APPENDIX H 

TERMS OF THE FINSAC PREFERENCE SHARES IN NCB (EXTRACT)

 

RIGHTS ATTACHING TO ZERO COUPON PREFERENCE SHARES

The special rights and restrictions attached to, and imposed on the zero coupon 30 year redeemable preference shares of J$1.00 (herein called the "Zero  Preference Coupon Shares") are as follows:

D.        As to Redemption  

The Zero Coupon Preference Shares shall, subject to the provisions of section 57 of the Companies Act (and/or any other enactment replacing or amending same) and to prior redemption of the Prior Ranking Preference Shares, be redeemed upon and subject to the following terms and condition.

(a)       The Bank shall have the right, at any time, after the date of allotment of any Zero Coupon Preference Share (provided it is fully paid) to redeem such share at par (that is to say, a redemption price of J$ 1.00 per share) and in the case of a partial  redemption proportionately in respect of each holding of Zero Coupon Preference Shares. 

(b)        (b)       So long as the Zero Coupon Preference Shares are outstanding the Bank shall at the close of each financial year of the Bank place to the credit of an account in its books to be called "Zero Coupon Preference Share Redemption Fund" a sum (to be appropriated out of its Adjusted Net Profits) representing the Annual Redemption Fund Contribution. For this purpose:  

(i)         "the Annual Redemption Fund Contribution" means, with respect to any financial year of the Bank, the sum calculated in accordance with the following formula, namely:  

RFS = Redemption Fund Contribution  

YTR

 

Where:  

(1)       "RFS" is the Redemption Fund Shortfall, being the amount which, as at the close of the financial year, with respect to which the calculation is being made, would be required along with funds, if any, then standing to the credit of the Zero Coupon Preference Shares Redemption Fund to redeem all the Zero Coupon Preference Shares outstanding as at such date;  

(2)       "YTR" is the number of financial years (including the financial year in respect of which the calculation is being made) left to run to December 31, 2028 (the Final Redemption Date).

 

(ii)        "Adjusted Net Profits" shall mean the net profits (as defined in section 8(4) of the Banking Act) of the Bank and its subsidiaries and shown in the audited consolidated profit and loss accounts of the Bank and its subsidiaries for the relative financial period to the nearest dollar after recognition of:  

(1)       any exceptional or extraordinary items (if and to the extent that such items were not taken into account in determining net profits);  

(2)       provisions for the following, namely:  

a)         the sum transferred or required to be transferred to the Reserve Fund as required by the Banking Act or any other law or regulation for the time being in force;  

b)         any sum transferred or required to be transferred to the retained earnings reserve in accordance with any written directive or instruction from the Bank of Jamaica or other competent authority;  

c)         the sum to be transferred or required to be transferred to a preference share redemption fund (to be determined mutatis mutandis in accordance with the principles set out above for the determination of the Annual Redemption Fund Contribution) in respect of  the outstanding 1997 Preference Shares;  

d)         the sum transferred or required to be transferred to the Bank's Preference Share Redemption Fund in accordance with the terms and conditions of the Bank's Preference Shares;  

(iii)       all losses (if any) made by the Bank in any previous financial year or years of the Bank to the extent that such losses have not been made good out of the profits earned subsequently by the Bank, being profits which remain unappropriated in the books of the Bank.

 

(c)        Subject to the provisions of the Companies Act or any enactment modifying or replacing same, the Bank may, at its discretion, redeem at par (that is to say a redemption price of J$ 1.00 per share) all or any of the Zero Coupon Preference Shares.  

(d)        If at the end of any financial year it shall be determined that the Bank has made Supra Profits then, same shall be applied in redeeming Zero Coupon Preference Shares. For the purposes hereof, "Supra Profits"  shall be profits (if any) remaining after deducting from Distributable Finsac Profits (to be determined based on the terms and conditions attaching to the Bank's Preference Shares) or otherwise making allowance for, the following items, namely:  

(i)         the dividends payable on all preference shares issued by the Bank;  

(ii)        a final dividend on the ordinary shares in the capital of the Bank of 20% of after tax profits; and  

(iii)       (any Super Profits (as defined in the relevant terms and conditions attached to the Bank's Preference Shares).  

