the Prospectus
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Dated the 5th day of December 2019
A copy of this Prospectus was delivered to the Registrar of Companies for registration pursuant to Section 372 of the Companies Act of Jamaica, 2004 (as amended) and was so registered on December 18th 2019. The Registrar of Companies accepts no responsibility whatsoever for the contents of this Prospectus.
A copy of this Prospectus was also delivered to the Financial Services Commission for registration pursuant to section 26 of the Securities Act and was so registered on December 19th 2019. The Financial Services Commission has not approved the offer of Shares for which subscription is invited nor has the Commission passed upon the accuracy or adequacy of this Prospectus.
Initial Public Offer by First Rock Capital Holdings Limited of up to 106,083,332 Shares of the Company in two (2) classes:
(i) 51,053,333 US$ Class A Ordinary Shares at USD Subscription Price of US$0.12 or the US$ Reserved Share Price of US$0.108 per Share; and
(ii) 55,029,999 J$ Class B Ordinary Shares at the J$ Subscription Price which is the J$ equivalent of US$0.12 per Share (calculated using the Subscription Rate as defined herein) or the J$ Reserved Share Price which is the J$ equivalent of US$0.108 per Share (calculated using the Subscription Rate as defined herein). with the right to upsize the offer by an additional 53,041,666 Shares in the event of oversubscription.
Registered Address Financial & Corporate Services Ltd 1st Floor, Bourbon House, Bourbon Street, Castries, Saint Lucia Local Address Suite 6, 14 Canberra Crescent, Kingston 6, Saint Andrew Telephone (876) 774-1733 Email [email protected] Website www.firstrockcap.com
First Rock Capital Holdings | Prospectus 3 Initial Public Offer of up to 106,083,332 Shares of the Company in two (2) classes:
1. 51,053,333 US$ Class A Ordinary Shares of which: a) 16,250,000 Shares are available to the general public at USD Subscription Price of US$0.12 per Share; b) 14,553,333 Shares are reserved for subscription to Key Strategic Partners (as defined herein) at the US$ Subscription Price of US$0.12 per Share; and c) 20, 250, 000 Shares are reserved for subscription by First Rock Affiliates (as defined herein) at the US$ Reserved Share Price of US$0.108 per Share.
2. 55,029,999 J$ Class B Ordinary Shares of which: a) 37,916,666 Shares are available to the general public at the J$ Subscription Price of the J$ equivalent of US$0.12 per Share calculated using the Subscription Rate (as defined here); b) 3,613,333 Shares are reserved for subscription to Key Strategic Partners at the J$ Subscription Price of the J$ equivalent of US$0.12 per Share calculated using the Subscription Rate (as defined herein); and c) 13,500,000 Shares are reserved for subscription by First Rock Affiliates at the J$ Reserved Share Price of the J$ equivalent of US$0.108 per Share calculated using the Subscription Rate (as defined herein);
payable in full on application, subject to the Company’s right to upsize the offer by an additional 53,041,666 Shares on oversubscription at the J$ Subscription Price ( J$ equivalent of US$0.12 per Share calculated using the Subscription Rate), J$ Reserved Share Price (J$ equivalent of US$0.108 per Share calculated using the Subscription Rate),US$ Subscription Price of US$0.12 per Share or the US$ Reserved Share Price of US$0.108 per Share as the case may be. Kindly note that the Jamaica Central Securities Depository charges an application fee of $163.10 (approximately $140 plus General Consumption Tax) in respect of each application for Shares.
If any category of the Reserved Shares is not subscribed for by the persons entitled to them, they will first become available for subscription by the other Reserve Share category in that share class. If after that exercise has been completed in the allotment process, all categories of Reserved Shares are not fully subscribed by the persons entitled to them said Shares will become available for subscription by the general public. The applicable subscription prices per share class will apply accordingly. This policy will be applied absolutely across all categories of Reserved Shares as set out in paragraphs (a) and (b) above.
In the event of an upsize, the Shares will be available for subscription by the Reserve Share applicants and/or the general public as determined by the Board of Directors of the Company. See Section 19 of this Prospectus for the terms and conditions of the Invitation.
4 First Rock Capital Holdings | Prospectus Share Capital Number of Total Value Shares Authorised a) ordinary Shares (i) Class A Ordinary Shares without par value Indefinite (ii) Class B Ordinary Shares without par value Indefinite b) Class A Preference Share of US$0.10 par 1,000,000 value each
Issued a) Class A Ordinary Shares without par value 166,122,068 b) Class B Ordinary Shares without par value 0 c) Class A Preference Share of US$0.10 par 1,000,000 value each
Now Available for Subscription in this IPO:
If option to upsize is not exercised 106,083,332 Ordinary Shares in two classes @ J$ Subscription 106,083,332 US$12,324,999.84 Price (J$ equivalent of US$0.12 per Share calculated using the Subscription Rate), J$ Reserved Share Price (J$ equivalent of US$0.108 per Share calculated using the Subscription Rate), US$ Subscription Price of US$0.12 per Share or the US$ Reserved Share Price of US$0.108 per Share as the case may be.
If option to upsize is exercised 159,124,998 Ordinary Shares in two classes @ J$ Subscription 159,124,998 US$18,487,465.46 Price (J$ equivalent of US$0.12 per Share calculated using the Subscription Rate), J$ Reserved Share Price (J$ equivalent of US$0.108 per Share calculated using the Subscription Rate), US$ Subscription Price of US$0.12 per Share or the US$ Reserved Share Price of US$0.108 per Share as the case may be. Assuming 53,041,666 Shares are allocated pro rata across the general public, Key Strategic Partners pool and First Rock Affiliates pools as follows:
a) 51.06 % to the General Public: 27,083,075; b) 17.12 % to the Key Strategic Partners: 9,080,733; and c) 31.82% to the First Rock Affiliates: 16,877,858, US$6,162,465.62 at a value of:
First Rock Capital Holdings | Prospectus 5 Table of Contents
Section 1 Important Disclaimers ...... 8 1.1 Responsibility for the Contents of this Prospectus...... 8 1.2 Contents of the Prospectus...... 8 1.3 The Initial Public Offer is made to Jamaican Residents in Jamaica Only...... 8 1.4 Acceptance of the Initial Public Offer...... 8 Section 2 Details of Application Process ...... 9 Section 3 Summary of Key Information on the Invitation ...... 10 Section 4 Letter to Prospective Investors ...... 13 Section 5 Definitions used in this Prospectus...... 15 Section 6 Disclaimer – Forward Looking Statements ...... 18 Section 7 The Invitation...... 19 7.1 General Information ...... 19 7.2 Minimum Fundraising ...... 19 7.3 Use of Proceeds ...... 19 7.4 Key Dates ...... 19 7.5 Contact Information for Key Personnel in the Invitation ...... 20 Section 8 Information about the Company ...... 21 8.1 The Company ...... 21 8.2 The Company’s Strategic Objectives ...... 25 8.3 Macroeconomic Data on the Commercial and Residential Real Estate Markets in Jurisdictions of Focus to Date...... 26 8.4 Opportunities Executed to Date...... 28 8.5 Pipeline Opportunities...... 36 8.6 Competitive Environment ...... 39 8.7 Capital Deployment & Allocation...... 39 8.8 Investment Strategy and the Economics of the Company...... 40 Section 9 Professional Advisors to the Company ...... 43 Section 10 Directors and Senior Officers and their Interests ...... 44 10.1 Biographical Details of the Directors and Senior Managers of the Company...... 44 10.2 Directors’ Interests in Shares ...... 46 10.3 Corporate Governance and Accountability...... 46 10.4 Directors’ Fees and Executive Emoluments ...... 46
6 First Rock Capital Holdings | Prospectus Section 11 Management Discussion and Analysis ...... 47 11.1 Discussion...... 47 11.2 Management ...... 50 11.3 Financial Projections of the First Rock Group...... 53 NOTES TO THE FINANCIAL PROJECTIONS...... 58 11.4 Financial Projections of the Company ...... 60 NOTES TO THE FINANCIAL PROJECTIONS...... 65 Section 12 Auditor’s Report and Financial Statements ...... 67 Section 13 Experts’ Consents ...... 92 Section 14 Dividend Policy...... 93 Section 15 Material Contracts ...... 94 Section 16 Risk Factors ...... 96 16.1 Market Risk...... 96 16.2 Credit Risk ...... 96 16.3 Liquidity Risk...... 96 16.4 Shares – Control Rights...... 96 16.5 Fluctuating Property Value ...... 96 16.6 Market for Shares...... 96 16.7 Lessee’s Risk ...... 97 16.8 Operational Risk...... 97 16.9 Risk of Catastrophic Events ...... 97 16.10 Acquisition Risk...... 97 16.11 New Accounting Rules or Standards...... 98 16.12 Saint Lucia and the Organisation for Economic Co-operation and Development (OECD)...... 98 Section 17 Documents available for Inspection ...... 99 Section 18 Statutory and General Information ...... 100 Section 19 Application Procedures and Terms & Conditions of Initial Public Offer...... 103 Section 20 Directors’ Signatures ...... 105 Appendix 1A - Application Form for J$ Class B Ordinary Shares...... 106 Appendix 1B - Application Form for US$ Class A Ordinary Shares...... 109 Appendix 2 Rights, Terms and Conditions of the Class A Preference Shares...... 112 Appendix 3 RIGHTS, TERMS AND CONDITIONS OF THE CLASS A & B ORDINARY SHARES...... 114
First Rock Capital Holdings | Prospectus 7 Section 1 Important Disclaimers
1.1 responsibility for the Contents of this Prospectus This Prospectus has been reviewed and approved by the Board of Directors risks of submitting an Application of the Company, details of which are set out in Section 10. The Directors of Form. Prospective investors are the Company whose names appear in Section 10 of this Prospectus are the also expected to seek appropriate persons responsible (both individually and collectively) for the information advice on the legal implications of contained in it. To the best of the knowledge and belief of the Directors, submitting an Application Form, who have taken all reasonable care to ensure that such is the case, the including but not limited to any tax information contained in this Prospectus is in accordance with the facts implications. and no information has been omitted which is likely to affect the import of Each prospective investor information contained herein. submitting an Application Form Neither the Financial Services Commission nor any Government agency or acknowledges and agrees that: regulatory authority in Jamaica has made any determination on the accuracy (i) He/She has been afforded a or adequacy of the matters contained in the Prospectus. meaningful opportunity to review the Prospectus and 1.2 contents of the Prospectus has received, all additional This Prospectus contains important information for prospective investors in information considered by it the Company. All prospective investors should read the Prospectus carefully to be necessary to verify the in its entirety before submitting an Application Form. accuracy of the information This Prospectus contains summaries which the Board of Directors of the contained in this Prospectus; it Company believe are accurate with respect to certain terms of certain has not relied on the Company or documents. Prospective investors may wish to inspect the actual documents any other persons in connection that are summarized, copies of which will be available as described in Section with its investigation of the 17. Any summaries of such documents appearing in this Prospectus are accuracy of such information qualified in their entirety by reference to the complete document. or its investment decision; Neither the publication of this Prospectus nor the Initial Public Offer shall (ii) no person has made any imply that there has been no change in the business, results of operations, representation concerning the financial condition or prospects of the Company since the date of this Company or this Prospectus Prospectus. or the Initial Public Offer on which the Applicant has relied in No person is authorised to provide information or to make any representation submitting its Application Form. whatsoever in connection with this Prospectus, which is not contained in this Prospectus.
1.3 The Initial Public Offer is made to Jamaican Residents in Jamaica Only This Prospectus is intended for use by Jamaican residents in Jamaica only and is not to be posted outside Jamaica or to be used for the making of any offer of Shares to the public in any country except Jamaica. The distribution or publication of this Prospectus and the making of the Initial Public Offer in certain jurisdictions outside of Jamaica is prohibited by law.
1.4 Acceptance of the Initial Public Offer This Prospectus is not a recommendation by the Company that prospective investors should submit Application Forms in respect of the Initial Public Offer. Prospective investors in the Company are expected to make their own assessment of the Company and the Initial Public Offer, and the merits and
8 First Rock Capital Holdings | Prospectus Section 2 Details of Application Process
An Application Form in respect of the Shares is provided Market and the USD Market. The application to the JSE at the end of this Prospectus (Appendix 1), together with is dependent upon the Company’s ability to: (i) raise notes on how to complete it for all applicants (both at least $200,000,000 (or the USD equivalent using the Reserved Share Applicants and the general public). The Subscription Rate) with respect to the Class A Ordinary subscription list for the Shares will open at 9:00 a.m. on Shares and the Class B Ordinary Shares, respectively, the Opening Date. Applications submitted prior to the in the Invitation; and (ii) meet the criteria for admission. Opening Date will be received, but not processed until Kindly note that this statement of the Company’s the Opening Date. The subscription list for the Shares intention is not a guarantee that the Shares will in fact will close at 4:30 p.m. on the Closing Date, subject to be admitted to trading on the Main Market and the USD the right of the Company to (a) close the subscription list Market. If, however, the Invitation is not fully subscribed at any time after it opens on 9:00 a.m. on the Opening and the Company does not raise at least $200,000,000 Date once the issue is fully subscribed and (b) extend (or the USD equivalent using the Subscription Rate) with the Closing Date for any reason, subject to the provisions respect to the Class A Ordinary Shares and the Class of section 48 of the Companies Act of Jamaica, 2004 (as B Ordinary Shares, respectively, in the Invitation, the amended). Company will not make an application for the Shares to In the event of an early closing of the subscription list, or be admitted to the Main Market and the USD Market and an extension of the Closing Date, notice will be posted on all applications will be returned to the persons making the website of the Jamaica Stock Exchange (JSE) (www. them, along with any payments made pursuant thereto. jamstockex.com). It is the intention of the Company to apply to the JSE for admission of the Shares to the Main
Date of Prospectus December 5th 2019
Opening Date January 13th 2020
Closing Date January 31st 2020 (subject to the right of the Company to designate an earlier or later date in the circumstances set out in this Prospectus).
Statement of the Basis of Allotment Within six (6) business days of Closing date.
Expected dispatch of investor statements Within ten (10) days of Closing Date. and any refund if applicable
Listing of Shares No more than five (5) business days after the Jamaica Stock Exchange approves the admission of Shares to the Main Market and the USD Market.
First Rock Capital Holdings | Prospectus 9 Section 3 Summary of Key Information on the Invitation
Acceptable Payment Method: Either: (i) Manager’s Cheque payable to “Sagicor Investments Jamaica Limited”; (ii) cleared funds held in a Sagicor Investments account; or (iii) Transfer or direct deposit to Sagicor Investments (details set out in the Application form attached herein). Absolutely no cash payments will be accepted.
Application Form: See Appendix 1 of the Prospectus.
Arrangers (i) Arranger & Lead Stock Broker Sagicor Investments Jamaica Limited 85 Hope Road Kingston 6 Saint Andrew
(ii) Co-Arranger Sygnus Capital Limited Unit 28, 80LMR 80 Lady Musgrave Road Kingston 10 Saint Andrew
Basis of Allotment “First come first served basis”, subject to the discretion of the Board of Directors.
Confirmation of Share Allotments: All Applicants may refer to the confirmation instructions that will be posted on the website of the Jamaica Stock Exchange (www.jamstockex.com) after the Closing Date (or the extended Closing Date, as the case may be).
Early Applications: All application forms must be submitted to Sagicor Investments, along with the requisite payment, in immediately available funds, at the locations set out in Section 19.5. Early applications may be submitted to Sagicor Investments. Any such 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, and shall be allotted pro rata. All other applications (that is, not early applications) will be received and processed on a first come, first served basis. ***
Final Allotment and Admission of Shares Within three (3) to four (4) weeks of the Closing Date. *** to Main Market and the USD Market:
10 First Rock Capital Holdings | Prospectus IPO Issuer: First Rock Capital Holdings Limited.
J$ Subscription Price J$ equivalent of US$0.12 per Share calculated using the Subscription Rate, payable in full on application.
J$ Reserved Share Price J$ equivalent of US$0.108 per Share calculated using the Subscription Rate, payable in full on application.
Minimum Subscription: 1,000 Shares.
Oversubscription In the event that subscriptions or applications are received for more Shares than the number of Shares available for subscription in this IPO, the Company reserves the full, unqualified and absolute right to increase the number of Shares in this IPO in order to satisfy all or part of the applications in the excess of the offer of up to 106,083,332 Shares, which are comprised in the IPO.
Reserved Share Applicants means the persons who are entitled to subscribe for Reserved Shares in their respective categories, namely Key Strategic Partners and First Rock Affiliates.
Returned Applications / Refunds: Available for collection where originally submitted within ten (10) days of the Closing Date (or the extended Closing Date, as the case may be).
Securities: Up to 106,083,332 Shares inclusive of 51,916,666 Reserved Shares* with the right to upsize the offer by an additional 53,041,666 Shares on oversubscription.
Subscription Rate means the weighted average selling rate of the US$ in exchange for J$ as published by the Bank of Jamaica three (3) Business Days prior to the Publication Date of the Invitation times a factor of 1.002. Subscription Price = (US$0.12 x Weighted Average Selling Rate as at October 28th, 2019 of J$138.67 ) x 1.002 Subscription Price = (US$0.12 x J$138.67) x 1.002 Subscription Price = J$16.67
Terms and Conditions: See Section 19 of Prospectus.
First Rock Capital Holdings | Prospectus 11 Timetable of Key Dates: Registration of Prospectus at the Companies Office: December 18th 2019 Registration of Prospectus at the FSC: December 19th 2019 Publication of Prospectus: December 19th 2019 Opening Date: 9:00 A.M. January 13th 2020 Closing Date: 4:30 P.M. January 31st 2020. See ** Below
Use of Proceeds of IPO See Section 7.3.
US$ Subscription Price US$0.12 per Share, payable in full on application.
US$ Reserved Share Price US$0.108 per Share, payable in full on application.
* Up to 51,916,666 Reserved Shares in the Invitation are reserved for priority Application from, and subscription by, the Reserved Share Applicants at the prices set out on page 2 herein. If any category of the Reserved Shares is not subscribed for by the persons entitled to them, they will first become available for subscription by the other Reserve Share category in that share class. If after that exercise has been completed in the allotment process, all categories of Reserved Shares are not fully subscribed by the persons entitled to them said Shares will become available for subscription by the general public. The applicable subscription prices per share class will apply accordingly.” In the event of an upsize, the additional Shares will be available for subscription by the Reserve Share applicants and/or the general public as determined by the Board of Directors of the Company. ** The subscription list will close at 4:30 p.m. on the Closing Date subject to the right of the Company to (a) close it at any time after 9:00 a.m. on the Opening Date once the issue is fully sold and subscribed and (b) extend the Closing Date for any reason, subject to the provisions of section 48 of the Companies Act of Jamaica 2004 (as amended). In either case, notice will be posted on the website of the JSE (www.jamstockex.com). *** It is the intention of the Company to apply to the Board of the JSE for admission of the Shares to trading on the Main Market and the USD Market. The application for admission is dependent on the Company’s ability to (i) raise a minimum of $200,000,000 (or the USD equivalent using the Subscription Rate) with respect to the Class A Ordinary Shares and the Class B Ordinary Shares, respectively, in the Invitation made in the Prospectus and (ii) meet the criteria for admission set out in the Main Market Rules. Please note that this statement of the Company’s intention is not a guarantee that the Shares will in fact be admitted to trading on the Main Market and the USD Market. If, however, the Invitation is not fully subscribed and the Company does not raise at least $200,000,000 (or the USD equivalent using the Subscription Rate) with respect to the Class A Ordinary Shares and the Class B Ordinary Shares, respectively, in the Invitation, the Company will not make an application for the Shares to be admitted to the Main Market and the USD Market as the case may be and all applications will be returned to the persons who made them, along with any payments made in relation thereto.
12 First Rock Capital Holdings | Prospectus Section 4 Letter to Prospective Investors
November 5th 2019 Dear Prospective Investors,
We are pleased to invite you to participate in an initial public offer of up to 106,083,332 Shares in the capital of the Company with the right to upsize the offer by an additional 53,041,666 Shares in the event of oversubscription.
The Company is an international business company duly incorporated under the laws of Saint Lucia. It is an investment holding company, with a core focus on real estate and private equity investments. The Company’s primary aim is to provide its Shareholders with a tax-efficient vehicle, offering an enhanced level of income, above average dividend yield and preservation of capital through the diversification of real assets. Therefore, the Company’s capital is deployed for the ultimate benefit of its Shareholders.
The Company was founded by myself, an Investment Banker and Dr. Michael Banbury, Medical Doctor and Entrepreneur, out of the need to have an entity that is squarely focused on real assets. The structure had to be efficient in both operations and taxation and so the Company was structured accordingly. The economies of focus at this time are Jamaica, Cayman, Costa Rica, Guyana and the United States. The Company has three (3) wholly owned subsidiaries; (i) First Rock USA LLC, a limited liability company incorporated in and under the laws of the State of Florida, USA; (ii) First Rock Capital Latam, Sociedad Anónima, a corporation incorporated in and under the laws of Costa Rica; and (iii) First Rock Capital Cayman Limited, a limited liability company incorporated in and under the laws of the Cayman Islands,
which together with the Company forms the First Rock Group.
The subsidiaries were formed in Cayman, USA and Costa Rica to create greater transparency and monitoring of the assets and income in said jurisdictions. They also facilitate the ease of doing further business in these jurisdictions as well as solidifying the presence of the First Rock Group. The jurisdictions of focus will expand over time but a key consideration for the Company will always be those jurisdictions exhibiting economic growth and strong prospects for economic growth; in essence, the Company has a distinct regional strategy.
The Board of Directors effectively represents titans of industry, spanning banking, investments, construction, law, sales and accounting.
The Company is administratively managed by First Rock Capital Resource Limited, which is a limited liability company duly incorporated under the laws of Jamaica and engaged under contract by the Company to achieve the Company’s goals and objectives whilst adhering to the policies and guidelines determined by the Company, in accordance with all applicable laws.
First Rock Capital Holdings | Prospectus 13 The Company commenced commercial operations in the first quarter of 2019, following the successful closure of its Private Placement in March 2019. Since then, the Company has built out a strong asset base comprising mostly real estate assets which is consistent with its core business. You are invited to review the Financial Statements in Section 12, Management Discussion and Analysis and Financial Projections in Section 11.
As is represented in the financials, the Company has deployed most of its capital and the expansion of its pipeline continues. Therefore, the net proceeds realized from this Invitation shall be used to (i) fund the pipeline opportunities set out in Section 8.5 herein (ii) pay the fees and expenses associated with the Invitation and (iii) continue the mandate and objectives of the Company in identifying opportunities in both the local and international real estate markets as per the process set out in Section 8.8 herein for future purchases of commercial and residential properties.
In determining the price per Share, the Company and its Arrangers considered a few factors: āā The current state of the securities market. āā The strength of the board and management. āā The trend, performance and market prices of companies that could be deemed as being similar in structure and model. āā The economic prospects of the markets in which the Company operates and/or plans to pursue. āā The financial performance of the Company to date and its prospects for growth.
This invitation represents an opportunity for prospective investors to partake in the success of the company and participate in the next exciting phase of growth by owning “a piece of this Rock”.
You are hereby invited to join the Company in this growth journey.
Yours sincerely,
For and on behalf of the Company
Mr. Ryan Reid Co-Founder
14 First Rock Capital Holdings | Prospectus Section 5 Definitions used in this Prospectus
Words or Phrases Definition Allotment means the allotment of the Shares to successful Applicants by Jamaica Central Securities Depositary Limited (JCSD), in its capacity as registrar and transfer agent of the Company, for and on its behalf. Applicant means a person (being an individual or a body corporate resident in Jamaica, whether a Reserved Share Applicant, or a member of the general public) who submits an Application in accordance with the terms and conditions of this Prospectus. Application Form means the Application Form to be completed by Applicants who wish to make an offer to subscribe for Shares in the Invitation which is set out in Appendix 1 herein. Articles of Association means the Second Amended and Restated Articles of Association of the Company (and as may be amended by the shareholders of the Company from time to time). Audit Committee means the audit committee of the Board of Directors. Auditor’s Report means the report of PricewaterhouseCoopers, Chartered Accountants set out in Section 12. Board of Directors the board of directors of the Company. Business Day means any day that commercial banks are generally open for normal banking business (not including Saturday, Sundays and public general holidays) in Kingston and Saint Andrew, Jamaica. Class A Ordinary Shares means the voting and participating Class A Ordinary Shares without par value in the capital of the Company. Class A Preference Shares the Company’s 1,000,000 Class A Preference Shares allotted to First Rock Capital Resource Limited and having the rights, terms and conditions allotted to it as set out in Appendix 3. Class B Ordinary Shares means the voting and participating Class B Ordinary Shares without par value in the capital of the Company. Closing Date The date of the closing of the invitation being January 31st 2020 (subject to the right of the Company to designate an earlier or later date in the circumstances set out in this Prospectus). Companies Act means the Companies Act of Jamaica, 2004 (as amended). Company or FCH First Rock Capital Holdings Limited, an international business company (IBC) with its registered office at Financial Corporate Services Ltd. 1st Floor, Bourbon House, Bourbon Street, Castries, Saint Lucia. Corporate Governance means the corporate governance committee of the Board of Directors. Committee Director a member of the Board of Directors of the Company. First Rock Affiliates Directors, persons who are shareholders of the Company as at November 30th 2019 and employees of the Management Company. First Rock Group means a collective reference of the Company and its Subsidiaries. Forward Looking Statements means the forward looking statements referred to in Section 6 of the Prospectus, which are disclaimed by the Company on the terms and for the reasons set out therein.
