Page

November 2010

Miranda Lane

FinanceTalking Ltd

T: +44 (0)1780 450500F: +44 (0)1780 450505E: info@financetalking.comW: www.financetalking.com

Best Practice in Investor RelationsPalestinian Capital Market Forum 2010

Making financial markets, accounts, corporate finance & valuation accessible

to all

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Programme

The Big Picture

Best PracticeLocal Issues

2

Page

Capital Markets Big Picture

Investment Bank

Investors

Raising

Money

Directors

Owners

ABC Co

Valuation

Sell side

Buy side

3

Page

Raising

Money

Benefits of Trust

Investment Bank

Investors

Directors

Owners

ABC Co

Valuation

Sell side

Buy side

Personal reputation

Personal reputation

Company reputation

Company reputation

Access to capital at lower cost

Access to capital at lower cost

Prepared to allocate capital

Prepared to allocate capital

Quality advice

Quality advice

Positive recommendation

s

Positive recommendation

s

4

Page

Raising

Money

If Trust is Lost

Investment Bank

Investors

Directors

Owners

ABC Co

Valuation

Sell side

Buy side

Less access to capital at higher cost

Less access to capital at higher cost

Capital is withdrawn

Capital is withdrawn

Advisers pull out

Advisers pull out

Reputational damage

Reputational damage

Reputational damage

Reputational damage

Negative recommendation

s

Negative recommendation

s

5

Page

Raising

Money

Regulation & Governance – a Prerequisite

Investment Bank

Investors

Directors

Owners

ABC Co

Valuation

Sell side

Buy side

CorporateGovernance

FinancialRegulator

6

Page

Raising

Money

Core Concepts

Investment Bank

Investors

Directors

Owners

ABC Co

Valuation

Sell side

Buy side

COMPANY•Highest standards of corporate governance•Full and early disclosure of price-sensitive information•Openness and honesty of management •Sensitivity towards the needs of investors

COMPANY•Highest standards of corporate governance•Full and early disclosure of price-sensitive information•Openness and honesty of management •Sensitivity towards the needs of investors

MARKET•Equal access for all shareholders to same information•No insider trading or other market abuse•Rules & regulations governing obligations of listed companies

MARKET•Equal access for all shareholders to same information•No insider trading or other market abuse•Rules & regulations governing obligations of listed companies

7

Page

Programme

The Big Picture

Local Issues

8

Page

Key IR Audiences

Sell-side Analysts

Investors & Buy-side Analysts

9

Page

Best Practice – First Steps

Sell-side Analysts

Investors & Buy-side Analysts

• Gain management buy-in for IR

• Develop your investment story

• Establish corporate governance principles

• Establish internal controls to protect shareholders’ investment

• Gain management buy-in for IR

• Develop your investment story

• Establish corporate governance principles

• Establish internal controls to protect shareholders’ investment

10

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I R

Setting Up IR

• Have a dedicated IR function

• Consider consultancy support

• Define your IR objectives

• Develop disclosure policy and establish mechanisms for reporting price-sensitive information

• Establish a financial reporting calendar

• Build relationships with analysts, investors & the financial media

• Prepare for likely crises

• Have a dedicated IR function

• Consider consultancy support

• Define your IR objectives

• Develop disclosure policy and establish mechanisms for reporting price-sensitive information

• Establish a financial reporting calendar

• Build relationships with analysts, investors & the financial media

• Prepare for likely crises

11

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Typical IR Objectives

I R

• To achieve a realistic valuation for the company’s shares by making the shares an attractive investment proposition

• To preserve a ready market for future capital

• To build a broad, diversified shareholder base with an appropriate shareholder mix

• To build a liquid but stable trading market

• To comply fully with the regulations designed to protect investors

• To lower the cost of capital

• To achieve a realistic valuation for the company’s shares by making the shares an attractive investment proposition

• To preserve a ready market for future capital

• To build a broad, diversified shareholder base with an appropriate shareholder mix

