II ANNUAL STUDYIR AGENCY “INTERFAX BUSINESS SERVICE”COMPARATIVE ANALYSIS OF VOLUNTARY INFORMATION DISCLOSUREPRACTICES OF R...
ON THE IMPORTANCE AND MOTIVATION OF THE STUDYCompetition of issuers for investors’ attention has become ever-more sophisti...
KEY FINDINGSThe Study allows to estimate both average level of activity lag of Russian issuers comparedto British issuers ...
 The most popular format (Diagram 1) both for largest Russian and British companies is  Annual Report (presentation versi...
METHODOLOGYLike last year, during the Study 2012 the analysis of activity of British and Russian publiccompanies in the fi...
achievements in IR Magazine Awards as well as their place in Financial Times BowenCraggs and KWD ratings.WHICH KEY FORMATS...
In general, all leading FVIDs, except presentation annual report, were more widely usedcompared to previous year, which is...
Diagram 1 Usage of various FVID activity – practices of Russian and British companies; FVIDs are given in the receding ord...
Interactive data room lost its popularity among 30% of British companies, while itspopularity increased (+84%) among Russi...
They have become more popular in Russia, too, though (+163%). Unfortunately, the Russiancompanies lost interest in such fo...
Table 9. Categories of voluntary disclosure formats (given in the order of receding popularity among 71 Russiancompanies r...
New format* (identified                                                                                              Tailo...
Tables 10-13 below allow us to understand which new FVIDs were initiated by Russian andBritish public companies. Let us ta...
Table 11. New FVIDs used by British public companies with large capitalization                     New FVID               ...
options of reducing the impact of country risks are offered by INTER RAO UES and X5 RetailGroup: in the first case the iss...
Table 16. Leaders in FVID usage activity among British issuers with large capitalization                                  ...
Below follow the companies which initiated the biggest number of new FVIDs out of 17,identified in this Study (Tables 18-2...
THE ISSUERS BECOME MORE ACTIVE IN VOLUNTARY DISCLOSURE ALONGWITH MARKET CAPITALIZATION GROWTHThe analysis demonstrated: co...
VOLUNTARY DISCLOSURE ACTIVITY INCREASES THE CHANCES FOR AN IROAND IR TEAM OF AN ISSUER TO BE RECOGNIZED BY THE INVESTMENTC...
CONTACT INFORMATIONIR Agency INTERFAX BUSINESS SERVICEAuthors of research:Stanislav Martushev,Maria GorbunovaTel: +7 (495)...
IBS Clients in 2008-2012This material is an intellectual property of “Interfax Business Service” CJSC. All intellectual ri...
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COMPARATIVE ANALYSIS OF VOLUNTARY INFORMATION DISCLOSURE PRACTICES OF RUSSIAN AND BRITISH PUBLIC COMPANIES

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Competition of issuers for investors’ attention has become ever-more sophisticated over the years and makes increasing demands on IR services for satisfying growing information requests by market participants.
Like investment bank analysts who keep searching for fresh investment ideas with a view to attracting attention of investor clients of their financial units, the issuers keep searching for innovative methods of convincing presentation of their activities and their industry’s trends to investors and analysts. One can say about “intellectual arms race” unfolding before our eyes between issuers not only within specific industries but in absentia between companies with similar capitalization and other similar fundamental characteristics.
The regulators’ requirements in the field of information disclosure do not systematically catch up with changes in the markets and investor demands. This is why issuers with advanced IR do not limit themselves to the publication of materials subject to regulatory (mandatory) disclosure (often tailored at specific investor categories – i.e. the company’s bondholders).
It is hard to overestimate the importance of voluntary disclosure for communication with investors. They are especially important for the issuers who are geographically remote from world financial centers with limited possibilities for management to regularly meet with the investment community. It is also true with regard to many Russian companies.
With a view to understanding current trends and specific methods of voluntary disclosure, IR agency “Interfax Business Service” annually reviews the activity of the issuers in this field through the example of Russian and British companies. The study conducted this year will allow the managers and specialists of IR departments to get an idea about existing voluntary disclosure formats and evaluate the level of voluntary disclosure of a specific issuer against the best national and foreign business practices.

