Term Paper on "Tiaro Coal Limited Prospectus"

Term Paper 7 pages (2171 words) Sources: 4 Style: Harvard

[EXCERPT] . . . .

Tiaro Coal Limited

Prospectus -- Tiaro Coal Limited

What is a prospectus and what are the major components within a prospectus?

Before an initial investor decides to buy shares of stocks, it is important for him or her to know the details of the investment offering for sale to the public. This will help the investor and the financial advisor to make an informed assessment about the investment in order to make investment decisions based on the investor's investment objectives. This information is available through a prospectus, a legal form, which is also known as an "offer document."

When a prospectus is issued where does it need to be lodged with in Australia and in the U.S.A.

For a prospectus issued in Australia, it needs to be lodged with the Australian Securities and Investment Commission (ASIC) on the prospectus date. In the United States of America, the prospectus is required to be filed with the Securities and Exchange Commission (SEC).

Briefly describe the process you would undertake to subscribe to this issue?

To be able to subscribe for the initial public offering of Tiaro Coal shares, an Application Form must be filled out, as attached to the Prospectus. A paper copy form can also be downloaded through the website: www.tiarocoal.com.au.As stated in the Corporation Act of 2001, it is prohibited to pass the application to another person unless it is attached to a complete and unaltered copy of the Prospectus. The Application Forms must be completed to facilitate the process and administration of investment, in accordance with the instructions in the reverse side. Once completed, the Forms and Checks for the relevant amount should be posted or delivered to:

The Registrar

Computershare Investor Services Pty Limited

GPO Box 2975

MELBOURNE VIC 3001

Australia

Please note that checks should be made payable to "Tiaro Coal Limited - Share Issue Account."

4. What amount is Tiaro Coal Limited wishing to raise and how do they hope to raise these funds?

Tiaro Coal Limited wishes to raise $3,000,000 through an initial public offering (IPO) of its shares. The issue price is $0.20 per share, for a total of 15,000,000 shares.

5. What is an underwriter and is this share subscription underwritten? If not suggest possible reasons why not.

Underwriters serve as financial intermediaries between the issuing corporation and the investor. They coordinate with the issuing company and facilitate the determination of the offering price, buy the shares from the issuing company, and sell to the investors through their distribution network. As stated in Section 3.8 of the Tiaro Coal Limited's Prospectus, the issue has not been underwritten. A possible reason why the company did not engage the services of an underwriter may be is to avoid the underwriter's fee.

6. What is Tiaro Coal Limited intending on doing with the funds?

Tiaro Coal Limited intends to use the proceeds from the sale of its shares for future exploration programs. There is a strong demand for metallurgical coal to supply steel mills in the global market. The company is optimistic about the possibility of providing the premium coal requirements of India, China, and the neighboring countries. Tentatively, $2,300,000 is allocated for the exploration and evaluation of Tiaro Coal Project Area. The remaining $455,000 and $245,000 will be used to pay the administrative costs and working capital, and to cover the expenses for the issue, respectively.

7. What is the minimum number of shares that an initial subscriber may purchase?

An initial investor may subscribe for a minimum of 10,000 shares at the offer price of $0.20 per share. If the initial investor elects to buy more than 10,000 shares, then it must be in the multiples of 1,000 shares.

8. What is a share option? What option is offered to share subscribers?

To make the share offering more appealing to the investors, some companies offer share options. This is a contract that gives the holder the right to buy or sell the stocks at some specific price (Van Horne: 1989: 93). For Tiaro Coal, the options were issued to acquire additional shares. Subscribers are entitled one free option for every one and one-half shares subscribed. These options are priced at $0.30 and are exercisable within two years of issue to provide funds for the future exploration programs. The options offered under the Prospectus will not be quoted in the ASX.

9. The prospectus refers to CHESS and HIN, what are they?

Clearing House Electronic sub-register System (CHESS) is operated by the Australian Securities Exchange's (ASX) Securities Clearing House (SCH) in accordance with the ASX Listing Rules and the SCH Business Rules. This facilitates the electronic buying and selling of shares. Tiaro Coal Limited has opted to participate in the CHESS and once its investors elect to hold their shares on the CHESS sub-register, the company will not be issuing certificates. It operates with bank-account style holding statements rather than share certificate (Wikipedia).

