I hope everyone had an enjoyable and safe summer with friends and family, and that you are ready for an eventful fall. Ian and his CIRI National team have been busy preparing for our autumn professional development program.

The season starts off with our Executive Insight sessions, scheduled in four cities across Canada. These will highlight how the changes in the economy have impacted the markets and ultimately your companies’ stock prices. Seasoned IROs will talk about their challenges and how they have communicated with investors in these turbulent times. Since our members come to investor relations from diverse backgrounds, we are offering programs on both finance and communications. In late October, Peggy Hedges, Professor at the Haskayne School of Business, will conduct an interactive session on financial statements and analysis for the IRO.

A communication session will be held in the spring of 2009. Be sure to attend the November 20 luncheon with Bruce Waterman, Chief Financial Officer of Agrium Inc. and Chief Financial Officer of the Year for 2008, according to Financial Executives International Canada, PricewaterhouseCoopers and the Caldwell Partners International. Details of all fall programs, including locations and pricing, are now available at www.ciri.org.

I’m very pleased to welcome to CIRI our new Director of Professional Development, Yvette Lokker. Yvette joined the CIRI team in early August and she is fully engaged in delivering our 2008/2009 program. Given her background in investor relations and experience in programming at the Ontario chapter level we are very lucky to have Yvette on our team. I know that you join me in welcoming her warmly as she reaches out to identify speakers for our events.

Details of upcoming Chapter events are available on the CIRI website. The Chapters and CIRI National are coordinating efforts to address important topics most effectively for members. We are aiming to maximize attendance through programming excellence.

In addition, we are proceeding with a study on accreditation of investor relations professionals. We will examine accreditation models in other professions, the benefits and challenges of accreditation, and the potential impact on IR professionals and CIRI. Members will be kept informed of our progress. The CIRI team has begun planning for our next annual Conference, which will be held in Victoria, British Columbia. Conference Co-Chairs will be announced shortly and a planning committee of CIRI members assembled. Some speaker invitations have already been issued. We anticipate another great program so mark your calendars for June 14-to-16, 2009 in Victoria.

You should expect your CIRI membership renewal notice in November. The many advantages of membership have been very evident to me over the past 10 years. Event discounts can actually pay for membership – but in my view, when you also consider six issues of Newsline and IR Focus annually, networking opportunities, and CIRI’s advocacy for IROs – the decision to renew is an easy one. I look forward to sharing all of these benefits with members in the year ahead. •

In the current economic climate, where the terms ‘credit crunch’ and ‘illiquid markets’ are discussed daily in national newspapers, companies have good reason to reconsider whether their financial reporting is sufficient. Analysts and investors will be poring over your company’s next financial statements and Management’s Discussion and Analysis (MD&A); looking for evidence of how the company is managing through the present market conditions.

Any web search for “business implications of climate change” will bring up hundreds if not thousands of articles, reports, studies and surveys on the topic. Recently introduced guidelines, laws, accords, mandates and commitments aimed at reducing our negative impact on the environment is a major business issue in Canada and around the world. As an investor relations professional, you must be prepared to address this increasing focus on environmental risk and ensure that investors understand the potential effects of your business on the environment and the impact of environmental regulation on your business.

What Investors Want to Know
In a February 13, 2008 news release, the Canada Pension Plan (CPP) Investment Board encouraged Canada’s largest companies to disclose more information on the business risks and opportunities they face as a result of climate change. The CPP Investment Board reported that it is one of 385 institutional investors around the world representing a total of US$57 trillion in assets under management that supports the Carbon Disclosure Project (CDP). The CDP is an independent not-for-profit organization aimed at creating “a lasting relationship between shareholders and corporations regarding the implications for shareholder value and commercial operations presented by climate change. Its goal is to facilitate a dialogue, supported by quality information, from which a rational response to climate change will emerge.”

“Imagination is more important than knowledge. Knowledge is limited. Imagination encircles the world.” – Albert Einstein

“It's a mistake to think that once you're done with school you need never learn anything new.” – Sophia Loren

Have you noticed a change in the air? A slight shift of the wind, an occasional look of anxiety on a child’s face, or the intermittent heart palpitation mid-sip of your mohito or glass of cabernet sauvignon? The season is changing, and everywhere you go it’s beginning to look like…school time!

CIRI’s highest honor, the Award for Excellence in Investor Relations, was presented by former winner Jo Mira Clodman to Tom Merinsky in June 2008, during CIRI’s Annual Conference. An abbreviated version of her remarks appears below. Each spring, a committee meets with the single purpose of determining whether to honor a CIRI member with our organization’s greatest tribute. The committee members are previous winners still active in CIRI and IR. The Award for Excellence recognizes outstanding contributions to CIRI and to developing the practice of investor relations.

Normally, the person making this presentation is the previous year’s winner – Nancy Woo of Eldorado Gold. But for the first time in the nearly 20-year history of the Award, neither the usual presenter, nor the winner, is at our Conference. Their absence reflects the challenges we all face in balancing work and family commitments. Nancy is on the road for her employer. Our winner is at home for his daughter’s high school graduation. I know both of them wish they could be in two places at once.

Let me tell you a bit about this year’s winner.

When companies around the world want to move heaven and earth to unlock the value of their resource assets, they call on Finning International. When Finning wants to unlock the story of its value for investors, it calls on the leadership and strategic thinking of its Vice President, Investor Relations, Tom Merinsky. Tom is based in Vancouver but his responsibilities span the globe.

Tom’s career began with 15 years in corporate and investment banking, and treasury roles. In 1996, he was named IR Manager of Westcoast Energy. Within days, he joined CIRI. After Westcoast was taken over, Tom moved first to Teck Cominco and later to Finning. Today, he truly has a ‘seat at the table’ and, as far as he’s concerned, one of the best possible jobs at a public company.

His tireless work on behalf of CIRI includes helping to reestablish the BC Chapter and becoming its President. He has served as Chair of CIRI’s Board of Directors and is currently immediate Past Chair.

IR is all about building value and building relationships. Tom’s colleagues in IR and at CIRI know he does a fine job on both fronts. He’s smart, he’s knowledgeable, he’s warm – he’s very credible – and he is committed to CIRI and to IR. We couldn’t ask for more from our leaders – or from an Award for Excellence winner. Please join me in a round of applause for CIRI’s 2008 Award for Excellence winner, Tom Merinsky. •

CSA staff provided guidance on May 9, 2008 regarding the disclosures expected from issuers intending to adopt IFRS before, on, or after January 1, 2011. This guidance applies to disclosure “relating to each financial reporting period in the three years before the first year that the issuer prepares financial statements in accordance with IFRS.” For public companies in Canada, the disclosure will begin as early as the second quarter 2008 MD&A (for companies with developed IFRS changeover plans), and no later than the annual 2008 MD&A. Management and IROs need to focus carefully on the guidance received from the CSA, the expected disclosures, and how best to communicate the change in accounting standards.

IFRS Changeover – a Significant Undertaking
The Staff Notice underscores the significance of the changeover to IFRS. It says that “…changing from current Canadian GAAP to IFRS will be a significant undertaking that may materially affect an issuer’s reported financial position and results of operations. It may also affect certain business functions. Investors and other market participants will need timely and meaningful information about these matters during the reporting periods leading up to an issuer’s changeover to IFRS.”

The CSA notes that since adopting IFRS is a change due to new accounting standards, it falls within the scope of current MD&A form requirements for annual and interim MD&A filed in compliance with National Instrument 51-102, Continuous Disclosure Obligations, as well as MD&A included in a prospectus.

The CSA encourages companies to consider whether any additional disclosure beyond MD&A could inform investors about how a company might be affected by the changeover to IFRS – and if other securities legislation requires the issuer to disclose specific information about the broader implications of its changeover to IFRS.

Incremental Approach To Disclosure
A company’s ability to provide information will naturally increase over time as it rolls out its IFRS implementation plan. The CSA therefore outlines an incremental approach to disclosure. The level of detail and the amount of quantified information increase as a company moves closer to its changeover date.

