Tattoo artist Kamal Beharrysingh is a wanted man in Princes Town. At Exquisite Crafts in Harris Mega Store in Princes Town, people literally put their body parts in his hands.

As manager of the shop, Beharrysingh, has been putting in long hours trying to get the perfect mark in permanent ink for his customers. Beharrysingh said that apart from the fact that this art has become high fashion in the US, many of the young people in TT are crazy about getting personal etchings on their body. He is well known for accuracy in completing the most complicated and intricate designs freehand and with the machine operated needles and ink. To ensure high standards,  each customer is treated with new needles and sterilised equipment for every job.

The south-based artist shows his skill and talent by slowly engraving a design just by looking at a picture on the wall. While many would choose to first draw the design before attempting it, Beharrysingh does much of his work freehand.  In order to do this, he applies deep concentration and effort to bring out the best finish, he said. Talking about all aspects of tattooing, Beharrysingh explained that there are many perceptions concerning poisonous ingredients used in the ink. “The ink that is being used comes directly from the US and is made from the bark of trees. It is all natural and non-poisonous,” he said.

He noted that tattooing is an attractive art that can add to the general appearance of an individual. “While many see this as a mark of being an outcast, it is now a fashion craze in many parts of the world.” He noted that this art has been condemned by many religions, but many people are slowly accepting it. And there is a thriving market in TT. Beharrysingh who is also a wood artist, and airbrush painter has many artworks to his credit. The lion in his shop, for instance, is an eye-catcher. He started his shop three years ago and has expanded into a major business in south Trinidad, will soon be opening a school for the arts.

Excerpts of a presentation delivered by Osborne Nurse, Chairman, Trinidad and Tobago Securities and Exchange Commission (SEC) at a seminar on the Proposed Take-Over By-Laws on August 14 at the Trinidad Hiltom. His speech was titled, “The Securities Regulation in Trinidad and Tobago.”

This seminar is part of the process to improve our contact and consultation with market participants. This is a first step and we will continue to use several means of achieving effective consultation in the future. This event also marks our signal to the market that we at the Trinidad and Tobago Securities and Exchange Commission will press on with the development, consultation and implementation of policies for the regulation and development of our securities market. As you are aware, the regulation of financial services throughout the world has in recent years been marked by the efforts of regulators to synchronise regulation of the different parts of the financial system in recognition of the increasing impact of the global market on such systems and the instantaneous nature of financial transactions. In order to achieve such synchronisation while recognising and paying due regard to the specific needs of different jurisdictions, regulators worldwide have developed codes of best practice that have been recommended for implementation by regulatory authorities. Thus in the banking and financial services sector best practice is defined through standards established by the Basle Committee, while in the securities industry, such best practice standards are established by the International Organisation of Securities Commissions (IOSCO).
IOSCO identifies the goals of securities regulation as:
* Ensuring market fairness, efficiency and transparency;
* Protection of investors; and
* Reduction of systemic risk.

These are intended to lead to and encourage market growth and development, particularly through instilling confidence, among investors, market participants and issuers of securities alike, that the risks in the market are known — and presumably understood — and that the playing field is level for all participants, even though it may not be smooth. A securities regulator like the Trinidad and Tobago Securities and Exchange Commission has relatively few tools to use to achieve these broad goals. The first and most important of these is an appropriate enabling legislative framework that recognises the importance of the goals of market regulation and that empowers the regulator to take the necessary steps to achieve those goals. We, at the Commission, have been engaged over the past year in a comprehensive exercise to review, modernise and revise the legislation in order to bring it up to international best practice standards. Indeed, the Take-Over By-Law that we are here to discuss today is only one part of that effort. Within the framework of the specific legislation that empowers securities regulators in each jurisdiction, there are three broad strategies and interventions practiced by regulators.
 These are:
* The establishment of standards as may be embodied in law through rules and regulations;
* The implementation of mechanisms to ensure market compliance with such standards; and
* The enforcement of those standards, through established administrative, civil and criminal proceedings.