First Rock Capital Holdings | Prospectus 15 Words or Phrases Definition FSC the Financial Services Commission of Jamaica, a statutory body corporate with its office at 39-43 Barbados Avenue, Kingston 5, Saint Andrew, Jamaica. IBC an international business company registered under the International Business Companies Act of Saint Lucia, 1999 (as amended). IBC Act International Business Companies Act of Saint Lucia, 1999 (as amended). Invitation means the invitation to subscribe for up to 106,083,332 Shares including Reserve Shares, additional 53,041,666 Shares on oversubscription IPO means “initial public offering” being one (1) of the five (5) methods of listing securities on the Jamaica Stock Exchange, as per the Main Market Rules. J$ or JMD the lawful currency of Jamaica. J$ Reserved Share Price J$ equivalent of US$0.108 per Share calculated using the Subscription Rate, payable in full on application. J$ Subscription Price J$ equivalent of US$0.12 per Share calculated using the Subscription Rate, payable in full on application.
JSE means the Jamaica Stock Exchange. Key Strategic Partners persons that the Company shall deem to be key and germane to its operations and/or this IPO such as: its professional advisors and consultants used in the IPO and its business operations. Main Market means the Main Market of the JSE. Management Agreement means the Management Agreement executed by and between First Rock Capital Resource Limited (as Manager of the First Rock Capital Holdings Limited) and the Company. Management Company or FCR First Rock Capital Resource Limited, a limited liability company incorporated under the laws of Jamaica with its registered office at 14 Canberra Crescent, Suite #6, Kingston 6, Saint Andrew, Jamaica. Memorandum of Association means the Second Amended and Restated Memorandum of Association of the Company (and as may be amended by the shareholders of the Company from time to time). Opening Date means the date on which the subscription list in respect of the Invitation opens, being 9:00 a.m. on January 13th 2020. Prospectus means this document, which constitutes a prospectus for the purposes of the Companies Act of Jamaica, 2004 and the Securities Act (as amended). Registrar means Jamaica Central Securities Depositary Limited (JCSD). Remuneration Committee means the remuneration committee of the Board of Directors. Reserved Share Applicants means the persons (as referred to herein) who are entitled to subscribe for Reserved Shares in their respective categories, namely Key Strategic Partners and First Rock Affiliates Reserved Shares means up to 51,916,666 Shares in the Invitation which are specifically reserved for Application from, and subscription by, the Reserved Share Applicants at the J$ Subscription Price (J$ equivalent of US$0.12 per Share calculated using the Subscription Rate), J$ Reserved Share Price (J$ equivalent of US$0.108 per Share calculated using the Subscription Rate), US$ Subscription Price of US$0.12 per Share or the US$ Reserved Share Price of US$0.108 per Share as the case may be.
16 First Rock Capital Holdings | Prospectus Words or Phrases Definition RTGS means the Real Time Gross Settlement System implemented by the Bank of Jamaica. Sagicor Investments means Sagicor Investments Jamaica Limited, a limited liability company duly incorporated under the Laws of Jamaica, bearing company number: 62,008 and whose registered office is located at 85 Hope Road, Kingston 6, Saint Andrew, Jamaica and being, inter alia, the lead broker to the Company for the purposes if the Invitation. Shareholders means the holders of Shares. Shares all classes of the authorised and/or issued ordinary shares in the capital of the Company, as the context shall require, inclusive of the Class A Ordinary Shares and Class B Ordinary Shares that are the subject of the Invitation, each having the rights set out in the Memorandum of Association and the Articles of Association. Subsidiaries means the following subsidiaries of the Company: i. First Rock USA, LLC; ii. First Rock Capital, LATAM, Sociedad Anónima; and iii. First Rock Capital Cayman Limited.
Subscription Price US$0.12 per Share excluding the Reserved Shares (or the J$ equivalent calculated using the Subscription Rate), payable in full on application. Subscription Rate means the weighted average selling rate of the US$ in exchange for J$ as published by the Bank of Jamaica (BOJ) three (3) Business Days prior to the Publication Date of the Invitation times a factor of 1.002. By way of example, if the Publication Date was October 31st 2019, then the Subscription Price would be calculated as follows: Subscription Price = (US$0.12 x Weighted Average Selling Rate as at October 28th, 2019 of J$138.67 ) x 1.002 Subscription Price = (US$0.12 x J$138.67) x 1.002 Subscription Price = J$16.67
Sygnus means Sygnus Capital Limited, a limited liability company duly incorporated under the Laws of Jamaica, bearing company number: 92,094 and whose registered office is located at 80 Lady Musgrave Road, Kingston 10, Saint Andrew and being the co-arranger for the Company for the purposes if the Invitation. Terms and Conditions of the means the terms and conditions for Applicants set out in Sections 20 of the Invitation Prospectus. Unaudited Financial means the unaudited financial statements of the Company that are set out Statements in Section 12 of the Prospectus. US$ or USD the lawful currency of the United States of America. US$ Reserved Share Price US$0.108 per Share payable in full on application. US$ Subscription Price US$0.12 per Share payable in full on application. USD Market the US Dollar Equities Market of the Jamaica Stock Exchange.
First Rock Capital Holdings | Prospectus 17 Section 6 Disclaimer – Forward Looking Statements
Save for the Historical Financial Data concerning the Company contained in this Prospectus, certain matters discussed in this Prospectus, including without limitation, statements of expectations, the discussions of future plans and financial projections, contain forward-looking statements. Forward-looking statements are statements that are not about historical facts and speak only as of the date they are made. Although the Directors believe that in making any such statements its expectations are based on reasonable assumptions, such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Prospective investors in the Company are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on which they have been made. 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 Company, 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 the Company, and prior to the admission of the Shares to the Main Market and the USD Market, the Company 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 the Company’s financial or regulatory position, or to reflect the occurrence of unanticipated events (subject to any legal or regulatory requirements for such disclosure to be made). There are important factors that could cause actual results to differ materially from those in forward- looking statements, certain of which are beyond the Company’s control. These factors include, without limitation, the following: economic, social and other conditions prevailing both within and outside of Jamaica, including actual rates of growth of the Jamaican and regional economies, instability, high domestic interest rates or exchange rate volatility
āā adverse climatic events and natural disasters
āā unfavourable market receptiveness to any of the Company’s new products
āā changes in any legislation or policy adversely affecting the revenues or expenses of the Company
āā any other factor negatively impacting on the realisation of the assumptions on which the Company’s financial projections are based
āā other factors identified in this Prospectus
āā other factors not yet known to the Company
Neither the FSC, nor any Government agency or regulatory authority in Jamaica, has made any determination on the accuracy or adequacy of the matters contained in this Prospectus.
18 First Rock Capital Holdings | Prospectus Section 7 The Invitation
7.1 General Information two of the Third Schedule to the The Company is seeking to raise up to US$12,324,999.84 from subscriptions Act is $200,000,000 (or the USD for up to 106,083,332 Shares (including subscriptions from the Reserved equivalent using the Subscription Share Applicants for the Reserved Shares at the Reserved Subscription Rate) with respect to the Class A Price). Up to 51,916,666 Shares of the aforementioned Shares are specifically Ordinary Shares and the Class B reserved for Application from, and subscription by, the Reserved Share Ordinary Shares, respectively, in Applicants. If any category of the Reserved Shares is not subscribed for by the Invitation. the persons entitled to them, they will first become available for subscription by the other Reserve Share category in that share class. If after that exercise 7.3 use of Proceeds has been completed in the allotment process, all categories of Reserved The net proceeds realized from the Shares are not fully subscribed by the persons entitled to them said Shares Invitation shall be used to (i) fund will become available for subscription by the general public. The applicable the pipeline opportunities set out subscription prices per share class will apply accordingly. in Section 8.5 herein, (ii) pay the fees and expenses associated with Further, the Company has reserved the right to upsize the offer by an the Invitation and (iii) continue additional 53,041,666 Shares on oversubscription which is to be offered to the mandate and objectives the general public and/or Reserved Share Applicants in the Invitation at the of the Company in identifying J$ Subscription Price (J$ equivalent of US$0.12 per Share calculated using opportunities in both the local and the Subscription Rate), J$ Reserved Share Price (J$ equivalent of US$0.108 international real estate markets as per Share calculated using the Subscription Rate), US$ Subscription Price of per the process set out in Section 8.8 US$0.12 per Share or the US$ Reserved Share Price of US$0.108 per Share as for future purchases of commercial the case may be. In the event of an upsize, the allocation of Shares in each and residential properties. share class will be at the discretion of the Board of Directors of the Company. If all of the up to 106,083,332 Shares (159,124,998 Shares in the event of a full 7.4 Key Dates upsize) are subscribed for and taken up by Applicants in the Invitation, the The Application Forms for use by Company will make application to the JSE for the Shares to be admitted to Applicants are provided at Appendix the Main Market and the USD Market as the case may be. If the application 1 at the end of this Prospectus, is successful, it is anticipated that the Shares will be admitted to trading together with notes on how to within three (3) to four (4) weeks of the Closing Date (or the extended Closing complete each. The subscription list Date, as the case may be). for the Shares will open at 9:00 a.m. on the Opening Date: January 13th In the event that the Company does not raise at least $200,000,000 with 2020 and will close at 4:30 p.m. on respect to the Class A Ordinary Shares and the Class B Ordinary Shares, the Closing Date: January 31st 2020 respectively, in the Invitation and/or the Shares are not admitted to trade on subject to the right of the Company the Main Market and the USD Market as the case may be, all Applications will to (a) close the subscription list at be returned to Applicants, along with any payments made in relation thereto. any time after 9:00 a.m. on the Prospective investors should read all of the sections referred to carefully Opening Date: January 13th 2020, together with the remainder of this document. Those prospective investors once the issue is fully subscribed who wish to subscribe for Shares should also refer to the full terms and and (b) extend the Closing Date conditions set out in Section 19 before completing the Application Form for any reason. In either case, set out in Appendix 1. the Company will arrange for an informational notice to be posted 7.2 Minimum Fundraising on the website of the JSE (www. For the purposes of section 48 of the Companies Act the minimum amount jamstockex.com). which, in the opinion of the Directors, must be raised as a result of the Invitation and received by the Company as a result of the subscription of its It is the intention of the Company Shares in the Invitation in order to provide for the matters set out in paragraph to apply to the JSE for admission of the Shares to the Main Market and
First Rock Capital Holdings | Prospectus 19 the USD Market as the case may be. The application is dependent on the Company’s ability to (i) raise at least $200,000,000 (or the USD equivalent using the Subscription Rate) with respect to the Class A Ordinary Shares and the Class B Ordinary Shares, respectively, in the Invitation and (ii) meet the criteria for admission. If such application is made and it is successful, the Company expects the Shares to be admitted to trading on the Main Market and the USD Market as the case may be within three (3) to four (4) weeks of the Closing Date (or the extended Closing Date) and for dealings to commence on that date. In the event that the Shares are not admitted to trading on the Main Market and the USD Market, as the case may, be all Applications received by the Company will be returned to Applicants as set out in Section 19.
7.5 contact Information for Key Personnel in the Invitation First Rock Capital Holdings Limited 14 Canberra Crescent, Suite 6, Kingston 6, Saint Andrew Mr. Ryan Reid, Co-Founder - 876-925-7625
Sagicor Investments Jamaica Limited 85 Hope Road, Kingston 6, Saint Andrew Mrs. Mischa McLeod-Hines, Assistant Vice-President, Capital Markets - (876) 764-0325 Mr. Steven Davis, Assistant Manager, Capital Markets - (876) 733-8944
Sygnus Capital Limited Unit 28, 80 LMR, 80 Lady Musgrave Road, Kingston 10, Saint Andrew Mr. Berisford Grey, Chief Executive Officer & Head of Investment Banking - 876-634-5005
20 First Rock Capital Holdings | Prospectus Section 8 Information about the Company
8.1 the Company
Vision Mission Core Values
The Caribbean’s most Shareholder- To capitalize on investment Integrity, Communication, centric investment holding company. opportunities, which will enable us to Performance, Results. constantly increase Shareholder value and deliver above average returns.
The Company is an international business company duly Company invests primarily in real estate assets including incorporated under the laws of Saint Lucia on October income generating investment properties, development 4th 2017; the Company commenced trading activities in projects (greenfield and brownfield), real estate linked late March of 2019 upon the completion of its Private financial instruments and opportunistic private equity Placement Offer. investments. The authorized capital of the Company is made up of: The Company’s investment scope includes Jamaica, the i. US$1,000,000 Class A Preference Shares wider Caribbean, North America and Latin America. The Company has three (3) wholly owned subsidiaries; ii. US$1,000,000,000 of Class A Ordinary Shares i. First Rock USA LLC, a limited liability company iii. J$100,000,000,000 of Class B Ordinary Shares incorporated in and under the laws of the State The authorized capital is divided into: of Florida, USA; i. indefinite Class A Preference Shares at US$0.10 ii. First Rock Capital Latam, Sociedad Anónima, a par value each; corporation incorporated in and under the laws of Costa Rica; and ii. indefinite Class A Ordinary Shares without par value; and iii. First Rock Capital Cayman Limited, a limited liability company incorporated in and under iii. indefinite Class B Ordinary Shares without par the laws of the Cayman Islands, value. which together with the Company forms the First The Company was formed to take advantage of Rock Group as illustrated in the chart below: investment opportunities in the acquisition and development of real property with the primary aim to provide its Shareholders with a tax-efficient vehicle for real estate investment, good dividend yield and The First capital appreciation in diversified real estate assets. The First Rock Rock Group Capital Corporate Holdings Chart Limited
First Rock USA, LLC First Rock Capital LATAM, First Rock Capital Sociedad Anónima Cayman Limited
First Rock Capital Holdings | Prospectus 21 The subsidiaries were formed The structure of the Management Company is illustrated in the chart below: in Cayman, USA and Costa Rica to create greater transparency and monitoring of the assets and income in said jurisdictions. They The Management Company’s also facilitate the ease of doing Organisational Chart further business in the jurisdictions as well as solidifying the Company’s presence. The jurisdictions of focus will expand over time but a key Management Company consideration for the Company First Rock Capital Resource Limited will always be those jurisdictions exhibiting economic growth and strong prospects for economic growth. The Company has elected to pay President & CEO Executive Assistant income tax of one per cent (1%) in Saint Lucia. Therefore, pursuant to the provisions of Article 11 of the CARICOM Double Taxation Treaty, Senior Operations Operations dividends/distributions paid to Officer Officer Shareholders who are residents of CARICOM Member States should be subject to withholding tax in Saint Lucia, at a rate of one (1%) percent, Chief Legal and with no further taxation in the Complaince Officer Paralegal Shareholder’s country of residence. A limited liability company, duly incorporated under the laws of Jamaica, First Rock Capital Executive Vice Real Estate Resource Limited administratively President Business manages the operations of Real Estate Business Coordinator the Company and executes its business strategies.
Project Manager
Manager Senior Finance & Analysis Accountant
Portfolio Analyst Accounting Officer
22 First Rock Capital Holdings | Prospectus The Management Company manages the Company’s assets in a manner that is consistent with the objectives, guidelines, and constraints outlined in the Company’s policies, Articles of Association and Memorandum of Association. The Management Company was issued with Class A Preference Shares to ensure that the structure of the investments made by the company, and by extension the investment objectives of the Company, is not subverted by shareholders holding shares in the other share classes who may acquire substantial interest in the Company. Holders of the Class A Ordinary Shares and Class B Ordinary Shares cannot alter the rights, terms, and conditions of the Class A Preference Shares and the Management Agreement. However, if in the future, the Company issues further preference shares they must rank subordinate to the Class A Preference Shares issued to the Management Company. Management fees and Preference Share dividends are paid to the Management Company as follows:
Management Fee A management fee of two per cent (2%) of the net asset value of the Company based on the Company’s audited financials. The fee is to be paid quarterly in arrears, based on the quarterly unaudited financial statements of the Company, subject to the ‘claw- back’ provision.
Performance-Based A performance based cumulative annual dividend calculated as twenty- five per cent (25%) of the audited annual total comprehensive income of the Company in excess of eight per cent (8%) (the ‘hurdle’ rate). See Appendix 2 for details. Dividend are to be paid quarterly in arrears, based on the quarterly unaudited financial statements of the Company, subject to the ‘claw- back’ provisions.
Clawback / Top Up Both the management fee and the performance-based dividend are subject to a ‘clawback’ by the Company if the audited annual financial results of the Company demonstrate a negative variance from the quarterly unaudited accounts used to determine the payment of fees/ dividends. If the audited annual financial results demonstrate a positive variance from the quarterly unaudited accounts, such additional amount will be paid to the Management Company (with no interest) so that it is made whole based on the audited results.
First Rock Capital Holdings | Prospectus 23 As at this date, the Shares in the Company are held in two classes – Class A Preference Shares and Class A Ordinary Shares. The Management Company solely holds the Class A Preference Shares. The Class A Ordinary Shares are held by individuals who participated in the Company’s Private Placement in March. The Company’s Top Twenty (20) holders of Class A Ordinary Shares and their shareholdings as at December 3rd, 2019 are represented in the table below:
Shareholders Volume of Shares Ownership %
1. JCSD TRUSTEE SERVICES LTD- SIGMA REAL ESTATE 15,400,000 9.27 2. DAVID CHIN & JOYCE CHIN 10,000,000 6.02 3. BEECH REALTY COMPANY 10,000,000 6.02 4. MF&G TRUST & FINANCE LTD - A/C 58 5,300,000 3.19 5. MF&G TRUST & FINANCE LTD - A/C 57 5,100,000 3.07 6. AIRPORT AUTHORITY OF JAMAICA 5,000,000 3.01 7. PHILIP MARTIN* AND SANDRA MARTIN* 5,000,000 3.01 8. RYAN KWESI REID/OBSERVATION GROUP LIMITED* 4,856,247 2.92 9. SALEEM MAHFOOD & STEPHANIE MCCONNELL 4,000,000 2.41 10. MICHAEL BANBURY* 4,000,000 2.41 11. YORK PAGE SEATON & CLAUDETTE MARIE SEATON* 3,854,158 2.32 12. GUL MANSUKHANI & MALINI MANSUKHANI 3,550,000 2.14 13. JMMB RETIREMENT SCHEME (MODERATE) 3,500,000 2.11 14. JMMB PENSION FUND 3,400,000 2.05 15. ROOSEVELT BIRD, JULIET BIRD & CHRISTOPHER BIRD 3,300,000 1.99 16. PAUL FRASER & HEATHER FRASER 3,040,000 1.83 17. JAMAICA MONEY MARKET BROKERS LTD - FM10 3,000,000 1.81 18. GUL L. KHEMLANI & MONICA KHEMLANI 3,000,000 1.81 19. PIERRE A. SHIRLEY* 3,000,000 1.81 20. WELLJEN LIMITED 3,000,000 1.81 Top Twenty (20) Shareholdings 101,300,405 60.98 Other Shareholdings 64,821,663 39.02 Total Issued Class A Ordinary Shares 166,122,068 100% Total no. of Shareholders 79 *connected party
24 First Rock Capital Holdings | Prospectus The table below reflects the overall holdings of Shares in capital of the Company prior to the Invitation and the anticipated holdings of Shares after the Invitation is closed and assuming the Invitation for 106,083,332 is taken up in full:
Class A Ordinary Shares – Before IPO Class B Ordinary Shares – Before IPO
Shareholders Number of Percentage of Shareholding Number of Number of issued Class Shareholding issued Class issued Class A Ordinary B Ordinary B Ordinary Shares Shares Shares Existing 166,122,068 100% Existing None 0% Shareholders Shareholders General Public None 0% General Public None 0% Reserved None 0% Reserved None 0%
Total 166,122,068 100% Total None 0%
Class A Ordinary Shares – After IPO Class B Ordinary Shares – After IPO
Shareholders Number of Number of Shareholding Number of Number of issued Class issued Class issued Class issued Class A Ordinary A Ordinary B Ordinary B Ordinary Shares Shares Shares Shares Existing 166,122,068 76.49% Existing None 0% Shareholders Shareholders
General Public 16,250,000 7.48% General Public 37,916,666 68.90% Reserved 34,803,333 16.03% Reserved 17,113,333 31.10%
Total 217,175,401 100% Total 55,029,999 100%
8.2 the Company’s Strategic Objectives The Company focuses on creating an opportunity for Shareholders to invest in a diversified portfolio of real estate assets, and thereby benefit from dividends from the Company’s real estate activities, without having to buy, manage or finance properties themselves. These strategic objectives are to be carried out in the following manner: 1. purchase and/or improvement of existing income producing properties to be managed by the Management Company; 2. purchase of properties for development whether solely by the Company or, on a case by case basis, with selected strategic partners for immediate sale upon completion or rental/income generation in accordance with the Asset Allocation and Asset Management policies of the Company that are described in sections 8.8(I) and 8.8(J), respectively; 3. purchase of greenfield1 and/or brownfield2 properties with the intention of making further development or redevelopment for capital gains (less than 12 months); 4. purchase and sale of any free assets for the purposes described above, including but not limited to structured notes, Shares, preference shares and corporate bonds;
1 land not previously used for a residential, commercial or industrial purpose. 2 property that was once used for commercial or industrial purposes and is now targeted for redevelopment.
First Rock Capital Holdings | Prospectus 25 5. prudent leverage of 8.3 Macroeconomic Data on the Commercial and Residential Real portfolio assets for Estate Markets in Jurisdictions of Focus to Date efficient management, enhancement of yield and/ A. USA/ Florida or to capitalize on pipeline The growth of gross domestic product (GDP) in the United States is expected opportunities. The debt to to slow to between one point five per cent (1.5%) and two per cent (2%) in equity ratio on any given 2020, down from an average of two point five per cent (2.5%) over the past asset is not expected to five years. Investment volume in 2020 should total between $478 billion exceed seventy-five per and $502 billion, on par with the prior two years and one of the strongest cent (75%). on record. As an ongoing funding strategy Demand for office space is expected to remain strong in 2020, with following the Invitation, the absorption forecast to total 20 million square feet. Flexible space is Company will consider market expected to continue to increase its share of total office inventory, albeit opportunities primarily in Jamaica, at a slower pace. Absorption gains are expected to be limited in 2020, with for the issue by the Company available supply outpacing demand by 20 million to 30 million square feet. of short – to medium – term Nevertheless, rents are expected to rise by five per cent (5%). structured notes and debt – type preference shares. Any further Miami’s labour market added 144,000 jobs and grew by thirteen point issuance of Shares to fund the nine per cent (13.9%) over the past five years. It is projected to experience Company’s activities will require the favourable conditions driven by booming demographics. They provide an approval of an ordinary majority of extremely rich talent pool for employers based in the country. The demand the Shareholders (more than fifty for commercial spaces should continue to grow as employers migrate to per cent (50%)) or the holders of Miami to seek educated and skilled employees. Class A Preference Shares, subject Florida’s median housing prices for both existing single-family homes and for to the preference shareholders condo-townhouse properties are on the rise. According to Florida Realtors, special voting rights (see Appendix the population of Florida grows by approximately 906 residents per day or 2). Any further issuance of debt more than 300,000 individuals per year. This creates an increasing demand type securities such as preference for housing. The median prices for condo-townhouses reportedly increased shares or notes, will not dilute the by two point nine per cent (2.9%) since the previous year; there was also a ordinary shareholdings arising from three point three per cent (3.3%) increase in median prices for single-family the Invitation, however; they may homes. involve charges on the assets of Based on the population growth, the below-average unemployment rate the Company which provide for the and job availability it is predicted that the real estate market, including both holders of the debt type securities residential and commercial properties will continue to grow exponentially. to have priority of payment over Shareholders in the unlikely event of insolvency, or voluntary winding B. Jamaica up or restructuring. The island’s GDP contracted by zero point eight per cent (0.8%) in 2008, when it was the only Caribbean country aside from the Bahamas to experience recession. GDP fell by three point four per cent (3.4%) in 2009, followed by a one point four per cent (1.4%) decline in 2010. After weak growth of one point four per cent (1.4%) in 2011, the economy slipped again into recession in 2012, contracting by around zero point five per cent (0.5%). However, the economy is projected to grow by around one point seven per cent (1.7%) this year and by another one point nine per cent (1.9%) in 2020, based on International Monetary Fund estimates. In light of this projected growth, the real estate market is expected to expand. Price increases will persist as demand continues to outpace supply. In Jamaica, more specifically, popular areas of Kingston and St. Andrew, it was reported that apartment prices ranged from US$200 per square foot
26 First Rock Capital Holdings | Prospectus to US$250 per square foot. The prices of housing also both residential and commercial investing in Cayman continue to increase and are expected to increase to attractive. US$340 per square foot. Demand continues to exceed supply in the residential market. D. Costa Rica As the economy continues to grow, young professionals The economy expanded by a modest two point seven have set their sights on owning homes/ properties. per cent (2.7%) in 2018, after annual growth rates of three point four per cent (3.4%) in 2017, four point two C. The Cayman Islands per cent (4.2%) in 2016, three point six per cent (3.6%) The Cayman Islands is experiencing a steady rise in in 2015, three point five per cent (3.5%) in 2014 and two property prices. It is suspected that this can attributed point three per cent (2.3%) in 2013, according to the to, on a smaller scale, the resilience of the local economy International Monetary Fund. The economy is projected and, on a grander scale, the health of the US Economy. to grow by two point nine per cent (2.9%) this year and With some areas of the island reporting increases of up by two point eight per cent (2.8%) in 2020. to thirty-five per cent (35%) compared to 2017, the extent The number of real estate transactions taking place of the growth of the real estate market is particular to in the country are on the rise. This can be attributed the Cayman Islands when compared to other countries to a large inflow of foreign investors. Additionally, the in the region. It is expected that the island’s population increase in tourist arrivals also plays a large part in this will continue to increase at an increasing rate, leading increase. to more residents, and buyers, and thus a strong real The increased investments and tourist arrivals creates estate market. a high demand for commercial developments to cater The Cayman Islands is one of the most affluent to the needs of the increased population. countries in the Caribbean. Thanks to its twin pillars of Costa Rica’s housing market remains strong, mainly development, tourism and international finance, this buoyed by the country’s booming tourism. Costa Rica British overseas territory enjoyed average real GDP has attracted an increasing number of tourists every growth of three point one per cent (3.1%) annually from year since 2010, many of which make the decision to 1998 to 2007. The country is the world’s sixth largest settle there, whether temporarily or permanently. banking centre. Cayman tourism is doing well with both stay over and cruise tourism numbers remaining steady In San Jose, the country’s capital, the average listing price in addition to development across the island. of houses rose by three point seven per cent (3.7%) year over year to US$1,110 per square meter (sq. m.) in July After several challenging years, Cayman Islands’ 2019. Likewise, condominium prices increased by one property market is now growing rapidly again, amidst point eight per cent (1.8%) to an average of US$1,724 increased consumer and investor confidence. Home per square metres. prices are rising strongly, property transactions are picking up and residential property construction is also An extra benefit for investors is that San Jose houses improving dramatically. yield surprisingly good rental returns, at eight point six per cent (8.6%), with apartments yielding seven point During the second quarter of 2017, the average value five per cent (7.5%), according to Global Property Guide of freehold property transfers rose by nine point six research. per cent (9.6%) to US$496,118 over the same period last year, based on figures from the Lands & Survey Property transactions have risen by double-digit figures Department. The average value of freehold property since 2013, according to local real estate experts. This is transfers surged by forty-two per cent (42%) year over not surprising given booming tourism. In 2018, the total year last year, after rising by six point seven per cent number of tourist arrivals rose by one point nine per (6.7%) in 2015 and declining by nine point five per cent cent (1.9%) year over year to a record 3,016,667 people, (9.5%) in 2014. The outlook for the market looks positive according to the Costa Rican Tourism Board. Then during going forward. The rental market is growing along with the first half of 2019, visitor arrivals increased further by the population of the islands. three point nine per cent (3.9%) year over year to about 1.73 million people, thanks to the continued increase of As residents and home buyers increase, the need for tourists from North America. commercial real estate, i.e. offices, retail, medical and other services are expected to increase. This makes
First Rock Capital Holdings | Prospectus 27 8.4 opportunities Executed to Date 21 Balmoral Avenue
Description
The property is a stand-alone, two storey office building of approximately 17,800 square feet leased to Medimpex Jamaica Limited for ten years with all ten years remaining.