Key elements of a changeover plan may address, for example, the impact of IFRS on:

• accounting policies, including choices among policies permitted under IFRS, and implementation decisions such as whether or not certain changes will be applied on a retrospective or a prospective basis;
• information technology and data systems;
• internal controls over financial reporting;
• disclosure controls and procedures, including investor relations and external communications plans;
• sufficiency of financial reporting expertise, including training requirements;
• business activities that may be influenced by GAAP measures, such as foreign currency, hedging, debt covenants, capital requirements and compensation arrangements. Following is a summary of the expected annual and interim MD&A disclosures in the years leading up to changeover.

2008 Interim MD&A

• If the company has developed an IFRS changeover plan, discuss key elements and timing.
• If the company is well advanced in its IFRS project, discuss the impact of the changeover on its financial reporting.

2008 Annual MD&A

• No later than three years before the changeover date, discuss the status of the key elements and the timing.
• If the company is well advanced in the IFRS changeover project, discuss the impact on its financial reporting.

2009 Interim MD&A

• Update the progress of the IFRS changeover plan and note any changes.

2009 Annual MD&A

• Discuss preparations for changeover to IFRS, building on aspects discussed in 2008 and interim 2009 MD&A.
• To ensure investors understand the key elements of the financial statements that will be affected, provide a narrative description of the major identified differences between the company’s current accounting policies and those it must/expects to apply in preparing IFRS financial statements, including any assumptions about future changes to IFRS.

2010 Interim and Annual MD&A

• Provide updated discussion of preparations for changeover to IFRS, building on aspects discussed in 2008, 2009, and interim 2010 MD&A.
• Discuss in more detail the key decisions and changes that have been or will be made relating to the changeover to IFRS, including decisions about accounting policy choices under IFRS 1 and other relevant individual IFRS standards.
• When preparing interim and annual MD&A, if a company has quantified information on IFRS’s impact on key line items in its financial statements, this information should be included.

The Staff Notice also outlines the specific requirements for disclosure by investment funds.

Next Steps
The changeover to IFRS is a major undertaking with potentially significant implications for issuers, investors and other market participants. Communicating timely and clearly with shareholders about the company’s progress and the expected impact of the conversion to IFRS on its reported financial position and results will help shareholder understanding and reduce the element of surprise. Many European companies, after their IFRS conversions in 2005, noted that they should have communicated better with their stakeholders in advance about the expected impact. We have the opportunity to learn from their experience. •

Rob Brouwer is a Partner and Mag Stewart is a Senior Manager with KPMG, Toronto.

What’s wrong with promoting your company? Nothing – subject to ‘truth in advertising’ laws and other prohibitions on anti-competitive behavior, that’s what marketing is all about: promoting your company and the goods or services that it sells.

What’s wrong with promoting the securities of your company? Nothing again, so long as you follow the rules – and there are quite a lot of them. Laws relating to the promotion of securities can be categorized in two basic rules – the registration rule and the prospectus rule. These rules reflect key objectives of Canadian securities laws: investor protection, investor confidence and capital market efficiency.

To understand the two basic rules, you need to know the meaning of a couple of important terms used in securities legislation: “trade” and “distribution”.

A “trade” includes:

"Put it before them briefly so they will read it, clearly so they will appreciate it, picturesquely so they will remember it and, above all, accurately so they will be guided by its light." ~ Joseph Pulitzer

In the extremely hectic world of IR, we are often stretched too thin – consumed with day to day tasks and putting out fires – to even consider adding to our workload with board reporting. Some of us barely make it through year-end with all our faculties intact! But in our constantly evolving profession, it has never been more important to implement some form of report to the board from the IR perspective. New and changing regulations, the advent of additional investment vehicles, laws, and market events – all impact our companies and are growing concerns for our shareholders. And your board needs to hear what you know, since you are closest to shareholders and the Street.

Year-to-date, the S&P/TSX Composite Index has declined at an almost 11.0% annualized rate, based on the results for the quarter ended March 31, 2008. In addition, due to the uncertainty created by sub-prime mortgage and non-bank asset-backed commercial paper exposure and write-downs, investors are not in a happy mood – and this is certainly unsurprising. Canada’s manufacturing sector is most likely in a recession. The paper and forest products industry? It’s in a multi-year depression! The press has absolutely nothing positive to report and CNN is giving us a constant barrage of disconcerting facts and figures.

Three or four times a week, Jim Estill, Chief Executive Officer of Guelph, Ontario-based SYNNEX Canada Limited – a subsidiary of U.S.-based and NYSE-listed SYNNEX Corporation – puts fingers to keyboard and cranks out a new blog entry for an audience of approximately 3,000 readers. "I can only blog about public matters after they're public, so I mostly blog about personal struggles," says Estill. The greatest perks from blogging? "I get lots of counsel and ideas, and sometimes people send me free books," he says.

Estill, who's published his Time Leadership blog since May 2005, is one of a small but attention-getting cadre of CEOs who share their insights in cyberspace. As of mid-April 2008, approximately 11.6% of Fortune 500 companies had active public blogs, according to the Fortune 500 Business Blogging Wiki. CEOs who blog represent a far tinier subset. In Canada, the number of public company CEOs who blog can almost certainly be counted on a single hand.

Among the more than 400 who attended the IR Magazine Canada Awards in Toronto, perhaps the most notable standouts were the CEOs, CFOs and other members of senior management teams supporting their IROs and celebrating their companies' successes. They proved the notion that IR is a team effort, as so many of the winning IROs attested.

Darren Entwistle, CEO of TELUS, who was ranked number one in the ‘Best IR by a CEO’ category, sent a video message. “In an era of increasing disclosure, TELUS takes seriously our duty to maintain an open and honest dialogue with the investor and analyst communities,” he said. “To foster these positive relationships, we are always striving to provide clarity on our strategic direction and decisions, addressing the tough issues, and as well listening to obtain insight on investor views. I see this as a two-way exchange of ideas. We also believe in setting annual targets and then being accountable for achieving and adjusting them if necessary in a very open manner.”

Robert Noorigian, head of IR at CN, summed up the sentiments of many of the winners. “When markets are really good, being an IRO is easy. It's when the markets start to get tough that being an IRO is hard,” he announced. “In back of me, there are a lot of other people who have made me and made my company look really good…Obviously there's my IR team but…there's the CEO, the CFO, the operating people, the chief marketing officer and many others.” Below is the list of winners, identified in a survey of more than 250 investment professionals from a list provided by Thomson Financial and Equicom, as well as 100 retail investors in a survey conducted by PrecisionIR Group. The full results, including in-depth comments about shortlisted companies by the analysts and fund managers who voted, are published in the Investor Perception Study, Canada 2008 available at www.thecrossbordergroup.com. •

Greg Secord, Vice President, Investor Relations at Open Text, Waterloo, Ontario runs Ontario’s Mentorship Program. In 2003, the Membership Committee “realized that we were falling short on creating an attractive membership portfolio for those in the early stages of their career. What we really needed was the ability to help new IROs feel like they were not just part of the profession, but also part of their group of peers. I was blessed early on in my career because I was mentored not just by the CEO of Open Text, but also by a very seasoned IR practitioner – Patrick Shaw,” Secord said.

Right from the start, Ontario’s Mentorship Committee worked to ensure that protégés received strong pairings and that mentors kept their commitments. “We were conscious of the fact that we didn’t want to overextend our mentors, as the program was and still is meant as an introduction. So we decided on a six-month timeframe,” said Secord. “Six months was considered not a tremendous time commitment for mentors, but enough so that they were serious about their dedication to the program.”

A year later, the BC chapter leveraged Ontario’s materials to begin its own program.

Five years later, Ontario’s flagship program and the BC program together support an average of 80 protégés and mentor pairs a year. The chapter programs have a roster of dedicated mentors.

