CAROLYN DaCOSTA – COMPANY SECRETARY
Carolyn, in her current capacity, has overarching
responsibility for ensuring that the organization
complies with standard financial and legal
practices and maintains the defined standards of
corporate governance. As such, she oversees the
establishment, implementation and monitoring of
the Group’s compliance and regulatory framework.
In keeping with JMMB’s commitment to effective
corporate governance, she ensures the compliance
of all relevant statutory and regulatory requirements,
as well as the management of the internal audit
process, monitoring changes in relevant legislation
and the regulatory environment and taking
appropriate action.
Carolyn’s professional qualifications include a
Bachelor of Laws from the University of London, A
Bachelor of Arts from the University of the West
Indies, and an MBA in Finance from the Manchester
Business School. Additionally, she is a Fellow Member
of the International Compliance Association and a
Justice of the Peace for the parish of St. Catherine.
He is the holder of a Bachelor of Science degree
from Nova South University and is a proud Calabar
alumnus.
11
Heads Of Country
KISHA ANDERSON – Country Manager – Jamaica
GUILLERMO ARANCIBIA – Country Manager – Dominican Republic
Group Executives
KEITH DUNCAN – Group Chief Executive Officer
DAMION BROWN – Group Risk Manager
CAROLYN DaCOSTA– Group Compliance Manager & Company Secretary
IMANI DUNCAN-PRICE – Group Chief Strategy Officer
DONNA DUNCAN-SCOTT – Group Executive Director, Culture & Human Development
PATRICK ELLIS – Group Chief Financial Officer
PAUL GRAY – Group Chief Investment Officer & Treasurer
JULIAN MAIR – Group Chief Investment Strategist
JANET PATRICK – Financial Controller – Planning and Strategy
SHELDON POWE – Group Chief Information Officer
KERRY-ANN STIMPSON – Group Marketing Manager
Heads Of Entities
KEISHA FORBES – Head, Investment Services, Jamaica Money Market Brokers Limited
JEROME SMALLING – CEO, JMMB Merchant Bank Limited
SHARON GIBSON – General Manager, JMMB Money Transfer Limited
CHRISTOPHER WALKER – Head, Client Fund Services, JMMB Fund Managers Limited
SHARON GILZEAN – General Manager, JMMB Insurance Brokers Limited
NIGEL ROMANO – CEO, Intercommercial Bank Limited
RONALD CARTER – CEO, JMMB Investments (Trinidad and Tobago) Limited
GUILLERMO ARANCIBIA – JMMB Puesto de Bolsa SA
JUAN JOSE MELO – CEO, Banco de Ahorro y Crédito JMMB Bank, S.A
EDGAR DEL TORO – CEO, JMMB Sociedad Administradora de Fondos de Inversión, S.A.
CURTIS MCDOWELL – CEO, JMMB Sociedad Fiduciaria, S.A.
12
JMMBGL PROSPECTUS
5.
SUMMARY OF KEY OFFER INFORMATION
The following summary information is derived from and should be read in conjunction with, and is
qualified in its entirety by, the full text of this Prospectus.
You are advised to read this entire Prospectus carefully before making an investment decision about this
Offer. Your attention is specifcally drawn to the Risk Factors in Section 17 of this Prospectus.
If you have any questions arising out of this document or if you require any explanation, you should consult
your stockbroker, licensed investment advisor, attorney-at-law, accountant or other professional advisor.
TIMETABLE
Publication of Prospectus
Offer Opens at 9:00 a.m.
Offer Closes at 3:30 p.m.
Allocation announced by
Refund cheques sent by
December 23, 2015
January 4, 2016
January 14, 2016
January 24, 2016
January 24, 2016
OFFER TO JMMB GROUP CLIENTS AND JOINT APPLICANTS
The Offers with respect to the 6.00% USD Preference Shares and the 7.50% JMD Preference Shares are hereby
made solely for the benefit of Clients and Applications for the 6.00% USD Preference Shares and the 7.50%
JMD Preference Shares by any other person will not be accepted. However, applicants for the 6.00% USD
Preference Shares and the 7.50% JMD Preference Shares may be made by a Client as the primary applicant
and jointly with applicants who are not Clients.
6.00% USD Preference Shares
ISSUER:
JMMB Group Limited
ELIGIBLE APPLICANT:
Clients and joint applicants where a Client is the
primary Applicant
SECURITIES:
9,000,000 Cumulative Redeemable Preference
Shares with no par value, each in the capital of
JMMB Group Limited
OFFER PRICE:
US$1.00 per Preference Share
TENOR:
Ninety-six (96) Months
NO. OF OFFERED SHARES:
9,000,000 Preference Shares
OFFER CAPITALISATION:
US$9,000,000.00 (or approximately
J$1,080,000,000.00)
HOW PAYABLE:
In full on application in United States Dollars by the
DIVIDEND PAYMENT
The first dividend payment on the 6.00% USD
Preference Shares will become due and payable
on April 14, 2016. Thereafter, dividends will be
due and payable quarterly on the 14th day of each
relevant month (July, October, January, April) or if
such day falls on a day other than a business day
then on the prior business day at the Agreed Rate
(as hereinafter defined) until maturity on January 14,
2024.
13
SIGNIFICANT TERMS AND CONDITIONS OF 6.00%
USD PREFERENCE SHARES:
The 6.00% USD Preference Shares (converted on
issue to be 6.00% USD Preference Stock Units) will
carry the right to a cumulative preferential dividend
payable quarterly at the Agreed Rate (as hereinafter
defined) on the capital for the time being paid up or
credited as paid up on the 6.00% USD Preference
Stock Units and on a winding up to repayment in
priority to the ordinary shareholders of JMMBGL.
They will not carry the right to vote save in narrowly
prescribed circumstances being (a) dividend not
paid for more than 12 months; or (b) on a winding
up. If the 6.00% USD Preference Stock Units are
listed on the JSE as proposed, JMMBGL will redeem
the Preference Stock Units by purchase over the JSE
for the price of US$1.00 per 6.00% USD Preference
Stock Unit on January 14, 2024 or if such day falls on
a day other than a business day then on the prior
business day. JMMBGL also reserves the right to
issue additional 6.00% USD Preference Shares in
the capital of JMMBGL, the same to be converted
to preference stock units ranking pari passu with
then existing 6.00% USD Preference Stock Units
or otherwise differing from such Preference Stock
Units.
Variation of the terms of issue will require the
consent of the holders of three-quarters (¾) of the
Preference Stock Units.
“Agreed Rate” means 6.00% per annum calculated
on the Offer Price per 6.00% USD Preference Share
(on a 365-day year basis).
7.50% Variable Rate JMD Preference Shares
The Offer with respect to the 7.50% Variable Rate JMD Preference Shares is hereby made solely for the benefit
of Clients and Applications for the 7.50% Variable Rate JMD Preference Shares by any other person will not be
accepted. However, applicants for the 7.50% Variable Rate JMD Preference Shares may be made by a Client as
the primary applicant and jointly with applicants who are not Clients.
ISSUER:
JMMB Group Limited
ELIGIBLE APPLICANT:
Clients and joint applicants where a Client is the
primary Applicant
SECURITIES:
1,500,000,000 Cumulative Redeemable Preference
JMMB Group Limited
OFFER PRICE:
J$1.00 per Preference Share
TENOR:
14
JMMBGL PROSPECTUS
1,500,000,000 Preference Shares
J$1,500,000,000.00
HOW PAYABLE:
In full on application by the Approved Payment
Method
DIVIDEND PAYMENT
The first dividend payment on the 7.50% Variable
Rate JMD Preference Shares will become due and
payable on February 14, 2016. Thereafter, dividends
will be due and payable monthly on the 14th day of
each month or if such day falls on a day other than
a business day then on the prior business day at the
Agreed Rate (as hereinafter defined) until maturity
on January 14, 2024.
VARIABLE RATE JMD PREFERENCE SHARES:
The 7.50% Variable Rate JMD Preference Shares
(converted on issue to be 7.50% Variable Rate JMD
Preference Stock Units) will carry the right to a
cumulative preferential dividend payable monthly
at the Agreed Rate (as hereinafter defined) on the
capital for the time being paid up or credited as
paid up on the 7.50% Variable Rate JMD Preference
up. If the 7.50% Variable Rate JMD Preference
Stock Units are listed on the JSE as proposed,
JMMBGL will redeem the Preference Stock Units
by purchase over the JSE for the price of J$1.00 per
7.50% Variable Rate JMD Preference Stock Unit on
January 14, 2024 or if such day falls on a day other
than a business day then on the prior business day.
JMMBGL also reserves the right to issue additional
7.50% Variable Rate JMD Preference Shares in the
capital of JMMBGL, the same to be converted to
preference stock units ranking pari passu with then
existing 7.50% Variable Rate JMD Preference Stock
Units or otherwise differing from such Preference
Stock Units.
“Agreed Rate” means the rate of 7.50% per
annum (on a 365-day year basis) during the period
commencing on the Closing Date and ending on
January 14, 2017 and thereafter the rate equal to
the most recent of the GOJ’s 180-day Weighted
Average Treasury Bill Yield (WATBY) plus 1.00% per
annum to be reset annually on January 14 of each
year until maturity of the 7.50% Variable Rate JMD
Preference Shares in this Offer.
15
prior to a Rest Date, JMMBGL shall be permitted
OFFER TO NON-CLIENTS
The Offers with respect to the 5.75% USD Preference Shares and the 7.25% JMD Preference Shares are hereby
made solely for the benefit of Applicants who are not Clients or who are not applying jointly with a primary
applicant who is a Client.
5.75% USD Preference Shares
ISSUER:
JMMB Group Limited
ELIGIBLE APPLICANT:
Applicants who are not Clients or who are not
applying jointly with a primary applicant who is a
Client
SECURITIES:
JMMB Group Limited
OFFER PRICE:
US$1.50 per Preference Share
TENOR:
US$2,000,000.00 (or approximately
J$360,000,000.00)
HOW PAYABLE:
In full on application in United States Dollars by the
DIVIDEND PAYMENT
The first dividend payment on the 5.75% USD
Preference Shares will become due and payable
on April 14, 2016. Thereafter, dividends will be
due and payable quarterly on the 14th day of each
relevant month (July, October, January, April) or if
such day falls on a day other than a business day
then on the prior business day at the Agreed Rate
(as hereinafter defined) until maturity on January 14,
2024.
16
JMMBGL PROSPECTUS
SIGNIFICANT TERMS AND CONDITIONS
OF 5.75 % PREFERENCE SHARES:
The 5.75% USD Preference Shares (converted on
issue to be 5.75% USD Preference Stock Units) will
carry the right to a cumulative preferential dividend
payable quarterly at the Agreed Rate (as hereinafter
defined) on the capital for the time being paid up or
credited as paid up on the 6.00% USD Preference
up. If the 5.75% USD Preference Stock Units are
listed on the JSE as proposed, JMMBGL will redeem
the Preference Stock Units by purchase over the JSE
for the price of US$1.50 per 5.75% USD Preference
issue additional 5.75% USD Preference Shares in
the capital of JMMBGL, the same to be converted
to preference stock units ranking pari passu with
then existing 5.75% USD Preference Stock Units
or otherwise differing from such Preference Stock
Units.
“Agreed Rate” means 5.75% per annum (on a 365day year basis) calculated on the Offer Price per
5.75% USD Preference Share.
7.25% VARIABLE RATE JMD PREFERENCE SHARES
ISSUER:
JMMB Group Limited
ELIGIBLE APPLICANT:
Applicants who are not Clients or who are not
applying jointly with a primary applicant who is a
Client
SECURITIES:
JMMB Group Limited
OFFER PRICE:
J$1.50 per Preference Share
TENOR:
J$105,000,000.00
HOW PAYABLE:
In full on application by the Approved Payment
Method
17
DIVIDEND PAYMENT
The first dividend payment on the 7.25% Variable
Rate JMD Preference Shares will become due and
payable on February 14, 2016. Thereafter, dividends
will be due and payable monthly on the 14th day of
each month or if such day falls on a day other than
a business day then on the prior business day at
the Agreed Rate (as hereinafter defined) per annum
until maturity on January 14, 2024.
VARIABLE RATE JMD PREFERENCE SHARES:
The 7.25% Variable Rate JMD Preference Shares
(converted on issue to be 7.25% Variable Rate JMD
Preference Stock Units) will carry the right to a
cumulative preferential dividend payable monthly
at the Agreed Rate (as hereinafter defined) per
annum on the capital for the time being paid up
or credited as paid up on the 7.25% Variable Rate
JMD Preference Stock Units and on a winding up to
repayment in priority to the ordinary shareholders
of JMMBGL. They will not carry the right to vote
save in narrowly prescribed circumstances being
(a) dividend not paid for more than 12 months;
or (b) on a winding up. If the 7.25% Variable Rate
JMD Preference Stock Units are listed on the JSE
as proposed, JMMBGL will redeem the Preference
Stock Units by purchase over the JSE for the price
of J$1.50 per 7.25% Variable Rate JMD Preference
issue additional 7.25% Variable Rate JMD Preference
Shares in the capital of JMMBGL, the same to be
converted to preference stock units ranking pari
passu with then existing 7.25% Variable Rate JMD
Preference Stock Units or otherwise differing from
such Preference Stock Units.
“Agreed Rate” means the rate of 7.25% per
annum (on a 365-day year basis) during the period
commencing on the Closing Date and ending on
January 14, 2017 and thereafter the rate equal to
the most recent of the GOJ’s 180-day Weighted
Average Treasury Bill Yield (WATBY) plus 1.00% per
annum to be reset annually on January 14 of each
year until maturity of the 7.25% Variable Rate JMD
Preference Shares in this Offer.
prior to a Reset Date, JMMBGL shall be permitted
18
JMMBGL PROSPECTUS
Intention To List On JSE
JMMBGL intends, immediately following the closing of the Offer, to make an application to the JSE to list the
6.00% USD Preference Shares, the 5.75% USD Preference Shares, the 7.50% Variable Rate JMD Preference
Shares and the 7.25% Variable Rate JMD Preference Shares sold in this Offer (converted to Preference stock
Units on issue) on the JSE to facilitate the trading of each of the said Preference Stock Units over the JSE. This
statement is not to be construed as a guarantee that all or any of the said Preference Stock Units will be listed.
6.
REASONS FOR OFFER AND USE OF PROCEEDS
The Offer forms part of the Company’s capital management strategy. This Offer will enable the JMMB Group
to continue its business line diversification and expansion. Part proceeds of the Offer will be used to replace
funds used to redeem the JMMB Preference Shares that will mature on January 7, 2016 thus enabling the
JMMB Group to maintain a robust financial and liquidity profile.
19
7.
INFORMATION ABOUT THE COMPANY
Corporate Profile
The JMMB Group is one of the leading financial groups in the Caribbean, serving approximately 220,000
clients in Jamaica, Trinidad and Tobago and the Dominican Republic combined. The JMMB Group provides a
broad range of financial solutions including investments, banking, remittances, and insurance brokering to
individual, corporate and institutional clients.
Our mission is to maximize client satisfaction through exceptional client care, world class financial advice and
expertise. Strength, ethics, credibility and openness are hallmarks of JMMB.
Grounded in our Vision of Love, our core values of integrity, respect, honesty and love, our cadre of talented
team members, and our commitment to helping our clients achieve their financial goals are the pillars of our
success.
Corporate Structure
20
JMMBGL PROSPECTUS
Corporate Citizenship
The JMMB Group takes its role as a socially-responsible corporate citizen very seriously, and this has been a
guiding principle and a part of our DNA since inception. Hence, our structured corporate social responsibility
programmes are delivered primarily through the Joan Duncan Foundation in Jamaica, and localized community
initiatives in the countries within which we operate. Throughout the years, our Vision of Love has been
extended to communities, supporting various initiatives in the areas of sports, health, education and general
outreach.
Summary of Key Performance Highlights from JMMB Group Unaudited Six
Months Financial Results - September 30, 2015:
Earnings per stock unit: J$0.72
Operating Revenue: J$5.87 billion
Net Profit: J$1.21 billion
Net Interest Income: J$2.77 billion
Key Milestones
•
Jamaica Money Market Brokers (JMMB) opened for business in November 1992, as the first money market
broker in Jamaica.
•
As a means of deliberate business line diversification in Trinidad and Tobago, JMMB acquired 50%
shareholding in Intercommercial Bank Limited (IBL) in 2005, and later gained full ownership of the IBL
Group in 2013.
•
In October 2007, JMMB Puesto de Bolsa opened its doors in the Dominican Republic, with a mandate to
actively develop the money market in one of the largest Spanish-speaking Caribbean islands.
•
On June 29, 2012, JMMB successfully completed the transaction to acquire the Capital & Credit Financial
Group (CCFG) in Jamaica. This enabled the expansion of the JMMB Group to include the provision of
merchant banking, remittance and unit trust products and services to its client base.
•
Jamaica Money Market Brokers Limited, under an approved Scheme of Arrangement, was delisted from
the Jamaica Stock Exchange (JSE), Barbados Stock Exchange (BSE) and Trinidad and Tobago Stock Exchange
(TTSE), and relisted as JMMB Group Limited on April 13, 2015.
Long-term Success
In continuing on the path of success, the JMMB Group will continue to: (a) expand and diversify its business
lines (b) exploit our operational synergies; (c) invest in infrastructure, technology and training; and (d) improve/
expand delivery channels to our clients.
21
8.
SHARE CAPITAL, STRUCTURES AND SHAREHOLDINGS
By virtue of the provisions of the Act, shares in the Company now have no par value.
CLASS PREFERENCE
AUTHORISED
PREFERENCE
No Maximum
–
–
ORDINARY
No Maximum
1,630,552,532
1,630,552,532
22
NUMBER ISSUED
STATED
JMMBGL PROSPECTUS
9.
LICENCES AND REGULATORY FRAMEWORK
Securities Regulation
Regulatory information in respect of JMMB Group Limited and its subsidiaries is as follows:
Name of entity
Country of
Incorporation
Principal Activities
Regulators
JMMB Group Limited
Jamaica
Financial Holding
Company
Jamaica
Bank of Jamaica, Financial Services
Commission,
Jamaica Stock Exchange Limited
Trinidad and Tobago
Trinidad and Tobago Securities
and Exchange Commission,
Trinidad and Tobago Stock
Exchange Limited
Barbados
Financial Services Commission,
Barbados Stock Exchange
JMMB Merchant Bank
Limited
Jamaica
Merchant banking
Bank of Jamaica
JMMB Money Transfer
Limited
Jamaica
Remittance
Bank of Jamaica
Jamaica Money Market
Brokers Limited
Jamaica
Securities dealing
and Primary dealer
Jamaica
Jamaica Stock Exchange Limited
JMMB Insurance Brokers
Limited
Jamaica
Insurance brokering
Financial Services Commission
JMMB Fund Managers
Limited
Jamaica
Fund management
Capital & Credit Securities Jamaica
Limited 1
Investment holding
JMMB Real Estate
Holdings Limited
Jamaica
Real estate holding
Unregulated
JMMB International
Limited
St. Lucia
Investment holding
and management
Unregulated
Jamaica
Stock brokering and
cambio services
Jamaica Stock Exchange Limited,
Bank of Jamaica
23
JMMB Securities Fund
Cayman Islands
Services Cayman Islands 2
Fund administrator
Cayman Islands Monetary
Authority
Capital & Credit Financial
Group Limited 2
Jamaica
Investment holding
Unregulated
Capital & Credit Holdings
Inc. 2
United States of
America
Investment holding
Unregulated
Capital & Credit
International Inc. 2
United States of
America
Securities brokering
Financial Industry Regulatory
Authority ( FINRA)
Jamaica Money Market
Brokers (Trinidad and
Tobago) Limited
Trinidad and
Tobago
Financial Holding
Company
Central Bank of Trinidad and
Tobago
JMMB Investments
Trinidad and
(Trinidad and Tobago) Ltd Tobago
and Exchange Commission
JMMB Securities (T&T)
Limited
Trinidad and
Tobago
Stock brokering
and Exchange Commission,
Trinidad and Tobago Stock
Exchange Limited
Intercommercial Bank
Limited
Trinidad and
Tobago
Commercial banking
Tobago, Trinidad and Tobago
Securities and Exchange
Commission
Intercommercial Trust
and Merchant Bank
Limited
Trinidad and
Tobago
Merchant banking
Tobago Trinidad and Tobago
Securities and Exchange
Commission
JMMB Holding Company
SRL
Dominican
Republic
Investment holding
company
Unregulated
Banco de Ahorro y
Credito JMMB Bank, SA
Dominican
Republic
Savings and loans
bank
Superintendencia de Bancos de la
Republica Dominicana
JMMB Sociedad
Administradora De
Fondos De Inversion, SA
Dominican
Republic
Mutual fund
administration
Superintendencia de Valores de la
Superintendencia de Valores de la
Pension Fund
Superintendencia de Pensiones
JMMB Puesto de Bolsa, SA Dominican
Republic
JMMB Sociedad Fiduciaria,
S.A. 3
AFP JMMB BDI, S.A. 3
24
Dominican
Republic
JMMBGL PROSPECTUS
(1) The Financial Services Commission Dealer Licence was returned in October 2015, after the Supreme Court approved the dissolution of the
Individual Retirement Account. Capital & Credit Securities Limited is a Special Purpose Vehicle within the JMMB Group used for the purposes
of holding and recovering bad loans. We are awaiting the FSC confirmation that Dealer Licence is cancelled.
(2) These companies are being wound up as part of the group reorganization.
(3) These companies are not operational: we are awaiting regulatory approval.
25
10. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION,
RESULTS OF OPERATIONS AND FUTURE PROSPECTS
26
JMMBGL PROSPECTUS
A. Presentation Of Historical Financial Data
The following is a summary of the key financial data extracted from the audited financial statements of Jamaica
Money Market Brokers Limited which, until March 31st 2015, prepared consolidated financial statements to
reflect the Group. On April 13 2015, Jamaica Money Market Brokers Limited became a subsidiary of JMMB
Group Limited which on even date was listed on the main stock exchanges of Jamaica, Trinidad and Tobago
and Barbados. It is important to note that had JMMB Group Limited been in existence for the periods below,
the Company’s financial results would have been exactly the same.
A complete set of audited financial statements of Jamaica Money Market Brokers Limited for the financial
year 2014/2015 together with the unaudited six-month results for JMMB Group Limited are set out later in
this prospectus.
(a subsidiary of JMMB Group Limited)
CONSOLIDATED
INCOME STATEMENT
For each of five years ended March 31, 2015
(Expressed in Jamaican dollars unless otherwise indicated)
Year Ended March 31,
2013
2012
$000
$000
2015
$000
2014
$000
2011
$000
13,337,816
12,279,750
11,251,553
9,165,585
8,813,920
(8,076,145)
5,261,671
(7,017,265)
5,262,485
(6,603,857)
4,647,696
(5,626,237)
3,539,348
(6,294,878)
2,519,042
Net Interest Income and Other Revenue
Interest income
Interest expense
Net interest income
Fees and commission income
Securities trading and foreign exchange gains, net
Loss on GOJ's National Debt Exchange
Fees earned on managing funds on behalf of clients
Foreign exchange margins from cambio trading
546,233
426,935
247,312
225,291
114,543
3,420,817
2,325,348
1,692,224
2,042,260
1,232,391
154,806
129,551
(754,272)
88,329
39,527
50,425
936,134
587,931
322,027
141,053
156,683
10,319,661
8,732,250
6,243,316
5,987,479
4,073,084
Dividends
14,255
8,578
37,741
11,413
19,314
Other
25,801
Operating revenue net of interest expense
Other income
Gain / (loss) on sale of property, plant and equipment
34,000
-
22,018
1,000
1,795
10,381,735
8,741,828
6,316,852
5,998,462
(430)
4,099,499
7,101
Staff costs
(3,911,132)
(2,877,717)
(2,256,177)
(1,724,133)
(1,259,065)
Other expenses
(3,876,565)
(2,792,530)
(2,360,448)
(1,490,570)
(1,326,884)
(7,787,697)
(5,670,247)
(4,616,625)
(3,214,703)
(2,585,949)
2,594,038
3,071,581
1,700,227
2,783,759
1,513,550
Operating Expenses
Operating Profit
Impairment loss on financial assets
Impairment loss on intangible assets
Gain on sale of associated companies
Gain on acquisition of subsidiaries
Share of profit/ (loss) of associated company
Profit beforeTaxation
Taxation
Profit for the year
(259,262)
19,263
-
(10,898)
361,657
(24,289)
(73,798)
-
(107,000)
-
-
-
-
-
-
2,055,592
(28,242)
72,354
30,258
24,327
2,354,039
3,398,051
3,647,375
2,814,017
1,509,636
(306,757)
(335,992)
209,488
(573,561)
(366,705)
2,047,282
3,062,059
3,856,863
2,240,456
1,142,930
1,931,980
2,832,855
3,739,058
2,216,808
1,116,272
115,302
229,204
117,805
23,648
26,658
2,047,282
3,062,059
3,856,863
2,240,456
1,142,930
Attributable to:
Owners of the parent
Non-Controlling interest
Earnings per stock unit
1.18
1.74
2.35
1.51
0.76
27
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
2015
$000
2014
$000
Year Ended March 31st
2013
$000
2012
$000
2011
$000
ASSETS
18,672,388
23,326,420
5,831,430
4,157,234
3,317,057
Interest receivable
Cash and cash equivalents
2,561,634
2,619,996
2,220,864
1,904,807
1,760,130
Income tax recoverable
2,130,926
2,043,597
1,832,210
1,423,097
1,235,689
31,924,543
26,551,175
10,227,126
3,375,627
3,445,800
1,245,160
1,927,206
833,746
2,139,992
Loans and notes receivable
Other receivables
Securities purchased under agreements to resell
Investments
Investment Properties
Membership share
Interest in associated companies
868,172
272,596
652,986
3,890,913
2,553,739
679,234
157,226,757
145,777,726
138,412,944
108,153,801
98,233,393
457,591
457,591
457,591
457,591
457,591
50,520
19,520
19,520
643,137
-
-
808,306
665,737
Intangible assets
1,060,277
1,005,314
-
472,522
86,090
77,788
Property, plant and equipment
2,033,688
1,841,497
1,296,136
1,102,948
991,427
Deferred income tax asset
38,933
150,384
447,951
2,617
18,300
Customers’ liability acceptances, guarantees and letters of credit
90,809
352,227
44,276
217,715,302
206,706,119
166,860,961
1,850,279
1,850,279
13,775
13,775
Retained earnings reserve
9,605,055
Investment revaluation reserve
2,037,032
-
-
124,736,554
113,019,058
1,850,279
365,847
365,847
13,775
13,775
13,775
9,605,055
9,109,778
8,222,323
636,397
1,724,253
402,605
719,185
(7,892)
20,432
SHAREHOLDERS' EQUITY
Share capital
Share premium
Cumulative translation reserve
Other Reserves
Retained earnings
(109,014)
-
56,233
-
(101,711)
-
-
-
13,672
7,567,587
6,173,689
4,096,999
1,781,396
8,212,255
20,964,714
18,335,428
16,693,373
10,778,054
9,345,166
758,350
353,552
519,503
94,077
57,165
21,723,064
18,688,980
17,212,876
10,872,131
9,402,331
Customer deposits
38,463,504
35,887,750
7,567,380
-
-
Due to other banks
435,032
283,386
378,560
-
-
Non-Controlling interests
LIABILITIES
Loan participations
Securities sold under agreements to repurchase
Notes payable
Loans payable
Redeemable Preference Shares
Defered income tax liability
Interest payable
144,501,658
3,644,384
4,228,705
143,302,425
341,082
135,907,311
-
-
-
-
4,228,705
-
-
107,591,924
97,068,266
470,688
623,873
-
-
2,759,346
2,759,346
2,924,994
682,307
627,360
536,698
752,393
1,157,747
1,185,595
1,182,974
1,193,398
937,521
922,493
Taxation
397,758
83,671
11,546
805,763
322,457
Payables
2,362,486
2,068,641
908,488
546,788
596,897
Liabilities under acceptances, guarantees and letters of credit
28
90,809
352,227
44,276
195,992,238
188,017,139
149,648,085
113,864,423
-
103,616,727
-
217,715,302
206,706,119
166,860,961
124,736,554
113,019,058
JMMBGL PROSPECTUS
RATES OF DIVIDENDS
PAID
Year ended March 31st
2015
2014
2013
2012
2011
$’000
$’000
$’000
$’000
$’000
Final dividend in respect of 2014 @17.0 cents per stock unit
277,194
-
-
-
-
Interim dividend in respect of 2015 @ 16.0 cents per stock unit
260,888
-
-
-
-
-
260,888
-
-
-
Final dividend in respect of 2012 @ 11.0 cents (2011: 10.0) cents per
stock unit
-
-
160,973
-
-
-
-
211,972
-
-
-
-
-
175,606
-
Dividend on Ordinary Shares
Final dividend in respect of 2011 @ 10.0 cents per stock unit
-
-
-
146,339
-
Special dividend in respect of 2012 @ 8.0 cents per stock unit
-
-
-
117,071
-
Final dividend in respect of 2013 @ 10.0 cents
-
-
163,055
-
-
Final dividend in respect of 2010 @ 6.0 cents
-
-
-
-
87,803
Interim dividend in respect of 2011 @ 8.0 cents
-
-
-
-
117,071
538,082
260,888
536,000
439,016
204,874
783,776,000 12.25% cumulative redeemable preference stock units
-
-
-
-
214,141
70,766,000 12% cumulative redeemable preference stock units
-
-
-
-
19,107
Preference share dividend
-
-
-
19,576
20,126
233,382
233,382
233,382
233,382
57,546
7,831
7,831
7,831
7,831
1,931
109,435
63,804
-
-
-
2,783
1,655
-
-
-
353,431
306,672
241,213
260,789
312,851
29
B. MANAGEMENT DISCUSSION AND ANALYSIS
The JMMB Group continues to chart the way forward in the financial services landscape across the region with
the roll-out of our new Integrated Financial Services model . This efficient and unique service delivery model
is being rolled out in phases across Jamaica, Trinidad and Tobago and Dominican Republic. It is grounded in a
culture of client financial partnership and provides a seamless, differentiated, value-added client experience
that is poised to bring innovation to the financial services markets that we serve. We believe the Integrated
Financial Services model will strengthen our presence locally and regionally, as well as reinforce the platform
for long-term sustainable growth and further enhance shareholder value.
During the financial year ended March 31, 2015 the Jamaican entities made significant progress in the
implementation of key foundational elements of the Integrated Financial Services model in addition to
extracting synergies from our operations as a result. With preparatory activities completed in Trinidad and
Tobago, the platform is set for building out the model while we stabilize and hone the core business drivers,
thereby creating a solid foundation for sustainable growth. The Dominican Republic businesses continue
to grow market share and expand their operations to include additional business lines. The addition of key
business lines and innovative products are key enablers to the implementation of our Integrated Financial
Services model.
Prior Year Group Financial Performance Re-Cap
For the financial year ended March 31, 2015 the JMMB Group recorded operating revenues of J$10.32 billion
compared to J$8.73 billion the prior year an increase of J$1.59 billion or 18.2%. Increases in Gains on Securities
Trading of J$1.09 billion and Foreign Exchange Margins of J$348.2 million accounted for most of the increase.
The increase in revenues was however offset by increases in expenses associated with the acquisition of
the IBL Group (J$1.12 billion), reorganization of the Dominican Republic operations (J$328.6 million) and an
increase in asset tax (J$179.5 million).
GROUP OPERATING REVENUE NET OF
INTEREST EXPENSE (in J$’000)
10,319,661
12,000,000
8,732,250
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
MARCH 31
MARCH 31
MARCH 31
MARCH 31
MARCH 31
2011
2012
2013
2014
2015
The JMMB Group recorded profit after taxes of J$2.05 billion which, was below the prior year’s outcome
of J$3.06 billion. The prior year’s results include non-recurring gains on the acquisition of the IBL Group
of J$361.7 million. Our results as at March 31st 2015 was also negatively affected by one-off provisions of
J$259.3 million on our investment portfolio.
Country Contribution
The Group continues to benefit significantly from our diversification strategy with Trinidad and Tobago
and Dominican Republic contributing approximately 29% or J$600 million to the Group’s profitability. The
Dominican Republic continues to exhibit solid performance and contributed over J$475 million while our
Trinidad and Tobago operations contributed J$120 million to the Group’s results.
30
JMMBGL PROSPECTUS
GROUP FINANCIAL PERFORMANCE
FOR THE SIX MONTHS ENDING
SEPTEMBER 30, 2015
J$3.10 billion for the same period in 2015/16 driven
largely by increased volume activity and the various
subsidiaries across the Group taking advantage of
market opportunities as they arise.
For the first six months of the 2015/16 financial
year, the Group continued on a positive trajectory
reporting profit after taxes of J$1.21 billion compared
to J$1.08 billion for the corresponding period in FY
2014/152.
Efficiency
Our operations in the Dominican Republic continue
to produce positive results contributing net profits
of J$77.1 million for the period. The Group continues
to build out its full range of services in the Dominican
Republic which includes money market mutual
funds and the newly acquired savings and loan
bank, Banco Rio de Ahorro Y Credito JMMB Bank
S.A. (JMMB Bank). With these new business lines,
the Dominican Republic is well poised for growth
in addition to rolling out our Integrated Financial
Services Model, consistent with the overarching
strategic objectives of the Group.
Our Trinidad and Tobago operations continued the
positive momentum from the prior financial year,
contributing J$96.8 million to the Group’s results. As
we continue the implementation of our Integrated
Financial Services Model expectations are that
Trinidad and Tobago’s overall contribution to the
Group’s profitability will steadily trend upwards.
Total Operating Revenues
For the first six months of 2015/16 the Group
recorded operating revenues net of interest
expenses of J$5.87 billion, an increase of J$884.75
million or 17.8% over the results of the corresponding
period in 2014/15. The Group’s Net Interest Income
(NII) showed positive growth year-over-year moving
from J$2.70 billion to J$2.77 billion, an increase of
J$67.77 million or 2.51%. This was driven largely by
continued growth in the loan portfolios of both JMMB
Merchant Bank (Jamaica) and Intercommercial Bank
(Trinidad and Tobago).
Other operating revenues, namely, Gains on
Securities Trading, Foreign Exchange margins
from foreign currency trading and Fees and
Commission income also reflected increases for the
first six months of 2015/16 when compared to the
corresponding period in 2014/15. Other Operating
Revenues grew by J$816.99 million moving from
J$2.28 billion for the first six months in 2014/15 to
Our efficiency ratio, an important measure of cost
efficiency, was 73% at the end of the first six months
of FY 2015/16 compared to 73.3% recorded for
the corresponding period in 2014/15. Operating
expenses for the period totalled J$4.3 billion, up
17.3% compared to J$3.7 billion for the prior year.
This increase was mainly attributable to staff related
costs, asset tax and expansion of business activities
regionally.
As we build and roll out our operating model across
the region to anchor our Integrated Financial Services
model, we will garner increased synergies and
efficiencies from our various companies which will
improve our operating efficiency through deliberate
and focused strategies to grow our revenues while
improving operational excellence.
Total Assets
As at September 30, 2015, the Group’s Asset base
increased by J$6.1 billion or 2.8% for the period,
moving from J$217.7 billion as at 31 March 2015
to J$223.8 billion. This increase in assets was
mainly funded by client deposits and institutional
repurchase agreements. In addition, consistent with
the Group’s strategy of moving assets off balance
sheet, managed funds on a non-recourse basis
increased to J$58.3 billion, up 77.7% compared to
J$32.8 billion for the prior year.