Transactional Details
Acquisition Cost US$2,600,000
Classification Commercial
Type Income Producing
Location Jamaica
28 First Rock Capital Holdings | Prospectus The Grove
Description
The Grove is a mixed-use development located along the seven-mile beach corridor in Grand Cayman. The development consists of commercial and retail spaces on the ground floor and fifty-eight one-bedroom apartments on the upper floors. The Company is under contract to acquire five of the apartments. Construction is underway and is expected to be completed in the first quarter of 2020. The units will be retained, managed and marketed to international visitors for short-term rentals.
Transactional Details
Acquisition Cost US$3,136,000
Classification Residential
Type Pre-Construction
Location Wider Caribbean (Cayman Islands)
First Rock Capital Holdings | Prospectus 29 Icon Brickell
Description
Located on Brickell Avenue, Miami, USA, Icon Brickell is one of South Florida’s largest condominium developments. A mix totalling over 1,800 units (1,648 residential and 162 hotel) in two residential towers and one condo-hotel; studios to three bedrooms and measuring 495 square feet to more than 2,600 square feet. The Company acquired two one-bedroom apartments situated on the 35th and 45th floors within its portfolio. One unit is leased on a guaranteed rental income program and benefits from additional income determined as a percentage of total rental income earned from the unit. The other is managed and marketed for short-term rentals.
Transactional Details
Acquisition Cost US$1,000,000
Classification Residential
Type Income Producing
Location USA
30 First Rock Capital Holdings | Prospectus Medinah 21
Description
The property is a 1.72-acre parcel of land, currently being developed as a mixed residential apartment and townhouse community, situated at 21 Salisbury Avenue, Kingston 6, Saint Andrew. The development consists of twelve standard town houses, six townhouses with basements, and twelve apartments. The Company is under contract to acquire two apartments and three townhouses (one standard and two with basements). Construction is underway and is expected to be completed by the fourth quarter of 2020 thereafter it is to be held for capital appreciation and ultimate sale.
Transactional Details
Acquisition Cost US$1,630,000
Classification Residential
Type Pre- Construction
Location Jamaica
First Rock Capital Holdings | Prospectus 31 5 Seaview Avenue
Description
The property is approximately 68,727 square feet or 1.58 acres with an existing residential building poised for a residential and/or commercial development. Planning is far advanced to execute a commercial development subject to obtaining all necessary approvals. Units will be sold for profits and some retained for residual income.
Transactional Details
Acquisition Cost US$2,200,000
Classification Commercial
Type Development
Location Jamaica
32 First Rock Capital Holdings | Prospectus Torres de Heredia
Description
A multi-block, high rise apartment complex located in San Jose, Costa Rica within close proximity to several free zones and the National Convention Centre. The complex will have seven blocks upon completion. The Company acquired five of the apartments and have entered a three-year guaranteed leaseback arrangement with the developer for all five.
Transactional Details
Acquisition Cost US$635,841
Classification Residential
Type Income Producing
Location Wider Caribbean (Costa Rica)
First Rock Capital Holdings | Prospectus 33 Ultima Park II
Description
Ultima Park II, located in the upscale area of Escazu, San Jose, Costa Rica is a mixed-use office and warehouse development. The complex was built in 2017 and comprises of fifty-six units with over 6,000 square metres of space. The Company acquired two units which are under three to five-year leases with reputable Costa Rican companies.
Transactional Details
Acquisition Cost US$1,129,000
Classification Commercial
Type Income Producing
Location Wider Caribbean (Costa Rica)
34 First Rock Capital Holdings | Prospectus WaterMill Villas
Description
WaterMill Villas is located in Old Fort Bay, St. Ann, consists of fourteen two-bedroom and four four-bedroom townhouses. The Company has three of the two-bedroom units within its portfolio. Each two-bedroom unit consists of two point five bathrooms, large living/dining area, full kitchen and covered garden patio. These units are be managed and marketed for local and international short-term rentals.
Transactional Details
Acquisition Cost US$872,426
Classification Residential
Type Income Producing
Location Jamaica
First Rock Capital Holdings | Prospectus 35 8.5 Pipeline Opportunities Bamboo Avenue
Description
Located in Kingston 6, Saint Andrew, the property is a 3. 4 acres plot of land with an existing residential building. The terrain and location of the subject property makes it ideal and suitable for a luxury townhouse development to generate profits through sale and residual income from rental of units. Ground to be broken in the second quarter of 2020.
Transactional Details
Purchase Price US$5,000,000
Intended Debt US$2,500,000
Intended Equity US$2,500,000
Classification Residential
Type Development
Location Jamaica
36 First Rock Capital Holdings | Prospectus Shoppes at Rosehall
Description
Shoppes at Rosehall is located along the north coast of Jamaica, in Rosehall, Montego Bay, Saint James. The property is a total of 6 acres, with 4.5 acres of developed land and 1.5 acres of undeveloped land. The property currently has twenty – nine shops, twenty-two of which are occupied/ leased generating rental income.
Transactional Details
Purchase Price US$13,250,000
Debt US$6,250,000
FCH Equity US$3,000,000
Syndication US$3,000,000
Classification Commercial
Type Income Producing
Location Jamaica
First Rock Capital Holdings | Prospectus 37 SunTrust
Description
Located at 9933 Sowder Village Square, Virginia, USA, the property is a single-story commercial office building consisting of 4,180 square feet, situated on 24,829 square feet of land. The property is currently leased and occupied by SunTrust Bank for twenty years with nine years remaining and an option to renew for two consecutive five year terms thereafter.
Transactional Details
Purchase Price US$7,000,000
Debt US$3,150,000
FCH Equity US$2,000,000
Syndication US$1,850,000
Classification Commercial
Type Income Producing
Location USA
38 First Rock Capital Holdings | Prospectus 8.6 competitive Environment Classification TYPE Allocation Competition in the real estate investment industry in Jamaica has grown over the past few years, with real estate based financial instruments such as real estate investment companies which offer a diversified product. In the view of the Company, there are currently five (5) major industry players in Jamaica whose securities are currently traded on the Jamaica Stock Exchange (JSE): i. 138 Student Living Jamaica Limited (138 SL) ii. Kingston Properties Limited (KPREIT) iii. PanJam Investment Limited (PJAM) iv. Sagicor Real Estate X Fund Limited (XFUND) v. Eppley Caribbean Property Fund Limited (EPLY)
8.7 capital Deployment & Allocation The capital raised from the IPO is to be deployed in Residential Commercial accordance with the Company’s strategy for realising targeted return on equity, while operating within a robust Deployment of the IPO proceeds will focus on the three risk management framework. (3) categories illustrated in the graph below, namely: The Company currently intends to focus initially on i. Income producing (64%) three (3) target jurisdictions namely: (i) Jamaica (ii) the These are real estate assets which will be Wider Caribbean and (iii) the United States of America acquired solely for the purpose of generating as illustrated in the graph below: rental income. ii. Developments (23%) This involves the acquisition of property JURISDICTION AllocatioN (green and brownfield) for commercial and or residential developments; and iii. Capital Gains (13%) From time to time, opportunities will arise whereby, properties may be acquired and held for capital appreciation and ultimate sale.
REAL ESTATE TYPE Allocation
Jamaica Wider Caribbean USA
Within these jurisdictions there will be an emphasis on both commercial real estate eighty per cent (80%) over residential real estate twenty per cent (20%) as illustrated in the graph below: Income Producing Capital Gains Developments
First Rock Capital Holdings | Prospectus 39 The Board of Directors has oversight of iv. Investment in Real Estate Linked and Other Financial asset allocation for the purposes of portfolio Instruments diversification. However, the Management As part of its yield generation strategy, the Company may Company has some discretion to determine invest in financial instruments securitized by real estate the actual allocations in accordance with the assets. In addition, other income may arise from gains in Company’s Asset Allocation Policy which is investments in real estate mutual funds, and revaluation described in section 8.8(I) below. Tactical of investment properties. asset allocation may from time to time result in the holdings falling outside of the B. Expenses approved limitations for the short term. Over The Company intends within a period of two (2) to three (3) years to the longer term, asset allocation is expected achieve a cost to income ratio not exceeding thirty per cent (30%). to remain stable over most market cycles. The following expenses will be borne by the Company: Since capital appreciation, depreciation and (i) Annual Company registration fees and any applicable taxes trading activity in each asset type can result in respective jurisdictions; in a deviation from the Company’s Asset (ii) Quarterly and annual financial reporting fees Allocation Policy, the overall asset allocation (iii) Accounting/Audit/Legal and other professional fees position will be monitored, and capital (iv) Administration and management fees; redirected as necessary. (v) Valuations and market reads /research fees; (vi) Marketing, public relations and advertising costs; and 8.8 Investment Strategy and the (vii) Sales commissions and selling agent fees. Economics of the Company C. Management Expense Ratio (MER) A. Revenue The Company targets a management expense ratio not exceeding The Company expects to derive revenue three point five per cent (3.5%). The MER includes management from four (4) main categories: fees plus Preference Share dividend, portfolio or the company’s i. Income Producing Properties day-to-day operating expenses, such as record keeping, valuation These are real estate assets acquired costs, audit and legal fees and other general & administrative solely for the purpose of generating costs, as well as non-recoverable taxes. The MER is expressed as rental income. Rental income is a percentage of the company’s average total assets. intended to represent the bulk of the Company’s total revenue in the short D. Leverage to medium term. The Company utilizes leverage as a part of its business strategy to enhance return on equity to Shareholders. The cost of debt is ii. Development Properties managed by the Company’s strategy to borrow at highly competitive This involves the acquisition of rates from various sources. The intention is to maintain a blended property (green and brownfield) debt to equity ratio of up to seventy- five per cent (75%) on its total for commercial and or residential portfolio. developments. iii. Capital Gains E. Funding Velocity This involves opportunities whereby The Company expects to fund US$12,250,000.00 over the next properties may be acquired and held twelve (12) months using the proceeds of the IPO based on for capital appreciation and ultimate evaluation and assessment of potential investment opportunities. sale. Income from the sale of units in developments is projected to come into effect during the first quarter of the 2021 Financial Year based on presumed pre-completion sales of some of the units in the development targets. A steady increase is projected over the review period as a part of the Company’s exit and rebalancing strategy.
40 First Rock Capital Holdings | Prospectus F. Management Fees All submissions to ARMC, will have This represents not more than two per cent (2%) of the net asset value parameters for submission including, of the Company based on the annual audited financial statements, but not limited to: payable quarterly to the Management Company based on the quarterly (i) overview; unaudited financial statements. (ii) financial projections G. Marketing, Sponsorship & Donations (iii) detailed analysis of the In line with best practice, this is not expected to exceed three per cent proposed opportunity (3%) of total revenue on a rolling basis. (iv) details of project partners H. The Company’s Economics (v) market appraisals of the The Company’s value proposition is designed to provide Shareholders with value of land and underlying three (3) main benefits: diversified portfolio of real estate and investment collateral assets, attractive tax efficient returns and stable distribution of cash-flows. (vi) SWOT analysis; and (i) Income Producing (64%), Development (23%) and Capital Gains (13%) (vii) justification for recommendation including (ii) Dividend Payout Ratio > 50% exit strategy. (iii) Targeted ROE of 12% by Year 5 In addition, leverage will be used as part (iv) Targeted Internal Rate of Return > 16% of the Company’s business strategy. The (v) Targeted Management Expense Ratio < 3.5% cost of debt, which is factored into the projected net revenue in the income I. Asset Allocation Policy statement projections, will be managed. The Asset Allocation Policy for the Company consists of deployment and The mandate is to maintain a debt to review strategies including but not limited to the following: equity ratio not exceeding seventy-five per cent (75%) overall. (i) management of assets and liabilities; Adjustments or changes to the Asset (ii) the limits and authorities for allocations; and Allocation Policy can only be approved (iii) the approach to measure, report and mitigate the by the Board of Directors. various risks that the Company may face. Recommendations for deployment of capital are to be made by the J. Asset Management Policy The Company’s Asset Management Policy Management Company’s Executive team, based on an initial screening provides guidelines for management of and due diligence of the opportunity. The Management Company’s five assets by the Management Company (5) member Asset and Risk Management Committee (ARMC) comprises and in particular: of: (i) it describes the overall (i) the Chairman of the Management Company objective and approach for (ii) two (2) other Non – Executive Directors managing the Company’s of the Management Company assets; (iii) the President and CEO of the Management Company (ii) it establishes the desired (iv) invitees: Manager- Finance, Risk & Compliance, Executive asset allocation mix designed Vice- President Real Estate Business and other experts. to achieve the strategic objectives All recommendations are presented to the ARMC by the Management Company executives. The ARMC approves all amounts up to (iii) it establishes asset US$4,000,000. For amounts greater than US$4,000,000, the ARMC seeks management guidelines final approval from the Management Company’s Board of Directors. and constraints regarding permissible assets and diversification of same; and
First Rock Capital Holdings | Prospectus 41 (iv) it defines the Stage Step Details responsibilities of the Board of Directors and 1 Screening • Signing of non-disclosure (NDA) other parties responsible • Initial due diligence of opportunity for the management • Indicative proposal of assets including the • Comprehensive due diligence / Management Company. analysis is undertaken. • Risk management committee Again, leverage is used as part of assess for suitability the Company’s business strategy. • Deal is rejected if risk / reward The cost of debt, which is factored ratio is unacceptable into the projected net revenue in • Deal is recommended to ARMC the income statement projections, if risk / reward is acceptable is managed. The mandate is to 2 Approval • Deal presented to ARMC maintain a debt to equity ratio not Process • Full financial information exceeding seventy-five per cent • Detailed Investment Memo (75%) overall. • Determination of IRR and exit The Asset Management Policy is • All risks & mitigants highlighted reviewed and revised by the Board • ARMC approves if
42 First Rock Capital Holdings | Prospectus Section 9 Professional Advisors to the Company
Arranger & Lead Stock Broker Sagicor Investments Jamaica Limited 85 Hope Road Kingston 6 Saint Andrew
Attorneys to the Company in the Invitation MH&CO., Attorneys-at-Law 7 Barbados Avenue (Second Floor) Kingston 5 Saint Andrew
Auditor PricewaterhouseCoopers Scotiabank Centre Duke Street KINGSTON
Co-Arranger Sygnus Capital Limited Unit 28, 80LMR 80 Lady Musgrave Road Kingston 10 Saint Andrew
Management Company First Rock Capital Resource Limited 14 Canberra Crescent Kingston 6 Saint Andrew
Registrars and Transfer Agent Jamaica Central Securities Depositary Limited 40 Harbour Street KINGSTON
First Rock Capital Holdings | Prospectus 43 Section 10 Directors and Senior Officers and their Interests
10.1 Biographical Details of the Directors and Senior Managers of the Company Brief biographical details of the Directors are set out below. The Directors’ residential addresses are set out in Section 19 hereto, and all of them may be contacted for business purposes at the Company’s local address at Suite 6, 14 Canberra Crescent, Kingston 6, Saint Andrew, Jamaica. Telephone: (876) 774-1733 Website: http://www.firstrockcap.com/
DIRECTORS’ BIOGRAPHIES
Dr. David Lowe Chairman (Non-Executive, Independent) Mr. David Lowe is the Chairman. He brings to the Board his considerable expertise in business and governance. He is formerly the Chief Executive Officer of Caribbean Producers Jamaica Limited a JSE listed company and currently serves as a board member of the National Health Fund and Chairman of the Western Region Health Authority (WRHA) and the National Compliance Regulatory Authority (NCRA). He received his Ph.D. in Corporate Finance from the Manchester Business School, University of Manchester, UK.
Norman Reid J.P. Deputy Chairman (Non-Executive, Independent) Mr. Norman Reid is the Deputy Chairman. He is a career banker and is the Chairman of Port Security Corps Limited, Sam Sharp Teachers College and also holds Directorships in the EXIM Bank, Access Financial Services Limited, Western Regional Health Authority, Embassy Loans USA LLC and Growth Tech Limited. Mr. Reid holds a BA in Banking and Finance, a Diploma in Banking (ACIB) and a Diploma in Retail Banking from the BAI (BANK Administration Institute) USA. He is also a Fellow of the Institute of Banking and Financial services in the UK. In 2018, he was appointed as a mentor to the Emerging Leaders Initiative administered by the BAI. He is also a Justic of the Peace for the Parish of St. James.
Douglas Halsall, O.D. Director (Non-Executive, Independent) Mr. Douglas Halsall has spent the last forty years in the Information Technology in Jamaica and has assisted in the implementation of the first Automated Teller Machine (ATM) in Jamaica, and in computerizing many industries ranging from Health Insurance, Credit Unions, Retail, Government Accounting and Hospitality & Tourism. He founded Advanced Integrated Systems (AIS) in 1987 and serves as its Chief Executive Officer. He previously served as Chairman and CEO of National Cash Register (NCR) for ten years. He was awarded the Order of Distinction in Information Technology.
44 First Rock Capital Holdings | Prospectus York Page Seaton, C.D., J.P. Director (Non-Executive, Independent) Mr. York Page (Y.P.) Seaton is a qualified engineer and founder and CEO of Y.P. Seaton & Associates Company Limited Construction, Development, Electrical and Mechanical Engineering Contracting company in Jamaica and the wider Caribbean. He was awarded the Order of Distinction (Commander) by the Government of Jamaica in construction and development and also serves as a Justice of the Peace for the parish of St. Andrew.
Lisandra Rickards Director (Non-Executive, Independent) Ms. Lisandra Rickards is currently the CEO of the Branson Centre of Entrepreneurship – Caribbean. The Centre seeks to help local businesses prosper by supporting their progress and development and assisting them to access the funding and the markets they need to scale their businesses. She brings to the Board her experience funding programmes in multiple categories including equity investing, crowdfunding, lending, and grants. She received an M.B.A. with Honours from Harvard Business School and a B.A. in Economics from the University of Chicago.
Alton Morgan Director (Non-Executive, Independent) Mr. Alton E. Morgan is an Attorney-at-Law admitted to practise in Jamaica in 1977. He is the Managing Partner the law firm Alton E. Morgan & Company which specializes in legal services concerning Real Estate and Property Development, and Business, as well as Arbitration. He serves on numerous private sector boards.
First Rock Capital Holdings | Prospectus 45 Kisha Anderson J.P. Director (Non-Executive, Independent) Mrs. Kisha Anderson began her tenure with Jamaica Money Market Brokers Limited (JMMB) in 1996 and has worked in several areas of the company’s operations. She recently served as Country Manager of JM’B’s Jamaican-based subsidiaries: Jamaica Money Market Brokers (JMMB) Limited, JMMB Merchant Bank Limited, JMMB Insurance Brokers Limited, JMMB Fund Managers Limited and JMMB Securities Limited (Jamaica). She has gained an in-depth understanding of the financial sector, through her extensive experience as part of the JMMB team and knowledge gained through her participation in a range of professional development courses including: project management, retail banking, people management and securities. She entered the field with a degree in Environmental Sciences from the UWI, Mona. In November 2015 she completed and graduated from a four (4) month Harvard Business School General Management Program, where she gained invaluable knowledge and exposure to new paradigms and techniques to support her strategic and leadership capabilities. She currently sits as a director on the Boards of JMMB Insurance Brokers Ltd., JMMB Fund Managers Ltd., JMMB Securities Limited, JMMB Money Transfer Limited, JMMB Ltd., JMMB Investments (T&T) and JMMB Securities (T&T). She is also a Justice of the Peace for the parish Kingston.
10.2 Directors’ Interests in Shares Remuneration Committee The following Director hold the following interest in Shares: Alton Morgan (Chairman) Norman Reid Director Shareholding Before Opening Date Lisandra Rickards York Page Seaton 3,854,158 Corporate Governance Douglas Halsall* 2,000,000 Committee *Connected- Health Administration Limited Alton Morgan (Chairman) No Director receives Shares, or option in respect of Shares in Douglas Halsall consideration of services rendered by him/her to the Company. Kisha Anderson
10.3 corporate Governance and Accountability In addition, the Company has appointed The Board of Directors has constituted two (2) committees, namely the PricewaterhouseCoopers to Audit Committee and the Remuneration Committee, as required pursuant provide it with external audit to the provisions of the Main Market Rules and has additionally constituted services. a Corporate Governance Committee, although not required by the Main Market Rules. The members of the respective committees are as follows: 10.4 Directors’ Fees and Audit Committee Executive Emoluments Norman Reid (Chairman) Members of the Board of Directors Douglas Halsall will receive a fee of US$1,500 per David Lowe quarter (inclusive of a $750 retainer) and a fee of US$500 per meeting of the Board (or any Subcommittee) attended.
46 First Rock Capital Holdings | Prospectus Section 11 Management Discussion and Analysis
11.1 Discussion Commercial Activity The following Management’s Discussion and Analysis (“MD&A”) is intended The Company began operating in to assist prospective investors with understanding the financial position of March 2019, upon completion of the First Rock Group for the period defined as the reporting period below. its private placement offer in which The MD&A is provided as a supplement to and should be read in conjunction approximately US$16 million in with the Reviewed Consolidated Financial Statements of the First Rock Group capital was raised from institutional and the accompanying notes. and accredited high net worth investors. As such, the financial results mainly reflect the activities Overview of the Business of the company from March 15th The Company is an international business company duly incorporated 2019 through to September 30th th under the laws of Saint Lucia in October 4 2017. It is an investment holding 2019. The company’s financial year company, with a core focus on real estate and private equity investments. end is December 31st and its first The Company’s primary aim is to provide its Shareholders with a tax-efficient financial year will consist of twenty- vehicle, offering an enhanced level of income, above average dividend six months ending December 31st yield and preservation of capital through the diversification of assets. 2019. No revenues were generated Therefore, the Company’s capital is deployed for the ultimate benefit of its prior to March 15th 2019. Shareholders. The Company invests primarily in real estate assets including income generating investment properties, development projects (greenfield and brownfield), real estate linked financial instruments and opportunistic Results of Operations private equity investments. First Rock Group The Company’s investment scope includes Jamaica, the wider Caribbean, The Group recorded a profit North America and Latin America. The Company has three (3) wholly owned attributable to shareholders of subsidiaries: US$218,261 over the twenty-three (i) First Rock USA LLC, a limited liability company incorporated in month period August 2017 to th and under the laws of the State of Florida, USA; September 30 2019 (“the reporting period”). Pre-operational expenses (ii) First Rock Capital Latam, Sociedad Anónima, a corporation consisting mainly of legal, marketing incorporated in and under the laws of Costa Rica; and and travel expenses, amounted to (iii) First Rock Capital Cayman Limited, a limited liability company US$61,941. Profit attributable to incorporated in and under the laws of the Cayman Islands, shareholders during the effective which together with the Company forms the First Rock Group. trading period March 2019 to September 2019 was therefore The subsidiaries were formed in Cayman, USA and Costa Rica to create US$280,202. greater transparency and monitoring of the assets and income in said jurisdictions. They also facilitate the ease of doing further business in the Total income during the reporting jurisdictions as well as solidifying the Company’s presence. The jurisdictions period was US$993,894 which of focus will expand over time but a key consideration for the Company comprised mainly of US$217,080 in will always be those jurisdictions exhibiting economic growth and strong interest from real estate linked notes prospects for economic growth. and other financial instruments, US$393,042 in Property Revaluation The Company is administratively managed by First Rock Capital Resource Gains and US$374,301 in foreign Limited, which is a limited liability company duly incorporated under the exchange gains. It is a key strategy laws of Jamaica and engaged under contract by the Company to achieve of the First Rock Group to acquire the Company’s goals and objectives whilst adhering to the policies properties at discounts to market and guidelines determined by the Company, in accordance with all value to not only realize revaluation applicable laws. gains, but also from a risk mitigation viewpoint in the event the asset is to be sold.