Protégés are often surprised at just how giving their mentors are, in terms of both time and advice. Linda Armstrong, Director, Investor Relations at Palladium, and an Ontario protégé says: “One of the best programs available today for CIRI members is the CIRI Ontario Mentorship Program. I value the knowledge and recommendations that my extremely experienced mentor provides … and I encourage others to sign up for this program.” Jon Bey, Manager, Investor Relations and Corporate Communications at Hamilton Resource Group, and a BC protégé, emphasized the program’s value. “The mentorship program has been a crucial part of my IR development and [is] essential for anyone entering an IR career,” he says.

Mentors have cited the chance to give back to the profession as one of their main reasons for participating. According to Bob Tait, Vice President, Investor Relations at First Uranium Corporation, “Having the opportunity to lend experience to the Mentorship Program can be very rewarding, as you can contribute to someone else's success and it gives you the chance to review and reset the priorities of your own IR program.” David Bryson, Vice President, Finance and Treasurer of Skye Resources Inc., echoes Bob’s sentiments: “I've enjoyed my participation as a mentor, both for the opportunity to give something back to IR, and because working through issues with someone else is a learning experience for me as well.”

The Ontario Chapter is planning a mentorship volunteer appreciation event this spring, which will serve as a great opportunity for mentors and protégés to meet. For more information, visit the Ontario Mentorship site at www.ciri.org/chapters/on/news/?article_id=238.

“The true satisfaction for me is when I meet new IROs and they’re coming up to me and saying thank you for pairing me up with this incredible mentor, or I’m really interested in participating in the mentorship program,” Secord says. “I think it says great things for us as an organization supporting the profession.” • If you would like to participate as either a protégé or mentor in Ontario, contact Sonya Mehan at ciriONmentor@ciri.org. In BC, email CIRIBC@ciri.org.

Determining when merger negotiations need to be disclosed to the public can be challenging. Disclose too soon and your stock may be in for a roller coaster ride – a premature announcement can scuttle the deal if the news drives the stock too high, while news of negotiations that are subsequently abandoned can send your stock tumbling. If you wait too long and get it wrong, you may find yourself accused of failing to meet securities laws requiring timely disclosure of material changes. Investor relations professionals can now look to the recently released decision of the Ontario Securities Commission (OSC) In the Matter of AiT Advanced Information Technologies Corporation, Bernard Jude Ashe and Deborah Weinstein for guidance.

Securities legal counsel advise, generally, that merger negotiations need not be disclosed until a definitive agreement is reached. The OSC’s decision, in essence, supports this position and provides some useful guidance as to when merger negotiations must be disclosed as a “material change” under the Ontario Securities Act.

As this article goes to print, it is safe to say that so far 2008 has provided investors with more volatility, pain and anguish than all of 2007. (And come to think of it, 2007 was a heck of a lot tougher to handle than 2006, wasn’t it?) The issue facing investors is how much more of this (lousy stock market performance) must we endure and when will it be over.

Alas and alack, I cannot help you there but I am confident that I can assist with one aspect: your upcoming annual proxy circular. When I was hired into this industry over 25 years ago, it was safe to say that we didn’t spend an enormous amount of time poring over these documents. Back then, when you had seen one annual proxy circular, you had seen them all: appoint auditors; approve the slate of directors; and fix management remuneration. In addition, individual shareholder proposals that did make the circular were incredibly rare and institutional shareholders didn’t pay much attention to them because the proposals weren’t taken very seriously. On top of that, it was very rare for a client to quiz us on how we voted on any issue, let alone an extraordinary one.

Now that many senior IROs have attained a ‘seat at the table’, they face fresh challenges, including navigating the triumphs – and trials – of a far closer working relationship with the CEO. John Paul Macdonald, Senior Vice President, Public Affairs at Bombardier Inc., says that all of the CEOs he has worked with have been extremely smart. “More often than not, though, really brilliant people lack people skills,” he says, and the stresses of the job can make CEOs irascible. His advice? Know your stuff, gain the financial literacy necessary to be credible, and present your views honestly but respectfully.

Although IROs can take steps to foster a better working relationship with the CEO, sometimes the chemistry is so flawed that it makes the job nearly impossible. Janet Craig, Vice President, Investor Relations, at Nortel Networks Corp., says that her only not-so-positive relationship with the six CEOs she has worked under foundered because of “philosophical and personal” differences. “I did the work I needed to do, but ultimately I wasn't as effective because honestly, I think that the CEO didn't like me that much,” says Craig. After a while, she found a new position. “I probably would have been fired if I hadn't left,” she adds.

The Right Chemistry
Naturally, every IRO identifies different make-or-break issues for working with a chief executive. “Before I go into a company, I always have a heart-to-heart talk with the CEO to determine if we have the same views of disclosure,” says Naomi Nemeth, Vice President,

Investor Relations, at Homeland Energy. She advocates a “very straightforward discussion of specific scenarios” because she wants to know whether the CEO plays by the book (her philosophy), or likes to push the disclosure envelope. Nemeth has turned down jobs because she didn't agree with the CEO on this critical point.

The initial interview presents a terrific opportunity to gauge whether the IRO/CEO relationship has the potential to work. How much time the CEO spends with a candidate is often an indication of the amount of access you'll later enjoy. Karen Attwell, who founded Attwell Communications in Calgary after a 10-year career in IR, puts it this way: “If the organization doesn't feel it's important for you to meet the CEO, it may not be the senior job they're presenting.” Having the right chemistry with the CEO isn't the same as being friends, maintains Macdonald. On the contrary, he believes that a good IRO needs the detachment to listen to analysts, investors, and journalists – and then explain their various points of view to management.

Macdonald advises new IROs to develop a thick skin. “If the CEO reads something he doesn't like and then lays into you, you have to have the patience and empathy to realize where it's coming from,” he says. Instead of feeling defenseless when tempers flare, IROs should consider the pressures CEOs face and “put on flak vests when things are going to be flying,” he jokes.

Canadian companies in the mining and oil and gas industries have reason to be particularly attuned to accounting developments internationally and in the U.S. these days. As Canada approaches the transition to International Financial Reporting Standards (IFRS), oil and gas companies are realizing that there is no comprehensive international equivalent to Canadian standards on full-cost accounting.

The International Accounting Standards Board has initiated a comprehensive research project to develop guidance on accounting issues unique to companies in extractive industries, but any new comprehensive standard will not be published before the Canadian transition to IFRS. The move to international standards in their current form will likely mean that exploration and evaluation costs will hit the P&L much sooner than they would have under Canadian GAAP; therefore, some Canadian SEC registrants have been considering moving to U.S. GAAP to defer the adoption of IFRS. Under U.S. GAAP (FAS 19), the successful efforts method is used to account for exploration costs, which allows some costs to be capitalized that may not be permitted under current IFRS.

Former Ontario Finance Minister Janet Ecker was the special guest at the CIRI Senior IR Assembly on November 22 in Toronto. Later, she sat down with CIRI President & CEO Ian Bacque for a question and answer session that drew on her life in politics, on television, and in business and corporate communications.

Portfolio managers know, all too well, that we live in a relative world; in many circumstances, it’s not how well you perform in absolute terms, but in relative ones, that count. If we deliver decent absolute returns for our clients year in and year out, but underperform most competitors, our jobs are at risk. (And heaven help us if the results are poor or even terrible in both absolute and relative terms.)

We also know that clients can occasionally have incredibly short memories. It’s the ‘What have you done for me lately’ syndrome. That is, from time to time, clients forget good past results and focus (in many cases, exclusively) on poor or relatively poor current results. And just in case our clients do not take the time to make sure we are delivering good absolute and relative returns, pension consultants and fund measurement services will graciously inform them of our performance.

The recent surge in private equity buyouts has some IROs questioning what they’d do if private equity investors came knocking. Already 3,000 private equity funds have raised $500 billion worldwide, according to the Private Equity Council. Some have been particularly aggressive in the Canadian market, including major U.S. buyout group KKR and the Ontario Teachers’ Pension Plan’s private equity arm. The question of what happens to investor relations at target companies largely depends on the private equity buyers but experts say IR should be aware of the options these deals present.

