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Investment Participation by Clients of Jay Smith & Associates
Table of Contents

Jay Smith & Associates is offering its clients the opportunity to invest in the company. Only the company's clients are eligible to participate. Investors shall receive cash interest at rates ranging up to 8%. Additionally, some clients may choose to receive either cash interest and/or merchandise credit interest, which can be at rates up to 15% if paid fully in merchandise credit. Clients may select cash interest payment options of either regular monthly or quarterly payments during the year or may accrue interest (which is then compounded monthly or quarterly) for payment at the end of the term of the investment.

So that a greater number of clients can participate, the minimum investment amount is only $2000, though larger amounts are sought. At the same time, it is possible to build up to the minimum amount over a six month period. The minimum length of investment is two years; longer term relationships are preferred.

Investment amounts and length of investment may vary with the goals of each client. Clients may make additional regular or occasional investments. Clients may select repayment options of fixed repayment date (for small amounts) or regular monthly or quarterly repayment intervals ("income flow").

Because the company takes a very conservative approach and thus limits the number of investments that can be scheduled for repayment in each month or quarter, the total number of investment opportunities is limited.

This presentation is directed only to Jay Smith & Associates clients. As do all investments, this investment has risks. Please read the risk statement.
Table of Contents Top 
How to Invest
Interest Rates
Additional Investments
About the Company
Previous Investor Experience
Financial Information
Tax Reporting
Risk Statement
Information Subject to Change
Introduction Top 
The concept of offering loan-type investment opportunities to our clients goes back at least to late 1970s. The suggestion was originally made by a client, and in the years since, many other clients have asked about investment possibilities. Over the years we have accepted investments from quite a few clients and the arrangement has worked well for everybody.

Jay Smith & Associates is a private corporation and does not offer its stock for sale to the public. However, like virtually every business, from time to time our company does borrow working capital from banks and investors. The obvious suggestion that results is: Let our clients earn higher rates of cash interest rather than giving the money to a bank! This opportunity is offered to clients, not to the general public. As a client you may have known me since 1973 or you may have just gotten to know me recently. However long we have known each other, I appreciate your patronage and that I have had the opportunity to serve you.

Additionally, some clients may find it advantageous to choose an interest option that pays some or all of their interest in the form of merchandise credit. In that situation, because the company is paying in merchandise (which cost the company less than the selling price), the company can afford to pay a higher rate of interest. While at first that sounds too good to be true, it really makes sense if you stop and think about it.

You are probably wondering "why is Jay really doing this?" The answer is very simple and stated above. Since my company is paying interest to somebody, who better than to my clients... instead of a bank. Secondarily, as the years go by, we encounter many great opportunities to purchase large collections; having more stable, long-term working capital puts the company in a better position to act on those opportunities.

Your other question is probably "how can Jay afford to pay such high interest rates?" Small businesses don't have a lot of choices. The seemingly low interest rates you hear about on the TV news are often not available to companies that need less than a few million dollars. Additionally, if you choose to receive some or all of your interest in the form of merchandise credit, I am paying you that interest with stamps that cost me less than their selling price (one would hope!).

If you have any questions or suggestions, please feel free to email me.
How to Invest Top 
If you are interested in this investment opportunity, you should...

Read this document:
1) Read and understand the Terms.
2) Read and understand the Risk Statement.
3) Read and understand this entire document.
4) Decide if this investment is appropriate for you.

Make your selections:
5) Consider the size of investment you desire to make.

6) Consider the period of time you wish to have your money invested. Notice the difference between the "initial term" (the time before principal payment commences) and the "final term" (when the final monthly repayment has been completed).

7) Consider the type of interest payment and calculation you desire: a) regular payment by cash or by merchandise credit vs. b) accrued, compounded interest paid at the end of the investment. Accrued interest is normally taxable as it accrues (just as is the interest you earn on a savings account).

8) If you wish to receive regular interest payments, then consider the interest payment method you desire; whether you wish to receive all cash, a combination of cash and merchandise credit, or all merchandise credit.

Complete your investment:
9) As soon as you have made your initial decisions, email me and tell me of your potential interest and goals.

10) I will then confirm the specific interest rate, options, and alternatives available based on your goals.

11) Reply to my confirmation, making any further decisions that may be needed.

