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. •

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.

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.

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.

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,

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.”

When asked to describe his leadership style in three words, Ian Bacque doesn’t miss a beat. “Focused, strategic and effective,” he says, from his home office in Uxbridge, Ontario. These qualities will definitely come in handy when Bacque officially steps into the role of President and CEO of CIRI this September 4th.

Speaking a month before his official start, Bacque is clearly looking forward to leading a growing organization in a fast-moving industry. Even in the middle of Southern Ontario’s stifling heat wave, he’s busy contemplating CIRI’s role. “Advancing the credibility of the investor relations profession and the competence of CIRI members is really the key role for CIRI,” he says. “Ensuring competence and professionalism will lead to greater credibility over the long term so long as there is also an effective communication plan around this effort.”

What attracted Bacque to his new position is the ability to lead such a well-known and respected national association. The fact that CIRI is in the capital markets arena is a real bonus, he adds. Most recently, Bacque spent three years as Director of Ontario Government Relations at TELUS. There he got a taste of what it’s like to work for a publicly-held company and he is excited to delve deeper into equity markets culture. At TELUS, he also gained first-hand knowledge of what it’s like to work with a dynamic CEO and some of the challenges and opportunities facing investor relations professionals.

“I really enjoyed TELUS’ high performance culture and its dynamic leadership made it exciting every single day,” he says. The company’s commitment to corporate citizenship also impressed Bacque, who was responsible for developing the telecom’s government relations plan and community investment program. “I enjoyed serving on the TELUS Toronto Community Board, making a difference in the communities in which we lived and worked; it felt good,” he says. “I’m very pleased that TELUS and its IR professionals are members of CIRI.”

A lawyer by profession, Bacque also spent time as a solicitor for The Toronto-Dominion Bank. Additionally, he has plenty of experience in policy and regulatory affairs, since he worked as a senior policy advisor for the Ontario Ministry of Finance. While at the Ministry, Bacque was involved in several regulatory initiatives including pension, insurance, and financial institution policy reforms, as well as working with the Ontario Securities Commission.

It comes as no surprise, then, that Bacque intends to get CIRI more engaged in regulatory issues affecting public companies and investor relations professionals. “CIRI’s vision is to be recognized as the Canadian authority on investor relations, committed to enabling fair and efficient capital markets, and one of its goals is to take a leadership role in Canadian capital markets by representing the views of CIRI members,” he says. “Achieving our vision and goals requires engaging governments, regulators, and policy makers during official processes, and also outside of these processes, to effectively advocate for CIRI members and their viewpoints.”

Bacque is no stranger to the inner workings of industry organizations. Prior to joining TELUS, he was Director of Government Relations at the Canadian Institute of Public & Private Real Estate Companies (now REALPac), a national real estate association representing Canada’s largest publicly listed and private real estate companies.

On reflection, Bacque says REALPac was a good introduction to the art of considering a wide range of views and finding a position that serves the goals of all members. “REALPac represented public companies, private companies, pension funds, and brokers, and, within those categories, members owned offices, shopping centers, apartment complexes, etc.,” he points. “So you had a wide range of viewpoints and you had to pull all of them together to figure out the common ground.”

Heading a professional organization based around job function rather than industry will call on similar skills, Bacque adds. “CIRI members may work for companies in all sectors of the economy, but they have a singularity of purpose, from a professional standpoint,” he says. “Whether an IR professional works for a mining or medical company, the goal is the same: to achieve an effective two-way information flow between a public company and the investment community.”

When asked what he is most looking forward to about leading CIRI, Bacque says learning about members and their companies tops his list. He is also enthusiastic about meeting his team and the rest of the CIRI Board because he feels they will be instrumental to his success. “Being effective requires an excellent team and being responsive to the Board’s direction in implementing the strategic plan, and, at the end of the day, associations are all about the members,” he adds.

First on Bacque’s agenda is soaking up information. “I’ll be listening a lot at the start, that’s for sure,” he says. He already sees plenty of opportunities for CIRI in terms of growing the membership and attracting sponsors, both of which will be key focuses when he takes over. Bacque is impressed with the level of professional development and continuing education that CIRI offers and says he will find it a challenge to build on the organization’s excellent record in these areas. He’s aware that it will take a little while for him to get his sea legs at CIRI. “I’m sure it will take some time in the role for me to get a good sense of what direction we’re going to be headed in,” he adds.

A father of two young children and stepdad to two teenagers, Bacque relaxes by spending time with his family. In the winter, the Bacque clan heads for the ski slopes; in the summer, swinging golf clubs is the sport of choice. As is fitting given his political background, the incoming CIRI leader is a self-confessed news junkie. “I am always reading newspapers and websites and have the radio on to stay on top of the latest news,” he adds. This desire to stay on top of news will undoubtedly serve Bacque well as he gets ready to enter the fast-paced world of IR.

IROs working for companies with dual listings are bound to ratchet up the air miles. “You can’t sit in your office in Toronto and manage a dual listing,” says Robert Lavalliere, speaking from an airport. The Vice President of IR at Anvil Mining, which trades in Australia and Toronto, has 20 years of experience running IR for companies with multiple listings and is adamant about getting out and kicking tires.

Today most investor relations professionals are actively targeting investor pools outside their domestic market and there are plenty of theories on the best way to pursue shareholders beyond your home terrain. Some IROs claim a secondary listing is the best strategy to tap into foreign institutional dollars while others say a single listing on a high profile exchange is enough to provide the liquidity and speed of execution that global institutions require.

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.

Adrian Holliday reports on the IR challenges for London’s Aim-listed companies

No trading record, no minimum market cap, fewer reporting requirements and, for investors, some congenial tax benefits. The attractions of London’s Alternative Investment Market (Aim), and other small exchanges around the globe, abound.

In 2005, Aim had its most profitable year since its launch in 1995 with 335 IPOs, raising a total of £6.46 bn ($11.31 bn) in new issues. The exchange’s total market cap rose 40 percent to £1,399 bn in contrast to £1,021 bn at the end of 2004.

But given the relative ease of listing on Aim, it’s understandable that some speculation about the quality of investor relations among listed issuers should ensue. The question is, how effective are the management teams of these nascent businesses at explaining their company’s strategy? And is the less strict regulatory environment a boon or a potential danger to investors?

Rising to the challenge
Rory Stear, CEO of Freeplay, a £6.63 mn market cap Aim-listed company that produces electronic appliances based on wind-up energy technology, believes in clarity. Effective IR for him involves maximizing every opportunity to put his case to the market using the clearest language possible.

‘I can’t stand jargon,’ says Stear. ‘The annual report is a great opportunity for a small company to remind all its stakeholders what it’s really about and to highlight the things that are unique about it, in the most straightforward language.’

Hardy Amies, the UK’s last couture house, is another Aim minnow, with a market cap of just £5 mn. CEO Tim Maltin says one of his biggest IR tests is keeping in touch with a very broad shareholder base and encouraging ongoing voting interest. ‘Our previous incarnation was on Ofex for five years, so we’ve actually been listed for seven years,’ says Maltin. Ofex is the UK independent market for companies up to £20 mn. According to Maltin, shareholders tend not to get involved in voting – and that apathy disappoints him.

One of the biggest challenges for these small companies involves the cost and logistics of communicating to a large audience. ‘Getting half-yearly results out to 2,000 shareholders, for instance, is very expensive,’ says Maltin.

Maltin has worked out a cunning way to keep costs down by hiring students to come and lick stamps for mail-outs. But even when costs are under control, these companies still face the daunting reality of trying to communicate to shareholders via intermediaries. ‘The other difficulty is that we send out things to shareholders who have shares in nominee accounts, and nominees are extremely bad at forwarding information to individual shareholders,’ adds Maltin.

