Introducing “investor relations” to corporate strategy using commercial imperative to bridge a governance gap January 2009 Rob Stangroom www.africaniscool.com

Definition of IR & background to AIC “ Investor relations is a strategic management responsibility that integrates finance, communication, marketing and securities law compliance to enable the most effective two-way communication between a company, the financial community, and other constituencies, which ultimately contributes to a company's securities achieving fair valuation.” (Adopted by the NIRI Board of Directors, March 2003.) IR ≠ PR

History of investor relations in USA Post WWII & depression = savings Interest & inflation were low Great need for capital in USA ’ 52 4.5m families owned shares 4.2% of population ‘ 65 20.1m families owned shares 15% of population Shareholders targeted for business Shareholder activists resulted PR abused – analysts “hyped” shares Managements & boards inexperienced SEC promoted retail investors GE & AMA & NIRI (4300 members) “ To become recognised and active as a group working in the long-term interests of the investor, of broad share ownership and of better relationships between companies and potential investors.”

Post WWII & depression = savings

Interest & inflation were low

Great need for capital in USA

’ 52 4.5m families owned shares 4.2% of population

‘ 65 20.1m families owned shares 15% of population

Shareholders targeted for business

Shareholder activists resulted

PR abused – analysts “hyped” shares

Managements & boards inexperienced

SEC promoted retail investors

GE & AMA & NIRI (4300 members)

IR function in the First world Engage investors directly Be an expert on the company Carry out the valuation and financial modelling Know all laws and regulations Be a communicator Analyse shareholders and market perceptions Attend conferences Collect salary of US$150,000 to US$250,000 per annum Africa is only just emerging onto the IR scene & technology means it can jump right into the 21 st century

Engage investors directly

Be an expert on the company

Carry out the valuation and financial modelling

Know all laws and regulations

Be a communicator

Analyse shareholders and market perceptions

Attend conferences

Collect salary of US$150,000 to US$250,000 per annum

Where technology is taking IR… Web 1.0 = document web Web 2.0 = people web Web 3.0 = database web Source

IR’s future – costs low, impact high 2.4m estimate = 8% of population Source Why isn’t Africa there yet?

The corporate IR website: a beast Marketing doesn’t understand finance Internal PR doesn’t understand marketing External PR company never in the loop Finance doesn’t understand IT Co sec. can manage shareholder lists but not shareholders No-one understands HR Legal department : everything is a legal case IT guy should be in charge but is TOO BUSY Governance codes + regulations + technology agenda

Marketing doesn’t understand finance

Internal PR doesn’t understand marketing

External PR company never in the loop

Finance doesn’t understand IT

Co sec. can manage shareholder lists but not shareholders

No-one understands HR

Legal department : everything is a legal case

IT guy should be in charge but is TOO BUSY

The reality of doing business… Are finding competition levels increasing? Are trying to re-build equity values? Are looking to protect market share? Are looking regional & need to show credibility? Wish to stand above their peers? Will be re-capitalising – from any source? How many companies:-

Are finding competition levels increasing?

Are trying to re-build equity values?

Are looking to protect market share?

Are looking regional & need to show credibility?

Wish to stand above their peers?

Will be re-capitalising – from any source?

Desired position in the investment community Actively participate in investment community identify, influence them & receive feedback achieves MANY objectives Your company website: a prime communications tool Data, strategy, interaction

Desired position in the investment community

“ African Is Cool” Smallest client US$3m mkt cap. Largest + US$500m Commercial benefits > cost of implementation Managed investor relations website “SaaS” How it works Filling a unique market gap: the basics No conflict with existing services e.g. PR firms Holistic outsourced online software as a service

Smallest client US$3m mkt cap. Largest + US$500m

Commercial benefits > cost of implementation

Managed investor relations website “SaaS”

How it works

Filling a unique market gap: the basics

No conflict with existing services e.g. PR firms

Our clients 14 clients in 4 countries: Botswana, Zambia, Malawi & Zimbabwe National Investment Trust Malawi nitlmalawi.com Malawi Property Investment Company malawiproperty.com IPO IR Celsys celsys.co.zw Econet Zimbabwe econet.co.zw Imara Holdings Botswana imaraholdings.com Telekom Networks Malawi tnminvestor.com IPO IR Copperbelt Energy Corporation cecinvestor.com African Sun Group africansuninvestor.com Kingdom Meikles kmal.co.zw + 2 commercial banks tba + 1 property + 1 agric company tba Market capitalisation of clients + / - US$1bn +/- 70,000 shareholders served