12) I will prepare and email a draft (PDF file) the formal written investment agreement which I will send to you for your review and consideration. Over the years, my my client-investors have come up with good ideas to add features to the agreement, thus I am always interested in your thoughts, goals, and concerns.

13) Return the approved investment agreement with your investment payment.
Terms Top 
The following is an overview of the typical types of terms and subjects involved in an investment agreement. The current specifics may vary with the type of investment, interest payment method, principal repayment schedule, and the individual goals of the investor. Only the written investment agreement provides the complete binding details.

Type of investment: This investment is a type of debt instrument variously called a "loan", "note", or "bond". This investment is unsecured and relies on the good faith and credit of the company. As do all investments, this type of investment has risks -- be sure to read the Risk Statement.

Repayment: The company is borrowing a sum which it promises to repay to the investor. Small invested amounts will repaid on a specific date. However, larger amounts of more than a few thousand dollars will be repaid in monthly payments, starting after the end of the intial term. (Interest is still earned and paid on any amount yet to be repaid.) [Only a limited number of investments will be scheduled to be repaid in each time period, thus limiting the total amount of investments that will be accepted. The monthly repayment method is the result of a desire to be conservative so that I can ensure that payments can be made from our normal operations cash flow, thus not relying any hoped-for future source of funds.]

Choices of types of interest: The company promises to pay either a) cash interest paid on scheduled dates or b) compounded interest paid as part of monthly payments after the initial term of the loan (investor's choice). Compounded interest that is paid as part of monthly payments after the the end of the initial term, will be compounded quarterly and accrued (added into the amount of the loan; interest is then paid on the interest, thus increasing the total yield). (Income tax is typically payable on interest as it accrues.) Any necessary interest calculations shall be calculated per day at 1/365th of the annual rate.

Choices of interest payment methods: At the time the investment is made, the client-lender has the choice of whether the interest is to be paid a) completely in cash, b) in a combination of cash and merchandise credit, or c) completely in merchandise credit. There may be only very exceptional limitations on the usage of merchandise credit: the merchandise credit usually may not be used toward a) certain private treaty sales; and b) certain commission or consignment sales arrangements made on behalf of sellers. Otherwise merchandise credit can be used toward all types of normal purchases. This is not a permanent decision; the merchandise-credit method can later fall-back to a money-payment method OR money-payment interest can be used instead as merchandise credit to purchase items at a discount.

Method of interest compounding: If a client chooses compounded interest (i.e. payment of interest starting at the end of the initial term instead of during the term), at the end of the first month or quarter, the interest earned on the investment balance will be added to the investment balance. At the end of each following month or quarter, interest will be calculated on the previous balance (which includes previously earned interest). However, for simplicity, if there is to be a change in the investment balance other than at the end of a month or quarter (i.e. funds are either added or paid out), the interest compounding calculation will be done prior to the change in the balance. (This results in a slightly higher yield for the investor.)

Change in interest payment method -- From merchandise credit interest changed TO money payment of interest: There are situations, such as incapacity or death of the client/lender or the client/lender ceasing to collect stamps, or simply because client/lender wishes to make a change, in which the client/lender no longer has use for interest being paid in the form of merchandise credit (if that method was originally selected). In such cases, the interest payment method can be changed to quarterly payment by check at the appropriate lower interest rate for that method. Additionally, already-accumulated merchandise credit can be recalculated at the money payment interest rate and then paid by monthly checks.

Change in interest payment method -- From money payment of interest or compounded interest TO merchandise credit: If a client/lender is normally receiving interest payment by check or is accruing compounded interest, it is still possible to instead use interest amounts to pay for purchases. This is done by applying a pre-arranged discount on the purchase that reflects a savings closer to that of the higher merchandise credit interest rate.

Additional investments: Investors may, with the company's approval, invest additional funds either regularly or occasionally. The repayment date(s) for the additional funds may or may not be the same as the previously invested funds and will be scheduled by the company, with the approval of the investor. The applicable interest rates on the additional investment(s) will be proposed by the company and will be based on a combination of the total amount invested and the length of the investment(s).

Renewal or extension of length of investment: The investor may at any time apply to renew or extend the length of the investment. Approval of renewal or extension is not guaranteed, however, the company will give preference to existing investors who wish to renew or extend. Investment lengths that are increased may result in a higher rate of interest being paid.