First Rock Capital Holdings | Prospectus 47 Total operating expenses during the reporting period amounted to Investment Properties US$767,428. This was mainly comprised of Management Fees of US$184,766 Profitability is expected to further and marketing and public relations expenses of US$156,078 and irrecoverable increase in the fourth quarter of General Consumption Tax (GCT) of US$51,788. This resulted in an efficiency the 2019 financial year as First ratio of eight per cent (8%). The Management Company is confident that this Rock Group begins to realize rental ratio will fall below three point five per cent (3.5%) by the end of the year, income portfolio of properties as additional capital is raised from the IPO, and profitability is increased. acquired to date. The Management As at September 30th 2019 the First Rock Group had US$15,896,914 in Company is therefore optimistic total assets, comprising mainly of US$8,602,992 in Investment Properties, that the target ROE of eight per cent US$4,198,571 in Financial Assets measured at amortised cost, including (8%) will be achieved by the end of real estate linked notes, and US$1,098,701 property acquisition deposits. the year. As at September 30th 2019 Shareholder Equity stood at US$15,695,467. Acquisition of three (3) two- US$16,602,207 in capital was raised privately from institutional and bedroom units in Watermill Villas, accredited investors, for 166,122,068 ordinary shares. One-time transaction Saint Ann was completed in August costs associated with the share issue for the private capital was US$554,963. and preparations are ongoing with These costs represented fees paid to the arranger, broker and selling agent a target of being ready for short- fees, and legal fees. An amount of US$30,036 has been accrued to date for term rentals for the 2019/20 Winter the IPO. Season. Anticipated net yield is projected to be 8% annually. The Company Acquisition of a commercial building on Balmoral Avenue was completed The Company recorded a profit attributable to Shareholders of US$169,276 in August. The tenant, Medimpex over the twenty-three-month period August 2017 to September 30th 2019 Jamaica Limited, has a ten (10) (“the reporting period”). Pre-operational expenses consisting mainly of legal, year lease agreement with lease marketing and travel expenses, amounted to US$61,941. Profit attributable payments commencing December to Shareholders during the effective trading period March to September 1st. Projected average annual net 2019 was therefore US$231,217. yield over the life of the lease is eight Total income during the reporting period of US$899,888 comprised mainly point five per cent (8.5%). of US$219,743 in interest from real estate linked notes and other financial Acquisition of both residential and instruments, US$305,844 in property revaluation gains and US$374,301 commercial properties in Costa in Foreign Exchange gains. It is a key strategy of the Company to acquire Rica was completed at the end of properties at discounts to market value to not only realize revaluation gains, September. Torres de Heredia is but also from a risk mitigation viewpoint in the event the asset is to be sold. a residential development where Total operating expenses during the reporting period amounted to the Company acquired five (5) US$722,407. This mainly comprised of Management Fees of US$184,766, apartments under a lease-back marketing and public relations expenses of US$155,928 and GCT Irrecoverable arrangement with the developer of US$51,788. with a guaranteed annual net yield As at September 30th 2019, the Company had US$15,845,980 in of eight per cent (8%). Ultima Park II total assets, comprising mainly of US$5,955,388 in investment is a commercial development where properties, US$4,198,571 in financial assets measured at amortised the Company acquired two (2) units cost, including real estate linked notes, and US$2,435,740 in related with attractive long-term leases party loans. with reputable tenants in place. The annual net yield from these units As at September 30th 2019 shareholder equity stood at US$15,646,482. are projected to be nine point one US$16,602,207 in capital was raised privately from institutional and five per cent (9.15%). accredited investors, for 166,122,068 ordinary shares. One-time transaction costs associated with the share issue for the private capital was US$554,963. Acquisition of two (2) condominium These costs represented fees paid to the arranger, broker and selling agent units in Icon on Brickell Avenue in fees, and legal fees. An amount of US$30,036 has been accrued to date for Miami was completed in July. One the IPO. unit is leased on a guaranteed rental
48 First Rock Capital Holdings | Prospectus income program and benefits from additional income The macro-economic environment in the jurisdictions determined as a percentage of total rental income where the Company has ventured is quite positive. In earned from the unit. The other unit is managed and Jamaica, where the Company’s core operations are, marketed for short-term rentals. Income from these low interest rates and reduced real estate transaction units are expected to be cyclical, but average annual costs have had a major impact on the buoyancy of the net yield over the next five years is projected to be in industry. In Cayman, as the population growth and the range of seven to eight per cent (7- 8%). tourism arrivals continue to outpace the available stock Acquisition of five (5) residential units at pre-construction of housing and tourist accommodations, construction is prices in The Grove Cayman is underway, with the on the rise. In Costa Rica, as the Government continues Company having duly executed sales agreements for to implement fiscal reform, consumer confidence is all five units, and a deposit of twenty per cent (20%) of beginning to rise, and as many major multinational the total purchase price has been paid to the vendor. The companies continue to view the country as an ideal Grove is a mixed-use development with retail spaces on logistics hub, the real estate industry is forecasted to the ground floor and residential units on the 2nd and remain strong. The USA property market is cyclical, and 3rd floors. Upon completion at the end of first quarter despite talks of an impending recession in some circles, of 2020, the Company will enter into contract with an the Company has targeted, and will continue to target, on-site property management company who will market properties in that jurisdiction which are historically the units for short-term rentals. The projected average resilient to any market shocks. annual net yield over the next five (5) years is eleven Having clientele from different jurisdictions is a core per cent (11%). part of the Company’s risk-mitigation strategy. Emphasis Income from developments are projected to start being will be placed on the North American jurisdiction, as realized in first quarter of 2021. This will primarily be data shows that there has been a steady increase from sales of units in Medinah 21, an upscale residential in investment into the Jamaican real estate market development located in Barbican, Kingston 6, Saint emanating from that region. The company will therefore Andrew Jamaica. In addition, during the Financial year continue to be guided by economic indicators in that 2021 and 2022, income from a combination of rental and jurisdiction, among others. It is expected that most of sales from the Seaview Avenue commercial development the Company’s revenue will be earned in hard currency, and Bamboo Avenue residential development is with a large portion of rental and purchase clientele projected to be realized. being multinational firms and US citizens. The Company’s liquidity ratio stood at nine to one (9:1) as The Company continues to pursue opportunities that at September 30th 2019. It is a key part of the Company’s will generate returns in excess of the eight per cent strategy to maintain a minimum liquidity ratio of three (8%) hurdle rate. For some of those opportunities, to one (3:1), especially considering that most of its discussions are quite advanced, and it is expected that investment portfolio is held in real estate assets, which the Company could enter into contract for these within are inherently illiquid. the next three (3) months. All the Company’s acquisitions to date have been done using equity. It was important to quickly deploy the equity raised via the private placement in March 2019 to satisfy shareholders’ expectations. Management believes the Company is now in a favourable position to leverage some of these assets, as well as future acquisitions, as there is now a portfolio of high-quality collateral available to financiers. Negotiations are far advanced with several regional financiers for a few of the Company’s assets, namely in Cayman and Jamaica. The Company’s strategy is to grow its leverage ratio to a maximum of seventy-five (75%) over the next five (5) years.
First Rock Capital Holdings | Prospectus 49 11.2 Management The assets and operations of the Company are administered and managed by the Management Company. The Management Company assists the Company in the execution its business strategy and its asset deployment and management. The members of the Board of Directors of the Management Company are as follows:
Dr. Michael Banbury Chairman (Non-Executive) Dr. Michael Banbury is a Co-founder of First Rock Capital Holdings Limited and First Rock Capital Resource Limited and serves as the Chief Executive Officer of Medical Associates Hospital, where he also sits on the Board. He is a Medical Doctor with specialty in Primary Care and Diabetology. Dr. Banbury is a graduate of the University of the West Indies School of Medicine where he earned his Bachelor of Medicine and Surgery (M.B.B.S). He is also a Fellow of the Royal Society for Public Health (F.R.S.P.H). Dr. Banbury serves at the Board level of various Private and Public sector entities and brings a wealth of management and business development experience.
Philip Martin Deputy Chairman (Non-Executive) Mr. Philip Martin is the Deputy Chairman of First Rock Capital Resource Limited. Mr. Martin is a seasoned Entrepreneur who has been in business for over 50 years. He is the Chairman and Managing Director of Caribbean Fencing Limited, a leading fencing provider in the region. He is also Chairman of W.A.K Investment Limited. Mr. Martin was the Co-founding Shareholder of Dehring Bunting & Golding Limited and International Media Content (Sportsmax); both were sold to the Scotia Group and Digicel Group respectively. He has served on numerous Private and Public sector boards, including Scotia Investments Limited.
Marjorie Seeberan Director (Non-Executive) Mrs. Marjorie Seeberan is a retired career Banker. She has a wealth of experience in banking and finance. Her most recent post was General Manager for Corporate Banking at National Commercial Bank Jamaica Limited. She was also the Executive Director for The University of the West Indies - May 1997 - November 2002, and before that she was the Senior Vice President of JP Morgan Chase up until November 1995. Mrs. Seeberan studied at New York University where she pursued her Master of Business Administration (M.B.A.), Finance.
50 First Rock Capital Holdings | Prospectus Ryan Reid J.P. Director (Executive) Mr. Ryan Reid is the Co-Founder of First Rock Capital Holdings Limited and First Rock Capital Resource Limited where he is also the President and CEO. Prior to this, he was the General Manager at Proven Wealth; a leading wealth management firm. Mr. Reid brings to the fore twelve years of experience in the real and financial sectors, with eight at the executive level in the financial sector. Throughout his career, he has had responsibilities of leading sales, services, accounting, investments and corporate finance teams. Mr. Reid studied at the University of the West Indies and the University of Wales where he pursued a Bachelor of Science in Banking and Finance and a Master’s in Business Administration in General Management respectively. He is the Co-Founder and Chairman of Growth Tech Limited (a local technology company), Chairman of Nationwide News Network Limited and holds directorships in Bumble Bee Digital Agency Limited, BrainBoxx Solutions and Wealth Team Incorporated. He has also held directorships in various Government of Jamaica Boards. Mr. Reid is a Justice of the Peace for the parish of St. Andrew.
Paul Hoo Director (Non-Executive) Mr. Paul Hoo is a graduate of Campion College and has a wealth of experience in business development and operations. His early business skills were sharpened in the Food Distribution Industry, specializing in the areas of marketing and sales. His career is hallmarked by management positions with dynamic organizations such as Grace Kennedy and Company Limited and Facey Commodity Company Limited. During his tenure as the Managing Director of Kingston Hatcheries Jamaica Limited, this company moved from a loss-making to a profitable position. Currently, Mr. Hoo serves as the Chairman of the Board of Petrojam, having been appointed to Jamaica’s only oil refinery in June 2018. A founding shareholder of Supreme Ventures Limited, Mr. Hoo became the President & CEO in 2001. In 2004 upon the passing of the then Chairman, Peter Stewart – accepted the role of Chairman until 2017 when he resigned. In 2001, Mr. Hoo was nominated by the Jamaica Observer for the “Business Leader of the Year Award.” He was also appointed Chairman of Jamaica’s Cocoa Industry Board in May 2008 until 2010. In 2017 he was conferred with the Order of Distinction (O.D.) from the Government of Jamaica, for outstanding contribution to the development of Sport.
First Rock Capital Holdings | Prospectus 51 Pierre Shirley Director (Executive) Mr. Pierre Shirley is the Executive Vice President of First Rock Capital Resource Limited, the Jamaica affiliate of the Company with direct oversight for the real estate investment portfolio. Until earlier this year, he was the General Manager of PROVEN REIT Limited a real estate portfolio valued in excess of US$20M. He has been involved in the real estate sector for approximately eighteen years with experience of both residential and commercial real estate deal structuring, developments, portfolio management, property management, sales, leasing and financing, mortgage origination, processing, underwriting, and funding. He received an MBA in 2015, an M.Sc. International Real Estate in 2009; and a B.B.A in 2008., all from Florida International University. He is also a licensed Real Estate Broker and a licensed Real Estate Instructor in the State of Florida and a licensed Real Estate Dealer in Jamaica.
Edwin Wint Director (Non-Executive) Mr. Edwin Wint is currently the Chairman & CEO at Better Homes and Gardens Real Estate Jamaica. His background is a Real Estate executive with broad experience in all aspects of valuation, facilities/ property management and estate management. Direct experience with real estate valuation, real estate investment consulting and real estate sales. Interested in turn-key facilities procurement as well as companies interested in top-end real estate development in the Caribbean. His specialties are Facilities Management Consulting. He was a Director of Real Estate Board and Commission for Strata Corporations, up until May 2018. He has also served as the President of the Realtors Association of Jamaica. Mr. Wint is the holder of a Master of Business Administration (MBA)/Post Graduate Diploma Construction Project Management, Construction & Real Estate from the University of Reading/College of Estate Management. He is a certified International Property Specialist, Real Estate and has a Diploma, Land Economy & Valuation Surveying from the University of Technology and a BA from The University of The West Indies.
52 First Rock Capital Holdings | Prospectus 11.3 Financial Projections of the First Rock Group
FIRST ROCK CAPITAL HOLDINGS GROUP
PROJECTIONS FOR THE 5-YEAR PERIOD JANUARY 2020 - DECEMBER 2024
Group Projected Statement of Dec. 2020 Dec. 2021 Dec. 2022 Dec. 2023 Dec. 2024 Financial Position US$ US$ US$ US$ US$
Bank & Cash Balances 1,747,186 3,851,723 2,759,458 2,077,866 2,847,265
Securities purchased under resale 4,000,000 2,000,000 1,000,000 1,000,000 1,000,000 agreements
Financial assets 11,935,185 12,750,000 12,525,000 12,800,000 13,850,000
Receivables 210,744 231,818 255,000 280,500 308,550
Loans receivable 850,000 950,000 950,000 950,000 950,000
Due from related parties 339,284 373,212 410,534 373,212 410,534
Property, plant & equipment 103,771 124,525 149,430 179,316 215,179
Investment Property 29,827,341 32,810,075 36,091,083 39,700,191 41,685,200
Pre-construction costs 1,900,000 2,280,000 2,736,000 3,009,600 3,160,080
Acquisition : Land 7,200,000 8,640,000 9,504,000 9,979,200 10,478,160
Development in progress 7,502,075 9,002,490 9,902,739 10,893,013 11,982,314
Total Assets 65,615,586 73,013,844 76,283,244 81,242,898 86,887,282
Long Term Loans 26,044,850 20,000,000 21,500,000 24,500,000 28,000,000
Other Liabilities 130,224 1,200,000 1,290,000 1,470,000 1,680,000
Corporation Tax Payable 2,294 48,630 74,329 80,521 87,895
- - - - -
Total Liabilities 26,177,368 21,248,630 22,864,329 26,050,521 29,767,895
Share Capital 37,757,243 47,757,243 47,757,243 47,757,243 47,757,243
Retained Earnings 1,680,974 4,007,971 5,661,671 7,435,134 9,362,144
Total Shareholders Equity 39,438,217 51,765,214 53,418,914 55,192,377 57,119,387
Liabilities & Shareholders Equity 65,615,586 73,013,844 76,283,244 81,242,898 86,887,282
First Rock Capital Holdings | Prospectus 53 Group Projected Statement Year Ended Year Ended Year Ended Year Ended Year Ended of Income & Expenditure Dec. 2020 Dec. 2021 Dec. 2022 Dec. 2023 Dec. 2024 US$ US$ US$ US$ US$ REVENUE Net Real Estate Income Income from real estate notes 568,333 990,000 1,045,000 1,045,000 1,100,000 Sale of units - 1,500,000 3,780,000 3,969,000 4,167,450 Rental income 3,249,556 3,759,400 4,156,000 4,726,100 5,767,080 Less: Property Operating Expenses (467,970) (498,692) (524,132) (549,390) (1,015,302)
Net Real Estate Income 3,349,920 5,750,709 8,456,869 9,190,711 10,019,229
Net Interest Income Interest Income 165,000 296,000 256,000 276,000 316,000 Interest Expense (1,164,791) (1,200,000) (1,290,000) (1,470,000) (1,680,000)
Net Interest Income -999,791 -904,000 -1,034,000 -1,194,000 -1,364,000
Other Income Gains on sale of financial assets 60,000 75,000 90,000 100,000 175,000 Dividend Income 240,000 264,000 290,400 319,440 335,412 Foreign Exchange Gain/ (Loss) 598,882 628,826 660,268 693,281 727,945 Unrealised FV gain 775,109 813,865 854,558 897,286 942,150
Total Other Income 1,673,991 1,781,691 1,895,226 2,010,007 2,180,507
Total Income 4,024,120 6,628,400 9,318,094 10,006,717 10,835,736
Expenses Management fee 629,879 1,043,851 1,080,622 1,120,223 1,163,471 Depreciation 377 12,453 14,943 17,932 21,518 Audit Fees 70,000 73,500 77,175 81,034 85,085 Research & Development 25,000 26,250 27,563 28,941 30,388 Other professional fees 21,752 22,840 23,982 25,181 26,440 Legal fees 64,000 67,200 70,560 74,088 77,792 Agents’ commission expense 18,000 18,900 19,845 20,837 21,879 Insurance - commercial 20,000 21,000 22,050 23,153 24,310
54 First Rock Capital Holdings | Prospectus Group Projected Statement Year Ended Year Ended Year Ended Year Ended Year Ended of Income & Expenditure Dec. 2020 Dec. 2021 Dec. 2022 Dec. 2023 Dec. 2024 US$ US$ US$ US$ US$ Seminars 10,000 10,500 11,025 11,576 12,155 Business meetings 10,000 10,500 11,025 11,576 12,155 Marketing, Public Relations, 120,724 132,568 186,362 185,124 200,461 Sponsorship & Donations Website expenses 7,251 7,613 7,994 8,394 8,813 Computer software expenses 25,000 26,250 27,563 28,941 30,388 Directors’ fees & travel 75,000 78,750 82,688 86,822 91,163 Local travel & subsistence 10,000 10,500 11,025 11,576 12,155 Foreign travel & subsistence 40,000 42,000 44,100 46,305 48,620 Office Space Facilities & 42,000 42,000 42,000 42,000 42,000 Resource charge Stationery & printing 7,500 7,875 8,269 8,682 9,116 Postage, delivery & cable 3,500 3,675 3,859 4,052 4,254 Dues & subscriptions 2,500 2,625 2,756 2,894 3,039 Investment & administration 12,000 12,600 13,230 13,892 14,586 fees Registrar fees 18,000 15,000 15,750 16,538 17,364 Regulatory fees 2,000 2,020 2,121 2,227 2,338 Withholding tax irrecoverable 1,920 1,344 1,411 1,482 1,556 GCT irrecoverable 66,060 69,363 72,831 76,473 80,296 Bank charges 4,000 4,200 4,410 4,631 4,862
TOTAL EXPENSES 1,306,462 1,765,377 1,885,157 1,954,570 2,046,207
Net Profit Before Pref 2,717,658 4,863,023 7,432,937 8,052,147 8,789,529 Dividend & Taxation Preference Dividend 29,197 136,085 706,641 837,514 949,647 Taxation 40,765 72,945 111,494 120,782 131,843
Net Profit Attributable 2,647,696 4,653,992 6,614,802 7,093,851 7,708,040 to Shareholders / Total Comprehensive Income
Return on Equity 10% 10% 13% 13% 14%
First Rock Capital Holdings | Prospectus 55 Group Projected Statement Year Ended Year Ended Year Ended Year Ended Year Ended of Cashflows Dec. 2020 Dec. 2021 Dec. 2022 Dec. 2023 Dec. 2024 US$ US$ US$ US$ US$ Cash Flows from Operating Activities: Net profit 2,647,696 4,653,992 6,614,802 7,093,851 7,708,040 Adjustment for: - Depreciation 377 12,453 14,943 17,932 21,518 Taxation Expense 917 46,336 25,699 6,192 7,374 - Operating cash flow before movements in working capital 2,648,991 4,712,781 6,655,444 7,117,975 7,736,931 Changes in: Loans receivable -44,260 -100,000 0 0 0 Other receivables 0 -21,074 -23,182 -25,500 -28,050 Other liabilities 79,716 1,069,776 90,000 180,000 210,000 Resale agreements -4,000,000 2,000,000 1,000,000 0 0 Related company -113,510 -33,928 -37,321 37,321 -37,321 Dividends paid -1,323,848 -2,326,996 -4,961,101 -5,320,388 -5,781,030 Net cash provided/(used in) by operating activities (2,752,911) 5,300,558 2,723,840 1,989,408 2,100,530
Cash Flows from Investing Activities: Acquisition / Disposal of PPE -100,377 -33,207 -39,848 -47,818 -57,381 Financial Assets -7,414,332 -814,815 225,000 -275,000 -1,050,000 Acquisition: Land -4,980,730 -1,440,000 -864,000 -475,200 -498,960 Pre-Construction costs -1,900,000 -380,000 -456,000 -273,600 -150,480 Development in progress -6,756,331 -1,500,415 -900,249 -990,274 -1,089,301 Investment Property -23,299,623 -2,982,734 -3,281,008 -3,609,108 -1,985,010 Cash used in investing activities (44,379,456) (7,151,171) (5,316,105) (5,671,000) (4,831,132)
Cash Flows from Financing Activities: Notes payable 26,044,850 -6,044,850 1,500,000 3,000,000 3,500,000 Issue of ordinary shares 22,250,000 10,000,000 0 0 0 Net cash provided by financing activities 48,294,850 3,955,150 1,500,000 3,000,000 3,500,000 Net (Decrease)/Increase in Cash and Cash Equivalent 1,162,483 2,104,537 -1,092,265 -681,592 769,398 Cash and cash equivalents at beginning of year 584,703 1,747,186 3,851,723 2,759,458 2,077,866 Cash and Cash Equivalents at end of period 1,747,186 3,851,723 2,759,458 2,077,866 2,847,265
56 First Rock Capital Holdings | Prospectus Group Projected Statement Share Capital Retained Earnings Total of Changes In Equity US$ US$ US$
2020 Balance at 1 January 2020 27,757,243 357,126 28,114,369 Total Comprehensive Income for the period 2,647,696 2,647,696 Rights Issue 10,000,000 10,000,000 Transaction Costs Share Issue Dividends Paid (1,323,848) (1,323,848) Balance at 31 December 2020 37,757,243 1,680,974 39,438,217
2021 Balance at 1 January 2021 37,757,243 1,680,974 39,438,217 Total Comprehensive Income for the period 4,653,992 4,653,992 Rights Issue 10,000,000 10,000,000 Transaction Costs Share Issue Dividends Paid (2,326,996) (2,326,996) Balance at 31 December 2021 47,757,243 4,007,971 51,765,214
2022 Balance at 1 January 2022 47,757,243 4,007,971 51,765,214 Total Comprehensive Income for the period 6,614,802 6,614,802 Rights Issue - - Transaction Costs Share Issue Dividends Paid (4,961,101) (4,961,101) Balance at 31 December 2022 47,757,243 5,661,671 53,418,914
2023 Balance at 1 January 2023 47,757,243 5,661,671 53,418,914 Total Comprehensive Income for the period 7,093,851 7,093,851 Rights Issue - - Transaction Costs Share Issue Dividends Paid (5,320,388) (5,320,388) Balance at 31 December 2023 47,757,243 7,435,134 55,192,377
2024 Balance at 1 January 2024 47,757,243 7,435,134 55,192,377 Total Comprehensive Income for the period 7,708,040 7,708,040 Rights Issue - - Transaction Costs Share Issue Dividends Paid (5,781,030) (5,781,030) Balance at 31 December 2024 47,757,243 9,362,144 57,119,387
First Rock Capital Holdings | Prospectus 57 NOTES TO THE FINANCIAL PROJECTIONS
Bank & Cash Balances Cash and cash equivalents comprise cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less.
Brokerage Commissions This represents fees payable to brokers for corporate finance services such as structuring of debt securities, etc.
Director’s Fees & Related expenses This represents fees payable to directors plus travel costs associated with board meetings. Fee structure is based on 9 directors at US$1500 per quarter.
Dividend income - Listed Equities & Mutual Funds Dividend income - Listed Equities & Mutual Funds comprises of dividends from mutual funds (primarily real estate) and listed equity investments. Additionally, it includes dividends from Private Equity investments.
Financial assets The Company’s financial instruments included in this classification are both securities with prices quoted in an active market or for which fair values are otherwise determinable, and securities with prices not quoted in an active market. These comprise mainly of Structured Notes, Corporate Bonds and Mutual Funds linked to Real Estate. This consists of FCH’s equity input in the Margaritaville Note, NFE Note, WAK Investments Note, CIS Note, and/or any other similar pipeline opportunities.
FV Gain Revaluation Gain comprises of gains from the revaluation of the Company’s investment properties. This includes gains realised on acquisition of properties below market value, and annual revaluation gains of investment properties.
GCT Irrecoverable This represents GCT paid on invoices which cannot be recovered due to the Company being non-Jamaican.
Income - Real Estate Structured Instruments Dividend Income - Real Estate Structured Instruments comprises of dividends earned on available for sale investments such as MVL, WAK Investments and/or any other similar pipeline opportunites.
Investment Properties Investment properties, comprising principally land and buildings, are held for long-term rental yields and capital appreciation and are treated as long-term investments. They are measured initially at cost, including related transaction costs and are subsequently measured at fair value.
Land / Development in Progress Land /Development in Progress comprises all costs that are directly attributable to development activities or that can be allocated on a reasonable basis to such activities. These costs comprise the value of land contributed to the development, direct costs related to property development activities and indirect costs that are attributable to the development activities and can be allocated to the project.