Establishment of Standards

The primary concern of a securities regulator is whether investors are fully informed of the risks to which they may be exposed when deciding or agreeing to invest in any security that may be offered to them. It is also important that investors have a level of comfort about the reputation, integrity and conduct of market actors. Consequently, regulators seek to establish standards that require the issuers of securities to register and to fully disclose a number of matters about their current or proposed operations, to identify the risks involved in the securities that are to be issued, and to disclose the interests in these securities of persons related to the issuer.

The process of registration that arises from these requirements is intended to satisfy the investing public that issuers are financially and organisationally sound and that they disclose the significant risks that are inherent in any security that may be issued. The regulator also has an obligation to ensure that the relevant disclosures are made both to the regulator and to the general public. We recognise that changes in the market do take place rapidly. Consequently securities regulators have the power to make and amend their rules in order to ensure that the regulations keep pace with market developments and trends.

Compliance with Standards

The compliance responsibilities of regulators are intended to ensure that all market participants recognise, uphold and meet the established standards and observe the law. Registrants are required to implement appropriate internal policies and procedures which may be subject to review by the regulator to ensure that the appropriate standards of operation and of behaviour are observed.

Enforcement of Standards

The third arrow in the regulator’s quiver is its power to enforce the standards that have been established. Enforcement is usually through a combination of moral suasion and the application of administrative, civil or criminal sanctions or penalties.

Regulatory Concerns in Trinidad and Tobago

After some six years of operation of the Trinidad and Tobago Securities and Exchange Commission, a number of regulatory concerns have come to the fore. The revision of the legislation in which we are currently involved is intended to strengthen our regulatory regime in these areas, and I will simply highlight a few of the most significant areas that the proposed revision seeks to address.

Transparency, Fairness and Efficiency

The first major issue of concern is that relating to the transparency, fairness and efficiency of the market. A number of issues arise here, including suspected illegal insider trading and the incidence of selective disclosure of market sensitive information which itself may potentially facilitate illegal insider trading. As a regulator the TTSEC is very concerned about the possibility of illegal insider trading and the existence of behaviours that may facilitate it. Consequently we have recently issued a statement discouraging selective disclosure and shall shortly publish guidelines on the handling of price-sensitive information. As well, we continue the process of examining certain transactions that took place in 2001 and 2002 to determine whether concerns about illegal insider trading are justified and to determine what steps ought to be taken to ensure that the appropriate sanctions are applied.

Similarly, we recently advised brokerages that the practice of pooling of trades does not allow for an adequate level of equity and transparency in brokers’ dealing with clients and that therefore, the practice should be terminated. In this context we have been encouraging the Trinidad and Tobago Stock Exchange to speed up implementation of the system of automated trading and we eagerly look forward to this critical aspect of modernisation of the Stock Exchange which we have been advised is scheduled for early in 2004. With automated trading and the full operation of the Central Securities Depository, we expect a significant improvement in the level of transparency, fairness and equity in the market.

The TTSEC has also recently reminded listed companies of the importance of timely filing of their financial reports, complete with all the required disclosures, since this is the main mechanism by which the public is kept informed of possible changes in the risk profile of the securities in which they have invested.

The Regulation of Takeovers

There is now no established legislative regime for regulating the process by which a person or persons may take control of or takeover a public company and for ensuring that such market activity is conducted in an orderly manner. This is a deficiency that needs urgently to be corrected. Some three years ago we published the first draft of the By-Law, but when we subsequently embarked on a comprehensive legislative review and revision exercise, we thought it wise to review the By-Law again against the background of the overall regulatory strategy being developed.

The Marketing and Sale of Foreign Securities in Trinidad and Tobago

There is increasing concern about the availability for sale of foreign securities which do not come under the jurisdiction of the Commission and about the activities of visiting securities sales persons that are also not regulated. We believe that the protection of our investors makes it mandatory for us to introduce a tighter level of regulation of foreign issues and of persons visiting the country to market and sell such issues.

Collective Investment Schemes/ Mutual Funds

The number of mutual funds and other forms of local and foreign collective investment schemes being marketed in Trinidad and Tobago has grown immensely over recent years and this growth has taken place without adequate supervision and regulation. This is another area in which we believe that substantial changes have to be made as soon as possible in order to ensure a fair and equitable market for these instruments, and we are currently considering a draft By-Law for Collective Investment Schemes.