______________________________________________________
2 The result for the period was impacted by the Group’s adoption of
International Financial Reporting Interpretation Committee (IFRIC) 21,
Levies. In accordance with IFRIC 21, asset tax expense imposed by the
Government of Jamaica is no longer eligible to be accounted for on
a periodic accrual basis but must be recorded in full when triggered.
Consequently, the amount accrued in April 2015 of J$397.5 million
was fully expensed in the first quarter. The 2014 results were also
restated to conform with the requirements of the interpretation.
31
TOTAL ASSETS (in J$’000)
250,000,000
206,706,119
217,715,302
223,803,530
200,000,000
150,000,000
100,000,000
50,000,000
MARCH 31,
MARCH 31,
MARCH 31,
MARCH 31,
MARCH 31,
SEPTEMBER
2011
2012
2013
2014
2015
30, 2015
Shareholders’ Equity
As at September 30, 2015, the Group shareholder equity remained robust at J$21.56 billion reflecting the
Group’s continued strength and is a critical ingredient for future growth.
Capital Adequacy
Our securities and banking operations in Jamaica, Trinidad and Tobago and Dominican Republic are required
to maintain appropriate unconsolidated risk-weighted Capital Adequacy Ratios stipulated by their respective
regulators. As at September 30th 2015 the respective capital to risk weighted assets ratios for our subsidiary
companies are shown below. All companies maintain robust levels of capital adequacy relative to regulatory
requirements.
COMPANY
ACTUAL
REQUIRED
(SHORT) / EXCESS)
Jamaica Money Market Brokers
Limited
15.90%
10.00%
5.90%
18.30%
10.00%
8.30%
Intercommercial Bank Limited
18.00%
10.00%
8.00%
Intercommercial Trust & Merchant
Bank
49.50%
10.00%
39.50%
JMMB Puesto de Bolsa
DOP 1,135 million
DOP 5 Million
DOP 1,130
JMMB Group Limited
16.20%
NA
STRATEGIC DIRECTION BY COUNTRY
Operations In Jamaica
Our Jamaican operations will be grounded on three pillars:
•
32
The expansion of our Integrated Financial Services model; expanding the branch network, enhancing
multi-channel options and continuing to deliver a unique experience grounded in JMMB’s differentiated
JMMBGL PROSPECTUS
•
•
service delivery model in a “warm, family setting” changing regulatory environment for securities
that is “effortless and convenient”.
dealers whereby migration of retail client funds
from on-balance sheet products to off balance sheet
Ongoing Partnership with our clients: We aim products such as unit trusts, mutual funds, as a
to consistently enhance our approach to financial subset of the overall investment offerings is receiving
planning by ensuring comprehensive needs greater focus.
discovery and the provision of holistic financial
solutions across business lines in Investments,
OFF BALANCE SHEET FUM
Banking and Insurance.
Continuously
Improving
Operational
Excellence: JMMB will continuously seek to
optimize our existing operating structures to
deliver more efficient service to our clients
while streamlining and re-engineering our key
processes to reduce costs.
60,000,000
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
MARCH 31, 2013
MARCH 31, 2014
MARCH 31, 2015
NB - Off Balance Sheet excludes direct ownership of assets by clients with JMMB as custodian.
– JMMB LIMITED (Investment Services)
Asset Management Business Line
Our asset management activities will broadly
continue to focus on the build out of our Integrated
Financial Services Model and more specifically our
Goal Planning Services model, all of which will be
supported by our recently implemented Portfolio
Planning tool. These activities will be augmented by
continuous client education and ongoing emphasis
on offering clients a diversified portfolio of assets to
meet their financial goals.
Figures are in $’000
NB - Off Balance Sheet excludes direct ownership of assets by clients
with JMMB as custodian. Figures are in $’000
Improving efficiency while strengthening the
Client Experience
The company embarked on a process of rationalizing
systems and processes resulting in a leaner and more
customer- centric operating model. As we continue to
innovate, we have added the ability to electronically
transfer funds between our Collective Investment
Schemes (Unit Trusts) and their other JMMB accounts
via MoneyLine - our online transaction system, which
is a first in Jamaica. Unit holders participating in
JMMB Fund Manager’s offerings now have the ability
to transact on their accounts, 24/7 at their own
convenience.
Significant emphasis will be given to increasing our
off-balance sheet offerings, with on-balance sheet
growth concentrated to institutional portfolios. Offbalance sheet offerings will be a combination of Initiatives such as these will support our strategic
mutual funds, unit trusts and direct ownership of thrust to continue to build out operational systems
assets e.g. bonds and equities. In order to achieve the that are aligned with international standards and are
foregoing, the existing product suite will be expanded in support of efforts to distinguish the value-added
to include a mix of varying asset classes and currency elements of a JMMB offering, broadening our clientele
options that can be packaged appropriately to and increasing our contribution to Group revenues in
provide diversification benefits for all portfolio types Jamaica. Existing platforms being implemented will
provide efficiencies especially in the areas of fund
and risk profiles.
administration and investment management.
This foregoing strategy largely represents a
continuation of an existing strategy that began in
2013, following JMMB’s acquisition of the Capital &
Credit Financial Group in which a Unit Trust licence
was procured. Since then, we have seen significant
growth in our overall off-balance sheet activities
that include both managed funds as well as direct
ownership of assets by clients with JMMB acting as
custodian.
This approach is consistent with the
Capital Markets Business Line
JMMB Capital Markets Unit (JMMBCMU) will continue
to play a significant role in the Group’s strategic
thrust by providing tailored solutions, through the
structuring and arranging of both traditional and
non-traditional transactions for clients seeking a
range of funding solutions. As the Jamaican economy
33
continues to improve, the Group is strategically well
positioned to take advantage of the opportunities
that will arise.
JMMBCMU covers a wide range of industries
including: Real Estate, Retail & Distribution, Financial
Institutions, Heavy & Light Manufacturing Industries,
Utilities,
Entertainment,
Financial
Services,
Telecommunications and Transportation.
JMMB MERCHANT BANK LIMITED
JMMB Merchant Bank (JMMBMB) will continue on
its strategic path of growth and stability, reflecting
the company’s commitment to client satisfaction
and employing prudent risk management practices.
JMMBMB continues to exhibit good asset quality
while continuing to grow a stable diversified deposit
base. JMMBMB will continue on the journey of
offering a unique brand of banking to the sector, by
leveraging the JMMB Way of partnering with clients
to achieve their goals and consistent with the three
pillars that support our strategic thrusts.
JMMBMB recently underwent a significant upgrade
to its IT platform which is a key enabler to delivering
on the strategic imperatives in support of our
Integrated Financial Services model.
Over the medium term JMMBMB will seek to
broaden its product offerings of banking services
and in particular support the productive sector and
the country’s growth agenda. This will be enhanced
by capabilities in providing access to deposits on
demand as well as lowering of the overall cost of
funds available to support the various sectors.
Operations In The Dominican
Republic
Our operation in the Dominican Republic
maintained its upward trajectory and continue to
develop innovative investment solutions for our
valued clients, allowing us to steadily grow market
share. As we strive to build out our Integrated
Financial Services model in the Dominican Republic,
three additional business lines were added of which
two have already received regulatory approval to
operate. In July 2015 JMMB received regulatory
approval from the Monetary Board of the Dominican
Republic to acquire 90% of the shares of Banco
Ahorro Y Credito Rio and in May 2015 regulatory
34
approval was granted to distribute our first mutual
fund product which was subsequently launched in
August 2015. The mutual fund will be managed by
JMMB Sociedad Administradora de Fondos de Inversion
(JMMB SAFI) for which regulatory approval was
received in December 2014. We await regulatory
approval for our pension management company,
JMMB Administradora de Fondos de Pensiones (JMMB
AFP).
Our Dominican Republic operation is well poised for
growth, solid diversification of its revenue streams
and the successful build out of our Integrated
Financial Services model.
Operations In Trinidad And Tobago
INTERCOMMERCIAL BANKING GROUP
(IBL GROUP)
As we move to complete the current financial year,
the IBL Group’s focus will be on transitioning to
and solidifying the JMMB Brand within the financial
services landscape in Trinidad and Tobago. It will
continue the drive for growth in market share
through a truly differentiated client experience, with
our customers’ best interest at the core of what we
do supported by a culture of love in our interactions
with our team, clients and stakeholders.
The further development of our team as financial
experts who provide our customers with superior
financial advice in a warm family setting is critical to
our long term strategy and will be a key focus going
forward.
As we execute our strategies overtime, efficiency
and cost management will be key priorities and
we will conduct continuous review of our internal
processes with a view to developing an operating
model that is both cost effective and sustainable
consistent with the overall Group approach.
JMMB INVESTMENTS (TRINIDAD AND
TOBAGO) LIMITED (JMMBITT)
JMMBITT will utilize a low-cost, high-efficiency model
by taking advantage of a Group Shared Services
model and leveraging the Group’s operational and
risk management expertise. In addition, JMMBITT
will execute a consolidated approach acting in
JMMBGL PROSPECTUS
concert with Intercommercial Bank Limited and its branch network in pursuit of a fully Integrated Financial
Services model in Trinidad and Tobago.
The focus will be on financial partnership with clients, as we seek to provide expert financial advice that
is tailored to their specific needs. We will enhance our strategic position with a high quality sales team,
implementation of the JMMB trading platforms and delivery of enhanced products through development and
innovation. As with Jamaica, our off-balance sheet activities will be critical strategic enablers.
C. THE WAY FORWARD FOR THE JMMB GROUP:
CONTINUED IMPLEMENTATION OF OUR INTEGRATED FINANCIAL SERVICES
MODEL ACROSS THE REGION – “Financial Life Goal Centres” and “Client Partnership”
The JMMB Group will continue to roll out our Integrated Financial Services Model across the region over the next
five years. We acknowledge that each country across the Group is at a different stage in the implementation
of the Model. Within the short to medium term, the most significant changes will be evident in Jamaica while
the other countries continue to build-out key foundational elements of the business. As such, our strategic
focus will be centred on key areas which we deem critical to the Group’s long-term success. These include:
•
Continued roll out of our new and differentiated Group Integrated Branch experience design as
grounded in JMMB’s Culture/DNA. Our Integrated branches will be established as “Financial Life Goals
Centres” providing ‘one-stop shopping’ for clients and offering “goal-oriented” solutions across various
business lines in a single location.
•
Improved operational excellence across the region with the roll out of our Group Operating Model to
anchor our regional Integrated Services Business Model through:
-
Implementing simplified, streamlined and optimized processes across the Group to support the
Customer Value Proposition (CVP) and Client Experience principles and extract synergies and
efficiencies.
Continuing the efforts in building out an operationally efficient business at the group, country
and entity level.
Integrating our operations in Jamaica, Trinidad and Tobago and the Dominican Republic while
consolidating and extracting the synergies from our acquisitions.
•
Continued roll-out of our Financial Partnership Culture (Client Partnership) – of integrity selling and
partnering with our clients on a journey towards the achievement of their life goals.
•
Organic Growth from the Base – maximizing cross-selling and up-selling opportunities aimed at
delivering a holistic financial planning experience to our clients.
•
Roll-out of our enhanced multichannel experience through the implementation of our Electronic Service
Delivery (ESD) Strategy.
•
Roll-out of our goal oriented financial solutions including Portfolio Management and Product Bundles
(across the region where applicable) and Mutual Funds in Trinidad and Tobago, Jamaica and the
Dominican Republic.
•
Further diversification of our business lines through continued growth in our Capital Markets Business
unit and by managing our balance sheet risk with the growth in off-balance sheet assets through Unit
Trust, Portfolio Management, Mutual Funds (In Trinidad and Tobago and the Dominican Republic) and
other off-balance sheet products.
35
The years ahead promise to be exciting for the JMMB Group, as we embark on a new chapter in our journey
to become the premier Caribbean-grown financial group and premier financial services group of choice
across the region. In 1992, the JMMB Group pioneered the money market, providing the “everyday Jamaican”
with strong investment opportunities in a warm family environment. Since then, we have grown in value
with a greater regional footprint and increased business line diversification. We therefore wish to thank you,
our shareholders, for investing a high level of confidence and trust in us and we invite you to continue the
journey with us as we are strategically positioned to bring even greater innovation to the market providing
the platform for future growth and further enhancement of shareholder value.
We would also like to acknowledge our loyal clients who continue to motivate us to find creative solutions to
meet their financial goals while we serve with care, integrity and love.
We have a dynamic, engaged and competent team that remains true to our core values and is committed to
the success of the JMMB Group. Notwithstanding our growth, we will remain true to our culture of delivering
an exceptional client experience, which is at the heart of our core values and is the central ethos that will allow
us to maintain brand loyalty and achieve the competitive edge necessary for long-term sustained success.
36
JMMBGL PROSPECTUS
11. FINANCIAL
STATEMENTS
JMMB GROUP LIMITED
UNAUDITED SIX MONTHS FINANCIAL
RESULTS FOR PERIOD ENDED
30 SEPTEMBER 2015
DIRECTORS’ STATEMENT - UNAUDITED SIX MONTHS
FINANCIAL RESULTS FOR PERIOD ENDED
30 SEPTEMBER 2015
38
FINANCIAL STATEMENTS
Consolidated profit and loss account
40
Consolidated statement of comprehensive income
41
Consolidated statement of financial position
42
Consolidated statement of changes in stockholders’ equity
43
Consolidated statement of cash flows
44
Notes to the financial statements
45
37
DIRECTORS’
STATEMENT
Performance Highlights
Net Profit of J$1.21 billion
Earnings per Stock Unit of J$0.72, (2014 - $0.63 restated)
Operating Revenue of J$5.87 billion, grew by 17.8%
Gains on securities trading of J$2.10 billion up 35.2%
Efficiency ratio 73.0% (2014 – 73.3%)
The Directors are pleased to announce that the JMMB Group has posted a net profit of J$1.21 billion and earnings per share of
J$0.72 for the six month period ended 30 September 2015. The Group continues to focus on its strategic initiatives of regional
diversification while integrating new entities and building core revenues.
The result for the period was impacted by the Group’s adoption of International Financial Reporting Interpretation Committee
(IFRIC) 21, Levies. In accordance with IFRIC 21, asset tax expense imposed by the Government of Jamaica is no longer eligible
to be accounted for on a periodic accrual basis but must be recorded in full when triggered. Consequently, the amount paid
in April 2015 of J$397.5 million was fully expensed in the first quarter. The 2014 results were also restated to conform with the
requirements of the interpretation. The full impact of the restatement is outlined in Note 4.
Operating revenues, namely, gains on securities trading, foreign exchange trading, and commission income also reflected
increases of 35.2%, 30.5% and 46.4% respectively. These were driven largely by volume increases and taking advantage of
market opportunities mainly in Jamaica.
Our operations in the Dominican Republic continue to produce positive results contributing net profits of J$77.1 million for the
period ended 30 September 2015. The Group continues to build out a full range of services in the Dominican Republic which
includes money market mutual funds and newly acquired savings and loan bank, Banco Rio de Ahorro Y Credito JMMB Bank
S.A. (JMMB Bank).
In Trinidad and Tobago, the Group’s operations continue to move in a positive trajectory, contributing J$96.8 million for the
period. Management continues to build out its integrated financial services model through JMMB Investments Trinidad and
Tobago Limited and its commercial banking arm, Intercommercial Bank Limited.
Our efficiency ratio (operating expenses/net operating revenue) an important measure of cost efficiency, was 73% at the
end of the period compared to 73.3% recorded for the corresponding period. Operating expenses for the period totalled J$4.3
billion, up 17.3% compared to J$3.7 billion for the prior year. This increase was mainly attributable to staff related costs, asset
tax and expansion of business activities regionally.
The asset base of the JMMB Group increased by J$6.1 billion or 2.8% for the period, moving from J$217.7 billion as at 31 March
2015 to J$223.8 billion as at 30 September 2015. This increase in assets was mainly funded by client deposits and repurchase
agreements. In addition, consistent with the Group’s strategy of moving assets off balance sheet, managed funds on a nonrecourse basis increased to J$58.3 billion, up 77.7% compared to J$32.8 billion for the prior year.
Regulatory Capital Requirements
The individually regulated companies within the Group continue to exceed the regulatory capital requirements. The regulatory
ratios for major subsidiaries in the Group are listed on the following page:
38
JMMBGL PROSPECTUS
Regulatory capital ratio
Company
30 Sep
2015
%
Regulatory capital to risk weighted assets ratio
(Minimum requirement – 10%)
15.9
18.3
18.0
Intercommercial Trust and Merchant Bank
Limited
49.5
Minimum capital of RD $5 million
RD $’000
1,134,522
JMMB Puesto de Bolsa, S.A.
Corporate Social Responsibility
In keeping with its mandate to be a responsible corporate citizen, the JMMB Group, continues to actively participate and
support a range of initiatives in the countries in which it operates namely: the Dominican Republic, Jamaica and Trinidad &
Tobago. As such, the JMMB Group has continued to focus on education, entrepreneurship, community outreach initiatives and
capacity building.
The Joan Duncan Foundation spearheaded several corporate social responsibility projects in Jamaica. Five and a half million
dollars (J$5.5M) was awarded in scholarships to fifty-nine (59) students during the period by the Foundation. Additionally,
the Group has shown its continued commitment to the Youth Upliftment Through Employment (YUTE) by providing financial
support for YUTE Microwork, a new programme which is aimed at building the capacity of beneficiaries to create selfemployment opportunities by accessing international labour markets through the growing global field of microwork online.
The Foundation provided ongoing support to venture competitions namely: the Vincent HoSang UWI Venture Competition
and the University of Technology (Jamaica) Business Model Competition, in a bid to build the entrepreneurial spirit among
young people. Additionally, the Group also provided financial support in partnership with team members in an array of
community initiatives to help transform those communities.
In the Dominican Republic, the JMMB Group’s corporate social responsibility efforts focused mainly on education and
entrepreneurship. Madelaes and Casa Nuestra Senora de La Altagracia, which houses orphaned children, were recipients of
donations to assist the children in their back-to-school preparation. The Group continues to provide financial support to the
Innovation and Entrepreneurship Tournament held by the Universidad Nacional Pedro Henriquez Urena Centre (UNPH); and
a special award for Most Socially Responsible Project, was sponsored by JMMB. In addition the company has established an
alliance with the university’s SBDC to provide assistance to small and medium businesses.
JMMB Group’s corporate social responsibility efforts have been reaffirmed in Trinidad & Tobago with focus being placed on
youth development and community outreach. Team members gave of their time and provided financial support to four of the
country’s children’s homes to assist with their welfare.
General
The JMMB Group continues to invest for the future with its key strategic imperative of building core revenues across diversified
business lines locally and through our regional territories.
As the Group continues to focus on long term sustainable growth and on enhancing shareholder value, the Directors extend
sincere appreciation to our clients, team members and shareholders who continue to support and contribute to its success.
Dr. Noel Lyon
Group Chairman
Keith Duncan
Group Chief Executive Officer
39
CONSOLIDATED PROFIT
AND LOSS ACCOUNT
Period ended 30 September 2015
Restated
Restated
Unaudited
Three Months
Ended
Unaudited
Three Months
Ended
Unaudited
Six Months
Ended
Unaudited
Six Months
Ended
30 Sep 15
30 Sep 14
30 Sep 15
30 Sep 14
$’000
$’000
$’000
$’000
Interest income
3,242,123
3,513,667
6,524,092
6,828,103
Interest expense
(1,909,875)
(2,102,349)
(3,754,814)
(4,126,591)
1,332,248
1,411,318
2,769,278
2,701,512
Fees and comm ission income
250,783
164,649
441,316
301,394
Gains on securities trading, net
869,863
792,687
2,095,557
1,549,949
Foreign exchange trading, net
305,020
217,197
562,013
430,557
2,757,914
2,585,851
5,868,164
4,983,412
7,338
5,093
12,748
8,526
2,765,252
2,590,944
5,880,912
4,991,938
(2,031,422)
(1,661,610)
(4,292,803)
(3,660,832)
733,830
929,334
1,588,109
1,331,106
Net interest income
Other Income
Div idends
Operating Expenses
Operating Profit
Gain on acquisition of subsidiary
Profit before Taxation
Taxation
Profit for the period
-
-
1,588,109
9,679
733,830
929,334
(126,167)
(149,722)
607,663
779,612
1,210,586
1,078,910
596,142
745,483
1,181,931
1,023,925
11,521
34,129
28,655
54,985
607,663
779,612
1,210,586
1,078,910
$0.37
$0.46
$0.72
$0.63
(377,523)
1,340,785
(261,875)
Attributable to:
Equity holders of the parent
Non-controlling interest
Earnings per stock unit
40
JMMBGL PROSPECTUS
CONSOLIDATED
STATEMENT OF
COMPREHENSIVE INCOME
Res tated
Res tated
Un aud ited
Un aud ited
Un aud ited
Un aud ited
Three M onth s
Three M onth s
Six M onth s
Six M onth s
End ed
End ed
End ed
End ed
30 Sep 15
30 Sep 14
30 Sep 15
30 Sep 14
$’0 00
$’0 00
$’0 00
$’0 00
6 07 ,6 63
7 79 ,6 12
1, 2 10 ,5 86
1, 0 78 ,9 10
(1, 36 0,3 0 7)
1, 21 9, 53 9
(1, 0 62 ,9 56)
1, 5 30 ,7 77
Other comprehensive income:
Items that may be subsequently reclassified to
profit or loss:
Unreali sed gains/(loss) on available for sale
investments
Foreig n exchange translation differen ces
(9 3,4 7 5)
(4 05, 6 3 9)
(47 ,16 9)
(33 8 ,2 05 )
(1, 45 3,7 8 2)
8 13 ,9 00
(1, 1 10 ,1 25)
1, 1 92 ,5 72
(8 46,1 1 9)
1,59 3,51 2
1 0 0,4 61
2,2 71 ,4 82
Equity holder s of the paren t
(7 30, 2 1 1)
1, 25 4, 41 0
10 5, 7 23
1, 8 92 ,2 25
Non-controllin g interest
(1 15, 9 0 8)
3 39 ,1 02
(5, 2 62)
37 9, 2 57
(8 46,1 1 9)
1,59 3,51 2
1 0 0,4 61
2,2 71 ,4 82
Totalcomprehensive income for period, net of
tax
Total comprehensive income attributable to:
41
CONSOLIDATED
STATEMENT OF
FINANCIAL POSITION
Un audited
as at
30 S ep 15
R es tated
Un aud ited
as at
30 S ep 1 4
A ud ited
as at
31 Marc h 15
$’ 000
$’ 000
$’ 000
23 ,565,829
24 ,514,229
18 ,672,388
ASSETS
Cas h and c as h equivalents
Interes t rec eivable
2, 500,579
2, 683,017
2, 561,634
Inc ome tax rec overable
1, 898,890
2, 112,205
2, 130,926
35 ,630,011
29 ,159,227
31 ,924,543
1, 699,735
2, 287,178
1, 245,160
154, 329,497
159, 098,589
157, 499,353
457, 591
457, 591
457, 591
98 ,540
129, 924
38 ,933
3, 566,263
2, 931,362
3, 093,965
L oan s and notes rec eivable, net of provisi on
O ther rec eivables
Inves tments and res ale agree ments
Inves tmen t properties
D eferred tax as s et
P rope rty, plan t and equipmen t and intang ible ass ets
C us tomers ’ liability unde r ac c ep tan c es , guarantees
and letters of c redit as pe r c ontra
56 ,595
364, 568
90 ,809
223,803,530
223,737,890
217,715,302
EQ UITY A ND L IA B IL IT IE S
Equ ity
S hare C apital
1, 864,054
1, 864,054
1, 864,054
R etained ea rning s res erve
9, 605,055
9, 605,055
9, 605,055
Inves tmen t revalua tion res erve
1, 022,588
1, 842,903
2, 037,032
Cumula tive tran s lation res erve
(17 0,778 )
(28 1,972 )
R etained ea rning s
8, 488,630
6, 920,420
7, 567,587
(10 9,014 )
20 ,809,549
19 ,950,460
20 ,964,714
753, 088
732, 808
758, 350
21 ,562,637
20 ,683,268
21 ,723,064
Cus tomer de posi ts
40 ,928,065
38 ,241,973
38 ,463,504
D ue to other banks
518, 564
333, 429
435, 032
L oan pa rtic ipations
-
2, 180,947
-
Non-c ontrolling interes t
T otal equity
L iabilities
Notes pa yable
Securities s old under ag reements to repurc has e
4, 262,085
1, 414,400
3, 644,384
1 46, 562,729
1 51, 402,940
144, 501,658
R edee mable preferen c e s hares
4, 228,705
4, 228,705
4, 228,705
Interes t payable
1, 220,567
1, 322,252
1, 185,595
425, 276
79 ,917
397, 758
3, 306,811
2, 605,418
2, 362,486
731, 496
880, 073
682, 307
56 ,595
364, 568
90 ,809
202,240,893
2 03,054,622
195,992,238
223,803,530
223,737,890
217,715,302
Inc ome tax payable
O ther payable
D eferred tax liability
L iabilities under acc eptanc es, g ua rantee s and letters
of c redit as per c ontra
42
-
-
Dividends paid
1,864,054
-
Other comprehensive incomefor period
Balances at 30 September2015 (Unaudited)
-
9,605,055
-
-
-
1,864,054 9,605,055
Balances at 31 March 2015 (Audited)
1,864,054 9,605,055
-
Dividends paid
Balances at 30 September 2014 (Unaudited)
-
1,022,588
-
(1,014,444)
-
2,037,032
1,842,903
-
(170,778)
-
(61,764)
-
(109,014)
(281,972)
-
(338,205)
8,488,630
(260,888)
-
1,181,931
7,567,587
6,920,420
(277,194)
-
20,809,549
(260,888)
(1,076,208)
1,181,931
20,964,714
19,950,460
(277,194)
868,301
1,023,925
(184,906)
1,208,831
18,335,428
$’000
753,088
-
(33,917)
28,655
758,350
732,808
-
324,271
54,985
-
54,985
353,552
$’000
NonControlling
Interest
Total
21,562,637
(260,888)
(1,110,125)
1,210,586
21,723,064
20,683,268
(277,194)
1,192,572
1,078,910
(184,906)
1,263,816
18,688,980
$’000
CONSOLIDATED
STATEMENT OF CHANGES
IN STOCKHOLDERS’ EQUITY
Other comprehensive incomefor period
1,206,506
1,208,831
6,173,689
$’000
1,023,925
-
56,233
$’000
Attributableto
Retained Equity holders
Earnings
of theParent
Profit for the period restated
-
636,397
$’000
Cumulative
Translation
Reserve
(184,906)
-
1,864,054 9,605,055
$’000
$’000
Investment
Revaluation
Reserve
Prior period adjustment, IFRIC 21 (Note 4)
Balances at 31 March 2014 (Audited)
Retained
Earnings
Reserve
Share
Capital
JMMBGL PROSPECTUS
43
CONSOLIDATED
STATEMENT OF
CASH FLOWS
R es tated
Un aud ited
S ix Month s
E nd ed
Un aud ited
S ix Month s
E nd ed
30 S ep 15
30 S ep 14
$’ 000
$’ 000
Cash F lows from O perating Ac tivities
P rofit for the period
1, 210, 586
1, 078, 910
-
( 9, 679)
Ad jus tments for:
Gain on ac quis ition of s ubs idiary
U nrealis ed ( gain)/los s on trading s ec urities
( 29,1 85)
77,447
D ep reci ation and amortis ation
248,007
208,555
1, 429, 408
1, 355, 233
Chang es in ope rating as s ets and liabilities
1, 468, 273
8, 205, 222
Net c as h provided by operating ac tivities
2, 897, 681
9, 560, 455
2, 255, 556
( 11,3 77, 827)
10,497
( 14,8 62)
Cash Flows from Investing Activities
Net purc ha s e of inves tmen t s ec urities
A c quis ition of s ubs idiaries net of c as h ac quired
Pu rc ha s e of property, plant and equipmen t and c omputer softwa re
Net c as h provided by/(us ed in) inves ting activities
( 568, 706)
1, 697, 347
( 285, 310)
(11,6 77, 999)
Cas h Flows from F inanci ng A c tivities
P roc eeds from iss ue of s ubordinated debt
-
1, 401, 600
L oan partic ipation
-
2, 180, 947
Notes pa yable
559,301
-
D ividends paid
( 260, 888)
( 277, 194)
298,413
3, 305, 353
4, 893, 441
1, 187, 809
Cash and cash equivalents at beginning of ye ar
18,672,388
23,326,420
Cash and c as h equivalents at end of period
23,565,829
24,514,229
Net c as h provided by financi ng ac tivities
Net inc rease in c as h and c as h equ ivalents
44
JMMBGL PROSPECTUS
NOTES TO THE
Segment Reporting
Six months period ended 30 S eptember 2015
Financial & Banking &
Related
Related
Services
Services
Other Eliminations
$’000
$’000
$’000
$’000
External revenues
Total
$’000
7,370,168
2,199,705
65,853
-
9,635,726
217,509
88,173
4,946
(310,628)
-
Total segment revenue
7,587,677
2,287,878
70,799
(310,628)
9,635,726
Segment results
1,259,118
328,275
716
-
1,588,109
Intersegment revenue
(377,523)
Taxation
1,210,586
Total segment assets
193,192,574
61,324,038
1,173,610
(31,886,692)
223,803,530
Totalsegment liabilities
171,444,077
52,193,172
1,111,825
(22,508,181)
202,240,893
Interest income
4,899,069
1,624,149
874
-
6,524,092
Operating expenses
Depreciation and
amortisation
2,958,482
2
1,263,518
70,803
-
4,292,803
214,914
30,136
2,957
-
248,007
Capital expenditure
458,946
109,760
-
-
568,706
45
NOTES TO THE
Segment Reporting
Six months period ended 30 S eptember 2014
Financial & Banking &
Related
Related
Services
Services
Other Eliminations
Total
$’000
$’000
$’000
$’000
$’000
7,093,336
2,008,028
17,165
-
9,118,529
236,019
82,348
6,639
(325,006)
-
7,329,355
2,090,376
23,804
(325,006)
9,118,529
Segment results
1,090,160
241,457
(511)
-
External revenues
Intersegment revenue
Gain on acquisition of
subsidiary
1,331,1606
9,679
1,340,785
Profit before tax
(261,875)
Taxation
1,078,910
189,328,225
61,106,240
919,847
(27,616,422)
223,737,890
Total segment liabilities
168,216,943
52,689,808
856,227
(18,708,356)
203,054,622
Interest income
5,210,028
1,617,956
119
-
6,828,103
Operating expenses
Depreciation and
amortisation
3,011,743
625,318
23,771
-
3,660,832
108,676
98,662
1,217
-
208,555
232,869
52,441
-
-
285,310
Capital expenditure
46
JMMBGL PROSPECTUS
NOTES TO THE
1. Identification
JMMB Group Limited (the “company”) is incorporated and domiciled in Jamaica. The registered office of the company
is located at 6 Haughton Terrace, Kingston 10, Jamaica. The principal activity of the Company is that of holding equity
investments in business enterprises.
The company is listed on the Jamaica Stock Exchange (JSE), Barbados Stock Exchange (BSE) and Trinidad and Tobago Stock
Exchange (TTSE).
The company is exempt from the provisions of the Money Lending Act.
It has nine subsidiaries incorporated in Jamaica, and there are other subsidiaries incorporated outside of Jamaica. The
operating subsidiaries are listed below. The company and its subsidiaries are collectively referred to as “Group”.
Name of Subsidiary
Limited and its subsidiaries
JMMB Insurance Brokers Limited
Real Estate Holdings Limited
Capital & Credit Securities Limited
JMMB Fund Managers Limited
JMMB International Limited
% Shareholding Held
by Parent/Subsidiary
Parent
100
100
100
100
100
100
100
(Trinidad and Tobago) Limited and
its subsidiaries
JMMB Investments (Trinidad and
Tobago) Limited and its
subsidiary
JMMB Securities (T&T) Limited
100
Intercommercial Bank Limited and
its subsidiary,
Intercommercial Trust and
Merchant Bank Limited
JMMB Holding Company Limited, SRL
and its subsidiaries
JMMB Puesto de Bolsa,S.A.
100
JMMB Sociedad Administradora De
Fondos De Inversion, S.A.
Capital & Credit Financial Group
Limited and its subsidiaries
JMMB Money Transfer Limited,
formerly Capital & Credit
Remittance Limited
Capital & Credit Holdings Inc.
Subsidiary
Country of
Incorporation
Jamaica
Jamaica
Jamaica
Jamaica
Jamaica
Jamaica
St. Lucia
Stock brokering
Insurance brokering JMMB
Real estate holding
Investment holding
Fund management
Investment holding and
management
Investment holding company
Trinidad and
Tobago
100
Trinidad and
Tobago
100
Trinidad and
Tobago
Trinidad and
Tobago
Trinidad and
Tobago
Dominican
Republic
Dominican
Republic
Dominican
Republic
Jamaica
Stock brokering
100
Jamaica
Funds transfer
100
United States of
America
Jamaica
Investment holding
100
100
80
70
100
100
Commercial Banking
Merchant Banking
management
Mutual fund administration
Investment holding
Merchant Banking
47
NOTES TO THE
2. Group reorganisation
On 13 April 2015, Jamaica Money Market Brokers Limited under an approved Scheme of Arrangement was delisted
from the Jamaica Stock Exchange (JSE), Barbados Stock Exchange (BSE) and Trinidad and Tobago Stock Exchange (TTSE).
Simultaneously the ordinary shares of the new ultimate parent company JMMB Group Limited were listed on those
exchanges. The mechanics of the scheme involved the following:
(i) The 1,630,552,530 existing JMMB ordinary shares held by members of the public being cancelled and simultaneously
1,630,552,530 new ordinary shares issued to JMMB Group Limited, making Jamaica Money Market Brokers Limited
(JMMB) a wholly owned subsidiary of JMMB Group Limited (JMMB Group).
(ii) In consideration of the cancellation of the existing JMMB ordinary shares, JMMB Group Limited issued ordinary
shares for the benefit of each eligible person (credited and fully paid up) distributed at a rate of one new JMMB Group
ordinary share for each cancelled JMMB ordinary share.
(iii)
JMMB Group applying and listing its ordinary shares on the JSE, TTSE and BSE:
There was no financial impact to the Group financial results as a result of the reorganisation.
3. Summary of Significant Accounting Policies
(a)
Basis of preparation
The Group’s consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS). These consolidated financial statements have been prepared under the historical cost
convention as modified by the revaluation of available-for-sale financial assets and financial assets at fair value
through profit or loss, as well as investment properties.
There have been no changes in accounting policies since the most recent audited accounts as at 31 March
2015.
All amounts are stated in Jamaican dollars unless otherwise indicated.
(b)
Basis of consolidation
The consolidated financial statements include the assets, liabilities and results of operations of the company and its
subsidiaries presented as a single economic entity.
Subsidiaries are all entities over which the company has the power to govern the financial and operating policies,
generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of
potential voting rights that are currently exercisable or convertible are considered when assessing whether the
company controls another entity. Subsidiaries are consolidated from the date on which control is attained by the
Group. They are no longer consolidated from the date that control ceases.
48
JMMBGL PROSPECTUS
NOTES TO THE
3. Summary of Significant Accounting Policies (Continued)
(b) Basis of consolidation (continued)
Intra-group transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred.
Accounting policies of subsidiaries are consistent with those of the Group.
The Group uses the acquisition method of accounting for business combinations. The cost of acquisition is measured
as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of
exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination
are measured at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest.
The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is
recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired,
the difference is recognized directly in the consolidated statement of revenue and expenses.