For the avoidance of doubt, it is hereby declared that, whether or not payment is made in full in respect to the above items, allowance shall, nonetheless, be made for those items in calculating Supra Profits.

(e)       The Bank shall on December 31, 2028 ("Final Redemption Date") redeem at par (that is to say, a redemption price of J$ 1.00 per share) all the Zero Coupon Preference Shares which are outstanding at that date; and if, in accordance with section 57 of the Companies Act (or any other applicable enactment, replacing or modifying same), the Zero Coupon Preference Shares shall not on any such date be capable of being redeemed by the Bank, such redemption shall be effected as soon as possible after the Zero Coupon Preference Shares shall have become capable of being redeemed.  

(f)         Not less than one (1) month's notice of the intention of the Bank to redeem shall be given to the holders of the Zero Coupon Preference Shares to be redeemed. The notice shall be in writing and shall fix the time and place for such redemption. At the time and place so fixed the registered holders of the Zero Coupon Preference Shares to be redeemed shall be bound to deliver up to the Bank the relative certificates for cancellation, and the Bank shall pay to them the redemption money in respect of such Zero Coupon Preference Shares.  

(g)       If any holder of Zero Coupon Preference Shares shall fail or refuse to surrender the certificate or certificates for such Zero Coupon Preference Shares or shall fail or refuse to accept the redemption money payable in respect of them such money shall be retained and held by the Bank in trust for such holder but without interest or further obligation whatever.  

(h)        No Zero Coupon Preference Share shall be redeemed otherwise than out of distributable profits or the proceeds of a fresh issue of shares made for the purpose of the redemption or out of capital to the extent permitted by the law, but the premium payable on redemption shall be paid either out of distributable profits, or to the extent permitted by law, out of the share premium account of the Bank.  

(i)         Notwithstanding anything herein, any redemption sum or other amount payable by the Bank in respect of the Zero Coupon Preference Shares may be paid by the surrender or endorsement and transfer of Finsac Bonds of a like nominal value as the redemption sum or the amount of payment. "Finsac Bonds" means promissory notes issued by Finsac and guaranteed by the Government of Jamaica.  

(j)         No Zero Coupon Preference Share redeemed by the Bank shall be capable of reissue and on redemption of any Zero Coupon Preference Shares the directors may convert the authorised share capital created as a consequence of such redemption into shares of any other class of share capital into which the authorised share capital of the Bank is or may at that time be divided of a like nominal amount or (as nearly as may be) as the shares of such class then in issue or into unclassified shares of the same nominal amount as the Zero Coupon Preference Shares.

 

E.        E.     Variation of Rights

Subject to the provisions of Section 72 of the Companies Act, all or any of the  special rights and privileges for the time being attached to the Zero Coupon Preference Shares may from time to time ( whether or not the Bank is being wound up), be varied or abrogated in any manner only with the consent in writing of the holders of not less than three-fourths (¾)  of the issued Zero Coupon Preference Shares or with the sanction of an extraordinary resolution passed at a separate general meeting of the holders of Zero Coupon Preference Shares. All the provisions of the Bank's Articles of Association as to general meetings of the Bank shall, mutatis mutandis, apply to any such separate general meeting but so that the necessary quorum shall be the holder(s) of not less than one-third (⅓) of the issued Zero Coupon Preference Shares.  

 

H.        H.     Prior Ranking Preference Shares  

"Prior Ranking Preference Shares" means  

(a)       450,000,000.00 zero coupon redeemable convertible preference shares of J$1.00 each ("the 1997 Preference Shares"); and  

(b)       3,670,000,000 12½% redeemable preference shares of J$1.00 each ("the Bank's Preference Shares")  

in the capital of the Bank.