Spelling it out
Again, clarity is the name of the game when young, Aim-listed companies are trying to explain their business strategies to current and potential investors. Many of these issuers are in complex and relatively new industries with which investors and analysts aren’t so familiar.

Michael Tapia, CEO of technology utilities company Qonnectis, finds keeping shareholders updated on the company’s business strategy a challenge. Qonnectis was originally a pure internet business, but it has now evolved into an internet technology and utilities operation.

‘I’m aware that some who are less in touch with the business haven’t understood how we’ve changed,’ Tapia says. ‘But we’re investing more in the IR part of the web site, which includes share price and industry information. We also include stories about energy news, the environment, carbon emissions and energy prices.’ Tapia views the web site as an efficient method for keeping shareholders informed on the industry and Qonnectis’ own story.

John Halfpenny, CEO of CMR Fuel Cells, recognizes the need for delivering a simplified IR message. His company develops fuel cell technology for a variety of power-generation applications, including military power packs.

‘You can focus on green energy or lower emissions, but the key story is the commercial proposition – the classic features and benefits,’ says Halfpenny. ‘Why is it that current solutions are deficient in meeting a need? How does your product meet its need?Marketers talk about features and technology, but it’s the benefits that people really look for.’

Attracting coverage
Sell-side coverage is another major hurdle for small-cap companies. ‘These companies may have a range of investors, including private clients, investing from a speculative basis – people who are perhaps buying for inheritance tax reasons – and buy-and-hold investors who bring responsibility, which is what you want,’ says Hardeep Tamana, CEO of stockbrokers Fyshe Group. ‘But you’ve got to understand the effect of news flow and how to make your stock marketable to the broker community. Plenty of companies do IR roadshows, but most fail to realize that under current FSA regulations, most firms will never feature on any stock recommendation list unless there’s independent research on the company.’

Getting that coverage is very difficult for early-stage issuers. ‘It’s always a question of economics,’ says John Nuttall, an analyst with London-based Investec. ‘If you believe a firm will generate sufficient commission or win an advisory relationship as a consequence of covering an Aim company, you’ll do it. But if you don’t think so, you won’t.’

Attracting the sell side is about economics, resources and time, adds Nuttall. He won’t consider covering any company with less than a £70 mn market cap. And while some companies might consider investing in paid-for research, it’s generally good practice to continue to target traditional brokerage research because that is what the buy side will read.

Maintaining the balance
While many Aim-listed issuers appear to be taking a proactive approach to investor relations, these companies aren’t required to do so. Gary Withey, a partner with London-based KSB Law, says current Aim legislation doesn’t require ongoing investor relations dialogue with shareholders. ‘When we float a company on the Aim market we make sure it is aware of the Quoted Companies Alliance guidelines for Aim companies, which require dialogue with shareholders to establish a mutual understanding of the company’s objectives,’ he says. ‘While this is helpful, the majority of the recommendations are about corporate governance. I can run a company according to all the available corporate governance guidelines, but still effectively tell my shareholders very little.’

Withey says the UK government’s current Company Law Reform White Paper addresses the disclosure challenge young companies face. ‘The problem we always have is how much you tell investors without releasing price-sensitive information,’ says Withey. ‘You can, by all means, have an IR director people can call with specific questions, but you can’t tell them specifically what you’re doing with projects likely to impact on the share price.’

Clarity, balance and consistency are the best IR ingredients for companies that are listed on Aim or any other small-cap exchange. This is the best way for a young company to attract shareholders that will take it to the next level of growth. As always, aim high.

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

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.

Jeff Cossette samples the opinions of the 572 investors and analysts who voted in the IR Magazine Canada Awards 2006

Not everyone can design an effective investor communications plan. Fewer still can focus the diverse talents needed to craft an IR strategy that ranks among the world’s best. Those at the top possess a remarkable blend of discipline and skill uniquely suited to the job at hand. But they also have something extra: an ineffable essence that binds these qualities together and that rubs off at the meeting point between company and investor.

How does an IRO know he or she has it? The standard metric of success – consistent, generous salary increases – is, of course, ‘standard’ for a reason. But a more fundamental – and perhaps less confidential – measure of job performance is the opinion of an IRO’s ‘external’ clients: investors and analysts. Their collective judgment is revealed each year at the IR Magazine Awards.

Since 1998, IR magazine has commissioned an annual study to uncover the Canadian financial community’s opinions on the state of IR. The IR Magazine Canada Awards, held in association with the Globe and Mail, are part of a global series canvassing over 8,000 investors and analysts in over a dozen countries and regions. This year, unlike previous surveys, each of the 250 Canadian sell- and buy-side analysts and portfolio managers was interviewed by phone. Together with the opinions of 215 retail investors and 107 US portfolio managers and analysts, verbatim comments are contained in the Investor Perception Study, Canada 2006. Institutional contacts were provided by Thomson Financial, while PrecisionIR from WILink conducted the retail survey.

Overall, the survey found that members of the Canadian investment community recognize IROs at Canadian companies as playing an important role in their daily working lives. However, a minority of respondents lament the fact that some IROs in Canada are not sufficiently senior to answer all their questions. Several say this problem can be ameliorated by raising the profile of the IRO’s role within the company.

‘IR in Canada is nowhere near on a par with the US,’ says one buy-sider. According to another: ‘At meetings, an IRO may accompany the CEO, but we never see them on their own – they just facilitate and organize meetings.’

When asked if IROs should present directly to the board, 60 percent of those who responded said ‘no’ – and many were even taken aback by the question. ‘That’s a job for senior management,’ says one respondent, echoing the prevailing sentiment. Another adds: ‘Keep them as far away from the board as possible. IROs often want to show how powerful they are, and they end up overreaching themselves.’ One respondent remarks: ‘The problem is IR people don’t listen to us very well in the first place.’

Listen and respond
In fact, the ability to listen is a key element to being a successful IRO – 40 percent of survey respondents list ‘communications skills’ as an effective IRO’s most important attribute. Smart IROs know that communication is a two-way street. For example, Scott Lamb, vice president of investor relations at TD Bank Financial Group, which won two prizes at this year’s awards gala at Toronto’s Royal York Hotel on January 26, attributes TD’s award for best IR web site to ‘listening to our clients’. ‘We pay attention to the kinds of questions coming into the IR department,’ says Lamb. ‘If we can meet that information need on our site, that just helps us to be more efficient, and our customer base appreciates it. It is key to have a two-way flow of information.’

Listening skills are also critical for Flora Wood, IR manager and corporate secretary at Harris Steel Group. ‘Most of the people we’re serving – analysts, institutions and retail investors – will tell us precisely what the most important thing is to them when deciding to invest in our company,’ says Wood, co-winner of the award for best IRO at a small to mid-cap company. ‘But they won’t necessarily tell us that in the first conversation. So listening skills are important to get enough of their trust that they are willing to tell us what they are looking for.’

Wood says an IRO’s key attributes vary by sector and market cap, but it is always necessary to be close to senior management. ‘You must be treated as someone who needs to know, as closely as possible, everything that management does, then filter confidential information and communicate a subset of the whole,’ he says. ‘The other approach some companies take is to educate the IRO only in what’s going to be communicable to the market. That’s not the best approach.’