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COMPARATIVE ANALYSIS OF VOLUNTARY INFORMATION DISCLOSURE PRACTICES OF RUSSIAN AND BRITISH PUBLIC COMPANIES

  1. 1. II ANNUAL STUDYIR AGENCY “INTERFAX BUSINESS SERVICE”COMPARATIVE ANALYSIS OF VOLUNTARY INFORMATION DISCLOSUREPRACTICES OF RUSSIAN AND BRITISH PUBLIC COMPANIES2012: The issuers keep increasing variety and thoroughness of their disclosureAcronyms in the text:FVID - Format of voluntary information disclosureWhat did we learn? 2011 2012Identified FVIDs: 18 35FVID usage intensity:largest Russian public companies 35.0% 30.7%largest British public companies 56.9% 45.6%The issuers which are the most active in voluntary disclosure Lukoil Gazprom Neft(among the largest as well as medium/small companies) Synergy CTC MediaThe issuers which have significantly intensified their VTB Bankvoluntary disclosure activity (among the largest as well as - IDGC ofmedium/small companies) VolgaCompanies reviewed (in Russia and in Great Britain): 80 126 Moscow, 2012
  2. 2. ON THE IMPORTANCE AND MOTIVATION OF THE STUDYCompetition of issuers for investors’ attention has become ever-more sophisticated over theyears and makes increasing demands on IR services for satisfying growing informationrequests by market participants.Like investment bank analysts who keep searching for fresh investment ideas with a view toattracting attention of investor clients of their financial units, the issuers keep searching forinnovative methods of convincing presentation of their activities and their industry’s trends toinvestors and analysts. One can say about “intellectual arms race” unfolding before our eyesbetween issuers not only within specific industries but in absentia between companies withsimilar capitalization and other similar fundamental characteristics.The regulators’ requirements in the field of information disclosure do not systematically catchup with changes in the markets and investor demands. This is why issuers with advanced IRdo not limit themselves to the publication of materials subject to regulatory (mandatory)disclosure (often tailored at specific investor categories – i.e. the company’s bondholders).It is hard to overestimate the importance of FVID for communication with investors. They areespecially important for the issuers who are geographically remote from world financialcenters with limited possibilities for management to regularly meet with the investmentcommunity. It is also true with regard to many Russian companies.With a view to understanding current trends and specific methods of voluntary disclosure, IRagency “Interfax Business Service” annually reviews the activity of the issuers in this fieldthrough the example of Russian and British companies. The study conducted this year willallow the managers and specialists of IR departments to get an idea about existing FVIDsand evaluate the level of voluntary disclosure of a specific issuer against the best nationaland foreign business practices.CONTENTS OF THE STUDY ON THE IMPORTANCE AND MOTIVATION OF THE STUDY ............................................................................................ 2 KEY FINDINGS ................................................................................................................................................................ 3 METHODOLOGY............................................................................................................................................................. 5 WHICH KEY FORMATS OF VOLUNTARY DISCLOSURE DO PUBLIC COMPANIES PREFER? .............................................. 6 NEW FVID PRACTICES .................................................................................................................................................. 10 COMPANIES’ RANKING IN VOLUNTARY DISCLOSURE LEVEL: GAZPROM NEFT AND CTC MEDIA – NEW RUSSIAN LEADERS....................................................................................................................................................................... 15 THE ISSUERS BECOME MORE ACTIVE IN VOLUNTARY DISCLOSURE ALONG WITH MARKET CAPITALIZATION GROWTH...................................................................................................................................................................... 18 VOLUNTARY DISCLOSURE ACTIVITY INCREASES THE CHANCES FOR AN IRO AND IR TEAM OF AN ISSUER TO BE RECOGNIZED BY THE INVESTMENT COMMUNITY ....................................................................................................... 19 CONTACT INFORMATION ............................................................................................................................................ 20 2