 

 RIGHTS ATTACHING TO BANK'S PREFERENCE SHARES  

The special rights and restrictions attached to, and imposed on, the redeemable non-­cumulative  preference shares (herein called "the Bank's Preference Shares ") are as follows:  

A.        As to Income  

(a)       The Bank's Preference Shares shall confer on the holders thereof, as a class, the right (subject to the provisions hereof) to receive the following dividends:  

(i)         a fixed non-cumulative dividend at the Agreed Coupon Rate on the capital for the time being paid up or credited as paid up thereon (including any premium, if applicable) to be determined and paid in accordance with the provisions set out at sub-paragraph 2 below; and  

(ii)        a fixed non-cumulative "claw-back" dividend on the capital for the time being paid up or credited as paid up (including any premium, if applicable) to determined and paid in accordance with the provisions set out in sub paragraph 2 below.  

(b)       With respect to the aforesaid fixed non-cumulative dividend, the following provisions shall be applicable, namely:  

(i)         No fixed non-cumulative dividend shall be paid on the Bank's Preference Shares in respect of any financial year of the Bank unless:  

(1)       at the end of such financial year, it shall be determined that the Bank (based on its audited financial statements) made Distributable Finsac Profits; and  

(2)       in any event, payment of such dividend will not cause the Bank to violate any  relevant BOJ Target or to fail to achieve any relevant BOJ Target.  

(ii)        In connection with the foregoing, "Distributable Finsac Profits" shall mean the net profits of the Bank (as defined in section 8(4) of the Banking Act) as shown in the audited profit and loss account of the Bank for the relevant financial period to the nearest dollar after recognition of:  

(1)       any exceptional or extraordinary items (if and to the extent that such items were not taken into account in determining net profits);  

(2)       provisions for the following, namely:  

a)         the sum transferred or required to be transferred to the Reserve Fund as required by the Banking Act or any other law or regulation for the time being in force;  

b)         any sum transferred or required to be transferred to the retained earnings reserve in accordance with any written directive or instruction from the Bank of Jamaica or other competent authority  

c)         the sum transferred or required to be transferred to a  preference share redemption fund (to be determined mutatis mutandis in accordance with the principles set out under paragraph F herein for the determination of the Annual Redemption Fund Contribution) in respect of the outstanding 1997 Preference Shares;  

d)         the sum transferred or required to be transferred to the Bank's Preference Share Redemption Fund in accordance with paragraph E below;  

e)         the sum transferred or required to be transferred to the 1998  Zero Coupon Preference Share Redemption Fund in accordance with the terms and conditions of  the Zero Coupon Preference Shares;  

f)          all losses (if any) made by the Bank in any previous financial  year or years of the Bank to the extent that such losses have not been made good out of the profits earned subsequently by the Bank being profits which remain unappropriated in the books of the Bank.  

 

            (iii)       If any Distributable Finsac Profits are realised at the close of any financial year then, to the extent that dividend can be paid on the Bank's Preference Shares without causing the Bank to violate any BOJ Target or to fail to achieve any BOJ Target, the Bank shall, out of the available Distributable Finsac Profits, pay the fixed non-cumulative dividend up to the Agreed Coupon Rate on the capital for the time being paid up or credited as paid up on the Bank's Preference Shares. Payment of such dividends shall be made no later than four (4) weeks after the audited financial statements for the relevant financial period are approved by the directors of the Bank.  