Legal & Professional Fees This represents in-house legal contract fees of US$54,000 per annum plus any additional fees.
Management fee This represents a fee of 2% of total shareholders’ equity, payable to the Management Company, the entity engaged to provide investment management services to the Company.
58 First Rock Capital Holdings | Prospectus Marketing, Sponsorship & Donations This represents best practice amount of 3% of revenue.
Other Liabilities Other Liabilities comprise of any other balances owed by the Company, such as interest payable, taxation payable, accrued expenses, etc.
Other Receivables Other Receivables comprise of balances due to the company, including prepayments, trade receivables and interest receivable on Financial assets at FV through P&L
Preference Dividend This represents performance fee payable to FCR, calculated at 25% of profits over hurdle profit. Hurdle profit is 8% of total shareholder equity.
Registrar Services This represents fees payable to JCSD for services related to the IPO and ongoing management of the Company’s shareholder register
Related Company Related company comprises of amounts due from/to the Company’s subsidiaries and associates. It also represents amounts due from/to the Management Company.
Rental Income Rental Income comprises of rental/lease income earned from income producing properties. These include the portfolio properties; Icon Condominiums, Ultima Park II commercial units, Torres de Heredia residential units, Grove residential units, Watermill Villas and Balmoral Avenue commercial unit. Also included are the pipeline investment properties; Suntrust Bank and Shoppes at Rosehall.
Sale of Units Sale of Units comprises of pre-sales and sales upon completion, of units in residential and commercial development projects. This consists of proceeds from sale of units in the Medinah 21, Bamboo Avenue and Seaview Avenue projects and/or any other similar pipeline opportunities
Software This represents accounting software license fees from Microgen UK of GBP12,000 per annum plus Argus Real Estate software subscription of US$2,400 per annum. Taxation This represents 1% of net taxable profits as per St. Lucian IBC Act.
First Rock Capital Holdings | Prospectus 59 11.4 Financial Projections of the Company
Projected Statement of Dec. 2020 Dec. 2021 Dec. 2022 Dec. 2023 Dec. 2024 Financial Position US$ US$ US$ US$ US$ Bank & Cash Balances 1,548,444 2,942,235 2,234,733 1,547,532 2,068,649 Securities purchased under resale agreements 4,000,000 2,000,000 1,000,000 1,000,000 1,000,000 Financial assets 11,935,185 12,750,000 12,525,000 12,800,000 13,850,000 Receivables 210,307 231,338 254,472 279,919 307,911 Related Party Loans 2,485,740 2,985,740 3,485,740 3,985,740 4,485,740 Due from related parties 346,286 380,915 419,007 380,915 419,007 Property, plant & equipment 73,771 88,525 106,230 127,476 152,971 Investment in subsidiary: FCH USA 2,400,000 3,500,000 4,000,000 5,000,000 6,000,000 FCH Cayman 1,254,000 2,500,000 3,500,000 4,500,000 5,500,000 FCH LATAM 629,531 1,500,000 2,000,000 2,500,000 3,000,000 Investment Property 16,926,500 18,619,150 20,481,065 21,505,118 22,580,374 Pre-construction costs 900,000 990,000 1,089,000 1,197,900 1,317,690 Acquisition : Land 7,200,000 7,560,000 7,938,000 8,334,900 8,751,645 Development in progress 6,502,075 7,152,282 7,509,896 7,885,391 8,279,661
TOTAL ASSETS 56,411,839 63,200,185 66,543,143 71,044,892 77,713,648 Long Term Loans 17,513,250 12,000,000 14,000,000 17,000,000 22,000,000 Other Liabilities 87,566 720,000 840,000 1,020,000 1,320,000 Corporation Tax Payable 1,429 33,081 51,152 56,785 59,109
TOTAL LIABILITIES 17,602,245 12,753,081 14,891,152 18,076,785 23,379,109 Share Capital 37,757,243 47,757,243 47,757,243 47,757,243 47,757,243 Retained Earnings 1,052,351 2,689,861 3,894,748 5,210,864 6,577,295
TOTAL SHAREHOLDERS EQUITY 38,809,594 50,447,104 51,651,991 52,968,107 54,334,538
LIABILITIES & SHAREHOLDERS EQUITY 56,411,839 63,200,185 66,543,143 71,044,892 77,713,648
60 First Rock Capital Holdings | Prospectus Year Ended Year Ended Year Ended Year Ended Year Ended Projected Statement of Dec. 2020 Dec. 2021 Dec. 2022 Dec. 2023 Dec. 2024 Income & Expenditure US$ US$ US$ US$ US$ REVENUE Net Real Estate Income Income from real estate notes 568,333 990,000 1,045,000 1,045,000 1,100,000 Sale of units - 1,000,000 2,520,000 2,646,000 2,778,300 Rental income 1,872,600 2,369,300 2,752,500 3,308,000 3,990,600 Less: Property Operating Expenses (291,462) (312,983) (336,343) (359,501) (823,273)
Net Real Estate Income 2,149,472 4,046,318 5,981,158 6,639,500 7,045,628 Net Interest Income Interest Income 295,859 458,859 458,859 518,859 598,859 Interest Expense (718,043) (720,000) (840,000) (1,020,000) (1,320,000)
Net Interest Income -422,184 -261,141 -381,141 -501,141 -721,141 Other Income Gains on sale of financial assets 60,000 75,000 90,000 100,000 150,000 Dividend Income 240,000 264,000 290,400 319,440 335,412 Foreign Exchange Gain/ (Loss) 389,273 408,737 429,174 450,633 473,164 Unrealised FV gain 381,112 400,168 420,176 441,185 463,244
Total Other Income 1,070,385 1,147,905 1,229,750 1,311,257 1,421,820
Total Income 2,797,673 4,933,081 6,829,767 7,449,616 7,746,307 Expenses Management fee 622,185 1,018,168 1,045,141 1,074,377 1,105,385 Depreciation 377 8,853 10,623 12,748 15,297 Audit Fees 45,000 47,250 49,613 52,093 54,698 Research & Development 25,000 26,250 27,563 28,941 30,388 Other professional fees 14,501 15,226 15,988 16,787 17,626 Legal fees 54,000 56,700 59,535 62,512 65,637 Agents’ commission expense 18,000 18,900 19,845 20,837 21,879 Insurance - commercial 15,000 15,750 16,538 17,364 18,233 Seminars 10,000 10,500 11,025 11,576 12,155 Business meetings 10,000 10,500 11,025 11,576 12,155 Marketing, Public Relations, Sponsorship & Donations 83,930 98,662 136,595 137,818 143,307 Website expenses 7,251 7,613 7,994 8,394 8,813 Computer software expenses 25,000 26,250 27,563 28,941 30,388 Directors’ fees & travel 65,000 68,250 71,663 75,246 79,008 Local travel & subsistence 10,000 10,500 11,025 11,576 12,155 Foreign travel & subsistence 25,000 26,250 27,563 28,941 30,388
First Rock Capital Holdings | Prospectus 61 Year Ended Year Ended Year Ended Year Ended Year Ended Projected Statement of Dec. 2020 Dec. 2021 Dec. 2022 Dec. 2023 Dec. 2024 Income & Expenditure US$ US$ US$ US$ US$ Office Space Facilities & Resource charge 42,000 42,000 42,000 42,000 42,000 Stationery & printing 7,500 7,875 8,269 8,682 9,116 Postage, delivery & cable 3,500 3,675 3,859 4,052 4,254 Dues & subscriptions 2,500 2,625 2,756 2,894 3,039 Investment & administration fees 12,000 12,600 13,230 13,892 14,586 Registrar fees 18,000 15,000 15,750 16,538 17,364 Regulatory fees 1,500 1,515 1,591 1,670 1,754 Withholding tax irrecoverable 1,620 1,134 1,191 1,250 1,313 GCT irrecoverable 66,060 69,363 72,831 76,473 80,296 Bank charges 3,400 3,570 3,749 3,936 4,133
TOTAL EXPENSES 1,188,324 1,624,979 1,714,521 1,771,112 1,835,367
Net Profit Before Pref Dividend & Taxation 1,609,349 3,308,103 5,115,246 5,678,504 5,910,940
Preference Dividend - - 244,549 357,255 386,105 Taxation 16,093 33,081 51,152 56,785 59,109
Net Profit Attributable to Shareholders / Total Comprehensive Income 1,593,255 3,275,022 4,819,544 5,264,464 5,465,726
Return on Equity 6% 7% 9% 10% 10%
62 First Rock Capital Holdings | Prospectus Year Ended Year Ended Year Ended Year Ended Year Ended Dec. 2020 Dec. 2021 Dec. 2022 Dec. 2023 Dec. 2024 Projected Statement of Cashflows US$ US$ US$ US$ US$ Cash Flows from Operating Activities: Net profit 1,593,255 3,275,022 4,819,544 5,264,464 5,465,726 Adjustment for: - Depreciation 377 8,853 10,623 12,748 15,297 Taxation Expense 52 31,652 18,071 5,633 2,324
Operating cash flow before movements in working capital 1,593,684 3,315,526 4,848,239 5,282,845 5,483,348 Changes in: Loans receivable 0 -500,000 -500,000 -500,000 -500,000 Other receivables 0 -21,031 -23,134 -25,447 -27,992 Other liabilities 38,258 632,434 120,000 180,000 300,000 Resale agreements -4,000,000 2,000,000 1,000,000 0 0 Related company -113,510 -34,629 -38,092 38,092 -38,092 Dividends paid -796,628 -1,637,511 -3,614,658 -3,948,348 -4,099,295
Net cash provided/(used in) by operating activities (3,278,195) 3,754,790 1,792,355 1,027,141 1,117,970
Cash Flows from Investing Activities: Acquisition / Disposal of PPE -70,377 -23,607 -28,328 -33,994 -40,792 Financial Assets -7,414,332 -814,815 225,000 -275,000 -1,050,000 Acquisition: Land -4,980,730 -360,000 -378,000 -396,900 -416,745 Pre-Construction costs -900,000 -90,000 -99,000 -108,900 -119,790 Development in progress -5,756,331 -650,207 -357,614 -375,495 -394,270 Investment Property -13,077,176 -1,692,650 -1,861,915 -1,024,053 -1,075,256
Cash used in investing activities (35,452,947) (6,847,748) (4,499,857) (4,714,342) (5,596,853)
Cash Flows from Financing Activities: Notes payable 17,513,250 -5,513,250 2,000,000 3,000,000 5,000,000 Issue of ordinary shares 22,250,000 10,000,000 0 0 0
Net cash provided by financing activities 39,763,250 4,486,750 2,000,000 3,000,000 5,000,000
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENT 1,032,108 1,393,792 -707,502 -687,201 521,117 Cash and cash equivalents at beginning ofyear 516,335 1,548,444 2,942,235 2,234,733 1,547,532
CASH AND CASH EQUIVALENTS AT END OF PERIOD 1,548,444 2,942,235 2,234,733 1,547,532 2,068,649
First Rock Capital Holdings | Prospectus 63 Projected Statement of Share Capital Retained Earnings Total Changes In Equity US$ US$ US$
2020 Balance at 1 January 2020 27,757,243 255,723 28,012,966 Total Comprehensive Income for the period 1,593,255 1,593,255 Rights Issue 10,000,000 10,000,000 Transaction Costs Share Issue Dividends Paid (796,628) (796,628) Balance at 31 December 2020 37,757,243 1,052,351 38,809,594
2021 Balance at 1 January 2021 37,757,243 1,052,351 38,809,594 Total Comprehensive Income for the period 3,275,022 3,275,022 Rights Issue 10,000,000 10,000,000 Transaction Costs Share Issue Dividends Paid (1,637,511) (1,637,511) Balance at 31 December 2021 47,757,243 2,689,861 50,4 47,104
2022 Balance at 1 January 2022 47,757,243 2,689,861 50,4 47,104 Total Comprehensive Income for the period 4,819,544 4,819,544 Rights Issue - - Transaction Costs Share Issue Dividends Paid (3,614,658) (3,614,658) Balance at 31 December 2022 47,757,243 3,894,748 51,651,991
2023 Balance at 1 January 2023 47,757,243 3,894,748 51,651,991 Total Comprehensive Income for the period 5,264,464 5,264,464 Rights Issue - - Transaction Costs Share Issue
Dividends Paid (3,948,348) (3,948,348) Balance at 31 December 2023 47,757,243 5,210,864 52,968,107
2024 Balance at 1 January 2024 47,757,243 5,210,864 52,968,107 Total Comprehensive Income for the period 5,465,726 5,465,726 Rights Issue - - Transaction Costs Share Issue Dividends Paid (4,099,295) (4,099,295) Balance at 31 December 2024 47,757,243 6,577,295 54,334,538
64 First Rock Capital Holdings | Prospectus NOTES TO THE FINANCIAL PROJECTIONS
Bank & Cash Balances Cash and cash equivalents comprise cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less.
Brokerage Commissions This represents fees payable to brokers for corporate finance services such as structuring of debt securities, etc.
Director’s Fees & Related expenses This represents fees payable to directors plus travel costs associated with board meetings. Fee structure is based on 9 directors at US$1500 per quarter.
Dividend income - Listed Equities & Mutual Funds Dividend income - Listed Equities & Mutual Funds comprises of dividends from mutual funds (primarily real estate) and listed equity investments. Additionally, it includes dividends from Private Equity investments.
Financial assets The Company’s financial instruments included in this classification are both securities with prices quoted in an active market or for which fair values are otherwise determinable, and securities with prices not quoted in an active market. These comprise mainly of Structured Notes, Corporate Bonds and Mutual Funds linked to Real Estate. This consists of the Company’s equity input in the Margaritaville Note, NFE Note, WAK Investments Note, CIS Note, and/ or any other similar pipeline opportunities.
FV Gain Revaluation Gain comprises of gains from the revaluation of the Company’s investment properties. This includes gains realised on acquisition of properties below market value, and annual revaluation gains of investment properties.
GCT Irrecoverable This represents GCT paid on invoices which cannot be recovered due to the Company being non-Jamaican.
Income - Real Estate Structured Instruments Dividend Income - Real Estate Structured Instruments comprises of dividends earned on available for sale investments such as MVL, WAK Investments and/or any other similar pipeline opportunites.
Investment Properties Investment properties, comprising principally land and buildings, are held for long-term rental yields and capital appreciation and are treated as long-term investments. They are measured initially at cost, including related transaction costs and are subsequently measured at fair value.
Land / Development in Progress Land / Development in Progress comprises all costs that are directly attributable to development activities or that can be allocated on a reasonable basis to such activities. These costs comprise the value of land contributed to the development, direct costs related to property development activities and indirect costs that are attributable to the development activities and can be allocated to the project.
Legal & Professional Fees This represents in-house legal contract fees of US$54,000 per annum plus any additional fees.
Management fee This represents a fee of 2% of total shareholders’ equity, payable to the Management Company.
Marketing, Sponsorship & Donations This represents best practice amount of 3% of revenue.
First Rock Capital Holdings | Prospectus 65 Other Liabilities Other Liabilities comprise of any other balances owed by the Company, such as interest payable, taxation payable, accrued expenses, etc.
Other Receivables Other Receivables comprise of balances due to the company, including prepayments, trade receivables and interest receivable on Financial assets at FV through P&L
Preference Dividend This represents performance fee payable to the Management, calculated at 25% of profits over hurdle profit. Hurdle profit is 8% of total shareholder equity.
Registrar Services This represents fees payable to JCSD for services related to the IPO and ongoing management of the Company’s shareholder register
Related Company Related company comprises of amounts due from/to the Company’s subsidiaries and associates. It also represents amounts due from/to FirstRock Capital Resource, a related party engaged to provide investment management services to the Company.
Rental Income Rental Income comprises of rental/lease income earned from income producing properties. These include the portfolio properties; Icon Condominiums, Ultima Park II commercial units, Torres de Heredia residential units, Grove residential units, Watermill Villas and Balmoral Avenue commercial unit. Also included are the pipeline investment properties; Suntrust Bank and Shoppes at Rosehall.
Sale of Units Sale of Units comprises of pre-sales and sales upon completion, of units in residential and commercial development projects. This consists of proceeds from sale of units in the Medinah 21, Bamboo Avenue and Seaview Avenue projects and/or any other similar pipeline opportunities.
Software This represents accounting software license fees from Microgen UK of GBP12,000 per annum plus Argus Real Estate software subscription of US$2,400 per annum.
Taxation This represents 1% of net profits as per St. Lucian company law.
66 First Rock Capital Holdings | Prospectus Section 12 Auditor’s Report and Financial Statements
First Rock Capital Holdings Limited
Financial Statements 30 September 2019
First Rock Capital Holdings | Prospectus 67
First Rock Capital Holdings Limited Index For the twenty-three months ended 30 September 2019
Page
Independent Auditor’s Report
Financial Statements Condensed consolidated statement of comprehensive income 1
Condensed consolidated statement of financial position 2
Condensed consolidated statement of changes in equity 3
Condensed consolidated statement of cash flows 4
Condensed company statement of comprehensive income 5
Condensed company statement of financial position 6
Condensed company statement of changes in equity 7
Condensed company statement of cash flows 8
Selected explanatory notes to the financial statements 9 - 22
68 First Rock Capital Holdings | Prospectus
Report on review of interim financial information
To the Directors of First Rock Capital Holdings Limited
Introduction We have reviewed the accompanying condensed consolidated interim statement of financial position of First Rock Capital Holdings Limited and its subsidiaries (the ‘Group’) and the condensed company interim statement of financial position of First Rock Capital Holdings Limited (the Company) as of 30 September 2019 and the related condensed consolidated and company statements of comprehensive income, changes in equity and cash flows for the twenty-three months period then ended and notes, comprising a summary of significant accounting policies and other explanatory notes. Management is responsible for the preparation and presentation of this condensed consolidated and company interim financial information in accordance with International Accounting Standards (IAS) 34, “Interim Financial Reporting”. Our responsibility is to express a conclusion on this condensed consolidated and company interim financial information based on our review. Scope of review We conducted our review in accordance with International Standard on Review Engagements 2410, 'Review of interim financial information performed by the independent auditor of the entity'. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial information is not prepared, in all material respects, in accordance with International Accounting Standards (IAS) 34, “Interim Financial Reporting”.
Chartered Accountants 6 November 2019 Kingston, Jamaica
PricewaterhouseCoopers, Scotiabank Centre, Duke Street, Box 372, Kingston, Jamaica T: (876) 922 6230, F: 876) 922 7581, www.pwc.com/jm
L.A. McKnight P.E. Williams B.L. Scott B.J.Denning G.A. Reece P.A. Williams R.S. Nathan C.I. Bell-Wisdom G.K.Moore T.N. Smith DaSilva K.D. Powell
First Rock Capital Holdings | Prospectus 69 Page 1 First Rock Capital Holdings Limited Condensed Consolidated Statement of Comprehensive Income For the twenty-three months ended 30 September 2019 (expressed in US dollars unless otherwise indicated)
For the twenty-three months ended 30 September 2019 Notes $ Revenue from contracts with customers 9,471 Other revenue – interest income 5 217,080 Net gain from fair value adjustment on investment property 7 393,042 Direct property operating expenses 4 (18,641) Net change in fair value of financial instruments at fair value through profit or loss (6,828) Depreciation of property, plant and equipment 4 (419) Management fees 4 (184,766) Marketing and administrative expenses (368,643) Operating expenses 4 (194,959) Operating loss (154,663) Foreign exchange gain 5 374,301 Profit before income taxes 219,638 Income tax expense 6 (1,377) Profit and total comprehensive income for the period 218,261
Basic and diluted earnings per share for profit attributable to the equity
holders of First Rock Capital Holdings Limited 14 $0.005
70 First Rock Capital Holdings | Prospectus First Rock Capital Holdings | Prospectus 71 Page 3 First Rock Capital Holdings Limited Condensed Consolidated Statement of Changes in Equity For the twenty-three months ended 30 September 2019 (expressed in US dollars unless otherwise indicated)
Attributable to equity holders of the Group
Number of Retained shares Share Capital Earnings Total Note $ $ $ Balance at 4 October 2017 - - - - Total comprehensive income - - 218,261 218,261 Transactions with owners Share issue 10 167,122,068 16,062,207 - 16,062,207 Transaction costs 10 - (585,001) - (585,001) Balance at 30 September 2019 167,122,068 15,477,206 218,261 15,695,467
72 First Rock Capital Holdings | Prospectus Page 4 First Rock Capital Holdings Limited Condensed Consolidated Statement of Cash Flows For the twenty-three months ended 30 September 2019 (expressed in United States dollars unless otherwise indicated)
Note 2019 $ Cash flows from operating activities Net profit 218,261 Adjustments for: Depreciation of property, plant and equipment 419 Interest income (219,891) Net gain from fair value adjustment on investment property (393,042) Income tax expense 1,377 Changes in working capital Increase in trade and other receivables (133,094) Net decrease in related party balances 76,123 Increase in trade and other payables 68,763 Increase in tenant deposits 17,800 Cash used in operating activities (363,284)
Cash flows from investing activities Interest received 142,241 Purchase of property, plant and equipment (35,796) Acquisition of investment property (8,209,950) Property acquisition deposit (1,098,701) Loan disbursement (821,633) Purchase of investments (3,005,380) Net cash used in investing activities (13,029,219)
Cash flows from financing activities Issue of shares, net of transaction costs 15,477,206 Net cash provided by financing activities 15,477,206 Net increase in cash and cash equivalents 2,084,703 Cash and cash equivalents at beginning of period - Cash and cash equivalents at the end of the period 9 2,084,703
First Rock Capital Holdings | Prospectus 73 Page 5 First Rock Capital Holdings Limited Condensed Company Statement of Comprehensive Income For the twenty-three months ended 30 September 2019 (expressed in United States dollars unless otherwise indicated)
For the twenty-three months ended 30 September 2019 $ Revenue from contracts with customers - Other revenue – interest income 5 219,743 Net gain from fair value adjustment on investment property 7 305,844 Direct property operating expenses 4 (15,735) Net change in fair value of financial instrument at fair value through profit or loss (6,828) Depreciation of property, plant and equipment 4 (419) Management fees 4 (184,766) Marketing and administrative expenses (350,601) Operating expenses 4 (170,886) Operating loss (203,648) Foreign exchange gain 5 374,301 Profit before income taxes 170,653 Income tax expense 6 (1,377) Profit and comprehensive income for the period 169,276
74 First Rock Capital Holdings | Prospectus First Rock Capital Holdings | Prospectus 75 Page 7 First Rock Capital Holdings Limited Condensed Company Statement of Changes in Equity For the twenty-three months ended 30 September 2019 (expressed in United States dollars unless otherwise indicated)
Attributable to equity holders of the Company
Number of Retained shares Share Capital Earnings Total ’ $ $ $ Balance at 4 October 2017 - - - - Net profit - - 169,276 169,276 Transactions with owners Share issue 10 162,122,068 16,062,207 - 16,062,207 Transaction costs 10 - (585,001) - (585,001) Balance at 30 September 2019 162,122,068 15,477,206 169,276 15,646,482
76 First Rock Capital Holdings | Prospectus Page 8 First Rock Capital Holdings Limited Condensed Company Statement of Cash Flows For the twenty-three months ended 30 September 2019 (expressed in United States dollars unless otherwise indicated)
2019 $ Cash flows from operating activities Net profit 169,276 Adjustments for: Depreciation of property, plant and equipment 419 Interest income (222,554) Net gain from fair value adjustment on investment property (305,844) Income tax expense 1,377 Changes in working capital Increase in trade and other receivables (132,657) Net increase in related parties (232,779) Increase in trade and other payables 66,814 Tenant deposits 17,800 Cash used in operating activities (638,148) Cash flows from investing activities Interest received 142,241 Capitalisation of subsidiaries (1,029,530) Purchase of property, plant and equipment (35,796) Acquisition of investment property (5,649,544) Property acquisition deposit (745,744) Issue of loans (2,501,633) Purchase of investments (3,002,717) Net cash used in investing activities (12,822,723) Cash flows from financing activities Issue of shares, net of transaction costs 15,477,206 Net cash provided by financing activities 15,477,206 Net increase in cash and cash equivalents 2,016,335 Cash and cash equivalents at beginning of period - Cash and cash equivalents at the end of the period 9 2,016,335
First Rock Capital Holdings | Prospectus 77 Page 9 First Rock Capital Holdings Limited Selected Explanatory Notes to the Financial Statements 30 September 2019 (expressed in United States dollars unless otherwise indicated)
1. Incorporation and Principal Activities
First Rock Capital Holdings Limited (the company) is an International Business Company (IBC) duly incorporated under the laws of Saint Lucia on 4 October 2017. The company commenced operations on 15 March 2019 and is domiciled in Jamaica. The registered office of the company is located at Bourbon House, Bourbon Street, Castries, Saint Lucia. Its main operations are located at Suite 6, 14 Canberra Crescent, Kingston 6, Saint Andrew.
The main activities of the company are holding investments and controlling the operations of its subsidiaries. The company’s core focus is real estate and private equity investments. The company’s primary aim is to provide its shareholders with a tax-efficient vehicle, offering an enhanced level of income, above average dividend yield and preservation of capital through the diversification of assets.
The company’s subsidiaries, which, together with the company are referred to as “the Group” are as follows:
Subsidiaries Principal Activities Incorporated Proportion of Financial Year in Issued Capital End Held by First Rock USA, LLC Property Investment USA 100% 31 December
First Rock Capital LATAM, Property Investment Costa Rica 100% 31 December Sociedad Anónima
First Rock Capital Cayman Ltd. Property Investment Cayman 100% 31 December
During the year, the Group incorporated the companies listed above.
2. 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, unless otherwise stated.