  3. 3. KEY FINDINGSThe Study allows to estimate both average level of activity lag of Russian issuers comparedto British issuers and the level of demand for each disclosure format: The Study 2012 identified, on the websites, 35 various formats of voluntary disclosure, which is double the number a year ago (18). In general, the most popular formats in the market are as follows: Issuers using Top five formats of voluntary disclosure the format, in % Annual report (presentation version) 89% IR release, operations 86% IR release, financials 85% Financial calendar 79% Presentation of financial statements 74% As of July 2012 largest British public companies on average still use formats of voluntary information disclosure significantly more often: the reviewed British companies use 46% of existing disclosure formats (15.9 out of 35), while largest Russian companies use only 31% of available formats (10.7 out of 35). Major Russian issuers seriously lag behind comparable British companies as far as their activity in using the following formats is concerned:  Interactive annual report,  Annual summary / Annual review,  Investor relations kit,  Webcast/Conference call,  FAQ, investor calculator, integration with social networks. Thus, Russian companies still lag far behind in using interactive disclosure formats. One can take note of positive developments last year demonstrated only by the significantly increased use of webcasts and conference calls by the companies. As far as interactivity is concerned, one should note that development of some formats is subject to constraining factors. Specifically, an issuer’s presence in popular social media is subject to risks associated with legal requirements to information disclosure and lower target orientation of IR communications, because one can not be absolutely certain who may read a post quoted repeatedly and how accurately it is interpreted in new context. Russian companies with medium/small capitalization look better than large local companies; they almost caught up with their British counterparts, the gap diminished compared to previous year: 21.1% compared to 22.3% of used formats. Unlike large companies, Russian mid-cap business is confidently ahead of Brits (!) in active use of whole number of formats (Investor Day (a number of presentations), Interactive data room, iPad app/website versions for PDA and WAP). However they still fall behind in using such formats as Investor Calculator and Fact sheet. 3
  4. 4.  The most popular format (Diagram 1) both for largest Russian and British companies is Annual Report (presentation version), publication of operational and financial IR releases, and display of financial calendar and interactive stock chart on the website. In this regard nothing has changed last year. Last year the largest issuers (both Russian and British) began using Investor Days more often. The Russians began more actively publishing separate presentations on development strategy (true for major issuers) and IR releases on operational results, while the Brits began publishing statements about sustainable development and post Investor relations kits on their websites more often (Diagrams 2-3). It’s encouraging that out of 17 new formats of voluntary disclosure (new in 2012) 30% were used only by Russian companies, 10% were initiated by the Brits, while the remaining 60% were used for the first time by the companies concurrently in both countries. The British voluntary information The Russians introduced larger number disclosure novelty – abridged annual of new formats: credit ratings in charts, report (annual summary) consensus forecast Interactive charts, tag clouds. Both Russians and Brits have expanded their practices of voluntary disclosure mainly on account of the formats tailored at retail investors (65% of newly introduced formats), and to a lesser extent institutional investors (35%). Russian leaders in voluntary disclosure level ranking are Gazprom Neft and CTC Media, while BG Group and Grainger lead among the British companies. Last year best achievements in using new formats of voluntary disclosure were demonstrated in Russia by VTB Bank and IDGC of Volga, and by Centrica and Grainger in Great Britain. The activity in the field of voluntary disclosure increase IRO’s and IR team’s chances to be recognized by the investment community being given prestigious IR awards, and their companies being included into leading international rankings and ratings. This conclusion is based upon the analysis of correlation between the issuers’ activity in the field of voluntary disclosure and the results of their participation in IR Magazine Awards as well as in Financial Times Bowen Craggs and KWD ratings. The quality of IR program and the level of its public IR documents are not directly related to the scale of the issuer’s business; successful IR work is possible in the companies with medium/small capitalization. In reality it is important for the management to recognize the significance of this corporate function, and for the company’s senior management to be interested in real results of IR activities. 4