One way Wood stays close to the loftier decision-makers at Harris Steel is via her role as corporate secretary. ‘The CEO who hired me gave me that title,’ Wood explains. ‘Frankly, I wasn’t entirely sure what that was and wanted to give it back, saying I just wanted to be an IRO. He said, insightfully: No. While it doesn’t make sense for you to be a director, you have to be someone who sits at the board level. As corporate secretary you are at all the meetings and learn from that experience. At the same time, that allows the board to have whatever degree of interaction with you that they want on the IR side.’

Strategic adviser
The ability to be both a corporate communicator and a strategic adviser within the company has also been a pleasant and exciting opportunity for Robert Noorigian, vice president of investor relations at CN. ‘Simply acting as a meeting coordinator could not be a very rewarding role,’ comments Noorigian, who won the award for best IRO in the mega-cap category (CN also took the prize for best investment community meetings and the Ciri grand prix for best overall IR, mega cap). ‘Board members will go through all the analyst reports and other written material provided to them, but they also want to talk to someone who talks to shareholders and analysts all the time,’ Noorigian continues. ‘They want to know what shareholders think about the direction the company is taking. More interaction with the board is a trend that will become increasingly important going forward. I do presentations to the board and I expect more IROs will do so in the future.’

According to Janet Craig, director of investor relations at ATI Technologies (which won the Ciri grand prix for best overall IR, large cap) and winner of the award for best IRO at a large cap, the IR person the investment community wants is ‘one who knows the business, can speak with management, and is responsive, proactive and polite.’

‘You are in a constant feedback loop as long as you have open relationships with analysts and investors,’ adds Sheila McIntosh, vice president of IR at EnCana, which won awards for best financial media relations and best retail investor communications. In fact, EnCana regularly does its own formal (and anonymous) survey of the investment community. ‘We do surveys at the end of each investor day – what worked and what didn’t, and suggestions for next time,’ says McIntosh. ‘Meanwhile, when we are talking to people on the phone, we can get a sense of whether people found things like conference calls informative or not.’

Another trait among investor relations officers that is highly valued by the investment community is specific industry knowledge and company experience. As one survey respondent explains: ‘The more familiar an IRO is with the company and industry, the more advantageous it is.’

Epitomizing this breed of IRO is Kim Nelson, investor relations manager at Langley, British Columbia-based biotech AnorMED. A former AnorMED scientist who spent five years in research, Nelson attributes her good relationships with analysts and investors to being able to answer questions with credibility. ‘Biotech is a difficult industry, and much of what we talk to investors and analysts about is our clinical data and the science behind the research,’ she says. ‘Being able to articulate that is a definite benefit.’

All in all, the survey results confirm that the anatomy of a successful IRO is composed of more than just communication skills and a flair for organizing meetings. Future award winners will be taking note.

by Jeff Cossette

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

Hulus Alpay offers some wise words on roadshows and cost savings for the annual reports

Q- We’re a small-cap company with a broad shareholder base and we’re not pleased with the rising costs of mailing out our annual report. We give shareholders the option to get the annual report online, but we still mail out around 2,000 reports. Any advice on how we can cut down these costs?

A- While it is certainly true that we live in a digital era, some things never change – like producing and distributing printed copies of your annual report. Although electronic copies seem like a no-brainer to save on printing costs, industry sources claim only about 15 percent of the population opts for them. That number should increase gradually over time, however.

In the interests of stretching your annual report budget, perhaps you can save money in other ways – for example, streamlining the preparation process to avoid expensive editorial changes later in the production phase. Also, you might want to rethink the length, the use of graphics and the choice of paper stock.

Something else to consider is that the ‘summary annual report’ seems to be back in vogue. These annuals contain fewer pages than traditional reports, since many of the financial pages are left out.

Depending on the nature and size of your company, you might also think about a folder-style report in which one of the folder’s pockets holds the 10K. Lastly, you may want to investigate the cost of distributing your annual report on a CD, or perhaps making this option availabe to your shareholders.

Q- Is there a standard practice for the length of presentations in one-on-one meetings? Last time we were on the road, investors seemed to want more time for questions and less time spent on the formal presentation. I’ve cut down my CEO’s slides and suggested we provide an extra five minutes for questions, but I wonder if there is a standard length that most companies follow.

A- What you’re finding is generally correct. Investors prefer to spend time asking questions when face to face with management. The length of one-on-one meetings varies from 20 minutes for a deal roadshow to as long as an hour for a non-deal roadshow. But as a general rule of thumb, investors will allow for a longer meeting when they’re genuinely interested in getting a deeper understanding of your story or industry. I recommend determining the length of each meeting in advance of your visit, either by asking the investor or making an educated guess based on what you think they want out of the meeting.

Investors aren’t shy and will tell you if they are simply looking for an opportunity to ask questions or want to be educated through a lengthy presentation. It’s important to have a presentation that can easily be modified to suit every opportunity. It’s really as simple as having a core presentation to which you either add or subtract slides depending on the investor’s familiarity with your company.

E-mail questions to advice@thecrossbordergroup.com. Hulus Alpay is senior vice president of New York-based IR and PR firm Makovsky & Company.

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

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

Companies from Spain, the US, Russia and Israel show the effects of good IR, writes Richard J. Wolff

Times change and practices evolve, but good IR must always include the ‘five Cs’ of communication: commitment, consistency, credibility, clarity and continuity. With sound communications, a well thought-out strategic IR plan and careful targeting to the right audiences, a company can realize its full and true valuation.

A well-known 2002 study by Oxford Metrica and Ernst & Young, ‘Risks that matter’, demonstrated that a company’s IR skills are a key factor affecting analysts’ and investors’ perceptions. Indeed, poor IR is often found to be one of the most important sources of sudden and major drops in share value. Investors demand responsiveness and accessibility and they want intermediaries who are able to discuss operating issues, markets and the competitive environment fluidly.

Why is transparency important?
Transparency provides the context that validates a company’s financial projections, including details on strategy, plans, risk management and corporate governance. It is a key determinant of shareholder value, and the demand for transparency rises whenever investor confidence wanes.

Take the banking industry. Back in the mid-1990s banks were still black boxes. The common attitude of bankers toward investors was ‘Follow me and I will provide great ROE, but don’t ask me how!’ Investors rightly balked, and enlightened banks, led by top-tier US institutions, decided to change their reporting and put a spotlight on their activities. They began to provide much greater granularity in reporting their operations, and this was well received by the marketplace.

Banco Santander is a case in point. In 1996 it instituted a policy of reporting more complete information by lines of business, and by mid-1998 its stock had soared 276 percent versus 176 percent for the Ibex 35. Of course, a lot of other things were happening at the time – Santander was becoming the largest bank in Latin

America and was well on its way to becoming the largest bank in the euro area by market capitalization – but this refreshingly open and transparent reporting stance unlocked value for the bank.

Eduardo Suárez, IRO at Santander, says: ‘Commitment to financial transparency served us well during our international expansion by highlighting the excellent operational efforts that were being realized by the bank.’

One example closer to home is the MIM Corporation, now BioScrip, which in early 2000 was an unknown pharmaceutical healthcare management organization. It had produced consistent financial results and growth, but was still unknown to the market and was valued at a significant discount to peers.

‘We instituted a proactive and strategic IR program in 2001, a year that coincided with enormous tensions and downward pressure in financial markets,’ recalls Barry Posner, an executive VP at BioScrip. ‘We based our effort on peer analysis and perception studies, and then developed analyst and institutional target lists and created investor materials communicating our strategy, our results and our benchmarks to the financial community.’ The result was that BioScrip was the second best Nasdaq performer in 2001, with more than 1,800 percent appreciation in share price.

Strategy and perception’s key role
Perception and benchmark studies, as well as peer analyses, are the tools a company needs to improve its marketplace perception and to determine whether its business strategy is resonating with investors. A company should seek to have a marketplace perception that is aligned with its true operational reality.