“It is an interesting journey to go through the process of being with a publicly held company and taking it private,” says Smooch Reynolds, Chief Executive Officer of IR-specialized recruiting firm The Repovich-Reynolds Group (TRRG). “But it really depends on whether the private equity firm wants the IR person to stay. If there are bondholders, there is still an investor component and it can be a worthwhile chapter of experience in doing a different type of IR.”

Katherine Vyse has special insight into this unique form of IR. As Senior Vice President, Global Marketing and Client Communications at Brookfield Asset Management, she’s in charge of raising her company’s profile with potential investors in Brookfield’s private equity funds. “My private equity IRO role is still evolving but currently it focuses on bringing some of the traditional IR tools and techniques to the private equity side of the business,” she says.

“Regard your good name as the richest jewel you can possibly be possessed of – for credit is like fire; when once you have kindled it you may easily preserve it, but if you once extinguish it, you will find it an arduous task to rekindle it again. The way to gain a good reputation is to endeavor to be what you desire to appear.”

Socrates Greek philosopher in Athens (469 BC - 399 BC)

This might seem like a dramatic way to begin a column about the art of investor relations, but it is directly on point with regard to my subject for this issue – reputation management. In the forum of public markets, fortunes (and stock prices) rise or fall in reaction to sometimes unforeseen or uncontrollable events.

As many of you know by now I’m a Quant, which is short for Quantitative Analyst. I employ statistical screening techniques to select stocks from which a portfolio is ultimately constructed and managed. Consequently I spend most of my time staring at numbers on my computer terminal or running optimization programs, which is equally rewarding. Clearly, managing money this way isn’t everyone’s cup of tea. The mere thought of statistics can turn many a stomach but it suits my temperament very well and our results have been very good.

Along with additional line items on the balance sheet, and a new statement of other comprehensive income, the enhanced disclosure and presentation standards provide more qualitative information about the risks that companies manage. By the first quarter of next year, that information will grow to include quantitative measures of risks managed by the company. Here is a brief description of some highlights.

CICA Handbook Section 3855, Financial Instruments – Recognition and Measurement,

Investor relations professionals from all sectors should be communicating their companys’ climate change efforts to investors and analysts, CSR experts say. “The more clearly you can communicate how your company is preparing for a carbon-constrained world, the better,” says Toby Heaps, Editor of Corporate Knights. “Most competitive companies now recognize that responding to climate change is part of identifying risks and opportunities,” adds Wesley Gee, CSR Advisor and Member Development Manager for Canadian Business for Social Responsibility (CBSR).

Companies in high-emitting sectors like oil and gas, utilities and automotive industries have long been aware of investors’ growing interest in climate change. In recent years, companies like Nexen, Petro-Canada and Imperial Oil have received shareholder proposals requesting information on their greenhouse gas emissions (GHG). This year U.S. shareholders filed more than 40 climate-related proposals compared to 27 in 2006, with the majority targeting high-emitting industries, according to PROXY Governance.

An issuer’s inability to accurately and quickly identify its shareholders has long been a subject of criticism in Canada. We certainly lack the transparency available in some other jurisdictions. Some people believe that institutional shareholders as a group actually like anonymity, and have thus resisted transparency initiatives, but I do not believe this is true. However challenging it may be, identifying your shareholders should be a key initiative of your IR program. You will find it difficult to qualitatively benchmark the success of your IR plan if you can’t ask for direct feedback from your investors. As well, gauging key changes in your ownership base will allow you to determine what is driving interest in your company – is it investment style, is it your industry, your strategy, your state of play, for example? Truly under-standing these things will also allow you to prioritize management time on road shows and enable you to be strategic about selecting your one-on-one meeting opportunities. You will also be better prepared in the event it becomes important to solicit a proxy vote.

With companies launching sustainability strategies daily, green is definitely the new black inside corporate boardrooms today. Environmental initiatives are now seen as a way to boost a company’s reputation and, in some cases, its bottom line. By investing in energy efficiency technologies and renewable energy, many Canadian companies are reducing their greenhouse gas (GHG) emissions and addressing a growing concern among institutional investors and sell-side analysts who have flagged global warming as an immediate concern. “Climate change is the most important issue for investors to follow right now,” says Julie Gorte, Senior Vice President for Sustainable Investing at mutual fund company Pax World Management Corp. Gorte has been studying corporate responses and trends in climate change for years and has seen a notable improvement in the number of companies addressing this issue and the quality of reporting in this area. Still, as Gorte says, companies are much more likely to report on climate risks if they also have positive news to tell. “GE, for example, is doing a good job of reporting on the issue as it’s making money with Ecoimagination but many companies that don’t have a positive story aren’t reporting at all.”

I’m not the most technologically proficient portfolio manager out there (but thank goodness my associate is, being fresh out of university). Whenever a new TLA is announced (and for the uninitiated, a TLA is a Three-Letter-Acronym), my head automatically starts spinning. I immediately conclude that, whatever it is, it has something to do with technology and, try as I might, I will never be able to totally comprehend what it does, or why it matters.

Terry McWilliams reports on the UK pension deficit crisis that’s hitting home for IR

recently as the 1990s, Britain’s corporate-sponsored pension plans were the envy of the world. Schemes were flush with abundance. Only the rare fund had a shortfall, and life was good. But now this pension paradise has been turned upside down.

Today, a staggering 94 percent of final salary pension schemes at FTSE 350 companies report pension deficits. Six FTSE 100 companies have shortfalls larger than 30 percent of their market capitalization. Underfunding estimates reach as high as £150 bn ($262 bn) for UK companies.

In Europe, the overall pension deficit was Ä116 bn ($138 bn) for the 50 companies on the Dow Jones Stoxx index, with companies in Germany, Spain, the UK and the Netherlands reporting the largest average pension deficits. ‘We’re talking some big numbers,’ says Marc Hommel, an actuary with PricewaterhouseCoopers.

This major reversal in fortunes set in motion a number of regulatory and accounting changes that companies must implement this year. The solutions designed to restore corporate pension health are complex and challenge traditional corporate power structures, experts say. ‘It’s an attack on all fronts,’ says Orlando Harvey Wood, a pensions partner with the Deloitte consulting practice in London. ‘So much has been piled on companies in such a short period of time.’

‘You won’t find a magic bullet solution, in my view,’ says John Grout, technical director for the Association of Corporate Treasurers. ‘Companies will have great difficulties with their shareholders, who will not like what they see.’

Filling the holes
Under the UK’s Pensions Act 2004, most companies must plug their pension funding gaps within a decade. Some have increased fund contributions, while others are making one-off payments. Royal

Bank of Scotland hacked its deficit downward with a £1.1 bn payment that included £750 mn in cash. Scottish & Newcastle’s cash one-off reduced its deficit to £372 mn. Another option is a buyout, which means providing enough assets to allow an insurance company to provide future benefits in full. The total cost, experts say, is much higher than the accounting figure on the books. Whatever the method chosen, UK companies in pension deficit must placate a new overseer: the pensions regulator.

To ensure full scheme funding, the regulator can prohibit dividends, halt mergers, acquisitions and divestitures, alter refinancings or stop other transactions. Lingerie manufacturer Sherwood Group, for example, was told to pay nearly £8 mn into its pension fund before a share buyback could proceed.

‘That shows the strength of the environment in which they’re operating,’ says Angela Knight, chief executive of the Association of Private Client Investment Managers and Stockbrokers (Apcims). ‘In fact, we have created something more powerful than the takeover panel on the Competition Commission.’ Bob Scott, partner at actuaries Lane Clark & Peacock, notes that potential mergers and acquisitions deals are already being curtailed.

While the regulator is a formidable force, company executives must also deal with newly empowered pension boards that have the authority to negotiate higher pension contributions. Pension trustees will be more demanding of cash, says Hommel. ‘It’s an opportunity for a trustee now at the corporate table to act as any other unsecured creditor,’ he adds.