Compliance

The Commission intends to acquire enhanced powers for ensuring compliance by the implementation of a system of on-site inspections and examinations which would not necessarily be related to specific accusations or suspicions of default or wrong doing. This is one of the critical mechanisms by which financial services regulators worldwide maintain effective surveillance of institutions under their watch.

Regulatory Rationalisation/Integration

The final area of concern and interest that I will deal with today is that of regulatory rationalisation. Currently, the Commission, the Central Bank and the Registrar of Companies oversee different aspects of the operations of players in the securities market. This shared responsibility leaves many gaps in the regulatory process, allowing for the possibility of regulatory arbitrage. This is one of the serious deficiencies of the existing legislative framework that we intend to address in the proposed revision of the SIA. Consequently, our proposed revision of the legislation will include specific provisions for amending the Companies Act, for bringing all aspects of securities regulation under the TTSEC and for facilitating collaboration and cooperation with the Central Bank as well as foreign regulators. The new Take-Over By-Law that is being considered and discussed here is but one step towards our overall objective of improving and strengthening our securities regulation and is the first element of our legislative and rule making agenda that will include, among other things:

* A Collective Investment Scheme By-Law;
* A Prospectus By-Law
* A General By-Law governing procedures for the regulation of the market; and
* A substantially revised Securities Industry Act.
We feel confident that the effective implementation of our strategy by a rejuvenated, vigilant and effective Securities Commission will help to develop the vibrant and growing capital market that is envisioned by the Government’s Vision 2020 for the financial services market in Trinidad and Tobago, and we look forward to your cooperation in our efforts.

ANSA McAL Limited – Results for the six months ended June 30, 2003

ANSA McAl’s profit attributable to shareholders for the six months ended June 30, 2003 was $91.099 million, an increase of 10.94% over the corresponding figure in 2002 of $82.112 million.  Third party turnover increased marginally by 1.23% from $1.114 billion in 2002 to $1.128 billion in 2003. Operating income increased by 3.38% moving from $191.964 million in 2002 to $198.455 million in 2003. Finance cost grew marginally from $50.291 million in 2002 to $50.613 million in 2003.  Profit before tax increased by 6.15% moving from $141.897 million in 2002 to $150.628 million in 2003.  The effective tax rate declined from 31.28% in 2002 to 26.15% in 2003. The Chairman attributed the slow growth in third party revenue to the sluggish economy, the closing of The Wire newspaper and the lower sales at Carib Glass because of the furnace fire.  However on the positive side all other sectors performed creditably.  Smirnoff Ice has had a very successful launch.  The new car models are also performing very well.

Looking to the future the Group has placed greater emphasis on increasing efficiencies and this is already bearing fruit with operating margins increasing in the half despite the significant losses at Carib Glass.  Burmac has won the contract to supply air-conditioning for the West Mall expansion.  The Group is also entering the roll on roll off market through its Carmax franchise.  Alstons Marketing is launching new products including the world famous Marlboro cigarette brand.  The new glass furnace has a larger capacity and would be more efficient.  It would produce light weight glass which is stronger than the old glass. The second half is always the better half for the Group, this would be even evident this year because the new furnace at Carib Glass would be up and running in September. The Group is also confident that the balance of the year will bring in record levels of profit.  We have adjusted our forecast to $1.35 a share which at the current price gives a PE of 13.33. Thus we recommend a hold on this share. The Board of Directors has approved the payment of an interim dividend of 25 cents per share, the same as last year.  The dividend would be paid on September 12, 2003 to shareholders on the register as at September 2, 2003.

Lever Brothers (West Indies) Limited – Results for the six months ended June 30, 2003

Turnover declined slightly for Lever Brothers (LBWI) in the six months ended June 30, 2003.  In 2003 turnover reached $179.0 million compared with the $186.4 million posted in the similar period in 2002. Gross profit also declined, by 4.9 per cent to $75.3 million in 2003 in comparison to the $79.2 million made in 2002. Operating expenses rose 11.5 per cent to $54.2 million in 2003 from the $48.7 million spent in 2002.  In explaining the increase of $5.8 million, the Chairman stated that an increased focus on marketing, together with one-time costs associated with computer system upgrades were the main causes. Operating profit was down 31.0 per cent to $21.1 million in the first half of 2003, while in the corresponding 2002 period this figure was $30.5 million.  Profit after taxation was 28.3 per cent lower in 2003 at $14.1 million from the $19.7 million made in 2002. An interim dividend of 35 cents per share has been declared payable on September 5, 2003, to registered shareholders as at August 26, 2003.  A better performance is expected in the second half of 2003 and we forecast an EPS of $1.55, and a total dividend of $1.55.  At the current trading price of 29.75 this gives a PE ratio of 19.2, making the share fully valued at this level.  We thus rate the share as a HOLD.  