Companies change over time, and investor recognition of transformation can be fundamental to unlocking shareholder value. If a company’s strategy calls for a substantial transformation of its operating units, the marketplace may be slow to perceive the change or may fail to detect it altogether. The task of the IRO is to help communicate the change by crafting the right messages and developing a calendar of IR activities (press releases, roadshows, conferences, trade events, etc) that convey the new operating reality and help shape a new perception in the marketplace.

Lukoil, one of the world’s largest vertically integrated oil and gas companies, is a good example of how to unite strategy and perception. Gennady Krasovsky, deputy director of strategic planning and investment analysis at Lukoil, comments on the key role played by investor relations as the company transformed itself: ‘Last year we unveiled our new strategy of transforming the perception of Lukoil as a Russian company into a perception of Lukoil as a global energy company. We intensified our investor and financial media communications with the help of a leading agency and focused on establishing Lukoil as a thought leader in the energy sector by providing strong sectoral research, which we are continuing to this day.’

Ever-increasing disclosure

Regulation FD brought about the ‘democratization’ of disclosure, requiring a level playing field among institutions, analysts and retail. Sox also increased the speed of disclosure and requires communication of all essential elements of a company’s performance. With all this regulatory attention, the distance between transparency and formal disclosure is narrowing. The regulators’ view is that better disclosure builds marketplace credibility.

One non-US company that has decided to embrace this view is Israel’s Bank Hapoalim, which recently announced a level 1 ADR program. Dr Nadine Baudot-Trajtenberg, head of IR at Bank Hapoalim, notes: ‘We have conducted a thorough benchmark study reviewing best practices to help us improve our communication with investors. We have greatly intensified our investor targeting and outreach and, wherever possible, we have underscored our strong commitment to being an international bank as well as the leading bank of Israel. Our decision to begin trading in New York reinforces our determination to be a global player and helps us to access the deepest capital market in the world.’

Gone are the days when CEOs, CFOs and IROs could sit back and say, ‘We’ll just perform as a company and the stock price will follow.’ Competition for investors’ attention is massive and global, and today’s investors have no incentive to put their money in companies that perform well but do not provide acceptable levels of transparency and communications. Like it or not, investor expectations of transparency have taken firm root over the last decade, and there is simply no other way forward in today’s capital markets.

Richard J. Wolff, chief executive officer, the Global Consulting Group, rwolff@hfgcg.com

The author would like to thank Jaime de Piniés, Anne McBride, Todd Gerlough and Daniela Viola of the Global Consulting Group for their assistance in preparing this article.

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

Foreign investment is driving the growth of IR in India. Ben Bland reports from Mumbai

markets in India have come a long way since 22 men gathered under a banyan tree in a Mumbai park to form the Native Share and Stockbrokers Association in 1875.

Today more than 7,000 companies are listed on the Bombay Stock Exchange (BSE), as it is now known, with at least another 150 companies expected to come to market this year. Together they’re expected to raise $10 bn, according to Prime Database, an agency that tracks primary listings.

The BSE’s benchmark Sensex index burst through the 10,000 barrier for the first time in early February – just one of the many signs of an equities boom largely driven by the foreign institutional investors (FIIs) that now own 30 percent of the market (see page 61, Shared value). In 2005, FIIs put more than $10 bn into Indian equities. And as they continue to invest in this market, they are forcing companies to improve their IR.

IR on the rise
It’s no coincidence that the first companies to seek out foreign investors through American depositary receipts (ADRs) or global depositary receipts (GDRs) are often the first to develop their IR programs. Take Grasim Industries, part of the Aditya Birla Group, which established its GDR program in Luxembourg in 1992. This move led Grasim’s CFO, DD Rathi, to launch the first ever non-deal roadshow by an Indian company in 1994.

Speaking at IR magazine’s debut conference in Mumbai on February 23, Rathi pointed out that the market capitalization of the BSE has risen spectacularly, from $303 bn in December 2004 to $604 bn in February 2006. This increase in equity has pushed the need for better IR, he added.

‘The rising interest of FIIs has had a significant impact on IR practice in India,’ explains Rohan Suchanti, vice president of Pressman PR. ‘Analysts from these institutions have played an important role in making companies see the value of sound investor relations.’

Ved Prakash Chaturvedi is managing director of Tata Asset Management, one of India’s biggest institutions with nearly $2 bn under management. He believes the IR mindset has been evolving over the last 15 years but, despite this, he feels there is still a lot of room for improvement, particularly ‘in the way companies go about targeting potential investors’.

At present, only 5-10 percent of mid and large-cap companies here have an IR function, according to MS Anand, deputy general manager of share registry and investor services company Karvy Computershare. He feels that IR will continue to expand in India as long as the market continues to do well, but is concerned this growth will tail off if there is a major correction or a crash. So it seems the link between good IR and valuation is still to be fully accepted by many in India.

Leading the way
Infosys Technologies is at the forefront of Indian IR, consistently commended by analysts and investors at the IR Magazine Asia Awards. NR Narayana Murthy, Infosys’ chairman and self-styled ‘chief mentor’, has argued that ‘the raison d’être of every corporate body is to ensure predictability, sustainability and profitability of revenues year after year’.

Infosys applies this philosophy directly to its IR. As S Krishnan, the company’s head of global taxation, puts it: ‘We know we have to give investors what they want.’ Krishnan says Infosys’ management is committed to open investor relations, and there is no discrimination between FIIs and domestic funds or between shareholders and non-holders.

To keep investors as up to date as possible, the company usually issues results within two weeks of the end of the quarter. ‘Infosys always prices share offers at a level that is attractive to the investor – a lower price if necessary,’ he says. ‘That was the philosophy when we listed on Nasdaq and continues to be today.’

Challenges ahead
But the IR picture in India isn’t all rosy. The country has a burgeoning financial media, and while this presents numerous opportunities for companies to convey their message, it also means there is an army of eager hacks waiting to pounce on any perceived inconsistency or poor performance.

There is no doubting the power of the financial media, according to R Ramaswamy, CFO and company secretary of MRO-TEK, a network solutions firm. His company was faced with an IR crisis after a set of results was misinterpreted by a TV station and the share price dropped by 10 percent. He explains that it is very difficult to correct erroneous media reporting and that it was vital to communicate directly with shareholders in this instance.

Rathi emphasizes that Indian companies also face significant difficulties in identifying who their non-domestic beneficial shareholders are. Only those FIIs registered with the Securities and Exchange Board of India are allowed to invest in the market directly. But non-registered individuals and institutions can invest indirectly through participatory notes (PNs), a type of derivative contract issued against the underlying security. However, the Reserve Bank of India, among others, has raised concerns about PNs because they mask shareholder identity.

Identifying your shareholders and dealing with a vociferous media are common challenges for IROs in an emerging market. But, as the discipline becomes more established in India, there are also great opportunities. ‘IR is gaining in prominence and getting bigger by the day,’ concludes Rajat Dutta, general manager of planning and corporate communication at the Great Eastern Shipping Company. ‘It’s an exciting profession to be in.’

by Ben Bland

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

Ben Bland looks ahead to two of the biggest events on the European IR calendar

It’s that time of year, folks. Dust off your suit and polish your chat-up lines for that IRO who caught your eye at last year’s gala dinner – it’s conference season once again. The UK’s IR community will gather at the Investor Relations Society’s (IRS) annual conference in London on May 4. The morning will kick off with a comprehensive look at risks and rewards as they relate to companies, investors and IROs. Another session will tackle the challenge laid down by Cadbury Schweppes chairman John Sunderland at last year’s conference, which is to improve institutional investors’ transparency and governance. Fund managers and governance and IR experts will go head to head on this issue.