Companies with huge deficits must negotiate better pension terms ‘or tell shareholders that cash flow will be going into the pension scheme,’ says Grout. ‘Not a welcome message for shareholders, and a nightmare for an IR director.’

Watch your step
Communicating pension deficit details and corporate fixes can be like walking in a minefield – one has to tread carefully. ‘If you’re a human resources person, an investor relations person or a general PR person, you’ve got a big problem,’ warns Grout. Different audiences have conflicting agendas: shareholders want return on investment, while workers want the promised retirement security.

‘The investor relations director has to juggle all of these things,’ says Grout. ‘In particular, you don’t say things to shareholders or analysts that do not exactly jell with what human resources is saying to the trade unions or the workforce. They will compare notes. Blogs will be set up and they’ll say things. It’s an unusually difficult job.’

Analysts are looking for clear explanations about pension deficits, actions and assumptions. ‘It is incredibly complicated,’ says Stephen Cooper, head of valuation and accounting research for UBS and one of the analysts calling for more information about assumptions. ‘But you need to disclose why it’s complicated and give the necessary explanations to help people interpret it. Companies shouldn’t hide behind long-held actuarial speak or technical jargon.’

Cooper thinks analysts will handle corporate valuations in a straightforward fashion, like debt. ‘Sure, these companies have large pension deficits,’ he notes. ‘But a company has to repay borrowings in the future; it’s like making lease payments on an aircraft, and they have to meet their pension obligations as well.’

Hommel says analysts will look at pension contribution impacts on cash flows, the scheme’s ranking against other creditors, claims on contingent assets, and the company’s ability to retain and motivate its workforce.

‘The pension deficit impact will be very hard for investors to measure,’ says Harvey Wood. ‘Most know it’s something to be worried about because it could have a material impact on stock price, dividend patterns and who knows what else.’

Analysts may face confusion as well. In his PhD study on analyst behavior, Ernst & Young partner and auditor Finn Kinserdal finds that many Norwegian analysts have difficulty with pension accounting. ‘These are smart people, but they think these [IAS19] rules are complicated,’ says Kinserdal, a member of the European Financial Reporting Advisory Group.

What lies ahead
UK companies don’t just have to deal with reducing deficits – they’ll also have to pay into a government Pension Protection Fund, which protects pensioners from company insolvencies. Premiums are based on the size of pension deficits and company credit ratings, and, as analysts note, represent another use of corporate cash.

Reducing total pension costs will be a future priority for companies. Analysts believe more companies will follow the example of Rentokil Initial, the first FTSE 100 company to freeze its final salary pension scheme and funnel new employees into a new, less costly program.

Knight says these closures are a clear example of the ‘law of unintended consequences’. ‘Regulators didn’t expect that rules enacted to protect pensions would result in their demise,’ she says. ‘But something had to be done at companies like British Airways, which is a small airline attached to a large pension fund.’

Recent publicity about the stability of private and public pensions has brought much-needed attention to retirement funding. ‘People are saving more for their pensions, and companies and employees are thinking more about it,’ Knight adds. ‘They’re not thinking of pensions as some sort of free benefit. Remuneration is a combination of salary and pension.’

The bad news is that the pension crisis isn’t going to disappear. ‘To think that it can’t get worse is to ignore the experience of Japan over the last 25 years,’ says Tony Osborn-Barker, a director in consulting at Deloitte. It seems that now is the time to bone up on the intricacies of communicating pension deficit details.

New reporting rules What exactly is the size of a company’s pension scheme deficit or surplus?

The answer is guided by IAS 19, the international accounting standard, and FRS 17, the British equivalent. All public companies in the UK and Europe are required to adopt IAS 19 beginning this year.

Under IAS 19, most companies are opting to reflect pension schemes’ actuarial gains and losses outside of profit calculations, although companies can recognize all pension costs against earnings immediately if they wish. And, for the first time, companies are required to incorporate a pension fund deficit (or surplus) directly onto the balance sheet, rather than putting the explanation in a note.

‘All I can say on the matter as an economist is that bringing corporate pension liabilities onto the balance sheet is a positive development,’ says Jean-Pierre Casey, head of research at the European Capital Markets Institute.

by Terry McWilliams

Morgan Molthrop explains how to strike gold on a west coast roadshow

Ah, the west coast. Sunshine, movie stars, vineyards, Disneyland, Highway 1 – and about $2.58 tn of equity capital to be tapped. And if that isn’t incentive enough for an IRO to head for California, how about this: California buy-siders are long-term investors. According to Cary Krosinsky at CapitalBridge, 96 percent of Californian investment turnover is characterized as either low, very low or moderate. As a bonus, 41 percent of that money is invested in value stocks: growth and Garp funds account for about 20 percent of the pie.

In northern California, Silicon Valley ensures a veritable Mecca of institutions focused on hardcore tech sectors. In the south, consumer products, biotech and healthcare companies abound in Orange County. A new tech corridor is springing up between Calabasas and Santa Barbara along the Ventura Freeway. Entertainment, broadcast media and communications companies congregate around Hollywood and Burbank, as do investors following these sectors. For companies in these industries – and their corollary sectors, like telecoms – a trip out west is essential.

The hometown team
‘Beyond the California-based firms, many of the buy-side institutions have specialists in the entertainment or tech fields that rival or exceed their east coast colleagues,’ says Roger Pondel, co-founder of Pondel/Wilkinson, one of southern California’s oldest and largest IR consultancies.

‘As a brand-name, large-cap company recognized around the world, we are fortunate to have an almost continual demand for meetings here from east coast and overseas analysts and investors,’ says Wendy Webb, senior vice president of IR at the Walt Disney Company. She notes that several top entertainment analysts and investors also call the Los Angeles area home, including Jeff Logsdon of Harris Nesbit Gerard, Dave Miller of Sanders Morris Harris, and Laura Martin of Soleil/Media Metrics on the sell side, and Capital Research and Management, TCW Asset Management and Primecap Management on the buy side.

‘There are so many entertainment and related internet and tech companies based on the west coast that we are often shown off as part of a sell-side-sponsored tour for institutional investors,’ notes Webb. ‘They might spend two or three days visiting Disney, Fox, DreamWorks, Google, Yahoo!, Paramount Studios, Warner Studios, Lions Gate, and so on.’

Trans-Pacific roadshows
For investor relations pros from other countries seeking capital in the US, California is an important stopping point. While the UK, Canada and Japan still top the list of foreign investments by Californian institutions, there is a healthy, growing investment trend toward China, Taiwan, Korea and Australia. And, as almost 75 percent of all flights to North America from Asia stop in either Los Angeles or San Francisco, the west coast is a natural location for Asian executives to tell their story to investors.

The top industries invested in by Californian institutions are financial: banks, insurance companies and real estate and mortgage capital firms. Not far behind are healthcare and oil and gas companies. ‘We have a very good record of providing full agendas for large-cap and growing mid-cap companies in these industries, especially in San Francisco,’ says Pondel.

Where to go, what to expect
While Los Angeles and San Francisco more or less evenly divide $2 tn of equity capital within their metropolitan borders, San Francisco is a far more efficient market for IR meetings, says Crocker Coulson, president of CCG Investor Relations, a Los Angeles-based IR consultancy. ‘With over 50 percent of San Francisco capital concentrated in the downtown area, you can do a luncheon meeting and then build a day of one-on-ones that will really bear fruit,’ he notes.

To be thorough in your pursuit of capital, Coulson suggests spending an extra day to include San Mateo, San Jose, Menlo Park or Oakland, visiting some of the boutique firms that might have a particular interest in your industry, growth prospects or market cap. One investment manager in San Mateo sees about half the firms he’s interested in without leaving his office. ‘Because of our size and our proximity to the airport, it’s relatively easy for them to visit us,’ he says.

San Francisco has a lot of choice when it comes to meeting venues. Webb favors the Mandarin Oriental, while another IRO says the Westin St Francis and Hyatt hotels are also adequate and convenient locations for meetings.