Readymix Limited – Results for the six months ended June 30, 2003

Readymix Limited (RML) posted some good results for the first half ended June 30, 2003.  Revenue increased by 24.2 per cent in 2003 to $61.9 million compared to the 2002 amount of $49.9 million.  Operating profit rose 47.3 per cent to $4.6 million in 2003 from the $3.1 million made in 2002. Profit before taxation was 60.5 per cent higher at $3.6 million in 2003, up from the 2002 figure of $2.2 million. Net profit increased 6.6 per cent in 2003 to $2.2 million when compared to the same period in 2002 when this amount was $1.3 million. The Chairman stated that the local premixed concrete market grew by about 33 per cent in the first half of 2003 in comparison with the same period in 2002.  The competition locally has increased with the entry of two new players, bringing the total number of sector players to nine. Significantly, RML has become the first Caribbean company in its industry to achieve the ISO 9002 Certification. Also, the Barbados subsidiary is performing well.  RML only began to supply concrete to the ALNG Train IV project in June of this year, and the contract shall continue until the end of 2003 at the very least.  In light of this we are projecting an EPS for 2003 in the order of 40 cents per share, together with a total dividend payout of 13 cents per share.  An interim dividend of six cents per share will be paid on September 29, 2003 to registered shareholders as at September 15, 2003.  Our recommendation on RML is HOLD.

Grace Kennedy and Company Limited – Results for the six months ended June 30, 2003 All amounts in J’can $.

Grace Kennedy and Company (GKC) posted a 17.6 per cent increase in revenue for the six months ended June 30, 2003.  Revenue rose to J$10.645 billion in 2003 from the 2002 figure of J$9.048 billion. Expenses rose 16.9 per cent in the first half of 2003 to J$9.963 billion, up from the J$8.523 billion incurred in 2002. Operating profit increased by 29.8 per cent to J$681.2 million form the previous amount of J$524.9 million. Profit before taxes were up by 13.4 per cent to J$998.9 million in 2003 from the corresponding 2002 amount of J$881.2 million. Profit attributable to shareholders increased 14.2 per cent in 2003 to J$694.4 million from J$608.3 million made in the corresponding 2002 period. First-half EPS totalled J$2.15 in 2003 for GKC, compared to J$1.89 recorded in the similar period in 2002.  We remain guarded on the second half as the stability of the Jamaican dollar and the level of interest rates can impact on the overall results of the Group. Nevertheless, we are estimating a full-year EPS in the region of TT50 cents per share, with the current exchange rate in Jamaica being J$59.00 to US$1.00.  We are maintaining a HOLD rating on this share. 

Analysis by West Indies Stockbrokers Limited. Member of the Trinidad and Tobago Stock Exchange Ltd.

Often you may hear about what a business plan consists of. While including the necessary items is very  important, you also want to make sure you don’t commit any of the following common business plan mistakes:
 1. Putting it off.
 Don’t wait to write a plan until you absolutely have to. Too many businesses make business plans only when they have no choice in the matter. Unless the bank or the  investors want a plan, there is no plan. Don’t wait to write your plan until you think you’ll  have enough time. “There’s not enough time for a plan,”  business people say. “I can’t plan. I’m too busy getting things done.” The busier you are, the more you need to  plan. If you are always putting out fires, you should build firebreaks or a sprinkler system. You can lose the whole forest for paying too much attention to the  individual burning trees.

 2. Cash flow casualness. Cash flow is more important than sales, profits, or  anything else in the business plan, but most people  think in terms of profits instead of cash. When you and  your friends imagine a new business, you think of what  it would cost to make the product, what you could sell it for, and what the profits per unit might be. We are  trained to think of business as sales minus costs and  expenses, which equal profits. Unfortunately, we don’t spend the profits in a business. We spend cash. So understanding cash flow is critical. If you have only one table in your business plan, make it the cash flow  table.