            (iv)       In these provisions:  

"Agreed Coupon Rate" means:  

(1)               up to the financial  year ending  September 30, 2002, 12 ½ % per annum; and  

(2)               after the financial year ending September 30, 2002, the weighted average yield rate applicable to the latest 6-month Treasury Bill tender ("WAYR") expressed as a percentage per annum. This rate shall be determined and applied at half yearly intervals on March 30 and September 30 of each year ("Calculation Date"). If as at any Calculation Date there are in issue no 6-month Treasury Bills issued by the Government of Jamaica during the 6-month period preceding such Calculation Date, then the Agreed Coupon Rate shall be determined using the WAYR on the latest Treasury Bill tender with a tenor of 136 to 210 days. References herein to "6-month Treasury Bills" shall mean Treasury Bills with a tenor of 181 to 183 days and, if pursuant to the foregoing, Treasury Bills with a tenor of 136 to 210 days are used to determine the Agreed Coupon Rate, then for the purposes hereof, such Treasury Bills shall be deemed to be 6-month Treasury Bills.  

"BOJ Target" means any minimum requirement or target:  

(1)        generally prescribed for banks under the Banking Act or under any law, regulation, order, direction or other subordinate legislation made or issued by the Bank of Jamaica or any competent authority; or  

(2)       specifically imposed or mandated in writing by the Bank of Jamaica or other competent authority upon the Bank in either case relating to capital base, reserve fund,            retained earnings reserve or other matter in respect of            which the fulfillment of the requirement or target would            require the Bank to retain or deal with its profits                 otherwise than by distributing same.

 

With respect to the claw-back dividend, the following provisions shall be applicable:  

(1)       The "claw-back" dividend shall be determined and paid if at the end of any financial year it shall be determined that the Bank has (based on its audited financial statements) made Super Profits and the Board of Directors of the Bank passes a resolution for claw-back dividend to be paid. In such a case, the Bank shall pay out of such Super Profits a fixed non-cumulative dividend in accordance with such resolution to the extent that same is payable in accordance with the provisions hereof.  

(2)       The Directors may resolve to pay claw-back dividend only if, with respect to any of the previous three (3) financial years of the Bank (herein called "the Claw-back Period"), the Bank failed to pay the whole or any part of the fixed non-cumulative dividend referred to in sub-paragraph 2.(a)(i) above on account of unavailability of  distributable profits.  

(3)       The maximum claw-back dividend payable as at the end of any financial year of the Bank shall be a sum equivalent to the unpaid fixed non-cumulative dividend which would have been payable during the Claw-back Period but which was not so paid on account of unavailability of Distributable Finsac Profits.  

(4)       Claw-back dividend shall be paid in the direct order in which such dividend arose. By way of illustration, if at the close of the financial year in 2006 claw-back dividend exists in respect of the years 2003, 2004 and 2005 then, in order of priority, claw-back dividend declared based on the financial statements for the financial year 2006 shall be applied first in paying claw-back dividend for the year 2003, secondly for the year 2004 and finally for the year 2005.

E.        As to Redemption  

The Bank's Preference Shares shall, subject to the provisions of section 57 of the Companies Act (and/or any other enactment replacing or amending same) and to prior redemption of the 1997 Preference Shares, be redeemed upon and subject to the following terms and conditions:  

(a)       The Bank shall have the right, at any time, after the date of allotment of any Bank's Preference Share (provided it is fully paid) to redeem such share at par (that is to say, a redemption price of J$1.00 per share) and in the case of a partial redemption proportionately in respect of each holding of Bank's Preference Shares.  

(b)        So long as the Bank's Preference Shares are outstanding the Bank shall at the close of each financial year of the Bank (prior to making any appropriation to the Redemption Funds in respect of the 1997 Preference Shares or the Zero Coupon Preference Shares) place to the credit of an account in its books to be called "the Bank's Preference Share Redemption Fund" a sum (to be appropriated out of its Adjusted Net Profits) representing the Annual Redemption Fund Contribution. For this purpose:  

(i)         "the Annual Redemption Fund Contribution" means, with respect to any financial year of the Bank, the sum calculated in accordance with the following formula, namely:  

RFS = Redemption Fund Contribution

YTR

 

Where:

 

(1)       "RFS" is the Redemption Fund Shortfall, being the amount which, as at the close of the financial year, with respect to which the calculation is being made, would be required along with funds, if any, then standing to the credit of the Bank's Preference Share Redemption Fund to redeem all the Bank's Preference Shares outstanding as at such date; and  

(2)       "YTR" is the number of financial years (including the financial year in respect of which the calculation is being made) left to run to December 31, 2013 (the Final Redemption Date).  