Early repayment: The company may, at its sole option, prepay any portion or all of any investment at any time without any premium, fee, or penalty. An investor who encounters hardship may apply to the company for early repayment of an investment. Such early repayment is not automatic or guaranteed and, if granted, may result in an interest penalty.

Transfer: This investment is not negotiable and may not be transferred, pledged, assigned, or otherwise disposed of without prior written consent of the company, except through inheritance in the case of the death of the investor. If there is a transfer by inheritance, the company will fulfill all obligations to the heir just as it would to the original client/investor. Additionally, the company will endeavor to be cooperative in any potential transfer situation to a family member that might arise for other reasons.

Entire agreement: The investment document signed by the parties shall be the entire and exclusive agreement between the parties. No verbal agreements or email correspondence are recognized; if there are to be additional agreements, such should be in writing and signed by both parties. This web page is only a summary of key features and may not be complete and/or current.

Amendments and modifications: If both parties agree to amend or modify the investment terms or agreement, such amendment or modification must be in writing and be signed by both parties.

Jurisdiction: This agreement shall be governed by the laws of the United States of America and the of State of North Carolina, and any disputes shall be under the legal jurisdiction of North Carolina.

There are usually other minor details in the Terms; this web page is just a summary of key features. The various options and details of these Terms are to be agreed upon at the time the investment is made. Only that written agreement shall be final and binding. The Terms information presented on this web page may not be complete or current, and are subject to change or correction.
Interest Rates Top 
The interest rate on an investment is determined by a) the amount invested, b) the length ("term") of the investment, c) the type of interest payment [cash vs. compounded], and d) the method of interest payment [all cash, cash & merchandise credit, all merchandise credit].

Given the variety of desired amounts, terms, methods, etc., that each person may have, and the fact that business interest rates are changing all the time, it is not practical to quote specific rates for every situation. However, here are some possible examples. These rates are for illustration purposes only, are probably not up to date, and are subject to change at any time.
  • 5% for $2,000 for two years, interest paid annually in cash.
  • 7% for $10,000 for four years, interest paid quarterly in cash.
  • 7.5% for $20,000 for five years, interest paid quarterly in cash.
  • 8% for $20,000 for five years, interest compounded and paid at the end of five years.
  • 8% for $2,000 for four years, interest paid annually in merchandise credit.
  • 12% for $10,000 for four years, interest paid quarterly in merchandise credit.
  • 15% for $20,000 for six years, interest paid quarterly in merchandise credit.
The possible range of combinations of options, investment amounts, and lengths of investment is too large to be completely presented here. Please email your desired variables to obtain a specific rate quotation.

Investors who are U.S. taxpayers will annually receive a "1099" form from the company so that the investor may report the amount of interest paid, accrued, or received in the form of merchandise credit.
Additional Investments Top 
In the past, clients have asked about the possibility of regularly or occasionally adding to their investment.

You may, with the company's approval, invest additional funds either regularly or occasionally. The repayment date(s) for the additional funds may or may not be the same as the previously invested funds and will be scheduled by the company, with the approval of the investor. The applicable interest rates on the additional investment(s) will be proposed by the company and will be based the investment amount(s) and length(s) at the time of the additional investment.
About the Company Top 
Jay Smith & Associates was founded by Jay Smith in 1973 to specialize in Scandinavian philately. First located in Madison, Wisconsin, the company became a corporation in the late 1970s. Jay has been a full-time stamp dealer since 1977.

In 1989, Jay Smith moved his family and the company to his current location in North Carolina. The previous Wisconsin corporation became a North Carolina corporation with the name of Cameron Trading Company, Inc. "Cameron" is Jay's middle name. The company is a private family-owned corporation with no non-family stockholders.

The company's entire business is involved in selling stamps and publishing information about stamps.

As d/b/a Jay Smith & Associates, the company's Scandinavian philatelic specialty has grown and developed into one of the leading Scandinavian specialists in the English-speaking world. In addition the company has developed a significant business in buying and selling non-Scandinavian stamps of all types. Approximately half of the company's revenue is derived from the sale of Scandinavian material and half from non-Scandinavian material.

Although most people assume that Jay Smith must be "ancient" by now, Jay was 15 years old when he founded the company in 1973. (This was the third company of his career at that point; previously operating one company selling Wisconsin Wildflowers and another company selling U.S. stamps). Born in 1958, Jay is as healthy and active as ever and every day enjoys doing the work he loves. Jay's wife, Bonnie, joined the company in 1991 and is actively involved in the daily operation and management of all aspects of the company.