(a) Basis of preparation These account policies used in the accounting for the company’s transactions are consistent with International Financial Reporting Standards (IFRS). These financial statements have been prepared for a 23 month period ended 30 September 2019, as the company was incorporated in October of 2017, but the Group commenced operations in March of 2019.
The consolidated financial statements have been prepared on a going concern basis, applying a historical cost convention, except for the measurement of investment property at fair value and financial assets classified as fair value through profit or loss (FVPL).
In preparing these financial statements, management used certain critical accounting estimates. Management also exercised its judgment in the process of applying the Group’s accounting policies. Changes in assumptions may have a significant impact on the consolidated financial statements in the period the assumptions changed. Management believes the underlying assumptions are appropriate. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3.
Standards, interpretations and amendments to published standards effective in the current period Certain new standards, interpretations and amendments to existing standards have been published that became effective during the current financial period. The Group’s substantial activities began in 2019, and therefore standards referenced below were used in the accounting for the relevant transactions.
78 First Rock Capital Holdings | Prospectus Page 10 First Rock Capital Holdings Limited Selected Explanatory Notes to the Financial Statements 30 September 2019 (expressed in United States dollars unless otherwise indicated)
2. Significant Accounting Policies (Continued)
(a) Basis of preparation (continued)
Amendment to IAS 7, ‘Statement of cash flows on disclosure initiative (effective for annual periods beginning on or after 1 January 2017). These amendments to IAS 7 introduce an additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from financing activities. The amendment is part of the IASB’s Disclosure Initiative, which continues to explore how financial statement disclosure can be improved.
IFRS 9 ‘Financial instruments’ (effective for annual periods beginning on or after 1 January 2018). IFRS 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets.
The Group’s debt instruments satisfy the conditions for classification as at amortised cost as the objective of the business model is to hold the financial asset for the collection of the contractual cash flows and the contractual cash flows under the instrument solely represent payments of principal and interest (SPPI). The Group has opted for the fair value through profit or loss (FVPL) for equity instruments.
IFRS 9 requires the recognition of impairment provisions based on expected credit losses (ECL). No ECLs are recognised in these financial statements are they were deemed to be immaterial.
IFRS 15, ‘Revenue from contracts with customers’ (effective for annual periods beginning on or after 1 January 2019). The standard replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction contracts’ and related interpretations. IFRS 15 deals with revenue recognition and establishes principles for reporting useful information about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the goods or service; so the notion of control replaces the existing notion of risks and rewards.
A key change to current practice is the point at which revenue is able to be recognised, which may shift so that some revenue that is currently recognised at a point in time at the end of a contract may be recognised over the contract term and vice versa. Other effects of the new standard include variable consideration that involves contracts with customers which provide a right of return, trade discounts or volume rebates which in some cases result in more revenue being deferred.
IFRS 16, ‘Leases’ (effective for annual periods beginning on or after 1 January 2019, with earlier application permitted if IFRS 15, ‘Revenue from Contracts with Customers’, is also applied). The International Accounting Standards Board (IASB) published IFRS 16, ‘Leases’, which replaces the current guidance in IAS 17. This will require changes in accounting by lessees in particular. IFRS 16 requires lessees to recognise a lease liability reflecting future lease payments and a ‘right-of-use asset’ for virtually all lease contracts. The IASB has included an optional exemption for certain short-term leases and leases of low- value assets; however, this exemption can only be applied by lessees. For lessors, the accounting stays almost the same. However, as the IASB has updated the guidance on the definition of a lease (as well as the guidance on the combination and separation of contracts), lessors will also be affected by the new standard. Under IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group is a lessor with operating leases. The Group has no operating lease liabilities.
First Rock Capital Holdings | Prospectus 79 Page 11 First Rock Capital Holdings Limited Selected Explanatory Notes to the Financial Statements 30 September 2019 (expressed in United States dollars unless otherwise indicated)
2. Significant Accounting Policies (Continued)
(a) Basis of preparation (continued)
Standards, interpretations and amendments to published standards effective in the current period (continued)
IFRIC 22, ‘Foreign currency transactions and advance consideration’ (effective for annual periods beginning on or after 1 January 2018). This IFRIC addresses foreign currency transactions or parts of transactions where there is consideration that is denominated or priced in a foreign currency. The interpretation provides guidance for when a single payment/receipt is made as well as for situations where multiple payments/ receipts are made. The guidance aims to reduce diversity in practice.
The date of the transaction determines the exchange rate to be used on initial recognition of the related asset, expense or income. The issue arises because lAS 21 requires an entity to use the exchange rate at the 'date of the transaction', which is defined as the date when the transaction first qualifies for recognition. The question therefore is whether the date of the transaction is the date when the asset, expense or income is initially recognised, or the earlier date on which the advance consideration is paid or received, resulting in recognition of a prepayment or deferred income. The Group recognises the non-monetary asset or liability arising from the advance consideration on the date of the transaction.
In addition to the above, several new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2017 and have not been applied in preparing these financial statements. None of these is expected to have a material effect on the financial statements of the Group.
Standards, interpretations and amendments to published standards that are not yet effective and not early adopted
At the date of authorisation of these financial statements, the Group has concluded that the following standards which are published but not yet effective, are relevant to its operations, but will have no material impact on adoption. These pronouncements are effective for annual periods beginning on or after the dates noted, and will be applied by the Group as of those dates, unless otherwise noted.
Amendments to IAS 1 and IAS 8 on the definition of material and is effective for reporting periods beginning on or after 1 January 2020. These amendments to IAS 1, ‘Presentation of financial statements’, and IAS 8, ‘Accounting policies, changes in accounting estimates and errors’, and consequential amendments to other IFRSs: i) use a consistent definition of materiality throughout IFRSs and the Conceptual Framework for Financial Reporting; ii) clarify the explanation of the definition of material; and iii) incorporate some of the guidance in IAS 1 about immaterial information.
There are no other standards, interpretations and amendments to existing standards that are not yet effective that would be expected to have a material impact on the operations of the Group.
80 First Rock Capital Holdings | Prospectus Page 12 First Rock Capital Holdings Limited Selected Explanatory Notes to the Financial Statements 30 September 2019 (expressed in United States dollars unless otherwise indicated)
2. Significant Accounting Policies (Continued)
The financial statements are prepared in accordance with the following significant accounting policies:
(b) Consolidation Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date control ceases. All of the Group’s companies have 31 December as their year-end. Consolidated financial statements are prepared using uniform accounting policies for like transactions. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Inter-company transactions, balances and unrealised gains or losses on transactions between Group companies are eliminated, except where there are indications of impairment.
In the company stand-alone financial statements, investments in subsidiaries are accounted for at cost less impairment. Cost also includes direct attributable costs of investment.
(c) Foreign currency translation
(i) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The largest portion of the company’s revenues, expenses and cash flows are denominated in United States dollars. The consolidated financial statements are presented in US dollars, which is the company’s functional currency. The company has determined that the US dollar its functional currency as its strategy is to contract with multinational entities (mainly US based), at rates consistent with rates charged in the US and therefore considers the US economy to the be primary economy to which it is exposed and the economy that determines the pricing of its goods and services. .
(ii) Transactions and balances Foreign currency transactions are accounted for at the exchange rates prevailing at the dates of the transactions. At each reporting date, monetary assets and liabilities denominated in foreign currencies are translated using the closing exchange rate. Exchange differences arising 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.
(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:
- assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that financial position; - income and expenses for each statement of comprehensive income 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 rate on the dates of the transactions). The Group is using monthly average exchange rates due to the increased volatility in exchange rates; and - all resulting exchange differences are recognised in the statement of comprehensive income. There were no exchange differences presented during the period as First Rock Sociedad Anónima was incorporated on 30 September 2019 and the exchange differences arising on translation are immaterial.
First Rock Capital Holdings | Prospectus 81 Page 13 First Rock Capital Holdings Limited Selected Explanatory Notes to the Financial Statements 30 September 2019 (expressed in United States dollars unless otherwise indicated)
2. Significant Accounting Policies (Continued)
(d) Investment property Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the companies in the consolidated Group, is classified as investment property. Investment property also includes property that is being constructed or developed for future use as investment property.
Investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs. After initial recognition, investment property is carried at fair value. Investment property that is being redeveloped for continuing use as investment property, or for which the market has become less active, continues to be measured at fair value.
Investment property under construction is measured at fair value if the fair value is considered to be reliably determinable. Investment properties under construction for which the fair value cannot be determined reliably, but for which the company expects the fair value of the property will be reliably determinable when construction is completed, are measured at cost less impairment until the fair value becomes reliably determinable or construction is completed - whichever is earlier.
Fair value is based on active market prices, adjusted, if necessary, for differences in the nature, location or condition of the specific asset. If this information is not available, the Group uses alternative valuation methods, such as recent prices on less active markets or discounted cash flow projections. The fair value of investment property reflects, among other things, rental income from current leases and other assumptions market participants would make when pricing the property under current market conditions. Fair may also be determined using recent comparable sales, with appropriate adjustments for size, location, condition etc, as appropriate. Subsequent expenditure is capitalised to the asset’s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the cost of the replacement is included in the carrying amount of the property, and the fair value is reassessed.
Changes in fair values are recognised in the income statement. Investment properties are derecognised when they have been disposed of. Where the Group disposes of a property at fair value in an arm’s length transaction, the carrying value immediately prior to the sale is adjusted to the transaction price, and the adjustment is recorded in the income statement within net gain from fair value adjustment on investment property. If an investment property becomes owner occupied, it is reclassified as property, plant and equipment. Its fair value as at the date of reclassification becomes its cost for subsequent accounting purposes. Where an investment property undergoes a change in use, such as commencement of development with a view to sell, the property is transferred to inventories. A property’s deemed cost for subsequent accounting as inventories is its fair value at the date of change in use.
82 First Rock Capital Holdings | Prospectus Page 14 First Rock Capital Holdings Limited Selected Explanatory Notes to the Financial Statements 30 September 2019 (expressed in United States dollars unless otherwise indicated)
2. Significant Accounting Policies (Continued)
(e) Investments and other financial assets and liabilities
Financial assets The Group’s financial assets comprise loans receivable, and investments at FVPL and at amortised cost, trade and other receivables, due from related parties, cash at bank and cash equivalents balances.
Financial instruments A financial instrument is any contract that gives rise to both a financial asset in one entity and a financial liability or equity in another entity.
(i) Classification The Group classifies its financial assets in the following measurement categories: - those to be measured subsequently at FVPL; and - those to be measured at amortised cost.
For assets measured at fair value through profit or loss, gains and losses will be recorded in profit or loss. For investments in equity instruments that are not held for trading, the Group has made an irrevocable election at the time of initial recognition to account for the equity investments at FVPL. The Group reclassifies debt investments when and only when its business model for managing those assets changes.
(ii) Recognition and derecognition Regular way purchases and sales of financial assets are recognised on the trade date, the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
(iii) Measurement At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at FVPL, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
The Group classifies its debt instruments at amortised cost. These are assets that are held for collection of contractual cash flows where those cash flows represent SPPI and eare measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains (losses) together with foreign exchange gains and losses. Impairment losses are presented as a separate line item in the consolidated statement of profit or loss.
The Group subsequently measures all equity investments at fair value. These fair value gains and losses are recognised in net change in fair value of financial instruments at fair value through profit or loss.
iv) Impairment The Group assesses on a forward-looking basis the ECL associated with its debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. The ECL in relation to trade receivables is immaterial.
First Rock Capital Holdings | Prospectus 83 Page 15 First Rock Capital Holdings Limited Selected Explanatory Notes to the Financial Statements 30 September 2019 (expressed in United States dollars unless otherwise indicated)
2. Significant Accounting Policies (Continued)
(e) Investments and other financial assets
Debt investments and other instruments are considered to be low credit risk when they have a low risk of default and the issuer has a strong capacity to meet its contractual cash flow obligations in the near term. The impairment charge for debt investments was assessed and none was recorded in profit or loss as the loss charge calculated was immaterial.
Financial assets Regular way purchases and sales of financial assets are recognised on the trade date, the date on which the Group commits to purchase or sell the asset.
Financial assets are derecognised only when the contractual rights to the cash flows from the financial assets expire or the Group transfers substantially all risks and rewards of ownership.
Trade and other receivables Trade receivables are recognised initially at fair value and subsequently are measured at amortised cost using the effective interest method, less impairment provision. The Group holds the trade receivables with the objective to collect the contractual cash flows.
Cash and cash equivalents Cash and cash equivalents include cash at bank and investments with original maturities of three months or less that are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value. Cash and cash equivalents are carried at cost which is assumed to approximate fair value due to the short-term nature of these items.
Financial liabilities The Group’s financial liabilities comprise payables. These are initially recognised at cost, being the amount received on origination of the liability and are subsequently measured at amortised cost using the effective interest method.
(f) Revenue Revenue includes rental income. Rental income from operating leases is recognised on a straight-line basis over the lease term. Revenue is measured at the transaction price agreed under the contract.
(g) Leases Properties leased out under operating leases are included in investment property in the consolidated statement of financial position. See note 2(f) for the recognition of rental income.
(h) Property, plant and equipment All property, plant and equipment are recorded at historical cost, less accumulated depreciation.
Depreciation is calculated on the straight-line basis at such rates as will write off the carrying value of the assets over the period of their expected useful lives. The Group currently has billboards as property, plant and equipment whose useful lives are 10 years.
(i) Share capital Shares are classified as equity when there is no obligation to transfer cash or other assets. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.
84 First Rock Capital Holdings | Prospectus Page 16 First Rock Capital Holdings Limited Selected Explanatory Notes to the Financial Statements 30 September 2019 (expressed in United States dollars unless otherwise indicated)
2. Significant Accounting Policies (Continued)
(j) Management fees A management fee of two per cent (2%) of the net asset value of the Group based on the Group’s audited financials will be paid quarterly to the Group’s management company First Rock Capital Resource Limited.
The fee is to be paid quarterly in arrears, based on the quarterly unaudited financial statements of the Group, subject to the ‘claw-back’ provision.
(k) Other expenses Expenses include legal, marketing, professional and other fees. They are recognised in profit or loss in the period in which they are incurred on an accrual basis.
(l) Income and deferred taxes Tax is recognised in the income statement, except to the extent that it relates to items recognised directly in other comprehensive income or equity - in which case, the tax is also recognised in other comprehensive income or equity.
The current income tax charge is calculated based on the tax laws enacted or substantively enacted at the date of the consolidated statement of financial position in the countries where the Group operates. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the date of the consolidated statement of financial position and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
First Rock Capital Holdings | Prospectus 85 Page 17 First Rock Capital Holdings Limited Selected Explanatory Notes to the Financial Statements 30 September 2019 (expressed in United States dollars unless otherwise indicated)
2. Significant Accounting Policies (Continued)
(m) Fair value estimation 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.
The following table provides an analysis of financial instruments held as at the statement of financial position date that, subsequent to initial recognition, are measured at fair value. The financial instruments are grouped into levels 1 to 3 based on the degree to which the fair value is observable, as follows: Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical instruments; Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the instrument, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and Level 3 fair value measurements are those derived from valuation techniques that include inputs for the instrument that are not based on observable market data (unobservable inputs).
The Group’s and Company’s equity instruments as at 30 September 2019 were classified as follows: Level 1 Level 2 Level 3 Total $ $ $ $’ 2018 Financial instruments at amortised cost – Quoted equities 176,313 - - 176,313 Unit trusts - 207,727 - 207,727 176,313 207,727 - 384,040 There were no transfers between levels during the year. The fair value of financial instruments traded in active markets is based on quoted market prices at the date of the statement of financial position.
3. Critical Accounting Estimates and Judgments in Applying Accounting Policies
The company makes estimates and assumptions that affect the reported amounts of assets and liabilities within� the next financial year. Estimates and judgements are continually evaluated and are based on historical� experience and other factors, including expectations of future events that are believed to be reasonable under� the circumstances.
Investment properties The fair value of investment properties is determined by independent valuators. The valuators use a variety of� methods, including the income method, which projects rental cash flows, considers periods of vacancy, and uses� an appropriate discount factor to discount cash flows. The valuators may also use recent comparable sales, with� adjustments for size, location, condition etc. Both methods involve significant judgement, which could result in� actual values being different from those realised from either sale, or continued rentals of these properties.
Income taxes The Group is subject to income taxes in numerous jurisdictions. Significant estimates are required in determining� the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate� tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based on estimates� of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts� that were initially recorded, such differences will impact the current tax and deferred tax provisions.
86 First Rock Capital Holdings | Prospectus Page 18 First Rock Capital Holdings Limited Selected Explanatory Notes to the Financial Statements 30 September 2019 (expressed in United States dollars unless otherwise indicated)
4. Expenses by nature
Total direct, selling and operating expenses: The The Group Company 2019 2019 $ $ Auditors’ remuneration 16,000 16,000 Depreciation 419 419 Direct property operating expenses 18,641 15,735 Directors’ fees and travel 32,818 32,068 Legal fees 49,800 34,010 Management fees 184,766 184,766 Marketing fees 184,446 184,296 Office expenses 7,433 7,404 Other 58,883 51,379 Professional fees 30,025 30,025 Rates and taxes 77,069 77,069 Software expenses 31,267 31,267 Travel and subsistence 75,861 57,969 767,428 722,407
5. Finance income
The The Group Company 2019 2019 $ $ Interest income 219,891 222,554 Foreign exchange gain 374,301 374,301 Amortisation costs (2,811) (2,811) 591,381 594,044
6. Taxation
The Group The tax liability presented represents the liability for the Company only. There were no tax liabilities incurred by the subsidiaries.
The Company The Company has elected to pay income tax of one per cent (1%) in Saint Lucia. Therefore, pursuant to the provisions of Article 11 of the CARICOM Double Taxation Treaty, dividends/distributions paid to Shareholders who are residents of CARICOM Member States should be subject to withholding tax in Saint Lucia, at a rate of one (%) percent, with no further taxation in the Shareholder’s country of residence.
First Rock Capital Holdings | Prospectus 87 Page 19 First Rock Capital Holdings Limited Selected Explanatory Notes to the Financial Statements 30 September 2019 (expressed in United States dollars unless otherwise indicated)
7. Investment property
The The Group Company 2019 2019 $ $
The Group holds three classes of investment property:
Land 2,215,000 2,215,000
Commercial property 4,079,823 2,850,000
Residential property 2,308,169 890,388
8,602,992 5,955,388
The The Group Company 2019 2019 $ $
Fair value at 4 October 2017 - -
Additions:
Direct acquisitions 5,649,546 5,649,546
Acquisitions through subsidiaries 2,560,404 -
Net gain from fair value adjustment on investment property 393,042 305,842
Fair value as at 30 September 2019 8,602,992 5,955,388
8. Financial assets The The Group Company 2019 2019 $ $ At amortised cost: Corporate bonds 2,636,814 2,636,814 Certificate of deposit 1,500,000 1,500,000 Interest receivable 61,757 61,757
4,198,571 4,198,571 At fair value through profit and loss: Quoted equities 176,313 176,313 Unit trust 207,727 207,727
384,040 384,040
88 First Rock Capital Holdings | Prospectus Page 20 First Rock Capital Holdings Limited Selected Explanatory Notes to the Financial Statements 30 September 2019 (expressed in United States dollars unless otherwise indicated)
9. Cash and Cash Equivalents
The The Group Company 2019 2019 $ $ Certificate of deposit with original maturity less than 90 days 1,500,000 1,500,000 Cash at bank 584,703 516,335
2,084,703 2,016,335
10. Share Capital
2019 2019 $ $ Class A Ordinary shares -
Opening balance 4 October 2017 - -
Fully paid (par value - USD$0.10) 160,622,068 16,062,207
Founders’ shares (no par value) 5,500,000 -
Equity transaction costs - (581,501)
Class A Preference shares
Opening balance 4 October 2017 - Issue of shares to Management company (par value – USD$0.10) 1,000,000 - Equity transaction costs - (3,500)
Total number of shares 167,122,068 15,477,206
11. Trade and other receivables The The Group Company 2019 2019 $ $
Rent receivable 3,100 -
Prepaid expenses 68,895 68,895
Due from broker 56,607 56,607 Other receivables 7,155 7,155
135,757 132,657
First Rock Capital Holdings | Prospectus 89 Page 21 First Rock Capital Holdings Limited Selected Explanatory Notes to the Financial Statements 30 September 2019 (expressed in United States dollars unless otherwise indicated)
12. Trade and other payables The The Group Company 2019 2019 $ $
Trade payable 10,313 9,113
Accrued expenses 52,268 51,519
Credit card payable 6,182 6,182
68,763 66,814
13. Related Party Transactions
(a) The statements of financial position include the following balances with related parties and companies:
The The Group Company 2019 2019 $ $ Amounts due from related parties: Subsidiaries: First Rock USA LLC - 262 First Rock Capital LATAM, S.A. - 6,736 First Rock Capital Cayman Limited - 301,900
Other related parties: First Rock Capital Resource Limited 37,384 37,384 37,384 346,282 Amounts due to related parties: Other related parties First Rock Capital Resource Limited 113,507 113,507 113,507 113,507
(76,123) 232,775 Related party transactions: Subsidiaries First Rock USA - 934,757 First Rock Capital LATAM, S.A. - 6,736 First Rock Capital Cayman Limited - 301,900
Other related parties First Rock Capital Resource Limited - 184,766 - 1,428,159
Directors’ fees totalled USD$6,000 for the Group and $5,250 for the Company for the period.
90 First Rock Capital Holdings | Prospectus Page 22 First Rock Capital Holdings Limited Selected Explanatory Notes to the Financial Statements 30 September 2019 (expressed in United States dollars unless otherwise indicated)
14. Earnings per share
Basic earnings per share are calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares outstanding during the year.
2019 Net profit attributable to shareholders ($) 218,261 Weighted average number of ordinary shares in issue 47,260,881 Basic earnings per share (USD per share) 0.005
The Group has no dilutive potential ordinary shares. The diluted earnings per share are the same as the basic earnings per share.
15. Dividends The Group declared and paid dividends at a rate USD 0.0012 per share in October 2019.
First Rock Capital Holdings | Prospectus 91 Section 13 Experts’ Consents
The Board of Directors First Rock Capital Holdings Limited Bourbon House Bourbon Street Castries St. Lucia
13 December 2019
A t tention: M r. Ryan Reid
Re: Consent letter for inclusion of ‘Auditor’s Report’ in Prospectus for the issue of ordinary shares in First Rock Capital Holdings Limited
Dear Sirs
In ac cordance with Section 42 of the Companies Act 2004 (Expert’s consent to issue of prospectus containing statement by him), PricewaterhouseCoopers hereby consents to:
(1 ) The inclusion of our ‘Auditor’s Report’ as set out in the prospectus and as required by Part II of the Third Schedule of the Companies Act 2004; and
(2) The subsequent issue of this prospectus c ontaining our ‘A uditor’s Report’ as referred to in part (1).
We further confirm that this statement of consent has not been withdrawn prior to the submission of this prospectus for registration with the Registrar o f Companies on 13 December 2019.
Y ours very truly
GAR:TAT:ich
Pricew aterhouseCoopers, Scotiabank Centre, Duke Street, Bo x 372, Kingston, Jam aica T: (876) 922 6230, F: 876) 922 7581, www.pwc.com/jm
L.A. McKnight P.E. Williams B.L. Scott B.J.Denning G.A. Reece P.A. Williams R.S. Nathan C.I. Bell-Wisdom G.K.Moore T.N. Smith DaSilva K.D. Powell
92 First Rock Capital Holdings | Prospectus Section 14 Dividend Policy
If the Shares are admitted to listing on the Main Market and the USD Market, the Board shall distribute a minimum of fifty per cent (50%) of profits to the Shareholders in the form of cash dividends to be paid quarterly.