• To build a liquid but stable trading market

• To comply fully with the regulations designed to protect investors

• To lower the cost of capital

12

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Buy-Side Relations

• Know who your investors are

• Develop strong personal relationships

• Regular roadshows/meetings with management

• Hold annual investor days/site visits/R&D updates etc

• Participate in investment bank sector conferences

• Conduct regular perception studies

• Don’t be drawn into selective briefing

•

• Know who your investors are

• Develop strong personal relationships

• Regular roadshows/meetings with management

• Hold annual investor days/site visits/R&D updates etc

• Participate in investment bank sector conferences

• Conduct regular perception studies

• Don’t be drawn into selective briefing

•

13

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Sell Side Relations

• Encourage a wide following - a better informed market will attract investors

• Offer regular briefings, site visits and updates

• Good disclosure on outlook will avoid a wide range of forecasts

• Conduct regular perception studies

• Don’t be drawn into selective briefing

• Encourage a wide following - a better informed market will attract investors

• Offer regular briefings, site visits and updates

• Good disclosure on outlook will avoid a wide range of forecasts

• Conduct regular perception studies

• Don’t be drawn into selective briefing

14

PageThe Investment Decision Making Process

Sector prospect

s

Company prospect

s

Financial analysis

Forecast ValuationInvestme

nt decision

15

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Key Valuation Variables

Sector prospects

Company prospects

Financial analysis

Forecast ValuationInvestment

decision

16

PageTelling Your Story & Influencing Valuation

Sector prospect

s

Company prospect

s

Financial analysis

Forecast ValuationInvestme

nt decision

Define your sector or peer

group

Define your sector or peer

group• Flag expected

changes to trends• Clear communication

of expected capital structure

• Flag expected changes to trends• Clear communication

of expected capital structure

Clear guidance

Clear guidance

Help with non-sensitive

items

Help with non-sensitive

items

Understand your investor

base

Understand your investor

base

Communicate•Quality•Growth•Risk

Communicate•Quality•Growth•Risk

Clear communication

of dividend policy

Clear communication

of dividend policy

Clear communication

of dividend policy

Clear communication

of dividend policy

Provide industry statistics

Provide industry statistics

KPIs to bring market closer to mgt's view

KPIs to bring market closer to mgt's view

17

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Building Trust

Sell-side Analysts

Investors & Buy-side Analysts

• Promise & deliver

• Build relationships

• Give regular access to senior management

• Demonstrate commitment to best corporate governance practices

• Benchmark disclosure, presentations & reports against best practices

• Keep talking

• Promise & deliver

• Build relationships

• Give regular access to senior management

• Demonstrate commitment to best corporate governance practices

• Benchmark disclosure, presentations & reports against best practices

• Keep talking

18

Page

Programme

The Big Picture

19

Page

Raising

Money

Local Issues

Investment Bank

Investors

Directors

Owners

ABC Co

Valuation

Sell side

Buy side

COMPANY•Control by founders•Liquidity•Size

COMPANY•Control by founders•Liquidity•Size

MARKET•Lack of data/analysis•Volatility•Other risks (geopolitical, repatriation of capital etc)

MARKET•Lack of data/analysis•Volatility•Other risks (geopolitical, repatriation of capital etc)

20

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Raising

Money

Palestine - Attracting Capital

Investment Bank

Investors

Directors

Owners

ABC Co

Valuation

Sell side

Buy side

COMPANY•A good growth story, backed up by track record to date•An understanding of risk•Strong management•Best practice corporate governance•Best practice IR•Liquidity•The prospect of returns commensurate with the risks involved

= create trust

COMPANY•A good growth story, backed up by track record to date•An understanding of risk•Strong management•Best practice corporate governance•Best practice IR•Liquidity•The prospect of returns commensurate with the risks involved

= create trust

MARKET•Develop data•Develop/attract intermediaries•Develop regulation•Develop corporate governance

= create trust

MARKET•Develop data•Develop/attract intermediaries•Develop regulation•Develop corporate governance

= create trust

21

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November 2010

Miranda Lane

FinanceTalking Ltd

T: +44 (0)1780 450500F: +44 (0)1780 450505E: info@financetalking.comW: www.financetalking.com

Best Practice in Investor RelationsPalestinian Capital Market Forum 2010

Making financial markets, accounts, corporate finance & valuation accessible

to all