IROs will have to wait until the afternoon to get their teeth into the real meat of the day, which is a discussion on the UK pension crisis and its implications for IR. After a range of parallel sessions, the day will be capped off with a dinner and awards ceremony, where delegates can network, discuss best practice and drink themselves into a stupor.

Meanwhile, in Frankfurt, Deutscher Investor Relations Verband (Dirk) will be holding sessions in English for the first time at its annual conference on May 22 and 23. The conference motto, ‘Aufbruch der Deutschland AG’, which was introduced last year, is an attempt to encapsulate the changing nature of capital markets in Germany. The English translation, ‘Germany Inc on the move’, fails to capture the double meaning of the German word Aufbruch, which implies a break-up of the old way of doing things as much as the development of new approaches.

‘The key message of the event is that new investors, new forms of financing and other developments are changing the German capital market as we know it,’ says Kay Bommer, Dirk’s general manager.

Dirk founding member Heinz-Joachim Neubürger will present the opening keynote speech. With Neubürger due to step down as CFO of Siemens in early May, he will be free to air his views on the importance of investor relations without being constrained by his corporate role.

Another highlight will be a second keynote by Axel Heitmann, CEO of Lanxess, a chemicals manufacturer spun off from Bayer. There will also be workshops looking at what German IROs can learn from their US and UK counterparts.

Best session for beginners
IRS: ‘Careers in IR: The changing dynamics’. In this session, experienced IROs tell all for the benefit of their more fresh-faced colleagues.

Dirk: ‘How can the board measure the success of investor relations?’ Ingo Alphéus of RWE presents a case study on this current topic.

Best session for senior IROs
IRS: ‘Changing influences on buy-side decision-making’ will dissect what fund managers expect from investor relations today.

Dirk: ‘Fixed income: How bonds and bondholder relations impact your equity – tools to get best value out of an active bondholder program’. With debt IR as the new buzzword, this is your chance to find out what debt holders use to assess a company’s debt story.

Best session for IROs with a conscience
IRS: ‘What comes first: SRI or CSR?’ Your chance to join the debate on how socially responsible investing and corporate social responsibility fit into investor relations.

Dirk: ‘Corporate social responsibility/ SRI investors’. This is a current topic for IR – here, two academics will explain how IR should tackle CSR and SRI.

Investors and analysts want more disclosure and less spin. They support shareholder proposals for majority voting for directors. Only 10 percent of sell-side analysts say they don’t cover small or mid-cap companies, and just 18 percent dropped small or mid-cap coverage over the last year.

These are just some of the results from the ‘non-awards’ portion of the Investor Perception Study (IPS) behind the IR Magazine US Awards 2006, which gathered opinions from 2,404 portfolio managers, analysts and retail investors. Around the world, IR magazine surveys over 5,000 individuals every year, making this study the largest of its kind today. This year in the US, Erdos & Morgan was once again commissioned to conduct the study with contact lists from research partners Thomson Financial, Ilios Partners, Barron’s and BetterInvesting.

Back to feedback
One of the first questions in the IPS was open-ended: what could IR do better? David Levine, VP of corporate advisory services at Thomson, could have predicted the response. ‘The investment community always wants more – more disclosure, more access to management, more everything,’ he says. ‘If a company has 24 product lines, they want 24 P&Ls. They want it as granular as it can be.’

This creates an inherent tension between investors and IROs, who, after all, simply don’t know or can’t disclose everything – like what the future holds. And Levine has little sympathy for respondents who complain of companies using Reg FD as an excuse not to communicate. ‘That’s disingenuous,’ he says. ‘You see portfolio managers backing a CEO into the corner at investor conferences, and if some of their questions were actually to receive an answer, someone would have to lead the CEO away in cuffs.’

404 question
2005 saw companies meeting their Sarbanes-Oxley Section 404 obligations for the first time, examining their financial reporting controls and getting them audited. Did companies do a good job of communicating about the process? Nearly 70 percent of buy-siders and 60 percent of sell-side respondents believe so. But while they got enough notice that companies were in compliance – or not, on occasion – many want more detail, and overall they believe companies are reluctant to discuss the substance of their 404 reports in public.

On the other hand, many survey respondents don’t care. As one says, ‘Companies are not doing a lot to publicize 404 reports, but I’m not sure there’s a huge demand for all the details. After all, auditing is boring.’

Small-cap struggle
There has been a constant refrain since Spitzer’s global settlement and then after Sox that small caps are lacking analyst coverage. But according to this year’s IPS, the vast majority of sell-side analysts surveyed still cover small and mid-cap stocks, although the number of stocks each individual covers has gradually increased over the past three years. Levine’s theory is that while big Wall Street firms may have less small-cap coverage now, specialist firms have picked up the slack: ‘The market for the sell side is now dominated by hedge funds, so analysts have an incentive to look for stocks with a greater upside, greater volatility and larger returns. Small and mid caps have got all that.’

Sell-side analysts have their own complaint that hasn’t been assuaged since last year’s survey focused on an issue straight from the headlines: corporate retaliation against sell-side analysts. In 2005 analysts were asked if they had ever felt shut out of a company’s communications after a downgrade; nearly 40 percent said yes. You would think that after a whole year’s scrutiny this practice would have declined – instead, it seems to have sensitized analysts. In 2006, 41 percent said yes when asked if they had felt shut out just over the past year.

Corporate advertising
The IPS is produced in association with Barron’s, so corporate advertising is an important focus. ‘The IPS has allowed us to track, over a period of many years, where investors get market information and what influences their investing activities,’ says Donald Black, VP of marketing at Barron’s. ‘The buy side, sell side and retail investors all name business/financial publications as the leading source for finding companies to follow as potential investment targets. That’s powerful data we use to convince firms to advertise in our pages.’

Results show that corporate advertising has led many portfolio managers, analysts and especially retail investors to investigate a company’s investment potential and even to invest. A huge majority of all three groups – over 85 percent – believe a powerful corporate advertising campaign can positively impact a company’s stock price.

A new question asked how respondents rate different corporate advertising messages. The buy side is most interested in management’s strategy, while the sell side’s attention focuses on new product development. The message all three groups are least interested in? A social, political or environmental one. So much for socially responsible investment.

by Neil Stewart

IR MAGAZINE US AWARDS 2006 WINNERS

Best disclosure policy
Wachovia

Best M&A investor relations
Duke Energy/Cinergy
Washington Mutual/Providian Financial

Best communications with the retail market GE

Best use of conferencing – mid to large cap Citrix Systems

Best annual report – large to mega-cap Berkshire Hathaway

Best annual report – mid to large-cap KLA-Tencor

Best annual report – small to mid-cap Gentex
Leggett & Platt

Best corporate advertising to the investment community Intel

Best financial media relations – mid to large-cap KLA-Tencor

Best senior management communications – mid to large-cap The E.W. Scripps Company

Best IR web site Cisco Systems
eBay

Best use of technology
Hartford Financial Services

Best IR for an IPO
Diamond Foods

Most improved investor relations
McDonald's

Best corporate governance
McGraw-Hill

Best IR by a continental European company in the US market
Nokia

Best IR by an Asia-Pacific company in the US market
TSMC

Best IR by a chairman, president or CEO Jeffrey Immelt, GE

Best investor relations officer – large to mega-cap
Joe Binz and Colleen Healy, Microsoft

Best investor relations officer – mid to large-cap
Tom Katzenmeyer and Amie Preston, Limited Brands

Best investor relations officer – small to mid-cap
Carol DiRaimo, Applebee's

Grand prix for best overall investor relations – mega-cap
GE

Grand prix for best overall investor relations – large-cap
Aflac

Grand prix for best overall investor relations – mid-cap
Citrix Systems

Grand prix for best overall investor relations – small-cap
Applebee's

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

There’s only one true test of IR, and it’s not stock price performance, investor decisions or sell-side ratings – it’s what analysts and investors think of a company’s IR program outside of stock performance. This year, over 2,400 fund managers, analysts and retail investors chose the best in IR among US companies on this basis. Their comments are contained in the IR magazine-commissioned Investor Perception Study, US 2006.