  5. 5. METHODOLOGYLike last year, during the Study 2012 the analysis of activity of British and Russian publiccompanies in the field of voluntary disclosure was carried out (Table 1).Table 1. Categories of Russian and British companies reviewed by “Interfax BusinessService” IR agency with regard to their activity in the field of voluntary disclosure (a total of126 companies)Categories of companies making the Companies of the Russian Companies of Great Britain list of leading national stock Federation reviewed reviewed exchange indices 38 largest companies of the 35 largest companies of FTSE- indices “Large capitalization 100* indexThe largest companies in terms of MICEX” and “Standardmarket capitalization capitalization MICEX”* Mcap: $5.1 – $158.8 billion Mcap: $2.3 –$111.0 billion USD USD 33 smallest companies of the 20 smallest companies of theThe smallest companies in terms of index “Base capitalization FTSE-350 indexmarket capitalization MICEX”* Mcap: $0.1-$1.8 billion USD Mcap:$ 0.1 – $0.6 billion USD*Additionally data was analyzed on the companies, chosen in the previous year, but excluded as of July 2012, as well asdata on the companies which were the leaders in IR and voluntary information disclosure based on leading European ratingsand awards, including Financial Times Bowen Craggs Index, KWD (earlier Hallvarsson & Halvarsson rating), IR MagazineAwards.The Study recorded each and every format of voluntary disclosure used by the issuers (Table2). If within reasonable time one could not find some format at the corporate website, it wasconsidered that a company does not disclose any information in such format (because aninvestor or an analyst would not find such a document either, should they visit this company’swebsite).Table 2. FVID usage activity among reviewed issuers’ categories, average Average activity of formats usage Number of formats % Company’s category 2011 2012 2011 2012 out of 18 out of 35 max 18 max 35 formats formats formats formats Russian companies with large capitalization 6.3 10.7 35.0% 30.7% Russian companies with medium/small capitalization 4.6 8.4 25.6% 21.1% British companies with large capitalization 10.3 15.9 56.9% 45.6% British companies with medium/small capitalization 5.1 7.8 28.1% 22.3%The analysis of correlation between FVID usage activity and size of capitalization (seeDiagrams 5-8) as well as Index of issuer’s recognition by the investment community wascarried out; the results thereof will be reviewed later. As follows from the title, this index wascreated with a view to demonstrating how the society evaluates the transparency of thecompanies. The index is composed of indicators which characterize the issuers’ 5
  6. 6. achievements in IR Magazine Awards as well as their place in Financial Times BowenCraggs and KWD ratings.WHICH KEY FORMATS OF VOLUNTARY DISCLOSURE DO PUBLIC COMPANIESPREFER?The preferences of the public companies in using FVID this year are as follows (Tables 3-7):Table 3. Top 5 FVID, which are popular in the Table 4. Top 5 FVID, which are popular in the group ofgroup of Russian issuers with large capitalization Russian issuers with medium/small capitalization FVID Popularity, % FVID Popularity, % Annual Report 89% Annual Report 82% IR release, operations 89% IR release, operations 79% IR release, financials 87% IR release, financials 73% Financial calendar 82% Financial calendar 70% Presentation of financial Interactive stock chart 64% 79% statements (PPT/PDF)Table 5. Top 5 FVID, which are popular in the group of Table 6. Top 5 FVID, which are popular in the group ofBritish issuers with large capitalization British issuers with medium/small capitalization Popularity, FVID Popularity, % FVID % Annual Report 85% Annual Report 100% IR release, financials 85% Webcast/Conference call 97% Presentation of financial IR release, operations 85% 94% statements (PPT/PDF) Interactive stock chart 75% Financial calendar 94% Presentation of financial 60% IR release, financials 94% statements (PPT/PDF) Table 8. Top 5 FVID, which are in general popular in theTable 7. Top 5 FVID, which are in general popular in the market in 2012г.market in 2011. FVID Popularity, % FVID Popularity, % Annual Report 89% Annual Report 98% IR release, operations 86% Financial calendar 75% IR release, financials 85% Interactive stock chart 74% Presentation of financial Financial calendar 79% 69% statements (PPT/PDF) Presentation of financial 74% IR release, financials 66% statements (PPT/PDF) 6