After the shares have been allotted, the shareholders will receive a CHESS statement that will advise them of their holder identification number (HIN). The statement also contains an explanation of procedures on future sale and purchase of stocks under CHESS. Any changes in the stockholders' shareholding within the particular month will be reflected in further statements.

10. From the prospectus it is anticipated that Tiaro Coal Limited would quote on the ASX on 3 March 2008. Did this happen, if so what was the trading price of the shares at the end of the first day of trading and comment on the price?

Tiaro Coal Limited made its stockmarket debut on March 03, 2008 at 11:30a.m. EDST. The company traded under the ticker-code TCM all of its 15 million securities. At the market close, the securities traded at $0.21 per share at the volume of 285,000 shares. This showed an increase in market price of $0.01 for each share of TCM.

11. How many directors in this company and who are they?

Tiaro Coal Limited is consists of five (5) directors. They are: Tan Sri Ibrahim Menudin, Vincent Tan, Peter Meers, Rado Jacob Rebek, and Richard Poole. Tan Sri Ibrahim Menudin is the Chairman. He holds the directorship position at HRL and Suria Capital Holdings Berhad, a public-listed company in Malaysia. He is also the current Chairman of Hudson MPA Sdn Bhd. His experiences as member of the board of different companies are good indication of his expertise in the field of finance, forestry, plantations, hotel and property development, manufacturing. The company's Chief Executive Officer and Director is Peter J. Meers. He is the current Chairman and Chief Executive Officer of HRL and non-executive director of Hudson Investment Group Limited (HGL). Among his experiences include 25 years of commercial banking (Australia and New Zealand Banking Group Limited) and directorship to company boards of Malaysian, Indonesian and Singaporean financial bodies. Vincent Tan is also a Director of Tiaro Coal. He is an Executive Director of HIGL and non-executive Director of HRL. Mr. Tan also previously worked as a Chartered Accountant. Another Director of Tiaro Coal is Mr. Rado Jacob Rebek. He is an Australian geologist with forty years of experience in exploration. He had led various teams who discovered new zinc, copper, gold, coal and iron ore deposits. Completing the roster of directors is Richard Jonathan Poole, who has a background in law. He is a specialist in corporate activities including ASX listing, funding, strategy, and business development.

12. How many shares do the directors have in Tiaro Coal Limited at the date of the prospectus?

Under the Constitution of Tiaro Coal, directors are not required to hold any shares in Tiaro Coal. Mr. Vincent See Yin Tan holds, through related parties, 132,220,176 indirect interests and 4,050,000 direct interests in HIGL; and 53,114,146 indirect interests in H|RL. Mr. Tan and Mr. Meers hold 41,742,050 indirect interests in HRL by virtue of their positions as Directors of HIGL. The other indirect interests in HRL by Mr. Tan and Mr. Meers are held by other related parties.

13. What is the difference between the expressions "Limited liability" and "no liability" and which is Tiaro Coal Limited?

Limited liability refers to the obligation of the company that is limited only up to the total amount invested. On the other hand, "No Liability" means no liability for shareholders. This is common in mining companies not entitled to call on the unpaid issue price of shares (Wikipedia).

Tiaro Coal Limited is an Australian public company, limited by shares (Australian Securities & Investment Commission's database).

14. What are the estimated costs associated with the share capital raising? Specify them.

When a company wishes to raise capital through issuance of shares, there are certain costs associated with the process. For Tiaro Coal, these costs are estimated as follows: legal fees ($70,000), geologist's report ($50,000), investigating accountant's report ($20,000), printing costs ($20,000), taxes ($10,000), fair value of the 5,000,000 Options issued to Arthur Phillip ($30,000) and other costs relating to the compilation of the Prospectus ($45,000). These costs will be offset… READ MORE

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