‘Be prepared for tough questions,’ suggests Pondel. ‘San Franciscans are savvy, proud people who don’t see the Wall Street Journal as a fashion accessory. They will have done their homework.’ He recommends a relatively brief introduction and a more give-and-take conversation over lunch.

The flight between San Francisco and Los Angeles is about an hour; if only traveling by road in Los Angeles were as easy – this is not a city for the autophobe. And if you haven’t been here before, don’t risk making your first trip with your CEO in tow, especially if you think you’re going to be able to use a cab or perhaps rent a car and MapQuest it. This is a trip you’ll need a guide for – one who has a good knowledge of the local investment community. So hire a car and expect to do what everyone does here: stay in it much of the time.

‘You can’t just have a luncheon meeting and expect people to travel to it,’ says Coulson. ‘The time it takes to get across town in Los Angeles precludes this. In New York, Boston, Chicago or San Francisco, institutional investors will show up at your meetings. But a group luncheon in Los Angeles means a retail broker luncheon.’

Not that that’s such a bad thing. If you’re looking for high-net-worth individual shareholders, this is the place to be. Somebody’s got to run all that Hollywood money, and you can draw these folks in if you keep the venue close to Beverly Hills. But that’s something you as the IRO can do on your own without your CEO – and only if an individual shareholder outreach program is appropriate for your company.

For institutional investors, you not only have to know how to get to them, you have to know which ones to target once you’re inside the complex. ‘Cap Research in Los Angeles has a lot of active funds,’ Pondel points out. ‘But its Byzantine internal structure makes it difficult to get into if you don’t know what you’re doing.’

Filling in targets
Chances are you already have a handful of Los Angeles investors in your portfolio, so start by meeting one-on-one with them. Then fill in your targets geographically, preferably using a local pro to help you determine time between meetings. ‘We usually start clients out in Pasadena, then hit downtown, the west side and Orange County,’ says Coulson. Pasadena investment houses include Roger Engemann Associates and Provident Investment Counsel. Downtown, there’s Capital Research and Wells Fargo.

If your firm has over $500 mn in market cap, you should spend a day in San Diego. Brandes, with over $1 bn in equities under management, is worth the trip alone. San Diego is about 90 minutes’ drive from Los Angeles if you don’t hit traffic. That means leaving early in the morning (5 am) or after rush hour (10 am) to arrive for 7 am or noon meetings.

For small to mid-cap companies, California offers a plethora of research houses and smaller banks. WR Hambrecht offers Dutch auction-style IPOs, and Roth Capital Partners in Orange County is number one in private investment in public equity transactions for small-cap growth.

The ideal Californian IR itinerary? Arrive in San Francisco on a Wednesday night. Have one-on-ones in the morning, a group luncheon, then one-on-ones in the afternoon. On Friday, visit one of the outlying investment houses and then head out to San Jose. Spend the weekend in Big Sur, south of Carmel on Highway 1, then fly out to Los Angeles. Visit your top targets with one-on-ones on Monday and head down to San Diego or Orange County on Tuesday morning after rush hour. Do a luncheon and afternoon one-on-ones, then fly out of either San Diego or Orange County airport on Wednesday.

by Morgan Molthrop

Visitor information, San Francisco

Where to present

Mandarin Oriental 222 Sansome Street +1 415 276 9888

Westin St Francis 335 Powell Street +1 415 397 7000

Where to stay

Four Seasons 757 Market Street +1 415 633 3000

Ritz-Carlton 600 Stockton at California St +1 415 296 7465

Where to take your CEO for dinner

The Dining Room at the Ritz-Carlton +1 415 773 6198

Visitor information, Los Angeles

Where to present

Omni Hotel 251 South Olive Street +1 213 617 3300

Where to stay

Beverly Hilton 9876 Wilshire Blvd +1 310 274 7777

Where to take your CEO
for dinner

Lucques 8474 Melrose Avenue

Top ten buy-side institutions Firm Main investment style Location

Equities under mgmnt ($bn)

Barclays Global Investors (US) Index San Francisco 725.7

Capital Research and Management Value Los Angeles 682.1

Capital Guardian Trust Co Garp Los Angeles 160.0

Calpers Index Sacramento 122.9

Dodge & Cox Value San Francisco 105.6

Brandes Investment Partners Value San Diego 101.0

Franklin Templeton Investments Growth San Mateo 72.1

Dimensional Fund Advisors Quantitative Santa Monica 62.4

TCW Group Growth Los Angeles 53.5

Primecap Management Company Growth Pasadena 49.3

Thanks to IR Magazine for allowing us to bring this article to you.

The 'Halloween massacre' has come and gone, but the discussion regarding the taxation of income trusts continues. Why is this happening? Will anything be accomplished? And, more importantly, do unitholders care?

Investors increasingly want companies to line their pockets rather than reinvest in growth or pay down debt. A recent study by Merrill Lynch reveals that 53% of 223 global fund managers would like companies to give money back to shareholders through share buybacks and dividends. Investors even think companies should issue debt to free up cash, the study shows. “The thinking is that companies are underleveraged and shareholders want them to take out debt to issue cash,” says David Bowers, Independent Consultant to Merrill Lynch.

If you have been an IRO for any length of time, you have likely crafted both good news and bad. Delivering the good news is usually easier. When you have bad news, you have typically had some considerable time to mull it over with colleagues and to figure out the best way to position it to investors. If the bad news is of your own making (that is, if it relates to your business performance and internal factors that lead to less than stellar results), you can likely clearly explain it and can give some 'upside' to assure investors that things will look up again soon.

What happens when some external force drops a bomb on you, literally or figuratively, and you have to communicate its impact? For instance, your plant burns down, you have a product recall, or the Federal Government announces a change to the Income Tax Act that essentially wipes out your raison d'être? On October 31, 2006, the Federal Government did just that when it announced it would “level the playing field” between income trusts and corporations.

Most people claim to have been truly shocked by the announcement, and therefore I assume that most IROs working for income trusts were shocked, and went to work on November 1 wondering what they could or should say to avoid a unit price meltdown. Given the rapid market response, clearly the answer was most likely 'nothing'. Markets have a life of their own in the face of this type of bombshell, and I do not think any words could have been crafted to mitigate what did in fact happen, at least not in the immediate term. However, most communications professionals felt compelled to say something, particularly since the timing of the announcement meant that most IROs were on the verge of a quarterly earnings release.

With 74 income trusts in the S&P/TSX Income Trust Index, 56 said something on the subject in the first press release after the Government's announcement. Among the 18 that said nothing, five were REITS, that, depending on structure, may not be affected by the tax changes. The most common theme from income trusts making this statement was, 'we are not sure we like this and we are examining its possible consequences. We'll get back to you.' I've been following up on the 'get back to you's', and many income trusts have not said much more on the subject since. Of course, this is not true of the energy trust sector, which became downright militant, formed a coalition, and paid a lot of money to produce a 233-page report to discredit the Government's action. This monumental effort has had little or no effect and the Government announced on December 19, 2006 that it is standing its ground. Granted, trying to change the course of a Government once the Minister has appeared on The National may have been more difficult than changing the course of the Bow River, but the coalition had to try.

As an aside, I have to ask, and not altogether facetiously, should we have been so surprised by the announcement? I'm not prescient, but the announcement was only a matter of time. Remember that income trusts are the brainchild of a few particularly smart lawyers (and maybe an accountant or two) who figured out how to structure mature cash-cow businesses to reduce tax paid at the corporate level. Of course, the tax effectiveness was widely publicized by new 'income trust departments' in major law firms, and over the last seven to eight years we have seen the conversion of all kinds of businesses to the structure, many of which are not exactly cash cows. The shareholders of these businesses were getting tired of waiting for growth in value through improved operations and therefore took the lure to bump it up on conversion. (Read here that I am not entirely sympathetic to the shareholders who are now crying foul).

The Income Tax Act is as thick as the Toronto phone book for one reason: the CRA eventually catches up to the smart lawyers. When assisting your CFO in drafting MD&A, I suggest you take a fresh look at “Risk Factors” and ask yourself whether you have addressed any competitive advantage that arises from some kind of external condition, such as a law, that could swiftly and arbitrarily change. Ensure you have thought about 'plan B'.