(i)
Non-controlling interest (NCI) are measured at their proportionate share of the acquiree’s
identifiable net assets at the acquisition date.
(ii)
Loss of control
When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary;
any related non-controlling interest (NCI) and other components of equity. Any resulting gain or loss is
recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value.
(c) Segment reporting
A segment is a distinguishable component of the Group that is engaged either in providing related products or services
(business segment), or in providing products or services within a particular economic environment (geographical
segment), which is subject to risks and rewards that are different from those of other segments. Operating segments
are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The
chief operating decision-maker is the Board of Directors.
(d) Taxation
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income
statement except to the extent that it relates to items recognised directly to equity, in which case it is recognised in
other comprehensive income.
(i)
Current taxation
Current income tax is the expected tax payable on the taxable income for the year, using tax rates enacted at
the reporting date, and any adjustment to income tax payable in respect of previous years.
49
NOTES TO THE
(d) Taxation (continued)
(ii)
Deferred taxation
Deferred income tax is provided using the balance sheet liability method, providing for temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used
for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities, using tax rates enacted at the reporting date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available
against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable
that the related tax benefit will be realised.
(e) Cash and cash equivalents
Cash comprises cash in hand, demand and call deposits with banks and very short-term balances with other brokers/
dealers. Cash equivalents are highly liquid financial assets that are readily convertible to known amounts of cash (that
is, with original maturities of less than three months), which are subject to insignificant risk of changes in value, and
are used for the purpose of meeting short-term commitments. Cash and cash equivalents are carried at cost.
Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are
included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
(f) Resale and repurchase agreements
Transactions involving purchases of securities under resale agreements (‘resale agreements’ or reverse repos’) or
sales of securities under repurchase agreements (‘repurchase agreements’ or ‘repos) are accounted for as short-term
collateralised lending and borrowing, respectively. Accordingly, securities sold under repurchase agreements remain
on the statement of financial position and are measured in accordance with their original measurement principles.
The proceeds of sale are reported as liabilities and are carried at amortised cost. Securities purchased under resale
agreements are reported not as purchases of the securities, but as receivables and are carried in the statement of
financial position at amortised cost. It is the policy of the Group to obtain possession of collateral with a market value
in excess of the principal amount loaned under resale agreements.
Interest earned on resale agreements and interest incurred on repurchase agreements is recognised as interest
income and interest expense, respectively, over the life of each agreement using the effective interest method.
(g) Financial assets
The Group classifies its financial assets into the following categories: financial assets at fair value through profit or
loss, loans and receivables and available-for-sale financial assets. Management determines the classification of its
financial assets at initial recognition.
50
JMMBGL PROSPECTUS
NOTES TO THE
(g) Financial assets (continued)
Investments
Available-for-sale financial assets
The Group’s investments in equity securities and certain debt securities are classified as available-for- sale and
are carried at fair value except for unquoted equity securities whose fair value cannot be reliably measured,
which are carried at cost. Changes therein, other than impairment losses, and foreign exchange gains and losses
on available-for-sale monetary items, are recognised in other comprehensive income and reflected in investment
revaluation reserve in equity. When an investment is derecognised, the cumulative gain or loss in equity is
transferred to profit and loss account.
Investments at fair value through profit or loss
The Group carries some investment securities at fair value through profit or loss if they are held for trading or
designated as such upon initial recognition. Financial instruments are designated at fair value through profit or
loss if the Group manages such investments and makes purchase and sale decisions based on their fair value.
Upon initial recognition, attributable transaction costs are recognised in profit or loss when incurred. Financial
instruments at fair value through profit or loss are measured at fair value and changes therein are recognised in
profit or loss.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments, that are not
quoted in an active market, and that the Group does not intend to sell immediately or in the near term.
Loans and receivables are measured at amortised cost using the effective interest method, except when the
Group chooses to designate the loans and receivables at fair value through profit or loss.
Investment properties
Investment properties are held for rental yields and fair value gains and are not occupied by the Group. Investment
properties are treated as a long-term investment and are carried at fair value, representing open market value
determined annually by the directors or by independent valuers. Changes in fair values are recognised in the
profit or loss. Rental income from investment properties is recognised in the profit and loss on a straight line
basis over the tenor of the lease.
(h) Borrowings
Borrowings (other than repos) are recognised initially at fair value net of transaction costs incurred. Borrowings are
subsequently stated at amortised cost with any difference between cost and redemption value being recognised in
the profit and loss account over the period of the borrowings using the effective interest method.
51
NOTES TO THE
(i) Earnings per stock unit
Earnings per stock unit (“EPS”) is computed by dividing profit attributable to the equity holders of the parent of
J$1,181,931,000 (2014 – J$1,023,925,000) by the weighted average number of stock units in issue during the period,
numbering 1,630,552,530 (2014 – 1,630,552,530).
(j) Managed funds
The company acts as agent and earns fees for managing clients’ funds on a non-recourse basis under a management
agreement. At 30 September 2015, funds managed in this way amounted to J$58,276,702,000 (2014 – J$32,803,456,000).
(k) Comparative Information
Where necessary, comparative figures have been reclassified to conform to changes in presentation in the current
period. In particular, profit and loss, statement of financial position, cash flows and segment report have been restated
to reflect adoption of IFRIC 21, Levies on basis consistent with internal management reporting (Note 4).
52
JMMBGL PROSPECTUS
NOTES TO THE
4. Restatement of Comparative Financial Information
The Group has adopted IFRIC 21, Levies, which is effective for annual reporting periods beginning on or after January 1,
2014, in respect of the recognition of assets tax. IFRIC 21 clarifies that the obligating event that gives rise to the payment
of a levy is the event identified by the legislation that triggers the obligation to pay the levy. It has been determined that
the obligating event for assets tax under the Assets Tax (Specified Bodies) Act is the entity being in existence for any party
of the year of assessment. The liability is therefore triggered on the first day of the Group’s financial year. Consequently,
the full liability for the asset tax, amounting to $397.5 million for 2015/2016, has been recognized on April 1, 2015. The
amounts for the corresponding quarters of
2014/2015 have been restated to show the effect of these changes on the consolidated profit and loss and statement of
financial position as set out below:
As previously
reported
30 Sep 2014
Effect of
IFRIC 21
Restated
30 Sep 2014
$'000
$'000
$'000
4,991,939
-
4,991,938
Consolidated profit and loss
Total operating revenue
Operating Expenses
(3,475,926 )
(184,906 )
(3,660,832 )
Operating Profit
1,516,012
(184,906 )
1,331,106
Taxation
9,679
-
9,679
1,525,691
(184,906 )
1,340,785
(261,875 )
-
(261,875)
1,263,816
(184,906 )
1,078,910
Total Assets
223,737,890
-
223,737,890
Total Liabilities
202,869,716
Consolidated Statement of Financial Position
Equity
20,868,174
184,906
(184,906 )
203,054,622
20,683,268
53
NOTES TO THE
5. Business Combinations
Acquisition of Banco Rio De Ahorro Y Credito
On 1 July 2015, JMMB Holding Company Limited, SRL, a 100% owned subsidiary, acquired 90% equity and obtained
management control of Banco Rio De Ahorro Y Credito JMMB Bank S.A., savings and loan bank for US$2,150,000 (J$254.5
million).
Valuations of acquired tangible and intangible assets are not finalised. Management has utilised provisions under IFRS 3
which allows the acquirer reasonable time to obtain information necessary to identify and measure identifiable assets
acquired and liabilities assumed. Management expects that this assessment will be concluded by the financial year
end. Details of the provisional purchase price allocation among net assets acquired and goodwill are as follows:
$'000
Purchase consideration – cash paid
Fair value of net assets acquired
G oodwill
The assets and liabilities arising from the acquisition are as follows:
254,512
(155,791 )
98,721
Fair
Value
$'000
265,009
Investment securities
166,639
757,648
Property, plant and equipment and intangible assets
Accounts receivable
Customer deposits
Due to financial institutions
Accounts payable
2,677
37,926
(1,034,032)
(781)
(21,985)
Net assets
17 3,101
Net assets acquired 90%
155,791
Cash consideration
Cash and cash equivalents acquired
Net cash inflow on acquisition
(254,512 )
265,009
10,497
Since the acquisition, the acquired business has contributed J$52,081,000 in revenues and incurred
operating expenses of J$55,224,000 for the Group.
54
JMMBGL PROSPECTUS
12.
CORPORATE GOVERNANCE
JMMBGL is committed to ensuring that its policies
and practices reflect a high standard of governance.
The Board of Directors of JMMBGL has adopted a
comprehensive framework of Corporate Governance
Guidelines, designed to balance performance and
ensure conformance. This enables JMMBGL to
undertake, in an effective manner, the prudent risktaking activities which are the basis of its business.
Board Role and Function
The Board’s role and responsibilities are summarized
below. They include oversight of the business and
affairs of the JMMB Group by:
•
Establishing with management and approving
the strategies and financial objectives;
•
Approving major corporate and capital
initiatives, capital expenditure acquisitions
and divestments in excess of limits delegated
to management;
•
Overseeing the establishment of appropriate
risk management systems including defining
JMMB Group’s risk appetite and establishing
appropriate financial policies such as target
capital and liquidity ratios;
•
Monitoring the performance of management
and the environment in which the JMMB Group
operates;
Approving of the JMMB Group’s policies; and
The Board of Directors
Directors are accountable to the shareholders
for JMMBGL’s performance and governance.
Management is responsible for implementing the
strategies and objectives approved by the Board of
Directors (“the Board”), and for carrying out the dayto-day management and control of JMMBGL’s affairs.
The core principles on which the JMMB Group
operates include the following:
• Conducting business with integrity and fairness;
• Transparency in all transactions;
• Timely disclosures and decisions, complying
with all the laws and regulations in the
jurisdictions in
which we operate;
• Accountability and responsibility towards the
stakeholders; and
• Commitment to conducting business in an
ethical and transparent manner.
The Board is committed to high standards of
corporate governance and sees this as critical
to strong business performance and investor
confidence. JMMBGL’s corporate governance
policies and procedures are built on a number of
regulatory standards as promulgated by the Bank
of Jamaica, the Stock Exchanges in Jamaica, Trinidad
and Tobago and Barbados, the Trinidad and Tobago
Securities and Exchange Commission, the Financial
Services Commissions of Barbados and Jamaica, the
PSOJ Code on Governance and the Trinidad and
Tobago Corporate Governance Code of 2013.
JMMB is a member of the Caribbean Corporate
Governance Institute and is also guided by its
principles.
•
•
Ensuring adherence to regulations in the
jurisdictions in which the JMMB Group operates.
The Board carries out its role in accordance with
JMMB Group’s values of love, integrity, honesty,
openness, care and accountability. It takes into
account at all times the interests of our clients,
shareholders, team members and the broader
community in which the JMMB Group operates.
The Board delegates to the Group CEO the
responsibility to achieve JMMB’s objective of
creating long term value for its shareholders in part
through excelling at securing and enhancing the
financial wellbeing of the clients, team members,
shareholders, businesses and communities.
The Group’s CEO is responsible for the day to day
management of the business and maintaining a
comprehensive set of management delegations.
These delegations cover commitments around
project investment, operational expenditure and
non-financial activities and processes. They are
designed to accelerate decision-making and improve
both efficiency and client service.
This report sets out our approach to governance
and explains the structure of the Committee, how it
operates and its accomplishments for the financial
year to date.
55
Responsibilities of the Corporate
Governance and Nominations
Committee
Below is an
responsibilities:
•
•
excerpt
of
the
Committees’
Ensure that the Board composition enables
effective oversight of the JMMB Group.
Assess routinely whether the Board and
its committees are functioning effectively.
The Board and its Committees, each, have
provided for in their respective charters, that
the committee members shall conduct annual
self-evaluations.
•
Lead the evaluation of the Directors and the
Board and report the results of the evaluations
to the Board.
•
Monitor and conduct general matters related
to Corporate Governance.
•
Establish policy frameworks and procedures
to deal with matters of conflict of interest.
•
Review periodically the size and composition
of the Board and make recommendations as
appropriate.
The Corporate Governance and Nominations
Committee reviews the JMMB Group’s corporate
governance policies as needed but does so at least
every 2 years. It considers the composition and
effectiveness of the Board and also the Boards of
the wholly owned subsidiaries. It also considers
the effectiveness of the Board and ensures that
the Board annually reviews its own performance,
policies and practices. These reviews seek to identify
where improvements can be made in the processes
that are managed by the Board. They also assess
the quality and effectiveness of information made
available to directors.
To date the Committee has met once so far to
consider the composition of the subsidiary boards
in order to ensure that there was an adequate mix of
expertise based on the subsidiary’s business model.
56
Composition of the Board
The composition of the Board is consistent with
local statutory and regulatory requirements
and best practices. All Directors are competent,
knowledgeable and experienced professionals who
provide strategic guidance and visionary leadership
to the JMMB Group.
JMMBGL Board has fourteen (14) directors of which
nine (9) are independent, two (2) non- executive and
three (3) executive directors.
The quorum is formed by a minimum of four (4)
members of which two (2) must be independent
directors.
The roles of Chairman and CEO are separate, in
keeping with regulations and international best
practices.
JMMBGL PROSPECTUS
BOARD COMMITTEE COMPOSITION
Composition
Committees
NAMES
POSITION
Noel Lyon PhD
Non-Executive
AUDIT
(Chairman)
Keith Duncan
Executive
Donna Duncan
Executive
Archibald Campbell
Independent
(Deputy
Chairman)
Chairman
Chairman
Member
Independent
Member
Wayne Sutherland
Non-Executive
Member
Dennis Harris
Independent
Member
Rodger Braham
Independent
Executive
Audrey Welds
Independent
Reece Kong
Independent
Andrew Cocking
Independent
FINANCE
Chairman
Independent
Independent
IS
COMMITTEE
Member
Anne Crick PhD
Hugh Duncan
HR &
COMPENSATION
Member
V. Andrew Whyte
Audrey Deer Williams
RISK
Chairman
Chairman
Member
Chairman
Member
CORPORATE
GOVERNANCE &
NOMINATIONS
Member
Member
Member
Member
Member
Member
Member
Member
Maurice Barnes and Khary Sharpe, who are independent directors on subsidiary boards, also sit on the
Information Systems Board Committee.
Board Committees
The directors bring to JMMBGL wide and diverse areas of expertise and experience, with knowledge in the areas
of financial management, accounting, law, information technology, strategy, human resources, risk management
and corporate governance.
Each committee has at least three (3) independent directors and is governed by a charter that outlines its roles
and responsibilities. The chairman of each committee must be an independent director.
In accordance with established principles of corporate governance, and to allow for better oversight of specific
risks and strategies, the Board delegates some of its responsibilities to the following committees:
• Audit Committee
• Risk Committee
• Human Resources and Compensation Committee
• Finance Committee
• Corporate Governance and Nominations Committee (see page 56)
• Information Systems (IS) Committee
57
Audit Committee
The Audit Committee assists the Board in discharging
its duties with regard to managing JMMB Group’s
operational risks, the maintenance of proper records
and controls and in ensuring that the transactions
of the JMMB Group are consistent with the policies
and directives of the Board. The Audit Committee
also ensures truth, fairness and compliance with
statutory and other relevant requirements in any
public statement of a financial nature made by the
JMMB Group, whether or not such a statement is the
subject of audit or any other professional scrutiny
and opinion.
effectiveness of the external reporting of financial
information and the internal control environment,
as well as obtaining an understanding of, JMMB
Group’s tax and accounting risks.
The main responsibilities of the Committee include
overseeing:
• The accounting policies;
• Statutory
and
requirements;
• Integrity of
statements;
regulatory
JMMB
Group’s
reporting
financial
The Audit Committee oversees the Internal Audit
and Compliance functions within the JMMB Group.
• Performance of the external auditor;
The Charter of the Audit Committee incorporates
a number of policies and practices to ensure that
the Committee is independent and effective. These
include the following:
• The timely and accurate publishing of
financial reports to our shareholders and the
public at large, in keeping with the relevant
regulations;
• All members must be independent directors.
At least one member should be a financial
expert with relevant qualifications and
experience as required by regulators.
• Review and approval of budgets;
• The Chairman of the Audit Committee cannot
be the Chairman of the Board.
• Review of all financial information published
for public use.
• Meetings are held quarterly and as required.
Risk Committee
• The Committee has the power to call
attendees as required, including open access
to management, external audit and the
right to seek explanations and additional
information;
The Risk Committee oversees JMMB Group’s risk
management framework. This includes credit risk,
market risk and liquidity and funding as well as
operational and reputational risks assumed by the
JMMB Group in the course of carrying on its business.
It reviews regular reports from management on
the measurement of risk and the adequacy and
effectiveness of JMMB Group’s risk management
and internal controls systems.
• Senior management and the internal and
external auditor have free and unfettered
access to the Audit Committee. The Group
Compliance Manager has a direct reporting
line to the Audit Chairman whilst maintaining
a management reporting line to the Group
Chief Executive Officer.
Finance Committee
The Finance Committee assists the Board in fulfilling
its statutory and fiduciary responsibilities relating to
the consolidated financial statements of JMMBGL. It
provides an objective and independent review of the
58
• Acquisition of assets not used in the normal
course of operation; and
A key purpose is to help formulate JMMB Group’s
risk appetite for consideration by the Board, and
agreeing and recommending a risk management
framework to the Board that is consistent with the
approved risk appetite.
This framework, which is designed to achieve
portfolio outcomes consistent with JMMB Group’s
risk-return expectations, includes:
JMMBGL PROSPECTUS
• The JMMB Group Risk Appetite Statement;
• High-level risk management policies for each of the risk areas it is responsible for overseeing; and
• A set of risk limits to manage exposures and risk concentrations.
The Committee monitors management’s compliance with the JMMB Group risk management framework
(including high-level policies and limits). It also makes recommendations to the Board on the key policies
relating to capital (that underpin the Internal Capital Adequacy Assessment Process), liquidity, and credit and
funding and other material risks. These are overseen and reviewed by the Board on at least an annual basis.
Significant transactions that could impact the overall financial strength and profile of the JMMB Group are
also discussed by the Committee. The JMMB Group has an integrated risk management framework in place
to identify, assess, manage and report risks and risk adjusted returns on a consistent and reliable basis.
Human Resources and Compensation Committee
The Human Resources and Compensation Committee assists the Board of Directors in discharging its duties
with regard to JMMB Group’s Human Resource Management, ensuring that activities are consistent with the
policies and directives of the Board. The Committee provides oversight to the JMMB Group in formulating
and reviewing compensation programmes for senior executive officers and board members, ensuring that
compensation is consistent with the objectives, strategy, risks and values of the JMMB Group.
The committee also meets on an ad hoc basis to interview and assess candidates for senior positions in the
JMMB Group.
Information Systems Committee
The responsibilities of the committee include appraising major Information Technology (IT) related projects
and technology architecture decisions; ensuring that JMMB Group’s IT programmes effectively support the
business objectives and strategies; providing guidance to the senior IT management team; advising the
Board of Directors on IT related matters and the effectiveness of the IT solutions currently employed across
subsidiaries; reviewing and approving IT policies at least annually and reviewing and recommending IT budget
and strategy annually.
The Information Systems Committee consists of at least 3 independent directors from JMMBGL and the
subsidiary boards.
With the restructuring of the JMMB Group, some committees are now Group Committees, while the banking
subsidiaries maintain some committees as required by regulations and best practices.
JMMBGL Committees
Audit
Board Committees
Audit
Board Committees
Audit
Finance
Risk
Corporate Governance and
Nominations
Risk
Credit
Credit
Human Resources and
Compensation
Information Systems
59
Directors’ training
Directors participate in an induction programme upon appointment and in a refresher programme on
a regular basis. This programme of continuing education ensures that the Board is kept up to date with
developments in the industry both locally and globally.
Continuous Disclosure
Matters which could be expected to have a material effect on the price or value of the Company’s securities
must be disclosed under the Jamaica Stock Exchange (JSE), Trinidad and Tobago Stock Exchange (TTSE) and
Barbados Stock Exchange (BSE) Rules which require that shareholders and the market are provided with full
and timely information about JMMB Group’s activities in compliance with continuous disclosure requirements.
Continuous disclosure policies and processes are in place throughout the JMMB Group to ensure that all
matters of a material nature which may potentially require disclosure are promptly reported to the regulators
and the market.
The Group Company Secretary is responsible for all regulatory disclosures and for ensuring that such
information is not released to any person until the information is released to the market.
Regulatory Compliance
The Group Compliance Manager provides a monthly regulatory report to the Board of Directors on all
companies within the JMMB Group. It is the responsibility of the Compliance Department to ensure that the
JMMB Group is in compliance with all laws and regulations, and standards of good governance in the various
territories in which members of the JMMB Group operate.
The Board understands the regulatory framework under which the JMMB Group operates and co-operates
with regulators to ensure that the financial system is safe and sound. The Board and Management therefore:
• Maintain an open communication with the regulators on all material issues pertaining to the JMMB
Group;
• Comply promptly and fully with requests for information as required by law;
• Are aware of the findings of the on-site examination process and direct senior management to
determine whether similar problems exist elsewhere in the JMMB Group and take corrective action;
and
• Ensure that there is annual training of all team members and directors on the Proceeds of Crime Act,
Code of Ethics, Know Your Client and Employees and any new regulations.
Board Assessment
A Risk Appetite Survey was conducted to ensure that the company’s operations are consistent with the Board’s
risk appetite.
60
JMMBGL PROSPECTUS
13.
DIVIDEND POLICY
The record of dividends declared and paid on JMMBGL’s ordinary shares is as follows1:
Financial Year
No. of Shares
Gross Dividend
Dividend Per Share
2015-2016
1,630,552,532
J$260,888,380.32
16 cents
The guiding philosophy behind JMMBGL’s dividend policy is to balance paying dividends with maintaining
sufficient retained earnings to ensure reinvestment of profits for future growth and expansion in addition
to robust capital adequacy ratios. This ensures that investors’ preference for immediate cash flows is met
while the company remains able to sustain dividend pay-outs due to re-investment and growth and complex
regulatory capital requirements. Dividend policies at the subsidiary level will be determined by the Board of
Directors of the subsidiary to allow for the input of minority shareholders, if existing.
JMMBGL currently has no contractual obligations that restrict dividend payments. The dividend policy
established by the Directors of JMMB on October 15, 2002 and adopted by JMMBGL is to pay a dividend of
between 15% and 30% of annual after tax profits, subject to the needs of the Company for the reinvestment
of profits to finance growth and for prudential purposes. This dividend policy is subject to review from time
to time by the Company’s Board of Directors.
It is the Company’s intention to pay dividends on the Preference Shares in accordance with their respective
Terms of Issue.
14.
MATERIAL CONTRACTS
JMMBGL has not entered into any material contracts within the last two years immediately preceding the
publication of this Prospectus.
15.
LITIGATION
The Company is not currently engaged in any material litigation nor is it aware of any pending material
litigation.
1 Note previous dividend payments were made by JMMB Limited which is now a subsidiary of JMMB Group Limited. The aforementioned dividend
payment was the first for JMMB Group Limited.
61
16.
RISK MANAGEMENT
THE JMMB GROUP RISK MANAGEMENT
FRAMEWORK
All financial institutions face inherent risks in their
operations, and the appropriate management of
these risks is important to the maximization of
stakeholder value over time.
Safeguarding Stakeholders’ Interest
Our unique value proposition remains at the core
of all our undertakings at the JMMB Group. Since
‘we always keep the customers’ best interest at
heart’, the JMMB Group invariably takes proactive
measures to safeguard the best interest of our
stakeholders. In fulfilling our vision of being an
integrated financial services institution we provide
a wide suite of products and services for our
clients. This is within the context of a robust risk
management framework whereby the risk universe
is accurately identified; material risk factors are then
continuously measured, monitored, controlled and
reported. The limit and breach escalation system
provides a mechanism for risk control, with limits
based on the desired risk appetite for each major
risk. Thus, the JMMB Group aims to sustain longterm value creation while ensuring the continued
financial soundness of the Group.
The overall risk appetite of the JMMB Group is
contemplated when developing strategy, and further
delineated in the strategies undertaken by each
material subsidiary. The geographic diversification
of the Group is inherently a risk mitigation tool.
Moreover, our clearly articulated group structure
provides clarity in our sight and monitoring of the
risks arising from idiosyncrasies in each jurisdiction
and possible contagion effects that may arise. Across
the Group, strategic initiatives are aligned with the
risk parameters outlined by the Board of Directors.
The Board as well as the Senior Management team
ensures that a strong risk culture is maintained
across the Group and risk management is effectively
embedded in each desk in the organization. However,
the day-to-day risk monitoring is primarily done by
the Group Risk Department.
In the 2015/2016 financial year, the JMMB
Group continues to improve the rigor of its risk
62
management framework adopting a principlebased approach to creating policies. This allows for
the seamless incorporation of all its subsidiaries
and its expanding range of financial products. We
continue to expand the scope of our enterprise risk
management framework within which risk measures
are integrated and linkages between risks are clearly
identified. This approach allows management to
have a holistic view of the Group’s risk exposures
and ensures that they are adequately managed at
all levels throughout the organization. We have also
increased our focus on model validation ensuring
that our methodologies remain effective and
adequately measure the various risk factors.
Risk Management Principles
The JMMB Group remains committed to the following
core principles of its risk management framework
i. There is a vibrant risk management culture
embedded in the organization as well as the
Board, senior management, team leaders and
all team members throughout the entities
in the Group who are aware of and aligned
to their roles and responsibilities in risk
management.
ii. Best practice risk management techniques
are employed in managing the various risks
to which the Group is exposed and adequate
resources are allocated to the management of
risk.
iii. Risk undertaken is within our risk appetite
framework and there are effective, dynamic
and adaptive processes for the ongoing
identification, measurement and management
of material risk exposures.
iv. The enterprise is adequately capitalized to
protect against the effects of major shocks
to the Group as well as its subsidiaries on a
stand-alone basis.
v. Data quality is continuously monitored to
ensure transparency, accuracy, completeness
and relevance.
vi. The operating environment for each
jurisdiction is taken into consideration and
risk management techniques are tailored to
adequately support each territory.
JMMBGL PROSPECTUS
Risk Appetite
As the JMMB Group continues to build out its
enterprise risk management framework, its risk
appetite statement remains an integral part of this
process. Our risk appetite statement framework
broadly articulates the maximum amount of risk
that the Group, and by extension, each subsidiary, is
willing to undertake in order to achieve its business
objectives. This incorporates, the operating
environment for each subsidiary, business lines,
operating constraints, as well as our core objective of
increasing stakeholders’ value, thereby maintaining
the long term viability of the Company and its
subsidiaries.
The risk appetite framework is approved by the
Company’s Board of Directors and contextualizes
all our decision-making processes. It considers the
material risk exposures of the overall Group as well
as for each subsidiary. There are policy limits in place
for each major category of risk for each subsidiary
and the overall Group. These are documented in
the respective risk policies and serve as the basis for
risk monitoring and control. To ensure consistent
alignment with the risk appetite statement, there
is an escalation process whereby risk indicators
that are in breach of stated limits are quickly and
systematically returned to acceptable levels.
THE JMMB GROUP RISK POLICY
OVERVIEW
The JMMB Group risk policy is the overarching
document that formally outlines the risk
management approach of the overall Group. There
is significant merit to viewing and/or managing risk
exposures from a global level. In this framework,
the business takes account of the inter-relatedness
of risk exposures and how the financial position and
risk profile of the organization is either strengthened
or weakened by this relatedness.
The policy explores and discusses all known risk
exposures of the JMMB Group and further outlines a
process for the determination and management of
new risk exposures. This includes market risk, credit
risk, liquidity risk and operational risk as well as the
issues of risk aggregation, capital adequacy, and
capital allocation. By effectively implementing and
managing this risk framework, we ensure the long
term earnings stability of the Group by effectively
managing all types of risks.
Consequently, the framework identifies the
methodologies to be used to identify, quantify and
manage risk from a best practice approach as well
as outline a Group-wide risk management process
that supports the effective identification and
management of risk.
The JMMB Group risk policy is the reference for
our risk governance framework as it involves the
processes for risk identification, risk assessment,
risk response, control activities, communication and
monitoring. The JMMB Group’s risk policy provides
the basis for articulating the policies for the Group
as well as the policies for individual risk exposures.
RISK GOVERNANCE FRAMEWORK
Ensuring the effectiveness of our risk
management activities
Board of Directors
Board Risk Committee
Management Committees
Risk Department
All other team members
The strength of the JMMB Group’s risk governance
framework reflects the rigor of our processes and
the competence of the delegated risk authorities.
Our business operations are invariably exposed
to the likelihood that outcomes will be worse than
expected. This is especially the case as we expand
our product offering across the Caribbean. Careful,
comprehensive and continuous analyses of the
risks involved are done and material exposures
identified for each subsidiary as well as the overall
Group. Importantly, since we operate over multiple
jurisdictions, the potential regulatory changes are
pre-empted along the lines of international best
practices and global guidelines (for example, the
Basel frameworks).
63
Material risk exposures are assessed. This assessment includes the interrelations and dependencies of these
risk factors. Both quantitative and qualitative approaches are used, thus ensuring a balance between the
outputs of our models and the extensive experience of our management team. Given the ever-changing
landscape in which the Group operates, these models and techniques are validated periodically to ensure
that they are efficient; adequately capture the risk factors; and are in alignment with best practices. Our
data quality is also validated for accuracy and sufficiency. Moreover, our risk officers engage in continuing
risk education programmes to maintain relevance in the field. These risk assessment processes and the
management of material risk exposures are documented in our various risk policies.
The evaluation and management of risk exposures is within the context of our risk appetite framework which
allows for transparency and efficiency. The practice of risk management continues to be deeply rooted
in the culture of the JMMB Group as each team member is aware of his/her role and responsibility in the
risk management process. The risk management hierarchy is shown in Figure 1. The Board of Directors of
the Company determines the overall level of acceptable risk, active oversight is provided by the Board Risk
Committee that approves and monitors the supporting risk tolerances. Thus, the Board Risk Committee
provides strategic direction for the Group and ensures that the risk governance framework remains strong.
The Board Risk Committee is directly supported by other committees within the Group. These are the Risk
Management, Credit Management and Asset Liability Management Committees which convene regularly and
more closely monitor the risk exposures of the Group and its subsidiaries against the limits set by the Board
Risk Committee. Furthermore, to ensure that risk management is a part of the fabric of the Group, members
of the Group Risk Department are included on committees that address the strategic objectives of the Group.
On an annual basis, the JMMB Group institutes an internal capital adequacy assessment process (ICAAP)
which supports our strategies and provides a comprehensive view of the risk profile of the Group and its
subsidiaries. It also provides the mechanism to adjust our business operations and strategies given our
internal and external environments.
Risk Measurement, Control and Reporting
The operations of the JMMB Group gives rise to the following material risk exposures: market risk, credit
risk, liquidity risk and operational risk. As previously mentioned the control process is based on an internal
limit system established with the approval of the Board of Directors. As such, there is an associated breach
escalation process that ensures that exposures outside of set boundaries are returned to acceptable levels.
Reports are generated periodically to inform decisions of senior management as well as to ensure that we
remain within the ambit of our risk appetite parameters.
Market Risk
Market risk is the likelihood that there is a decline in the value of assets due to adverse movements in market
factors such as interest rates, foreign exchange rates and equity prices. In accordance with international
best practices, the JMMB Group monitors both the market risk exposures within individual entities and
consolidated exposures across the countries in which we operate.
This is accomplished using the Value-at-Risk (VaR) framework, in conjunction with frequent scenario analysis
and stress testing. We also monitor interest rate risk and currency risk that may affect the value of assets.
Value-at-Risk (VaR)
Value-at-Risk (VaR) provides a single measure that captures the potential loss in the portfolio over a
specific time-period and for a given probability. This metric is widely used by financial institutions globally
and currently, the JMMB Group computes a 10-day Monte Carlo VaR using a 99% confidence level, which
may be adjusted to meet specific needs. Though the usefulness of the VaR measure is accepted, one of
its main drawbacks is that it does not approximate ‘worst-case losses’.
64
JMMBGL PROSPECTUS
As such, the Group Risk Department also
estimates expected shortfall (which is the
expected loss given that the VaR is exceeded),
augmented by stress tests and scenario analysis.
Stress tests estimate unlikely yet plausible
situations while the scenario analyses model
historical financial crises both locally and
internationally. These metrics are analysed as a
percentage of economic capital which provides
an indication of the Group’s ability to absorb
losses based on adverse market movements.
In each instance, we assess the capacity of the
JMMB Group and its subsidiaries, as stand-alone
entities to withstand the occurrence of such
low probability yet high impact events. This
monitoring is done at least monthly and reports
are presented to the Board.
Interest Rate Risk
Interest rate risk is the possibility that there
will be adverse movement in the value of
the fixed income investments arising from
fluctuations in the level, slope and curvature of
the yield curve. The JMMB Group has material
exposure to interest rate risk, given the nature
of its business. Interest rate risk is managed
using duration analysis and estimation of repricing gaps. Duration reflects an instrument’s
sensitivity to interest rate risk while re-pricing
gap approximates the potential change in net
interest income.
Stress testing considers plausible movement
in interest rate and the impact on our current
financial condition. We also employ reverse
stress testing at times to determine the
magnitude of adverse interest rate movements
that would produce certain negative outcomes.
Portfolio exposures are adjusted to take
advantage of expected market conditions, while
limiting losses should adverse conditions occur.
Currency Risk
In alignment with our value proposition of
providing simple, transparent solutions, the
JMMB Group provides financial products in
various currencies. This gives rise to currency
risk which represents the possibility of adverse
change in the exchange rate for any two
currencies. Net positions for all the foreign
currencies are monitored by setting limits and
are hedged where necessary. There is also
periodic stress testing of our currency risk based
on plausible ‘worst-case’ adverse movement in
currency pairs.
Credit and Counterparty Risk
Credit risk is the potential for loss due to failure
of a borrower to meet its contractual obligation to
repay a debt in accordance with the agreed terms.
The JMMB Group is exposed to credit risk from its
lending, investment and funding activities, where
counterparties have contractual obligations to
make payments or facilitate transactions. The Board
indicates a tolerance level for credit risk, which is
actively managed by the credit risk team.
For our lending activities which are concentrated in
the merchant and commercial banks, limits are set
on credit exposures by various classifications, such
as economic sector, collateral type provided, loan
purpose and customer profile. The JMMB Group
applies quantitative techniques to the provision and
pricing of credit facilities, thereby facilitating better
business decisions. We therefore seek to ensure the
expected return on a credit facility is reflective of its
level of risk, which allows the Group to better deploy
its capital and provide fair pricing of loans to clients.
Using our internally developed models and
fundamental research, we assign ratings and
determine exposure limits to counterparties arising
from investment and funding activities. This is
augmented with the use of third-party research,
where practicable. Material counterparties across
the Group are actively monitored and their ratings
updated based on changes to their financial outlook.
Counterparty credit assessments are conducted
prior to material exposure to any entity, and
quarterly reviews done for the most significant
counterparties to ensure changes in the financial
health of counterparties are detected early. The
proactive nature of the monitoring of counterparties
allows the JMMB Group to better identify any
entity facing problems and adjust exposures and
contractual terms to acceptable levels.
Given the expansion of the Group geographically,
we continuously improve our counterparty risk
management capabilities to better manage Groupwide exposures. This is done in the context of an
expansion in the universe of products and services
to corporate and institutional clients.