  7. 7. In general, all leading FVIDs, except presentation annual report, were more widely usedcompared to previous year, which is demonstrated by the indicators of their popularity. Inspite of identified lower popularity of presentation annual report it still remains the mostpopular format. The lower activity in using annual reports in Russia is due to reduced scale ofdisclosure by companies, which were acquired by strategic investors and are actually on theway to forthcoming delisting.It is worth noting that the Russian issuers ignore this FVID moreoften than the British ones, missing an opportunity to realize allthe potential of this IR instrument, while annual report not onlyoccupies a prominent place in the best IR practices, butimproves every year. For example, in 2% of reports for the year2011 QR codes are used for convenient transition to electronicversion and interactive tables (Picture 1), while 5% of reportsare divided into subject modules, which are convenient for Picture 1. Reference to QR- code used in INTER RAO UESdownloading and perception of information. It is important to annual reportnote though, that such ideas were used only by the Russian http://www.interrao.ru/upload/dcompanies reviewed in our Study, and none by a British one. ocs/interrao_ar2011_rus.pdfThis year IR releases surpassed financial calendar inpopularity having pushed it to the fourth position of the Top-5FVID in 2012, while presentation of financial statementsshifted from the fourth to the fifth position. These formats alsoallow the issuers to experiment with additional functionality;Rostelecom, for instance, submitted a video version of afinancial IR release (Picture 2), while 21% of issuers usefinancial calendars, integrated with Outlook, iCal and other Picture 2. Reference tosoftware, which can not but be appreciated by the users. 2.5% Rostlecom video release.of the companies filter their calendars by events, while the http://rostelecom.ru/ir/results_an d_presentations/financials/IFRS/calendars at the sites of KTK and Acron allow to download all 1q2012.phpmaterials associated with the event, at once, which is anexcellent finding to optimize navigation on the website (Picture3).Usage activity of existing FVIDs in the market in general isdemonstrated in Diagram 1. Picture 3. Reference to KTK investor calendar. http://oaoktk.ru/investors/ 7
  8. 8. Diagram 1 Usage of various FVID activity – practices of Russian and British companies; FVIDs are given in the receding order of popularity among 71 Russian companies.Last year popularity of webcasts and conference calls among the Russian issuers withlarge capitalization increased the most (Diagram 2). Their usage frequency by Russiancompanies increased almost fivefold, though among British issuers this format’s popularityincreased only by 8% compared to 2011, while popularity of sets of presentations forInvestor days increased the most among the British issuers with large capitalization: +314%compared to 2011. However, their popularity increased by 286% among Russian companiesas well during the same period. 8
  9. 9. Interactive data room lost its popularity among 30% of British companies, while itspopularity increased (+84%) among Russian companies. The Russians use interactivestock charts less frequently (-10%). It is interesting that such a seemingly habitualinstrument still allows to find interesting solutions. For example, interactive stock chart at theUralkali website is very conveniently combined with investment calculator, which is dulyappreciated by retail investors.Diagram 2. The increment of various FVIDs’ usage activity by public companies with large capitalization(2012/2011, %). FVIDs are given in the order of receding popularity among 35 Russian companies with largecapitalization.FAQ is the leader in popularity growth among Russian issuers with medium/smallcapitalization (+324%), while the interest in it among Brits diminished on the contrary (-43%)(Diagram 3). What is more, many issuers combine them into thematic blocks to moreconveniently search for new information. Operational IR releases were used by the largestnumber of new users among British companies with medium/small capitalization (+240%). 9
  10. 10. They have become more popular in Russia, too, though (+163%). Unfortunately, the Russiancompanies lost interest in such format as strategy presentation (-100% per year). Theyshouldn’t have done it, for it is one of FVIDs which is in great demand by investors. In GreatBritain the interest in interactive annual report diminished most significantly (-43%), whilethe Russians continue using this format with the same intensity (+1%).Diagram 3. The increment of various FVIDs’ usage activity by public companies with medium/smallcapitalization (2012/2011, %). FVIDs are given in the order of receding popularity among 33 Russian companieswith medium/small capitalization.NEW FVID PRACTICESThis year the analysis of IR sections of public companies’ websites identified 35 FVIDs –twice the number recorded by the Study in 2011, which demonstrates continuousdevelopment of voluntary disclosure instruments. 10