 

(ii)        "Adjusted Net Profits" shall mean the net profits (as defined in section 8(4) of the Banking Act) of the Bank as shown in the audited profit and loss accounts of the Bank for the relative financial period to the nearest dollar after recognition of:  

(1)       any exceptional or extraordinary items (if and to the extent that such items were not taken into account in determining net profits);  

(2)       provisions for the following, namely:  

a)         the sum transferred or required to be transferred to the Reserve Fund as required by the Banking Act or any other law or regulation for the time being in force;  

b)         any sum transferred or required to be transferred to the retained earnings reserve in accordance with any written directive or instruction from the Bank of Jamaica or other competent authority.  

(3)       all losses (if any) made by the Bank in any previous financial   year or years of the Bank to the extent that such losses have not been made good out of the profits earned subsequently by the Bank, being profits which remain unappropriated in the books of the Bank.  

(c)        Subject to the provisions of the Companies Act or any enactment modifying or replacing same the Bank may, at its discretion, redeem at par (that is to say a redemption price of J$1.00 per share) all or any of the Bank's Preference Shares.  

(d)       If at the end of any financial year it shall be determined that the Bank has made Super Profits then, same shall be applied in redeeming Bank's Preference Shares. For the purposes hereof, "Super Profits" shall  be profits (if any) remaining after deducting from Distributable. Finsac Profits (as defined above) or otherwise making allowance for, the following items, namely: 

(i)         the dividends payable on the Bank's Preference Shares and any other preference shares issued by the Bank; and  

(ii)        a final dividend on the ordinary shares in the capital of the Bank of 20% of after tax profits.  

For the avoidance of doubt, it is hereby declared that, whether or not payment is made in full in respect of the above items, allowance shall, nonetheless, be made for those items in calculating Super Profits and Super Profits shall be applied in redeeming Bank's Preference Shares and/or in paying claw-back dividends in priority to the redemption of any 1997 Preference Shares or Zero Coupon Preference Shares.   

(e)       The Bank shall on December 31, 2013 ("Final Redemption Date") redeem at par (that is to say, a redemption price of J$ 1.00 per share) all the Bank's Preference Shares which are outstanding at that date; and if, in accordance with section 57 of the Companies Act (or any other applicable enactment, replacing or modifying same), the Bank's Preference Shares shall not on any such date be capable of being redeemed by the Bank, such redemption shall be effected as soon as possible after the Bank's Preference Shares shall have become capable of being redeemed.  

(f)         Not less than one (1) month's notice of the intention of the Bank to redeem shall be given to the holders of the Bank's Preference Shares to be redeemed. The notice shall be in writing and shall fix the time and place for such redemption. At the time and place so fixed the registered holders of the Bank's Preference Shares to be redeemed shall be bound to deliver up to the Bank the relative certificates for cancellation, and the Bank shall pay to them the redemption money in respect of such Bank's Preference Shares.  

(g)       If any holder of Bank's Preference Shares shall fail or refuse to surrender the certificate or certificates for such Bank's Preference Shares or shall fail or refuse to accept the redemption money payable in respect of them such money shall be retained and held by the Bank in trust for such holder but without interest or further obligation whatever;  

(h)        No Bank's Preference Shares shall be redeemed otherwise than out of distributable profits or the proceeds of a fresh issue of shares made for the purpose of the redemption or out of capital to the extent permitted by the law, but the premium payable on redemption shall be paid either out of distributable profits, or to the extent permitted by law, out of the share premium account of the Bank;