65
Liquidity Risk
Liquidity risk is the possibility that a firm will be unable to meet financial obligations without suffering material
losses. Liquidity risk refers to both funding liquidity risk - where a firm is unable to meet its financial obligations
as they become due at an economic price, and also asset liquidity risk – where a given security cannot be sold
at its market value due to insufficient market depth. Given that liquidity risk is often a consequence of other
types of risk as well as the significant impact it can have on a financial institution, it is actively managed within
the Group with both short-term and long-term horizons.
While there is an overall Group liquidity risk policy which specifies minimum liquidity requirements for the
business as well as other guidelines and limits which provide stronger assurance that all obligations can be met
even under very stressful market conditions, there are also entity-level liquidity policies. These are informed
by the liquidity gaps, retention rates, business models and market conditions. Key liquidity metrics monitoring
liquidity gaps, overall liquid assets to total assets and available liquid assets are regularly monitored to ensure
that liquidity objectives are not compromised. Desired capital and liquidity levels are adjusted according to
evaluations of market conditions and liquidity conditions.
Operational Risk
Operational risk may be defined as “the risk of loss from inadequate or failed internal processes, people
and systems or from external events.” The JMMB Group has enhanced its operational risk framework which
ensures that operational risk is limited to acceptable levels within the Group, so as to maximize the benefits of
our diversification even as the complexity of operations increases. Rigorous and appropriate control systems
and processes, along with operational redundancies and business recovery plans, act to safeguard against
significant disruptions in our operations. A rigorous compliance framework and independent internal audit
programme exist to ensure that controls are maintained and all material risks are properly identified and
adequately managed.
OPTIMIZING RETURNS FOR ALL STAKEHOLDERS
The JMMB Group remains firmly committed to its strategy of business line and geographic diversification,
which has created significant value to shareholders and improved the resilience of the Group. Diversification
has also enhanced the product offering of the Group and its ability to meet the needs of its clients regionally.
This is anchored on detailed capital planning which reflects the capacity of the Group to absorb unexpected
losses from inherent risk exposures in these product offerings. There is also an external component where
we ensure that we are within the limits set by the regulators and which offers comfort to our stakeholders.
The flexibility of the JMMB Group’s risk management framework allows it to adapt to support the vision of
the Group by ensuring that business decisions adequately incorporate the inherent risks involved, so as to
optimize stakeholders’ value.
66
JMMBGL PROSPECTUS
17.
RISK FACTORS
The JMMB Group is faced with a number of risk
factors in its normal business operations. While
we have highlighted our rigorous risk management
framework, prospective investors in the Preference
Shares should carefully consider all the information
in this Prospectus including the risk factors set
out below and are encouraged to take advice
from a licensed stockbroker or other professional
advisor. The list of risk factors includes competitive
pressure, regulatory and accounting changes
and deterioration in economic outlook. The listed
factors should not be considered to be the entire
risk universe to which we are exposed.
Trading And Ownership Rights Of
Preference Shares
There may be volatility in the stock price.
Neither the Group nor any of its advisors can
predict the stock’s trading behaviour after any class
of Preference Stock Units are listed on the Jamaica
Stock Exchange.
Newly-issued shares may experience significant
volatility in stock price which may extend beyond
the short term and which may be dependent on
the Group’s performance, investors’ confidence and
other factors over which the JMMB Group has no
control.
The Group may decide to issue additional shares
at a later date.
The Directors of the Company may hereafter
authorise the issue of additional preference shares
in the Company. Such shares, once issued, may rank
pari passu with the existing Preference Shares in
any class (including upon a winding up) and may be
listed on the JSE or on any other stock exchange(s).
Additional shares so issued could affect the market
price of the Preference Shares in the respective
class.
Economic And Market Conditions
Risks
Low economic growth in some of the countries
in which we operate could dampen growth.
Both Jamaica and Trinidad and Tobago may
experience marginal economic growth in the near
term. While this could constrain the pace at which
we grow in these territories, economic growth in the
Dominican Republic continues to be robust and our
operations there continue to expand.
Fiscal and monetary policies in territories in
which we operate could impact the Group.
Changes in fiscal and monetary policies by the
Government may affect the behaviour of capital
markets. Such changes in policies may create
opportunities as well as challenges for the Group.
In each jurisdiction, the Group is exposed to high
levels of sovereign risk.
A material proportion of the Group assets are
in instruments issued by sovereigns across the
region, especially in countries in which it operates.
Additionally, securities held on behalf of customers
are mainly emerging market sovereign credits. Any
deterioration in the credit-worthiness of these
sovereigns could affect the value of these securities
and by extension the financial performance of the
Group.
Industry-Related Risks
Regulatory and Legal Uncertainties
The Preference Issue does not include voting
rights.
The JMMB Group operates in a heavily regulated
industry. Changes in the regulations of any of our
jurisdictions relating to existing Regulations or the
introduction of new Regulations or Guidelines may
affect the operations of the Group and thereby
affect profitability. In Jamaica, the Banking Services
Act was recently passed and gazetted, and in
Trinidad and Tobago, there are plans to implement
aspects of Basel II/III regulations. As it relates to
the Securities Dealers sector, the FSC is proposing
changes to prudential requirements that could have
an impact on the business over time.
Offering of Preference Shares will not confer legal or
effective control of the Company on Applicants.
New Accounting Rules or Standards could be
implemented.
67
The Group may become subject to new accounting
rules or standards that differ from those that are
presently applicable. Such new accounting rules or
standards could require significant changes in the
way the JMMB Group currently reports its financial
position, operating results or cash flows. Such
changes could be applied retrospectively.
There could be new entrants or competitive
pressures from existing participants.
Marginal economic outlook in some of the territories
could result in intensified competitive pressure as
other financial institutions seek to grow business by
increasing market share. The JMMB Group will need
to be proactive in its strategy to retain and grow its
market share. Additionally, new companies could
be incorporated or consolidation result in existing
companies being sounder.
Source of Profits
The JMMB Group is an active participant in the
securities market. This involves taking positions in
equities and debt securities, which are subject to
risks. A substantial portion of the Group’s profit is
derived from investment in securities. The Group’s
profitability may be significantly influenced by
the risks of the markets in which it trades and the
transactions undertaken by the Group. The JMMB
Group understands that risks and rewards are
correlated and seeks to ensure that it does not
expose itself or its clients to risks that do not provide
a compensating return.
Cross-Border/ International
Operations Risk
Adverse events in the two foreign countries
in which the Group operates could negatively
affect business operations.
Given that the Group operates in three different
countries and is domiciled in Jamaica, it is exposed
to adverse events in these countries that may impact
its financial results and by extension its share price.
These events include:
• international
political
and
economic
conditions;
• changes in government regulations in various
countries;
68
• trade barriers;
• adverse tax consequences; and
• costs associated with expansion into new
territories.
The Group expects that international revenues will
continue to be a material portion of its total revenues
and continues to actively monitor conditions in
these countries.
Operational Risk
While we attempt to mitigate operational risk,
losses could still arise from inadequate or failed
internal processes, people and systems, or from
external events.
This catch-all category of risks includes:
• employee errors;
• computer and manual systems failures,
security failures;
• fire, floods or other losses to physical assets;
and
• fraud or other criminal activity.
As there are subsidiaries which are financial
institutions, the Group’s operations are particularly
susceptible to the risk of money laundering. The
Group has established internal procedures to
safeguard against that risk.
People risk could arise as key personnel leave
the institution for a variety of reasons.
It is very important that the JMMB Group attracts and
retains highly skilled personnel to accommodate
growth, new products development and the
provision of services and to replace personnel who
leave. Competition for qualified personnel can be
intense, especially in the securities industry, and
there are a limited number of people with the
requisite knowledge and experience. The Group
will need to attract and retain qualified personnel
and failure to do so could have a material adverse
impact on its operating results and stock price. The
Group has a strong management team and actively
recruits new and skilled talent.
JMMB’s management believes that there are
currently no significant or unusual developments
surrounding the risks described in this Section 17.
JMMBGL PROSPECTUS
18.
CONSENTS
KPMG has given and not withdrawn its consent to the issue of this Prospectus with the inclusion therein of its
report and the references to its name in the form and context in which they are included.
19.
DOCUMENTS AVAILABLE FOR INSPECTION
From the date of publication of the Prospectus, the following copies of documents will be available for
inspection on any weekday (except Saturday, Sunday and public holidays) during the hours of 10:00 a.m. to
3:30 p.m., at our head office located at 6 Haughton Terrace, Kingston 10 and our branches islandwide:
(1)
Copies of the current Prospectus;
(2)
Copies of the constitutive documents of the Company;
(3)
Copies of the written consent of the Auditors KPMG;
(4)
Copies of the material contracts referred to under Section 14 above;
(5)
Copies of the unaudited Financial Statements for the Company for the 6 months ended September 30,
2015; and
(6)
Copies of the Audited Financial Statements for Jamaica Money Market Brokers Limited for the years
ended March 2015, 2014, 2013, 2012 and 2011 respectively.
20.
STATUTORY AND GENERAL INFORMATION
1. The Company has no founders or management or deferred shares.
2. The Articles of Incorporation of the Company do not fix any share qualification for a Director of the
Company. Neither has the Company in a general meeting fixed any share qualification for Directors.
3. The Articles of Incorporation of the Company contain the following provisions on the remuneration of
Directors:
(a)
The remuneration of the Directors shall from time to time be determined by the Company in
General Meeting. Such remuneration shall be deemed to accrue from day to day. The Directors
may also be paid all traveling, hotel and other expenses properly incurred by them in attending and
returning from meetings of the Directors or any committees of the Directors or General Meetings of
the Company or in connection with the business of the Company. (Article 86)
(b)
Any Director who serves on any committee or who devotes special attention to the business of the
Company, or who otherwise performs services which in the opinion of the Directors are outside the
scope of the ordinary duties of a Director, may be paid such extra remuneration by way of salary,
percentage of profits or otherwise as the Directors may determine. (Article 87)
69
70
(c)
A Director of the Company may be or become a Director or other officer of, or otherwise interested in,
any company promoted by the Company or in which the Company may be interested as shareholder
or otherwise, and no such Director shall be accountable to the Company for any remuneration
or other benefits received by him/her as a director or officer of, or from his/her interest in, such
other company unless the Company otherwise directs. The Directors may exercise the voting power
conferred by the shares in any such other company held or owned by the Company or exercisable by
them as directors of such other company, in such manner in all respects as they think fit (including
the exercise thereof in favour of any resolution appointing themselves or any of them, directors or
other officers of such company), and any Director may vote in favour of the exercise of such voting
rights in the manner aforesaid, notwithstanding that he/she may be or about to be, appointed a
director or other officer of such company, and as such is or may become interested in the exercise
of such voting rights in the manner aforesaid. (Article 89)
(d)
A Director may hold any other office or place of profit under the Company (other than the office
of auditor) in conjunction with his/her office of Director for such period and on such terms (as to
remuneration and otherwise) as the Directors may determine and no Director or intending Director
shall be disqualified by his/her office from contracting with the Company either with regard to his
tenure of any such other office or place of profit or as vendor, purchaser or otherwise, nor shall any
such contract, or any contract or arrangement entered into by or on behalf of the Company in which
any Director is in any way interested, be liable to be avoided, nor shall any Director so contracting or
being so interested be liable to account to the Company for any profit realized by any such contract
or arrangement by reason of such Director holding that office or of the fiduciary relation thereby
established. (Article 97(3))
(e)
Any Director may act by himself/herself or his/her firm in a professional capacity for the Company,
and he/she or his/her firm shall be entitled to remuneration for professional services as if he/she
were not a Director; provided that nothing herein contained shall authorize a Director or his/her
firm to act as auditor of the Company. (Article 97(5))
(f)
The Directors may establish or arrange any contributory or non-contributory pension or
superannuation scheme for the benefit of, or pay a gratuity pension or emolument to any person
who is or has been employed by or in the service of the Company, or any subsidiary of the Company,
or of its holding Company or to any person who is, or has been, a Director or other officer of the
Company or any such subsidiary, or a subsidiary of its holding Company and the widow, family or
dependents of any such person. The Directors may also subscribe to any Association or fund which
they consider to be for the benefit of the Company or any such subsidiary or a subsidiary of its
holding Company or any such person as aforesaid, and make payments for or towards any hospital
or scholastic expenses or any insurance of any such person or the approval of the Commissioner
of Income Tax & Audit Department provided that any Director shall be entitled to retain any benefit
received by him/her hereunder, subject only, where the Act requires, to proper disclosure to the
members and the approval of the Company in General Meeting. (Article 100)
(g)
A Managing Director shall receive such remuneration (whether by way of salary, commission or
JMMBGL PROSPECTUS
participation in profits, or partly in one way and partly in another) as the Directors may determine
and it may be made a term of his/her appointment that he/she be paid a pension or gratuity on
retirement from office. (Article 121)
4. The names and descriptions of the Directors are set out in Section 4 of this Prospectus. The addresses of
the Directors are as follows:
Director
Address
Noel Lyon
Suite 16A, 80 LMR, 80 Lady Musgrave Road, Kingston 10
Keith Duncan
6 Haughton Terrace, Kingston 10
Donna Duncan Scott
Archibald Campbell
The University of the West Indies, Mona, Kingston 6
Hugh Duncan
Wayne Sutherland
Suite 16A, 80 LMR, 80 Lady Musgrave Road, Kingston 10
V. Andrew Whyte
6A Oxford Road, Kingston 5
Anne Crick
Rodger Braham
Dennis Harris
79-81A Slipe Road, Kingston 5
Andrew Cocking
Audrey Deer-Williams
40 Knutsford Boulevard, Kingston 5
Reece Kong
Suite 12, 1D–1E Braemar Avenue, Kingston 5
Audrey Welds
5. No minimum amount is required to be raised out of the proceeds of the Preference Share Issue to provide
for any of the matters set out in paragraph 2 of Part 1 of the Third Schedule to the Act.
6. The application lists with respect to the 6.00% USD Preference Shares, the 5.75% USD Preference Shares,
the 7.50% Variable Rate JMD Preference Shares and the 7.25% Variable Rate JMD Preference Shares will
open at 9:00 a.m. on January 4, 2016 and will close at 3:30 pm on January 14, 2016. The Company reserves
the right to close any application list at any time without notice if Applications have been received for the
full amount of the respective Preference Shares offered and the right(s) to extend such closing beyond
the date(s) above-mentioned and/or offer Preference Shares greater in number than originally offered.
All Applicants will be required to pay in full, on Application, the Offer Price per Preference Share. No
further sum will be payable on Allotment.
7.
No person has been given any option to subscribe for any shares or debentures in the Company.
8. (a) As at September 30, 2015 JMMBGL held the following investments:
(i) Trade investments
(ii) Quoted Investments (other than trade investments)
(iii) Unquoted Investments (other than trade investments)
J$Nil
J$Nil
J$Nil
(b) There is an amount of $17,363,000.00 goodwill shown in the financial statements of JMMBGL but no
amount for patent or trademarks; and there is no contract for sale and purchase which would involve
any goodwill, patent or trademarks.
71
(c)
Notes Payable reflect specific subsidiary
obligations as at September 30th, 2015. See
note 25 of the Audited Financial Statements
for details.
(d) None of the proceeds of this issue will be
used to pay dividends.
9. No property has been or is proposed to be
purchased or acquired by the Company, which is
to be paid for wholly or partly out of the proceeds
of this Offer as prescribed by paragraph 6 to 9
(inclusive) of Part 1 of the Third Schedule of the
Act.
10. No amount has been paid within the two years
preceding the date of this Prospectus, or is
payable, as commission for subscribing or
agreeing to subscribe, or procuring or agreeing
to procure subscriptions, for any shares in or
debentures of the Company.
11. All costs associated with the Offer (approximately
J$30,000,000 consisting of Legal and professional
fees of $19,000,000, Marketing and Advertising
$8,000,000 and Miscellaneous $3,000,000 will
be borne by JMMBGL.
12. No amount or benefit has been paid or given to
any promoter within the two years preceding
the date of this Prospectus, and no amount or
benefit is intended to be paid or given to any
promoter.
13. Material Contracts are noted in Section 14 of the
Prospectus.
14. The name and address of the auditors of the
Company are:
KPMG
Chartered Accountants
The Victoria Mutual Building
6 Duke Street
Kingston
Jamaica, W. I.
15. The issued share capital of the Company consists
of one class of shares, namely ordinary shares.
All ordinary shares rank pari passu in respect of
the capital and dividends and carry voting rights
in the Company.
72
16. The authorized issued share capital of the
Company is J$1,830,718,902.00 divided into
1,630,552,532 ordinary shares with no par value.
17. The Company was incorporated on May 7, 2012
and authorized to carry on business in Jamaica as
a public company since August 14, 2014.
18. Jamaica Taxation
Under current legislation, JMMBGL’s taxable
profits are subject to tax at the rate of 33 1/3%
and the company currently claims Preference
dividends as a deductible tax expense.
Preference dividends paid to local investors that
qualify for treatment as a deductible expense
by the issuer are not subject to with-holding tax
at source. Accordingly, income tax at the rate of
33 1/3% for stockholders which are regulated
companies or at the rate of 30% for stockholders
which are large unregulated companies or at the
rate of 25% for individuals and all other persons,
will be payable on such dividends in the hands
of Jamaican resident stockholders.
Capital distributions are subject to transfer tax
(currently 5% on the amount of the distribution).
If the preference stock units are listed on the
JSE as anticipated, then the transfer of these
Preference Stock Units on the JSE is exempt
from transfer tax and ad valorem stamp duty.
If the Preference Stock Units are transferred
other than by way of the facilities of the JSE
then such transfer tax (currently 5%) and stamp
duty (currently approximately 1%) would be
chargeable. With respect to other possible tax
implications, Applicants should consult their
own tax advisors.
19. Underwriting
The Offer is not underwritten.
JMMBGL PROSPECTUS
21.
APPLICATION PROCEDURES AND CONDITIONS OF OFFER
Application Procedures, Terms and Conditions
1.
You may apply for Preference Shares in the Offer by means of the Application Form included in this
Prospectus and which is also be available for download at www.jmmb.com and www.jamstockex.com.
Each duly completed and signed Application Form, with respect to the 6.00% USD Preference Shares, the
5.75% USD Preference Shares, the 7.50% Variable Rate JMD Preference Shares and/or the 7.25% Variable
Rate JMD Preference Shares, accompanied/supported by copy of a Valid Identification (Drivers License,
Passport or National ID), copy of TRN card for all Applicants and payment for the full amount payable for
the respective Preference Shares applied for TOGETHER WITH the following must be paid by an Approved
Payment Method and must be taken to the locations specified at section 3 of this Prospectus on or before
3:30 p.m. (Jamaica time) on January 14, 2016:
(i)
JCSD flat fee of US$2.33 (applicable to the 6.00% USD Preference Shares and 5.75% USD Preference
Shares) or JMD$134.00 (applicable to 7.50% Variable Rate JMD Preference Shares and 7.25% Variable
Rate JMD Preference Shares); plus
(ii) Dividend Mandate of US$3.50 (applicable to the 6.00% USD Preference Shares and 5.75% USD
Preference Shares) or JMD$134.00 (applicable to 7.50% Variable Rate JMD Preference Shares and
7.25% Variable Rate JMD Preference Shares).
2. An Approved Payment Method shall be any of the following:
(a) Manager’s cheques payable to “JMMBGL Preference Share Offer 2016 USD” or
“JMMBGL Preference Share Offer 2016 JAD”, as the case may be;
(b) Cleared funds held in an investment account in the Applicant’s name at JMMB (supported by an
authorisation from the Applicant instructing JMMB to make payment from that account to an account
held at JMMB in the name of “JMMBGL Preference Share Offer 2016 USD” or “JMMBGL Preference
Share Offer 2016 JAD”, as the case may be);
(c)
In respect of the 7.50% Variable Rate JMD Preference Shares and the 7.25% Variable Rate JMD
Preference Shares and cambio for the 6.00% USD Preference Shares and the 5.75% USD Preference
Shares, transfer in the Real Time Gross Settlement (RTGS) system to an account held at JMMB in the
name of JMMBGL Preference Share Offer 2016 JAD or “JMMBGL Preference Share Offer 2016 USD”, as
the case may be, in the case of payments of J$2 million or more;
(d) In respect of the 7.50% Variable Rate JMD Preference Shares and the 7.25% Variable Rate JMD
Preference Shares, transfer via the Automated Clearing House (ACH) to an account held at JMMB in
the name of JMMBGL Preference Share Offer 2016 JAD;
(e) In respect of the 6.00% USD Preference Shares, the 5.75% USD Preference Shares, the 7.50% Variable
Rate JMD Preference Shares and the 7.25% Variable Rate JMD Preference Shares, transfer via NCB
E-Link to a specified account held at JMMB;
(f)
3.
In respect of the 6.00% USD Preference Shares and the 5.75% USD Preference Shares, wire transfer
to an account held at JMMB in the name of JMMBGL Preference Share Offer 2016 USD.
(a) In respect of the 6.00% USD Preference Shares and the 5.75% USD Preference Shares, wire transfer
to an account held at JMMB in the name of JMMBGL Preference Share Offer 2016 USD.
73
(b) Each Application for the 7.50% Variable Rate JMD Preference Shares and 7.25% Variable Rate JMD
Preference Shares must be for multiples of 1,000 Preference Shares subject to a minimum of 50,000
Preference Shares (in the relevant class of Preference Shares).
4. The Directors of the Company in their sole discretion may accept (in whole or in part) or reject any
application to purchase Preference Shares even if your application is received, validated and processed.
The acceptance may be in respect of the whole or any part of your application and, accordingly, the
allocated number of shares may be reduced.
5. If the Company accepts your application to purchase (in whole or in part), this will be a binding contract
under which you will have agreed to subscribe for the Preference Shares in respect of which your
application has been accepted at the Offer Price.
6. APPLICATION FORMS MAY BE SUBMITTED IN ADVANCE OF THE OPENING DATE. Early Applications will be
received, but not processed until the Opening Date. All early Applications will be treated as having been
received at the same time, being 9:00 a.m. on the Opening Date. All other Applications will be received
and processed on a first come, first served basis.
7.
If with respect to the 6.00% USD Preference Shares, the 5.75% USD Preference Shares, the 7.50%
Variable Rate JMD Preference Shares and/or the 7.25% Variable Rate JMD Preference Shares the Offer is
oversubscribed, the respective Preference Shares may be apportioned for Allotment among the Applicants
by the Directors, taking into account the factors described at clause 8 below and any other factors that
the Directors consider relevant. Should the Offer with respect to the 6.00% USD Preference Shares, the
5.75% USD Preference Shares, the 7.50% Variable Rate JMD Preference Shares and/or the 7.25% Variable
Rate JMD Preference Shares be oversubscribed, Applicants may by allotted fewer Preference Shares than
they applied for.
8. Once the Offer with respect to the 6.00% USD Preference Shares, the 5.75% USD Preference Shares, the
7.50% Variable Rate JMD Preference Shares and/or the 7.25% Variable Rate JMD Preference Shares closes,
if the Offer is oversubscribed with respect to the 6.00% USD Preference Shares, the 5.75% USD Preference
Shares, the 7.50% Variable Rate JMD Preference Shares and/or the 7.25% Variable Rate JMD Preference
Shares then and in such event the 6.00% USD Preference Shares, the 5.75% USD Preference Shares, the
7.50% Variable Rate JMD Preference Shares and/or the 7.25% Variable Rate JMD Preference Shares, as the
case may be, may be allotted to Applicants on a “Pro Rata” basis.
9. In the event that the Offer with respect to the 6.00% USD Preference Shares, the 5.75% USD Preference
Shares, the 7.50% Variable Rate JMD Preference Shares and/or the 7.25% Variable Rate JMD Preference
Shares is oversubscribed, the Directors reserve the right in their sole discretion (but shall not be obligated)
to issue and allot further 6.00% USD Preference Shares, 5.75% USD Preference Shares, 7.50% Variable
Rate JMD Preference Shares and/or 7.25% Variable Rate JMD Preference Shares in the Company as part
of this Offer, on the same terms and at the same offer price per 6.00% USD Preference Shares, 5.75%
USD Preference Shares, 7.50% Variable Rate JMD Preference Shares and/or 7.25% Variable Rate JMD
Preference Shares as the case may be, such new shares to rank pari-passu with the 6.00% USD Preference
Shares, the 5.75% USD Preference Shares, the 7.50% Variable Rate JMD Preference Shares and the 7.25%
Variable Rate JMD Preference Shares.
10. In respect of each Application which is accepted in whole or in part by the Company, the Company will
issue a letter of allotment in the name of that Applicant (or in the joint names of joint Applicants) for the
number of Preference Shares allotted to the Applicant.
11. Cheques for the amounts refundable to Applicants whose Applications are not accepted in whole or in
part will be refunded by post or credited to accounts at Jamaica Money Market Brokers Limited or JMMB
Merchant Bank Limited, without interest on such amounts. The Company will use its best efforts to put
the letters of allotment and refund cheques in the mail within ten working days after the Closing Date
74
JMMBGL PROSPECTUS
or as soon thereafter as practicable. Unless specifically requested by an Applicant, no physical share
certificates will be issued. If specifically requested by any Applicant, a physical share certificate for the
Preference Shares allotted to the Applicant shall be issued by the Company and delivered to the Applicant
within 45 days after the close of the Offer.
12. Each letter of allotment and refund cheque will be mailed through the post at the Applicant’s risk to the
address of the Applicant (or of the first-named joint Applicant) stated in the Application Form.
13. Letters of allotment are not transferable or assignable.
22.
DIRECTORS’ SIGNATURES
Signed on behalf of JMMB Group Limited by the below-mentioned Directors, for and on behalf of the Directors
of JMMB Group Limited, dated as of the December 18, 2015.
Name of Director
Original Signed by
Noel Lyon PhD.
Keith Duncan
75
APPENDIX 1
AUDITOR’S CONSENT
76
JMMBGL PROSPECTUS
APPENDIX 2
Terms of Issue for Classes of Shares the Subject of This Offer
TERMS OF ISSUE OF 6.00% USD PREFERENCE SHARES
JMMB Group Limited
(the “Company”)
“Terms of Issue – Cumulative Redeemable 6.00% USD Preference Shares”
In these Terms of Issue:
“Agreed Rate” means 6.00% per annum (on a 365-day year basis).
“Business Day” means a date, not being a Saturday, Sunday or public holiday when banks are open for business
in Jamaica.
“Preference Stock Units” means the preference stock units created on conversion of the Preference Shares, on
issue.
The Preference Shares in the capital of the Company, with no par value, and subject as hereinafter
provided, a tenor of ninety-six (96) months, the same to be issued at a price of US$1.00 shall be
denominated “Cumulative Redeemable 6.00% USD Preference Shares” (herein in these Terms, the
“Preference Shares”) conferring upon the registered holders thereof the following rights and shall be
subject to the following restrictions, namely:
(a)
the right to a cumulative preferential dividend at the Agreed Rate per annum on the capital for the
time being paid up or credited as paid up on the Preference Stock Units, to be paid quarterly, in
United States Dollars, in each case on the earliest possible date following declaration by the Board
of Directors of the Company and processing by the Registrar and Transfer Agent engaged by the
Company to attend to, inter alia, payments to registered holders;
(b)
the right on a winding up of the Company or other return of capital to repayment in United States
Dollars in priority to any payment to the holders of any other shares or stock units in the capital of
the Company of:
(i)
the amounts paid up on the Preference Stock Units; and
(ii) any arrears or accruals of the cumulative preferential dividend on the Preference Stock Units,
whether declared or earned, or not, calculated down to the date of such repayment but to no
further or other right to share in the surplus assets of the Company on a winding up.
77
(c)
the Preference Stock Units shall NOT carry the right to vote at any general meeting of the Company
EXCEPT in circumstances where the cumulative dividend on the Preference Stock Units remains
unpaid for a period greater than 12 months and/or a resolution to wind up the Company has been
passed AND in either such event, every holder of Preference Stock Units present in person or by
proxy shall have one vote, and on a poll every holder of Preference Stock Units, present in person or
by proxy, shall have one vote for each Preference Stock Unit of which he/she is the holder.
(d)
The Company may, without any consent or sanction of the holders of Preference Stock Units create
and issue further preference shares, the same to be converted into preference stock units either
ranking pari passu and identically in all respects and so as to form one class with the existing
Preference Stock Units or ranking pari passu therewith as regards priority in respect of income and/
or capital but carrying a different rate of dividend or otherwise differing from the Preference Stock
Units.
(e)
The Preference Shares shall be issued as redeemable preference shares, converted on issue to
Preference Stock Units and subject to the provisions contained in Section 56 of the Companies Act of
Jamaica (the “Act”) (as the same may be amended from time to time) redemption of such Preference
Stock Units shall be effected in the manner and on the terms following:
(i)
For greater certainty in these Terms, it is hereby confirmed that redemption of the Preference
Stock Units by the Company may be effected pursuant to a notice issued by the Company in
accordance with these Terms.
(ii) At the time and place fixed for redemption of Preference Stock Units:
(f)
78
a.
the registered holder, if such registered holder is the holder of Preference Stock Units by
virtue of an allotment by the Company (the “original holder”) or a transferee from the
original holder effected OTHER than by the facilities of the Jamaica Stock Exchange, shall
be bound to deliver up to the Company the relative share/stock certificate(s) with respect
to the said Preference Stock Units for cancellation following redemption; and
b.
the Company shall be bound to redeem the said Preference Stock Units and shall pay
the registered holder, the redemption money in respect of such Preference Stock Units
together with any arrears or accruals of the cumulative preferential dividend (whether
earned or declared or not) calculated down to the date fixed for payment.
If the fixed cumulative dividend on the Preference Stock Units shall have been paid up in full up to
and including the last yearly date fixed for payment, the Company may (subject to the provisions
of the Companies Act) redeem all or any of the Preference Stock Units on January 14, 2024 or if
such day falls on a day other than a business day then on the prior business day by the purchase
of such Preference Stock Units on the Jamaica Stock Exchange (by way of an uninterruptible put
through) or by private treaty at a price of US$1.00 per Preference Stock Unit (exclusive of stamp duty,
commission and other expenses of purchase and any accrued dividend thereon).
JMMBGL PROSPECTUS
(g)
As from the time fixed for redemption of any of the Preference Stock Units under any notice given
by the Company pursuant to paragraph (e) of these Terms, dividends shall cease to accrue on such
Preference Stock Units except in respect of any Preference Stock Unit in respect of which payment
due on such redemption was refused.
(h)
If any holder of Preference Stock Units shall fail or refuse to surrender the certificate(s) for
such Preference Stock Units (where such surrender is required) or shall fail or refuse to accept
the redemption money payable in respect of such Preference Stock Units, at the time fixed for
redemption of any of the Preference Stock Units under any notice given by the Company pursuant
to paragraph (e) of these Terms, such money shall be retained and held by the Company in trust for
such registered holder but without interest or further obligation whatever.
(i)
No Preference Stock Units shall be redeemed otherwise than out of distributable profits or the
proceeds of a fresh issue of shares made for the purposes of the redemption as permitted by the
Act.
(j)
No Preference Stock Units redeemed by the Company shall be capable of re-issue and on redemption
of any Preference Stock Units, the Directors may convert the authorised share capital created as a
consequence of such redemption into shares and/or stock units of any other class of share capital
into which the authorised share capital of the Company is or may at that time be divided of a like
nominal amount (as nearly as may be) as the shares and/or stock units of such class then in issue
or into unclassified shares and/or stock units of the same nominal amount as the Preference Stock
Units.
(k)
The rights attaching to the Preference Stock Units may not be varied either while the Company is a
going concern or during or in contemplation of a winding up of the Company without the consent in
writing of the holders of three-fourths of the issued Preference Stock Units or without the sanction
of an Extraordinary Resolution passed at a separate meeting of that class, but not otherwise. To
every such separate meeting, all of the provisions of the Articles of Incorporation of the Company
relating to general meetings of the Company or to proceedings thereat shall, mutatis mutandis
apply, except that the necessary quorum shall be two persons at least holding or representing by
proxy one-third in nominal amount of the issued Preference Shares (but so that if at any adjourned
meeting of such holders a quorum as above defined is not present those members who are present
shall be a quorum) and that the holders of Preference Shares shall, on a poll, have one vote in
respect of each Preference Stock Unit held by them respectively.
These Terms of Issue were approved by the directors of the Company pursuant to a resolution of the directors of the Company passed at a
directors’ meeting held on October 29, 2015 as supplemented by a resolution of a committee of directors of the Company (duly appointed
by the directors of the Company) passed at a meeting of the committee aforesaid held on November 16, 2015 the authority for the issue of
the Preference Shares on such terms having been authorised by the Company pursuant to a special resolution of the Company passed at an
Extraordinary General Meeting of the Company held on September16, 2015.
79
TERMS OF ISSUE OF 5.75% USD PREFERENCE SHARES
JMMB Group Limited
(the “Company”)
“Terms of Issue – Cumulative Redeemable 5.75% USD Preference Shares”
“Agreed Rate” means 5.75% per annum (on a 365-day year basis).
in Jamaica.
issue.
provided, a tenor of ninety-six (96) months, the same to be issued at a price of US$1.50 shall be
denominated “Cumulative Redeemable 5.75% USD Preference Shares” (herein in these Terms, the
“Preference Shares”) conferring upon the registered holders thereof the following rights and shall be
subject to the following restrictions, namely:
(a)
the right to a cumulative preferential dividend at the Agreed Rate per annum on the capital for the
time being paid up or credited as paid up on the Preference Stock Units, to be paid quarterly, in
United States Dollars, in each case on the earliest possible date following declaration by the Board
(b)
the right on a winding up of the Company or other return of capital to repayment in United States
Dollars in priority to any payment to the holders of any other shares or stock units in the capital of
the Company of:
(i)
(c)
80
JMMBGL PROSPECTUS
(d)
Units.
(e)
(i)
a.
b.
(f)
and including the last yearly date fixed for payment, the Company may (subject to the provisions
of the Companies Act) redeem all or any of the Preference Stock Units on January 14, 2024 or if
such day falls on a day other than a business day then on the prior business day by the purchase
of such Preference Stock Units on the Jamaica Stock Exchange (by way of an uninterruptible put
through) or by private treaty at a price of US$1.50 per Preference Stock Unit (exclusive of stamp duty,
commission and other expenses of purchase and any accrued dividend thereon).
(g)
81
(h)
(i)
Act.
(j)
Units.
(k)
82
JMMBGL PROSPECTUS
TERMS OF ISSUE OF 7.50% VARIABLE RATE JMD PREFERENCE SHARES
JMMB Group Limited
(the “Company”)
“Terms of Issue – Cumulative Redeemable 7.50% Variable Rate JMD Preference
Shares”
“Agreed Rate” means the rate of 7.50% per annum (on a 365-day year basis) during the period commencing on
the Closing Date and ending on January 14, 2017 and thereafter the rate equal to the most recent of the GOJ’s
180-day Weighted Average Treasury Bill Yield (WATBY) plus 1.00% per annum to be reset annually on January
14 of each year until maturity of the Cumulative Redeemable 7.50% Variable Rate JMD Preference Shares.
In the event that there is no 180-day Weighted Average Treasury Bill issued within the last 90 days prior to a
Revaluation Date, JMMBGL shall be permitted to use the implied 180 day rate based on GOJ JMD Yield curve
as displayed on Bloomberg 2 days prior to the revaluation date.
in Jamaica.
issue.
provided, a tenor of ninety-six (96) months, the same to be issued at a price of J$1.00 shall be
denominated “Cumulative Redeemable 7.50% Variable Rate JMD Preference Shares” (herein in these
Terms, the “Preference Shares”) conferring upon the registered holders thereof the following rights
and shall be subject to the following restrictions, namely:
(a)
the right to a cumulative preferential dividend at the Agreed Rate per annum on the capital for
the time being paid up or credited as paid up on the Preference Stock Units, to be paid monthly,
in Jamaican Dollars, in each case on the earliest possible date following declaration by the Board
(b)
the right on a winding up of the Company or other return of capital to repayment in Jamaican Dollars
in priority to any payment to the holders of any other shares or stock units in the capital of the
Company of:
(i)
83
(c)
(d)
Units.