Some of 2006’s top companies, including GE, Aflac and Limited Brands, are no strangers to winning accolades from the US investment community for their IR efforts. These repeat winners are the benchmarks for investor communications among their peers. Other IR practitioners are new to the spotlight and stood out because of their extraordinary efforts over the last year.

Carol DiRaimo is a three-time winner of best IRO in the small to mid cap category who somehow manages to give the Street the impression she’s on call 24/7. ‘I am anxiously awaiting developments in human cloning,’ jokes DiRaimo, VP of IR at Kansas-based Applebee’s International, which also won the grand prix for best overall IR in the small cap category for the third year running. ‘Two of me would be better than one. Until that time, I will continue to rely on my Blackberry.’

As in past years, fund managers and analysts applauded DiRaimo’s timely and thorough responses. Not surprisingly, DiRaimo has a policy of responding to messages before retiring for the night and often works early morning hours before heading to the office.

‘I’ve learned that sell-side analysts usually have a pattern of when they publish their research,’ she says. ‘Some do it before midnight, but others publish between 4 am and 7 am.’

Limited Brands’ Tom Katzenmeyer and Amie Preston also stood out for their responsiveness among analysts and fund managers. ‘Both Tom and Amie always answer our queries, no matter how lame!’ says one analyst. ‘They are willing to hear our investment theses and comments. They don’t play those you-downgraded-our-stock-so-wewon’t- call-you-back-so-fast games.’

Katzenmeyer and Preston won best IRO in the mid to large cap category. This is the fourth year in a row that this team has walked away with these awards.

Also applauded for its responsiveness was Citrix Systems’ IR team, which won the grand prix for best overall IR in the mid-cap category. ‘Citrix is very responsive and provides good, detailed information,’ says one respondent. This is a first-time win for the Florida-based company.

City swings
Along with timely responses, the US investment community clearly appreciates a visit. Two of 2006’s grand prix winners were applauded by fund managers and analysts for the quality and number of meetings they hold.

‘We do over 250 investor meetings in a year and about six big analyst meetings,’ says Dan Janki, VP of investor communications at GE, which won the grand prix for best overall IR in the mega cap category. ‘We do city swings in and outside the US where we spend the morning with specific institutions and do a retail focus. Then, in the afternoon, we spend time with executives and customers in that city.’

To pull off this level of engagement, Janki needs a very cooperative management team. In fact, his CEO, Jeffrey Immelt, was praised as the most thorough and fully involved CEO by one analyst and took home the award for best IR by a chairman, president or CEO in 2006. ‘Immelt stands out because of his access to investors and willingness to talk openly and candidly about the company,’ says Janki. ‘We tie that into our financial reporting to ensure investors have the information they need.’

New York-based insurance giant Aflac’s IR team also prioritizes face-to-face meetings. ‘The cornerstone of our communications is the annual analyst meeting that we conduct every spring,’ says Ken Janke, senior VP of IR at Aflac, which won the grand prix in the large cap category.

The company gets about 100 attendees from the buy and sell sides when it hosts the event in New York and around 80 when it goes off-site to Atlanta. ‘We have a meeting on our business that runs from 8 am to 4 pm, and we joke about drinking from a fire hose in terms of the amount of information.’

Going the extra mile
Two weeks after its analyst meeting, Aflac’s IR team publishes a transcript of the event – this runs to about 90 pages. ‘It’s a really great tool,’ notes Janke. ‘Investors find it very convenient for getting an in-depth understanding of the company.’

Institutional investors and sell-side analysts also took note of McDonald’s over the last year and voted the company as having the most improved IR in the US for 2006. ‘Mary Kay Shaw [VP of IR] has made a strong effort to further the transparency of the company’s strategies and increase access to management,’ says one analyst.

‘We took management around much more than in the past and IR made phone calls proactively rather than just returning calls,’ says Shaw. ‘I was very proactive in meeting shareholders to introduce new management and communicate our thoughts on activist shareholder proposals.’

McDonald’s has been the target of activist campaigns related to genetic engineering of food and has been upfront in addressing this with shareholders. ‘McDonald’s IR effort has steered management to address current and prospective activist issues with thorough and objective analysis,’ says one investor.

Above the rest
Another notable US winner this year is McGraw-Hill, which picked up the award for best corporate governance. ‘For a media company – and a family-run business at that – McGraw-Hill has more concern and respect for shareholder value than its peers,’ says one analyst. ‘It’s the most transparent media company and has a fairly impressive and independent board.’

‘Our senior management has long known the importance of having an independent board, and McGraw-Hill has had a majority of independent directors for decades,’ notes Steven Weiss, VP of corporate communications for the publisher. The stock is widely held by McGraw family members, but they do not hold a separate class of shares.

In July 2005, the company’s board eliminated its poison pill provision and approved a new shareholder rights plan. ‘The policy states that if the board adopts a new rights plan without first obtaining shareholder approval, the new plan will expire within one year of adoption unless ratified by shareholders,’ says Weiss. ‘The new policy is consistent with good corporate governance practices and provides the board with the ability to act in the best interests of our shareholders.’

Straight talk
It’s the timeliness and intelligibility of Wachovia’s financial statements that captured the attention of analysts and fund managers this year – the North Carolina-based bank won best disclosure policy in 2006. Wachovia’s IRO says the bank’s current policy is the culmination of six years of hard work.

‘The policy has evolved since the end of 2000 and we have been working steadily since,’ says Alice Lehman, senior VP of IR at Wachovia. ‘We developed a formal plan for the whole company and then worked to make the information more userfriendly, complete and transparent.’

Lehman has been upfront in telling the investment community that one of her IR goals is to improve the disclosure of the bank’s financials, and she has received positive feedback. ‘We have heard time and time again that this is one of the best disclosures on the Street,’ she says.

This sentiment extends to the majority of IR magazine’s US winners, who are consistently complimented for the transparency and depth of information they provide to portfolio managers and analysts. These are indeed the models of best practice for IR according to the profession’s most important target audiences.

Another commonality among these award winners is the internal recognition IR receives, particularly from senior management. GE, Aflac, Applebee’s and Limited Brands’ IR teams, for instance, all have tremendous support from top management that recognizes the value of IR.

So, while the only real test for IR is what the investment community thinks, the only real chance for IR to shine is if it’s valued by management – and management’s view of IR is usually fairly easy to discern. For instance, a sure sign of approval is a trip to Tiffany’s with your CEO the morning after the IR Magazine US Awards. That’s what one of this year’s top winners reportedly received. But as shopping trips are covered by full disclosure requirements, she can’t disclose what was purchased. We’ll just have to watch for a particularly bejeweled IRO at 2007’s big event.

by Adrienne Baker

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

Adrienne Baker looks at the investor relations behind the biggest M&A deals going

Some IROs really take responsiveness to heart. Suffering from sinus troubles and in the midst of preparing to jet off to Munich the next morning, Kiran Bhojani still takes time to respond to questions about how he’s handling the IR behind one of the biggest deals around.