So what are some of the types of messages that income trust IROs have crafted since October 31 in an attempt to recover unit value, and are they working? I have very simplistically analyzed them, and have arrived at what should not be a surprising conclusion: if the underlying business is sound, if growth prospects are good, and there really is a cash cow – the message is simple: we are disappointed, but we have a strong business that will continue to make money, whether we or our holders are paying the tax. For these types of trusts, unit price dipped post October 31, but is rallying. For some, unit price has reached a 52-week high due to outstanding business results and future prospects. Several have had lots of good news to deliver since the initial reaction, including increased distribution rates and vigorous 2007 business plans. It's easy to spin that story.

For the businesses that were likely never suitable for the income trust structure or that have underperformed since conversion, the messages can be paraphrased: we're not sure what we will do, but please hang in there for the four-year tax holiday. If tax planning emerges as your number one growth opportunity, there are some real flaws in your underlying business model, and perhaps a going-private transaction should be considered. The alternative would be to use the four years to help senior management come up with a viable business model that, on an apples to apples comparison, will be as attractive an investment as the best equities in your sector. Then you will have a story to tell.

The lesson from this: in the face of an unexpected IR crisis, no message can change your fortunes if your underlying facts and circumstances make it unbelievable. Crisis communication requires a cool head, a sober assessment of the facts and their potential impact, and a commitment to avoid any unjustified reassurances. Apply the same integrity to your crisis communications as you do to your routine disclosure.
Claire Milton, General Counsel and Secretary, High Liner Foods Incorporated

Base metal stocks are rocking (pardon the pun) but it wasn’t always so. In the 80s and 90s, base metal stocks were generally poor investments because the underlying commodities didn’t do anything. However, during that time frame, Noranda was one of the best performing base metals companies, if not the best. It was 50% owned by Brascan Financial and paid the parent company (as well as the rest of the shareholders) a massive quarterly dividend, far in excess of its competitors’ payouts (or those of any rational resource company, for that matter). As a result, Noranda did not have the necessary resources to finance grassroots exploration and development and, unlike its peers, did not undertake the capital expenditure programs that provided poor returns. Consequently it didn’t fritter away precious financial resources. Ironically, Noranda was a great performer because its (financial) hands were tied. In other words, it was the best stock in a very bad sector.

“The Halloween massacre” is how Anne-Marie Buchmuller describes the day Finance Minister Jim Flaherty changed the tax rules governing income trusts. The head of IR for Calgary-based Sound Energy Trust had only been on the job for two weeks when the Minister dropped his tax bombshell and sent the market into a tailspin. The surprise announcement translated into a $20 billion drop in the S&P/TSX composite index on November 1 with sharp losses for the trust sector, which has yet to recover.

“We have had many calls from investors, mostly retail, who are very upset – they lost a lot of money,” reports Buchmuller. “Shock and outrage is the best to describe how our investor base has reacted,” adds David Carey, Senior Vice President, Capital Markets for ARC Energy Trust. “We lost 25% overnight and are still down 20% a month later. A lot of people were caught unaware; our phone lines lit up and email system overflowed with questions from unitholders.”

A godsend, stroke of luck, divine intervention, call it what you will but I felt a sense of huge relief when I got the email announcing the Webinar – Web Back in the Spotlight. I work for a small publicly traded company and I had been tasked with completely redesigning our company’s website, including the investor relations section. What an amazing opportunity; this will be awesome in my portfolio, I thought. A big challenge, sure, but one I could handle and was excited to take on…until I actually started work on the project. I was overwhelmed. We weren’t just changing the look of the site but all the messaging as well – and we were doing it all in-house. I recognized that what we had wasn’t working, but I didn’t know where to start. My resources included two IT people and a really ugly website.

Mike Reilly looks at the ‘other’ over-the-counter market as the Pink Sheets launches a US version of Aim

There’s a new wrinkle in the fabric of the markets – one that may bring an alternative for US investors hungry to own more international shares and for foreign issuers eager to raise their profile but unwilling to take on the costs of SEC registration, exchange listing requirements and Sox compliance.

The Pink Sheets – or the Pinks, as it is known on Wall Street – dates back almost to the beginning of the 20th century. It has traditionally been seen – and still is by many today – as an outdated paper-based quotes arena for a wide array of shares – and mostly dicey penny stocks at that.

But under the stewardship of a savvy New York area native named R Cromwell Coulson, the Pink Sheets has become a robust contender for the attention of many companies, including western Europeans who have recently shied away from the US.

With a snappy internet venue for its now all-electronic quotations, the Pink Sheets has steadily added features to make the market attractive to all constituents – issuers, market-makers and, most importantly, investors. Its quotes are distributed by all the major vendors, from Reuters to Bloomberg. Now it plans an elite quotation that will require high levels of disclosure, though not as high or as extensive and expensive as those required by SEC registration.

Here comes OTCQX
The Pink Sheets’ new OTCQX is touted as being similar to London’s Alternative Investment Market (Aim) in its structure, and Coulson has created a chart on the new web site (www.otcqx.com) showing the parallels. The chart also shows how the new service will stand out from both the Pink Sheets and the OTC Bulletin Board, on which many over-the-counter stocks are posted under the aegis of NASD.

The bottom line for non-US companies is that by backing a US quote of their stock listed, say, in London or Frankfurt, a ready market is presented for US investors. Such quote generation is done by market-makers, typically broker-dealers, who simply begin to make a market in a given stock and then post their bid and ask prices. This may come from their own belief that interest is out there, or it could be generated by institutions that let the dealers know they want to see prices.

Companies like Nestlé, Roche and Heineken already trade on the Pink Sheets and enjoy US visibility without the high costs of Sox regulations or registration and listing fees. ‘Look at consumer brands with US employees, with big US customer bases,’ says Coulson. ‘If you are Volkswagen, you want people who buy your cars to be able to buy the shares easily. It increases the number of repeat customers.’

The overall move in European markets toward greater transparency and best practice in disclosure plays directly into the new OTCQX proposition. By offering a venue that guarantees only companies with strong disclosure habits and regular financial reporting that meets its listing standards, the OTCQX hopes to attract more investors and well-regarded issuers, regardless of size.

More varied IR
The new service will create three tiers of companies, with the highest level of well-qualified firms having to hit several marks in addition to regular financial reporting and good disclosure. Added criteria include management certifications, quarterly reporting and the appointment of a ‘designated advisor’ – a kind of monitor to ensure compliance.

Since there is no exchange listing and the requirements of SEC filings are limited to matching those of companies’ home countries, there can often be a certain relaxation of IR among Pink Sheets stocks. There is no retail component to IR for Roche, for example, since its shares are mostly owned by institutions and it does not seek retail investors in the US. Then there are the special situations, which abound on the Pinks. Owens Corning, driven to bankruptcy by asbestos lawsuits, moved over to the Pink Sheets while working itself out of its problems.

Sox pushed some US companies onto the Pinks along with foreign ones. Moving off the American Exchange shortly after Sox came over the horizon was a strategic choice for the Ziegler Companies, a Midwestern financial services firm with billions of dollars in business and billions more under management for clients.

‘I immediately perceived Sox as highly problematic from an expense and management point of view,’ says Ziegler CEO John Mulherin. ‘Requirements for new board committees, Section 404 compliance, extra auditing – all these combined to create a task we could not afford. We decided to de-list and deregister.’

But unlike Owens Corning and others who almost seem to be hiding on the Pinks, Ziegler cares a lot about its shareholders and their perception. ‘We made a lot of calls, wrote letters and had conversations with shareholders, clients, employees and other constituents. We spent a great deal of time explaining to people how to use the Pink Sheets,’ Mulherin recalls. ‘It was important we be very clear about our views on corporate governance and transparency.’