(e)
(i)
(f)
84
a.
b.
and including the last yearly date fixed for payment, the Company may (subject to the provisions of
the Companies Act) redeem all or any of the Preference Stock Units on January 14, 2024 or if such
day falls on a day other than a business day then on the prior business day by the purchase of such
Preference Stock Units on the Jamaica Stock Exchange (by way of an uninterruptible put through) or
by private treaty at a price of J$1.00 per Preference Stock Unit (exclusive of stamp duty, commission
and other expenses of purchase and any accrued dividend thereon).
JMMBGL PROSPECTUS
(g)
(h)
(i)
Act.
(j)
Units.
(k)
85
TERMS OF ISSUE OF 7.25% VARIABLE RATE JMD PREFERENCE SHARES
JMMB Group Limited
(the “Company”)
“Terms of Issue – Cumulative Redeemable 7.25% Variable Rate JMD Preference
Shares”
“Agreed Rate” means the rate of 7.25% per annum (on a 365-day year basis) during the period commencing on
the Closing Date and ending on January 14, 2017 and thereafter the rate equal to the most recent of the GOJ’s
180-day Weighted Average Treasury Bill Yield (WATBY) plus 1.00% per annum to be reset annually on January
14 of each year until maturity of the Cumulative Redeemable 7.25% Variable Rate JMD Preference Shares.
In the event that there is no 180-day Weighted Average Treasury Bill issued within the last 90 days prior to a
Revaluation Date, JMMBGL shall be permitted to use the implied 180 day rate based on GOJ JMD Yield curve
as displayed on Bloomberg 2 days prior to the revaluation date.
in Jamaica.
issue.
provided, a tenor of ninety-six (96) months, the same to be issued at a price of J$1.50 shall be
denominated “Cumulative Redeemable 7.25% Variable Rate JMD Preference Shares” (herein in these
Terms, the “Preference Shares”) conferring upon the registered holders thereof the following rights
and shall be subject to the following restrictions, namely:
(a)
the right to a cumulative preferential dividend at the Agreed Rate per annum on the capital for
the time being paid up or credited as paid up on the Preference Stock Units, to be paid monthly,
in Jamaican Dollars, in each case on the earliest possible date following declaration by the Board
(b)
the right on a winding up of the Company or other return of capital to repayment in Jamaican Dollars
in priority to any payment to the holders of any other shares or stock units in the capital of the
Company of:
(i)
86
JMMBGL PROSPECTUS
(c)
(d)
Units.
(e)
PreferenceStock Units and subject to the provisions contained in Section 56 of the Companies Act of
(i)
(f)
a.
b.
and including the last yearly date fixed for payment, the Company may (subject to the provisions of
the Companies Act) redeem all or any of the Preference Stock Units on January 14, 2024 or if such
day falls on a day other than a business day then on the prior business day by the purchase of such
Preference Stock Units on the Jamaica Stock Exchange (by way of an uninterruptible put through) or
by private treaty at a price of J$1.50 per Preference Stock Unit (exclusive of stamp duty, commission
and other expenses of purchase and any accrued dividend thereon).
87
(g)
(h)
(i)
Act.
(j)
Units.
(k)
88
JMMBGL PROSPECTUS
APPENDIX 3
FINANCIAL
STATEMENTS
AUDITED FINANCIAL RESULTS
FOR THE YEAR ENDED
31 MARCH 2015
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
90
Consolidated profit and loss account
92
Consolidated statement of comprehensive income
93
Consolidated statement of financial position
94
Consolidated statement of changes in stockholders’ equity
96
Consolidated statement of cash flows
97
Profit and loss account
99
Statement of comprehensive income
100
Statement of financial position
101
Statement of changes in stockholders’ equity
102
Statement of cash flows
103
Notes to the financial statements
105
89
105 TO 182
90
JMMBGL PROSPECTUS
91
CONSOLIDATED PROFIT
AND LOSS ACCOUNT
Year ended 31 March 2015
Note
2015
$’000
2014
$’000
5
5
13,337,816
(8,076,145)
5,261,671
546,233
3,420,817
154,806
936,134
10,319,661
12,279,750
(7,017,265)
5,262,485
426,935
2,325,348
129,551
587,931
8,732,250
14,255
25,801
22,018
10,381,735
8,578
1,000
8,741,828
(3,911,132)
(3,876,565)
(7,787,697)
2,594,038
(259,262)
19,263
2,354,039
(306,757)
2,047,282
(2,877,717)
(2,792,530)
(5,670,247)
3,071,581
(10,898)
361,657
(24,289)
3,398,051
(335,992)
3,062,059
1,931,980
115,302
2,047,282
2,832,855
229,204
3,062,059
$1.18
$1.74
Interest income
Interest expense
Net interest income
Fee and commission income
Fees earned from managing funds on behalf of clients
Other income
Dividends
Other
Gain on sale of property, plant and equipment
Operating Expenses
Staff costs
Other expenses
Operating Profit
Share of loss of associated companies (net of tax)
Taxation
Profit for the Year
6
8
7
27
9
Attributable to:
Earning per stock unit
The notes on pages 105 to 182 are an integral part of these financial statements
92
10
JMMBGL PROSPECTUS
CONSOLIDATED
STATEMENT OF
COMPREHENSIVE INCOME
2015
$’000
2014
$’000
Profit for the Year
2,047,282
3,062,059
Other comprehensive income
Items that may be reclassified to profit or loss:
Unrealised gains/(losses) on available-for-sale securities
Foreign exchange differences on translation of foreign subsidiaries
Total other comprehensive income/(loss), net of tax
Total comprehensive income for year, net of tax
1,619,731
(94,847)
1,524,884
3,572,166
(1,483,011)
157,944
(1,325,067)
1,736,992
3,167,368
404,798
3,572,166
1,902,943
(165,951)
1,736,992
Total comprehensive income attributable to:
93
CONSOLIDATED
STATEMENT OF
FINANCIAL POSITION
Note
ASSETS
Interest receivable
Other receivables
Intangible assets
Deferred income tax assets
Customers’ liability acceptances, guarantees and letters
of credit as per contra
94
12
13
14
15
16
18
19
20
21
2015
$’000
2014
$’000
18,672,388
2,561,634
2,130,926
31,924,543
1,245,160
272,596
157,226,757
457,591
1,060,277
2,033,688
38,933
23,326,420
2,619,996
2,043,597
26,551,175
1,927,206
652,986
145,777,726
457,591
1,005,314
1,841,497
150,384
90,809
217,715,302
352,227
206,706,119
JMMBGL PROSPECTUS
CONSOLIDATED
STATEMENT OF
FINANCIAL POSITION
(Cont’d)
Note
STOCKHOLDERS' EQUITY
Share capital
Share premium
Cumulative translation reserve
Retained earnings
22
23
23
23
2015
$’000
2014
$’000
1,850,279
13,775
9,605,055
2,037,032
(109,014)
7,567,587
20,964,714
758,350
21,723,064
1,850,279
13,775
9,605,055
636,397
56,233
6,173,689
18,335,428
353,552
18,688,980
38,463,504
435,032
144,501,658
3,644,384
4,228,705
682,307
1,185,595
397,758
2,362,486
35,887,750
283,386
143,302,425
4,228,705
627,360
1,182,974
83,671
2,068,641
90,809
195,992,238
217,715,302
352,227
188,017,139
206,706,119
LIABILITIES
Customer deposits
Due to other banks
Notes payable
Redeemable preference shares
Deferred income tax liabilities
Interest payable
Income tax payable
Other payables
Liabilities under acceptances, guarantees and letters of
credit as per contra
24
25
22
21
Approved for issue by the Board of Directors on 29 May 2015 and signed on its behalf by:
Keith Duncan
Dr. Noel Lyon
Group Chairman
95
Total
Attributable
Share
Reserve
Reserve
Reserve
$’000
Earnings
(929,912)
157,944
(1,087,856)
2,832,855
16,693,373
$’000
The Parent
(395,155) (1,483,011)
229,204 3,062,059
519,503 17,212,876
$’000
Interest
$’000
Total
Non-
Premium
-
- 2,832,855
$’000
-
1,724,253 (101,711) 4,096,999
$’000
-
-
to Equity
Share
$’000
-
157,944
Retained Investment Cumulative
Capital
$’000
9,109,778
(1,087,856)
157,944
holders of Controlling
$’000
13,775
-
-
Earnings Revaluation Translation Retained
1,850,279
-
-
(1,087,856)
Note
-
-
-
-
Balances at 31 March 2013
-
-
-
1,850,279
-
-
-
-
13,775
-
-
-
-
-
9,605,055
-
495,277
-
- (165,247)
1,400,635
-
636,397
-
-
(1,087,856)
-
-
-
-
1,931,980
56,233 6,173,689
-
-
(260,888)
(495,277)
157,944 2,832,855
(165,247)
1,400,635
1,931,980
18,335,428
(260,888)
-
1,902,943
404,798 3,572,166
289,496 1,524,884
70,400
219,096
353,552 18,688,980
-
1,619,731
115,302 2,047,282
-
(94,847)
(260,888)
-
(165,951) 1,736,992
(395,155) (1,325,067)
Foreign exchange differences on translation of
Unrealised losses on available-for-sale securities
Other comprehensive income for 2014:
Profit for the year
-
-
-
-
-
3,167,368
1,235,388
157,944
foreign subsidiaries’ balances
23
-
-
-
-
Total other comprehensive income for 2014
11
-
1,931,980
Foreign exchange differences on translation of
Unrealised gains on available-for-sale securities
Profit for the year
Dividends
Transactions with owners of the company
Transfer from retained earnings
Total comprehensive income for 2014
foreign subsidiaries’ balances
1,400,635 (165,247)
1,400,635 (165,247)
(538,082)
758,350 21,723,064
-
-
20,964,714
(538,082)
-
(538,082)
-
-
2,037,032 (109,014) 7,567,587
-
-
-
-
-
9,605,055
-
-
13,775
11
1,850,279
Total other comprehensive income for 2015
Dividends
96
CONSOLIDATED
STATEMENT OF CHANGES
IN STOCKHOLDERS’
EQUITY
JMMBGL PROSPECTUS
CONSOLIDATED
STATEMENT OF
CASH FLOWS
Note
2015
$’000
2014
$’000
2,047,282
3,062,059
(13,337,816)
8,076,145
306,757
(19,263)
259,262
156,700
285,636
(22,018)
56,057
(273,162)
(2,464,420)
(12,279,750)
7,017,265
335,992
(361,657)
24,289
10,898
97,684
220,178
(1,000)
57,196
(476,668)
(2,293,514)
(87,306)
(5,373,368)
715,831
477,789
2,575,754
151,646
-
(184,375)
(3,129,882)
(719,629)
3,237,927
5,119,335
(95,174)
167,056
1,199,233
(2,637,785)
13,396,178
(8,073,524)
(208,696)
2,476,173
709,978
7,395,114
9,698,698
11,880,618
(7,027,689)
(33,534)
14,518,093
Cash Flows from Operating Activities
Profit for the year
Adjustments for:
Interest income
Interest expense
Income tax charge
Share of loss of associated company
Impairment of financial assets
Amortisation of intangible assets
Depreciation of property, plant and equipment
Gain on sale of property, plant and equipment
Unrealised loss on trading securities
Foreign currency translation gains
Changes in operating assets and liabilities Income tax recoverable, net
Notes receivable
Other receivables
Customer deposits
Due to other banks
Loan participation
(341,082)
Other payables
Interest received
Interest paid
Taxation paid
Net cash provided by operating activities (Page 98)
5
5
9
27
7
19
20
97
CONSOLIDATED
STATEMENT OF
CASH FLOWS (cont’d)
2015
Note
Cash Flows from Operating Activities (Page 97)
2014
$’000
$’000
2,476,173
14,518,093
(9,727,379)
(6,754,510)
Investment securities, net
Purchase of computer software
19
(167,380)
(73,064)
Purchase of property, plant and equipment
20
(465,017)
(311,589)
39,242
10,076
27
(12,191)
8,897,513
(10,332,725)
1,768,426
-
1,469,359
3,644,384
-
Proceeds from disposal of property, plant and equipment
Acquisition of subsidiaries, net of cash acquired
Net cash (used in)/provided by investing activities
Cash Flows from Financing Activities
Proceeds from issue of redeemable preference shares
Notes payable
Dividends paid
11
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
CASH AND CASH EQUIVALENTS AT END OF YEAR
98
12
(538,082)
(260,888)
3,106,302
1,208,471
96,218
-
(4,654,032)
17,494,990
23,326,420
5,831,430
18,672,388
23,326,420
JMMBGL PROSPECTUS
PROFIT AND LOSS
ACCOUNT
Note
2014
$’000
2013
$’000
5
5
8,221,960
(5,701,834)
2,520,126
95,305
2,329,085
14,649
246,299
5,205,464
7,670,214
(4,737,318)
2,932,896
82,351
1,049,282
19,829
285,766
4,370,124
4,287
24,006
23,651
5,257,408
2,873
45,300
1,000
4,419,297
(2,004,912)
(1,846,635)
(3,851,547)
1,405,861
(218,355)
1,187,506
(245,982)
941,524
(1,671,833)
(1,598,094)
(3,269,927)
1,149,370
1,149,370
(199,238)
950,132
Interest income from securities
Interest expense
Net interest income
Fee and commission income
Fees earned on managing funds on behalf of clients
Other income
Dividends
Other
Gain on sale of property plant and equipment
Operating Expenses
Staff costs
Other expenses
Operating Profit
Taxation
Profit for the Year
6
8
7
9
99
STATEMENT OF
COMPREHENSIVE
INCOME
Profit for the Year
2015
$’000
941,524
2014
$’000
950,132
372,648
1,314,172
(161,733)
788,399
Other comprehensive income
Items that may be reclassified to profit or loss:
Unrealised gains/(losses) on available-for-sale securities
Total comprehensive income for year, net of tax
100
JMMBGL PROSPECTUS
STATEMENT OF
FINANCIAL POSITION
Note
ASSETS
Interest receivable
Other receivables
Due from fellow subsidiary
Interest in subsidiaries
Intangible assets
12
13
14
26
15
16
17
19
20
2015
$’000
2014
$’000
4,801,893
1,643,222
1,770,654
4,406,134
2,123,701
1,594,798
13,294,476
106,000,797
7,819,873
248,676
1,287,613
144,991,837
7,463,523
1,606,665
1,694,249
3,468,014
2,105,891
13,522,982
97,776,242
7,777,963
148,360
1,186,645
136,750,534
1,850,279
13,775
3,135,431
9,605,055
296,856
14,901,396
1,850,279
13,775
2,731,989
9,605,055
(75,792)
14,125,306
119,529,981
2,370,864
4,228,705
663,212
919,154
359,376
424,351
1,594,798
130,090,441
144,991,837
116,464,345
75,464
4,228,705
593,093
853,542
40,958
369,121
122,625,228
136,750,534
STOCKHOLDERS’ EQUITY
Share capital
Share premium
Retained earnings
22
23
LIABILITIES
Notes payable
Interest payable
Income tax payable
Other payables
Due to fellow subsidiary
24
25
22
21
26
Approved for issue by the Board of Directors on 29 May 2015 and signed on its behalf by:
Dr. Noel Lyon
Group Chairman
Keith Duncan
101
STATEMENT OF CHANGE
IN STOCKHOLDERS’
EQUITY
Note
Profit for year
Investment
Retained
Share
Share
Revaluation
Earnings
Retained
Capital
Premium
Reserve
Reserve
Earnings
Total
$’000
$’000
$’000
$’000
$’000
$’000
1,850,279
13,775
85,941
9,109,778
2,538,022
13,597,795
-
-
-
-
950,132
950,132
-
-
(161,733)
-
-
(161,733)
Unrealised losses on available-for-sale securities
-
-
(161,733)
-
950,132
788,399
Transfer from retained earnings
-
-
-
495,277
(495,277)
-
Dividends
11
-
-
-
-
(260,888)
(260,888)
1,850,279
13,775
(75,792)
9,605,055
2,731,989
14,125,306
-
-
-
-
941,524
941,524
Unrealised gains on available-for-sale securities
-
-
372,648
-
-
372,648
-
-
372,648
-
941,524
1,314,172
Profit for year
Dividends
11
-
-
-
-
(538,082)
(538,082)
1,850,279
13,775
296,856
9,605,055
3,135,431
14,901,396
102
JMMBGL PROSPECTUS
STATEMENT OF
CASH FLOWS
Note
2015
$’000
2014
$’000
941,524
950,132
(8,221,960)
5,701,834
245,982
218,355
30,800
136,364
(23,651)
60,734
(154,135)
(1,064,153)
(7,670,214)
4,737,318
199,238
22,320
125,111
(1,000)
(1,637,095)
(76,405)
(938,120)
(17,810)
55,230
228,506
3,065,636
1,252,884
8,185,403
(5,636,222)
(43,741)
3,758,324
(221,041)
(707,639)
(523,168)
20,018
3,674,658
4,875,600
5,481,333
7,345,382
(4,853,104)
7,973,611
Cash Flows from Operating Activities
Profit for the year
Adjustments for:
Interest income
Interest expense
Income tax charge
Amortisation of intangible assets
Depreciation of property, plant and equipment
Gains on sale of property, plant and equipment
Unrealised loss on trading securities
Foreign currency translation gains
5
5
9
7
19
20
Changes in operating assets and liabilities Income tax recoverable, net
Notes receivable
Other receivables
Other payables
Interest received
Interest paid
Taxation paid
Net cash provided by operating activities (Page 104)
103
STATEMENT OF
CASH FLOWS
(cont’d)
Note
Cash Flows from Operating Activities (Page 103)
2015
$’000
2014
$’000
3,758,324
7,973,611
(7,886,783)
(3,353,139)
(41,910)
(1,577,014)
Investment securities, net
Interest in subsidiary
Purchase of computer software
19
(135,687)
(71,678)
Purchase of property, plant and equipment
20
(244,107)
(189,277)
34,997
3,505
(8,273,490)
(5,187,603)
Proceeds from disposal of property, plant and equipment
Net cash used in investing activities
Cash Flows from Financing Activities
Proceeds from the issue of redeemable preference shares
-
Notes payable
Dividends paid
11
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
CASH AND CASH EQUIVALENTS AT END OF YEAR
104
12
1,469,359
2,295,400
(305,406)
(538,082)
(260,888)
1,757,318
903,065
96,218
-
(2,661,630)
3,689,073
7,463,523
3,774,450
4,801,893
7,463,523
JMMBGL PROSPECTUS
NOTES TO THE
1. Identification
Jamaica Money Market Brokers Limited (the “company”) is incorporated and domiciled in Jamaica. The registered office of
the company is located at 6 Haughton Terrace, Kingston 10, Jamaica. The principal activities of the Company are securities
brokering, securities trading, merchant and commercial banking, dealing in money market instruments, operating a
foreign exchange cambio and managing funds on behalf of clients
The company is exempt from the provisions of the Money Lending Act.
It has eight subsidiaries incorporated in Jamaica, and there are other subsidiaries incorporated outside of Jamaica. The
operating subsidiaries are listed below. The company and its subsidiaries are collectively referred to as “Group”.
Name of Subsidiary
(Trinidad and Tobago) Limited
JMMB Investments
(Trinidad and Tobago) Limited
AIC Securities Limited
and its subsidiary,
Intercommercial Trust and
Merchant Bank Limited
% Shareholding Held Country of
by Parent/Subsidiary Incorporation
Parent
100
100
Jamaica
Jamaica
Stock brokering
Insurance brokering
Trinidad and Tobago
Investment holding company
100
Trinidad and Tobago
100
Trinidad and Tobago
Stock brokering
100
Trinidad and Tobago
Commercial Banking
100
Trinidad and Tobago
Merchant Banking
St. Lucia
management
management
100
100
JMMB Holdings, SRL and its
subsidiary
JMMB Puesto de Bolsa,S.A.
100
80
JMMB Sociedad Administradora
De Fondos De Inversion, S.A.
JMMB Real Estate Holdings Limited
Subsidiary
70
100
Capital & Credit Financial Group Limited
100
JMMB Money Transfer Limited,
formerly Capital & Credit Remittance Limited
Capital & Credit Holdings Inc.
Dominican
Republic
Dominican
Republic
Dominican
Republic
Republic
Jamaica
Mutual fund administration
Real estate holding
Jamaica
Investment holding
100
Jamaica
Funds transfer
100
United States of America
Investment holding
100
Jamaica
Merchant Banking
100
Jamaica
Investment holding
100
Jamaica
Fund management
105
NOTES TO THE
1.
Identification (Continued)
On 30 April 2014, JMMB Investments (Trinidad and Tobago) Limited, a 100% owned subsidiary, acquired 100% equity of
AIC Securities Limited for TT$5.21 million (J$89.98 million) (Note 27).
2.
Summary of Significant Accounting Policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated.
(a)
Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and
the relevant provisions of the Jamaican Companies Act. These consolidated financial statements have been prepared
on the historical cost basis except for the measurement of available-for-sale financial assets and financial assets at fair
value through profit or loss, as well as investment properties at fair value.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The
areas involving a high degree of judgement or complexity, or areas where assumptions and estimates are significant to
the financial statements are disclosed in Note 3.
New, revised and amended standards and interpretations that became effective during the year that are
relevant to the Group’s operations:
Certain new, revised and amended standards and interpretations came into effect during the current financial year.
The Group has adopted those which are relevant to its operations, but their adoption did not result in any changes to
amounts recognised or disclosed in these financial statements.
New, revised and amended standards and interpretations not yet effective:
Certain new, revised and amended standards and interpretations have been issued which are not yet effective for the
current year and which the Group has not early adopted. Management considers that the following may be relevant to
the Group’s operations when they become effective:
(i)
106
IFRS 9, Financial Instruments, which is effective for annual reporting periods beginning on or after January 1, 2018,
replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes
revised guidance on the classification and measurement of financial assets and liabilities, including a new expected
credit loss model for calculating impairment of financial assets and the new general hedge accounting requirements.
It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. Although
the permissible measurement bases for financial assets – amortised cost, fair value through other comprehensive
income (FVOCI) and fair value through profit or loss (FVTPL) - are similar to IAS 39, the criteria for classification into
the appropriate measurement category are significantly different. IFRS 9 also replaces the ‘incurred loss’ model in
IAS 39 with an ‘expected credit loss’ model, which means that a loss event will no longer need to occur before an
impairment allowance is recognized.
JMMBGL PROSPECTUS
NOTES TO THE
2.
Summary of Significant Accounting Policies (Continued)
(a)
Basis of preparation (continued)
New, revised and amended standards and interpretations not yet effective (continued):
(ii)
IFRS 15, Revenue From Contracts With Customers, effective for annual reporting periods beginning on or
after January 1, 2017, replaces IAS 11, Construction Contracts, IAS 18, Revenue, IFRIC 13, Customer Loyalty
Programmes, IFRIC 15, Agreements for the Construction of Real Estate, IFRIC 18, Transfer of Assets from
Customers, and SIC-31, Revenue – Barter Transactions Involving Advertising Services. It does not apply to
insurance contracts, financial instruments or lease contracts, which fall in the scope of other IFRSs. It also
does not apply if two companies in the same line of business exchange non-monetary assets to facilitate sales
to other parties.
The Group will apply a five-step model to determine when to recognise revenue, and at what amount. The
model specifies that revenue should be recognised when (or as) an entity transfers control of goods or services
to a customer at the amount to which the entity expects to be entitled. Depending on whether certain criteria
are met, revenue is recognised at a point in time, when control of goods or services is transferred to the
customer; or over time, in a manner that best reflects the entity’s performance.
There will be new qualitative and quantitative disclosure requirements to describe the nature, amount, timing,
and uncertainty of revenue and cash flows arising from contracts with customers.
(iii) IAS 16, Property, Plant and Equipment, and IAS 38, Intangible Assets, have been amended by the issue of
“Amendments to IAS 16 and IAS 38, Clarification of Acceptable Methods of Depreciation and Amortisation”,
which are effective for annual reporting periods beginning on or after January 1, 2016, as follows:
• The amendment to IAS 16 explicitly states that revenue-based methods of depreciation cannot be used. This
is because such methods reflect factors other than the consumption of economic benefits embodied in the
assets.
• The amendment to IAS 38 introduces a rebuttable presumption that the use of revenue-based amortisation
methods is inappropriate for intangible assets.
(iv) Improvements to IFRS, 2010-2012 and 2011-2013 Cycles, contain amendments to certain standards and
interpretations and are effective for annual reporting periods beginning on or after July 1, 2014. The main
amendments applicable to the Group are as follows:
• IFRS 3, Business Combinations, has been amended to clarify the classification and measurement of
contingent consideration in a business combination. When contingent consideration is a financial instrument,
its classification as a liability or equity is determined by reference to IAS 32, Financial Instruments: Presentation,
rather than to any other IFRSs. Contingent consideration that is classified as an asset or a liability is always
subsequently measured at fair value, with changes in fair value recognized in profit or loss. Consequential
amendments are also made to IAS 39, Financial Instruments: Recognition and Measurement and IFRS 9,
Financial Instruments to prohibit contingent consideration from subsequently being measured at amortised
cost. In addition, IAS 37, Provisions, Contingent Liabilities and Contingent Assets, has been amended to exclude
provisions related to contingent consideration of an acquirer. IFRS 3, has also been amended to clarify that the
standard does not apply to the accounting for the formation of all types of joint arrangements in IFRS 11, Joint
Arrangements - i.e. including joint operations in the financial statements of the joint arrangements themselves.
107
NOTES TO THE
2.
(a)
(iv) Improvements to IFRS 2010-2012 and 2011-2013 cycles (continued)
(v)
•
IFRS 2, Share-based Payments, has been amended to clarify the definition of ‘vesting condition’ by
separately defining ‘performance condition’ and ‘service condition’. The amendment also clarifies how
to distinguish between a market and a non-market performance condition and the basis on which a
performance condition can be differentiated from a non-vesting condition.
•
IFRS 13, Fair Value Measurement, has been amended to clarify that issuing of the standard and
consequential amendments to IAS 39 and IFRS 9 did not intend to prevent entities from measuring
short-term receivables and payables that have no stated interest rate at their invoiced amounts without
discounting, if the effect of not discounting is immaterial.
•
IAS 16, Property, Plant and Equipment, and IAS 38, Intangible Assets, have been amended to clarify that,
at the date of revaluation:
the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the
carrying amount of the asset and the accumulated depreciation (amortization) is adjusted to equal
the difference between the gross carrying amount and the carrying amount of the asset after taking
account of accumulated impairment losses or;
-
the accumulated depreciation (amortization) is eliminated against the gross carrying amount of the
asset.
•
IAS 24, Related Party Disclosures, has been amended to extend the definition of ‘related party’ to
include a management entity that provides key management personnel services to the reporting entity,
either directly or through a management entity. For related party transactions that arise when key
management personnel services are provided to a reporting entity, the reporting entity is required to
separately disclose the amounts that it has recognized as an expense for those services that are provided
by a management entity; however, it is not required to ‘look through’ the management entity and
disclose compensation paid by the management entity to the individuals providing the key management
personnel services.
•
IAS 40, Investment Property, has been amended to clarify that an entity should assess whether an
acquired property is an investment property under IAS 40 and perform a separate assessment
under IFRS 3 to determine whether the acquisition of the investment property constitutes a business
combination.
Improvements to IFRS, 2012-2014 Cycle, contain amendments to certain standards and interpretations and
are effective for annual reporting periods beginning on or after January 1, 2016. The main amendments
applicable to the branch are as follows:
•
108
-
IFRS 7, Financial Instruments: Disclosures, has been amended to clarify when servicing arrangements
JMMBGL PROSPECTUS
NOTES TO THE
2.
(a)
(v)
are in the scope of its disclosure requirements on continuing involvement in transferred assets in cases
when they are derecognized in their entirety. A servicer is deemed to have continuing involvement if it has
an interest in the future performance of the transferred asset -e.g. if the servicing fee is dependent on the
amount or timing of the cash flows collected from the transferred financial asset; however, the collection
and remittance of cash flows from the transferred asset to the transferee is not, in itself, sufficient to be
considered ‘continuing.
(vi) IAS 1 Presentation of Financial Statements, effective for annual reporting periods beginning on or after January
1, 2016, has been amended to clarify or state the following:
• specific single disclosures that are not material do not have to be presented even if they are minimum
requirements of a standard;
• the order of notes to the financial statements is not prescribed;
• line items on the statement of financial position and the statement of profit or loss and other comprehensive
income (OCI) should be disaggregated if this provides helpful information to users. Line items can be
aggregated if they are not material;
• specific criteria are provided for presenting subtotals on the statement of financial position and in the
statement of profit or loss and OCI, with additional reconciliation requirements for the statement of profit
or loss and OCI; and
• the presentation in the statement of OCI of items of OCI arising from joint ventures and associates accounted
for using the equity method follows the IAS 1 approach of splitting items that may, or that will never, be
reclassified to profit or loss.
(vii) IAS 27, Separate Financial Statements, has been amended, with the issue of “Equity Method in Separate
Financial Statements”, amended effective for annual reporting periods beginning on or after January 1, 2016,
to allow the use of the equity method in separate financial statements, and applies to the accounting for
subsidiaries, associates, and joint ventures.
(viii) IFRS 10, Consolidated Financial Statements, and IAS 28, Investments in Associates and Joint Ventures, have
been amended, in respect of Sale or Contribution of Assets between an Investor and its Associate or Joint
Venture, effective for annual reporting periods beginning on or after January 1, 2016. The amendments
require that when a parent loses control of a subsidiary in a transaction with an associate or joint venture, the
full gain be recognized when the assets transferred meet the definition of a ‘business’ under IFRS 3, Business
Combinations.
The Group is assessing the impact, if any, that these new, revised and amended standards and interpretations will,
when they become effective, have on its future financial statements.
109
NOTES TO THE
2.
(b)
Basis of consolidation
The consolidated financial statements include the assets, liabilities and results of operations of the Company
and its subsidiaries presented as a single economic entity.
Subsidiaries are all entities over which the Company has the power to govern the financial and operating
policies, generally accompanying a shareholding of more than one half of the voting rights of an investee,
there is exposure to variability of returns and the company can use its power to influence the returns. The
existence and effect of potential voting rights that are currently exercisable or convertible are considered
when assessing whether the Company controls another entity. Subsidiaries are consolidated from the date
on which control is transferred to the Group. They are no longer consolidated from the date that control
ceases.
Intra-group transactions, balances and unrealised gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of
the asset transferred. Accounting policies of subsidiaries are consistent with those of the Group.
The Group uses the acquisition method of accounting for business combinations. The cost of acquisition is
measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed
at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a
business combination are measured at their fair values at the acquisition date, irrespective of the extent of
any non-controlling interest. The excess of the cost of acquisition over the fair value of the Group’s share
of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair
value of the net assets of the subsidiary acquired, the difference is recognized directly in the consolidated
statement of revenue and expenses.
(i)
Non-controlling interest (NCI) are measured at their proportionate share of the acquiree’s identifiable net
assets at the acquisition date.
(ii) Loss of control
When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary,
and any related non-controlling interest (NCI) and other components of equity. Any resulting gain or loss is
recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value.
(iii) Associates
Associates are all entities over which the Group has significant influence, but not control, over the financial and
operating policies. The consolidated financial statements include the Group’s share of the total recognised
gains and losses of associates on the equity basis, from the date that significant influence commences until
the date that influence ceases. When the Group’s share of losses in an associate exceeds its interest in the
associate, the Group’s carrying amount is reduced to nil and recognition of further losses is discontinued
except to the extent that the Group has incurred legal or constructive obligations or made payments on
behalf of an associate.
110
JMMBGL PROSPECTUS
NOTES TO THE
2.
(c)
Financial instruments
General
A financial instrument is any contract that gives rise to a financial asset of one enterprise and financial liability or
equity instrument
of another enterprise.
(i) Classification of financial instruments
Financial instruments are classified, recognised and measured in accordance with the substance of the terms
of the contracts as set out herein.
Management determines the appropriate classification of investments at the time of purchase, taking account
of the purpose for which the investments were purchased. The Group classifies non-derivative financial assets
into the following categories:
Loans and receivables: This comprises securities acquired, loans granted with fixed or determinable payments
and which are not quoted in an active market.
Held-to-maturity: This comprises securities with fixed or determinable payments and fixed maturities that
the Group has the positive intent and ability to hold to maturity.
Fair value through profit or loss: This comprises securities that the Group acquires for the purpose of selling
or repurchasing in the near term, or that it holds as part of a portfolio that is managed together for short-term
profit or position taking, or that it designates as such at the time of acquisition.
Available-for-sale: The Group’s financial instruments included in this classification are securities with prices
quoted in an active market or for which the fair values are otherwise determinable, and which are designated
as such upon acquisition or not classified in any of the other categories.
(ii)
Recognition and derecognition - non-derivative financial assets and financial liabilities –
The Group recognises a financial instrument when it becomes a party to the contractual terms of the
instrument.
The Group initially recognises loans and receivables and debt securities on the date when they are originated.
All other financial assets and financial liabilities are initially recognised on the trade date.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire,
or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the
risks and rewards of ownership of the financial asset are transferred, or it neither transfers not retains all or
substantially all the risks and rewards of ownership and does not retain control over the transferred asset.
Any interest in such derecognised financial assets that is created or retained by the Group is recognised as a
separate asset or liability.
The Group derecognises a financial liability when its contractual obligations expire or are discharged or
cancelled.
111
NOTES TO THE
2.
(c)
Financial instruments (continued)
(iii) Measurement and gains and losses - Non-derivative financial assets
Loans and receivables: On initial recognition these are measured at fair value plus any directly attributable
transaction costs. Subsequent to initial recognition, they are measured at amortised cost, using the effective
interest method, less impairment losses. Where securities classified as loans and receivables become quoted
in an active market, such securities will not be reclassified as available-for-sale securities. An active market is
one where quoted prices are readily and regularly available from an exchange, dealer, broker or other agency
and those prices represent actual and regularly occurring market transactions on an arm’s length basis.
Held-to-maturity: On initial recognition these are measured at fair value plus any directly attributable
transaction costs. Subsequent to initial recognition, they are measured at amortised cost, using the effective
interest method, less impairment losses. Any sale or reclassification of a significant amount of held-tomaturity investments that are not close to their maturity would result in the reclassification of all held-tomaturity investments as available-for-sale, and prevent the Group from classifying investment securities as
held-to-maturity for the financial year in which sale or reclassification occurs and the following two financial
years.
Financial assets at fair value through profit or loss: On initial recognition these are measured at fair value,
with directly attributable transaction costs recognised in profit or loss as incurred. Subsequent to initial
recognition, financial assets at fair value through profit or loss are measured at fair value and changes therein,
as well as any interest or dividend income, are recognised in profit or loss.
Available-for-sale: On initial recognition, these are measured at fair value plus any directly attributable
transaction costs. Subsequent to initial recognition, they are measured at fair value, with unrealised gains
and losses arising from changes in fair value treated as follows:
(i)
•
Changes in the fair value of monetary securities denominated in a foreign currency and classified as
available-for-sale are analysed between translation differences resulting from changes in amortised
cost of the security and other changes in the carrying amount of the security. The translation
differences are recognised in profit or loss. Changes in the fair value of securities classified as
available-for-sale are recognised in other comprehensive income.