 3. Idea inflation. Plans don’t sell new business ideas to investors. People  do. The plan, though necessary, is only a way to present information. Investors invest in people, not ideas. Don’t overestimate the importance of the idea,  particularly the importance of the uniqueness of the  idea. You don’t need a great idea to start a business;  you need time, money, perseverance, common sense, and so forth. Very few successful businesses are based entirely  on new ideas. A new idea is much harder to sell than an existing one, because people don’t understand a new idea   and they are often unsure if it will work.

 4. Fear and dread. Doing a business plan isn’t as hard as you think. You don’t have to write a doctoral thesis or a novel. There are good books to help, many advisors  among the Small Business Development Centers (SBDCs), business schools, and there is software available to help you (such as Business Plan Pro, and others).

5. Spongy, vague goals. Leave out the vague and the meaningless babble of business phrases (such as “being he best”) because they are simply hype. Remember that  the objective of a plan is its results, and for results,  you need tracking and follow up. You need specific dates, management responsibilities, budgets, and  milestones. Then you can follow up. No matter how well  thought out or brilliantly presented, it means nothing uness it produces results.

6. One size fits all. Tailor your business plan to its real business purpose. Business plans can be different things: they are often just sales documents to sell an idea for a new business. They can be detailed action plans, financial plans, marketing plans, and even personnel plans.              
        
7. Diluted priorities. Remember, strategy is focus. A priority list with 3-4 items is focus. A priority list  with 20 items is something else, certainly not strategic, and rarely if ever effective. The more items on the list, the less the importance of each. 

8. Hockey-stick shaped growth projections. Have projections that are conservative so you can defend  them. When in doubt, be less optimistic.

Online music services backed by the major record labels are about to sweeten their offers with a little brown sugar.

Many of the Rolling Stones’ classic rock ‘n’ roll songs will be available to subscribers in North America of the Rhapsody music service operated by RealNetworks Inc. In two weeks, the Stones’ post-1971 recordings also are expected to start appearing on rival music services, such as Roxio Inc.’s Pressplay and Apple Computer Inc.’s iTunes Music Store. The move — potentially a watershed moment for label-authorised services — means that hundreds of the Stones’ songs will be available online for $1 or less per track in a digital format similar to MP3 files but scrambled to limit copying. A major promotional campaign for the Stones and Rhapsody is planned by electronics retailer Best Buy Co. Holdouts among top-selling artists — such as the Stones, the Beatles and Led Zeppelin — have made it harder for label-authorised services to compete with file sharing. Although such rock luminaries as Bob Dylan, Bruce Springsteen and the Beach Boys have made their catalogs available over the last year, other stars have pulled back, imposing new restrictions on Apple and others that want to sell individual tracks from CDs.

The industry-authorised services can use all the help they can get. They’ve attracted just a fraction of the audience lured by online file-sharing networks such as Kazaa, where tens of millions of users make unauthorised free copies of music and movies. The free outlets are comprehensive and relatively simple to use, but many of the authorised services have been hampered by complex and inconsistent limitations. For example, a deal expected to be announced today will give Rhapsody subscribers a different set of rules for Stones songs made before and after 1971. Under a pact with the band’s original label, ABKCO, pre-1971 songs such as “(I Can’t Get No) Satisfaction” and “Gimme Shelter” can be played on an online jukebox but not copied onto CDs. But post-1971 tracks, including “Brown Sugar,” “Angie” and “It’s Only Rock ‘N Roll (But I Like It),” can be copied onto CDs.

Although the band, formed in 1962, is seven years older than the Internet, it has long showed an interest in using technology to promote sales. Progress made by authorised services over the last six months helped convince the band and its advisors that the time was right to jump online, said Ted Cohen, senior vice president of digital development and distribution at EMI Group’s EMI Music, the Stones’ record company since 1971. “I think it shows a level of trust and a level of partnership with our artists that says, this is the future, or a major part of the future of how music gets distributed,” Cohen said. The Stones’ endorsement isn’t a “silver bullet” for the authorised services, but it’s still significant, said analyst Michael McGuire of technology research firm GartnerG2. Not only is the Stones’ catalog rich in hits, but the band’s reputation for being shrewd in its business affairs could help convince other holdout artists about the value of selling songs online, McGuire said. “They have been satisfied, so to speak,” McGuire said. “I think that is important in and of itself.” The risk for artists is that fans will buy a few songs online instead of whole CDs. That’s why other holdouts may not budge, McGuire said, until they see what happens to the Stones’ CD sales over the next few months.