14 clients in 4 countries: Botswana, Zambia, Malawi & Zimbabwe

National Investment Trust Malawi nitlmalawi.com

Malawi Property Investment Company malawiproperty.com IPO IR

Celsys celsys.co.zw

Econet Zimbabwe econet.co.zw

Imara Holdings Botswana imaraholdings.com

Telekom Networks Malawi tnminvestor.com IPO IR

Copperbelt Energy Corporation cecinvestor.com

African Sun Group africansuninvestor.com

Kingdom Meikles kmal.co.zw

+ 2 commercial banks tba

+ 1 property + 1 agric company tba

Investorpass ™ : IR software Vendor B2i Technologies: Texas USA + 300 clients Appends to existing websites seamlessly An online CRM and CMS Web-mail for each investor Self populating / managed investor contacts Full audit trail of investor activity Strong analytical and interrogation reports Sarbanes Oxley compliant – i.e. secure

Vendor B2i Technologies: Texas USA + 300 clients

Appends to existing websites seamlessly

An online CRM and CMS

Web-mail for each investor

Self populating / managed investor contacts

Full audit trail of investor activity

Strong analytical and interrogation reports

Sarbanes Oxley compliant – i.e. secure

Comprehensive data – “educated investment decisions” Timely data – “material data within 24 hours” Interactivity – “ability to communicate & receive feedback” Brief overview of a comprehensive IR website Other key issues Updating website Reaching an audience – existing and potential investors Identifying the audience individually The make up of your IR website

Comprehensive data – “educated investment decisions”

Timely data – “material data within 24 hours”

Interactivity – “ability to communicate & receive feedback”

Brief overview of a comprehensive IR website

Other key issues

Updating website

Reaching an audience – existing and potential investors

Identifying the audience individually

Using your website…… A retail shareholder strategy:- Objective:- Build shareholder loyalty Build brand Improve corporate “reputation” Automated contacts collection & management Build brand, cross sell keep costs low Use shareholder education as a tool Identify diaspora investors

A retail shareholder strategy:-

Objective:-

Build shareholder loyalty

Build brand

Improve corporate “reputation”

Automated contacts collection & management

Build brand, cross sell keep costs low

Use shareholder education as a tool

Identify diaspora investors

To respond to or influence the media Emails are free – press releases are not Pre-empt press releases Respond to the media / press directly Crisis communications Newspaper and PR firm placement costs can be avoided if you have a direct communications channel with the broader media Using your website……

To respond to or influence the media

Emails are free – press releases are not

Pre-empt press releases

Respond to the media / press directly

Crisis communications

Why communicate online? Legal & regulatory requirements Easy access to a global community It makes money, brand & reputation growth is cheap Increases valuation:- 79% of analysts include poor communication as a reason to downgrade stock valuations 88% of analysts said poor disclosure also dropped ratings Shareholders purchased shares based on 2 assumptions:- There is a market for them At a reasonable price Corporate governance guidelines

Legal & regulatory requirements

Easy access to a global community

It makes money, brand & reputation growth is cheap

Increases valuation:-

79% of analysts include poor communication as a reason to downgrade stock valuations

88% of analysts said poor disclosure also dropped ratings

Shareholders purchased shares based on 2 assumptions:-

There is a market for them

At a reasonable price

Your annual report…. Annual reports: prime tool for analysts Can be used to identify investors Africanfinancials.com Traffic analysis Costs a lot: must be delivered in hardcopy Should be scaled down to Abridged – 6 pages Regulatory - IFRS Online - Sample iPaper annual report Af.com Only 29% of all African annual reports are online 27% for Ghana Annual reports

Annual reports: prime tool for analysts

Can be used to identify investors

Africanfinancials.com

Traffic analysis

Costs a lot: must be delivered in hardcopy

Should be scaled down to

Abridged – 6 pages

Regulatory - IFRS

Online - Sample iPaper annual report

Barriers to online communications fallen away High commercial ROI to online communications Fulfill core governance practices in one solution Take an active interest in IR Early starters will benefit the most Objective is to ensure equities can achieve “fair valuation” “ Good Governance” principles are not “implemented” they result from actions by management to communicate responsibly with the investment community Our message

Barriers to online communications fallen away

High commercial ROI to online communications

Fulfill core governance practices in one solution

Take an active interest in IR

Early starters will benefit the most

Objective is to ensure equities can achieve “fair valuation”

“ Good Governance” principles are not “implemented” they result from actions by management to communicate responsibly with the investment community

“ Questions” & “ Thank you”

“ Questions”

&

“ Thank you”