OTC Markets Group and Compass Investor Relations share what investors expect from companies in today's highly-competitive capital markets. Whether your company is newly-listed or is at a more mature stage with a wider shareholder base, this webinar provides ideas to improve your corporate governance and attract new capital and wider ownership. You can view the webinar here: https://youtu.be/VupeEGfDbLk

1. Corporate Governance Best
Practices and Communication
Strategies Webinar
05/25/2017

2. ABOUT COMPASS INVESTOR RELATIONS
• Combined 40+ years’ of investor relations experience
• 500 Client Years
• 2,000 Investor/Banker/Analyst meetings
• Counsel to over a dozen IPOs
• Mark Collinson, Partner
• 18 years experience serving as a banker and investor in the U.S. and Europe
• Principal, private equity funds, Bankers Trust, New York, Los Angeles, London
• MBA, University of Chicago, Economics degree, London School of Economics
• Elaine Ketchmere, Partner
• 20+ years of experience in the finance and communications industries
• Crafts compelling investment messages across all lines of shareholder
communication
• Former research analyst and CFA charter holder
• MBA from Loyola Marymount University and BA in business from CSU Fullerton
2

3. 3
• Improved access to capital at lower cost
• Improved trading volumes/liquidity
• Wider share ownership - larger funds, foreign
interest
• Improved standing with all stakeholders
SUPERIOR CORPORATE GOVERNANCE AND
DISCLOSURE PRACTICES

4. 4
• Study 1: Best governance vs worst: ROI +18.7%
pa, ROE +23.8% pa
• Study 2: Strong shareholder rights vs. weak: US
+8.5% pa EU +3%
• Study 3: efforts to improve governance produce
excess returns
SUPERIOR CORPORATE GOVERNANCE AND
DISCLOSURE PRACTICES

5. FOLLOW THE 4C’S OF CORPORATE
COMMUNICATION
• Clarity
• Consistency
• Compliance
• Credibility
5

6. FOLLOW THE 4C’S OF CORPORATE
COMMUNICATION
• Put yourself in the investor’s shoes
• What are their concerns?
• How do they view your governance practices?
• Let your investors guide your corporate
governance practices
6

7. KEYS TO SUPERIOR CORPORATE GOVERNANCE
1. Make your financial reporting the best among
your peers
2. Have a great board of directors
3. Show you can be trusted with shareholders’
money
4. Talk and listen to investors
5. Keep the best company you can
7

8. 1. MAKE YOUR FINANCIAL REPORTING THE
BEST AMONG YOUR PEERS
• A track record of on-time reporting
• Be prepared to discuss material weaknesses in
financial reporting
• Superior transparency and justifications in areas
key to investors e.g.:
• Use of capital
• Current capital structure
• Executive/Board compensation structures
• Related party transactions
• Corporate strategy
8

9. 1. MAKE YOUR FINANCIAL REPORTING THE
BEST AMONG YOUR PEERS
1.1 Find a way to always report on time
• Establish a solid internal accounting team, build up + add
high quality CFO
• Small, affordable auditor is acceptable for very early stage
companies. Upgrade later
• Especially important when approaching SOX404b threshold
1.2 Make using the 4C’s a habit
1.3 Establish your own best practices
• Disclosure policy
• Business Conduct and Code of Ethics
9

10. KEYS TO ON-TIME REPORTING:
PLANNING AND COORDINATION
10
Internal
Audit
CFO
Review
Auditor
Draft A/Cs
IR Review
PR &
Script
Management
Messaging
Auditor
sign-off
Legal
counsel
sign-off
Release to
public
Disclosure
committee
sign-off
Legal
counsel
Form 10
draft
SEC Filing
Quarter
End
Filing
date

11. 2. HAVE A GREAT BOARD OF DIRECTORS
• Quality, not quantity
• Independent members, preferably in the majority
• Members with justifiable claims to the right
expertise
• Strong codes of ethics
• Not set up to entrench management or
themselves
• Records of regular meetings with and without
management
11

12. 2. HAVE A GREAT BOARD OF DIRECTORS
2.1 Develop solid charter, code of ethics and
committee charters
2.2 Start with a financial expert, audit committee
2.3 Attracting directors to a microcap company can
be challenging and expensive
• Use your network to obtain credible board
recommendations
• Consider equity compensation
2.3 Think strategically
• Find directors who have expertise or connections in
areas that can help your business grow
12

13. 3. SHOW YOU CAN BE TRUSTED WITH
SHAREHOLDERS’ MONEY
• Erase concerns that management:
• Is more interested in a larger, less risky business
than shareholder returns
• Wants to take value from shareholders and keep
it for themselves
• Is uninterested in minority shareholders
• Holds on to free cash for too long
13

14. 3. SHOW YOU CAN BE TRUSTED WITH
SHAREHOLDERS’ MONEY
• Demonstrate consistently that:
• The company is competing and winning in the
right addressable markets
• Management are players, not the umpires
• The company is always for sale
• The board has been involved in the tough
decisions
14

15. 4. COMMUNICATE WITH INVESTORS
• Communication defined:
• An act or instance of transmitting information
• A process by which information is exchanged
• To establish a rapport, which in turn means:
• A friendly, harmonious relationship; especially a
relationship characterized by agreement, mutual
understanding, or empathy that makes communication
possible or easy
Now you know what they want to hear about
so……tell them
15

16. 4. COMMUNICATE WITH INVESTORS
• Answer questions truthfully and directly
• Use the 4C’s
• Know your audience
• Set clear milestones and meet them
• A forward-looking statement sets an
expectation. If things have changed, say so
• Be timely in your communication
16

17. 5. KEEP THE BEST COMPANY YOU CAN
• You will be judged by the past, present and future
company you keep
• Perform due diligence on your advisors
• Aim as high as you can
• Push your advisors to improve as you improve
17

18. 5. KEEP THE BEST COMPANY YOU CAN
5.1 Always look to upgrade if the cost makes sense
• Auditor/outside counsel/banker, etc.
5.2 Consider Upgrading to OTCQX
• Get a high quality sponsor
• Meeting the listing requirements sends a positive signal
to investors
• Enjoy greater liquidity, higher market cap, broader
shareholder base, etc.
18

19. • Capital markets are competitive
• Be the best a shareholder can ask for, given your
circumstances, performance and prospects
• The costs of great corporate governance can be
moderate and managed
• Significant superior return on investment via lower cost
of capital and other resources
• Shareholders will pay for the best
19
FINAL THOUGHTS

20. CONTACT
Mark Collinson
Partner
714-222-5161
mcollinson@compass-ir.com
Elaine Ketchmere, CFA
Partner
310-528-3031
eketchmere@compass-ir.com
5757 West Century Blvd, 7th Floor
Los Angeles, CA 90045
www.compassinvestorrelations.com