Jay Smith & Associates has had employees since around 1978 and has ranged in staff size from two to eight. The company currently has five full-time employees (including Jay & Bonnie), currently four of which are family members, and at times one or more part-time employees.

The company was among the earlier philatelic businesses to adopt computer technology. Currently operating Linux servers, Oracle and Informix databases, Windows PCs operating virtually on Linux workstations, websites, including a secure payment website, the company has a strong technology base which helps to maintain a high level of productivity while enabling Jay and Bonnie to provide personal service to clients. Both Jay & Bonnie have technology and/or programming backgrounds.

The company is moving toward a future that holds potential for further growth and development in the business. Even after 46 years in the business, there are many opportunities for further company growth and success. While stamp collecting is not at the peak levels it experienced 40-50 years ago, there are still many opportunities for a well- and efficiently-run company to provide products and services to stamp collectors. [We purposefully do not making specific forward-looking statements, forecasts, projections, or reveal marketing plans in this information.]
Previous Investor Experience Top 
As do all companies, this company has relied on banks and investors for additional working capital for growth and to finance particularly large purchases. In fact, the very first Scandinavian purchase Jay made in November, 1973, was a dealer's stock of Swedish stamps, financed by an investor. It was not a lot of money by adult standards, but it was a big deal for a 15 year old.

In the decades since, the company has had excellent loan relationships with banks. However, since banks a) are not terribly familiar with the stamp business and b) these days have nearly-constant management changes, the company has also had relationships with a variety of private investors who are also clients.

The history of these client-investor relationships goes back to the late 1970s and is flawless. In fact, in several cases, the relationships have outlived the original investor and the investment has passed to the next generation and continued for many additional years. The investments have varied over the years, but have ranged in size (each) from the low 5-figures to the low 6-figures. These client-investors are private individuals who, for obvious reasons, do not wish their names to be published.

The company is experienced with and accustomed to its responsibilities when working with investors.
Financial Information Top 
The company is a private family-held corporation that does not publicly release financial information. This presentation does not provide any past, present, or forecasted financial information. The company does not plan to release financial information to investors in the future.

These facts may increase the risk level of the investment and some investors may thus consider the risks to be unacceptable.

[Note: In the past, we discovered that some of our competitors attempted by various methods, despite confidentiality agreements, to obtain confidential financial information that had been provided to potential investors.]
Tax Reporting Top 
We are required to annually report interest payments, accrued interest, and interest in the form of merchandise credit, of $600 and higher made to U.S. residents by issuing IRS form 1099-INT. (If you are not familiar with this form, it is the "W-2" for interest income.) The 1099-INT form is sent to all our U.S. investors, even for amounts below $600, in January of each year.
Risk Statement Top 
As do all forms of investments, this investment has significant risks. The purpose of this "Risk Statement" is to ensure that potential investors understand that there are risks.

Not every type of investment is appropriate for every investor. Each investor must analyze his/her goals and the appropriateness of this type of investment. It is not appropriate for any investor to invest a large portion of his/her assets in any single investment.

This company is a privately/family held corporation that does not publicly release financial statements. No financial information or details is being provided to investors. The company has no plans to release financial information to investors in the future.

The company's ability to repay these investments will depend upon many factors, including the overall state of the economy, the state of the stamp market, and the quality of business decisions made by the company's management.

As with any company, even after 46 years in business, it is possible that this company's business could fail. Such failure could seriously limit or prevent the company's ability to repay investors.

This investment is based solely on the company's good faith and credit, the skill of its management, the stability of the stamp market, and many other factors, none of which are in the control of the investor. This investment is not guaranteed or insured or secured.
Information Subject to Change Top 
The information in this presentation, the various options and details of the Terms, and all other information presented here is subject to change or correction at any time.

The various options and details of the Terms are to be agreed upon at the time a specific investment is made. Only that written agreement shall be final and binding.

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Jay Smith & Associates   P.O. Box 650   Snow Camp, NC 27349-0650   USA
Toll-Free Phone (US & Canada): 1-800-447-8267   Phone: 336-376-9991   Fax: 336-376-6750   Email: js@JaySmith.com

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