First Rock Capital Holdings | Prospectus 93 Section 15 Material Contracts
The following contracts, not being contracts entered into in the ordinary course of business, have been entered into by the Company within the last two (2) years immediately preceding the date of issue of this Prospectus and is, or may be, material, namely:
No Parties Type of Contract Property Date 1. First Rock Capital Holdings Limited & Management N/A 08.05.2018 First Rock Capital Resource Limited Agreement 2. 129 Properties Limited & First Rock Agreement for Sale Medinah 21 – Unit No. 8 01.05.2019 Capital Holdings Limited 3. Islandwide Construction Limited & Installation Medinah 21 – Unit No. 8 01.05.2019 First Rock Capital Holdings Limited Agreement 4. 129 Properties Limited & First Rock Agreement for Sale Medinah 21 – Unit No. 17 01.05.2019 Capital Holdings Limited 5. Islandwide Construction Limited & Installation Medinah 21 – Unit No. 17 01.05.2019 First Rock Capital Holdings Limited Agreement 6. 129 Properties Limited & First Rock Agreement for Sale Medinah 21 – Unit No. 18 01.05.2019 Capital Holdings Limited 7. Islandwide Construction Limited & Installation Medinah 21 – Unit No. 18 01.05.2019 First Rock Capital Holdings Limited Agreement 8. 129 Properties Limited & First Rock Agreement for Sale Medinah 21 – Unit No. 24 01.05.2019 Capital Holdings Limited 9. Islandwide Construction Limited & Installation Medinah 21 – Unit No. 24 01.05.2019 First Rock Capital Holdings Limited Agreement 10. 129 Properties Limited & First Rock Agreement for Sale Medinah 21 – Unit No. 29 01.05.2019 Capital Holdings Limited 11. Islandwide Construction Limited & Installation Medinah 21 – Unit No. 29 01.05.2019 First Rock Capital Holdings Limited Agreement 12. First Rock USA, LLC & BVHR LLC Residential Lease Icon Brickell – Unit 4511 01.09.2019 Agreement 13. First Rock Capital Holdings Limited & Contract for Sale and Icon Brickell – Unit 4511 16.05.2019 Icon 4511 LLC Purchase 14. First Rock USA, LLC & Miami Vacation Management Icon Brickell – Unit 3501 30.10.2019 Rentals Agreement 15. First Rock Capital Holdings Limited & Contract for Sale and Icon Brickell – Unit 3501 16.05.2019 Ironton Properties Inc Purchase 16. First Rock Capital Holdings Limited & Agreement for Sale Balmoral Avenue 09.07.2019 Everoy H. Chin & Co. Ltd 17. First Rock Capital Cayman Limited & Purchase and Sale The Grove 18.07.2019 Five Points Investment Limited Agreement 18. First Rock Capital Holdings Limited & Agreement for Sale Seaview Avenue 24.07.2019 Lowal Limited
94 First Rock Capital Holdings | Prospectus No Parties Type of Contract Property Date 19. First Rock Capital, LATAM, Sociedad Lease Agreement Torres de Heredia – A505 30.09.2019 Anónima & T H Inversiones Inmobilliarias F P,Sociedad Anónima 20. First Rock Capital, LATAM, Sociedad Lease Agreement Torres de Heredia - A506 30.09.2019 Anónima & T H Inversiones Inmobilliarias F P, Sociedad Anónima 21. First Rock Capital, LATAM, Sociedad Lease Agreement Torres de Heredia - A508 30.09.2019 Anónima & T H Inversiones Inmobilliarias F P, Sociedad Anónima 22. First Rock Capital, LATAM, Sociedad Lease Agreement Torres de Heredia - A609 30.09.2019 Anónima & T H Inversiones Inmobilliarias F P, Sociedad Anónima 23. First Rock Capital, LATAM, Sociedad Lease Agreement Torres de Heredia – A709 30.09.2019 Anónima & T H Inversiones Inmobilliarias F P, Sociedad Anónima 24. First Rock Capital, LATAM, Sociedad Agreement for Sale Torres de Heredia – A505, 30.09.2019 Anónima & Inmobiliaria Punta Fina A506, A508, A609, P221, FPSO Sociedad Anónima P222, P223 P225, 25. First Rock Capital, LATAM, Sociedad Assignment of Ultima Park 27.09.2019 Anónima & Ultima Park Dos, Contractual Rights Sociedad Anónima and Obligations 26. First Rock Capital, LATAM, Sociedad Lease Agreement Ultima Park 27.09.2019 Anónima & Ultima Park Dos, Sociedad Anónima 27. First Rock Capital, LATAM, Sociedad Lease Agreement Ultima Park 27.09.2019 Anónima & Ultima Park Dos, Sociedad Anónima 28. First Rock Capital, LATAM, Sociedad Agreement for Sale Properties of San Jose 31.09.2019 Anónima & Ultima Park Dos, real folio registration Sociedad Anónima number 158576-F-000 29. First Rock Capital Holdings Limited & Agreement for Sale Water Mills Villa - Lot 9 23.08.2019 New Hope Limited 30. First Rock Capital Holdings Limited & Agreement for Sale Water Mills Villa - Lot 10 22.08.2019 New Hope Limited 31. First Rock Capital Holdings Limited & Agreement for Sale Water Mills Villa - Lot 11 22.08.2019 New Hope Limited 32. First Rock Capital Holdings Limited & Property Manager Water Mills Villa - Lot 9 07.11.2019 Dahlia E. Klein Agreement 33. First Rock Capital Holdings Limited & Property Manager Water Mills Villa - Lot 10 07.11.2019 Dahlia E. Klein Agreement 34. First Rock Capital Holdings Limited & Property Manager Water Mills Villa - Lot 11 07.11.2019 Dahlia E. Klein Agreement
First Rock Capital Holdings | Prospectus 95 Section 16 Risk Factors
The nature of the Company’s operations exposes it to various risks which 16.4 shares – Control Rights the Company seeks to mitigate so as to preserve capital and achieve Shareholders will have rights to an optimal risk adjusted return on assets. Some of the risks that the attend and vote at general meetings Company will seek to monitor and mitigate, include but are not limited of the Company. The rights of to the following: Shareholders do not extend to the 16.1 Market Risk amendment of the terms of the Class A Preference Shares issued The assets acquired by the Company will be exposed to changes in value. to the Management Company. The following strategies will be used to minimize the impact of market risk on the assets held: Any further issuance of Shares to fund the Company’s activities will (i) strong governance framework to enforce risk limits based on require the approval of an ordinary risk appetite; majority of the Shareholders (more (ii) portfolio diversification to minimize overall risk exposure; than fifty per cent (50%)) or the Class A Preference Shareholders. (iii) periodic reporting on risk affecting the various assets; and Any further issuance of debt type (iv) sensitivity analysis of the impact of changes in market variables securities such has preference on the Company’s assets carried out periodically. shares or notes, will not dilute the 16.2 credit Risk ordinary shareholdings arising from the Invitation, however Credit risk is the risk that a debtor fails to meet its obligations in accordance they may involve charges on the with the terms of the debt. The Company’s operations will expose it assets of the Company which to credit risk due to the provision or holding of debt instruments. The provide for the holders of the following strategies will be used to mitigate the impact of credit risk: debt type securities to have (i) thorough analysis of counterparty credit position; priority of payment over ordinary (ii) stress testing of the Company’s portfolio to assess the impact Shareholders, in the unlikely event of creditor default; of insolvency, or voluntary winding up or restructuring. (iii) requiring suitable collateral security; and (iv) imposition of a maximum exposure limit per creditor. 16.5 Fluctuating Property Value Fluctuation in the market value 16.3 Liquidity Risk of the Companies assets will be Liquidity risk is the risk that the Company is unable to meet its financial reflected in the value of the Shares. obligations, due to an inability to convert assets into cash, without Property value may fall for a variety incurring a loss of principal or interest during the process. of reasons, including but not limited The following strategies will be used to mitigate against liquidity risk: to, change in government policy; low demand for real estate assets (i) establishment of policies and procedures to ensure sufficient (due to economic downturn or liquidity; comprehensive assessment of projected liquidity arising other factors triggering a reduction from asset/liability cash flows over varying periods of time; in demand for the Companies real (ii) development of a contingency funding plan for periods of estate assets and developments). reduced market liquidity; 16.6 Market for Shares (iii) conducting stress tests of liquidity due to determine potential areas of liquidity strain; The Shares may (whether after listing) experience flat trading, being (iv) maintaining access to various funding sources for diversification very infrequent or insignificant and ability to raise funds in a timely manner; and volumes of trading, either of which (v) monitoring mismatched asset/liability positions. may extend beyond the short term and which may be dependent on the
96 First Rock Capital Holdings | Prospectus Company’s financial performance, accounting errors, failure to procure appropriate insurance coverage, as well as on investors’ confidence and compliance failures), legal risk and reputation risk. This catch-all and other factors over which the category of risks also includes employee errors, computer and manual Company has no control. In either systems failures, security failures, fire, floods or other losses to physical case the market price of the Shares assets, and fraud or other criminal activity or any other risk that affects may be negatively affected or the volume of visitor arrivals to the island. The Directors consider that constrained from growing. the businesses are prudent and that each insures itself against some (but Also, the Jamaican securities not all) of these risks. It may not be feasible for the businesses to insure market is relatively small and the against all of the risks mentioned, because coverage may not be available, market in the Shares is expected or it may not be economical to do so. For instance: to be relatively thin compared to (i) the insurers could delay settlement or deny liability in respect of what may happen in larger capital a claim which could delay or prevent the repair or reinstatement markets, trades in small quantities of the real estate asset with consequential loss of rental income of Shares can trigger wide swings and exposure to increased costs of repairs or reinstatement; (up or down) in the market price of (ii) an insurer or reinsurer could become insolvent or otherwise be the Notes and make it easier for their unable to fulfil their obligation under the policy of insurance; market price to be manipulated. (iii) loss of rent is not covered under the insurance policy; and 16. 7 Lessee’s Risk (iv) after a loss, the existing tenant may elect to relocate to other Although the Management premises or to close operations in the leased premises and the Company exercises its due diligence Management Company may be unable to promptly find a suitable in selecting reputable tenants replacement tenant. for the real estate assets of the Company, changes in the financial 16.9 risk of Catastrophic Events circumstances of a tenant could Property damage and business interruption arising out of natural disasters affect their creditworthiness and and other catastrophes, may have a significant impact on the results of business practices. Rental income the operations and financial condition of the Company. Natural disasters could therefore be affected by and other catastrophes can be caused by various events including, but counter-party risk under the not limited to, hurricanes, earthquakes, tornadoes, wind, hail, fires and relevant leases – this risk arises if a explosions, and the incidence and severity of natural disasters and other tenant is unable or unwilling to pay catastrophes are inherently unpredictable. Most natural disasters and their rent when it becomes due. This other catastrophes are localized; however, hurricanes, earthquakes and risk has been mitigated by requiring floods have the potential to produce significant damage in widespread tenants to place a security deposit areas. of one month’s rent. 16.10 Acquisition Risk 16.8 operational Risk There are risks associated with real estate acquisition and property The Company is also subject to development. Some of these risks are as follows: the risk of loss resulting from (i) the inability of one or more parties to complete the acquisition disruptions to the business of its after making a non-refundable deposit and incurring other group, or inadequate or failed related costs; internal processes, people and systems, or from external events (ii) the actual costs of repositioning, redeveloping, retrofitting or (including severe weather, other maintaining the acquired real estate asset may exceed initial acts of God and social unrest) estimates; affecting any of those companies. (iii) the acquisition agreement may contain conditions of completion This definition also includes that may become onerous due to changing circumstance that are systemic risk (including the risk of
First Rock Capital Holdings | Prospectus 97 not within the Company’s control, which may not be satisfied; (iv) the Company may acquire properties subject to liabilities and without any recourse, or with only limited recourse against prior owners or other third parties with respect to unknown liabilities. Therefore, if a liability were asserted against the Company based upon ownership of those real estate asset, the Company might face substantial sums to settle or contest it, which could adversely affect its operations and cash flow. Unknown liabilities with respect to acquired real estate assets might include: a) liabilities for clean-up of undisclosed environmental contamination; b) claims by tenants, vendors or other persons against the former owners of the properties; and c) liabilities incurred in the ordinary course of business.
16.11 New Accounting Rules or Standards The Company 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 Company and/or investee companies currently report its financial position, operating results or cash flows. Such changes could be applied retrospectively. This is a risk that is common to companies that apply International Financial Reporting Standards (IFRS).
16.12 Saint Lucia and the Organisation for Economic Co-operation and Development (OECD) Saint Lucia is a member of the Organisation for Economic Co-operation and Development (OECD) and accordingly is subject to its policies with respect to taxation, which includes corporate income tax. In recent times, the OECD has had a thrust to ensure that tax rates within each tax type are homogenized by its members.
98 First Rock Capital Holdings | Prospectus Section 17 Documents available for Inspection
Copies of the following documents may be inspected on appointment at the offices Messrs. MH&CO., Attorneys- at-Law between the hours of 9:00 a.m. and 4:00 p.m. on Monday to Friday, up to and including the Closing Date (or the extended Closing Date, as the case may be): 1. The Second Amended and Restated Articles of Association of the Company 2. The Second Amended and Restated Memorandum of Association of the Company 3. The Company’s Certificate of Incorporation. 4. Company’s Certificate of Incumbency. 5. The Company’s Tax Clearance Certificate. 6. The Auditor’s Report. 7. The consent of the PricewaterhouseCoopers set out in Section 13. 8. The material contracts referred to in Section 15.
First Rock Capital Holdings | Prospectus 99 Section 18 Statutory and General Information
Statutory Information required to be set out in this Prospectus by section 41 and the Third Schedule to the Companies Act and other general information follow. 1. The Company was incorporated on October 4th 2017 and its registered office is Bourbon House, Bourbon Street, Castries, Saint Lucia. 2. The Company has no founders or deferred shares. 3. The Articles and Memorandum of Association fix no shareholding qualification for the Directors (Article 83) and none has been otherwise fixed by the Company in general meeting. 4. The Articles and Memorandum of Association contain the following provisions with respect to the remuneration of the Directors: Remuneration of Directors 82. The remuneration of the directors shall be such amount as the board of directors, or any appropriate committee of the board of directors, may determine. Such remuneration shall be deemed to accrue from day to day. The directors may also be paid all travelling, hotel and other expenses properly incurred by them in attending and returning from meetings of the directors or any committee of the directors or general meetings of the Company or in connection with the business of the Company. 84. 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 members or otherwise, and no such director shall be accountable to the Company for any remuneration or other benefits received by him as a director or officer of, or from his interest in, such other company unless the Company otherwise directs. Directors May Contract with the Company 95(3). A director may hold any other office or place of profit under the Company (other than the office of auditor) in conjunction with his 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 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 realised by any such contract or arrangement by reason of such director holding that office or of the fiduciary relationship thereby established. 95(5). Any director may act by himself or his firm in a professional capacity for the Company, and he or his firm shall be entitled to remuneration for professional services as if he were not a director; provided that nothing herein contained shall authorise a director or his firm to act as auditor to the Company. Payment of Pensions, Etc. to Directors 97. The directors may give or award pensions, annuities, gratuities and superannuation or other allowances or benefits to any persons who are or have at any time been directors of or employed by or in the service of the Company, or any company which is a subsidiary of the Company and to the wives, widows, children and other relatives and dependants of any such persons, and may set up, establish, support and maintain pension, superannuation or other funds or schemes (whether contributory or non-contributory) for the benefit of such persons as are hereinbefore referred to or any of them or any class of them. Any director shall be entitled to receive and retain for his own benefit any such pension, annuity, gratuity, allowance or other benefit, and may vote as a director in respect of the exercise of any of the powers of this Article conferred upon the directors notwithstanding that he is or may be or become interested therein.
100 First Rock Capital Holdings | Prospectus 100. The directors, on behalf of the Company, may pay a gratuity or pension or allowance on retirement to any director who has held any other salaried office or place of profit with the Company or to his widow or dependents and may make contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance. 5. The names and addresses of the Directors appear in Section 10.1 of this Prospectus. The residential addresses of the respective directors are as follows: Director Residential Address Dr. David Lowe 7 Marine Point Lagoons, Freeport, Saint James Douglas Halsall, O.D. 4 Oakdale Avenue, Kingston 8, Saint Andrew York Page Seaton, C.D., J.P Dawes Road, Coopers Hall, Saint Andrew Kisha Anderson Ottawa Avenue, Town House #7, Kingston 6, Saint Andrew Norman Reid 8 Davis Avenue, Red Hills Manor, Saint James Alton Morgan 5 Ridgefield Avenue, P.O. Box 1344, Kingston 8, Saint Andrew Lisandra Rickards 25 Merrivale Avenue, Kingston 8, Saint Andrew
6. The minimum amount required to be raised out of the proceeds of the Invitation to provide for the matters set out in paragraph 2 of Part 1 of the Third Schedule to the Companies Act (the “minimum subscription”) is at least $200,000,000 (or the USD equivalent using the Subscription Rate) with respect to the Class A Ordinary Shares and the Class B Ordinary Shares, respectively, in the Invitation. 7. The Invitation will open for subscription at 9:00 a.m. on January 13th 2020 and will close at 4:30 p.m. on the Closing Date, January 31st 2020 , subject to the Company’s right to close the application list at any time after 9:00 a.m. on the Opening Date if Applications have been received for an amount in excess of the Shares offered under this Prospectus, or to extend the Closing Date for any reason whatsoever. 8. All Applicants will be required to pay in full the J$ Subscription Price (J$ equivalent of US$0.12 per Share calculated using the Subscription Rate), J$ Reserved Share Price (J$ equivalent of US$0.108 per Share calculated using the Subscription Rate), US$ Subscription Price of US$0.12 per Share or the US$ Reserved Share Price of US$0.108 per Share as the case may be. No further sum will be payable on allotment. 9. No previous offer of Shares has been made to the public. 10. Save for the entitlement of the Reserved Shares Applicants, no person has, or is entitled to be given, any option to subscribe for any shares in, or debentures of, the Company. 11. As at the date of this Prospectus, the aggregate principal amount of indebtedness of the Company is approximately US$113,507 due to related parties for the Company and the First Rock Group. 12. Details of the Company’s real property is set out in Section 8.4. The Company does not own trademarks. There is no amount for goodwill, patent, or trademarks shown in the financial statements of the Company and there is no contract for sale and purchase which would involve any goodwill, patent or trademark. 13. As at the September 30th 2019, the Company held investments as follows: At amortised cost: US$ Corporate bonds 2,636,814 Certificate of deposit 1,500,000 Investment receivable 61,757 4,198,571 At fair value through profits and loss: Quoted equities 176,313 Unit trust 207,727 384,040
First Rock Capital Holdings | Prospectus 101 14. No amount is currently recommended for 21. The Company was incorporated on October 10th distribution by way of dividend. 2017 and commenced trading activities in late 15. Within the two (2) preceding years, no commissions March of 2019 upon the completion of its Private have been paid, nor will any be payable to anyone Placement Offer. The Company has the following for subscribing or agreeing to subscribe or procuring three (3) subsidiaries: or agreeing to procure subscriptions for any Shares (i) First Rock USA, LLC; or debentures of the Company. (ii) First Rock Capital, LATAM, Sociedad 16. The Company expects to pay the expenses of the Anónima; and Invitation out of the proceeds of its fundraising and (iii) First Rock Capital Cayman Limited. the Company estimates that the expenses in the Invitation will not exceed approximately Seventy 22. Within the last two (2) years preceding the date of Million Jamaican Dollars (J$70,000,000), inclusive of this Prospectus, no amount or benefit has been General Consumption Tax, which includes fees for paid or given or is intended to be paid or given the following services: to any promoter, save for Sagicor Investments Jamaica Limited and Sygnus Capital Limited, for a) Arranger, Co-Arranger, financial arrangement, financial advisory and brokerage advisory and brokerage fees; services services associated with the Invitation b) Legal fees; and listing on the JSE or any other agents or brokers c) Auditor’s and Accounting fees; appointed by the Company. d) Statutory fees including initial listing fees; 23. Litigation As at the date of this Prospectus, the Company is e) Marketing expenses; and not involved in any litigation, arbitration or similar f) Registrar and Transfer Agent fees. proceedings pending and/or threatened against the Company. However, this is subject to change in the event of an upsize. 24. Applicable Regulatory Regime The current business of the Company does not 17. The issue is not underwritten. require it to be regulated as a bank, financial 18. The material contracts of the Company are set out institution or as an insurer. However, the Company in Section 15. will be regulated by the Securities Act and the JSE 19. The name and address of the auditors to the Rules after listing on the Main Market and the USD Company is PricewaterhouseCoopers, Scotiabank Market of the JSE. Centre, Duke Street, KINGSTON. 25. Dividends 20. PricewaterhouseCoopers have given and have The Company declared and paid dividends at a not withdrawn their consent to the issue of this rate of US$0.0012 per Class A Ordinary Share in Prospectus with the inclusion of the Auditor’s Report October 2019. and Historical Financial Information and their name in the form and context in which it is included.
102 First Rock Capital Holdings | Prospectus Section 19 Application Procedures and Terms & Conditions of Initial Public Offer
1. All Applicants must submit an Application Form as provided at Appendix 1 to this Prospectus. Reserved Share Applicants shall apply by indicating which pool of Reserved Shares is applicable. 2. All Applicants will be deemed to have accepted the terms and conditions of the Invitation and any other terms and conditions set out in this Prospectus, including any terms and conditions set out in this Section 19 and Appendix 1. 3. Each Applicant acknowledges and agrees that: a) he/she has been afforded a meaningful opportunity to review the Prospectus (including the terms and conditions set out in this Section 19), and to gather and review all additional information considered by him/ her to be necessary to verify the accuracy of the information contained in this Prospectus; and b) no person connected with the Company has made any representation concerning the Company or this Prospectus not contained in this Prospectus, on which the Applicant has relied in submitting his/her Application Form. 4. Application Forms from the general public, Key Strategic Partners and First Rock Affiliates must request a minimum of 1,000 Shares and shall be made in multiples of 1,000. Application Forms from the general public in other denominations will not be processed or accepted. 5. All Application Forms must be submitted together with payment for the Shares in the form of either: a) a manager’s cheque made payable to “Sagicor Investments Jamaica Limited”; or b) authorization from the Applicant on the Application Form, instructing Sagicor Investments to make payment from cleared funds held with Sagicor Investments in an investment account in the Applicant’s name; or c) transfer or direct deposit to Sagicor Investments (details set out in the Application form attached herein).
All completed Application Forms must be delivered to Sagicor Investments at the following locations Islandwide:
Branch Location Hope Road (Head Office) 85 Hope Road, Kingston 6, Saint Andrew
Dominica Drive 17 Dominica Drive, Kingston 5, Saint Andrew
Montego Bay Shop B8, 21B Fairview Shopping Centre, Bogue Estates, Montego Bay, Saint James
Duke and Tower Street 17A Duke Street, Kingston
Half Way Tree 6C Constant Spring Road, Kingston, Saint Andrew
Liguanea 106 Hope Road, Kingston, Saint Andrew
Tropical Plaza Shop #25, 12 1/2 & 14 Constant Spring Road Kingston, Saint Andrew
Portmore Shop#34, Portmore Pines Plaza, Portmore, Saint Catherine
Ocho Rios Unit 5&6 Eight Rivers Town Centre, Buckfield Ocho Rios, Saint Ann
Savanna-La-Mar Great George Street, Savanna-La-Mar, Westmoreland
Mandeville 5-7 Ward Avenue, Mandeville, Manchester
May Pen 6B Manchester Avenue, May Pen, Clarendon
Black River Corner High and School Streets, Black River, Saint Elizabeth
First Rock Capital Holdings | Prospectus 103 6. All Shares in the Invitation are priced at the J$ specified by the Applicant in his/her Application Subscription Price (J$ equivalent of US$0.12 per Form) will result in a binding contract under which Share calculated using the Subscription Rate), J$ the Applicant will be deemed to have agreed to Reserved Share Price (J$ equivalent of US$0.108 per subscribe for the number of allotted Shares at Share calculated using the Subscription Rate), US$ the Subscription Price, subject to the Articles and Subscription Price of US$0.12 per Share or the US$ Memorandum of Association and these terms and Reserved Share Price of US$0.108 per Share as the conditions set out in Section 19. case may be. 10. If the Invitation is successful in raising at least 7. Application Forms submitted to Sagicor Investments $200,000,000 (or the USD equivalent using the in advance of the Opening Date (early applications) Subscription Rate) with respect to the Class A will be received but not processed until the Opening Ordinary Shares and the Class B Ordinary Shares, Date. All advance applications will be treated as respectively, in the Invitation, and the Shares are having been received at 9:00 a.m. on the Opening admitted to trade on the Main Market and the USD Date, January 13th 2020 and shall be allotted pro Market, successful Applicants will be allotted Shares rata. All Application Forms received from 9:00 for credit to their account at the Registrar specified a.m. onwards on the Opening Date will be time in their Application Forms. Applicants may refer stamped for processing in the order in which they to the informational notice that will be posted on were received. That is, the Application Forms will the website of the JSE (www.jamstockex.com) after be processed on a first come, first served basis. the Closing Date. Applicants who wish to receive Application Forms that meet the requirements set share certificates must make a specific request to out in this Section 19 will be processed. the Registrar. 8. For the purposes of paragraph 7. above the 11. With respect to refunds that are less that the RTGS Directors, in their sole discretion, may: threshold of $1 Million, the Company will endeavour a) accept or reject any Application Form in whole to return cheques for the amounts refundable to or part without giving reasons, and neither the Applicants whose applications are not accepted, Company nor the Directors shall be liable to or whose application are only accepted in part, any Applicant or any other person for doing so; to Sagicor Investments within ten (10) days after the Closing Date (or the extended Closing Date, b) treat multiple Applications by any person as the case may be) or as soon as practicable (whether in individual or joint names) as a thereafter. Each refund cheque will be sent to single Application, or accept or reject multiple Sagicor Investments for collection by the Applicant applications in its sole discretion; and (or the first-named joint Applicant) stated in the c) the Company may notwithstanding, that the Application Form. Any other persons purporting intention of the Company is to allot the Shares to collect a cheque on behalf of the Applicant must on a first come, first served basis, reserve the be authorised in writing by the Applicant(s) to do right to allot the Shares to Applicants on a basis so. All refunds of a quantum greater than the RTGS to be determined by it in its sole discretion in the threshold of $1 Million, will be refunded via RTGS to event the Invitation is oversubscribed, including the account of origin. on a pro rata basis. 12. Applicants must be at least eighteen (18) years old. 9. Neither the submission of an Application Form by an However, Applicants who have not yet attained the Applicant nor its receipt by the Company will result age of eighteen (18) years, may apply jointly with in a binding contract between the Applicant and Applicants who are at least eighteen (18) years the Company. Only the allotment of Shares by the of age. Registrar on behalf of the Company to an Applicant (whether such Shares represent all or part of those
104 First Rock Capital Holdings | Prospectus Section 20 Directors’ Signatures
First Rock Capital Holdings | Prospectus 105 Appendix 1 Application Form
Appendix 1A - Application Form for J$ Class B Ordinary Shares
FIRSTROCK CAPITAL HOLDINGS LIMITED INITIAL PUBLIC OFFER - APPLICATION FORM
PLEASE READ CAREFULLY BEFORE COMPLETING THIS FORM
To: First Rock Capital Holdings Limited (“First Rock Capital” or “the Company”)
Re: Invitation for Subscription for up to 159,124,998 ordinary shares (“the Application Shares”) in First Rock Capital Holdings Limited made pursuant to the Prospectus dated the 5th day of December 2019 (the “Prospectus”).
I/We confirm that I/we have read and understood and hereby agree to be bound by the terms and conditions contained in the Prospectus, all of which are incorporated in this Application Form by reference.