Did the move to the Pinks pay off? ‘The effort was endorsed by shareholders, who saw that we were saving capital and guarding profits. The stock price appreciated by 10 percent,’ the Ziegler CEO states.

Foreign companies unwilling to take the expensive and rules-strewn path of a full exchange listing may be encouraged by the new ‘premium’ OTCQX. After all, Federal Reserve figures show non-US stocks represented just shy of 16 percent of US portfolios at the end of 2005 – a record level, but one that leaves a lot of room for growth.

by Mike Reilly
Thanks to IR Magazine for allowing us to bring this article to you.

When do you need outside help? Dea Katel looks at how companies work with IR and financial PR agencies

The scope of IR consultants’ relationships with both clients and the investment community is now broader than ever before. The hot competition for capital means more companies are seeking market intelligence like peer research, while others are doing more with less by outsourcing IR chores. Whether a company needs to get creative, diversify its shareholder base, go global with its message or survive a crisis, help isn’t far away. IR magazine talked to seven companies about how they use consultants.

WASHINGTON – With state-run Chinese firms raising increasing sums in US markets, there's growing speculation that US regulators may step in to protect investors.

The tech market meltdown of recent years was one of the comparisons made at this month's hearing on China and the capital markets, held by the US-China Economic and Security Review Commission (USCC).

One worry is that China continues to experience financial scandals in its banks, even as it rushes to overhaul and list state banks such as the Bank of China and China Construction Bank to meet the WTO’s financial market requirements by late 2006. Citing poor transparency and other problems at banks and other state-owned firms expected to list in New York, USCC chairman Richard D'Amato warned of a prospective China 'bubble'.

USCC members have suggested the Securities Exchange Commission (SEC) could scrutinize new China offerings for risk and standards of corporate governance. But what steps might US regulators take? According to Commissioner Michael Wessel, who co-chaired the hearing, 'Sarbanes-Oxley and other securities laws on the books provide substantial authority to the SEC and other authorities to ensure greater scrutiny of Chinese banks seeking to raise funds in the U.S.' And, he adds, 'If the law does not provide adequate authority, the SEC should provide guidance to Congress about what additional tools they may need.'

It was suggested at the hearing that US regulators avoid driving Chinese companies to list elsewhere. Still, says Wessel, 'The SEC has the duty to ensure that US investors have the information they need to make informed decisions – and they need to ensure that any material information is available and scrutinized.'

One wild card is the expected shift of SEC policy now that Republican congressman Christopher Cox has been confirmed as head of the Securities and Exchange Commission (SEC). Many predict a much more relaxed regulatory regime than under predecessor William Donaldson.

Even if this is the case, the SEC may not relax when it comes to China listings. 'It's too early to prejudge what the SEC will do under Chairman Cox,' cautions Wessel. 'He has a strong record on China as it relates to economic and national security. I have confidence that he’ll use the legal authority and tools available to ensure that investors have the information they need or – if he needs additional authority – that he will ask for it.'

Washington, DC -- The SEC has filed changes against two former Kmart executives for providing misleading information a few months before the company filed for bankruptcy.

LONDON -- A growing number of UK large-cap companies are webcasting their annual general meetings via their corporate web site, while others are using video and dedicated web sites to offer stakeholders a richer multimedia experience.

Majority voting is taking off as the ideal model for director elections. The American Federation of State, County and Municipal Employees (AFSCME) Pension Plan recently submitted the first binding resolutions seeking majority voting at Paychex and Sysco.

The move is a significant change of strategy for AFSCME, which has been a major supporter of the SEC's proposed shareholder access rule. With that rule appearing to be dead in the water, the pension group is now pursuing the majority-voting path.

'We consider proxy access and majority elections as compatible. The problem is that, for the moment, we are not able to get proxy access on the ballot,' says Richard Ferlauto, AFSCME's director of pension investment policy. Non-binding shareholder resolutions calling for majority vote standards have become common place this past proxy season and over 20 companies have adopted some form of the scheme after a majority of shareholders voted in favor.

AFSCME is pushing for a stronger solution. Its position at Paychex and Sysco calls for a binding resolution requiring a majority vote rule. The pension group will get to test shareholders' appetite for the proposal at Paychex's AGM this fall. The company is encouraging shareholders to oppose the proposal on grounds that it is evaluating the idea and the changing legal environment relating to the principle.

The Council of Institution Investors recently submitted a letter to the Delaware State Bar Association asking it to press the state to alter Section 216 of the Delaware General Corporation Law to make majority voting the presumptive choice for Delaware corporations. The American Bar Association is currently examining the issue in a separate inquiry.

The recent Michael Jackson trial underlined the dangers of having valuation tied to a name and face. Despite the not guilty verdict, the value of Jackson’s brand has been sullied by accusations of child molestation and his admitted obsession with all things fantastical and child-like. And all those who profited from his pop icon empire will feel the loss.

Which brings us to IR. One of the strongest arguments for the function being strategic is that it gives analysts and investors someone to talk to when the CEO is unavailable, indisposed or out to lunch, both figuratively and literally. What if your CEO admitted to a favorite pastime of spending hours up in trees? Investors might not feel as comfortable with his or her leadership strategy or even start hoping that someone else was steering the ship.

ShareGift USA benefits companies, shareholders and charities, writes Neil Stewart

US companies cleaning up their shareholder registers have a new, CSR-friendly option in ShareGift USA. This British import, established in 1996, is based on a simple but effective idea: companies invite investors with a small number of shares to give those shares to ShareGift, then ShareGift bundles up the shares and sells them to raise cash for charity.

Mike Reilly studies the impacts of faster, cheaper stock trading.

One share can be voted numerous times by different investors, skewing results and hurting shareholder rights, finds Adrian Holliday

One share, one vote. It’s a simple principle. But in reality, it may be one share, two or three votes – perhaps even more. Brilliant blue skies may mark the start of proxy season, but that time of year can also bring a disruptive dimension to shareholder democracy: over-voting.

“You have to make sure you have control of the pen as your operating environment will change overnight,” cautions Greg Martin, Vice President and CFO of Vancouver-based Zincore Metals. This is Martin’s advice to an IR person suddenly thrust into a hostile takeover bid, which is exactly what happened to him last November when Barrick Gold went after Placer Dome, where he headed investor relations. “You are used to working with a select group of people, and all of a sudden you are sitting at the table with 25 people who are all trying to prove their worth,” Martin adds, referring to the entourage of legal, banking and communications advisers that accompanies a sizable deal.

Investors are interested in quantifying the effects of climate change but a consensus on what companies report and what shareholders measure is necessary.

While individually, many retail investors may only own a few hundred shares of your company’s stock, their collective purchasing power cannot be ignored. Some blue chip Canadian companies have a substantial retail shareholder base and their ownership is likely understated, given that indirectly held shares are purchased through vehicles such as mutual funds. At RBC, approximately 50% of common shares are held by individual investors.

Are Canadian companies missing out on the chance to tap into a cost-effective, regular capital source that can turn customers into investors and boost shareholder loyalty? Direct purchase plans (DPPs) provide tremendous benefits for U.S. issuers, and may offer similar rewards for Canadian issuers.

With the declining sell-side coverage experienced in recent years, companies are looking for different and better ways to attract the investor attention they need. The typical IRO is focusing extensively on the buy-side analyst to make up this loss of coverage and attract new investment.

Lead article from Newsline, Volume 14 Issue 4 - July 2004
... the lines are drawn in a battle that you can expect to see played out over the coming months and perhaps years. In the U.S., the Business Roundtable, the American Society of Corporate Secretaries and other business groups are lobbying the SEC to unmask beneficial holders (see 'World Context'). In Europe, the European Commission is said to be preparing a system similar to American 13F filings. And in Canada, which is held up as a model for change, issuers still grumble about the unwieldy and inadequate system of NOBOs and OBOs...

Canadian IR Practitioner column Newsline Volume 14 Issue 2 March 2004
Regular face-to-face contact with investors is critical to the success of an investor relations program. A road show can help boost visibility, get your story to the right investors and build management credibility.