  11. 11. Table 9. Categories of voluntary disclosure formats (given in the order of receding popularity among 71 Russiancompanies reviewed) New format* (identified Tailored at investors: in the Study-2012 for the Format name I - Institutional, first time) R – Retail** Annual Report (Presentation version) I IR release, operations I IR release, financials I Financial calendar I Presentation of financial statements (PPT/PDF) I Interactive stock chart R Investor day (a number of presentations) I Webcast/Conference call I Investor calculator + R Fact sheet R FAQ R Interactive presence map + R Interactive annual report I Integration with social networks + R Investor relations kit I Transcripts of interviews, presentations, public addresses + I iPad app/website versions for PDA and WAP + I Interactive data room I Sustainable development report I Strategy presentation I Investor and analyst handbook (data book, XLS) I Analyst commentaries/reports + R Shareholder hotline + R Investor bulletin I Company fact book + I Credit ratings in charts + I Shareholder’s personal account + R Market analysis (presentations) + I Tag cloud + R Investor and analyst handbook (text) I 11
  12. 12. New format* (identified Tailored at investors: in the Study-2012 for the Format name I - Institutional, first time) R – Retail** Consensus forecast Interactive charts + I IR blog + R Market analysis (press releases) + R Shareholder newsletter/magazine + R Annual summary/annual review + I Notes: *A number of formats, identified as new, were not absolutely new for the global IR market, but they were new in terms of selection for this Study (both for Russian and British components of the selection); **The division of the formats by tailored at institutional or retail investors is not the only possible one, and reflects nothing but the view of the Study’s authors. The novelty in British practice of voluntary information disclosure is an abridged version of annual report (annual summary). Russian issuers proposed bigger variety of new FVIDs: credit ratings in charts, consensus forecast Interactive charts, tag clouds. A number of FVIDs were used for the first time by both British and Russian companies: market analysis in the form of presentations and press releases, webcast transcripts, fact book, IR blog, personal account.Diagram 4. Proportion of new FVIDs used by Russian and British public companies 12
  13. 13. Tables 10-13 below allow us to understand which new FVIDs were initiated by Russian andBritish public companies. Let us take note that main attention of the issuers of all groups wasdrawn to the instruments tailored at retail investors.Table 10. New FVIDs used by Russian public companies with large capitalization New FVID FVID Popularity Target audience: institutional investors Transcripts of interviews, presentations, public addresses 24% iPad app/website versions for PDA and WAP 16% Fact book 11% Credit ratings in charts 11% Market analysis (presentations) 8% Consensus forecast Interactive charts 5% Target audience: retail investors Investor calculator 45% Interactive presence map 34% Integration with social networks 34% Shareholder hotline 11% Personal Account 11% Analyst commentaries/reports 8% Tag cloud 5% IR blog 5% Market analysis (press releases) 3% Shareholder newsletter/magazine 3%One should note that development of some interactive formats is subject to constrainingfactors. For example, on the one hand, the presence of an issuer in popular social medianetworks allows to expand the number of IR instruments, more comprehensively elucidateactivity and state of a company, having received an access to new audience, and organizebilateral communications with existing and potential investors and analysts. On the otherhand, a company’s decision to expand the number of IR instruments through social media issubject to risks associated with legal requirements to information disclosure and lower targetorientation of IR communications, for one can not be absolutely certain who will readrepeatedly quoted post and if it is correctly interpreted in new context. 13
  14. 14. Table 11. New FVIDs used by British public companies with large capitalization New FVID FVID Popularity Target audience: institutional investors Transcripts of interviews, presentations, public 54% addresses Annual summary / annual review 51% iPad app/website versions for PDA and WAP 37% Fact book 20% Market analysis (presentations) 3% Target audience: retail investors Investor calculator 83% Integration with social networks 66% Interactive presence map 37% Personal Account 17% Analyst commentaries/reports 11% Shareholder hotline 9% IR blog 6% Shareholder newsletter/magazine 6%Table 12. New FVIDs used by Russian public companies with medium/small capitalization New FVID FVID Popularity Target audience: institutional investors iPad app/website versions for PDA and WAP 18% Transcripts of interviews, presentations, public 12% addresses Target audience: retail investors Investor calculator 27% Interactive presence map 24% Integration with social networks 15% Analyst commentaries/reports 9% Shareholder hotline 6% Tag cloud 3%Table 13. New FVIDs used by British public companies with medium/small capitalization New FVID FVID Popularity Target audience: institutional investors Annual summary / annual review 20% Transcripts of interviews, presentations, public 5% addresses Fact book 5% iPad app/website versions for PDA and WAP 5% Target audience: retail investors Investor calculator 50% Integration with social networks 25% Interactive presence map 20% Analyst commentaries/reports 10% Market analysis (press releases) 5% Personal Account 5% Shareholder newsletter/magazine 5%The format containing information about the reasons to invest into a company has not yetfound its proper place in current IR practices. However some issuers (e.g. Vimpelcom, RusAl,Aviva) include this data into their presentations and subsections of IR websites. Interesting 14