•
When securities classified as available-for-sale are sold or impaired, and therefore derecognised, the
fair value adjustments accumulated in other comprehensive income are reclassified to profit or loss.
Cash comprises cash in hand, demand and call deposits with banks and very short-term balances with other
brokers/dealers. Cash equivalents are highly liquid financial assets that are readily convertible to known
amounts of cash (that is, with original maturities of less than three months), which are subject to insignificant
risk of changes in value, and are used for the purpose of meeting short-term commitments. Cash and cash
equivalents are carried at cost.
Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are
included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
112
JMMBGL PROSPECTUS
NOTES TO THE
2.
(c)
Financial instruments (continued)
(ii) Investment securities
Investment securities are classified, recognised/derecognised and measured in the manner set out for financial
assets under “General” in this note 2(c) above.
(iii) Resale and repurchase agreements
Transactions involving purchases of securities under resale agreements (‘resale agreements’ or reverse repos’)
or sales of securities under repurchase agreements (‘repurchase agreements’ or ‘repos) are accounted for as
short-term collateralised lending and borrowing, respectively. Accordingly, securities sold under repurchase
agreements remain on the statement of financial position and are measured in accordance with their original
measurement principles. The proceeds of sale are reported as liabilities and are carried at amortised
cost. Securities purchased under resale agreements are reported not as purchases of the securities, but
as receivables and are carried in the statement of financial position at amortised cost. It is the policy of the
Group to obtain possession of collateral with a market value in excess of the principal amount loaned under
resale agreements.
Interest earned on resale agreements and interest incurred on repurchase agreements is recognised as
interest income and interest expense, respectively, over the life of each agreement using the effective interest
method.
(iv) Loans and notes receivable and other receivables
Loans and notes receivable and other receivables are stated at amortised cost less allowance for impairment.
(v)
Account payable
Accounts payable are stated at their amortised cost.
(vi) Interest-bearing borrowings
Interest-bearing borrowings [other than repos, which are described in Note 2(c) (iii)] are recognised initially at
fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings
are stated at amortised cost, with any difference between cost and redemption recognised in the profit or loss
over the period of the borrowings on an effective yield basis.
(vii) Embedded derivatives
Derivatives may be embedded in another contractual arrangement (a host contract). The Group accounts for
an embedded derivative separately from the host contract when the host contract is not itself carried at fair
value through profit or loss. Separated embedded derivatives are measured at fair value, with all changes
in fair value recognised in profit or loss. Separated embedded derivatives are presented in the statement of
financial position together with the host contract.
113
NOTES TO THE
2.
(d)
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost
includes expenditures that are directly attributable to the acquisition of the asset.
The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly
attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and
removing the items and restoring the site on which they are located. The cost of replacing part of an item of
property, plant and equipment is recognised in the carrying amount of the item if it is probable that future
economic benefits embodied within the part flow to the Group and its cost can be measured reliably. The
costs of day-to-day servicing of property, plant and equipment are recognised in profit or loss.
Property, plant and equipment, with the exception of freehold land and paintings, on which no depreciation
is provided, are depreciated on the straight-line basis at annual rates estimated to write down the assets to
their residual values over their expected useful lives. The depreciation rates are as follows:
Freehold buildings
Leasehold improvements
Motor vehicles
Computer equipment
Other equipment, furniture and fittings
2½% - 5%
The shorter of the estimated useful life and the period
of the lease
20%
20% - 25%
10% - 20%
The depreciation method, useful lives and residual values are reassessed at each reporting date.
114
(e)
Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible
assets acquired in a business combination is fair value at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment
losses. Internally generated intangible assets, excluding capitalised development costs meeting the criteria of
IAS 38, are not capitalised and the expenditure is charged against profits in the year in which the expenditure
is incurred. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets
with finite lives are amortised over the useful economic life and assessed for impairment whenever there is
an indication that the intangible asset may be impaired. The amortisation period for an intangible asset with
a finite useful life is reviewed at a minimum at each financial year end. Changes in the expected useful life or
the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by
changing the amortisation period and treated as changes in accounting estimates. The amortisation expense
on intangible assets with finite lives is recognised in profit or loss.
(i)
Computer software
Computer software is carried at cost, less accumulated amortisation and impairment losses. Amortisation is
charged on the straight-line basis over the useful lives of the assets at a rate of 25% per annum, from the date
it is available for use.
JMMBGL PROSPECTUS
NOTES TO THE
2.
(e)
Intangible assets (continued)
(ii) Goodwill
Goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value
of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the cost is less than the
fair value (negative goodwill), it is recognised immediately in profit or loss. Goodwill is measured at cost less
accumulated impairment losses. Goodwill is assessed for impairment at least annually.
(iii) Customer list
Acquired customer lists are measured initially at historical cost. Customer lists have a finite useful life and are
carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to
allocate the cost over the expected retention period with the Group, which ranges from 8 to 15 years.
(iv) Licences
These assets represents the value of the JMMB Securities Limited seat on the Jamaica Stock Exchange and the
banking licence and securities licence acquired for Intercommercial Bank Limited and AIC Securities Limited,
which have indefinite useful lives. These assets are tested for impairment annually, and whenever there is an
indication that the asset may be impaired, the carrying amount is reduced to the recoverable amount.
(v)
(f)
Other intangibles
Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less
accumulated amortisation and any accumulated impairment losses
Foreign currency translation
(i)
Functional and presentation currency
Items included in the financial statements of each of the Group entities are measured using the currency of the
primary economic environment in which the entity operates (‘the functional currency’).
The consolidated financial statements are presented in Jamaican dollars, which is the company’s functional
and presentation currency.
115
NOTES TO THE
2.
(f)
Foreign currency translation (continued)
(ii) Transactions and balances
Foreign currency transactions are accounted for at the exchange rates prevailing at the dates of the
transactions. At the date of the statement of financial position, monetary assets and liabilities denominated
in foreign currencies are translated using the closing exchange rate.
Exchange differences resulting from the settlement of transactions at rates different from those at the dates
of the transactions, and unrealised foreign exchange differences on unsettled foreign currency monetary
assets and liabilities are recognised in profit or loss.
Exchange differences on non-monetary financial assets are a component of the change in their fair value.
Depending on the classification of a non-monetary financial asset, exchange differences are either recognised
in profit or loss (applicable for trading securities), or within other comprehensive income if non-monetary
financial assets are classified as available-for-sale. In the case of changes in the fair value of monetary assets
denominated in foreign currency classified as available-for-sale, a distinction is made between translation
differences resulting from changes in amortised cost of the security and other changes in the carrying amount
of the security. Translation differences related to changes in the amortised cost are recognised in profit or
loss, and other changes in the carrying amount, except impairment, are recognised in other comprehensive
income.
(iii) Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary
economy) that have a functional currency different from the presentation currency are translated into the
presentation currency as follows:
•
•
•
116
Assets and liabilities for each statement of financial position presented are translated at the closing rate at the
date of that statement;
Income and expenses for each income statement are translated at average exchange rates (unless this average
is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in
which case income and expenses are translated at the dates of the transactions); and
All resulting exchange differences are recognised in other comprehensive income and accumulated as a
separate component of equity.
JMMBGL PROSPECTUS
NOTES TO THE
2.
(g)
Share capital
The Group classifies capital instruments as financial liabilities or equity instruments in accordance with the
substance of the contractual terms of the instrument. Preference share capital is classified as equity if it is
non-redeemable, or redeemable only at the issuer’s option, and any dividends are discretionary. Dividends
thereon are recognised as distributions within equity. Preference share capital is classified as a liability if it
is redeemable on a specific date or at the option of the stockholders, or if dividends are not discretionary.
Dividends thereon are recognised as interest in profit or loss.
The Group’s redeemable preference shares are redeemable on specific dates, and bear entitlements to
distributions that are cumulative, and not at the discretion of the directors. Accordingly, they are presented
as financial liability.
Incremental costs directly attributable to the issue of an equity instrument are deducted from the initial
measurement of the equity instruments.
(h) Taxation
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised
in profit or loss except to the extent that it relates to items recognised directly to equity, in which case it is
recognised in other comprehensive income.
(i)
Current income tax
Current income tax is the expected tax payable on the taxable income for the year, using tax rates
enacted at the reporting date, and any adjustment to income tax payable in respect of previous years.
(ii)
Deferred income tax
Deferred income tax is provided for temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount
of deferred tax provided is based on the expected manner of realisation or settlement of the carrying
amount of assets and liabilities, using tax rates enacted at the reporting date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be
available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is
no longer probable that the related tax benefit will be realised.
117
NOTES TO THE
2.
(i)
Impairment
The carrying amounts of the Group’s assets, except for deferred tax assets, are reviewed at each reporting
date to determine whether there is any indication of impairment. If any such indication exists for any asset, the
asset’s recoverable amount is estimated at each reporting date. An impairment loss is recognised whenever
the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment
losses are recognised in profit or loss.
When a decline in the fair value of an available-for-sale financial asset has been recognised in other
comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that
had been recognised in other comprehensive income is reclassified to profit or loss even though the financial
asset has not been derecognised. The amount of the cumulative loss that is recognised in profit or loss is the
difference between the acquisition cost and current fair value less any impairment loss on that financial asset
previously recognised in profit or loss.
(i)
Calculation of recoverable amount
The recoverable amount of the Group’s receivables is calculated as the present value of expected future
cash flows, discounted at the original effective interest rate inherent in the asset. Receivables with a
short duration are not discounted.
The recoverable amount of other assets is the greater of their fair value less cost to sell and value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market assessments of the time value of money and the
risks specific to the asset. For an asset that does not generate largely independent cash inflows, the
recoverable amount is determined for the cash-generating unit to which the asset belongs.
(ii) Reversals of impairment
An impairment loss in respect of a receivable is reversed if the subsequent increase in recoverable
amount can be related objectively to an event occurring after the impairment loss was recognised.
An impairment loss in respect of an investment in an equity instrument classified as available for sale is
not reversed through profit or loss, but through other comprehensive income. If the fair value of a debt
instrument classified as available-for-sale increases and the increase can be objectively related to an
event occurring after the impairment loss was recognised in profit or loss, the impairment loss shall be
reversed, with the amount of the reversal recognised in profit or loss.
In respect of other assets, an impairment loss is reversed if there has been a change in the estimates
used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the
carrying amount that would have been determined, net of depreciation or amortisation, if no impairment
loss had been recognised.
118
JMMBGL PROSPECTUS
NOTES TO THE
2.
(j)
Revenue recognition
Revenue is income that arises from the ordinary activities of the Group. The principal types of revenue and
the manner in which they are recognised are as follows:
(i)
Interest income
Interest income is recorded on the accrual basis. Interest income includes the amortisation of any discount
or premium, transaction costs or other differences between the initial carrying amount of an interest-earning
instrument and its amount at maturity calculated on the effective interest rate basis. When financial assets
become doubtful of collection, they are written down to their recoverable amounts and interest income is
thereafter recognised based on the rate of interest that was used to discount the future cash flows for the
purpose of measuring the recoverable amount, which is the original effective interest rate of the instrument
calculated at the acquisition or origination date.
(ii)
Fees and commissions
Fee and commission income are recognised on the accrual basis when the service has been provided. Fees
and commissions arising from negotiating or participating in the negotiation of a transaction for a third party
are recognised on completion of the underlying transaction. Portfolio and other management advisory
and service fees are recognised based on the applicable service contracts, usually on a time-apportionate
basis. Asset management fees related to investment funds are recognised rateably over the period in which
the service is provided. Performance-linked fees or fee components are recognised when the performance
criteria are fulfilled.
(iii) Dividends
Dividend income is recognized when the right to receive payment is irrevocably established
(k) Employee benefits
Employee benefits are all forms of consideration given by the Group in exchange for service rendered by
employees. These include current or short-term benefits such as salaries, bonuses, NIS contributions, vacation
leave; non-monetary benefits such as medical care; post-employments benefits such as pensions; and other
long-term employee benefits such as termination benefits.
Employee benefits that are earned as a result of past or current service are recognised in the following manner:
Short-term employee benefits are recognised as a liability, net of payments made, and charged as expense.
The expected cost of vacation leave that accumulates is recognised when the employee becomes entitled to
the leave. Post-employment benefits are accounted for as described below. Other long-term benefits are not
considered material and are charged off when incurred.
Pensions are the Group’s only post-employment benefit. Pension fund costs included in Group profit or loss
represent contributions to the defined-contribution fund which the Group operates to provide retirement
pensions for the Group’s employees (Note 30). Contributions to the fund, made on the basis provided for in
the rules, are accrued and charged off when due.
119
NOTES TO THE
2.
(l)
Operating leases
Payments made under operating leases are recognised in profit or loss on the straight line basis over the
terms of the leases.
(m) Segment reporting
A segment is a distinguishable component of the Group that is engaged either in providing related products or
services (business segment), or in providing products or services within a particular economic environment
(geographical segment), which is subject to risks and rewards that are different from those of other segments.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision-maker. The chief operating decision-maker is the Board of Directors.
120
(n)
Interest expense
Interest expense is recognised in profit or loss using the effective interest method. The effective interest
rate is the rate that exactly discounts the estimated future cash payments through the expected life of the
financial liability (or, where appropriate, a shorter period) to the carrying amount of the financial liability.
(o)
Borrowings
Borrowings are recognised initially at fair value net of transaction costs incurred. Borrowings are subsequently
stated at amortised cost and any difference between net proceeds and the redemption value is recognised in
profit or loss over the period of the borrowings using the effective interest method.
(p)
Investment properties are held for rental yields and fair value gains and are not occupied by the Group.
Investment properties are treated as a long-term investment and are carried at fair value. Fair value is
determined every third year by an independent professional valuer, and in each of the two intervening years
by the directors. Changes in fair values are recognised in profit or loss. Rental income from investment
properties is recognised in profit and loss on the straight line basis over the tenor of the lease.
(q)
Comparative information
Where necessary, comparative figures have been reclassified to conform to changes in presentation in the
current year.
JMMBGL PROSPECTUS
NOTES TO THE
3.
Critical Accounting Judgements and Key Sources of Estimation Uncertainty
The preparation of the financial statements in conformity with IFRS requires management to make estimates, based
on assumptions and judgements. Management also makes judgements other than those involving estimations, in the
process of applying the accounting policies. The estimates and judgements affect (1) the reported amounts of assets,
liabilities, contingent assets and contingent liabilities at the reporting date and the income and expenses for the year
then ended, and (2) the carrying amounts of assets and liabilities in the next financial year.
The estimates and judgements are based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances, and are continually evaluated to confirm their
continuing appropriateness.
The estimates, and the assumptions underlying them, as well as the judgements are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only
that period, or in the period of the revision and future periods if the revision affects both current and future periods
Estimates that can cause a significant adjustment to the carrying amounts of assets and liabilities in the next financial
year and judgements that have a significant effect on the amounts recognised in the financial statements, include the
following:
(a)
Key sources of estimation uncertainty
(i)
Allowance for losses
In determining amounts recorded for allowance for losses in the financial statements, management makes
judgements regarding indicators of impairment, that is, whether there are indicators that suggest there may be
a measurable decrease in the estimated future cash flows from investments, notes receivable and other financial
assets, for example, repayment default and adverse economic conditions. The specific counterparty of the total
allowances for impairment applies to financial assets evaluated individually for impairment and is based on
management’s best estimate of the present value of the cash flows that are expected to be received. In estimating
these cash flows, management makes assumptions about a counterparty’s financial situation and the net realisable
value of any underlying collateral. Each impaired asset is assessed on its merits, and the work out strategy and
estimate of cash flows considered recoverable are independently approved by the Credit and Market Risk functions.
(ii) Fair value of financial instruments
There are no quoted market prices for a significant portion of the Group’s financial assets and liabilities. Accordingly,
fair values of several financial assets are estimated using prices obtained from a yield curve. The yield curve is, in
turn, obtained from a pricing source which estimates the yield curve on the basis of indicative prices submitted
to it by licensed banks and other financial institutions in Jamaica. There is significant uncertainty inherent in this
approach; the fair values determined in this way are classified as Level 2 fair values. Some other fair values are
estimated based on quotes published by broker/dealers, and these are also classified as Level 2. The estimates of
fair value arrived at from these sources may be significantly different from the actual price of the instrument in an
actual arm’s length transaction (see notes 16 and 29).
121
NOTES TO THE
3.
Critical Accounting Judgements and Key Sources of Estimation Uncertainty (Continued)
(b) Critical accounting judgements in applying the Group’s accounting policies
The Group’s accounting policies provide scope for assets and liabilities to be designated on inception into
different accounting categories in certain circumstances:
•
•
4.
In classifying financial assets or liabilities as ‘’trading’’, the Group has determined that they meet the description
of trading assets and liabilities set out in accounting policy 2 (c).
In designating financial assets and liabilities at fair value through profit or loss, the Group has determined that
they have met the criteria for this designation set out in accounting policy 2(c).
Segment Reporting
A segment is a distinguishable component of the Group that is engaged either in providing related products
or services (business segment), or in providing products or services within a particular economic environment
(geographical segment), which is subject to risks and rewards that are different from those of other segments. The
Group’s activities are organised into three main business segments:
i)
Financial and related services which include securities brokering, stock brokering, portfolio planning, funds
management and investment advisory services.
ii) Banking and related services which include taking deposits, granting loans and other credit facilities and
foreign currency trading.
iii) Other represents remittance and related services, insurance brokering, investment and real estate holding.
External revenues
Inter-segment revenue
Segment results
Impairment loss on financial asset
Profit before tax
Income tax expense
Profit for the year
122
Financial &
Related
Services
$’000
14,106,369
616,670
14,723,039
2,118,497
The Group
Banking &
Related
Services
Other
Eliminations
$’000
$’000
$’000
4,248,340
103,171
43,188
9,253
(669,111)
4,291,528
112,424
(669,111)
469,846
5,695
-
188,714,368
61,105,189
975,945
(33,080,200)
Group
$’000
18,457,880
18,457,880
2,594,038
(259,262)
19,263
2,354,039
(306,757)
2,047,282
217,715,302
JMMBGL PROSPECTUS
NOTES TO THE
4.
Segment Reporting (Continued)
Financial &
Related
Services
$’000
165,552,460
Interest income
Interest expense
Operating expenses
Depreciation and amortisation
Capital expenditure
10,039,267
6,758,071
5,171,943
318,008
501,338
The Group
Banking &
Related
Services
Other
Eliminations
$’000
$’000
$’000
52,348,316
913,020
(22,821,558)
3,297,471
1,318,074
2,502,174
118,239
105,770
1,078
113,580
6,089
25,289
-
Group
$’000
195,992,238
13,337,816
8,076,145
7,787,697
442,336
632,397
Financial &
Related
Services
$’000
12,947,022
485,298
13,432,320
2,624,528
The Group
Banking &
Related
Services
Other
Eliminations
$’000
$’000
$’000
2,730,549
81,522
63,700
5,488
(554,486)
2,794,249
87,010
(554,486)
443,290
3,763
-
176,427,565
56,767,815
891,254
(27,380,515)
206,706,119
157,227,188
48,882,631
826,277
(18,918,957)
188,017,139
10,140,635
6,108,163
2,137,275
909,102
1,840
-
-
12,279,750
7,017,265
4,173,959
237,063
322,055
1,413,042
77,081
62,598
83,246
3,718
-
-
5,670,247
317,862
384,653
External revenues
Inter-segment revenue
Segment results
Impairment loss on financial asset
Share of profit of associated companies
Profit before tax
Income tax expense
Profit for the year
Interest income
Interest expense
Operating expenses
Capital expenditure
Group
$’000
15,759,093
15,759,093
3,071,581
(10,898)
361,657
(24,289)
3,398,051
(335,992)
3,062,059
123
NOTES TO THE
5.
Net Interest Income
$’000
Interest income
Resale agreements
Total interest income
Interest expense
Repurchase agreements
Notes payable
Total interest expense
Net interest income
Total interest income on financial assets not at
fair value through profit or loss
6.
The Group
2015
2014
$’000
$’000
46,162
2,510,568
812,789
9,968,297
13,337,816
15,978
1,590,326
11,110
10,662,336
12,279,750
23,266
438,788
426,560
7,333,346
8,221,960
16,861
349,840
436,268
6,867,245
7,670,214
6,915,906
806,809
353,430
8,076,145
5,261,671
6,258,983
451,610
306,672
7,017,265
5,262,485
5,230,347
118,057
353,430
5,701,834
2,520,126
4,399,621
31,025
306,672
4,737,318
2,932,896
13,337,816
12,279,750
8,221,960
7,670,214
Staff Costs
The Group
2015
2014
$’000
$’000
Salaries and benefits, including
profit-related pay
Statutory payroll contributions
Pension costs (Note 30)
Training and development
Other staff benefits
7.
The Company
2015
2014
$’000
3,112,102
249,497
128,062
67,702
353,769
3,911,132
2,284,451
181,553
88,735
31,873
291,105
2,877,717
The Company
2015
2014
$’000
$’000
1,620,681
146,308
51,604
41,408
144,911
2,004,912
1,338,092
124,820
46,673
27,734
134,514
1,671,833
Impairment Loss on Financial Assets
The impairment charge was for a provision on certain of the Group’s investments in its equity and corporate bond
portfolio.
124
JMMBGL PROSPECTUS
NOTES TO THE
8.
Operating Expenses
The following are among the items charged in arriving at profit before taxation
Marketing, corporate affairs and donations
Bad debts, less recoveries
Directors’ fees
Irrecoverable - GCT
Insurance
Auditors’ remuneration
Assets tax
Information technology
Legal and other professional fees
Repairs and maintenance
Office rental
Loan loss, less recoveries
Security
Stationery, printing and postage
Utilities
Bank charges and interest
Other
2015
$’000
353,168
56,044
442,336
107,466
179,255
124,561
57,544
374,241
320,668
437,208
115,607
296,462
181,151
140,086
93,797
204,681
198,841
193,449
3,876,565
The Group
2014
$’000
251,510
13,372
317,862
61,357
148,360
60,162
52,995
194,756
269,697
353,459
81,955
186,458
192,037
79,875
104,753
135,622
171,021
117,279
2,792,530
The Company
2015
2014
$’000
$’000
221,701
184,826
13,372
167,164
147,432
40,739
29,741
125,218
111,931
34,294
34,651
16,450
16,436
313,827
167,897
200,288
189,402
185,312
183,634
73,969
76,894
28,420
25,758
3,784
81,115
71,019
58,701
87,902
102,128
98,820
128,722
117,088
64,803
41,291
1,846,635
1,598,094
125
NOTES TO THE
9. Taxation
(a)
Income tax for the parent is computed at 33 1/3% on the profit for the year adjusted for tax purposes. Income taxes
for all other subsidiaries are based on statutory income tax rates prevailing in each jurisdiction:
The Group
1% tax on assets
Green fund levy
Current income tax
Deferred income tax (Note 21)
(b)
2015
$’000
2,035
2,148
518,600
(216,026)
306,757
2015
$’000
2,354,039
Tax calculated at 33 1/3%
784,680
Adjusted for the effects of:
Income not subject to tax
(635,859)
Disallowed expenses
338,854
Tax losses not recognized
70,461
Effect of taxation under different tax regime (275,076)
Green fund levy
2,077
Other
21,620
306,757
126
The Company
2015
2014
$’000
$’000
362,159
40,958
(116,177)
158,280
245,982
199,238
The tax on profit differs from the theoretical amount that would arise using the statutory rate of 33 1/3% as
follows:
Profit before taxation
(c)
2014
$’000
2,286
1,876
101,497
230,333
335,992
The Group
2014
$’000
3,398,051
2015
$’000
1,187,506
The Company
2014
$’000
1,149,370
1,132,684
395,835
383,123
(617,618)
157,601
189,850
(526,237)
1,876
(2,164)
335,992
(415,889)
268,706
(2,670)
245,982
(274,751)
90,893
(27)
199,238
At the reporting date, taxation losses, subject to agreement with the relevant Tax Authorities, available for set off
against future taxable profits, amounted to approximately $1,177,945,000 (2014: $2,553,453,000) for the Group
and nil (2014: $885,455,000) for the company.
JMMBGL PROSPECTUS
NOTES TO THE
10. Earnings per Stock Unit
Earning per stock unit (‘’ EPS’’) is computed by dividing the profit attributable to stockholders of the parent of $1,931,980,000
(2014: $2,832,855,000) by the weighted average number of ordinary stock units in issue during the year, numbering
1,630,552,530 (2014: 1,630,555,230).
11. Dividends
The Group and The Company
2015
2014
$’000
$’000
277,194
260,888
260,888
538,082
260,888
Final dividend in respect of 2014 @ 17.0 cents per stock unit
12. Cash and Cash Equivalents
Cash
Cash equivalents
The Group
2015
2014
$’000
$’000
7,507,954 13,711,524
11,164,434 9,614,896
18,672,388 23,326,420
2015
$’000
4,258,590
543,303
4,801,893
The Company
2014
$’000
6,898,222
565,301
7,463,523
Cash equivalents of the Group and company include $543,240,000 (2014: $548,759,000) held by an investment broker as
security for funding provided on certain investment securities which is not available for immediate use. In addition, the
Group also has restricted amount of $7,685,160 (2014: $7,595,574) deposited at an interest rate of 2.5% (2014: 2.5%) under
an agreement with a building society which co-ordinates and administers a home ownership assistance programme on
behalf of the Group for its employees.
127
NOTES TO THE
13. Loans and Notes Receivable
The Group
Corporate
Financial institutions
Individuals
Less: provision for impairment
2015
$’000
17,642,910
6,344,748
8,977,175
32,964,833
(1,040,290)
31,924,543
2014
$’000
14,829,906
2,415,140
10,200,588
27,445,634
(894,459)
26,551,175
The Company
2015
2014
$’000
$’000
1,219,688
1,051,194
567,017
209,636
2,639,433
2,220,983
4,426,138
3,481,813
(20,004)
(13,799)
4,406,134
3,468,014
Provision for impairment
The Group
Balance at 1 April
Provision acquired
Charge for year
Write-offs
Translation gains
Balance at 31 March
2015
$’000
894,459
3,666
181,151
(46,541)
7,555
1,040,290
2014
$’000
521,650
153,149
428,426
(207,153)
(1,613)
894,459
The Company
2015
2014
$’000
$’000
13,799
17,745
3,666
3,784
(1,245)
(3,946)
20,004
13,799
Notes receivable include the balance on an interest-free revolving advance of $324,036,605 (2014: $324,036,605) to the
trustees of the Group’s Employee Share Ownership Plan (ESOP), the repayment date for which has not yet been fixed. The
number of shares held by the ESOP at 31 March 2015 was 162,138,701 (2014: 158,501,767).
128
JMMBGL PROSPECTUS
NOTES TO THE
14. Other Receivables
The Group
Receivables from related parties
Other receivables
Staff loans
Less: provision for impairment
2015
$’000
937,645
308,905
1,246,550
(1,390)
1,245,160
2014
$’000
1,658,251
276,507
1,934,758
(7,552)
1,927,206
The Company
2015
2014
$’000
$’000
1,418,656
1,567,045
408,015
269,467
297,953
276,507
2,124,624
2,113,019
(923)
(7,128)
2,123,701
2,105,891
The Group
Balance at 1 April
Charge for year
Recoveries/write-off
Balance at 31 March
15.
2014
$’000
5,254
13,372
(11,074)
7,552
The Company
2015
2014
$’000
$’000
7,128
3,182
13,372
(6,205)
(9,426)
923
7,128
2014
$’000
338,520
218,559
95,907
652,986
The Company
2015
2014
$’000
$’000
527,426
538,000
12,404,910
12,658,965
362,140
326,017
13,294,476
13,522,982
2015
$’000
7,552
43
(6,205)
1,390
Securities Purchased Under Agreements to Resell
The Group
Denominated in Jamaica dollars
Denominated in United States dollars
Denominated in Dominican Republic Pesos
Denominated in Trinidad and Tobago dollars
2015
$’000
72,162
200,434
272,596
Resale agreements include balances with related parties as set out in Note 26. All resale agreements mature within
twelve months after the reporting date.
The securities that the Group obtains as collateral under resale agreements may be used as collateral under repurchase
agreements. Certain of these securities and interest accrued thereon are pledged as security for repurchase agreements
(Note 24).
At the reporting date, the fair value of the securities obtained and held under resale agreements was $294,036,000
(2014: $685,635,000) and $15,911,514,000 (2014: $13,756,305,000) for the Group and company, respectively
129
NOTES TO THE
16. Investment Securities
The Group
The Company
2015
$’000
2014
$’000
2015
$’000
2014
$’000
Government of Jamaica securities
Sovereign
Corporate:
22,433,743
213,053
25,969,157
195,887
16,395,464
213,053
20,030,547
195,887
Government of Jamaica guaranteed
Other
6,048,483
133,248
28,828,527
6,115,895
69,053
32,349,992
2,876,929
19,485,446
2,997,918
4,250
23,228,602
73,345,970
12,292,110
33,421
4,951,841
8,504,821
16,750,687
310,937
75,268
440,819
838,848
117,544,722
65,231,606
3,213,523
4,417,831
9,606,972
18,376,802
219,550
80,253
513,926
834,899
102,495,362
69,598,277
10,830,897
4,951,841
496,830
123,992
57,054
22,075
440,819
86,521,785
60,596,560
2,515,739
4,417,831
5,165,231
84,458
51,857
50,882
508,688
73,391,246
1,614
469,145
144,238
1,576,640
50,362
12,956
2,254,955
593,812
663,456
213,954
922,313
182,903
12,956
2,589,394
1,614
144,238
66,069
211,921
593,812
213,954
348,628
1,156,394
Loans and receivables:
Available-for-sale securities:
Certificates of deposit
Government of Jamaica Treasury Bills
Government of Jamaica guaranteed
Corporate bonds
Other sovereign bonds
Quoted securities
Units in unit trusts
Money Market Funds
Other
Fair value through profit and loss:
Credit default swap
Corporate bonds
Quoted securities
Unquoted equities
130
JMMBGL PROSPECTUS
NOTES TO THE
16.
Investments Securities (Continued)
The Group
2015
$’000
2014
$’000
8,803,785
54,030
8,857,815
157,486,019
(259,262)
157,226,757
8,207,138
135,840
8,342,978
145,777,726
145,777,726
The Company
2015
2014
$’000
$’000
Held to maturity:
Credit linked note
Sovereign bonds
Less: provision for impairment losses
106,219,152
(218,355)
106,000,797
97,776,242
97,776,242
The Group
Balance as 1 April
Recoveries
Charge for the year
Balance as 31 March
2015
$’000
(259,262)
(259,262)
2014
$’000
57,009
(57,009)
-
The Company
2015
2014
$’000
$’000
(218,355)
(218,355)
-
131
NOTES TO THE
16.
Investments Securities (Continued)
Investments mature, from the reporting date, as follows:
The Group
The Company
2015
2014
$’000
$’000
2015
$’000
2014
$’000
1,465,232
5,586,835
29,487,193
59,275,488
95,814,748
51,142
1,499,056
31,675,803
58,568,574
91,794,575
708,010
5,550,023
26,871,254
52,866,068
85,995,355
1,148
857,838
25,589,827
54,772,106
81,220,919
11,571,295
124,011
596,804
12,292,110
2,784,779
428,744
3,213,523
10,830,897
10,830,897
2,515,739
2,515,739
1,550,301
5,966,116
12,794,383
27,729,691
48,040,491
1,079,408
157,226,757
699,686
3,068,581
15,957,157
30,022,369
49,747,793
1,021,835
145,777,726
1,271,589
182,228
7,214,608
8,668,425
506,120
106,000,797
2,654,963
1,556,313
9,216,880
13,428,156
611,428
97,776,242
Government of Jamaica securities:
Within 3 months
From 3 months to 1 year
From 1 year to 5 years
Over 5 years
Certificates of deposit:
Within 3 months
Sovereign bonds and corporate bonds:
Within 3 months
Over 5 years
Other [see (c) below]
(a) Government of Jamaica securities and certain other bonds are pledged as security for repurchase agreements (Note 24).
(b) Government of Jamaica securities having an aggregate face value of $165,000,000 (2014: $165,000,000) have been pledged
as collateral against possible overdrafts at the Central Bank and against uncleared effects at one of the company’s bankers.
(c) Other includes quoted equities, unit trusts and interest in pooled money market fund for which there are no fixed
maturity dates.
132
JMMBGL PROSPECTUS
NOTES TO THE
17.
Interest in Subsidiaries
The Company
2015
2014
$’000
$’000
Shares, at cost – equity
– preference
Loan
Jamaica Money Market Brokers (Trinidad and Tobago) Limited
Loan
JMMB Real Estate Holdings Limited
26,050
55,000
81,050
26,050
79,000
105,050
125,000
10,000
135,000
125,000
10,000
135,000
1,642,924
336,765
1,979,689
1,577,014
336,765
1,913,779
500,000
500,000
1
1
9
98,665
98,674
9
98,665
98,674
2,794,414
2,752,504
JMMB Holdings Limited, SRL
Shares, at cost - equity
Loan
Balance carried forward to page 134
133
NOTES TO THE
17.
Interest in Subsidiaries (Continued)
The Company
2015
2014
$’000
$’000
Balance brought forward from page 133
2,794,414
2,752,504
Capital and Credit Financial Group Limited
4,644,589
4,644,589
126,315
126,315
254,555
7,819,873
254,555
7,777,963
Shares, at cost - equity
134
JMMBGL PROSPECTUS
NOTES TO THE
18. Investment Properties
The properties are stated at fair market value, as appraised by professional, independent valuers. The valuation model
considers the present value of the net cash flows that can be generated from the property, condition of the buildings and its
location (prime vs secondary), in addition to recent market transactions in the same proximity.
Investment properties generated revenue of $1,938,590 (2014: $2,378,000) and expenses of $6,663,000 (2014: $4,929,000) for
the year.
The fair value of the Group’s investment properties is categorised into Level 3 of the fair value hierarchy.
Valuation techniques
Market approach. This model takes
into account:
• The fact that the intention is to
dispose of the property in an open
market transaction
• The expected sale would take place
on the basis of a willing seller and
willing buyer;
• A reasonable period in which to
negotiate a sale, taking into account
the nature of the property and
state of the market;
Significant unobservable inputs
• Judgements about whether the
property can be sold, exchanged,
transferred, let,mortgaged or
used for any other economic
activity, within its use class.
• The strength of demand for the
property, given its condition,
location and range of potential
uses.
Inter-relationship between key
unobservable inputs and fair
value measurement
The estimated fair value would
increase / (decrease) if:
• The strength of the demand is
greater less than judged.
• The potential rental income from
the property is greater / (less) than
judged.
• The potential rental value of the
property in the current investment
climate.
• Values are expected to remain
stable throughout the period of
market exposure and disposal by
of sale (hypothetical);
• The property will be freely exposed
to the market; and
• The potential rental value of the
property in the current investment
climate.