‘You make sure you know everything about the business and strategy,’ says the head of IR for Düsseldorf-based energy giant E.ON. ‘I was involved right from the start, so I know every aspect of the transaction including the legal and regulatory details.’

On February 21, E.ON launched a €29.1 bn ($34.72 bn) all-cash bid for Spanish utility Endesa. The offer topped a previous bid by Spain’s Gas Natural by about 30 percent. ‘We immediately went on a roadshow to Frankfurt, Paris, London; we hit all the major markets in Europe and the US to speak to our shareholders,’ reports Bhojani. ‘They said, Thanks for coming by and explaining your strategy. They really appreciated it. Don’t wait to go on the road.’

The company now awaits regulatory approval of the deal from Spain’s National Energy Commission, which was granted wider powers in the wake of E.ON’s bid. With such a straightforward all-cash offer, the only real concern raised by shareholders during the roadshow was whether the Spanish government would block the deal, says Bhojani. ‘There are a lot of things working in the direction we’d like to see,’ he adds. The European Commission, for instance, is reviewing the validity of new powers given to Spain’s energy regulator.

While IR’s job is not to meddle in political grandstanding, such spectacles can be hard to avoid when it comes to large M&A deals in Europe, where national government agendas often clash with broader European market concerns. But, as Bhojani says: ‘We stay out of politics – we are business people.’

One step ahead
As ‘business people’, IR professionals need to stay on top of the strategy and keep investors and analysts continuously informed. ‘It’s very simple and very complex,’ says Martine Hue, who heads IR for Luxembourg-based steelmaker Arcelor. ‘We have to inform our investors and repeat endlessly what we have achieved in four years in terms of profitability and growth, which has all led to free cash flow that has to go to investors in different forms like dividends and buybacks.’

Hue sits on the other side of one of the most closely watched deals today. She’s heading the IR strategy behind Arcelor’s defense of a €19.9 bn hostile bid by Mittal Steel. It’s been a series of group and one-on-one meetings for Hue and her management team and, on this late March night, they’re hosting a gala event for 1,000 retail shareholders where CEO Guy Dolle will tell the story yet again.

But telling the equity story – repeatedly, and in a very short period – is nothing new for experienced IROs. What can leave one a little breathless is the incessant demand for information from hedge funds and arbitrageurs.

In the Arcelor-Mittal fight, there are no shares available on the Mittal side, so arbs are not a concern – but hedge funds are watching like hawks. ‘You have the hedge funds that are waiting for an improvement on the offer made by Mittal, and if that should happen, you have two categories of hedge funds: those that will stay and those that will bring their shares to Mittal,’ says Hue. ‘It depends on the information you get from both sides.’

‘Our deal was a full stock deal, so there were people taking positions in one or the other stock and the phones were ringing fairly regularly,’ reports Julie Dill, VP of investor and shareholder relations at Charlotte, North Carolina-based Duke Energy, which is acquiring Cincinnati-based Cinergy. ‘The hedge funds and the arbs were really just pushing to try to see if we would break and give some added insight,’ she adds. Fortunately, says Dill, her team was well trained ‘to stay on message’.

Shark watch
In big transactions, hedge funds are clearly a force to be reckoned with. ‘You have to talk to them and meet them, and make specific efforts to adapt information to those people who sometimes won’t vote or probably won’t be shareholders at the time of the formal offer,’ says Matthieu Simon-Blavier of Georgeson Shareholder Communications.

Based in Paris, Simon-Blavier is currently working on the defense side of the Arcelor-Mittal bid as well as representing other big names like Gas Natural and Suez. He says the key with hedge funds is finding out who they are and why they have taken a stake in the company.

Following the Deutsche Bourse coup last year, where hedge funds blocked the exchange’s bid for the London Stock Exchange and forced out its top two executives, it’s important to be aware that some hedge funds will buy up a chunk of shares and take an activist position. ‘Then you have others that are not voting at all,’ notes Simon-Blavier. The key is to distinguish one from the other.

Proxy advisors can often provide a link between IR and hedge funds. Once hired, Simon-Blavier’s firm receives calls from hedge funds asking about a client company’s strategy. ‘We contact them, but at the same time, some are calling us knowing we are advising the company,’ he says. ‘They may want to meet with the company or receive their latest information.’

The ‘X’ factor
For veteran M&A specialists, there are few surprises when it comes to these deals. Simon-Blavier says the only twist in the Arcelor-Mittal fight is the media’s behavior. ‘All the focus has been on Arcelor, but no one knows much about the Mittal side because we don’t have a history in terms of governance,’ he says. Specifically, the fact that the Mittal family owns more than 80 percent of the voting rights should be a concern to potential holders of the company, he adds.

The media also played an unexpected role in Washington Mutual’s acquisition of Providian Financial last summer, when a major shareholder went public with its opposition to the bid. On August 1, Putnam Investments, one of Providian’s major holders, put out a release saying Washington Mutual’s bid was too low. ‘When Putnam put out that press release, everything moved up a notch as that was almost unprecedented,’ Providian IRO Jack Carsky told IR magazine in September.

The media jumped on the story following Putnam’s release, criticizing Institutional Shareholder Services’ (ISS) role in the deal and suggesting that shareholders were giving up their right to an independent assessment of the bid by accepting Washington Mutual’s offer. ‘We thought there may be some shareholders not satisfied with the price offered, but we didn’t think they would be so vocal and visible,’ explains Alan Magleby, senior vice president of IR at Washington Mutual.

While heading IR at JPMorgan, Magleby never experienced such action by a major shareholder. ‘It seemed there was a piling effect from a media perspective, but we had worked closely with ISS and ratings agencies and they were comfortable that the price was fair,’ he says. In the end, the bid went through with 83 percent of total voting shares approving the deal.

The majority of IROs won’t experience the intensity of a high-profile M&A transaction that comes complete with front-page news stories, political strife, regulatory hurdles and swarms of sharks eagerly waiting to make a fast buck off any tidbit of information. Still, the same principles apply for small deals in terms of IR strategy.

‘You need to show the market that you are on top of the defense – or offense – situation from an IR point of view,’ advises Mark Simms, managing director of London-based independent capital markets intelligence specialists Capital Precision. ‘Then you become a valuable commodity.’

In the loop
A good way for investor relations people to shine is by reaching out to investors and analysts immediately and keeping them closely informed the whole way through. ‘Sometimes the best learning experience is a baptism of fire,’ comments Richard Dietz, SVP of IR for AT&T, which has a bid out to buy smaller telecom company BellSouth. ‘But we are very disciplined in preparing the IR activity around these kinds of deals.’

In announcing the BellSouth offer, AT&T had an analyst call with a variety of experts explaining the deal at length, including how it would impact the company’s guidance. ‘We understand how important it is for analysts to understand what we are trying to do and why,’ adds Dietz.

‘Investors want to look in the eyes of the CEO, hear them explain the strategy and see them be open and transparent about when they made the decision and how,’ says Bhojani. ‘We have to explain thoroughly the advantages of Arcelor and why it’s important to stay an Arcelor shareholder,’ adds Hue.

At the end of the day, as Hue points out, investor relations ‘doesn’t drive the bus’. But an IRO’s reputation certainly depends on how well and quickly stakeholders are informed throughout the ride, which comes back to the crucial issue of responsiveness. When taken to heart, it forms the backbone of exceptional IR, in any situation.

by Adrienne Baker

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

Ben Bland reports on how to plan the ultimate European roadshow, one city at a time

For youthful English aristocrats in the 18th century, the grand tour was an opportunity to sample the many delights of Europe. But while these prototype backpackers took months or sometimes even years traveling at their leisure, foreign issuers lining up at a European roadshow are probably looking at a week or two at most. Their trips are likely to be less enjoyable than the drinking and philandering popular with the young bucks, but a lot more rewarding – financially speaking, at least.