  15. 15. options of reducing the impact of country risks are offered by INTER RAO UES and X5 RetailGroup: in the first case the issuer calls for “fighting corruption together” by reporting about arelevant precedent over “the hotline” (http://www.interrao.ru/company/corrupt/), while Х5Retail Group strives for transparency, having added unusual form of feedback “No tocorruption” (http://www.x5.ru/ru/nocorruption/nocorruption/).COMPANIES’ RANKING IN VOLUNTARY DISCLOSURE LEVEL: GAZPROM NEFTAND CTC MEDIA – NEW RUSSIAN LEADERSNow let us look at the leaders of 2012 in terms of activity in the field of voluntary disclosure.The issuers’ rankings are as follows below:Table 14. Leaders in FVID usage activity among Russian issuers with large capitalization Market Format usage capitalization Issuer activity by billion USD issuer (28.06.2012) Gazprom Neft 54.3% 20.9 Lukoil 51.4% 45.9 Gazprom 45.7% 111.0 Sberbank 45.7% 55.6 Uralkali 45.7% 22.5Table 15. Leaders in FVID usage activity among Russian issuers with medium/small capitalization Market Format usage capitalization Issuer activity by billion USD issuer (28.06.2012) CTC Media 42.9% 1.3 Pharmstandard 34.3% 1.7 Synergy 34.3% 0.4 LENENERGO 34.3% 0.2 Novorossiysk Commercial Sea 31.4% 1.8 Port (NCSP) 15
  16. 16. Table 16. Leaders in FVID usage activity among British issuers with large capitalization Market Format usage Issuer capitalization billion activity by issuer USD (28.06.2012) BG Group 62.9% 64.2 British American 60.0% 97.1 Tobacco Centrica 60.0% 25.6 Rio Tinto 57.1% 63.7 BP 54.3% 119.4Table 17. Leaders in FVID usage activity among British issuers with medium/small capitalization Market Format usage Issuer capitalization billion activity by issuer USD (28.06.2012) Grainger 45.7% 0.6 Shanks Group 45.7% 0.5 British Assets Trust Public 34.3% 0.5 Limited Company Cape 31.4% 0.5 Gem Diamonds 28.6% 0.4The Study identified Gazprom Neft as the leader in the group of Russian issuers with largecapitalization which pushed the last year’s leader, Gazprom, to the third position. Lukoil’sposition has not changed since last year – still second position. The British BG Group movedtwo lines up having pushed last year’s leader, Vodafone Group, from the first position. BritishAmerican Tobacco moved nine lines up, Rio Tinto advanced by two lines, and BP kept its lastyear’s position.A number of changes occurred in the ranking of Russian issuers with medium/smallcapitalization: the first two positions were taken by CTC media and Pharmstandard, whileSynergy stayed on the third line. Lenenergo, which did not participate in the Study-2011,occupied the fourth position, and last year’s leader, Novorossiysk Commercial Cea Port,moved down from the first to the fifth position. In British ranking the situation is changing asdynamically, while the leader remained the same — Grainger 16
  17. 17. Below follow the companies which initiated the biggest number of new FVIDs out of 17,identified in this Study (Tables 18-21).Table 18. Leaders in using new FVID among Russian issuers with large capitalization Number of used Company FVIDs, (max=17) VTB Bank 7 Sberbank 6 Gazprom Neft 6 Gazprom 5 Lukoil 4Table 19. Leaders in using new FVID among Russian issuers with medium/small capitalization Number of used Company FVIDs, (max=17) IDGC of Volga 4 Pharmstandard 3 CTC Media 3 Enel OGK-5 2 Novorossiysk Commercial Sea Port 2 (NCSP)Table 20. Leaders in using new FVID among British issuers with large capitalization Number of used Company FVIDs, (max=17) Centrica 7 British American 6 Tobacco BG Group 6 Anglo American 6 Barclays 6Table 21. Leaders in using new FVID among British issuers with medium/small capitalization Number of used Company FVIDs, (max=17) Grainger 5 Shanks Group 5 Anite 3 Cape 3 JPMorgan Asian 3 Investment Trust 17
  18. 18. THE ISSUERS BECOME MORE ACTIVE IN VOLUNTARY DISCLOSURE ALONGWITH MARKET CAPITALIZATION GROWTHThe analysis demonstrated: correlation between the size of the issuers’ market capitalizationand their activity in using FVID in Russian companies (especially in medium/small) isexpressed more tangibly than in British companies, i.e. in Russia the larger the company, themore attention is paid to voluntary information disclosure, while in British companies theimpact of capitalization on the level of information disclosure of the issuer is less significant.This may be due to stricter requirements to disclose information to the companies listed atWestern stock exchanges. Investor relations culture in general may also play a certain role,for it had been molded in the western markets long before