135
NOTES TO THE
19. Intangible Assets
The Group
Customer
Computer
License
Other
List
Software
Goodwill
Total
$’000
$’000
$’000
$’000
$’000
$’000
-
174,000
315,456
481,037
16,744
987,237
177,452
128,612
210,012
-
20,520
-
-
-
-
20,520
-
-
-
73,064
-
73,064
Cost
31 March 2013
Acquired in business combination
(Note 27)
Transfer
Additions
Exchange rate adjustment
31 March 2014
-
516,076
7,630
5,530
9,030
-
619
22,809
205,602
308,142
534,498
554,101
17,363
1,619,706
10,707
208
8,348
-
-
19,263
167,380
Acquired in business combination
(Note 27)
Transfer
Additions
-
-
10,710
156,670
-
11,686
8,146
13,638
(4,573)
-
28,897
227,995
316,496
567,194
706,198
17,363
1,835,246
31 March 2013
-
107,000
26,557
381,158
-
514,715
Charge for the year
-
31,956
43,006
22,722
-
97,684
-
1,580
413
-
-
1,993
31 March 2014
-
140,536
69,976
403,880
-
614,392
Charge for the year
-
70,308
54,303
32,089
-
156,700
-
3,064
813
-
-
3,877
-
213,908
125,092
435,969
-
774,969
31 March 2015
227,995
102,588
442,102
270,229
17,363
1,060,277
31 March 2014
205,602
167,606
464,522
150,221
17,363
1,005,314
31 March 2013
-
67,000
288,899
99,879
16,744
472,522
31 March 2015
Accumulated Amortisation
31 March 2015
Net Book Value
136
JMMBGL PROSPECTUS
NOTES TO THE
19.
Intangible Assets (Continued)
The Company
Cost
31 March 2013
Additions
31 March 2014
Additions
Adjustments
31 March 2014
Accumulated Amortisation
31 March 2013
Charge for the year
31 March 2014
Charge for the year
31 March 2015
Net Book Value
31 March 2015
31 March 2014
31 March 2013
Computer
Software
$’000
Total
$’000
437,256
71,678
508,934
135,687
(4,571)
640,050
437,256
71,678
508,934
135,687
(4,571)
640,050
338,254
22,320
360,574
30,800
391,374
338,254
22,320
360,574
30,800
391,374
248,676
148,360
99,004
248,676
148,360
99,004
137
20.
Property, Plant and Equipment
Cost
At 31 March 2013
Acquisition of subsidiaries
(Note 27)
Additions
Transfer
Disposals
Exchange adjustment
31 March 2014
(Note 27)
Additions
Transfer
Disposals
Exchange adjustment
31 March 2015
Accumulated Depreciation
31 March 2013
(Note 27)
Charge for the year
Disposals
Transfer
Exchange adjustment
31 March 2014
(Note 27)
Charge for the year
Disposals
Exchange adjustment
31 March 2015
Net Book Value
31 March 2015
31 March 2014
31 March 2013
17,054
103,398
86,344
181,300
(32,724)
(6,775)
1,286
1,213,100
12,194
154,393
524
1,070,013
902,902
Freehold
Land and
Buildings
$’000
47,583
(17,283)
13,408
366,753
189,418
35,305
8,598
323,045
89,724
53,764
(17,283)
14,182
575,915
339,812
11,593
(4,574)
18,173
525,252
160,248
Leasehold
Improvement
$’000
30,469
38,524
23,518
11,912
(4,146)
(283)
27,148
10,061
(8,495)
19,665
18,099
8,732
(8,688)
(616)
57,617
24,151
(8,495)
916
58,189
41,617
Motor
Vehicles
$’000
192,445
151,317
149,618
8,600
76,073
(9,149)
(11,951)
470,992
67,179
(31)
(153)
234
407,419
340,190
10,776
111,735
(8,897)
(8,913)
663,437
70,495
(2,836)
(31)
1,300
558,736
489,808
Computer
Equipment
$’000
6,062
131,564
(5,061)
31,708
1,006,380
515,294
90,579
(194)
153
24,441
842,107
211,834
447,752
Equipment,
Furniture and
Fittings
$’000
704,712
220,178
(8,720)
33,273
1,695,634
746,191
11,675
22,451
109,486
465,017
32,724
(11,220)
(52,863)
49,188
55,127
1,516,794 4,026,863
792,397
50,957
2,836
(4,697)
35,696
1,324,941
14,662
285,636
(35,639)
32,882
1,993,175
1,144,403
311,589
(17,797)
56,609
3,537,131
2,042,327
Total
$’000
The Group
18,504
121,902
209,162
202,207
70,524
510,414 2,033,688
482,834 1,841,497
235,918 1,296,136
1,091,198
966,615
816,558
138
NOTES TO THE
JMMBGL PROSPECTUS
NOTES TO THE
20.
Property, Plant and Equipment (Continued)
The Company
Freehold
Land and
Buildings
$’000
Leasehold
Improvement
$’000
Motor
Vehicles
$’000
Equipment,
Computer Furniture and
Equipment
Fittings
$’000
$’000
828,420
72,595
901,015
141,480
(6,775)
1,035,720
101,013
101,013
101,013
38,461
23,984
(2,931)
59,514
59,514
476,556
68,203
544,759
56,313
601,072
378,413
24,495
(2,499)
400,409
46,314
446,723
1,822,863
189,277
(5,430)
2,006,710
244,107
(6,775)
2,244,042
83,190
14,088
97,278
14,775
112,053
75,866
7,269
83,135
8,581
91,716
23,403
7,681
(2,927)
28,157
9,331
37,488
323,526
64,743
388,269
71,750
460,019
191,896
31,330
223,226
31,927
255,153
697,881
125,111
(2,927)
820,065
136,364
956,429
923,667
803,737
745,230
9,297
17,878
25,147
22,026
31,357
15,058
141,053
156,490
153,030
191,570
177,183
186,517
1,287,613
1,186,645
1,124,982
Total
$’000
Cost
31 March 2013
Additions
Disposals
31 March 2014
Additions
Disposals
31 March 2015
Accumulated Depreciation
31 March 2013
Charge for the year
Disposals
31 March 2014
Charge for the year
31 March 2015
Net Book Value
31 March 2015
31 March 2014
31 March 2013
21. Deferred Income Taxes
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current income tax
assets against current income tax liabilities and when the deferred income tax assets and liabilities relate to income tax
levied by the same fiscal authority on either the taxable entity or a different taxable entity where there is an intention to
settle the balances on the net basis.
Deferred income tax is calculated in full on temporary differences under the liability method using a principal tax rate of
33 1/3% as deferred tax is currently applicable only to the jurisdiction that apply this rate.
139
NOTES TO THE
21. Deferred Income Taxes (Continued)
Deferred tax assets and liabilities recognised on the statement of financial position are as follows:
The Group
Deferred income tax assets
Net deferred income tax liabilities
2014
$’000
150,384
(627,360)
(476,976)
The Company
2015
2014
$’000
$’000
(663,212)
(593,093)
(663,212)
(593,093)
2014
$’000
(88,747)
(14,457)
(230,333)
(142,660)
(779)
(476,976)
The Company
2015
2014
$’000
$’000
(593,093)
(531,493)
116,177
(158,280)
(186,296)
96,680
(663,212)
(593,093)
2015
$’000
38,933
(682,307)
(643,374)
The movement in the net deferred income tax balance is as follows:
The Group
Net balance at beginning of year
Deferred tax acquired on acquisition
(Charge)/credited to profit or loss (Note 9)
Charged to other comprehensive income
Net balance at end of year
2015
$’000
(476,976)
216,026
(381,672)
(752)
(643,374)
Deferred income tax assets and deferred income liabilities are due to the following items:
The Group
Deferred income tax assets Investments
Other payables
Interest payable
Tax losses carried forward
Deferred income tax liabilities Investments
Unrealised foreign exchange gains
Interest receivable
Net deferred income tax liabilities
140
The Company
2015
2014
$’000
$’000
2015
$’000
2014
$’000
680,406
9,893
102
372,369
125,517
1,188,287
822,452
12,894
106
348,436
391,448
1,575,336
670,482
9,186
306,496
986,164
723,146
12,279
284,486
295,122
1,315,033
121,100
1,152,433
14,332
543,796
1,831,661
(643,374)
41,075
1,412,989
15,051
583,197
2,052,312
(476,976)
1,150,376
5,594
493,406
1,649,376
(663,212)
1,409,078
7,552
491,496
1,908,126
(593,093)
JMMBGL PROSPECTUS
NOTES TO THE
22. Share Capital
Authorised:
Ordinary stock units of no par value
Fixed rate cumulative redeemable preference shares of no par
Issued ordinary share capital:
Ordinary stock units in issue
2015
Number of
Shares
$’000
2014
Number of
Shares
$’000
1,816,400
4,000,000
5,816,400
1,816,400
4,000,000
5,816,400
2015
Number of
Shares
$’000
2014
Number of
Shares
$’000
1,630,552
1,630,552
2015
$’000
2014
$’000
Stated capital:
1,630,552,530 ordinary stock units
Less redeemable preference stock units required by IFRS to
be accounted for as liabilities in the financial statements
1,850,279
2,667,219
92,127
1,430,964
38,395
6,078,984
1,850,279
2,667,219
92,127
1,430,964
38,395
6,078,984
(4,228,705)
1,850,279
(4,228,705)
1,850,279
During August 2013, the company issued, 715,482,000 7.50% fixed rate cumulative redeemable preference shares and
15,358,000 7.25% fixed rate cumulative redeemable preference shares at a price of $2.00 and $2.50 per share, respectively, to
the public by public offering.
141
NOTES TO THE
22. Share Capital (Continued)
The holders of ordinary stock units are entitled to receive dividends as declared from time to time and are entitled to
one vote per share at Annual General meetings of the Company.
The significant terms and conditions of the preference stock units are as follows:
(i) The right to a cumulative preferential dividend payable monthly at the rate agreed for each class;
(ii) The right, on winding up, to receive all arrears of dividend and repayment of the capital in priority to the ordinary
shareholders;
(iii) No right to vote except where dividends are not paid for twelve months or on winding up of the Company.
The rights attaching to the ordinary shares include the following:
(i) Entitlement of dividends as declared from time to time (Note 11)
(ii) Entitlement to one vote per share at meetings of the Company
23. Retained Earnings Reserve
(a)
Retained Earnings Reserve
In previous years, in accordance with a board resolution, the Company transferred a portion of its profit after tax
to a non-distributable retained earnings reserve. This reserve constitutes a part of the Company’s capital base in
determining the capital adequacy ratio.
(b)
Investment Revaluation Reserve
The investment revaluation reserve comprises the cumulative net change in the fair value of available-for-sale
financial assets until the assets are derecognized or impaired.
(c)
Cumulative Translation Reserve
The cumulative translation reserve comprises all foreign currency differences arising from the translation of the
financial statements of foreign operations.
142
JMMBGL PROSPECTUS
NOTES TO THE
24. Securities Sold Under Agreements to Repurchase
The Group
Denominated in Jamaica dollars
Denominated in United States dollars
Denominated in Pound Sterling
Denominated in Euro
Denominated in Dominican Republic Peso
Denominated in Canadian dollars
Denominated in Trininad and Tobago dollars
2015
$’000
44,034,480
89,252,857
3,094,179
129,492
7,032,692
579,226
378,732
144,501,658
2014
$’000
42,725,093
85,841,109
3,425,236
255,037
10,528,260
527,690
143,302,425
The Company
2015
2014
$’000
$’000
44,554,761
42,822,963
71,172,323
69,433,419
3,094,179
3,425,236
129,492
255,037
579,226
527,690
119,529,981
116,464,345
Repurchase agreements are collateralised by certain securities and other instruments held by the Group and the company
with a carrying value of $153,455,379,000 (2014: $148,776,000) and $120,588,082,000 (2014: $117,590,300,000), respectively,
(Notes 12, 15 and 16).
Repurchase agreements include balances with related parties as set out in Note 26. Certain of the securities described in Note
16 and interest accrued thereon are pledged as security for these repurchase agreements.
25.
Notes Payable
The Group
(i)
(ii)
(iii)
Senior Unsecured US$ Fixed Note
Capital and Credit Financial Group Limited
7% promissory note
Subordinated debt
2015
$’000
2,295,400
2014
$’000
-
2015
$’000
2,295,400
The Company
2014
$’000
-
1,348,984
3,644,384
-
75,464
2,370,864
75,464
75,464
(i)
This note is unsecured and bears interest at 6.75% per annum, with interest payable on quarterly basis. The note
matures July 18, 2016; however, noteholders have an option to either redeem their notes on the maturity date or
extend the maturity to July 18, 2019 at an interest rate of 7.75% per annum.
(ii)
This promissory note is unsecured, bears interest at 7% per annum and repayable 31 May 2015.
(iii)
This represent subordinated debt of TT$80 million issued by subsidiary during the financial year for a term of eight
(8) years, maturing on 28 March 2022, at a fixed rate of 4.5% per annum.
143
NOTES TO THE
26. Related Party Transactions and Balances
Parties are considered to be related if one party has the ability to control or exercise significant influence over the other
party in making financial or operational decisions.
Related companies include ultimate parent company, parent company, fellow subsidiaries and associated company.
Related parties include directors, key management and companies for which the Group provides management services.
(i) The statement of financial position includes balances, arising in the normal course of business, with related parties,
as follows:
The Group
2015
2014
$’000
$’000
DirectorsNotes receivable
Interest payable
Customer deposits
Major shareholders Notes receivable
Interest payable
Subsidiaries Resale agreements
Notes receivable
Interest receivable
Accounts receivable
Notes payable
Interest payable
Accounts payable
144
The Company
2015
2014
$’000
$’000
109,277
(439)
(126,159)
(105,422)
34,753
(639)
(68,304)
(185,173)
36,001
(387)
(105,422)
14,463
(587)
(185,173)
324,037
(190)
(33,612)
324,037
(29)
(14,197)
324,037
(190)
(33,612)
324,037
(29)
(14,197)
-
-
14,620,616
624,558
17,081
1,594,798
(3,541,875)
(75,464)
(9,901)
(1,594,798)
12,966,422
209,636
11,187
(350,520)
(75,464)
(1,615)
-
JMMBGL PROSPECTUS
NOTES TO THE
26. Related Party Transactions and Balances (Continued)
(ii) The income statement includes the following income earned from, and expenses incurred in, transactions with
related parties, in the ordinary course of business:
The Group
DirectorsInterest income
Interest expense
Major Shareholders Interest income
Interest expense
Subsidiaries Interest income
Interest expense
Managed funds
Gain on sale of securities
(iii)
The Company
2015
2014
$’000
$’000
2015
$’000
2014
$’000
9,761
(7,862)
4,732
(6,002)
1,526
(5,614)
646
(4,836)
1,829
(15,197)
4,141
(582)
1,829
(15,197)
4,141
(582)
-
-
490,469
(192,605)
417,020
(30,998)
451,400
591,180
451,400
591,180
Key management personnel are those persons having authority and responsibility for planning, directing
and controlling the activities of the Group, directly or indirectly. Such persons comprise the directors, senior
management of the company and company secretary. The compensation paid or payable to key management for
employee services is as shown below:
The Group
Directors emoluments:
Fees (Note 6)
Management remuneration
Key management compensation:
Short-term employee benefits (Note 6)
Post-employment benefits
The Company
2015
2014
$’000
$’000
2015
$’000
2014
$’000
107,466
52,216
61,357
43,932
40,739
52,216
29,741
43,932
250,657
12,051
422,390
238,525
11,081
354,895
171,499
11,147
275,601
130,768
10,247
214,688
145
NOTES TO THE
27. Business Combinations
Acquisition of AIC Securities Limited (AIC)
On 30 April 2014, JMMB Investments (Trinidad and Tobago) Limited, a 100% owned subsidiary, acquired 100% equity of
AIC Securities Limited for TT$5.21 million (J$89.97 million).
Valuations of acquired tangible and intangible assets are now finalised. Details of the provisional purchase price
allocation among net assets acquired and goodwill are as follows:
Purchase consideration
Negative goodwill
$'000
89,977
(109,240)
(19,263)
Investment and resale agreements
Intangible assets
Property, plant and equipment and intangible assets
Accounts receivable
Taxation payable
Accounts payable
Net assets
Cash consideration
Net cash outflow on acquisition
Fair
Value
$'000
77,786
97,399
19,263
7,790
23
33,785
(17)
(126,789)
109,240
(89,977)
77,786
(12,191)
In the eleven month period ended 31 March 2015, AIC Securities Limited contributed revenue of J$37,999,000 and net profit
of J$4,206,000 to the Group’s results. If the acquisition had occured on the 1 April 2014, management estimates that revenue
would have been J$40,520,000, and net profit for the year would have been J$1,681,000. In determining these amounts
management has assumed that the fair value adjustments, determined previously, that arose on the acquisition date would
have been the same if the acquisition had occurred on the 1 April 2014.
146
JMMBGL PROSPECTUS
NOTES TO THE
27. Business Combinations (Continued)
Acquisition of Intercommercial Bank Limited
On 3 October 2013, the company acquired the remaining 50% of the share capital of Intercommercial Bank Limited (IBL) for
US$8,750,000; IBL thereby became a 100% subsidiary of the JMMB Group.
Valuations of acquired tangible and intangible assets are now finalised. Details of the purchase price allocation among net
assets acquired and goodwill are as follows:
Purchase consideration
Fair value of JMMB’s 50% shareholding
Total consideration paid
Negative goodwill
$'000
916,038
855,530
1,771,568
(2,133,225)
(361,657)
Loans and notes receivable, net of provisions
Deferred tax assets
Intangible assets
Accounts receivable
Deferred tax liability
Deposits
Accounts payable
Net assets
Cash consideration
Net cash inflow on acquisition
Fair
Value
$'000
9,813,551
1,468,993
13,194,167
9,117
439,691
516,076
27,009
339,404
(23,573)
(23,201,035)
(450,175)
2,133,225
916,038
(9,813,551)
(8,897,513)
147
NOTES TO THE
27. Business Combinations (Continued)
Loans and notes receivable are stated after IFRS provisions of J$228,352,000.
In the six month period ended 31 March 2014, Intercommercial Bank Limited contributed revenue of J$794,210,000
and net profit of J$156,445,000 to the Group’s results. If the acquisition had occur on the 1 April 2013, management
estimates that revenue would have been J$1,436,439,000, and net profit for the year would have been J$106,459,000.
In determining these amounts management has assumed that the fair value adjustments, determined previously, that
arose on the acquisition date would have been the same if the acquisition had occurred on the 1 April 2013.
28. Financial Risk Management
A financial instrument is any contract that gives rise to a financial asset of one enterprise and financial liability or equity
instrument of another enterprise.
(a) Introduction and overview
The Group has exposure to the following risks from its use of financial instruments:
• Credit risk
• Liquidity risk
• Market risk
• Operational risk
Risk management framework
The risks are managed through an established risk management framework for the Group, which involves the analysis,
evaluation, acceptance and management of some degree of risk or combination of risks. Taking risk is core to the financial
business, and the operational risks are an inevitable consequence of being in business. The Group’s aim is therefore to
achieve an appropriate balance between risk and return and minimise potential adverse effects on the Group’s financial
performance.
The Group’s risk management policies are designed to identify and analyse these risks, to set appropriate risk limits and
controls, and to monitor the risks and adherence to limits by means of reliable and up-to-date information systems. The
Group regularly reviews its risk management policies and systems to reflect changes in markets, products and emerging
best practice.
The Board of Directors is ultimately responsible for the establishment and oversight of the Group’s risk management
framework. The Board has established committees/departments for managing and monitoring risks, as follows:
(i)
148
Risk Management Committee
The Risk Management Committee is a Board Committee responsible for the supervision of the overall risk
management functions of the Group. The committee decides the policies and strategy for integrated risk
management of the various risk exposures of the Group.
JMMBGL PROSPECTUS
NOTES TO THE
28. Financial Risk Management (Continued)
Risk management framework (continued)
(ii)
Board Credit Committee
The Board Credit Committee is responsible for approving all credit requests above a specified threshold and
ensuring that all lending facilities conform to standards agreed by the Board and embodied in Credit Risk
Policy. The committee is ultimately responsible for determining the composition and management of the credit
portfolio and has available a number of measures it can employ in this respect including the making of specific
and general provisions against actual or potential bad debts. The committee is supported in its work by the
Management Credit Committee.
(iii)
Audit Committee
The Audit Committee monitors the quality of the Group’s internal controls and compliance with regulatory
requirements. The Audit Committee is assisted in its oversight role by the Internal Audit Function and the Risk
Management unit and Compliance Unit. Internal Audit undertakes both regular and ad hoc reviews of the risk
management controls and procedures, the results of which are reported quarterly to the Audit Committee.
The management of certain specific aspects of operational risk, such as fraud, is also within the purview of the
Audit Committee.
(iv)
Investment Committee
The Investment Committee is a senior management level committee responsible for the management of market
risks. The committee monitors the composition of assets and liabilities, evaluates potential market risk involved
in launching new products, reviews and articulates funding policy and decides optimal ways of managing the
Group’s liquidity.
(b)
Credit risk
The Group assumes credit risk, which is the risk that its customers or counterparties will cause a financial loss for
the Group by failing to discharge their contractual obligations. Credit exposures arise principally in lending and
investment activities. The Group structures the levels of credit risk it undertakes by placing limits on the amount
of risk accepted in relation to a single counterparty, or groups of related counterparties and to geographical and
industry segments.
Credit review process
The Group has established a credit quality review process involving regular analysis of the ability of borrowers
and other counterparties to meet interest and capital repayment obligations.
149
NOTES TO THE
(b) Credit risk (continued)
(i)
The Group assesses the probability of default of individual counterparties using internal ratings. Clients of the
Group are segmented into rating classes. The Group’s rating scale, which is shown below, reflects the range of
default probabilities defined for each rating class.
Group’s internal rating scale:
Rating grades
1
2
3
4
5
6
7
Description of the grade
Excellent
Good credit
Average credit
Acceptable
Marginal
Substandard
Doubtful
Exposure to credit risk is managed in part by obtaining collateral and corporate and personal guarantees. Counterparty
limits are established by the use of a credit classification system, which assigns each counterparty a risk rating. Risk
ratings are subject to regular revision. The credit quality review process allows the Group to assess the potential loss
as a result of the risk to which it is exposed and to take corrective action.
Loan and notes receivable that are cash secured are not included in a credit classification, based on the Group’s rating
grades.
(ii)
Investments and resale agreements
The Group limits its exposure to credit risk by investing in liquid securities and with counterparties that have
high credit quality. As a consequence, management’s expectation of default is low.
The Group has documented investment policies which facilitate the management of credit risk on investment
securities and resale agreements. The Group’s exposure and the credit ratings of its counterparties are
continually monitored.
(iii)
150
Cash and cash equivalents are held in financial institutions which management regards as strong and there is
no significant concentration. The strength of these financial institutions is constantly reviewed by the Credit
and Risk Management Committees.
JMMBGL PROSPECTUS
NOTES TO THE
(b)
Credit risk (continued)
Collateral and other credit enhancements
The amount and type of collateral required depends on an assessment of the credit risk of the counterparty.
Guidelines are implemented regarding the acceptability of different types of collateral.
The main types of collateral obtained are as follows:
Notes receivable – Cash and other near cash securities, mortgages over commercial and residential properties,
charges over general business assets such as premises, equipment, inventory, accounts receivable, marketable
securities and motor vehicles.
Resale agreements – Government of Jamaica securities and Bank of Jamaica securities. The collateral obtained
(including accrued interest) is at least 100% of the sum of the principal value of the resale agreement plus
interest to be earned.
Management monitors the market value of collateral held and where necessary requests additional collateral
in accordance with the underlying agreement.
Exposure to credit risk
Impairment
The main considerations for the loans and notes receivable impairment assessment include arrears of principal,
or interest overdue by more than 90 days, or whether there are any known difficulties in the cash flows of
counterparties, credit rating downgrades, or infringement of the original terms of the contract.
The Group addresses impairment assessment by reviewing all loans and notes receivable with risk ratings of
5 and above.
Individually assessed allowances are provided for financial assets based on a review conducted at least
annually, or more regularly, when individual circumstances require. Impairment allowances on individually
assessed accounts are determined by an evaluation of the incurred loss at the reporting date on a case-bycase basis, and are applied to all accounts. The assessment normally encompasses collateral held and the
anticipated receipts for that individual account.
The internal rating tool assists management to determine whether objective evidence of impairment exists,
based on the following criteria set out by the Group:
• Delinquency in contractual payments of principal or interest;
• Cash flow difficulties experienced by the borrower (e.g. equity ratio, net income percentage of sales);
• Breach of loan covenants or conditions;
• Initiation of bankruptcy proceedings;
• Deterioration of the borrower’s competitive position; and
• Deterioration in the value of collateral.
151
NOTES TO THE
Maximum exposure to credit risk before collateral held or other credit enhancements
The maximum credit exposure, that is, the amount of loss that would be suffered if every counter-party to the
Group’s financial assets were to default at once, is represented as follows:
(1)
For financial assets recognised at the reporting date:
The carrying amounts of financial assets as shown on the statement of financial position.
(2)
For financial assets not recognised at the reporting date:
Loan commitments
Guarantees and letters of credit
The Group
2015
2015
$’000
$’000
2,267,955
2,405,817
77,274
349,438
2,345,229
2,755,255
The Company
2015
2014
$’000
$’000
-
Loans and notes receivable, other receivables and investment securities
(i)
Financial assets – individually impaired
Financial assets that are individually impaired before taking into consideration the cash flows from collateral held are as
follows:
The Group and Company
2015
2014
$’000
$’000
(ii)
1,086,773
901,124
Full provision has been made for financial assets that are individually impaired.
The fair value of the collateral that the Group and company held as security for individually impaired loans and
notes receivable was $1,073,542,000 (2014: $1,623,118,000).
There are no financial assets other than loans and notes receivable and other receivables that were individually
impaired.
(iii)
152
Financial assets that are past due but not impaired amount to $1,898,560,000 (2014: $1,626,756,000) for the
Group and company.
JMMBGL PROSPECTUS
NOTES TO THE
(b)
(iv) Repossessed properties are sold as soon as practicable with the proceeds used to reduce the outstanding
indebtedness. The Group does not occupy repossessed properties for business or other use.
The carrying value of the loans on which the collateral was repossessed during the year was $10,380,000
(2014: $4,160,000).
(v)
Renegotiated loans and leases
Restructuring activities include extended payment arrangements, approved external management plans,
modification and deferral of payments. Following restructuring, a previously overdue customer account
is reset to a normal status and managed together with other similar accounts. Restructuring policies and
practices are based on indicators or criteria which, in the judgment of management, indicate that payment
will most likely continue. These policies are kept under continual review.
There are no loans, that would otherwise be past due or impaired, whose terms have been negotiated.
(vi)
The Group monitors concentrations of credit risk by sector and by geographic location. An analysis of
concentrations of credit risk at the reporting date is shown below:
The Group
2015
Cash and
Carrying amounts
Loans and
cash
notes
Resale
equivalents
receivable
agreements
Investments
Total
$’000
$’000
$’000
$’000
$’000
18,672,388
31,924,543
272,596
157,226,757
208,096,284
-
-
-
107,022,013
107,022,013
Concentration by sector
Government of Jamaica
Bank of Jamaica
Corporate bonds
Retail
-
-
-
4,821,519
4,821,519
2,384,354
-
-
11,627,701
14,012,054
-
10,356,563
-
14,494,645
24,851,208
16,288,034
9,067,248
272,596
19,260,880
44,888,758
-
12,500,732
-
-
12,500,732
18,672,388
31,924,543
272,596
157,226,757
208,096,284
150,766,735
Concentration by location
Jamaica
6,114,941
15,040,060
272,596
129,339,138
North America
2,593,080
-
-
943
2,594,023
Trinidad and Tobago
9,964,367
16,884,483
-
6,758,438
33,607,288
-
-
-
21,128,238
21,128,238
18,672,388
31,924,543
272,596
157,226,757
208,096,284
Other
153
NOTES TO THE
(b)
The Group
2014
Carrying amounts
Cash and
Loans and
cash
notes
Resale
Investment
equivalents
receivable
agreements
securities
Total
$’000
$’000
$’000
$’000
$’000
23,326,420
26,551,175
652,986
145,777,726
196,308,307
-
-
-
112,560,915
112,560,915
-
-
285,968
19,813,116
20,099,084
Bank of Jamaica
-
-
367,018
2,905,791
3,272,809
Corporate bonds
-
13,655,273
-
8,663,196
22,318,469
23,326,420
2,768,154
-
1,834,708
27,929,282
-
10,127,748
-
-
10,127,748
23,326,420
26,551,175
652,986
145,777,726
196,308,307
9,025,243
12,768,047
524,227
139,606,176
161,923,693
525,224
13,114
-
-
538,338
12,970,887
13,770,014
128,759
2,651,744
29,521,404
805,066
-
-
3,519,806
4,324,872
23,326,420
26,551,175
652,986
145,777,726
196,308,307
Retail
Jamaica
North America
Trinidad and Tobago
Other
154
JMMBGL PROSPECTUS
NOTES TO THE
(b)
The Company
2015
Cash and
Loans and
cash
notes
Resale
Investment
equivalents
receivable
agreements
securities
Total
$’000
$’000
$’000
$’000
$’000
4,801,893
4,406,134
13,294,476
106,000,797
128,503,300
-
-
-
93,824,125
93,824,125
Sovereign bonds
-
-
-
198,587
198,587
1,266,360
-
-
10,830,897
12,097,257
-
1,199,684
-
684,294
1,883,978
3,535,533
567,017
13,294,476
462,894
17,859,920
-
2,639,433
-
-
2,639,433
4,801,893
4,406,134
13,294,476
106,000,797
128,503,300
4,258,590
4,406,134
13,294,476
105,174,732
127,133,932
North America
280,501
-
-
943
281,444
Trinidad and Tobago
262,802
-
-
67,957
330,759
-
-
-
757,165
757,165
4,801,893
4,406,134
13,294,476
106,000,797
128,503,300
Carrying amounts
Bank of Jamaica
Corporate
Retail
Jamaica
Other
155
NOTES TO THE
(b)
The Company
2014
Carrying amounts
Cash and
Loans and
cash
notes
Resale
Investment
equivalents
receivable
agreements
securities
Total
$’000
$’000
$’000
$’000
$’000
7,463,523
3,468,014
13,522,982
97,776,242
122,230,761
88,636,669
-
-
-
88,636,669
Sovereign bonds
-
-
-
628,973
628,973
Bank of Jamaica
-
-
-
2,515,739
2,515,739
Corporate
-
1,051,194
-
5,435,291
6,486,485
7,463,523
209,636
13,522,982
559,570
21,755,711
-
2,207,184
-
-
2,207,184
7,463,523
3,468,014
13,522,982
97,776,242
122,230,761
6,857,333
3,468,014
13,522,982
94,128,480
117,976,809
520,303
-
-
-
520,303
85,887
-
-
127,956
213,843
-
-
-
3,519,806
3,519,806
7,463,523
3,468,014
13,522,982
97,776,242
122,230,761
Retail
Jamaica
North America
Trinidad and Tobago
Other
Collateral and other credit enhancements held against financial assets
The Group holds collateral against loans and advances to customers and others in the form of mortgage interests over
property, other registered securities over other assets, and guarantees. Estimates of fair value are based on the value of
collateral assessed at the time of borrowing, and generally are not updated except when a loan is individually assessed
as impaired. Collateral generally is not held over balances with banks or broker/dealers, except when securities are held
under resale agreements. Collateral is generally not held against investment securities, and no such collateral was held
at the reporting date (2014: no collateral held).
156
32,703
305,504
-
Total
Subtotal
39,749,746
1,167,184
40,754
342,118
Liens on motor vehicles
784,312
Other
Property
Debt securities
impaired financial assets:
Against past due and
2,642,715
373,040
1,931,468
Subtotal
6,714,775
169,392
1,660,939
1,639,008
13,901,303
3,367,567
31,419,769
1,725,204
384,529
34,066
1,306,609
-
2,241,581
362,099
252,953
1,605,033
21,496
35,939,847 27,452,984
8,051,983
Other
Property
Cash secured
Against past due but not
Subtotal
Other
188,889
2,206,460
Equities
2,614,018
Debt securities
19,300,979
3,577,518
294,036
-
-
-
-
-
-
-
-
-
-
294,036
-
-
-
294,036
-
-
$’000
2015
3,497,987
-
-
-
-
-
-
-
-
-
-
3,497,987
-
-
-
3,497,987
-
-
$’000
2014
Resale agreements
2015
2014
$’000
-
-
-
29,407
789,517
-
102,086
-
6,100
95,986
39,190
-
19,527
19,663
4,781,969 3,670,738
93,642
-
10,250
83,392
-
32,694
-
22,422
10,272
-
4,655,633 3,529,462
-
-
8,632
1,802,592
3,660
2,840,749 2,710,538
$’000
-
The Company
Loans and notes
receivable
2014
-
-
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
15,911,514 13,756,305
-
-
-
-
-
-
-
-
-
-
15,911,514 13,756,305
-
-
-
15,911,514 13,756,305
-
-
$’000
2015
Resale agreements
NOTES TO THE
Property
Cash secured
Against neither past due nor
2014
$’000
2015
$’000
Loans and notes
receivable
The Group
loans to borrowers and others is shown below:
An estimate, made at the time of borrowing, of the fair value of collateral and other security enhancements held against
JMMBGL PROSPECTUS
157
NOTES TO THE
(c)
Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its payment obligations associated with its financial
liabilities when they fall due and to replace funds when they are withdrawn. The consequence may be the failure
to meet obligations to repay depositors and fulfil commitments to lend.
The Group is exposed to daily calls on its available cash resources from overnight placement of funds, maturing
placement of funds and loan draw-downs. The Group does not maintain cash resources to meet all of these needs
as experience shows that a minimum level of investment of maturing funds can be predicted with a high level of
certainty.
The Group’s approach to managing liquidity is to ensure, as far as possible, that it has sufficient liquidity to meet
its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or
risking damages to the Group’s reputation.
Liquidity risk management process
The Group’s liquidity management process includes:
(i)
Monitoring future cash flows and liquidity on a daily basis. This incorporates an assessment of expected cash
flows and the availability of high grade collateral which could be used to secure funding if required;
(ii)
Maintaining a portfolio of highly marketable and diverse assets that can easily be liquidated as protection
against any unforeseen interruption to cash flow;
(iii) Optimising cash returns on investments;
(iv) Managing the concentration and profile of debt maturities.
Monitoring and reporting take the form of cash flow measurement and projections for the next day, week and
month, respectively, as these are key periods for liquidity management. The starting point for those projections is
an analysis of the contractual maturity of the financial liabilities and the expected collection date of the financial
assets.
The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing liabilities
as they mature, are important factors in assessing the liquidity of the Group and its exposure to changes in
interest rates and exchange rates.
158
JMMBGL PROSPECTUS
NOTES TO THE
(c)
Liquidity risk (continued)
The tables below present the residual contractual maturities of undiscounted cash flows (both interest and
principal cash flows) of the Group’s and the company’s financial liabilities.