The application of International Accounting Standards (IAS) 39 — measurement of Financial Instruments and IAS 28 — investments in associates, caused concern for the Guardian Holdings Limited (GHL) shareholder at the last Annual General Meeting (AGM). 

Chairman Nazir Ahamad was forced to explain the application of IAS 28 on Group profits as at June 30 2003.  The standard is relevant to GHL’s 21% holding in RBTT Financial Holdings Limited (RBTTFH). “When group consolidated accounts are prepared, the unrealized investment gain and dividends derived from this strategic investment are replaced by the proportionate share of the RBTTFH’s profits for the period… This consolidation adjustment caused the Group’s profits to be reduced to $120.4 million. Also, the Group’s investment in RBTTFH has a market value of $1.5 billion but it is reflected in the Group’s balance sheet at $806 million in accordance with the requirements of IAS 28. Both standards deal with the measurement and treatment on an ongoing basis (from year end to year end ) of investment assets by a company. Investments (shares in companies, financial instruments) held for other than short term disposal fall under the purview of IAS 39.  All financial assets and liabilities including derivatives are recognised on the balance sheet at the fair value paid or received inclusive of transaction costs — commissions, fees, levies, transfer taxes and duties. Subsequent to acquisition, the items are recognised at fair value as determined by the value they would trade at on the market.  Where a fair value estimate cannot be made the assets are measured at cost. This standard is consistent with the long-term objective of the IASC of full fair value accounting for all financial assets and liabilities.

Investments that represent substantial interests in a company held in an associate company, where the investor has influence must be governed by IAS28.  The standard calls for use of the equity method of accounting. Application of this method translates to investments being initially recorded at cost and subsequently adjusted to reflect the investor’s share of the net profit or loss of the associate (investee). Distributions received from the investee reduce the carrying amount of the investment. Unrealised profits and losses resulting from upstream (associate to investor) and downstream (investor to associate) transactions should be eliminated to the extent of the investor’s interest in the associate. An investor must account for an investment in an associate in its consolidated financial statements by applying the equity method. Both standards aim to control the manner in which companies account for their investments  to ensure that assets are not overvalued and, that the basis for accounting of increases in asset values is  transparent and measurable by any stakeholder.  IAS 28 attempts to remove any gains that may result from trading between the associate and investor i.e. double counting from the published accounts of the investor (company).

These objectives become important when we consider that shareholders and would-be investors are interested in the increased wealth of a company.  The standards curb the enthusiasm of accountants and other financial wizards to make companies more attractive to shareholders /investors. The GHL Chair suggests that the directorship may be able to alleviate the concerns of the shareholders.  With respect to IAS 39, the action plan should involve the development of a national or regional market where assets and liabilities are actively traded.  With its extensive managerial data base and regional links the company is well poised to launch such an objective in conjunction with the region’s Stock Exchange Boards. Until this is done, no open market valuations will exist for assets and increased valuations will not be recognisable for assets. IAS 28 will stop being relevant when GHL ceases to have significant influence in RBTTFH, which is improbable, considering the indelible links between the two entities. As a result, GHL has to continue to apply the standards.  As a result, at the year end and in the years to come, we expect GHL shareholders to whine about the loss in asset value and unrealised gains.  Shareholders have to embrace these standards as part of their reality.  Investments will at times suffer from an increasingly regulatory financial framework, whose long term objective is  protection of shareholders’ interests by ensuring that management has little flexibility within which to manipulate figures.  Shareholders need to expand their annual concerns to include questions of the fiduciary responsibility and the adherence of the company to the regulatory framework.  It is time that they look beyond the dividends receivable on an annual basis.

Maxine Attong is a financial and management consultant.
E-mail :  enhanceink@hotmail.com