it was formed in Russia. Diagram 5. Correlation between market capitalization of Diagram 6. Correlation between market capitalization of Russian issuers with large capitalization and their FVID British issuers with large capitalization and their FVID usage activity usage activity 180,0 120,0 160,0 Market capitalization, billion USD 100,0 140,0 Market capitalization, billion USD 120,0 80,0 100,0 60,0 80,0 60,0 40,0 40,0 20,0 20,0 0,0 0,0 0% 20% 40% 60% 80% 0% 20% 40% 60% -20,0 Formats usage activity by issuers, % of max 35 formats Formats usage activity by issuers, % of max 35 formats Diagram 7. Correlation between market capitalization of Diagram 8. Correlation between market capitalization of Russian issuers with medium/small capitalization and their British issuers with medium/small capitalization and their FVID usage activity FVID usage activity 0,6 2,0 0,5 Market capitalization, billion USD 1,8Market capitalization, billion USD 1,6 0,4 1,4 1,2 0,3 1,0 0,2 0,8 0,6 0,1 0,4 0,2 0,0 0% 10% 20% 30% 40% 50% 0,0 0% 10% 20% 30% 40% 50% Formats usage activity by issuers, % of max 35 formats Formats usage activity by issuers, % of max 35 formats 18
  19. 19. VOLUNTARY DISCLOSURE ACTIVITY INCREASES THE CHANCES FOR AN IROAND IR TEAM OF AN ISSUER TO BE RECOGNIZED BY THE INVESTMENTCOMMUNITYThere is no secret that activity in the field of voluntary disclosure contributes to recognition ofthe issuer by the investment community, which as a practical matter may express itself inreceiving prestigious IR awards, and in companies being included into leading internationalrankings and ratings.Analysis of the data on the companies for the period 2009-2012 allowed to identify thecorrelation between the issuer’s activity in the field of voluntary disclosure and its recognitionby the investment community. This resulted in setting up the model below.Diagram 9. The model of correlation between the issuer’s recognition by the investment community and itsactivity in the field of voluntary information disclosure 60% Index of recognition of the issuer by the investment 50% 40% community 30% y = 0,5705x + 0,0231 20% 10% 0% 0% 10% 20% 30% 40% 50% 60% 70% Coefficient of activity in the field of voluntary information disclosureIndex of recognition of the issuer by the investment community was formed as follows. Thepoints scored by the issuers as a result of their participation in Financial Times BowenCraggs and KWD ratings and for IR Magazine Awards, were adapted to the scale from 0% to100%. Value of the index for an individual issuer is an average of three indicators.
  20. 20. CONTACT INFORMATIONIR Agency INTERFAX BUSINESS SERVICEAuthors of research:Stanislav Martushev,Maria GorbunovaTel: +7 (495) 647-8850Fax: +7 (499) 256-2520E-mail: IR@interfax.ruWeb: www.irconsulting.ruInterfax Business Service is a subsidiary of Interfax Group and specializes in providing consultingand other services in the field of Investor Relations in Russia and CIS countries.Interfax is uniquely positioned for rendering IR services: it has resources of a leading Russianinformation agency, close business relations with Russian institutional and private investors, workexperience with issuers and investors in various fields (information disclosure, ratings, credit risks,analytics).Interfax Information Services Group creates information products and means of communication forbusiness and political decisions. The Group, established in 1989, combines a network of national,regional and industrial information agencies working in Russia, other CIS countries, China andCentral Europe. Interfax (www.interfax.com, www.interfax.ru) is composed of the companies and unitswhich work out integrated solutions and provide news, analytical services, market data, fundamentalinformation.Interfax-CEA regularly prepares statistical and analytical materials about various segments offinancial market in Russia and CIS countries, provides information about activities of Russianinstitutional investors. The company’s products include as follows: daily projections and reports on thestate of various segments of financial market, ranking of Russian banks and insurance companiesissued under “Interfax-100” brand, as well as ranking of the banks and insurance companies of theCIS countries – “Interfax-1000”.An international rating agency Moodys Investors Service is Interfax’s partner in Moodys InterfaxRating Agency, which holds leading position in the Russian rating services market.Together with Experian, a world leader in the field of information solutions for business, Interfaxestablished a credit bureau “Experian-Interfax” with a view to providing information regardingtimeliness of credit payments by borrowers.A special analytical service provider Interfax-ACI, which is a part of Interfax Group, established thelargest information and analytical data base about the companies – SPARK - which consolidatedinformation about all legal entities registered in Russia. 20
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