A well-planned and executed European roadshow presents the chance to meet with a range of diverse but important investors in a reasonably short space of time. Management’s itinerary will depend on the nature of the company, its current investor base and its future targeting plans.

But it would be hard (or foolhardy) to miss out London or Frankfurt. ‘You just have to do London and Frankfurt because there’s so much there,’ says Gunnar Miller, head of European equity research at Allianz Global Investors in Frankfurt. ‘After that you could probably do a rotating schedule of the other important but not as time-efficient places.’ With this in mind, what follows is one plan you might consider for organizing your European roadshow, with experts’ opinions on what each money center offers.

Days one and two: London
Where else to start your journey than Europe’s biggest financial center, with local institutions collectively managing $2.38 tn in equities under management? ‘You get great exposure among the financial community here,’ says Neil Wesley, a fund manager with London-based Morley Fund Management.

Logistically speaking, London is also something of an international transport hub. However, that doesn’t mean that getting around is quick or easy. Whether you arrive at Heathrow or on one of the new all-business-class airlines at Stansted Airport, you’re bound to spend at least 45 minutes traveling into central London.

But transport is likely to be the least of your worries as you try to whittle down which of London’s 2,000 analysts and 3,000 portfolio managers you would like to meet. One clear divide is between the traditional, long-only fund managers, most of whom are based in the City, and the hedge fund community, which is based around Mayfair in the West End.

Hedge funds are growing faster in London than anywhere else in the world and now account for some $225 bn of assets under management (roughly 10 percent of the total equities under management in the capital), according to International Financial Services London.

The days of companies dreading hedge fund interest are now long gone, and most accept that hedge fund managers are little different from other potential investors. ‘Many of the more reputable hedge funds claim they have longer-term horizons than the media gives them credit for,’Wesley comments.

As for traditional buy-side institutions such as Morley, Wesley says larger caps with more liquidity capture the most fund manager attention. But that doesn’t mean that mid caps have nothing to gain here. ‘The mid-cap sector, which is not as well researched, can be interesting, and there might be a few gems you can look to unearth,’Wesley adds.

Day three: Edinburgh
After two days in London, fly up to Edinburgh for a day to escape the bustle and get access to an investment community that is often unfairly overlooked. With $295 bn under management, Edinburgh’s buy side holds more in equities than Zurich institutions ($231 bn) and slightly less than Frankfurt’s buy side ($355 bn).

According to Andrew Milligan, head of global strategy at Standard Life Investments, Edinburgh has a large enough asset management community to attract visiting companies. Because of its distance from London, however, the Scottish capital also has ‘a certain independence and detachment and an ability to take the long-term view,’ he adds.

The fund management universe in Edinburgh is also quite diverse given the city’s size. ‘There are a number of operations like ourselves, Scottish Widows and Axa that are related to large insurance companies, even though we’re all active managers with third-party funds,’ explains Milligan. ‘Then there is a group of smaller operations who are usually very externally orientated, such as Martin Currie and Baillie Gifford. Lastly, there are some more high-performance funds and some investment trusts.’

For those weary of London’s traffic and public transport, Edinburgh is also much easier to get around, with most of the key institutions situated in the relatively compact city center.

Days four and five: Paris
You can now get from central London to the heart of Paris by train in less than three hours, saving you the hassle of airport check-ins and allowing some much-needed time to edit your presentations or catch up on sleep. You’ll most likely need the latter, because the analysts and investors in Paris will expect a more formal approach than their Anglo-Saxon counterparts.

‘Maybe in the UK or the US, the equity story and future expectations are more important,’ says Philippe Risacher, Paris-based European sales director of CapitalBridge, a market intelligence firm. ‘But people are more formal in France. You need to be very clear and precise; figures are important.’

The sell side plays less of a role in Paris so it’s easier to target the buy side directly, according to Risacher. ‘The buyside market is bigger than the sell side,’ he says. ‘On the sell side there are no more than five or six main French players, including Société Générale Securities Services, BNP Paribas and Exane. But on the buy side, there’s Credit Agricole, BNP Paribas, Société Générale Asset Management and Aviva, to name but a few.’

As in London, traffic is a real problem, especially during rush hour. You might find it more convenient to take the Métro. With good planning, you should be able to complete all your main meetings in two days.

Days six and seven: Frankfurt
The best way to plan your roadshow is to measure the potential footprint of each visit in terms of the amount of assets under management you can cover in a given period of time. Miller explains the formula: ‘Zurich’s a pretty small town, which means you can go there for a oneday trip and walk from one place to the other. It’s similar in Frankfurt, but your footprint in Frankfurt in terms of how much assets under management you can visit in one fell swoop is much bigger.’

Allianz positions itself as a truly global asset manager with a focus on fundamentals and no predetermined sector or geographic concentrations. Miller feels that many companies could do more to help investors understand their story. Too often, he claims, issuers rely on a ‘stylized meeting cycle’ of uninspiring CFO and IRO presentations following quarterly reporting.

‘I’d much prefer management to come around and talk about their business off the quarter,’ he comments. ‘The market digests quarterly results in minutes and hours. You don’t have to come round and read us a report that we’ve already read and show us numbers that we’ve already seen.’

Rather than trying to work out the nebulous investment ‘style’ of each city or institution, companies would perhaps be better off spending their time honing their presentation technique. ‘I have a meeting with a large-cap company today and I was a little hard pressed to put together a question list because they’ve just done the numbers,’ says Miller. ‘Most of the number-based questions have already been asked and they haven’t been in the office since they reported, so they don’t have any new input. Increasingly I’m encouraging people to suggest management think outside of the box more.’

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

Editor's note: The Bank of New York sponsored this special feature

The stock transfer agency market is continuing to witness significant change. Fewer players, the introduction of new technology and evolving regulation present considerable challenges and opportunities, not only for those involved in the transfer agency business but also for public corporations that rely on outside agents to maintain shareowner records and perform services quite visible to senior management.

Market consolidation
During the past several years, the transfer market has undergone some consolidation as smaller agents have exited the business. Competition has generally been categorized in two tiers: large agents and smaller agents with a local presence. Over the past 18 months, however, the landscape has changed considerably, led by the acquisition of one large agent and the recently announced exit of another small agent. Prior to this contraction, agents were trying to purchase market share by driving prices downward. In the face of price compression, agents position themselves based on relationship, technology, service quality and compliance postures. As transfer agents work to differentiate themselves from each other, issuers benefit from higher standards and customized solutions.

For corporations looking to select a transfer agent, the picture is particularly challenging. Jack Sunday, CEO of independent research house Group Five, explains: ‘This is a very mature market and there is healthy competition between the top three or four providers.’ And the situation is only likely to continue as new requirements weed out the weaker providers. ‘I strongly suspect we will see further consolidation leading to fewer choices for clients,’ Sunday says. ‘A lot of the smaller players will move out of the market or be taken over.’

Ranked number one
Sunday points out that the results of the 2005 shareowner services corporate satisfaction study support his point. The Bank of New York topped the list in the transfer agent industry for the fourth consecutive year, for agents managing more than 10 mn shareowner accounts. Sunday explains that while there has always been some similarity in the services provided, the results of the past few years show that the industry as a whole has improved the quality and breadth of its services. Over 1,450 US corporations participated in the survey, representing about