I/We hereby apply for ______ordinary shares in First Rock Capital on and subject to the terms and conditions of the IPO set out in the Prospectus at the price of JMD ______each. I/We have made / remitted payment of the sum of JMD ______for my/our subscription/purchase and the JCSD processing fee of JMD 163.10 (inclusive of GCT) with proof of payment attached. I/We agree to accept the Application Shares or any smaller number in respect of which this application may be accepted, subject to the terms and conditions in the Prospectus and the Articles of Incorporation of First Rock Capital Holdings Limited, by which I/ We agree to be bound. I/We request you to sell and/or transfer to me/us the number of Application Shares, which may be allocated to me/us at the close of the said IPO on the terms and conditions governing applications, as set forth in the Prospectus. I/We hereby agree to accept the Application Shares that may be allocated to me/us to be credited to an account in my/ our name(s) in the Jamaica Central Securities Depository (JCSD).
Instructions to completing application form: All fields are relevant and must be completed. If you already have an account with the JCSD, please ensure that you indicate your JCSD Account number. General Pool Reserved Shares for Key Partners Reserved Shares for First Rock Affiliates
106 First Rock Capital Holdings | Prospectus PRIMARY HOLDER
Full Name of Applicant (Individual or Company)
TRN Occupation/ Line of Business
Address Line 1
Address Line 2
Nationality or Country Telephone (Home) of Incorporation
Telephone (Work) Telephone (Cellular) Facsimile
Email Address Broker Code
JCSD Number Broker Account
Signatures (Company) DIRECTOR DIRECTOR/SECRETARY
Signature (Individual) SEAL OR STAMP REQUIRED FOR COMPANIES
APPLICANT
JOINT HOLDER(S)
Full Name (1st Joint Holder)
TRN Occupation/
Signature Date (Individual)
Full Name (2nd Joint Holder)
TRN Occupation/
Signature Date (Individual)
Full Name (3rd Joint Holder)
TRN Occupation/
Signature Date (Individual)
PAYMENT VERIFICATION INFORMATION
Managers Cheque
Cheque Number Cheque Amount Institution
RTGS
Amount Confirmation/ Reference # Institution
Sender’s Sender Account # Account Name
ALL APPLICANTS MUST INPUT THEIR TRN NUMBERS. THIS OFFER IS NOT MADE TO PERSONS OUTSIDE JAMAICA
First Rock Capital Holdings | Prospectus 107 NOTES ON HOW TO COMPLETE THE APPLICATION FORM 1) All completed applications must be delivered Sagicor Investments Jamaica Limited at, 85 Hope Road, Kingston 6 or to any of their offices in Jamaica. 2) Applications must be for a minimum of 1,000 shares with increments in multiples of 1,000 shares. Applications in other denominations will not be processed or accepted. 3) If you are a Reserve Share Applicant, please specify in the reserved share section on Application Form. 4) All applicants must attach their payment for the specified number of Shares they have applied for, in the form of either: a) A Manager’s cheque made payable to Sagicor Investments Jamaica Limited and b) Transfer in Real Time Gross Settlement (RTGS) system, in the case of payment of J$1,000,000 or more to Beneficiary Bank Name: Sagicor Bank Jamaica Limited Beneficiary Account Name: Sagicor Investments Jamaica Limited Beneficiary Account: 5503131813 BIC: SAJAJMKN Payment Reference: “Client Name” – First Rock Capital IPO 5) If you are applying jointly with another person, you must complete the Joint Holder Information and each joint holder must sign the Application Form in the place indicated. 6) All Applicants must be at least 18 years old and must attach a certified copy of their T.R.N. card or Jamaican Driver’s Licence displaying the T.R.N. 7) Share Certificates will not be issued unless specifically requested through your broker. Instead, the shares allotted to a successful applicant will be credited to his account at the Jamaica Central Securities Depository (“JCSD”). If the applicant does not have a JCSD account, one will be created by your broker and the allotted shares deposited to that account. 8) All Applicants are deemed to have accepted the terms and conditions set out in the Prospectus and the Articles of Incorporation of the Company generally.
THIS SECTION FOR USE BY BROKER ONLY
DATE APPLICATION RECEIVED:______TIME RECEIVED______
PAYMENT METHOD: Cheque Electronic Transfer
PAYMENT AMOUNT:______PAYMENT DATE:______
POOL:______
______Broker Authorised Signatory & Stamp
108 First Rock Capital Holdings | Prospectus Appendix 1 Application Form
Appendix 1B- Application Form for US$ Class A Ordinary Shares
FIRSTROCK CAPITAL HOLDINGS LIMITED INITIAL PUBLIC OFFER - APPLICATION FORM
PLEASE READ CAREFULLY BEFORE COMPLETING THIS FORM
To: First Rock Capital Holdings Limited (“First Rock Capital” or “the Company”)
Re: Invitation for Subscription for up to 159,124,998 ordinary shares (“the Application Shares”) in First Rock Capital Holdings Limited made pursuant to the Prospectus dated the 5th day of December 2019 (the “Prospectus”).
I/We confirm that I/we have read and understood and hereby agree to be bound by the terms and conditions contained in the Prospectus, all of which are incorporated in this Application Form by reference.
I/We hereby apply for ______ordinary shares in First Rock Capital on and subject to the terms and conditions of the IPO set out in the Prospectus at the price of USD 0.12 each. I/We have made / remitted payment of the sum of USD ______for my/our subscription/purchase and the JCSD processing fee of USD 1.50 (inclusive of GCT) with proof of payment attached. I/We agree to accept the Application Shares or any smaller number in respect of which this application may be accepted, subject to the terms and conditions in the Prospectus and the Articles of Incorporation of First Rock Capital Holdings Limited, by which I/ We agree to be bound. I/We request you to sell and/or transfer to me/us the number of Application Shares, which may be allocated to me/us at the close of the said IPO on the terms and conditions governing applications, as set forth in the Prospectus. I/We hereby agree to accept the Application Shares that may be allocated to me/us to be credited to an account in my/ our name(s) in the Jamaica Central Securities Depository (JCSD).
Instructions to completing application form: All fields are relevant and must be completed. If you already have an account with the JCSD, please ensure that you indicate your JCSD Account number. General Pool Reserved Shares for Key Partners Reserved Shares for First Rock Affiliates
First Rock Capital Holdings | Prospectus 109 PRIMARY HOLDER
Full Name of Applicant (Individual or Company)
TRN Occupation/ Line of Business
Address Line 1
Address Line 2
Nationality or Country Telephone (Home) of Incorporation
Telephone (Work) Telephone (Cellular) Facsimile
Email Address Broker Code
JCSD Number Broker Account
Signatures (Company) DIRECTOR DIRECTOR/SECRETARY
Signature (Individual) SEAL OR STAMP REQUIRED FOR COMPANIES
APPLICANT
JOINT HOLDER(S)
Full Name (1st Joint Holder)
TRN Occupation/
Signature (Individual) Date
Full Name (2nd Joint Holder)
TRN Occupation/
Signature (Individual) Date
Full Name (3rd Joint Holder)
TRN Occupation/
Signature (Individual) Date
PAYMENT VERIFICATION INFORMATION
US Local Draft
Cheque Number Cheque Amount Institution
Wire Details
Amount Confirmation/ Reference # Institution
Sender’s Sender Account # Account Name
ALL APPLICANTS MUST INPUT THEIR TRN NUMBERS. THIS OFFER IS NOT MADE TO PERSONS OUTSIDE JAMAICA
110 First Rock Capital Holdings | Prospectus NOTES ON HOW TO COMPLETE THE APPLICATION FORM 1) All completed applications must be delivered Sagicor Investments Jamaica Limited at, 85 Hope Road, Kingston 6 or to any of their offices in Jamaica. 2) 2) Applications must be for a minimum of 1,000 shares with increments in multiples of 1,000 shares. Applications in other denominations will not be processed or accepted. 3) If you are a Reserve Share Applicant, please specify in the reserved share section on Application Form. 4) All applicants must attach their payment for the specified number of Shares they have applied for, in the form of either: a) A USD Local Draft made payable to Sagicor Investments Jamaica Limited and b) Transfer or deposit of funds to the following account: Beneficiary Bank: Bank of America, 100 S.E. 2nd Street, Miami, Florida, 33131 ABA Number: 026009593 Account Name: Sagicor Investments Jamaica Limited Account Number: 1901952184 Payment Reference: “Client Name” – First Rock Capital IPO 5) If you are applying jointly with another person, you must complete the Joint Holder Information and each joint holder must sign the Application Form in the place indicated. 6) All Applicants must be at least 18 years old and must attach a certified copy of their T.R.N. card or Jamaican Driver’s Licence displaying the T.R.N. 7) Share Certificates will not be issued unless specifically requested through your broker. Instead, the shares allotted to a successful applicant will be credited to his account at the Jamaica Central Securities Depository (“JCSD”). If the applicant does not have a JCSD account, one will be created by your broker and the allotted shares deposited to that account. 8) All Applicants are deemed to have accepted the terms and conditions set out in the Prospectus and the Articles of Incorporation of the Company generally.
THIS SECTION FOR USE BY BROKER ONLY
DATE APPLICATION RECEIVED:______TIME RECEIVED______
PAYMENT METHOD: Cheque Electronic Transfer
PAYMENT AMOUNT:______PAYMENT DATE:______
POOL:______
______Broker Authorised Signatory & Stamp
First Rock Capital Holdings | Prospectus 111 Appendix 2 Rights, Terms and Conditions of the Class A Preference Shares
1. Ranking The Class A Preference Shares issued to First Rock Capital Resource shall rank pari passu as between and among themselves and in priority to any other shares issued by the Company, inclusive of the Shares, subject to the provisions of section 5, below. 2. Right to Cumulative Dividend Each Class A Preference Share will be entitled to a cumulative annual preference dividend, which shall be equivalent to: Twenty- five per cent (25%) of the audited annual total comprehensive income of the Company (calculated in accordance with International Financial Reporting Standards prevailing from time to time, and expressed in US dollars) (“Total Income”) in each financial year in excess of the Annual Earnings Hurdle. DIVIDED BY The number of Class A Preference Shares in issue when the said cumulative annual preference dividend is paid. The “Annual Earnings Hurdle” shall be the amount which results when the Hurdle Rate of eight per cent (8%) is applied to the Total Income of the Company. For the purposes above, the cumulative annual preference dividend will initially be calculated and paid to the holders on the basis of the Company’s interim unaudited quarterly financial statements, PROVIDED ALWAYS THAT: (i) in the event of a negative variance between the interim unaudited quarterly financial statements and the audited annual financial statements in any given year, any surplus amount paid to First Rock Capital Resource Limited by way of the initial payment of the cumulative annual preference dividend will be subject to ‘claw back’ or re-payment from First Rock Capital Resource Limited and, if such re-payment is not made, the Company shall have a right of set – off of such surplus amount against any future cumulative annual preference dividend that may be payable to First Rock Capital Resource Limited; and (ii) in the event of a positive variance between the interim unaudited quarterly financial statements and the audited annual financial statements in any given year, if all or any portion of such cumulative annual dividend remains unpaid, it shall accumulate and be payable out of the profits and gain of the Company at the end of the said financial year and otherwise, in the next ensuing financial year until it has been paid in full. 3. Voting, etc The holder of the Class A Preference Shares shall have the right to receive notices of, attend and vote at any general meetings of the Company and any meetings of the holders of any class of Shareholders of the Company. On a show of hands, the holder of the Class A Preference Shares shall have one vote and on a poll it shall have such number of votes as is equivalent to one hundred and one per cent (101%) of the aggregate votes vested in all the Shares. The terms of the Class A Preference Shares may not be varied without the consent in writing of all of the holders of such Class A Preference Shares. 4. Rights to Return of Capital The Class A Preference Shares shall, apart from the right to the cumulative annual preference dividend, have no economic rights or entitlements save for the right on a winding up to the repayment of the capital paid, or credited as paid, thereon and the right to share in any surplus on winding up on a pari passu basis with the capital paid on the Shares.
112 First Rock Capital Holdings | Prospectus 5. As to Further Issues of any Other Preference Shares: The Company shall not issue any further preference shares either ranking pari passu and so as to form one class with the existing Class A Preference Shares; and/or ranking in priority to the Class A Preference Shares, UNLESS the holders of all of the Class A Preference Shares provide consent in writing to any further issue of such shares ranking pari passu with or in priority to the Class A Preference Shares. 6. As to Variation of any Rights Attaching: The rights attaching to the Class A Preference Shares shall not be varied without the consent in writing of all of the holders of the Class A Preference Shares then in issue, either while the Company is a going concern, or during or in contemplation of a winding-up of the Company. Any modification or termination of the Management Agreement between the Company and First Rock Capital Resource Limited shall be deemed a variation of the rights attaching to the Class A Preference Shares and accordingly may be effective only with the consent in writing of the holder(s) of the Class A Preference Shares. Any disposal which, alone or when aggregated with any other disposal(s) forming part of, or connected with, the same or a connected transaction, constitutes a disposal of the whole or a material part of the assets of the Company shall be deemed to be a variation of the rights attaching to the Class A Preference Shares and accordingly may be effective only with the consent in writing of the holder of the Class A Preference Shares. For these purposes, a part of the Company’s assets shall only be deemed to be material if: (i) its book value, calculated by reference to the latest audited account, or the total consideration to be received on its disposal is not less than twenty-five per cent (25%) of the book value of the net assets of the Company; (ii) the average profits attributable to it represent at least twenty-five per cent 25% of the average profits of the Company, being the average of the last three (3) financial years of the Company for which audited accounts are available (or such lesser number of years for which audited financial statements are available) before deducting all charges, except taxation and extraordinary items; and (iii) the book value of any assets and the attributability of profits thereto shall, in each case, be conclusively determined (at the request of the holder of the Class A Preference Shares) by the auditors of the Company and be subject to such adjustment as the auditors consider appropriate. 7. Mandatory Winding-Up on Departure of the Management Company If the Company shall experience “under-performance”, the Shareholders may by resolution passed at a general meeting vote to wind-up the Company and the holder of the Class A Preference Shares shall not be entitled to vote on any such resolution. “Underperformance” shall mean that for five (5) consecutive financial years, not including any year prior to the Financial Year 2020, the gross return on equity is less than four per cent (4%) based on the audited financial statements.
First Rock Capital Holdings | Prospectus 113 APPENDIX 3 RIGHTS, TERMS AND CONDITIONS OF THE CLASS A & B ORDINARY SHARES
The Articles and Memorandum of Association contains the following provisions with respect to the rights of voting at meetings and the rights with respect to capital and dividends attached to the Class A Ordinary Shares and the Class B Ordinary Shares.:
1. Variation of Rights Memorandum of Association Provision 8 The designations, powers, preferences, rights, qualifications, limitations and restrictions of each class and series of shares that the company is authorized to issue shall be fixed by resolution of the members, but the directors shall not allocate different rights as to voting, dividends, redemption or distributions on liquidation unless the Memorandum of Association shall have been amended to create separate classes of shares and all the aforesaid rights as to voting, dividends, redemption and distributions shall be identical in each separate class. Any variation of the rights of any class of shares shall be determined by a resolution of members, and the quorum for a separate class meeting (other than an adjourned meeting) to consider a variation of the rights of any class of shares shall be the holders of at least one-third of the issued shares of the said class. Provision 9 If at any time the authorized capital is divided into different classes or series of shares, the rights attached to any class or series (unless otherwise provided by the terms of issue of the shares of that class or series) may, whether or not the Company is being wound up, be varied with the consent in writing of the holders of not less than three-fourths of the issued shares of that class or series and of the holders of not less than three-fourths of the issued shares of any other class or series of shares which may be affected by such variation. Provision 10 The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari pasu therewith. Provision 11 The Company may amend its Memorandum of Association and Articles of Association by a resolution of members or directors.
Articles of Association Articles SHARE CAPITAL AND VARIATION OF RIGHTS 2. Without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares: (a) any share in the Company may be issued with such preferred, deferred or other special rights or such restrictions, whether in regard to dividend, voting, return of capital or otherwise as the Company may from time to time by ordinary resolution of the members determine; (b) the Company may issue shares which by the terms of issue will be redeemed or at the option of the Company may be redeemed provided that where by such terms power is reserved to purchase for redemption any such share: (i) purchases not made through any stock exchange or by tender shall be limited to a maximum price; (ii) if purchases are by tender, tenders shall be available to all members alike;
114 First Rock Capital Holdings | Prospectus (c) any new preference shares may, with the or any interest in any fractional part of a share or sanction of an ordinary resolution of the (except only as by these Articles or by law otherwise members, be issued on the terms that they are, provided) any other rights in respect of any share or at the option of the Company are liable, to be except an absolute right to the entirety thereof in redeemed on such terms and in such manner the registered holder. as the Company before the issue of the shares 4. Subject to the rules of any stock exchange, every may by special resolution of the members person whose name is entered as a member in the determine; Register shall be entitled without payment to receive (d) subject to the terms of issue of any shares, if within ten (10) days after allotment or lodgement of at any time the share capital is divided into transfer one certificate for all his shares or several different classes of shares, the rights attached certificates each for one or more of his shares. In to any class (unless otherwise provided by the the case of shares deposited by a member in a terms of issue of the shares of that class) may licensed central securities depository and thereafter whether or not the Company is being wound transferred, evidence as to the transferee’s title to up, be varied with the consent in writing of the such shares shall be provided in accordance with holders of three-fourths (3/4) of the issued the rules of any stock exchange. Every person shall shares of the class and of the holders of not be entitled without payment, to one certificate less than three-fourths (3/4) of the issued shares for all his shares of each class and when part only of any other class or series of shares which of the shares comprised in a certificate is sold or may be affected by such variation, or with the transferred to a new certificate for the remainder sanction of an extraordinary resolution passed of the shares so comprised. Every certificate shall at a separate general meeting of the holders of be under the Seal, which shall be affixed with the the shares of the class. To every such separate authority of the directors only, and shall specify general meeting the provisions of these Articles the shares to which it relates, and the amount relating to general meetings shall apply, but so paid up thereon. Provided that in respect of a that the necessary quorum shall be two persons share or shares held jointly by several persons the at least holding or representing by proxy one- Company shall not be bound to issue more than one third (1/3) of the issued shares of the class and certificate, and delivery of a certificate for a share that any holder of shares of the class present in to one of several joint holders shall be sufficient person or by proxy may demand a poll; delivery to all such holders. (e) the rights conferred upon the holders of the 5. The directors may (and shall, if required by the shares of any class issued with preferred or rules of any stock Exchange) subject to such proper other rights shall be deemed to be varied by safeguards as they shall determine, authorize the the creation or issue of further shares ranking Secretary or transfer agent of the Company to pari passu therewith; certify any instrument of transfer of shares in or (f) the shares shall be under the control of the debentures of the Company against certificates directors, who may allot and dispose of or grant lodged. options over the same to such persons, on such 6. If a share certificate be worn out , defaced, lost or terms, and in such manner as they think fit. All destroyed, it may be renewed on payment of a fee of shares are issued with a par value. twenty (20) cents in Jamaican currency or such lesser 3. Except as required by law, no person shall be sum and on such terms (if any) upon production of recognised by the Company as holding any share the worn out or defaced certificate or on satisfactory upon any trust, and the Company shall not be proof of its loss or destruction together with any bound by or be compelled in any way to recognize indemnity required as the directors think fit and the (even when having notice thereof) any equitable, payment of out-of-pocket expenses of the Company contingent, future or partial interest in any share incurred in investigating the loss.
First Rock Capital Holdings | Prospectus 115 2. Alteration of Capital held by the Company as treasury shares that are Articles of Association entitled to any preference, if any, in the assets of the Company upon liquidation of the Company. Articles 50. No reduction of capital shall be effected unless 44. Subject to the terms of the Preference Shares, the directors determine that immediately after and with the prior or subsequent approval by an the reduction the Company will be able to satisfy Ordinary Resolution of the members, the Company its liabilities as they become due in the ordinary may amend its Memorandum to increase or course of its business and that the realizable reduce its authorized capital and in connection assets of the Company will not be less than its therewith the Company may increase or reduce total liabilities, other than deferred taxes, as the number of shares which the Company may shown in the books of the Company and its issue, increase or reduce the par value of any of its remaining capital, and, in the absence of fraud, shares or effect any combination of the foregoing. the decision of the directors as to the realizable 45. Where the Company reduces its authorized capital value of the assets of the Company is conclusive, under the foregoing Article, then, for purposes of unless a question of law is involved. computing the capital of the Company, any capital 51. Where the Company reduces its capital under that before the reduction was represented by Article 44 the Company may: shares but immediately following the reduction is no longer represented by shares shall be deemed (a) return to its members any amount received to be capital transferred from surplus to capital. by the Company upon the issue of any of its shares; 46. The Company by Resolution of the directors may amend its Memorandum to divide the shares, (b) purchase, redeem or otherwise acquire its including issued shares, of a class or series of shares out of capital; or shares into a larger number of shares of the same (c) cancel any capital that is lost or not class or series. represented by assets having a realizable 47. The Company may by Resolution of the directors value. amend its Memorandum to combine the shares, including issued shares, of a class or series of 3. Voting shares into a smaller number of shares of the Articles of Association same class or series. Articles 48. The capital of the Company may by a Resolution VOTES OF MEMBERS GENERALLY of the directors be increased by transferring an amount of the surplus of the Company to capital 67. Subject to any rights or restrictions for the time and, subject to the provisions of Articles 49 and being attached to any class or classes of shares, 50, the capital of the Company may be reduced on a show of hands every member present by transferring an amount of the capital of the in person shall have one (1) vote, and on a poll company to surplus. every member, present in person or by proxy, shall have one (1) vote for each share of which he 49. No reduction of capital shall be effected that is the holder. reduces the capital of the Company to an amount that is less than the aggregate par value 68. In the case of joint holders, the vote of the senior of all outstanding shares with par value and all who tenders a vote, whether in person or by shares with par value held by the Company as proxy, shall be accepted to the exclusion of the treasury shares and the aggregate of the amounts votes of the other joint holders; and for this designated as capital of all outstanding shares purpose, seniority shall be determined by the without par value and all shares without par value order in which the names stand in the register of members.
116 First Rock Capital Holdings | Prospectus 69. A member of unsound mind, or in respect of whom the like discretion, either be employed in the an order has been made by any court having business of the Company or be invested in such jurisdiction in lunacy, may vote whether on a show investments (other than shares of the Company) of hands or on a poll, by his committee, receiver as the directors may from time to time think fit. or other person in the nature of a committee or The directors may also without placing the same receiver appointed by that court, and any such to reserve carry forward any profits which they committee, receiver, or other person may on a may think prudent not to divide. poll vote by proxy. 134. Subject to the rights of persons, if any, entitled 70. No member shall be entitled to vote at any to shares with special rights as to dividend, all general meeting unless all calls or other sums dividends shall be declared and paid according presently payable by him in respect of shares in to the amounts paid or credited as paid on the the Company have been paid. shares in respect whereof the dividend is paid, 71. No objection shall be raised to the qualification but no amount paid up or credited as paid up of any voter except at the meeting or adjourned on a share in advance of calls shall be treated meeting at which the vote objected to is given or for the purposes of this regulation as paid on tendered, and every vote not disallowed at such the share. All dividends shall be apportioned meeting shall be valid for all purposes. Any such and paid proportionately to the amounts paid objection made in due time shall be referred to up or credited as paid up on the shares during the chairman of the meeting, whose decision shall any portion or portions of the period in respect be final and conclusive. of which the dividend is paid; but if any share is issued on terms providing that it shall rank for 72. On a poll votes may be given either personally dividend as from a particular date such share shall or by proxy. rank for dividend accordingly. 135. The directors may deduct from any dividend 4. Dividends payable to any member all sums of money (if Articles any) presently payable by him to the Company ORDINARY SHARE DIVIDENDS AND RESERVE on account of calls or otherwise in relation to any the shares of the Company. 130. The Company in general meeting may declare dividends in respect of the Ordinary Shares, 136. Any general meeting of the Company declaring but no such dividend shall exceed the amount a dividend or bonus may direct payment of recommended by the directors. such dividend or bonus wholly or partly by the distribution of specific assets and in particular of 131. The directors may from time to time pay to the paid up shares, debentures or debenture stock Ordinary Shareholders and to any other holders of any other company or in any one or more of of shares in the Company, such interim dividends such ways and the directors shall give effect to as appear to the directors to be justified by the such resolution, and where any difficulty arises profits of the Company. in regard to such distribution, the directors may 132. No dividend shall be paid otherwise than out of settle the same as they think expedient, and in profits. particular may issue fractional certificates and fix 133. The directors may, before recommending any the value for distribution of such specific assets dividend as aforesaid, set aside out of the profits or any part thereof and may determine that cash of the Company such sums as they think proper as payments shall be made to any members upon a reserve or reserves which shall, at the discretion the footing of the value so fixed in order to adjust of the directors, be applicable for any purpose to the rights of all parties, and may vest any such which the profits of the Company may be properly specific assets in trustees as may seem expedient applied, and pending such application may, at to the directors.
First Rock Capital Holdings | Prospectus 117 137. All dividends unclaimed after having been declared may be invested or otherwise made use of by the directors for the benefit of the Company until claimed and if unclaimed for twelve (12) years or more after the date of the declaration of the dividend may be forfeited and retained by the Company. 138. Any dividend, interest or other moneys payable in cash in respect of shares may be paid by cheque or warrant sent through the post directed to the registered address of the holder or, in the case of joint holders, to the registered address of that one of the joint holders who is first named on the register of members or to such person and to such address as the holder or joint holders may in writing direct. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent. Any one (1) of two (2) or more joint holders may give effectual receipts for any dividends, bonuses or other moneys payable in respect of the shares held by them as joint holders. 139. No dividend shall bear interest against the Company.
118 First Rock Capital Holdings | Prospectus