2015
The Group
Within 3
Months
3 to 12
Months
1 to 5
Years
Contractual
Cash flow
Carrying
Amount
$’000
$’000
$’000
$’000
$’000
Customer deposits
10,845,973
15,115,275
14,682,905
40,644,153
38,463,504
Due to other banks
82,569
-
477,195
559,764
435,032
114,051,059
27,427,167
5,309,502
146,787,728
144,501,658
145,312
421,705
3,117,170
3,684,187
3,644,384
Financial Liabilities
Securities sold under agreements
to repurchase
Notes payable
Payables
-
-
4,256,259
4,256,259
4,228,705
2,362,486
-
-
2,362,486
2,362,486
127,487,399
42,964,147
27,843,031
198,294,577
193,635,769
2014
The Group
Within 3
Months
3 to 12
Months
1 to 5
Years
Contractual
Cash flow
Carrying
Amount
$’000
$’000
$’000
$’000
$’000
Customer deposits
7,802,039
17,178,729
11,376,997
36,357,765
35,887,750
Due to other banks
-
2,872
372,633
375,505
283,386
111,000,491
29,957,077
5,176,935
146,134,503
143,302,425
-
-
4,256,259
4,256,259
4,228,705
to repurchase
Payables
2,068,640
-
-
2,068,640
2,068,641
120,871,170
47,138,678
21,182,824
189,192,672
185,770,907
159
NOTES TO THE
(c)
Liquidity risk (continued)
2015
The Company
Within 3
Months
3 to 12
Months
1 to 5
Years
Contractual
Cash flow
Carrying
Amount
$’000
$’000
$’000
$’000
$’000
93,230,233
27,427,167
678,764
121,336,164
119,529,981
Notes payable
to repurchase
-
-
2,410,667
2,410,667
2,370,864
-
4,259,204
-
4,259,204
4,228,705
424,351
-
-
424,351
424,351
93,654,584
31,686,371
3,089,431
128,430,386
126,553,901
Payables
2014
The Company
Within 3
Months
3 to 12
Months
1 to 5
Years
Contractual
Cash flow
Carrying
Amount
$’000
$’000
$’000
$’000
$’000
116,464,345
90,241,628
27,728,772
437,062
118,407,462
Notes payable
to repurchase
-
77,063
-
77,063
75,464
-
-
4,256,259
4,256,259
4,228,705
369,121
-
-
369,121
369,121
90,610,749
27,805,835
4,693,321
123,109,905
121,137,635
Payables
160
JMMBGL PROSPECTUS
NOTES TO THE
(d)
Market risk
The Group assumes market risks, which are the changes in market prices, such as interest rates, equity prices,
foreign exchange rates and commodity prices, that will affect the Group’s income or fair value of its financial
instruments. The objective of market risk management is to manage and control market risk exposures within
acceptable parameters, while optimizing return on risk.
The overall responsibility for market risk management is vested in the Board Risk Management Committee. The
Risk Department is responsible for the development of detailed risk management policies (subject to review and
approval by the Board Risk Management Committee) and for the day-to-day review of their implementation.
The principal tool used to measure and control market risk exposures within the Group is Value at Risk (VaR). The
VaR of a portfolio is the estimated loss that will arise on the portfolio over a specified period of time (the holding
period) from an adverse market movement with a specified probability (confidence level). The VaR model used
by the Group is based on a 99 percent confidence level and assumes a 10 day holding period. The VaR model used
is based mainly on the Monte Carlo simulation model. Taking account of market data from the previous year
and observed relationships between differences in market prices, the model generates a wide range of plausible
future scenarios for market price movements.
Although VaR is an important tool for measuring market risk, the assumptions on which the model is based do give
rise to some limitations, including the following:
•
A 10 day holding period assumes that it is possible to hedge or dispose of positions within that period. This
is considered to be a reasonable assumption, but may not be the case in situations in which there is severe
market illiquidity for a prolonged period;
•
A 99% confidence level does not reflect losses that may occur beyond this level. Even within the model used,
there is a one percent probability that losses could exceed the VaR;
•
VaR is calculated on an end-of-day basis and does not reflect exposures that may arise on positions during the
trading day;
•
The use of historical data to determine the relationships between different market prices may not cover all
possible scenarios, as these relationships may break down in times of market stress;
•
The VaR Measure is dependent on the Group’s positions and volatility of market prices. The VaR of an unchanged
position reduces if the market prices volatility declines and vice-versa.
The Group uses VaR limits for its overall portfolio and for sub-portfolios. The overall structure of VaR limits is
subject to review and approval by the Board Risk Management Committee. VaR is measured at least once daily.
Daily reports of utilization of VaR limits are prepared by the Risk department and regular summaries submitted to
the Board Risk Management Committee.
161
NOTES TO THE
(d)
Market risk (continued)
A summary of the VaR position of the Group‘s overall portfolio as at 31 March 2015 and during the year then
ended is as follows:
2015 Overall VaR
2014 Overall VaR
31 March
$’000
2,125,891
4,279,539
Average for
Year
$’000
3,137,163
3,090,307
Maximum
during Year
$’000
8,839,834
12,733,451
Minimum
during Year
$’000
1,259,592
843,813
The limitations of the VaR methodology are recognised by supplementing VaR limits with other position and
sensitivity limit structures, including limits to address potential concentration of risks within the portfolio.
(i)
Currency risk
Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate
because of changes in foreign exchange rates.
The Group is exposed to foreign currency risk on transactions that it undertakes in foreign currencies
that give rise to the net currency gains and losses recognised during the year. Such exposures comprise
the assets and liabilities of the Group that are not denominated in its functional currency. The Group
ensures that the risk is kept to an acceptable level by monitoring its value at risk exposure.
At the reporting date, the Jamaica dollar equivalents of net foreign currency assets/(liabilities) were as
follows:
United States dollars
Great Britain pounds
Euros
Trinidad and Tobago dollars
Canadian dollars
Peso
162
The Group
2015
2014
$’000
$’000
(3,088,699)
(1,359,023)
202,528
(114,647)
64,781
63,292
281,300
133,764
(89,161)
-
The Company
2015
2014
$’000
$’000
3,524,224
113,273
190,856
(69,502)
60,181
16,148
281,300
133,764
(89,135)
367,761
330,894
Exchange rates
2015
2014
$’000
$’000
114.77
109.28
169.16
180.58
124.33
150.31
18.01
16.98
89.92
98.06
2.57
2.54
JMMBGL PROSPECTUS
NOTES TO THE
(d)
(i) Currency risk (continued)
Foreign currency sensitivity
The following tables indicate the currencies to which the Group and company had significant exposure on their
monetary assets and liabilities and their forecast cash flows. The change in currency rates below represents
management’s assessment of a reasonably possible change in foreign exchange rates at the reporting date:
Currency:
USD
GBP
EUR
CAD
TT$
Currency:
USD
GBP
EUR
PESO
CAD
TT$
Change in
Currency Rate
2015
%
Effect
on Profit
2015
$’000
5
5
5
5
5
(154,435)
10,126
3,329
(4,458)
14,065
(131,463)
Change in
Currency Rate
2015
%
Effect
on Profit
2015
$’000
5
5
5
5
5
5
176,211
9,543
3,009
18,388
(4,340)
14,065
216,876
The Group
Change in
Currency Rate
2014
%
Effect
on Profit
2014
$’000
5
5
5
5
5
(67,951)
(5,732)
3,165
6,688
(63,830)
The Company
Change in
Currency Rate
2014
%
5
5
5
5
5
5
Effect
on Profit
2014
$’000
5,664
(3,475)
807
16,545
6,688
26,229
163
NOTES TO THE
(d)
(ii) Interest rate risk
Interest rate risk is the risk that the value or future cash flows of a financial instrument will fluctuate because
of changes in market interest rates.
Floating rate instruments expose the Group to cash flow interest risk, whereas fixed interest rate
instruments expose the Group to fair value interest risk.
The following tables summarise the Group’s and the company’s exposure to interest rate risk to earnings.
It includes the Group’s and company’s financial instruments at carrying amounts, categorised by the
earlier of contractual repricing or maturity dates.
2015
The Group
Within 3
Months
3 to 6
Months
6 to 12
Months
$’000
$’000
$’000
1 to 5 Non interest
Years
Bearing
Total
$’000
$’000
$’000
At 31 March 2015:
Assets
18,672,388
-
-
-
-
18,672,388
3,904,342
17,291,371
1,557,683
7,080,862
2,090,285
31,924,543
-
-
-
272,596
Securities purchased under
agreements to resell
Total interest bearing assets
272,596
-
23,427,116
7,891,509
46,276,442
25,182,880
11,021,172
122,885,118
2,730,672 208,096,284
108,181,890
16,393,302
15,228,360
4,698,106
- 144,501,658
9,463,489 115,804,256
640,387 157,226,757
Liabilities
to repurchase
4,228,705
-
-
-
-
4,228,705
Notes payable
2,203,584
-
-
1,440,800
-
3,644,384
Due to other financial institutions
Deposits
Other
-
-
80,511
354,521
-
435,032
30,617,388
2,411,024
871,810
211,021
4,352,261
38,463,504
2,362,486
2,362,486
-
-
-
-
Total interest bearing liabilities
145,231,567
18,804,326
16,180,681
6,704,448
Total interest sensitivity gap
(98,955,125)
6,378,554
(5,159,509)
116,180,670
(3,984,075)
14,460,515
(98,955,125) (92,576,571) (97,736,080)
18,444,590
14,460,515
-
6,714,747 193,635,769
Cumulative interest
sensitivity gap
164
JMMBGL PROSPECTUS
NOTES TO THE
(d)
(ii) Interest rate risk (continued)
2014
The Group
Within 3
Months
3 to 6
Months
6 to 12
Months
$’000
$’000
$’000
1 to 5 Non interest
Years
Bearing
Total
$’000
$’000
$’000
At 31 March 2014:
Assets
23,326,420
-
-
-
-
23,326,420
6,289,435
12,422,157
743,242
7,096,341
-
26,551,175
652,986
-
-
-
-
652,986
145,777,726
2,242,522
3,709,793
5,609,342
134,216,069
-
32,511,363
16,131,950
6,352,584
141,312,410
- 196,308,307
110,100,160
17,843,905
11,073,842
4,284,518
- 143,302,425
4,228,705
-
-
-
-
-
2,768
-
280,618
-
283,386
31,540,915
2,080,209
-
2,266,626
-
35,887,750
Liabilities
to repurchase
Due to other financial institutions
Deposits
Other
4,228,705
-
-
-
-
2,068,641
2,068,641
145,869,780
19,926,882
11,073,842
6,831,762
2,068,641
185,770,907
(113,358,417)
(3,794,932)
(4,721,258)
134,480,648
(2,068,641)
10,537,400
(113,358,417) (117,153,349) (121,874,607)
12,606,041
10,537,400
-
Cumulative interest
sensitivity gap
165
NOTES TO THE
(d)
2015
The Company
Within 3
Months
3 to 6
Months
6 to 12
Months
1 to 5 Non interest
Years
Bearing
Total
$’000
$’000
$’000
$’000
$’000
$’000
4,801,893
-
-
-
-
4,801,893
3,747,363
48,198
610,573
-
-
4,406,134
13,294,476
-
-
-
-
13,294,476
At 31 March 2015:
Assets
22,206,388
1,417,820
5,703,792
76,371,203
301,594 106,000,797
44,050,120
1,466,018
6,314,365
76,371,203
301,594 128,503,300
Liabilities
Securities sold under
92,390,267
11,344,968
15,228,360
566,386
-
119,529,981
Notes payable
agreements to repurchase
2,370,864
-
-
-
-
2,370,864
4,228,705
-
-
-
-
4,228,705
-
-
-
-
424,351
424,351
98,989,836
11,344,968
15,228,360
566,386
424,351
126,553,901
(54,939,716)
(9,878,950)
(8,913,995)
75,804,817
(122,757)
1,949,399
(54,939,716) (64,818,666)
(73,732,661)
2,072,156
1,949,399
-
Other payables
Cumulative interest
sensitivity gap
166
JMMBGL PROSPECTUS
NOTES TO THE
(d)
(ii)
Interest rate risk (continued)
2014
The Company
Within 3
Months
3 to 6
Months
6 to 12
Months
1 to 5 Non interest
Years
Bearing
Total
$’000
$’000
$’000
$’000
$’000
$’000
At 31 March 2014:
Assets
7,463,523
-
-
-
-
7,463,523
2,867,115
256,259
344,640
-
-
3,468,014
13,522,982
-
-
-
-
13,522,982
97,776,242
25,603,448
50,271
3,618,693 68,401,091
102,739
49,457,068
306,530
3,963,333 68,401,091
102,739 122,230,761
89,358,615
15,681,451
11,073,842
350,437
75,464
-
-
-
4,228,705
-
-
-
-
-
93,662,784
15,681,451
11,073,842
(44,205,716)
(15,374,921)
Cumulative interest sensitivity gap
(44,205,716)
(59,580,637)
Liabilities
to repurchase
Notes payable
Other payables
- 116,464,345
-
75,464
-
-
4,228,705
-
369,121
369,121
350,437
369,121
121,137,635
(7,110,509) 68,050,654
(266,382)
1,093,126
1,093,126
-
(66,691,146)
1,359,508
-
167
NOTES TO THE
(d)
Interest rate sensitivity
The following table indicates the sensitivity to a reasonable possible change in interest rates, with all other
variables held constant, on the Group’s interest income in the profit and loss account and gains recognised in
other comprehensive income.
The sensitivity of the profit or loss is the effect of the assumed changes in interest rates on net profit based on
the floating rate financial assets and financial liabilities. The sensitivity of stockholders’ equity is calculated by
revaluing fixed rate available-for-sale financial assets for the gross effects of the assumed changes in interest
rates. The correlation of a number of variables will have an impact on market risk. It should be noted that
movements in these variables are non-linear and are assessed individually.
The Group
Effect
on Profit
2015
Effect
on Equity
2015
Effect
on Profit
2014
Effect
on Equity
2014
$’000
$’000
$’000
$’000
Change in basis points
JMD/USD
-100/-50
+ 250/+200
(245,879)
3,669,976
(444,300)
3,554,373
613,751
(10,386,868)
1,249,824
(10,056,533)
Effect
on Profit
2015
Effect
on Equity
2015
Effect
on Profit
2014
Effect
on Equity
2014
$’000
$’000
$’000
$’000
The Company
Change in basis points
JMD/USD
-100/-50
+ 250/+200
168
(212,293)
3,254,355
(390,461)
3,131,652
498,650
(8,793,639)
1,010,260
(7,704,336)
JMMBGL PROSPECTUS
NOTES TO THE
(d)
Equity price risk
Equity price risk arises on equity securities held by the Group as part of its investment portfolio. Management
monitors the mix of debt and equity securities in its investment portfolio based on market expectations. The
primary goal of the Group’s investment strategy is to maximize investment returns while managing risk so as
to minimize potential adverse effects on the Group’s financial performance.
The Group’s equity securities are listed on the Jamaica and Trinidad and Tobago Stock Exchanges. A 5% increase
or decrease in quoted bid prices at the reporting date would result in an increase or decrease, respectively, in
equity of $15,565,736 (2014: $9,669,886) for the Group and $5,217,867 (2014: $9,353,974) for the company.
169
NOTES TO THE
(e)
Operational risk
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the
Group’s processes, personnel, technology and infrastructure, and from external factors other than credit,
market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted
standards of corporate behaviour. Operational risks arise from all of the Group’s operations.
The Group’s objective is to manage operational risks so as to balance the avoidance of financial losses and
damage to the Group’s reputation with overall cost effectiveness and to avoid control procedures that restrict
initiative and creativity.
The primary responsibility for the development and implementation of controls to address operational risk is
assigned to senior management within each business unit. This responsibility is supported by the development
of overall standards for the management of operational risk in the following areas:
•
requirement for appropriate segregation of duties, including the independent authorisation of
transactions;
•
requirements for the reconciliation and monitoring of transactions;
•
compliance with regulatory and other legal requirements;
•
documentation of control and procedures;
•
requirement for the periodic assessment of operational risks faced, and the adequacy of controls and
procedures to address the risks indentified;
•
requirements for the reporting of operational losses and proposed remedial action;
•
development of a contingency plan;
•
risk mitigation, including insurance where this is effective.
Compliance with the Group’s standards is supported by a programme of periodic reviews undertaken by
Internal Audit. The results of internal audit reviews are discussed with the management of the business unit
to which they relate, with summaries submitted to senior management and the Audit Committee.
170
JMMBGL PROSPECTUS
NOTES TO THE
(f)
Capital management
The Group’s lead regulator, the Financial Services Commission (FSC), monitors the capital requirements for the
Group as a whole.
The objectives when managing capital, which is a broader concept than the ‘equity’ on the face of the statement
of financial position, are:
(i) To comply with the capital requirements set by the regulators of the financial markets where the entities
within the Group operate;
(ii) To safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns
for stockholders and benefits for other stakeholders; and
(iii) To maintain a strong capital base to support the development of its business.
Capital adequacy and the use of regulatory capital are monitored monthly by the Group’s management based
on the guidelines developed by the Financial Services Commission (FSC), Jamaica Stock Exchange (JSE) and
the Risk Management Unit. The required information is filed with the respective Regulatory Authorities at
stipulated intervals.
The regulated authorities requires each regulated entity to:
(i) Hold the minimum level of the regulatory capital; and
(ii) Maintain a minimum ratio of total regulatory capital to the risk-weighted assets.
The Group’s regulatory capital is divided into two tiers:
(i) Tier 1 capital: share capital, share premium, retained earnings, investment revaluation reserve and
cumulative translation reserve.
(ii) Tier 2 capital: redeemable preference shares and investment revaluation reserve.
The risk-weighted assets are determined according to specified requirements that seek to reflect the varying
levels of risk attached to assets and off-balance sheet exposures.
There have been no material changes in the Group’s management of capital during the period,
The regulated companies within the Group are: Jamaica Money Market Brokers Limited (JMMB), JMMB
Securities Limited (JMMBSL), JMMB Fund Managers (JMMBFM), JMMB Insurance Brokers Limited (JMMBIB),
JMMB Puesto de Bolsa, S.A, JMMB Merchant Bank Limited (JMMBMB) and Intercommercial Bank Limited (IBL),
Intercommercial Trust and Merchant bank Limited (ITMBL), JMMB Investment (Trinidad and Tobago) Limited
(JMMBTT) and AIC Securities Limited (AIC).
The table below summarises the composition of regulatory capital and the ratios of the regulated companies
within the Group for the years ended 31 March 2015 and 31 March 2014.
171
NOTES TO THE
(f)
Capital management (continued)
Tier 1 capital
Tier 2 capital
Total regulatory capital
Risk-weighted assets:
On-balance sheet
Foreign exchange exposure
Total risk-weighted assets
Actual regulatory capital to risk
weighted assets
Required regulatory capital to
risk weighted assets
Regulatory capital –
Tier 1 capital
Tier 2 capital
Total regulatory capital
Total required capital
Risk-weighted assets –
On statement of financial position
Of statement of financial position
Foreign exchange exposure
Actual regulatory capital to risk
weighted assets
Required regulatory capital to risk
weighted assets
172
JMMB
2015
J$’000
14,604,539
1,175,487
15,780,026
JMMB
2014
J$’000
14,125,307
2,021,228
16,146,535
JMMBSL
2015
J$’000
282
282
JMMBSL
2014
J$’000
220
39
259
JMMBIB
2015
J$’000
85,672
85,672
JMMBIB
2014
J$’000
82,908
82,908
107,386,100
4,427,356
111,813,456
94,660,502
594,078
95,254,580
302
133
435
174
164
338
-
-
14%
17%
65%
77%
-
-
10%
10%
10%
10%
-
-
ITMBL
2015
TT$’000
ITMBL
2014
TT$’000
IBL
2015
TT$’000
IBL
2014
TT$’000
JMMBMB
2015
J$’000
JMMBIB
2014
J$’000
23,036
304
23,340
22,389
369
22,758
109,125
72,358
181,483
106,059
11,017
117,076
-
-
-
39,698
39,698
46,179
46,179
59%
49%
20%
14%
17%
18%
10%
10%
10%
10%
10%
10%
915,240
915,240
-
840,006
840,006
4,581,869 4,541,939
81,256
62,521
4,663,125 4,604,460
2,687,184 2,547,666
24,629,073 22,456,448
1,403,279 1,525,902
839,489 1,694,308
26,871,841 25,676,658
JMMBGL PROSPECTUS
NOTES TO THE
(f)
Capital management (continued)
JMMBFM
2015
2014
$’000
$’000
Tier 1 capital
241,378
205,803
Tier 2 capital
-
-
241,378
205,803
23,392
16,139
167,085
115,258
145%
179%
Actual regulatory capital
Required level of regulatory capital
Total risk-weighted assets
Tier one capital ratio to total capital
The increase of the regulatory capital in 2015 for JMMBFM is mainly due to the contribution of the current period profit.
(i)
The capital requirement for JMMBIB is to maintain a minimum capital base of $10 million.
(ii)
The capital requirement for JMMB Puesto de Bolsa is RD$5 million plus other reserve which is 5% of liquid profits.
This subsidiary has exceeded all capital requirements.
(iii)
The capital requirement of JMMB Investments (Trinidad and Tobago) Limited and AIC Securities Limited is to
maintain a minimum capital base of TT$15 million and TT$5 million respectively.
The individually regulated entities within the Group have complied with all externally imposed capital requirements
throughout the year.
173
NOTES TO THE
29. Financial Instruments – Fair Value
(a)
Definition and measurement of fair values
The Group’s accounting policies on measurement and disclosure require the measurement of fair values for
financial assets and financial liabilities. Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date.
When measuring fair value of an asset or liability, where a quoted market price is available, fair value is computed
by the Group using the quoted bid price at the reporting date, without any deduction for transaction costs
or other adjustments. Where a quoted market price is not available, fair value is computed using alternative
techniques, making use of available input data; the Group uses observable data as far as possible. Fair values
are categorised into different levels in a three-level fair value hierarchy, based on the degree to which the
inputs used in the valuation techniques are observable. The different levels in the hierarchy have been defined
as follows:
Level 1 refers to financial assets and financial liabilities that are measured by reference to published quotes in
an active market. A financial instrument is regarded as quoted in an active market if quoted prices are readily
and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency
and those prices represent actual and regularly occurring market transactions on an arm's length basis.
Level 2 refers to financial assets and financial liabilities that are measured using a valuation technique based on
assumptions that are supported by prices from observable current market transactions, and for which pricing
is obtained via pricing services, but where prices have not been determined in an active market. This includes
financial assets with fair values based on broker quotes, investments in funds with fair values obtained via
fund managers, and assets that are valued using a model whereby the majority of assumptions are market
observable.
Level 3 refers to financial assets and financial liabilities that are measured using non-market observable inputs.
This means that fair values are determined in whole or in part using a valuation technique (model) based on
assumptions that are neither supported by prices from observable current market transactions in the same
instrument nor are they based on available market data.
There were no transfers between levels during the year.
174
JMMBGL PROSPECTUS
NOTES TO THE
29. Financial Instruments – Fair Value (Continued)
(b)
Techniques for measuring fair value of investment securities classified as Level 2
Type of Financial Instrument
Method of estimating fair value
Cash and cash equivalents, other receivables, resale
agreements, accounts payable, repurchase
agreements, Bank of Jamaica certificates of deposit
Considered to approximate their carrying values,
due to their short-term nature
Units in unit trusts
Prices quoted by unit trust managers
Non-Jamaican sovereign bonds and corporate
bonds
Estimated using bid-prices published by major
overseas brokers.
Traded overseas
Estimated using bid-prices published by major
overseas brokers.
Other
Estimated using mid-market prices using JSDA yield
curve.
Interest in money market fund
Considered to be the carrying value because of the
short term nature and variable interest rate.
Considered to be carrying value as the coupon rates
approximates the market rate.
Notes payable
Considered to be carrying value as the coupon rate
approximates the market rate.
(c)
Accounting classifications and fair values
The following table shows the classification of financial assets and financial liabilities and their carrying
amounts.
Where the carrying amounts of financial assets and financial liabilities are measured at fair value, their levels in
the fair value hierarchy\are also shown. Where the carrying amounts of financial assets and financial liabilities
are not measured at fair value, and those carrying amounts are a reasonable approximation of fair value, fair
value information (including amounts, and levels in the fair value hierarchy) is not disclosed.
175
Credit default swap
Certificate of Deposit
Securities
Ordinary share unquoted
Ordinary shares quoted
-
-
-
-
-
-
-
75,268
440,819
16,750,687
12,959,832
-
73,379,391
12,292,110
-
310,937
2,254,955
-
-
-
1,576,640
144,238
469,145
1,614
-
12,956
50,362
8,857,815
-
-
-
54,030
-
8,803,785
-
-
-
-
Held
to
maturity
$’000
-
-
-
-
-
-
-
-
-
-
-
Other
financial
liabilities
$’000
128,616,585
1,294,771
75,268
440,819
18,381,357
13,104,070
9,272,930
73,381,005
12,292,110
12,956
361,299
Total
$’000
2015
The Group
Corporate Bonds
-
1,294,771
At fair value
through
Available- profit & loss
account
for-sale
$’000
$’000
Foreign Government Securities
-
117,503,815
Level 1
$’000
361,299
-
-
-
-
-
-
-
-
-
9,272,930
73,381,005
12,292,110
12,956
-
-
-
-
-
-
-
-
$’000
18,381,357
13,104,070
9,272,930
73,381,005
12,292,110
12,956
361,299
Total
$’000
Level 3
13,104,070
75,268
440,819
Level 2
$’000
18,381,357
-
18,672,388
272,596
440,819
-
272,596
1,294,771
-
-
24,357,087
83,357
6,272,813
-
-
-
22,433,743
213,053
6,181,731
31,924,543
1,245,160
80,943,214
75,268
-
-
-
38,463,504
435,032
4,228,705
2,362,486
128,616,585
-
-
38,463,504
435,032
4,228,705
2,362,486
144,501,658
189,991,385
-
18,672,388
-
-
-
144,501,658
189,991,385
-
272,596
-
-
-
1,294,771
22,433,743
213,053
6,181,731
31,924,543
1,245,160
80,943,214
-
-
128,255,286
-
-
361,299
-
$’000
Money Market Funds
-
Loan and
receivables
Units in Unit Trust
-
Financial assets measured as
fair value
Other
Financial assets not measured
at fair value
Cash and cash equivalent
Security purchased under
agreement to resell
Securities
Sovereign
Corporate
Loans receivable
Other receivable
Financial liabilities not
measured at fair value
Customer deposits
Due to other banks
Other liabilities
to repurchase
176
NOTES TO THE
Customer deposits
Due to other banks
Other liabilities
to repurchase
-
-
-
25,969,157
195,887
6,184,948
26,551,175
1,927,206
84,807,779
-
-
652,986
-
-
65,231,606
14,024,803
18,376,802
513,926
80,253
834,899
102,495,362
-
23,326,420
219,550
3,213,523
-
-
-
-
-
-
-
593,812
663,456
213,954
922,313
2,589,394
182,903
12,956
-
-
-
-
-
-
8,207,138
135,840
8,342,978
-
Held-tomaturity
$’000
143,302,425
185,770,907
35,887,750
283,386
4,228,705
2,068,641
-
-
-
-
-
-
Other
financial
liabilities
$’000
2014
402,453
12,956
3,213,523
Total
$’000
143,302,425
185,770,907
35,887,750
283,386
4,228,705
2,068,641
25,969,157
195,887
6,184,948
26,551,175
1,927,206
84,807,779
652,986
23,326,420
65,825,418
663,456
22,445,895
19,434,955
513,926
80,253
834,899
113,427,734
The Group
402,453
402,453
-
Level 1
$’000
26,035,681
146,872
5,574,977
652,986
65,825,418
663,456
22,445,895
19,434,955
513,926
80,253
834,899
113,025,281
12,956
3,213,523
Level 2
$’000
-
-
$’000
Level 3
65,825,418
663,456
22,445,895
19,434,955
513,926
80,253
834,899
113,427,734
402,453
12,956
3,213,523
Total
$’000
NOTES TO THE
at fair value
agreement to resell
Securities
Sovereign
Corporate
Loans receivable
Other receivable
fair value
Ordinary share unquoted
Securities
Credit default swap
Corporate Bonds
Money Market Funds
Units in Unit Trust
Other
Loan and
receivables
$’000
At fair value
through
for-sale
account
$’000
$’000
JMMBGL PROSPECTUS
177
16,395,464
13,294,476
4,801,893
-
-
-
-
-
-
69,598,277
5,448,671
123,992
440,819
22,075
86,521,785
57,054
10,830,897
-
-
-
-
-
1,614
144,238
66,069
211,921
-
At fair value
through
for-sale
account
$’000
$’000
-
-
-
-
-
-
-
-
Held-tomaturity
$’000
119,529,981
126,553,901
2,370,864
4,228,705
424,351
-
-
-
-
-
-
Other
financial
liabilities
$’000
119,529,981
126,553,901
2,370,864
4,228,705
424,351
2,876,929
213,053
4,406,134
2,123,701
44,111,650
16,395,464
13,294,476
4,801,893
65,599,891
5,592,909
190,061
440,819
22,075
86,733,706
57,054
10,830,897
Total
$’000
57,054
57,054
-
Level 1
$’000
2,971,951
83,357
17,525,815
13,294,476
85,995,355
8,469,838
403,114
440,819
22,075
86,676,652
10,830,897
Level 2
$’000
-
-
85,995,355
8,469,838
403,114
440,819
22,075
86,733,706
57,054
10,830,897
2015
The Company
2,876,929
213,053
4,406,134
2,123,701
44,111,650
-
-
$’000
Total
$’000
-
-
Level 3
-
Loan and
receivables
$’000
fair value
Securities
Corporate Bonds
Money Market Funds
Unit in Unit Trust
at fair value
Cash and equivalent
agreement to resell
Securities
guarantee
Sovereign
Loans receivable
Other receivable
Notes payable
Other liabilities
to repurchase
178
NOTES TO THE
-
Money Market Funds
Notes payable
Other liabilities
to repurchase
at fair value
agreement to resell
Securities
guarantee
Sovereign
Other
Loans receivable
Other receivable
-
-
2,997,918
195,887
4,250
3,468,014
2,105,891
49,789,012
-
-
20,030,547
-
-
13,522,982
-
-
50,882
73,391,246
7,463,523
23,228,602
508,688
84,458
-
-
-
-
-
-
1,156,394
-
348,628
213,954
593,812
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Held-tomaturity
$’000
116,464,345
121,137,635
75,464
4,228,705
369,121
-
-
-
-
-
-
-
-
-
Other
financial
liabilities
$’000
2014
Total
$’000
116,464,345
121,137,635
75,464
4,228,705
369,121
2,997,918
195,887
4,250
3,468,014
2,105,891
49,789,012
20,030,547
13,522,982
7,463,523
50,882
74,547,640
508,688
433,086
9,797,016
61,190,372
51,857
2,515,739
The Company
51,857
-
-
-
-
-
51,857
-
Level 1
$’000
2,793,397
146,872
4,278
20,010,132
13,522,982
50,882
74,495,783
508,688
433,086
9,797,016
61,190,372
2,515,739
Level 2
$’000
-
-
-
-
-
-
$’000
Level 3
50,882
74,547,640
508,688
433,086
9,797,016
61,190,372
51,857
2,515,739
Total
$’000
NOTES TO THE
Unit in Unit Trust
-
9,583,062
60,596,560
-
Corporate Bonds
51,857
2,515,739
Availablefor-sale
$’000
-
fair value
Securities
Loan and
receivables
$’000
At fair value
through
profit & loss
account
$’000
JMMBGL PROSPECTUS
179
NOTES TO THE
30. Post-employment Benefits
Pensions are the only post-employment benefits to which the Group is committed. To better secure the payment of
promised benefits, the company operates a defined-contribution pension plan for the Group’s Jamaican employees
who have satisfied certain minimum service requirements. The Fund is financed by equal contributions of employer
and employees of 5% of pensionable salaries with an option for employees to contribute up to an additional 10% of
pensionable salaries.
The Fund is administered by trustees and the assets are held separately from those of the Group, except for some of the
assets which are included in funds being managed by the company (Note 31). Under the rules of the Fund, an actuarial
valuation should be carried out by the appointed actuaries every three years. An actuarial valuation of the Fund was
done as at 31 December 2011 by ACTMAN International Limited, independent actuaries, revealed a funding surplus, a
portion of which the trustees allocated to the members’ accounts.
The contributions for the year amounted to $128,062,000 (2014: $88,735,000) for the Group and $51,604,000
(2014: $46,673,000) for the company.
The pension benefit is the annuity that can be purchased by the amount standing to the credit of the member’s account
at the date of retirement.
31. Managed Funds
The Group acts as agent and earns fees for managing clients’ funds on a non-recourse basis under a management
agreement. This includes some of the assets of the Group’s pension scheme (Note 30). Although the Group is the
custodian of the securities in which the clients participate, it has no legal or equitable right or interest in these securities.
Accordingly, the securities in which the client’s funds are invested have been excluded from these financial statements.
At 31 March 2015, for the Group and the company, funds managed in this way amounted to $58,664,469,000 (2014:
$37,140,776,000) which includes assets of the Group’s pension scheme (Note 30), amounting to $355,920,000 (2014:
$105,450,000) for the Group and the company. The financial statements included the following assets held in (liabilities
payable to) the managed funds:
Investments
Interest payable
Customer deposits
180
2015
$’000
440,819
(57,018)
(25,578,798)
(1,597,611)
The Group
2014
$’000
508,688
(553)
(13,080,333)
(549,951)
The Company
2015
2014
$’000
$’000
410,819
508,688
(57,018)
(553)
(25,578,798)
(13,080,333)
-
JMMBGL PROSPECTUS
NOTES TO THE
32. Contingencies and Commitments
Operating leases
The Group has entered into several lease agreements for rental of offices. The amount charged in the profit and loss
account during the year is $220,925,000 (2014: $113,446,000).
The total annual commitment to be paid is as follows:
2015
2016
2017
2018
2019
Over 5 years
The Group
2015
2014
$’000
$’000
253,345
134,404
158,542
123,970
150,932
123,773
117,339
117,417
117,077
117,417
634,997
615,966
33. Group Reorganisation
On 13 April 2015, Jamaica Money Market Brokers Limited under an approved Scheme of Arrangement were delisted
from the Jamaica Stock Exchange (JSE), Barbados Stock Exchange (BSE) and Trinidad & Tobago Stock Exchange (TTSE).
Simultaneously the ordinary shares of the new ultimate Parent company JMMB Group Limited were listed on those
exchanges. The mechanics of the scheme involved the following:
(i)
The 1,630,552,530 existing JMMB ordinary shares held by members of the public being cancelled and simultaneously
1,630,552,530 new ordinary shares issued to JMMB Group Limited, making Jamaica Money Market Brokers Limited
(JMMB) a wholly owned subsidiary of JMMB Group Limited (JMMB Group).
(ii)
In consideration of the cancellation of the existing JMMB ordinary shares, JMMB Group Limited issued ordinary
shares for the benefit of each eligible person (credited and fully paid up) distributed at a rate of one new JMMB
Group ordinary share for each cancelled JMMB ordinary share.
(iii) JMMB Group applying and listing its ordinary shares on the JSE, TTSE and BSE:
The main reasons for the reorganisation of the current group structure were as follows:
(i)
Several companies within the JMMB Group operate in the financial services sector, and there is a great deal of
overlap between some member companies. It is therefore intended that the new Group structure will eliminate
those overlaps and allow the combined Group to be optimally structured to take advantage of operational and
strategic synergies as well as to reduce costs of administration.
181
NOTES TO THE
33. Group Reorganisation (Continued)
The main reasons for the reorganisation of the current group structure were as follows: (continued)
(ii)
Inclusion within the combined Group, an entity listed under the Financial Institutions Act of Jamaica (the FIA) and
therefore subject to the supervision of the Bank of Jamaica (BOJ) pursuant to Section 29 of the FIA. The combined
Group must be structured in a way that permits the BOJ to effectively carry out its supervisory mandate under the
FIA. The approved Group structure allows JMMB Group Limited to be an approved financial holding company and
facilitates full and unhindered access by BOJ to information from all members of the Group.
There was no financial impact to the Group financial results as a result of the reorganisation.
182
CUSTOMIZED SOLUTIONS • BANKING • INVESTMENTS • CAMBIO • INSURANCE BROKERS • MONEY TRANSFER

preference share offer - Jamaica Stock Exchange

Transcription

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